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STATION CASINOS
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the fiscal year ended DECEMBER 31, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from _____________ to
____________.
Commission file number 000-21640
STATION CASINOS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0136443
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2411 WEST SAHARA AVENUE, LAS VEGAS, NEVADA 89102
(Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code: (702) 367-2411
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01
Par Value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates (all
persons other than executive officers or directors) of the registrant as of
March 3, 2000, based on the closing price per share as reported on the New York
Stock Exchange was $486,817,981.
As of March 3, 2000, the registrant has 40,345,672 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Registrant's 1999 Annual Meeting of
Stockholders to be held May 23, 2000 (which has not been made publicly available
as of the date of this filing) are incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
FORWARD-LOOKING STATEMENTS
When used in this report and elsewhere by management from time to time,
the words "believes," "anticipates," and "expects" and similar expressions are
intended to identify forward-looking statements with respect to the financial
condition, results of operations and the business of Station Casinos, Inc. (the
"Company") and its subsidiaries including the expansion, development and
acquisition projects, legal proceedings and employee matters of the Company and
its subsidiaries. Certain important factors, including but not limited to,
competition from other gaming operations, leverage, construction risks, the
inherent uncertainty and costs associated with litigation, and licensing and
other regulatory risks, could cause the Company's actual results to differ
materially from those expressed in the Company's forward-looking statements.
Further information on potential factors which could affect the financial
condition, results of operations and business of the Company and its
subsidiaries including, without limitation, the expansion, development and
acquisition projects, legal proceedings and employee matters of the Company and
its subsidiaries are included in the filings of the Company with the Securities
and Exchange Commission. Readers are cautioned not to place undue reliance on
any forward-looking statements, which speak only as of the date thereof. The
Company undertakes no obligation to publicly release any revisions to such
forward-looking statements to reflect events or circumstances after the date
hereof.
GENERAL
Station Casinos, Inc. is an established multi-jurisdictional gaming and
entertainment enterprise that currently owns and operates four major
hotel/casino properties and two smaller casino properties in the Las Vegas
Metropolitan area, and gaming and entertainment complexes in St. Charles and
Kansas City, Missouri. The Company also owns and provides slot route management
services in southern Nevada. Management's growth strategy includes the
master-planned expansion of the Company's existing gaming facilities in Nevada
and Missouri, as well as the evaluation and pursuit of additional acquisition or
development opportunities in Nevada and other gaming markets.
In Las Vegas, the Company owns and operates Palace Station Hotel &
Casino ("Palace Station"), Boulder Station Hotel & Casino ("Boulder
Station"), Texas Station Gambling Hall & Hotel ("Texas Station"), Sunset
Station Hotel & Casino ("Sunset Station") and Tropicana Station, Inc., the
operator of Wild Wild West Gambling Hall & Hotel ("Wild Wild West") and,
together with Palace Station, Boulder Station, Texas Station, and Sunset
Station, the "Las Vegas Casino Properties". The Company also owns a 50%
interest in Town Center Amusements, Inc. d.b.a. Barley's Casino & Brewing
Company ("Barley's"). Palace Station is situated on 39 acres on Sahara Avenue
adjacent to Interstate 15, and is near major attractions on the Las Vegas
Strip and downtown Las Vegas. Boulder Station is situated on 46 acres along
Boulder Highway, immediately adjacent to Interstate 515, and is located
on the opposite side of Las Vegas from Palace Station. Texas Station is
located on 47 acres at the corner of Lake Mead Boulevard and Tonopah Highway
in North Las Vegas. Sunset Station is located on 105 acres on Sunset Road
immediately adjacent to Interstate 515 and features a
Spanish/Mediterranean-themed hotel/casino. Each of the Company's Las Vegas
casinos caters primarily to local Las Vegas residents. The Company markets
the casinos together under the Station Casinos' brand, offering convenience
to residents throughout the Las Vegas Valley with its strategically located
properties.
In Missouri, the Company owns and operates Station Casino Kansas City
and Station Casino St. Charles. Station Casino Kansas City, is situated on 183
acres immediately east of the heavily traveled Interstate 435 bridge, seven
miles east of downtown Kansas City. Station Casino Kansas City caters to local
customers within the greater Kansas City area, as well as tourists from outside
the region. Station Casino St. Charles is located on 52 acres situated
immediately north of the Interstate 70 bridge in St. Charles, and is
strategically located to attract customers from the St. Charles and greater St.
Louis areas, as well as tourists from outside the region. Management employs the
same operating strategies that have been successful at the Company's properties
in the competitive Las Vegas market in order to secure a strong presence in the
Missouri markets.
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OPERATING STRATEGY
Management believes that the following key principles have been
integral to its success as a gaming operator and intends to continue to employ
these strategies at each of its various operations.
TARGETED CUSTOMER BASE
The Company's operating strategy emphasizes attracting and retaining
customers primarily from the local and repeat visitor markets. The Las Vegas
Casino Properties and Station Casino Kansas City and Station Casino St. Charles
(collectively the "Casino Properties") attract customers from their local
markets through innovative, frequent and high-profile promotional programs,
focused marketing efforts and convenient locations, and from the repeat visitor
market through aggressive marketing and the development of strong relationships
with specifically targeted travel wholesalers. Although perceived value
initially attracts a customer to the Casino Properties, actual value generates
customer satisfaction and loyalty. Management believes that actual value becomes
apparent during the customer's visit through an enjoyable, affordable and
high-quality entertainment experience. Las Vegas, which is and has been one of
the fastest growing cities in the United States, is characterized by a strong
economy and demographics which include an increasing number of retirees and
other active gaming customers. This strategy applies as well to the Missouri
markets. The Company believes that its out-of-town patrons are also discerning
customers who enjoy the Company's value-oriented, high-quality approach. This is
particularly true in Las Vegas where patrons view the Company's hotel and casino
product as a preferable alternative to attractions located on the Las Vegas
Strip and downtown Las Vegas.
PROVIDE A HIGH-VALUE EXPERIENCE
Because the Company targets the repeat customer, management is
committed to providing a high-value entertainment experience for its customers
in its restaurants, hotels, casinos, and other entertainment amenities.
Management believes that the value offered by restaurants at each of the Casino
Properties is a major factor in attracting its local gaming customers, as dining
is a primary motivation for casino visits by many locals. Through their
restaurants, each of which has a distinct theme and style of cuisine, the
Company's Casino Properties offer generous portions of high-quality food at
reasonable prices. In addition, the Company's operating strategy focuses on slot
and video poker machine play. The Company's target market consists of frequent
gaming patrons who seek not only a friendly atmosphere and convenience, but also
higher than average payout rates. Because locals and repeat visitors demand
variety and quality in their slot and video poker machine play, the Casino
Properties offer the latest in slot and video poker technology, including
several games designed exclusively for the Company.
As part of its commitment to providing a quality entertainment
experience for its patrons, the Company is dedicated to ensuring a high level of
customer satisfaction and loyalty by providing attentive customer service in a
friendly, casual atmosphere. Management recognizes that consistent quality and a
comfortable atmosphere stem from the collective care and friendliness of each
employee. The Company, which began as a family-run business, has maintained
close-knit relationships among its management and endeavors to instill among its
employees this same sense of loyalty. Toward this end, management takes a
hands-on approach through active and direct involvement with employees at all
levels.
MARKETING AND PROMOTION
The Company employs an innovative marketing strategy that utilizes
frequent, high-profile promotional programs in order to attract customers and
establish a high level of name recognition. In addition to aggressive marketing
through television, radio and newspaper advertising, the Company has created and
sponsored such promotions as "Paycheck Bonanza" and the "Great Giveaway," a
popular football season contest. These promotions have become a tradition in the
locals' market and have had a positive impact upon the Company's patronage
during their respective promotion periods.
In April 1999, the Company introduced its unified Boarding Pass
player rewards program at the Las Vegas Casino Properties. The Boarding Pass
program allows guests to earn points based on their level of gaming activity.
These points can then be redeemed for food, entertainment and merchandise at
any of the Las Vegas Casino Properties. This "single card", for which the
technology was developed in-house, sets the Company apart from its
competition in the Las Vegas locals market.
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CASINO PROPERTIES
Set forth below is certain information concerning the properties that
are owned and operated by the Company. The properties are more fully described
in the following table.
<TABLE>
<CAPTION>
CASINO PROPERTIES (1)
CASINO
SQUARE HOTEL GAMING PARKING
PROPERTY FOOTAGE ROOMS SLOTS (2) TABLES (3) SPACES (4)
- ----------------------------------- ------- ----- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Las Vegas Casino Properties
Palace Station ............... 84,000 1,028 2,244 47 3,700
Boulder Station .............. 89,000 300 3,108 47 4,350
Texas Station ................ 95,000 200 2,795 43 5,300
Sunset Station ............... 110,000 467 3,000 56 5,700
Missouri Casino Properties
Station Casino St. Charles ... 45,000 - 1,875 40 5,400
Station Casino Kansas City ... 140,000 200 3,188 144 5,000
Other
Wild Wild West ............... 12,500 260 250 7 500
Barley's ..................... 10,000 - 199 9 -
Southwest Gaming ............. - - 797 - -
</TABLE>
(1) The information with respect to each property other than Station Casino St.
Charles is as of December 31, 1999. Information for Station Casino St.
Charles is as of March 30, 2000, after the change from moving all gaming
operations from the riverboat to the barge.
(2) Includes slot and video poker machines and other coin-operated devices.
(3) Generally includes blackjack ("21"), craps, roulette, pai gow poker, mini
baccarat, Caribbean stud poker, let it ride, big six, three card and
double down stud. The Las Vegas Casino Properties also offer a keno lounge,
poker room, bingo parlor and a race and sports book. The Missouri Casino
Properties also offer a poker room. Wild Wild West and Barley's also offer
a sports book.
(4) Includes covered parking spaces of 1,900 for Palace Station, 1,900 for
Boulder Station, 3,500 for Texas Station, 2,000 for Sunset Station and
4,000 for Station Casino St. Charles.
LAS VEGAS CASINO PROPERTIES
PALACE STATION
Palace Station is situated on approximately 39 acres strategically
located at the intersection of Sahara Avenue and Interstate 15, one of Las
Vegas' most heavily traveled areas, and a short distance from McCarran
International Airport and from major attractions on the Las Vegas Strip and
downtown Las Vegas. With Palace Station's ample parking and its convenient
location, customers are assured easy access to the hotel and casino, a factor
that management believes is particularly important in attracting and retaining
its customers. The Palace Station complex has approximately 287,000 square feet
of main facility area and features a turn-of-the-century railroad station theme.
The complex also includes two swimming pools, an approximately 20,000-square
foot banquet and convention center, five full-service restaurants, several
fast-food outlets, a 24-hour gift shop and a non-gaming video arcade.
Palace Station's five full-service restaurants have a total of over
1,225 seats. These restaurants offer a variety of high-quality food at
reasonable prices, including the 24-hour Iron Horse Cafe (featuring a Chinese
menu in addition to American fare), an all-you-can-eat buffet known as "The
Feast," the Broiler (a steak and seafood restaurant), the Pasta Palace (an
Italian restaurant) and the Guadalajara Bar & Grille (a Mexican restaurant).
Palace Station guests also may take advantage of the Palace Saloon Piano Bar and
the Trax Lounge, which provide music, dancing and entertainment.
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BOULDER STATION
Boulder Station, which opened in August 1994, is situated on
approximately 46 acres strategically located on the opposite side of Las
Vegas from Palace Station. Patrons enjoy convenient access to this facility
which is located on Boulder Highway and immediately adjacent to the
Interstate 515 interchange. Management believes that its highly visible
location at this well-traveled intersection offers a competitive advantage
relative to existing hotels and casinos located on Boulder Highway.
Boulder Station is located approximately four miles east of the Las Vegas
Strip and approximately four miles southeast of downtown Las Vegas. The
Boulder Station complex has approximately 337,000 square feet of main
facility area and, like Palace Station, features a turn-of-the-century
railroad station theme. The complex also includes five full-service
restaurants, several fast-food outlets, a 280-seat entertainment lounge,
eight additional bars, a high-quality 11-screen movie theater complex, a
Kid's Quest child-care facility, a swimming pool, a non-gaming video arcade
and a gift shop.
Boulder Station's five full-service restaurants have a total of over
1,400 seats. These restaurants offer a variety of high-quality food at
reasonable prices. Restaurant themes and menus are similar to Palace Station's,
allowing Boulder Station to benefit from the market acceptance and awareness of
this product. Restaurants include the 24-hour Iron Horse Cafe (featuring a
Chinese menu in addition to American fare), an all-you-can-eat buffet known as
"The Feast," the Broiler (a steak and seafood restaurant), the Pasta Palace (an
Italian restaurant), and the Guadalajara Bar & Grille (a Mexican restaurant). In
addition to these restaurants which are similar to the offerings at Palace
Station, Boulder Station offers various fast-food outlets. Boulder Station's
restaurants and bars are located in open settings that are designed to
intermingle the dining and gaming experience.
TEXAS STATION
Texas Station, which opened in July 1995, is situated on
approximately 47 acres located at the corner of Lake Mead Boulevard and
Tonopah Highway in North Las Vegas. The facility features a friendly,
"down-home" Texas atmosphere, highlighted by its distinctive early-Texas
architecture. In February 1999, the Company completed a $55 million
master-planned expansion of Texas Station. Upon completing this expansion,
Texas Station has approximately 390,000 square feet of main facility area
which also includes five full-service restaurants, several fast-food outlets,
a 10,000-square foot Kid's Quest child-care facility, a 132-seat
entertainment lounge, seven additional bars, a high-quality 18-screen movie
theater complex, a swimming pool, a non-gaming video arcade and a gift shop.
Management believes that the theater complex provides a competitive advantage
for the property and is an additional attraction that draws a significant
number of patrons to the facility (see "Expansion Strategy" in this Item 1
for discussion of an additional master-planned expansion of Texas Station).
Texas Station's five full-service restaurants have a total of over
1,300 seats. These restaurant facilities offer a variety of high-quality food at
reasonable prices, including the 24-hour Yellow Rose Cafe (a 24-hour coffee
shop), the Stockyard Steakhouse, the Guadalajara Bar & Grille (a Mexican
restaurant), the San Lorenzo (an Italian restaurant) and the Market Street
Buffet (featuring seven different food stations). In addition to the Texas
Station-themed restaurants, guests may also take advantage of the unique
features of the Martini Ranch, the Whiskey Bar with a seven-foot high bronco
rider, which rotates on a pedestal and may be viewed by patrons on all sides,
the Garage Bar which features a 1976, fire engine red Cadillac Eldorado with
seven-foot Texas long-horns on the hood, or the Armadillo Honky Tonk where a
3,000 piece cut glass armadillo is the centerpiece of a dance hall. The facility
also offers a variety of fast-food outlets to enhance the customers' dining
selection. Management believes that the quality and variety of the restaurants
offered at the facility are a major draw in the rapidly growing North Las Vegas
and Summerlin markets.
SUNSET STATION
Sunset Station, which opened in June 1997, is located on an
approximately 105-acre parcel at the intersection of Interstate 515 and
Sunset Road. Multiple access points provide customers convenient access to
the gaming complex and parking areas. Situated in a highly concentrated
commercial corridor along Interstate 515, Sunset Station has prominent
visibility from the freeway and the Sunset commercial corridor. Sunset
Station is located approximately nine miles east of McCarran International
Airport and eight miles southeast of Boulder Station. In November 1998, the
Company completed a $34 million master-planned expansion of Sunset Station.
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Sunset Station is distinguished from the Company's other properties by
its interior and exterior Spanish/Mediterranean-style architecture. The facility
features approximately 428,000 square feet of main facility area, plus seven
full-service restaurants, themed to capitalize on the restaurants at the
Company's other properties, an entertainment lounge, additional bars, a
microbrewery, a gift shop, a non-gaming video arcade, tenant lease space for
additional restaurants, a high-quality 13-screen movie theater complex, a Kid's
Quest child-care facility, an outdoor swimming pool and an amphitheater, as well
as several fast-food outlets and franchises.
Sunset Station's seven full-service restaurants have a total of over
2,100 seats featuring "live-action" cooking and simulated patio dining. These
restaurant facilities offer a variety of high-quality food at reasonable prices,
including the 24-hour Sunset Cafe (a 24-hour coffee shop), the Sonoma Cellar (a
steakhouse), the Casa Del Sol (a seafood restaurant), the Capri (an Italian
restaurant), Guadalajara Bar & Grille (a Mexican restaurant), Sunset Brewing
Company (a microbrewery) and The Feast Around the World, a live action buffet
featuring Mexican, Italian, barbecue, American and Chinese cuisine. Guests may
also take advantage of the Gaudi Bar, a centerpiece of the casino featuring over
8,000 square feet of stained-glass and a water light display. The facility also
offers fast-food outlets to enhance the customers' dining selection.
Sunset Station is located on approximately 105 acres, approximately 70
acres of which have been developed. The Company is currently evaluating
potential development plans for the undeveloped property. Uses for the land
could include a lifestyle entertainment retail center, as well as the
development of several pads for various build-to-suit retail, restaurant and
entertainment concepts. Timing and definitive plans have not yet been determined
for such a development.
MISSOURI CASINO PROPERTIES
STATION CASINO KANSAS CITY
Station Casino Kansas City opened in January 1997. This facility is
a master-planned gaming and entertainment destination facility featuring a
historic Missouri riverboat theme and is strategically located to attract
customers from the greater Kansas City area, as well as tourists from outside
the region. The facility is located on an approximately 183-acre site
immediately east of the heavily traveled Interstate 435 bridge, seven miles
east of downtown Kansas City. Station Casino Kansas City's marketing programs
are specifically designed to effectively target and capture repeat customer
demand from the local customer base and also capture the strong visitor and
overnight markets. Management believes that Station Casino Kansas City has
specific advantages relative to other riverboat facilities in the region and
that it is the premier facility in the Kansas City market. The site is
adjacent to the Interstate 435 bridge, which supports traffic flow of
approximately 90,000 cars per day. Interstate 435 is a six-lane, north-south
expressway offering quick and easy accessibility and direct visibility of the
site.
The Station Casino Kansas City facility features two continuously
docked gaming vessels situated in a man-made protective basin. The Company
believes the Station Casino Kansas City facility offers the first Las
Vegas-style gaming experience in the Midwest. The gaming facilities are docked
adjacent to a land-based entertainment facility with approximately 526,000
square feet of main facility area which includes six full-service restaurants,
several fast-food outlets, 11 bars and lounges, a 1,400-seat Grand Pavillion
featuring headline entertainment, a Kid's Quest child-care facility, a
high-quality 18-screen movie theater complex, a 5,700-square foot non-gaming
video arcade and midway operated by Sega GameWorks and a gift shop.
Station Casino Kansas City's restaurants offer a variety of
high-quality food at reasonable prices. Restaurants include an all-you-can-eat
live action buffet "Feast Around the World," featuring Italian, Mexican,
Chinese, barbecue, and traditional American fare, Bugatti's Little Italy Cafe,
featuring fine Italian cuisine and a wine bar with an extensive selection,
Pancho Villa's Cantina, featuring southwestern foods, the Orleans Seafood Co.
and Oyster Bar, featuring fresh Louisiana style seafood, and the Hafbrauhaus
Brewery & Biergarten featuring a wide selection of micro-brewed lagers, an
assortment of American and Bavarian cuisine and live entertainment. In addition,
Station Casino Kansas City leases space to a well-known Kansas City favorite,
Arthur Bryant's Barbeque.
STATION CASINO ST. CHARLES
Station Casino St. Charles opened in May 1994. Station Casino St.
Charles is situated immediately north of the Interstate 70 bridge in St. Charles
on approximately 52 acres owned by the Company. The Station Casino St. Charles
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complex is strategically located to attract customers from the St. Charles and
greater St. Louis area, as well as tourists from outside the region. The site is
adjacent to the Interstate 70 bridge. Interstate 70 is a 10-lane, east-west
expressway offering quick and easy accessibility to and direct visibility of the
Station Casino St. Charles site.
In March 2000, the Company completed a reconfiguration of the two
gaming vessels at Station Casino St. Charles. In response to the new "open
boarding" rules that went into effect in the St. Louis market in September 1999,
the Company has moved all of the gaming operations to the existing barge which
contains 45,000 square feet of gaming and entertainment space. Station Casino
St. Charles features a 250-seat all-you-can-eat buffet known as "The Feast," as
well as an 80-seat specialty steakhouse known as "The Broiler." In addition to
the casinos and restaurants, the facility offers three bars, an entertainment
lounge, a lobby, a ticketing facility and a gift shop.
In May 1996, the Company completed construction of an elevated
roadway and a 4,000-space five-story parking structure. The parking facility
is constructed above the existing flood plain. The elevated roadway and
parking structure provide improved access to the gaming facilities and
significantly diminish Station Casino St. Charles' susceptibility to closure
during the spring flooding season.
In the fall of 1996, the Company commenced an expansion project at
Station Casino St. Charles which included the building of a backwater basin
containing two new gaming vessels and a new retail and entertainment complex.
Since December 31, 1997, construction on the Station Casino St. Charles
expansion project has been halted.
The Company currently believes the Station Casino St. Charles expansion
project as originally contemplated fulfills a strategic need in the St. Louis,
Missouri market. While the Company desires to complete and operate these new
facilities, circumstances may arise in the future, including the lack of
available financing, a downturn in the demand for gaming facilities or increased
regulatory requirements unique to the state of Missouri and more attractive uses
of available capital, which may prevent the expansion project from being
completed as originally designed, if at all. As a result of the uncertainty
surrounding the expansion project, the Company evaluated the carrying values of
the assets in St. Charles as of December 31, 1999 and concluded that a
write-down of the assets was appropriate.
As of December 31, 1999, the existing operating assets and $169.0
million the Company had invested in the expansion project were written down by
approximately $125.2 million. The Company does not anticipate that any major
construction activity on the expansion project will resume in the near term.
THE SOUTHWEST COMPANIES
The Company provides slot route management services to numerous food
and beverage establishments and commercial businesses in Southern Nevada through
its subsidiary, Southwest Gaming Services, Inc. ("SGSI"). SGSI commenced its
slot route business in southern Nevada in December 1990. Management combined its
gaming experience with its route management abilities to capitalize on the
rapidly expanding slot route business.
EXPANSION STRATEGY
SELECTION CRITERIA
Management believes that a highly visible central location, convenient
access and ample parking are critical factors in attracting local patronage and
repeat visitors. Additionally, sites must be large enough to support
multi-phased master-planned growth. The Company selects sites that are centrally
located within a dense population base so that the facility cannot be cut-off
from its primary market. These sites generally have been adjacent to
high-traffic surface streets and interstate highways. Management believes that
each of its casino properties' locations has provided the Company with a
significant competitive advantage to attract its targeted customer base.
MASTER-PLANNED DEVELOPMENT
Management's expansion strategy includes the master-planned expansion
of its existing and future gaming locations. In designing project sites, the
Company plans and engineers for multi-phased facility expansion to accommodate
future growth and to allow the Company to develop dominant properties in each
market place. A project's
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master-planned design typically allows the option of adding hotel rooms, casino
space and non-gaming entertainment such as movie theaters, additional
restaurants, retail shops, and various other entertainment venues.
The Company has commenced another phase of master-planned
construction at Texas Station. Construction has begun on the $55 million
project, which is expected to be completed in the first quarter of 2001. The
next phase of the master plan is designed to further position Texas Station
as an all-inclusive entertainment destination for Las Vegas residents. The
project will include the addition of 350 gaming devices, a 60-lane bowling
alley and approximately 40,000 square feet of meeting and banquet space.
EXPANSION, DEVELOPMENT AND ACQUISITION OPPORTUNITIES
The Company continually evaluates the timing and scope of its
master-planned developments at each of its properties and may determine from
time to time to expand the scope of, improve on or suspend the implementation of
its master plans. These decisions are dependent upon the availability of
financing, competition and future economic and gaming regulatory environments,
many of which are beyond the Company's control.
The Company also evaluates other development and acquisition
opportunities in current and emerging gaming markets, including land-based,
dockside, riverboat and Indian gaming opportunities. The Company's decision
whether to proceed with any new gaming development or acquisition opportunity is
dependent upon future economic and regulatory factors, the availability of
financing and competitive and strategic considerations, many of which are beyond
the Company's control.
GREEN VALLEY PROJECT
A 50/50 joint venture between the Company and GCR Gaming, LLC (a
subsidiary of American Nevada Corporation) has proposed to build a new
resort/casino on the south side of Interstate 215 at Green Valley Parkway in
Henderson, Nevada. The 40-acre resort site is part of a 170-acre mixed-use
commercial, retail and office project. The resort site has been designated a
gaming enterprise district under Nevada Senate Bill 208 and local ordinances
since 1996. Construction is expected to commence during the third quarter of
2000 and is expected to be completed in the fourth quarter of 2001. The
estimated construction cost of this project is $270 to $280 million. The
yet-to-be named project will be managed by a subsidiary of the Company. The
Company and American Nevada Corporation have co-owned Barley's since January
1996.
The new project is planned to complement the Green Valley Ranch
master-planned community. The plans for the project include over 330,000
square feet of public space and 200 hotel rooms. Planned entertainment
amenities include a state-of-the-art spa with outdoor pools; a 10-screen
movie theater; six full-service restaurants; a fast-food court with six
quick-serve outlets and a non-gaming arcade. It is anticipated that the
casino will have 95,000 square feet of gaming with over 2,400 slot machines
and 40 table games. The planned facility also includes a race and sports
book, a poker room and parking for approximately 3,200 vehicles in a low-rise
garage and on surface parking.
UNITED AUBURN INDIAN COMMUNITY
On October 12, 1999, the Company announced that it has entered into
a Development Services Agreement and a Management Agreement with the United
Auburn Indian Community (the "UAIC"). Subject to the receipt of certain
governmental approvals, as well as voter approval of a proposed amendment to
the California constitution, the Company and the UAIC intends to develop a
gaming and entertainment facility on 49 acres, approximately seven miles
north of Interstate 80, in Placer County, California, near Sacramento. The
scope and the timing of this project has yet to be determined.
COMPETITION
The gaming industry includes land-based casinos, dockside casinos,
riverboat casinos, casinos located on Indian reservations and other forms of
legalized gaming. There is intense competition among companies in the gaming
industry, many of which have significantly greater resources than the Company.
Certain states have recently legalized, and several other states are currently
considering legalizing, casino gaming in designated areas. Legalized casino
gaming in such states and on Indian reservations will provide strong competition
to the Company and could adversely affect the Company's operations, particularly
to the extent that such gaming is conducted in areas close to the Company's
operations. Indian gaming in California, as it currently exists, has had little,
if any impact on the Company's operations to date, although there are no
assurances as to future impact. Proposition 5, a California ballot initiative
passed by voters in California on November 3, 1998, would have permitted Indian
tribes who enter into agreements with the State of California to conduct certain
gaming activities including horse race wagering, gaming devices (including slot
machines), banked card games and lotteries. In August 1999 Proposition 5 was
ruled unconstitutional by the California Supreme Court on the basis that the
initiative would permit the operation of Nevada and New Jersey type casinos,
which is prohibited by the California Constitution. Proposition 1A is an
amendment to the California Constitution, passed by the voters of California
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on March 7, 2000, designed to modify the Constitution to authorize the Governor
to negotiate compacts with federally recognized Indian tribes, subject to
Legislative ratification, for the operation of slot machines, lottery games, and
banking and percentage games on Indian lands. In September 1999 the Governor
negotiated, and the Legislature ratified, compacts with 57 Indian tribes that
became effective with the passage of Proposition 1A. It is not certain how
Proposition 1A will affect the Company; however, because visitors from
California make up Nevada's largest visitors market, with Proposition 1A,
increased competition from Indian gaming may result in a decline in the
Company's revenues and may have a material adverse effect on the Company's
business.
The Las Vegas Casino Properties face competition from all other
casinos and hotels in the Las Vegas area, including to some degree, from each
other. Such competition includes at least 11 hotel/casinos targeted primarily
towards local residents and repeat visitors, as well as numerous non-hotel
gaming facilities targeted towards local residents. The Company competes with
other locals oriented hotel/casinos by focusing on repeat customers and
attracting these customers through innovative marketing programs. The
Company's value-oriented, high-quality approach is designed to generate
repeat business. Additionally, the casino properties are strategically
located and designed to permit convenient access and ample parking, which are
critical factors in attracting local visitors and repeat patrons. Currently,
there are approximately 30 major gaming properties located on or near the Las
Vegas Strip, 12 located in the downtown area and several located in other
areas of Las Vegas. In addition, two new hotel/casinos are under construction
which will add approximately 2,800 rooms to the Las Vegas area. One of the
new hotel/casinos is located on the Las Vegas Strip and is expected to draw
significant numbers of visitors. This new facility could have a positive
effect on the Las Vegas Casino Properties through increased local employment
and increased visitor traffic to Las Vegas. However, major additions,
expansions or enhancements of existing properties or the construction of new
properties by competitors, could also have a material adverse effect on the
businesses of the Las Vegas Casino Properties. The additional capacity has
had little, if any, impact on the Las Vegas Casino Properties' hotel
occupancy or casino volume to date, although there can be no assurance that
hotel occupancy or casino volume will not be adversely affected in the future.
The Las Vegas Casino Properties face more direct competition from 11
hotel/casinos primarily targeted to the local and the repeat visitor markets.
Some of these competitors have completed expansions and existing competitors
and new entrants into these markets are in the planning stages or under
construction on other projects. Other gaming operators own undeveloped
properties on which they could develop gaming facilities in the immediate
vicinity of Texas Station. In July 1999, The Regent Las Vegas Hotel and
Casino ("the Regent") opened in northwest Las Vegas approximately five miles
from Texas Station. The Regent competes indirectly with Texas Station because
of its close proximity to Texas Station. Another new hotel/casino will be
opening near the Regent in the second half of 2000 and will compete directly
with Palace Station and Texas Station. Also, a smaller competitor on Boulder
Highway is anticipated to open in the first half of 2000. Although the
Company has competed strongly in these marketplaces, there can be no
assurance that additional capacity will not have a negative impact on the
Company.
The Missouri Gaming Commission has been empowered to determine the
number of gaming licenses supportable by the region's economic situation. As
of December 31, 1999, 41 applications for gaming licenses had been filed with
the State of Missouri, including ten applications to operate in the St. Louis
marketplace. Ten licensees are currently licensed in Missouri, in St. Louis,
Kansas City, St. Joseph and Caruthersville, Missouri. Station Casino St.
Charles competes primarily with other gaming operations in and around St.
Louis, Missouri. Currently, in addition to Station Casino St. Charles, there
are four competitors operating in the St. Louis market. In particular,
Station Casino St. Charles directly competes with a facility located in
Maryland Heights which opened in 1997. Such direct competition is due to the
Maryland Heights facility's size, quality and close proximity. The Company
has experienced a decline in revenues at Station Casino St. Charles since the
opening of the Maryland Heights facility. The Company has taken steps that
management believes will mitigate the effects of such competition and the
decline in revenues has stabilized. However, in light of ever increasing
competition, there can be no assurance as to the future performance of
Station Casino St. Charles. Additionally, two of the four competitors
operating in the St. Louis market are located in Illinois, which does not
impose the $500 loss limit imposed in Missouri. Gaming also has been approved
by local voters in jurisdictions near St. Louis, including St. Charles,
Jefferson City and other cities and counties along the Mississippi and
Missouri Rivers. The Missouri Gaming Commission is currently considering
applicants for a gaming license in the St. Louis area. It is not known at
this time if a new license will be granted, or, if granted, when the licensee
could open a new facility. Any new gaming operations developed near St. Louis
would likely provide significant competition to Station Casino St. Charles.
Gaming laws in surrounding states and in other areas may be amended in ways
that would increase the competition to Station Casino St. Charles. This
increasing competition could have a material adverse effect on the Company's
business.
On March 21, 1997, Davis Gaming was selected for investigation for
licensure for a riverboat gaming operation which it intends to develop in
Boonville, Missouri, a city in central Missouri near Jefferson City and
Columbia. Davis Gaming recently sold its rights to build and operate the Isle of
Capri which has until March 31, 2000, to obtain approval
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from the Boonville City Council. In addition, Mark Twain Casino L.L.C. was
selected for investigation for licensure for a riverboat gaming operation which
it intends to develop in LaGrange, Missouri, a city in northeastern Missouri.
Neither area is currently served by a Missouri gaming facility. The Isle of
Capri Project has proceeded and has received preliminary site and development
approval from the Missouri Gaming Commission. On February 23, 2000, the Mark
Twain Casino Project received approval from the Missouri Gaming Commission to
operate its proposed riverboat gaming operation in a continuously docked manner.
Station Casino Kansas City competes primarily with other gaming
operations in and around Kansas City, Missouri. In addition to Station Casino
Kansas City, there are three other gaming facilities currently operating in
the Kansas City market. Gaming has been approved by local voters in
jurisdictions near Kansas City, including St. Joseph (which currently has one
riverboat gaming operation), Jefferson City and other cities and counties
along the Missouri River. Since the opening of Station Casino Kansas City,
Sam's Town, the closest gaming development to Station Casino Kansas City,
closed and Boyd Gaming, the owner of Sam's Town, sold most of Sam's Town's
assets to Harrah's, the operator of Harrah's-North Kansas City, the next
closest gaming operator in the area. The Kansas state senate is currently
considering a bill to allow games of chance at the Woodlands race track which
is approximately 15 miles from Station Casino Kansas City. Although this has
been proposed in the past and failed, there are no assurances it will fail
again. Any new gaming operations developed near Kansas City would likely
provide significant competition to Station Casino Kansas City.
Several companies are engaging in riverboat gaming in states
neighboring Missouri. Illinois sites, including Alton, East St. Louis, and
Metropolis, enjoy certain competitive advantages over Station Casino St. Charles
because Illinois, unlike Missouri, does not impose limits on the size of losses
and places fewer restrictions on the extension of credit to customers. In
contrast, Missouri gaming law provides for a maximum loss of $500 per player on
each cruise and prohibits the extension of credit (except credit cards and
checks). Unlike Illinois gaming law, the Missouri gaming law places no limits on
the number of gaming positions allowed at each site. As of December 31, 1999,
Illinois had approved a total of ten licenses; however, only nine licensees are
operating riverboat gaming facilities. While riverboats currently are the only
licensed form of casino-style gaming in Illinois and the number of licenses is
restricted to ten, possible future competition may arise if gaming is legalized
in or around Chicago, which was specifically excluded from the legislation
permitting gaming in Illinois.
The Company's Missouri gaming operations also compete to a lesser
extent with the riverboat and floating gaming facilities in Mississippi,
Louisiana, Iowa and Indiana. Like Illinois, neither Mississippi nor Louisiana
gaming legislation imposes limits on wagers or losses. Gaming laws in these
states and in other areas may be amended in ways that would increase the
competition to the Company's Missouri gaming operations.
To a lesser extent, the Company's operations compete with gaming
operations in other parts of the state of Nevada, such as Reno, Laughlin and
Lake Tahoe, with facilities in Atlantic City, New Jersey and other parts of the
world and with state-sponsored lotteries, on-and-off-track pari-mutuel wagering,
card parlors and other forms of legalized gambling.
REGULATION AND LICENSING
NEVADA GAMING REGULATIONS
The ownership and operation of casino gaming facilities, the operation
of gaming device routes and the manufacture and distribution of gaming devices
in Nevada are subject to: (i) the Nevada Gaming Control Act and the rules and
regulations promulgated thereunder (collectively, the "Nevada Act"); and (ii)
various local ordinances and regulations. The Company's gaming operations are
subject to the licensing and regulatory control of the Nevada Gaming Commission
("Nevada Commission"), the Nevada State Gaming Control Board ("Nevada Board"),
the City of Las Vegas, the Clark County Liquor and Gaming Licensing Board (the
"Clark County Board"), the City of North Las Vegas, the City of Henderson and
certain other local regulatory agencies. The Nevada Commission, the Nevada
Board, the City of Las Vegas, the Clark County Board, the City of North Las
Vegas, the City of Henderson, and certain other local regulatory agencies are
collectively referred to as the "Nevada Gaming Authorities".
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices
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of licensees, including the establishment of minimum procedures for internal
controls and the safeguarding of assets and revenues, providing reliable record
keeping and requiring the filing of periodic reports with the Nevada Gaming
Authorities; (iv) the prevention of cheating and fraudulent practices; and (v)
providing a source of state and local revenues through taxation and licensing
fees. Change in such laws, regulations and procedures could have an adverse
effect on the Company's gaming operations.
The Company's direct and indirect subsidiaries that conduct gaming
operations in Nevada are required to be licensed by the Nevada Gaming
Authorities. The gaming licenses require the periodic payment of fees and taxes
and are not transferable. SGSI is licensed as a distributor and as an operator
of a slot machine route. Palace Station Hotel & Casino, Inc. ("PSHC"), Boulder
Station, Inc. ("BSI"), Texas Station, Inc. ("TSI"), Sunset Station, Inc.
("SSI"), and Tropicana Station, Inc. ("TRSI") have received licenses to conduct
nonrestricted gaming operations. Town Center Amusements, Inc. ("TCAI") has been
licensed to conduct nonrestricted gaming operations at Barley's Casino & Brewing
Company ("Barley's Casino"), a micro brewery and casino located in Southeast Las
Vegas. The Company's ownership in TCAI is held through an intermediary company
known as Green Valley Station, Inc. ("GVSI") which is licensed as a member and
Manager of TCAI. The Company is registered by the Nevada Commission as a
publicly traded corporation (a "Registered Corporation") and has been found
suitable to own the stock of PSHC, BSI, TSI, SSI, TRSI, GVSI, and SGSI. The
Company is also licensed as a manufacturer and distributor. PSHC, BSI, TSI, SSI,
TRSI, GVSI, and SGSI are each a corporate gaming licensee and TCAI is a limited
liability company licensee (individually a "Gaming Subsidiary" and collectively
the "Gaming Subsidiaries") under the terms of the Nevada Act. As a Registered
Corporation, the Company is required periodically to submit detailed financial
and operating reports to the Nevada Commission and the Nevada Board and furnish
any other information which the Nevada Commission or the Nevada Board may
require. No person may become a stockholder or holder of an interest of, or
receive any percentage of profits from the Gaming Subsidiaries without first
obtaining licenses and approvals from the Nevada Gaming Authorities. The Company
and the Gaming Subsidiaries have obtained from the Nevada Gaming Authorities the
various registrations, findings of suitability, approvals, permits and licenses
(individually, a "Gaming License" and collectively, the "Gaming Licenses")
required in order to engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, a Registered
Corporation, such as the Company or the Gaming Subsidiaries, which hold a
license, in order to determine whether such individual is suitable or should be
licensed as a business associate of a Registered Corporation or a gaming
licensee. Officers, directors and certain key employees of the Gaming
Subsidiaries must file applications with the Nevada Gaming Authorities and may
be required to be licensed or found suitable by the Nevada Gaming Authorities.
Officers, directors and key employees of the Company who are actively and
directly involved in gaming activities of the Gaming Subsidiaries may be
required to be licensed or found suitable by the Nevada Gaming Authorities. The
Nevada Gaming Authorities may deny an application for licensing for any cause
which they deem reasonable. A finding of suitability is comparable to licensing,
and both require submission of detailed personal and financial information
followed by a thorough investigation. The applicant for licensing or a finding
of suitability must pay all the costs of the investigation. Changes in licensed
positions must be reported to the Nevada Gaming Authorities and in addition to
their authority to deny an application for a finding of suitability or
licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a
change in corporate position.
If the Nevada Gaming Authorities were to find an officer, director or
key employee unsuitable for licensing or unsuitable to continue to have a
relationship with the Company or the Gaming Subsidiaries, the companies involved
would have to sever all relationships with such person. In addition, the Nevada
Commission may require the Company or the Gaming Subsidiaries to terminate the
employment of any person who refuses to file the appropriate applications.
Determinations of suitability or questions pertaining to licensing are not
subject to judicial review in Nevada.
The Company and the Gaming Subsidiaries are required to submit detailed
financial and operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing transactions
by the Company and the Gaming Subsidiaries must be reported to or approved by
the Nevada Commission and/or the Nevada Board.
If it were determined that the Nevada Act was violated by a Gaming
Subsidiary, the gaming licenses it holds could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, the Company, the Gaming Subsidiaries and the
persons involved could be subject to substantial fines for each separate
violation of the Nevada Act at the discretion of the Nevada Commission. Further,
a supervisor could be
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appointed by the Nevada Commission to operate Palace Station, Boulder Station,
Texas Station, Sunset Station, Wild Wild West and Barley's Casino and, under
certain circumstances, earnings generated during the supervisor's appointment
(except for the reasonable rental value of the premises) could be forfeited to
the State of Nevada. Limitation, conditioning or suspension of the Gaming
Licenses of the Gaming Subsidiaries or the appointment of a supervisor could
(and revocation of any Gaming License would) materially adversely affect the
Company's gaming operations.
Any beneficial owner of the Company's voting securities, regardless of
the number of shares owned, may be required to file an application, be
investigated, and have their suitability as a beneficial owner of the Company's
voting securities determined if the Nevada Commission has reason to believe that
such ownership would otherwise be inconsistent with the declared policies of the
state of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Act provides that persons who acquire beneficial ownership
of more than 5% of the voting securities of a Registered Corporation must report
the acquisition to the Nevada Commission. The Nevada Act also requires that
beneficial owners of more than 10% of the voting securities of a Registered
Corporation must apply to the Nevada Commission for a finding of suitability
within thirty days after the Chairman of the Nevada Board mails the written
notice requiring such filing. An "institutional investor," as defined in the
Nevada Commission's regulations, which acquires beneficial ownership of more
than 10%, but not more than 15% of the Company's voting securities may apply to
the Nevada Commission for a waiver of such finding of suitability if such
institutional investor holds the voting securities for investment purposes only.
An institutional investor shall not be deemed to hold voting securities for
investment purposes unless the voting securities were acquired and are held in
the ordinary course of business as an institutional investor and not for the
purpose of causing, directly or indirectly, the election of a majority of the
members of the board of directors of the Company, any change in the Company's
corporate charter, bylaws, management policies or operations of the Company, or
any of its gaming affiliates, or any other action which the Nevada Commission
finds to be inconsistent with holding the Company's voting securities for
investment purposes only. Activities which are not deemed to be inconsistent
with holding voting securities for investment purposes only include: (i) voting
on all matters voted on by stockholders; (ii) making financial and other
inquiries of management of the type normally made by securities analysts for
informational purposes and not to cause a change in its management, policies or
operations; and (iii) such other activities as the Nevada Commission may
determine to be consistent with such investment intent. If the beneficial holder
of voting securities who must be found suitable is a corporation, partnership or
trust, it must submit detailed business and financial information including a
list of beneficial owners. The applicant is required to pay all costs of
investigation.
Any person who fails or refuses to apply for a finding of suitability
or a license within thirty days after being ordered to do so by the Nevada
Commission or the Chairman of the Nevada Board, may be found unsuitable. The
same restrictions apply to a record owner if the record owner, after request,
fails to identify the beneficial owner. Any stockholder who is found unsuitable
and who holds, directly or indirectly, any beneficial ownership of the common
stock of a Registered Corporation beyond such period of time as may be
prescribed by the Nevada Commission may be guilty of a criminal offense. The
Company is subject to disciplinary action if, after it receives notice that a
person is unsuitable to be a stockholder or to have any other relationship with
the Company or the Gaming Subsidiaries, the Company (i) pays that person any
dividend or interest upon voting securities of the Company, (ii) allows that
person to exercise, directly or indirectly, any voting right conferred through
securities held by that person, (iii) pay remuneration in any form to that
person for services rendered or otherwise, or (iv) fails to pursue all lawful
efforts to require such unsuitable person to relinquish his voting securities
including, if necessary, the immediate purchase of said voting securities for
cash at fair market value. Additionally, the Clark County Board has the
authority to approve all persons owning or controlling the stock of any
corporation controlling a gaming license.
The Nevada Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file applications, be investigated
and be found suitable to own the debt security of a Registered Corporation if
the Nevada Commission has reason to believe that such ownership would otherwise
be inconsistent with the declared policies of the State of Nevada. If the Nevada
Commission determines that a person is unsuitable to own such security, then
pursuant to the Nevada Act, the Registered Corporation can be sanctioned,
including the loss of its approvals, if without the prior approval of the Nevada
Commission, it: (i) pays to the unsuitable person any dividend, interest, or any
distribution whatsoever; (ii) recognizes any voting right by such unsuitable
person in connection with such securities; (iii) pays the unsuitable person
remuneration in any form; or (iv) makes any payment to the unsuitable person by
way of principal, redemption, conversion, exchange, liquidation or similar
transaction.
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The Company is required to maintain a current stock ledger in Nevada
which may be examined by the Nevada Gaming Authorities at any time. If any
securities are held in trust by an agent or by a nominee, the record holder may
be required to disclose the identity of the beneficial owner to the Nevada
Gaming Authorities. A failure to make such disclosure may be grounds for finding
the record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However, to
date, the Nevada Commission has not imposed such a requirement on the Company.
The Company may not make a public offering of its securities without
the prior approval of the Nevada Commission if the securities or proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. On May 27, 1999, the Nevada Commission granted the Company prior
approval to make public offerings for a period of two years, subject to certain
conditions ("Shelf Approval"). However, the Shelf Approval may be rescinded for
good cause without prior notice upon the issuance of an interlocutory stop order
by the Chairman of the Nevada Board and must be renewed at the end of the two
year approval period. The Shelf Approval also applies to any affiliated company
wholly-owned by the Company (an "Affiliate") which is a publicly traded
corporation or would thereby become a publicly traded corporation pursuant to a
public offering. The Shelf Approval also includes approval for the Gaming
Subsidiaries to guarantee any security issued by, or to hypothecate their assets
to secure the payment or performance of any obligations evidenced by a security
issued by, the Company or an Affiliate in a public offering under the Shelf
Approval. The Shelf Approval does not constitute a finding, recommendation or
approval by the Nevada Commission or the Nevada Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities offered.
Any representation to the contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock
or asset acquisitions, management or consulting agreements, or any act or
conduct by a person whereby such person obtains control, may not occur without
the prior approval of the Nevada Commission. Entities seeking to acquire control
of a Registered Corporation must satisfy the Nevada Board and the Nevada
Commission that they meet a variety of stringent standards prior to assuming
control of such Registered Corporation. The Nevada Commission may also require
controlling stockholders, officers, directors and other persons having a
material relationship or involvement with the entity proposing to acquire
control, to be investigated and licensed as part of the approval process
relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada corporate gaming licensees, and Registered Corporations
that are affiliated with those operations, may be injurious to stable and
productive corporate gaming. The Nevada Commission has established a regulatory
scheme to ameliorate the potentially adverse effects of these business practices
upon Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming licensees and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before a Registered Corporation can make exceptional repurchases of
voting securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Registered
Corporation's Board of Directors in response to a tender offer made directly to
the Registered Corporation's stockholders for the purpose of acquiring control
of the Registered Corporation.
License fees and taxes, computed in various ways depending on the type
of gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the serving or selling of food or refreshments or
the selling of any merchandise. Nevada licensees that hold a license as an
operator of a slot route, or manufacturer's or distributor's license also pay
certain fees and taxes to the state of Nevada.
Any person who is licensed, required to be licensed, registered,
required to be registered, or is under common control with such persons
(collectively, "Licensees"), and who proposes to become involved in a gaming
venture outside of Nevada, is required to deposit with the Nevada Board, and
thereafter maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation by the Nevada Board of their participation in such
foreign gaming. The revolving fund is
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subject to increase or decrease in the discretion of the Nevada Commission.
Thereafter, licensees are required to comply with certain reporting requirements
imposed by the Nevada Act. Licensees are also subject to disciplinary action by
the Nevada Commission if they knowingly violate any laws of the foreign
jurisdiction pertaining to the foreign gaming operation, fail to conduct the
foreign gaming operation in accordance with the standards of honesty and
integrity required of Nevada gaming operations, engage in activities or enter
into associations that are harmful to the state of Nevada or its ability to
collect gaming taxes and fees, or employ, contract with or associate with a
person in the foreign operation who has been denied a license or finding of
suitability in Nevada on the grounds of unsuitability or whom a court in the
state of Nevada has found guilty of cheating. The loss or restriction of the
Company's gaming licenses in Nevada would have a material adverse effect on its
business and could require the Company to cease gaming operations in Nevada.
NEVADA LIQUOR REGULATIONS
The sale of alcoholic beverages at Palace Station is subject to
licensing, control and regulation by the City of Las Vegas. The sale of
alcoholic beverages at Boulder Station and Wild Wild West is subject to
licensing control and regulation by the Clark County Board. Texas Station is
subject to licensing control and regulation of the City of North Las Vegas.
Sunset Station and Barley's Casino are subject to the licensing control and
regulation of the City of Henderson and the Department of Treasury, Bureau of
Alcohol, Tobacco and Firearms. All licenses are revocable and are not
transferable. The agencies involved have full power to limit, condition, suspend
or revoke any such license, and any such disciplinary action could (and
revocation would) have a material adverse effect on the operations of the Gaming
Subsidiaries.
MISSOURI GAMING REGULATIONS
Gaming was originally authorized in the State of Missouri and the City
of St. Charles on November 3, 1992, by referendum, although no governmental
action was taken to enforce or implement the original law. On April 29, 1993,
Missouri enacted the Missouri Gaming Law which replaced the original law and
established the Missouri Gaming Commission, which is responsible for the
licensing and regulation of riverboat gaming in Missouri. The Missouri Gaming
Commission has discretion to approve gaming license applications for both
permanently moored ("dockside") riverboat casinos and powered ("excursion")
riverboat casinos. On September 20, 1993, the Company filed its initial
application with the Missouri Gaming Commission for either a dockside or a
cruising gaming license in St. Charles, Missouri, which license was issued on
May 27, 1994, thereby making the Company one of the first two entrants in the
Missouri riverboat gaming market.
Opponents of gaming in Missouri have brought several legal challenges
to gaming in the past and may possibly bring similar challenges in the future.
There can be no assurances that any future challenges, if brought, would not
further interfere with full-scale gaming operations in Missouri, including the
operations of the Company and its subsidiaries.
On January 25, 1994, as a result of a cause of action brought by
anti-gaming interests, the Missouri Supreme Court held that games of chance,
including certain games authorized under the Missouri Gaming Law such as bingo
and keno, constitute "lotteries" and were therefore prohibited under the
Missouri Constitution. A statewide election on April 5, 1994, failed to adopt a
constitutional amendment that would have exempted excursion boats and floating
facilities from such constitutional prohibition on lotteries. Therefore, in May
1994, the Company commenced operations only with those games which involve some
element of skill ("limited gaming"), such as poker and blackjack, that would be
constitutionally permissible. The authorization of both games of skill and games
of chance ("full-scale gaming") occurred on November 8, 1994 with passage by
Missouri voters of a constitutional amendment virtually identical to the measure
which was defeated on April 5, 1994. Full-scale gaming became effective on
December 9, 1994, and by the end of December 1994, the Company was conducting
full-scale gaming on both its excursion and dockside casinos in St. Charles,
Missouri.
On January 16, 1997, the Missouri Gaming Commission granted Kansas City
Station Corporation two (2) Class A licenses to own and operate the River King
and River Queen floating gaming facilities.
On November 25, 1997, the Supreme Court ruled, in a case brought by
anti-gaming interests involving certain operators who compete with Station
Casino St. Charles in Maryland Heights, Missouri, that gaming may occur only in
artificial spaces that are contiguous to the surface stream of the Missouri and
Mississippi rivers. On November 3, 1998, the citizens of the State of Missouri
approved a Constitutional amendment which was proposed by initiative petition,
that retroactively legalized lotteries, gift enterprises and games of chance
aboard excursion gambling boats and floating
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facilities located within artificial spaces containing water that are within
1,000 feet of the closest edge of the main channel of the Mississippi or
Missouri Rivers. This amendment to the Constitution was certified on November
23, 1998.
Under the Missouri Gaming Law, the ownership and operation of riverboat
gaming facilities in Missouri are subject to extensive state and local
regulation. By virtue of its gaming license in Missouri, the Company, any
subsidiaries it has or it may form and certain of its officers and employees are
subject to the Missouri Gaming Law and the regulations of the Missouri Gaming
Commission.
As part of the application and licensing process for a gaming license,
the applicant must submit detailed financial, operating and other reports to the
Missouri Gaming Commission. Each applicant has an ongoing duty to update the
information provided to the Missouri Gaming Commission in the application. In
addition to the information required of the applicant, directors, officers and
other key persons must submit Personal Disclosure Forms which include detailed
personal financial information and are subject to thorough investigations. All
gaming employees must obtain an occupational license issued by the Missouri
Gaming Commission. Operators' licenses are issued through application to the
Missouri Gaming Commission, which requires, among other things, (a)
investigations into an applicant's character, financial responsibility and
experience qualifications and (b) that applicants furnish (i) an affirmative
action plan for the hiring and training of minorities and women and (ii) an
economic development or impact report. License fees are a minimum of $50,000 for
the initial application and $25,000 annually thereafter.
The Missouri Gaming Commission may revoke or suspend gaming licenses
and impose other penalties for violation of the Missouri Gaming Law and the
rules and regulations which may be promulgated thereunder, including, without
limitation, forfeiture of all gaming equipment used for improper gaming and
fines of up to three times an operator's highest daily amount of gross receipts
from wagering on the gambling games conducted during the preceding twelve
months. No gaming licensee or occupational licensee may pledge, hypothecate or
transfer in any way any license, or any interest in a license, issued by the
Missouri Gaming Commission. An ownership interest in a gaming licensee that is
not a publicly held entity or a holding company that is not a publicly held
entity may not be pledged or hypothecated in any way to, or otherwise be subject
to any type of security interest held by, any entity or person other than a
regulated bank or saving and loan association without prior approval of the
Missouri Gaming Commission. Missouri Gaming Commission regulations prohibit a
licensee from consummating any of the following transactions without at least 60
days' prior notice to the Missouri Gaming Commission, and during such period,
the Missouri Gaming Commission may disapprove the transaction or require the
transaction be delayed pending further investigation; (i) any transfer or
issuance of an ownership interest in a gaming licensee that is not a publicly
held entity or a holding company that is not a publicly held entity; and (ii)
any pledge or hypothecation or grant of any type of security interest in an
ownership interest in a gaming licensee that is not a publicly held entity or a
holding company that is not a publicly held entity to a regulated bank or saving
and loan association; provided that no ownership interest may be transferred in
any way pursuant to any pledge, hypothecation or security interest without
separate notice to the Missouri Gaming Commission at least thirty days prior to
such transfer, which restriction must be specifically included in the grant of
pledge, hypothecation or security interest.
Missouri Gaming Commission regulations require a licensee to notify the
Missouri Gaming Commission of its intention to consummate any of the following
transactions at least fifteen days prior to such consummation, and the Missouri
Gaming Commission may reopen the licensing hearing prior to or following the
consummation date to consider the effect of the transaction on the licensee's
suitability; (i) any issuance of ownership interest in a publicly held gaming
licensee or a publicly held holding company, if such issuance would involve,
directly or indirectly, an amount of ownership interest equaling five percent or
greater of the ownership interest in the gaming licensee or holding company
after the issuance is complete; (ii) any private incurrence of debt equal to or
exceeding one million dollars by a gaming licensee or holding company that is
affiliated with the holder of a license; (iii) any public issuance of debt by a
gaming licensee or holding company that is affiliated with the holder of a
license; and (iv) any significant related party transaction as defined in the
regulations.
The Missouri Gaming Law imposes operational requirements on riverboat
operators, including a charge of two dollars per gaming customer that licensees
must pay to the Missouri Gaming Commission, certain minimum payout requirements,
a 20% tax on adjusted gross receipts, prohibitions against providing credit to
gaming customers (except for the use of credit cards and cashing checks) and a
requirement that each licensee reimburse the Missouri Gaming Commission for all
costs of any Missouri Gaming Commission staff necessary to protect the public on
the licensee's riverboat. Licensees must also submit audited quarterly financial
reports to the Commission and pay the associated auditing fees. Other areas of
operation which are subject to regulation under Missouri rules are the size,
denomination
15
<PAGE>
and handling of chips and tokens; the surveillance methods and computer
monitoring of electronic games; accounting and audit methods and procedures; and
approval of an extensive internal control system. The Missouri rules also
require that all of an operator's purchases of chips, tokens, dice, playing
cards and electronic gaming devices must be acquired from suppliers licensed by
the Missouri Gaming Commission. The Missouri Gaming Law provides for a loss
limit of $500 per person per excursion and requires licensees to maintain
scheduled excursions with boarding and disembarking times regardless of whether
the riverboat cruises. Although the Missouri Gaming Law provides no limit on the
amount of riverboat space that may be used for gaming, the Missouri Gaming
Commission is empowered to impose such space limitations through the adoption of
rules and regulations. Additionally, United States Coast Guard safety
regulations could affect the amount of riverboat space that may be devoted to
gaming. The Missouri Gaming Law also includes requirements as to the form of
riverboats, which must resemble Missouri's riverboat history to the extent
practicable and include certain non-gaming amenities. All ten licensees
currently operating riverboat gaming operations in Missouri are authorized to
conduct all or a portion of their operations on a dockside basis.
With respect to the availability of dockside gaming, which may be more
profitable than excursion gaming, the Missouri Gaming Commission is empowered to
determine on a site-by-site basis where such gaming is appropriate and shall be
permitted. On December 27, 1994, Station Casino St. Charles was granted a
dockside gaming license for its floating gaming facility by the Missouri Gaming
Commission. On April 16, 1996, Station Casino St. Charles, subsequently received
approval from the Missouri Gaming Commission to conduct its operations on its
excursion gaming riverboat on a continuously docked basis. The U.S. Coast Guard
has recommended to the Missouri Gaming Commission that all gaming vessels on the
Missouri River be required to remain dockside because certain characteristics of
the Missouri River, including turbulence, lack of emergency response
infrastructure and potential congestion, create substantially elevated risks for
the operation of large capacity passenger vessels. Dockside gaming in Missouri
may differ from dockside gaming in other states, such as Mississippi, because
the Missouri Gaming Commission has the ability to require "simulated cruising."
The simulated cruises are required to be a minimum of two hours and a maximum of
four hours. Dockside gaming in Missouri may not be as profitable as dockside
gaming in other states because of the admission fee paid for each patron that
enters the excursion gambling boat.
The Company understands that the Missouri Gaming Commission and
offices of the United States Attorney in Missouri are conducting
investigations regarding the actions of an attorney who worked on certain
Company legal matters in Missouri. The Company believes that the
investigations relate to, among other things, certain bonus payments made by
the Company to such attorney. The Company has received requests for
information and documents from these agencies and is cooperating fully. The
Company is unaware of any improprieties on its part. However, due to the
uncertainty inherent in any investigation, the Company cannot predict the
ultimate outcome of these investigations. If the Company were to be
implicated in any wrongdoing, this could lead to further proceedings against
the Company, and could result in significant fines and/or other penalties
imposed on the Company, which, if imposed, could have a material adverse
effect on the Company's business and gaming licenses.
GENERAL GAMING REGULATIONS IN OTHER JURISDICTIONS
If the Company becomes involved in gaming operations in any other
jurisdictions, such gaming operations will subject the Company and certain of
its officers, directors, key employees, stockholders and other affiliates
("Regulated Persons") to strict legal and regulatory requirements, including
mandatory licensing and approval requirements, suitability requirements, and
ongoing regulatory oversight with respect to such gaming operations. Such legal
and regulatory requirements and oversight will be administered and exercised by
the relevant regulatory agency or agencies in each jurisdiction (the "Regulatory
Authorities"). The Company and the Regulated Persons will need to satisfy the
licensing, approval and suitability requirements of each jurisdiction in which
the Company seeks to become involved in gaming operations. These requirements
vary from jurisdiction to jurisdiction, but generally concern the
responsibility, financial stability and character of the owners and managers of
gaming operations as well as persons financially interested or involved in
gaming operations. In general, the procedures for gaming licensing, approval and
finding of suitability require the Company and each Regulated Person to submit
detailed personal history information and financial information to demonstrate
that the proposed gaming operation has adequate financial resources generated
from suitable sources and adequate procedures to comply with the operating
controls and requirements imposed by law and regulation in each jurisdiction,
followed by a thorough investigation by such Regulatory Authorities. In general,
the Company and each Regulated Person must pay the costs of such investigation.
An application for any gaming license, approval or finding of suitability may be
denied for any cause that the Regulatory Authorities deem reasonable. Once
obtained, licenses and approvals may be subject to periodic renewal and
generally are not transferable. The Regulatory Authorities may at any
16
<PAGE>
time revoke, suspend, condition, limit or restrict a license, approval or
finding of suitability for any cause they deem reasonable. Fines for violations
may be levied against the holder of a license or approval and in certain
jurisdictions, gaming operation revenues can be forfeited to the state under
certain circumstances. There can be no assurance that the Company will obtain
all of the necessary licenses, approvals and findings of suitability or that its
officers, directors, key employees, other affiliates and certain other
stockholders will satisfy the suitability requirements in one or more
jurisdictions, or that such licenses, approvals and findings of suitability, if
obtained, will not be revoked, limited, suspended or not renewed in the future.
Failure by the Company to obtain, or the loss or suspension of, any
necessary licenses, approval or findings of suitability would prevent the
Company from conducting gaming operations in such jurisdiction and possibly in
other jurisdictions. The Company may be required to submit detailed financial
and operating reports to Regulatory Authorities.
The laws, regulations and procedures pertaining to gaming are subject
to the interpretation of the Regulatory Authorities and may be amended. Any
changes in such laws, regulations, or their interpretations could have a
material adverse effect on the Company.
EMPLOYEES
As of December 31, 1999, the Company and its subsidiaries had
approximately 10,700 employees. From time to time, certain employees of the
Company are contacted by unions and the Company engages in discussions with such
employees regarding establishment of collective bargaining agreements. In 1998,
approximately 12 of the Company's employees have voted to be represented by a
union. While the Company is from time to time faced with such movements by
employees, the Company does not believe that such movements will have any
broad-based impact on its employees; however there can be no assurances to that
effect. Management believes that it has good relationships with its employees.
ITEM 2. PROPERTIES
Palace Station is situated on approximately 39 acres located on the
west side of Las Vegas, Nevada. The Company owns 26 acres and leases the
remaining 13 acres pursuant to five long-term ground leases with unaffiliated
third parties. The property is subject to a lien to secure borrowings under the
Amended Bank Facility.
Boulder Station is situated on approximately 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 National Trust and Savings Association
("Bank of America NT&SA") and the beneficiary of which is KB Enterprises, an
affiliated company owned by Frank J. Fertitta, Jr. and Victoria K. Fertitta (the
"Related Lessor"), the parents of Frank J. Fertitta III, Chairman of the Board
and Chief Executive Officer of the Company. The lease has a maximum term of 65
years, ending in June 2058. The lease provides for monthly payments of $135,525
through 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. The Company 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. The Company's leasehold interest in the property and the acreage it owns
directly are subject to a lien to secure borrowings under the Amended Bank
Facility.
Texas Station is situated on approximately 47 acres located in North
Las Vegas, Nevada. The Company leases this land from a trust pursuant to a
long-term ground lease. The trustee of this trust is Bank of America NT&SA, the
beneficiary of which is Texas Gambling Hall & Hotel, Inc., 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 through June
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 for 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
17
<PAGE>
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. The Company's leasehold interest in the property is subject to a lien to
secure borrowings under the Amended Bank Facility.
Sunset Station is situated on approximately 105 acres located in the
Green Valley/Henderson area of Las Vegas, Nevada. The Company leases
approximately 48 acres pursuant to a long-term ground lease with an unaffiliated
third party. The lease was entered into in June 1994, and has a term of 65 years
with monthly rental payments of $120,000, adjusted on each subsequent five-year
anniversary by a cost of living factor. In June 2001, the Company has an option
to purchase this land for $23.8 million. Additionally, in June 2001, the lessor
has an option to sell this land to the Company for $21.8 million. Of the
remaining land, approximately 52 acres were purchased by the Company in
September 1995, for approximately $11.0 million.
Station Casino St. Charles is situated on approximately 52 acres
located immediately north of Interstate 70 on the edge of the Missouri River in
St. Charles, Missouri. The Company owns the entire 52 acres. The Company's
ownership interest in the St. Charles property is subject to liens to secure
borrowings under the Amended Bank Facility.
Station Casino Kansas City is situated on approximately 183 acres in
Kansas City, Missouri. The Company entered into a joint venture with an
unaffiliated third party to acquire the property. Station Casino Kansas City
leases 171 acres of the site from the joint venture with current monthly
payments of $93,636. Commencing April 1, 1998, and every anniversary
thereafter, the rent shall be adjusted by a cost of living factor of not more
than 5% or less than 2% per annum. The lease expires March 31, 2006, with an
option to extend the lease for up to eight renewal periods of ten years each,
plus one additional seven year period. In connection with the joint venture
agreement, the Company received an option providing for the right to acquire
the joint venture partner's interest in this joint venture. The Company has
the option to acquire this interest at any time after April 1, 2002 through
April 1, 2011, for $11.7 million, however, commencing April 1, 1998, the
purchase price will be adjusted by a cost of living factor of not more than
5% or less than 2% per annum. The Company paid $2.6 million for this option.
The Company's leasehold interest in the property is subject to a lien to
secure borrowings under the Amended Bank Facility, and under certain
circumstances the Amended Bank Facility permits the lenders to force the
exercise of such option.
The Company has acquired or leased several parcels of land in
various jurisdictions as part of the Company's development activities.
Included in land for held development at December 31, 1999 is approximately
$18.8 million related to land which had been acquired for potential gaming
projects in jurisdictions where gaming has been approved. Subsequent to
December 31, 1999, the Company acquired additional parcels of land for
potential gaming projects. The cost of these new parcels was approximately
$30.2 million.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are defendants in various lawsuits
relating to routine matters incidental to their business. As with all
litigation, no assurance can be provided as to the outcome of the following
matters and litigation inherently involves significant costs.
SETTLEMENT OF CRESCENT LITIGATION
On January 16, 1998, the Company entered into an Agreement and Plan of
Merger, as amended (the "Merger") with Crescent Real Estate Equities Company, a
Texas real estate investment trust ("Crescent"). The Company wrote off $2.9
million of costs incurred related to the Merger. The Merger became subject to
litigation between the two companies. On April 14, 1999, the Company announced
that it had settled its lawsuits with Crescent arising out of the failed Merger.
Under the terms of the settlement agreement, Crescent paid the Company $15
million, and the parties have released each other from all claims.
18
<PAGE>
LOW WATER LEVEL AT STATION CASINO ST. CHARLES; EPA INVESTIGATION
During December 1998 and January 1999, the water level of the Missouri
River was well below normal. In addition, over time silt and debris flowing
downstream have built up under the gaming barges and other ancillary barges at
Station Casino St. Charles. These circumstances have caused a portion of these
barges, at times, to touch the river bottom. Because these barges have touched
the river bottom, the American Bureau of Shipping ("ABS") decertified the barges
on January 8, 1999. As a result of the decertification, the Missouri Gaming
Commission expressed concern regarding the effect of the low water level on the
barges. However, based upon improvement in the water level and the Company's
agreement to work with ABS to re-certify all of the barges at a time when the
river levels permit, the Missouri Gaming Commission allowed the gaming facility
to remain open. On November 11, 1999, ABS recertified the barges. The Company
continues to monitor the situation very carefully and believes that the facility
should remain in operation. However, there can be no assurance that the
Company's assessment will not change or that the relevant authorities will
continue to permit the operation of the facility. A prolonged closure of the
facility as a result of the low water level would have a material adverse effect
on the Company's business, financial position and results of operations.
The Company has taken steps and intends to take further steps to remedy
the problems caused by the low water level. These further steps include dredging
material from under the barges. The Company does not expect the cost of these
remedial activities to be material, although there can be no assurance that such
costs will not exceed the Company's expectations. Dredging and construction
activities generally require permits from the United States Army Corps of
Engineers (the "Corps of Engineers"). The Company has received certain permits
to continue dredging activities. The Company is in the process of applying for
additional permits which will allow it to dredge more efficiently than the
current permit. There can be no assurance that the Corps of Engineers will grant
such permits or that they will be granted on a timely basis. In the event that
low water levels return, the Company could be forced to close the facility. The
Company's ability to receive the required permits could be adversely affected by
the investigation described below.
On February 3, 1999, the Company received a subpoena issued by the
EPA requesting that documentation relating to the Company's dredging
activities at the facility be furnished to the Grand Jury in the United
States District Court for the Eastern District of Missouri. Several employees
and persons who contracted to work for the Company received similar
subpoenas. The Company believes that the EPA is investigating allegations
that the Company or the Company's contractors dredged and disposed of silt
and debris from the area of the facility either without proper permits or
without complying with such permits. The Company has completed the
investigation of the substance of the allegations and continues to cooperate
fully with the EPA. The investigation could lead to further proceedings
against the Company which could result in significant fines and other
penalties imposed on the Company. On December 9, 1999, the Company and the
United States, on behalf of the Corps of Engineers, tentatively entered into
a "Consent Decree" regarding the alleged dredging activities. On February 15,
2000, the United States District Court for the Eastern District of Missouri,
after public notice and passage of the comment period, approved the Consent
Decree. Subsequently, the Consent Decree was published in the National
Register without comment or objection. As a result, the approval of the
Consent Decree and the expiration of the notice period now brings resolution
to this matter.
POULOS/AHEARN CASE
On April 26, 1994, a suit seeking status as a class action lawsuit was
filed by plaintiff, William H. Poulos, et al., as class representative, in the
United States District Court, Middle District of Florida, naming 41
manufacturers, distributors and casino operators of video poker and electronic
slot machines, including the Company. On May 10, 1994, a lawsuit alleging
substantially identical claims was filed by another plaintiff, William Ahearn,
et al., as class representative, in the United States District Court, Middle
District of Florida, against 48 manufacturers, distributors and casino operators
of video poker and electronic slot machines, including the Company and most of
the other major hotel/casino companies. The lawsuits allege that the defendants
have engaged in a course of fraudulent and misleading conduct intended to induce
persons to play such games based on a false belief concerning how the gaming
machines operate, as well as the extent to which there is an opportunity to win.
The two lawsuits have been consolidated into a single action, and have been
transferred to the United States District Court for the District of Nevada. On
September 26, 1995, a lawsuit alleging substantially identical claims was filed
by plaintiff, Larry Schreier, et. al, as class representative, in the United
States District Court for the District of Nevada, naming 45 manufacturers,
distributors, and casino operators of video poker and electronic slot machines,
including the Company. Motions to dismiss the Poulos/Ahearn and Schreier cases
were filed by defendants. On April 17, 1996, the Poulos/Ahearn lawsuits were
dismissed, but plaintiffs were given leave to file Amended Complaints on or
before May 31, 1996. On May 31, 1996, an Amended Complaint was filed, naming
William H. Poulos, et. al, as plaintiff. Defendants filed a motion to dismiss.
On August 15, 1996, the Schreier lawsuit was dismissed with leave to amend. On
September 27, 1996, Schreier filed an Amended Complaint. Defendants filed
motions to dismiss the Amended
19
<PAGE>
Complaint. In December 1996, the Court consolidated the Poulos/Ahearn, the
Schreier, and a third case not involving the Company and ordered all pending
motions be deemed withdrawn without prejudice, including Defendants' Motions to
Dismiss the Amended Complaints. The plaintiffs filed a Consolidated Amended
Complaint on February 13, 1997. On or about December 19, 1997, the Court issued
formal opinions granting in part and denying in part the defendants' motion to
dismiss. In so doing, the Court ordered plaintiffs to file an amended complaint
in accordance with the Court's orders in January of 1998. Accordingly,
plaintiffs amended their complaint and filed it with the United Stated District
Court for the District of Nevada in February 1998. The Company and all other
defendants continue to deny the allegations contained in the amended complaint
filed on behalf of plaintiffs. The plaintiffs are seeking compensatory, special,
consequential, incidental, and punitive damages in unspecified amounts. The
defendants have committed to vigorously defend all claims and allegations
contained in the consolidated action. The parties have fully briefed the issues
regarding class certification, which are currently pending before the court. The
Company does not expect that the lawsuits will have a material adverse effect on
the Company's financial position or results of operations.
NICOLE ANDERSON CASE
A suit seeking status as a class action lawsuit was filed by plaintiff
Nicole Anderson, et. al., as class representative, on September 24, 1997, in the
United States District Court for the Eastern District of Missouri, Eastern
Division. The lawsuit alleges certain racially based discriminatory action at
Station Casino St. Charles and seeks injunctive relief and compensatory,
special, consequential, incidental and punitive damages in unspecified amounts.
On or about October 24, 1997, plaintiff filed her first amended complaint. On
November 24, 1997, the Company filed its answer to plaintiff's first amended
complaint which denied the allegations contained therein.
On August 25, 1998, a hearing was held to determine whether this
lawsuit could be certified as a class action. The Court conditionally certified
a subclass of dealers in the table game department; the other plaintiffs may
proceed individually with their claims. The parties have entered into a
settlement agreement which has been submitted to the United States District
Court for the Eastern District of Missouri, Eastern Division, to determine the
fairness, reasonableness and adequacy of the terms of settlement and whether an
order and final judgment should be entered approving the proposed settlement
agreement. On October 18, 1999, the order and final judgment was issued by the
United States District Court for the Eastern District of Missouri.
STEPHEN B. SMALL CASE
A class action lawsuit was filed by plaintiff Stephen B. Small, et al.,
as class representative, on November 28, 1997, in the United States District
Court for the Western District of Missouri, naming four gaming operators in
Kansas City, Missouri, including Kansas City Station Corporation. The lawsuit
alleged that the defendants are conducting gaming operations that are not
located on the Missouri River in violation of certain state and federal
statutes. The plaintiff also sought compensatory, special, consequential, and
incidental damages in unspecified amounts. On September 1, 1998, the United
States District Court granted Kansas City Station Corporation's motion to
dismiss the lawsuit. On February 16, 1999, the plaintiff served the defendants
with a notice of appeal of the federal court dismissal. On October 30, 1998, the
plaintiff filed a similar lawsuit in the Circuit Court of Cole County, Missouri.
The lawsuit alleged that the operators were conducting illegal games of chance
prior to December 3, 1998, the effective date of a Constitutional amendment
passed by Missouri voters on November 3, 1998, legalizing gaming facilities
within 1,000 feet of the main channel of the Mississippi and Missouri Rivers. On
February 9, 1999, the Cole County Circuit Court granted Kansas City Station
Corporation's motion to dismiss the lawsuit. On February 19, 1999, the plaintiff
served the defendants with a notice of appeal of the state court dismissal.
Management believes that the plaintiff's claims are without merit and does not
expect that the lawsuit will have a material adverse effect on the Company's
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of fiscal year 1999.
20
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock trades on the New York Stock Exchange under the symbol
"STN". Prior to September 5, 1996, the common stock traded on the Nasdaq Stock
Market under the symbol "STCI". The following table sets forth, for the periods
indicated, the high and low sale price per share of the Common Stock as reported
on the New York Stock Exchange.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
FISCAL YEAR ENDING DECEMBER 31, 1999
------------------------------------
<S> <C> <C>
First Quarter $ 14.88 $ 7.94
Second Quarter 20.38 12.25
Third Quarter 24.63 17.00
Fourth Quarter 27.38 16.50
TRANSITION PERIOD ENDING DECEMBER 31, 1998
------------------------------------------
First Quarter $ 15.88 $ 13.19
Second Quarter 15.31 5.06
Third Quarter 8.50 4.00
</TABLE>
As of March 3, 2000, there were 653 holders of record of the Company's
common stock.
The Company has never paid cash dividends on any shares of Common
Stock. The Company does not intend to pay cash dividends in the foreseeable
future so that it may reinvest its earnings in the development of its
business. The payment of dividends in the future will be at the discretion of
the Board of Directors of the Company. Restrictions imposed by the Company's
debt instruments and other agreements, limit the payment of dividends by the
Company (see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Description of Certain Indebtedness and Capital
Stock").
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<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
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 nine month period ended December 31, 1998
(the "Transition Period 1998").
The selected consolidated financial data presented below as of and for the
Company's fiscal years ended March 31, 1996, 1997 and 1998, for the Transition
Period 1998, and for the fiscal year ended December 31, 1999 have been derived
from consolidated financial statements which, except for 1996 and 1997, are
contained elsewhere in this Annual Report on Form 10-K. The selected
consolidated financial data set forth below are qualified in their entirety by,
and should be read in conjunction with, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements, the notes thereto and other financial and statistical information
included elsewhere in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED TRANSITION
DECEMBER 31, PERIOD FOR THE YEARS ENDED MARCH 31,
---------------------------------------
1999 1998 1998 1997 1996
------------- ------------- ------------ ------------ ------------
(amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Net revenues ............................................... $ 942,469 $ 642,214 $ 769,610 $ 583,515 $ 466,857
Operating income ........................................... 28,871 64,696 84,186 58,123 69,464
Income (loss) before income taxes and extraordinary item .. (47,223) (9,864) (4,120) 21,378 40,051
Extraordinary item-loss on early retirement of debt,
net of applicable income tax benefit ................... (10,653) (3,104) (2,042) - -
Net income (loss) applicable to common stock ............... (44,758) (17,531) (12,441) 6,518 25,419
Basic and diluted earnings (loss) per common share ......... $ (1.14) $ (0.50) $ (0.35) $ 0.18 $ 0.75
BALANCE SHEET DATA:
Total assets ............................................... $ 1,276,273 $ 1,531,925 $ 1,300,216 $ 1,234,118 $ 827,314
Long-term debt ............................................. 942,480 1,147,266 900,226 760,963 464,998
Stockholders' equity ....................................... 216,801 269,406 286,887 298,848 278,470
</TABLE>
22
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the financial statements and notes
thereto included elsewhere in this Annual Report on Form 10-K.
RESULTS OF OPERATIONS
The following table highlights the results of operations for the Company
(dollars in thousands):
<TABLE>
<CAPTION>
Fiscal Twelve Nine Fiscal
Year Months Months Year
Ended Ended Transition Ended Ended
December 31, December 31, Period December 31, March 31,
1999 1998 1998 1997 1998
------------ ------------ ---------- ------------ ---------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
NET REVENUES - TOTAL $ 942,469 $ 847,015 $ 642,214 $ 564,809 $ 769,610
Nevada Operations (a) 584,852 526,854 397,908 341,447 470,393
Missouri Operations (a) 313,439 290,160 219,734 203,374 273,800
Other (a) 44,178 30,001 24,572 19,988 25,417
OPERATING INCOME (LOSS) - TOTAL $ 28,871 $ 92,380 $ 64,696 $ 56,502 $ 84,186
Nevada Operations (a) 147,217 111,902 83,669 60,028 88,261
Missouri Operations (a) (85,269) (1,528) (5,056) 6,358 9,886
Other (a) (33,077) (17,994) (13,917) (9,884) (13,961)
CASH FLOWS FROM:
Operating activities $ 173,058 $ 108,321 $ 76,692 $ 73,326 $ 104,955
EBITDA, AS ADJUSTED (b) - TOTAL $ 236,970 $ 192,384 $ 147,682 $ 117,764 $ 162,466
Nevada Operations (a) 186,677 150,413 113,284 96,029 133,158
Missouri Operations (a) 69,223 54,314 43,163 29,640 40,791
Other (a) (18,930) (12,343) (8,765) (7,905) (11,483)
EBITDA, AS ADJUSTED (b),
ADJUSTED FOR THE SUNSET
EQUIPMENT LEASE - TOTAL $ 242,890 $ 200,952 $ 154,186 $ 121,942 $ 168,708
Nevada Operations (a) 192,597 158,981 119,788 100,207 139,400
</TABLE>
(a) The Nevada Operations include the accounts of: Palace Station, Boulder
Station, Texas Station and Sunset Station. The Missouri Operations include
the accounts of: Station Casino St. Charles and Station Casino Kansas City.
Other includes the operations of Wild Wild West, which opened in July 1998,
the Company's investment in Barley's, Southwest Gaming and Corporate
expense.
(b) "EBITDA, As Adjusted" consists of operating income plus depreciation,
amortization, preopening expenses and impairment loss. The Company believes
that in addition to cash flows and net income, EBITDA, As Adjusted is a
useful financial performance measurement for assessing the operating
performance of the Company. Together with net income and cash flows,
EBITDA, As Adjusted provides investors with an additional basis to evaluate
the ability of the Company to incur and service debt and incur capital
expenditures. To evaluate EBITDA, As Adjusted and the trends it depicts,
the components should be considered. The impact of interest, taxes,
depreciation and amortization, preopening expenses and impairment loss,
each of which can significantly affect the Company's results of operations
and liquidity and should be considered in evaluating the Company's
operating performance, cannot be determined from EBITDA, As Adjusted.
Further, EBITDA, As Adjusted does not represent net income or cash flows
from operating, financing and investing activities as defined by generally
accepted accounting principles ("GAAP") and does not necessarily indicate
cash flows will be sufficient to fund cash needs. It should not be
considered as an alternative to net income, as an indicator of the
Company's operating performance or to cash flows as a measure of liquidity.
In addition, it should be noted that not all gaming companies that report
EBITDA or adjustments to such measures may calculate EBITDA, or such
adjustments in the same manner as the Company, and therefore, the Company's
measure of EBITDA, As Adjusted may not be comparable to similarly titled
measures used by other gaming companies.
23
<PAGE>
Consolidated net revenues, cash flows from operating activities, and
EBITDA, As Adjusted for the fiscal year ended December 31, 1999 increased as
compared to the Transition Period 1998. These increases are due to the
Transition Period 1998 consisting of nine months as compared to the fiscal year
ended December 31, 1999, which is twelve months. The above table presents
certain results of operations from the unaudited twelve month period ended
December 31, 1998 for comparison purposes.
Consolidated net revenues, operating income, cash flows from operating
activities and EBITDA, As Adjusted for the Transition Period 1998 decreased as
compared to the fiscal year ended March 31, 1998. These decreases are due to the
Transition Period 1998 consisting of nine months as compared to the fiscal year
ended March 31, 1998, which is twelve months. The above table presents certain
results of operations from the unaudited nine month period ended December 31,
1997 for comparison purposes.
CONSOLIDATED NET REVENUES
The increase in consolidated net revenues for the fiscal year ended
December 31, 1999 as compared to the twelve months ended December 31, 1998 is
due to increased revenues at all of the Company's properties. Increased revenues
at the Nevada Operations are partially a result of the completed master-planned
expansions at Texas Station and Sunset Station, which were completed in February
1999 and November 1998, respectively. In addition, revenues at the Nevada
Operations increased due to the introduction of the Boarding Pass player rewards
program in April 1999, which makes it more convenient for customers to redeem
points earned from gaming activity at any of the Nevada properties. Net revenues
at the Missouri Operations increased 8% primarily due to Station Casino Kansas
City which generated a 13% increase in net revenues.
Consolidated net revenues increased for the Transition Period 1998 as
compared to the nine months ended December 31, 1997 due to increased revenues
from the Nevada properties generally, and results from Sunset Station, which
opened in June 1997, are included for only seven months in the nine months ended
December 31, 1997. Also, revenues from the Station Casino Kansas City facility
continued to steadily improve. Net revenues at Station Casino St. Charles
declined 5% as a result of significant competition in the St. Louis market.
OPERATING INCOME/OPERATING MARGIN
The Company's operating income was impacted by certain charges in each
of the above periods that affect the ability to analyze year to year
comparisons. The following table identifies these charges (dollars in
thousands):
<TABLE>
<CAPTION>
Fiscal Twelve Nine Fiscal
Year Months Months Year
Ended Ended Transition Ended Ended
December 31, December 31, Period December 31, March 31,
1999 1998 1998 1997 1998
------------ ----------- ---------- ------------ -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Operating income ...................................... $ 28,871 $ 92,380 $ 64,696 $ 56,502 $ 84,186
OPERATING MARGIN .............................. 3.1% 10.9% 10.1% 10.0% 10.9%
Certain charges:
Impairment loss ............................... $137,435 $ 30,011 $ 30,011 ---- ----
Preopening expenses ........................... ---- ---- ---- $ 10,866 $ 10,866
Operating income, excluding certain charges ........... $166,306 $122,391 $ 94,707 $ 67,368 $ 95,052
OPERATING MARGIN, EXCLUDING CERTAIN CHARGES .... 17.6% 14.4% 14.7% 11.9% 12.4%
</TABLE>
Consolidated operating income, excluding certain charges, improved by
$43.9 million in the fiscal year ended December 31, 1999 as compared to the
twelve months ended December 31, 1998 with operating income at all of the
Company's properties increasing. The increases at the Nevada properties are
attributed to the same factors affecting consolidated net revenues discussed
above and the increases at the Missouri properties are primarily attributed to a
95.2% increase in operating income, excluding certain charges, at Station Casino
Kansas City due to a significant
24
<PAGE>
improvement in operations at this property. In addition, the decline in the
prior year at Station Casino St. Charles was reversed as the property posted a
$1.6 million increase in operating income, excluding certain charges.
The consolidated operating margin, excluding certain charges, improved
in the fiscal year ended December 31, 1999 as compared to the twelve months
ended December 31, 1998, due to the operating margins at Sunset Station and
Station Casino Kansas City improving over 600 basis points and smaller increases
at all of the other properties.
Operating margin, excluding certain charges, improved in the Transition
Period 1998 as compared to the fiscal year ended March 31, 1998 primarily as a
result of significantly improved operations at Station Casino Kansas City.
Operating income, excluding certain charges at Station Casino Kansas City,
improved by $17.8 million in the Transition Period 1998 as compared to the nine
months ended December 31, 1997. The only casino property experiencing a decline
in operating income, excluding certain charges, was Station Casino St. Charles,
which experienced a $4.4 million decline due to the increased competition
discussed above.
The following table highlights the various sources of revenues and
expenses for the Company as compared to prior periods (dollars in thousands):
<TABLE>
<CAPTION>
Fiscal Twelve Nine Fiscal
Year Months Months Year
Ended Ended Transition Ended Ended
December 31, December 31, Period December 31, March 31,
1999 1998 1998 1997 1998
------------ ------------ ----------- ------------ -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Casino revenues $ 764,089 $ 673,124 $ 509,149 $ 436,872 $ 600,847
Casino expenses 356,365 328,953 249,353 211,502 291,102
MARGIN 53.4% 51.1% 51.0% 51.6% 51.6%
Food and beverage revenues $ 141,116 $ 138,044 $ 104,538 $ 97,859 $ 131,365
Food and beverage expenses 88,898 88,423 66,121 67,626 89,928
MARGIN 37.0% 35.9% 36.7% 30.9% 31.5%
Room revenues $ 42,870 $ 39,678 $ 30,040 $ 27,692 $ 37,330
Room expenses 15,860 14,975 11,515 10,001 13,461
MARGIN 63.0% 62.3% 61.7% 63.9% 63.9%
Other revenues $ 62,286 $ 59,924 $ 47,663 $ 41,233 $ 53,494
Selling, general and administrative $ 190,753 $ 181,723 $ 136,649 $ 128,196 $ 173,270
PERCENT OF NET REVENUES 20.2% 21.5% 21.3% 22.7% 22.5%
Corporate expenses $ 23,007 $ 15,661 $ 11,431 $ 10,391 $ 14,621
PERCENT OF NET REVENUES 2.4% 1.8% 1.8% 1.8% 1.9%
</TABLE>
CASINO. Casino revenues increased for the fiscal year ended December
31, 1999 as compared to the twelve months ended December 31, 1998 as a result of
the same factors affecting consolidated net revenues discussed above. The casino
profit margin increased to 53.4% for the fiscal year ended December 31, 1999
from 51.1% for the twelve months ended December 31, 1998 with all properties
improving their margin with the exception of Boulder Station which decreased
slightly.
Casino profit margin for the Transition Period 1998 remained relatively
consistent with results for the nine months ended December 31, 1997.
FOOD AND BEVERAGE. Food and beverage revenues for the fiscal year ended
December 31, 1999 increased 2.2% over food and beverage revenues for the twelve
months ended December 31, 1998. This increase is primarily due to the completion
of the expansion projects at Sunset Station and Texas Station. These increases
in food and beverage revenues in Nevada were offset by decreases at the Missouri
properties. Also, food and beverage revenues increased due to selected menu
price increases, which were offset by a decrease in food covers at all of the
properties. Food and
25
<PAGE>
beverage net profit margins increased to 37.0% for the fiscal year ended
December 31, 1999 from 35.9% for the twelve months ended December 31, 1998.
Food and beverage revenues for the Transition Period 1998 increased
6.8% over food and beverage revenues for the nine months ended December 31,
1997. The primary reason for this increase is the results from Sunset Station,
which opened in June 1997, are included for only seven months in the nine months
ended December 31, 1997. The increase in food and beverage revenues is less than
the overall increase in revenues. This is primarily due to a decline in food and
beverage revenues at Station Casino Kansas City. In the prior year's period, the
Company was very aggressive in promoting Station Casino Kansas City's food
operations.
Food and beverage net profit margins improved to 36.7% for the
Transition Period 1998, from 30.9% in the nine months ended December 31, 1997.
This increase in margin is due to improvement at the Company's Nevada
Operations, primarily as a result of continued focus on cost control, as well as
selected menu price increases.
ROOM. Room revenues for the fiscal year ended December 31, 1999
increased 8.0% over room revenues for the twelve months ended December 31, 1998.
The primary reason for this increase is the opening of the Wild Wild West
Gambling Hall & Hotel in July 1998, which contributed $2.3 million of room
revenues in the fiscal year ended December 31, 1999 as compared to $1.1 million
of room revenues in the twelve months ended December 31, 1998.
The company-wide room occupancy decreased to 89% in the fiscal year
ended December 31, 1999 as compared to 90% in the twelve months ended December
31, 1998 due to the Company increasing room rates at the properties. The average
daily room rate increased to $54 in the fiscal year ended December 31, 1999 as
compared to $51 in the twelve months ended December 31, 1998.
Room revenues for the Transition Period 1998 increased 8.5% over room
revenues for the nine months ended December 31, 1997. The primary reason for
this increase is the results from Sunset Station, which opened in June 1997, are
included for only seven months in the nine months ended December 31, 1997.
Additionally, the Company opened the Wild Wild West Gambling Hall & Hotel in
July 1998, which contributed $1.1 million of room revenues in the Transition
Period 1998. Offsetting these increases was a decline in room revenues at Palace
Station and Boulder Station. These declines were primarily a result of a lower
average daily room rate.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). As a percent of net
revenues, SG&A decreased to 20.2% in the fiscal year ended December 31, 1999 as
compared to 21.5% in the twelve months ended December 31, 1998. As a percent of
net revenues, SG&A decreased to 21.3% in the Transition Period 1998 as compared
to 22.7% in the nine months ended December 31, 1997. These decreases are due
primarily to the fine tuning of operations at Sunset Station and Station Casino
Kansas City. In the Company's experience, when a new property opens, SG&A as a
percent of net revenues is higher than normal, and reduces as the property's
operations mature. Also, due to the fixed cost nature of some of these expenses,
they decrease on a percentage basis as the Company continues to increase
revenue.
CORPORATE EXPENSES. Corporate expenses as a percent of net revenues
increased to 2.4% in the fiscal year ended December 31, 1999 as compared to 1.8%
in the twelve months ended December 31, 1998. The Company has increased its
corporate infrastructure as it continues to lay the foundation for future
growth. Corporate expenses as a percent of net revenues for the Transition
Period 1998 were consistent with the nine months ended December 31, 1997.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$0.7 million in the fiscal year ended December 31, 1999 to $70.7 million as
compared to $70.0 million in the twelve months ended December 31, 1998. This
increase is due to the completion of the expansion projects at Sunset Station
and Texas Station which were completed in November 1998 and February 1999,
respectively. This increase was offset by decreases at Boulder Station and
Station Casino St. Charles as a portion of the original equipment became fully
depreciated during the fiscal year ended December 31, 1999, as both properties
have been open for five years. In addition, Palace Station had a large purchase
of slot machines in 1994 that became fully depreciated during the fiscal year
ended December 31, 1999. Depreciation at Station Casino St. Charles should also
decline going forward, due to the write-off of assets noted below, while
depreciation at Sunset Station should increase due to the purchase of various
equipment leases in 1999.
26
<PAGE>
Depreciation and amortization increased $2.6 million in the Transition
Period 1998 to $53.0 million as compared to $50.4 million in the nine months
ended December 31, 1997. This increase is due to the results of Sunset Station
being included for only seven months in the nine months ended December 31, 1997.
IMPAIRMENT LOSS. In accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
the Company recorded an impairment loss of $137.4 million in the fiscal year
ended December 31, 1999 and $30.0 million in the Transition Period 1998 to
adjust the carrying value of its fixed assets and land held for development to
their estimated fair value. In the fiscal year ended December 31, 1999,
approximately $125.2 million of the impairment loss was related to Station
Casino St. Charles. In the fourth quarter of 1999, the Company made a decision
to reconfigure the existing Station Casino St. Charles facility to a more
efficient layout in response to the new open boarding rules promulgated by the
Missouri Gaming Commission that began in September 1999 in the St. Louis market.
All gaming operations will be moved to the existing barge by the end of the
first quarter of 2000. The existing riverboat is expected to be sold after the
reconfiguration is complete. In accordance with SFAS No. 121, the riverboat and
miscellaneous other fixed assets were written down by approximately $15 million
to their net realizable value.
In addition, the Company performed an evaluation of the carrying values
of the remaining assets in St. Charles and determined a $110 million write-down
of the asset values was necessary. The write-down was deemed appropriate after a
review of the property's asset valuations relative to the Company's near-term
investment objectives. The balance of the impairment loss in the fiscal year
ended December 31, 1999, resulted primarily from the Company's determination
that it will sell a 40-acre parcel of land in Henderson, Nevada, that it
recently acquired. Future development of the property will be limited to
non-gaming purposes. The resulting write-down of the parcel was necessary to
reflect the value of the land as a non-gaming site.
In the Transition Period 1998, the impairment loss principally involves
assets at the Station Casino St. Charles facility, including a riverboat
formerly used in the Missouri operations, capitalized project costs associated
with various parcels of land determined to have no value, and several parcels of
land within close proximity to the St. Charles, Missouri site that were being
held for future development. The fair value of the impaired assets was primarily
determined through the market's interest in riverboats and barges, and on the
comparable sales prices on parcels of land in the St. Charles area. The total
amount of the impairment loss in the Transition Period 1998 related to this
category of assets was approximately $23.4 million. In addition to the assets
described above, the most significant portion of the remaining impairment loss
in the Transition Period 1998 relates to several parcels of land in Nevada and
Texas that the Company had acquired in the past for either defensive or
expansion purposes. The value of these parcels was determined based on sales
prices for comparable parcels of land on the market. The following two
circumstances led to the Company's decision to write-down these assets to their
fair market value: (1) the passage, in Nevada, of legislation which places
significantly higher requirements on land to be zoned for gaming purposes, and
(2) the termination of the Plan of Merger with Crescent Real Estate Equities
Company (see "Part I. Item 3. Legal Proceedings - Settlement of Crescent
Litigation").
Included in other assets, net on the accompanying consolidated balance
sheet as of December 31, 1999, is $26.1 million related primarily to parcels of
land. The Company is actively attempting to dispose of these non-strategic
assets and expects to complete the sale of certain of these assets in the first
half of calendar year 2000.
PREOPENING EXPENSES. Prior to December 31, 1998, the Company
capitalized preopening expenses associated with its construction projects,
including Sunset Station, which opened in June 1997. Such amounts were expensed
upon the opening of the related project. During the fiscal year ended March 31,
1998, the Company expensed preopening expenses of $10.9 million related
primarily to this project. Preopening expenses incurred after January 1, 1999
will be expensed as incurred.
INTEREST EXPENSE, NET. Interest costs incurred (expensed and
capitalized) decreased 6.2% to $85.4 million for the fiscal year ended December
31, 1999 as compared to $91.0 million in the twelve months ended December 31,
1998. This decrease is due to a decline of $17.2 million in total long-term debt
from the prior year and to a reduction in average interest rates on long-term
debt to 9.0% from 9.6% in the prior year.
Interest costs incurred (expensed and capitalized) for the Transition
Period 1998 of $67.6 million remained consistent with interest costs incurred
for the nine months ended December 31, 1997 of $68.9 million.
27
<PAGE>
OTHER INCOME/EXPENSE. During the fourth quarter of the fiscal year
ended December 31, 1999, the Company wrote off $2.4 million of costs incurred
related to the termination of the Flamingo Hilton Kansas City acquisition.
The acquisition was terminated when the Missouri Gaming Commission (the
"Commission") informed the Company that it would not be able to complete its
licensing investigation on or before the termination date set forth in the
acquisition agreement. The Company believes the Commission was unable to
complete its licensing investigation in the required time frame because of
the investigation of the actions of an attorney who worked on the Company's
legal matters in Missouri (see "Regulation and Licensing - Missouri Gaming
Regulations").
In April 1999, the Company received a $15.0 million settlement payment
from Crescent Real Estate Equities, Inc., which is included in the "Merger
settlement, net of related legal costs" line on the accompanying Consolidated
Statements of Operations (see "Part I. Item 3. Legal Proceedings - Settlement
of Crescent Litigation").
In 1999, the Company recorded an extraordinary charge of $10.4 million
(net of applicable tax benefit) to reflect the write-off of the unamortized debt
discount, unamortized loan costs and the premium to redeem the 95/8% senior
subordinated notes, which were repaid on January 4, 1999. In addition, the
Company also recorded an extraordinary charge of $0.3 million (net of applicable
tax benefit) related to the write-off of unamortized loan costs on the Company's
$75.0 million secured term loan facility.
LIQUIDITY AND CAPITAL RESOURCES
During the fiscal year ended December 31, 1999, the Company
generated cash flows from operating activities of $173.1 million. At December
31, 1999, the Company had total available borrowings of $530.8 million under
the Amended Bank Facility, of which $377.3 million was directly outstanding
and $4.8 million was reserved for the potential payment of an outstanding
letter of credit. Total available borrowings will reduce beginning March 31,
2000 and each quarter thereafter in accordance with the terms of the Amended
Bank Facility (see "Description of Certain Indebtedness and Capital
Stock-Amended Bank Facility"). The Company also had $73.1 million in cash and
cash equivalents.
During the year ended December 31, 1999, total capital expenditures
were approximately $76.4 million, of which approximately (i) $30.3 million was
associated with the purchase of equipment previously under operating leases at
Sunset Station, (ii) $16.2 million was associated with the expansion project at
Texas Station, (iii) $22.3 million was for maintenance capital expenditures, and
(iv) $7.6 million was associated with various other projects.
The Company's primary capital requirements during fiscal year 2000 are
expected to include (i) another expansion project at Texas Station, estimated to
cost approximately $55 million, (ii) equity contributions to the proposed Green
Valley Ranch project expected to be approximately $40 million, (iii) strategic
land purchases throughout the Las Vegas area, (iv) opportunistic repurchases of
the Company's Common Stock, (v) maintenance capital expenditures, and (vi)
principal and interest payments on indebtedness.
The Company believes that cash flows from operations, borrowings under
the Amended Bank Facility, vendor and lease financing of equipment, and existing
cash balances will be adequate to satisfy the Company's anticipated uses of
capital during fiscal year 2000. The Company, however, continually is evaluating
its financing needs. If more attractive financing alternatives or expansion,
development or acquisition opportunities become available to the Company, the
Company may amend its financing plans assuming such financing would be permitted
under its existing debt agreements (See "Description of Certain Indebtedness and
Capital Stock") and other applicable agreements.
FUTURE DEVELOPMENT
GREEN VALLEY PROJECT
A 50/50 joint venture between the Company and GCR Gaming, LLC has
proposed to build a new resort/casino in Henderson, Nevada. Construction is
expected to commence during the third quarter of 2000 and is expected to be
completed in the fourth quarter of 2001. The estimated construction cost of this
project is $270 to $280 million. The project is expected to be funded with total
equity contributions from the partners of approximately $80 million and third
party financing for the remainder. If third party financing cannot be obtained
or is insufficient to fund the construction costs, the Company and GCR Gaming,
LLC would be obligated to contribute amounts necessary to finance the
construction and opening of the project.
28
<PAGE>
LAND ACQUISITION
In addition to the Green Valley Project, the Company has purchased
or has options to purchase an additional 151 acres of land for two additional
gaming sites in the Las Vegas Valley which will be used for future
development. The Rhodes Ranch site consists of two parcels totaling 83 acres,
located at the intersection of Durango Road and the Southern Beltway/I-215
located in the southwest quadrant of Las Vegas. The Boulder/Tropicana site is
a 68-acre site consisting of two parcels at the intersection of Boulder
Highway and Tropicana Avenue in eastern Las Vegas. The Company is leasing
(with an option to purchase) 34 acres of the site and has entered into an
option to purchase the adjacent 34-acre parcel. The Company paid $30.2
million for the land mentioned above and will make combined lease and option
payments of $1.6 million per year. The Company has no immediate plans to
develop these sites.
The Company's capital requirements in 2000 could also include
amounts necessary to fund the proposed development of the project with the
United Auburn Indian Community to the extent development of such project is
commenced in 2000. In addition, the Company has in the past, and may in the
future, make acquisitions and enter into joint ventures on an opportunistic
basis. While the Company has not entered into any agreement with respect to
any such future acquisition or joint venture other than as disclosed in this
report, the Company's capital requirements in 2000 may include amounts
necessary to permit the Company to pursue such expansion activities.
YEAR 2000 READINESS
The Company did not encounter any Year 2000 problems. The total cost to
the Company of making the Company's systems Year 2000 compliant was
approximately $3.0 million. The majority of this cost related to the acquisition
of new computer hardware to replace the systems which were not Year 2000
compliant and the purchase of new software to replace non-compliant software.
These costs were capitalized and will be depreciated over their expected useful
life. To the extent existing hardware or software was replaced, the Company
recognized a loss currently for the undepreciated balance. This loss is included
in the above cost.
LOW WATER LEVEL AT STATION CASINO ST. CHARLES
During December 1998 and January 1999, the water level of the Missouri
River was well below normal. In addition, over time silt and debris flowing
downstream have built up under the gaming barges and other ancillary barges at
Station Casino St. Charles. These circumstances have caused a portion of these
barges, at times, to touch the river bottom. Because these barges have touched
the river bottom, the American Bureau of Shipping decertified the barges on
January 8, 1999. As a result of the decertification, the Missouri Gaming
Commission expressed concern regarding the effect of the low water level on the
barges. However, based upon improvement in the water level and the Company's
agreement to work with the American Bureau of Shipping to re-certify all of the
barges at a time when the river levels permit, the Missouri Gaming Commission
allowed the gaming facility to remain open. On November 11, 1999, the American
Bureau of Shipping recertified the barges. The Company continues to monitor the
situation very carefully and believes that the facility should remain in
operation. However, there can be no assurance that the Company's assessment will
not change or that the relevant authorities will continue to permit the
operation of the facility. A prolonged closure of the facility as a result of
the low water level would have a material adverse effect on the Company's
business, financial position and results of operations.
REGULATION AND TAXES
The Company is subject to extensive regulation by the Nevada and
Missouri gaming authorities and will be subject to regulation, which may or may
not be similar to that in Nevada, by any other jurisdiction in which it may
conduct gaming activities in the future. Changes in applicable laws or
regulations could have a significant impact on the Company's operations.
Pursuant to legislation enacted in 1996, a federal commission conducted a
two-year study of the gaming industry in the United States and reported its
findings and recommendations to Congress. To date there have been no changes to
existing laws or regulations as a result of this report.
The gaming industry represents a significant source of tax revenues,
particularly to the State of Nevada and its counties and municipalities. From
time to time, various state and federal legislators and officials have proposed
changes in tax law, or in the administration of such law, affecting the gaming
industry. Proposals in recent years that have not been
29
<PAGE>
enacted included a federal gaming tax and increases in state or local taxes,
however, we have no assurances that future proposals, including a recent
proposal in Nevada, will not be enacted. This recent proposal in Nevada would
increase the tax on gaming revenue from 6 1/4% to 11 1/4%. If enacted, this
proposal would have a material impact on the results of operations for the
Company.
Management believes that the Company's recorded tax balances are
adequate. However, it is not possible to determine with certainty the likelihood
of possible changes in tax law or in the administration of such law. Such
changes, if adopted, could have a material adverse effect on the Company's
operating results.
DESCRIPTION OF CERTAIN INDEBTEDNESS AND CAPITAL STOCK
AMENDED BANK FACILITY
In August 1999, the Company amended its existing bank credit facility
(the "Revolving Facility") and entered into a new $200.0 million secured term
loan facility (the "Term Loan") (collectively, "the Amended Bank Facility"). The
Amended Bank Facility is secured by substantially all of the assets of Palace
Station, Boulder Station, Texas Station, Sunset Station, Station Casino St.
Charles and Station Casino Kansas City (the "Borrowers"). The proceeds from the
Term Loan were used to repay the Company's existing $75.0 million secured term
loan facility and to reduce outstanding borrowings under the Company's Revolving
Facility. The Company recorded an extraordinary charge of $0.3 million (net of
applicable tax benefit) to reflect the write-off of the unamortized loan costs
on the refinanced $75.0 million secured term loan facility. The Term Loan
matures on December 31, 2005 and amortizes in installments of $0.5 million on
each fiscal quarter end from March 31, 2000 until and including December 31,
2004 and of $47.5 million on each fiscal quarter end thereafter. The interest
rate on the Term Loan is 2.50% above the Eurodollar Rate. The Term Loan contains
financial covenants substantially identical to the covenants in the indentures
governing the Company's senior subordinated notes.
The Revolving Facility provides for borrowings up to an aggregate
principal amount of $330.8 million at December 31, 1999. The Revolving Facility
matures on September 30, 2003. The availability under the Revolving Facility
will reduce by $14.0 million on March 31, 2001 and June 30, 2001; by $17.5
million on September 30, 2001, December 31, 2001, March 31, 2002, June 30, 2002
and September 30, 2002; and by $30.6 million on each fiscal quarter end
thereafter. Borrowings under the Revolving Facility bear interest at a margin
above the Alternate Base Rate or the Eurodollar Rate (each, as defined in the
Revolving Facility), as selected by the Company. The margin above such rates,
and the fee on the unfunded portions of the Revolving Facility, will vary
quarterly based on the Company's combined consolidated ratio of debt to EBITDA
(each, as defined in the Revolving Facility). As of December 31, 1999, the
Borrower's margin above the Eurodollar Rate on borrowings under the Revolving
Facility was 1.63%. The maximum margin for Eurodollar Rate borrowings is 2.75%.
The maximum margin for Alternate Base Rate borrowings is 1.50%. As of December
31, 1999, the fee for the unfunded portion of the Revolving Facility was 40
basis points.
The Revolving Facility contains certain financial and other covenants.
These include a maximum funded debt to Adjusted EBITDA ratio for the Borrowers
combined of 2.50 to 1.00 for each fiscal quarter, a minimum fixed charge
coverage ratio for the preceding four quarters for the Borrowers combined of
1.50 to 1.00 for each fiscal quarter, limitations on indebtedness, limitations
on asset dispositions, limitations on investments, limitations on prepayments of
indebtedness and rent and limitations on capital expenditures. As of December
31, 1999, the Borrowers combined funded debt to Adjusted EBITDA ratio was 1.52
to 1.00 and their combined fixed charge coverage ratio for the preceding four
quarters ended December 31, 1999 was 2.55 to 1.00. A tranche of the Revolving
Facility contains a minimum tangible net worth requirement for Palace Station
and certain restrictions on distributions of cash from Palace Station to the
Company. As of December 31, 1999, Palace Station's tangible net worth exceeded
the requirement by approximately $9.3 million. These covenants limit Palace
Station's ability to make payments to the Company, a significant source of
anticipated cash for the Company.
In addition, the Revolving Facility has financial and other covenants
relating to the Company. These include a tangible net worth covenant and a
covenant limiting the consolidated funded debt to Adjusted EBITDA ratio to no
more than 5.00 to 1.00 on December 31, 1999 and reducing quarterly to 4.00 to
1.00 on September 30, 2001. Other covenants limit prepayments of indebtedness or
rent (including, subordinated debt other than refinancings meeting certain
criteria), limitations on asset dispositions, limitation on dividends,
limitations on indebtedness, limitations on investments and limitations on
capital expenditures. The Revolving Facility also prohibits the Company from
holding excess cash and cash equivalents. As of December 31, 1999, the Company's
consolidated funded debt to Adjusted EBITDA ratio was 3.93 to
30
<PAGE>
1.00. The Company has pledged the stock of all of its subsidiaries except Kansas
City Station Corporation and St. Charles Riverfront Station, Inc. and has agreed
to pledge the stock of the latter two subsidiaries upon regulatory approval
(which is expected to be obtained).
SENIOR SUBORDINATED NOTES
The Company has $542.3 million, net of unamortized discount of $5.6
million, of senior subordinated notes outstanding as of December 31, 1999, $198
million of these notes bear interest, payable semi-annually, at a rate of 101/8%
per year, $150 million of these notes bear interest, payable semi-annually, at a
rate of 93/4% per year and $199.9 million of these notes bear interest, payable
semi-annually, at a rate of 87/8% per year (collectively the "Notes"). The
indentures governing the Notes (the "Indentures") contain certain customary
financial and other covenants which limit the Company and its subsidiaries'
ability to incur additional debt and to pay dividends. At December 31, 1999, the
Company's Consolidated Coverage Ratio (as defined) was 1.32 to 1.00. The
Indentures provide that the Company may not incur additional indebtedness, other
than specified types of indebtedness, unless the Consolidated Coverage Ratio is
at least 2.00 to 1.00. As a result, the covenant limits the Company's ability to
incur additional indebtedness for borrowings under the Amended Bank Facility not
to exceed the greater of $200 million or 1.5 times Operating Cash Flow (as
defined) for the four most recent quarters, plus $15 million. The limitation on
the incurrence of additional indebtedness and dividend restrictions in the
Indentures significantly restrict the Company's ability to pay dividends on its
capital stock. The Indentures also give the holders of the Notes the right to
require the Company to purchase the Notes at 101% of the principal amount of the
Notes plus accrued interest thereon upon a Change of Control and Rating Decline
(each as defined in the Indentures) of the Company.
SUNSET OPERATING LEASE
The Company entered into an operating lease for furniture, fixtures and
equipment (the "Equipment") with a cost of up to $40.0 million, dated as of
September 25, 1996 (the "Sunset Operating Lease") with First Security Trust
Company of Nevada. A total of $35.7 million of this facility had been drawn. The
Company incurred approximately $2.0 million of rent expense per quarter related
to the Sunset Operating Lease. In October 1999, the Company exercised its option
to purchase the equipment for approximately $27.0 million. The purchase price
was funded with borrowings from the Company's Revolving Facility.
COMMON STOCK
The Company is authorized to issue up to 90,000,000 shares of its
common stock, $0.01 par value per share (the "Common Stock"), 42,455,999 shares
of which were issued and 778,329 shares were held in treasury as of December 31,
1999. Each holder of the Common Stock is entitled to one vote for each share
held of record on each matter submitted to a vote of stockholders. Holders of
the Common Stock have no cumulative voting, conversion, redemption or preemptive
rights or other rights to subscribe for additional shares other than pursuant to
the Rights Plan described below. Subject to any preferences that may be granted
to the holders of the Company's preferred stock, each holder of Common Stock is
entitled to receive ratably such dividends as may be declared by the Board of
Directors out of funds legally available therefor as well as any distributions
to the stockholders and, in the event of liquidation, dissolution or winding up
of the Company, is entitled to share ratably in all assets of the Company
remaining after payment of liabilities.
RIGHTS PLAN
On October 6, 1997, the Company declared a dividend of one preferred
share purchase right (a "Right") for each outstanding share of Common Stock. The
dividend was paid on October 21, 1997. Each Right entitles the registered holder
to purchase from the Company one one-hundredth of a share of Series A Preferred
Stock, par value $0.01 per share ("Preferred Shares") of the Company at a price
of $40.00 per one one-hundredth of a Preferred Share, subject to adjustment. The
Rights are not exercisable until the earlier of 10 days following a public
announcement that a person or group of affiliated or associated persons have
acquired beneficial ownership of 15% or more of the outstanding Common Stock
("Acquiring Person") or 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any person
or group of affiliated persons becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer, the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding Common Stock.
31
<PAGE>
The Rights will expire on October 21, 2007. Acquiring Persons do not
have the same rights to receive Common Stock as other holders upon exercise of
the Rights. Because of the nature of the Preferred Shares' dividend, liquidation
and voting rights, the value of one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Common Share. In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, the proper provisions will be made so that
each holder of a Right, other than Rights beneficially owned by the Acquiring
Person (which will thereafter become void), will thereafter have the right to
receive upon exercise that number of shares of Common Stock having a market
value of two times the exercise price of the Right. In the event that the
Company is acquired in a merger or other business combination transaction or 50%
or more of its consolidated assets or earning power are sold after a person or
group has become an Acquiring Person, proper provision will be made so that each
holder of a Right will thereafter have the right to receive, upon exercise
thereof, that number of shares of Common Stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Right. Because of the characteristics of the Rights in connection
with a person or group of affiliated or associated persons becoming an Acquiring
Person, the Rights may have the effect of making an acquisition of the Company
more difficult and may discourage such an acquisition.
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of its
preferred stock, $0.01 par value per share (the "Preferred Stock"). As of June
14, 1999, the Company redeemed all 2,070,000 shares of its $3.50 Convertible
Preferred Stock in exchange for 6,741,632 shares of the Company's Common Stock.
The Board of Directors, without further action by the holders of Common Stock,
may issue shares of Preferred Stock in one or more series and may fix or alter
the rights, preferences, privileges and restrictions, including the voting
rights, redemption provisions (including sinking fund provisions), dividend
rights, dividend rates, liquidation rates, liquidation preferences, conversion
rights and the description and number of shares constituting any wholly unissued
series of Preferred Stock. Except as described above, the Board of Directors,
without further stockholder approval, may issue shares of Preferred Stock with
rights that could adversely affect the rights of the holders of Common Stock.
The issuance of shares of Preferred Stock under certain circumstances could have
the effect of delaying or preventing a change of control of the Company or other
corporate action.
TREASURY STOCK
The Company is authorized to repurchase up to approximately 6.3 million
shares of its Common Stock. As of December 31, 1999, the Company had purchased
0.8 million shares at a cost of $11.9 million.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market
rates and prices, such as interest rates, foreign currency exchange rates and
commodity prices. The Company's primary exposure to market risk is interest rate
risk associated with its long-term debt. The Company attempts to limit its
exposure to interest rate risk by managing the mix of its long-term fixed-rate
borrowings and short-term borrowings under the Amended Bank Facility. Borrowings
under the Amended Bank Facility bear interest, at the Company's option, at a
specified premium over the prime rate or at a specified premium over the one-,
two-, three-, or six-month London Interbank Offered Rate ("LIBOR"). However, the
amount of outstanding borrowings is expected to fluctuate and may be reduced
from time to time. The Revolving Facility matures in September 2003 and the
Amended Bank Facility matures in December 2005.
The following table provides information about the Company's long-term
debt at December 31, 1999 (see also "Description of Certain Indebtedness and
Capital Stock") (amounts in thousands):
<TABLE>
<CAPTION>
Maturity Face Carrying Estimated
Date Amount Value Fair Value
---------------------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Revolving Facility at a weighted average
interest rate of approximately 7.94%............ September 2003 $177,300 $177,300 $177,300
Term Loan, interest at 8.69%......................... December 2005 200,000 200,000 200,000
8 7/8% senior subordinated notes..................... December 2008 199,900 199,900 192,863
9 3/4% senior subordinated notes..................... April 2007 150,000 145,326 150,405
10 1/8% senior subordinated notes.................... March 2006 198,000 197,087 203,267
Other notes, interest ranging from 7.83% to 9.00%.... Various to June 2007 22,867 22,867 22,867
----------- --------- ---------
Total $948,067 $942,480 $946,702
=========== ======== ==========
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
ITEM 8. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
<S> <C>
Report of Independent Public Accountants............................................................................ 34
Consolidated Balance Sheets......................................................................................... 35
Consolidated Statements of Operations............................................................................... 36
Consolidated Statements of Stockholders' Equity..................................................................... 37
Consolidated Statements of Cash Flows............................................................................... 38
Notes to Consolidated Financial Statements.......................................................................... 39
</TABLE>
33
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Station Casinos, Inc.:
We have audited the accompanying consolidated balance sheets of Station
Casinos, Inc. (a Nevada corporation) and subsidiaries as of December 31, 1999
and 1998, and the related consolidated statements of operations, stockholders'
equity and cash flows for the year ended December 31, 1999, for the nine months
ended December 31, 1998 and for the year ended March 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Station Casinos,
Inc. and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the year ended December 31, 1999, for the
nine months ended December 31, 1998 and for the year ended March 31, 1998, in
conformity with accounting principles generally accepted in the United States.
Arthur Andersen LLP
Las Vegas, Nevada
January 24, 2000
34
<PAGE>
<TABLE>
<CAPTION>
STATION CASINOS, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ..................................................... $ 73,072 $ 59,040
Cash - restricted for payment of long-term debt - defeased January 4, 1999 ... - 202,383
Accounts and notes receivable, net ............................................ 12,346 18,372
Inventories ................................................................... 6,013 5,466
Prepaid gaming tax ............................................................ 10,035 8,908
Prepaid expenses .............................................................. 8,219 6,786
Deferred income tax ........................................................... 10,519 4,981
------------- -------------
Total current assets ...................................................... 120,204 305,936
Property and equipment, net ................................................... 1,025,753 1,147,890
Land held for development ..................................................... 18,839 17,009
Deferred income tax, net ...................................................... 21,823 -
Other assets, net ............................................................. 89,654 61,090
============= =============
Total assets .............................................................. $ 1,276,273 $ 1,531,925
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ............................................. $ 8,647 $ 13,323
Accounts payable .............................................................. 11,998 18,636
Accrued payroll and related ................................................... 25,065 18,162
Construction contracts payable ................................................ 750 10,399
Accrued interest payable ...................................................... 12,341 15,306
Accrued progressives .......................................................... 8,877 7,438
Accrued expenses and other current liabilities ................................ 50,011 34,672
------------- -------------
Total current liabilities ................................................. 117,689 117,936
Long-term debt, less current portion .......................................... 933,833 946,308
9 5/8% Senior subordinated notes - defeased January 4, 1999 ................... - 187,635
Other long-term liabilities, net .............................................. 7,950 10,640
------------- -------------
Total liabilities ......................................................... 1,059,472 1,262,519
------------- -------------
Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred stock, par value $.01; authorized 5,000,000 shares; 0 and
2,070,000 convertible preferred shares issued and outstanding .............. - 103,500
Common stock, par value $.01; authorized 90,000,000 shares;
42,455,999 and 35,312,192 shares issued .................................... 424 353
Treasury stock, 778,329 and 213,008 shares, at cost ........................... (11,862) (2,006)
Additional paid-in capital .................................................... 282,294 168,867
Deferred compensation - restricted stock ...................................... (7,432) (159)
Accumulated deficit .......................................................... (45,907) (1,149)
Accumulated other comprehensive income ........................................ (716) -
------------- -------------
Total stockholders' equity ................................................ 216,801 269,406
------------- -------------
Total liabilities and stockholders' equity ................................ $ 1,276,273 $ 1,531,925
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
35
<PAGE>
STATION CASINOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE NINE FOR THE YEAR
ENDED MONTHS ENDED ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 MARCH 31, 1998
--------------------- -------------------- --------------------
(SEE NOTE 1)
<S> <C> <C> <C>
Operating revenues:
Casino ................................................ $ 764,089 $ 509,149 $ 600,847
Food and beverage ..................................... 141,116 104,538 131,365
Room .................................................. 42,870 30,040 37,330
Other ................................................. 62,286 47,663 53,494
-------------- -------------- --------------
Gross revenues ................................... 1,010,361 691,390 823,036
Promotional allowances ................................ (67,892) (49,176) (53,426)
-------------- -------------- --------------
Net revenues ..................................... 942,469 642,214 769,610
-------------- -------------- --------------
Operating costs and expenses:
Casino ................................................ 356,365 249,353 291,102
Food and beverage ..................................... 88,898 66,121 89,928
Room .................................................. 15,860 11,515 13,461
Other ................................................. 30,616 19,463 24,762
Selling, general and administrative ................... 190,753 136,649 173,270
Corporate expense ..................................... 23,007 11,431 14,621
Depreciation and amortization ......................... 70,664 52,975 67,414
Impairment loss ....................................... 137,435 30,011 -
Preopening expenses ................................... - - 10,866
-------------- -------------- --------------
913,598 577,518 685,424
-------------- -------------- --------------
Operating income ............................................ 28,871 64,696 84,186
-------------- -------------- --------------
Other income (expense):
Interest expense, net ................................. (84,618) (66,127) (78,826)
Interest expense - defeasance, net .................... - (835) -
Abandoned acquisition costs ........................... (2,409) - -
Merger settlement, net of related legal costs ......... 12,824 (2,943) -
Write-off of costs to elect REIT status ............... - - (2,914)
Other ................................................. (1,891) (4,655) (6,566)
-------------- -------------- --------------
(76,094) (74,560) (88,306)
-------------- -------------- --------------
Loss before income taxes and extraordinary item ............. (47,223) (9,864) (4,120)
Income tax benefit .......................................... 14,929 871 966
-------------- -------------- --------------
Loss before extraordinary item .............................. (32,294) (8,993) (3,154)
Extraordinary item - loss on early retirement of debt, net
of applicable income tax benefit ........................ (10,653) (3,104) (2,042)
-------------- -------------- --------------
Net loss .................................................... (42,947) (12,097) (5,196)
Preferred stock dividends ................................... (1,811) (5,434) (7,245)
-------------- -------------- --------------
Net loss applicable to common stock ......................... $ (44,758) $ (17,531) $ (12,441)
============== ============== ==============
Weighted average common shares outstanding .................. 39,128,094 35,311,715 35,309,189
============== ============== ==============
Basic and diluted loss per common share:
Loss applicable to common stock, before
extraordinary item ............................... $ (0.87) $ (0.41) $ (0.29)
Extraordinary item ....................................... $ (0.27) $ (0.09) $ (0.06)
Loss applicable to common stock .......................... $ (1.14) $ (0.50) $ (0.35)
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
36
<PAGE>
STATION CASINOS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DEFERRED
ADDITIONAL COMPENSATION-
PREFERRED COMMON TREASURY PAID - IN RESTRICTED
STOCK STOCK STOCK CAPITAL STOCK
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balances, March 31,1997 ........... $ 103,500 $ 353 $ -- $ 167,397 $ (1,225)
Exercise of stock options ......... -- -- -- 26 --
Cancellation of restricted
stock ........................... -- -- -- (243) 243
Amortization of deferred
compensation .................... -- -- -- -- 454
Preferred stock dividends ......... -- -- -- -- --
Net loss .......................... -- -- -- -- --
------------ ------------ ------------ ------------ -------------
Balances, March 31, 1998 .......... 103,500 353 -- 167,180 (528)
Exercise of stock options ......... -- -- -- 36 --
Amortization of deferred
compensation .................... -- -- -- -- 369
Preferred stock dividends ......... -- -- -- -- --
Purchase of treasury stock, at
cost (213 shares) ............... -- -- (2,006) -- --
Other ............................. -- -- -- 1,651 --
Net loss .......................... -- -- -- -- --
------------ ------------ ------------ ------------ -------------
Balances, December 31, 1998,
(see Note 1) .................... 103,500 353 (2,006) 168,867 (159)
Exercise of stock options ......... -- 1 -- 827 --
Issuance of restricted stock ...... -- 3 -- 7,510 (7,513)
Amortization of deferred
compensation .................... -- -- -- -- 240
Preferred stock dividends.......... -- -- -- -- --
Preferred stock conversion ........ (103,500) 67 -- 103,746 --
Purchase of treasury stock, at
cost (565 shares) ............... -- -- (9,856) -- --
Other ............................. -- -- -- 1,344 --
Asset held for sale market
valuation adjustment ............ -- -- -- -- --
Net loss .......................... -- -- -- -- --
------------ ------------ ------------ ------------ -------------
Balances, December 31, 1999 ....... $ -- $ 424 $ (11,862) $ 282,294 $ (7,432)
============ ============ ============ ============ =============
<CAPTION>
RETAINED ACCUMULATED
EARNINGS OTHER TOTAL
(ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
DEFICIT) INCOME EQUITY
------------ ------------ ------------
<S> <C> <C> <C>
Balances, March 31,1997 ........... $ 28,823 $ -- $ 298,848
Exercise of stock options ......... -- -- 26
Cancellation of restricted
stock ........................... -- -- --
Amortization of deferred
compensation .................... -- -- 454
Preferred stock dividends ......... (7,245) -- (7,245)
Net loss .......................... (5,196) -- (5,196)
------------ ------------ ------------
Balances, March 31, 1998 .......... 16,382 -- 286,887
Exercise of stock options ......... -- -- 36
Amortization of deferred
compensation .................... -- -- 369
Preferred stock dividends ......... (5,434) -- (5,434)
Purchase of treasury stock, at
cost (213 shares) ............... -- -- (2,006)
Other ............................. -- -- 1,651
Net loss .......................... (12,097) -- (12,097)
------------ ------------ ------------
Balances, December 31, 1998,
(see Note 1) .................... (1,149) -- 269,406
Exercise of stock options ......... -- -- 828
Issuance of restricted stock ...... -- -- --
Amortization of deferred
compensation .................... -- -- 240
Preferred stock dividends.......... (1,811) -- (1,811)
Preferred stock conversion ........ -- -- 313
Purchase of treasury stock, at
cost (565 shares) ............... -- -- (9,856)
Other ............................. -- -- 1,344
Asset held for sale market
valuation adjustment ............ -- (716) (716)
Net loss .......................... (42,947) -- (42,947)
------------ ------------ ------------
Balances, December 31, 1999 ....... $ (45,907) $ (716) $ 216,801
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
37
<PAGE>
STATION CASINOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE NINE FOR THE YEAR
ENDED MONTHS ENDED ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 MARCH 31,1998
------------------- ------------------- ---------------
(SEE NOTE 1)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ........................................................... $ (42,947) $ (12,097) $ (5,196)
-------------- -------------- --------------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization .................................. 70,664 52,975 67,414
Amortization of debt discount and issuance costs ............... 2,659 4,254 6,443
Loss on early retirement of debt ............................... 16,389 4,775 2,668
Merger and related legal costs ................................. - 2,943 -
Impairment loss ................................................ 137,435 30,011 -
Write-off of costs to elect REIT status ........................ - - 2,914
Preopening expenses ............................................ - - 10,866
(Decrease) increase in deferred income tax ..................... (32,733) (6,410) 2,854
Changes in assets and liabilities:
Decrease (increase) in accounts and notes receivable, net .... 6,026 (5,598) (4,845)
Increase in inventories and prepaid expenses and other ....... (3,113) (2,839) (3,228)
(Decrease) increase in accounts payable ...................... (6,893) 2,138 (4,608)
Increase in accrued expenses and other current liabilities ... 25,170 9,531 23,160
Other, net ..................................................... 401 (2,991) 6,513
-------------- -------------- --------------
Total adjustments .................................... 216,005 88,789 110,151
-------------- -------------- --------------
Net cash provided by operating activities ............ 173,058 76,692 104,955
-------------- -------------- --------------
Cash flows from investing activities:
Capital expenditures ........................................... (76,344) (96,482) (130,853)
Proceeds from sale of property and equipment ................... 5,025 5,998 4,925
Assets held for sale ........................................... (37,468) - -
Decrease in construction contracts payable ..................... (9,649) (135) (84,301)
Preopening expenses ............................................ - - (8,551)
Other, net ..................................................... (13,217) (3,152) (627)
-------------- -------------- --------------
Net cash used in investing activities ................ (131,653) (93,771) (219,407)
-------------- -------------- --------------
Cash flows from financing activities:
(Payments) borrowings under bank facility, net ................. (1,700) 55,000 47,000
Payments under the Sunset loan agreement ....................... - - (46,000)
Proceeds from notes payable .................................... - - 16,239
Principal payments on notes payable ............................ (16,004) (11,780) (27,030)
Proceeds from the issuance of senior subordinated notes ........ - 199,900 144,287
Defeasance of 9 5/8% senior subordinated notes ................. (201,670) - -
Purchase of treasury stock ..................................... (9,856) (2,006) -
Dividends paid on preferred stock .............................. (1,811) (5,434) (7,245)
Exercise of stock options ...................................... 828 36 26
Debt issuance costs and other, net ............................. 457 (7,372) (5,189)
-------------- -------------- --------------
Net cash (used in) provided by financing activities .. (229,756) 228,344 122,088
-------------- -------------- --------------
Cash and cash equivalents:
(Decrease) increase in cash and cash equivalents ............... (188,351) 211,265 7,636
Balance, beginning of year ..................................... 261,423 50,158 42,522
-------------- -------------- --------------
Balance, end of year ........................................... $ 73,072 $ 261,423 $ 50,158
============== ============== ==============
Supplemental cash flow disclosures:
Cash paid for interest, net of amounts capitalized ............. $ 85,176 $ 65,275 $ 66,691
Cash paid for income taxes, net ................................ $ 15,202 $ 519 $ 92
Property and equipment purchases financed by debt .............. $ 35 $ 2,978 $ 3,532
Preferred stock converted to common stock and additional
paid-in capital .............................................. $ 100,131 $ - $ -
Market valuation adjustment for asset held for sale ............ $ 716 $ - $ -
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
38
<PAGE>
STATION CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
BASIS OF PRESENTATION AND ORGANIZATION
Station Casinos, Inc. (the "Company"), a Nevada Corporation, is an
established multi-jurisdictional gaming and entertainment enterprise that
currently owns and operates four major hotel/casino properties and two smaller
casino properties in Las Vegas, Nevada, and gaming and entertainment complexes
in St. Charles and Kansas City, Missouri. The Company also owns and provides
slot route management services in southern Nevada.
The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries, Palace Station Hotel & Casino,
Inc. ("Palace Station"), Boulder Station, Inc. ("Boulder Station"), Texas
Station, Inc. ("Texas Station"), Sunset Station, Inc. ("Sunset Station"), St.
Charles Riverfront Station, Inc. ("Station Casino St. Charles"), Kansas City
Station Corporation ("Station Casino Kansas City"), Southwest Gaming Services,
Inc. ("SGSI") and Tropicana Station, Inc., the operator of the Wild Wild West
Gambling Hall & Hotel ("Wild Wild West"), which opened in July 1998. The Company
also owns a 50% interest in Town Center Amusements, Inc. d.b.a. Barley's Casino
& Brewing Company ("Barley's"). All significant intercompany accounts and
transactions have been eliminated.
CHANGE IN FISCAL YEAR
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 nine month period ended December 31, 1998 (the
"Transition Period 1998"). Selected consolidated financial data for the twelve
months ended December 31, 1998 is presented below, for comparison purposes only
(amounts in thousands, unaudited).
<TABLE>
<S> <C>
Net revenues.................................................. $ 847,015
Operating income.............................................. 92,380
Loss before income taxes and extraordinary item............... (10,092)
Income tax benefit............................................ 453
Extraordinary item, net of applicable income tax benefit...... (5,146)
Net loss...................................................... (14,785)
Net loss applicable to common stock........................... (22,030)
Loss per common share applicable to common stock.............. (0.62)
</TABLE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include investments purchased with an
original maturity of 90 days or less.
INVENTORIES
Inventories are stated at the lower of cost or market; cost being
determined on a first-in, first-out basis.
39
<PAGE>
STATION CASINOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and
amortization are computed using the straight-line method over the estimated
useful lives of the assets or the terms of the capitalized lease, whichever is
less. Costs of major improvements are capitalized, while costs of normal repairs
and maintenance are charged to expense as incurred.
CAPITALIZATION OF INTEREST
The Company capitalizes interest costs associated with debt incurred in
connection with major construction projects. Interest capitalization ceases once
the project is substantially complete or no longer undergoing construction
activities to prepare it for its intended use. When no debt is specifically
identified as being incurred in connection with such construction projects, the
Company capitalizes interest on amounts expended on the project at the Company's
weighted average cost of borrowed money. Interest capitalized for the fiscal
year ended December 31, 1999 was approximately $0.4 million, for the Transition
Period 1998 was approximately $1.2 million and for the fiscal year ended March
31, 1998 was approximately $12.8 million.
DEBT ISSUANCE COSTS
Debt issuance costs incurred in connection with the issuance of
long-term debt are capitalized and amortized to interest expense over the terms
of the related debt agreements.
PREOPENING EXPENSES
During the construction of and prior to the opening of a facility, all
operating expenses, including incremental salaries and wages directly related
thereto, were capitalized as preopening expenses. The construction phase
typically covers a period of 12 to 24 months. The majority of preopening costs
are incurred in the three months prior to opening. The Company expensed
preopening expenses immediately upon the opening of the related facility. During
the fiscal year ended March 31, 1998, the Company incurred preopening expenses
of $10.9 million, substantially related to the opening of Sunset Station. During
the fiscal year ended December 31, 1999 and the Transition Period 1998, the
Company had no preopening expenses. Effective January 1, 1999, Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities", changed the
manner in which the Company accounts for preopening expenses. Preopening
expenses incurred after January 1, 1999 will be expensed as incurred.
REVENUES AND PROMOTIONAL ALLOWANCES
In accordance with industry practice, the Company recognizes as casino
revenues the net win from gaming activities, which is the difference between
gaming wins and losses. All other revenues are recognized as the service is
provided. Revenues include the retail value of accommodations and food and
beverage provided on a complimentary basis to customers. The estimated
departmental costs of providing such promotional allowances are included in
casino costs and expenses and consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED TRANSITION YEAR ENDED
DECEMBER 31, PERIOD MARCH 31,
1999 1998 1998
---------------- --------------- --------------
<S> <C> <C> <C>
Food and beverage............................................... $ 51,916 $ 38,816 $ 40,573
Room............................................................ 2,527 1,877 3,027
Other........................................................... 3,106 1,932 2,828
--------------- --------------- --------------
Total......................................................... $ 57,549 $ 42,625 $ 46,428
=============== =============== ==============
</TABLE>
40
<PAGE>
EARNINGS (LOSS) APPLICABLE TO COMMON STOCK
In the fiscal year ended March 31, 1998, the Company adopted Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." This
statement replaces previously reported earnings per share ("EPS") with basic EPS
and diluted EPS. Basic EPS is computed by dividing net income (loss) applicable
to common stock by the weighted average common shares outstanding during the
period. Diluted EPS reflects the additional dilution for all potentially
dilutive securities such as stock options and convertible preferred stock.
Diluted EPS is not presented separately because the exercise of stock options
and the conversion of the convertible preferred stock does not have a dilutive
effect on the per share amounts.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 requires companies
to classify items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings, and is effective for financial statements
issued for fiscal years beginning after December 15, 1997. The Company has
adopted SFAS No. 130 as reflected in the accompanying consolidated financial
statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information." SFAS No. 131 establishes additional
standards for segment reporting in financial statements and is effective for
fiscal years beginning after December 15, 1997. The Company currently operates
in only one segment.
RECLASSIFICATIONS
Certain amounts in the Transition Period 1998 and the March 31, 1998
consolidated financial statements have been reclassified to conform to the
December 31, 1999 presentation. These reclassifications had no effect on the
Company's net loss.
2. ACCOUNTS AND NOTES RECEIVABLE
Components of accounts and notes receivable are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1999 1998
--------------- ------------
<S> <C> <C>
Casino................................................................. $ 7,496 $ 6,238
Hotel.................................................................. 2,546 1,743
Insurance Proceeds (see Note 3)........................................ - 7,239
Other.................................................................. 5,263 5,187
------------ ------------
15,305 20,407
Allowance for doubtful accounts........................................ (2,959) (2,035)
------------- -------------
Accounts and notes receivable, net................................ $ 12,346 $ 18,372
============= =============
</TABLE>
41
<PAGE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31,
1999 and 1998 (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
ESTIMATED LIFE (YEARS) 1999 1998
---------------------- --------------- ---------------
<S> <C> <C> <C>
Land ................................................ - $ 36,737 $ 37,864
Land leases acquired................................. 48-52 4,995 4,685
Buildings and leasehold improvements................. 31-45 765,042 728,642
Boats and barges..................................... 20-45 67,009 100,086
Furniture, fixtures and equipment.................... 3-7 284,167 251,681
Construction in progress............................. - 119,353 224,572
--------------- ---------------
1,277,303 1,347,530
Accumulated depreciation and amortization............ (251,550) (199,640)
--------------- ---------------
Property and equipment, net..................... $ 1,025,753 $ 1,147,890
=============== ===============
</TABLE>
At December 31, 1999 and 1998, substantially all property and equipment
of the Company is pledged as collateral for long-term debt.
CONSTRUCTION IN PROGRESS
In the fall of 1996, the Company commenced an expansion project at
Station Casino St. Charles which included the building of a backwater basin
containing two new gaming vessels and a new retail and entertainment complex.
Since December 31, 1997, construction on the Station Casino St. Charles
expansion project has been halted. Included in construction in progress at
December 31, 1999 is approximately $101.0 million related to the Station Casino
St. Charles expansion project (see Asset Impairment discussion below).
ASSET IMPAIRMENT
In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", the Company
recorded an impairment loss of $137.4 million in the fiscal year ended December
31, 1999 and $30.0 million in the Transition Period 1998 to adjust the carrying
value of its fixed assets and land held for development to their estimated fair
value. In the fiscal year ended December 31, 1999, approximately $125.2 million
of the impairment loss was related to Station Casino St. Charles. In the fourth
quarter of 1999, the Company made a decision to reconfigure the existing Station
Casino St. Charles facility to a more efficient layout in response to the new
open boarding rules promulgated by the Missouri Gaming Commission that began in
September 1999 in the St. Louis market. All gaming operations will be moved to
the existing barge by the end of the first quarter of 2000. The existing
riverboat is expected to be sold after the reconfiguration is complete. In
accordance with SFAS No. 121, the riverboat and miscellaneous other fixed assets
were written down by approximately $15 million to their net realizable value.
In addition, the Company performed an evaluation of the carrying values
of the remaining assets in St. Charles and determined a $110 million write-down
of the asset values was necessary. The write-down was deemed appropriate after a
review of the property's asset valuations relative to the Company's near-term
investment objectives. The balance of the impairment loss in the fiscal year
ended December 31, 1999, resulted primarily from the Company's determination
that it will sell a 40-acre parcel of land in Henderson, Nevada, that it
recently acquired. Future development of the property will be limited to
non-gaming purposes. The resulting write-down of the parcel was necessary to
reflect the value of the land as a non-gaming site.
In the Transition Period 1998, the impairment loss principally involves
assets at the Station Casino St. Charles facility, including a riverboat
formerly used in the Missouri operations, capitalized project costs associated
with various parcels of land determined to have no value, and several parcels of
land within close proximity to the St. Charles, Missouri site that were being
held for future development. The fair value of the impaired assets was primarily
determined through the market's interest in riverboats and barges, and on the
comparable sales prices on parcels of land in the St. Charles area.
42
<PAGE>
The total amount of the impairment loss in the Transition Period 1998 related to
this category of assets was approximately $23.4 million. In addition to the
assets described above, the most significant portion of the remaining impairment
loss in the Transition Period 1998 relates to several parcels of land in Nevada
and Texas that the Company had acquired in the past for either defensive or
expansion purposes. The value of these parcels was determined based on sales
prices for comparable parcels of land on the market. The following two
circumstances led to the Company's decision to write-down these assets to their
fair market value: (1) the passage, in Nevada, of legislation which places
significantly higher requirements on land to be zoned for gaming purposes, and
(2) the termination of the Plan of Merger with Crescent Real Estate Equities
Company (see Note 11).
Included in other assets, net on the accompanying consolidated balance
sheet as of December 31, 1999, is $26.1 million related primarily to parcels of
land. The Company is actively attempting to dispose of these non-strategic
assets and expects to complete the sale of certain of these assets in the first
half of calendar year 2000.
PALACE STATION FIRE AND FLOOD
On July 20, 1998, Palace Station suffered damage to its casino and
hotel tower as a result of a thunderstorm in the Las Vegas Valley. In November
1998, repairs were completed to the casino and all of the rooms in the 21-story
hotel tower became fully functional. Losses associated with the property damage
and business interruption were covered under the Company's insurance policies.
As of December 31, 1998, the Company had recorded $6.8 million in other revenues
in the Consolidated Statements of Operations for the Transition Period 1998
related to the business interruption claim. During the quarter ended March 31,
1999, the Company received its final payment from its insurance company on these
claims.
4. LAND HELD FOR DEVELOPMENT
The Company has acquired several parcels of land in various
jurisdictions as part of the Company's development activities. The Company's
decision on whether to proceed with any new gaming opportunity is dependent upon
future economic and regulatory factors, the availability of financing and
competitive and strategic considerations. As many of these considerations are
beyond the Company's control, no assurances can be made that the Company will be
able to obtain appropriate licensing or be able to secure additional, acceptable
financing in order to proceed with any particular project. Included in land held
for development at December 31, 1999 and 1998 is approximately $18.8 million and
$17.0 million, respectively, related to land which had been acquired for
potential gaming projects in jurisdictions where gaming has been approved. In
June 1997, $5.0 million of certain expired option payments to lease or acquire
land for future development, which had previously been capitalized, were
expensed in other expense on the accompanying Consolidated Statements of
Operations.
43
<PAGE>
5. LONG-TERM DEBT
Long-term debt consists of the following (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Amended and restated reducing revolving credit facility, $330.8 million limit at
December 31, 1999, due September 30, 2003, interest at a margin above the
bank's prime rate or the Eurodollar Rate (7.94% at December 31, 1999) ................... $ 177,300 $ 304,000
Secured term loan facility, $200.0 million limit at December 31, 1999, due
December 31, 2005, interest at 2.50% above the Eurodollar Rate (8.69% at
December 31, 1999) ..................................................................... 200,000 75,000
8 7/8% senior subordinated notes, interest payable semi-annually, principal due
December 1, 2008 ....................................................................... 199,900 199,900
9 3/4% senior subordinated notes, interest payable semi-annually, principal due April 15,
2007, net of unamortized discount of $4.7 million at December 31, 1999 .................. 145,326 144,914
10 1/8% senior subordinated notes, interest payable semi-annually, principal due March 15,
2006, net of unamortized discount of $0.9 million at December 31, 1999 .................. 197,087 196,981
Other long-term debt, collateralized by various assets, including slot machines, furniture
and equipment, and land, monthly installments including interest ranging from 7.83% to
9.00% at December 31, 1999 .............................................................. 22,867 38,836
------------ ------------
Total long-term debt ............................................................... 942,480 959,631
Current portion of long-term debt .......................................................... (8,647) (13,323)
------------ ------------
Total long-term debt, less current portion ......................................... 933,833 946,308
9 5/8% senior subordinated notes, net of unamortized discount of $5.4 million at
December 31, 1998, defeased January 4, 1999 ............................................. - 187,635
------------ ------------
Total .............................................................................. $ 933,833 $ 1,133,943
============ ============
</TABLE>
In December 1998, the Company completed an offering of $199.9
million of senior subordinated notes due in December 2008, that have equal
priority with the Company's other senior subordinated notes. The $199.9
million senior subordinated notes bear interest payable semi-annually, at a
rate of 8 7/8% per year (the "8 7/8% Notes"). At December 31, 1998, the
Company had deposited the net proceeds from the sale of the 8 7/8% Notes and
a portion of the funds borrowed under the Amended Bank Facility in a separate
trust account with the trustee under the indenture relating to the 9 5/8%
senior subordinated notes (the "9 5/8% Notes") to redeem and to pay accrued
interest and redemption premiums related to the 9 5/8% Notes on the
redemption date. The redemption occurred on January 4, 1999. The Company
recorded an extraordinary charge of $10.4 million (net of applicable tax
benefit) to reflect the write-off of the unamortized debt discount,
unamortized loan costs and the premium to redeem the 9 5/8% Notes.
In April 1997, the Company completed an offering of $150 million of
senior subordinated notes due in April 2007, that have equal priority with
the other senior subordinated notes. The $150 million senior subordinated
notes have a coupon rate of 9 3/4% and were priced to yield 10.37% to
maturity. The discount on the $150 million senior subordinated notes has been
recorded as a reduction to long-term debt in the accompanying consolidated
balance sheets.
In March 1996, the Company completed an offering of $198 million of
senior subordinated notes due in March 2006, that have equal priority with
the other senior subordinated notes. The $198 million senior subordinated
notes have a coupon rate of 10 1/8% and were priced to yield 10.24% to
maturity. The discount on the $198 million senior subordinated notes has been
recorded as a reduction to long-term debt in the accompanying consolidated
balance sheets.
The indentures governing the Company's senior subordinated notes (the
"Indentures") contain certain customary financial and other covenants which
limit the Company and its subsidiaries' ability to incur additional debt and to
pay dividends. At December 31, 1999, the Company's Consolidated Coverage Ratio
(as defined in the Indentures) was 1.32 to 1.00. The
44
<PAGE>
Indentures provide that the Company may not incur additional indebtedness, other
than specified types of indebtedness, unless the Consolidated Coverage Ratio is
at least 2.00 to 1.00. As a result, the covenant limits the Company's ability to
incur additional indebtedness for borrowings under the Amended Bank Facility not
to exceed the greater of $200 million or 1.5 times Operating Cash Flow (as
defined) for the four most recent quarters, plus $15 million. The limitation on
the incurrence of additional indebtedness and dividend restrictions in the
Indentures significantly restrict the Company's ability to pay dividends on its
capital stock. The Indentures also give the holders of the Notes the right to
require the Company to purchase the Notes at 101% of the principal amount of the
Notes plus accrued interest thereon upon a Change of Control and Rating Decline
(each as defined in the Indentures) of the Company.
In August 1999, the Company amended its existing bank credit facility
(the "Revolving Facility") and entered into a new $200.0 million secured term
loan facility (the "Term Loan") (collectively, "the Amended Bank Facility"). The
Amended Bank Facility is secured by substantially all of the assets of Palace
Station, Boulder Station, Texas Station, Sunset Station, Station Casino St.
Charles and Station Casino Kansas City (the "Borrowers"). The proceeds from the
Term Loan were used to repay the Company's existing $75.0 million secured term
loan facility and to reduce outstanding borrowings under the Company's Revolving
Facility. The Company recorded an extraordinary charge of $0.3 million (net of
applicable tax benefit) to reflect the write-off of the unamortized loan costs
on the refinanced $75.0 million secured term loan facility. The Term Loan
matures on December 31, 2005 and amortizes in installments of $0.5 million on
each fiscal quarter end from March 31, 2000 until and including December 31,
2004 and of $47.5 million on each fiscal quarter end thereafter. The interest
rate on the Term Loan is 2.50% above the Eurodollar Rate. The Term Loan contains
financial covenants substantially identical to the covenants in the indentures
governing the Company's senior subordinated notes.
The Revolving Facility provides for borrowings up to an aggregate
principal amount of $330.8 million at December 31, 1999. The Revolving Facility
matures on September 30, 2003. The availability under the Revolving Facility
will reduce by $14.0 million on March 31, 2001 and June 30, 2001; by $17.5
million on September 30, 2001, December 31, 2001, March 31, 2002, June 30, 2002
and September 30, 2002; and by $30.6 million on each fiscal quarter end
thereafter. Borrowings under the Revolving Facility bear interest at a margin
above the Alternate Base Rate or the Eurodollar Rate (each, as defined in the
Revolving Facility), as selected by the Company. The margin above such rates,
and the fee on the unfunded portions of the Revolving Facility, will vary
quarterly based on the Company's combined consolidated ratio of debt to EBITDA
(each, as defined in the Revolving Facility). As of December 31, 1999, the
Borrower's margin above the Eurodollar Rate on borrowings under the Revolving
Facility was 1.63%. The maximum margin for Eurodollar Rate borrowings is 2.75%.
The maximum margin for Alternate Base Rate borrowings is 1.50%. As of December
31, 1999, the fee for the unfunded portion of the Revolving Facility was 40
basis points.
The Revolving Facility contains certain financial and other covenants.
These include a maximum funded debt to Adjusted EBITDA ratio for the Borrowers
combined of 2.50 to 1.00 for each fiscal quarter, a minimum fixed charge
coverage ratio for the preceding four quarters for the Borrowers combined of
1.50 to 1.00 for each fiscal quarter, limitations on indebtedness, limitations
on asset dispositions, limitations on investments, limitations on prepayments of
indebtedness and rent and limitations on capital expenditures. As of December
31, 1999, the Borrowers combined funded debt to Adjusted EBITDA ratio was 1.52
to 1.00 and their combined fixed charge coverage ratio for the preceding four
quarters ended December 31, 1999 was 2.55 to 1.00. A tranche of the Revolving
Facility contains a minimum tangible net worth requirement for Palace Station
and certain restrictions on distributions of cash from Palace Station to the
Company. As of December 31, 1999, Palace Station's tangible net worth exceeded
the requirement by approximately $9.3 million. These covenants limit Palace
Station's ability to make payments to the Company, a significant source of
anticipated cash for the Company.
In addition, the Revolving Facility has financial and other covenants
relating to the Company. These include a tangible net worth covenant and a
covenant limiting the consolidated funded debt to Adjusted EBITDA ratio to no
more than 5.00 to 1.00 on December 31, 1999 and reducing quarterly to 4.00 to
1.00 on September 30, 2001. Other covenants limit prepayments of indebtedness or
rent (including, subordinated debt other than refinancings meeting certain
criteria), limitations on asset dispositions, limitation on dividends,
limitations on indebtedness, limitations on investments and limitations on
capital expenditures. The Revolving Facility also prohibits the Company from
holding excess cash and cash equivalents. As of December 31, 1999, the Company's
consolidated funded debt to Adjusted EBITDA ratio was 3.93 to 1.00. The Company
has pledged the stock of all of its subsidiaries except Kansas City Station
Corporation and St. Charles Riverfront Station, Inc. and has agreed to pledge
the stock of the latter two subsidiaries upon regulatory approval (which is
45
<PAGE>
expected to be obtained).
On September 25, 1996, Sunset Station, a wholly-owned subsidiary of the
Company, entered into a Construction/Term Loan Agreement (the "Sunset Loan
Agreement") with a group of lenders, pursuant to which Sunset Station received a
commitment for $110 million to finance the remaining development and
construction costs of Sunset Station. The Company also entered into an operating
lease for certain furniture, fixtures and equipment with a cost of up to $40
million to be subleased to Sunset Station as part of the Sunset Station project
(see Note 6).
The Sunset Loan Agreement included a first mortgage term note in the
amount of $110 million (the "Sunset Note") which was non-recourse to the
Company, except as to certain construction matters pursuant to a completion
guarantee dated as of September 25, 1996, executed by the Company on behalf of
Sunset Station and except that the Company had pledged all of the stock of
Sunset Station as security for the Sunset Loan Agreement. As of March 31, 1998,
the Sunset Note had been repaid. The early retirement resulted in an
extraordinary loss of $2.0 million, net of the applicable income tax benefit.
In order to manage the interest rate risk associated with the Sunset
Note, Sunset Station entered into an interest rate swap agreement. This
agreement swapped the variable rate interest pursuant to the Sunset Note to a
fixed rate of 9.58% (5.83% fixed plus the Sunset Note margin), on $35 million
notional amount as of January 1997 increasing to $60 million at March 1997, $90
million at June 1997, $100 million at September 1997 and then decreasing to $95
million at June 1998. The agreement expired in December 1998. The difference
paid or received pursuant to the swap agreement was accrued as interest rates
changed and recognized as an adjustment to interest expense on the Sunset Note.
At the time of the early retirement of the Sunset Note, the Borrowers under the
Bank Facility accepted the interest rate swap on substantially identical terms
to those of the Sunset Note.
The estimated fair value of the Company's long-term debt at December
31, 1999, was approximately $946.7 million, compared to its book value of
approximately $942.5 million. The estimated fair value amounts were based on
quoted market prices on or about December 31, 1999, for the Company's debt
securities that are publicly traded. For the Amended Bank Facility, the fair
value approximates the carrying amount of the debt due to the short-term
maturities of the individual components of the debt.
Scheduled maturities of long-term debt are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
2000 ....................................................... $ 8,647
2001 ....................................................... 9,920
2002 ....................................................... 1,052
2003 ....................................................... 188,210
2004 ....................................................... 2,130
Thereafter ................................................. 732,521
----------
Total ...................................................... $ 942,480
==========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
BOULDER STATION LEASE
The Company entered into a ground lease for 27 acres of land on which
Boulder Station is located. The Company leases this land from a trust pursuant
to a long-term ground lease. The trustee of this trust is Bank of America NT&SA,
the beneficiary of which is KB Enterprises, an affiliated company owned by Frank
J. Fertitta, Jr. and Victoria K. Fertitta (the "Related Lessor"), the parents of
Frank J. Fertitta III, Chairman of the Board and Chief Executive Officer of the
Company. The lease has a maximum term of 65 years, ending in June 2058. The
lease provides for monthly payments of $135,525 through 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
46
<PAGE>
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. The Company did not exercise its June 1998 option. The Company's
leasehold interest in the property is subject to a lien to secure borrowings
under the Amended Bank Facility.
TEXAS STATION LEASE
The Company entered into a ground lease for 47 acres of land on which
Texas Station is located. The Company leases this land from a trust pursuant to
a long-term ground lease. The trustee of this trust is Bank of America NT&SA,
the beneficiary of which is Texas Gambling Hall & Hotel, Inc. 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 through
June 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 for 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. The Company's leasehold interest in the property
is subject to a lien to secure borrowings under the Amended Bank Facility.
SUNSET STATION LEASE
In June 1994, the Company entered into a lease agreement for
approximately 48 acres of land on which Sunset Station is located. The lease
has a term of 65 years with monthly rental payments of $120,000, adjusted on
each subsequent five-year anniversary by a cost of living factor. In June
2001, the Company has an option to purchase this land for $23.8 million.
Additionally, in June 2001, the lessor has an option to sell this land to the
Company for $21.8 million.
STATION CASINO KANSAS CITY LEASE
The Company has entered into a joint venture which owns the land on
which Station Casino Kansas City is located. At December 31, 1999, $3.0 million
related to this investment is included in other assets, net in the accompanying
consolidated balance sheets.
In April 1994, Station Casino Kansas City entered into an agreement
with the joint venture to lease this land. Currently, the agreement requires
monthly payments of $93,636. Commencing April 1, 1998 and every anniversary
thereafter, the rent shall be adjusted by a cost of living factor of not more
than 5% or less than 2% per annum. The lease expires March 31, 2006, with an
option to extend the lease for up to eight renewal periods of ten years each,
plus one additional seven year period. In connection with the joint venture
agreement, the Company received an option providing for the right to acquire
the joint venture partner's interest in this joint venture. The Company has
the option to acquire this interest at any time after April 1, 2002 through
April 1, 2011, for $11.7 million, however, commencing April 1, 1998, the
purchase price will be adjusted by a cost of living factor of not more than
5% or less than 2% per annum. At December 31, 1999, $2.6 million paid by the
Company in consideration for this option is included in other assets, net in
the accompanying consolidated balance sheets. The Company's leasehold
interest in the property is subject to a lien to secure borrowings under the
Amended Bank Facility.
UNITED AUBURN INDIAN COMMUNITY
On October 12, 1999, the Company announced that it has entered into a
Development Services Agreement and a Management Agreement with the United Auburn
Indian Community (the "UAIC"). Subject to the receipt of certain governmental
approvals, as well as voter approval of a proposed amendment to the California
constitution, the Company and the UAIC intends to develop a gaming and
entertainment facility on 49 acres, approximately seven miles north of
Interstate 80, in Placer County, California, near Sacramento. The scope and the
timing of this project has yet to be determined.
47
<PAGE>
EQUIPMENT LEASE
In connection with the Sunset Loan Agreement, the Company entered into
an operating lease for furniture, fixtures and equipment (the "Equipment") with
a cost of up to $40 million, dated as of September 25, 1996, (the "Sunset
Operating Lease") with First Security Trust Company of Nevada. A total of $35.7
million of this facility had been drawn. The Company incurred approximately $2.0
million of rent expense per quarter related to the Sunset Operating Lease. In
October 1999, the Company exercised its option to purchase the equipment for
approximately $27.0 million. The purchase price was funded with borrowings from
the Company's Revolving Facility.
OPERATING LEASES
The Company leases several parcels of land and equipment used in its
operations at Palace Station, Boulder Station, Texas Station, Sunset Station,
Station Casino Kansas City and Wild Wild West. Leases on various parcels ranging
from 13 acres to 171 acres have terms expiring between March 2006 and July 2063.
Future minimum lease payments required under these operating leases and other
noncancelable operating leases are as follows (amounts in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
2000................................................................................................. $ 9,663
2001................................................................................................. 10,484
2002................................................................................................. 11,376
2003................................................................................................. 11,410
2004................................................................................................. 11,332
Thereafter........................................................................................... 437,023
-----------
Total........................................................................................... $ 491,288
===========
</TABLE>
Rent expense totaled approximately $14.6 million, $12.1 million and
$12.6 million for the fiscal year ended December 31, 1999, the Transition Period
1998 and the fiscal year ended March 31,1998, respectively. Rent of $0.3 million
was capitalized in connection with the construction of Sunset Station for the
fiscal year ended March 31, 1998.
7. STOCKHOLDERS' EQUITY
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of its
preferred stock, $0.01 par value per share (the "Preferred Stock"). As of June
14, 1999, the Company redeemed all 2,070,000 shares of its $3.50 Convertible
Preferred Stock in exchange for 6,741,632 shares of the Company's Common Stock.
The Board of Directors, without further action by the holders of Common Stock,
may issue shares of Preferred Stock in one or more series and may fix or alter
the rights, preferences, privileges and restrictions, including the voting
rights, redemption provisions (including sinking fund provisions), dividend
rights, dividend rates, liquidation rates, liquidation preferences, conversion
rights and the description and number of shares constituting any wholly unissued
series of Preferred Stock. Except as described above, the Board of Directors,
without further stockholder approval, may issue shares of Preferred Stock with
rights that could adversely affect the rights of the holders of Common Stock.
The issuance of shares of Preferred Stock under certain circumstances could have
the effect of delaying or preventing a change of control of the Company or other
corporate action.
TREASURY STOCK
The Company is authorized to repurchase up to approximately 6.3 million
shares of its Common Stock. As of December 31, 1999, the Company had purchased
0.8 million shares at a cost of $11.9 million.
48
<PAGE>
RIGHTS PLAN
On October 6, 1997, the Company declared a dividend of one preferred
share purchase right (a "Right") for each outstanding share of Common Stock. The
dividend was paid on October 21, 1997. Each Right entitles the registered holder
to purchase from the Company one one-hundredth of a share of Series A Preferred
Stock, par value $0.01 per share ("Preferred Shares") of the Company at a price
of $40.00 per one one-hundredth of a Preferred Share, subject to adjustment. The
Rights are not exercisable until the earlier of 10 days following a public
announcement that a person or group of affiliated or associated persons have
acquired beneficial ownership of 15% or more of the outstanding Common Stock
("Acquiring Person") or 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any person
or group of affiliated persons becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer, the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding Common Stock.
The Rights will expire on October 21, 2007. Acquiring Persons do not
have the same rights to receive Common Stock as other holders upon exercise of
the Rights. Because of the nature of the Preferred Shares' dividend, liquidation
and voting rights, the value of one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Common Share. In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, the proper provisions will be made so that
each holder of a Right, other than Rights beneficially owned by the Acquiring
Person (which will thereafter become void), will thereafter have the right to
receive upon exercise that number of shares of Common Stock having a market
value of two times the exercise price of the Right. In the event that the
Company is acquired in a merger or other business combination transaction or 50%
or more of its consolidated assets or earning power are sold after a person or
group has become an Acquiring Person, proper provision will be made so that each
holder of a Right will thereafter have the right to receive, upon exercise
thereof, that number of shares of Common Stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Right. Because of the characteristics of the Rights in connection
with a person or group of affiliated or associated persons becoming an Acquiring
Person, the Rights may have the effect of making an acquisition of the Company
more difficult and may discourage such an acquisition.
8. BENEFIT PLANS
STOCK COMPENSATION PROGRAM
The Company has adopted a Stock Compensation Program (the "Program")
which includes (i) an Incentive Stock Option Plan for the grant of incentive
stock options, (ii) a Compensatory Stock Option Plan providing for the grant
of nonqualified stock options, (iii) a Restricted Shares Plan providing for
the grant of restricted shares of common stock and (iv) a Nonemployee
Director Stock Option Plan, providing for the grant of nonqualified stock
options. Officers, key employees, directors (whether employee directors or
nonemployee directors) and independent contractors or agents of the Company
and its subsidiaries are eligible to participate in the program. However,
only employees of the Company and its subsidiaries are eligible to receive
incentive stock options.
A maximum of 10,807,000 shares of common stock have been reserved for
issuance under the Program. Options are granted at the current market price at
the date of grant. The plan provides for a variety of vesting schedules, ranging
from immediate to twenty percent a year for five years, to be determined at the
time of grant. All options have an exercise period of ten years from the date of
grant.
49
<PAGE>
The Program will terminate ten years from the date of adoption, unless
terminated earlier by the Board of Directors, and no options or restricted
shares may be granted under the Program after such date. Summarized information
for the Program is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED DECEMBER 31, TRANSITION PERIOD ENDED MARCH 31,
1999 1998 1998
--------------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
----------------------- ----------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of the year 6,003,330 $ 12.43 5,067,452 $ 13.30 4,432,182 $ 15.22
Granted 750,766 $ 21.55 1,038,306 $ 7.69 1,799,742 $ 7.50
Exercised (71,483) $ 11.58 (1,123) $ 12.00 (4,012) $ 12.24
Canceled (76,951) $ 8.62 (101,305) $ 7.91 (1,160,460) $ 11.59
--------- --------- ----------
Outstanding at end of the year 6,605,662 $ 13.51 6,003,330 $ 12.43 5,067,452 $ 13.30
========= ========= ==========
Exercisable at end of year 3,768,443 $ 15.13 1,951,594 $ 16.60 1,485,971 $ 17.28
========= ========= ==========
Options available for grant 3,609,463 113,278 1,050,279
========= ========= ==========
</TABLE>
The following table summarizes information about the options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ --------------------------------
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE AT CONTRACTUAL EXERCISE AT EXERCISE
PRICES DECEMBER 31, 1999 LIFE PRICE DECEMBER 31, 1999 PRICE
----------------------------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4.94 - $ 5.38 81,500 8.7 $ 5.36 13,500 $ 5.29
$ 7.50 - $ 11.00 2,390,702 8.2 $ 7.67 433,122 $ 7.70
$11.63 - $17.31 2,366,960 6.3 $14.20 2,140,321 $ 14.04
$18.00 - $24.75 1,766,500 5.7 $20.87 1,181,500 $ 19.95
--------- ---------
6,605,662 6.8 $13.51 3,768,443 $ 15.13
========= =========
</TABLE>
Restricted stock grants of 330,000 and 170,500 shares were issued
during the fiscal years ended December 31, 1999 and March 31, 1995,
respectively. The effect of these grants is to increase the issued and
outstanding shares of the Company's common stock and decrease the number of
shares available for grant in the plan. Deferred compensation is recorded for
the restricted stock grants equal to the market value of the Company's common
stock on the date of grant. The deferred compensation is amortized over the
period the restricted stock vests and is recorded as compensation expense in the
accompanying consolidated statements of operations.
50
<PAGE>
The Company applies APB Opinion No. 25 and related interpretations in
accounting for the Program. Accordingly, compensation expense recognized was
different than what would have been otherwise recognized under the fair value
based method defined in SFAS No. 123, "Accounting for Stock-Based Compensation".
Had compensation expense for the plans been determined in accordance with SFAS
No. 123, the effect on the Company's net loss applicable to common stock and
basic loss per common share would have been as follows (amounts in thousands,
except per share data):
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED TRANSITION YEAR ENDED
DECEMBER 31, PERIOD MARCH 31,
1999 1998 1998
---------------- --------------- --------------
<S> <C> <C> <C>
Net loss applicable to common stock:
As reported..................................................... $ (44,758) $ (17,531) $ (12,441)
Proforma........................................................ $ (48,526) $ (19,201) $ (14,455)
Basic and diluted loss per common share:
As reported..................................................... $ (1.14) $ (0.50) $ (0.35)
Proforma........................................................ $ (1.24) $ (0.54) $ (0.41)
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing method with the following assumptions:
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED TRANSITION YEAR ENDED
DECEMBER 31, PERIOD MARCH 31,
1999 1998 1998
---------------- --------------- --------------
<S> <C> <C> <C>
Expected dividend yield............................................ --- --- ---
Expected stock price volatility.................................... 50.00% 51.90% 46.20%
Risk-free interest rate............................................ 5.90% 4.51% 6.03%
Expected average life of options (years)........................... 3.91 3.87 4.84
Expected fair value of options granted............................. $9.46 $3.34 $3.38
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to April 1, 1995, the resulting pro forma net income may
not be representative of that to be expected in future years.
401(K) PLANS
The Company has a defined contribution 401(k) plan, which covers all
employees who meet certain age and length of service requirements and allows an
employer contribution up to 50 percent of the first four percent of each
participating employee's compensation. Effective October 1, 1998, the employer
contribution was increased from 25 percent of the first four percent of each
participating employee's compensation. Plan participants can elect to defer
before tax compensation through payroll deductions. These deferrals are
regulated under Section 401(k) of the Internal Revenue Code. The Company's
matching contribution was approximately $2,103,000, $678,000 and $499,000 for
the fiscal year ended December 31, 1999, the Transition Period 1998 and the
fiscal year ended March 31, 1998, respectively.
9. EXECUTIVE COMPENSATION PLANS
The Company has employment agreements with certain of its executive
officers. These contracts provide for, among other things, an annual base
salary, supplemental long-term disability and supplemental life insurance
benefits in excess of the Company's normal coverage for employees. In addition,
the Company has adopted a Supplemental Executive Retirement Plan for its Chief
Executive Officer and a Supplemental Management Retirement Plan for certain key
executives as selected by the Human Resources Committee of the Company's Board
of Directors. Other executive plans include a Deferred Compensation Plan and a
Long-Term Stay-On Performance Incentive Plan.
51
<PAGE>
10. INCOME TAXES
The Company files a consolidated federal income tax return. The benefit
for income taxes for financial reporting purposes consists of the following
(amounts in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED TRANSITION YEAR ENDED
DECEMBER 31, PERIOD MARCH 31,
1999 1998 1998
---------------- ---------- -------------
<S> <C> <C> <C>
Income tax benefit from continuing operations...................... $ 14,929 $ 871 $ 966
Tax benefit from extraordinary loss on early retirement of debt.... 5,736 1,671 626
---------------- ------------ --------------
Total income taxes....................................... $ 20,665 $ 2,542 $ 1,592
================ ============ ==============
</TABLE>
The benefit (provision) for income taxes attributable to the net loss
consists of the following (amounts in thousands):
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED TRANSITION YEAR ENDED
DECEMBER 31, PERIOD MARCH 31,
1999 1998 1998
-------------- ------------- --------------
<S> <C> <C> <C>
Current................................................................ $ (14,960) $ 3,953 $ 18,083
Deferred............................................................... 35,625 (1,411) (16,491)
-------------- ------------- --------------
Total income taxes.............................................. $ 20,665 $ 2,542 $ 1,592
============== ============= ==============
</TABLE>
52
<PAGE>
The income tax benefit differs from that computed at the federal
statutory corporate tax rate as follows:
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED TRANSITION YEAR ENDED
DECEMBER 31, PERIOD MARCH 31,
1999 1998 1998
---------------- --------------- --------------
<S> <C> <C> <C>
Federal statutory rate................................................. 35.0% 35.0% 35.0%
Lobbying and political................................................. (1.2) (16.8) (7.0)
Meals and entertainment................................................ (0.9) (1.2) (3.7)
Credits earned, net.................................................... 0.8 2.5 3.6
Other, net............................................................. (1.2) (2.1) (4.5)
---------------- --------------- --------------
Effective tax rate..................................................... 32.5% 17.4% 23.4%
================ =============== =============
</TABLE>
The tax effects of significant temporary differences representing net
deferred tax assets and liabilities are as follows (amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1999 1998
---------------- ----------------
<S> <C> <C>
Deferred tax assets:
Current:
Accrued vacation, bonuses and group insurance.......................... $ 9,854 $ 5,691
Prepaid gaming taxes................................................... (2,880) (1,910)
Other.................................................................. 3,545 1,200
---------------- ----------------
Total current.............................................................. 10,519 4,981
---------------- ----------------
Long-term:
Preopening and other costs, net of amortization........................ 7,135 10,632
FICA credits........................................................... 2,947 2,127
State deferred taxes................................................... 2,023 2,023
Net operating loss..................................................... 2,690 14,208
Alternative minimum tax credits........................................ 27,725 18,891
---------------- ----------------
Total long-term............................................................ 42,520 47,881
---------------- ----------------
Total deferred tax assets.................................................. 53,039 52,862
---------------- ----------------
Deferred tax liabilities:
Long-term:
Temporary differences related to property and equipment................ (19,963) (52,149)
Other.................................................................. (734) (1,104)
---------------- ----------------
Total deferred tax liabilities............................................. (20,697) (53,253)
---------------- ----------------
Net ...................................................................... $ 32,342 $ (391)
================ ================
</TABLE>
The Company currently has a net operating loss carryforward of $7.7
million which expires in 2018. The excess of the alternative minimum tax over
the regular federal income tax is a tax credit which can be carried forward
indefinitely to reduce future regular federal income tax liabilities. The
Company did not record a valuation allowance at December 31, 1999 or 1998
relating to recorded tax benefits because all benefits are more likely than not
to be realized.
11. LEGAL MATTERS
On January 16, 1998, the Company entered into an Agreement and Plan of
Merger, as amended (the "Merger") with Crescent Real Estate Equities Company, a
Texas real estate investment trust ("Crescent"). The Company wrote off $2.9
million of costs incurred related to the Merger (which are included in other
expense in the accompanying consolidated statements of operations for the
Transition Period 1998). The Merger became subject to litigation between the two
companies. On April 14,
53
<PAGE>
1999, the Company announced that it had settled its lawsuits with Crescent
arising out of the failed Merger. Under the terms of the settlement agreement,
Crescent paid the Company $15 million, and the parties have released each other
from all claims.
In addition, the Company is a litigant in legal matters arising in the
normal course of business. In the opinion of management, all pending legal
matters are either adequately covered by insurance or, if not insured, will not
have a material adverse effect on the financial position or the results of
operations of the Company.
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
INCOME
(LOSS) NET
BEFORE INCOME BASIC
INCOME (LOSS) EARNINGS
TAXES APPLICABLE (LOSS)
OPERATING AND TO PER
NET INCOME EXTRAORDINARY COMMON COMMON
REVENUES (LOSS) ITEM STOCK SHARE
----------- ------------ --------------- --------- ---------
(amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
First quarter.................................... $ 229,931 $ 35,776 $ 12,997 $ (4,045) $ (0.11)
Second quarter................................... 235,371 41,552 34,525 21,592 0.58
Third quarter.................................... 237,531 42,235 20,976 13,143 0.31
Fourth quarter................................... 239,636 (90,692) (115,721) (75,448) (1.80)
TRANSITION PERIOD 1998
First quarter.................................... $ 206,250 $ 29,179 $ 5,528 $ 1,488 $ 0.04
Second quarter................................... 213,448 31,622 5,090 1,033 0.03
Third quarter.................................... 222,516 3,895 (20,482) (20,052) (0.57)
YEAR ENDED MARCH 31, 1998
First quarter.................................... $ 173,516 $ 8,178 $ (12,846) $ (10,101) $ (0.29)
Second quarter................................... 194,097 23,340 3,655 546 0.02
Third quarter.................................... 197,196 24,984 5,299 1,613 0.05
Fourth quarter................................... 204,801 27,684 (228) (4,499) (0.13)
</TABLE>
54
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is incorporated by reference the information appearing in the
section entitled "Directors and Executive Officers" in the Registrant's
definitive Proxy Statement to be made publicly available with the
Securities and Exchange Commission.
ITEM 11. EXECUTIVE COMPENSATION
There is incorporated by reference the information appearing in the
section entitled "Executive Compensation" in the Registrant's
definitive Proxy Statement to be made publicly available with the
Securities and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is incorporated by reference the information appearing in the
section entitled "Security Ownership of Certain Beneficial Owners and
Management" in the Registrant's definitive Proxy Statement to be made
publicly available with the Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is incorporated by reference the information appearing in the
sections entitled "Certain Relationships and Related Transactions" in
the Registrant's definitive Proxy Statement to be made publicly
available with the Securities and Exchange Commission.
55
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements (including related notes to Consolidated
Financial Statements) filed in Part II of this report are listed below:
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1999 and 1998
Year Ended December 31, 1999, Nine Months Ended December 31, 1998 and
Year Ended March 31, 1998
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(a) 2. None
(a) 3. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
2.1 Agreement and Plan of Reorganization dated as of February 1,
1993 among Frank J. Fertitta, Jr., as Trustee of the Frank J.
Fertitta and Victoria K. Fertitta Revocable Family Trust dated
June 17, 1989, Frank J. Fertitta III, Blake L. Sartini, Delise
F. Sartini and Lorenzo J. Fertitta. (Incorporated herein by
reference to Registration Statement No. 33-59302)
2.2 Agreement and Plan of Merger, dated as of January 16, 1998
among Crescent Real Estate Equities Company and Station
Casinos, Inc. (Incorporated herein by reference to the
Company's Form 8-K dated January 27, 1998)
2.3 Amendment No. 1 dated as of February 17, 1998 to Agreement
and Plan of Merger. (Incorporated herein by reference to the
Company's Form 10-K for the fiscal year ended March 31, 1998)
2.4 Amendment No. 2 dated as of June 14, 1998, to Agreement and
Plan of Merger. (Incorporated herein by reference to the
Company's Form 8-K dated June 17, 1998)
3.1 Amended and Restated Articles of Incorporation of the
Registrant. (Incorporated herein by reference to Registration
Statement No. 33-76156)
3.2 Restated Bylaws of the Registrant. (Incorporated herein by
reference to Registration Statement No. 33-76156)
4.1 Form of Subordinated Note of the Registrant (1998 Issue).
(included in Exhibit 4.5)
4.2 Form of Subordinated Note of the Registrant (1997 Issue).
(Incorporated herein by reference to the Company's Form 8-K
dated April 3, 1997)
56
<PAGE>
4.3 Form of Subordinated Note of the Registrant (1996 Issue).
(Incorporated herein by reference to the Company's Form 8-K
dated March 25, 1996)
4.4 Form of Subordinated Note of the Registrant (1994 Issue).
(Incorporated herein by reference to Registration Statement
No. 33-76156)
4.5 Indenture dated as of December 3, 1998 between the Registrant
and First Union National Bank as Trustee. (Incorporated herein
by reference to the Company's Registration Statement on Form
S-4 dated January 27, 1999)
4.6 Indenture dated as of April 3, 1997 between Registrant and
First Union National Bank as Trustee. (Incorporated by
reference to the Company's Form 8-K dated April 3, 1997)
4.7 Indenture dated as of March 29, 1996 between the Registrant
and First Union National Bank, as Trustee. (Incorporated
herein by reference to the Company's Form 8-K dated March 25,
1996)
4.8 Indenture dated as of May 11, 1994 between the Registrant and
First Union National Bank (f.k.a. First Fidelity Bank,
National Association) as Trustee. (Incorporated herein by
reference to the Company's Annual Report on Form 10-K for the
period ended March 31, 1994)
4.9 First Supplemental Indenture dated as of March 25, 1996
between Registrant and First Union National Bank, (f.k.a.
First Fidelity Bank, National Association), as Trustee with
respect to the Indenture dated as of May 11, 1994.
(Incorporated herein by reference to the Company's Form 8-K
dated March 25, 1996)
4.10 Certificate of Resolutions of Convertible Preferred Stock of
the Registrant. (Incorporated herein by reference to the
Company's Form 8-K dated March 25, 1996)
4.11 Form of Convertible Preferred Stock of the Registrant.
(Incorporated herein by reference to the Company's Form 8-K
dated March 25, 1996)
4.12 Rights Agreement dated October 6, 1997 between the Company and
Continental Stock Transfer and Trust Company, as Rights Agent.
(Incorporated herein by reference to the Company's Form 8-K
dated October 9, 1997)
4.13 Amendment to Rights Agreement, dated as of January 16, 1998,
between Station Casinos, Inc. and Continental Stock Transfer &
Trust Company, as Rights Agent. (Incorporated herein by
reference to the Company's Form 8-K dated January 27, 1998)
4.14 Amendment No. 2 to Rights Agreement, dated as of December 1,
1998, between Station Casinos, Inc. and Continental Stock
Transfer & Trust Company, as Rights Agent. (Incorporated
herein by reference to the Company's Form 8-K dated November
6, 1998)
4.15 Certificate of Resolutions of $100 Redeemable Preferred Stock.
(Incorporated herein by reference to the Company's Form 10-K
for the fiscal year ended March 31, 1998)
4.16 Third Amended and Restated Reducing Revolving Loan Agreement
dated as of August 25, 1999. (Incorporated herein by reference
to the Company's Quarterly Report on Form 10-Q for the period
ended September 30, 1999)
4.17 Amendment No. 1 to Third Amended and Restated Reducing
Revolving Loan Agreement dated as of September 24, 1999.
(Incorporated herein by reference to the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1999)
57
<PAGE>
4.18 Amendment No. 2 to Third Amended and Restated Reducing
Revolving Loan Agreement dated as of January 25, 2000
4.19 Term Loan Agreement dated as of August 25, 1999.
(Incorporated herein by reference to the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1999)
4.20 Amendment No. 1 to Term Loan Agreement dated September 24,
1999. (Incorporated herein by reference to the Company's
Quarterly Report on Form 10-Q for the period ended September
30, 1999)
10.1 Lease dated as of December 17, 1974 between Teddy Rich
Enterprises and Townefood, Inc. (Incorporated herein by
reference to Registration Statement No. 33-59302)
10.2 Lease dated as of May 8, 1973 between Teddy Rich Enterprises
and Mini-Price Motor Inn., including Addendum dated May 8,
1973; Lease Addendum dated June 10, 1974 amending lease dated
May 8, 1973 between Teddy Rich Enterprises and Mini-Price
Motor Inn, Inc. (Incorporated herein by reference to
Registration Statement No. 33-59302)
10.3 First Amendment to Lease (With Option) dated as of April 1,
1999 between Palace Station Hotel & Casino, Inc. and Flamingo
Associates, Inc. (Incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1999)
10.4 Second Amendment to Lease (With Option) dated as of April 1,
1999 between Palace Station Hotel Casino, Inc. and Flamingo
Associates, Inc. (Incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1999)
10.5 Lease dated as of February 16, 1976 between Richfield
Development Co. and Mini-Price Motor Inn. (Incorporated herein
by reference to Registration Statement No. 33-59302)
10.6 First Amendment to Lease (With Option) dated as of April 1,
1999 between Palace Station Hotel & Casino, Inc. and Richfield
Development Co. (Incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1999)
10.7 Second Amendment to Lease (With Option) dated as of April 1,
1999 between Palace Station Hotel & Casino, Inc. and Richfield
Development Co. (Incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1999)
10.8 Lease dated as of September 6, 1977 between Richard Tam and
Mini-Price Motor Inn Joint Venture (Parcel B1). (Incorporated
herein by reference to Registration Statement No. 33-59302)
10.9 Lease dated as of September 6, 1977 between Richard Tam and
Mini-Price Motor Inn Joint Venture (Parcel B2). (Incorporated
herein by reference to Registration Statement No. 33-59302)
10.10 First Amendment to Lease (With Option) dated as of April 1,
1999 between Palace Station Hotel & Casino, Inc. and Richard
Tam. (Incorporated herein by reference to the Company's
Quarterly Report on Form 10-Q for the period ended September
30, 1999)
10.11 Second Amendment to Lease (With Option) dated as of April 1,
1999 between Palace Station Hotel & Casino, Inc. and Richard
Tam. (Incorporated herein by reference to the Company's
Quarterly Report on Form 10-Q for the period ended September
30, 1999)
10.12 Executive Employment Agreement between Frank J. Fertitta III
and the Registrant dated as of December 1, 1999
58
<PAGE>
10.13 Executive Employment Agreement between Glenn C. Christenson
and the Registrant dated as of December 1, 1999
10.14 Executive Employment Agreement between Scott M Nielson and
the Registrant dated as of December 1, 1999
10.15 Executive Employment Agreement between Blake L. Sartini and
the Registrant dated as of December 1, 1999
10.16 Executive Employment Agreement between William W. Warner and
the Registrant dated as of December 1, 1999
10.17 Executive Employment Agreement between Mark E. Brown and the
Registrant dated as of August 2, 1999
10.18 Stock Compensation Program of the Registrant. (Incorporated
herein by reference to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1993)
10.19 Amendment dated as of August 22, 1995 to the Stock
Compensation Program. (Incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1995)
10.20 Supplemental Executive Retirement Plan of the Registrant dated
as of November 30, 1994. (Incorporated herein by reference to
the Company's Quarterly Report on Form 10-Q for the period
ended December 31, 1994)
10.21 Supplemental Management Retirement Plan of the Registrant
dated as of November 30, 1994. (Incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for
the period ended December 31, 1994)
10.22 Long-Term Stay-On Performance Incentive Plan between the
Registrant and Glenn C. Christenson, Scott M Nielson and Blake
L. Sartini. (Incorporated herein by reference to the Company's
Quarterly Report on Form 10-Q for the period ended December
31, 1994)
10.23 Long-Term Stay-On Performance Incentive Plan between the
Registrant and William W. Warner
10.24 Long-Term Stay-On Performance Incentive Plan between the
Registrant and Mark E. Brown
10.25 Amended and Restated Deferred Compensation Plan of the
Registrant effective as of September 30, 1999
10.26 Special Long-Term Disability Plan of the Registrant dated as
of November 30, 1994. (Incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the period ended
December 31, 1994)
10.27 Ground Lease between Boulder Station, Inc. and KB Enterprises
dated as of June 1, 1993. (Incorporated herein by reference to
the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1993)
10.28 Option to Lease or Purchase dated as of June 1, 1993 between
Boulder Station, Inc. and KB Enterprises. (Incorporated herein
by reference to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1993)
10.29 Option to Acquire Interest Under Purchase Contract dated as of
June 1, 1993 between Boulder Station, Inc. and KB Enterprises.
(Incorporated herein by reference to the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1993)
59
<PAGE>
10.30 First Amendment to Ground Lease and Sublease, dated as of June
30, 1995, by and between KB Enterprises, as landlord and
Boulder Station, Inc. (Incorporated herein by reference to the
Company's Form 8-K dated July 5, 1995)
10.31 Ground Lease between Registrant and Texas Gambling Hall &
Hotel, Inc. dated as of June 1, 1995. (Incorporated herein by
reference to the Company's Form 8-K dated July 5, 1995)
10.32 First Amendment to Ground Lease dated as of June 30, 1995
between Registrant and Texas Gambling Hall & Hotel, Inc.
(Incorporated herein by reference to the Company's Form 8-K
dated July 5, 1995)
10.33 Assignment, Assumption and Consent Agreement (Ground Lease)
dated as of July 6, 1995 between Registrant and Texas Station,
Inc. (Incorporated herein by reference to the Company's Form
8-K dated July 5, 1995)
10.34 Sublease Agreement dated as of November 30, 1992 between the
City of St. Charles and St. Charles Riverfront Station, Inc.
(Incorporated herein by reference to Registrant Statement No.
33-59302)
10.35 Lease between Navillus Investment Co.; Jerome D. Mack as
trustee of the Center Trust; Peter Trust Limited Partnership;
and Third Generation Limited Partnership and Registrant.
(Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the period ended March 31, 1994)
10.36 Joint Venture Agreement dated as of September 25, 1993,
between First Holdings Company and the Registrant.
(Incorporated herein by reference to the Company's Form 8-K
dated July 5, 1995)
10.37 Assignment and Assumption Agreement (Joint Venture Agreement)
dated as of March 25, 1996 between the Registrant and Kansas
City Station Corporation. (Incorporated herein by reference to
the Company's Annual Report on Form 10-K for the period ended
March 31, 1996)
10.38 Amendment to Joint Venture Agreement dated as of November 15,
1993, between First Holdings Company and the Registrant.
(Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the period ended March 31, 1996)
10.39 Second Amendment to Joint Venture Agreement, dated as of April
22, 1996, between First Holdings Company and Kansas City
Station Corporation. (Incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1996)
10.40 Development Agreement dated as of April 24, 1995, between
Kansas City Station Corporation and the Port Authority of
Kansas City. (Incorporated herein by reference to the
Company's Form 8-K dated July 5, 1995)
10.41 Lease Agreement, dated as of April 1, 1994 between
Station/First Joint Venture and Kansas City Station
Corporation. (Incorporated herein by reference to the
Company's Form 8-K dated July 5, 1995)
10.42 First Amendment to Lease Agreement dated as of March 19, 1996
between Station/First Joint Venture and Kansas City Station
Corporation. (Incorporated herein by reference to the
Company's Annual Report on Form 10-K for the period ended
March 31, 1996)
10.43 Second Amendment to Lease Agreement, dated as of April 22,
1996, between Station/First Joint Venture and Kansas City
Station Corporation. (Incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1996)
10.44 Form of Indemnification Agreement for Directors and Executive
Officers. (Incorporated herein by reference to Registration
Statement No. 33-59302)
60
<PAGE>
10.45 Form of Indemnification Agreement between the Registrant and
Frank Fertitta, Jr. (Incorporated herein by reference to
Registration Statement No. 33-59302)
10.46 Participation Agreement dated as of September 25, 1996 among
the Registrant, as Lessee, and First Security Trust Company of
Nevada, as Lessor and Trustee, and the other Persons that are
parties to such agreement. (Incorporated herein by reference
to the Company's Form 8-K dated October 29, 1996)
10.47 Lease Agreement dated as of September 25, 1996 between First
Security Trust Company of Nevada as Trustee and Lessor and the
Registrant, as Lessee. (Incorporated herein by reference to
the Company's Form 8-K dated October 29, 1996)
10.48 Sublease Agreement dated as of September 25, 1996 between the
Registrant, as Sublessor and Sunset Station as Sublessee.
(Incorporated herein by reference to the Company's Form 8-K
dated October 29, 1996)
10.49 Sunset Station 1996 Trust Agreement dated as of September 25,
1996 between the Registrant, as Grantor, and First Security
Trust Company of Nevada, as Trustee. (Incorporated herein by
reference to the Company's Form 8-K dated October 29, 1996)
10.50 Master Certificate Purchase Agreement dated October 22, 1999
among Sunset Station Leasing Company, LLC as Purchaser, First
Security Trust Company of Nevada as Trustee, each of the
parties to the Participation Agreement, as Sellers, Sunset
Station, Inc. as Sublessee and the Registrant as Lessee.
(Incorporated herein by reference to the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1999)
10.51 Consulting Agreement between Lorenzo Fertitta and the
Registrant dated February 1, 1999. (Incorporated herein by
reference to the Company's Annual Report on Form 10-K for the
Transition Period from April 1, 1998 to December 31, 1998)
10.52 Operating Agreement dated March 10, 2000, among Green Valley
Ranch Gaming, LLC, GCR Gaming, LLC and GV Ranch Station, Inc.,
a wholly owned subsidiary of the Registrant
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8K - None
(c) None
(d) None
61
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
STATION CASINOS, INC.
Dated: March 28, 2000 By: /s/ Frank J. Fertitta III
-----------------------------------------------
Frank J. Fertitta III
Chairman of the Board, President and Chief
Executive Officer (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Frank J. Fertitta III Chairman of the Board, President and Chief March 28, 2000
- ------------------------------- Executive Officer (Principal Executive
Frank J. Fertitta III Officer)
/s/ Glenn C. Christenson Executive Vice President, Chief Financial March 28, 2000
- ------------------------------- Officer, Chief Administrative Officer,
Glenn C. Christenson Treasurer and Director (Principal
Financial and Accounting Officer)
/s/ Blake L. Sartini Executive Vice President, Chief Operating March 28, 2000
- ------------------------------- Officer and Director
Blake L. Sartini
/s/ R. Hal Dean Director March 28, 2000
- -------------------------------
R. Hal Dean
/s/ Lorenzo J. Fertitta Director March 28, 2000
- -------------------------------
Lorenzo J. Fertitta
/s/ Lowell H. Lebermann, Jr. Director March 28, 2000
- -------------------------------
Lowell H. Lebermann, Jr.
/s/ Delise F. Sartini Director March 28, 2000
- -------------------------------
Delise F. Sartini
/s/ Richard J. Heckmann Director March 28, 2000
- -------------------------------
Richard J. Heckmann
</TABLE>
62
<PAGE>
EXHIBIT 4.18
AMENDMENT NO. 2 TO THIRD AMENDED AND RESTATED
REDUCING REVOLVING LOAN AGREEMENT
Reference is hereby made to that certain Third Amended and Restated
Reducing Revolving Loan Agreement dated as of August 25, 1999 among Palace
Station Hotel & Casino, Inc., Boulder Station, Inc., Texas Station, Inc., St.
Charles Riverfront Station, Inc., Kansas City Station Corporation and Sunset
Station, Inc. (collectively, the "Borrowers"), Station Casinos, Inc. ("Parent")
(but only for the purpose of making the covenants set forth in Articles 8 and 9
of such Loan Agreement), the Lenders party thereto, Societe Generale, as
Documentation Agent, Bank of Scotland, as Co-Agent, and Bank of America, N.A.,
as Administrative Agent (the "Administrative Agent") (as heretofore amended, the
"Loan Agreement"). Capitalized terms used but not defined herein are used with
the meanings set forth for those terms in the Loan Agreement.
Borrowers, Parent and the Administrative Agent, acting with the consent
of all of the Lenders pursuant to Section 14.2 of the Loan Agreement, agree as
follows:
1. AMENDMENT TO SECTION 1.1. Section 1.1 of the Loan Agreement is
amended by (a) striking the words "Parent Leverage Ratio" where they appear
in the second line and in the tabular caption within the definition of
"Applicable Pricing Level," (b) substituting in place of such words in both
such places in the definition of "Applicable Pricing Level" the words "Parent
Funded Debt Ratio" and (c) deleting the definition of "Parent Leverage Ratio"
in its entirety.
2. AMENDMENT TO SECTION 1.1. Section 1.1 of the Loan Agreement is
further amended by revising the definitions of "Annualized Adjusted EBITDA",
"Reduction Amount" and "Reduction Date" to read, respectively, as follows:
"ANNUALIZED ADJUSTED EBITDA" means (a) with respect to Parent
or Borrowers and with respect to any fiscal period ending
during the period from December 31, 1999 through and including
June 30, 2000, the SUM OF (i) the Adjusted EBITDA of Parent or
Borrowers (as applicable) for that fiscal period EXCLUDING
Adjusted EBITDA of Sunset for that fiscal period PLUS (ii) the
Sunset Annualization Amount for that fiscal period and (b)
with respect to Parent or Borrower and with respect to any
fiscal period ending after June 30, 2000, the Adjusted EBITDA
of Parent and Borrowers (as applicable) for that fiscal
period. "REDUCTION AMOUNT" means, with respect to each
Reduction Date, the amount set forth below opposite such
Reduction Date:
-1-
<PAGE>
Reduction Date Amount
-------------- ------
September 30, 1999 $ 7,000,000
December 31, 1999 $12,250,000
March 31, 2001
and June 30, 2001 $14,000,000
September 30, 2001
through September 30, 2002 $17,500,000
December 31, 2002
through September 30, 2003 $30,625,000
"REDUCTION DATE" means (a) September 30, 1999, (b) December
31, 1999 and (c) March 1, 2001 and each Quarterly Payment Date
thereafter.
3. AMENDMENT TO SECTION 1.1. Section 1.1 of the Loan Agreement is
further amended by (a) deleting the definition of "Annualization Amount"
therein contained and (b) adding the following new definition at the
appropriate alphabetical place:
"SUNSET ANNUALIZATION AMOUNT" means (a) for the fiscal period
consisting of the four (4) Fiscal Quarters ending December 31,
1999, the Adjusted EBITDA of Sunset for the Fiscal Quarter
then ended MULTIPLIED BY four (4), (b) for the fiscal period
consisting of the four (4) Fiscal Quarters ending March 31,
2000, the Adjusted EBITDA of Sunset for the two (2) Fiscal
Quarters then ended MULTIPLIED BY two (2) and (c) for the
fiscal period consisting of the four (4) Fiscal Quarters
ending June 30, 2000, the Adjusted EBITDA of Sunset for the
three (3) Fiscal Quarters then ended MULTIPLIED BY four thirds
(4/3).
4. WAIVER OF SECTION 6.1. Section 6.1 of the Loan Agreement is hereby
waived as respects its application to the Disposition of the vessel now
located at St. Charles, Missouri known as "Station Casino Belle"; PROVIDED
that such Disposition is to a Person that is not an Affiliate of Parent.
-2-
<PAGE>
5. AMENDMENT OF SECTION 6.7. Section 6.7 of the Loan Agreement is
amended by revising clause (c) thereof to read as follows:
(c) Indebtedness under the Term Loan Agreement or Indebtedness
that refinances in its entirety such Indebtedness; PROVIDED
that (i) the principal amount of such refinancing Indebtedness
does not exceed the principal amount then outstanding under
the Term Loan Agreement, (ii) all Indebtedness under the Term
Loan Agreement is retired concurrently with the incurrence of
such refinancing Indebtedness, (iii) the average scheduled
life of such refinancing Indebtedness is at least one (1) year
beyond the average remaining scheduled life of the
Indebtedness under the Term Loan Agreement and (iv) such
refinancing Indebtedness is not secured by a Lien on any
assets of any Borrower or of Parent or any of the Restricted
Subsidiaries.
6. AMENDMENT OF SECTION 9.5. Section 9.5 of the Loan Agreement is
amended by (a) striking the amount "$50,000,000" in the fourth line of clause
(e) thereof and (b) such Indebtedness; PROVIDED that (i) the principal amount
of such refinancing Indebtedness does not exceed the principal amount then
outstanding under the Term Loan Agreement, (ii) the Indebtedness under the
Term Loan Agreement is retired concurrently with the incurrence of such
refinancing Indebtedness, (iii) the average scheduled life of such
refinancing Indebtedness is at least one (1) year beyond the average
remaining scheduled life of the Indebtedness under the Term Loan Agreement
and (iv) such refinancing Indebtedness is not secured by a Lien on any assets
of any Borrower or of Parent or any of the Restricted Subsidiaries.
7. AMENDMENT TO SECTION 9.14. Section 9.14 of the Loan Agreement is
amended by (a striking the amount "$15,000,000" in clause (d) (iii) thereof
and (b) substituting in place of such amount the amount "$25,000,000."
8. AMENDMENT TO SECTION 10.1. Section 10.1 of the Loan Agreement is
amended by (a) striking the words "Parent Leverage Ratio" where they appear
in lines 3 and 8 of clause (c) thereof and (b) substituting in place of such
words the words "Parent Funded Debt Ratio."
9. AMENDMENT OF EXHIBITS. EXHIBIT B (Compliance Certificate) and EXHIBIT
J (Pricing Certificate) are hereby amended to conform to the foregoing
amendments, in such forms as are mutually acceptable to the Administrative
Agent and Borrowers.
-3-
<PAGE>
10. CONDITIONS PRECEDENT. The effectiveness of this Amendment shall be
conditioned upon receipt by the Administrative Agent of all of the following:
(a) Counterparts of this Amendment executed by all parties hereto;
(b) Written consents of each of the Sibling Guarantors to the
execution, delivery and performance hereof in the form of
EXHIBIT A to this Amendment;
(c) Written consent of all of the Lenders as required under
Section 14.2 of the Loan Agreement in the form of EXHIBIT B to
this Amendment; and
(d) Such other assurances, certificates, documents, consents or
opinions as the Administrative Agent or the Lenders reasonably
may require.
11. REPRESENTATIONS AND WARRANTIES. Borrowers hereby represent and
warrant that no Default or Event of Default has occurred and remains
continuing.
12. CONSENT OF PARENT. The execution of this Amendment by Parent shall
constitute its consent, in its capacity as guarantor under the Parent
Guaranty, to this Amendment.
13. CONFIRMATION. In all other respects, the terms of the Loan Agreement
and the other Loan Documents are hereby confirmed.
14. IN WITNESS WHEREOF, Borrowers and the Administrative Agent have
executed this Amendment as of January 25, 2000 by their duly authorized
representatives.
PALACE STATION HOTEL & CASINOS, INC.
BOULDER STATION, INC.
TEXAS STATION, INC.
ST. CHARLES RIVERFRONT STATION, INC.
KANSAS CITY STATION CORPORATION
SUNSET STATION, INC.
By: /s/ GLENN C. CHRISTENSON
---------------------------
Glenn C. Christenson
Senior Vice President
-4-
<PAGE>
STATION CASINOS, INC.
By: /s/ GLENN C. CHRISTENSON
---------------------------
Glenn C. Christenson
Executive Vice President and
Chief Financial Officer
BANK OF AMERICA, N.A., as
Administrative Agent
By: /s/ JANICE HAMMOND
---------------------------
Janice Hammond
Vice President
-5-
<PAGE>
Exhibit A to Amendment
CONSENT OF SIBLING GUARANTORS
Reference is hereby made to that certain Third Amended and Restated
Reducing Revolving Loan Agreement dated as of August 25, 1999 among Palace
Station Hotel & Casino, Inc., Boulder Station, Inc., Texas Station, Inc., St.
Charles Riverfront, Inc., Kansas City Station Corporation and Sunset Station
(collectively, the "Borrowers"), Station Casinos, Inc. ("Parent") (but only for
the purpose of making the covenants set forth in Articles 8 and 9 of the Loan
Agreement (as defined below)), the Lenders party thereto, Societe Generale, as
Documentation Agent, Bank of Scotland, as Co-Agent, and Bank of America, N.A.,
as Administrative Agent, (as heretofore amended, the "Loan Agreement").
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Loan Agreement.
Each of the undersigned hereby consents to the execution, delivery and
performance by Borrowers of Amendment No. 2 to the Loan Agreement.
Each of the undersigned represents and warrants to the Administrative
Agent and the Lenders that the Sibling Guaranty remains in full force and effect
in accordance with its terms.
Dated: January 25, 2000
GREEN VALLEY STATION, INC. SOUTHWEST GAMING SERVICES, INC.
By: /s/ GLENN C. CHRISTENSON By: /s/ BLAKE L. SARTINI
------------------------ --------------------
Glenn C. Christenson Blake L. Sartini
Vice President and Secretary
Chief Financial Officer
-6-
<PAGE>
TROPICANA STATION, INC. SOUTHWEST SERVICES, INC.
By: /s/ GLENN C. CHRISTENSON By: /s/ BLAKE L. SARTINI
------------------------ --------------------
Glenn C. Christenson Blake L. Sartini
Senior Vice President Secretary
SUNSET STATION LEASING COMPANY, LLC
By: /s/ GLENN C. CHRISTENSON
------------------------
Glenn C. Christenson
Senior Vice President
-7-
<PAGE>
Exhibit B to Amendment
CONSENT OF LENDER
Reference is hereby made to that certain Third Amended and Restated
Reducing Revolving Loan Agreement dated as of August 25, 1999 among Palace
Station Hotel & Casino, Inc., Boulder Station, Inc., Texas Station, Inc., St.
Charles Riverfront, Inc., Kansas City Station Corporation and Sunset Station
(collectively, the "Borrowers"), Station Casinos, Inc. ("Parent") (but only for
the purpose of making the covenants set forth in Articles 8 and 9 of the Loan
Agreement (as defined below)), the Lenders party thereto, Societe Generale, as
Documentation Agent, Bank of Scotland, as Co-Agent, and Bank of America, N.A.,
as Administrative Agent, (as heretofore amended, the "Loan Agreement").
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Loan Agreement.
The undersigned Lender hereby consents to the execution and delivery of
Amendment No. 2 to Third Amended and Restated Reducing Revolving Loan Agreement,
by the Administrative Agent on its behalf, substantially in the form of the most
recent draft presented to the undersigned Lender.
Dated:
-----------------
-------------------------------
[Printed Name of Lender]
By:
---------------------------
---------------------------
[Printed Name and Title]
-8-
<PAGE>
EXHIBIT 10.12
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and entered into
as of the 1st day of December, 1999, by and between Station Casinos, Inc., a
Nevada corporation, with its principal offices located at 2411 West Sahara
Avenue, Las Vegas, Nevada 89102 (the "COMPANY"), and MR. FRANK J. FERTITTA III
(the "Executive").
WHEREAS, the Company and the Executive are parties to an Amended and
Restated Employment Agreement dated as of December 22, 1997 (the "FORMER
AGREEMENT"); and
WHEREAS, the Executive has agreed to continue his employment with the
Company on the terms and conditions set forth herein; and
WHEREAS, the parties to this Agreement desire to replace the Former
Agreement in its entirety with this Agreement, and the Former Agreement shall no
longer be of any force or effect;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the Company and
the Executive (each individually a "PARTY" and together the "PARTIES") agree as
follows.
1. DEFINITIONS. In addition to certain terms defined elsewhere in this
Agreement, the following terms shall have the following respective meanings:
1.1 "AFFILIATE" shall mean any Person controlling, controlled by or
under common control with the Company,
1.2 "BASE AMOUNT" shall have the meaning ascribed to such term in
Section 280G of the Code.
1.3 "BASE SALARY" shall mean the salary provided for in SUBSECTION 3.1
or any increased salary granted to the Executive (a) by the Board or (b)
pursuant to the provisions of SUBSECTION 3 or SUBSECTION 7.1(b).
1.4 "BOARD" shall mean the Board of Directors of the Company,
including any successor of the Company in the event of a Change in Control.
1.5 "CAUSE" shall mean that the Executive:
(a) has been convicted of a felony or any crime involving fraud,
theft, embezzlement, dishonesty or moral turpitude;
(b) has been found unsuitable to hold a gaming license by final,
non-appealable decision of the Nevada Gaming Commission; or
<PAGE>
(c) in carrying out his duties under this Agreement, has engaged in
acts or omissions constituting gross negligence or willful
misconduct resulting, in either case, in material economic harm
to the Company, unless such act, or failure to act, was believed
by the Executive in good faith to be in the best interests of the
Company or any Affiliate.
1.6 A "CHANGE IN CONTROL"
(a) shall be deemed to have occurred if:
(1) any Person, corporation, entity or group (other than the
Existing Equity Holders) is or becomes the beneficial owner,
directly or indirectly, of securities representing 50% or more of
the combined voting power of the Company's Voting Stock (an
"Acquisition Event"), or
(2) the Company consolidates with or merges into another
corporation or entity, or any corporation or entity consolidates
with or merges into the Company, with the effect that the
beneficial owners of the Company's Voting Stock held immediately
prior to the consummation of such consolidation or merger cease
to beneficially own, directly or indirectly, securities
representing 50% or more of the combined voting power of the
Company's Voting Stock (or if the Company is not the surviving
entity, the surviving company's voting securities) upon the
consummation of such consolidation or merger (a "Merger Event"),
or
(3) the Company sells, conveys, transfers or leases to any
person, corporation, entity or group, directly or indirectly, in
one transaction or series of related transactions, properties
and/or assets that accounted for 75% or more of the earnings
(before interest, taxes, depreciation and amortization) of the
Company, on a consolidated basis for the four-fiscal quarter
period immediately preceding the date of consummation of such
transaction (a "Sale Event").
(b) Notwithstanding the foregoing, a reincorporation, spin-off,
split-off or other reorganization transaction (a "Reorganization
Event"), or series of related transactions, in which either the
"beneficial owners" of the Company's Voting Stock or the Existing
Equity Holders beneficially own securities representing 50% or
more of the combined voting power of the Company's Voting Stock
upon the consummation of such transaction shall not constitute an
Acquisition Event, Merger Event or Sale Event for purposes of
this definition. For purposes of this definition, "beneficial
ownership" shall have the same meaning as defined in Rules 13d-3
and 13d-5 under the Securities Exchange Act of 1934, as amended,
except that a Person shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only
after the passage of time.
2
<PAGE>
(c) For the purposes of this definition, upon consummation of an
Acquisition Event, Merger Event, Sale Event or Reorganization
Event, the "Company's Board" and the "Company's Shareholders"
shall refer to (i) in the case of an Acquisition Event, the
Company, (ii) in the case of a Merger Event, the company
surviving the merger or consolidation, (iii) in the case of a
Sale Event, the transferee of the properties, and/or assets, and
(iv) in the case of a Reorganization Event, the entity or
entities surviving such Reorganization Event on a consolidated
basis.
1.7 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.8 "COMPANY PROPERTY" shall mean all items and materials provided by
the Company to the Executive, or to which the Executive has access, in the
course of his employment, including, without limitation, all files, records,
documents, drawings, specifications, memoranda, notes, reports, manuals,
equipment, computer disks, videotapes, drawings, blueprints and other documents
and similar items relating to the Company, its Affiliates or their respective
customers, whether prepared by the Executive or others, and any and all copies,
abstracts and summaries thereof.
1.9 "CONFIDENTIAL INFORMATION" shall mean all nonpublic and/or
proprietary information respecting the business of the Company or any Affiliate,
including, without limitation, its products, programs, projects, promotions,
marketing plans and strategies, business plans or practices, business
operations, employees, research and development, intellectual property,
software, databases, trademarks, pricing information and accounting and
financing data. Confidential Information also includes information concerning
the Company's or any Affiliate's customers, such as their identity, address,
preferences, playing patterns and ratings or any other information kept by the
Company or any Affiliate concerning its customers whether or not such
information has been reduced to documentary form. Confidential Information does
not include information that is, or becomes, available to the public unless such
availability occurs through an unauthorized act on the part of the Executive.
1.10 "DEFERRED COMPENSATION PLAN FOR EXECUTIVES" shall mean the
Company's Deferred Compensation Plan for Executives, effective as of November
30, 1994, as the same may be amended from time to time.
1.11 "DISABILITY" shall mean a physical or mental incapacity that
prevents the Executive from performing the essential functions of his position
with the Company for a minimum period of ninety (90) days as determined (a) in
accordance with any long-term disability plan provided by the Company of which
the Executive is a participant, or (b) by the following procedure: The Executive
agrees to submit to medical examinations by a licensed healthcare professional
selected by the Company, in its sole discretion, to determine whether a
Disability exists. In addition, the Executive may submit to the Company
documentation of a Disability, or lack thereof, from a licensed healthcare
professional of his choice. Following a determination of a Disability or lack of
Disability by the Company's or the Executive's licensed healthcare professional,
the other Party may submit subsequent documentation relating to the existence of
a Disability from a licensed healthcare professional selected by such other
party. In the event that the medical opinions of such licensed healthcare
professionals conflict, such
3
<PAGE>
licensed healthcare professionals shall appoint a third licensed healthcare
professional to examine the Executive, and the opinion of such third licensed
healthcare professional shall be dispositive.
1.12 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.13 "EXISTING EQUITY HOLDERS" shall mean, in addition to the
Executive, Blake L. Sartini, Delise F. Sartini, Lorenzo J. Fertitta, Glenn C.
Christenson and Scott M Nielson and their executors, administrators or the legal
representatives of their estates, their heirs, distributees and beneficiaries,
and any trust as to which any of the foregoing is a settlor or co-settlor and
any corporation, partnership or other entity which is an Affiliate of any of the
foregoing, and any lineal descendants of such persons (but only to the extent
that the beneficial ownership of the Voting Stock held by such lineal
descendants was directly received by gift, trust or sale from any such person).
1.14 "GOOD REASON" shall mean and exist if, without the Executive's
prior written consent, one or more of the following events occurs:
(a) the Executive is not appointed to or is otherwise removed from
the office(s) provided for in SUBSECTION 2.3, for any reason
other than the termination of his employment;
(b) the Executive is assigned any duties or responsibilities that are
inconsistent with the scope of duties and responsibilities
associated with the Executive's position as described in
SUBSECTION 2.3;
(c) the Company gives the Executive notice pursuant to SUBSECTION 2.2
that it does not intend to extend the Term of Employment for an
additional five year period;
(d) the Executive is not appointed to or is removed from membership
on the Board;
(e) the Executive is required to relocate from, or maintain his
principal office outside of, Las Vegas;
(f) the Executive suffers a reduction in the authorities, duties or
responsibilities associated with his position as described in
SUBSECTION 2.3, on the basis of which he makes a determination in
good faith that he can no longer carry out such position in the
manner contemplated at the time this Agreement was entered into;
(g) the Executive's Base Salary is decreased by the Company or is not
increased as provided for in SUBSECTION 3.1 and/or SUBSECTION
7.1(b),
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(h) the Executive is excluded from participation in any employee
benefit or incentive plan or program offered to other executives
of the Company or his benefits or opportunities under any
employee benefit or incentive plan or program of the Company is
or are materially reduced;
(i) the Executive is not permitted to participate in the Deferred
Compensation Plan for Executives or any other incentive
compensation plans or programs offered by the Company to senior
executives;
(j) the Company fails to pay the Executive any deferred payments that
have become payable under the Deferred Compensation Plan for
Executives or any other bonus or incentive plans;
(k) the Company fails to reimburse the Executive for business
expenses in accordance with the Company's policies, procedures or
practices;
(l) the Company fails to agree to or to actually indemnify the
Executive for his actions and/or inactions, as either a director
or officer of the Company, to the fullest extent permitted by
Nevada law and the Company's by-laws, and/or the Company fails to
maintain reasonably sufficient levels of directors' and officers'
liability insurance coverage for the Executive when such
insurance is available;
(m) the Company fails to make any of the payments or to provide any
of the benefits required under SUBSECTION 7.1.
(n) the Company fails to obtain a written agreement satisfactory to
the Executive from any successor or assign of the Company to
assume and perform this Agreement; or
(o) the Company purports to terminate the Executive's employment for
Cause but such purported termination is not effected in
accordance with SECTION 6.2 of this Agreement.
1.15 "PERSON" shall mean any individual, firm, partnership,
association, trust, company, corporation or other entity.
1.16 "PRO RATA BONUS" shall mean an amount equal to seventy-five
percent (75%) of the Executive's current Base Salary, multiplied by a fraction,
the numerator of which is the number of days in such year during which the
Executive was actually employed by the Company and the denominator of which is
365.
1.17 "SPECIAL LONG-TERM DISABILITY PLAN" shall mean the Company's
Special Long-Term Disability Plan, effective as of November 30, 1994, as the
same may be amended from time to time.
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1.18 "SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN" shall mean the Company's
Supplemental Executive Retirement Plan, effective as of November 30, 1994, as
the same may be amended from time to time.
1.19 "TERM OF EMPLOYMENT" shall mean the period specified in
SUBSECTION 2.2.
1.20 "VOTING STOCK" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. TERM OF EMPLOYMENT, POSITIONS AND RESPONSIBILITIES.
2.1 EMPLOYMENT ACCEPTED. The Company hereby employs the Executive, and
the Executive hereby accepts employment with the Company, for the Term of
Employment, in the positions and with the duties and responsibilities set forth
in SUBSECTION 2.3, and upon such other terms and conditions as are stated in
this Agreement.
2.2 TERM OF EMPLOYMENT. The initial Term of Employment shall commence
upon the date of this Agreement and, unless earlier terminated pursuant to the
provisions of this Agreement, shall terminate upon the close of business on the
day immediately preceding the fifth anniversary of the date of this Agreement;
PROVIDED, HOWEVER, that the initial Term of Employment shall automatically be
extended for successive five-year periods if neither Party has advised the other
in writing in accordance with SECTION 13 at least twelve (12) months prior to
the end of the then current Term of Employment that such Term of Employment will
not be extended for an additional five (5) year period. In the event that such
notice is given, the Executive's employment shall terminate upon the close of
business on the day immediately preceding the fifth anniversary of the date that
such notice is given.
2.3 TITLE AND RESPONSIBILITIES. During the Term of Employment, the
Executive shall be employed as the President, Chief Executive Officer and
Chairman of the Board of the Company and shall serve as a member of the Board.
In carrying out his duties under this Agreement, the Executive shall only report
to the Board. During the Term of Employment, the Executive shall devote
reasonable time and attention to the business and affairs of the Company and
shall use his best efforts, skills and abilities to promote the Company's
interests. Anything herein to the contrary notwithstanding, the Executive shall
not be precluded from engaging in charitable and community affairs and managing
his personal investments. The Executive may serve as a member of the board of
directors of other corporations, subject to the approval of a majority of the
Board, which approval shall not be unreasonably withheld or delayed.
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3. COMPENSATION.
3.1 BASE SALARY. During the Term of Employment, the Executive shall be
entitled to receive a base salary (the "BASE SALARY") payable no less frequently
than in equal bi-weekly installments at an annualized rate of no less than
$1,250,000. Such Base Salary shall be reviewed annually for increase (but not
decrease) in the discretion of the Human Resources Committee of the Board. In
conducting any such annual review, the Human Resources Committee shall take into
account any change in the Executive's responsibilities, increases in the
compensation of other executives of the Company or any Affiliate (or any
competitor(s) of either or both), the performance of the Executive and/or other
pertinent factors. Such increased Base Salary shall then constitute the
Executive's "Base Salary" for purposes of this Agreement.
3.2 ANNUAL BONUS. The Company may pay the Executive an annual
discretionary bonus for each calendar year ending during the Term of Employment
in an amount that will be determined by the Human Resources Committee based on
the Executive's performance. Any annual bonus that may be awarded to the
Executive shall be paid at the same time as annual bonuses are paid to other
senior officers of the Company, unless the Executive has elected to defer
receipt of all or part of the bonus amounts to which he is entitled in respect
of any such calendar year, in accordance with the terms and provisions of any
deferred compensation program maintained by the Company.
3.3 DEFERRED COMPENSATION. The Executive shall be eligible to
participate in the Company's Deferred Compensation Plan for Executives, and any
other deferred compensation plans that the Company may adopt for executives,
pursuant to the terms of the plans.
4. EMPLOYEE BENEFIT PROGRAMS.
4.1 PENSION AND WELFARE BENEFIT PLANS. During the Term of Employment,
the Executive shall be entitled to participate in all employee benefit programs
made available to the Company's executives or salaried employees generally, as
such programs may be in effect from time to time, including, without limitation,
pension and other retirement plans, profit sharing plans, group life insurance,
group health insurance, accidental death and dismemberment insurance, long-term
disability, sick leave (including salary continuation arrangements), vacations,
holidays and other employee benefit programs sponsored by the Company.
4.2 ADDITIONAL PENSION AND WELFARE BENEFITS. In addition to the
foregoing, the Company shall provide the Executive with the following benefits:
(a) Executive Group Health Insurance coverage pursuant to such plan
or plans as the Company may select and which shall be fully paid
for by the Company;
(b) full salary continuation during the first ninety (90) days of any
physical or mental incapacity that prevents the Executive from
performing his duties and, for any Disability that continues
thereafter, benefits pursuant to the Company's Special Long-Term
Disability Plan and any other long-term
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disability benefits pursuant to any other disability plan of
which the Executive is a participant;
(c) an annual supplemental retirement benefit as set forth in the
Supplemental Executive Retirement Plan, in addition to any other
benefit pursuant to any other retirement plan under which the
Executive is covered;
(d) life insurance coverage in an aggregate amount of not less than
$30,000,000 through individual and/or group policies, including a
split dollar policy and a term life policy; and
(e) the Executive shall be eligible to participate in any long-term
compensation programs maintained by the Company to the extent
provided in the applicable plan documents.
5. BUSINESS EXPENSE REIMBURSEMENT AND PERQUISITES.
5.1 EXPENSE REIMBURSEMENT. During the Term of Employment, the
Executive shall be entitled to receive reimbursement by the Company for all
reasonable out-of-pocket expenses incurred by him in performing services under
this Agreement, subject to providing the proper documentation of said expenses.
5.2 PERQUISITES. During the Term of Employment, the Executive shall
also be entitled to any of the Company's executive perquisites in accordance
with the terms and provisions of the applicable policies, including, without
limitation:
(a) use of an automobile;
(b) payment or reimbursement of the cost of an annual physical
examination;
(c) vacation of at least four weeks per year;
(d) payment or reimbursement of initiation fees and annual membership
fees and assessments for a country club, a luncheon club and a
physical fitness program of the Executive's choice; and
(e) payment or reimbursement of fees and expenses, up to a maximum
amount of $10,000.00, incurred in connection with having this
Agreement reviewed by legal counsel prior to execution.
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6. TERMINATION OF EMPLOYMENT.
6.1 TERMINATION DUE TO DEATH OR DISABILITY. The Executive's employment
shall be terminated immediately in the event of his death or Disability. In the
event of a termination due to the Executive's death or Disability, the Executive
or his estate, as the case may be, shall be entitled, in lieu of any other
compensation whatsoever, to:
(a) Base Salary at the rate in effect at the time of his termination,
in the case of death, for a period of twenty-four (24) months
following the termination of employment;
(b) any annual bonus awarded but not yet paid;
(c) a Pro Rata Bonus for the fiscal year in which death or Disability
occurs;
(d) any deferred compensation or bonuses, including interest or other
credits on the deferred amounts, to the extent provided in the
plans or programs providing for deferral;
(e) immediate vesting of all restricted stock and unvested stock
options and to exercise all stock options for the remaining
option term, as if his employment had not terminated;
(f) reimbursement for expenses incurred but not paid prior to such
termination of employment;
(g) in the case of Disability, continuation of the Executive's health
and welfare benefits at the level in effect on the date of
termination through the end of the 60th month following the
termination of the Executive's employment, or the economic
equivalent thereof, as if the Executive's employment had
continued during such period; and
(h) such rights to other compensation and benefits as may be provided
in applicable plans and programs of the Company, including,
without limitation, applicable employee benefit plans and
programs, according to the terms and provisions of such plans and
programs.
6.2 TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate
the Executive's employment for Cause at any time during the Term of Employment
by giving written notice to the Executive, authorized by a vote of at least a
majority of the members of the Board, that the Company intends to terminate his
employment for Cause. Such written notice shall specify the particular act or
acts, or failure to act, providing the basis for termination. The Executive
shall be given the opportunity within thirty (30) days of the receipt of such
notice to meet with the Board to defend such act or acts, or failure to act. If
at the conclusion of the Executive's presentation of his defense, a majority of
the Board, nonetheless, determines that the Executive's employment is terminable
for Cause, the Executive shall be given thirty (30) days after such meeting to
correct such acts or failure to act, unless the Board also determines that the
Executive's acts or failure to act are incapable of correction. Upon failure of
the Executive,
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within thirty (30) days, to correct such acts or failure to act, or upon the
Board's determination that correction is not possible, the Executive's
employment by the Company shall automatically be terminated under this
SUBSECTION 6.2 for Cause. During the pendency of the foregoing process, the
Executive shall continue to be paid his Base Salary but shall be placed on
leave of absence status.
In the event of a termination for Cause, the Executive shall be
entitled, in lieu of any other compensation whatsoever, to:
(a) Base Salary at the rate in effect at the time of his termination
through the date of termination of employment;
(b) any bonus awarded but not yet paid;
(c) any deferred compensation or bonuses, including interest or other
credits on the deferred amounts, to the extent provided in the
plans or programs providing for deferral;
(d) reimbursement for expenses incurred but not paid prior to such
termination of employment; and
(e) such rights to other benefits as may be provided in applicable
plans and programs of the Company, including, without limitation,
applicable employee benefit plans and programs, according to the
terms and conditions of such plans and programs.
Notwithstanding anything to the contrary in this SUBSECTION 6.2, if
the Executive's employment is terminated for Cause due to his having been
convicted pursuant to SUBSECTION 1.5(A) but said conviction is subsequently
overturned on appeal and he is not required to submit to re-trial within six (6)
months thereafter, the Executive shall be entitled to the payments and the
economic equivalent of the benefits he would have received if his employment had
been terminated without Cause under SUBSECTION 6.4.
6.3 TERMINATION BY THE EXECUTIVE WITHOUT GOOD REASON. The Executive
may terminate his employment on his own initiative for any reason upon thirty
(30) days prior written notice to the Company. Such termination shall have the
same consequences as a termination for Cause under SUBSECTION 6.2.
6.4 TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding any
other provision of this Agreement, the Company may terminate the Executive's
employment without Cause, other than due to death or Disability, at any time
during the Term of Employment by giving written notice to the Executive. In the
event that the Company terminates the Executive's employment without Cause, the
Executive shall be entitled, in lieu of any other compensation whatsoever, to:
(a) an amount equal to five times 175 percent of the Executive's Base
Salary at the rate in effect at the time of his termination;
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(b) any bonus awarded but not yet paid;
(c) any deferred bonus, including interest or other credits on the
deferred amounts, to the extent provided in the Deferred
Compensation Plan for Executives;
(d) immediate vesting of all restricted stock and unvested stock
options and to exercise all stock options for the remaining
option term, as if his employment had not terminated;
(e) reimbursement for expenses incurred but not paid prior to such
termination of employment;
(f) continuation of all benefits provided to the Executive pursuant
to SUBSECTION 4.2, including, without limitation, the Executive's
group health insurance and participation in the Company's Special
Long-Term Disability Plan and any other long-term disability
insurance generally provided to senior executives of the Company,
at the level in effect at the time of his termination of
employment, through the end of the 60th month following such
termination, or the economic equivalent thereof, as if such
Executive were employed during such period; and
(g) such rights to other benefits as may be provided in applicable
plans and programs of the Company, including, without limitation,
applicable employee benefit plans and programs, according to the
terms and conditions of such plans and programs.
6.5 TERMINATION BY THE EXECUTIVE WITH GOOD REASON. The Executive may
terminate his employment on his own initiative for Good Reason upon thirty (30)
days prior written notice to the Company. Such termination shall have the same
consequences as a termination without Cause under SUBSECTION 6.4.
7. CHANGE IN CONTROL.
7.1 CHANGE IN CONTROL. Immediately upon a Change in Control, in
addition to any other compensation or benefits payable pursuant to this
Agreement or otherwise, the Executive shall be entitled to:
(a) a payment in cash equal to three times 175 percent of his Base
Salary;
(b) minimum annual increases in the Executive's Base Salary equal to
the greater of (i) five percent, or (ii) the percentage of
increase in the Consumer Price Index for the [Nevada area] as
reported by the United States Department of Labor for the
immediately preceding calendar year;
(c) annual bonuses of at least 75 percent of his Base Salary;
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(d) immediate vesting of all benefits, without penalty or reduction
in rights or benefits, including, without limitation:
(i) vesting of all stock options and stock appreciation rights,
which shall be and remain exercisable for the remaining option
term;
(ii) vesting of all rights to all restricted stock of the Company
held in the Executive's name or for his benefit;
(iii) vesting and cash-out of any phantom stock units; and
(iv) vesting and payout of any incentive shares;
(e) immediate eligibility for retirement under the Supplemental
Executive Retirement Plan without penalty for early retirement;
(f) continued funding of the Executive's split dollar life insurance
policy and any other life insurance policies maintained by the
Company on behalf of the Executive, as if the Executive were
employed by the Company through the maturity date of such
policies or payment in full of all premium obligations under such
policies; and
(g) such rights to other benefits as may be provided in applicable
plans and programs of the Company, including, without limitation,
applicable employee benefit plans and programs, according to the
terms and conditions of such plans and programs.
7.2 TERMINATION OF THE EXECUTIVE'S EMPLOYMENT AFTER A CHANGE IN
CONTROL. If subsequent to a Change in Control, the Executive's employment is
terminated by the Company without Cause or by Executive for Good Reason, the
Executive shall be entitled, in addition to any compensation and benefits
provided pursuant to SUBSECTION 6.4 and SUBSECTION 7.1, above, to:
(a) an amount equal to the greater of (i) five times 175 percent of
his Base Salary at the time of the Change in Control or (ii) five
times 175 percent of his Base Salary at the time of the
termination of his employment;
(b) continuation of all employee benefits provided to the Executive
pursuant to SUBSECTION 4.2 for a period of sixty (60) months
following such termination of employment, or the economic
equivalent thereof, as if the Executive were an employee of the
Company during such period; and
(c) an additional amount which, after the payment of all federal,
state and local income taxes attributable to such additional
amount, equals the positive difference, if any, of:
(i) $20,000,000, MINUS
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(ii) the product of:
(A) the amount that would have been payable to the
Executive under SUBSECTION 6.4(a) if his employment had
been terminated without Cause prior to a Change in
Control, the amount paid pursuant to SUBSECTION 7.1(a)
and the amount payable pursuant to SUBSECTION 7.2(a),
MULTIPLIED by:
(B) the difference of:
(i) one, MINUS
(ii) the Executive's combined marginal income tax rate.
7.3 TERMINATION BY EXECUTIVE WITHOUT GOOD REASON AFTER A CHANGE IN
CONTROL. If the Executive terminates his employment without Good Reason
following a Change in Control, in addition to any payments paid or payable
pursuant to SUBSECTION 7.1, but in lieu of any other compensation and benefits
whatsoever, he shall be entitled to the following:
(a) if such termination occurs in the first twelve (12) months
following a Change in Control, the Executive shall be entitled to
an amount equal to eighty percent (80%) of the amounts payable to
the Executive pursuant to:
(i) SUBSECTION 6.4(a),
(ii) SUBSECTION 7.2(a),
(iii) an amount, if any, calculated in accordance with SUBSECTION
7.2(c), and
(iv) the benefits provided in SUBSECTION 6.4 (b), (c), (e), (f)
AND (g).
(b) if such termination occurs after the first twelve (12) months
following a Change in Control, the Executive shall be entitled to
an amount equal to one hundred percent (100%) of the amounts
provided for in paragraphs (a)(i) and (a)(ii) of SUBSECTION
7.3(a), an amount, if any, calculated in accordance with
SUBSECTION 7.2(c), using the sum of $20,000,000, and the benefits
provided in SUBSECTION 6.4(b), (c), (e), (f) AND (g), and
(c) in either instance, the Executive shall be entitled to such
rights to benefits as may be provided in applicable plans and
programs of the Company, including, without limitation,
applicable employee benefit plans and programs, according to the
terms and conditions of such plans and programs.
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7.4 TERMINATION FOR OTHER REASONS AFTER A CHANGE IN CONTROL. If the
Executive's employment is terminated by the Company for any reason not provided
by SUBSECTION 7.2 or SUBSECTION 7.3, his rights shall be determined in
accordance with the applicable Subsection of SECTION 6.
7.5 FUNDING OF PAYMENTS. All payments payable to the Executive
pursuant to this SECTION 7, except for payments payable as a lump sum, shall be
made to a trust which shall be established for such purpose and shall provide
for Towers Perrin to serve as the trustee thereof.
8. CONDITIONS TO PAYMENTS.
8.1 TIMING OF PAYMENTS. Unless otherwise provided herein, any
payments to which the Executive shall be entitled under SECTIONS 6 AND 7
following the termination of his employment shall be made as promptly as
possible and in no event later than five business days following such
termination of employment.
8.2 NO MITIGATION; NO OFFSET. In the event of any termination of
employment under SECTIONS 6 OR 7, the Executive shall be under no obligation
to seek other employment and there shall be no offset against amounts due to
the Executive on account of any remuneration attributable to any subsequent
employment that the Executive may obtain. Any amounts payable to the
Executive are in the nature of severance payments, or liquidated damages, or
both, and are not in the nature of a penalty.
9. SPECIAL REIMBURSEMENT.
9.1 If any payment or benefit paid or payable, or received or to
be received, by or on behalf of the Executive in connection with a Change in
Control pursuant to SUBSECTION 7.1 or the termination of the Executive's
employment pursuant to SUBSECTIONS 7.2, 7.3 OR 7.4 , whether any such
payments or benefits are pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any Affiliate, any Person,
or otherwise (the "TOTAL PAYMENTS"), will or would be subject to the excise
tax imposed under Section 4999 of the Code (the "EXCISE TAX"), the Company
shall pay to the Executive an additional amount (the "GROSS-UP PAYMENT") such
that, after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes) imposed upon or in respect of
the Total Payments and the Gross-Up Payments, including, without limitation,
any income taxes (and any interest and penalties imposed with respect
thereto) and any Excise Tax imposed thereon, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the Total
Payments.
9.2 For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of such Excise Tax,
(a) the Total Payments shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise
Tax, unless in the opinion of tax counsel selected by the Company
and reasonably acceptable to the Executive
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(which opinion shall be provided to the Executive) such Total
Payments (in whole or in part) (i) do not constitute parachute
payments, including (without limitation) by reason of Section
280G(b)(4)(A) of the Code, (ii) such excess parachute payments
(in whole or in part) represent reasonable compensation for
services actually rendered, within the meaning of Section
280G(b)(4)(B) of the Code, or (iii) are not, in the opinion of
legal counsel, otherwise subject to the Excise Tax, and
(b) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.
9.3 In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder, the Executive shall repay to
the Company, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the initial
Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
accordance with SUBSECTION 9.1 in respect of such excess Excise Tax (plus any
interest, penalties or additions payable by the Executive with respect to such
excess Excise Tax) at the time that the amount of such excess Excise Tax is
finally determined. The Executive and the Company shall each reasonably
cooperate with each other in connection with any administrative or judicial
proceedings concerning the existence or amount of any such subsequent liability
for Excise Tax with respect to the Total Payments.
10. INDEMNIFICATION.
10.1 GENERAL. The Company agrees that if the Executive is made a party
or is threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (an "INDEMNIFIABLE ACTION"), by
reason of the fact that he is or was a director or officer of the Company or is
or was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether or not the basis of such Indemnifiable Action is alleged action
in an official capacity as a director, officer, member, employee or agent while
service as a director, officer, member, employee or agent, he shall be
indemnified and held harmless by the Company to the fullest extent authorized by
Nevada law and the Company's by-laws, as the same exist or may hereafter be
amended, against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by the Executive in connection
therewith.
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10.2 PROCEDURE. The indemnification provided pursuant to this SECTION
10 shall be subject to the following conditions:
(a) The Executive must promptly give the Company written notice of
any actual or threatened Indemnifiable Action;
(b) The Company will be permitted, at its option, to participate in,
or to assume, the defense of any Indemnifiable Action;
(c) The Executive must provide reasonable cooperation to the Company
in the defense of any Indemnifiable Action; and
(d) The Executive must refrain from settling any Indemnifiable Action
without obtaining the Company's prior written consent, which
consent shall not be unreasonably withheld.
10.3 ADVANCEMENT OF COSTS AND EXPENSES. The Company agrees to advance
all costs and expenses referred to in SUBSECTION 10.1; PROVIDED, HOWEVER, that
the Executive agrees to repay to the Company any amounts so advanced to the
extent that a court of competent jurisdiction finds that any acts or omissions
by the Executive were:
(a) in knowing violation of any agreement between the Executive and
the Company;
(b) in bad faith or involving intentional misconduct or a knowing
violation of law or that the Executive personally gained a
financial profit or other advantage to which he was not legally
entitled; or
(c) for which a court, having jurisdiction in the matter, determines
that indemnification is not lawful.
10.4 NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
payment of expenses incurred in defending an Indemnifiable Action in advance of
its final disposition conferred in this SECTION 10 shall not be exclusive of any
other right which the Executive may have or hereafter may acquire under any
statute, provision of the certificate of incorporation or by-laws of the
Company, agreement, vote of stockholders or disinterested directors or
otherwise.
10.5 D&O INSURANCE. The Company will maintain a directors' and
officers' liability insurance policy covering the Executive that provides
coverage that is reasonable in relation to the Executive's position during the
Term of Employment.
11. CONFIDENTIAL INFORMATION AND COMPANY PROPERTY.
11.1 CONFIDENTIAL INFORMATION. The Executive understands and
acknowledges that Confidential Information constitutes a valuable asset of the
Company and its Affiliates and may not be converted to the Executive's own or
any third party's use. Accordingly, the Executive hereby agrees that he shall
not, directly or indirectly, during the Term of Employment or for a period of
twelve (12) months after the termination of his employment, disclose any
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Confidential Information to any Person not expressly authorized by the Company
to receive such Confidential Information. The Executive further agrees that he
shall not directly or indirectly, during the Term of Employment or for a period
of twelve (12) months after the termination of his employment, use or make use
of any Confidential Information in connection with any business activity other
than that of the Company. The Parties acknowledge and agree that this Agreement
is not intended to, and does not, alter either the Company's rights or the
Executive's obligations under any state or federal statutory or common law
regarding trade secrets and unfair trade practices.
11.2 COMPANY PROPERTY. All Company Property is and shall remain
exclusively the property of the Company. Unless authorized in writing to the
contrary, the Executive shall promptly, and without charge, deliver to the
Company on the termination of employment hereunder, or at any other time the
Company may so request, all Company Property that the Executive may then possess
or have under his control.
11.3 REQUIRED DISCLOSURE. In the event the Executive is required by
law or court order to disclose any Confidential Information or to produce any
Company Property, the Executive shall promptly notify the Company of such
requirement and provide the Company with a copy of any court order or of any law
which requires such disclosure and, if the Company so elects, to the extent
permitted by applicable law, give the Company an adequate opportunity, at its
own expense, to contest such law or court order prior to any such required
disclosure or production by the Executive.
11.4 SURVIVAL. The Executive agrees that the provisions of this
SECTION 11 shall survive the termination of this Agreement and the termination
of the Executive's employment.
12. DISPUTE RESOLUTION. The Company agrees that in the event the
Executive finds it necessary to initiate any legal action to obtain any
payments, benefits or rights provided by this Agreement to him, the Company
shall reimburse the Executive for all attorney's fees and other related expenses
incurred by him to the extent the Executive is successful in such action.
13. NOTICES. All notices, demands and requests required or permitted
to be given to either Party under this Agreement shall be in writing and shall
be deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the Party concerned at the address indicated below or to such changed address as
such Party may subsequently give notice of:
If to the Company: Station Casinos, Inc.
2411 West Sahara Avenue
Las Vegas, NV 89102
Attn: Scott M Nielson
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With a copy to: Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street, 30th Floor
Los Angeles, CA 90017
Attn: Kenneth J. Baronsky
If to the Executive: Frank J. Fertitta III
2411 West Sahara Avenue
Las Vegas, NV 89102
14. EMPLOYEE BENEFIT PLAN DOCUMENTS. In the event that any provision
of this Agreement conflicts with the terms and provisions of any employee
benefit plan document, the provisions of this Agreement shall govern; and the
Company shall take any and all actions that may be necessary, including
amendment of any plan document, to the extent necessary to effect the provision
of benefits expressly provided upon termination of the Executive's employment
pursuant to SECTIONS 6 AND 7.
15. BENEFICIARIES/REFERENCES. The Executive shall be entitled to
select a beneficiary or beneficiaries to receive any compensation or benefit
payable hereunder following the Executive's death, and may change such election,
by giving the Company written notice thereof. In the event of the Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to the Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
16. SURVIVORSHIP. The respective rights and obligations of the Parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this SECTION 16 are in addition to the survivorship provisions of
any other Section of this Agreement.
17. REPRESENTATIONS AND WARRANTIES. Each Party represents and warrants
that he or it is fully authorized and empowered to enter into this Agreement and
that the performance of his or its obligations under this Agreement will not
violate any agreement between that Party and any other Person.
18. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the Parties with respect thereto. No
representations, inducements, promises or agreements not embodied herein shall
be of any force or effect.
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19. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding
upon and inure to the benefit of the Parties and their respective successors,
heirs and assigns; PROVIDED, HOWEVER, that no rights or obligations of the
executive under this Agreement may be assigned or transferred by the Executive,
other than rights to compensation and benefits hereunder, which may be
transferred only by will or operation of law and subject to the limitations of
this Agreement; and PROVIDED, FURTHER, that no rights or obligations of the
Company under this Agreement may be assigned or transferred by the Company,
except that such rights or obligations may be assigned or transferred pursuant
to a merger or consolidation in which the Company is not the continuing entity,
or the sale or liquidation of all or substantially all of the assets of the
Company, provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or transferee
assumes the liabilities, obligations and duties of the Company under this
Agreement, either contractually or as a matter of law.
20. AMENDMENT OR WAIVER. No provision in this Agreement may be amended
or waived unless such amendment or waiver is agreed to in writing, signed by
both Parties. No waiver by one Party of any breach by the other Party of any
condition or provision of this Agreement to be performed by such other Party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same or any prior or subsequent time. No failure of the Company to exercise
any power given it hereunder or to insist upon strict compliance by the
Executive with any obligation hereunder, and no custom or practice at variance
with the terms hereof, shall constitute a waiver of the right of the Company to
demand strict compliance with the terms hereof.
21. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
22. GOVERNING LAW. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Nevada without
reference to the principles of conflict of laws thereof. In the event of any
dispute or controversy arising out of or relating to this Agreement, the Parties
mutually and irrevocably consent to, and waive any objection to, the exclusive
jurisdiction of any court of competent jurisdiction in Clark County, Nevada, to
resolve such dispute or controversy.
23. HEADINGS. The headings of the Sections and Subsections contained
in this Agreement are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.
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24. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which shall constitute one and
the same Agreement with the same effect as if all Parties had signed the same
signature page. Any signature page of this Agreement may be detached from any
counterpart of this Agreement and reattached to any other counterpart of this
Agreement identical in form hereto but having attached to it one or more
additional signature pages.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
STATION CASINOS, INC.
By: /s/ GLENN C. CHRISTENSON
----------------------------------
Name: Glenn C. Christenson
Title: Executive Vice President
Chief Financial Officer
Chief Administrative Officer
/s/ FRANK J. FERTITTA III
----------------------------
FRANK J. FERTITTA III
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EXHIBIT 10.13
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and entered into
as of the 1st day of December, 1999, by and between STATION CASINOS, INC., a
Nevada corporation, with its principal offices located at 2411 West Sahara
Avenue, Las Vegas, Nevada 89102 (the "COMPANY"), and GLENN C. CHRISTENSON (the
"EXECUTIVE").
WHEREAS, the Company and the Executive are parties to an Amended and
Restated Employment Agreement dated as of December 22, 1997 (the "FORMER
AGREEMENT"); and
WHEREAS, the Executive has agreed to continue his employment with the
Company on the terms and conditions set forth herein; and
WHEREAS, the parties to this Agreement desire to replace the Former
Agreement in its entirety with this Agreement, and the Former Agreement shall no
longer be of any force or effect;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the Company and
the Executive (each individually a "PARTY" and together the "PARTIES") agree as
follows.
1. DEFINITIONS. In addition to certain terms defined elsewhere in this
Agreement, the following terms shall have the following respective meanings:
1.1 "AFFILIATE" shall mean any Person controlling, controlled by or
under common control with, the Company.
1.2 "BASE AMOUNT" shall have the meaning ascribed to such term in
Section 280G of the Code.
1.3 "BASE SALARY" shall mean the salary provided for in SUBSECTION 3.1
of this Agreement.
1.4 "BOARD" shall mean the Board of Directors of the Company.
1.5 "CAUSE" shall mean that the Executive:
(a) has been formally charged with or convicted of any felony or any
crime involving fraud, theft, embezzlement, dishonesty or moral
turpitude;
(b) has been found unsuitable to hold a gaming license; or
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(c) in carrying out his duties under this Agreement, has engaged in
acts or omissions constituting gross negligence or willful
misconduct resulting, in either case, in material economic harm
to the Company.
1.6 "CHANGE IN CONTROL" shall be deemed to have occurred if:
(a) (1) any Person, corporation, entity or group (other than the
Existing Equity Holders) is or becomes the beneficial owner,
directly or indirectly, of securities representing 50% or more
of the combined voting power of the Company's Voting Stock (an
"Acquisition Event"), or
(2) the Company consolidates with or merges into another
corporation or entity, or any corporation or entity consolidates
with or merges into the Company, with the effect that the
beneficial owners of the Company's Voting Stock held immediately
prior to the consummation of such consolidation or merger cease
to beneficially own, directly or indirectly, securities
representing 50% or more of the combined voting power of the
Company's Voting Stock (or if the Company is not the surviving
entity, the surviving company's voting securities) upon the
consummation of such consolidation or merger (a "Merger Event"),
or
(3) the Company sells, conveys, transfers or leases to any
person, corporation, entity or group, directly or indirectly, in
one transaction or series of related transactions, properties
and/or assets that accounted for 75% or more of the earnings
(before interest, taxes, depreciation and amortization) of the
Company, on a consolidated basis for the four-fiscal quarter
period immediately preceding the date of consummation of such
transaction (a "Sale Event"); AND
(b) within thirty-six (36) months following an Acquisition Event,
Merger Event or Sale Event, individuals who immediately prior to
such Acquisition Event, Merger Event or Sale Event constituted
the Company's Board, together with any new or replacement
directors whose election by the Company's Board, or whose
nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the directors then
in office who were either directors on the Company's Board
immediately prior to such Acquisition Event, Merger Event or
Sale Event (or whose election or nomination for election was
previously so approved), cease for any reason to constitute a
majority of the directors of the Company's Board then in office.
Notwithstanding the foregoing, a reincorporation, spin-off, split-off or
other reorganization transaction (a "Reorganization Event"), or series of
related transactions, in which either the "beneficial owners" of the
Company's Voting Stock or the Existing Equity Holders beneficially own
securities representing 50% or more of the combined voting power of the
Company's Voting Stock upon the consummation of such transaction shall not
constitute an Acquisition Event, Merger Event or Sale Event for purposes of
this definition. For purposes of this
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definition, "beneficial ownership" shall have the same meaning as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time.
For the purposes of this definition, upon consummation of an Acquisition Event,
Merger Event, Sale Event or Reorganization Event, the "Company's Board" and the
"Company's Shareholders" shall refer to (i) in the case of an Acquisition Event,
the Company, (ii) in the case of a Merger Event, the company surviving the
merger or consolidation, (iii) in the case of a Sale Event, the transferee of
the properties, and/or assets, and (iv) in the case of a Reorganization Event,
the entity or entities surviving such Reorganization Event on a consolidated
basis.
1.7 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.8 "COMPANY PROPERTY" shall mean all items and materials provided by
the Company to the Executive, or to which the Executive has access, in the
course of his employment, including, without limitation, all files, records,
documents, drawings, specifications, memoranda, notes, reports, manuals,
equipment, computer disks, videotapes, drawings, blueprints and other documents
and similar items relating to the Company, its Affiliates or their respective
customers, whether prepared by the Executive or others, and any and all copies,
abstracts and summaries thereof.
1.9 "COMPETING BUSINESS" shall mean any Person engaged in the gaming
industry that directly or through an affiliate or subsidiary conducts its
business within the Restricted Area.
1.10 "CONFIDENTIAL INFORMATION" shall mean all nonpublic and/or
proprietary information respecting the business of the Company or any Affiliate,
including, without limitation, its products, programs, projects, promotions,
marketing plans and strategies, business plans or practices, business
operations, employees, research and development, intellectual property,
software, databases, trademarks, pricing information and accounting and
financing data. Confidential Information also includes information concerning
the Company's or any Affiliate's customers, such as their identity, address,
preferences, playing patterns and ratings or any other information kept by the
Company or any Affiliate concerning its customers whether or not such
information has been reduced to documentary form. Confidential Information does
not include information that is, or becomes, available to the public unless such
availability occurs through an unauthorized act on the part of the Executive.
1.11 "DEFERRED COMPENSATION PLAN FOR EXECUTIVES" shall mean the
Company's Deferred Compensation Plan for Executives, effective as of November
30, 1994, as the same may be amended from time to time.
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1.12 "DISABILITY" shall mean a physical or mental incapacity that
prevents the Executive from performing the essential functions of his position
with the Company for a period of ninety (90) days as determined (a) in
accordance with any long-term disability plan provided by the Company of which
the Executive is a participant, or (b) by the following procedure: The Executive
agrees to submit to medical examinations by a licensed healthcare professional
selected by the Company, in its sole discretion, to determine whether a
Disability exists. In addition, the Executive may submit to the Company
documentation of a Disability, or lack thereof, from a licensed healthcare
professional of his choice. Following a determination of a Disability or lack of
Disability by the Company's or the Executive's licensed healthcare professional,
the other Party may submit subsequent documentation relating to the existence of
a Disability from a licensed healthcare professional selected by such other
Party. In the event that the medical opinions of such licensed healthcare
professionals conflict, such licensed healthcare professionals shall appoint a
third licensed healthcare professional to examine the Executive, and the opinion
of such third licensed healthcare professional shall be dispositive.
1.13 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.14 "EXISTING EQUITY HOLDERS" shall mean Frank J. Fertitta III, Blake
L. Sartini, Delise F. Sartini, Lorenzo J. Fertitta, Glenn C. Christenson and
Scott M Nielson and their executors, administrators or the legal representatives
of their estates, their heirs, distributees and beneficiaries, and any trust as
to which any of the foregoing is a settlor or co-settlor and any corporation,
partnership or other entity which is an affiliate of any of the foregoing, and
any lineal descendants of such persons (but only to the extent that the
beneficial ownership of the Voting Stock held by such lineal descendants was
directly received by gift, trust or sale from any such person).
1.15 "GOOD REASON," as used in SUBSECTION 7.2, shall mean and exist if
there has been a Change in Control and, thereafter, without the Executive's
prior written consent, one or more of the following events occurs:
(a) the Executive is assigned duties or responsibilities that are
inconsistent, in any significant respect, with the position of a
senior manager;
(b) the Executive is required to relocate from, or maintain his
principal office outside of, Clark County, Nevada;
(c) the Executive's Base Salary is decreased by the Company;
(d) the Executive is excluded from participation in any employee
benefit or short-term incentive plan or program offered to other
similarly executives of the Company or his benefits under such
plans or programs are materially reduced;
(e) the Company fails to pay the Executive any deferred payments
that have become payable under the Deferred Compensation Plan
for Executives;
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(f) the Company fails to reimburse the Executive for business
expenses in accordance with the Company's policies, procedures
or practices;
(g) the Company fails to agree to or to actually indemnify the
Executive for his actions and/or inactions, as either a director
or an officer of the Company, in accordance with SECTION 10,
and/or the Company fails to maintain reasonably sufficient
levels of directors' and officers' liability insurance coverage
for the Executive when such insurance is available; or
(h) the Company fails to obtain a written agreement from any
successor or assign of the Company to assume the obligations
under this Agreement upon a Change in Control.
1.16 "LONG-TERM STAY-ON PERFORMANCE INCENTIVE PLAN" shall mean the
Company's Long-Term Stay-On Performance Incentive Plan, effective as of
September 27, 1994, as the same may be amended from time to time.
1.17 "PERSON" shall mean any individual, firm, partnership, association,
trust, company, corporation or other entity.
1.18 "PRO RATA BONUS" shall mean an amount equal to sixty percent (60%)
of the Executive's current Base Salary, multiplied by a fraction, the numerator
of which is the number of days in such year during which the Executive was
actually employed by the Company and the denominator of which is 365.
1.19 "RESTRICTED AREA" shall mean:
(a) the City of Las Vegas, Nevada, and the area within a twenty-five
(25) mile radius of that city; and
(b) the Cities of Kansas City, Missouri and St. Louis, Missouri, and
the areas within a fifty (50) mile radius of each of those
cities;
PROVIDED, HOWEVER, that in the event the Executive voluntarily terminates this
Agreement pursuant to SUBSECTION 6.3, the Restricted Area shall exclude the Las
Vegas Strip (which is defined as that area bounded by Paradise Road and straight
extensions thereof on the East, Charleston Boulevard on the North, I-15 on the
West, and Sunset Road on the South, as outlined in red on Exhibit A attached
hereto) and Downtown Las Vegas (which is defined as that area bounded by Eastern
Avenue and straight extensions thereof on the East, I-515 (U.S. Highway 93/95)
on the North, I-15 on the West, and Charleston Boulevard on the South, as
outlined in red on Exhibit A attached hereto).
1.20 "RESTRICTION PERIOD" shall mean the period ending twenty-four (24)
months after the termination or expiration of the Term of Employment, regardless
of the reason for such termination or expiration.
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1.21 "SPECIAL LONG-TERM DISABILITY PLAN" shall mean the Company's
Special Long-Term Disability Plan, effective as of November 30, 1994, as the
same may be amended from time to time.
1.22 "SUPPLEMENTAL MANAGEMENT RETIREMENT PLAN" shall mean the Company's
Supplemental Management Retirement Plan, effective as of November 30, 1994, as
the same may be amended from time to time.
1.23 "TERM OF EMPLOYMENT" shall mean the period specified in SUBSECTION
2.2.
1.24 "VOTING STOCK" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. TERM OF EMPLOYMENT, POSITION AND RESPONSIBILITIES.
2.1 EMPLOYMENT ACCEPTED. The Company hereby employs the Executive, and
the Executive hereby accepts employment with the Company, for the Term of
Employment, in the position and with the responsibilities set forth in
SUBSECTION 2.3 and upon such other terms and conditions as are stated in this
Agreement.
2.2 TERM OF EMPLOYMENT. The initial Term of Employment shall commence
upon the date of this Agreement and, unless earlier terminated pursuant to the
provisions of this Agreement, shall terminate upon the close of business on the
day immediately preceding the fifth anniversary of the date of this Agreement;
PROVIDED, HOWEVER, that the initial Term of Employment shall automatically be
extended for successive five-year periods if neither Party has advised the other
in writing in accordance with SECTION 14 at least twelve (12) months prior to
the end of the then current Term of Employment that such Term of Employment will
not be extended for an additional five year period. In the event that such
notice is given, the Executive's employment shall terminate upon the close of
business on the day immediately preceding the fifth anniversary of the then
current Term of Employment.
2.3 RESPONSIBILITIES. During the Term of Employment, the Executive shall
be employed as Executive Vice President, Chief Financial Officer, Chief
Administrative Officer and Treasurer of the Company, or in such other capacity
as the Company may direct, and shall have such responsibilities as the Company
may direct from time to time. During the Term of Employment, the Executive shall
devote his full time and attention to the business and affairs of the Company
and shall use his best efforts, skills and abilities to promote the Company's
interests. Anything herein to the contrary notwithstanding, the Executive shall
not be precluded from engaging in charitable and community affairs and managing
his personal investments. The Executive also may serve as a member of the board
of directors of other corporations, subject to the approval of a majority of the
Board, which approval shall not be unreasonably withheld or delayed.
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3. COMPENSATION.
3.1 BASE SALARY. During the Term of Employment, the Executive shall be
entitled to receive a base salary (the "Base Salary") payable no less frequently
than in equal bi-weekly installments at an annualized rate of no less than
$600,000. The Base Salary shall be reviewed annually for increase (but not
decrease) in the discretion of the Human Resources Committee of the Board. In
conducting any such annual review, the Human Resources Committee shall take into
account any change in the Executive's responsibilities, increases in the
compensation of other executives of the Company or any Affiliate (or any
competitor(s) of either or both), the performance of the Executive and/or other
pertinent factors. Such increased Base Salary shall then constitute the
Executive's "Base Salary" for purposes of this Agreement.
3.2 ANNUAL BONUS. The Company may pay the Executive an annual
discretionary bonus for each fiscal year ending during the Term of Employment in
an amount that will be determined by the Human Resources Committee based on the
Executive's performance. Any annual bonus that may be awarded to the Executive
shall be paid at the same time as annual bonuses are paid to other senior
officers of the Company, unless the Executive has elected to defer receipt of
all or part of the bonus amounts to which he is entitled in respect of any such
calendar year in accordance with the terms and provisions of any deferred
compensation program maintained by the Company.
3.3 STAY-ON INCENTIVES. The Executive shall be eligible to participate
in the Company's Long-Term Stay-On Performance Incentive Plan pursuant to the
terms of the Plan.
3.4 DEFERRED COMPENSATION. The Executive shall be eligible to
participate in the Company's Deferred Compensation Plan for Executives, and any
other deferred compensation plans that the Company may adopt for executives,
pursuant to the terms of the plans.
4. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
4.1 PENSION AND WELFARE BENEFIT PLANS. During the Term of Employment,
the Executive shall be entitled to participate in all employee benefit programs
made available to the Company's executives or salaried employees generally, as
such programs may be in effect from time to time, including, without limitation,
pension and other retirement plans, profit sharing plans, group life insurance,
group health insurance, accidental death and dismemberment insurance, long-term
disability, sick leave (including salary continuation arrangements), vacations,
holidays and other employee benefit programs sponsored by the Company.
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4.2 ADDITIONAL PENSION AND WELFARE BENEFITS. In addition to the
foregoing, the Company shall provide the Executive with the following benefits:
(a) group health insurance coverage through the Company's
Exec-U-Care Medical Plan, effective as of July 1, 1994, or
pursuant to such other plan or plans as the Company may select
from time to time, and which shall be fully paid for by the
Company; in addition, if the Executive's employment is
terminated pursuant to SECTION 6 or SECTION 7 for any reason
that permits him to continue his participation under any group
health - plan sponsored by the Company after termination, the
Executive shall be permitted to continue his participation
beyond the period provided for in the applicable subsection, at
his own expense, until the earlier of the date he becomes
eligible to participate in any other employer's group health
plan and his reaching age 62, provided that the Company's group
health insurance carrier at the time permits such continued
participation;
(b) full salary continuation during the first 90 days of any
physical or mental incapacity that prevents the Executive from
performing his duties and, for any Disability that continues
thereafter, benefits pursuant to the Company's Special Long-Term
Disability Plan and any other long-term disability benefits
pursuant to any other disability plan of which the Executive is
a participant;
(c) an annual supplemental retirement benefit as set forth in the
Supplemental Management Retirement Plan, in addition to any
other benefit pursuant to any other retirement plan under which
the Executive is covered; and
(d) supplemental life insurance coverage, through an individual
policy, a group policy or a combination thereof, in an aggregate
amount of not less than $7.5 million.
5. BUSINESS EXPENSE REIMBURSEMENT AND PERQUISITES.
5.1 EXPENSE REIMBURSEMENT. During the Term of Employment, the Executive
shall be entitled to receive reimbursement by the Company for all reasonable
out-of-pocket expenses incurred by him in performing services under this
Agreement, subject to providing the proper documentation of said expenses.
5.2 PERQUISITES. During the Term of Employment, the Executive shall also
be entitled to any of the Company's executive perquisites in accordance with the
terms and provisions of the applicable policies, including, without limitation:
(a) vacation of four weeks per year;
(b) payment or reimbursement of the cost of an annual physical
examination;
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(c) payment or reimbursement of initiation fees and annual
membership fees and assessments for a country club, a luncheon
club and a physical fitness program of the Executive's choice;
and
(d) payment or reimbursement of fees and expenses, up to a maximum
amount of $2500.00, incurred in connection with having this
Agreement reviewed by legal counsel of his own choosing prior to
execution.
6. TERMINATION OF EMPLOYMENT.
6.1 TERMINATION DUE TO DEATH OR DISABILITY. The Executive's employment
shall be terminated immediately in the event of his death or Disability. In the
event of a termination due to the Executive's death or Disability, the Executive
or his estate, as the case may be, shall be entitled, in lieu of any other
compensation whatsoever, to:
(a) Base Salary at the rate in effect at the time of his termination
until the date of death or Disability;
(b) any annual bonus awarded but not yet paid;
(c) a Pro Rata Bonus for the fiscal year in which death or
Disability occurs;
(d) in the case of death, any deferred compensation or bonuses,
including interest or other credits on the deferred amounts, to
the extent provided in the plans or programs providing for
deferral, and in the case of Disability, immediate vesting of
any deferred compensation or bonuses, including interest or
other credits on the deferred amounts;
(e) reimbursement of expenses incurred but not paid prior to such
termination of employment; and
(f) such rights to other benefits as may be provided in applicable
plans and programs of the Company, including, without
limitation, applicable employee benefit plans and programs,
according to the terms and provisions of such plans and
programs.
6.2 TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate the
Executive's employment for Cause at any time during the Term of Employment by
giving written notice to the Executive. In the event of a termination for Cause,
the Executive shall be entitled, in lieu of any other compensation and benefits
whatsoever, to:
(a) Base Salary at the rate in effect at the time of his termination
through the date of termination of employment;
(b) any annual bonus awarded but not yet paid;
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(c) any deferred compensation or bonuses, including interest or
other credits on the deferred amounts, to the extent provided in
the plans or programs providing for deferral;
(d) reimbursement for expenses incurred but not paid prior to such
termination of employment; and
(e) such rights to other benefits as may be provided in applicable
plans and programs of the Company, including, without
limitation, applicable employee benefit plans and programs,
according to the terms and conditions of such plans and
programs.
Notwithstanding anything to the contrary in this SUBSECTION 6.2, if the
Executive's employment is terminated for Cause (i) due to his having been
formally charged pursuant to SUBSECTION 1.5(a) but thereafter said charges are
dismissed or the Executive is acquitted, or (ii) due to his having been
convicted pursuant to SUBSECTION 1.5(a) but said conviction is subsequently
overturned on appeal and he is not required to submit to re-trial within six (6)
months thereafter, the Company shall have the option of reinstating the
Executive with payment of all base salary payments that would have been paid to
him had his employment not been terminated and restoration of all benefits
provided for pursuant to SECTION 4, or making a payment to him of an amount
equal to three times 160 percent of the Executive's Base Salary at the rate in
effect at the time of his termination.
6.3 TERMINATION BY THE EXECUTIVE. The Executive may terminate his
employment on his own initiative for any reason prior to a Change in Control
upon thirty (30) days prior written notice to the Company. Such termination
shall have the same consequences as a termination for Cause under SUBSECTION
6.2.
6.4 TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding any other
provision of this Agreement, the Company may terminate the Executive's
employment without Cause, other than due to death or Disability, at any time
during the Term of Employment by giving written notice to the Executive. In the
event that the Company terminates the Executive's employment without Cause, the
Executive shall be entitled, in lieu of any other compensation and benefits
whatsoever, to:
(a) an amount equal to three times 160 percent of the Executive's
Base Salary at the rate in effect at the time of his
termination, one-third of which shall be paid in a lump sum upon
satisfaction of the conditions set forth in SUBSECTION 8.3, and
the other two-thirds of which shall be paid out in equal
bi-weekly installments for the duration of the Restriction
Period;
(b) any annual bonus awarded but not yet paid;
(c) any deferred bonus, including interest or other credits on the
deferred amounts, to the extent provided in the plans or
programs providing for deferral;
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(d) exercise, within 180 days, all stock options that have vested
prior to termination, and shall forfeit all stock options that
have not vested;
(e) reimbursement for expenses incurred but not paid prior to such
termination of employment; and
(f) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
6.5 TERMINATION DUE TO EXPIRATION OF THE TERM OF EMPLOYMENT. If either
Party elects not to extend the initial Term of Employment or any successive Term
of Employment, the Executive shall not be entitled to any additional
compensation after the expiration thereof, but such termination of employment
shall not otherwise affect accrued but unpaid compensation or benefits provided
under this Agreement or pursuant to any Company plan or program.
7. CHANGE IN CONTROL.
7.1 CHANGE IN CONTROL PAYMENT. Immediately upon a Change in Control, in
addition to any other compensation or benefits payable pursuant to this
Agreement or otherwise, the Executive shall be entitled to a payment in cash
equal to three times 160 percent of his Base Salary. Unless otherwise provided
for in this Agreement, the Executive's rights upon a Change in Control to
benefits under programs, plans and policies of the Company shall be determined
according to the terms and provisions of such programs, plans and policies.
7.2 TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR
GOOD REASON AFTER A CHANGE IN CONTROL. If within five years following a Change
in Control, the Executive's employment is terminated by the Company without
Cause or by the Executive for Good Reason, the Executive shall be entitled, in
addition to any payment paid or payable pursuant to SUBSECTION 7.1, but in lieu
of any other compensation and benefits whatsoever, to:
(a) an amount equal to the greater of (i) five times 160 percent of
the Executive's Base Salary at the time of the Change in Control
or (ii) five times 160 percent of the Executive's Base Salary at
the time of the termination of his employment, three-fifths of
which shall be paid in a lump sum upon satisfaction of the
conditions set forth in SUBSECTION 8.3 and two-fifths of which
shall be paid out in equal bi-weekly installments for the
duration of the Restriction Period,
(b) immediate vesting of any restricted stock of the Company held in
the Executive's name or for his benefit;
(c) immediate vesting of any stock options and stock appreciation
rights granted by the Company, which stock options and stock
appreciation rights shall continue to be and shall remain
exercisable until the earlier of
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(i) five years and (ii) the remaining term of such stock options
and stock appreciation rights as set forth in the agreement
granting, or otherwise awarding, such stock option or stock
appreciation right as if no termination had taken place;
(d) immediate vesting and cash-out of any phantom stock units
granted to the Executive;
(e) immediate vesting and pay out of any shares awarded to the
Executive pursuant to the Company's Long-Term Stay-On
Performance Incentive Plan;
(f) immediate vesting of the Executive's supplemental retirement
benefit as set forth in the Supplemental Management Retirement
Plan;
(g) continued funding of the Executive's split dollar life insurance
policy as if the Executive were employed by the Company through
the maturity date of such policy or, at the Company's option,
payment in full of all premium obligations under such policy;
and
(h) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
7.3 TERMINATION BY EXECUTIVE WITHOUT GOOD REASON AFTER A CHANGE IN
CONTROL. If the Executive terminates his employment without Good Reason within
ninety (90) days following the first anniversary of a Change in Control, the
Executive shall be entitled, in addition to any payment paid or payable pursuant
to SUBSECTION 7.1, but in lieu of any other compensation and benefits
whatsoever, to:
(a) an amount equal to the greater of (i) three times 160 percent of
the Executive's Base Salary at the time of the Change in Control
or (ii) three times 160 percent of the Executive's Base Salary
at the time of the termination of his employment, one-third of
which shall be paid in a lump sum upon satisfaction of the
conditions set forth in SUBSECTION 8.3 and two-thirds of which
shall be paid out in equal bi-weekly installments for the
duration of the Restriction Period;
(b) immediate vesting of any stock options and stock appreciation
rights granted by the Company, which stock options and stock
appreciation rights shall continue to be and shall remain
exercisable until the earlier of (i) three years and (ii) the
remaining term of such stock options and stock appreciation
rights as set forth in the agreement granting, or otherwise
awarding, such stock option or stock appreciation right as if no
termination had taken place;
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(c) immediate vesting and cash-out of any phantom stock units
granted to the Executive;
(d) immediate vesting of the Executive's supplemental retirement
benefit as set forth in the Supplemental Management Retirement
Plan;
(e) continued funding of the Executive's split dollar life insurance
policy as if the Executive were employed by the Company through
the maturity date of such policy or, at the Company's option,
payment in full of all premium obligations under such policy;
and
(f) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
7.4 TERMINATION FOR OTHER REASONS AFTER A CHANGE IN CONTROL. If the
Executive's employment is terminated after a Change in Control for any reason
not otherwise provided for in this SECTION 7, his rights shall be determined in
accordance with the applicable subsection of SECTION 6.
8. CONDITIONS TO PAYMENTS UPON TERMINATION.
8.1 TIMING OF PAYMENTS. Unless otherwise provided herein, any payments
to which the Executive shall be entitled pursuant to SECTIONS 6 AND 7 shall be
payable upon the satisfaction of the conditions set forth in SUBSECTION 8.3.
8.2 NO MITIGATION; NO OFFSET. In the event of any termination of the
Executive's employment under SECTIONS 6 OR 7, the Executive shall be under no
obligation to seek other employment and there shall be no offset against amounts
due to the Executive on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. Notwithstanding any
contrary provision contained herein, in the event of any termination of
employment of the Executive, the exclusive remedies available to the Executive
shall be the amounts due under SECTIONS 6 OR 7, which are in the nature of
severance payments, or liquidated damages, or both, and are not in the nature of
a penalty. In the event of a termination of this Agreement, neither Party shall
publish in any way or make any negative comment or statement about the other
Party or concerning the reasons for such termination. The provisions of this
SUBSECTION 8.2 shall survive the expiration or earlier termination of this
Agreement.
8.3 GENERAL RELEASE. No payments or benefits payable to the Executive
upon the termination of his employment pursuant to SECTIONS 6 OR 7 shall be made
to the Executive unless and until he executes a general release substantially in
the form annexed to this Agreement as Exhibit B and such general release becomes
effective pursuant to its terms.
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8.4 COMPLIANCE WITH THE AGREEMENT. No payments or benefits payable to
the Executive upon the termination of his employment pursuant to SECTIONS 6 OR 7
shall be made to the Executive if he fails to comply with all of the terms and
conditions of this Agreement, including, without limitation, SECTIONS 11 AND 12.
8.5 CONTINUING OBLIGATIONS OF EXECUTIVE. No act or omission by the
Executive in breach of this Agreement, including, without limitation his failure
to execute the general release and the resulting forfeiture of termination
payments, shall be deemed to permit the Executive to forego or waive such
payments in order to avoid his obligations under SECTION 11.
9. SPECIAL REIMBURSEMENT.
9.1 If any payment or benefit paid or payable, or received or to be
received, by or on behalf of the Executive in connection with a Change in
Control pursuant to SUBSECTION 7.1 or the termination of the Executive's
employment pursuant to SUBSECTION 7.2 , whether any such payments or benefits
are pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Affiliate, any Person, or otherwise (the "TOTAL
PAYMENTS"), will or would be subject to the excise tax imposed under Section
4999 of the Code (the "EXCISE TAX"), the Company shall pay to the Executive an
additional amount (the "GROSS-UP PAYMENT") such that, after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes) imposed upon or in respect of the Total Payments and the Gross-Up
Payments, including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and any Excise Tax imposed thereon, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Total Payments.
9.2 For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax,
(a) the Total Payments shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise
Tax, unless in the opinion of tax counsel selected by the
Company and reasonably acceptable to the Executive (which
opinion shall be provided to the Executive) such Total Payments
(in whole or in part) (i) do not constitute parachute payments,
including (without limitation) by reason of Section
280G(b)(4)(A) of the Code, (ii) such excess parachute payments
(in whole or in part) represent reasonable compensation for
services actually rendered, within the meaning of Section
280G(b)(4)(B) of the Code, or (iii) are not, in the opinion of
legal counsel, otherwise subject to the Excise Tax, and
(b) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent
auditors in accordance with the principles of Sections
280G(d)(3) and (4) of the Code.
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9.3 In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder, the Executive shall repay to
the Company, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the initial
Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
accordance with SUBSECTION 9.1 in respect of such excess Excise Tax (plus any
interest, penalties or additions payable by the Executive with respect to such
excess Excise Tax) at the time that the amount of such excess Excise Tax is
finally determined. The Executive and the Company shall each reasonably
cooperate with each other in connection with any administrative or judicial
proceedings concerning the existence or amount of any such subsequent liability
for Excise Tax with respect to the Total Payments.
10. INDEMNIFICATION.
10.1 GENERAL. The Company agrees that if the Executive is made a party
or is threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (an "INDEMNIFIABLE ACTION"), by
reason of the fact that he is or was a director or officer of the Company or is
or was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether or not the basis of such Indemnifiable Action is alleged action
in an official capacity as a director, officer, member, employee or agent, while
serving as a director, officer, member, employee or agent, he shall be
indemnified and held harmless by the Company to the fullest extent permitted by
Nevada law and the Company's by-laws, as the same exist or may hereafter be
amended, against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by the Executive in connection
therewith.
10.2 PROCEDURE. The indemnification provided pursuant to this SECTION 10
shall be subject to the following conditions:
(a) The Executive must promptly give the Company written notice of
any actual or threatened Indemnifiable Action;
(b) The Company will be permitted, at its option, to participate in,
or to assume, the defense of any Indemnifiable Action;
(c) The Executive must provide reasonable cooperation to the Company
in the defense of any Indemnifiable Action; and
(d) The Executive must refrain from settling any Indemnifiable
Action without obtaining the Company's prior written consent,
which consent shall not be unreasonably withheld.
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10.3 ADVANCEMENT OF COSTS AND EXPENSES. The Company agrees to advance
all costs and expenses referred to in SUBSECTION 10.1; PROVIDED, HOWEVER, that
the Executive agrees to repay to the Company all amounts so advanced in the
event that the Company reasonably determines in good faith that any acts or
omissions by the Executive were:
(a) in knowing violation of any agreement between the Executive and
the Company;
(b) in bad faith or involving intentional misconduct or a knowing
violation of law or that the Executive personally gained a
financial profit or other advantage to which he was not legally
entitled; or
(c) for which a court, having jurisdiction in the matter, determines
that indemnification is not lawful.
10.4 NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
payment of expenses incurred in defending an Indemnifiable Action in advance of
its final disposition conferred in this SECTION 10 shall not be exclusive of any
other right which the Executive may have or hereafter may acquire under any
statute, provision of the certificate of incorporation or by-laws of the
Company, agreement, vote of stockholders or disinterested directors or
otherwise.
10.5 D&O INSURANCE. The Company will maintain a directors' and officers'
liability insurance policy covering the Executive that provides coverage that is
reasonable in relation to the Executive's position during the Term of
Employment.
11. COVENANT NOT ENGAGE IN CERTAIN ACTS.
11.1 GENERAL. The Parties understand and agree that the purpose of the
restrictions contained in this SECTION 11 is to protect the goodwill and other
legitimate business interests of the Company, and that the Company would not
have entered into this Agreement in the absence of such restrictions. The
Executive acknowledges and agrees that the restrictions are reasonable and do
not, and will not, unduly impair his ability to make a living after the
termination of his employment with the Company. The provisions of this SECTION
11 shall survive the expiration or sooner termination of this Agreement.
11.2 NON-ASSISTANCE; NON-DIVERSION. In consideration for this Agreement
to employ the Executive and the other valuable consideration provided hereunder,
the Executive agrees and covenants that during the Term of Employment and during
the Restriction Period, and except when acting on behalf of the Company or on
behalf of any Affiliate, the Executive shall not, directly or indirectly, for
himself or any third party, or alone or as a member of a partnership, or as an
officer, director, shareholder or otherwise, engage in the following acts:
(a) divert or attempt to divert any existing business of the Company
or any Affiliate;
(b) accept any position or affiliation with, or render any services
on behalf of, any Competing Business; or
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(c) hire or retain any employee of the Company or any Affiliate to
provide services for any other Person or induce, solicit,
attempt to solicit, encourage, divert, cause or attempt to cause
any employee or prospective employee of the Company or any
Affiliate to (i) terminate and/or leave such employment, or (ii)
accept employment with anyone other than the Company or an
Affiliate.
11.3 CESSATION/REIMBURSEMENT OF PAYMENTS. If the Executive violates any
provision of this SECTION 11, the Company may, upon giving written notice to the
Executive, immediately cease all payments and benefits that it may be providing
to the Executive pursuant to SECTION 3, SECTION 6 or SUBSECTION 7.2, and the
Executive may be required to reimburse the Company for any payments received
from, and the cash value of any benefits provided by, the Company between the
first day of the violation and the date such notice is given; PROVIDED, HOWEVER,
that the foregoing shall be in addition to such other remedies as may be
available to the Company and shall not be deemed to permit the Executive to
forego or waive such payments in order to avoid his obligations under this
SECTION 11.
11.4 SURVIVAL. The Executive agrees that the provisions of this SECTION
11 shall survive the termination of this Agreement and the termination of the
Executive's employment.
12. CONFIDENTIAL INFORMATION AND COMPANY PROPERTY.
12.1 CONFIDENTIAL INFORMATION. The Executive understands and
acknowledges that Confidential Information constitutes a valuable asset of the
Company and its Affiliates and may not be converted to the Executive's own or
any third party's use. Accordingly, the Executive hereby agrees that he shall
not directly or indirectly, during the Term of Employment or any time
thereafter, disclose any Confidential Information to any Person not expressly
authorized by the Company to receive such Confidential Information. The
Executive further agrees that he shall not directly or indirectly, during the
Term of Employment or any time thereafter, use or make use of any Confidential
Information in connection with any business activity other than that of the
Company. The Parties acknowledge and agree that this Agreement is not intended
to, and does not, alter either the Company's rights or the Executive's
obligations under any state or federal statutory or common law regarding trade
secrets and unfair trade practices.
12.2 COMPANY PROPERTY. All Company Property is and shall remain
exclusively the property of the Company. Unless authorized in writing to the
contrary, the Executive shall promptly, and without charge, deliver to the
Company on the termination of employment hereunder, or at any other time the
Company may so request, all Company Property that the Executive may then possess
or have under his control.
12.3 REQUIRED DISCLOSURE. In the event the Executive is required by law
or court order to disclose any Confidential Information or to produce any
Company Property, the Executive shall promptly notify the Company of such
requirement and provide the Company with a copy of any court order or of any law
which requires such disclosure and, if the Company
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so elects, to the extent permitted by applicable law, give the Company an
adequate opportunity, at its own expense, to contest such law or court order
prior to any such required disclosure or production by the Executive.
12.4 SURVIVAL. The Executive agrees that the provisions of this SECTION
12 shall survive the termination of this Agreement and the termination of the
Executive's employment.
13. MUTUAL ARBITRATION AGREEMENT.
13.1 ARBITRABLE CLAIMS. All disputes between the Executive (and his
attorneys, successors, and assigns) and the Company (and its trustees,
beneficiaries, officers, directors, managers, affiliates, employees, agents,
successors, attorneys, and assigns) relating in any manner whatsoever to the
employment or termination of the Executive, including, without limitation, all
disputes arising under this Agreement ("ARBITRABLE CLAIMS"), shall be resolved
by binding arbitration as set forth in this SECTION 13 (the "MUTUAL ARBITRATION
AGREEMENT"). Arbitrable Claims shall include, but are not limited to, claims for
compensation, claims for breach of any contract or covenant (express or
implied), and tort claims of all kinds, as well as all claims based on any
federal, state, or local law, statute or regulation, but shall not include the
claims based on the statutes enumerated in SUBSECTION 13.4 or the Company's
right to seek injunctive relief as provided in SECTION 15. Arbitration shall be
final and binding upon the Parties and shall be the exclusive remedy for all
Arbitrable Claims. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY
JUDGE OR JURY IN REGARD TO ARBITRABLE CLAIMS, EXCEPT AS PROVIDED BY SECTION
13.4.
13.2 PROCEDURE. Arbitration of Arbitrable Claims shall be in accordance
with the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association, as amended, and as augmented in this
Agreement. Either Party may bring an action in court to compel arbitration under
this Agreement and to enforce an arbitration award. Otherwise, neither Party
shall initiate or prosecute any lawsuit, appeal or administrative action in any
way related to an Arbitrable Claim. The initiating Party must file and serve an
arbitration claim within sixty (60) days of learning the facts giving rise to
the alleged claim. All arbitration hearings under this Agreement shall be
conducted in Las Vegas, Nevada. The Federal Arbitration Act shall govern the
interpretation and enforcement of this Agreement. The fees of the arbitrator
shall be divided equally between both Parties.
13.3 CONFIDENTIALITY. All proceedings and all documents prepared in
connection with any Arbitrable Claim shall be confidential and, unless otherwise
required by law, the subject matter and content thereof shall not be disclosed
to any Person other than the parties to the proceedings, their counsel,
witnesses and experts, the arbitrator and, if involved, the court and court
staff.
13.4 APPLICABILITY. This SECTION 13 shall apply to all disputes under
this Agreement other than:
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(a) disputes relating to the enforcement of the Company's rights
under SECTIONS 11 AND 12 of this Agreement; and
(b) claims brought under Title VII of the Civil Rights Act of 1964,
the Civil Rights Act of 1866, the Age Discrimination in
Employment Act of 1967 (including the Older Workers Benefit
Protection Act), and the Americans with Disabilities Act, the
Fair Labor Standards Act, the Equal Pay Act, the Family and
Medical Leave Act and the Employee Retirement Income Security
Act of 1974, the Nevada Fair Employment Practices Act, the
Missouri Human Rights Act or any other applicable state or local
fair employment law.
13.5 ACKNOWLEDGEMENTS. The Executive acknowledges that he:
(a) has carefully read this SECTION 13;
(b) understands its terms and conditions; and
(c) has entered into this Mutual Arbitration Agreement voluntarily
and not in reliance on any promises or representations made by
the Company other than those contained in this Mutual
Arbitration Agreement.
14. NOTICES. All notices, demands and requests required or permitted to be
given to either Party under this Agreement shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the Party concerned at the address indicated below or to such changed address as
such Party may subsequently give notice of:
If to the Company: Station Casinos, Inc.
2411 West Sahara Avenue
Las Vegas, NV 89102
Attn: Scott M. Nielson
With a copy to: Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street, 30th Floor
Los Angeles, CA 90017
Attn: Kenneth J. Baronsky
If to the Executive: Glenn C. Christenson
2346 Villandry Court
Henderson, NV 89014
15. RIGHT TO SEEK INJUNCTIVE RELIEF. The Executive acknowledges that a
violation on his part of any of the covenants contained in SECTIONS 11 AND 12
would cause immeasurable and irreparable damage to the Company. The Executive
accordingly agrees and hereby grants his consent that, without limiting the
remedies available to the Company, any
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actual or threatened violation of such covenants may be enforced by injunctive
relief or by other equitable remedies issued or ordered by any court of
competent jurisdiction.
16. EMPLOYEE BENEFIT PLAN DOCUMENTS. In the event that any terms and
provisions of this Agreement conflict with the terms and provisions of any
employee benefit plan document, the terms and provisions of this Agreement shall
govern, and the Company shall take any and all actions that may be necessary,
including amendment of any plan document, to effect the provision of benefits
expressly provided upon termination of the Executive's employment pursuant to
SECTIONS 6 AND 7.
17. BENEFICIARIES/REFERENCES. The Executive shall be entitled to select a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following the Executive's death, and may change such election, by
giving the Company written notice thereof. In the event of the Executive's death
or a judicial determination of his incompetence, reference in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiaries,
estate or other legal representative.
18. SURVIVORSHIP. The respective rights and obligations of the Parties
hereunder shall survive the expiration or earlier termination of this Agreement
to the extent necessary to the intended preservation of such rights and
obligations. The provisions of this SECTION 18 are in addition to the
survivorship provisions of any other section of this Agreement.
19. REPRESENTATIONS AND WARRANTIES. Each Party represents and warrants that
he or it is fully authorized and empowered to enter into this Agreement and that
the performance of his or its obligations under this Agreement will not violate
any Agreement between that Party and any other Person.
20. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the Parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings, whether
written or oral, express or implied, between the Parties with respect hereto. No
representations, inducements, promises or agreements not embodied herein shall
be of any force or effect.
21. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors, heirs and
assigns; PROVIDED, HOWEVER, that no rights or obligations of the Executive under
this Agreement may be assigned or transferred by the Executive, other than
rights to compensation and benefits hereunder, which may be transferred only by
will or operation of law and subject to the limitations of this Agreement; and
PROVIDED, FURTHER, that no rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company, except that such rights
or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale or
liquidation of all or substantially all of the assets of the Company, provided
that the assignee or transferee is the successor to all or substantially all of
the assets of the Company and such assignee or transferee assumes the
liabilities, obligations and duties of the Company under this Agreement, either
contractually or as a matter of law.
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22. AMENDMENT OR WAIVER. No provision in this Agreement may be amended or
waived unless such amendment or waiver is agreed to in writing, signed by both
Parties. No waiver by one Party of any breach by the other Party of any
condition or provision of this Agreement to be performed by such other Party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same or any prior or subsequent time. No failure of the Company to exercise
any power given it hereunder or to insist upon strict compliance by the
Executive with any obligation hereunder, and no custom or practice at variance
with the terms hereof, shall constitute a waiver of the right of the Company to
demand strict compliance with the terms hereof.
23. SEVERABILITY. In the event that any provision or portion of this
Agreement, except SECTION 6, SECTION 7 and SECTION 11, shall be determined to be
invalid or unenforceable for any reason, in whole or in part, the remaining
provisions of this Agreement shall be unaffected thereby and shall remain in
full force and effect to the fullest extent permitted by law. If either SECTION
6, SECTION 7 or SECTION 11 is determined to be invalid or unenforceable for any
reason, in whole or in part, either Party may terminate this Agreement without
further obligations or duties hereunder.
24. GOVERNING LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Nevada without reference
to the principles of conflict of laws thereof. In the event of any dispute or
controversy arising out of or relating to this Agreement that is not an
arbitrable claim, the Parties mutually and irrevocably consent to, and waive any
objection to, the exclusive jurisdiction of any court of competent jurisdiction
in Clark County, Nevada, to resolve such dispute or controversy.
25. HEADINGS. The headings of the sections and subsections contained in
this agreement are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.
26. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which shall constitute one and the
same Agreement with the same effect as if all Parties had signed the same
signature page. Any signature page of this Agreement may be detached from any
counterpart of this Agreement and reattached to any other counterpart of this
Agreement identical in form hereto but having attached to it one or more
additional signature pages.
27. ACKNOWLEDGEMENT. The Executive represents and acknowledges the
following:
(a) he has carefully read this Agreement in its entirety;
(b) he understands the terms and conditions contained herein;
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(c) he has had the opportunity to review this Agreement with legal
counsel of his own choosing and has not relied on any statements
made by the Company or its legal counsel as to the meaning of
any term or condition contained herein or in deciding whether to
enter into this Agreement; and
(d) he is entering into this Agreement knowingly and voluntarily.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
STATION CASINOS, INC.
By: /s/ SCOTT M NIELSON
-------------------------
Name: Scott M Nielson
Title: Executive Vice President,
General Counsel and Secretary
/s/ GLENN C. CHRISTENSON
---------------------------
Glenn C. Christenson
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EXHIBIT "B"
GENERAL RELEASE AND COVENANT NOT TO SUE
This GENERAL RELEASE AND COVENANT NOT TO SUE (this "Release") is executed
and delivered by GLENN C. CHRISTENSON (the "Executive") to STATION CASINOS,
INC., a Nevada corporation (the "Company").
In consideration of the agreement by the Company to provide the separation
payments and benefits in SECTION 6 and SECTION 7 of the Employment Agreement
between the Executive and the Company, dated as of December 1, 1999 (the
"Employment Agreement"), and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Executive hereby
agrees as follows:
1. RELEASE AND COVENANT. THE EXECUTIVE, OF HIS OWN FREE WILL, VOLUNTARILY
RELEASES AND FOREVER DISCHARGES THE COMPANY AND ITS SUBSIDIARIES AND AFFILIATES,
AND EACH OF THEIR RESPECTIVE PAST AND PRESENT AGENTS, EMPLOYEES, MANAGERS,
REPRESENTATIVES, OFFICERS, DIRECTORS, ATTORNEYS, ACCOUNTANTS, TRUSTEES,
SHAREHOLDERS, PARTNERS, INSURERS, HEIRS, PREDECESSORS-IN-INTEREST, ADVISORS,
SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE "RELEASED PARTIES") FROM, AND
COVENANTS NOT TO SUE OR PROCEED AGAINST ANY OF THE FOREGOING ON THE BASIS OF,
ANY AND ALL PAST OR PRESENT CAUSES OF ACTION, SUITS, AGREEMENTS OR OTHER RIGHTS
OR CLAIMS WHICH THE EXECUTIVE, HIS DEPENDENTS, RELATIVES, HEIRS, EXECUTORS,
ADMINISTRATORS, SUCCESSORS AND ASSIGNS HAS OR HAVE AGAINST ANY OF THE RELEASED
PARTIES UPON OR BY REASON OF ANY MATTER ARISING OUT OF HIS EMPLOYMENT BY THE
COMPANY AND THE CESSATION OF SAID EMPLOYMENT, AND INCLUDING, BUT NOT LIMITED TO,
ANY ALLEGED VIOLATION OF THE CIVIL RIGHTS ACTS OF 1964 AND 1991, THE EQUAL PAY
ACT OF 1963, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967 (INCLUDING THE
OLDER WORKERS BENEFIT PROTECTION ACT OF 1990), THE REHABILITATION ACT OF 1973,
THE FAMILY AND MEDICAL LEAVE ACT OF 1993, THE AMERICANS WITH DISABILITIES ACT OF
1990, THE EMPLOYMENT RETIREMENT INCOME SECURITY ACT OF 1974, THE NEVADA FAIR
EMPLOYMENT PRACTICES ACT, THE MISSOURI HUMAN RIGHTS ACT, THE LABOR LAWS OF THE
UNITED STATES, NEVADA AND MISSOURI, AND ANY OTHER FEDERAL, STATE OR LOCAL LAW,
REGULATION OR ORDINANCE, OR PUBLIC POLICY, CONTRACT OR TORT LAW, HAVING ANY
BEARING WHATSOEVER ON THE TERMS AND CONDITIONS OR CESSATION OF HIS EMPLOYMENT
WITH THE COMPANY.
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2. DUE CARE. THE EXECUTIVE ACKNOWLEDGES THAT HE HAS RECEIVED A COPY OF THIS
RELEASE PRIOR TO ITS EXECUTION AND HAS BEEN ADVISED HEREBY OF HIS OPPORTUNITY TO
REVIEW AND CONSIDER THIS RELEASE FOR TWENTY-ONE (21) DAYS PRIOR TO ITS
EXECUTION. THE EXECUTIVE FURTHER ACKNOWLEDGES THAT HE HAS BEEN ADVISED HEREBY TO
CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS RELEASE. THE EXECUTIVE ENTERS
INTO THIS RELEASE HAVING FREELY AND KNOWINGLY ELECTED, AFTER DUE CONSIDERATION,
TO EXECUTE THIS RELEASE AND TO FULFILL THE PROMISES SET FORTH HEREIN. THIS
RELEASE SHALL BE REVOCABLE BY THE EXECUTIVE DURING THE SEVEN (7) DAY PERIOD
FOLLOWING ITS EXECUTION, AND SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE
EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. IN THE EVENT OF SUCH A REVOCATION, THE
EXECUTIVE SHALL NOT BE ENTITLED TO THE CONSIDERATION FOR THIS RELEASE SET FORTH
ABOVE.
3. RELIANCE BY THE EXECUTIVE. THE EXECUTIVE ACKNOWLEDGES THAT, IN HIS
DECISION TO ENTER INTO THIS RELEASE, HE HAS NOT RELIED ON ANY REPRESENTATIONS,
PROMISES OR ARRANGEMENT OF ANY KIND, INCLUDING ORAL STATEMENTS BY
REPRESENTATIVES OF THE COMPANY, EXCEPT AS SET FORTH IN THIS RELEASE.
4. MISCELLANEOUS. THE EXECUTIVE SHALL NOT DISCLOSE THE EXISTENCE OR
CONTENTS OF THIS RELEASE TO ANYONE OTHER THAN HIS IMMEDIATE FAMILY, ACCOUNTANTS
OR ATTORNEYS, AND THE EXECUTIVE SHALL INSTRUCT SUCH THIRD PARTIES NOT TO
DISCLOSE THE SAME. THIS RELEASE SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA WITHOUT REFERENCE
TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF. IF ANY PROVISION OF THIS RELEASE
IS HELD INVALID OR UNENFORCEABLE FOR ANY REASON, THE REMAINING PROVISIONS SHALL
BE CONSTRUED AS IF THE INVALID OR UNENFORCEABLE PROVISION HAD NOT BEEN INCLUDED.
ii
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This GENERAL RELEASE AND COVENANT NOT TO SUE is executed by the Executive
and delivered to the Company on _______________________.
Executive
- ------------------------------
Name: Glenn C. Christenson
STATE OF ___________ )
) ss:
COUNTY OF ____________ )
On this _____ day of ________________, ____, before me, a Notary Public
of the State of _______________, personally appeared ____________, to me known
and known to me to be the person described and who executed the foregoing
release and did then and there acknowledge to me that he voluntarily executed
the same.
- -----------------------------
NOTARY PUBLIC
[NOT TO BE SIGNED OR NOTARIZED UPON EXECUTION OF EMPLOYMENT AGREEMENT]
iii
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EXHIBIT 10.14
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and entered
into as of the 1st day of December, 1999, by and between STATION CASINOS,
INC., a Nevada corporation, with its principal offices located at 2411 West
Sahara Avenue, Las Vegas, Nevada 89102 (the "COMPANY"), and SCOTT M NIELSON
(the "EXECUTIVE").
WHEREAS, the Company and the Executive are parties to an Amended and
Restated Employment Agreement dated as of December 22, 1997 (the "FORMER
AGREEMENT"); and
WHEREAS, the Executive has agreed to continue his employment with the
Company on the terms and conditions set forth herein; and
WHEREAS, the parties to this Agreement desire to replace the Former
Agreement in its entirety with this Agreement, and the Former Agreement shall no
longer be of any force or effect;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the Company and
the Executive (each individually a "PARTY" and together the "PARTIES") agree as
follows.
1. DEFINITIONS. In addition to certain terms defined elsewhere in this
Agreement, the following terms shall have the following respective meanings:
1.1 "AFFILIATE" shall mean any Person controlling, controlled by or
under common control with, the Company.
1.2 "BASE AMOUNT" shall have the meaning ascribed to such term in
Section 280G of the Code.
1.3 "BASE SALARY" shall mean the salary provided for in SUBSECTION 3.1
of this Agreement.
1.4 "BOARD" shall mean the Board of Directors of the Company.
1.5 "CAUSE" shall mean that the Executive:
(a) has been formally charged with or convicted of any felony or any
crime involving fraud, theft, embezzlement, dishonesty or moral
turpitude;
(b) has been found unsuitable to hold a gaming license; or
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(c) in carrying out his duties under this Agreement, has engaged in
acts or omissions constituting gross negligence or willful
misconduct resulting, in either case, in material economic harm
to the Company.
1.6 "CHANGE IN CONTROL" shall be deemed to have occurred if:
(a) (1) any Person, corporation, entity or group (other than the
Existing Equity Holders) is or becomes the beneficial owner,
directly or indirectly, of securities representing 50% or more of
the combined voting power of the Company's Voting Stock (an
"Acquisition Event"), or
(2) the Company consolidates with or merges into another
corporation or entity, or any corporation or entity consolidates
with or merges into the Company, with the effect that the
beneficial owners of the Company's Voting Stock held immediately
prior to the consummation of such consolidation or merger cease
to beneficially own, directly or indirectly, securities
representing 50% or more of the combined voting power of the
Company's Voting Stock (or if the Company is not the surviving
entity, the surviving company's voting securities) upon the
consummation of such consolidation or merger (a "Merger Event"),
or
(3) the Company sells, conveys, transfers or leases to any
person, corporation, entity or group, directly or indirectly, in
one transaction or series of related transactions, properties
and/or assets that accounted for 75% or more of the earnings
(before interest, taxes, depreciation and amortization) of the
Company, on a consolidated basis for the four-fiscal quarter
period immediately preceding the date of consummation of such
transaction (a "Sale Event"); AND
(b) within thirty-six (36) months following an Acquisition Event,
Merger Event or Sale Event, individuals who immediately prior to
such Acquisition Event, Merger Event or Sale Event constituted
the Company's Board, together with any new or replacement
directors whose election by the Company's Board, or whose
nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the directors then
in office who were either directors on the Company's Board
immediately prior to such Acquisition Event, Merger Event or Sale
Event (or whose election or nomination for election was
previously so approved), cease for any reason to constitute a
majority of the directors of the Company's Board then in office.
Notwithstanding the foregoing, a reincorporation, spin-off, split-off or other
reorganization transaction (a "Reorganization Event"), or series of related
transactions, in which either the "beneficial owners" of the Company's Voting
Stock or the Existing Equity Holders beneficially own securities representing
50% or more of the combined voting power of the Company's Voting Stock upon the
consummation of such transaction shall not constitute an Acquisition Event,
Merger Event or Sale Event for purposes of this definition. For purposes of this
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definition, "beneficial ownership" shall have the same meaning as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time.
For the purposes of this definition, upon consummation of an Acquisition
Event, Merger Event, Sale Event or Reorganization Event, the "Company's
Board" and the "Company's Shareholders" shall refer to (i) in the case of an
Acquisition Event, the Company, (ii) in the case of a Merger Event, the
company surviving the merger or consolidation, (iii) in the case of a Sale
Event, the transferee of the properties, and/or assets, and (iv) in the case
of a Reorganization Event, the entity or entities surviving such
Reorganization Event on a consolidated basis.
1.7 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.8 "COMPANY PROPERTY" shall mean all items and materials provided by
the Company to the Executive, or to which the Executive has access, in the
course of his employment, including, without limitation, all files, records,
documents, drawings, specifications, memoranda, notes, reports, manuals,
equipment, computer disks, videotapes, drawings, blueprints and other documents
and similar items relating to the Company, its Affiliates or their respective
customers, whether prepared by the Executive or others, and any and all copies,
abstracts and summaries thereof.
1.9 "COMPETING BUSINESS" shall mean any Person engaged in the gaming
industry that directly or through an affiliate or subsidiary conducts its
business within the Restricted Area.
1.10 "CONFIDENTIAL INFORMATION" shall mean all nonpublic and/or
proprietary information respecting the business of the Company or any Affiliate,
including, without limitation, its products, programs, projects, promotions,
marketing plans and strategies, business plans or practices, business
operations, employees, research and development, intellectual property,
software, databases, trademarks, pricing information and accounting and
financing data. Confidential Information also includes information concerning
the Company's or any Affiliate's customers, such as their identity, address,
preferences, playing patterns and ratings or any other information kept by the
Company or any Affiliate concerning its customers whether or not such
information has been reduced to documentary form. Confidential Information does
not include information that is, or becomes, available to the public unless such
availability occurs through an unauthorized act on the part of the Executive.
1.11 "DEFERRED COMPENSATION PLAN FOR EXECUTIVES" shall mean the
Company's Deferred Compensation Plan for Executives, effective as of November
30, 1994, as the same may be amended from time to time.
1.12 "DISABILITY" shall mean a physical or mental incapacity that
prevents the Executive from performing the essential functions of his position
with the Company for a period of ninety (90) days as determined (a) in
accordance with any long-term disability plan provided by the Company of which
the Executive is a participant, or (b) by the following procedure: The Executive
agrees to submit to medical examinations by a licensed healthcare professional
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selected by the Company, in its sole discretion, to determine whether a
Disability exists. In addition, the Executive may submit to the Company
documentation of a Disability, or lack thereof, from a licensed healthcare
professional of his choice. Following a determination of a Disability or lack
of Disability by the Company's or the Executive's licensed healthcare
professional, the other Party may submit subsequent documentation relating to
the existence of a Disability from a licensed healthcare professional
selected by such other Party. In the event that the medical opinions of such
licensed healthcare professionals conflict, such licensed healthcare
professionals shall appoint a third licensed healthcare professional to
examine the Executive, and the opinion of such third licensed healthcare
professional shall be dispositive.
1.13 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.14 "EXISTING EQUITY HOLDERS" shall mean Frank J. Fertitta III, Blake
L. Sartini, Delise F. Sartini, Lorenzo J. Fertitta, Glenn C. Christenson and
Scott M Nielson and their executors, administrators or the legal representatives
of their estates, their heirs, distributees and beneficiaries, and any trust as
to which any of the foregoing is a settlor or co-settlor and any corporation,
partnership or other entity which is an affiliate of any of the foregoing, and
any lineal descendants of such persons (but only to the extent that the
beneficial ownership of the Voting Stock held by such lineal descendants was
directly received by gift, trust or sale from any such person).
1.15 "GOOD REASON," as used in SUBSECTION 7.2, shall mean and exist if
there has been a Change in Control and, thereafter, without the Executive's
prior written consent, one or more of the following events occurs:
(a) the Executive is assigned duties or responsibilities that are
inconsistent, in any significant respect, with the position of a
senior manager;
(b) the Executive is required to relocate from, or maintain his
principal office outside of, Clark County, Nevada;
(c) the Executive's Base Salary is decreased by the Company;
(d) the Executive is excluded from participation in any employee
benefit or short-term incentive plan or program offered to other
senior executives of the Company or his benefits under such plans
or programs are materially reduced;
(e) the Company fails to pay the Executive any deferred payments that
have become payable under the Deferred Compensation Plan for
Executives;
(f) the Company fails to reimburse the Executive for business
expenses in accordance with the Company's policies, procedures or
practices;
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(g) the Company fails to agree to or to actually indemnify the
Executive for his actions and/or inactions, as either a director
or an officer of the Company, in accordance with SECTION 10,
and/or the Company fails to maintain reasonably sufficient levels
of directors' and officers' liability insurance coverage for the
Executive when such insurance is available; or
(h) the Company fails to obtain a written agreement from any
successor or assign of the Company to assume the obligations
under this Agreement upon a Change in Control.
1.16 "LONG-TERM STAY-ON PERFORMANCE INCENTIVE PLAN" shall mean the
Company's Long-Term Stay-On Performance Incentive Plan, effective as of
September 27, 1994, as the same may be amended from time to time.
1.17 "PERSON" shall mean any individual, firm, partnership,
association, trust, company, corporation or other entity.
1.18 "PRO RATA BONUS" shall mean an amount equal to sixty percent
(60%) of the Executive's current Base Salary, multiplied by a fraction, the
numerator of which is the number of days in such year during which the Executive
was actually employed by the Company and the denominator of which is 365.
1.19 "RESTRICTED AREA" shall mean:
(a) the City of Las Vegas, Nevada, and the area within a twenty-five
(25) mile radius of that city; and
(b) the Cities of Kansas City, Missouri and St. Louis, Missouri, and
the areas within a fifty (50) mile radius of each of those
cities;
PROVIDED, HOWEVER, that in the event the Executive voluntarily terminates this
Agreement pursuant to SUBSECTION 6.3, the Restricted Area shall exclude the Las
Vegas Strip (which is defined as that area bounded by Paradise Road and straight
extensions thereof on the East, Charleston Boulevard on the North, I-15 on the
West, and Sunset Road on the South, as outlined in red on Exhibit A attached
hereto) and Downtown Las Vegas (which is defined as that area bounded by Eastern
Avenue and straight extensions thereof on the East, I-515 (U.S. Highway 93/95)
on the North, I-15 on the West, and Charleston Boulevard on the South, as
outlined in red on Exhibit A attached hereto).
1.20"RESTRICTION PERIOD" shall mean the period ending twenty-four (24)
months after the termination or expiration of the Term of Employment, regardless
of the reason for such termination or expiration.
1.21"SPECIAL LONG-TERM DISABILITY PLAN" shall mean the Company's
Special Long-Term Disability Plan, effective as of November 30, 1994, as the
same may be amended from time to time.
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1.22"SUPPLEMENTAL MANAGEMENT RETIREMENT PLAN" shall mean the Company's
Supplemental Management Retirement Plan, effective as of November 30, 1994, as
the same may be amended from time to time.
1.23"TERM OF EMPLOYMENT" shall mean the period specified in SUBSECTION
2.2.
1.24"VOTING STOCK" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. TERM OF EMPLOYMENT, POSITION AND RESPONSIBILITIES.
2.1 EMPLOYMENT ACCEPTED. The Company hereby employs the Executive, and
the Executive hereby accepts employment with the Company, for the Term of
Employment, in the position and with the responsibilities set forth in
SUBSECTION 2.3 and upon such other terms and conditions as are stated in this
Agreement.
2.2 TERM OF EMPLOYMENT. The initial Term of Employment shall commence
upon the date of this Agreement and, unless earlier terminated pursuant to the
provisions of this Agreement, shall terminate upon the close of business on the
day immediately preceding the fifth anniversary of the date of this Agreement;
PROVIDED, HOWEVER, that the initial Term of Employment shall automatically be
extended for successive five-year periods if neither Party has advised the other
in writing in accordance with SECTION 14 at least twelve (12) months prior to
the end of the then current Term of Employment that such Term of Employment will
not be extended for an additional five year period. In the event that such
notice is given, the Executive's employment shall terminate upon the close of
business on the day immediately preceding the fifth anniversary of the then
current Term of Employment.
2.3 RESPONSIBILITIES. During the Term of Employment, the Executive
shall be employed as Executive Vice President, General Counsel and Secretary, or
in such other capacity as the Company may direct, and shall have such
responsibilities as the Company may direct from time to time. During the Term of
Employment, the Executive shall devote his full time and attention to the
business and affairs of the Company and shall use his best efforts, skills and
abilities to promote the Company's interests. Anything herein to the contrary
notwithstanding, the Executive shall not be precluded from engaging in
charitable and community affairs and managing his personal investments,
including the following outside interests: (a) Pacific Gaming Decatur, Inc.,
d/b/a Decatur Express, 2650 S. Decatur Boulevard, Las Vegas, Nevada 89102; (b) B
& B B, Inc., d/b/a Virgin River Hotel & Casino, 100 W. Pioneer Boulevard,
Mesquite, Nevada 89024; and (c) Bauchman Gaming Ventures, LLC, d/b/a Ernie's
Casino, 1901 N. Rancho Drive, Las Vegas, Nevada 89106. The Executive also may
serve as a member of the board of directors of other corporations, subject to
the approval of a majority of the Board, which approval shall not be
unreasonably withheld or delayed.
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3. COMPENSATION.
3.1 BASE SALARY. During the Term of Employment, the Executive shall be
entitled to receive a base salary (the "Base Salary") payable no less frequently
than in equal biweekly installments at an annualized rate of no less than
$475,000. The Base Salary shall be reviewed annually for increase (but not
decrease) in the discretion of the Human Resources Committee of the Board. In
conducting any such annual review, the Human Resources Committee shall take into
account any change in the Executive's responsibilities, increases in the
compensation of other executives of the Company or any Affiliate (or any
competitor(s) of either or both), the performance of the Executive and/or other
pertinent factors. Such increased Base Salary shall then constitute the
Executive's "Base Salary" for purposes of this Agreement.
3.2 ANNUAL BONUS. The Company may pay the Executive an annual
discretionary bonus for each fiscal year ending during the Term of Employment in
an amount that will be determined by the Human Resources Committee based on the
Executive's performance. Any annual bonus that may be awarded to the Executive
shall be paid at the same time as annual bonuses are paid to other senior
officers of the Company, unless the Executive has elected to defer receipt of
all or part of the bonus amounts to which he is entitled in respect of any such
calendar year in accordance with the terms and provisions of any deferred
compensation program maintained by the Company.
3.3 STAY-ON INCENTIVES. The Executive shall be eligible to participate
in the Company's Long-Term Stay-On Performance Incentive Plan pursuant to the
terms of the Plan.
3.4 DEFERRED COMPENSATION. The Executive shall be eligible to
participate in the Company's Deferred Compensation Plan for Executives, and any
other deferred compensation plans that the Company may adopt for executives,
pursuant to the terms of the plans.
4. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
4.1 PENSION AND WELFARE BENEFIT PLANS. During the Term of Employment,
the Executive shall be entitled to participate in all employee benefit programs
made available to the Company's executives or salaried employees generally, as
such programs may be in effect from time to time, including, without limitation,
pension and other retirement plans, profit sharing plans, group life insurance,
group health insurance, accidental death and dismemberment insurance, long-term
disability, sick leave (including salary continuation arrangements), vacations,
holidays and other employee benefit programs sponsored by the Company.
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4.2 ADDITIONAL PENSION AND WELFARE BENEFITS. In addition to the
foregoing, the Company shall provide the Executive with the following benefits:
(a) group health insurance coverage through the Company's Exec-U-Care
Medical Plan, effective as of July 1, 1994, or pursuant to such
other plan or plans as the Company may select from time to time,
and which shall be fully paid for by the Company;
(b) full salary continuation during the first 90 days of any physical
or mental incapacity that prevents the Executive from performing
his duties and, for any Disability that continues thereafter,
benefits pursuant to the Company's Special Long-Term Disability
Plan and any other long-term disability benefits pursuant to any
other disability plan of which the Executive is a participant;
(c) an annual supplemental retirement benefit as set forth in the
Supplemental Management Retirement Plan, in addition to any other
benefit pursuant to any other retirement plan under which the
Executive is covered; and
(d) supplemental life insurance coverage, through an individual
policy, a group policy or a combination thereof, in an aggregate
amount of not less than $7.5 million.
5. BUSINESS EXPENSE REIMBURSEMENT AND PERQUISITES.
5.1 EXPENSE REIMBURSEMENT. During the Term of Employment, the
Executive shall be entitled to receive reimbursement by the Company for all
reasonable out-of-pocket expenses incurred by him in performing services under
this Agreement, subject to providing the proper documentation of said expenses.
5.2 PERQUISITES. During the Term of Employment, the Executive shall
also be entitled to any of the Company's executive perquisites in accordance
with the terms and provisions of the applicable policies, including, without
limitation:
(a) vacation of four weeks per year;
(b) payment or reimbursement of the cost of an annual physical
examination;
(c) payment or reimbursement of initiation fees and annual membership
fees and assessments for a country club, a luncheon club and a
physical fitness program of the Executive's choice; and
(d) payment or reimbursement of fees and expenses, up to a maximum
amount of $2500.00, incurred in connection with having this
Agreement reviewed by legal counsel of his own choosing prior to
execution.
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6. TERMINATION OF EMPLOYMENT.
6.1 TERMINATION DUE TO DEATH OR DISABILITY. The Executive's employment
shall be terminated immediately in the event of his death or Disability. In the
event of a termination due to the Executive's death or Disability, the Executive
or his estate, as the case may be, shall be entitled, in lieu of any other
compensation whatsoever, to:
(a) Base Salary at the rate in effect at the time of his termination
until the date of death or Disability;
(b) any annual bonus awarded but not yet paid;
(c) a Pro Rata Bonus for the fiscal year in which death or Disability
occurs;
(d) in the case of death, any deferred compensation or bonuses,
including interest or other credits on the deferred amounts, to
the extent provided in the plans or programs providing for
deferral, and in the case of Disability, immediate vesting of any
deferred compensation or bonuses, including interest or other
credits on the deferred amounts;
(e) reimbursement of expenses incurred but not paid prior to such
termination of employment; and
(f) such rights to other benefits as may be provided in applicable
plans and programs of the Company, including, without limitation,
applicable employee benefit plans and programs, according to the
terms and provisions of such plans and programs.
6.2 TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate
the Executive's employment for Cause at any time during the Term of Employment
by giving written notice to the Executive. In the event of a termination for
Cause, the Executive shall be entitled, in lieu of any other compensation and
benefits whatsoever, to:
(a) Base Salary at the rate in effect at the time of his termination
through the date of termination of employment;
(b) any annual bonus awarded but not yet paid;
(c) any deferred compensation or bonuses, including interest or other
credits on the deferred amounts, to the extent provided in the
plans or programs providing for deferral;
(d) reimbursement for expenses incurred but not paid prior to such
termination of employment; and
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(e) such rights to other benefits as may be provided in applicable
plans and programs of the Company, including, without limitation,
applicable employee benefit plans and programs, according to the
terms and conditions of such plans and programs.
Notwithstanding anything to the contrary in this SUBSECTION 6.2, if the
Executive's employment is terminated for Cause (i) due to his having been
formally charged pursuant to SUBSECTION 1.5(A) but thereafter said charges are
dismissed or the Executive is acquitted, or (ii) due to his having been
convicted pursuant to SUBSECTION 1.5(A) but said conviction is subsequently
overturned on appeal and he is not required to submit to re-trial within six (6)
months thereafter, the Company shall have the option of reinstating the
Executive with payment of all base salary payments that would have been paid to
him had his employment not been terminated and restoration of all benefits
provided for pursuant to SECTION 4, or making a payment to him of an amount
equal to three times 160 percent of the Executive's Base Salary at the rate in
effect at the time of his termination.
6.3 TERMINATION BY THE EXECUTIVE. The Executive may terminate his
employment on his own initiative for any reason prior to a Change in Control
upon thirty (30) days prior written notice to the Company. Such termination
shall have the same consequences as a termination for Cause under SUBSECTION
6.2.
6.4 TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding any
other provision of this Agreement, the Company may terminate the Executive's
employment without Cause, other than due to death or Disability, at any time
during the Term of Employment by giving written notice to the Executive. In the
event that the Company terminates the Executive's employment without Cause, the
Executive shall be entitled, in lieu of any other compensation and benefits
whatsoever, to:
(a) an amount equal to three times 160 percent of the Executive's
Base Salary at the rate in effect at the time of his termination,
one-third of which shall be paid in a lump sum upon satisfaction
of the conditions set forth in SUBSECTION 8.3, and the other
two-thirds of which shall be paid out in equal biweekly
installments for the duration of the Restriction Period;
(b) any annual bonus awarded but not yet paid;
(c) any deferred bonus, including interest or other credits on the
deferred amounts, to the extent provided in the plans or programs
providing for deferral;
(d) exercise, within 180 days, all stock options that have vested
prior to termination, and shall forfeit all stock options that
have not vested;
(e) reimbursement for expenses incurred but not paid prior to such
termination of employment; and
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(f) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
6.5 TERMINATION DUE TO EXPIRATION OF THE TERM OF EMPLOYMENT. If either
Party elects not to extend the initial Term of Employment or any successive Term
of Employment, the Executive shall not be entitled to any additional
compensation after the expiration thereof, but such termination of employment
shall not otherwise affect accrued but unpaid compensation or benefits provided
under this Agreement or pursuant to any Company plan or program.
7. CHANGE IN CONTROL.
7.1 CHANGE IN CONTROL PAYMENT. Immediately upon a Change in Control,
in addition to any other compensation or benefits payable pursuant to this
Agreement or otherwise, the Executive shall be entitled to a payment in cash
equal to three times 160 percent of his Base Salary. Unless otherwise provided
for in this Agreement, the Executive's rights upon a Change in Control to
benefits under programs, plans and policies of the Company shall be determined
according to the terms and provisions of such programs, plans and policies.
7.2 TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR
GOOD REASON AFTER A CHANGE IN CONTROL. If within five years following a Change
in Control, the Executive's employment is terminated by the Company without
Cause or by the Executive for Good Reason, the Executive shall be entitled, in
addition to any payment paid or payable pursuant to SUBSECTION 7.1, but in lieu
of any other compensation and benefits whatsoever, to:
(a) an amount equal to the greater of (i) five times 160 percent of
the Executive's Base Salary at the time of the Change in Control
or (ii) five times 160 percent of the Executive's Base Salary at
the time of the termination of his employment, three-fifths of
which shall be paid in a lump sum upon satisfaction of the
conditions set forth in SUBSECTION 8.3 and two-fifths of which
shall be paid out in equal biweekly installments for the duration
of the Restriction Period,
(b) immediate vesting of any restricted stock of the Company held in
the Executive's name or for his benefit;
(c) immediate vesting of any stock options and stock appreciation
rights granted by the Company, which stock options and stock
appreciation rights shall continue to be and shall remain
exercisable until the earlier of (i) five years and (ii) the
remaining term of such stock options and stock appreciation
rights as set forth in the agreement granting, or otherwise
awarding, such stock option or stock appreciation right as if no
termination had taken place;
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(d) immediate vesting and cash-out of any phantom stock units granted
to the Executive;
(e) immediate vesting and pay out of any shares awarded to the
Executive pursuant to the Company's Long-Term Stay-On Performance
Incentive Plan;
(f) immediate vesting of the Executive's supplemental retirement
benefit as set forth in the Supplemental Management Retirement
Plan;
(g) continued funding of the Executive's split dollar life insurance
policy as if the Executive were employed by the Company through
the maturity date of such policy or, at the Company's option,
payment in full of all premium obligations under such policy; and
(h) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
7.3 TERMINATION BY EXECUTIVE WITHOUT GOOD REASON AFTER A CHANGE IN
CONTROL. If the Executive terminates his employment without Good Reason within
ninety (90) days following the first anniversary of a Change in Control, the
Executive shall be entitled, in addition to any payment paid or payable pursuant
to SUBSECTION 7.1, but in lieu of any other compensation and benefits
whatsoever, to:
(a) an amount equal to the greater of (i) three times 160 percent of
the Executive's Base Salary at the time of the Change in Control
or (ii) three times 160 percent of the Executive's Base Salary at
the time of the termination of his employment, one-third of which
shall be paid in a lump sum upon satisfaction of the conditions
set forth in SUBSECTION 8.3 and two-thirds of which shall be paid
out in equal biweekly installments for the duration of the
Restriction Period;
(b) immediate vesting of any stock options and stock appreciation
rights granted by the Company, which stock options and stock
appreciation rights shall continue to be and shall remain
exercisable until the earlier of (i) three years and (ii) the
remaining term of such stock options and stock appreciation
rights as set forth in the agreement granting, or otherwise
awarding, such stock option or stock appreciation right as if no
termination had taken place;
(c) immediate vesting and cash-out of any phantom stock units granted
to the Executive;
(d) immediate vesting of the Executive's supplemental retirement
benefit as set forth in the Supplemental Management Retirement
Plan;
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(e) continued funding of the Executive's split dollar life insurance
policy as if the Executive were employed by the Company through
the maturity date of such policy or, at the Company's option,
payment in full of all premium obligations under such policy; and
(f) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
7.4 TERMINATION FOR OTHER REASONS AFTER A CHANGE IN CONTROL. If the
Executive's employment is terminated after a Change in Control for any reason
not otherwise provided for in this SECTION 7, his rights shall be determined in
accordance with the applicable subsection of SECTION 6.
8. CONDITIONS TO PAYMENTS UPON TERMINATION.
8.1 TIMING OF PAYMENTS. Unless otherwise provided herein, any payments
to which the Executive shall be entitled pursuant to SECTIONS 6 AND 7 shall be
payable upon the satisfaction of the conditions set forth in SUBSECTION 8.3.
8.2 NO MITIGATION; NO OFFSET. In the event of any termination of the
Executive's employment under SECTIONS 6 OR 7, the Executive shall be under no
obligation to seek other employment and there shall be no offset against amounts
due to the Executive on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. Notwithstanding any
contrary provision contained herein, in the event of any termination of
employment of the Executive, the exclusive remedies available to the Executive
shall be the amounts due under SECTIONS 6 OR 7, which are in the nature of
severance payments, or liquidated damages, or both, and are not in the nature of
a penalty. In the event of a termination of this Agreement, neither Party shall
publish in any way or make any negative comment or statement about the other
Party or concerning the reasons for such termination. The provisions of this
SUBSECTION 8.2 shall survive the expiration or earlier termination of this
Agreement.
8.3 GENERAL RELEASE. No payments or benefits payable to the Executive
upon the termination of his employment pursuant to SECTIONS 6 OR 7 shall be made
to the Executive unless and until he executes a general release substantially in
the form annexed to this Agreement as Exhibit B and such general release becomes
effective pursuant to its terms.
8.4 COMPLIANCE WITH THE AGREEMENT. No payments or benefits payable to
the Executive upon the termination of his employment pursuant to SECTIONS 6 OR 7
shall be made to the Executive if he fails to comply with all of the terms and
conditions of this Agreement, including, without limitation, SECTIONS 11 AND 12.
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8.5 CONTINUING OBLIGATIONS OF EXECUTIVE. No act or omission by the
Executive in breach of this Agreement, including, without limitation his failure
to execute the general release and the resulting forfeiture of termination
payments, shall be deemed to permit the Executive to forego or waive such
payments in order to avoid his obligations under SECTION 11.
9. SPECIAL REIMBURSEMENT.
9.1 If any payment or benefit paid or payable, or received or to be
received, by or on behalf of the Executive in connection with a Change in
Control pursuant to SUBSECTION 7.1 or the termination of the Executive's
employment pursuant to SUBSECTION 7.2 , whether any such payments or benefits
are pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Affiliate, any Person, or otherwise (the "TOTAL
PAYMENTS"), will or would be subject to the excise tax imposed under Section
4999 of the Code (the "EXCISE TAX"), the Company shall pay to the Executive an
additional amount (the "GROSS-UP PAYMENT") such that, after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes) imposed upon or in respect of the Total Payments and the Gross-Up
Payments, including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and any Excise Tax imposed thereon, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Total Payments.
9.2 For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax,
(a) the Total Payments shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise
Tax, unless in the opinion of tax counsel selected by the Company
and reasonably acceptable to the Executive (which opinion shall
be provided to the Executive) such Total Payments (in whole or in
part) (i) do not constitute parachute payments, including
(without limitation) by reason of Section 280G(b)(4)(A) of the
Code, (ii) such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered,
within the meaning of Section 280G(b)(4)(B) of the Code, or (iii)
are not, in the opinion of legal counsel, otherwise subject to
the Excise Tax, and
(b) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.
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9.3 In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder, the Executive shall repay to
the Company, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the initial
Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
accordance with SUBSECTION 9.1 in respect of such excess Excise Tax (plus any
interest, penalties or additions payable by the Executive with respect to such
excess Excise Tax) at the time that the amount of such excess Excise Tax is
finally determined. The Executive and the Company shall each reasonably
cooperate with each other in connection with any administrative or judicial
proceedings concerning the existence or amount of any such subsequent liability
for Excise Tax with respect to the Total Payments.
10. INDEMNIFICATION.
10.1 GENERAL. The Company agrees that if the Executive is made a party
or is threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (an "INDEMNIFIABLE ACTION"), by
reason of the fact that he is or was a director or officer of the Company or is
or was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether or not the basis of such Indemnifiable Action is alleged action
in an official capacity as a director, officer, member, employee or agent, while
serving as a director, officer, member, employee or agent, he shall be
indemnified and held harmless by the Company to the fullest extent permitted by
Nevada law and the Company's by-laws, as the same exist or may hereafter be
amended, against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by the Executive in connection
therewith.
10.2 PROCEDURE. The indemnification provided pursuant to this SECTION
10 shall be subject to the following conditions:
(a) The Executive must promptly give the Company written notice of
any actual or threatened Indemnifiable Action;
(b) The Company will be permitted, at its option, to participate in,
or to assume, the defense of any Indemnifiable Action;
(c) The Executive must provide reasonable cooperation to the Company
in the defense of any Indemnifiable Action; and
(d) The Executive must refrain from settling any Indemnifiable Action
without obtaining the Company's prior written consent, which
consent shall not be unreasonably withheld.
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10.3 ADVANCEMENT OF COSTS AND EXPENSES. The Company agrees to advance
all costs and expenses referred to in SUBSECTION 10.1; PROVIDED, HOWEVER, that
the Executive agrees to repay to the Company all amounts so advanced in the
event that the Company reasonably determines in good faith that any acts or
omissions by the Executive were:
(a) in knowing violation of any agreement between the Executive and
the Company;
(b) in bad faith or that the Executive personally gained a financial
profit or other advantage to which he was not legally entitled;
or
(c) for which a court, having jurisdiction in the matter, determines
that indemnification is not lawful.
10.4 NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
payment of expenses incurred in defending an Indemnifiable Action in advance of
its final disposition conferred in this SECTION 10 shall not be exclusive of any
other right which the Executive may have or hereafter may acquire under any
statute, provision of the certificate of incorporation or by-laws of the
Company, agreement, vote of stockholders or disinterested directors or
otherwise.
10.5 D&O INSURANCE. The Company will maintain a directors' and
officers' liability insurance policy covering the Executive that provides
coverage that is reasonable in relation to the Executive's position during the
Term of Employment.
11. COVENANT NOT ENGAGE IN CERTAIN ACTS.
11.1 GENERAL. The Parties understand and agree that the purpose of the
restrictions contained in this SECTION 11 is to protect the goodwill and other
legitimate business interests of the Company, and that the Company would not
have entered into this Agreement in the absence of such restrictions. The
Executive acknowledges and agrees that the restrictions are reasonable and do
not, and will not, unduly impair his ability to make a living after the
termination of his employment with the Company. The provisions of this SECTION
11 shall survive the expiration or sooner termination of this Agreement.
11.2 NON-ASSISTANCE; NON-DIVERSION. In consideration for this
Agreement to employ the Executive and the other valuable consideration provided
hereunder, the Executive agrees and covenants that during the Term of Employment
and during the Restriction Period, and except when acting on behalf of the
Company or on behalf of any Affiliate, the Executive shall not, directly or
indirectly, for himself or any third party, or alone or as a member of a
partnership, or as an officer, director, shareholder or otherwise, engage in the
following acts:
(a) divert or attempt to divert any existing business of the Company
or any Affiliate;
(b) accept any position or affiliation with, or render any services
on behalf of, any Competing Business; or
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(c) hire or retain any employee of the Company or any Affiliate to
provide services for any other Person or induce, solicit, attempt
to solicit, encourage, divert, cause or attempt to cause any
employee or prospective employee of the Company or any Affiliate
to (i) terminate and/or leave such employment, or (ii) accept
employment with anyone other than the Company or an Affiliate.
Notwithstanding the foregoing, the Executive's minority ownership of any of the
outside interests described in SECTION 2.3 shall not be deemed to be a violation
of SUBSECTION 11.2(a).
11.3 CESSATION/REIMBURSEMENT OF PAYMENTS. If the Executive violates
any provision of this SECTION 11, the Company may, upon giving written notice to
the Executive, immediately cease all payments and benefits that it may be
providing to the Executive pursuant to SECTION 3, SECTION 6 or SUBSECTION 7.2,
and the Executive may be required to reimburse the Company for any payments
received from, and the cash value of any benefits provided by, the Company
between the first day of the violation and the date such notice is given;
PROVIDED, HOWEVER, that the foregoing shall be in addition to such other
remedies as may be available to the Company and shall not be deemed to permit
the Executive to forego or waive such payments in order to avoid his obligations
under this SECTION 11.
11.4 SURVIVAL. The Executive agrees that the provisions of this
SECTION 11 shall survive the termination of this Agreement and the termination
of the Executive's employment.
12. CONFIDENTIAL INFORMATION AND COMPANY PROPERTY.
12.1 CONFIDENTIAL INFORMATION. The Executive understands and
acknowledges that Confidential Information constitutes a valuable asset of the
Company and its Affiliates and may not be converted to the Executive's own or
any third party's use. Accordingly, the Executive hereby agrees that he shall
not directly or indirectly, during the Term of Employment or any time
thereafter, disclose any Confidential Information to any Person not expressly
authorized by the Company to receive such Confidential Information. The
Executive further agrees that he shall not directly or indirectly, during the
Term of Employment or any time thereafter, use or make use of any Confidential
Information in connection with any business activity other than that of the
Company. The Parties acknowledge and agree that this Agreement is not intended
to, and does not, alter either the Company's rights or the Executive's
obligations under any state or federal statutory or common law regarding trade
secrets and unfair trade practices.
12.2 COMPANY PROPERTY. All Company Property is and shall remain
exclusively the property of the Company. Unless authorized in writing to the
contrary, the Executive shall promptly, and without charge, deliver to the
Company on the termination of employment hereunder, or at any other time the
Company may so request, all Company Property that the Executive may then possess
or have under his control.
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12.3 REQUIRED DISCLOSURE. In the event the Executive is required by
law or court order to disclose any Confidential Information or to produce any
Company Property, the Executive shall promptly notify the Company of such
requirement and provide the Company with a copy of any court order or of any law
which requires such disclosure and, if the Company so elects, to the extent
permitted by applicable law, give the Company an adequate opportunity, at its
own expense, to contest such law or court order prior to any such required
disclosure or production by the Executive.
12.4 SURVIVAL. The Executive agrees that the provisions of this
SECTION 12 shall survive the termination of this Agreement and the termination
of the Executive's employment.
13. MUTUAL ARBITRATION AGREEMENT.
13.1 ARBITRABLE CLAIMS. All disputes between the Executive (and his
attorneys, successors, and assigns) and the Company (and its trustees,
beneficiaries, officers, directors, managers, affiliates, employees, agents,
successors, attorneys, and assigns) relating in any manner whatsoever to the
employment or termination of the Executive, including, without limitation, all
disputes arising under this Agreement ("ARBITRABLE CLAIMS"), shall be resolved
by binding arbitration as set forth in this SECTION 13 (the "MUTUAL ARBITRATION
AGREEMENT"). Arbitrable Claims shall include, but are not limited to, claims for
compensation, claims for breach of any contract or covenant (express or
implied), and tort claims of all kinds, as well as all claims based on any
federal, state, or local law, statute or regulation, but shall not include the
claims based on the statutes enumerated in SUBSECTION 13.4 or the Company's
right to seek injunctive relief as provided in SECTION 15. Arbitration shall be
final and binding upon the Parties and shall be the exclusive remedy for all
Arbitrable Claims. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY
JUDGE OR JURY IN REGARD TO ARBITRABLE CLAIMS, EXCEPT AS PROVIDED BY SECTION
13.4.
13.2 PROCEDURE. Arbitration of Arbitrable Claims shall be in
accordance with the National Rules for the Resolution of Employment Disputes of
the American Arbitration Association, as amended, and as augmented in this
Agreement. Either Party may bring an action in court to compel arbitration under
this Agreement and to enforce an arbitration award. Otherwise, neither Party
shall initiate or prosecute any lawsuit, appeal or administrative action in any
way related to an Arbitrable Claim. The initiating Party must file and serve an
arbitration claim within sixty (60) days of learning the facts giving rise to
the alleged claim. All arbitration hearings under this Agreement shall be
conducted in Las Vegas, Nevada. The Federal Arbitration Act shall govern the
interpretation and enforcement of this Agreement. The fees of the arbitrator
shall be divided equally between both Parties.
13.3 CONFIDENTIALITY. All proceedings and all documents prepared in
connection with any Arbitrable Claim shall be confidential and, unless otherwise
required by law, the subject matter and content thereof shall not be disclosed
to any Person other than the parties to the proceedings, their counsel,
witnesses and experts, the arbitrator and, if involved, the court and court
staff.
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13.4 APPLICABILITY. This SECTION 13 shall apply to all disputes under
this Agreement other than:
(a) disputes relating to the enforcement of the Company's rights
under SECTIONS 11 AND 12 of this Agreement; and
(b) claims brought under Title VII of the Civil Rights Act of 1964,
the Civil Rights Act of 1866, the Age Discrimination in
Employment Act of 1967 (including the Older Workers Benefit
Protection Act), and the Americans with Disabilities Act, the
Fair Labor Standards Act, the Equal Pay Act, the Family and
Medical Leave Act and the Employee Retirement Income Security Act
of 1974, the Nevada Fair Employment Practices Act, the Missouri
Human Rights Act or any other applicable state or local fair
employment law.
13.5 ACKNOWLEDGEMENTS. The Executive acknowledges that he:
(a) has carefully read this SECTION 13;
(b) understands its terms and conditions; and
(c) has entered into this Mutual Arbitration Agreement voluntarily
and not in reliance on any promises or representations made by
the Company other than those contained in this Mutual Arbitration
Agreement.
14. NOTICES. All notices, demands and requests required or permitted to be
given to either Party under this Agreement shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the Party concerned at the address indicated below or to such changed address as
such Party may subsequently give notice of:
If to the Company: Station Casinos, Inc.
2411 West Sahara Avenue
Las Vegas, NV 89102
Attn: Glenn C. Christenson
With a copy to: Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street, 30th Floor
Los Angeles, CA 90017
Attn: Kenneth J. Baronsky
If to the Executive: Scott M Nielson
9037 Waterfield Court
Las Vegas, NV 89134
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15. RIGHT TO SEEK INJUNCTIVE RELIEF. The Executive acknowledges that a
violation on his part of any of the covenants contained in SECTIONS 11 AND 12
would cause immeasurable and irreparable damage to the Company. The Executive
accordingly agrees and hereby grants his consent that, without limiting the
remedies available to the Company, any actual or threatened violation of such
covenants may be enforced by injunctive relief or by other equitable remedies
issued or ordered by any court of competent jurisdiction.
16. EMPLOYEE BENEFIT PLAN DOCUMENTS. In the event that any terms and
provisions of this Agreement conflict with the terms and provisions of any
employee benefit plan document, the terms and provisions of this Agreement shall
govern, and the Company shall take any and all actions that may be necessary,
including amendment of any plan document, to effect the provision of benefits
expressly provided upon termination of the Executive's employment pursuant to
SECTIONS 6 AND 7.
17. BENEFICIARIES/REFERENCES. The Executive shall be entitled to select a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following the Executive's death, and may change such election, by
giving the Company written notice thereof. In the event of the Executive's death
or a judicial determination of his incompetence, reference in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiaries,
estate or other legal representative.
18. SURVIVORSHIP. The respective rights and obligations of the Parties
hereunder shall survive the expiration or earlier termination of this Agreement
to the extent necessary to the intended preservation of such rights and
obligations. The provisions of this SECTION 18 are in addition to the
survivorship provisions of any other section of this Agreement.
19. REPRESENTATIONS AND WARRANTIES. Each Party represents and warrants that
he or it is fully authorized and empowered to enter into this Agreement and that
the performance of his or its obligations under this Agreement will not violate
any Agreement between that Party and any other Person.
20. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the Parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings, whether
written or oral, express or implied, between the Parties with respect hereto. No
representations, inducements, promises or agreements not embodied herein shall
be of any force or effect.
21. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors, heirs and
assigns; PROVIDED, HOWEVER, that no rights or obligations of the Executive under
this Agreement may be assigned or transferred by the Executive, other than
rights to compensation and benefits hereunder, which may be transferred only by
will or operation of law and subject to the limitations of this Agreement; and
PROVIDED, FURTHER, that no rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company, except that such rights
or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale or
liquidation of all or substantially all of the assets of the Company, provided
that the assignee or transferee is the successor to all or
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substantially all or the assets of the Company and such assignee or
transferee assumes the liabilities, obligations and duties of the Company
under this Agreement, either contractually or as a matter of law.
22. AMENDMENT OR WAIVER. No provision in this Agreement may be amended or
waived unless such amendment or waiver is agreed to in writing, signed by both
Parties. No waiver by one Party of any breach by the other Party of any
condition or provision of this Agreement to be performed by such other Party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same or any prior or subsequent time. No failure of the Company to exercise
any power given it hereunder or to insist upon strict compliance by the
Executive with any obligation hereunder, and no custom or practice at variance
with the terms hereof, shall constitute a waiver of the right of the Company to
demand strict compliance with the terms hereof.
23. SEVERABILITY. In the event that any provision or portion of this
Agreement, except SECTION 6, SECTION 7 and SECTION 11, shall be determined to be
invalid or unenforceable for any reason, in whole or in part, the remaining
provisions of this Agreement shall be unaffected thereby and shall remain in
full force and effect to the fullest extent permitted by law. If either SECTION
6, SECTION 7 or SECTION 11 is determined to be invalid or unenforceable for any
reason, in whole or in part, either Party may terminate this Agreement without
further obligations or duties hereunder.
24. GOVERNING LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Nevada without reference
to the principles of conflict of laws thereof. In the event of any dispute or
controversy arising out of or relating to this Agreement that is not an
arbitrable claim, the Parties mutually and irrevocably consent to, and waive any
objection to, the exclusive jurisdiction of any court of competent jurisdiction
in Clark County, Nevada, to resolve such dispute or controversy.
25. HEADINGS. The headings of the sections and subsections contained in
this agreement are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.
26. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which shall constitute one and the
same Agreement with the same effect as if all Parties had signed the same
signature page. Any signature page of this Agreement may be detached from any
counterpart of this Agreement and reattached to any other counterpart of this
Agreement identical in form hereto but having attached to it one or more
additional signature pages.
27. ACKNOWLEDGEMENT. The Executive represents and acknowledges the
following:
(a) he has carefully read this Agreement in its entirety;
(b) he understands the terms and conditions contained herein;
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(c) he has had the opportunity to review this Agreement with legal
counsel of his own choosing and has not relied on any statements
made by the Company or its legal counsel as to the meaning of any
term or condition contained herein or in deciding whether to
enter into this Agreement; and
(d) he is entering into this Agreement knowingly and voluntarily.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
STATION CASINOS, INC.
By: /s/ GLENN C. CHRISTENSON
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Name: Glenn C. Christenson
Title: Executive Vice President, Chief Financial
Officer, Chief Administrative Officer and
Treasurer
/s/ SCOTT M NIELSON
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Scott M Nielson
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EXHIBIT "B"
GENERAL RELEASE AND COVENANT NOT TO SUE
This GENERAL RELEASE AND COVENANT NOT TO SUE (this "Release") is
executed and delivered by SCOTT M NIELSON(the "Executive") to STATION CASINOS,
INC., a Nevada corporation (the "Company").
In consideration of the agreement by the Company to provide the
separation payments and benefits in SECTION 6 and SECTION 7 of the Employment
Agreement between the Executive and the Company, dated as of December 1, 1999
(the "Employment Agreement"), and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Executive hereby
agrees as follows:
1. RELEASE AND COVENANT. THE EXECUTIVE, OF HIS OWN FREE WILL,
VOLUNTARILY RELEASES AND FOREVER DISCHARGES THE COMPANY AND ITS SUBSIDIARIES AND
AFFILIATES, AND EACH OF THEIR RESPECTIVE PAST AND PRESENT AGENTS, EMPLOYEES,
MANAGERS, REPRESENTATIVES, OFFICERS, DIRECTORS, ATTORNEYS, ACCOUNTANTS,
TRUSTEES, SHAREHOLDERS, PARTNERS, INSURERS, HEIRS, PREDECESSORS-IN-INTEREST,
ADVISORS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE "RELEASED PARTIES") FROM,
AND COVENANTS NOT TO SUE OR PROCEED AGAINST ANY OF THE FOREGOING ON THE BASIS
OF, ANY AND ALL PAST OR PRESENT CAUSES OF ACTION, SUITS, AGREEMENTS OR OTHER
RIGHTS OR CLAIMS WHICH THE EXECUTIVE, HIS DEPENDENTS, RELATIVES, HEIRS,
EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS HAS OR HAVE AGAINST ANY OF THE
RELEASED PARTIES UPON OR BY REASON OF ANY MATTER ARISING OUT OF HIS EMPLOYMENT
BY THE COMPANY AND THE CESSATION OF SAID EMPLOYMENT, AND INCLUDING, BUT NOT
LIMITED TO, ANY ALLEGED VIOLATION OF THE CIVIL RIGHTS ACTS OF 1964 AND 1991, THE
EQUAL PAY ACT OF 1963, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967
(INCLUDING THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990), THE REHABILITATION
ACT OF 1973, THE FAMILY AND MEDICAL LEAVE ACT OF 1993, THE AMERICANS WITH
DISABILITIES ACT OF 1990, THE EMPLOYMENT RETIREMENT INCOME SECURITY ACT OF 1974,
THE NEVADA FAIR EMPLOYMENT PRACTICES ACT, THE MISSOURI HUMAN RIGHTS ACT, THE
LABOR LAWS OF THE UNITED STATES, NEVADA AND MISSOURI, AND ANY OTHER FEDERAL,
STATE OR LOCAL LAW, REGULATION OR ORDINANCE, OR PUBLIC POLICY, CONTRACT OR TORT
LAW, HAVING ANY BEARING WHATSOEVER ON THE TERMS AND CONDITIONS OR CESSATION OF
HIS EMPLOYMENT WITH THE COMPANY.
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2. DUE CARE. THE EXECUTIVE ACKNOWLEDGES THAT HE HAS RECEIVED A COPY
OF THIS RELEASE PRIOR TO ITS EXECUTION AND HAS BEEN ADVISED HEREBY OF HIS
OPPORTUNITY TO REVIEW AND CONSIDER THIS RELEASE FOR TWENTY-ONE (21) DAYS PRIOR
TO ITS EXECUTION. THE EXECUTIVE FURTHER ACKNOWLEDGES THAT HE HAS BEEN ADVISED
HEREBY TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS RELEASE. THE
EXECUTIVE ENTERS INTO THIS RELEASE HAVING FREELY AND KNOWINGLY ELECTED, AFTER
DUE CONSIDERATION, TO EXECUTE THIS RELEASE AND TO FULFILL THE PROMISES SET
FORTH HEREIN. THIS RELEASE SHALL BE REVOCABLE BY THE EXECUTIVE DURING THE
SEVEN (7) DAY PERIOD FOLLOWING ITS EXECUTION, AND SHALL NOT BECOME EFFECTIVE
OR ENFORCEABLE UNTIL THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. IN THE EVENT
OF SUCH A REVOCATION, THE EXECUTIVE SHALL NOT BE ENTITLED TO THE CONSIDERATION
FOR THIS RELEASE SET FORTH ABOVE.
3. RELIANCE BY THE EXECUTIVE. THE EXECUTIVE ACKNOWLEDGES THAT, IN HIS
DECISION TO ENTER INTO THIS RELEASE, HE HAS NOT RELIED ON ANY REPRESENTATIONS,
PROMISES OR ARRANGEMENT OF ANY KIND, INCLUDING ORAL STATEMENTS BY
REPRESENTATIVES OF THE COMPANY, EXCEPT AS SET FORTH IN THIS RELEASE.
4. MISCELLANEOUS. THE EXECUTIVE SHALL NOT DISCLOSE THE EXISTENCE OR
CONTENTS OF THIS RELEASE TO ANYONE OTHER THAN HIS IMMEDIATE FAMILY, ACCOUNTANTS
OR ATTORNEYS, AND THE EXECUTIVE SHALL INSTRUCT SUCH THIRD PARTIES NOT TO
DISCLOSE THE SAME. THIS RELEASE SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA WITHOUT REFERENCE
TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF. IF ANY PROVISION OF THIS RELEASE
IS HELD INVALID OR UNENFORCEABLE FOR ANY REASON, THE REMAINING PROVISIONS SHALL
BE CONSTRUED AS IF THE INVALID OR UNENFORCEABLE PROVISION HAD NOT BEEN INCLUDED.
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This GENERAL RELEASE AND COVENANT NOT TO SUE is executed by the
Executive and delivered to the Company on _______________________.
Executive
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Name: Scott M Nielson
STATE OF ______________________________)
) ss:
COUNTY OF______________________________)
On this _____ day of ________________, ____, before me, a Notary Public
of the State of _______________, personally appeared Scott M Nielson, to me
known and known to me to be the person described and who executed the foregoing
release and did then and there acknowledge to me that he voluntarily executed
the same.
_________________________
NOTARY PUBLIC
[NOT TO BE SIGNED OR NOTARIZED UPON EXECUTION OF EMPLOYMENT AGREEMENT]
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EXHIBIT 10.15
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and entered into
as of the 1st day of December, 1999, by and between STATION CASINOS, INC., a
Nevada corporation, with its principal offices located at 2411 West Sahara
Avenue, Las Vegas, Nevada 89102 (the "COMPANY"), and BLAKE L. SARTINI (the
"EXECUTIVE").
WHEREAS, the Company and the Executive are parties to an Amended and
Restated Employment Agreement dated as of December 22, 1997 (the "FORMER
AGREEMENT"); and
WHEREAS, the Executive has agreed to continue his employment with the
Company on the terms and conditions set forth herein; and
WHEREAS, the parties to this Agreement desire to replace the Former
Agreement in its entirety with this Agreement, and the Former Agreement shall no
longer be of any force or effect;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the Company and
the Executive (each individually a "PARTY" and together the "PARTIES") agree as
follows.
1. DEFINITIONS. In addition to certain terms defined elsewhere in this
Agreement, the following terms shall have the following respective meanings:
1.1 "AFFILIATE" shall mean any Person controlling, controlled by or
under common control with, the Company.
1.2 "BASE AMOUNT" shall have the meaning ascribed to such term in
Section 280G of the Code.
1.3 "BASE SALARY" shall mean the salary provided for in SUBSECTION 3.1
of this Agreement.
1.4 "BOARD" shall mean the Board of Directors of the Company.
1.5 "CAUSE" shall mean that the Executive:
(a) has been formally charged with or convicted of any felony or any
crime involving fraud, theft, embezzlement, dishonesty or moral
turpitude;
(b) has been found unsuitable to hold a gaming license; or
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(c) in carrying out his duties under this Agreement, has engaged in
acts or omissions constituting gross negligence or willful
misconduct resulting, in either case, in material economic harm
to the Company.
1.6 "CHANGE IN CONTROL" shall be deemed to have occurred if:
(a) (1) any Person, corporation, entity or group (other than the
Existing Equity Holders) is or becomes the beneficial owner,
directly or indirectly, of securities representing 50% or more of
the combined voting power of the Company's Voting Stock (an
"Acquisition Event"), or
(2) the Company consolidates with or merges into another
corporation or entity, or any corporation or entity consolidates
with or merges into the Company, with the effect that the
beneficial owners of the Company's Voting Stock held immediately
prior to the consummation of such consolidation or merger cease
to beneficially own, directly or indirectly, securities
representing 50% or more of the combined voting power of the
Company's Voting Stock (or if the Company is not the surviving
entity, the surviving company's voting securities) upon the
consummation of such consolidation or merger (a "Merger Event"),
or
(3) the Company sells, conveys, transfers or leases to any
person, corporation, entity or group, directly or indirectly, in
one transaction or series of related transactions, properties
and/or assets that accounted for 75% or more of the earnings
(before interest, taxes, depreciation and amortization) of the
Company, on a consolidated basis for the four-fiscal quarter
period immediately preceding the date of consummation of such
transaction (a "Sale Event"); AND
(b) within thirty-six (36) months following an Acquisition Event,
Merger Event or Sale Event, individuals who immediately prior to
such Acquisition Event, Merger Event or Sale Event constituted
the Company's Board, together with any new or replacement
directors whose election by the Company's Board, or whose
nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the directors then
in office who were either directors on the Company's Board
immediately prior to such Acquisition Event, Merger Event or Sale
Event (or whose election or nomination for election was
previously so approved), cease for any reason to constitute a
majority of the directors of the Company's Board then in office.
Notwithstanding the foregoing, a reincorporation, spin-off, split-off or other
reorganization transaction (a "Reorganization Event"), or series of related
transactions, in which either the "beneficial owners" of the Company's Voting
Stock or the Existing Equity Holders beneficially own securities representing
50% or more of the combined voting power of the Company's Voting Stock upon the
consummation of such transaction shall not constitute an Acquisition Event,
Merger Event or Sale Event for purposes of this definition. For purposes of this
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definition, "beneficial ownership" shall have the same meaning as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time.
For the purposes of this definition, upon consummation of an Acquisition Event,
Merger Event, Sale Event or Reorganization Event, the "Company's Board" and the
"Company's Shareholders" shall refer to (i) in the case of an Acquisition Event,
the Company, (ii) in the case of a Merger Event, the company surviving the
merger or consolidation, (iii) in the case of a Sale Event, the transferee of
the properties, and/or assets, and (iv) in the case of a Reorganization Event,
the entity or entities surviving such Reorganization Event on a consolidated
basis.
1.7 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.8 "COMPANY PROPERTY" shall mean all items and materials provided by
the Company to the Executive, or to which the Executive has access, in the
course of his employment, including, without limitation, all files, records,
documents, drawings, specifications, memoranda, notes, reports, manuals,
equipment, computer disks, videotapes, drawings, blueprints and other documents
and similar items relating to the Company, its Affiliates or their respective
customers, whether prepared by the Executive or others, and any and all copies,
abstracts and summaries thereof.
1.9 "COMPETING BUSINESS" shall mean any Person engaged in the gaming
industry that directly or through an affiliate or subsidiary conducts its
business within the Restricted Area.
1.10 "CONFIDENTIAL INFORMATION" shall mean all nonpublic and/or
proprietary information respecting the business of the Company or any Affiliate,
including, without limitation, its products, programs, projects, promotions,
marketing plans and strategies, business plans or practices, business
operations, employees, research and development, intellectual property,
software, databases, trademarks, pricing information and accounting and
financing data. Confidential Information also includes information concerning
the Company's or any Affiliate's customers, such as their identity, address,
preferences, playing patterns and ratings or any other information kept by the
Company or any Affiliate concerning its customers whether or not such
information has been reduced to documentary form. Confidential Information does
not include information that is, or becomes, available to the public unless such
availability occurs through an unauthorized act on the part of the Executive.
1.11 "DEFERRED COMPENSATION PLAN FOR EXECUTIVES" shall mean the
Company's Deferred Compensation Plan for Executives, effective as of November
30, 1994, as the same may be amended from time to time.
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1.12 "DISABILITY" shall mean a physical or mental incapacity that
prevents the Executive from performing the essential functions of his position
with the Company for a period of ninety (90) days as determined (a) in
accordance with any long-term disability plan provided by the Company of which
the Executive is a participant, or (b) by the following procedure: The Executive
agrees to submit to medical examinations by a licensed healthcare professional
selected by the Company, in its sole discretion, to determine whether a
Disability exists. In addition, the Executive may submit to the Company
documentation of a Disability, or lack thereof, from a licensed healthcare
professional of his choice. Following a determination of a Disability or lack of
Disability by the Company's or the Executive's licensed healthcare professional,
the other Party may submit subsequent documentation relating to the existence of
a Disability from a licensed healthcare professional selected by such other
Party. In the event that the medical opinions of such licensed healthcare
professionals conflict, such licensed healthcare professionals shall appoint a
third licensed healthcare professional to examine the Executive, and the opinion
of such third licensed healthcare professional shall be dispositive.
1.13 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.14 "EXISTING EQUITY HOLDERS" shall mean Frank J. Fertitta III, Blake
L. Sartini, Delise F. Sartini, Lorenzo J. Fertitta, Glenn C. Christenson and
Scott M Nielson and their executors, administrators or the legal representatives
of their estates, their heirs, distributees and beneficiaries, and any trust as
to which any of the foregoing is a settlor or co-settlor and any corporation,
partnership or other entity which is an affiliate of any of the foregoing, and
any lineal descendants of such persons (but only to the extent that the
beneficial ownership of the Voting Stock held by such lineal descendants was
directly received by gift, trust or sale from any such person).
1.15 "GOOD REASON," as used in SUBSECTION 7.2, shall mean and exist if
there has been a Change in Control and, thereafter, without the Executive's
prior written consent, one or more of the following events occurs:
(a) the Executive is assigned duties or responsibilities that are
inconsistent, in any significant respect, with the position of a
senior manager;
(b) the Executive is required to relocate from, or maintain his
principal office outside of, Clark County, Nevada;
(c) the Executive's Base Salary is decreased by the Company;
(d) the Executive is excluded from participation in any employee
benefit or short-term incentive plan or program offered to other
similarly executives of the Company or his benefits under such
plans or programs are materially reduced;
(e) the Company fails to pay the Executive any deferred payments
that have become payable under the Deferred Compensation Plan
for Executives;
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(f) the Company fails to reimburse the Executive for business
expenses in accordance with the Company's policies, procedures
or practices;
(g) the Company fails to agree to or to actually indemnify the
Executive for his actions and/or inactions, as either a director
or an officer of the Company, in accordance with SECTION 10,
and/or the Company fails to maintain reasonably sufficient
levels of directors' and officers' liability insurance coverage
for the Executive when such insurance is available; or
(h) the Company fails to obtain a written agreement from any
successor or assign of the Company to assume the obligations
under this Agreement upon a Change in Control.
1.16 "LONG-TERM STAY-ON PERFORMANCE INCENTIVE PLAN" shall mean the
Company's Long-Term Stay-On Performance Incentive Plan, effective as of
September 27, 1994, as the same may be amended from time to time.
1.17 "PERSON" shall mean any individual, firm, partnership,
association, trust, company, corporation or other entity.
1.18 "PRO RATA BONUS" shall mean an amount equal to sixty percent
(60%) of the Executive's current Base Salary, multiplied by a fraction, the
numerator of which is the number of days in such year during which the Executive
was actually employed by the Company and the denominator of which is 365.
1.19 "RESTRICTED AREA" shall mean:
(a) the City of Las Vegas, Nevada, and the area within a twenty-five
(25) mile radius of that city; and
(b) the Cities of Kansas City, Missouri and St. Louis, Missouri, and
the areas within a fifty (50) mile radius of each of those
cities;
PROVIDED, HOWEVER, that in the event the Executive voluntarily terminates this
Agreement pursuant to SUBSECTION 6.3, the Restricted Area shall exclude the Las
Vegas Strip (which is defined as that area bounded by Paradise Road and straight
extensions thereof on the East, Charleston Boulevard on the North, I-15 on the
West, and Sunset Road on the South, as outlined in red on Exhibit A attached
hereto) and Downtown Las Vegas (which is defined as that area bounded by Eastern
Avenue and straight extensions thereof on the East, I-515 (U.S. Highway 93/95)
on the North, I-15 on the West, and Charleston Boulevard on the South, as
outlined in red on Exhibit A attached hereto).
1.20 "RESTRICTION PERIOD" shall mean the period ending twenty-four
(24) months after the termination or expiration of the Term of Employment,
regardless of the reason for such termination or expiration.
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1.21 "SPECIAL LONG-TERM DISABILITY PLAN" shall mean the Company's
Special Long-Term Disability Plan, effective as of November 30, 1994, as the
same may be amended from time to time.
1.22 "SUPPLEMENTAL MANAGEMENT RETIREMENT PLAN" shall mean the
Company's Supplemental Management Retirement Plan, effective as of November 30,
1994, as the same may be amended from time to time.
1.23 "TERM OF EMPLOYMENT" shall mean the period specified in
SUBSECTION 2.2.
1.24 "VOTING STOCK" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. TERM OF EMPLOYMENT, POSITION AND RESPONSIBILITIES.
2.1 EMPLOYMENT ACCEPTED. The Company hereby employs the Executive, and
the Executive hereby accepts employment with the Company, for the Term of
Employment, in the position and with the responsibilities set forth in
SUBSECTION 2.3 and upon such other terms and conditions as are stated in this
Agreement.
2.2 TERM OF EMPLOYMENT. The initial Term of Employment shall commence
upon the date of this Agreement and, unless earlier terminated pursuant to the
provisions of this Agreement, shall terminate upon the close of business on the
day immediately preceding the fifth anniversary of the date of this Agreement;
PROVIDED, HOWEVER, that the initial Term of Employment shall automatically be
extended for successive five-year periods if neither Party has advised the other
in writing in accordance with SECTION 14 at least twelve (12) months prior to
the end of the then current Term of Employment that such Term of Employment will
not be extended for an additional five year period. In the event that such
notice is given, the Executive's employment shall terminate upon the close of
business on the day immediately preceding the fifth anniversary of the then
current Term of Employment.
2.3 RESPONSIBILITIES. During the Term of Employment, the Executive
shall be employed as Executive Vice President and Chief Operating Officer, or in
such other capacity as the Company may direct, and shall have such
responsibilities as the Company may direct from time to time. During the Term of
Employment, the Executive shall devote his full time and attention to the
business and affairs of the Company and shall use his best efforts, skills and
abilities to promote the Company's interests. Anything herein to the contrary
notwithstanding, the Executive shall not be precluded from engaging in
charitable and community affairs and managing his personal investments. The
Executive also may serve as a member of the board of directors of other
corporations, subject to the approval of a majority of the Board, which approval
shall not be unreasonably withheld or delayed.
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3. COMPENSATION.
3.1 BASE SALARY. During the Term of Employment, the Executive shall be
entitled to receive a base salary (the "Base Salary") payable no less frequently
than in equal bi-weekly installments at an annualized rate of no less than
$600,000. The Base Salary shall be reviewed annually for increase (but not
decrease) in the discretion of the Human Resources Committee of the Board. In
conducting any such annual review, the Human Resources Committee shall take into
account any change in the Executive's responsibilities, increases in the
compensation of other executives of the Company or any Affiliate (or any
competitor(s) of either or both), the performance of the Executive and/or other
pertinent factors. Such increased Base Salary shall then constitute the
Executive's "Base Salary" for purposes of this Agreement.
3.2 ANNUAL BONUS. The Company may pay the Executive an annual
discretionary bonus for each fiscal year ending during the Term of Employment in
an amount that will be determined by the Human Resources Committee based on the
Executive's performance. Any annual bonus that may be awarded to the Executive
shall be paid at the same time as annual bonuses are paid to other senior
officers of the Company, unless the Executive has elected to defer receipt of
all or part of the bonus amounts to which he is entitled in respect of any such
calendar year in accordance with the terms and provisions of any deferred
compensation program maintained by the Company.
3.3 STAY-ON INCENTIVES. The Executive shall be eligible to participate
in the Company's Long-Term Stay-On Performance Incentive Plan pursuant to the
terms of the Plan.
3.4 DEFERRED COMPENSATION. The Executive shall be eligible to
participate in the Company's Deferred Compensation Plan for Executives, and any
other deferred compensation plans that the Company may adopt for executives,
pursuant to the terms of the plans.
4. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
4.1 PENSION AND WELFARE BENEFIT PLANS. During the Term of Employment,
the Executive shall be entitled to participate in all employee benefit programs
made available to the Company's executives or salaried employees generally, as
such programs may be in effect from time to time, including, without limitation,
pension and other retirement plans, profit sharing plans, group life insurance,
group health insurance, accidental death and dismemberment insurance, long-term
disability, sick leave (including salary continuation arrangements), vacations,
holidays and other employee benefit programs sponsored by the Company.
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4.2 ADDITIONAL PENSION AND WELFARE BENEFITS. In addition to the
foregoing, the Company shall provide the Executive with the following benefits:
(a) group health insurance coverage through the Company's Exec-U-Care
Medical Plan, effective as of July 1, 1994, or pursuant to such
other plan or plans as the Company may select from time to time,
and which shall be fully paid for by the Company;
(b) full salary continuation during the first 90 days of any physical
or mental incapacity that prevents the Executive from performing
his duties and, for any Disability that continues thereafter,
benefits pursuant to the Company's Special Long-Term Disability
Plan and any other long-term disability benefits pursuant to any
other disability plan of which the Executive is a participant;
(c) an annual supplemental retirement benefit as set forth in the
Supplemental Management Retirement Plan, in addition to any other
benefit pursuant to any other retirement plan under which the
Executive is covered; and
(d) supplemental life insurance coverage, through an individual
policy, a group policy or a combination thereof, in an aggregate
amount of not less than $5.5 million.
5. BUSINESS EXPENSE REIMBURSEMENT AND PERQUISITES.
5.1 EXPENSE REIMBURSEMENT. During the Term of Employment, the
Executive shall be entitled to receive reimbursement by the Company for all
reasonable out-of-pocket expenses incurred by him in performing services under
this Agreement, subject to providing the proper documentation of said expenses.
5.2 PERQUISITES. During the Term of Employment, the Executive shall
also be entitled to any of the Company's executive perquisites in accordance
with the terms and provisions of the applicable policies, including, without
limitation:
(a) vacation of four weeks per year;
(b) payment or reimbursement of the cost of an annual physical
examination;
(c) payment or reimbursement of initiation fees and annual membership
fees and assessments for a country club, a luncheon club and a
physical fitness program of the Executive's choice; and
(d) payment or reimbursement of fees and expenses, up to a maximum
amount of $2500.00, incurred in connection with having this
Agreement reviewed by legal counsel of his own choosing prior to
execution.
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6. TERMINATION OF EMPLOYMENT.
6.1 TERMINATION DUE TO DEATH OR DISABILITY. The Executive's employment
shall be terminated immediately in the event of his death or Disability. In the
event of a termination due to the Executive's death or Disability, the Executive
or his estate, as the case may be, shall be entitled, in lieu of any other
compensation whatsoever, to:
(a) Base Salary at the rate in effect at the time of his termination
until the date of death or Disability;
(b) any annual bonus awarded but not yet paid;
(c) a Pro Rata Bonus for the fiscal year in which death or Disability
occurs;
(d) in the case of death, any deferred compensation or bonuses,
including interest or other credits on the deferred amounts, to
the extent provided in the plans or programs providing for
deferral, and in the case of Disability, immediate vesting of any
deferred compensation or bonuses, including interest or other
credits on the deferred amounts;
(e) reimbursement of expenses incurred but not paid prior to such
termination of employment; and
(f) such rights to other benefits as may be provided in applicable
plans and programs of the Company, including, without limitation,
applicable employee benefit plans and programs, according to the
terms and provisions of such plans and programs.
6.2 TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate
the Executive's employment for Cause at any time during the Term of Employment
by giving written notice to the Executive. In the event of a termination for
Cause, the Executive shall be entitled, in lieu of any other compensation and
benefits whatsoever, to:
(a) Base Salary at the rate in effect at the time of his termination
through the date of termination of employment;
(b) any annual bonus awarded but not yet paid;
(c) any deferred compensation or bonuses, including interest or other
credits on the deferred amounts, to the extent provided in the
plans or programs providing for deferral;
(d) reimbursement for expenses incurred but not paid prior to such
termination of employment; and
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(e) such rights to other benefits as may be provided in applicable
plans and programs of the Company, including, without limitation,
applicable employee benefit plans and programs, according to the
terms and conditions of such plans and programs.
Notwithstanding anything to the contrary in this SUBSECTION 6.2, if the
Executive's employment is terminated for Cause (i) due to his having been
formally charged pursuant to SUBSECTION 1.5(A) but thereafter said charges are
dismissed or the Executive is acquitted, or (ii) due to his having been
convicted pursuant to SUBSECTION 1.5(A) but said conviction is subsequently
overturned on appeal and he is not required to submit to re-trial within six (6)
months thereafter, the Company shall have the option of reinstating the
Executive with payment of all base salary payments that would have been paid to
him had his employment not been terminated and restoration of all benefits
provided for pursuant to SECTION 4, or making a payment to him of an amount
equal to three times 160 percent of the Executive's Base Salary at the rate in
effect at the time of his termination.
6.3 TERMINATION BY THE EXECUTIVE. The Executive may terminate his
employment on his own initiative for any reason prior to a Change in Control
upon thirty (30) days prior written notice to the Company. Such termination
shall have the same consequences as a termination for Cause under SUBSECTION
6.2.
6.4 TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding any
other provision of this Agreement, the Company may terminate the Executive's
employment without Cause, other than due to death or Disability, at any time
during the Term of Employment by giving written notice to the Executive. In the
event that the Company terminates the Executive's employment without Cause, the
Executive shall be entitled, in lieu of any other compensation and benefits
whatsoever, to:
(a) an amount equal to three times 160 percent of the Executive's
Base Salary at the rate in effect at the time of his termination,
one-third of which shall be paid in a lump sum upon satisfaction
of the conditions set forth in SUBSECTION 8.3, and the other
two-thirds of which shall be paid out in equal bi-weekly
installments for the duration of the Restriction Period;
(b) any annual bonus awarded but not yet paid;
(c) any deferred bonus, including interest or other credits on the
deferred amounts, to the extent provided in the plans or programs
providing for deferral;
(d) exercise, within 180 days, all stock options that have vested
prior to termination, and shall forfeit all stock options that
have not vested;
(e) reimbursement for expenses incurred but not paid prior to such
termination of employment; and
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(f) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
6.5 TERMINATION DUE TO EXPIRATION OF THE TERM OF EMPLOYMENT. If
either Party elects not to extend the initial Term of Employment or any
successive Term of Employment, the Executive shall not be entitled to any
additional compensation after the expiration thereof, but such termination of
employment shall not otherwise affect accrued but unpaid compensation or
benefits provided under this Agreement or pursuant to any Company plan or
program.
7. CHANGE IN CONTROL.
7.1 CHANGE IN CONTROL PAYMENT. Immediately upon a Change in Control,
in addition to any other compensation or benefits payable pursuant to this
Agreement or otherwise, the Executive shall be entitled to a payment in cash
equal to three times 160 percent of his Base Salary. Unless otherwise provided
for in this Agreement, the Executive's rights upon a Change in Control to
benefits under programs, plans and policies of the Company shall be determined
according to the terms and provisions of such programs, plans and policies.
7.2 TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR
GOOD REASON AFTER A CHANGE IN CONTROL. If within five years following a Change
in Control, the Executive's employment is terminated by the Company without
Cause or by the Executive for Good Reason, the Executive shall be entitled, in
addition to any payment paid or payable pursuant to SUBSECTION 7.1, but in lieu
of any other compensation and benefits whatsoever, to:
(a) an amount equal to the greater of (i) five times 160 percent of
the Executive's Base Salary at the time of the Change in Control
or (ii) five times 160 percent of the Executive's Base Salary at
the time of the termination of his employment, three-fifths of
which shall be paid in a lump sum upon satisfaction of the
conditions set forth in SUBSECTION 8.3 and two-fifths of which
shall be paid out in equal bi-weekly installments for the
duration of the Restriction Period,
(b) immediate vesting of any restricted stock of the Company held in
the Executive's name or for his benefit;
(c) immediate vesting of any stock options and stock appreciation
rights granted by the Company, which stock options and stock
appreciation rights shall continue to be and shall remain
exercisable until the earlier of (i) five years and (ii) the
remaining term of such stock options and stock appreciation
rights as set forth in the agreement granting, or otherwise
awarding, such stock option or stock appreciation right as if no
termination had taken place;
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(d) immediate vesting and cash-out of any phantom stock units granted
to the Executive;
(e) immediate vesting and pay out of any shares awarded to the
Executive pursuant to the Company's Long-Term Stay-On Performance
Incentive Plan;
(f) immediate vesting of the Executive's supplemental retirement
benefit as set forth in the Supplemental Management Retirement
Plan;
(g) continued funding of the Executive's split dollar life insurance
policy as if the Executive were employed by the Company through
the maturity date of such policy or, at the Company's option,
payment in full of all premium obligations under such policy; and
(h) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
7.3 TERMINATION BY EXECUTIVE WITHOUT GOOD REASON AFTER A CHANGE IN
CONTROL. If the Executive terminates his employment without Good Reason within
ninety (90) days following the first anniversary of a Change in Control, the
Executive shall be entitled, in addition to any payment paid or payable pursuant
to SUBSECTION 7.1, but in lieu of any other compensation and benefits
whatsoever, to:
(a) an amount equal to the greater of (i) three times 160 percent of
the Executive's Base Salary at the time of the Change in Control
or (ii) three times 160 percent of the Executive's Base Salary at
the time of the termination of his employment, one-third of which
shall be paid in a lump sum upon satisfaction of the conditions
set forth in SUBSECTION 8.3 and two-thirds of which shall be paid
out in equal bi-weekly installments for the duration of the
Restriction Period;
(b) immediate vesting of any stock options and stock appreciation
rights granted by the Company, which stock options and stock
appreciation rights shall continue to be and shall remain
exercisable until the earlier of (i) three years and (ii) the
remaining term of such stock options and stock appreciation
rights as set forth in the agreement granting, or otherwise
awarding, such stock option or stock appreciation right as if no
termination had taken place;
(c) immediate vesting and cash-out of any phantom stock units granted
to the Executive;
(d) immediate vesting of the Executive's supplemental retirement
benefit as set forth in the Supplemental Management Retirement
Plan;
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(e) continued funding of the Executive's split dollar life insurance
policy as if the Executive were employed by the Company through
the maturity date of such policy or, at the Company's option,
payment in full of all premium obligations under such policy; and
(f) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
7.4 TERMINATION FOR OTHER REASONS AFTER A CHANGE IN CONTROL. If the
Executive's employment is terminated after a Change in Control for any reason
not otherwise provided for in this SECTION 7, his rights shall be determined in
accordance with the applicable subsection of SECTION 6.
8. CONDITIONS TO PAYMENTS UPON TERMINATION.
8.1 TIMING OF PAYMENTS. Unless otherwise provided herein, any payments
to which the Executive shall be entitled pursuant to SECTIONS 6 AND 7 shall be
payable upon the satisfaction of the conditions set forth in SUBSECTION 8.3.
8.2 NO MITIGATION; NO OFFSET. In the event of any termination of the
Executive's employment under SECTIONS 6 OR 7, the Executive shall be under no
obligation to seek other employment and there shall be no offset against amounts
due to the Executive on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. Notwithstanding any
contrary provision contained herein, in the event of any termination of
employment of the Executive, the exclusive remedies available to the Executive
shall be the amounts due under SECTIONS 6 OR 7, which are in the nature of
severance payments, or liquidated damages, or both, and are not in the nature of
a penalty. In the event of a termination of this Agreement, neither Party shall
publish in any way or make any negative comment or statement about the other
Party or concerning the reasons for such termination. The provisions of this
SUBSECTION 8.2 shall survive the expiration or earlier termination of this
Agreement.
8.3 GENERAL RELEASE. No payments or benefits payable to the Executive
upon the termination of his employment pursuant to SECTIONS 6 OR 7 shall be made
to the Executive unless and until he executes a general release substantially in
the form annexed to this Agreement as Exhibit B and such general release becomes
effective pursuant to its terms.
8.4 COMPLIANCE WITH THE AGREEMENT. No payments or benefits payable to
the Executive upon the termination of his employment pursuant to SECTIONS 6 OR 7
shall be made to the Executive if he fails to comply with all of the terms and
conditions of this Agreement, including, without limitation, SECTIONS 11 AND 12.
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8.5 CONTINUING OBLIGATIONS OF EXECUTIVE. No act or omission by the
Executive in breach of this Agreement, including, without limitation his
failure to execute the general release and the resulting forfeiture of
termination payments, shall be deemed to permit the Executive to forego or
waive such payments in order to avoid his obligations under SECTION 11.
9. SPECIAL REIMBURSEMENT.
9.1 If any payment or benefit paid or payable, or received or to be
received, by or on behalf of the Executive in connection with a Change in
Control pursuant to SUBSECTION 7.1 or the termination of the Executive's
employment pursuant to SUBSECTION 7.2 , whether any such payments or benefits
are pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Affiliate, any Person, or otherwise (the
"TOTAL PAYMENTS"), will or would be subject to the excise tax imposed under
Section 4999 of the Code (the "EXCISE TAX"), the Company shall pay to the
Executive an additional amount (the "GROSS-UP PAYMENT") such that, after
payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes) imposed upon or in respect of the Total
Payments and the Gross-Up Payments, including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and any
Excise Tax imposed thereon, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments.
9.2 For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax,
(a) the Total Payments shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise
Tax, unless in the opinion of tax counsel selected by the Company
and reasonably acceptable to the Executive (which opinion shall
be provided to the Executive) such Total Payments (in whole or in
part) (i) do not constitute parachute payments, including
(without limitation) by reason of Section 280G(b)(4)(A) of the
Code, (ii) such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered,
within the meaning of Section 280G(b)(4)(B) of the Code, or (iii)
are not, in the opinion of legal counsel, otherwise subject to
the Excise Tax, and
(b) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.
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9.3 In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder, the Executive shall repay to
the Company, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the initial
Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
accordance with SUBSECTION 9.1 in respect of such excess Excise Tax (plus any
interest, penalties or additions payable by the Executive with respect to such
excess Excise Tax) at the time that the amount of such excess Excise Tax is
finally determined. The Executive and the Company shall each reasonably
cooperate with each other in connection with any administrative or judicial
proceedings concerning the existence or amount of any such subsequent liability
for Excise Tax with respect to the Total Payments.
10. INDEMNIFICATION.
10.1 GENERAL. The Company agrees that if the Executive is made a party
or is threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (an "INDEMNIFIABLE ACTION"), by
reason of the fact that he is or was a director or officer of the Company or is
or was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether or not the basis of such Indemnifiable Action is alleged action
in an official capacity as a director, officer, member, employee or agent, while
serving as a director, officer, member, employee or agent, he shall be
indemnified and held harmless by the Company to the fullest extent permitted by
Nevada law and the Company's by-laws, as the same exist or may hereafter be
amended, against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by the Executive in connection
therewith.
10.2 PROCEDURE. The indemnification provided pursuant to this SECTION
10 shall be subject to the following conditions:
(a) The Executive must promptly give the Company written notice of
any actual or threatened Indemnifiable Action;
(b) The Company will be permitted, at its option, to participate in,
or to assume, the defense of any Indemnifiable Action;
(c) The Executive must provide reasonable cooperation to the Company
in the defense of any Indemnifiable Action; and
(d) The Executive must refrain from settling any Indemnifiable Action
without obtaining the Company's prior written consent, which
consent shall not be unreasonably withheld.
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10.3 ADVANCEMENT OF COSTS AND EXPENSES. The Company agrees to advance
all costs and expenses referred to in SUBSECTION 10.1; PROVIDED, HOWEVER, that
the Executive agrees to repay to the Company all amounts so advanced in the
event that the Company reasonably determines in good faith that any acts or
omissions by the Executive were:
(a) in knowing violation of any agreement between the Executive and
the Company;
(b) in bad faith or involving intentional misconduct or a knowing
violation of law or that the Executive personally gained a
financial profit or other advantage to which he was not legally
entitled; or
(c) for which a court, having jurisdiction in the matter, determines
that indemnification is not lawful.
10.4 NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
payment of expenses incurred in defending an Indemnifiable Action in advance of
its final disposition conferred in this SECTION 10 shall not be exclusive of any
other right which the Executive may have or hereafter may acquire under any
statute, provision of the certificate of incorporation or by-laws of the
Company, agreement, vote of stockholders or disinterested directors or
otherwise.
10.5 D&O INSURANCE. The Company will maintain a directors' and
officers' liability insurance policy covering the Executive that provides
coverage that is reasonable in relation to the Executive's position during the
Term of Employment.
11. COVENANT NOT ENGAGE IN CERTAIN ACTS.
11.1 GENERAL. The Parties understand and agree that the purpose of the
restrictions contained in this SECTION 11 is to protect the goodwill and other
legitimate business interests of the Company, and that the Company would not
have entered into this Agreement in the absence of such restrictions. The
Executive acknowledges and agrees that the restrictions are reasonable and do
not, and will not, unduly impair his ability to make a living after the
termination of his employment with the Company. The provisions of this SECTION
11 shall survive the expiration or sooner termination of this Agreement.
11.2 NON-ASSISTANCE; NON-DIVERSION. In consideration for this
Agreement to employ the Executive and the other valuable consideration provided
hereunder, the Executive agrees and covenants that during the Term of Employment
and during the Restriction Period, and except when acting on behalf of the
Company or on behalf of any Affiliate, the Executive shall not, directly or
indirectly, for himself or any third party, or alone or as a member of a
partnership, or as an officer, director, shareholder or otherwise, engage in the
following acts:
(a) divert or attempt to divert any existing business of the Company
or any Affiliate;
(b) accept any position or affiliation with, or render any services on
behalf of, any Competing Business; or
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(c) hire or retain any employee of the Company or any Affiliate to
provide services for any other Person or induce, solicit, attempt
to solicit, encourage, divert, cause or attempt to cause any
employee or prospective employee of the Company or any Affiliate
to (i) terminate and/or leave such employment, or (ii) accept
employment with anyoneother than the Company or an Affiliate.
11.3 CESSATION/REIMBURSEMENT OF PAYMENTS. If the Executive violates
any provision of this SECTION 11, the Company may, upon giving written notice to
the Executive, immediately cease all payments and benefits that it may be
providing to the Executive pursuant to SECTION 3, SECTION 6 or SUBSECTION 7.2,
and the Executive may be required to reimburse the Company for any payments
received from, and the cash value of any benefits provided by, the Company
between the first day of the violation and the date such notice is given;
PROVIDED, HOWEVER, that the foregoing shall be in addition to such other
remedies as may be available to the Company and shall not be deemed to permit
the Executive to forego or waive such payments in order to avoid his obligations
under this SECTION 11.
11.4 SURVIVAL. The Executive agrees that the provisions of this
SECTION 11 shall survive the termination of this Agreement and the termination
of the Executive's employment.
12. CONFIDENTIAL INFORMATION AND COMPANY PROPERTY.
12.1 CONFIDENTIAL INFORMATION. The Executive understands and
acknowledges that Confidential Information constitutes a valuable asset of the
Company and its Affiliates and may not be converted to the Executive's own or
any third party's use. Accordingly, the Executive hereby agrees that he shall
not directly or indirectly, during the Term of Employment or any time
thereafter, disclose any Confidential Information to any Person not expressly
authorized by the Company to receive such Confidential Information. The
Executive further agrees that he shall not directly or indirectly, during the
Term of Employment or any time thereafter, use or make use of any Confidential
Information in connection with any business activity other than that of the
Company. The Parties acknowledge and agree that this Agreement is not intended
to, and does not, alter either the Company's rights or the Executive's
obligations under any state or federal statutory or common law regarding trade
secrets and unfair trade practices.
12.2 COMPANY PROPERTY. All Company Property is and shall remain
exclusively the property of the Company. Unless authorized in writing to the
contrary, the Executive shall promptly, and without charge, deliver to the
Company on the termination of employment hereunder, or at any other time the
Company may so request, all Company Property that the Executive may then possess
or have under his control.
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12.3 REQUIRED DISCLOSURE. In the event the Executive is required by
law or court order to disclose any Confidential Information or to produce any
Company Property, the Executive shall promptly notify the Company of such
requirement and provide the Company with a copy of any court order or of any law
which requires such disclosure and, if the Company so elects, to the extent
permitted by applicable law, give the Company an adequate opportunity, at its
own expense, to contest such law or court order prior to any such required
disclosure or production by the Executive.
12.4 SURVIVAL. The Executive agrees that the provisions of this
SECTION 12 shall survive the termination of this Agreement and the termination
of the Executive's employment.
13. MUTUAL ARBITRATION AGREEMENT.
13.1 ARBITRABLE CLAIMS. All disputes between the Executive (and his
attorneys, successors, and assigns) and the Company (and its trustees,
beneficiaries, officers, directors, managers, affiliates, employees, agents,
successors, attorneys, and assigns) relating in any manner whatsoever to the
employment or termination of the Executive, including, without limitation, all
disputes arising under this Agreement ("ARBITRABLE CLAIMS"), shall be resolved
by binding arbitration as set forth in this SECTION 13 (the "MUTUAL ARBITRATION
AGREEMENT"). Arbitrable Claims shall include, but are not limited to, claims for
compensation, claims for breach of any contract or covenant (express or
implied), and tort claims of all kinds, as well as all claims based on any
federal, state, or local law, statute or regulation, but shall not include the
claims based on the statutes enumerated in SUBSECTION 13.4 or the Company's
right to seek injunctive relief as provided in SECTION 15. Arbitration shall be
final and binding upon the Parties and shall be the exclusive remedy for all
Arbitrable Claims. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY
JUDGE OR JURY IN REGARD TO ARBITRABLE CLAIMS, EXCEPT AS PROVIDED BY SECTION
13.4.
13.2 PROCEDURE. Arbitration of Arbitrable Claims shall be in
accordance with the National Rules for the Resolution of Employment Disputes of
the American Arbitration Association, as amended, and as augmented in this
Agreement. Either Party may bring an action in court to compel arbitration under
this Agreement and to enforce an arbitration award. Otherwise, neither Party
shall initiate or prosecute any lawsuit, appeal or administrative action in any
way related to an Arbitrable Claim. The initiating Party must file and serve an
arbitration claim within sixty (60) days of learning the facts giving rise to
the alleged claim. All arbitration hearings under this Agreement shall be
conducted in Las Vegas, Nevada. The Federal Arbitration Act shall govern the
interpretation and enforcement of this Agreement. The fees of the arbitrator
shall be divided equally between both Parties.
13.3 CONFIDENTIALITY. All proceedings and all documents prepared in
connection with any Arbitrable Claim shall be confidential and, unless otherwise
required by law, the subject matter and content thereof shall not be disclosed
to any Person other than the parties to the proceedings, their counsel,
witnesses and experts, the arbitrator and, if involved, the court and court
staff.
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13.4 APPLICABILITY. This SECTION 13 shall apply to all disputes under
this Agreement other than:
(a) disputes relating to the enforcement of the Company's rights
under SECTIONS 11 AND 12 of this Agreement; and
(b) claims brought under Title VII of the Civil Rights Act of 1964,
the Civil Rights Act of 1866, the Age Discrimination in
Employment Act of 1967 (including the Older Workers Benefit
Protection Act), and the Americans with Disabilities Act, the
Fair Labor Standards Act, the Equal Pay Act, the Family and
Medical Leave Act and the Employee Retirement Income Security Act
of 1974, the Nevada Fair Employment Practices Act, the Missouri
Human Rights Act or any other applicable state or local fair
employment law.
13.5 ACKNOWLEDGEMENTS. The Executive acknowledges that he:
(a) has carefully read this SECTION 13;
(b) understands its terms and conditions; and
(c) has entered into this Mutual Arbitration Agreement voluntarily
and not in reliance on any promises or representations made by
the Company other than those contained in this Mutual Arbitration
Agreement.
14. NOTICES. All notices, demands and requests required or permitted to be
given to either Party under this Agreement shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the Party concerned at the address indicated below or to such changed address as
such Party may subsequently give notice of:
If to the Company: Station Casinos, Inc.
2411 West Sahara Avenue
Las Vegas, NV 89102
Attn: Scott M Nielson
With a copy to: Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street, 30th Floor
Los Angeles, CA 90017
Attn: Kenneth J. Baronsky
If to the Executive: Blake L. Sartini
9100 Golden Eagle Drive
Las Vegas, NV 89134
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15. RIGHT TO SEEK INJUNCTIVE RELIEF. The Executive acknowledges that a
violation on his part of any of the covenants contained in SECTIONS 11 AND 12
would cause immeasurable and irreparable damage to the Company. The Executive
accordingly agrees and hereby grants his consent that, without limiting the
remedies available to the Company, any actual or threatened violation of such
covenants may be enforced by injunctive relief or by other equitable remedies
issued or ordered by any court of competent jurisdiction.
16. EMPLOYEE BENEFIT PLAN DOCUMENTS. In the event that any terms and
provisions of this Agreement conflict with the terms and provisions of any
employee benefit plan document, the terms and provisions of this Agreement shall
govern, and the Company shall take any and all actions that may be necessary,
including amendment of any plan document, to effect the provision of benefits
expressly provided upon termination of the Executive's employment pursuant to
SECTIONS 6 AND 7.
17. BENEFICIARIES/REFERENCES. The Executive shall be entitled to select a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following the Executive's death, and may change such election, by
giving the Company written notice thereof. In the event of the Executive's death
or a judicial determination of his incompetence, reference in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiaries,
estate or other legal representative.
18. SURVIVORSHIP. The respective rights and obligations of the Parties
hereunder shall survive the expiration or earlier termination of this Agreement
to the extent necessary to the intended preservation of such rights and
obligations. The provisions of this SECTION 18 are in addition to the
survivorship provisions of any other section of this Agreement.
19. REPRESENTATIONS AND WARRANTIES. Each Party represents and warrants that
he or it is fully authorized and empowered to enter into this Agreement and that
the performance of his or its obligations under this Agreement will not violate
any Agreement between that Party and any other Person.
20. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the Parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings, whether
written or oral, express or implied, between the Parties with respect hereto. No
representations, inducements, promises or agreements not embodied herein shall
be of any force or effect.
21. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors, heirs and
assigns; PROVIDED, HOWEVER, that no rights or obligations of the Executive under
this Agreement may be assigned or transferred by the Executive, other than
rights to compensation and benefits hereunder, which may be transferred only by
will or operation of law and subject to the limitations of this Agreement; and
PROVIDED, FURTHER, that no rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company, except that such rights
or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale or
liquidation of all or substantially all of the assets of the Company, provided
that the assignee or transferee is the successor to all or
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substantially all of the assets of the Company and such assignee or transferee
assumes the liabilities, obligations and duties of the Company under this
Agreement, either contractually or as a matter of law.
22. AMENDMENT OR WAIVER. No provision in this Agreement may be amended or
waived unless such amendment or waiver is agreed to in writing, signed by both
Parties. No waiver by one Party of any breach by the other Party of any
condition or provision of this Agreement to be performed by such other Party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same or any prior or subsequent time. No failure of the Company to exercise
any power given it hereunder or to insist upon strict compliance by the
Executive with any obligation hereunder, and no custom or practice at variance
with the terms hereof, shall constitute a waiver of the right of the Company to
demand strict compliance with the terms hereof.
23. SEVERABILITY. In the event that any provision or portion of this
Agreement, except SECTIONS 6, SECTION 7 and SECTION 11, shall be determined to
be invalid or unenforceable for any reason, in whole or in part, the remaining
provisions of this Agreement shall be unaffected thereby and shall remain in
full force and effect to the fullest extent permitted by law. If either SECTION
6, SECTION 7 or SECTION 11 is determined to be invalid or unenforceable for any
reason, in whole or in part, either Party may terminate this Agreement without
further obligations or duties hereunder.
24. GOVERNING LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Nevada without reference
to the principles of conflict of laws thereof. In the event of any dispute or
controversy arising out of or relating to this Agreement that is not an
arbitrable claim, the Parties mutually and irrevocably consent to, and waive any
objection to, the exclusive jurisdiction of any court of competent jurisdiction
in Clark County, Nevada, to resolve such dispute or controversy.
25. HEADINGS. The headings of the sections and subsections contained in
this agreement are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.
26. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which shall constitute one and the
same Agreement with the same effect as if all Parties had signed the same
signature page. Any signature page of this Agreement may be detached from any
counterpart of this Agreement and reattached to any other counterpart of this
Agreement identical in form hereto but having attached to it one or more
additional signature pages.
27. ACKNOWLEDGEMENT. The Executive represents and acknowledges the
following:
(a) he has carefully read this Agreement in its entirety;
(b) he understands the terms and conditions contained herein;
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(c) he has had the opportunity to review this Agreement with legal
counsel of his own choosing and has not relied on any statements
made by the Company or its legal counsel as to the meaning of any
term or condition contained herein or in deciding whether to
enter into this Agreement; and
(d) he is entering into this Agreement knowingly and voluntarily.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
STATION CASINOS, INC.
By: /s/ GLENN C. CHRISTENSON
------------------------
Name: Glenn C. Christenson
Title: Executive Vice President, Chief
Financial Officer, Chief
Administrative Officer and
Treasurer
/s/ BLAKE L. SARTINI
---------------------------
Blake L. Sartini
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EXHIBIT "B"
GENERAL RELEASE AND COVENANT NOT TO SUE
This GENERAL RELEASE AND COVENANT NOT TO SUE (this "Release") is
executed and delivered by BLAKE L. SARTINI (the "Executive") to STATION
CASINOS, INC., a Nevada corporation (the "Company").
In consideration of the agreement by the Company to provide the
separation payments and benefits in SECTION 6 and SECTION 7 of the Employment
Agreement between the Executive and the Company, dated as of December 1, 1999
(the "Employment Agreement"), and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Executive
hereby agrees as follows:
1. RELEASE AND COVENANT. THE EXECUTIVE, OF HIS OWN FREE WILL,
VOLUNTARILY RELEASES AND FOREVER DISCHARGES THE COMPANY AND ITS SUBSIDIARIES
AND AFFILIATES, AND EACH OF THEIR RESPECTIVE PAST AND PRESENT AGENTS,
EMPLOYEES, MANAGERS, REPRESENTATIVES, OFFICERS, DIRECTORS, ATTORNEYS,
ACCOUNTANTS, TRUSTEES, SHAREHOLDERS, PARTNERS, INSURERS, HEIRS,
PREDECESSORS-IN-INTEREST, ADVISORS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE
"RELEASED PARTIES") FROM, AND COVENANTS NOT TO SUE OR PROCEED AGAINST ANY OF
THE FOREGOING ON THE BASIS OF, ANY AND ALL PAST OR PRESENT CAUSES OF ACTION,
SUITS, AGREEMENTS OR OTHER RIGHTS OR CLAIMS WHICH THE EXECUTIVE, HIS
DEPENDENTS, RELATIVES, HEIRS, EXECUTORS, ADMINISTRATORS, SUCCESSORS AND
ASSIGNS HAS OR HAVE AGAINST ANY OF THE RELEASED PARTIES UPON OR BY REASON OF
ANY MATTER ARISING OUT OF HIS EMPLOYMENT BY THE COMPANY AND THE CESSATION OF
SAID EMPLOYMENT, AND INCLUDING, BUT NOT LIMITED TO, ANY ALLEGED VIOLATION OF
THE CIVIL RIGHTS ACTS OF 1964 AND 1991, THE EQUAL PAY ACT OF 1963, THE AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967 (INCLUDING THE OLDER WORKERS BENEFIT
PROTECTION ACT OF 1990), THE REHABILITATION ACT OF 1973, THE FAMILY AND
MEDICAL LEAVE ACT OF 1993, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE
EMPLOYMENT RETIREMENT INCOME SECURITY ACT OF 1974, THE NEVADA FAIR EMPLOYMENT
PRACTICES ACT, THE MISSOURI HUMAN RIGHTS ACT, THE LABOR LAWS OF THE UNITED
STATES, NEVADA AND MISSOURI, AND ANY OTHER FEDERAL, STATE OR LOCAL LAW,
REGULATION OR ORDINANCE, OR PUBLIC POLICY, CONTRACT OR TORT LAW, HAVING ANY
BEARING WHATSOEVER ON THE TERMS AND CONDITIONS OR CESSATION OF HIS EMPLOYMENT
WITH THE COMPANY.
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2. DUE CARE. THE EXECUTIVE ACKNOWLEDGES THAT HE HAS RECEIVED A COPY
OF THIS RELEASE PRIOR TO ITS EXECUTION AND HAS BEEN ADVISED HEREBY OF HIS
OPPORTUNITY TO REVIEW AND CONSIDER THIS RELEASE FOR TWENTY-ONE (21) DAYS PRIOR
TO ITS EXECUTION. THE EXECUTIVE FURTHER ACKNOWLEDGES THAT HE HAS BEEN ADVISED
HEREBY TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS RELEASE. THE
EXECUTIVE ENTERS INTO THIS RELEASE HAVING FREELY AND KNOWINGLY ELECTED, AFTER
DUE CONSIDERATION, TO EXECUTE THIS RELEASE AND TO FULFILL THE PROMISES SET
FORTH HEREIN. THIS RELEASE SHALL BE REVOCABLE BY THE EXECUTIVE DURING THE
SEVEN (7) DAY PERIOD FOLLOWING ITS EXECUTION, AND SHALL NOT BECOME EFFECTIVE
OR ENFORCEABLE UNTIL THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. IN THE EVENT
OF SUCH A REVOCATION, THE EXECUTIVE SHALL NOT BE ENTITLED TO THE CONSIDERATION
FOR THIS RELEASE SET FORTH ABOVE.
3. RELIANCE BY THE EXECUTIVE. THE EXECUTIVE ACKNOWLEDGES THAT, IN HIS
DECISION TO ENTER INTO THIS RELEASE, HE HAS NOT RELIED ON ANY REPRESENTATIONS,
PROMISES OR ARRANGEMENT OF ANY KIND, INCLUDING ORAL STATEMENTS BY
REPRESENTATIVES OF THE COMPANY, EXCEPT AS SET FORTH IN THIS RELEASE.
4. MISCELLANEOUS. THE EXECUTIVE SHALL NOT DISCLOSE THE EXISTENCE OR
CONTENTS OF THIS RELEASE TO ANYONE OTHER THAN HIS IMMEDIATE FAMILY,
ACCOUNTANTS OR ATTORNEYS, AND THE EXECUTIVE SHALL INSTRUCT SUCH THIRD PARTIES
NOT TO DISCLOSE THE SAME. THIS RELEASE SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA WITHOUT
REFERENCE TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF. IF ANY PROVISION OF
THIS RELEASE IS HELD INVALID OR UNENFORCEABLE FOR ANY REASON, THE REMAINING
PROVISIONS SHALL BE CONSTRUED AS IF THE INVALID OR UNENFORCEABLE PROVISION HAD
NOT BEEN INCLUDED.
ii
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This GENERAL RELEASE AND COVENANT NOT TO SUE is executed by the
Executive and delivered to the Company on _______________________.
Executive
- ------------------------------
Name: Blake L. Sartini
STATE OF )
-------------------------- ) ss:
COUNTY OF )
-------------------------
On this _____ day of ________________, ____, before me, a Notary Public
of the State of _______________, personally appeared ____________, to me known
and known to me to be the person described and who executed the foregoing
release and did then and there acknowledge to me that he voluntarily executed
the same.
- -----------------------------
NOTARY PUBLIC
[NOT TO BE SIGNED OR NOTARIZED UPON EXECUTION OF EMPLOYMENT AGREEMENT]
iii
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EXHIBIT 10.16
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and entered into
as of the 1st day of December, 1999, by and between STATION CASINOS, INC., a
Nevada corporation, with its principal offices located at 2411 West Sahara
Avenue, Las Vegas, Nevada 89102 (the "COMPANY"), and WILLIAM W. WARNER (the
"EXECUTIVE").
WHEREAS, the Company and the Executive are parties to an Amended and
Restated Employment Agreement dated as of December 22, 1997 (the "FORMER
AGREEMENT"); and
WHEREAS, the Executive has agreed to continue his employment with the
Company on the terms and conditions set forth herein; and
WHEREAS, the parties to this Agreement desire to replace the Former
Agreement in its entirety with this Agreement, and the Former Agreement shall no
longer be of any force or effect;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the Company and
the Executive (each individually a "PARTY" and together the "PARTIES") agree as
follows.
1. DEFINITIONS. In addition to certain terms defined elsewhere in this
Agreement, the following terms shall have the following respective meanings:
1.1 "AFFILIATE" shall mean any Person controlling, controlled by or
under common control with, the Company.
1.2 "BASE AMOUNT" shall have the meaning ascribed to such term in
Section 280G of the Code.
1.3 "BASE SALARY" shall mean the salary provided for in SUBSECTION 3.1
of this Agreement.
1.4 "BOARD" shall mean the Board of Directors of the Company.
1.5 "CAUSE" shall mean that the Executive:
(a) has been formally charged with or convicted of any felony or any
crime involving fraud, theft, embezzlement, dishonesty or moral
turpitude;
(b) has been found unsuitable to hold a gaming license; or
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(c) in carrying out his duties under this Agreement, has engaged in
acts or omissions constituting gross negligence or willful
misconduct resulting, in either case, in material economic harm
to the Company.
1.6 "CHANGE IN CONTROL" shall be deemed to have occurred if:
(a) (1) any Person, corporation, entity or group (other than the
Existing Equity Holders) is or becomes the beneficial owner,
directly or indirectly, of securities representing 50% or more of
the combined voting power of the Company's Voting Stock (an
"Acquisition Event"), or
(2) the Company consolidates with or merges into another
corporation or entity, or any corporation or entity consolidates
with or merges into the Company, with the effect that the
beneficial owners of the Company's Voting Stock held immediately
prior to the consummation of such consolidation or merger cease
to beneficially own, directly or indirectly, securities
representing 50% or more of the combined voting power of the
Company's Voting Stock (or if the Company is not the surviving
entity, the surviving company's voting securities) upon the
consummation of such consolidation or merger (a "Merger Event"),
or
(3) the Company sells, conveys, transfers or leases to any
person, corporation, entity or group, directly or indirectly, in
one transaction or series of related transactions, properties
and/or assets that accounted for 75% or more of the earnings
(before interest, taxes, depreciation and amortization) of the
Company, on a consolidated basis for the four-fiscal quarter
period immediately preceding the date of consummation of such
transaction (a "Sale Event"); AND
(b) within thirty-six (36) months following an Acquisition Event,
Merger Event or Sale Event, individuals who immediately prior to
such Acquisition Event, Merger Event or Sale Event constituted
the Company's Board, together with any new or replacement
directors whose election by the Company's Board, or whose
nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the directors then
in office who were either directors on the Company's Board
immediately prior to such Acquisition Event, Merger Event or Sale
Event (or whose election or nomination for election was
previously so approved), cease for any reason to constitute a
majority of the directors of the Company's Board then in office.
Notwithstanding the foregoing, a reincorporation, spin-off, split-off or other
reorganization transaction (a "Reorganization Event"), or series of related
transactions, in which either the "beneficial owners" of the Company's Voting
Stock or the Existing Equity Holders beneficially own securities representing
50% or more of the combined voting power of the Company's Voting Stock upon the
consummation of such transaction shall not constitute an Acquisition
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Event, Merger Event or Sale Event for purposes of this definition. For
purposes of this definition, "beneficial ownership" shall have the same
meaning as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act
of 1934, as amended, except that a Person shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time.
For the purposes of this definition, upon consummation of an Acquisition Event,
Merger Event, Sale Event or Reorganization Event, the "Company's Board" and the
"Company's Shareholders" shall refer to (i) in the case of an Acquisition Event,
the Company, (ii) in the case of a Merger Event, the company surviving the
merger or consolidation, (iii) in the case of a Sale Event, the transferee of
the properties, and/or assets, and (iv) in the case of a Reorganization Event,
the entity or entities surviving such Reorganization Event on a consolidated
basis.
1.7 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.8 "COMPANY PROPERTY" shall mean all items and materials provided by
the Company to the Executive, or to which the Executive has access, in the
course of his employment, including, without limitation, all files, records,
documents, drawings, specifications, memoranda, notes, reports, manuals,
equipment, computer disks, videotapes, drawings, blueprints and other documents
and similar items relating to the Company, its Affiliates or their respective
customers, whether prepared by the Executive or others, and any and all copies,
abstracts and summaries thereof.
1.9 "COMPETING BUSINESS" shall mean any Person engaged in the gaming
industry that directly or through an affiliate or subsidiary conducts its
business within the Restricted Area.
1.10 "CONFIDENTIAL INFORMATION" shall mean all nonpublic and/or
proprietary information respecting the business of the Company or any Affiliate,
including, without limitation, its products, programs, projects, promotions,
marketing plans and strategies, business plans or practices, business
operations, employees, research and development, intellectual property,
software, databases, trademarks, pricing information and accounting and
financing data. Confidential Information also includes information concerning
the Company's or any Affiliate's customers, such as their identity, address,
preferences, playing patterns and ratings or any other information kept by the
Company or any Affiliate concerning its customers whether or not such
information has been reduced to documentary form. Confidential Information does
not include information that is, or becomes, available to the public unless such
availability occurs through an unauthorized act on the part of the Executive.
1.11 "DEFERRED COMPENSATION PLAN FOR EXECUTIVES" shall mean the
Company's Deferred Compensation Plan for Executives, effective as of November
30, 1994, as the same may be amended from time to time.
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1.12 "DISABILITY" shall mean a physical or mental incapacity that
prevents the Executive from performing the essential functions of his position
with the Company for a period of ninety (90) days as determined (a) in
accordance with any long-term disability plan provided by the Company of which
the Executive is a participant, or (b) by the following procedure: The Executive
agrees to submit to medical examinations by a licensed healthcare professional
selected by the Company, in its sole discretion, to determine whether a
Disability exists. In addition, the Executive may submit to the Company
documentation of a Disability, or lack thereof, from a licensed healthcare
professional of his choice. Following a determination of a Disability or lack of
Disability by the Company's or the Executive's licensed healthcare professional,
the other Party may submit subsequent documentation relating to the existence of
a Disability from a licensed healthcare professional selected by such other
Party. In the event that the medical opinions of such licensed healthcare
professionals conflict, such licensed healthcare professionals shall appoint a
third licensed healthcare professional to examine the Executive, and the opinion
of such third licensed healthcare professional shall be dispositive.
1.13 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.14 "EXISTING EQUITY HOLDERS" shall mean Frank J. Fertitta III, Blake
L. Sartini, Delise F. Sartini, Lorenzo J. Fertitta, Glenn C. Christenson and
Scott M Nielson and their executors, administrators or the legal representatives
of their estates, their heirs, distributees and beneficiaries, and any trust as
to which any of the foregoing is a settlor or co-settlor and any corporation,
partnership or other entity which is an affiliate of any of the foregoing, and
any lineal descendants of such persons (but only to the extent that the
beneficial ownership of the Voting Stock held by such lineal descendants was
directly received by gift, trust or sale from any such person).
1.15 "GOOD REASON," as used in SUBSECTION 7.2, shall mean and exist if
there has been a Change in Control and, thereafter, without the Executive's
prior written consent, one or more of the following events occurs:
(a) the Executive is assigned duties or responsibilities that are
inconsistent, in any significant respect, with the position of a
senior manager;
(b) the Executive is required to relocate from, or maintain his
principal office outside of, Clark County, Nevada;
(c) the Executive's Base Salary is decreased by the Company;
(d) the Executive is excluded from participation in any employee
benefit or short-term incentive plan or program offered to other
similarly executives of the Company or his benefits under such
plans or programs are materially reduced;
(e) the Company fails to pay the Executive any deferred payments that
have become payable under the Deferred Compensation Plan for
Executives;
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(f) the Company fails to reimburse the Executive for business
expenses in accordance with the Company's policies, procedures or
practices;
(g) the Company fails to agree to or to actually indemnify the
Executive for his actions and/or inactions, as either a director
or an officer of the Company, in accordance with SECTION 10,
and/or the Company fails to maintain reasonably sufficient levels
of directors' and officers' liability insurance coverage for the
Executive when such insurance is available; or
(h) the Company fails to obtain a written agreement from any
successor or assign of the Company to assume the obligations
under this Agreement upon a Change in Control.
1.16 "LONG-TERM STAY-ON PERFORMANCE INCENTIVE PLAN" shall mean the
Company's Long-Term Stay-On Performance Incentive Plan, effective as of
April 1, 1999, as the same may be amended from time to time.
1.17 "PERSON" shall mean any individual, firm, partnership,
association, trust, company, corporation or other entity.
1.18 "PRO RATA BONUS" shall mean an amount equal to sixty percent
(60%) of the Executive's current Base Salary, multiplied by a fraction, the
numerator of which is the number of days in such year during which the Executive
was actually employed by the Company and the denominator of which is 365.
1.19 "RESTRICTED AREA" shall mean:
(a) the City of Las Vegas, Nevada, and the area within a twenty-five
(25) mile radius of that city; and
(b) the Cities of Kansas City, Missouri and St. Louis, Missouri, and
the areas within a fifty (50) mile radius of each of those
cities;
PROVIDED, HOWEVER, that in the event the Executive voluntarily terminates this
Agreement pursuant to SUBSECTION 6.3, the Restricted Area shall exclude the Las
Vegas Strip (which is defined as that area bounded by Paradise Road and straight
extensions thereof on the East, Charleston Boulevard on the North, I-15 on the
West, and Sunset Road on the South, as outlined in red on Exhibit A attached
hereto) and Downtown Las Vegas (which is defined as that area bounded by Eastern
Avenue and straight extensions thereof on the East, I-515 (U.S. Highway 93/95)
on the North, I-15 on the West, and Charleston Boulevard on the South, as
outlined in red on Exhibit A attached hereto).
1.20 "RESTRICTION PERIOD" shall mean the period ending twenty-four
(24) months after the termination or expiration of the Term of Employment,
regardless of the reason for such termination or expiration.
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1.21 "SPECIAL LONG-TERM DISABILITY PLAN" shall mean the Company's
Special Long-Term Disability Plan, effective as of November 30, 1994, as the
same may be amended from time to time.
1.22 "SUPPLEMENTAL MANAGEMENT RETIREMENT PLAN" shall mean the
Company's Supplemental Management Retirement Plan, effective as of November 30,
1994, as the same may be amended from time to time.
1.23 "TERM OF EMPLOYMENT" shall mean the period specified in
SUBSECTION 2.2.
1.24 "VOTING STOCK" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. TERM OF EMPLOYMENT, POSITION AND RESPONSIBILITIES.
2.1 EMPLOYMENT ACCEPTED. The Company hereby employs the Executive, and
the Executive hereby accepts employment with the Company, for the Term of
Employment, in the position and with the responsibilities set forth in
SUBSECTION 2.3 and upon such other terms and conditions as are stated in this
Agreement.
2.2 TERM OF EMPLOYMENT. The initial Term of Employment shall commence
upon the date of this Agreement and, unless earlier terminated pursuant to the
provisions of this Agreement, shall terminate upon the close of business on the
day immediately preceding the fifth anniversary of the date of this Agreement;
PROVIDED, HOWEVER, that the initial Term of Employment shall automatically be
extended for successive five-year periods if neither Party has advised the other
in writing in accordance with SECTION 14 at least twelve (12) months prior to
the end of the then current Term of Employment that such Term of Employment will
not be extended for an additional five year period. In the event that such
notice is given, the Executive's employment shall terminate upon the close of
business on the day immediately preceding the fifth anniversary of the then
current Term of Employment.
2.3 RESPONSIBILITIES. During the Term of Employment, the Executive
shall be employed as Vice President of Finance of the Company, or in such other
capacity as the Company may direct, and shall have such responsibilities as the
Company may direct from time to time. During the Term of Employment, the
Executive shall devote his full time and attention to the business and affairs
of the Company and shall use his best efforts, skills and abilities to promote
the Company's interests. Anything herein to the contrary notwithstanding, the
Executive shall not be precluded from engaging in charitable and community
affairs and managing his personal investments. The Executive also may serve as a
member of the board of directors of other corporations, subject to the approval
of a majority of the Board, which approval shall not be unreasonably withheld or
delayed.
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3. COMPENSATION.
3.1 BASE SALARY. During the Term of Employment, the Executive shall be
entitled to receive a base salary (the "Base Salary") payable no less frequently
than in equal bi-weekly installments at an annualized rate of no less than
$375,000. The Base Salary shall be reviewed annually for increase (but not
decrease) in the discretion of the Human Resources Committee of the Board. In
conducting any such annual review, the Human Resources Committee shall take into
account any change in the Executive's responsibilities, increases in the
compensation of other executives of the Company or any Affiliate (or any
competitor(s) of either or both), the performance of the Executive and/or other
pertinent factors. Such increased Base Salary shall then constitute the
Executive's "Base Salary" for purposes of this Agreement.
3.2 ANNUAL BONUS. The Company may pay the Executive an annual
discretionary bonus for each fiscal year ending during the Term of Employment in
an amount that will be determined by the Human Resources Committee based on the
Executive's performance. Any annual bonus that may be awarded to the Executive
shall be paid at the same time as annual bonuses are paid to other senior
officers of the Company, unless the Executive has elected to defer receipt of
all or part of the bonus amounts to which he is entitled in respect of any such
calendar year in accordance with the terms and provisions of any deferred
compensation program maintained by the Company.
3.3 STAY-ON INCENTIVES. The Executive shall be eligible to participate
in the Company's Long-Term Stay-On Performance Incentive Plan pursuant to the
terms of the Plan.
3.4 DEFERRED COMPENSATION. The Executive shall be eligible to
participate in the Company's Deferred Compensation Plan for Executives, and any
other deferred compensation plans that the Company may adopt for executives,
pursuant to the terms of the plans.
4. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
4.1 PENSION AND WELFARE BENEFIT PLANS. During the Term of Employment,
the Executive shall be entitled to participate in all employee benefit programs
made available to the Company's executives or salaried employees generally, as
such programs may be in effect from time to time, including, without limitation,
pension and other retirement plans, profit sharing plans, group life insurance,
group health insurance, accidental death and dismemberment insurance, long-term
disability, sick leave (including salary continuation arrangements), vacations,
holidays and other employee benefit programs sponsored by the Company.
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4.2 ADDITIONAL PENSION AND WELFARE BENEFITS. In addition to the
foregoing, the Company shall provide the Executive with the following benefits:
(a) group health insurance coverage through the Company's Exec-U-Care
Medical Plan, effective as of July 1, 1994, or pursuant to such
other plan or plans as the Company may select from time to time,
and which shall be fully paid for by the Company;
(b) full salary continuation during the first 90 days of any physical
or mental incapacity that prevents the Executive from performing
his duties and, for any Disability that continues thereafter,
benefits pursuant to the Company's Special Long-Term Disability
Plan and any other long-term disability benefits pursuant to any
other disability plan of which the Executive is a participant;
(c) an annual supplemental retirement benefit as set forth in the
Supplemental Management Retirement Plan, in addition to any other
benefit pursuant to any other retirement plan under which the
Executive is covered; and
(d) supplemental life insurance coverage, through an individual
policy, a group policy or a combination thereof, in an aggregate
amount of not less than $4.0 million.
5. BUSINESS EXPENSE REIMBURSEMENT AND PERQUISITES.
5.1 EXPENSE REIMBURSEMENT. During the Term of Employment, the
Executive shall be entitled to receive reimbursement by the Company for all
reasonable out-of-pocket expenses incurred by him in performing services under
this Agreement, subject to providing the proper documentation of said expenses.
5.2 PERQUISITES. During the Term of Employment, the Executive shall
also be entitled to any of the Company's executive perquisites in accordance
with the terms and provisions of the applicable policies, including, without
limitation:
(a) vacation of four weeks per year;
(b) payment or reimbursement of the cost of an annual physical
examination;
(c) payment or reimbursement of initiation fees and annual membership
fees and assessments for a country club, a luncheon club and a
physical fitness program of the Executive's choice; and
(d) payment or reimbursement of fees and expenses, up to a maximum
amount of $2500.00, incurred in connection with having this
Agreement reviewed by legal counsel of his own choosing prior to
execution.
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6. TERMINATION OF EMPLOYMENT.
6.1 TERMINATION DUE TO DEATH OR DISABILITY. The Executive's employment
shall be terminated immediately in the event of his death or Disability. In the
event of a termination due to the Executive's death or Disability, the Executive
or his estate, as the case may be, shall be entitled, in lieu of any other
compensation whatsoever, to:
(a) Base Salary at the rate in effect at the time of his termination
until the date of death or Disability;
(b) any annual bonus awarded but not yet paid;
(c) a Pro Rata Bonus for the fiscal year in which death or Disability
occurs;
(d) in the case of death, any deferred compensation or bonuses,
including interest or other credits on the deferred amounts, to
the extent provided in the plans or programs providing for
deferral, and in the case of Disability, immediate vesting of any
deferred compensation or bonuses, including interest or other
credits on the deferred amounts;
(e) reimbursement of expenses incurred but not paid prior to such
termination of employment; and
(f) such rights to other benefits as may be provided in applicable
plans and programs of the Company, including, without limitation,
applicable employee benefit plans and programs, according to the
terms and provisions of such plans and programs.
6.2 TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate
the Executive's employment for Cause at any time during the Term of Employment
by giving written notice to the Executive. In the event of a termination for
Cause, the Executive shall be entitled, in lieu of any other compensation and
benefits whatsoever, to:
(a) Base Salary at the rate in effect at the time of his termination
through the date of termination of employment;
(b) any annual bonus awarded but not yet paid;
(c) any deferred compensation or bonuses, including interest or other
credits on the deferred amounts, to the extent provided in the
plans or programs providing for deferral;
(d) reimbursement for expenses incurred but not paid prior to such
termination of employment; and
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(e) such rights to other benefits as may be provided in applicable
plans and programs of the Company, including, without limitation,
applicable employee benefit plans and programs, according to the
terms and conditions of such plans and programs.
Notwithstanding anything to the contrary in this SUBSECTION 6.2, if the
Executive's employment is terminated for Cause (i) due to his having been
formally charged pursuant to SUBSECTION 1.5(A) but thereafter said charges are
dismissed or the Executive is acquitted, or (ii) due to his having been
convicted pursuant to SUBSECTION 1.5(A) but said conviction is subsequently
overturned on appeal and he is not required to submit to re-trial within six (6)
months thereafter, the Company shall have the option of reinstating the
Executive with payment of all base salary payments that would have been paid to
him had his employment not been terminated and restoration of all benefits
provided for pursuant to SECTION 4, or making a payment to him of an amount
equal to three times 160 percent of the Executive's Base Salary at the rate in
effect at the time of his termination.
6.3 TERMINATION BY THE EXECUTIVE. The Executive may terminate his
employment on his own initiative for any reason prior to a Change in Control
upon thirty (30) days prior written notice to the Company. Such termination
shall have the same consequences as a termination for Cause under SUBSECTION
6.2.
6.4 TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding any
other provision of this Agreement, the Company may terminate the Executive's
employment without Cause, other than due to death or Disability, at any time
during the Term of Employment by giving written notice to the Executive. In the
event that the Company terminates the Executive's employment without Cause, the
Executive shall be entitled, in lieu of any other compensation and benefits
whatsoever, to:
(a) an amount equal to three times 160 percent of the Executive's
Base Salary at the rate in effect at the time of his termination,
one-third of which shall be paid in a lump sum upon satisfaction
of the conditions set forth in SUBSECTION 8.3, and the other
two-thirds of which shall be paid out in equal bi-weekly
installments for the duration of the Restriction Period;
(b) any annual bonus awarded but not yet paid;
(c) any deferred bonus, including interest or other credits on the
deferred amounts, to the extent provided in the plans or programs
providing for deferral;
(d) exercise, within 180 days, all stock options that have vested
prior to termination, and shall forfeit all stock options that
have not vested;
(e) reimbursement for expenses incurred but not paid prior to such
termination of employment; and
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(f) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
6.5 TERMINATION DUE TO EXPIRATION OF THE TERM OF EMPLOYMENT. If either
Party elects not to extend the initial Term of Employment or any successive Term
of Employment, the Executive shall not be entitled to any additional
compensation after the expiration thereof, but such termination of employment
shall not otherwise affect accrued but unpaid compensation or benefits provided
under this Agreement or pursuant to any Company plan or program.
7. CHANGE IN CONTROL.
7.1 CHANGE IN CONTROL PAYMENT. Immediately upon a Change in Control,
in addition to any other compensation or benefits payable pursuant to this
Agreement or otherwise, the Executive shall be entitled to a payment in cash
equal to three times 160 percent of his Base Salary. Unless otherwise provided
for in this Agreement, the Executive's rights upon a Change in Control to
benefits under programs, plans and policies of the Company shall be determined
according to the terms and provisions of such programs, plans and policies.
7.2 TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR
GOOD REASON AFTER A CHANGE IN CONTROL. If within five years following a Change
in Control, the Executive's employment is terminated by the Company without
Cause or by the Executive for Good Reason, the Executive shall be entitled, in
addition to any payment paid or payable pursuant to SUBSECTION 7.1, but in lieu
of any other compensation and benefits whatsoever, to:
(a) an amount equal to the greater of (i) five times 160 percent of
the Executive's Base Salary at the time of the Change in Control
or (ii) five times 160 percent of the Executive's Base Salary at
the time of the termination of his employment, three-fifths of
which shall be paid in a lump sum upon satisfaction of the
conditions set forth in SUBSECTION 8.3 and two-fifths of which
shall be paid out in equal bi-weekly installments for the
duration of the Restriction Period,
(b) immediate vesting of any restricted stock of the Company held in
the Executive's name or for his benefit;
(c) immediate vesting of any stock options and stock appreciation
rights granted by the Company, which stock options and stock
appreciation rights shall continue to be and shall remain
exercisable until the earlier of (i) five years and (ii) the
remaining term of such stock options and stock appreciation
rights as set forth in the agreement granting, or otherwise
awarding, such stock option or stock appreciation right as if no
termination had taken place;
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(d) immediate vesting and cash-out of any phantom stock units granted
to the Executive;
(e) immediate vesting and pay out of any shares awarded to the
Executive pursuant to the Company's Long-Term Stay-On Performance
Incentive Plan;
(f) immediate vesting of the Executive's supplemental retirement
benefit as set forth in the Supplemental Management Retirement
Plan;
(g) continued funding of the Executive's split dollar life insurance
policy as if the Executive were employed by the Company through
the maturity date of such policy or, at the Company's option,
payment in full of all premium obligations under such policy; and
(h) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
7.3 TERMINATION BY EXECUTIVE WITHOUT GOOD REASON AFTER A CHANGE IN
CONTROL. If the Executive terminates his employment without Good Reason within
ninety (90) days following the first anniversary of a Change in Control, the
Executive shall be entitled, in addition to any payment paid or payable pursuant
to SUBSECTION 7.1, but in lieu of any other compensation and benefits
whatsoever, to:
(a) an amount equal to the greater of (i) three times 160 percent of
the Executive's Base Salary at the time of the Change in Control
or (ii) three times 160 percent of the Executive's Base Salary at
the time of the termination of his employment, one-third of which
shall be paid in a lump sum upon satisfaction of the conditions
set forth in SUBSECTION 8.3 and two-thirds of which shall be paid
out in equal bi-weekly installments for the duration of the
Restriction Period;
(b) immediate vesting of any stock options and stock appreciation
rights granted by the Company, which stock options and stock
appreciation rights shall continue to be and shall remain
exercisable until the earlier of (i) three years and (ii) the
remaining term of such stock options and stock appreciation
rights as set forth in the agreement granting, or otherwise
awarding, such stock option or stock appreciation right as if no
termination had taken place;
(c) immediate vesting and cash-out of any phantom stock units granted
to the Executive;
(d) immediate vesting of the Executive's supplemental retirement
benefit as set forth in the Supplemental Management Retirement
Plan;
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(e) continued funding of the Executive's split dollar life insurance
policy as if the Executive were employed by the Company through
the maturity date of such policy or, at the Company's option,
payment in full of all premium obligations under such policy; and
(f) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
7.4 TERMINATION FOR OTHER REASONS AFTER A CHANGE IN CONTROL. If the
Executive's employment is terminated after a Change in Control for any reason
not otherwise provided for in this SECTION 7, his rights shall be determined in
accordance with the applicable subsection of SECTION 6.
8. CONDITIONS TO PAYMENTS UPON TERMINATION.
8.1 TIMING OF PAYMENTS. Unless otherwise provided herein, any payments
to which the Executive shall be entitled pursuant to SECTIONS 6 AND 7 shall be
payable upon the satisfaction of the conditions set forth in SUBSECTION 8.3.
8.2 NO MITIGATION; NO OFFSET. In the event of any termination of the
Executive's employment under SECTIONS 6 OR 7, the Executive shall be under no
obligation to seek other employment and there shall be no offset against amounts
due to the Executive on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. Notwithstanding any
contrary provision contained herein, in the event of any termination of
employment of the Executive, the exclusive remedies available to the Executive
shall be the amounts due under SECTIONS 6 OR 7, which are in the nature of
severance payments, or liquidated damages, or both, and are not in the nature of
a penalty. In the event of a termination of this Agreement, neither Party shall
publish in any way or make any negative comment or statement about the other
Party or concerning the reasons for such termination. The provisions of this
SUBSECTION 8.2 shall survive the expiration or earlier termination of this
Agreement.
8.3 GENERAL RELEASE. No payments or benefits payable to the Executive
upon the termination of his employment pursuant to SECTIONS 6 OR 7 shall be made
to the Executive unless and until he executes a general release substantially in
the form annexed to this Agreement as Exhibit B and such general release becomes
effective pursuant to its terms.
8.4 COMPLIANCE WITH THE AGREEMENT. No payments or benefits payable to
the Executive upon the termination of his employment pursuant to SECTIONS 6 OR 7
shall be made to the Executive if he fails to comply with all of the terms and
conditions of this Agreement, including, without limitation, SECTIONS 11 AND 12.
8.5 CONTINUING OBLIGATIONS OF EXECUTIVE. No act or omission by the
Executive in breach of this Agreement, including, without limitation his failure
to execute the general release and the resulting forfeiture of termination
payments, shall be deemed to permit
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the Executive to forego or waive such payments in order to avoid his
obligations under SECTION 11.
9. SPECIAL REIMBURSEMENT.
9.1 If any payment or benefit paid or payable, or received or to be
received, by or on behalf of the Executive in connection with a Change in
Control pursuant to SUBSECTION 7.1 or the termination of the Executive's
employment pursuant to SUBSECTION 7.2 , whether any such payments or benefits
are pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Affiliate, any Person, or otherwise (the "TOTAL
PAYMENTS"), will or would be subject to the excise tax imposed under Section
4999 of the Code (the "EXCISE TAX"), the Company shall pay to the Executive an
additional amount (the "GROSS-UP PAYMENT") such that, after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes) imposed upon or in respect of the Total Payments and the Gross-Up
Payments, including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and any Excise Tax imposed thereon, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Total Payments.
9.2 For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax,
(a) the Total Payments shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise
Tax, unless in the opinion of tax counsel selected by the Company
and reasonably acceptable to the Executive (which opinion shall
be provided to the Executive) such Total Payments (in whole or in
part) (i) do not constitute parachute payments, including
(without limitation) by reason of Section 280G(b)(4)(A) of the
Code, (ii) such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered,
within the meaning of Section 280G(b)(4)(B) of the Code, or (iii)
are not, in the opinion of legal counsel, otherwise subject to
the Excise Tax, and
(b) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.
9.3 In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder, the Executive shall repay to
the Company, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of
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the Executive's employment (including by reason of any payment the existence
or amount of which cannot be determined at the time of the initial Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in accordance
with SUBSECTION 9.1 in respect of such excess Excise Tax (plus any interest,
penalties or additions payable by the Executive with respect to such excess
Excise Tax) at the time that the amount of such excess Excise Tax is finally
determined. The Executive and the Company shall each reasonably cooperate with
each other in connection with any administrative or judicial proceedings
concerning the existence or amount of any such subsequent liability for Excise
Tax with respect to the Total Payments.
10. INDEMNIFICATION.
10.1 GENERAL. The Company agrees that if the Executive is made a party
or is threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (an "INDEMNIFIABLE ACTION"), by
reason of the fact that he is or was a director or officer of the Company or is
or was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether or not the basis of such Indemnifiable Action is alleged action
in an official capacity as a director, officer, member, employee or agent, while
serving as a director, officer, member, employee or agent, he shall be
indemnified and held harmless by the Company to the fullest extent permitted by
Nevada law and the Company's by-laws, as the same exist or may hereafter be
amended, against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by the Executive in connection
therewith.
10.2 PROCEDURE. The indemnification provided pursuant to this SECTION
10 shall be subject to the following conditions:
(a) The Executive must promptly give the Company written notice of
any actual or threatened Indemnifiable Action;
(b) The Company will be permitted, at its option, to participate in,
or to assume, the defense of any Indemnifiable Action;
(c) The Executive must provide reasonable cooperation to the Company
in the defense of any Indemnifiable Action; and
(d) The Executive must refrain from settling any Indemnifiable Action
without obtaining the Company's prior written consent, which
consent shall not be unreasonably withheld.
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10.3 ADVANCEMENT OF COSTS AND EXPENSES. The Company agrees to advance
all costs and expenses referred to in SUBSECTION 10.1; PROVIDED, HOWEVER, that
the Executive agrees to repay to the Company all amounts so advanced in the
event that the Company reasonably determines in good faith that any acts or
omissions by the Executive were:
(a) in knowing violation of any agreement between the Executive and
the Company;
(b) in bad faith or involving intentional misconduct or a knowing
violation of law or that the Executive personally gained a
financial profit or other advantage to which he was not legally
entitled; or
(c) for which a court, having jurisdiction in the matter, determines
that indemnification is not lawful.
10.4 NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
payment of expenses incurred in defending an Indemnifiable Action in advance of
its final disposition conferred in this SECTION 10 shall not be exclusive of any
other right which the Executive may have or hereafter may acquire under any
statute, provision of the certificate of incorporation or by-laws of the
Company, agreement, vote of stockholders or disinterested directors or
otherwise.
10.5 D&O INSURANCE. The Company will maintain a directors' and
officers' liability insurance policy covering the Executive that provides
coverage that is reasonable in relation to the Executive's position during the
Term of Employment.
11. COVENANT NOT ENGAGE IN CERTAIN ACTS.
11.1 GENERAL. The Parties understand and agree that the purpose of the
restrictions contained in this SECTION 11 is to protect the goodwill and other
legitimate business interests of the Company, and that the Company would not
have entered into this Agreement in the absence of such restrictions. The
Executive acknowledges and agrees that the restrictions are reasonable and do
not, and will not, unduly impair his ability to make a living after the
termination of his employment with the Company. The provisions of this SECTION
11 shall survive the expiration or sooner termination of this Agreement.
11.2 NON-ASSISTANCE; NON-DIVERSION. In consideration for this
Agreement to employ the Executive and the other valuable consideration provided
hereunder, the Executive agrees and covenants that during the Term of Employment
and during the Restriction Period, and except when acting on behalf of the
Company or on behalf of any Affiliate, the Executive shall not, directly or
indirectly, for himself or any third party, or alone or as a member of a
partnership, or as an officer, director, shareholder or otherwise, engage in the
following acts:
(a) divert or attempt to divert any existing business of the Company
or any Affiliate;
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(b) accept any position or affiliation with, or render any services
on behalf of, any Competing Business; or
(c) hire or retain any employee of the Company or any Affiliate to
provide services for any other Person or induce, solicit, attempt
to solicit, encourage, divert, cause or attempt to cause any
employee or prospective employee of the Company or any Affiliate
to (i) terminate and/or leave such employment, or (ii) accept
employment with anyone other than the Company or an Affiliate.
11.3 CESSATION/REIMBURSEMENT OF PAYMENTS. If the Executive violates
any provision of this SECTION 11, the Company may, upon giving written notice to
the Executive, immediately cease all payments and benefits that it may be
providing to the Executive pursuant to SECTION 3, SECTION 6 or SUBSECTION 7.2,
and the Executive may be required to reimburse the Company for any payments
received from, and the cash value of any benefits provided by, the Company
between the first day of the violation and the date such notice is given;
PROVIDED, HOWEVER, that the foregoing shall be in addition to such other
remedies as may be available to the Company and shall not be deemed to permit
the Executive to forego or waive such payments in order to avoid his obligations
under this SECTION 11.
11.4 SURVIVAL. The Executive agrees that the provisions of this
SECTION 11 shall survive the termination of this Agreement and the termination
of the Executive's employment.
12. CONFIDENTIAL INFORMATION AND COMPANY PROPERTY.
12.1 CONFIDENTIAL INFORMATION. The Executive understands and
acknowledges that Confidential Information constitutes a valuable asset of the
Company and its Affiliates and may not be converted to the Executive's own or
any third party's use. Accordingly, the Executive hereby agrees that he shall
not directly or indirectly, during the Term of Employment or any time
thereafter, disclose any Confidential Information to any Person not expressly
authorized by the Company to receive such Confidential Information. The
Executive further agrees that he shall not directly or indirectly, during the
Term of Employment or any time thereafter, use or make use of any Confidential
Information in connection with any business activity other than that of the
Company. The Parties acknowledge and agree that this Agreement is not intended
to, and does not, alter either the Company's rights or the Executive's
obligations under any state or federal statutory or common law regarding trade
secrets and unfair trade practices.
12.2 COMPANY PROPERTY. All Company Property is and shall remain
exclusively the property of the Company. Unless authorized in writing to the
contrary, the Executive shall promptly, and without charge, deliver to the
Company on the termination of employment hereunder, or at any other time the
Company may so request, all Company Property that the Executive may then possess
or have under his control.
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12.3 REQUIRED DISCLOSURE. In the event the Executive is required by
law or court order to disclose any Confidential Information or to produce any
Company Property, the Executive shall promptly notify the Company of such
requirement and provide the Company with a copy of any court order or of any law
which requires such disclosure and, if the Company so elects, to the extent
permitted by applicable law, give the Company an adequate opportunity, at its
own expense, to contest such law or court order prior to any such required
disclosure or production by the Executive.
12.4 SURVIVAL. The Executive agrees that the provisions of this
SECTION 12 shall survive the termination of this Agreement and the termination
of the Executive's employment.
13. MUTUAL ARBITRATION AGREEMENT.
13.1 ARBITRABLE CLAIMS. All disputes between the Executive (and his
attorneys, successors, and assigns) and the Company (and its trustees,
beneficiaries, officers, directors, managers, affiliates, employees, agents,
successors, attorneys, and assigns) relating in any manner whatsoever to the
employment or termination of the Executive, including, without limitation, all
disputes arising under this Agreement ("ARBITRABLE CLAIMS"), shall be resolved
by binding arbitration as set forth in this SECTION 13 (the "MUTUAL ARBITRATION
AGREEMENT"). Arbitrable Claims shall include, but are not limited to, claims for
compensation, claims for breach of any contract or covenant (express or
implied), and tort claims of all kinds, as well as all claims based on any
federal, state, or local law, statute or regulation, but shall not include the
claims based on the statutes enumerated in SUBSECTION 13.4 or the Company's
right to seek injunctive relief as provided in SECTION 15. Arbitration shall be
final and binding upon the Parties and shall be the exclusive remedy for all
Arbitrable Claims. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY
JUDGE OR JURY IN REGARD TO ARBITRABLE CLAIMS, EXCEPT AS PROVIDED BY SECTION
13.4.
13.2 PROCEDURE. Arbitration of Arbitrable Claims shall be in
accordance with the National Rules for the Resolution of Employment Disputes of
the American Arbitration Association, as amended, and as augmented in this
Agreement. Either Party may bring an action in court to compel arbitration under
this Agreement and to enforce an arbitration award. Otherwise, neither Party
shall initiate or prosecute any lawsuit, appeal or administrative action in any
way related to an Arbitrable Claim. The initiating Party must file and serve an
arbitration claim within sixty (60) days of learning the facts giving rise to
the alleged claim. All arbitration hearings under this Agreement shall be
conducted in Las Vegas, Nevada. The Federal Arbitration Act shall govern the
interpretation and enforcement of this Agreement. The fees of the arbitrator
shall be divided equally between both Parties.
13.3 CONFIDENTIALITY. All proceedings and all documents prepared in
connection with any Arbitrable Claim shall be confidential and, unless otherwise
required by law, the subject matter and content thereof shall not be disclosed
to any Person other than the parties to the proceedings, their counsel,
witnesses and experts, the arbitrator and, if involved, the court and court
staff.
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13.4 APPLICABILITY. This SECTION 13 shall apply to all disputes under
this Agreement other than:
(a) disputes relating to the enforcement of the Company's rights
under SECTIONS 11 AND 12 of this Agreement; and
(b) claims brought under Title VII of the Civil Rights Act of 1964,
the Civil Rights Act of 1866, the Age Discrimination in
Employment Act of 1967 (including the Older Workers Benefit
Protection Act), and the Americans with Disabilities Act, the
Fair Labor Standards Act, the Equal Pay Act, the Family and
Medical Leave Act and the Employee Retirement Income Security Act
of 1974, the Nevada Fair Employment Practices Act, the Missouri
Human Rights Act or any other applicable state or local fair
employment law.
13.5 ACKNOWLEDGEMENTS. The Executive acknowledges that he:
(a) has carefully read this SECTION 13;
(b) understands its terms and conditions; and
(c) has entered into this Mutual Arbitration Agreement voluntarily
and not in reliance on any promises or representations made by
the Company other than those contained in this Mutual Arbitration
Agreement.
14. NOTICES. All notices, demands and requests required or permitted to be
given to either Party under this Agreement shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the Party concerned at the address indicated below or to such changed address as
such Party may subsequently give notice of:
If to the Company: Station Casinos, Inc.
2411 West Sahara Avenue
Las Vegas, NV 89102
Attn: Scott M Nielson
With a copy to: Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street, 30th Floor
Los Angeles, CA 90017
Attn: Kenneth J. Baronsky
If to the Executive: William W. Warner
8504 Estrelita
Las Vegas, NV 89128
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15. RIGHT TO SEEK INJUNCTIVE RELIEF. The Executive acknowledges that a
violation on his part of any of the covenants contained in SECTIONS 11 AND 12
would cause immeasurable and irreparable damage to the Company. The Executive
accordingly agrees and hereby grants his consent that, without limiting the
remedies available to the Company, any actual or threatened violation of such
covenants may be enforced by injunctive relief or by other equitable remedies
issued or ordered by any court of competent jurisdiction.
16. EMPLOYEE BENEFIT PLAN DOCUMENTS. In the event that any terms and
provisions of this Agreement conflict with the terms and provisions of any
employee benefit plan document, the terms and provisions of this Agreement shall
govern, and the Company shall take any and all actions that may be necessary,
including amendment of any plan document, to effect the provision of benefits
expressly provided upon termination of the Executive's employment pursuant to
SECTIONS 6 AND 7.
17. BENEFICIARIES/REFERENCES. The Executive shall be entitled to select a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following the Executive's death, and may change such election, by
giving the Company written notice thereof. In the event of the Executive's death
or a judicial determination of his incompetence, reference in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiaries,
estate or other legal representative.
18. SURVIVORSHIP. The respective rights and obligations of the Parties
hereunder shall survive the expiration or earlier termination of this Agreement
to the extent necessary to the intended preservation of such rights and
obligations. The provisions of this SECTION 18 are in addition to the
survivorship provisions of any other section of this Agreement.
19. REPRESENTATIONS AND WARRANTIES. Each Party represents and warrants that
he or it is fully authorized and empowered to enter into this Agreement and that
the performance of his or its obligations under this Agreement will not violate
any Agreement between that Party and any other Person.
20. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the Parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings, whether
written or oral, express or implied, between the Parties with respect hereto. No
representations, inducements, promises or agreements not embodied herein shall
be of any force or effect.
21. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors, heirs and
assigns; PROVIDED, HOWEVER, that no rights or obligations of the Executive under
this Agreement may be assigned or transferred by the Executive, other than
rights to compensation and benefits hereunder, which may be transferred only by
will or operation of law and subject to the limitations of this Agreement; and
PROVIDED, FURTHER, that no rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company, except that such rights
or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale or
liquidation of all or substantially all of the assets of the Company, provided
that the assignee or transferee is the successor to all or substantially all of
the
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assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company under this Agreement, either
contractually or as a matter of law.
22. AMENDMENT OR WAIVER. No provision in this Agreement may be amended or
waived unless such amendment or waiver is agreed to in writing, signed by both
Parties. No waiver by one Party of any breach by the other Party of any
condition or provision of this Agreement to be performed by such other Party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same or any prior or subsequent time. No failure of the Company to exercise
any power given it hereunder or to insist upon strict compliance by the
Executive with any obligation hereunder, and no custom or practice at variance
with the terms hereof, shall constitute a waiver of the right of the Company to
demand strict compliance with the terms hereof.
23. SEVERABILITY. In the event that any provision or portion of this
Agreement, except SECTION 6, SECTION 7 and SECTION 11, shall be determined to be
invalid or unenforceable for any reason, in whole or in part, the remaining
provisions of this Agreement shall be unaffected thereby and shall remain in
full force and effect to the fullest extent permitted by law. If either SECTION
6, SECTION 7 or SECTION 11 is determined to be invalid or unenforceable for any
reason, in whole or in part, either Party may terminate this Agreement without
further obligations or duties hereunder.
24. GOVERNING LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Nevada without reference
to the principles of conflict of laws thereof. In the event of any dispute or
controversy arising out of or relating to this Agreement that is not an
arbitrable claim, the Parties mutually and irrevocably consent to, and waive any
objection to, the exclusive jurisdiction of any court of competent jurisdiction
in Clark County, Nevada, to resolve such dispute or controversy.
25. HEADINGS. The headings of the sections and subsections contained in
this agreement are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.
26. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which shall constitute one and the
same Agreement with the same effect as if all Parties had signed the same
signature page. Any signature page of this Agreement may be detached from any
counterpart of this Agreement and reattached to any other counterpart of this
Agreement identical in form hereto but having attached to it one or more
additional signature pages.
27. ACKNOWLEDGEMENT. The Executive represents and acknowledges the
following:
(a) he has carefully read this Agreement in its entirety;
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(b) he understands the terms and conditions contained herein;
(c) he has had the opportunity to review this Agreement with legal
counsel of his own choosing and has not relied on any statements
made by the Company or its legal counsel as to the meaning of any
term or condition contained herein or in deciding whether to
enter into this Agreement; and
(d) he is entering into this Agreement knowingly and voluntarily.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
STATION CASINOS, INC.
By: /s/ GLENN C. CHRISTENSON
-------------------------
Name: Glenn C. Christenson
Title: Executive Vice President, Chief
Financial Officer, Chief
Administrative Officer and
Treasurer
/s/ WILLIAM W. WARNER
---------------------------
William W. Warner
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EXHIBIT "B"
GENERAL RELEASE AND COVENANT NOT TO SUE
This GENERAL RELEASE AND COVENANT NOT TO SUE (this "Release") is
executed and delivered by WILLIAM W. WARNER (the "Executive") to STATION
CASINOS, INC., a Nevada corporation (the "Company").
In consideration of the agreement by the Company to provide the
separation payments and benefits in SECTION 6 and SECTION 7 of the Employment
Agreement between the Executive and the Company, dated as of December 1, 1999
(the "Employment Agreement"), and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Executive hereby
agrees as follows:
1. RELEASE AND COVENANT. THE EXECUTIVE, OF HIS OWN FREE WILL,
VOLUNTARILY RELEASES AND FOREVER DISCHARGES THE COMPANY AND ITS SUBSIDIARIES AND
AFFILIATES, AND EACH OF THEIR RESPECTIVE PAST AND PRESENT AGENTS, EMPLOYEES,
MANAGERS, REPRESENTATIVES, OFFICERS, DIRECTORS, ATTORNEYS, ACCOUNTANTS,
TRUSTEES, SHAREHOLDERS, PARTNERS, INSURERS, HEIRS, PREDECESSORS-IN-INTEREST,
ADVISORS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, T/HE "RELEASED PARTIES") FROM,
AND COVENANTS NOT TO SUE OR PROCEED AGAINST ANY OF THE FOREGOING ON THE BASIS
OF, ANY AND ALL PAST OR PRESENT CAUSES OF ACTION, SUITS, AGREEMENTS OR OTHER
RIGHTS OR CLAIMS WHICH THE EXECUTIVE, HIS DEPENDENTS, RELATIVES, HEIRS,
EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS HAS OR HAVE AGAINST ANY OF THE
RELEASED PARTIES UPON OR BY REASON OF ANY MATTER ARISING OUT OF HIS EMPLOYMENT
BY THE COMPANY AND THE CESSATION OF SAID EMPLOYMENT, AND INCLUDING, BUT NOT
LIMITED TO, ANY ALLEGED VIOLATION OF THE CIVIL RIGHTS ACTS OF 1964 AND 1991, THE
EQUAL PAY ACT OF 1963, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967
(INCLUDING THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990), THE REHABILITATION
ACT OF 1973, THE FAMILY AND MEDICAL LEAVE ACT OF 1993, THE AMERICANS WITH
DISABILITIES ACT OF 1990, THE EMPLOYMENT RETIREMENT INCOME SECURITY ACT OF 1974,
THE NEVADA FAIR EMPLOYMENT PRACTICES ACT, THE MISSOURI HUMAN RIGHTS ACT, THE
LABOR LAWS OF THE UNITED STATES, NEVADA AND MISSOURI, AND ANY OTHER FEDERAL,
STATE OR LOCAL LAW, REGULATION OR ORDINANCE, OR PUBLIC POLICY, CONTRACT OR TORT
LAW, HAVING ANY BEARING WHATSOEVER ON THE TERMS AND CONDITIONS OR CESSATION OF
HIS EMPLOYMENT WITH THE COMPANY.
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2. DUE CARE. THE EXECUTIVE ACKNOWLEDGES THAT HE HAS RECEIVED A COPY OF
THIS RELEASE PRIOR TO ITS EXECUTION AND HAS BEEN ADVISED HEREBY OF HIS
OPPORTUNITY TO REVIEW AND CONSIDER THIS RELEASE FOR TWENTY-ONE (21) DAYS PRIOR
TO ITS EXECUTION. THE EXECUTIVE FURTHER ACKNOWLEDGES THAT HE HAS BEEN ADVISED
HEREBY TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS RELEASE. THE
EXECUTIVE ENTERS INTO THIS RELEASE HAVING FREELY AND KNOWINGLY ELECTED, AFTER
DUE CONSIDERATION, TO EXECUTE THIS RELEASE AND TO FULFILL THE PROMISES SET FORTH
HEREIN. THIS RELEASE SHALL BE REVOCABLE BY THE EXECUTIVE DURING THE SEVEN (7)
DAY PERIOD FOLLOWING ITS EXECUTION, AND SHALL NOT BECOME EFFECTIVE OR
ENFORCEABLE UNTIL THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. IN THE EVENT OF
SUCH A REVOCATION, THE EXECUTIVE SHALL NOT BE ENTITLED TO THE CONSIDERATION FOR
THIS RELEASE SET FORTH ABOVE.
3. RELIANCE BY THE EXECUTIVE. THE EXECUTIVE ACKNOWLEDGES THAT, IN HIS
DECISION TO ENTER INTO THIS RELEASE, HE HAS NOT RELIED ON ANY REPRESENTATIONS,
PROMISES OR ARRANGEMENT OF ANY KIND, INCLUDING ORAL STATEMENTS BY
REPRESENTATIVES OF THE COMPANY, EXCEPT AS SET FORTH IN THIS RELEASE.
4. MISCELLANEOUS. THE EXECUTIVE SHALL NOT DISCLOSE THE EXISTENCE OR
CONTENTS OF THIS RELEASE TO ANYONE OTHER THAN HIS IMMEDIATE FAMILY, ACCOUNTANTS
OR ATTORNEYS, AND THE EXECUTIVE SHALL INSTRUCT SUCH THIRD PARTIES NOT TO
DISCLOSE THE SAME. THIS RELEASE SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA WITHOUT REFERENCE
TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF. IF ANY PROVISION OF THIS RELEASE
IS HELD INVALID OR UNENFORCEABLE FOR ANY REASON, THE REMAINING PROVISIONS SHALL
BE CONSTRUED AS IF THE INVALID OR UNENFORCEABLE PROVISION HAD NOT BEEN INCLUDED.
ii
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This GENERAL RELEASE AND COVENANT NOT TO SUE is executed by the
Executive and delivered to the Company on _______________________.
Executive
- ------------------------------
Name: William W. Warner
STATE OF )
-------------------------- ) ss:
COUNTY OF )
-------------------------
On this _____ day of ________________, ____, before me, a Notary Public
of the State of _______________, personally appeared ____________, to me known
and known to me to be the person described and who executed the foregoing
release and did then and there acknowledge to me that he voluntarily executed
the same.
- -----------------------------
NOTARY PUBLIC
[NOT TO BE SIGNED OR NOTARIZED UPON EXECUTION OF EMPLOYMENT AGREEMENT]
<PAGE>
EXHIBIT 10.17
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and entered into as of
the 2nd day of August, 1999, by and between STATION CASINOS, INC., a Nevada
corporation, with its principal offices located at 2411 West Sahara Avenue, Las
Vegas, Nevada 89102 (the "COMPANY"), and MARK E. BROWN (the "EXECUTIVE").
WHEREAS, the Company desires to employ the Executive on the terms and
conditions set forth herein; and
WHEREAS, the Executive desires to be employed by the Company on the terms
and conditions set forth herein; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the Company and
the Executive (each individually a "PARTY" and together the "PARTIES") agree as
follows.
1. DEFINITIONS. In addition to certain terms defined elsewhere in this
Agreement, the following terms shall have the following respective meanings:
1.1 "AFFILIATE" shall mean any Person controlling, controlled by or
under common control with, the Company.
1.2 "BASE AMOUNT" shall have the meaning ascribed to such term in
SECTION 280G of the Code.
1.3 "BASE SALARY" shall mean the salary provided for in SUBSECTION 3.1
of this Agreement.
1.4 "BOARD" shall mean the Board of Directors of the Company.
1.5 "CAUSE" shall mean that the Executive:
(a) has been formally charged with or convicted of any felony or any
crime involving fraud, theft, embezzlement, dishonesty or moral
turpitude;
(b) has been found unsuitable to hold a gaming license; or
(c) in carrying out his duties under this Agreement, has engaged in
acts or omissions constituting gross negligence or willful
misconduct resulting, in either case, in material economic harm
to the Company.
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1.6 "CHANGE IN CONTROL" shall be deemed to have occurred if:
(a) (1) any Person, corporation, entity or group (other than the
Existing Equity Holders) is or becomes the beneficial owner,
directly or indirectly, of securities representing 50% or more of
the combined voting power of the Company's Voting Stock (an
"Acquisition Event"), or
(2) the Company consolidates with or merges into another
corporation or entity, or any corporation or entity consolidates
with or merges into the Company, with the effect that the
beneficial owners of the Company's Voting Stock held immediately
prior to the consummation of such consolidation or merger cease
to beneficially own, directly or indirectly, securities
representing 50% or more of the combined voting power of the
Company's Voting Stock (or if the Company is not the surviving
entity, the surviving company's voting securities) upon the
consummation of such consolidation or merger (a "Merger Event"),
or
(3) the Company sells, conveys, transfers or leases to any
person, corporation, entity or group, directly or indirectly, in
one transaction or series of related transactions, properties
and/or assets that accounted for 75% or more of the earnings
(before interest, taxes, depreciation and amortization) of the
Company, on a consolidated basis for the four-fiscal quarter
period immediately preceding the date of consummation of such
transaction (a "Sale Event"); AND
(b) within thirty-six (36) months following an Acquisition Event,
Merger Event or Sale Event, individuals who immediately prior to
such Acquisition Event, Merger Event or Sale Event constituted
the Company's Board, together with any new or replacement
directors whose election by the Company's Board, or whose
nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the directors then
in office who were either directors on the Company's Board
immediately prior to such Acquisition Event, Merger Event or Sale
Event (or whose election or nomination for election was
previously so approved), cease for any reason to constitute a
majority of the directors of the Company's Board then in office.
Notwithstanding the foregoing, a reincorporation, spin-off, split-off or other
reorganization transaction (a "Reorganization Event"), or series of related
transactions, in which either the "beneficial owners" of the Company's Voting
Stock or the Existing Equity Holders beneficially own securities representing
50% or more of the combined voting power of the Company's Voting Stock upon the
consummation of such transaction shall not constitute an Acquisition Event,
Merger Event or Sale Event for purposes of this definition. For purposes of this
definition, "beneficial ownership" shall have the same meaning as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended,
except that a Person shall be
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deemed to have "beneficial ownership" of all shares that any such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time.
For the purposes of this definition, upon consummation of an Acquisition Event,
Merger Event, Sale Event or Reorganization Event, the "Company's Board" and the
"Company's Shareholders" shall refer to (i) in the case of an Acquisition Event,
the Company, (ii) in the case of a Merger Event, the company surviving the
merger or consolidation, (iii) in the case of a Sale Event, the transferee of
the properties, and/or assets, and (iv) in the case of a Reorganization Event,
the entity or entities surviving such Reorganization Event on a consolidated
basis.
1.7 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.8 "COMPANY PROPERTY" shall mean all items and materials provided by
the Company to the Executive, or to which the Executive has access, in the
course of his employment, including, without limitation, all files, records,
documents, drawings, specifications, memoranda, notes, reports, manuals,
equipment, computer disks, videotapes, drawings, blueprints and other documents
and similar items relating to the Company, its Affiliates or their respective
customers, whether prepared by the Executive or others, and any and all copies,
abstracts and summaries thereof.
1.9 "COMPETING BUSINESS" shall mean any Person engaged in the gaming
industry that directly or through an affiliate or subsidiary conducts its
business within the Restricted Area.
1.10 "CONFIDENTIAL INFORMATION" shall mean all nonpublic and/or
proprietary information respecting the business of the Company or any Affiliate,
including, without limitation, its products, programs, projects, promotions,
marketing plans and strategies, business plans or practices, business
operations, employees, research and development, intellectual property,
software, databases, trademarks, pricing information and accounting and
financing data. Confidential Information also includes information concerning
the Company's or any Affiliate's customers, such as their identity, address,
preferences, playing patterns and ratings or any other information kept by the
Company or any Affiliate concerning its customers whether or not such
information has been reduced to documentary form. Confidential Information does
not include information that is, or becomes, available to the public unless such
availability occurs through an unauthorized act on the part of the Executive.
1.11 "DEFERRED COMPENSATION PLAN FOR EXECUTIVES" shall mean the
Company's Deferred Compensation Plan for Executives, effective as of November
30, 1994, as the same may be amended from time to time.
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1.12 "DISABILITY" shall mean a physical or mental incapacity that
prevents the Executive from performing the essential functions of his position
with the Company for a period of ninety (90) days as determined (a) in
accordance with any long-term disability plan provided by the Company of which
the Executive is a participant, or (b) by the following procedure: The Executive
agrees to submit to medical examinations by a licensed healthcare professional
selected by the Company, in its sole discretion, to determine whether a
Disability exists. In addition, the Executive may submit to the Company
documentation of a Disability, or lack thereof, from a licensed healthcare
professional of his choice. Following a determination of a Disability or lack of
Disability by the Company's or the Executive's licensed healthcare professional,
the other Party may submit subsequent documentation relating to the existence of
a Disability from a licensed healthcare professional selected by such other
Party. In the event that the medical opinions of such licensed healthcare
professionals conflict, such licensed healthcare professionals shall appoint a
third licensed healthcare professional to examine the Executive, and the opinion
of such third licensed healthcare professional shall be dispositive.
1.13 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.14 "EXISTING EQUITY HOLDERS" shall mean Frank J. Fertitta III, Blake
L. Sartini, Delise F. Sartini, Lorenzo J. Fertitta, Glenn C. Christenson and
Scott M Nielson and their executors, administrators or the legal representatives
of their estates, their heirs, distributees and beneficiaries, and any trust as
to which any of the foregoing is a settlor or co-settlor and any corporation,
partnership or other entity which is an affiliate of any of the foregoing, and
any lineal descendants of such persons (but only to the extent that the
beneficial ownership of the Voting Stock held by such lineal descendants was
directly received by gift, trust or sale from any such person).
1.15 "GOOD REASON," as used in SUBSECTION 7.2, shall mean and exist if
there has been a Change in Control and, thereafter, without the Executive's
prior written consent, one or more of the following events occurs:
(a) the Executive is assigned duties or responsibilities that are
inconsistent, in any significant respect, with the position of a
senior manager;
(b) the Executive is required to relocate from, or maintain his
principal office outside of, Clark County, Nevada;
(c) the Executive's Base Salary is decreased by the Company;
(d) the Executive is excluded from participation in any employee
benefit or short-term incentive plan or program offered to other
similarly executives of the Company or his benefits under such
plans or programs are materially reduced;
(e) the Company fails to pay the Executive any deferred payments that
have become payable under the Deferred Compensation Plan for
Executives;
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(f) the Company fails to reimburse the Executive for business
expenses in accordance with the Company's policies, procedures or
practices;
(g) the Company fails to agree to or to actually indemnify the
Executive for his actions and/or inactions, as either a director
or an officer of the Company, in accordance with SECTION 10,
and/or the Company fails to maintain reasonably sufficient levels
of directors' and officers' liability insurance coverage for the
Executive when such insurance is available; or
(h) the Company fails to obtain a written agreement from any
successor or assign of the Company to assume the obligations
under this Agreement upon a Change in Control.
1.16 "LONG-TERM STAY-ON PERFORMANCE INCENTIVE PLAN" shall mean the
Company's Long-Term Stay-On Performance Incentive Plan, effective as of
August 2, 1999, as the same may be amended from time to time.
1.17 "PERSON" shall mean any individual, firm, partnership,
association, trust, company, corporation or other entity.
1.18 "PRO RATA BONUS" shall mean an amount equal to sixty percent
(60%) of the Executive's current Base Salary, multiplied by a fraction, the
numerator of which is the number of days in such year during which the Executive
was actually employed by the Company and the denominator of which is 365.
1.19 "RESTRICTED AREA" shall mean:
(a) the City of Las Vegas, Nevada, and the area within a twenty-five
(25) mile radius of that city; and
(b) the Cities of Kansas City, Missouri and St. Louis, Missouri, and
the areas within a fifty (50) mile radius of each of those
cities;
PROVIDED, HOWEVER, that in the event the Executive voluntarily terminates this
Agreement pursuant to SUBSECTION 6.3, the Restricted Area shall exclude the Las
Vegas Strip (which is defined as that area bounded by Paradise Road and straight
extensions thereof on the East, Charleston Boulevard on the North, I-15 on the
West, and Sunset Road on the South, as outlined in red on Exhibit A attached
hereto) and Downtown Las Vegas (which is defined as that area bounded by Eastern
Avenue and straight extensions thereof on the East, I-515 (U.S. Highway 93/95)
on the North, I-15 on the West, and Charleston Boulevard on the South, as
outlined in red on Exhibit A attached hereto).
1.20 "RESTRICTION PERIOD" shall mean the period ending twenty-four
(24) months after the termination or expiration of the Term of Employment,
regardless of the reason for such termination or expiration.
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1.21 "SPECIAL LONG-TERM DISABILITY PLAN" shall mean the Company's
Special Long-Term Disability Plan, effective as of November 30, 1994, as the
same may be amended from time to time.
1.22 "SUPPLEMENTAL MANAGEMENT RETIREMENT PLAN" shall mean the
Company's Supplemental Management Retirement Plan, effective as of November 30,
1994, as the same may be amended from time to time.
1.23 "TERM OF EMPLOYMENT" shall mean the period specified in
SUBSECTION 2.2.
1.24 "VOTING STOCK" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. TERM OF EMPLOYMENT, POSITION AND RESPONSIBILITIES.
2.1 EMPLOYMENT ACCEPTED. The Company hereby employs the Executive, and
the Executive hereby accepts employment with the Company, for the Term of
Employment, in the position and with the responsibilities set forth in
SUBSECTION 2.3 and upon such other terms and conditions as are stated in this
Agreement.
2.2 TERM OF EMPLOYMENT. The initial Term of Employment shall commence
upon the date of this Agreement and, unless earlier terminated pursuant to the
provisions of this Agreement, shall terminate upon the close of business on the
day immediately preceding the fifth anniversary of the date of this Agreement;
provided, however, that the initial Term of Employment shall automatically be
extended for successive five-year periods if neither Party has advised the other
in writing in accordance with SECTION 14 at least twelve (12) months prior to
the end of the then current Term of Employment that such Term of Employment will
not be extended for an additional five year period. In the event that such
notice is given, the Executive's employment shall terminate upon the close of
business on the day immediately preceding the fifth anniversary of the then
current Term of Employment.
2.3 RESPONSIBILITIES. During the Term of Employment, the Executive
shall be employed as Executive Vice President of the Company, or in such other
capacity as the Company may direct, and shall have such responsibilities as the
Company may direct from time to time. During the Term of Employment, the
Executive shall devote his full time and attention to the business and affairs
of the Company and shall use his best efforts, skills and abilities to promote
the Company's interests. Anything herein to the contrary notwithstanding, the
Executive shall not be precluded from engaging in charitable and community
affairs and managing his personal investments, including the following outside
interests: serving as a Member of the Board of Directors of Summerlin Medical
Center, a Member of the Board of Directors of the YMCA of Southern Nevada, a
Member of the Board of Directors of the Nevada Taxpayers Association, a Member
of the Board of Directors and the Board of Trustees of the Las Vegas Chamber of
Commerce, a Member of the Executive Search Committee of the Nevada
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Development Authority and a Member of the Board of Trustees of the UNLV
Foundation. The Executive also may serve as a member of the board of directors
of other corporations, subject to the approval of a majority of the Board, which
approval shall not be unreasonably withheld or delayed.
3. COMPENSATION.
3.1 BASE SALARY. During the Term of Employment, the Executive shall be
entitled to receive a base salary (the "Base Salary") payable no less frequently
than in equal bi-weekly installments at an annualized rate of no less than
$375,000. The Base Salary shall be reviewed annually for increase (but not
decrease) in the discretion of the Human Resources Committee of the Board. In
conducting any such annual review, the Human Resources Committee shall take into
account any change in the Executive's responsibilities, increases in the
compensation of other executives of the Company or any Affiliate (or any
competitor(s) of either or both), the performance of the Executive and/or other
pertinent factors. Such increased Base Salary shall then constitute the
Executive's "Base Salary" for purposes of this Agreement.
3.2 ANNUAL BONUS. The Company may pay the Executive an annual
discretionary bonus for each fiscal year ending during the Term of Employment in
an amount that will be determined by the Human Resources Committee based on the
Executive's performance. Any annual bonus that may be awarded to the Executive
shall be paid at the same time as annual bonuses are paid to other senior
officers of the Company, unless the Executive has elected to defer receipt of
all or part of the bonus amounts to which he is entitled in respect of any such
calendar year in accordance with the terms and provisions of any deferred
compensation program maintained by the Company.
3.3 STAY-ON INCENTIVES. The Executive shall be eligible to participate
in the Company's Long-Term Stay-On Performance Incentive Plan pursuant to the
terms of the Plan.
3.4 DEFERRED COMPENSATION. The Executive shall be eligible to
participate in the Company's Deferred Compensation Plan for Executives, and any
other deferred compensation plans that the Company may adopt for executives,
pursuant to the terms of the plans.
4. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
4.1 PENSION AND WELFARE BENEFIT PLANS. During the Term of Employment,
the Executive shall be entitled to participate in all employee benefit programs
made available to the Company's executives or salaried employees generally, as
such programs may be in effect from time to time, including, without limitation,
pension and other retirement plans, profit sharing plans, group life insurance,
group health insurance, accidental death and dismemberment insurance, long-term
disability, sick leave (including salary continuation arrangements), vacations,
holidays and other employee benefit programs sponsored by the Company.
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4.2 ADDITIONAL PENSION AND WELFARE BENEFITS. In addition to the
foregoing, the Company shall provide the Executive with the following benefits:
(a) group health insurance coverage through the Company's Exec-U-Care
Medical Plan, effective as of July 1, 1994, or pursuant to such
other plan or plans as the Company may select from time to time,
and which shall be fully paid for by the Company;
(b) full salary continuation during the first 90 days of any physical
or mental incapacity that prevents the Executive from performing
his duties and, for any Disability that continues thereafter,
benefits pursuant to the Company's Special Long-Term Disability
Plan and any other long-term disability benefits pursuant to any
other disability plan of which the Executive is a participant;
(c) an annual supplemental retirement benefit as set forth in the
Supplemental Management Retirement Plan, in addition to any other
benefit pursuant to any other retirement plan under which the
Executive is covered; and
(d) supplemental life insurance coverage, through an individual
policy, a group policy or a combination thereof, in an aggregate
amount of not less than $4.0 million.
5. BUSINESS EXPENSE REIMBURSEMENT AND PERQUISITES.
5.1 EXPENSE REIMBURSEMENT. During the Term of Employment, the
Executive shall be entitled to receive reimbursement by the Company for all
reasonable out-of-pocket expenses incurred by him in performing services under
this Agreement, subject to providing the proper documentation of said expenses.
5.2 PERQUISITES. During the Term of Employment, the Executive shall
also be entitled to any of the Company's executive perquisites in accordance
with the terms and provisions of the applicable policies, including, without
limitation:
(a) vacation of four weeks per year;
(b) payment or reimbursement of the cost of an annual physical
examination;
(c) payment or reimbursement of initiation fees and annual membership
fees and assessments for a country club, a luncheon club and a
physical fitness program of the Executive's choice; and
(d) payment or reimbursement of fees and expenses, up to a maximum
amount of $2500.00, incurred in connection with having this
Agreement reviewed by legal counsel of his own choosing prior to
execution.
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6. TERMINATION OF EMPLOYMENT.
6.1 TERMINATION DUE TO DEATH OR DISABILITY. The Executive's employment
shall be terminated immediately in the event of his death or Disability. In the
event of a termination due to the Executive's death or Disability, the Executive
or his estate, as the case may be, shall be entitled, in lieu of any other
compensation whatsoever, to:
(a) Base Salary at the rate in effect at the time of his termination
until the date of death or Disability;
(b) any annual bonus awarded but not yet paid;
(c) a Pro Rata Bonus for the fiscal year in which death or Disability
occurs;
(d) in the case of death, any deferred compensation or bonuses,
including interest or other credits on the deferred amounts, to
the extent provided in the plans or programs providing for
deferral, and in the case of Disability, immediate vesting of any
deferred compensation or bonuses, including interest or other
credits on the deferred amounts;
(e) reimbursement of expenses incurred but not paid prior to such
termination of employment; and
(f) such rights to other benefits as may be provided in applicable
plans and programs of the Company, including, without limitation,
applicable employee benefit plans and programs, according to the
terms and provisions of such plans and programs.
6.2 TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate
the Executive's employment for Cause at any time during the Term of Employment
by giving written notice to the Executive. In the event of a termination for
Cause, the Executive shall be entitled, in lieu of any other compensation and
benefits whatsoever, to:
(a) Base Salary at the rate in effect at the time of his termination
through the date of termination of employment;
(b) any annual bonus awarded but not yet paid;
(c) any deferred compensation or bonuses, including interest or other
credits on the deferred amounts, to the extent provided in the
plans or programs providing for deferral;
(d) reimbursement for expenses incurred but not paid prior to such
termination of employment; and
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(e) such rights to other benefits as may be provided in applicable
plans and programs of the Company, including, without limitation,
applicable employee benefit plans and programs, according to the
terms and conditions of such plans and programs.
Notwithstanding anything to the contrary in this SUBSECTION 6.2, if the
Executive's employment is terminated for Cause (i) due to his having been
formally charged pursuant to SUBSECTION 1.5(a) but thereafter said charges are
dismissed or the Executive is acquitted, or (ii) due to his having been
convicted pursuant to SUBSECTION 1.5(a) but said conviction is subsequently
overturned on appeal and he is not required to submit to re-trial within six (6)
months thereafter, the Company shall have the option of reinstating the
Executive with payment of all base salary payments that would have been paid to
him had his employment not been terminated and restoration of all benefits
provided for pursuant to SECTION 4, or making a payment to him of an amount
equal to three times 160 percent of the Executive's Base Salary at the rate in
effect at the time of his termination.
6.3 TERMINATION BY THE EXECUTIVE. The Executive may terminate his
employment on his own initiative for any reason prior to a Change in Control
upon thirty (30) days prior written notice to the Company. Such termination
shall have the same consequences as a termination for Cause under SUBSECTION
6.2.
6.4 TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding any
other provision of this Agreement, the Company may terminate the Executive's
employment without Cause, other than due to death or Disability, at any time
during the Term of Employment by giving written notice to the Executive. In the
event that the Company terminates the Executive's employment without Cause, the
Executive shall be entitled, in lieu of any other compensation and benefits
whatsoever, to:
(a) an amount equal to three times 160 percent of the Executive's
Base Salary at the rate in effect at the time of his termination,
one-third of which shall be paid in a lump sum upon satisfaction
of the conditions set forth in SUBSECTION 8.3, and the other
two-thirds of which shall be paid out in equal bi-weekly
installments for the duration of the Restriction Period;
(b) any annual bonus awarded but not yet paid;
(c) any deferred bonus, including interest or other credits on the
deferred amounts, to the extent provided in the plans or programs
providing for deferral;
(d) exercise, within 180 days, all stock options that have vested
prior to termination, and shall forfeit all stock options that
have not vested;
(e) reimbursement for expenses incurred but not paid prior to such
termination of employment; and
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(f) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
6.5 TERMINATION DUE TO EXPIRATION OF THE TERM OF EMPLOYMENT. If either
Party elects not to extend the initial Term of Employment or any successive Term
of Employment, the Executive shall not be entitled to any additional
compensation after the expiration thereof, but such termination of employment
shall not otherwise affect accrued but unpaid compensation or benefits provided
under this Agreement or pursuant to any Company plan or program.
7. CHANGE IN CONTROL.
7.1 CHANGE IN CONTROL PAYMENT. Immediately upon a Change in Control,
in addition to any other compensation or benefits payable pursuant to this
Agreement or otherwise, the Executive shall be entitled to a payment in cash
equal to three times 160 percent of his Base Salary. Unless otherwise provided
for in this Agreement, the Executive's rights upon a Change in Control to
benefits under programs, plans and policies of the Company shall be determined
according to the terms and provisions of such programs, plans and policies.
7.2 TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR
GOOD REASON AFTER A CHANGE IN CONTROL. If within five years following a Change
in Control, the Executive's employment is terminated by the Company without
Cause or by the Executive for Good Reason, the Executive shall be entitled, in
addition to any payment paid or payable pursuant to SUBSECTION 7.1, but in lieu
of any other compensation and benefits whatsoever, to:
(a) an amount equal to the greater of (i) five times 160 percent of
the Executive's Base Salary at the time of the Change in Control
or (ii) five times 160 percent of the Executive's Base Salary at
the time of the termination of his employment, three-fifths of
which shall be paid in a lump sum upon satisfaction of the
conditions set forth in SUBSECTION 8.3 and two-fifths of which
shall be paid out in equal bi-weekly installments for the
duration of the Restriction Period,
(b) immediate vesting of any restricted stock of the Company held in
the Executive's name or for his benefit;
(c) immediate vesting of any stock options and stock appreciation
rights granted by the Company, which stock options and stock
appreciation rights shall continue to be and shall remain
exercisable until the earlier of (i) five years and (ii) the
remaining term of such stock options and stock appreciation
rights as set forth in the agreement granting, or otherwise
awarding, such stock option or stock appreciation right as if no
termination had taken place;
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(d) immediate vesting and cash-out of any phantom stock units granted
to the Executive;
(e) immediate vesting and pay out of any shares awarded to the
Executive pursuant to the Company's Long-Term Stay-On Performance
Incentive Plan;
(f) immediate vesting of the Executive's supplemental retirement
benefit as set forth in the Supplemental Management Retirement
Plan;
(g) continued funding of the Executive's split dollar life insurance
policy as if the Executive were employed by the Company through
the maturity date of such policy or, at the Company's option,
payment in full of all premium obligations under such policy; and
(h) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
7.3 TERMINATION BY EXECUTIVE WITHOUT GOOD REASON AFTER A CHANGE IN
CONTROL. If the Executive terminates his employment without Good Reason within
ninety (90) days following the first anniversary of a Change in Control, the
Executive shall be entitled, in addition to any payment paid or payable pursuant
to SUBSECTION 7.1, but in lieu of any other compensation and benefits
whatsoever, to:
(a) an amount equal to the greater of (i) three times 160 percent of
the Executive's Base Salary at the time of the Change in Control
or (ii) three times 160 percent of the Executive's Base Salary at
the time of the termination of his employment, one-third of which
shall be paid in a lump sum upon satisfaction of the conditions
set forth in SUBSECTION 8.3 and two-thirds of which shall be paid
out in equal bi-weekly installments for the duration of the
Restriction Period;
(b) immediate vesting of any stock options and stock appreciation
rights granted by the Company, which stock options and stock
appreciation rights shall continue to be and shall remain
exercisable until the earlier of (i) three years and (ii) the
remaining term of such stock options and stock appreciation
rights as set forth in the agreement granting, or otherwise
awarding, such stock option or stock appreciation right as if no
termination had taken place;
(c) immediate vesting and cash-out of any phantom stock units granted
to the Executive;
(d) immediate vesting of the Executive's supplemental retirement
benefit as set forth in the Supplemental Management Retirement
Plan;
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(e) continued funding of the Executive's split dollar life insurance
policy as if the Executive were employed by the Company through
the maturity date of such policy or, at the Company's option,
payment in full of all premium obligations under such policy; and
(f) continuation of the Executive's medical insurance, at the
Company's expense, for 18 months or, at the Company's option,
payment to the Executive of the economic equivalent thereof.
7.4 TERMINATION FOR OTHER REASONS AFTER A CHANGE IN CONTROL. If the
Executive's employment is terminated after a Change in Control for any reason
not otherwise provided for in this SECTION 7, his rights shall be determined in
accordance with the applicable SUBSECTION of SECTION 6.
8. CONDITIONS TO PAYMENTS UPON TERMINATION.
8.1 TIMING OF PAYMENTS. Unless otherwise provided herein, any payments
to which the Executive shall be entitled pursuant to SECTIONS 6 and 7 shall be
payable upon the satisfaction of the conditions set forth in SUBSECTION 8.3.
8.2 NO MITIGATION; NO OFFSET. In the event of any termination of the
Executive's employment under SECTIONS 6 OR 7, the Executive shall be under no
obligation to seek other employment and there shall be no offset against amounts
due to the Executive on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. Notwithstanding any
contrary provision contained herein, in the event of any termination of
employment of the Executive, the exclusive remedies available to the Executive
shall be the amounts due under SECTIONS 6 OR 7, which are in the nature of
severance payments, or liquidated damages, or both, and are not in the nature of
a penalty. In the event of a termination of this Agreement, neither Party shall
publish in any way or make any negative comment or statement about the other
Party or concerning the reasons for such termination. The provisions of this
SUBSECTION 8.2 shall survive the expiration or earlier termination of this
Agreement.
8.3 GENERAL RELEASE. No payments or benefits payable to the Executive
upon the termination of his employment pursuant to SECTIONS 6 OR 7 shall be made
to the Executive unless and until he executes a general release substantially in
the form annexed to this Agreement as Exhibit B and such general release becomes
effective pursuant to its terms.
8.4 COMPLIANCE WITH THE AGREEMENT. No payments or benefits payable to
the Executive upon the termination of his employment pursuant to SECTIONS 6 OR 7
shall be made to the Executive if he fails to comply with all of the terms and
conditions of this Agreement, including, without limitation, SECTIONS 11 AND 12.
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8.5 CONTINUING OBLIGATIONS OF EXECUTIVE. No act or omission by the
Executive in breach of this Agreement, including, without limitation his failure
to execute the general release and the resulting forfeiture of termination
payments, shall be deemed to permit the Executive to forego or waive such
payments in order to avoid his obligations under SECTION 11.
9. SPECIAL REIMBURSEMENT.
9.1 If any payment or benefit paid or payable, or received or to be
received, by or on behalf of the Executive in connection with a Change in
Control pursuant to SUBSECTION 7.1 or the termination of the Executive's
employment pursuant to SUBSECTION 7.2 , whether any such payments or benefits
are pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Affiliate, any Person, or otherwise (the "TOTAL
PAYMENTS"), will or would be subject to the excise tax imposed under SECTION
4999 of the Code (the "EXCISE TAX"), the Company shall pay to the Executive an
additional amount (the "GROSS-UP PAYMENT") such that, after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes) imposed upon or in respect of the Total Payments and the Gross-Up
Payments, including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and any Excise Tax imposed thereon, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Total Payments.
9.2 For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax,
(a) the Total Payments shall be treated as "parachute payments"
within the meaning of SECTION 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of SECTION
280G(b)(1) of the Code shall be treated as subject to the Excise
Tax, unless in the opinion of tax counsel selected by the Company
and reasonably acceptable to the Executive (which opinion shall
be provided to the Executive) such Total Payments (in whole or in
part) (i) do not constitute parachute payments, including
(without limitation) by reason of SECTION 280G(b)(4)(A) of the
Code, (ii) such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered,
within the meaning of SECTION 280G(b)(4)(B) of the Code, or (iii)
are not, in the opinion of legal counsel, otherwise subject to
the Excise Tax, and
(b) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of SECTIONS 280G(d)(3) and (4)
of the Code.
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9.3 In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder, the Executive shall repay to
the Company, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at the rate provided in
SECTION 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the initial
Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
accordance with SUBSECTION 9.1 in respect of such excess Excise Tax (plus any
interest, penalties or additions payable by the Executive with respect to such
excess Excise Tax) at the time that the amount of such excess Excise Tax is
finally determined. The Executive and the Company shall each reasonably
cooperate with each other in connection with any administrative or judicial
proceedings concerning the existence or amount of any such subsequent liability
for Excise Tax with respect to the Total Payments.
10. INDEMNIFICATION.
10.1 GENERAL. The Company agrees that if the Executive is made a party
or is threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (an "INDEMNIFIABLE ACTION"), by
reason of the fact that he is or was a director or officer of the Company or is
or was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether or not the basis of such Indemnifiable Action is alleged action
in an official capacity as a director, officer, member, employee or agent, while
serving as a director, officer, member, employee or agent, he shall be
indemnified and held harmless by the Company to the fullest extent permitted by
Nevada law and the Company's by-laws, as the same exist or may hereafter be
amended, against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by the Executive in connection
therewith.
10.2 PROCEDURE. The indemnification provided pursuant to this SECTION
10 shall be subject to the following conditions:
(a) The Executive must promptly give the Company written notice of
any actual or threatened Indemnifiable Action;
(b) The Company will be permitted, at its option, to participate in,
or to assume, the defense of any Indemnifiable Action;
(c) The Executive must provide reasonable cooperation to the Company
in the defense of any Indemnifiable Action; and
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(d) The Executive must refrain from settling any Indemnifiable Action
without obtaining the Company's prior written consent, which
consent shall not be unreasonably withheld.
10.3 ADVANCEMENT OF COSTS AND EXPENSES. The Company agrees to advance
all costs and expenses referred to in SUBSECTION 10.1; provided, however, that
the Executive agrees to repay to the Company all amounts so advanced in the
event that the Company reasonably determines in good faith that any acts or
omissions by the Executive were:
(a) in knowing violation of any agreement between the Executive and
the Company;
(b) in bad faith or involving intentional misconduct or a knowing
violation of law or that the Executive personally gained a
financial profit or other advantage to which he was not legally
entitled; or
(c) for which a court, having jurisdiction in the matter, determines
that indemnification is not lawful.
10.4 NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
payment of expenses incurred in defending an Indemnifiable Action in advance of
its final disposition conferred in this SECTION 10 shall not be exclusive of any
other right which the Executive may have or hereafter may acquire under any
statute, provision of the certificate of incorporation or by-laws of the
Company, agreement, vote of stockholders or disinterested directors or
otherwise.
10.5 D&O INSURANCE. The Company will maintain a directors' and
officers' liability insurance policy covering the Executive that provides
coverage that is reasonable in relation to the Executive's position during the
Term of Employment.
11. COVENANT NOT ENGAGE IN CERTAIN ACTS.
11.1 GENERAL. The Parties understand and agree that the purpose of the
restrictions contained in this SECTION 11 is to protect the goodwill and other
legitimate business interests of the Company, and that the Company would not
have entered into this Agreement in the absence of such restrictions. The
Executive acknowledges and agrees that the restrictions are reasonable and do
not, and will not, unduly impair his ability to make a living after the
termination of his employment with the Company. The provisions of this SECTION
11 shall survive the expiration or sooner termination of this Agreement.
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11.2 NON-ASSISTANCE; NON-DIVERSION. In consideration for this
Agreement to employ the Executive and the other valuable consideration provided
hereunder, the Executive agrees and covenants that during the Term of Employment
and during the Restriction Period, and except when acting on behalf of the
Company or on behalf of any Affiliate, the Executive shall not, directly or
indirectly, for himself or any third party, or alone or as a member of a
partnership, or as an officer, director, shareholder or otherwise, engage in the
following acts:
(a) divert or attempt to divert any existing business of the Company
or any Affiliate;
(b) accept any position or affiliation with, or render any services
on behalf of, any Competing Business; or
(c) hire or retain any employee of the Company or any Affiliate to
provide services for any other Person or induce, solicit, attempt
to solicit, encourage, divert, cause or attempt to cause any
employee or prospective employee of the Company or any Affiliate
to (i) terminate and/or leave such employment, or (ii) accept
employment with anyone other than the Company or an Affiliate.
11.3 CESSATION/REIMBURSEMENT OF PAYMENTS. If the Executive violates
any provision of this SECTION 11, the Company may, upon giving written notice to
the Executive, immediately cease all payments and benefits that it may be
providing to the Executive pursuant to SECTION 3, SECTION 6 or SUBSECTION 7.2,
and the Executive may be required to reimburse the Company for any payments
received from, and the cash value of any benefits provided by, the Company
between the first day of the violation and the date such notice is given;
provided, however, that the foregoing shall be in addition to such other
remedies as may be available to the Company and shall not be deemed to permit
the Executive to forego or waive such payments in order to avoid his obligations
under this SECTION 11.
11.4 SURVIVAL. The Executive agrees that the provisions of this
SECTION 11 shall survive the termination of this Agreement and the termination
of the Executive's employment.
12. CONFIDENTIAL INFORMATION AND COMPANY PROPERTY.
12.1 CONFIDENTIAL INFORMATION. The Executive understands and
acknowledges that Confidential Information constitutes a valuable asset of the
Company and its Affiliates and may not be converted to the Executive's own or
any third party's use. Accordingly, the Executive hereby agrees that he shall
not directly or indirectly, during the Term of Employment or any time
thereafter, disclose any Confidential Information to any Person not expressly
authorized by the Company to receive such Confidential Information. The
Executive further agrees that he shall not directly or indirectly, during the
Term of Employment or any time thereafter, use or make use of any Confidential
Information in connection with any business activity other than that of the
Company. The Parties acknowledge and agree that this Agreement
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is not intended to, and does not, alter either the Company's rights or the
Executive's obligations under any state or federal statutory or common law
regarding trade secrets and unfair trade practices.
12.2 COMPANY PROPERTY. All Company Property is and shall remain
exclusively the property of the Company. Unless authorized in writing to the
contrary, the Executive shall promptly, and without charge, deliver to the
Company on the termination of employment hereunder, or at any other time the
Company may so request, all Company Property that the Executive may then possess
or have under his control.
12.3 REQUIRED DISCLOSURE. In the event the Executive is required by
law or court order to disclose any Confidential Information or to produce any
Company Property, the Executive shall promptly notify the Company of such
requirement and provide the Company with a copy of any court order or of any law
which requires such disclosure and, if the Company so elects, to the extent
permitted by applicable law, give the Company an adequate opportunity, at its
own expense, to contest such law or court order prior to any such required
disclosure or production by the Executive.
12.4 SURVIVAL. The Executive agrees that the provisions of this
SECTION 12 shall survive the termination of this Agreement and the termination
of the Executive's employment.
13. MUTUAL ARBITRATION AGREEMENT.
13.1 ARBITRABLE CLAIMS. All disputes between the Executive (and his
attorneys, successors, and assigns) and the Company (and its trustees,
beneficiaries, officers, directors, managers, affiliates, employees, agents,
successors, attorneys, and assigns) relating in any manner whatsoever to the
employment or termination of the Executive, including, without limitation, all
disputes arising under this Agreement ("ARBITRABLE CLAIMS"), shall be resolved
by binding arbitration as set forth in this SECTION 13 (the "MUTUAL ARBITRATION
AGREEMENT"). Arbitrable Claims shall include, but are not limited to, claims for
compensation, claims for breach of any contract or covenant (express or
implied), and tort claims of all kinds, as well as all claims based on any
federal, state, or local law, statute or regulation, but shall not include the
claims based on the statutes enumerated in SUBSECTION 13.4 or the Company's
right to seek injunctive relief as provided in SECTION 15. Arbitration shall be
final and binding upon the Parties and shall be the exclusive remedy for all
Arbitrable Claims. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY
JUDGE OR JURY IN REGARD TO ARBITRABLE CLAIMS, EXCEPT AS PROVIDED BY SECTION
13.4.
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13.2 PROCEDURE. Arbitration of Arbitrable Claims shall be in
accordance with the National Rules for the Resolution of Employment Disputes of
the American Arbitration Association, as amended, and as augmented in this
Agreement. Either Party may bring an action in court to compel arbitration under
this Agreement and to enforce an arbitration award. Otherwise, neither Party
shall initiate or prosecute any lawsuit, appeal or administrative action in any
way related to an Arbitrable Claim. The initiating Party must file and serve an
arbitration claim within sixty (60) days of learning the facts giving rise to
the alleged claim. All arbitration hearings under this Agreement shall be
conducted in Las Vegas, Nevada. The Federal Arbitration Act shall govern the
interpretation and enforcement of this Agreement. The fees of the arbitrator
shall be divided equally between both Parties.
13.3 CONFIDENTIALITY. All proceedings and all documents prepared in
connection with any Arbitrable Claim shall be confidential and, unless otherwise
required by law, the subject matter and content thereof shall not be disclosed
to any Person other than the parties to the proceedings, their counsel,
witnesses and experts, the arbitrator and, if involved, the court and court
staff.
13.4 APPLICABILITY. This SECTION 13 shall apply to all disputes under
this Agreement other than:
(a) disputes relating to the enforcement of the Company's rights
under SECTIONS 11 AND 12 of this Agreement; and
(b) claims brought under Title VII of the Civil Rights Act of 1964,
the Civil Rights Act of 1866, the Age Discrimination in
Employment Act of 1967 (including the Older Workers Benefit
Protection Act), and the Americans with Disabilities Act, the
Fair Labor Standards Act, the Equal Pay Act, the Family and
Medical Leave Act and the Employee Retirement Income Security Act
of 1974, the Nevada Fair Employment Practices Act, the Missouri
Human Rights Act or any other applicable state or local fair
employment law.
13.5 ACKNOWLEDGEMENTS. The Executive acknowledges that he:
(a) has carefully read this SECTION 13;
(b) understands its terms and conditions; and
(c) has entered into this Mutual Arbitration Agreement voluntarily
and not in reliance on any promises or representations made by
the Company other than those contained in this Mutual Arbitration
Agreement.
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14. NOTICES. All notices, demands and requests required or permitted to be
given to either Party under this Agreement shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the Party concerned at the address indicated below or to such changed address as
such Party may subsequently give notice of:
If to the Company: Station Casinos, Inc.
2411 West Sahara Avenue
Las Vegas, NV 89102
Attn: Scott M Nielson
With a copy to: Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street, 30th Floor
Los Angeles, CA 90017
Attn: Kenneth J. Baronsky
If to the Executive: Mark E. Brown
9049 Waterfield Court
Las Vegas, NV 89134
15. RIGHT TO SEEK INJUNCTIVE RELIEF. The Executive acknowledges that a
violation on his part of any of the covenants contained in SECTIONS 11 AND 12
would cause immeasurable and irreparable damage to the Company. The Executive
accordingly agrees and hereby grants his consent that, without limiting the
remedies available to the Company, any actual or threatened violation of such
covenants may be enforced by injunctive relief or by other equitable remedies
issued or ordered by any court of competent jurisdiction.
16. EMPLOYEE BENEFIT PLAN DOCUMENTS. In the event that any terms and
provisions of this Agreement conflict with the terms and provisions of any
employee benefit plan document, the terms and provisions of this Agreement shall
govern, and the Company shall take any and all actions that may be necessary,
including amendment of any plan document, to effect the provision of benefits
expressly provided upon termination of the Executive's employment pursuant to
SECTIONS 6 and 7.
17. BENEFICIARIES/REFERENCES. The Executive shall be entitled to select a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following the Executive's death, and may change such election, by
giving the Company written notice thereof. In the event of the Executive's death
or a judicial determination of his incompetence, reference in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiaries,
estate or other legal representative.
18. SURVIVORSHIP. The respective rights and obligations of the Parties
hereunder shall survive the expiration or earlier termination of this Agreement
to the extent necessary to the intended preservation of such rights and
obligations. The provisions of this SECTION 18 are in addition to the
survivorship provisions of any other section of this Agreement.
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19. REPRESENTATIONS AND WARRANTIES. Each Party represents and warrants that
he or it is fully authorized and empowered to enter into this Agreement and that
the performance of his or its obligations under this Agreement will not violate
any Agreement between that Party and any other Person.
20. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the Parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings, whether
written or oral, express or implied, between the Parties with respect hereto. No
representations, inducements, promises or agreements not embodied herein shall
be of any force or effect.
21. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors, heirs and
assigns; PROVIDED, HOWEVER, that no rights or obligations of the Executive under
this Agreement may be assigned or transferred by the Executive, other than
rights to compensation and benefits hereunder, which may be transferred only by
will or operation of law and subject to the limitations of this Agreement; and
PROVIDED, FURTHER, that no rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company, except that such rights
or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale or
liquidation of all or substantially all of the assets of the Company, provided
that the assignee or transferee is the successor to all or substantially all of
the assets of the Company and such assignee or transferee assumes the
liabilities, obligations and duties of the Company under this Agreement, either
contractually or as a matter of law.
22. AMENDMENT OR WAIVER. No provision in this Agreement may be amended or
waived unless such amendment or waiver is agreed to in writing, signed by both
Parties. No waiver by one Party of any breach by the other Party of any
condition or provision of this Agreement to be performed by such other Party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same or any prior or subsequent time. No failure of the Company to exercise
any power given it hereunder or to insist upon strict compliance by the
Executive with any obligation hereunder, and no custom or practice at variance
with the terms hereof, shall constitute a waiver of the right of the Company to
demand strict compliance with the terms hereof.
23. SEVERABILITY. In the event that any provision or portion of this
Agreement, except SECTION 6, SECTION 7 and SECTION 11, shall be determined to be
invalid or unenforceable for any reason, in whole or in part, the remaining
provisions of this Agreement shall be unaffected thereby and shall remain in
full force and effect to the fullest extent permitted by law. If either SECTION
6, SECTION 7 or SECTION 11 is determined to be invalid or unenforceable for any
reason, in whole or in part, either Party may terminate this Agreement without
further obligations or duties hereunder.
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24. GOVERNING LAW. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Nevada without reference
to the principles of conflict of laws thereof. In the event of any dispute or
controversy arising out of or relating to this Agreement that is not an
arbitrable claim, the Parties mutually and irrevocably consent to, and waive any
objection to, the exclusive jurisdiction of any court of competent jurisdiction
in Clark County, Nevada, to resolve such dispute or controversy.
25. HEADINGS. The headings of the sections and SUBSECTIONs contained in
this agreement are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.
26. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which shall constitute one and the
same Agreement with the same effect as if all Parties had signed the same
signature page. Any signature page of this Agreement may be detached from any
counterpart of this Agreement and reattached to any other counterpart of this
Agreement identical in form hereto but having attached to it one or more
additional signature pages.
27. ACKNOWLEDGEMENT. The Executive represents and acknowledges the
following:
(a) he has carefully read this Agreement in its entirety;
(b) he understands the terms and conditions contained herein;
(c) he has had the opportunity to review this Agreement with legal
counsel of his own choosing and has not relied on any statements
made by the Company or its legal counsel as to the meaning of any
term or condition contained herein or in deciding whether to
enter into this Agreement; and
(d) he is entering into this Agreement knowingly and voluntarily.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
STATION CASINOS, INC.
By: /s/ GLENN C. CHRISTENSON
-------------------------
Name: Glenn C. Christenson
Title: Executive Vice President, Chief
Financial Officer, Chief
Administrative Officer and
Treasurer
/s/ MARK E. BROWN
---------------------------
Mark E. Brown
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EXHIBIT "B"
GENERAL RELEASE AND COVENANT NOT TO SUE
This GENERAL RELEASE AND COVENANT NOT TO SUE (this "Release") is
executed and delivered by MARK E. BROWN (the "Executive") to STATION CASINOS,
INC., a Nevada corporation (the "Company").
In consideration of the agreement by the Company to provide the
separation payments and benefits in SECTION 6 and SECTION 7 of the Employment
Agreement between the Executive and the Company, dated as of August 2, 1999 (the
"Employment Agreement"), and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Executive hereby
agrees as follows:
1. RELEASE AND COVENANT. THE EXECUTIVE, OF HIS OWN FREE WILL,
VOLUNTARILY RELEASES AND FOREVER DISCHARGES THE COMPANY AND ITS SUBSIDIARIES AND
AFFILIATES, AND EACH OF THEIR RESPECTIVE PAST AND PRESENT AGENTS, EMPLOYEES,
MANAGERS, REPRESENTATIVES, OFFICERS, DIRECTORS, ATTORNEYS, ACCOUNTANTS,
TRUSTEES, SHAREHOLDERS, PARTNERS, INSURERS, HEIRS, PREDECESSORS-IN-INTEREST,
ADVISORS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE "RELEASED PARTIES") FROM,
AND COVENANTS NOT TO SUE OR PROCEED AGAINST ANY OF THE FOREGOING ON THE BASIS
OF, ANY AND ALL PAST OR PRESENT CAUSES OF ACTION, SUITS, AGREEMENTS OR OTHER
RIGHTS OR CLAIMS WHICH THE EXECUTIVE, HIS DEPENDENTS, RELATIVES, HEIRS,
EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS HAS OR HAVE AGAINST ANY OF THE
RELEASED PARTIES UPON OR BY REASON OF ANY MATTER ARISING OUT OF HIS EMPLOYMENT
BY THE COMPANY AND THE CESSATION OF SAID EMPLOYMENT, AND INCLUDING, BUT NOT
LIMITED TO, ANY ALLEGED VIOLATION OF THE CIVIL RIGHTS ACTS OF 1964 AND 1991, THE
EQUAL PAY ACT OF 1963, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967
(INCLUDING THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990), THE REHABILITATION
ACT OF 1973, THE FAMILY AND MEDICAL LEAVE ACT OF 1993, THE AMERICANS WITH
DISABILITIES ACT OF 1990, THE EMPLOYMENT RETIREMENT INCOME SECURITY ACT OF 1974,
THE NEVADA FAIR EMPLOYMENT PRACTICES ACT, THE MISSOURI HUMAN RIGHTS ACT, THE
LABOR LAWS OF THE UNITED STATES, NEVADA AND MISSOURI, AND ANY OTHER FEDERAL,
STATE OR LOCAL LAW, REGULATION OR ORDINANCE, OR PUBLIC POLICY, CONTRACT OR TORT
LAW, HAVING ANY BEARING WHATSOEVER ON THE TERMS AND CONDITIONS OR CESSATION OF
HIS EMPLOYMENT WITH THE COMPANY.
<PAGE>
2. DUE CARE. THE EXECUTIVE ACKNOWLEDGES THAT HE HAS RECEIVED A COPY OF
THIS RELEASE PRIOR TO ITS EXECUTION AND HAS BEEN ADVISED HEREBY OF HIS
OPPORTUNITY TO REVIEW AND CONSIDER THIS RELEASE FOR TWENTY-ONE (21) DAYS PRIOR
TO ITS EXECUTION. THE EXECUTIVE FURTHER ACKNOWLEDGES THAT HE HAS BEEN ADVISED
HEREBY TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS RELEASE. THE
EXECUTIVE ENTERS INTO THIS RELEASE HAVING FREELY AND KNOWINGLY ELECTED, AFTER
DUE CONSIDERATION, TO EXECUTE THIS RELEASE AND TO FULFILL THE PROMISES SET FORTH
HEREIN. THIS RELEASE SHALL BE REVOCABLE BY THE EXECUTIVE DURING THE SEVEN (7)
DAY PERIOD FOLLOWING ITS EXECUTION, AND SHALL NOT BECOME EFFECTIVE OR
ENFORCEABLE UNTIL THE EXPIRATION OF SUCH SEVEN (7) DAY PERIOD. IN THE EVENT OF
SUCH A REVOCATION, THE EXECUTIVE SHALL NOT BE ENTITLED TO THE CONSIDERATION FOR
THIS RELEASE SET FORTH ABOVE.
3. RELIANCE BY THE EXECUTIVE. THE EXECUTIVE ACKNOWLEDGES THAT, IN HIS
DECISION TO ENTER INTO THIS RELEASE, HE HAS NOT RELIED ON ANY REPRESENTATIONS,
PROMISES OR ARRANGEMENT OF ANY KIND, INCLUDING ORAL STATEMENTS BY
REPRESENTATIVES OF THE COMPANY, EXCEPT AS SET FORTH IN THIS RELEASE.
4. MISCELLANEOUS. THE EXECUTIVE SHALL NOT DISCLOSE THE EXISTENCE OR
CONTENTS OF THIS RELEASE TO ANYONE OTHER THAN HIS IMMEDIATE FAMILY, ACCOUNTANTS
OR ATTORNEYS, AND THE EXECUTIVE SHALL INSTRUCT SUCH THIRD PARTIES NOT TO
DISCLOSE THE SAME. THIS RELEASE SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA WITHOUT REFERENCE
TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF. IF ANY PROVISION OF THIS RELEASE
IS HELD INVALID OR UNENFORCEABLE FOR ANY REASON, THE REMAINING PROVISIONS SHALL
BE CONSTRUED AS IF THE INVALID OR UNENFORCEABLE PROVISION HAD NOT BEEN INCLUDED.
ii
<PAGE>
This GENERAL RELEASE AND COVENANT NOT TO SUE is executed by the
Executive and delivered to the Company on ____________________________.
Executive
- ------------------------------
Name: Mark E. Brown
STATE OF )
-------------------------- ) ss:
COUNTY OF )
-------------------------
On this _____ day of ________________, ____, before me, a Notary
Public of the State of _______________, personally appeared ____________, to me
known and known to me to be the person described and who executed the foregoing
release and did then and there acknowledge to me that he voluntarily executed
the same.
- -----------------------------
NOTARY PUBLIC
[NOT TO BE SIGNED OR NOTARIZED UPON EXECUTION OF EMPLOYMENT AGREEMENT]
iii
<PAGE>
EXHIBIT 10.23
April 1, 1999
William W. Warner
8504 Estrelita Drive
Las Vegas, NV 89128
RE: LONG-TERM STAY-ON PERFORMANCE INCENTIVE PAYMENT.
Dear Bill:
This letter (the "AGREEMENT") sets forth the terms and conditions
pursuant to which Station Casinos, Inc. (the "COMPANY") has decided to award you
a Long-Term Stay-On Performance Incentive Payment (the "LTSO Payment").
1. PURPOSE. The purpose of the LTSO Payment is to advance the interests of
the Company by providing you with a cash incentive to remain with the
Company through April 1, 2006.
2. AMOUNT. Subject to the conditions contained herein, the Company will
provide you with a LTSO Payment in the amount of $500,000 as follows:
(a) On April 1, 2003 (the "FIRST AWARD DATE"), you will be paid
one-half of the LTSO Payment, minus the deductions required by
law, provided that you have remained continuously employed by
the Company from April 1, 1999 through March 31, 2003. In the
event that your employment or service with the Company is
terminated for any reason, including, but not limited to, your
death, disability, resignation or retirement, at any time
before the First Award Date, you will forfeit any and all
eligibility for payments pursuant to this Agreement.
(b) On April 1, 2006 (the "SECOND AWARD DATE"), you will be paid
the second half of the LTSO Payment, minus the deductions
required by law, provided that you have remained continuously
employed by the Company from April 1, 1999 through March 31,
2006. In the event that your employment or service with the
Company is terminated for any reason, including, but not
limited to, your death, disability, resignation or retirement,
at any time after the First Award Date but before the Second
Award Date, you will forfeit any and all eligibility for
remaining payments pursuant to this Agreement.
<PAGE>
Long-Term Stay-On Performance Plan
April 1, 1999
Page 2
- --------------------------------------------------------------------------------
3. EMPLOYMENT AGREEMENT. The LTSO Payment is conditioned upon your signing
an employment agreement with the Company, which shall be dated as of
December 1, 1999 (the "EMPLOYMENT AGREEMENT"). If prior to the First
Award Date or the Second Award Date, you breach any term of the
Employment Agreement, you will forfeit any and all rights to any and
all payments under this Agreement as of the date of such breach.
4. RIGHT TO CONTINUED EMPLOYMENT OR SERVICE. Nothing in this Agreement
shall confer on you any right to continue in the employ of or service
to the Company or, except as may otherwise be limited by a written
agreement between the Company and you, in any way affect the Company's
right to terminate your employment or service without prior notice at
any time for any or no reason.
5. CONFIDENTIALITY. As a condition of your receipt of the LTSO Payment,
you agree that you will not disclose the contents of this Agreement,
including the amount of the LTSO Payment, to anyone except your
immediate family, accountant or attorney without the prior written
consent of the Company. If you breach this obligation, you will forfeit
any and all rights to any and all payments under this Agreement.
6. GOVERNING LAW. The validity, construction, interpretation and effect of
this Agreement 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.
7. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors, heirs and assigns; provided, however, that none of your
rights or obligations under this Agreement may be assigned or
transferred by you, other than rights to compensation and benefits
hereunder, which may be transferred only by will or operation of law
and subject to the limitations of this Agreement.
STATION CASINOS, INC.,
A Nevada corporation
By: /s/ GLENN C. CHRISTENSON
---------------------------
Glenn C. Christenson
Executive Vice President
Chief Financial Officer
Chief Administrative Officer
By signing below, you hereby acknowledge and agree to all of the foregoing terms
and conditions of this Agreement.
AGREED TO AND ACCEPTED BY:
/s/ WILLIAM W. WARNER
- ----------------------------
William W. Warner
<PAGE>
EXHIBIT 10.24
August 2, 1999
Mark E. Brown
9049 Waterfield Court
Las Vegas, NV 89134
RE: LONG-TERM STAY-ON PERFORMANCE INCENTIVE PAYMENT.
Dear Mark:
This letter (the "AGREEMENT") sets forth the terms and conditions pursuant
to which Station Casinos, Inc. (the "COMPANY") has decided to award you a
Long-Term Stay-On Performance Incentive Payment (the "LTSO Payment").
1. PURPOSE. The purpose of the LTSO Payment is to advance the interests of the
Company by providing you with a cash incentive to remain with the Company
through August 2, 2006.
2. AMOUNT. Subject to the conditions contained herein, the Company will
provide you with a LTSO Payment in the amount of $500,000 as follows:
(a) On August 2, 2003 (the "FIRST AWARD DATE"), you will be paid one-half
of the LTSO Payment, minus the deductions required by law, provided
that you have remained continuously employed by the Company from
August 2,1999 through August 1, 2003. In the event that your
employment or service with the Company is terminated for any reason,
including, but not limited to, your death, disability, resignation or
retirement, at any time before the First Award Date, you will forfeit
any and all eligibility for payments pursuant to this Agreement.
(b) On August 2, 2006 (the "SECOND AWARD DATE"), you will be paid the
second half of the LTSO Payment, minus the deductions required by law,
provided that you have remained continuously employed by the Company
from August 2, 1999 through August 1, 2006. In the event that your
employment or service with the Company is terminated for any reason,
including, but not limited to, your death, disability, resignation or
retirement, at any time after the First Award Date but before the
Second Award Date, you will forfeit any and all eligibility for
remaining payments pursuant to this Agreement.
<PAGE>
Long-Term Stay-On Performance Plan
August 2, 1999
Page2
- --------------------------------------------------------------------------------
3. EMPLOYMENT AGREEMENT. The LTSO Payment is conditioned upon your signing an
employment agreement with the Company, which shall be dated as of August 2,
1999 (the "EMPLOYMENT AGREEMENT"). If prior to the First Award Date or the
Second Award Date, you breach any term of the Employment Agreement, you
will forfeit any and all rights to any and all payments under this
Agreement as of the date of such breach.
4. RIGHT TO CONTINUED EMPLOYMENT OR SERVICE. Nothing in this Agreement shall
confer on you any right to continue in the employ of or service to the
Company or, except as may otherwise be limited by a written agreement
between the Company and you, in any way affect the Company's right to
terminate your employment or service without prior notice at any time for
any or no reason.
5. CONFIDENTIALITY. As a condition of your receipt of the LTSO Payment, you
agree that you will not disclose the contents of this Agreement, including
the amount of the LTSO Payment, to anyone except your immediate family,
accountant or attorney without the prior written consent of the Company. If
you breach this obligation, you will forfeit any and all rights to any and
all payments under this Agreement.
6. GOVERNING LAW. The validity, construction, interpretation and effect of
this Agreement 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.
7. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
heirs and assigns; provided, however, that none of your rights or
obligations under this Agreement may be assigned or transferred by you,
other than rights to compensation and benefits hereunder, which may be
transferred only by will or operation of law and subject to the limitations
of this Agreement.
STATION CASINOS, INC.,
A Nevada corporation
By: /s/ GLENN C. CHRISTENSON
---------------------------
Glenn C. Christenson
Executive Vice President
Chief Financial Officer
Chief Administrative Officer
By signing below, you hereby acknowledge and agree to all of the foregoing terms
and conditions of this Agreement.
AGREED TO AND ACCEPTED BY:
/s/ MARK E. BROWN
- ----------------------------------
Mark E. Brown
<PAGE>
EXHIBIT 10.25
STATION CASINOS, INC.
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
(As Amended and Restated)
Effective September 30, 1999
* * * * *
SECTION 1. PURPOSE. The purpose of the Plan is for the Company to
provide certain select executives of the Company with an opportunity to defer
receipt of compensation for services rendered to the Company. It is intended
that the Plan shall aid the Company in retaining and attracting employees whose
abilities, experience and judgment can contribute to the continued progress of
the Company. This Plan is a continuation of the Company's Deferred Compensation
Plan for Executives originally effective November 30, 1994.
SECTION 2. DEFINITIONS.
(a) "Account(s)" means the Deferred Compensation Account, the
Supplemental Contributions Account and/or the Matching Contributions Account, as
the context requires.
(b) "Bonus" means any special and/or discretionary
compensation amounts in excess of Salary, determined by the Company to be
payable to a Participant with respect to services rendered.
(c) "Change of Control" means and shall be deemed to have
occurred if a "change of control," as the same is defined in the Indenture dated
March 29, 1996, governing the
<PAGE>
Company's $198,000,000 principal amount of Senior Subordinated Notes Due 2006
and as in effect on the date of the initial issuance of such securities,
occurs.
(d) "Committee" means the Human Resources Committee of the
Company's Board of Directors.
(e) "Company" means Station Casinos, Inc.
(f) "Continuous Service" means a Participant's uninterrupted
service with the Company or any affiliate whether before or after the date of
original effectiveness of the Plan. Service shall not be deemed interrupted by a
leave of absence authorized by the Committee, an absence due to mandatory
military service or an absence due to disability while the Participant is
receiving benefits under any short-term or long-term disability plan or
arrangement maintained or sponsored by the Company.
(g) "Deferred Compensation" means the sum of Salary and Bonus
that are the subject of an elective deferral under Section 5.
(h) "Deferred Compensation Account" means the bookkeeping
account established for a Participant under the Plan and to which Deferred
Compensation amounts with respect to such Participant are credited from time to
time, as adjusted from time to time as provided in the Plan.
(i) "Deferred Compensation Election Form" means the form
pursuant to which Eligible Executives elect to become Participants in the Plan
and defer compensation thereunder, in such form as the Committee determines from
time to time in its sole discretion.
(j) "Disability" means mental or physical disability as
determined by the Committee in accordance with standards and procedures similar
to those under the Company's broad-based regular long-term disability plan, if
any. At any time that the Company does not
2
<PAGE>
maintain such a long-term disability plan, Disability shall mean the
inability of a Participant, as determined by the Committee, substantially to
perform such Participant's regular duties and responsibilities due to a
medically determinable physical or mental illness which has lasted (or can
reasonably be expected to last) for a period of six (6) consecutive months.
(k) "Eligible Executive" means any employee of the Company
being paid Salary at a rate in excess of the amount specified in Section
401(a)(17) of the Internal Revenue Code of 1986, as amended, and who is selected
for participation by the Committee.
(l) "Matching Contributions Account" means the bookkeeping
account established for a Participant under the Plan and to which the Company's
matching contributions under Section 5(b) of the Plan are credited from time to
time, as adjusted from time to time under the Plan.
(m) "Participant" means an Eligible Executive who has elected
to defer Salary and/or Bonus amounts pursuant to the Plan or on whose behalf the
Company has made a supplemental contribution under Section 5(c).
(n) "Plan" means The Station Casinos, Inc. Deferred
Compensation Plan for Executives, as set forth herein and as amended from time
to time.
(o) "Plan Year" means the calendar year.
(p) "Salary" means the regular base compensation paid by the
Company to an employee (without regard to any reduction thereof pursuant to the
Plan or any thrift or savings plan maintained by the Company), exclusive of
Bonus payments and any other incentive payments made by the Company to such
employee.
(q) "Stock Unit" shall mean a right to receive one share of
common stock of the Company under Section 6 of this Plan.
3
<PAGE>
(r) "Supplemental Contributions Account" means the
bookkeeping account established for the Participant under the Plan and to
which the Company's supplemental contributions under Section 5(c) of the Plan
are credited from time to time, as adjusted from time to time under the Plan.
(s) "Unforeseeable Emergency" means a severe financial
hardship to the Participant resulting from a sudden and unexpected illness or
accident of the Participant or a dependent of the Participant, loss of the
Participant's property due to casualty, or other similar extraordinary
unforeseeable circumstances arising as a result of events beyond the control
of the Participant.
SECTION 3. ELIGIBILITY. Individuals eligible to participate in the
Plan shall consist of the Eligible Executives of the Company.
SECTION 4. ADMINISTRATION.
(a) The Plan shall be administered by the Committee. The
Committee is authorized to construe and interpret the Plan and promulgate,
amend and rescind rules and regulations relating to the implementation,
administration and maintenance of the Plan. Subject to the terms and
conditions of the Plan, the Committee shall make all determinations necessary
or advisable for the implementation, administration and maintenance of the
Plan including, without limitation, determining the Eligible Executives and
correcting any technical defect(s) or technical omission(s), or reconciling
any technical inconsistency(ies), in the Plan. The Committee may designate
persons other than members of the Committee to carry out the day-to-day
ministerial administration of the Plan under such conditions and limitations
as it may
4
<PAGE>
prescribe; PROVIDED, HOWEVER, that the Committee shall not delegate its
authority with regard to the determination of Eligible Executives. The
Committee's determinations under the Plan need not be uniform and may be made
selectively among Participants, whether or not such Participants are
similarly situated. Any determination, decision or action of the Committee in
connection with the construction, interpretation, administration,
implementation or maintenance of the Plan shall be final, conclusive and
binding upon all Participants and any person(s) claiming under or through any
Participants.
(b) The Company will indemnify and hold harmless the
Committee and each member thereof against any cost or expense (including
without limitation attorney's fees) or liability (including without
limitation any sum paid in settlement of a claim with the approval of the
Company) arising out of any act or omission to act, except in the case of
willful gross misconduct or gross negligence.
SECTION 5. PARTICIPATION; ELECTIVE DEFERRALS; MATCHING
CONTRIBUTIONS; SUPPLEMENTAL CONTRIBUTIONS; ADJUSTMENT OF STOCK UNITS.
(a) To elect to participate in the Plan for a particular
Plan Year, an Eligible Executive must execute a Deferred Compensation
Election Form and file such form with the Committee (or its designee) before
the commencement of such Plan Year; PROVIDED that the amount of Bonus
deferred by the Executive may be determined by amendment to the Deferred
Compensation Election Form made during the Plan Year but prior to the
determination of the amount of such Bonus. To participate in the Plan during
the first year in which an individual becomes eligible to participate in the
Plan, the new Eligible Executive must make an election to defer Salary
compensation for services to be performed subsequent to the election and/or
to defer
5
<PAGE>
Bonus compensation, in each case, within 30 days after the date the new
Eligible Executive becomes eligible. Such election shall:
(i) contain a statement that the Eligible Executive elects to
defer a portion of the Eligible Executive's Salary (up to 50% thereof,
in increments of 1%) and/or Bonus (up to 100% thereof, in increments of
1%) for a specified Plan Year that becomes payable to the Eligible
Executive after the filing of such;
(ii) apply only to the Salary otherwise payable to the
Eligible Executive during the Plan Year for which such election is made
and to any Bonus payment that is attributable to the Eligible
Executive's services rendered to the Company during the Plan Year for
which such election is made (whether or not actually payable in such
Plan Year);
(iii) be irrevocable with respect to the Plan Year to which it
applies; and
(iv) if the Eligible Executive so desires, specify a date, no
earlier than thirteen months after the date such election is made, that
the vested accrued balances of his or her Accounts will be paid
pursuant to Section 6 below. Absent such election, the vested accrued
balances of his or her Accounts will be paid following his or her
termination of employment in accordance with Section 6 below. A
Participant may change his or her election as to the date on which the
vested accrued balances of his or her Accounts will be paid at any time
prior to the payment of such amounts; PROVIDED, HOWEVER, that such
election to change the distribution date shall only be effective with
respect to payments of vested accrued Account balances to be made no
earlier than 13 months after the date of such election. If a
Participant was to receive payment of the vested accrued balances of
his or her Accounts prior to the date which is 13 months after the date
of such election,
6
<PAGE>
such Participant's vested accrued Account balances shall be paid in
accordance with his or her most recent other election made more than
13 months prior to the payment date of his or her vested accrued
Account balances.
Upon receipt of an Eligible Executive's deferral election, the Company shall
establish as an accounting entry an individual Deferred Compensation Account for
such Eligible Executive and such Eligible Executive shall become a Participant
under the Plan. Thereafter, the Company shall credit the Executive's Deferred
Compensation Account with all Deferred Compensation which would otherwise have
been payable to the Eligible Executive in the absence of an election under the
Plan. All amounts credited to the Deferred Compensation Account shall be
credited in the form of Stock Units. The Deferred Compensation Account shall be
credited no less frequently than the first day of each month in an amount equal
to the sum of the Deferred Compensation that would otherwise have been paid by
the Company in accordance with the Company's normal payroll practices for the
immediately preceding month. The number of Stock Units credited to a
Participant's Deferred Compensation Account shall equal the dollar amount
deferred for credit to such account divided by the fair market value of one
share of common stock of the Company, determined as the closing price on the
market on which the common stock of the Company is listed (the "Fair Market
Value of the Common Stock") on any day prior to the seventh calendar day after
the date a deferral amount is credited to the Deferred Compensation Account.
Fractional Stock Units will be used. Each Stock Unit shall be deemed to pay
dividends and distributions as if it were one share of common stock of the
Company and any such deemed dividends or distributions will result in the
crediting of additional Stock Units to the Deferred Compensation Account as of
the first day of the month following the month in which such dividends or
distributions were paid, with the number of Stock Units so credited to
7
<PAGE>
be calculated in the manner set forth above for deferrals. Such deferral
amounts and deemed dividends and distributions, which are pending the
crediting of Stock Units to the Deferred Compensation Account, shall not be
credited with any earnings. After the crediting of Stock Units to the
Deferred Compensation Account, subsequent fluctuations in the Fair Market
Value of the Common Stock shall not effect any change in the number of such
Stock Units then credited to the Deferred Compensation Account.
(b) At the beginning of each month, the Company shall, if
on the first day of any such month the Participant is employed by the
Company, credit matching contributions to the Participant's Matching
Contributions Account in an amount up to 10% of the salary amounts actually
deferred under the Plan by the Participant in respect of the preceding month
and up to 10% of the Bonus the Executive elected to defer on the then current
Deferred Compensation Election Form (as adjusted for amendments) for such
Plan Year. The Company match percentage cannot exceed the percentage deferred
by the Participant. Such matching contributions shall be credited in Stock
Units calculated in the same manner as Deferred Compensation is calculated.
(c) From time to time, the Company may, in its sole
discretion, credit supplemental contributions to the Participant's
Supplemental Contributions Account in such amounts as the Company shall
determine in its sole discretion. Such supplemental contributions shall be
credited in Stock Units calculated in the same manner as Deferred
Compensation is calculated.
(d) In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, common stock,
other securities or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up,
8
<PAGE>
spin-off, combination or other similar transaction or event affects the
common stock of the Company such that an adjustment is determined by the
Committee, in its discretion, to be necessary or appropriate, the Committee
may, in such manner as it in good faith deems equitable, adjust any or all of
the number of shares of common stock, other property (including cash) or
other securities represented by a Stock Unit.
(e) At the end of each Plan Year and at the time any
payment or distribution is made in accordance with this Plan, the Accounts
(or in the case of a payment or distribution, the Accounts from which the
payment or distribution is made) shall be adjusted in the following manner:
(i) if the Fair Market Value of the Common Stock increases by 4% or more as
of the end of a Plan Year (or a prorated portion of 4% if calculated for a
mid-year payment or distribution) no adjustment will be made, (ii) if the
Fair Market Value of the Common Stock does not increase by at least 4% as of
the end of a Plan Year (or a prorated portion of 4% if calculated for a
mid-year payment or distribution), each Participant's Accounts will be
credited with Stock Units at the time of calculation sufficient to make the
Fair Market Value of the Common Stock represented by Stock Units in each
Participant's Accounts equal to the sum of (1) the aggregate balance of his
or her Accounts at the beginning of the Plan Year plus (2) the aggregate
balance of his or her Accounts at the beginning of the Plan Year multiplied
by 4% (or a prorated portion of 4% for a mid-year payment or distribution)
plus (3) the amount of all the contributions made to the Participant's
Accounts during the Plan Year plus (4) the product of the amount of all the
contributions made to the Participant's Accounts during the Plan Year
multiplied by 4% (or a prorated portion of 4% to the extent any portion of
the contributions were invested in the Accounts for less than the full Plan
Year with respect to each such portion and each such partial Plan Year).
9
<PAGE>
SECTION 6. PAYMENT OF DEFERRED COMPENSATION. The vested accrued
balances in a Participant's Deferred Compensation Account, Matching
Contributions Account and Supplemental Account shall be paid to a Participant,
or, in the case of any Participant's death prior to payment, the Participant's
designated beneficiary(ies), only in common stock of the Company with one share
of such common stock being issued for each Stock Unit no later than the earlier
of (i) fifteen business days after the end of the month in which the termination
of the Participant's employment occurs, or (ii) the date specified by the
Participant on his or her most recent Deferred Compensation Election Form
submitted to the Company in accordance with Section 5(a)(iv) above; PROVIDED,
HOWEVER, that if any portion of the vested accrued balance in a Participant's
Accounts is to be distributed in a Plan Year in which all or a portion of such
distribution would not be deductible by the Company because of Section 162(m) of
the Internal Revenue Code of 1986, as amended, the Company may, in its sole
discretion, delay the payment of the nondeductible portion of such Participant's
Accounts until such time as the Company determines the payment of such amounts
will be deductible by the Company.
SECTION 7. VALUATION. At the end of each Plan Year, the vested and
unvested balances in the Deferred Compensation Account, Supplemental
Contributions Account and the Matching Contributions Account of each Participant
shall be determined by the Company, taking into account any increase therein for
such Plan Year as a result of deemed dividends or distributions. The balance
determined, as of the end of each Plan Year, shall be communicated in writing to
each Participant as soon as practicable after the end of the Plan Year. In the
case of any termination of employment under Section 6(i) above, the vested and
unvested balances in the Deferred Compensation Account, Supplemental
Contributions Account and the Matching Contributions Account of any affected
Participant shall be determined by the Company as of the end of the month in
which there occurs any such termination of employment, also taking into account
any increase therein for such Plan Year to date as a result of any deemed
dividends or distributions. In the case of a payment to a Participant under
Section 6(ii) above, the vested and unvested balances in the
10
<PAGE>
Deferred Compensation Account, Supplemental Contributions Account and the
Matching Contributions Account of any affected Participant shall be
determined by the Company as of the last day of the calendar month ending at
least 15 days prior to the date of such payment, also taking into account any
increase therein for such Plan Year to date as a result of any deemed
dividends or distributions.
SECTION 8. DISTRIBUTIONS IN CASES OF HARDSHIP. The Committee may make
distributions to a Participant from the vested balances in such Participant's
Deferred Compensation Account, Supplemental Contributions Account or Matching
Contributions Account upon a showing by such Participant that an Unforeseeable
Emergency has occurred. Such distributions shall be limited to the amount shown
to be necessary to meet the Unforeseeable Emergency.
SECTION 9. VESTING. Notwithstanding anything contained herein to the
contrary, a Participant's accrued balance in such Participant's Deferred
Compensation Account (and the amounts payable with respect thereto) shall be
fully vested at all times. A Participant's accrued balance in such Participant's
Matching Contributions Account (and the amounts
11
<PAGE>
payable with respect thereto) and in such Participant's Supplemental
Contributions Account (and the amounts payable with respect thereto) shall,
in each case, be vested as to 20% of the balance in such Account for each
year of Continuous Service completed by the Participant and shall be fully
vested after the Participant has completed five years of Continuous Service.
Notwithstanding the immediately preceding sentence, if (a) the Participant
dies, (b) the Participant's employment with the Company is terminated due to
Disability or (c) a Change of Control occurs, such Participant's accrued
balance in the Matching Contributions Account and Supplemental Contributions
Account shall be fully vested as of the date of death, the date of such
termination or the date of any such Change of Control, as the case may be.
SECTION 10. FORFEITURE. Upon any Participant's termination of
employment other than due to death or Disability, such Participant's accrued
balance in such Participant's unvested Matching Contributions Accounts (and
the amounts payable with respect thereto) and in such Participant's unvested
Supplemental Contributions Account (and the amounts payable with respect
thereto) shall, in each case, be forfeited by such Participant.
SECTION 11. AMENDMENT; TERMINATION. The Plan may be amended,
modified or terminated at any time by the Committee except that no such
amendment, modification or termination shall have a material adverse effect
on the accrued balance of any Participant's Deferred Compensation Account,
Supplemental Contributions Account and/or Matching Contributions Account as
of the effective date of any such amendment, modification or termination
(without the consent of the Participant (or, if the Participant is dead, his
or her beneficiary(ies))); PROVIDED HOWEVER, that a termination of the Plan
followed by a distribution of
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all vested and unvested account balances shall be deemed to not have a
material adverse effect on a Participant's accrued balances.
SECTION 12. PARTICIPANT'S RIGHTS UNSECURED; NO DUTY TO INVEST. The
right of a Participant to receive any payment or distribution hereunder shall
be an unsecured claim against the general assets of the Company. No Company
assets shall in any way be subject to any prior claim by any Participant. The
Company shall have no duty whatsoever to set aside or invest any amounts
credited to any Deferred Compensation Account, Supplemental Contributions
Account or Matching Contributions Account established under the Plan. Nothing
in the Plan shall confer upon any employee of the Company any right to
continued employment with the Company, nor shall it interfere in any way with
the right, if any, of the Company to terminate the employment of any employee
at any time for any reason. A Participant shall have no right, title, or
interest whatsoever in or to any specific assets of the Company, nor any
investments, if any, which the Company may make to aid it in meeting its
obligations hereunder. Nothing contained in this Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship, between the Company and any
Participant or any other person. The Company may enter into a "rabbi" trust
agreement to provide for a source of funds out of which all or any portion of
the benefits under the Plan may be satisfied.
SECTION 13. RESTRICTIONS ON ALIENATION. No amount deferred or credited
to any Account under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, levy or charge. Any
attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber,
levy or charge the same shall be void; nor shall any amount
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<PAGE>
be in any manner be subject to any claims for the debts, contracts,
liabilities, engagements or torts of the Participant (or the Participant's
beneficiary or personal representative) entitled to such benefit. No
Participant shall be entitled to borrow at any time any portion of the
Participant's Account balances under the Plan.
SECTION 14. WITHHOLDING. As a condition to the receipt of any Stock
Units or shares of common stock pursuant to the terms of this Plan, the
Participants, or their beneficiaries or personal representatives, as
applicable, shall remit to the Company, in cash, an amount equal to amount of
any taxes required to be withheld by the Company pursuant to any Federal,
state or local law, rule or regulation with respect to the payment of such
Stock Units or shares of common stock. The Participants, their beneficiaries
and personal representatives shall bear any and all Federal, foreign, state,
local, income, or other taxes imposed on amounts paid under the Plan.
SECTION 15. PARTICIPANTS BOUND BY TERMS OF THE PLAN. By electing to
become a Participant, each Eligible Executive shall be deemed conclusively to
have accepted and consented to all terms of the Plan and all actions or
decisions made by the Company with regard to the Plan. Such terms and consent
shall also apply to and be binding upon the beneficiaries, personal
representatives and other successors in interest of each Participant. Each
Participant shall receive a copy of the Plan.
SECTION 16. DESIGNATION OF BENEFICIARY(IES). Each Participant under the
Plan may designate a beneficiary or beneficiaries to receive any payment which
under the terms of the Plan
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becomes payable on, after or as a result of the Participant's death. At any
time, and from time to time, any such designation may be changed or cancelled
by the Participant without the consent of any such beneficiary. Any such
designation, change or cancellation must be on a form provided for that
purpose by the Committee and shall not be effective until received by the
Committee. If no beneficiary has been designated by a deceased Participant,
or if the designated beneficiaries have predeceased the Participant, the
beneficiary shall be the Participant's estate. If the Participant designates
more than one beneficiary, any payments under the Plan to such beneficiaries
shall be made in equal shares unless the Participant has expressly designated
otherwise, in which case the payments shall be made in the shares designated
by the Participant.
SECTION 17. SEVERABILITY OF PROVISIONS. In the event any provision of
the Plan would serve to invalidate the Plan, that provision shall be deemed to
be null and void, and the Plan shall be construed as if it did not contain the
particular provision that would make it invalid. The Plan shall be binding upon
and inure to the benefit of (a) the Company and its respective successors and
assigns, and (b) each Participant, his or her designees and estate. Nothing in
the Plan shall preclude the Company from consolidating or merging into or with,
or transferring all or substantially all of its assets to, another corporation,
or engaging in any other corporate transaction.
SECTION 18. GOVERNING LAW AND INTERPRETATION. The Plan shall be
construed and enforced in accordance with, and the rights of the parties hereto
shall be governed by, the laws of the State of Nevada. This Plan shall not be
interpreted as either an employment or trust agreement.
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SECTION 19. OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS.
Payments and other benefits received by a Participant under the Plan shall
not be deemed a part of a Participant's compensation for purposes of the
determination of benefits under any other employee welfare or benefit plans
or arrangements, if any, provided by the Company or any affiliate of the
Company. The existence of the Plan notwithstanding, the Company may adopt
such other compensation plans or programs and additional compensation
arrangements as it deems necessary to attract, retain and motivate employees.
The Committee is authorized to cause to be established a trust agreement or
several trust agreements or similar arrangements from which the Committee may
make payments of amounts due or to become due to any Participants under the
Plan.
SECTION 20. EFFECTIVE DATE OF THE PLAN. The Plan as reflected herein
shall be effective as of September 30, 1999 upon its adoption by the Company.
The Plan originally was effective as of November 30, 1994.
IN WITNESS WHEREOF, the Plan is hereby adopted by the Company on this
28th day of March, 2000.
Station Casinos, Inc.
By: /s/ GLENN C. CHRISTENSON
-----------------------------
Glenn C. Christenson
Executive Vice President
Chief Financial Officer
Chief Administrative Officer
16
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EXHIBIT 10.52
OPERATING AGREEMENT
GREEN VALLEY RANCH GAMING, LLC
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS...................................................................................1
1.1 DEFINITIONS............................................................................1
ARTICLE II FORMATION...................................................................................16
2.1 FORMATION.............................................................................16
2.2 NAME..................................................................................16
2.3 PURPOSES AND POWERS...................................................................16
2.4 REGISTERED AGENT AND REGISTERED OFFICE................................................17
ARTICLE III MANAGEMENT.................................................................................17
3.1 THE MANAGER...........................................................................17
3.2 EXPENSE OF CONSTRUCTION...............................................................18
3.3 MANAGER'S DUTIES DURING PRE-OPENING PERIOD............................................18
3.4 MANAGER'S ADDITIONAL DUTIES, INCLUDING DURING OPERATIONAL PERIOD......................20
3.5 COMPENSATION OF THE MANAGER...........................................................28
3.6 REMOVAL OF MANAGER....................................................................28
3.7 OFFICERS..............................................................................30
3.8 CONFLICTS OF INTEREST.................................................................30
3.9 TAX MATTERS PARTNER...................................................................31
3.10 LIABILITY OF MEMBERS AND MANAGER......................................................32
3.11 PROHIBITION AGAINST PUBLICLY TRADED PARTNERSHIP.......................................32
3.12 THE EXECUTIVE COMMITTEE...............................................................32
3.13 DECISIONS SUBJECT TO EXECUTIVE COMMITTEE APPROVAL.....................................32
3.14 PLACE OF MEETINGS AND MEETINGS BY TELEPHONE...........................................33
3.15 REGULAR MEETINGS......................................................................33
3.16 SPECIAL MEETINGS......................................................................33
3.17 QUORUM................................................................................33
3.18 MANNER OF ACTING......................................................................33
3.19 WAIVER OF NOTICE......................................................................33
3.20 ADJOURNMENT...........................................................................33
3.21 ACTION WITHOUT A MEETING..............................................................34
3.22 RESIGNATION...........................................................................34
3.23 REMOVAL...............................................................................34
3.24 VACANCIES.............................................................................34
3.25 COMPENSATION TO EXECUTIVE COMMITTEE MEMBERS...........................................34
3.26 LIABILITY TO THIRD PARTIES............................................................34
3.27 NO GUARANTEE OF RETURN BY MEMBERS OF THE EXECUTIVE COMMITTEE..........................34
3.28 TRANSACTIONS WITH COMPANY OR OTHERWISE................................................34
3.29 INDEMNIFICATION.......................................................................35
ARTICLE IV FINANCIAL MATTERS...........................................................................35
4.1 INITIAL CAPITAL CONTRIBUTIONS.........................................................35
4.2 ADDITIONAL CAPITAL CONTRIBUTIONS......................................................38
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4.3 DEFAULT...............................................................................39
4.4 ALLOCATION OF PROFITS AND LOSSES......................................................43
4.5 DISTRIBUTIONS.........................................................................45
ARTICLE V MEMBERS; TRANSFER OF INTERESTS...............................................................46
5.1 ADMISSION.............................................................................46
5.2 TRANSFER OF INTERESTS.................................................................46
5.3 GAMING LICENSING......................................................................48
5.4 REQUIRED MEMBER APPROVALS.............................................................49
5.5 PLACE OF MEETINGS AND MEETINGS BY TELEPHONE...........................................49
5.6 ANNUAL MEETING........................................................................49
5.7 SPECIAL CALL OF MEETINGS..............................................................50
5.8 NOTICE OF MEETINGS OF MEMBERS.........................................................50
5.9 MANNER OF GIVING NOTICE...............................................................50
5.10 ADJOURNED MEETING; NOTICE.............................................................50
5.11 QUORUM; VOTING........................................................................50
5.12 WAIVER OF NOTICE BY CONSENT OF ABSENT MEMBERS.........................................50
5.13 MEMBER ACTION BY WRITTEN CONSENT WITHOUT A MEETING....................................51
5.14 RECORD DATE FOR MEMBER NOTICE, VOTING, AND GIVING CONSENTS............................51
5.15 IN GENERAL...........................................................................51
ARTICLE VI DISSOLUTION, LIQUIDATION AND TERMINATION....................................................53
6.1 DISSOLUTION...........................................................................53
6.2 LIQUIDATION AND TERMINATION...........................................................53
6.3 ARTICLES OF DISSOLUTION...............................................................54
6.4 NEGATIVE CAPITAL ACCOUNTS.............................................................54
6.5 DEEMED DISTRIBUTION AND RECONTRIBUTION................................................54
6.6 LIMITATIONS ON RIGHTS OF MEMBERS......................................................54
ARTICLE VII AMENDMENTS.................................................................................54
7.1 AMENDMENTS GENERALLY..................................................................54
7.2 AMENDMENTS BY THE EXECUTIVE COMMITTEE.................................................55
ARTICLE VIII MISCELLANEOUS.............................................................................55
8.1 NOTICES...............................................................................56
8.2 BINDING EFFECT........................................................................56
8.3 HEADINGS..............................................................................56
8.4 SEVERABILITY..........................................................................56
8.5 FURTHER ACTION........................................................................56
8.6 GOVERNING LAW.........................................................................56
8.7 WAIVER OF ACTION FOR PARTITION........................................................56
8.8 COUNTERPART EXECUTION.................................................................56
8.9 CPI ADJUSTMENT........................................................................56
8.10 PUBLICITY.............................................................................56
8.11 TRANSITION AS MANAGER.................................................................57
8.12 BROKER FEES...........................................................................57
</TABLE>
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LIST OF EXHIBITS
Exhibit A List of Investment Banking Firms
Exhibit B Fertitta Family Members
Exhibit C GCR Gaming Guarantor, LLC Guaranty
Exhibit D Infrastructure Improvements
Exhibit E Initial Members and Membership Interests
Exhibit F Permitted Exceptions
Exhibit G Legal Description of Resort Property
Exhibit H Example of Shared Expenses
Exhibit I Station Guaranty
Exhibit J Articles of Organization
Exhibit K Grant, Bargain and Sale Deed
Exhibit L GCR Property Representations
Exhibit M Notice Addresses
LIST OF SCHEDULES
Schedule I Contracts
Schedule II Legal Proceedings
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OPERATING AGREEMENT
GREEN VALLEY RANCH GAMING, LLC
Operating Agreement dated as of March 10, 2000 (the "EFFECTIVE DATE"),
among Green Valley Ranch Gaming, LLC, a Nevada limited-liability company (the
"COMPANY"), GCR Gaming, LLC, a Nevada limited-liability company ("GCR"), GV
Ranch Station, Inc., a Nevada corporation ("STATION") and a wholly-owned
subsidiary of Station Casinos, Inc. ("PARENT"), and Station in its capacity as
the Manager (as hereinafter defined).
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. The following capitalized words and phrases have the
indicated meanings in this Agreement:
"ACT" means Chapter 86 of the Nevada Revised Statutes, as amended from
time to time (and any corresponding provisions of succeeding law).
"ADDITIONAL CONTRIBUTION DEFAULT" has the meaning set forth in SECTION
4.3(b)(i).
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
(1) Credit to such Capital Account any amounts that such
Member is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(2) Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"AFFILIATE" means, with respect to any Person, (i) any other Person
directly or indirectly controlling, controlled by, or under common control with,
such Person (excluding employees of a Person, other than executive officers and
board members of such Person), (ii) any Person who is an officer or director of
any Person described in Clause (i) of this definition, (iii) with respect to
GCR, any Greenspun Family Member, and with respect to either Parent or Station,
any Fertitta Family Member, or (iv) any family member of any Person described in
Clause (iii). For purposes of this definition, the term "family member" shall be
deemed to be the spouses and lineal descendants of the Persons described in
Clause (iii).
<PAGE>
"AFFILIATE TRANSACTION" has the meaning set forth in SECTION 3.8(B).
"AGREEMENT" means this Operating Agreement, as amended from time to
time. Words such as "herein," "hereinafter," "hereof," "hereto," and "hereunder"
refer to this Agreement as a whole, unless the context otherwise requires.
"ANNUAL PLAN AND OPERATING BUDGET" means the operating plan and budget
for each Fiscal Year during the Operating Period, as proposed by the Manager and
approved by the Executive Committee pursuant to the terms of this Agreement,
setting forth in reasonable detail the Company's projected Gross Revenues,
Operating Expenses, debt service requirements and capital expenditure and
working capital requirements, including in each case the components thereof. The
annual plan also shall include a concise written narrative regarding any
material changes to the Project's operating standards, policies and procedures
or to the Company's projections regarding the components of Gross Revenues or
Operating Expenses.
"APPRAISED VALUE" means, in the case of a Membership Interest, the fair
market value thereof as determined by agreement of Station and GCR or, in the
event that Station and GCR are unable to agree upon such value within 30 days
after the requirement to determine Appraised Value arises, as determined by one
investment banking firm selected jointly by (and paid equally by) Station and
GCR from the list attached hereto as EXHIBIT A; provided, however, if either
Station or GCR give written notice to the other within 5 days after the
expiration of the foregoing 30-day period that it desires to have 3 investment
banking firms determine the Appraised Value of the Membership Interests, rather
than one investment banking firm, or if Station and GCR are unable to agree on
one investment banking firm within such 30-day period, the decision shall be
made by three investment banking firms one of which shall be selected and paid
by Station from EXHIBIT A and one shall be selected and paid by GCR from EXHIBIT
A within 15 days after the expiration of the foregoing 30-day period and one
shall be selected from EXHIBIT A by the two investment banking firms so selected
within 15 days after the expiration of the foregoing 15-day period and paid
equally by Station and GCR. In the event that there is one investment banking
firm, its determination shall be the Appraised Value. If there are three
investment banking firms, the Appraised Value shall be the average of the two
closest determinations in dollar value made by the three investment banking
firms as so selected. The determination of Appraised Value pursuant to the
foregoing process shall be final and binding on all parties. The determination
of the fair market value by the investment banking firms shall be based on the
value of the Company as a going concern (without any discount for lack of
liquidity, restrictions on transferability or minority interest), but less any
Company indebtedness, multiplied by the percentage ownership interest
represented by the Membership Interest in question.
"ARTICLES" means the Articles of Organization of the Company filed with
the Nevada Secretary of State on November 19, 1999.
"AVAILABLE FUNDS LETTER" means a letter from a national bank,
investment banking company or certified public accounting firm stating that GCR
Gaming Guarantor, LLC or Parent, as the case may be, has sufficient cash,
available credit line, readily marketable securities or other evidence of
ability to pay $125,000,000 in the case of GCR Gaming Guarantor, LLC, or to pay
$150,000,000 in the case of Parent, as of the date of such letter.
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<PAGE>
"BANK ACCOUNTS" means those bank or financial institution accounts as
are necessary for the construction, day-to-day and long-term management and
operation of the Project, including the Operating Bank Account and the Reserve
Fund.
"BANKRUPT" means with respect to any Member the occurrence of any of
the following:
(3) Filing a voluntary petition in bankruptcy or for
reorganization or for adoption of an arrangement under the United
States Bankruptcy Code;
(4) Making a general assignment for the benefit of creditors;
(5) The appointment by a court of a receiver for all or
substantially all of the assets of such Member;
(6) The entry of an order for relief in the case of an
involuntary petition in bankruptcy; or
(7) The assumption of custody or sequestration by a court of
competent jurisdiction of all or substantially all of the Member's
assets.
"BASE MANAGEMENT FEE" means the base management fee to be paid to the
Manager pursuant to SECTION 3.5(a).
"CAPITAL ACCOUNT" means, with respect to any Member, the capital
account maintained for such Member in accordance with the following provisions:
(8) To each Member's Capital Account there shall be credited
such Member's Capital Contributions, such Member's distributive share
of Profits and any items in the nature of income or gain that are
specially allocated to such Member pursuant to SECTION 4.4(c) hereof,
and the amount of any Company liabilities assumed by such Member or
that are secured by any Company property distributed to such Member;
(9) To each Member's Capital Account there shall be debited
the amount of cash and the Gross Asset Value of any property other than
money distributed to such Member pursuant to any provision of this
Agreement (other than payments made pursuant to SECTION 3.5 hereof) and
such Member's distributive share of Losses and any items in the nature
of expenses or losses that are specially allocated to such Member
pursuant to SECTION 4.4(c) hereof;
(10) In the event that all or any part of a Membership
Interest in the Company is Transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital Account of
the transferor to the extent it relates to the Transferred interest;
and
(11) In determining the amount of any liability for purposes
of the foregoing Clauses (i) and (ii) of this definition of Capital
Account, there shall be taken into account Code Section 752(c) and any
other applicable provisions of the Code and Regulations.
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The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Regulations
Section 1.704-1(b) and shall be interpreted and applied in a manner consistent
with such Regulations. The Manager shall (i) make any adjustments that are
necessary or appropriate to maintain equality between the Capital Accounts of
the Members and the amount of capital reflected on the Company's balance sheet,
as computed for book purposes, in accordance with Regulations Section
1.704-1(b)(2)(iv)(g), and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Section 1.704-1(b) of the Regulations.
"CAPITAL CONTRIBUTION" means, with respect to a Member as of any date,
the amount of money and other property actually contributed to the Company by
such Member through such date. The amount of a Capital Contribution made in
property other than money shall be the fair market value, net of assumed
liabilities, of the contributed property as determined in good faith by the
Executive Committee; provided, however, GCR's Initial Capital Contribution
(including the Resort Property) shall have the value ascribed in SECTION
4.1(a)).
"CAPITAL IMPROVEMENTS AND REPLACEMENTS" means a capital expenditure, as
defined under GAAP, for a modification, refurbishment, alteration, addition,
improvement or renovation to any portion of the Project, including the
Furniture, Fixtures and Equipment associated with the Project.
"CHANGE IN CONTROL" means, in the case of Station, either of the
following:
(12) Neither Frank Fertitta, III, Blake Sartini or Lorenzo J.
Fertitta, or their respective lineal descendants, are, for a period of
ninety (90) days or more in any calendar year, the chief executive
officer of Parent with the powers, duties and authority commensurate
with such office; or
(13) Parent or a wholly-owned subsidiary of Parent ceases to
own 100% of the capital stock of Station.
For the purposes of the definition of "PARENT," "Parent" shall include
any entity that survives a merger or consolidation in the event Parent merges
with or consolidates into another entity and any entity that acquires all or
substantially all of the assets of Parent in the event that Parent sells,
transfers or otherwise disposes of all or substantially all of its assets.
"CHANGE IN CONTROL CALL" has the meaning set forth in SECTION 5.2(b).
"CHANGE IN CONTROL PUT" has the meaning set forth in SECTION 5.2(b).
"CHANGE IN CONTROL PUT EXERCISE NOTICE" has the meaning set forth in
SECTION 5.2(b).
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time (or any corresponding provisions of succeeding law).
"CONSTRUCTION FINANCING" means third-party debt financing for the
construction of the Project.
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"CONSTRUCTION MANAGER" means the individual selected and appointed by
the Manager with the prior approval of the Executive Committee to manage and
supervise the construction activities of the Project on a day-to-day basis.
"CONSTRUCTION PLAN" means the comprehensive construction plan for the
Project submitted by a construction firm selected by the Executive Committee,
including the estimated time frame for completion and implementation of such
plan, which Construction Plan shall be approved by the Executive Committee. The
Construction Plan may be approved as a whole or in segments or by components by
the Executive Committee.
"CPI ADJUSTMENT" has the meaning set forth in SECTION 8.9.
"DEFAULT AMOUNT" has the meaning set forth in SECTION 4.3(b)(i).
"DEFAULT CALL" has the meaning set forth in SECTION 4.3(d).
"DEFAULT CONTRIBUTION" has the meaning set forth in SECTION 4.3(b)(i).
"DEFAULT DISTRIBUTIONS" has the meaning set forth in SECTION 4.3(b)(i).
"DEFAULT PUT" has the meaning set forth in SECTION 4.3(d)(ii).
"DEFAULT PUT EXERCISE DATE" has the meaning set forth in SECTION
4.3(d)(ii).
"DEFAULT REPAYMENT EVENT" has the meaning set forth in SECTION
4.3(B)(ii).
"DESIGN, DEVELOPMENT AND CONSTRUCTION BUDGET" means the aggregate hard
and soft costs of construction of the Project, proposed by the Manager and
approved by the Executive Committee, including real estate costs, all costs
associated with the Resort Property, Vertical Improvements and Infrastructure
Improvements, allowances for Furniture, Fixtures and Equipment attached or used
within the Project, construction and design fees, permits and licenses,
Pre-Opening Program costs, capitalized interest, and all associated financing
fees through the date that the Project receives a final certificate of occupancy
from the applicable governmental authority. The Design, Development and
Construction Budget may be approved as a whole or in segments or by components
(e.g., the Infrastructure Improvements separate from the Vertical Improvements,
or components of the Vertical Improvements, such as interior furnishings as
compared to the foundation and exterior facade, etc.).
"DESIGN PLAN" means the architectural, interior design and landscaping
plans for the Project submitted by architectural, interior design and
landscaping firms selected by the Manager and approved by the Executive
Committee, which Design Plan shall be approved by the Executive Committee. The
Design Plan may be approved as a whole or in segments or by components by the
Executive Committee.
"DILUTION DATE" has the meaning set forth in SECTION 4.3(d).
"DILUTION INTEREST" has the meaning set forth in SECTION 4.3(b)(i).
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"DILUTION INTEREST PAYMENT AMOUNT" has the meaning set forth in SECTION
4.3(b)(i).
"DISPROPORTIONATE CONTRIBUTION" has the meaning set forth in SECTION
4.2(d).
"DISTRIBUTABLE CASH" has the meaning set forth in SECTION 3.4(k).
"EBITDA" for any period means the Company's net income for such period
(after deduction of the Base Management Fee for such period but prior to any
deduction of the Incentive Management Fee for such period) PLUS, to the extent
deducted in determining such net income, the Company's interest, income tax,
depreciation and amortization expenses (including pre-opening expenses) for such
period, in accordance with GAAP consistently applied and excluding in such
calculation non-operating, non-recurring gains and losses.
"EFFECTIVE DATE" has the meaning set forth in the Preamble.
"EXECUTIVE COMMITTEE" has the meaning set forth in SECTION 3.12.
"EXEMPT AFFILIATE" means a Person who is not a Fertitta Family Member,
but who is an Affiliate solely because such Person is an investor in Parent or
an investor in a successor to Parent by merger, consolidation, acquisition or
similar manner, for a bona fide business purpose other than to evade the
prohibition set forth in SECTION 3.8a).
"EXEMPT PROPERTY" means a hotel and/or casino owned, operated, or
managed by an investor in Parent (other than a Fertitta Family Member) or a
successor to Parent (by merger, consolidation, acquisition or similar manner
which is undertaken for an independent, bona fide business purpose other than to
evade the prohibition set forth in SECTION 3.8a)) which was owned, operated or
managed by such an investor in Parent (other than a Fertitta Family Member) or a
successor to Parent prior to such merger, consolidation, acquisition or similar
transaction.
"FERTITTA FAMILY MEMBERS" means those Persons on EXHIBIT B, and such
Persons' spouses and lineal descendants or trusts for the benefit of such
Persons or their spouses or lineal descendants if such Persons or such spouses
or lineal descendants are the trustees therefor.
"FISCAL MONTH" means an individual monthly accounting period of the
Company ending on the close of business on the last day of each calendar month.
"FISCAL YEAR" means the Company's fiscal year ending on December 31 of
each year (or, if earlier, the date on which the Company is liquidated within
the meaning of Regulations Section 1.704-1(b)(ii)(g)). The first Fiscal Year of
the Company shall commence on the Effective Date, and subsequent Fiscal Years
shall commence on January 1.
"FORCE MAJEURE" means war, insurrection, strikes, walkouts, riots,
floods, earthquakes, fires, casualties, acts of God, acts of the public enemy,
epidemics, quarantine restrictions, freight embargoes, lack of transportation,
governmental restrictions, laws, rules, regulations, ordinances and/or
proceedings (including, without limitation, those relating to building, zoning
and land use and litigation brought by unrelated third parties, including
eminent domain), unusually severe weather, inability to secure necessary labor,
materials or tools, delays of any contractor,
6
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subcontractor or supplier outside the reasonable control of the affected
party, acts or failures to act (including the failure to issue Governmental
Approvals or other approvals, consents, permits or licenses) of an
unaffiliated party, acts or failures to act of any public or governmental
agency, private or public utility or other entity (including GCR with regard
to Station, and Station with regard to GCR) not due to the delay or fault of
the affected party, or any other causes beyond the reasonable control or
without the fault of the party claiming an extension of time to perform;
provided, however, that such event actually affects such party's ability to
perform and only for so long as it does affect such party's ability to
perform.
"FURNITURE, FIXTURES AND EQUIPMENT" means all furniture, fixtures and
equipment reasonably required for the operation of the Project, including but
not limited to office furniture, computer and communications systems,
specialized hotel equipment necessary for the operation of the hotel/casino,
food and beverage equipment, laundries and recreational facilities, but not
including any such furniture, fixtures or equipment owned by Parent, Manager or
their Subsidiaries (other than the Company) and used in the operation of the
Project. Such items also shall include specialized casino equipment, including
cashier, money sorting and money counting equipment, slot machines, table games,
video gaming equipment, and other similar gaming equipment as well as
surveillance equipment.
"GAAP" means United States generally accepted accounting principles, as
in effect from time to time.
"GAMING AUTHORITY" means those federal, state and local governmental,
regulatory and administrative authorities, agencies, boards and officials
responsible for or involved in the regulation of gaming or gaming activities in
any jurisdiction, including within the State of Nevada, specifically, the Nevada
Gaming Commission, the Nevada State Gaming Control Board, and applicable local
authorities.
"GAMING LAWS" means those laws pursuant to which any Gaming Authority
possesses regulatory, licensing or permit authority over gaming within any
jurisdiction and, within the State of Nevada, specifically, the Nevada Gaming
Control Act, as codified in NRS Chapter 463, as amended from time to time, and
the regulations of the Nevada Gaming Commission promulgated thereunder, as
amended from time to time.
"GAMING LICENSES" shall mean all licenses, consents, permits,
approvals, authorizations, registrations, findings of suitability, franchises
and entitlements issued by any Gaming Authority necessary for or relating to the
conduct of activities under the Gaming Laws.
"GCR GUARANTY" means the Guaranty of GCR Gaming Guarantor, LLC,
attached to this Agreement as EXHIBIT C.
"GCR'S INITIAL CAPITAL CONTRIBUTION" has the meaning set forth in
SECTION 4.1(a).
"GENERAL MANAGER" means the individual selected and appointed by the
Manager with the prior approval of the Executive Committee to manage and
supervise the activities of the Project on a day-to-day basis during the
Operating Period.
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"GOVERNMENTAL APPROVALS" means all permits, licenses, consents and
approvals of agencies of the City of Henderson, Nevada, Clark County, Nevada,
the State of Nevada, or United States necessary for the construction of the
Project and related Infrastructure Improvements in accordance with the Master
Development Plan, and operation of the Project, excluding any Gaming Licenses or
liquor licenses, permits or approvals required to be obtained by the Members.
The material terms and conditions of all Governmental Approvals (excluding
Gaming Licenses and liquor licenses) shall be subject to the prior approval of
the Executive Committee; provided, however, that if neither member of the
Executive Committee notifies the Manager within seven (7) calendar days after
such written request for approval of a material term that he objects to such
term, the Executive Committee shall be deemed to have approved such material
term.
"GRANT, BARGAIN AND SALE DEED" has the meaning set forth in SECTION
4.1(a).
"GREENSPUN FAMILY MEMBER" means any of the following people: Susan
Fine, Danny Greenspun, Jane Greenspun Gayle, Brian Greenspun, and Phillip
Peckman, and each of such Persons' spouses and lineal descendants or trusts for
the benefit of any such Persons or their spouses and lineal descendants if such
Person or such spouses or lineal descendants are the trustees therefor.
"GROSS ASSET VALUE" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(14) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values, as
determined in good faith by the Executive Committee, as of the
liquidation of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); the acquisition of an additional interest in the
Company by any new or existing Member in exchange for more than a DE
MINIMIS Capital Contribution; and the distribution by the Company to a
Member of more than a DE MINIMIS amount of property as consideration
for the Member's interest in the Company;
(15) The Gross Asset Value of any Company asset distributed to
any Member shall be the gross fair market value of such asset, as
determined in good faith by the Executive Committee, on the date of
distribution;
(16) The Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Regulation Section
1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values shall
not be adjusted pursuant to this Clause (iii) to the extent that an
adjustment pursuant to the foregoing Clause (i) is made in connection
with a transaction that would otherwise result in an adjustment
pursuant to this Clause (iii); and
(17) The Gross Asset Value of any asset contributed to the
Company shall be its agreed-upon fair-market value, adjusted for book
depreciation, amortization or other cost recovery deductions for
periods subsequent to its contribution in the manner provided in
Paragraph (vi) of the definition of "Profit" and "Loss."
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"GROSS REVENUES" means all cash revenues and income (excluding
interest income) of any kind derived from the use or operation of the Project
determined in accordance with GAAP consistently applied, including without
limitation, income from gaming activities; income from rental of guest rooms;
food and beverage sales; income from entertainment programs and merchandise
sales; telephone, telegraph and telex revenues; rental or other payments from
lessees, sublessees and concessionaires and others occupying space or
rendering services at the Project (but not (A) reimbursements for utilities,
taxes or similar matters, or (B) the gross receipts of such lessees,
sublessees or concessionaires except to the extent the same is part of such
rental payments); income from vending machines; health club fees; and the
actual cash proceeds of business interruption or similar insurance and of
temporary condemnation awards after deducting necessary expenses in
connection with the adjustment or collection of such proceeds; excluding,
however, to the extent included in cash revenues and income of any kind
derived from the use or operation of the Project and without duplication, (i)
any proceeds from the sale, financing or refinancing or other disposition of
the Project or substantially all of the assets of the Company; (ii) any
proceeds from the sale, financing, refinancing or other disposition of
Furniture, Fixtures and Equipment or other capital assets; (iii) proceeds of
any fire, extended coverage or other insurance policies (excluding any
proceeds of business interruption or similar insurance); (iv) condemnation
(other than temporary) awards and other amounts received by the Company in
lieu of condemnation; (v) any refunds, rebates, discounts and credits of a
similar nature given, paid or returned in the course of obtaining Gross
Revenues or components thereof, other than complementaries provided to
patrons of the Project in the ordinary course of business and consistent with
the Annual Plan and Operating Budget; (vi) gratuities or service charges or
other similar receipts which the Company or the Manager pays to employees or
others; (vii) excise, sales, gross receipts, admission, entertainment,
tourist, use or similar taxes or charges collected from patrons or guests or
as part of the sale price for goods, services or entertainment, other than
taxes imposed on gaming revenues; (viii) any sum and credits received for
lost or damaged merchandise; (ix) credit card processing fees and costs; and
(x) bad debts.
"GUARANTIES" means the GCR Guaranty and Station Guaranty.
"GUARANTOR" means each of Station Casinos, Inc. and GCR Gaming
Guarantor, LLC in their respective capacities as the signatories on the
Guaranties attached to this Agreement.
"INCENTIVE MANAGEMENT FEE" means the incentive management fee payable
to the Manager pursuant to SECTION 3.5(b).
"INDEX" has the meaning set forth in SECTION 8.9.
"INFRASTRUCTURE IMPROVEMENTS" means (i) the rough grading of the Resort
Property, and (ii) those physical improvements relating to the Resort Property
identified in EXHIBIT D.
"INITIAL CAPITAL CONTRIBUTIONS" has the meaning set forth in SECTION
4.1(b).
"INITIAL DILUTION" has the meaning set forth in SECTION 4.3(b)(i).
"LICENSING PROBLEM" has the meaning set forth in SECTION 5.3(b).
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"MANAGER" means Station or any successor to Station approved by the
Executive Committee pursuant to the terms of this Agreement.
"MASTER DEVELOPMENT PLAN" means the comprehensive development plan
(including estimated time lines therefor) for the Project, including the Design
Plan, the Construction Plan, the Design, Development and Construction Budget and
Infrastructure Improvements, each as may be amended from time to time in
accordance with the terms of this Agreement, and all as approved by the
Executive Committee. The components of the Master Development Plan may be
approved as a whole or in segments or by components by the Executive Committee.
"MEMBER" means any Person that is or becomes a party to this Agreement
as a member of the Company. The initial Members of the Company are GCR and
Station, and the addresses of the initial Members are set forth on EXHIBIT E.
"MEMBER NONRECOURSE DEDUCTIONS" shall mean "partner nonrecourse
deductions" as determined in accordance with Regulations Section 1.704-2(i)(2).
"MEMBERSHIP INTEREST" means a Member's undivided percentage interest in
the Company. Such interest includes any and all rights to which such Member may
be entitled as provided in this Agreement or the Act, including such Member's
Capital Account, together with all obligations of such Member under this
Agreement or the Act. The initial percentage Membership Interests of the initial
Members of the Company are set forth on Exhibit E, which percentages shall be
subject to adjustment from time to time as set forth in SECTION 4.3.
"MEMBER'S REPRESENTATIVE" has the meaning set forth in SECTION 5.6(b).
"MINIMUM GAIN" shall mean "partnership minimum gain" as determined in
accordance with Regulations Section 1.704-2(d)(1).
"MINIMUM GAIN ATTRIBUTABLE TO MEMBER NONRECOURSE DEBT" shall mean
"partner nonrecourse debt minimum gain" as determined in accordance with
Regulations Section 1.704-2(i)(3).
"NONRECOURSE DEDUCTIONS" shall have the meaning set forth in
Regulations Section 1.704-2(c).
"NOTICE ADDRESS" has the meaning set forth in SECTION 8.1.
"NOTICES" has the meaning set forth in SECTION 8.1.
"OPENING" means the date on which the casino portion of the Project is
first opened to the public and commences business.
"OPERATING COSTS" means, to the extent included within the Design,
Development and Construction Budget or the then-current Annual Plan and
Operating Budget or to the extent otherwise approved by the Executive
Committee, all costs and expenses of constructing, maintaining, conducting
and supervising the operation of the Project which are properly attributable
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to the Fiscal Month or Fiscal Year under consideration in accordance with
GAAP, including without limitation:
(18) the cost of all food and beverages sold or consumed by
the Company and of all Operating Supplies and Operating Consumables,
with the exception of the cost of food and beverages and other items
sold or consumed by lessees and sublessees;
(19) salaries, wages and other benefits of the Company's
personnel employed with respect to the Project, including costs of
payroll taxes and employee benefits, the salaries, wages, benefits, and
expenses, including travel expenses, of third-party consultants;
(20) the cost of all other materials, supplies, goods and
services in connection with the operation of the Project including,
without limitation, heat and utilities, trash removal, office supplies,
security and all other services performed by third parties, telephone
and data processing equipment and other equipment;
(21) the cost of repairs to and maintenance of the Project to
the extent not paid for from the Reserve Fund or by the actual cash
proceeds of any fire or casualty insurance after deducting necessary
expenses in connection with the adjustment or collection of such
proceeds;
(22) insurance and bonding premiums with respect to the
Project, including, without limitation, property damage insurance,
public liability insurance, workers' compensation insurance, or
insurance required by similar employee benefits acts and such business
interruption or other insurance as may be provided for protection
against claims, liabilities and losses incurred with respect to
deductibles applicable to the foregoing types of insurance;
(23) all taxes, assessments, water/sewer charges, and other
fees and charges (other than federal, state or local income taxes and
franchise taxes or the equivalent) payable by or assessed against the
Company with respect to the operation of the Project;
(24) legal, consulting, lobbying, accounting and other fees
for professionals for services related to the development or operation
of the Project;
(25) all expenses for marketing the Project, including all
expenses of advertising, sales, promotion and public relations
activities; and
(26) all excise, sales, gross receipts, admission,
entertainment, tourist or use taxes, gaming taxes and device fees, real
estate taxes, ad valorem taxes, personal property taxes, utility taxes
and other taxes (as those terms are defined by GAAP), assessments for
public improvements, and municipal, county and state license and permit
fees.
Operating Costs shall include Shared Expenses. The type and estimated amount of
Shared Expenses and method for calculation of the same shall be approved by the
Executive Committee to fairly distribute the costs of such services when it
considers the Annual Plan and Operating Budget; provided, however, that such
allocation will not discriminate against the Company as compared with
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the allocation of such expenses among other properties operated by Parent,
Manager or their Subsidiaries. For example, subject to the prior sentence,
Shared Expenses may include the costs incurred by the Manager, Parent or
their respective Subsidiaries for direct salary and wages (including, without
limitation, employer's contributions under FICA, unemployment compensation or
other employment taxes, and Manager's, Parent's or their respective
Subsidiaries' regular pension fund contributions, worker's compensation,
group life, accident, health and other health insurance premiums, profit
sharing, and retirement plans, disability and other similar benefits) paid to
or accrued for the benefit of employees of the Manager, Parent or their
respective Subsidiaries that are assigned to perform a function for the
Company that otherwise would be filled by an employee of, or third party
provider to, the Company, prorated to the extent actually attributable to
each such employee's actual time incurred for the benefit of the Company.
Shared Expenses shall be subject to audit by any Member not more than once
every Fiscal Year.
Operating Costs and Shared Expenses will not include (i) any costs
incurred by the Manager, Parent, or Manager's or Parent's Subsidiaries,
Station or GCR that are not expressly reimbursable by the Company pursuant to
the terms of this Agreement or the then-current Annual Plan and Operating
Budget, such as general overhead expenses of Station, Manager, or Parent or
Manager's or Parent's Subsidiaries, or (ii) the Base Management Fee or
Incentive Management Fee.
"OPERATING BANK ACCOUNT" means the Bank Account maintained by and in
the name of the Company for the payment of Operating Costs and the deposit of
monies related to the business, which account shall be separate and distinct
from any other accounts, reserves or deposits required by this Agreement. The
Operating Bank Account shall be an interest bearing account if such an account
is reasonably available and all interest earned shall be retained in the
Operating Bank Account.
"OPERATING CONSUMABLES" means all food, beverages and other immediately
consumable items utilized in operating the Project, such as soap, cleaning
materials, matches, stationary, brochures, folios, and other similar items.
"OPERATING PERIOD" means that time period from the Opening until the
liquidation of the Company.
"OPERATING SUPPLIES" means all non-capital equipment necessary for the
day-to-day operation of the Project, including but not limited to chips, tokens,
uniforms, playing cards, glassware, linens, silverware, utensils and dishware.
"PERMANENT FINANCING" means any debt financing incurred by the Company
in refinancing or replacement of the Construction Financing or prior Permanent
Financing on terms and conditions approved by the Executive Committee.
"PERMITTED EXCEPTIONS" means, with respect to the Resort Property,
those matters set forth on EXHIBIT F.
"PERSON" means any individual, corporation, limited liability company,
partnership, trust or other entity.
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"PRE-OPENING PERIOD" means that time period from the Effective Date to
the Opening.
"PRE-OPENING PLAN" means an action plan and budget (which need not be
in writing, except for the budget therefor) delineating the key actions (with
estimated timelines) to be taken by the Manager on behalf of the Company to
prepare the Project for the Opening, including recruitment, training, marketing,
advertising, operations planning and cost estimates, in each case consistent
with the Design, Development and Construction Budget, which Pre-Opening Plan
shall be subject to approval by the Executive Committee.
"PROBLEM MEMBER" has the meaning set forth in SECTIONS 5.3(a) AND (b).
"PROFITS" and "LOSSES" for each Fiscal Year (or other period) means an
amount equal to the Company's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(27) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or
Losses pursuant to this definition shall be added to such taxable
income or loss;
(28) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise
taken into account in computing Profits or Losses pursuant to this
definition shall be subtracted from such taxable income or loss;
(29) In the event the Gross Asset Value of any Company asset
is adjusted pursuant to Clause (i) or Clause (ii) of the definition of
Gross Asset Value, the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for purposes
of computing Profits or Losses;
(30) Gain or loss resulting from any disposition of property
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax basis of
such property differs from its Gross Asset Value;
(31) Notwithstanding any other provision of this definition,
any items that are specially allocated pursuant to SECTIONS 4.4(c) AND
4.4(d)(ii) hereof shall be excluded from such taxable income or loss;
and
(32) If the Gross Asset Value of any Company asset is
different from its adjusted tax basis at the beginning of the Fiscal
Year, then, in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account an amount which bears the
same ratio to such beginning Gross Asset Value as the federal income
tax depreciation, amortization or other cost recovery deduction bears
to such beginning adjusted tax basis; provided, however, that if such
beginning adjusted tax basis is zero, such amount shall be determined
with reference
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to such beginning Gross Asset Value using any reasonable method
determined by the Manager.
"PROJECT" means the Vertical Improvements and the Infrastructure
Improvements, all in accordance with the Master Development Plan.
"REGULATIONS" means the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"REGULATORY ALLOCATIONS" has the meaning set forth in SECTION
4.4(c)(vi).
"REMOVAL PUT EXERCISE DATE" has the meaning set forth in SECTION
3.6(c).
"RESERVE FUND" means a Bank Account maintained by and in the name of
the Company for the payment of Capital Improvements and Replacements for the
Project, which account shall be separate and distinct from any other accounts,
reserves or deposits required by this Agreement. The Reserve Fund shall be an
interest bearing account if such an account is reasonably available and all
interest earned shall be retained in the Reserve Fund.
"RESORT PROPERTY" means the real property upon which the Project is to
be developed. The Resort Property is legally described on EXHIBIT G attached
hereto.
"RESTRICTED ACTIVITY" has the meaning set forth in SECTION 3.8(a).
"RETAINED DISTRIBUTIONS" has the meaning set forth in SECTION
4.3(b)(ii).
"RETURN ON TOTAL PROJECT COST" means, with respect to any Fiscal Year
of the Company, the percentage determined by dividing the Company's EBITDA for
such Fiscal Year by the quotient resulting from dividing (A) the Total Project
Cost as of the beginning of such Fiscal Year, plus the Total Project Cost as of
the end of such Fiscal Year, by (B) the integer two (2). (In the event that the
Incentive Management Fee is payable in any year in which there are less than 12
calendar months, then the Incentive Management Fee shall be calculated in such
year utilizing the EBITDA for the actual months (or portions thereof) on an
annualized basis, with the Return on Total Project Costs similarly being
determined based on the first and last day of the applicable period, rather than
a Fiscal Year).
"SECONDARY DILUTION" has the meaning set forth in SECTION 4.3(b)(i).
"SHARED EXPENSES" means Parent's, the Manager's or their respective
Subsidiaries' (as the case may be) allocated out-of-pocket costs (not including
any mark-up or other profit margin) for shared employees and for shared services
related to the Project as approved by the Executive Committee (examples of
Shared Expenses and method for allocating the same are set forth on EXHIBIT H).
"STATION GUARANTY" means the Guaranty of Station Casinos, Inc. attached
to this Agreement as EXHIBIT I.
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"STATION'S INITIAL CAPITAL CONTRIBUTION" has the meaning set forth in
SECTION 4.1(b).
"SUBSIDIARY" means, with respect to any Person, any other Person at
least fifty percent (50%) of the economic or voting interest of which is owned
by such Person.
"TAX ITEMS" has the meaning set forth in SECTION 4.4(d)(i).
"TAX MATTERS MEMBER" has the meaning set forth in SECTION 3.9.
"TOTAL PROJECT COSTS" means the total investment in the land, property,
improvements, plant and equipment of the Project, in accordance with GAAP, plus
pre-opening expenses, but excluding amortization and depreciation.
"TRANSFER" means, as a noun, any voluntary or involuntary transfer,
sale, assignment, pledge, hypothecation or other disposition and, as a verb,
voluntarily or involuntarily to transfer, sell, assign, pledge, hypothecate or
otherwise dispose of.
"TRANSITION PERIOD" has the meaning set forth in SECTION 4.3(f).
"TWENTY FIVE PERCENT PAYMENT" means a payment of twenty-five percent
(25%) per annum on the outstanding amount of a Default Amount (after reflecting
at each point during the calculation of such 25% payment the amount of any
Default Distributions or Retained Distributions) to be paid by the defaulting
Member to the non-defaulting Member pursuant to the terms of SECTION 4.3 from
the date on which such Default Amount was to be paid through the date on which
such Default Amount is last outstanding (up to a maximum of one year).
"UNSUITABLE PERSON" means a Member, Manager or officer of the Company,
or an Affiliate of any such Person, (i) who is denied or refused a Gaming
License by any Gaming Authority in the State of Nevada, disqualified from
eligibility for a Gaming License necessary for the ownership of or participation
in non-restricted gaming in the State of Nevada, determined to be unsuitable to
own or control a Membership Interest or determined to be unsuitable to be
connected with a Person engaged in gaming activities in the State of Nevada by a
Gaming Authority or otherwise fails to obtain a Gaming License necessary for the
ownership of or participation in non-restricted gaming in the State of Nevada,
or (ii) whose continued involvement in the business of the Company as a Member,
Manager, officer, employee or otherwise, (A) causes the Company to lose or to be
threatened with the reasonably likely loss of any Gaming License, or (B) is
deemed likely, in the reasonable discretion of GCR and Station and based on
verifiable information or information received from the Gaming Authorities, to
jeopardize or adversely affect the likelihood that the Gaming Authorities will
issue a Gaming License to the Company or to adversely affect the Company's use
of or entitlement to any Gaming License or that of GCR, Station or Parent, or
any of their Affiliates.
"VERTICAL IMPROVEMENTS" means all buildings, structures and
improvements to be constructed on the Resort Property and all fixtures and
equipment attached to or forming a part thereof (including, without
limitation, heating, lighting, plumbing, sanitation, air conditioning,
laundry, refrigeration, kitchen, elevator and similar items or systems, guest
rooms, restaurants, bars and banquet, meeting and other public areas,
commercial space, including concessions and shops, garage
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and parking space, storage and service areas, recreational facilities and
areas, public grounds and gardens, permanently affixed signage, aquatic
facilities, and other facilities and appurtenances) in accordance with the
Master Development Plan, but excluding the Infrastructure Improvements.
"VOTING STOCK" means all issued and outstanding shares of a Person's
stock of any type, or class or any other security issued by such Person,
entitling the holder of such stock or other security to vote for any member of
such Person's board of directors or otherwise with respect to the control and
affairs of such Person.
"WITHHELD TAXES" has the meaning ascribed to it in SECTION 4.5(b)
hereof.
ARTICLE II
FORMATION
1.2 FORMATION. The Company was formed by the filing of the Articles of
Organization with the Nevada Secretary of State on November 19, 1999, which
Articles of Organization are attached hereto as EXHIBIT J .
1.3 NAME. The name of the Company shall be Green Valley Ranch Gaming,
LLC, and all business of the Company shall be conducted in such name or in any
other name or names that are selected by the Manager with the prior approval of
the Executive Committee. Subject to Executive Committee approval, the name of
the casino portion of the Project may include some variation of the words
"Station Casino," and Station and Parent shall license to the Company such name
and all associated trademarks, logos and systems necessary for use in connection
with the operation of the Project pursuant to a license agreement executed
contemporaneously with this Agreement. Such license agreement provides, among
other things, that, in the event that Station ceases to be a Member of the
Company pursuant to a termination of this Agreement or otherwise, the Company or
the successor to the business of the Company will have the right to use such
name, marks, logos and systems (including, but not limited to, reservation
systems and computer systems) in the manner used on the date of termination of
Station's status as a Member for a period equal to the greater of (i) two
months, or (ii) the duration of the Transition Period, if GCR has exercised its
rights pursuant to the terms of this Agreement to cause Station to act as
Manager during such Transition Period, in both instances after which time such
name, marks, logos and systems may no longer be used in connection with the
Project without Parent's consent. If Station is terminated as the Manager
pursuant to SECTION 3.6(a)(i, ii OR iii), then such right to use such name,
mark, logos and systems shall be for up to six months.
1.4 PURPOSES AND POWERS. The purpose of the Company is to develop and
operate the Project. In connection therewith, the Company shall have authority
to engage in any lawful business, purpose or activity permitted by the Act, and
it shall possess and may exercise all of the powers and privileges granted by
the Act or which may be exercised by any limited-liability company organized
pursuant to the Act, together with any powers incidental thereto, so far as such
powers or privileges are necessary or convenient to the conduct, promotion or
attainment of the business, purposes or activities of the Company.
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1.5 REGISTERED AGENT AND REGISTERED OFFICE. The Manager shall
constitute the Company's registered agent for purposes of the Act and the
Manager shall maintain the registered office of the Company as required by
the Act. The address of the Company's initial registered office shall be 2411
Sahara Avenue, Las Vegas, Nevada 89102. In addition to any records required
by the Act, the Manager shall maintain the following records at the
registered office: (i) a current list of the full name and last known
business address of each Member and Manager, separately identifying the
Members in alphabetical order and the Manager(s) in alphabetical order; (ii)
a copy of the filed Articles of the Company and all amendments thereto,
together with executed copies of any powers of attorney pursuant to which any
document has been executed; (iii) copies of the Company's federal, foreign,
state and local income tax returns and reports, if any, for the three most
recent years; (iv) copies of this Agreement and any amendments thereto; and
(v) any financial statements of the Company for the three most recent years.
The Company's registered agent and office may be changed by the Executive
Committee.
ARTICLE III
MANAGEMENT
1.6 THE MANAGER. Subject to the approval rights vested in the
Executive Committee, the Members or GCR pursuant to this Agreement, the sole
responsibility and authority for the management of the Company is vested in
the Manager, and the Manager shall have the complete right and authority to
manage the business and affairs of the Company. The rights, duties and
obligations of Station as Manager are personal to Station based on Station
and Parent's unique experience and, except as expressly set forth in this
Agreement, may not be transferred, assigned or delegated without the prior
approval of GCR and Station. Except as limited in SECTION 3.7 below, any duly
authorized officer of the Manager shall have the authority to act on behalf
of the Manager. Except as set forth in this Agreement, the Manager may not
resign without the unanimous approval of the Members and may be removed only
as expressly set forth in this Agreement. No Member, acting in its capacity
as a Member, shall constitute an agent of the Company or have any authority
to act for or bind the Company. The Members agree that they shall use
commercially reasonably efforts to cooperate with the Manager as reasonably
requested by the Manager in carrying out its duties under this Agreement and
in complying with any restrictions placed on the Members or the Company by
any Gaming Authority.
(a) STANDARD OF CARE. In conducting the management of the
Company, the Manager shall (i) comply with the provisions of this Agreement,
and (ii) act in good faith in a manner reasonably believed to be in the best
interests of the Company and with the same care as a prudent person would
exercise in the management of its own hotel and gaming properties. Subject to
the foregoing, the Manager may reasonably rely on information, opinions,
reports or statements prepared or presented by officers, employees or other
agents of the Company acting within the scope of their employment or by
counsel, public accountants or other advisors to the Company.
(b) STANDARD OF OPERATION. The Manager shall operate the
casino portion of the Project (including restaurants, food and beverage and all
other components related thereto) to a standard of operation at least as high as
that existing at the Parent's or the Parent's Subsidiaries' highest quality
casinos as of the date of this Agreement, unless the Annual Plan and Operating
Budget would not reasonably allow the maintenance of such standard of operation.
The Manager
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shall, at all times during this Agreement, operate the hotel, meeting
facilities, room service, restaurants related to the hotel, pool, spa (if the
Manager operates the spa), concierge, hotel and meeting facilities' valet
parking and ancillary food and beverage and other components related to the
hotel (excluding the casino related components) to a standard of operation
competitive with service at the then-existing higher-end Las Vegas area
resorts, unless the Annual Plan and Operating Budget would not reasonably
allow the maintenance of such standard of operation.
1.7 EXPENSE OF CONSTRUCTION. Subject to the Design, Development and
Construction Budget approved by the Executive Committee, the Company shall
pay the fees, costs and expenses of planning, constructing, financing,
designing, equipping, decorating and furnishing the Project. Notwithstanding
the foregoing, GCR shall pay directly to the contractor the costs of rough
grading the Resort Property and constructing the Infrastructure Improvements
in excess of $11,000,000.00, after the Company has expended in full
$11,000,000 for such Infrastructure Improvements pursuant to the Design,
Development and Construction Budget. Any such payment by GCR shall not be
deemed to be a Capital Contribution and shall not affect the Capital Account
of GCR.
1.8 MANAGER'S DUTIES DURING PRE-OPENING PERIOD. During the Pre-Opening
Period, the Manager shall make available to the Company Station's and Parent's
unique experience in the design and planning of modern hotels and casinos, and
shall supervise the planning, designing, equipping, decorating and furnishing of
the Project. Without limiting the foregoing, the Manager shall have the
following duties and responsibilities:
(1) MASTER DEVELOPMENT PLAN. The Manager shall consult with
the Executive Committee on a regular basis regarding the formulation of the
components of the Master Development Plan and shall submit such components for
approval by the Executive Committee prior to submittal thereof to the City of
Henderson (or other application or filing to any governmental or
quasi-governmental entity) and at times necessary to assure construction of the
Project can commence by July 1, 2000. Further, at the sole expense of the
Company pursuant to the approved Design, Development and Construction Budget,
the Manager shall, subject to Force Majeure, take commercially reasonable steps
to cause the Company to obtain timely all Governmental Approvals necessary in
order to commence construction of the Project by July 1, 2000. In addition, at
the sole expense of the Company pursuant to the approved Design, Development and
Construction Budget, the Manager shall take commercially reasonably steps to
cause the Company to procure and maintain insurance during construction that
conforms to reasonable industry standards; such insurance shall conform to the
applicable requirements of SECTION 3.4(l) (e.g., the Members' being additional
insureds, 30-day notice of cancellation, etc.).
(2) CONSTRUCTION FINANCING. The Manager shall promptly make
application for, and shall, subject to Force Majeure, take all commercially
reasonable steps within its control to cause the Company to obtain, at the
Company's sole cost and expense, a commitment or signed engagement letter for
Construction Financing on or prior to March 15, 2000. Such Construction
Financing (including any commitment therefor), and any Permanent Financing
incurred by the Company, including the documentation with respect thereto, shall
be subject to the prior approval of the Executive Committee.
(3) CONSTRUCTION OF INFRASTRUCTURE IMPROVEMENTS. Commencing no
later than April 15, 2000, subject to Force Majeure, the Manager shall cause the
Company to commence rough
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grading of the Resort Property and construction of the Infrastructure
Improvements and shall diligently prosecute such construction to completion,
and in any event shall use commercially reasonable efforts to protect the
Resort Property's land use entitlements. The Manager shall not authorize any
change in the scope of the rough grading or the Infrastructure Improvements
without the prior written approval of GCR. Further, the Manager shall not,
without the prior written approval of GCR, authorize any increase in the cost
of any line item for Infrastructure Improvements as set forth in the Design,
Development and Construction Budget by more than five percent (5%), or any
increase in the aggregate cost of the rough grading and Infrastructure
Improvements exceeding $12,400,000. GCR shall not unreasonably withhold or
delay its approval to a request by the Manager pursuant to this SECTION
3.3.(c).
(4) CONSTRUCTION OF VERTICAL IMPROVEMENTS. Commencing no later
than July 1, 2000, subject to Force Majeure, the Manager shall cause the Company
to commence construction of the Vertical Improvements and shall use commercially
reasonable efforts to protect the Resort Property's land use entitlements.
Thereafter, the Manager shall use commercially reasonable efforts to supervise
and cause the completion of the construction of the Project and to obtain on
behalf of the Company all Furniture, Fixtures and Equipment requisite for the
operation of the Project, all in accordance with the Master Development Plan and
at the Company's sole cost and expense. Except as set forth in SECTION 3.3(c)
with respect to rough grading of the Resort Property and Infrastructure
Improvements, the Manager may authorize a change order which changes the Design
Plan, the Construction Plan, the Design, Development and Construction Budget or
Master Development Plan without the prior approval of the Executive Committee;
provided, however, the Executive Committee's prior approval shall be required
for any change order that materially changes the Design Plan, the Construction
Plan, the Design, Development and Construction Budget or Master Development
Plan. In the event that neither member of the Executive Committee notifies the
Manager within seven (7) calendar days after receipt of such written request for
approval of a material change to the Design Plan, the Construction Plan, the
Design, Development and Construction Budget or Master Development Plan that he
objects to such change, the Executive Committee shall be deemed to have approved
such material change. A material change requiring the approval of the Executive
Committee is any item that: (a) materially changes the scope, appearance or
functionality of the Project; or (b) increases the cost of the design and
construction of the Project (excluding the Infrastructure Improvements) as set
forth in the Design, Development and Construction Budget of the Vertical
Improvements to more than $265,000,000.00, regardless of whether such changes
are covered by a contingency reserve.
(5) CONSTRUCTION CONTRACT APPROVALS. The Manager shall submit
the Company's contracts with the architect, interior design and landscaping
prime contractors for the Project and the general construction contractor for
the Project for the prior approval of the Executive Committee. If requested by
GCR, the contract with the general contractor shall be divided into two
contracts, one for the Infrastructure Improvements and one for the remainder of
the Project.
(6) PRE-OPENING PLAN. The Manager shall prepare and submit for
Executive Committee approval within 90 days prior to the Opening, and put into
effect as appropriate after receiving such approval, a Pre-Opening Plan for the
organization, services, sales and marketing program of the Project, and shall
use commercially reasonable efforts to cause the Company to engage the General
Manager and such employees as may be necessary in connection with the operation
of the Project.
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(7) PRE-OPENING SERVICES. Consistent with the approved
Pre-Opening Plan, the Manager shall use commercially reasonable efforts to cause
the Company to enter into agreements and arrangements with concessionaires,
licensees, tenants, suppliers, sub-contractors or other intended users of the
facilities of the Project, subject to the prior approval of the Executive
Committee in the case of leases, licenses or concessions or other contracts as
set forth in SECTION 3.4(m) AND SECTION 3.13. The Manager shall recruit and
train for and on behalf of the Company the initial staff of the Project through
such training programs and other training techniques as the Manager shall deem
advisable and test the proposed operation of the Project by furnishing the
services normally offered in the operation of a hotel/casino, including the
serving of food and beverages, and generally operating the completed portions of
the Project for a reasonable test period immediately prior to the Opening.
(8) REPORTING. During the Pre-Opening Period, the Manager
shall provide the Executive Committee with monthly progress reports not later
than the twentieth day of each month, which progress reports shall set forth in
reasonable detail all expenditures during the preceding month together with a
comparison of such expenditures to budgeted amounts and a revised estimate of
the Project's remaining cost to completion. In addition, representatives of the
Manager shall be available to meet with representatives of the Members on at
least a monthly basis to review the status of the Project.
(9) CONTRACTS. The Manager shall use commercially reasonable
efforts to cause the Company to comply with and not to become in default under
any contract, agreement, loan document or other obligation of the Company if the
failure to comply therewith or a default thereunder would have a material
adverse effect on the Company or any Member.
(10) ADDITIONAL RESPONSIBILITIES. The Manager shall comply
with the provisions of SECTIONS 3.4(c), 3.4(h), 3.4(j), 3.4(n) AND 3.4(p) prior
to Opening, and the Members and Executive Committee shall have their respective
rights as set forth therein. Also, the provisions of SECTIONS 3.4(d), 3.4(e) AND
3.4(f) shall apply prior to the Opening to the extent that they reasonably
should be applicable.
1.9 MANAGER'S ADDITIONAL DUTIES, INCLUDING DURING OPERATIONAL PERIOD.
During the Operating Period, the Manager shall provide to the Company all
services customarily provided by Parent, Station or their respective
Subsidiaries or Affiliates to other casinos owned or controlled by Parent,
including financial, accounting, marketing, reservations, human resources and
risk management services, shall afford the Company the benefit of group
purchasing and similar services, and shall, subject to the Annual Plan and
Operating Budget, take commercially reasonable steps to include the Company in
such promotions being offered through Parent's (or its Subsidiaries' or
Affiliates') other casinos in the Las Vegas area. In addition, the Manager shall
provide the Company with the services of senior management personnel of Parent
to the extent required to enable the Company to conduct its operations in
accordance with SECTION 3.1(b). Without limiting the foregoing, the Manager
shall have the following responsibilities and duties during the Operating Period
and, to the extent applicable, prior to the Operating Period, which, except as
provided in this Agreement (including the necessity for approval of the Annual
Plan and Operating Budget or inclusion in the Design, Development and
Construction Budget, as applicable), shall be at the sole cost and expense of
the Company:
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(1) ANNUAL PLAN AND OPERATING BUDGET.
(1) Not less than ninety (90) days prior to
Opening and not less than forty-five (45) days prior to the commencement of
each full Fiscal Year thereafter, the Manager shall submit for approval by
the Executive Committee a proposed Annual Plan and Operating Budget. If the
Executive Committee fails to approve the proposed Annual Plan and Operating
Budget by December 1 of any given calendar year, the Project shall continue
to operate under the most recent Annual Plan and Operating Budget as if it
were for such upcoming Fiscal Year until the Executive Committee otherwise
agrees; except that capital expenditures (including equipment leases and
similar transactions) for Capital Improvements and Replacements shall be
permitted to the extent that amounts on deposit in the Reserve Fund are
sufficient to fund the costs of such expenditures and thereafter only to
repair or replace damaged portions of the Project or damaged or unusable
Furniture, Fixtures and Equipment.
(2) The Manager shall propose revisions to the
Annual Plan and Operating Budget from time to time to reflect any
unanticipated significant changes, variables or events or to include
significant additional unanticipated items of income or expense. Any such
revision shall be submitted to the Executive Committee for approval. If the
Executive Committee fails to approve such revision within thirty (30) days
after the date of such submission, the Project shall be operated in
accordance with the original Annual Plan and Operating Budget until the
Executive Committee otherwise agrees.
(3) Except as expressly set forth in SECTION 3.13
or elsewhere in this Agreement, the Manager may enter into any contract,
agreement, license or other financial obligation so long as the amounts
required to finance the Company's performance of such contract, agreement,
license or other financial obligation during the then-current fiscal year
have been included in the then-current Annual Plan and Operating Budget, or
make any change in the interior or exterior use, operation, functionality or
appearance of the Project (that is not a material change), without the prior
approval of the Executive Committee. In the event that the Manager requests
the approval of the Executive Committee for a material change to the interior
or exterior use, operation, functionality or appearance of the Project and
neither member of the Executive Committee notifies the Manager within seven
(7) calendar days after receipt of such written request that he objects to
such change, the Executive Committee shall be deemed to have approved such
material change.
(4) A pro forma for the first 5-years of operation
of the Project, including compensation projected to be payable to the Manager
pursuant to SECTION 3.5, previously has been provided to the Members. The pro
forma is for illustrative purposes only and is not an approved Annual Plan
and Operating Budget and neither Station nor GCR make any representations or
warranties with respect thereto.
(2) CAPITAL EXPENDITURES.
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(1) The Manager shall recommend to the Executive
Committee from time to time proposed Capital Improvements and Replacements
and the design and specifics thereof. If the Executive Committee approves
such Capital Improvements and Replacements (including a budget therefor), the
Manager shall use commercially reasonable efforts to cause the installation
thereof. All Capital Improvements and Replacements approved by the Executive
Committee shall be made at the sole cost and expense of the Company (subject
to the budget therefor) and to the extent reasonably feasible in a manner
that will minimize any adverse impact on the normal operation of the Project.
(2) The Manager shall, to the extent Company funds
are available following allocation pursuant to SECTION 3.4(k), set aside
within 15 days following the end of each Fiscal Month after Opening an amount
equal to three percent (3%) of Gross Revenues for such Fiscal Month, which
amounts shall be deposited into the Reserve Fund to pay for Capital
Improvements and Replacements. Any expenditures for Capital Improvements and
Replacements during any Fiscal Year which have been budgeted in the Annual
Plan and Operating Budget or otherwise approved by the Executive Committee
may be made by the Manager without additional approval and, to the extent
funds are available, such payments shall be made by the Manager from the
Reserve Fund (including accrued interest and unused accumulations from
earlier years). Any amounts remaining in the Reserve Fund at the close of a
Fiscal Year shall be carried forward and retained in the Reserve Fund until
fully used as herein provided. To the extent the Reserve Fund is insufficient
at a particular time, or to the extent the Reserve Fund plus anticipated
contributions for the existing Fiscal Year is less than the amount required
by the Annual Plan and Operating Budget for the ensuing Fiscal Year, then
additional expenditures shall be subject to the prior approval by the
Executive Committee and, if such expenditures are approved, the Executive
Committee shall determine the source of funds for such Capital Improvements
and Replacements; provided that the Members shall have the funding obligation
set forth in SECTION 4.2(c) hereof. The Manager may, in its reasonable
discretion, sell capital items that are obsolete or are no longer needed for
the operation of the Project and deposit the proceeds thereof in the Reserve
Fund; provided that Executive Committee prior approval shall be required with
respect to the sale of any capital item with a fair market value of $500,000
or more.
(3) In the event a condition should exist with
respect to the Project of an emergency nature, including structural repairs,
which requires that immediate repairs are necessary to preserve and protect
the Project, assure its continued operation or protect the health and safety
of its guests or employees, the Manager, on behalf and at the sole cost and
expense of the Company and as an Operating Cost, is authorized to take all
steps and to make all expenditures reasonably necessary to repair and correct
any such condition, whether or not provisions have been made in the
applicable Annual Plan and Operating Budget for any such emergency
expenditures, up to a maximum of $500,000 for any single such emergency. The
Manager agrees that it shall cause the Company to make such repairs and
replacements only after it has made a reasonable attempt (if circumstances
permit) to inform the Executive Committee of the existence of such emergency,
the repairs and replacements it proposes to make, and the estimated amount of
expenditures to be incurred. If the Manager has been unable to advise the
Executive Committee in advance, it shall promptly notify the Executive
Committee after taking any necessary action. Expenditures made by the Manager
in connection with an emergency shall be paid for first by the Company from
the Reserve Fund to the extent funds are available, and then from the
Operating Bank Account.
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(4) In the event that repairs to, or additions,
changes or corrections in, the Project of any nature shall be required by
reason of any laws, ordinances, rules or regulations now or hereafter in
force, or by order of any governmental or municipal power, department,
agency, authority or officer, the Manager shall inform the Executive
Committee of the existence of the governmental regulations and the repairs,
additions, changes or corrections it believes are required to be made and the
estimated expenditures to be incurred. The Executive Committee shall
determine whether to contest the validity or application of any such
governmental requirements or to make such repairs; provided, however, that
the Manager shall be authorized and empowered to take all actions it
reasonable believes are necessary to comply with applicable laws if the
failure to so comply might expose the Company, any Member, or the Manager to
criminal liability, materially and adversely affect the operation of the
Project, or jeopardize any Gaming License held by the Manager, Parent, any of
Parent's Subsidiaries, any Member or the Company.
(3) PERMITS. The Manager, at the sole cost and expense of
the Company, shall use commercially reasonable efforts to obtain on or before
the Opening and thereafter keep in full force and effect, all Governmental
Approvals, including Gaming Licenses and liquor, bar, restaurant, sign and
hotel licenses, as may be required for the operation of the Project pursuant
to the operations standard in SECTION 3.1(b), other than any Gaming Licenses
or liquor licenses, permits or approvals required to be obtained by the
Members and their Affiliates in their individual capacities (which the
Members agree to use their best efforts to obtain at their respective sole
cost and expense prior to the scheduled Opening, including the timely
submission of all applications and disclosures required or requested by the
Gaming Authorities and liquor licensing authorities). The Manager shall
operate and manage the Project in a manner that will not materially adversely
affect the Governmental Approvals necessary for the operation of the Project,
but in all events shall use all reasonable efforts within its control to
cause the Company, at the Company's sole cost and expense, to comply with all
material conditions or requirements set out in any Governmental Approvals.
(4) OPERATING SUPPLIES AND OPERATING CONSUMABLES. After
Opening, the Manager shall, on behalf of the Company, use commercially
reasonable efforts to obtain and maintain such Operating Supplies and
Operating Consumables as it deems reasonably necessary for the operation of
the Project in accordance with the Master Development Plan and subject to the
provisions of this Agreement and the then-current Annual Plan and Operating
Budget.
(5) PERSONNEL.
(1) The Manager shall hire all employees of the
Company for and on behalf of the Company. All personnel hired by the Company for
the Project (other than those that constitute Shared Expenses) shall be
employees of the Company and all wages, compensation and benefits shall be the
exclusive obligation of the Company and the Manager shall not be liable to any
of the Company's personnel therefor, except to the extent that the Manager sets
the compensation in contravention of the Annual Plan and Operating Budget
without the Executive Committee's approval. Subject to the Annual Plan and
Operating Budget, the Manager shall hire, supervise, direct, discharge and
determine the compensation, other benefits and terms of employment of the
Company's personnel. With the exception of the General Manager, the Manager
shall be the sole judge of the fitness and qualifications of such personnel and
is vested with absolute discretion in hiring, supervising, directing,
discharging and determining the compensation, other benefits and terms of
employment of such personnel. The Members may consult, advise or communicate
with
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the Manager, Construction Manager, or the General Manager regarding Project
personnel or problems related to personnel at any time, but no Member shall
interfere with or give orders or instructions to any personnel employed at
the Project.
(2) The Manager shall use commercially reasonable
efforts to cause the Company to obtain workers' compensation insurance and
employer's liability insurance. The insurance coverages required hereunder shall
be set forth in the Annual Plan and Operating Budget.
(3) The general hiring policies and the discharge of
employees at the Project shall in all material respects comply with all "Equal
Employment Opportunity" laws and regulations, and the Manager agrees to comply
in all material respects with all laws, regulations and ordinances regarding the
employment and payment of persons engaged in the operation of the Project,
including without limitation all "Equal Employment Opportunity" laws and
regulations.
(4) The Manager shall keep the Executive Committee
informed of all negotiations with labor unions representing employees at the
Project, and neither the Manager nor the Company shall enter into any union
contracts covering its employees without the prior approval of the Executive
Committee, unless required by law to do so (which contracts, in all cases, shall
be furnished to the Executive Committee as soon as reasonably possible).
(6) SALES, MARKETING AND ADVERTISING. Subject to the Annual
Plan and Operating Budget, the Manager shall, at the sole cost and expense of
the Company, advertise and promote the business of the Project, institute and
supervise a sales and marketing program, and coordinate with tour programs
marketed by airlines, travel agents and government tourist departments when the
Manager deems the same to be advisable for the operation of the Project. Subject
to the Annual Plan and Operating Budget, the Manager may cause the Project to
participate in sales and promotional campaigns and activities involving
complimentary rooms, food and beverages to customers, bona fide travel agents,
tourist officials and airline representatives where such is customary and
appropriate in the gaming industry.
(7) MAINTENANCE AND REPAIRS. Subject to the Annual Plan and
Operating Budget, the Manager shall make or cause the Company to make, at the
sole cost and expense of the Company, all repairs, replacements, corrections and
maintenance items to the Project as shall be required in the normal and ordinary
course of operation of the Project. In conjunction therewith and subject to this
Agreement (including SECTION 3.13) and the Annual Plan and Operating Budget, the
Manager is authorized to make and enter into in the name of, for the account of
and at the expense of the Company, all such contracts and agreements as in the
Manager's opinion are reasonably necessary for the repair and maintenance of the
Project and to cause the same to be paid by the Company when due.
(8) COMPLIANCE WITH LEGAL REQUIREMENTS. The Manager shall take
all commercially reasonable actions necessary to materially comply with, and to
cause the Company to materially comply with, any and all laws, orders or
requirements of any federal, state, county or municipal agency affecting the
Project or the ownership or operations thereof. The Executive Committee shall
determine whether to contest any tax payment or assessment, or any governmental
or regulatory order or requirements (except that, where failure to comply
promptly with any such order or requirements might expose the Company, any
Member or the Manager to criminal liability,
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materially and adversely affect the operation of the Project or jeopardize
any Gaming License held by the Manager, Parent, any of Parent's Subsidiaries,
any Member or the Company, the Manager may take such action without Executive
Committee approval). The Manager shall promptly notify the Executive
Committee in writing of all such orders and notices or requirements that are
received by the Manager. Except as otherwise provided in this Agreement, the
costs of such compliance shall be at the expense of the Company.
(9) FINANCIAL STATEMENTS.
(1) On or before the fifteenth day of each Fiscal
Month, the Manager shall deliver to each Member a profit and loss statement,
statement of income and balance sheet showing the results of the operation of
the Project for the preceding Fiscal Month and the year-to-date, and having
attached thereto a computation of the Base Management Fee and Incentive
Management Fee for such preceding month and the year-to-date.
(2) Within ninety (90) days after the end of each
Fiscal Year, the Manager shall deliver to each Member an audited balance
sheet together with a comparison to the previous Fiscal Year (after the first
full Fiscal Year) and a related detailed statement of profit and loss
(including all supporting departmental schedules of revenues and expenses),
together with a comparison to the previous Fiscal Year and the current Annual
Plan and Operating Budget, and having annexed thereto a computation in
reasonable detail of the Base Management Fee and Incentive Management Fee for
such Fiscal Year; and
(3) Upon the written request of any Member, such
other additional statements, computations and reports regularly or otherwise
prepared by the Company, or otherwise contemplated or required under this
Agreement.
(10) ACCOUNTING MATTERS AND FISCAL PERIODS.
(1) At the cost and expense of the Company, the
Manager shall cause an audit of the Company's annual financial statements to
be performed following the end of each Fiscal Year (and upon termination of
this Agreement if not coincident with a Fiscal Year end) by a
nationally-recognized, independent certified public accounting firm with
expertise in gaming proposed by the Manager and approved by the Executive
Committee.
(2) The books and records reflecting the Project
operations shall be kept by the Manager in accordance with GAAP applied on a
consistent basis, and shall be maintained in the Las Vegas, Nevada
metropolitan area. The Members and their respective accounting firms shall
have the right to examine and copy the books and records of the Project upon
reasonable prior notice to the Manager.
(11) OPERATING BANK ACCOUNT. Subject to the terms and
conditions of this Agreement, all sums received from the operation of the
Project and all sums advanced by the Company for purposes other than Capital
Improvements and Replacement shall be deposited in the Operating Bank
Account. The Manager shall disburse funds from the Operating Bank Account on
a monthly basis in the following order of priority and to the extent
available:
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(1) when due, all Operating Costs;
(2) when due, the payment of debt service with
respect to the Construction Financing or any Permanent Financing; (1)
(3) when due, the payment of debt service with
respect to other loans from third parties;
(4) the Base Management Fee and Incentive Management
Fee (including any accrued Base Management Fee and Incentive Management Fee from
prior periods); except in the event that Station (A) is no longer a Member, the
Base Management Fee and Incentive Management Fee (including any accrued Base
Management Fee and Incentive Management Fee from prior periods) shall be paid as
an Operating Cost under subsection (i) above, or (B) is in default of its
obligations as a Member under this Agreement, including, but, not limited to, to
make any capital contributions pursuant to Article IV, in which event the Base
Management Fee and Incentive Management Fee that accrues following such default
shall be paid after the payment of any debt service due to any non-defaulting
Member under subsection (vii) below;
(5) the payment for emergency expenditures to the
extent paid from the Operating Bank Account or from amounts on deposit in the
Reserve Fund;
(6) deposits into the Reserve Fund and any other
reserves established by the Executive Committee for anticipated expenditures,
liabilities or contingencies;
(7) when due, the payment of debt service with
respect to any loans from the Members; and
(8) the remaining balance thereof shall constitute
"DISTRIBUTABLE CASH" for purposes of this Agreement.
In following the priorities set forth above, the Manager will reserve funds in
the Operating Bank Account each Fiscal Month for payment of any Operating Costs
for any of the above items which the Manager has a duty to pay that are not paid
on a monthly basis (e.g., real estate taxes, insurance premiums and so on). To
the extent that there are sufficient funds on deposit in the Operating Bank
Account, the Manager shall perform the function of paying all Operating Costs
and other items set forth above (including but not limited to debt service, real
estate taxes, insurance premiums, etc.) unless otherwise agreed by the Executive
Committee.
(12) INSURANCE COVERAGE. The Manager agrees to use
commercially reasonable efforts to cause the Company to procure and maintain at
all times during the term hereof, as an Operating Cost, insurance in such
amounts and coverages as may be required by the then-current Annual Plan and
Operating Budget, which shall be no less than that necessary to conform to
reasonable industry standards for a similar hotel and casino, taking into
consideration inflation and any events or trends of liability which affect the
risks attendant to owning and operating the Project. All such insurance shall be
provided under policies issued by insurance companies of good reputation and of
sound financial responsibility and licensed by the State of Nevada. All
liability, business interruption and crime insurance policies shall be written
in the name of the Company with
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each of the Members and the Manager being named thereon as additional
insureds. All insurance policies shall be endorsed specifically to the effect
that the proceeds of any crime or business interruption losses shall be made
payable to the Company, or to the extent required by any lender of
Construction Financing, Permanent Financing or other financing, to such
lender. All such policies of insurance shall also be endorsed specifically to
the effect that such policies shall not be canceled or materially changed
without at least thirty (30) days prior written notice to the Members and the
Manager. To the extent obtainable without significantly increasing the
premium cost, all policies of comprehensive public liability insurance and
comprehensive crime insurance shall contain an endorsement to the effect that
such insurance shall be primary to any other similar insurance carried by the
Company, the Members or the Manager. Certificates of insurance shall be sent
to the Members and the Manager at the addresses provided in SECTION 8.1.
(13) LEASE AGREEMENTS. The Manager shall be responsible for
the leasing of space in the Project in the Company's name to third-party
lessees, licensees and concessionaires, subject to the prior approval of the
Executive Committee of the tenant, licensee or concessionaire, and terms of such
leases, licenses or other occupancy agreements. The Manager will enforce such
leases, licenses or other occupancy agreements in a manner which is consistent
with sound business practices. Revenues received by the Company under any lease,
license or occupancy agreements shall be deemed a part of Gross Revenues as
defined under this Agreement, except for reimbursements for utilities, taxes or
similar matters.
(14) LEGAL ACTION. The Manager shall have the right to
institute, on behalf of and in the name of the Company, any and all legal
actions or proceedings affecting the Project, including the construction
thereof, such as, but not limited to, to collect charges, rent or other income
from the Project or to remove any tenants, terminate a lease, license, or
concession agreement, a breach thereof or default entered by any tenant,
licensee, concessionaire, supplier, or contractor, or to protect and/or litigate
to final decision in any appropriate forum, any violation, rule, regulation or
agreement concerning the Project, including the construction thereof; provided
that approval of the Executive Committee shall be required with respect to the
institution or defense of any action (or settlement thereof) where there is a
reasonable possibility of exposure to the Company in excess of $250,000 or that
could have a material adverse effect on the operation of the Project; provided
further, however, that the Executive Committee shall be deemed to have approved
the institution of any action or defense of an action unless either member of
the Executive Committee notifies the Manager that he disapproves such action
within seven (7) days after receipt of written notice requesting such
institution or defense. Any counsel to be engaged under this subsection with
respect to any matter with a reasonable possibility of exposure to the Company
in excess of $250,000 or that could have a material adverse effect on the
operation of the Project shall be proposed by the Manager, subject to the prior
approval of the Executive Committee.
(15) CONSULTATION. At the monthly Member Representative
meeting, representatives of the Manager and the General Manager shall meet with
the Member Representatives to discuss the performance of the Project and of the
Manager of its obligations hereunder and the Manager's plans and expectations
for the Project for the remaining Fiscal Year.
(16) EMERGENCIES. Notwithstanding anything to the contrary
contained within this SECTION 3.4, if at any time it becomes necessary in the
Manager's reasonable judgment to cease operations of all or part of the Project
to protect the Project from material and adverse consequences
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or to protect the health, safety or welfare of the guests or employees of the
Project, then the Manager may close and cease operations of that portion of
the Project, reopening the same when the Manager reasonably believes that
such event has passed; provided, however, that the Manager shall immediately
notify the Executive Committee of such event and shall keep that portion of
the Project closed for the minimum reasonable period of time.
(17) CONTRACTS. The Manager shall use commercially reasonable
efforts to cause the Company to comply with and not to become in default under
any contract, agreement, loan document or other obligation of the Company if
such failure to comply or a default thereunder would have a material adverse
effect on the Company or any Member.
1.10 COMPENSATION OF THE MANAGER. In addition to other reimbursements
expressly provided for in this Agreement, during the Operating Period but except
for any period occurring after Station has been removed as Manager pursuant to
SECTION 3.6(a), and subject to SECTIONS 3.6(b) AND 3.4(k), the Company shall pay
to Station when it is the Manager the amounts set forth below in this SECTION
3.5.
(1) BASE MANAGEMENT FEE. The Company shall pay the Manager a
Base Management Fee equal to two percent (2%) of the Company's Gross Revenues
for the applicable period. The Base Management Fee for each Fiscal Year during
the Operating Period will be paid in monthly installments in arrears immediately
following the delivery of the Company's financial statements for each Fiscal
Month. After the delivery of the Company's audited financial statements for each
Fiscal Year, appropriate adjustments shall be made for any overpayment or
underpayment of Base Management Fees during such Fiscal Year on the next monthly
installment of Base Management Fees due.
(2) INCENTIVE MANAGEMENT FEE. In addition to the Base
Management Fee, the Company shall pay the Manager an Incentive Management Fee in
an amount equal to the sum (determined without duplication) of (x) 5.0% of the
Company's EBITDA during the Operating Period for the applicable Fiscal Year to
the extent such EBITDA is positive and represents a Return on Total Project Cost
of up to 15.0%, and (y) 10.0% on that portion of the Company's EBITDA during the
Operating Period for such Fiscal Year that exceeds a 15% Return on Total Project
Costs; provided, however, that the Incentive Management Fee for any Fiscal Year
shall not exceed an amount equal to 5.4% of the Company's EBITDA for the
applicable Fiscal Year. Five percent (5%) of the Company's monthly EBITDA shall
be paid monthly in arrears immediately following delivery of the Company's
financial statements for each Fiscal Month as a partial payment on the annual
Incentive Management Fee. After the delivery of the Company's audited financial
statements for each Fiscal Year, appropriate adjustments shall be made for any
overpayment or underpayment of the Incentive Management during such Fiscal Year
on the next monthly installment of Incentive Management Fees due.
(3) EXPENSE REIMBURSEMENT. The Company shall be responsible
for all Operating Costs incurred in accordance with the terms and provisions of
this Agreement, including the Annual Plan and Operating Budget, and will
reimburse all such Operating Costs incurred thereby by or on behalf of the
Manager or Members pursuant to an approved Annual Plan and Operating Budget.
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1.11 REMOVAL OF MANAGER.
(1) So long as GCR is not in material breach of the
provisions of this Agreement, GCR may give notice to the Manager that it
desires to remove Station as the Manager:
(1) upon 30 days prior written notice in the event
that Station defaults upon the making of its Initial Capital Contribution
pursuant to SECTION 4.1(b), if Station has not made its Initial Capital
Contribution within such 30-day period;
(2) upon not less than 10 days prior written
notice in the event (A) Station's Gaming License is revoked or is suspended
for more than thirty days in any calendar year (provided, however, that
Station shall not act as Manager during any such period of revocation or
suspension), (B) Station becomes Bankrupt, or (C) a trustee in bankruptcy is
appointed for Parent, a receiver is appointed for substantially all of the
assets of Parent, or Parent is Bankrupt and because of such Bankruptcy
Station is unable to fulfill the material terms of its obligations as
Manager; provided that, in no event may GCR remove Station as Manager upon a
determination that Station is an Unsuitable Person until the conditions
contained in clause (A) of this subsection (ii) have been satisfied;
provided, further, for the time that Station is not acting as Manager, it
shall not receive the compensation set forth in SECTION 3.5; or
(3) upon 30 days prior written notice in the event
that Station engages in an act or omission that is grossly negligent,
reckless or constitutes intentional misconduct, and such action or omission
has a material adverse effect on the Company; provided that such termination
shall be effective with respect to any such action or omission that is
susceptible to complete cure (I.E., as if there has been no such action or
failure to act) only if such action or failure to act has remained uncured at
the end of such 30-day period; or
(4) if Station no longer is a Member of the
Company.
GCR shall give Station notice of its desire to remove Station as
Manager pursuant to SECTION 3.6(a) within 60 days after GCR has actual
knowledge of the events giving rise to the right to remove Station. If GCR
does not give such written notice within such 60-day period, then GCR shall
not have a right to remove Station based on the grounds for which it had such
actual knowledge; provided, however, nothing herein shall prevent GCR from
removing Station if it subsequently has actual knowledge of further ground(s)
for removal.
(2) Notwithstanding that GCR may not have grounds to remove
Station as the Manager pursuant to this SECTION 3.6(a), GCR nonetheless may
bring an action on its own behalf or on behalf of the Company, at law, equity or
pursuant to other available remedies against Station as the Manager for breach
of its material obligations hereunder (including, but not limited to material
breach of the standards of care and operation) as the Manager and for any
damages or other costs incurred by GCR or the Company as a result of such
breach, including, but not limited to, during the design and construction phase
of the Project. The Company may offset any final non-appealable judgment against
the Manager against any fees owed Manager pursuant to SECTION 3.5.
(3) In the event that Station is removed as Manager, Station
shall have the right to require GCR to acquire Station's Membership Interest in
the Company at the Appraised Value.
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Station shall notify GCR in writing within 60 days after being removed as the
Manager that it is considering exercising such right and that the Appraised
Value must be determined. Within 30 days following the determination of
Appraised Value, Station must give written notice to GCR if it desires to
sell its Membership Interests at the Appraised Value (the "REMOVAL PUT
EXERCISE DATE"). The closing on such acquisition shall occur within 60 days
after the receipt of all necessary consents and approvals for such Transfer.
Station's Membership Interest shall be conveyed free and clear of all liens
and encumbrances, except those of this Agreement, and Station and its
Affiliates shall be released from all indebtedness or guaranties incurred on
behalf of the Company. The purchase price shall be paid in cash, unless
otherwise agreed by Station.
In the event GCR defaults on acquiring a Station's Membership
Interest pursuant to this subsection, or the requisite consents and approvals
to transfer have not been (or cannot be) obtained for such sale within one
year after the Removal Put Exercise Date, or and its Affiliates cannot be
released from all indebtedness or guaranties upon such sale (including the
Guarantee by Parent attached to this Agreement) within one year after the
Removal Put Exercise Date, then Station can require the Company or its assets
to be sold pursuant to actions taken by an investment banker (selected by
Station from the list on EXHIBIT A) in a commercially reasonable time frame.
1.12 OFFICERS. Subject to applicable provisions of the Gaming Laws, the
Manager shall have the authority to appoint and remove, in its sole discretion,
persons serving as officers of the Company subordinate to the General Manager
and to delegate to such persons such duties and responsibilities as the Manager
shall deem to be in the best interests of the Company (except that the Manager
shall not be permitted to delegate the essential management and supervisory
functions of the General Manager). All such appointments and delegations may be
revocable at will by the Manager. Notwithstanding the foregoing, the Company
shall engage a Construction Manager approved by the Executive Committee at all
times during the Pre-Opening Period and a General Manager approved by the
Executive Committee at all times during the Operating Period. Either member of
the Executive Committee may require the Manager to discharge the Construction
Manager or the General Manager in the event that, after notice from the Manager
and a 60-day opportunity to cure, such Person's performance is unsatisfactory to
such Member. The second request by the same member of the Executive Committee to
discharge either the Construction Manager or the General Manager shall result in
termination of such Person by the Manager without further notice or opportunity
to cure. If any Person elected to serve as an officer of the Company is found to
be an Unsuitable Person, the Manager shall immediately remove such person as an
officer and such Person shall thereupon automatically cease to be an officer.
1.13 CONFLICTS OF INTEREST.
(1) Until the fifth anniversary of the date of the Opening,
none of the Manager, the Members, Fertitta Family Members, Greenspun Family
Members, or any Affiliate of any of the foregoing (excluding, however, an Exempt
Affiliate), whether alone or with other Persons, shall (i) directly or
indirectly own, manage or operate any hotel and/or casino (other than an Exempt
Property) within three miles of the Resort Property or (ii) allow the operation
of a hotel and/or casino (other than an Exempt Property) on property within
three miles of the Resort Property that is owned, in whole or in part, directly
or indirectly, by such Manager, such Member, Fertitta Family Members, Greenspun
Family Members, or Affiliate of any of the foregoing (excluding, however, an
Exempt Affiliate) (either of the foregoing (i) or (ii) referred to below as a
"RESTRICTED ACTIVITY"); provided
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that this restriction does not prohibit GCR, the Greenspun Family Members and
their Affiliates from collectively and in aggregate owning less than 5% of
the publicly traded Voting Stock of a company involved in a Restricted
Activity, or prohibit Parent, Station, the Fertitta Family Members and their
Affiliates from collectively and in aggregate owning less than 5% of the
publicly traded Voting Stock of a company involved in a Restricted Activity,
in both cases only so long as such investment is passive and without any
ability or intent to exercise influence or control over the management or
direction of the entity in which the Voting Stock is owned; and provided,
further that this restriction shall not prohibit GCR or the Greenspun Family
Members and their Affiliates from allowing, owning or operating a non-gaming
hotel property within three miles of the Resort Property.
(2) Except for a Restricted Activity, each of the Members, the
Manager, Fertitta Family Members, Greenspun Family Members, and their respective
Affiliates shall be entitled to enter into any transaction that may be
considered to be competitive with, or a business opportunity that may be
beneficial to, the Company. Any transactions or agreements (other than
transactions or agreements expressly contemplated by this Agreement, including
reimbursement of Shared Expenses, as long as such transactions are otherwise in
compliance with this Agreement) between the Manager, the Parent, any Member,
Fertitta Family Members, Greenspun Family Members, or their respective
Affiliates (on the one hand) and the Company (on the other) (any such
transaction referred to herein as an "AFFILIATE TRANSACTION") shall be disclosed
to the Members in advance and shall be on commercially reasonable, arms-length
terms that are no less favorable to the Company than could be obtained from an
independent third party. No transaction with the Company shall be voidable
solely because a Member has a direct or indirect interest in the transaction if
either (i) the transaction is fair to the Company or (ii) the disinterested
Manager or disinterested Member(s), in either case knowing the material facts of
the transaction and the Member's interest, authorize, approve or ratify the
transaction. Notwithstanding the foregoing, any loans to the Company by any
Member or Affiliate of a Member shall require the approval of the Executive
Committee.
(3) Station and the Company acknowledge that an Affiliate of
GCR shall be the "declarant" under the declaration of covenants, conditions and
restrictions affecting the Resort Property, and that the "declarant" may take
actions that are inconsistent with this Agreement, or not in the best interest
of the Company, and GCR shall not be in breach hereof by reason of such actions
and "declarant" shall not have any duty under this Agreement to Station, Parent,
or the Company; provided, however, that nothing in this SECTION 3.8(c) shall
permit such Affiliate "declarant" to engage in a Restricted Activity under
SECTION 3.8(a) hereof.
(4) The provisions of SECTION 3.8(a) related to prohibitions
on Restricted Activities shall survive the withdrawal, expulsion, buy-out or
other termination of GCR or Station as a Member, for the lesser of five years
after the date of the Opening or three years after the withdrawal, expulsion,
buy-out or termination.
1.14 TAX MATTERS PARTNER. The Manager is hereby designated as the "tax
matters partner" of the Company under Code Section 6231(a)(7) (the "TAX MATTERS
MEMBER"). The Tax Matters Member shall give prompt notice to the Members of (i)
the receipt by the Tax Matters Member of written notice that a federal, state or
local taxing authority intends to examine the Company's income tax returns for
any year; (ii) receipt by the Tax Matters Member of written notice of a final
partnership administrative adjustment under Code Section 6223; and (iii) receipt
by the Tax Matters Member of any request from the Internal Revenue Service for
waiver of any applicable statute of
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limitations with respect to any tax return of the Company. The Tax Matters
Member may not extend or waive the statute of limitations or take any other
action that would compromise any tax position of the Company without the
approval of GCR and Station.
1.15 LIABILITY OF MEMBERS AND MANAGER. Except as otherwise provided
by the Act, none of the Members or the Manager shall be obligated personally
for any debt, obligation or liability of the Company or of any Member solely
by reason of being a Member or the Manager of the Company. Except as
otherwise provided in this Agreement or by applicable law, none of the
Members or the Manager shall have any fiduciary or other duty to the Company
or any Member with respect to the business and affairs of the Company. The
Company shall indemnify each Member and hold each Member harmless from and
against any and all debts, obligations, and liabilities of the Company, if
any, to which such Member becomes subject solely by reason of being a Member,
whether arising in contract, tort or otherwise; provided, however, that the
indemnification obligation of the Company under this SECTION 3.10 shall be
paid only from the assets of the Company, and no Member shall have any
personal obligation, or any obligation to make any Capital Contribution, with
respect thereto.
1.16 PROHIBITION AGAINST PUBLICLY TRADED PARTNERSHIP. The Manager
shall take all action necessary to prevent the Company from qualifying as a
publicly-traded partnership within the meaning of Section 7704 of the Code.
1.17 THE EXECUTIVE COMMITTEE. There shall be an executive committee
(the "EXECUTIVE COMMITTEE") of the Company comprised of one representative of
each of Station and GCR, so long as such Persons remain as Members of the
Company. The member of the Executive Committee designated by Station shall be
Frank Fertitta, III and the member designated by GCR shall be Brian L.
Greenspun so long as they are alive and not disabled and are not found to be
Unsuitable Persons. Station and GCR shall designate their respective
replacement appointees to the Executive Committee in writing to the other
Member and, except as set forth in the prior sentence, may remove their
respective appointees at any time by written notice to the other. Subject to
the provisions of SECTION 4.3(c), at all times the GCR representative of the
Executive Committee shall be a Greenspun Family Member and the Station
representative of the Executive Committee shall be a Fertitta Family Member.
Subject to the provisions of SECTION 4.3(c), at any time a vacancy is created
on the Executive Committee by death, removal (with or without cause) or
resignation, no action shall be taken by the Executive Committee until the
Executive Committee is reconstituted in accordance with the provisions of
this SECTION 3.12, unless each Member that is entitled to nominate such
replacement member of the Executive Committee shall consent to the taking of
such action. In the event of a Transfer permitted pursuant to SECTION 5.2(a)
of the entire Membership Interest, the transferee shall have the power to
appoint the Executive Committee member previously granted to its transferor.
If any Person appointed to serve as a member of the Executive Committee is
found to be an Unsuitable Person, such Person shall immediately be removed as
a member of the Executive Committee by the Members and shall thereupon
automatically cease to be a member of the Executive Committee.
1.18 DECISIONS SUBJECT TO EXECUTIVE COMMITTEE APPROVAL.
Notwithstanding the powers of the Manager pursuant to SECTION 3.1, and
subject to the provisions of SECTION 4.3(c), the following matters shall
require the prior unanimous approval of the Executive Committee:
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(1) Any contracts, agreements (whether written or oral) or
commitments (including leases of Furniture, Fixtures and Equipment) which (i)
obligate the Company for a period of more than one (1) year, and (ii) subject to
the Company to potential liability or payments of $250,000 or more (including
any extensions thereof); (1)
(2) Any sale of any portion of the assets of the Company
having a fair market value of $500,000 or more;
(3) Any financing for the improvement, construction or
operation of the Project (including lease/purchase or similar financing
transactions), other than the Construction Financing or Permanent Financing,
which subjects the Company to principal and interest payment obligations
equaling or exceeding $1,000,000 in any Fiscal Year; and
(4) Any other decision reserved to, or approval required by,
the Executive Committee pursuant to this Agreement.
1.19 PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings of the
Executive Committee may be held at any place that has been designated from time
to time by resolution of the Executive Committee. In the absence of such a
designation, regular meetings shall be held at the principal place of business
of the Company. Any meeting, regular or special, may be held by conference
telephone or similar communications equipment so long as all members of the
Executive Committee participating in the meeting can hear one another, and all
members of the Executive Committee participating by telephone or similar
communications equipment shall be deemed to be present in person at the meeting.
1.20 REGULAR MEETINGS. The Executive Committee shall not be required to
have regular meetings, except as otherwise determined by the Executive
Committee.
1.21 SPECIAL MEETINGS. Special meetings of the Executive Committee for
any purpose or purposes may be called at any time by one member of the Executive
Committee. Notice of the time and place of a special meeting shall be given and
deemed received pursuant to SECTION 8.1.
1.22 QUORUM. All of the members of the Executive Committee shall
constitute a quorum for the transaction of business, except to adjourn as
provided in SECTION 3.20.
1.23 MANNER OF ACTING. Every act or decision of the Executive Committee
shall require the affirmative unanimous approval of all of the members of the
Executive Committee.
1.24 WAIVER OF NOTICE. Notice of any meeting need not be given to any
member of the Executive Committee who either before or after the meeting signs a
written waiver of notice, a consent to holding the meeting, or an approval of
the minutes. The waiver of notice or consent need not specify the purpose of the
meeting. All such waivers, consents, and approvals shall be filed with the
records of the Company or made a part of the minutes of the meeting. Notice of a
meeting shall also be deemed given to any member of the Executive Committee who
attends the meeting without protesting before or at its commencement the lack of
notice to that member of the Executive Committee.
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1.25 ADJOURNMENT. If a quorum is not present, any member of the
Executive Committee present (including all members of the Executive Committee
participating as permitted by SECTION 3.14), whether or not constituting a
quorum, may adjourn any meeting to another time and place. Notice of the time
and place of holding an adjourned meeting need not be given unless the meeting
is adjourned for more than forty-eight (48) hours, in which case notice of the
time and place shall be given before the time of the adjourned meeting in the
manner specified in SECTION 3.16.
1.26 ACTION WITHOUT A MEETING. Any action to be taken by the Executive
Committee at a meeting may be taken without such meeting by the written consent
of all of the members of the Executive Committee. Any such written consent may
be executed and given by telecopy or similar electronic means.
1.27 RESIGNATION. Subject to the restrictions of SECTION 3.12, any
member of the Executive Committee may resign at any time by giving written
notice to the Members of the Company. The resignation of any members of the
Executive Committee shall take effect upon receipt of notice thereof or at such
later time as shall be specified in such notice; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
1.28 REMOVAL. A member of the Executive Committee may only be removed
pursuant to SECTION 3.12 or SECTION 4.3(c).
1.29 VACANCIES. A vacancy on the Executive Committee may only be filled
in accordance with SECTION 3.12.
1.30 COMPENSATION TO EXECUTIVE COMMITTEE MEMBERS. The members of the
Executive Committee shall receive no compensation but shall be reimbursed for
their reasonable and customary expenses incurred in attending meetings of the
Executive Committee.
1.31 LIABILITY TO THIRD PARTIES. The debts, obligations, and
liabilities of the Company, whether arising in contract, tort, or otherwise,
shall be solely the debts, obligations, and liabilities of the Company, and no
member of the Executive Committee or the Manager shall be obligated personally
for any such debt, obligation, or liability by reason of his or her acting as a
member of the Executive Committee or, except as otherwise provided in this
Agreement, as the Manager.
1.32 NO GUARANTEE OF RETURN BY MEMBERS OF THE EXECUTIVE COMMITTEE. The
members of the Executive Committee and the Manager do not, in any way, guarantee
the return of the Members' Capital Contributions or a profit for the Members
from the operations of the Company. Except as set forth in SECTION 3.8, the
members of the Executive Committee shall incur no liability to the Company or to
any of the Members as a result of engaging in any other business or venture. The
members of the Executive Committee shall be entitled to any other protection
afforded to such members of the Executive Committee under the Act.
1.33 TRANSACTIONS WITH COMPANY OR OTHERWISE. Subject to SECTION 3.8,
the members of the Executive Committee, or any agent, servant, or employee of
the members of the Executive Committee, may engage in and possess any interest
in other businesses or ventures of every nature and description, independently
or with other Persons, and neither the Company nor any of the Members shall have
any rights, by virtue of this Agreement or otherwise, in and to such independent
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ventures or the income or profits derived therefrom, or any rights, duties, or
obligations in respect thereof.
1.34 INDEMNIFICATION. To the fullest extent permitted by the Act:
(1) The Company (and any receiver, liquidator, or trustee of,
or successor to, the Company) shall indemnify and hold harmless the Manager and
each member of the Executive Committee, as well as each Affiliate of the Manager
and the members of the Executive Committee and their respective officers,
partners, shareholders, directors, managers, members and employees (each an
"INDEMNITEE"), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, proceedings, costs,
expenses and disbursements of any kind or nature whatsoever ("CLAIMS")
(including, without limitation, all reasonable costs and expenses of defense,
appeal and settlement of any and all suits, actions and proceedings involving an
Indemnitee, and all costs of investigation in connection therewith) that may be
imposed on, incurred by, or asserted against an Indemnitee, in any way relating
to or arising out of, or alleged to relate to or arise out of the performance of
any duties or services by or on behalf of the Company or any action, inaction or
omission on the part of an Indemnitee in connection with managing the Company's
business and affairs or otherwise acting as Manager or the members of the
Executive Committee pursuant hereto; provided that the indemnification
obligations in this SECTION 3.29 shall not apply to Claims brought by the
Members, the Manager or Guarantors; provided, further that the indemnification
obligations in this SECTION 3.29 shall not apply to the portion of any
liability, obligation, loss, damage, penalty, cost, expense or disbursement that
has been finally adjudged in a non-appealable order of court of competent
jurisdiction to have resulted from (i) the gross negligence of the Manager, (ii)
the intentional misconduct or actual fraud by the proposed Indemnitee, or (iii)
any action for which indemnification is prohibited under the Act.
(2) The Company shall pay expenses as they are incurred by an
Indemnitee in connection with any action, claim or proceeding that such
Indemnitee asserts in good faith to be subject to the indemnification
obligations set forth herein, upon receipt of an undertaking from such
Indemnitee to repay all amounts so paid by the Company to the extent that it is
finally determined that the Indemnitee is not entitled to be indemnified
therefor under the terms hereof.
(3) The indemnification and expense payments to be provided by
the Company hereunder shall be paid only from the assets of the Company, and no
Member shall have any personal obligation, or any obligation to make any Capital
Contribution, with respect thereto.
ARTICLE IV
FINANCIAL MATTERS
1.35 INITIAL CAPITAL CONTRIBUTIONS.
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(1) GCR CAPITAL CONTRIBUTION. As its initial Capital
Contribution, subject to Force Majeure and Parent providing an Available Funds
Letter immediately prior to GCR's transfer of the Resort Property, on or prior
to such time as necessary to commence construction of the Infrastructure
Improvements by April 15, 2000, GCR shall convey to the Company, by grant,
bargain and sale deed attached as EXHIBIT K (the "GRANT, BARGAIN AND SALE DEED")
(joined by GCR's transferor or containing an assignment of rights under the
grant, bargain and sale deed from GCR's transferor), title to the Resort
Property, free and clear of any liens, encumbrances, assessments, parties in
possession or delinquent real property taxes, but subject to the Permitted
Exceptions and the deed restrictions set forth in the form of the Grant, Bargain
and Sale Deed. Prior to or concurrently with such conveyance, GCR shall, at its
sole cost and expense, (i) take all steps necessary to transfer all land use
permits and approvals with respect to the Resort Property to the Company, (ii)
prepare and have filed and recorded in the Office of the County Recorder of
Clark County, Nevada such subdivision map and records of survey as shall permit
the Resort Property to be conveyed to the Company as a single, separate legal
parcel, and (iii) provide the Company with a commitment for an 1970 ALTA
extended coverage owner's policy of title insurance from Nevada Title in the
amount of $24,500,000 to insure the Company's title to in the Resort Property
subject only to the Permitted Exceptions and those subsequently approved by the
Executive Committee or caused by Station or the Company. GCR shall, in a timely
manner, that will not materially interfere with or delay the construction of the
Vertical Improvements, subject to Force Majeure, and at its sole cost and
expense, cause the relocation of the existing power lines to a strip of land
primarily adjacent to the northern boundary of the Resort Property. The Company
shall grant such easements as reasonably necessary for the location and
maintenance of such power lines. Upon conveyance of the Resort Property pursuant
to this SECTION 4.1(a), GCR shall be entitled to a credit to its Capital Account
in the amount of $24,500,000.00. In addition, GCR's initial Capital Contribution
shall be increased by an amount equal to $552,136.00 (it being acknowledged and
agreed that such amount has been contributed by GCR prior to the date hereof).
(The $24,500,000.00 plus $552,136.00 hereinafter may be referred to as "GCR'S
INITIAL CAPITAL CONTRIBUTION"). At the time of conveyance of the Resort Property
by GCR, GCR Gaming Guarantor, LLC, shall provide an Available Funds Letter. Real
estate taxes, assessments, and other taxes, fees, and costs customarily prorated
in commercial real estate transactions in the Las Vegas, Nevada area, shall be
prorated between GCR and the Company as on the date the Resort Property is
contributed; provided that, pursuant to this subparagraph, GCR shall be entitled
to an increase in its Initial Capital Contribution by the amount of such
prorations (other than the cost of the owner's title policy and any transfer
taxes) for which GCR is responsible as the party conveying the Resort Property.
As of the Effective Date, GCR hereby makes the
representations and warranties set forth on EXHIBIT L in favor of the Company.
Concurrently with the transfer of the Resort Property to the Company, GCR shall
make such representations and warranties in favor of the Company, subject to
Force Majeure changes and changes with respect to matters about which it did not
have knowledge at the Effective Date (unless such representation and warranty is
not qualified by "knowledge"). If GCR does not make any such representations or
warranties at the time transfer of the Resort Property is required to be made
(other than because of Force Majeure changes or matters of which it did not have
knowledge at the Effective Date (unless such representation and warranty is not
qualified by "knowledge")) and such failure would have a material adverse effect
on the ability to utilize the Resort Property for the Project as contemplated by
this Agreement, then GCR shall have 60 days from the date that transfer is
required of such Resort Property to cure the breach. If GCR cannot cure such
matter within such 60 days, Station shall have the following options: (i)
terminate this Agreement and seek its actual damages from GCR, or (ii) require
the
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transfer of the Resort Property and seek actual damages from GCR, in either
case (i) or (ii), GCR shall not be deemed to have defaulted on its obligation to
contribute the Resort Property or make its Initial Capital Contribution for
purposes of SECTION 4.3(a). If GCR cannot make any of such representations or
warranties at the time transfer of the Resort Property is required because of
Force Majeure changes or because of a matter about which it did not have
knowledge at the Effective Date (unless such representation and warranty is not
qualified by "knowledge"), then GCR shall have 90 days to cure such problem
which causes it not to make such representation or warranty using commercially
reasonable efforts to do so. If, after 90 days, GCR cannot so cure the problem,
Station may either terminate this Agreement (and GCR and Station agree that they
will split equally (50/50) all costs incurred by GCR, Station and Parent which
can reasonably be documented and which relate directly to this Agreement or the
Project, excluding in the case of GCR, that portion of costs not related
exclusively to this Agreement or the development of the Resort Property on which
the Project is to be located or for any purpose other than the Project) or agree
to accept the conveyance of the Resort Property with the representations and
warranties as can be made by GCR (in which case the Company shall be solely
responsible for the cost of the cure of any item(s) related to the
representations and warranties GCR is unable to make); provided that in either
case GCR shall not be deemed to be in default on its obligation to contribute
the Resort Property or make its Initial Capital Contribution for purposes of
SECTION 4.3(a). Except for the express representations and warranties set forth
on EXHIBIT L, Station, Parent, the Manager and the Company acknowledge that they
have not relied on any representations or warranties from GCR with respect to
the Resort Property and they have had the opportunity to conduct such due
diligence of the Resort Property as they deem appropriate, including, but not
limited to, liens and encumbrances, feasibility and suitability for development,
environmental matters, existing zoning and use permits, availability of
utilities and access, soils and topography, and are relying solely on their own
investigation of the Resort Property, and accept the Resort Property as GCR's
Initial Capital Contribution "AS-IS," with all faults and without any warranties
(express or implied) whatsoever.
Notwithstanding anything in this Agreement to the contrary, GCR is
hereby authorized for and on behalf of the Company, and at the sole expense of
the Company, to pursue as it deems reasonably appropriate an extension of any
and all land use entitlements affecting the Resort Property; provided, that, if
GCR fails to pursue such extensions, the Manager may do so for and on behalf of
the Company, at the sole and expense of the Company.
(2) STATION CAPITAL CONTRIBUTION. As its initial Capital
Contribution, Station shall pay (or shall have paid on Station's behalf) to or
for the benefit of the Company, when and as required by the Company an amount
equal to $25,052,136.00 (it being acknowledged and agreed that $1,531,754.00 has
been contributed by Station prior to the date hereof), which shall be utilized
as needed to pay the obligations of the Company, including, without limitation,
with respect to the Infrastructure Improvements as set forth in SECTION 3.2,
when and as due ("STATION'S INITIAL CAPITAL CONTRIBUTION," and, together with
GCR's Initial Capital Contribution, referred to herein collectively as the
"INITIAL CAPITAL CONTRIBUTIONS"). All such funds advanced by Station or on
Station's behalf shall constitute Capital Contributions of Station; provided,
however, that funds paid by or on behalf of Station for general overhead of
Station (or any Affiliate of Station, Parent or Manager or their Subsidiaries)
shall not be deemed a Capital Contribution of Station. If not previously
advanced or if not earlier required by any lender to the Company, the remaining
Station's Initial Capital Contribution shall be contributed in full on the later
to occur of October 1, 2000 or when GCR makes GCR's Initial Capital
Contribution. Station agrees that it shall continue to make Station's Initial
Capital Contribution at such times and in such amounts as shall be necessary to
enable the
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Company to pay expenses as set forth in the first sentence of this
Subsection 4.1(b), whether or not GCR has made its Initial Capital Contribution,
but subject to the limitation set forth in the prior sentence. On a monthly
basis, the Company shall render to the Executive Committee a written accounting
of Station's Initial Capital Contributions to date.
1.36 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as set forth in this
SECTION 4.2, as determined by the Executive Committee (after using commercially
reasonable efforts to obtain third party loans) or as set forth in any
"make-well," completion guaranty or similar obligation to which the Members
become subject pursuant to the terms of the Construction Financing or Permanent
Financing, no Member shall be required to make any Capital Contribution other
than those set forth in SECTION 4.1. Any additional Capital Contributions
pursuant to this SECTION 4.2 shall be made by the Members pro rata in accordance
with their Membership Interests as of the date that such Capital Contribution is
required to be made pursuant to the terms of this Agreement, in such forms and
amounts as may be determined by the Executive Committee, and shall be made only
after the Initial Capital Contributions have been made in full. In connection
with any such additional Capital Contributions, the Company shall revalue the
Members' Capital Accounts in accordance with Section 1.704-(b)(2)(iv)(f) of the
Regulations. Except as expressly provided in this Agreement, no Member shall be
entitled to withdraw as a Member or to demand or receive a return of its Capital
Contribution. No obligation of a Member to make any Capital Contribution
hereunder may be enforced by a creditor of the Company unless the Member
expressly consents to such enforcement or to the assignment of such obligation
to such creditor.
(1) Unless, otherwise determined by the Executive Committee,
GCR and Station shall contribute, pro rata in accordance with their Membership
Interests as of the date that such Capital Contribution is required to be made
pursuant to the terms of this Agreement, upon 30 days prior written notice from
any member of the Executive Committee specifying the amount of such Capital
Contribution and the date on which such Capital Contribution is to be made, all
amounts necessary to commence construction of the Project by July 1, 2000, and
to diligently pursue completion of construction in accordance with the Master
Development Plan.
(2) If any Executive Committee member determines that
reasonable financing is unavailable to meet the requirements of the current
approved Annual Plan and Operating Budget, then any member of the Executive
Committee, upon 30-days' prior written notice specifying the amount of such
Capital Contribution and the date on which such Capital Contribution is to be
made, may demand an additional Capital Contribution from the Members to fund
such current requirements, which shall be made by the Members pro rata in
accordance with their Membership Interests as of the date that such Capital
Contribution is required to be made pursuant to the terms of this Agreement;
provided, however, the aggregate amount of such additional Capital Contributions
pursuant to this SECTION 4.2(b) shall not exceed $10,000,000 for each of GCR and
Station (or their respective successors or assigns, in aggregate) over the term
of this Agreement.
(3) If the revenues of the Project are insufficient to fund
the Reserve Fund during any Fiscal Month, then any member of the Executive
Committee, upon 30-days' prior written notice specifying the amount of such
Capital Contribution and the date on which such Capital Contribution is required
to be made, may demand an additional Capital Contribution from the Members
(which shall be made by the Members pro rata in accordance with their Membership
Interests as of the date that such Capital Contribution is required to be made
pursuant to the terms of this Agreement in an amount not to exceed in any Fiscal
Year the difference between 3% of Gross Revenues for such
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Fiscal Year (or partial Fiscal Year to date) less the Reserve Fund previously
funded in such Fiscal Year. Within 120 days after the end of the applicable
Fiscal Year, if any additional Capital Contributions were made pursuant to
this SECTION 4.2(c) in such Fiscal Year, the Company shall distribute to the
Members the positive amount, if any, equal to the difference between (x) the
sum of (I) the amounts reserved from revenues by the Company for the Reserve
Fund plus (II) all additional Capital Contributions made pursuant to this
SECTION 4.2(c) in such Fiscal Year, less (y) an amount equal to 3% of Gross
Revenues for such Fiscal Year; provided, however that any such distribution
shall be in proportion to the contributions made. (1)
(4) If an Initial Dilution has occurred under Section
4.3(b)(i) during the one-year period immediately preceding the date on which
any additional Capital Contributions required to be made pursuant to this
SECTION 4.2 or any of its Subsections (a) through (c), and the defaulting
Member has not paid the Dilution Interest Payment Amount with respect to such
Additional Contribution Default, then the additional contribution required by
the non-defaulting Member as a result of the difference between the
Membership Interest of the non-defaulting Member immediately prior to the
Initial Dilution and the Membership Interest of the non-defaulting Member
immediately after the Initial Dilution shall be deemed a "DISPROPORTIONATE
CONTRIBUTION" for all purposes hereunder.
1.37 DEFAULT.
(1) DEFAULT IN MAKING INITIAL CAPITAL CONTRIBUTION. In the
event either GCR or Station defaults in making their Initial Capital
Contributions (subject to Force Majeure or as otherwise set forth in SECTION
4.1(a) in the case of GCR, and any delays in Station in making its final
payment of the Station's Initial Capital Contribution because of delays by
GCR in making its Initial Capital Contribution or Force Majeure (other than
the inability to pay money) in the case of Station), then if such default is
not cured within 30-days' following receipt of written notice from the
non-defaulting Member, as the sole and exclusive remedy for such default: (i)
the defaulting Member shall be deemed expelled from the Company, (ii) if the
defaulting Member is GCR, Station may sue for specific performance of GCR's
obligations under SECTION 4.1(a), and (iii) if the defaulting Member is
Station, GCR may sue Station and Parent under this Agreement and the Station
Guaranty for the amount equal to $25,052,136.00 less the amount of Station's
Initial Capital Contribution actually contributed. GCR and Station
acknowledge and agree that the failure of either to make their respective
Initial Capital Contributions shall result in damage to the other and the
Company, the exact amount of which is impractical or extremely difficult to
calculate, and that the remedies set forth in this SECTION 4.3(a) are a fair
and reasonable calculation of damages under the circumstances, and not a
penalty or forfeiture.
(2) DEFAULT IN MAKING ADDITIONAL CAPITAL CONTRIBUTION.
(1) If any Member fails to timely make all or part of
any additional Capital Contribution (an "ADDITIONAL CONTRIBUTION DEFAULT")
required to be made by such Member pursuant to SECTION 4.2 (including the
failure to pay under any "make-well" or completion guaranty) (the amount of such
failed payment referred to herein as a "DEFAULT AMOUNT"), the non-defaulting
Member may elect to contribute to the Company all or a part of the Default
Amount (a "DEFAULT CONTRIBUTION"). The Default Contribution shall be deemed
contributed as an additional Capital Contribution by the non-defaulting Member
and the percentage of Membership Interests of the non-defaulting Member shall
then be adjusted (an "INITIAL DILUTION") such that the percentage of such
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Membership Interests shall be increased to a fraction, the numerator of which
equals the aggregate Capital Contributions of the non-defaulting Member
immediately prior to the payment of the Default Contribution plus 100% of the
Default Contribution, and the denominator of which is the aggregate Capital
Contributions of all Members (the resulting increase in the percentage of the
non-defaulting Member's Membership Interest is referred to herein as the
"DILUTION INTEREST"). The percentage of the Membership Interest of the
defaulting Member shall be reduced accordingly. Until the Dilution Interest
is acquired by the defaulting Member in accordance with the provisions of
this Subsection 4.3(b) by paying the Dilution Interest Payment Amount (as
hereinafter defined), or until all amounts due and owing under the GCR
Guaranty or Station Guaranty (including the Twenty-Five Percent Payment), as
applicable, have been paid in full, the non-defaulting Member shall be
entitled to all distributions to which the defaulting Member would have been
entitled in respect of its Membership Interests (each such distribution paid
to the non-defaulting Member in respect of the defaulting Member's Membership
Interest is referred to herein as a "DEFAULT DISTRIBUTION"). Default
Distributions shall be credited first against the Twenty Five Percent
Payment, second against the Default Contribution itself, and third against
the amount of any Disproportionate Contribution. For a period of one year
following the non-defaulting Member's contribution of the Default
Contribution, the defaulting Member shall have the option of acquiring the
Dilution Interest by paying the non-defaulting Member an amount (the
"DILUTION INTEREST PAYMENT AMOUNT") equal to (w) 100% of the amount of the
Default Contribution, plus (x) the Twenty Five Percent Payment, plus (y) the
amount of all Disproportionate Contributions, minus (z) the amount of any
Default Distributions, in which case the Default Contribution will be
canceled, the dilution of the defaulting Member's Membership Interests shall
be reversed, and an amount equal to 100% of the Default Contribution will be
added to the Capital Account balance of the defaulting Member. If the
Dilution Interest is not acquired in full by the defaulting Member within the
foregoing one-year period, the percentage of Membership Interests of the
non-defaulting Member shall then be further adjusted (a "SECONDARY DILUTION")
such that the non-defaulting Member's percentage of the Membership Interests
shall be increased to a fraction, the numerator of which equals (I) the
aggregate Capital Contribution of the non-defaulting Member to date
(including the Default Contribution), plus (II) the Twenty Five Percent
Payment which is deemed contributed as an additional Capital Contribution
solely for purposes of calculating a Member's percentage of Percentage
Interests, minus (III) the amount of any Default Distributions, and the
denominator of which is the aggregate Capital Contribution of all Members.
The percentage of the Membership Interest of the defaulting Member shall be
reduced accordingly.
(2) In the event of an Additional Contribution
Default, the non-defaulting Member also may elect either to (A) withdraw, no
later than five (5) days after such additional Capital Contribution was made by
the non-defaulting Member, its additional Capital Contribution which was made
timely (and upon such withdrawal, the defaulting Member no longer shall be in
default, and the requirement to make an additional Capital Contribution shall be
deemed to have been canceled and neither Member shall have been deemed to have
made an additional Capital Contribution), or (B) not make a Default Contribution
at all. In the event that the non-defaulting Member elects the foregoing option
(B), the Company shall not pay any distribution to the defaulting Member from
the date on which such additional Capital Contribution was required to be made
by the defaulting Member, and such amounts that otherwise would be distributed
to the defaulting Member shall be retained by the Company and deemed to be a
Capital Contribution of the defaulting Member ("RETAINED DISTRIBUTIONS"), until
the earliest of (a) the date on which the defaulting Member has contributed such
Default Amount to the Company (reduced by any Retained Distributions), there are
no other unpaid delinquent Capital Contributions required to be made by such
Member, and the
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defaulting Member has paid the non-defaulting Member the Twenty Five Percent
Payment on the Default Amount and all subsequent delinquent Capital
Contributions, (b) the date on which all amounts due and owing with respect
to all delinquent Capital Contributions (including the Default Amount) under
the GCR Guaranty or Station Guaranty (including the Twenty Five Percent
Payment), as applicable, have been paid in full, or (c) the date on which the
aggregate amount of all such Retained Distributions equals the sum of (X) the
Default Amount, (Y) all other subsequent delinquent Capital Contributions
that remain unpaid as of the date of determination, and (Z) the Twenty Five
Percent Payment on the Default Amount and all subsequent delinquent Capital
Contributions. In the event that any of the foregoing (a), (b) or (c) occurs
(a "DEFAULT REPAYMENT EVENT"), an amount equal to 100% of the Default Amount
shall be deemed to be contributed to the capital of the Company on behalf of
the defaulting Member and the defaulting Member's Capital Account shall be
adjusted to reflect such Capital Contribution and the Company shall pay the
non-defaulting Member the Twenty Five Percent Payment (to the extent such
Twenty Five Percent Payment has not been paid previously to the
non-defaulting Member).
(3) DISENFRANCHISEMENT At any time after an Additional
Contribution Default (except if the non-defaulting Member withdraws its
additional Capital Contribution pursuant to SUBSECTION 4.3(b)(ii)(A)), the
defaulting Member shall have no representatives on the Executive Committee
and no vote on any matter coming before the Members, except that such
defaulting Member's consent still shall be required with respect to the items
set forth in SECTION 5.4 hereof. The disenfranchisement pursuant to this
SECTION 4.3(c) shall end either as provided in SECTION 4.3(e) below or at
such time as the defaulting Member has paid the Dilution Interest Payment
Amount or a Default Repayment Event has occurred.
(4) DEFAULT CALL AND PUT.
(1) Within thirty (30) days after the day after a
Secondary Dilution occurs (a "DILUTION DATE") pursuant to SECTION 4.3(b), and
within thirty (30) days after each of the first five annual anniversaries of
a Dilution Date, and on the tenth and fifteenth annual anniversaries of a
Dilution Date, the non-defaulting Member may give written notice to the
defaulting Member that it is considering exercising the right to purchase the
defaulting Member's Membership Interest (the "DEFAULT CALL") and that the
Appraised Value should be determined as of the date of such notice. Within 30
days after the determination of the Appraised Value, the non-defaulting
Member shall notify the defaulting Member if it desires to exercise the
Default Call. The purchase and sale thereafter shall occur within 10 days
following receipt of all necessary third-party consents and approvals for
such transfer. At the Closing, the Membership Interests shall be conveyed
free and clear of all liens and encumbrances (except this Agreement), and the
selling Member and its Affiliates shall be released from all indebtedness or
guaranties incurred on behalf of the Company. The acquisition price shall be
the Appraised Value and, unless the defaulting Member otherwise agrees, be
paid in cash.
(2) No later than one year prior to the fifth,
tenth and fifteenth annual anniversaries of a Dilution Date, the defaulting
Member may give written notice to the non-defaulting Member that it is
considering exercising the right to sell its Membership Interest to the
non-defaulting Member (the "DEFAULT PUT") and that the Appraised Value should
be calculated as of 30 days prior to the applicable anniversary of a Dilution
Date. Within 30 days after the determination of the Appraised Value, the
defaulting Member shall notify the non-defaulting Member if it desires to
exercise the Default Put (the "DEFAULT PUT EXERCISE DATE"). The purchase and
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sale shall occur on the later of within 30 days prior to the fifth, tenth and
fifteenth annual anniversaries of a Dilution Date, as applicable, or 10 days
following receipt of all necessary third-party consents and approvals for
such transfer. At the closing, the Membership Interest shall be conveyed free
and clear of all liens and encumbrances (except this Agreement), and the
selling Member and its Affiliates shall be released from all indebtedness or
guaranties incurred on behalf of the Company. The acquisition price shall be
the Appraised Value, and, unless the defaulting Member otherwise agrees, be
paid in cash.
In the event a Member defaults on acquiring a Member's Membership
Interest pursuant to a Default Put, or the requisite consents and approvals to
transfer have not (or cannot be) obtained with respect to a Default Put within
one year after the Default Put Exercise Date, or the selling Member and its
Affiliates cannot be released from all indebtedness or guaranties with respect
to a Default Put (including the applicable Guarantee attached to this Agreement)
within one year after the Default Put Exercise Date, then the selling Member can
require the Company or its assets to be sold pursuant to actions taken by an
investment banker (selected by the selling Member from the list on EXHIBIT A) in
a commercially reasonable time period.
(5) GUARANTIES. If a Member defaults on making any additional
Capital Contribution set forth in SECTION 4.2, then the non-defaulting Member or
the Company may sue on the Station Guaranty or GCR Guaranty, as the case may be,
to the extent permitted pursuant to the terms thereof. At such time as the
non-defaulting Member or the Company collects on the applicable Guaranty an
amount equal to the full amount of the Default Amount (plus the Twenty Five
Percent Payment related thereto, as well as all costs, reasonable attorneys fees
and other amounts owing under the applicable Guaranty) from the applicable
Guarantor, then the defaulting Member shall no longer be disenfranchised
pursuant to SECTION 4.3(c) and:
(1) if the non-defaulting Member has made a Default
Contribution pursuant to SECTION 4.3(b)(i) with respect to such Default Amount,
the non-defaulting Member shall be entitled to the full amount collected on the
applicable Guaranty (except that the entity enforcing the Guaranty shall be
entitled to retain any costs or attorneys fees collected on such Guaranty) and
any dilution set forth in SECTION 4.3(b) shall be reversed as if such dilution
had not occurred; provided that if (A) the Default Put or Default Call actually
has closed prior to the payment on the applicable Guaranty, it shall not be
reversed, but there shall be no further right to collect on the applicable
Guaranty, or (B) there has been collection in full on the applicable Guaranty
prior to the closing on a Default Put or Default Call, there shall be no right
to pursue a Default Put or Default Call with respect to such default;
(2) if no Default Contribution was made with respect
to such Default Amount, 100% of the amount of such Default Amount recovered on
the applicable Guaranty shall be contributed to the capital of the Company on
behalf of the defaulting Member (but the entity enforcing the Guaranty shall be
entitled to retain any costs or attorneys' fees collected on such Guaranty) and
the Membership Interest of the defaulting Member shall be adjusted to reflect
such Capital Contribution; and
(3) in the event of either SECTIONS 4.3(e)(i) or
(ii), the non-defaulting Member shall be paid from the amount collected on the
Guaranty or by the defaulting Member if such collection is insufficient, the
Twenty Five Percent Payment.
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GCR and Station acknowledge and agree that the failure of either to
make their respective additional Capital Contributions shall result in damage to
the other and the Company, the exact amount of which is impractical or extremely
difficult to calculate, and that the remedies set forth in SECTION 4.3(b-e) are
a fair and reasonable calculation of damages under the circumstances, and not a
penalty or forfeiture.
(6) RESIGNATION AS MANAGER. In the event of a default by
Station in providing Station's Initial Capital Contribution pursuant to SECTION
4.1(b) and the expulsion of Station as a Member, or a dilution of Station under
SECTION 4.3(b), Station may give written notice to GCR that it desires to resign
as Manager; provided, however, Station shall, if requested by GCR, be obligated
to serve as the Manager for a period of up to 36 months (the "TRANSITION
PERIOD") after the expulsion or Dilution Date, during which time Station shall
continue to perform its obligations hereunder and continue to receive
compensation and expense reimbursement pursuant to SECTION 3.5, and will
cooperate with GCR in its efforts to engage a successor Manager of the Project.
1.38 ALLOCATION OF PROFITS AND LOSSES.
For purposes of determining Capital Accounts under this SECTION 4.4:
(i) Capital Accounts shall first be reduced by distributions with respect to
such Fiscal Year, and (ii) a Member's Capital Account shall be increased by such
Member's share of Minimum Gain and Minimum Gain Attributable to Member
Nonrecourse Debt determined as of the end of such Fiscal Year.
(1) PROFITS. After giving effect to the special allocations
set forth in SECTION 4.4(c), Profits shall be allocated as follows: (i) first,
to those Members with negative Capital Account balances, that portion of Profits
which is equal in amount to, and in proportion to, such Members' respective
negative Capital Accounts in the Company, provided that no such Profits shall be
allocated under this paragraph to a Member once such Member's Capital Account is
brought to zero; and (ii) the balance, to those Members in the amount and to the
extent necessary to increase the Members' respective Capital Accounts so that if
the proceeds were distributed under SECTION 6.2(c) at the end of the Fiscal
Year, such proceeds would be distributed in accordance with the Members'
respective Capital Account balances.
(2) LOSSES. After giving effect to paragraph 4.4(c) of this
Agreement, Losses shall be allocated to each Member as follows: (i) first, to
those Members to the extent and in such proportions necessary to decrease the
respective positive balances in all Members' Capital Accounts so that the
proceeds distributed under SECTION 6.2(c) will be distributed in accordance with
the Members' respective Adjusted Capital Accounts; and (ii) the balance, to the
Members in accordance with the manner in which they bear the economic risk of
loss associated with such loss.
(3) SPECIAL ALLOCATIONS. Notwithstanding any provisions of
SECTION 4.4(a) or SECTION 4.4(b), the following special allocations shall be
made in the following order:
(1) MINIMUM GAIN CHARGEBACK (NONRECOURSE
LIABILITIES). If there is a net decrease in Minimum Gain for any Fiscal Year
(except as a result of certain conversions or refinancings of Company
indebtedness, certain capital contributions or certain revaluations of property
as further outlined in Regulation Sections 1.704-2(d)(4), (f)(2), or (f)(3)),
each Member shall be specially allocated items of Company income and gain for
such year (and, if necessary, subsequent years) in an amount equal to that
Member's share of the net decrease in Minimum Gain.
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The items to be so allocated shall be determined in accordance with
Regulation Section 1.704-2(f) and (j)(2). This SECTION 4.4(c)(i) is intended
to comply with the minimum gain chargeback requirement in said section of the
Regulations and shall be interpreted consistently therewith. Allocations
pursuant to this SECTION 4.4(c)(i) shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant hereto.
(2) MINIMUM GAIN ATTRIBUTABLE TO MEMBER
NONRECOURSE DEBT. If there is a net decrease in Minimum Gain Attributable to
Member Nonrecourse Debt during any Fiscal Year (other than due to the
conversion, refinancing or other change in the debt instrument causing it to
become partially or wholly nonrecourse, certain capital contributions, or
certain revaluations of property as Further outlined in Regulation Section
1.704-2(i)(4)), each Member shall be specially allocated items of Company
income and gain for such year (and, if necessary, subsequent years) in an
amount equal to that Member's share of the net decrease in the Minimum Gain
Attributable to Member Nonrecourse Debt. The items to be so allocated shall
be determined in accordance with Regulation Sections 1.704-2(i)(4) and
(j)(2). This SECTION 4.4(c)(ii) is intended to comply with the minimum gain
chargeback requirement with respect to Member Nonrecourse Debt contained in
said sections of the Regulations and shall be interpreted consistently
therewith. Allocations pursuant to this SECTION 4.4(c)(ii) shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant hereto.
(3) QUALIFIED INCOME OFFSET. In the event any
Member unexpectedly receives any adjustments, allocations or distributions
described in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), and
such Member has an Adjusted Capital Account Deficit, items of Company income
and gain shall be specially allocated to such Member in an amount and manner
sufficient to eliminate the Adjusted Capital Account Deficit as quickly as
possible. This SECTION 4.4(c)(iii) is intended to constitute a "qualified
income offset" under Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
(4) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions
for any Fiscal Year or other applicable period shall be allocated to the
Members in proportion to their respective Capital Account balances.
(5) MEMBER NONRECOURSE DEDUCTIONS. Member
Nonrecourse Deductions for any Fiscal Year shall be specially allocated to
the Member that bears the economic risk of loss for the debt in respect of
which such Member Nonrecourse Deductions are attributable (as determined
under Regulation Sections 1.704-2(b)(4) and (i)(1)).
(6) CURATIVE ALLOCATIONS. The Regulatory
Allocations (as hereinafter defined) shall be taken into account in
allocating other items of income, gain, loss and deduction among the Members
so that, to the extent possible, the cumulative net amount of allocations of
Company items under SECTION 4.4(a), (b) AND (c) hereof shall be equal to the
net amount that would have been allocated to each Member if the Regulatory
Allocations had not occurred. This Paragraph (vi) is intended to minimize to
the extent possible and to the extent necessary any economic distortions that
may result from application of the Regulatory Allocations and shall be
interpreted in a manner consistent therewith. For purposes hereof,
"REGULATORY ALLOCATIONS" shall mean all the allocations provided under this
SECTION 4.4(c) other than this Paragraph (vi).
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(4) TAX ALLOCATIONS.
(1) GENERALLY. Subject to Paragraph (ii) of this
Subsection (d), items of income, gain, loss, deduction and credit to be
allocated for income tax purposes (collectively, "TAX ITEMS") shall be
allocated among the Members on the same basis as their respective book items.
(2) ALLOCATIONS RESPECTING SECTION 704(c) AND
REVALUATIONS. Notwithstanding Paragraph (i) of this Subsection (d), Tax Items
with respect to Company property that is subject to Code Section 704(c)
and/or Regulation Section 1.704-1(b)(2)(iv)(f) shall be allocated in
accordance with said Code section and/or Regulation Section 1.704-1(b)(4)(i),
as the case may be, using the "traditional method" or, upon unanimous
approval of the Members, any other reasonable method permitted in Regulations
Section 1.704-3.
1.39 DISTRIBUTIONS.
(1) DISTRIBUTIONS PRIOR TO LIQUIDATION. Distributable Cash
shall be disbursed or distributed to the Members only at such times and in
such amounts as shall be determined by the Executive Committee in the
following manner and order of priority:
(1) First, to the Members pro rata in accordance
with the accrued but undistributed Twenty-Five Percent Payment Amount on
Default Amounts until each Member who is entitled to the Twenty-Five Percent
Payment Amount shall have received (giving effect to all distributions
pursuant to this SECTION 4.5(a)(i) in the current and all prior Fiscal Years)
an amount equal to the Twenty-Five Percent Payment Amount.
(2) Second, to the Members, pro rata in accordance
with each Member's share of unreturned Default Contributions until each
Member shall have received (giving effect to all distributions pursuant to
this SECTION 4.5(a)(ii) in the current and previous Fiscal Years) an amount
equal to such Member's Default Contributions.
(3) Third, to the Members pro rata in accordance
with each Member's share of unreturned Capital Contributions (other than
Default Contributions) until each Member shall have received (giving effect
to all distributions pursuant to this SECTION 4.5(a)(iii) in the current and
previous Fiscal Years) an amount equal to such Member's Capital Contributions
(other than Default Contributions).
(4) Fourth, to the Members, pro rata in accordance
with each Member's percentage of Membership Interests.
Any such distributions shall be made to the Members on a pro rata basis in
proportion to the respective percentage Membership Interests held by them at
the time of such distributions. Notwithstanding the foregoing, as an advance
against distributions pursuant to the preceding sentence, the Company shall
distribute to each Member on an annual basis not later than 120 days
following the end of each Fiscal Year an amount equal to 40% of the Profits
allocated to such Member for such Fiscal Year pursuant to SECTION 4.4(a).
(2) WITHHOLDING. The Company shall withhold and pay over to
the Internal Revenue Service or other applicable taxing authority all taxes or
withholdings, and all interest,
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penalties, additions to tax, and similar liabilities in connection therewith
or attributable thereto (hereinafter "WITHHELD TAXES") to the extent that the
Manager reasonably determines that such withholding and/or payment is
required by the Code or any other law, rule or regulation. The Manager shall
determine to which Member such Withheld Taxes are attributable in accordance
with applicable law. All amounts withheld pursuant to this SECTION 4.5(b)
with respect to any allocation, payment or distribution to any Member shall
be treated as amounts distributed to such Member pursuant to SECTION 4.5(a)
hereof for all purposes of this Agreement.
(3) CERTAIN ADJUSTMENTS. If an amount payable to the
Company is reduced because the Person paying that amount withholds and/or
pays over to the Internal Revenue Service or other applicable taxing
authority any amount as a result of the status of a Member, the Manager shall
make such adjustments to amounts distributed and allocated among Members as
the Manager reasonably determines to be appropriate.
ARTICLE V
MEMBERS; TRANSFER OF INTERESTS
1.40 ADMISSION. The initial Members became Members of the Company at
the Effective Date. Notwithstanding any contrary provision of the Act, the
Company may admit new Members to the Company only with the prior consent of the
Executive Committee on such terms as Station and GCR mutually agree. No Person
shall be admitted as a Member until all approvals required by the Gaming Laws
are obtained.
1.41 TRANSFER OF INTERESTS.
(1) NO TRANSFER WITHOUT EXECUTIVE COMMITTEE CONSENT. No Member
may Transfer all or any part of its Membership Interest in the Company (other
than a Transfer (i) pursuant to SECTION 4.3(d), SECTION 5.2(b) or SECTION 5.3)
or (ii) subject to SECTION 5.2(b), to one or more Greenspun Family Members (or
an entity wholly owned by one or more Greenspun Family Members) in the case of
GCR and a wholly owned subsidiary of Parent in the case of Station which
expressly assumes in writing the obligations of the transferor under this
Agreement (as long as such Transfer would not adversely affect the
classification of the Company as a partnership for federal or state income tax
purposes)) or otherwise assign or delegate any of such Member's rights and
obligations as a Member without the consent of Station and GCR. In the event of
a Transfer permitted by Clause (ii) of the preceding sentence, the transferor
and transferee(s) shall be treated as a single Member for all purposes of this
Agreement. For purposes of this Section, there shall be a Transfer of GCR's
Membership Interest in the Company if one or more Greenspun Family Members do
not own 100% of GCR; provided, however, that the pledge or other hypothecation
of GCR's or Station's Membership Interest to secure Construction Financing or
Permanent Financing, or the subsequent foreclosure or transfer in lieu thereof,
to the construction or permanent lender or bona fide purchaser or transferee of
such lender, shall not be deemed a Transfer. Notwithstanding anything in this
Agreement to the contrary, in the event of any Transfer by GCR or Station of any
or all of its Membership Interest in contravention of this SECTION 5.2(a), such
as, but not limited to, by operation of law, bankruptcy or the like, the
transferee shall have no rights to vote any matters coming before the Members
and the other Member shall have the sole right to vote and appoint members to
the Executive Committee.
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(2) TRANSFER UPON CHANGE IN CONTROL. Station shall give
written notice to GCR no later than 30 days following a Change in Control,
which notice shall describe the events or circumstances which constitute such
Change in Control in reasonable detail. GCR may, within 30 days after its
receipt of such notice, give written notice to Station that it is considering
selling its Membership Interest to Station (a "CHANGE IN CONTROL PUT") or
purchasing Station's Membership Interest (a "CHANGE IN CONTROL CALL") and
that the Appraised Value should be determined as of the date of such notice
from GCR. Within 30 days after the determination of the Appraised Value, GCR
shall notify Station if it elects to exercise the Change in Control Put (the
"CHANGE IN CONTROL PUT EXERCISE NOTICE") or the Change in Control Call, in
either case at the Appraised Value as determined pursuant to the immediately
preceding sentence. The purchase of Station's Membership Interest or GCR's
Membership Interest, as the case may be, pursuant to the exercise of a Change
in Control Call or a Change in Control Put shall occur within 10 days
following receipt of all necessary third-party consents and approvals for
such transfer, with the purchase price payable in cash at such closing,
unless otherwise agreed by the party selling the Membership Interest. The
Membership Interests shall be conveyed free and clear of all liens and
encumbrances (except this Agreement), and the selling Member and its
Affiliates shall be released from all indebtedness and guaranties incurred on
behalf of the Company.
In the event Station defaults on acquiring GCR's Membership Interest
pursuant to a change in Control Put, or the requisite consents and approvals
to transfer have not (or cannot be) obtained with respect to a Change in
Control Put within one year after the Change in Control Put Exercise Notice,
or GCR and its Affiliates cannot be released from all indebtedness or
guaranties with respect to a Change in Control Put (including the GCR
Guaranty attached to this Agreement) within one year after the Change in
Control Put Exercise Notice, then GCR can require the Company or its assets
to be sold pursuant to actions taken by an investment banker (selected by GCR
from the list on EXHIBIT A) in a commercially reasonable time frame.
(3) SPECIAL PROVISIONS APPLICABLE TO CHANGE IN CONTROL PUT
OR CALL OR DEFAULT PUT OR CALL. In the event that Station's Membership
Interest is the subject of a Change in Control Put or Call or Default Put or
Call, Station shall, at the option of GCR, be obligated to continue to serve
as the Manager for a period of up to the Transition Period after the
consummation of the purchase of Station's Membership Interest, during which
time Station shall continue to perform its obligations hereunder and receive
the Incentive Management Fee and the Base Management Fee and will cooperate
with GCR in its efforts to engage a successor manager for the Project.
(4) ATTEMPTED TRANSFERS IN CONTRAVENTION. Any attempted
Transfer in contravention of this Article 5 shall be void and of no effect
and shall not bind or be recognized by the Company. In the case of an
attempted Transfer not permitted hereby, the parties attempting to engage in
such Transfer shall indemnify and hold harmless (and hereby agree to
indemnify and hold harmless), the Company and the other Members from all
costs, liabilities and damages that any of such indemnified Persons may incur
(including, without limitation, incremental tax liability and attorneys' fees
and expenses) as a result of such attempted Transfer and efforts to enforce
the indemnity granted hereby.
(5) DISTRIBUTIONS AND ALLOCATIONS UPON TRANSFERS. If during
any Fiscal Year there is a Transfer of an interest in the Company in
compliance with the provisions of this Article 5, Profits and Losses and all
other items attributable to the transferred interest for such period shall be
divided and allocated between the transferor and the transferee by taking
into account their varying
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interests during the period in accordance with Code Section 706(d), using the
interim closing of books method or, upon the unanimous approval of the
Members, any other conventions permitted by law and selected by the Manager.
All distributions with respect to the transferred interest on or before the
date of the Transfer shall be made to the Transferor, and all distributions
thereafter with respect to the transferred interest shall be made to the
Transferee. Neither the Company nor the Manager shall incur any liability for
making allocations and distributions in accordance with the provisions of
this Article 5.
(6) COMPLIANCE WITH GAMING LAWS. Notwithstanding anything
to the contrary set forth herein, no Membership Interest or other ownership
interest in the Company shall be issued or transferred in any manner
whatsoever except in compliance with all Gaming Laws and only after the
receipt of all necessary Gaming Licenses.
1.42 GAMING LICENSING. Each Member agrees to promptly and
diligently, at its own cost, file for and seek to obtain it and its
Affiliates Gaming Licenses for the Project.
(1) In the event that any Member (the "PROBLEM MEMBER") has
not received its Gaming License for the Project by the time of the Opening
or, by virtue of its pending gaming application, is substantially impairing
or impeding the receipt by the Company of the Gaming Licenses necessary for
the Opening, then the other Member shall acquire the Problem Member's
Membership Interest, free and clear of all liens and encumbrances (other than
this Agreement), for a purchase price equal to 100% of the Problem Member's
unreturned Capital Contribution, payable in cash, and the Problem Member and
its Affiliates shall be released from all indebtedness and guaranties
incurred on behalf of the Company. For a period of one year after such
purchase, if the Problem Member obtains its Gaming License, it shall have the
option, subject to the approval of the applicable Gaming Authorities, to
repurchase its Membership Interest, free and clear of all liens and
encumbrances (other than this Agreement), for a purchase price equal to the
purchase price paid for such Membership Interest by the non-Problem Member,
payable in cash, and assumption of one-half of all indebtedness or guaranties
outstanding by the other Member or its Affiliates on behalf of the Company.
For a period of one year after the purchase of the Problem Member's
Membership Interest or such time as the Problem Member repurchases its
Membership Interest, whichever is shorter, the Company shall not make any
distributions to its Members (other than the payment of fees and
reimbursement of costs in the ordinary course of business).
(2) If, subsequent to Opening and the initial licensing of
a Member, a Member (also, a "PROBLEM MEMBER") is substantially impeding or
impairing the ability of the Company to maintain its Gaming License for the
Project, or is resulting in the imposition of significantly burdensome terms
and conditions on any such Gaming Licenses (a "LICENSING PROBLEM"), then the
other Member may give written notice to the Problem Member and the Problem
Member shall have the lesser of that time required by the Gaming Authorities
or ninety (90) days to correct such Gaming Problem. If such Gaming Problem is
not corrected within the shorter of the above time periods, then the
non-Problem Member may give written notice that it shall acquire the Problem
Member's Membership Interest, free and clear of all liens and encumbrances
(other than imposed by this Agreement) for an amount equal to the Problem
Member's unreturned Capital Contributions, and the Problem Member shall be
released from all indebtedness and guaranties incurred on behalf of the
Company. The closing on such acquisition shall occur upon the lesser of the
time required by applicable Gaming Authority or 90 days after the notice of
intent to acquire the Problem Member's Membership Interest. The purchase
price shall be paid in cash.
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1.43 REQUIRED MEMBER APPROVALS. Notwithstanding any other provision
herein to the contrary, the prior unanimous affirmative approval of the Members
of the Company shall be required with respect to each of the following:
(1) Approval of a Restricted Activity by a Member;
(2) Approval of an Affiliate Transaction by a Member which is
not an arms-length bona fide fair market value transaction;
(3) Amendments to the Articles and, except as set forth in
SECTION 7.2, any amendment of this Agreement;
(4) Any sale of the business or substantially all of the
assets of the Company, or merger of the Company in which the Company is not the
surviving entity and the Members of the Company immediately prior to such
transaction do not hold a majority of the Voting Stock of the entity surviving
such merger, which sale or merger is not an arms-length bona fide fair market
value transaction;
(5) Approval of the resignation of the Manager pursuant to
SECTION 3.1;
(6) Admission of new Member(s) pursuant to SECTION 5.1 or
Transfers pursuant to SECTION 5.2(a) (other than under Sections 5.2(a)(i) or
(ii));
(7) Dissolution of the Company pursuant to SECTION 6.1(a); or
(8) Approval by GCR of any of the matters set forth in SECTION
3.3 (c).
1.44 PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Meetings of Members
shall be held at any place designated by the Executive Committee. In the absence
of any such designation, meetings of Members shall be held at the principal
place of business of the Company. Any meeting of the Members may be held by
conference telephone or similar communications equipment so long as all Members
participating in the meeting can hear one another, and all Members participating
by telephone or similar communications equipment shall be deemed to be present
in person at the meeting.
1.45 ANNUAL MEETING.
(1) No annual meeting of the Members shall be required.
(2) The Members shall designate in writing one representative
(a "MEMBER'S REPRESENTATIVE") to attend a regular monthly informational meeting
of the Members at which time the Manager shall review the financial statements
set forth in SECTION 3.4(i) and shall present such other information with
respect to the Project as reasonably requested by any Member's Representative. A
member may change its Member's Representative by written notice to the Executive
Committee.
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1.46 SPECIAL CALL OF MEETINGS. Special meetings of the Members may
be called at any time by any Member owning 25% or more of the Membership
Interests of the Company or by the Executive Committee for the purpose of
taking action upon any matter requiring the vote or authority of the Members
as provided in this Agreement or the Act or upon any other matter as to which
such vote or authority is deemed by the Members or the Executive Committee to
be necessary or desirable; provided, however, in no event may any Member call
a special meeting of the Members more than once in any four week period.
1.47 NOTICE OF MEETINGS OF MEMBERS. All notices of meetings of
Members shall be sent or otherwise given in accordance with SECTION 8.1 not
less then five (5) nor more than ninety (90) days before the date of the
meeting. The notice shall specify (i) the place, date, and hour of the
meeting, and (ii) the general nature of the business to be transacted.
1.48 MANNER OF GIVING NOTICE. Notice of any meeting of the Members
shall be given pursuant to SECTION 8.1
1.49 ADJOURNED MEETING; NOTICE. Any meeting of Members whether or not a
quorum is present, may be adjourned from time to time by the vote of the
majority of the Membership Interests represented at that meeting, either in
person or by proxy. When any meeting of Members is adjourned to another time or
place, notice need not be given of the adjourned meeting, unless a new record
date of the adjourned meeting is fixed or unless the adjournment is for more
than sixty (60) days from the date set for the original meeting, in which case
the Executive Committee shall set a new record date and shall give notice in
accordance with the provisions of SECTIONS 5.8 AND 5.9. At any adjourned
meeting, the Company may transact any business that might have been transacted
at the original meeting.
1.50 QUORUM; VOTING. At any meeting of the Members, a majority of the
Membership Interests of the Company, present in person or by proxy, shall
constitute a quorum for all purposes. Except as otherwise required by this
Agreement (including, without limitation, SECTION 5.4 above) or the Act, all
matters shall be determined by an affirmative vote of Members holding at least a
majority of the Membership's Interests of the Company when a quorum is present.
1.51 WAIVER OF NOTICE BY CONSENT OF ABSENT MEMBERS. The transactions of
a meeting of Members however called and noticed and wherever held, shall be as
valid as though taken at a meeting duly held after regular call and notice if a
quorum is present either in person or by proxy and if either before or after the
meeting, each person entitled to vote who was not present in person or by proxy
signs a written waiver of notice or a consent to a holding of the meeting or an
approval of the minutes. The waiver of notice or consent need not specify either
the business to be transacted or the purpose of any meeting of Members.
Attendance by a person at a meeting shall also constitute a waiver of notice of
that meeting, except when the person objects at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters not included in the notice of the meeting
if that objection is expressly made at the beginning of the meeting.
1.52 MEMBER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Except as
provided in this Agreement or the Act, any action that may be taken at any
meeting of Members, may be taken without a meeting and without prior notice if a
consent in writing setting forth the action so taken
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is signed by Members holding at least a majority of the Membership Interests
of the Company, or such greater number as is required by this Agreement or
the Act with respect to a particular issue. Any such written consent may be
executed and given by telecopy or similar electronic means. Such consents
shall be filed with the Company and shall be maintained in the Company's
records.
1.53 RECORD DATE FOR MEMBER NOTICE, VOTING, AND GIVING CONSENTS.
(1) For purposes of determining the Members entitled to vote
or act at any meeting or adjournment thereof, the record date for determining
Members entitled to notice of or to vote at a meeting of Members shall be at the
close of business on the business day immediately preceding the day on which
notice is given, or if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held.
(2) The record date for determining Members entitled to give
consent to action in writing without a meeting, (i) when no prior action of the
Executive Committee has been taken, shall be the day on which the first written
consent is given or (ii) when prior action of the Executive Committee has been
taken, shall be (x) such date as determined for that purpose by the Executive
Committee, which record date shall not precede the date upon which the
resolution fixing it is adopted by the Executive Committee and shall not be more
than 20 days after the date of such resolution or (y) if no record date is fixed
by the Executive Committee the record date shall be the close of business on the
day on which the Executive Committee adopts the resolution relating to that
action.
(3) Only Members of record on the record date as herein
determined shall have any right to vote or to act at any meeting or give consent
to any action relating to such record date, provided that no Member who
Transfers all or part of such Member's Membership Interest after a record date
(and no transferee of such Membership Interest) shall have the right to vote or
act with respect to the transferred Membership Interest as regards the matter
for which the record date was set.
1.54 IN GENERAL. As of the date of its execution of this Agreement,
each of the Members and the Manager (other than the Manager with respect to
SECTIONS 5.15(e) AND (f)), hereby makes each of the representations and
warranties applicable to such Member or Manager as set forth in this SECTION
5.15 hereof, and such warranties and representations shall survive the execution
of this Agreement, and be for the benefit of the Company and other Members:
(1) DUE INCORPORATION OR FORMATION; AUTHORIZATION OF
AGREEMENT. If such Member or Manager is a corporation, limited liability
company, or a partnership, it is duly organized or duly formed, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation or formation and has the corporate, limited liability company, or
partnership power and authority to own its property and carry on its business as
owned and carried on at the date hereof and as contemplated hereby. Such Member
or Manager is duly licensed or qualified to do business and in good standing in
each of the jurisdictions in which the failure to be so licensed or qualified
would have a material adverse effect on its financial condition or its ability
to perform its obligations hereunder. Such Member or Manager has the individual,
corporate, limited liability company, or partnership power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and,
if such Member or Manager is a corporation, limited liability company, or
partnership, the execution, delivery, and performance of this Agreement has been
duly authorized
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by all necessary corporate, limited liability company, or partnership action.
This Agreement constitutes the legal, valid, and binding obligation of such
Member or Manager enforceable in accordance with its respective terms (except
as enforceability may be limited by applicable bankruptcy, insolvency or
other similar laws affecting creditor's rights generally, and except that the
availability of equitable remedies is subject to judicial discretion).
(2) NO CONFLICT WITH RESTRICTIONS; NO DEFAULT. Neither the
execution, delivery, and performance of this Agreement nor the consummation
by such Member or Manager of the transactions contemplated hereby (i) will
conflict with, violate, or result in a breach of any of the terms,
conditions, or provisions of any law, regulation, order, writ, injunction,
decree, determination, or award of any court, any governmental department,
board, agency, or instrumentality, domestic or foreign, or any arbitrator,
applicable to such Member or Manager, (ii) will conflict with, violate,
result in a breach of, or constitute a default under any of the terms,
conditions, or provisions of the articles of incorporation or organization,
bylaws, operating agreement, or partnership agreement of such Member or
Manager, if such Member or Manager is a corporation, limited liability
company or partnership, or, except as set forth in the next sentence with
respect to Station and Parent, of any material agreement or instrument to
which such Member or Manager is a party or by which such Member or Manager is
or may be bound or to which any of its material properties or assets is
subject, (iii) will, except as set forth in the next sentence with respect to
Station and Parent, conflict with, violate, result in a breach of, constitute
a default under (whether with notice or lapse of time or both), accelerate or
permit the acceleration of the performance required by, give to others any
material interests or rights, or require any consent, authorization, or
approval under any indenture, mortgage, lease agreement, or instrument to
which such Member or Manager is a party or by which such Member or Manager is
or may be bound, or (iv) will result in the creation or imposition of any
lien upon any of the material properties or assets of such Member or Manager.
With respect to Station and Parent, certain provisions of this Agreement may
conflict with other agreements, or require the consent of unrelated parties.
Notwithstanding such conflict or necessity of consent, Station agrees that it
is absolutely bound by the terms of this Agreement, and Station further
acknowledges and agrees that its failure to perform an obligation under the
terms of this Agreement (even if such obligations may cause a breach of
another agreement or require the consent of a third party) shall entitle GCR
to its remedies available pursuant to the terms of this Agreement.
(3) GOVERNMENTAL AUTHORIZATIONS. Any registration,
declaration or filing with or consent, approval, license, permit or other
authorization or order by, any governmental or regulatory authority, domestic
or foreign, that is required in connection with the valid execution,
delivery, acceptance, and performance by such Member or Manager under this
Agreement or the consummation by such Member or Manager of any transaction
contemplated hereby has been completed, made, or obtained on or before the
Effective Date of this Agreement, except as set forth in this Agreement.
(4) LITIGATION. There are no actions, suits, proceedings,
or investigations pending or, to the knowledge of such Member or Manager,
threatened against or affecting such Member or Manager or any of their
properties, assets, or businesses in any court or before or by any
governmental department, board, agency, or instrumentality, domestic or
foreign, or any arbitrator which could, if adversely determined (or, in the
case of an investigation could lead to any action, suit, or proceeding, which
if adversely determined could) reasonably be expected to materially impair
such Member's or Manager's ability to perform its obligations under this
Agreement or to have a material adverse effect on the consolidated financial
condition of
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such Member or Manager; and such Member or Manager has not received any
currently effective notice of any default, and such Member is not in default,
under any applicable order, writ, injunction, decree, permit, determination,
or award of any court, any governmental department, board, agency, or
instrumentality, domestic or foreign, or any arbitrator which could
reasonably be expected to materially impair such Member's or Manager's
ability to perform its obligations under this Agreement or to have a material
adverse effect on the consolidated financial condition of such Member or
Manager.
(5) INVESTIGATION. Such Member is acquiring its Membership
Interest based upon its own investigation, and the exercise by such Member of
its rights and the performance of its obligations under this Agreement will
be based upon its own investigation, analysis, and expertise. Such Member's
acquisition of its Membership Interest is being made for its own account for
investment, and not with a view to the sale or distribution thereof.
(6) ACCREDITED INVESTOR. Such Member is an "accredited
investor" within the meaning of applicable state and federal securities laws.
The Member's overall commitment to investments that are not readily marketable
is not disproportionate to its net worth, and the purchase of the Membership
Interest will not cause such overall commitment to become excessive.
ARTICLE VI
DISSOLUTION, LIQUIDATION AND TERMINATION
1.55 DISSOLUTION. The Company shall dissolve and its affairs shall be
wound up upon the occurrence of any of the following:
(1) the mutual consent of all Members at any time; or
(2) the occurrence of any other event that effects a
dissolution of the Company under the Act.
1.56 LIQUIDATION AND TERMINATION. On dissolution of the Company, the
Manager shall act as liquidating trustee or may appoint one or more Members as
liquidating trustee. The liquidating trustee shall proceed diligently to wind up
the affairs of the Company and make final distributions as provided herein and
in the Act. The costs of liquidation shall be borne by the Company. Until final
distribution, the liquidating trustee shall continue to operate the Company
properties with all of the power and authority of the Manager. The steps to be
accomplished by the liquidating trustee are as follows:
(1) as promptly as possible after dissolution and again after
final liquidation, the liquidating trustee shall cause an accounting to be made
by a firm of independent public accountants of the Company's assets, liabilities
and operations through the last day of the calendar month in which the
dissolution occurs or the final liquidation is completed, as applicable;
(2) the liquidating trustee shall pay, satisfy or discharge
from Company funds all of the debts, liabilities and obligations of the Company
(including, without limitation, all expenses incurred in liquidation) or
otherwise make adequate provision for payment and discharge thereof (including,
without limitation, the establishment of a cash escrow fund for contingent
liabilities in such amount and for such term as the liquidating trustee may
reasonably determine); and
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(3) all remaining assets of the Company shall be
distributed to the Members in accordance with SECTION 4.5(a).
1.57 ARTICLES OF DISSOLUTION. On completion of the distribution of
Company assets as provided herein, the Company's existence shall be terminated,
and the Manager (or such other person or persons as the Act may require or
permit) shall file Articles of Dissolution with the Secretary of State of Nevada
under the Act and take such other actions as may be necessary to terminate the
existence of the Company.
1.58 NEGATIVE CAPITAL ACCOUNTS. No Member with a deficit balance in its
Capital Account shall have any obligation to make any contribution to the
capital of the Company with respect to such deficit, and such deficit shall not
be considered a debt owed to the Company or to any other Person for any purpose
whatsoever.
1.59 DEEMED DISTRIBUTION AND RECONTRIBUTION. Notwithstanding any other
provision of this Article 6, in the event the Company is liquidated within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no event described in
SECTION 6.1 has occurred, such liquidation shall not cause a dissolution of the
Company for purposes of the Act and the Company's assets shall not be
liquidated, the Company's liabilities shall not be paid or discharged, and the
Company's affairs shall not be wound up. Instead, the assets and liabilities of
the Company shall be deemed to have been contributed to a new company and the
interests in the new company shall be deemed distributed to members of the
former Company, which shall be operated and governed by this Agreement
1.60 LIMITATIONS ON RIGHTS OF MEMBERS. Each Member shall look solely to
the assets of the Company for the return of its Capital Contribution, and except
as expressly provided herein no Member shall have priority over any other Member
as to the return of its Capital Contribution or as to any distributions or
allocations.
ARTICLE VII
AMENDMENTS
1.61 AMENDMENTS GENERALLY. Except as otherwise provided in this Article
7, and notwithstanding any contrary provision of the Act, any amendments to this
Agreement and to the Articles may be adopted with the unanimous written consent
of all the Members; provided, however, that in no event may the provisions of
SECTIONS 3.1 THROUGH 3.8, 3.10, 3.13, 3.26 THROUGH 3.29 or this Article VII
regarding amendments to such provisions be amended without the approval of the
Manager as long as Station is the Manager.
1.62 AMENDMENTS BY THE EXECUTIVE COMMITTEE. Without limiting the power
to amend this Agreement granted by SECTION 7.1 hereof, this Agreement may be
amended by the Executive Committee, by executing an instrument of amendment and
giving each Member notice thereof, without the consent of any of the Members,
(i) to effect changes of a ministerial nature that do not adversely affect the
rights, duties or obligations of the Members; (ii) to give effect to the
admission of Members in accordance with the terms hereof; (iii) to conform the
terms of this Agreement with any Regulations issued under Code Section 704; or
(iv) with respect to the Company's status as a partnership (and not as an
association taxable as a corporation) for federal or state income tax
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purposes (x) to comply with the requirements of the Regulations, or (y) to
ensure the continuation of partnership status; provided, however, that in the
opinion of counsel of the Company any of such amendments do not adversely
affect the rights or interests of any of the Members. Notwithstanding the
foregoing, no amendment shall be adopted pursuant to this SECTION 7.2 if such
amendment would adversely affect the limited liability of the Members or the
status of the Company as a partnership for federal or state income tax
purposes. 1.1
ARTICLE VIII
MISCELLANEOUS
1.63 NOTICES. All notices, requests, consents and other formal
communication between the Members, the Manager, the members of the Executive
Committee and the Company that are required or permitted under this Agreement
("NOTICES") shall be in writing and shall be sent to the address for the
respective addressee provided on EXHIBIT M attached hereto or, in this case
of the Company, at its registered address under SECTION 2.4 (each a "NOTICE
ADDRESS"). Notices shall be (i) delivered personally with a written receipt
of delivery, (ii) sent by a recognized overnight courier requiring a written
acknowledgment of receipt or providing a certification of delivery or
attempted deliver (E.G., Federal Express, Airborne, UPS), (iii) sent by
certified or registered mail, postage prepaid, return receipt requested, or
(iv) transmitted by facsimile machine provided that the facsimile
transmission is received between 8:00 a.m. and 5:00 p.m. (as determined by
the time zone of the addressee), Monday through Friday but excluding holidays
on which the primary office of the addressee is closed, and provided further
that a duplicate copy of the Notice is delivered to the respective Notice
Address on the first regular business day following the date of facsimile
transmission. Notices shall be deemed delivered when actually received by the
addressee at the respective Notice Address; provided, however, that if the
Notice was sent by overnight courier or mail as aforesaid and is
affirmatively refused or cannot be delivered during customary business hours
by reason of the absence of a signatory to acknowledge receipt, or by reason
of a change of address with respect to which the addressor did not have
either knowledge or written notice delivered in accordance with this
paragraph, then the first attempted delivery shall be deemed to constitute
delivery.
Each Member, the Manager, the members of the Executive Committee and
the Company shall be entitled to change its Notice Address from time to time,
and to add up to two additional notice addressees, by delivering to all
Members, the Manager, the members of the Executive Committee and the Company
notice thereof in the manner herein provided for the delivery of Notices.
1.64 BINDING EFFECT. Except as otherwise provided in this Agreement,
every covenant, term and provision of this Agreement shall be binding upon
and inure to the benefit of the Members and their respective successors,
transferees and (subject to the limitations in Article 5 hereof) assigns.
1.65 HEADINGS. Section and (except for the definitions in SECTION
1.1) other headings contained in this Agreement are for reference purposes
only and are not intended to describe, interpret, define or limit the scope,
extent or intent of this Agreement or any provision hereof.
55
<PAGE>
1.66 SEVERABILITY. Every provision of this Agreement is intended to
be severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
1.67 FURTHER ACTION. Each Member, upon the request of the Manager,
agrees to perform all further acts and execute, acknowledge and deliver any
documents which may be reasonably necessary, appropriate or desirable to
carry out the provisions of this Agreement.
1.68 GOVERNING LAW. The laws of the State of Nevada shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Members.
1.69 WAIVER OF ACTION FOR PARTITION. Each of the Members irrevocably
waives any right that it may have to maintain any action for partition with
respect to any of the Company's assets.
1.70 COUNTERPART EXECUTION. This Agreement may be executed in any
number of counterparts with the same effect as if all of the Members had
signed the same document. All counterparts shall be construed together and
shall constitute one agreement.
1.71 CPI ADJUSTMENT. Each of the dollar thresholds specified in this
Agreement shall be subject to adjustment (the "CPI ADJUSTMENT") in each year
of the term of this Agreement as set forth in this SECTION 8.9 based upon the
difference, if positive, between the United States Department of Labor Bureau
of Labor Statistics Consumer Price Index - All Urban Consumers (U.S. City
Average, All Items, Base Period 1982-84=100) (the "INDEX") as of the date of
determination and the Index as of the Effective Date. If the Index is
discontinued or revised during the term of this Agreement, such other
government index or computation with which it is replaced shall be used in
order to obtain substantially the same result that would be obtained if such
index had not been discontinued or revised. The first CPI Adjustment shall be
proposed by the Manager in the Annual Plan and Operating Budget presented to
the Executive Committee for approval for the second full year after Opening,
based on the change from the prior year, and shall be proposed to the
Executive Committee annually thereafter for approval with the Annual Plan and
Operating Budget.
1.72 PUBLICITY. Neither GCR nor Station shall make any formal public
statement(s) or announcements regarding the Project or this Agreement without
the prior consent of the other, which consent shall not be unreasonably
withheld; provided that if either party is unable to obtain the prior consent
of the other with respect to a formal announcement that is, on the advice of
legal counsel, believed to be required by law, then such party may make or
issue such legally required statement or announcement and promptly furnish
the other party with a copy thereof.
1.73 TRANSITION AS MANAGER. During the Transition Period, Station
shall reasonably cooperate with Company and GCR to make a transition in the
management of the Project, including transferring all of the property of the
Project, including books and records, customer lists, employee and services
records and manuals, supplier lists and other similar documents or
information, which shall remain the sole property of the Company. After
Station no longer is Manager, it shall make itself reasonably available for
reasonable and customary compensation to advise and consult in any transition
for a reasonable period of time.
56
<PAGE>
1.74 BROKER FEES. Station represents and warrants that upon the
formation of the Company or transfer of the Resort Property to the Company,
there will be no brokerage fees or commissions or other compensation due or
payable on an absolute or contingent basis to any person, firm, corporation, or
other entity, with respect to or on account of the formation of the Company or
transfer of Resort Property, arising by, through or under Station.
* * * * * *
57
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement under seal as of the Effective Date.
GREEN VALLEY RANCH GAMING, LLC
By: GV Ranch Station, Inc.
Its Manager
By: /s/ SCOTT M NIELSON
------------------------------------
Title: Secretary
GCR GAMING, LLC
By: /s/ BRIAN GREENSPUN
------------------------------------
Title: Manager
GV RANCH STATION, INC.
By: /s/ SCOTT M NIELSON
------------------------------------
Title: Secretary
AS MANAGER:
GV RANCH STATION, INC.
By: /s/ SCOTT M NIELSON
------------------------------------
Title: Secretary
58
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EXHIBIT A
List of Investment Banking Firms
1. Credit Suisse First Boston
2. Bear, Stearns & Co., Inc.
3. CIBC Oppenheimer
4. Lehman Brothers
5. Merrill Lynch & Co., Inc.
6. Wasserstein Perella & Co., Inc.
7. Banc of America Securities LLC
8. Donaldson, Lufkin & Jenrette, Inc.
9. Jefferies & Company, Inc.
10. The Goldman Sachs Group, Inc.
11. BT Alex Brown (Macquarie Bank Limited)
12. BancBoston Robertson Stephens
A-1
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EXHIBIT B
Fertitta Family Members
1. Frank J. Fertitta III
2. Blake L. Sartini
3. Lorenzo J. Fertitta
B-1
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EXHIBIT C
GCR Gaming Guarantor, LLC Guaranty
GUARANTY
The undersigned GCR Gaming Guarantor, LLC, a Nevada limited
liability company (the "GUARANTOR"), and an Affiliate of GCR Gaming, LLC
("GCR"), hereby irrevocably and unconditionally guarantees the payment and
performance by GCR pursuant to SECTIONS 4.1(a) AND 4.2 of the Operating
Agreement ( the "AGREEMENT") of Green Valley Ranch Gaming, LLC (the
"COMPANY") to the same extent that GCR is bound thereby. Such Guaranty is for
the benefit of the Company and, to the extent that GCR fails to make any
required contribution of capital under the Agreement and Station is not in
default under the Agreement, for the benefit of Station, each independently
and severally, and such Guaranty also is a guaranty of the Twenty-Five
Percent Payment for the period commencing on the date on which GCR's payment
obligation begins and ending on the earlier to occur of (a) one year from
such date, and (b) the date on which such payment obligation which GCR fails
to make in breach of the foregoing SECTIONS 4.1(a) AND 4.2 of the Agreement
has been satisfied. Upon the earlier of the Company closing on the
Construction Financing (as defined in the Agreement) or ninety (90) days
after Opening of the Project to the public, the obligations guaranteed hereby
shall be limited to those set forth in SECTIONS 4.2(b) AND 4.2(c) and the
amount of payment and performance guaranteed hereby as required by such
sections shall be limited to $15,000,000.00 in aggregate.
The Guarantor hereby grants to the Company, which may be exercised
solely by Station on behalf of the Company (and to which the Company consents
by acceptance of this Guaranty), in Station's sole discretion and without
notice to, or consent by, the Guarantor, but subject to the terms and
conditions of the Agreement, the power and authority to modify, waive, renew,
compromise, extend, accelerate or otherwise change the time or place of
payment of or to otherwise change the terms of the payment of the amounts
guaranteed hereby, the other obligations guaranteed hereby or the provisions
of the Agreement related thereto. The liability of the Guarantor shall not be
terminated, affected, impaired or reduced in any way by any action taken by
Station under the foregoing provision or any other provision hereof or by any
delay, failure or refusal of Station to exercise any right or remedy it may
have against GCR, or any other person, including other guarantors, if any,
liable for all or any part of the obligations guaranteed hereby.
Satisfaction by the Guarantor of any liability hereunder incident to
a particular default under the Agreement, if additional default(s) shall
occur under the Agreement, shall not discharge the Guarantor except with
respect to the default satisfied, it being the intent hereof that this
Guaranty and the obligations of the Guarantor hereunder shall be continuing
and irrevocable and shall survive until termination of the Agreement, and
shall survive termination of the Agreement to the extent any defaults exist
at the time of such termination. Notwithstanding the foregoing or anything
else set forth herein, and in addition thereto, if at any time all or any
part of any payment received by Station or the Company from the Guarantor
under or with respect to this Guaranty is or must be rescinded or returned
for any reason whatsoever (including, but not limited to, determination that
said payment was a voidable preference under insolvency, bankruptcy or
reorganization laws), then the Guarantor's obligations hereunder shall, to
the extent of the payment rescinded or returned, be deemed to have continued
in existence, notwithstanding such previous receipt of payment by Station or
the Company, and Guarantor's obligations hereunder shall continue to be
effective or be
C-1
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reinstated, as the case may be, as to such payment, all as though such
previous payment to Station or the Company had never been made. The
provisions of the foregoing sentence shall survive termination of this
Guaranty and of the Agreement, and shall remain a valid and binding
obligation of the Guarantor until satisfied.
The Guarantor hereby waives notice of acceptance of this Guaranty by
Station or the Company and this Guaranty shall immediately be binding upon the
Guarantor. In addition, to the extent permitted by law, the undesigned hereby
waives and agrees not to assert or take advantage of: (a) any right to require
Station or the Company to proceed against GCR or the Company or any other person
at any time or to pursue any other remedy in Station's or the Company's power
before proceeding against the Guarantor hereunder; (b) the defense of the
statute of limitations in any action hereunder or in any action for the
collection of the payment of the amounts guaranteed or the performance of any
other obligations guaranteed hereby; (c) any defense that may arise by reason of
the incapacity, lack of authority, death or disability of any other person or
persons or the failure of Station or the Company to file or enforce a claim
against the estate (in administration, bankruptcy or any other proceeding) of
any other person or persons; (d) demand, presentment for payment, notice of
nonpayment, protest, notice of protest and all other notices of any kind; (e)
any defense based upon an election of remedies by Station or the Company which
destroys or otherwise impairs any or all of the subrogation rights of the
Guarantor, the right of the Guarantor to proceed against GCR or the Company or
any other person for reimbursement, or both; (f) any principle or provision of
law, statutory or otherwise, which is or might be in conflict with the terms and
provisions of this Guaranty; or (g) any duty on the part of Station or the
Company to disclose to the Guarantor any facts Station or the Company may now or
hereafter know about GCR or the Company, regardless of whether Station or the
Company had reason to believe that any such facts materially increase the risk
beyond that which the Guarantor intends to assume or has reason to believe that
such facts are unknown to the Guarantor or has a reasonable opportunity to
communicate such facts to the Guarantor, it being understood and agreed that the
Guarantor is fully responsible for being and keeping informed of the financial
condition of GCR or the Company and of any and all circumstances bearing on the
risk that liability may be incurred by the Guarantor hereunder.
The liability of the Guarantor under this Guaranty shall be an
absolute, direct, immediate and unconditional guaranty of payment and
performance and not of collectability, and is not conditioned or contingent upon
the genuineness, validity, regularity or enforceability of the Agreement. The
obligations of the Guarantor hereunder are independent of the obligations of GCR
and, in the event of any default hereunder, a separate action or actions may be
brought and prosecuted against the Guarantor whether or not GCR is joined
therein or a separate action or actions are brought against GCR. Station or the
Company may maintain successive actions for other defaults. Station's and the
Company's rights hereunder shall not be exhausted by its exercise of any of
their rights or remedies or by any such action or by any number of successive
actions and the Guarantor hereby waives and covenants not to assert any defense
in the nature of splitting of causes of action or merger of judgments. It is
expressly understood that the obligations of the Guarantor hereunder are an
additional and cumulative benefit given to Station and the Company for their
security and as an inducement to execute the Agreement. The amount of the
Guarantor's liability and all rights, powers and remedies of Station and the
Company hereunder shall be cumulative and not alternative and such rights,
powers and remedies shall be in addition to all rights, powers and remedies
given to Station or the Company under the Agreement or otherwise by law (except
as expressly set forth in the Agreement).
C-2
<PAGE>
All notices or other communications provided for or permitted
hereunder shall be in writing and shall be given in the same manner as
provided in SECTION 8.1 of the Agreement and be deemed given as set forth
therein, when addressed to the Guarantor at: 901 North Green Valley Parkway,
Suite 200, Henderson, Nevada 89104, Station as set forth in EXHIBIT M of the
Agreement, and the Company at its registered offices.
The Guarantor hereby agrees to pay to Station or the Company, as the
case may be, upon demand, reasonable attorneys' fees and all costs and other
expenses which either or both expends or incurs in enforcing the obligations
guaranteed hereby or enforcing this Guaranty against the Guarantor whether or
not suit is filed, including, without limitation, all reasonable attorneys'
fees, costs and expenses incurred by either or both in connection with any
insolvency, bankruptcy, reorganization, arrangement or other similar
proceedings involving GCR or the Guarantor which in any way affect the
exercise by Station or the Company, as the case may be, of its rights and
remedies hereunder. Until paid to Station or the Company, as the case may be,
such attorneys' fees, costs and expenses shall bear interest at the rate of
twenty-five percent (25%) per annum.
Should any one or more provisions of this Guaranty be determined to
be illegal or unenforceable, all other provisions nevertheless shall be
effective.
No provision of this Guaranty or right of Station or the Company
hereunder can be waived nor can the Guarantor be released from its
obligations hereunder except by a writing duly executed by Station and the
Company or unless this Guaranty terminates pursuant to the terms hereof. This
Guaranty may not be modified, amended, revised, changed or varied in any way
whatsoever except by the express terms of a writing duly executed by Station,
the Company and the Guarantor.
In the event that Station assigns its Membership Interest pursuant
to SECTION 5.2(a) of the Agreement, this Guaranty shall automatically be
assigned therewith in whole or in part, as applicable, without the need of
any express assignment; provided, however, in the event that GCR assigns its
Membership Interest to Station pursuant to a put or a call, this Guaranty
shall terminate and be of no force or effect for any defaults arising after
such assignment. This Guaranty is personal to the Guarantor and cannot be
assigned without the prior written approval of Station, which approval shall
be in its sole discretion, and any assignment in violation of this provision
shall be null and void. Subject to the provisions of this paragraph, this
Guaranty shall inure to the benefit of and bind the heirs, legal
representatives, administrators, executors, successors and assigns of Station
and the Guarantor.
This Guaranty shall be governed by and construed in accordance with
the laws of the State of Nevada. In any action brought under or arising out
of this Guaranty, the Guarantor hereby consents to the jurisdiction of any
competent court within the State of Nevada and consents to service of process
by any means authorized by the law of the State of Nevada.
The Guarantor hereby agrees that it will not and will not permit its
directors, officers, stockholders, members, managers, partners and other
Affiliates to take any action that could reasonably be expected to prevent,
hinder or delay the performance of the undersigned of its obligations hereunder,
including, without limitation, transferring any assets of the Guarantor outside
the ordinary course of business that could reasonably be expected to prevent,
hinder or delay the performance of the undersigned of its obligations hereunder.
C-3
<PAGE>
The undersigned represents and warrants that:
(a) It is duly organized, validly existing and in good standing under
the laws of the jurisdiction where it purports to be organized;
(b) It has full corporate or limited liability company power and
authority to enter into and perform this Guaranty;
(c) The execution, delivery and performance of this Guaranty has been
duly authorized by all necessary corporate or limited liability company action
by such party and, if necessary, its equityholders;
(d) This Guaranty has been duly executed and delivered by a duly
authorized officer or other representative of such party and constitutes the
legal, valid and binding obligation of such party enforceable in accordance with
its respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws affecting creditor's rights
generally, and except that the availability of equitable remedies is subject to
judicial discretion);
(e) No consent, approval, order, license, authorization or validation
of, or filing, recording or registration with, or exemption of or by any person
or entity is required in connection with the execution, delivery and performance
of this Guaranty by such party; and
(f) Neither the execution, delivery or performance by such party of
this Guaranty, nor compliance by such party with the terms and provisions hereof
will: (i) contravene any applicable provision of any law, statute, rule or
regulation or any order, writ, injunction or decree of any court or governmental
instrumentality, or (ii) conflict with or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any security interest or other lien upon any of
the property or assets of such party pursuant to the terms of any indenture,
mortgage, deed of trust or other instrument to which such party is a party or by
which such party or any of its property or assets is bound or may be subject.
Dated this ____ day of March, 2000.
GCR GAMING GUARANTOR, LLC
By:
-------------------------------
Title:
----------------------------
C-4
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EXHIBIT D
Page 1 of 2
"Infrastructure Improvements" means the following:
- - A 60" storm drain along the 4A and 4B road alignments.
- - The first stage of a 10' by 10' box culvert (noted as 7A).
- - Roads including utilities for road sections 1C, 3, 4A and 4B and
temporary road sections 2A and 2B.
- - Traffic signals at intersections 8, 9 and 10.
- - "Entry Features" at the intersections of Paseo Verde Parkway and road
sections 3 and 4B.
- - Landscaping to include (i) at least 24' back of curb on all road
sections (1C, 3, 4A, 4B,14A,14B and 14C); (ii) Nevada Power substation
(noted as 15); (iii) "Central Amenity" to be located at the Northwest
corner of the intersection of road sections 4A and 5B; and (iv)
Beltway Buffer on the North side of the Resort Property.
Note: All number references are to Exhibit "D" page 2 of 2.
D-1
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EXHIBIT D
Page 2 of 2
[Attach Resort at Green Valley Ranch, Phasing Plan, 1/31/00]
D-2
<PAGE>
EXHIBIT E
Initial Members and Membership Interests
GCR Gaming, LLC, a Nevada limited liability company 50%
G.V. Ranch Station, Inc., a Nevada corporation 50%
E-1
<PAGE>
EXHIBIT F
Permitted Exceptions
1. The matters listed on Schedule B, Section II of that certain Title
Commitment No. 863-043722, issued by Nevada Title Company, effective as
of March 8, 2000, at 7:30 a.m. (the "TITLE COMMITMENT"), except (a)
that GCR shall be required to obtain the vacation of Lake Mead Drive
prior to the contribution of the Resort Property, (b) that GCR shall be
required to file such records of survey as contemplated pursuant to
Section 4.1(a)(ii) of the Operating Agreement to allow it to convey the
Resort Property as a separate legal parcel, (c) that the Easement in
favor of Nevada Power Company, recorded December 16, 1991, listed as
Exception No. 7 to Schedule B, Section II of the Commitment shall be
either vacated or terminated, and (d) the Resort Property shall not be
responsible for more than $2,400,000 of principal debt in connection
with the liens covered by Exception Nos. 4, 9, and 10 on Schedule B,
Section II of the Title Commitment.
2. The matters identified on that certain survey of the Resort Property,
by CVL Consultants, Inc., certified on February 29, 2000, consisting of
three sheets, except for those matters set forth as exceptions (a)
through (d) under paragraph no. 1 above with respect to the Title
Commitment.
3. Facilities Relocation and Easement Agreement, dated January 14, 2000,
by and between Nevada Power Company and Green Valley Development
Limited Partnership, a Nevada limited partnership.
4. Declaration of Covenants, Conditions and Restrictions of Green Valley
Ranch Commercial to be executed by Parcel 37/47, LLC, a Nevada limited
liability company, pursuant and attached to the letter agreement dated
March 10, 2000, executed by the Company, GCR, and Station.
5. The matters identified on that certain Vacation Map for the purpose of
vacating a portion of Lake Mead Drive Easement Granted per Document
recorded September 20, 1999, in Book 990920 as Instrument 00948, of
Official Records in the Clark County Recorder's Office, Clark County,
Nevada, prepared by HMH Engineering and Surveying, Inc., certified on
February 28, 2000, consisting of two sheets.
6. Those matters affecting title created by, through or under the Company
or the Manager, or with the prior written approval of the Company or
the Manager.
F-1
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EXHIBIT G
Legal Description of Resort Property
A PORTION OF SECTION 19, TOWNSHIP 22 SOUTH, RANGE 62 EAST, M.D.M., CITY OF
HENDERSON, CLARK COUNTY, NEVADA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE CENTERLINE INTERSECTION OF PASEO VERDE PARKWAY AND CARNEGIE
ROAD, AS SHOWN IN FILE 88 OF PARCEL MAPS, PAGE 45, OFFICIAL RECORDS OF CLARK
COUNTY, NEVADA; THENCE ALONG THE SAID CENTERLINE OF PASEO VERDE PARKWAY, SOUTH
87Deg.53'34" EAST, 243.11 FEET; THENCE LEAVING SAID CENTERLINE, NORTH
02Deg.06'26" EAST, 59.50 FEET TO THE POINT OF BEGINNING;
THENCE PARALLEL SAID CENTERLINE, NORTH 87Deg.53'34" WEST, 156.10 FEET TO A
CURVE CONCAVE NORTHEASTERLY;
THENCE NORTHWESTERLY ALONG SAID CURVE, HAVING A RADIUS OF 54.00 FEET, THROUGH A
CENTRAL ANGLE OF 52Deg.21'25", FOR AN ARC LENGTH OF 49.35 FEET TO A
NON-TANGENT CURVE CONCAVE NORTHEASTERLY;
THENCE NORTHERLY ALONG SAID CURVE, HAVING A RADIAL BEARING AT THIS POINT OF
NORTH 69Deg.14'41" EAST, AND HAVING A RADIUS OF 54.00 FEET, THROUGH A
CENTRAL ANGLE OF 22Deg.51'57", FOR AN ARC LENGTH OF 21.55 FEET;
THENCE NORTH 87Deg.53'50" WEST, 5.65 FEET TO A NON-TANGENT CURVE CONCAVE
EASTERLY;
THENCE NORTHERLY ALONG SAID CURVE, HAVING A RADIAL BEARING AT THIS POINT OF
NORTH 79Deg.16'14" EAST, AND HAVING A RADIUS OF 54.00 FEET, THROUGH A
CENTRAL ANGLE OF 12Deg.50'24", FOR AN ARC LENGTH OF 12.10 FEET;
THENCE NORTH 02Deg.06'38" EAST, 124.76 FEET TO A CURVE CONCAVE WESTERLY;
THENCE NORTHERLY ALONG SAID CURVE, HAVING A RADIUS OF 1,533.00 FEET, THROUGH A
CENTRAL ANGLE OF 09Deg.23'41", FOR AN ARC LENGTH OF 251.36 FEET TO A REVERSE
CURVE CONCAVE EASTERLY;
THENCE NORTHERLY ALONG SAID CURVE, HAVING A RADIAL BEARING AT THIS POINT OF
NORTH 82Deg.42'57" EAST, AND HAVING A RADIUS OF 100.00 FEET, THROUGH A
CENTRAL ANGLE OF 16Deg.15'32", FOR AN ARC LENGTH OF 28.38 FEET;
THENCE NORTH 08Deg.58'29" EAST, 87.28 FEET TO A CURVE CONCAVE SOUTHWESTERLY;
THENCE NORTHWESTERLY ALONG SAID CURVE, HAVING A RADIUS OF 70.00 FEET, THROUGH A
CENTRAL ANGLE OF 57Deg.17'14", FOR AN ARC LENGTH OF 69.99 FEET;
THENCE NORTH 48Deg.18'45" WEST, 28.67 FEET TO A CURVE CONCAVE NORTHEASTERLY;
THENCE NORTHWESTERLY ALONG SAID CURVE, HAVING A RADIUS OF 50.00 FEET, THROUGH A
CENTRAL ANGLE OF 32Deg.36'31", FOR AN ARC LENGTH OF 28.46 FEET TO A REVERSE
CURVE CONCAVE SOUTHWESTERLY;
THENCE NORTHWESTERLY ALONG SAID CURVE, HAVING A RADIAL BEARING AT THIS POINT OF
SOUTH 74Deg.17'46" WEST, AND HAVING A RADIUS OF 1,533.00 FEET, THROUGH A
CENTRAL ANGLE OF 13Deg.01'04", FOR AN ARC LENGTH OF 348.30 FEET TO A REVERSE
CURVE CONCAVE NORTHEASTERLY;
THENCE NORTHERLY ALONG SAID CURVE, HAVING A RADIAL BEARING AT THIS POINT OF
NORTH 61Deg.16'42" EAST, AND HAVING A RADIUS OF 1,475.00 FEET, THROUGH A
CENTRAL ANGLE OF 23Deg.43'18", FOR AN ARC LENGTH OF 610.68 FEET;
G-1
<PAGE>
THENCE NORTH 61Deg.12'01" EAST, 26.67 FEET TO THE EAST LINE OF CARNEGIE ROAD
AS SHOWN IN BOOK 64 OF PLATS, PAGE 68, OFFICIAL RECORDS OF CLARK COUNTY, NEVADA,
AND BEING A NON-TANGENT CURVE CONCAVE EASTERLY;
THENCE NORTHERLY ALONG SAID EAST LINE AND CURVE, HAVING A RADIAL BEARING AT THIS
POINT OF NORTH 85Deg.42'32" EAST, AND HAVING A RADIUS OF 1,450.00 FEET,
THROUGH A CENTRAL ANGLE OF 04Deg.48'01", FOR AN ARC LENGTH OF 121.48 FEET TO
A NON-TANGENT CURVE CONCAVE NORTHERLY;
THENCE EASTERLY ALONG SAID CURVE, HAVING A RADIAL BEARING AT THIS POINT OF NORTH
02Deg.19'07" WEST, AND HAVING A RADIUS OF 6,242.00 FEET, THROUGH A CENTRAL
ANGLE OF 04Deg.02'40", FOR AN ARC LENGTH OF 440.60 FEET;
THENCE NORTH 84Deg.03'59" EAST, 82.95 FEET TO A CURVE CONCAVE SOUTHERLY;
THENCE EASTERLY ALONG SAID CURVE, HAVING A RADIUS OF 179.00 FEET, THROUGH A
CENTRAL ANGLE OF 02Deg.37'50", FOR AN ARC LENGTH OF 8.22 FEET;
THENCE NORTH 86Deg.41'49" EAST, 122.27 FEET TO A CURVE CONCAVE SOUTHERLY;
THENCE EASTERLY ALONG SAID CURVE, HAVING A RADIUS OF 25.00 FEET, THROUGH A
CENTRAL ANGLE OF 08Deg.39'08", FOR AN ARC LENGTH OF 3.78 FEET;
THENCE SOUTH 84Deg.39'03" EAST, 81.20 FEET; THENCE NORTH 86Deg.41'49"
EAST, 2.41 FEET TO A CURVE CONCAVE NORTHERLY;
THENCE EASTERLY ALONG SAID CURVE, HAVING A RADIUS OF 233.50 FEET, THROUGH A
CENTRAL ANGLE OF 02Deg.37'50", FOR AN ARC LENGTH OF 10.72 FEET;
THENCE NORTH 84Deg.03'59" EAST, 160.52 FEET TO A CURVE CONCAVE
SOUTHWESTERLY;
THENCE SOUTHEASTERLY ALONG SAID CURVE, HAVING A RADIUS OF 25.00 FEET, THROUGH A
CENTRAL ANGLE OF 80Deg.23'54", FOR AN ARC LENGTH OF 35.08 FEET;
THENCE SOUTH 15Deg.32'07" EAST, 235.93 FEET TO A CURVE CONCAVE
NORTHEASTERLY;
THENCE SOUTHEASTERLY ALONG SAID CURVE, HAVING A RADIUS OF 1,033.00 FEET, THROUGH
A CENTRAL ANGLE OF 05Deg.26'15", FOR AN ARC LENGTH OF 98.03 FEET TO A
REVERSE CURVE CONCAVE SOUTHWESTERLY;
THENCE SOUTHEASTERLY ALONG SAID CURVE, HAVING A RADIAL BEARING AT THIS POINT OF
SOUTH 69Deg.01'38" WEST, AND HAVING A RADIUS OF 967.00 FEET, THROUGH A
CENTRAL ANGLE OF 05Deg.26'15", FOR AN ARC LENGTH OF 91.77 FEET;
THENCE SOUTH 15Deg.32'07" EAST, 152.13 FEET TO A CURVE CONCAVE WESTERLY;
THENCE SOUTHERLY ALONG SAID CURVE, HAVING A RADIUS OF 100.00 FEET, THROUGH A
CENTRAL ANGLE OF 19Deg.03'57", FOR AN ARC LENGTH OF 33.28 FEET;
THENCE SOUTH 03Deg.31'50" WEST, 84.72 FEET TO A CURVE CONCAVE NORTHEASTERLY;
THENCE SOUTHEASTERLY ALONG SAID CURVE, HAVING A RADIUS OF 70.00 FEET, THROUGH A
CENTRAL ANGLE OF 70Deg.10'35", FOR AN ARC LENGTH OF 85.74 FEET TO A REVERSE
CURVE CONCAVE SOUTHWESTERLY;
THENCE SOUTHEASTERLY ALONG SAID CURVE, HAVING A RADIAL BEARING AT THIS POINT OF
SOUTH 23Deg.21'15" WEST, AND HAVING A RADIUS OF 30.00 FEET, THROUGH A
CENTRAL ANGLE OF 52Deg.48'05", FOR AN ARC LENGTH OF 27.65 FEET TO A REVERSE
CURVE CONCAVE NORTHEASTERLY;
THENCE SOUTHEASTERLY ALONG SAID CURVE, HAVING A RADIAL BEARING AT THIS POINT OF
NORTH 76Deg.09'20" EAST, AND HAVING A RADIUS OF 471.00 FEET, THROUGH A
CENTRAL ANGLE OF 20Deg.13'43", FOR AN ARC LENGTH OF 166.29 FEET;
THENCE SOUTH 34Deg.04'23" EAST, 91.73 FEET TO A CURVE CONCAVE NORTHEASTERLY;
THENCE SOUTHEASTERLY ALONG SAID CURVE, HAVING A RADIUS OF 233.00 FEET, THROUGH A
CENTRAL ANGLE OF 05Deg.43'01", FOR AN ARC LENGTH OF 23.25 FEET;
THENCE SOUTH 39Deg.47'24" EAST, 416.71 FEET TO A CURVE CONCAVE WESTERLY;
THENCE SOUTHERLY ALONG SAID CURVE, HAVING A RADIUS OF 54.00 FEET, THROUGH A
CENTRAL ANGLE OF 89Deg.57'02", FOR AN ARC LENGTH OF 84.78 FEET TO THE NORTH
LINE OF SAID PASEO VERDE PARKWAY;
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THENCE ALONG SAID NORTH LINE THE FOLLOWING TWO (2) COURSES:
1. SOUTH 50Deg.09'37" WEST, 52.38 FEET TO A CURVE CONCAVE
NORTHWESTERLY;
2. SOUTHWESTERLY ALONG SAID CURVE, HAVING A RADIUS OF 1,352.50 FEET,
THROUGH A CENTRAL ANGLE OF 40Deg.57'04", FOR AN ARC LENGTH OF 966.67 FEET TO
A COMPOUND CURVE CONCAVE NORTHERLY;
THENCE LEAVING SAID NORTH LINE, AND WESTERLY ALONG SAID CURVE, HAVING A RADIAL
BEARING AT THIS POINT OF NORTH 01Deg.06'41" EAST, AND HAVING A RADIUS OF
100.00 FEET, THROUGH A CENTRAL ANGLE OF 20Deg.47'05", FOR AN ARC LENGTH OF
36.28 FEET TO A REVERSE CURVE CONCAVE SOUTHERLY;
THENCE WESTERLY ALONG SAID CURVE, HAVING A RADIAL BEARING AT THIS POINT OF SOUTH
21Deg.53'46" WEST, AND HAVING A RADIUS OF 100.00 FEET, THROUGH A CENTRAL
ANGLE OF 19Deg.47'20", FOR AN ARC LENGTH OF 34.54 FEET TO THE POINT OF
BEGINNING.
BASIS OF BEARINGS:
NORTH 01Deg.01'26" EAST, BEING THE BEARING OF THE WEST LINE OF THE SOUTHWEST
QUARTER
(SW 1/4) OF SECTION 19, TOWNSHIP 22 SOUTH, RANGE 62 EAST, M.D.M., CITY OF
HENDERSON, CLARK COUNTY, NEVADA, AS SHOWN IN FILE 88 OF PARCEL MAPS, PAGE 45,
OFFICIAL RECORDS OF CLARK COUNTY, NEVADA.
END OF DESCRIPTION.
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<PAGE>
EXHIBIT H
Example of Shared Expenses
The following are examples of costs that are allocated between Parent's
Subsidiaries that operate non-restricted gaming facilities (the
"Hotel/Casinos").
ROOM RESERVATIONS- Room Reservations is a centralized function that is accounted
for at the Parent level. This department books all rooms pre-sold at the
Hotel/Casinos. The costs incurred by Room Reservations relate to payroll,
telephone service fees, and reservation fees paid for reservations booked by
outside vendors. These costs are allocated based on each Hotel/Casino's share of
total room inventory controlled by Parent's Subsidiaries.
STATION ADVERTISING- Parent's in-house advertising department performs various
advertising functions for the Hotel/Casinos, including the following, the costs
of which are allocated as follows:
- Media purchases - billed directly to the Hotel/Casino which
required the purchase at 100% of cost (Purchasing media
in-house avoids paying a 15% media commission to an outside
advertising agency).
- Multi-Hotel/Casino media - allocated based upon a formula
(generally).
- Public relations--allocated equally between all Hotel/Casinos.
- Special promotions - system-wide (allocated on a formula
dependent upon participation).
- Special promotions - single Hotel/Casino; billed to that
Hotel/Casino.
- In-house production - publications for human resources, video
production, commercials, sign animation, web-site, etc.
(allocated based upon the type of activity and the number of
Hotel/Casinos participating).
- General operations - allocated based on a total revenue
formula.
INFORMATION TECHNOLOGY (IT) - Parent runs its IT group centrally, allowing for
specialists (programmers, help-desk, system administrators, etc.) to perform
services at all Hotel/Casinos. This centralization and allocation eliminates the
need for each Hotel/Casino to hire specialists and purchase related equipment.
Direct costs, such as maintenance or service agreements for on-property
equipment, are billed directly to the applicable Hotel/Casinos. Indirect costs
(primarily payroll and related benefits costs) are allocated to the
Hotel/Casinos based upon percentage of total revenue.
CENTRAL MAIL - Parent processes all direct mail at a central location rather
than outsourcing this function. The capital and operating costs of this function
are allocated to each Hotel/Casino based upon the actual volume of mailings
performed for that Hotel/Casino.
FOOD & BEVERAGE MANAGEMENT - In order to ensure that the food and beverage
operations at each of the Hotel/Casinos remains at the highest level of quality
and consistency, Parent has centralized the supervision of food and beverage
activities. This function is allocated equally between the Hotel/Casino. The
costs allocated are primarily payroll and related benefit costs, as well as
travel and entertainment, general supplies, and some consulting expenses.
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RELATIONSHIP MARKETING - Parent operates its relationship marketing (database
marketing) function centrally and allocates all costs equally between the
Hotel/Casinos. The costs allocated are primarily payroll and related benefit
costs as well as travel and entertainment expenses.
BANK CHARGES - Parent manages its banking relationships centrally and bills each
Hotel/Casino for direct charges generated by that Hotel/Casino. These costs are
specifically identifiable to the Hotel/Casino and relate to the transaction
charges, primarily generated in the cage. No payroll is allocated for this item.
Transactions include check cashing, purchasing and depositing currency, armored
car services, etc.
SPORTSBOOK - Parent manages its race and sportsbook operations centrally and
allocates costs equally to each Hotel/Casino for the personnel required to
administer this function. The costs allocated are primarily payroll and related
benefit costs.
PAYROLL DEPARTMENT - Parent processes all Nevada payroll from a central location
and allocates the costs related to this function based on the number of
employees at each Hotel/Casino. The costs allocated are primarily payroll and
related benefits costs.
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<PAGE>
EXHIBIT I
Station Guaranty
GUARANTY
The undersigned Station Casinos, Inc. (the "GUARANTOR"), a Nevada
corporation and the parent corporation of G.V. Ranch Station, Inc. ("STATION"),
hereby irrevocably and unconditionally guarantees the payment and performance by
Station pursuant to SECTIONS 4.1(b) AND 4.2 of the Operating Agreement (the
"AGREEMENT") of Green Valley Ranch Gaming, LLC (the "COMPANY") to the same
extent that Station is bound thereby. Such Guaranty is for the benefit of the
Company and, to the extent that Station fails to make any required contribution
of capital under the Agreement and GCR is not in default under the Agreement,
for the benefit of GCR, each independently and severally, and such Guaranty also
is a guaranty of the Twenty-Five Percent Payment for the period commencing on
the date on which Station's payment obligation accrues and ending on the earlier
to occur of (a) one year from such date and (b) the date on which such payment
obligation which Station fails to make in breach of the foregoing SECTIONS
4.1(b) AND 4.2 of the Agreement has been satisfied. This Guaranty shall
terminate upon the closing of the Construction Financing (as defined in the
Agreement). Upon the earlier of the Company closing on the Construction
Financing (as defined in the Agreement) or ninety (90) days after Opening of the
Project to the public, the obligations guaranteed hereby shall be limited to
those set forth in SECTIONS 4.2(b) AND 4.2(c) and the amount of payment and
performance guaranteed hereby as required by such sections shall be limited to
$15,000,000.00 in aggregate.
The Guarantor hereby grants to the Company, which may be exercised
solely by GCR on behalf of the Company (and to which the Company consents by
acceptance of this Guaranty), in GCR's sole discretion and without notice to, or
consent by, the Guarantor, but subject to the terms and conditions of the
Agreement, the power and authority to modify, waive, renew, compromise, extend,
accelerate or otherwise change the time or place of payment of or to otherwise
change the terms of the payment of the amounts guaranteed hereby, the other
obligations guaranteed hereby or the provisions of the Agreement related
thereto. The liability of the Guarantor shall not be terminated, affected,
impaired or reduced in any way by any action taken by GCR under the foregoing
provision or any other provision hereof or by any delay, failure or refusal of
GCR to exercise any right or remedy it may have against Station, or any other
person, including other guarantors, if any, liable for all or any part of the
obligations guaranteed hereby.
Satisfaction by the Guarantor of any liability hereunder incident to a
particular default under the Agreement, if additional default(s) shall occur
under the Agreement, shall not discharge the Guarantor except with respect to
the default satisfied, it being the intent hereof that this Guaranty and the
obligations of the Guarantor hereunder shall be continuing and irrevocable and
shall survive until termination of the Agreement, and shall survive termination
of the Agreement to the extent any defaults exist at the time of such
termination. Notwithstanding the foregoing or anything else set forth herein,
and in addition thereto, if at any time all or any part of any payment received
by GCR or the Company from the Guarantor under or with respect to this Guaranty
is or must be rescinded or returned for any reason whatsoever (including, but
not limited to, determination that said payment was a voidable preference under
insolvency, bankruptcy or reorganization laws), then the Guarantor's obligations
hereunder shall, to the extent of the payment rescinded or returned, be deemed
to have continued in existence, notwithstanding such previous receipt of payment
by GCR
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<PAGE>
or the Company, and Guarantor's obligations hereunder shall continue to be
effective or be reinstated, as the case may be, as to such payment, all as
though such previous payment to GCR or the Company had never been made. The
provisions of the foregoing sentence shall survive termination of this
Guaranty and of the Agreement, and shall remain a valid and binding
obligation of the Guarantor until satisfied.
The Guarantor hereby waives notice of acceptance of this Guaranty by
GCR or the Company and this Guaranty shall immediately be binding upon the
Guarantor. In addition, to the extent permitted by law, the undesigned hereby
waives and agrees not to assert or take advantage of: (a) any right to
require GCR or the Company to proceed against Station or the Company or any
other person at any time or to pursue any other remedy in GCR's or the
Company's power before proceeding against the Guarantor hereunder; (b) the
defense of the statute of limitations in any action hereunder or in any
action for the collection of the payment of the amounts guaranteed or the
performance of any other obligations guaranteed hereby; (c) any defense that
may arise by reason of the incapacity, lack of authority, death or disability
of any other person or persons or the failure of GCR or the Company to file
or enforce a claim against the estate (in administration, bankruptcy or any
other proceeding) of any other person or persons; (d) demand, presentment for
payment, notice of nonpayment, protest, notice of protest and all other
notices of any kind; (e) any defense based upon an election of remedies by
GCR or the Company which destroys or otherwise impairs any or all of the
subrogation rights of the Guarantor, the right of the Guarantor to proceed
against Station or the Company or any other person for reimbursement, or
both; (f) any principle or provision of law, statutory or otherwise, which is
or might be in conflict with the terms and provisions of this Guaranty; or
(g) any duty on the part of GCR or the Company to disclose to the Guarantor
any facts GCR or the Company may now or hereafter know about Station or the
Company, regardless of whether GCR or the Company had reason to believe that
any such facts materially increase the risk beyond that which the Guarantor
intends to assume or has reason to believe that such facts are unknown to the
Guarantor or has a reasonable opportunity to communicate such facts to the
Guarantor, it being understood and agreed that the Guarantor is fully
responsible for being and keeping informed of the financial condition of
Station or the Company and of any and all circumstances bearing on the risk
that liability may be incurred by the Guarantor hereunder.
The liability of the Guarantor under this Guaranty shall be an
absolute, direct, immediate and unconditional guaranty of payment and
performance and not of collectability, and is not conditioned or contingent
upon the genuineness, validity, regularity or enforceability of the
Agreement. The obligations of the Guarantor hereunder are independent of the
obligations of Station and, in the event of any default hereunder, a separate
action or actions may be brought and prosecuted against the Guarantor whether
or not Station is joined therein or a separate action or actions are brought
against Station. GCR or the Company may maintain successive actions for other
defaults. GCR's and the Company's rights hereunder shall not be exhausted by
its exercise of any of their rights or remedies or by any such action or by
any number of successive actions and the Guarantor hereby waives and
covenants not to assert any defense in the nature of splitting of causes of
action or merger of judgments. It is expressly understood that the
obligations of the Guarantor hereunder are an additional and cumulative
benefit given to GCR and the Company for their security and as an inducement
to execute the Agreement. The amount of the Guarantor's liability and all
rights, powers and remedies of GCR and the Company hereunder shall be
cumulative and not alternative and such rights, powers and remedies shall be
in addition to all rights, powers and remedies given to GCR or the Company
under the Agreement or otherwise by law (except as expressly set forth in the
Agreement).
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<PAGE>
All notices or other communications provided for or permitted hereunder
shall be in writing and shall be given in the same manner as provided in SECTION
8.1 of the Agreement and be deemed given as set forth therein, when addressed to
the Guarantor at: 2411 Sahara Avenue, Las Vegas, Nevada 89102, GCR as set forth
in EXHIBIT M of the Agreement, and the Company at its registered offices.
The Guarantor hereby agrees to pay to GCR or the Company, as the case
may be, upon demand, reasonable attorneys' fees and all costs and other expenses
which either or both expends or incurs in enforcing the obligations guaranteed
hereby or enforcing this Guaranty against the Guarantor whether or not suit is
filed, including, without limitation, all reasonable attorneys' fees, costs and
expenses incurred by either or both in connection with any insolvency,
bankruptcy, reorganization, arrangement or other similar proceedings involving
Station or the Guarantor which in any way affect the exercise by GCR or the
Company, as the case may be, of its rights and remedies hereunder. Until paid to
GCR or the Company, as the case may be, such attorneys' fees, costs and expenses
shall bear interest at the rate of twenty-five percent (25%) per annum.
Should any one or more provisions of this Guaranty be determined to be
illegal or unenforceable, all other provisions nevertheless shall be effective.
No provision of this Guaranty or right of GCR or the Company hereunder
can be waived nor can the Guarantor be released from its obligations hereunder
except by a writing duly executed by GCR and the Company or unless this Guaranty
terminates pursuant to the terms hereof. This Guaranty may not be modified,
amended, revised, changed or varied in any way whatsoever except by the express
terms of a writing duly executed by GCR, the Company and the Guarantor.
In the event that GCR assigns its Membership Interest pursuant to
SECTION 5.2(a) of the Agreement, this Guaranty shall automatically be assigned
therewith in whole or in part, as applicable, without the need of any express
assignment; provided, however, in the event that Station assigns its Membership
Interest to GCR pursuant to a put or a call under the Agreement, this Guaranty
shall terminate and be of no force or effect for any defaults arising after such
assignment. This Guaranty is personal to the Guarantor and cannot be assigned
without the prior written approval of GCR, which approval shall be in its sole
discretion, and any assignment in violation of this provision shall be null and
void. Subject to the provisions of this paragraph, this Guaranty shall inure to
the benefit of and bind the heirs, legal representatives, administrators,
executors, successors and assigns of GCR and the Guarantor.
This Guaranty shall be governed by and construed in accordance with the
laws of the State of Nevada. In any action brought under or arising out of this
Guaranty, the Guarantor hereby consents to the jurisdiction of any competent
court within the State of Nevada and consents to service of process by any means
authorized by the law of the State of Nevada.
The Guarantor hereby agrees that it will not and will not permit its
directors, officers, stockholders, members, managers, partners and other
Affiliates to take any action that could reasonably be expected to prevent,
hinder or delay the performance of the undersigned of its obligations hereunder,
including, without limitation, transferring any assets of the Guarantor outside
the ordinary course of business that could reasonably be expected to prevent,
hinder or delay the performance of the undersigned of its obligations hereunder.
I-3
<PAGE>
The undersigned represents and warrants that:
(a) It is duly organized, validly existing and in good standing under
the laws of the jurisdiction where it purports to be organized;
(b) It has full corporate or limited liability company power and
authority to enter into and perform this Guaranty;
(c) The execution, delivery and performance of this Guaranty has been
duly authorized by all necessary corporate or limited liability company action
by such party and, if necessary, its equityholders;
(d) This Guaranty has been duly executed and delivered by a duly
authorized officer or other representative of such party and constitutes the
legal, valid and binding obligation of such party enforceable in accordance with
its respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws affecting creditor's rights
generally, and except that the availability of equitable remedies is subject to
judicial discretion);
(e) No consent, approval, order, license, authorization or validation
of, or filing, recording or registration with, or exemption of or by any person
or entity is required in connection with the execution, delivery and performance
of this Guaranty by such party; and
(f) Neither the execution, delivery or performance by such party of
this Guaranty, nor compliance by such party with the terms and provisions hereof
will: (i) contravene any applicable provision of any law, statute, rule or
regulation or any order, writ, injunction or decree of any court or governmental
instrumentality, or (ii) conflict with or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any security interest or other lien upon any of
the property or assets of such party pursuant to the terms of any indenture,
mortgage, deed of trust or other instrument to which such party is a party or by
which such party or any of its property or assets is bound or may be subject.
Dated this ____ day of March, 2000.
STATION CASINOS, INC.
By:
----------------------------
Title:
-------------------------
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<PAGE>
EXHIBIT J
Articles of Organization
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<PAGE>
EXHIBIT K
Grant, Bargain and Sale Deed
GRANT, BARGAIN, SALE DEED
THIS INDENTURE WITNESSETH: That ______________________________________________
________________________________________________________________________________
FOR A VALUABLE CONSIDERATION, the receipt of which is hereby acknowledged, do
hereby Grant, Bargain, Sell and Convey to ______________________________________
________________________________________________________________________________
all that real property situated in the _____________________ County of
_____________________ State of Nevada, bounded and described as follows:
See ANNEX 1 attached hereto and incorporated herein
by this reference. [See Legal Description of Resort
Property in Operating Agreement]
Together with all and singular the tenements, hereditaments and appurtenances
thereto belonging or in anywise appertaining, subject to the matters set forth
on ANNEX 2 attached hereto and incorporated herein by this reference. [See
"Permitted Exceptions in Operating Agreement"]
Witness _______________ hand ________ this day of _____________________, 19____
STATE OF NEVADA } ___________________________________
} SS. ___________________________________
COUNTY OF ___________ } ___________________________________
On ___________________________________________ Before me, a Notary Public,
personally appeared personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to this
instrument and acknowledged that he (she or they) executed it.
Signature _____________________________________
(Notary Public)
(Notarial Seal)
- --------------------------------------------------------------
ESCROW NO.:
_______________
MAIL TAX STATEMENTS TO:_______________________________________
______________________________________________________________
______________________________________________________________
<PAGE>
EXHIBIT L
GCR Property Representations
GCR represents and warrants to the Company and Station that the
following matters are true and correct as of the execution of this Agreement
and, subject to SECTION 4.1(a) of the Agreement, will also be true and correct
as of the date of transfer of the Resort Property to the Company as if made on
the date thereof:
(1) With respect to the Resort Property, and except as
contained in the Property Documents (defined below), GCR has received no written
notice from any governmental authority advising GCR of (i) a violation of any
laws or regulations (whether now existing or which will exist with the passage
of time) or (ii) any action which must be taken to avoid a violation thereof.
(2) Prior to the Effective Date, GCR has delivered to Station
copies of all of the following (the "PROPERTY DOCUMENTS") which are in its or
its Affiliates' possession and of which GCR has actual knowledge:
(1) Copies of all surveys of the Resort Property and
all plans and specifications for improvements to be constructed on the Resort
Property, which surveys, plans and specifications first were created by GCR or
its Affiliates or delivered to GCR or its Affiliates on or after January 1,
1998;
(2) Copies of any inspection, engineering,
environmental or architectural studies or reports which relate to the physical
condition of the Resort Property or to the improvements contemplated to be
constructed on the Resort Property pursuant to this Agreement, which studies or
reports were first created by GCR or its Affiliates or delivered to GCR or its
Affiliates on or after January 1, 1998.
(3) A copy of the bill or bills issued for the most
recent year for which bills have been issued for all real estate taxes or
assessments currently applicable to the Resort Property and a copy of any and
all real estate tax or assessment notices currently applicable to the Resort
Property (collectively, the "TAX BILLS").
(4) A copy of all outstanding management,
maintenance, repair, service and supply contracts (including, without
limitation, grading, quarry and landscaping agreements), equipment rental
agreements, all contracts for repair or capital replacement to be performed at
the Resort Property, and any other contracts relating to or affecting the Resort
Property (other than Leases), any of the foregoing of which has a remaining
payment obligation in excess of $100,000 and which will be binding upon the
Resort Property or the Company subsequent to the transfer to the Company
(collectively, the "CONTRACTS").
(5) A copy of all leases and any other agreements
which are in effect thereto with the tenants of the Resort Property (the
"LEASES").
(6) Copies of all licenses, permits, authorizations
and approvals obtained by GCR or its Affiliates that currently or will in the
future apply to the Resort Property as they relate
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to the Project, or any portion thereof, occupancy thereof or any present use
thereof (the "GOVERNMENTAL PERMITS").
(7) A copy of all outstanding guarantees and
warranties covering the Resort Property.
(8) Copies of pending insurance claims or
litigation documents relating to the Resort Property.
(3) Except as contained in the Property Documents, to GCR's
actual knowledge, there are no leases, rental, tenancy or occupancy
agreements binding all or any portion of the Resort Property.
(4) Except as contained in the Property Documents, GCR has
no actual knowledge of any documents, materials or studies not in GCR's or
its Affiliates' possession that disclose material facts that would materially
adversely affect the development of the Resort Property for the Project.
(5) Upon the formation of the Company or transfer of the
Resort Property to the Company, there will be no brokerage fees or
commissions or other compensation due or payable on an absolute or contingent
basis to any person, firm, corporation, or other entity, with respect to or
on account of the formation of the Company or transfer of the Resort
Property, arising by, through or under GCR or its Affiliates.
(6) SCHEDULE I attached hereto is a schedule of all of the
Contracts of which GCR has actual knowledge which have been or shall be
delivered or made available to Station. To GCR's actual knowledge, except as
disclosed to Station in writing, the Contracts are in full force and effect,
without material default by any party and without any material claims made
for the right of setoff, except as expressly provided by the terms of such
Contracts or as disclosed to Station in writing at the time of such delivery.
To GCR's actual knowledge, except as disclosed to Station in writing, the
Contracts constitute the entire agreements with such vendors with respect to
the specific scope of work set forth therein relating to the Resort Property,
have not been amended, modified or supplemented, except for such amendments,
modifications and supplements delivered to Station, and to GCR's actual
knowledge, there are no other agreements with any third parties affecting the
Resort Property with a remaining payment obligation in excess of $100,000,
which will be binding on the Resort Property or the Company subsequent to the
transfer to the Company.
(7) Except as set forth in the Property Documents or
disclosed in writing to Station, to GCR's actual knowledge, there are no
condemnation, environmental, zoning or other land-use regulation proceedings
with respect to the Resort Property, either instituted or overtly threatened,
which would materially detrimentally affect the value of the Resort Property
or the use and operation of the Resort Property for the Project.
(8) Except as contained in the Property Documents, to GCR's
actual knowledge, no "HAZARDOUS MATERIALS" are used, generated, transported,
treated, constructed, deposited, stored, dispensed, placed or located in, on
or under the Resort Property including, without limitation, the groundwater
located thereunder, except for those quantities of Hazardous Materials which
do violate applicable environmental laws. For the purpose of this Agreement,
"Hazardous Materials" shall
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include, but not be limited to, (A) substances defined as "hazardous
materials," "hazardous substances," "hazardous wastes," or "toxic substances"
in the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601, ET SEQ.; the
Materials Transportation Act, 49 U.S.C. Section 1801, ET SEQ.; the Resource
Conservation and Recovery Act 42 U.S.C. Section 6901 ET SEQ.; applicable
state and local statutes and regulations; and in the regulations adopted and
publications promulgated pursuant to said laws from time to time, and (B) any
chemical, material, substance or other matter of any kind whatsoever which is
prohibited, regulated or limited by any federal, state, local, county or
regional authority or legislation, including, without limitation, that
enumerated above in Clause (A). Except as set forth in the Property
Documents, to GCR's actual knowledge, there is no asbestos or PCB contained
in or stored on the Resort Property including, without limitation, the
materials comprising the Improvements. Notwithstanding anything herein to the
contrary, GCR discloses and modifies the foregoing representations, and
Station and the Company acknowledge, that vacated Lake Mead Drive is situated
near or on portions of the Resort Property, and that the Resort Property may
contain such Hazardous Materials as may result from such a roadway or the use
thereof, including, but not limited to, petroleum products and brake dust
(e.g., asbestos), and agrees to accept the Resort Property subject to the
same.
(9) Except as set forth in the Property Documents or
disclosed to Station, GCR has not received any written notice from any
insurance carrier or any of the tenants under the Leases of any material
defects in the Resort Property, or in any portion thereof, which would
materially adversely affect the insurability thereof or the cost of such
insurance.
(10) Except as set forth in SCHEDULE II attached hereto or
as set forth in the Property Documents, there are no pending, or, to GCR's
actual knowledge, overtly threatened legal proceedings or actions of any kind
or character with respect to the Resort Property which would materially
adversely affect the Resort Property or GCR's interest therein.
(11) GCR is not a "foreign person" within the meaning of
Section 1445(f)(3) of the Internal Revenue Code of 1986 (the "Code"), and GCR
will furnish to the Company and Station, prior to the transfer of title to
the Resort Property, an affidavit to that effect in form reasonably
satisfactory to Station.
The representations and warranties made in this Agreement by GCR
shall be continuing and shall be deemed remade by GCR as of the transfer of
the Resort Property to the Company with the same force and effect as if in
fact made at that time, subject, however, to the provisions of SECTION 4.1(a)
of the Agreement. None of the representations or warranties made in this
Agreement shall merge into any instrument or conveyance delivered at the
transfer of the Resort Property to the Company but shall survive the transfer
of the Resort Property to the Company for a period of 12 months.
Notwithstanding anything to the contrary herein, to the extent Scott Nielson,
Bill Warner, Frank Fertitta, or Glenn Christenson have actual knowledge of
any incorrect statement in any representation or warranty made by GCR,
neither Station nor the Company can rely on such representation or warranty.
As used herein, "GCR'S ACTUAL KNOWLEDGE" means the current, actual personal
knowledge of only Phillip Peckman, Chris Philibbosian, Rob Solomon, Mitchell
Mize and John Kilduff, without investigation and without imputation of any
other person's knowledge. The fact that reference is made to the personal
knowledge of named individuals shall not render such individuals personally
liable for my breach of any of the foregoing representations and warranties.
The Company and Station shall have those remedies set forth in the Agreement
for the breach of any representation or warranty.
L-4
<PAGE>
EXHIBIT M
Notice Addresses
Company: Green Valley Ranch Gaming, LLC
2411 Sahara Avenue
Las Vegas, NV 89102
Attention: Frank J. Fertitta III
with copy to: Station Casinos, Inc.
2411 Sahara Avenue
Las Vegas, NV 89102
Attn: Scott M. Nielson, Esq.
GCR: GCR Gaming, LLC
c/o The Greenspun Corporation
901 North Green Valley Parkway, Suite 210
Henderson, NV 89014
Attention: Brian Greenspun
with copy to: GCR Gaming Guarantor, LLC
c/o The Greenspun Corporation
901 North Green Valley Parkway, Suite 210
Henderson, NV 89014
Attention: Brian Greenspun
with copy to: The Greenspun Corporation
901 North Green Valley Parkway
Suite 210
Henderson, NV 89014
Attn: Phillip J. Peckman
Station: G.V. Ranch Station, Inc.
2411 Sahara Avenue
Las Vegas, NV 89102
Attention: Scott M. Nielson, Esq.
Parent: Station Casinos, Inc.
2411 Sahara Avenue
Las Vegas, NV 89102
Attention: Scott M. Nielson, Esq.
Manager: G.V. Ranch Station, Inc.
2411 Sahara Avenue
Las Vegas, NV 89102
Attention: Frank J. Fertitta III
with copy to: Station Casinos, Inc.
2411 Sahara Avenue
Las Vegas, NV 89102
Attn: Scott Nielson, Esq.
M-1
<PAGE>
SCHEDULE I
Contracts
1. Martin & Martin, Phases II and III, dated 6/3/99, in the
amount of $287,320.00.
2. Lifescapes International Inc., dated 6/29/99, in the amount
of $530,200.00.
3. Martin & Martin, Resort Perimeter Roads, dated 12/21/99, in
the amount of $109,900.00.
<PAGE>
SCHEDULE II
LEGAL PROCEEDINGS
None.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF STATION CASINOS, INC.
NEVADA CORPORATIONS
Palace Station Hotel & Casino, Inc.
Texas Station, Inc.
Boulder Station, Inc.
Sunset Station, Inc.
Tropicana Station, Inc.
Southwest Gaming Services, Inc.
Town Center Amusements, Inc. d.b.a. Barley's Casino & Brewing Company (50%
ownership)
GV Ranch Station, Inc.
MISSOURI CORPORATIONS
Kansas City Station Corporation
St. Charles Riverfront Station, Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K, into the Company's
previously filed registration statements on Form S-8 (File No. 33-70342), Form
S-8 (File No. 33-63752), Form S-8 (File No. 333-11975) and Form S-8 (File No.
333-80925).
Arthur Andersen LLP
Las Vegas, Nevada
March 30, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 35 AND 36 OF THE COMPANY'S FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 73,072
<SECURITIES> 0
<RECEIVABLES> 15,305
<ALLOWANCES> (2,959)
<INVENTORY> 6,013
<CURRENT-ASSETS> 120,204
<PP&E> 1,277,303
<DEPRECIATION> (251,550)
<TOTAL-ASSETS> 1,276,273
<CURRENT-LIABILITIES> 117,689
<BONDS> 933,833
0
0
<COMMON> 424
<OTHER-SE> 216,377
<TOTAL-LIABILITY-AND-EQUITY> 1,276,273
<SALES> 0
<TOTAL-REVENUES> 942,469
<CGS> 0
<TOTAL-COSTS> 491,739
<OTHER-EXPENSES> 70,664
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,618
<INCOME-PRETAX> (47,223)
<INCOME-TAX> 14,929
<INCOME-CONTINUING> (32,294)
<DISCONTINUED> 0
<EXTRAORDINARY> (10,653)
<CHANGES> 0
<NET-INCOME> (44,758)
<EPS-BASIC> (1.14)
<EPS-DILUTED> (1.14)
</TABLE>
