<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
STATION CASINOS,
INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by
/ / Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------
(4) Date Filed:
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</TABLE>
<PAGE>
STATION CASINOS, INC.
2411 WEST SAHARA AVENUE
LAS VEGAS, NEVADA 89102
(702) 367-2411
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD: MAY 23, 2000
TO BE HELD AT: SUNSET STATION HOTEL & CASINO
------------------------
To the Stockholders:
NOTICE is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Station Casinos, Inc., a Neveda corporation (the "Company") will be
held at Sunset Station Hotel & Casino on May 23, 2000, beginning at 10:00 a.m.
local time, for the following purposes:
1. To elect two directors to serve for a term of three years until the 2003
Annual Meeting of Stockholders and until their respective successors have
been duly elected and qualified;
2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the Company's 2000 fiscal year;
3. To approve the Company's Senior Executive Annual Bonus Plan;
4. To consider and transact such other business as may properly come before
the Annual Meeting or any adjournment thereof;
all as more fully described in the accompanying Proxy Statement.
Holders of Common Stock, par value $.01 per share, at the close of business
on March 24, 2000, the record date fixed by the Company's board of directors
(the "Board of Directors"), are entitled to notice of and to vote at the Annual
Meeting. The Board of Directors urges all stockholders of record to exercise
their right to vote at the Annual Meeting personally or by proxy. Accordingly,
we are sending you the following Proxy Statement and the enclosed proxy card.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING PLEASE SPECIFY YOUR
VOTE ON THE ACCOMPANYING PROXY CARD AND SIGN, DATE AND RETURN IT AS PROMPTLY AS
POSSIBLE IN THE ENCLOSED PRE-ADDRESSED, POSTAGE-PAID ENVELOPE.
Your prompt response will be appreciated.
By Order of the Board of Directors
Scott M Nielson
SECRETARY
Las Vegas, Nevada
March 30, 2000
<PAGE>
STATION CASINOS, INC.
2411 WEST SAHARA AVENUE
LAS VEGAS, NEVADA 89102
------------------------
PROXY STATEMENT
------------------------
The accompanying proxy is solicited by the board of directors (the "Board of
Directors") of Station Casinos, Inc., (the "Company") to be used at the Annual
Meeting of Stockholders on May 23, 2000 (the "Annual Meeting") to be held at
10:00 a.m. local time at the Sunset Station Hotel & Casino, 1301 West Sunset
Road, Henderson, Nevada. This Proxy Statement and the enclosed form of proxy are
being sent to Stockholders on or about March 30, 2000.
At the Annual Meeting, stockholders will be asked to consider and vote upon
the following matters:
ITEM I The election of two directors to serve until the 2003 Annual
Meeting.
ITEM II Approval of the Company's Senior Executive Annual Bonus
Plan.
ITEM III A proposal to ratify the appointment of Arthur Andersen LLP
as the Company's independent public accountants for the
Company's 2000 fiscal year.
Any stockholder giving a proxy may revoke it at any time prior to its
exercise at the Annual Meeting by giving notice of such revocation either
personally or in writing to the Secretary of the Company at the Company's
executive offices, by subsequently executing and delivering another proxy or by
voting in person at the Annual Meeting.
The Board of Directors believes that the election of its director nominees,
the ratification of the appointment of the independent public accountants and
the approval of the Senior Executive Annual Bonus Plan are in the best interests
of the Company and its stockholders and recommends the approval of each of the
proposals contained in this Proxy Statement.
VOTING
Shares represented by duly executed and unrevoked proxies in the enclosed
form received by the Board of Directors will be voted at the Annual Meeting in
accordance with the specifications made therein by the stockholders, unless
authority to do so is withheld. If no specification is made, shares represented
by duly executed and unrevoked proxies in the enclosed form will be voted FOR
the election as directors of the nominees listed herein, FOR the ratification of
the appointment of independent public accountants, FOR the approval of the
Company's Senior Executive Annual Bonus Plan and, with respect to any other
matter that may properly come before the Annual Meeting, in the discretion of
the persons voting the respective proxies.
The cost of preparing, assembling and mailing of proxy materials will be
borne by the Company. Directors, executive officers and other employees may also
solicit proxies but without receiving special compensation. Brokerage houses,
nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable out-of-pocket expenses incurred in sending proxy materials to
beneficial owners.
Only holders of record at the close of business on March 24, 2000 (the
"Record Date") of the Company's common stock, $.01 par value (the "Common
Stock"), will be entitled to vote at the Annual Meeting. On the Record Date,
there were 40,363,142 shares of Common Stock outstanding. Each share of Common
Stock is entitled to one vote on all matters presented at the Annual Meeting.
1
<PAGE>
VOTE REQUIRED
The election of the director nominees requires a plurality of the votes cast
in person or by proxy at the Annual Meeting. Under Nevada law, the Company's
Restated Articles of Incorporation (the "Articles") and the Company's Restated
Bylaws (the "Bylaws"), shares as to which a stockholder abstains or withholds
from voting on the election of directors and shares to which a broker indicates
that it does not have discretionary authority to vote ("broker non-votes") on
the election of directors will not be counted as voting thereon and therefore
will not affect the election of the nominees receiving a plurality of the votes
cast.
Ratification of the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the Company's 2000 fiscal year and the
approval of the Company's Senior Executive Annual Bonus Plan require the
affirmative vote of a majority of shares present in person or represented by
proxy at the Annual Meeting and entitled to vote at the Annual Meeting. Under
the Articles and Bylaws, each abstention and broker non-vote on this proposal
has the same legal effect as a vote against such proposal.
The stockholders of the Company have no dissenters or appraisal rights in
connection with any of items I, II or III.
ITEM I
NOMINEES FOR ELECTION OF DIRECTORS
The Articles and Bylaws require that the number of directors on the Board of
Directors be not less than three (3) nor more than fifteen (15). Currently, the
Board of Directors has fixed the number of directors at eight (8). In April
1999, the Board of Directors increased the number of members of the Board of
Directors from seven (7) to eight (8). The Board elected Richard J. Heckmann as
the eighth Director to serve in such capacity until his successor is duly
elected and qualified. The Board of Directors presently consists of the
following persons: Frank J. Fertitta III, Glenn C. Christenson, Blake L.
Sartini, R. Hal Dean, Lorenzo J. Fertitta, Lowell H. Lebermann, Jr., Delise F.
Sartini and Richard J. Heckmann. The Board of Directors is staggered into three
classes. Class I consists of R. Hal Dean and Lowell H. Lebermann, Jr., whose
terms expire in 2000. Class II consists of Glenn C. Christenson, Blake L.
Sartini and Richard J. Heckmann, whose terms expire in 2001. Class III consists
of Frank J. Fertitta III, Lorenzo J. Fertitta, and Delise F. Sartini, whose
terms expire in 2002. At each annual meeting, the terms of one class of
directors expire. Each director nominee is elected to the Board of Directors for
a term of three years.
At the Annual Meeting two directors are to be elected to serve until the
2003 Annual Meeting and until their successors are elected and qualified. Unless
authority to vote for directors is withheld in the proxy card, it is the
intention of the persons named in the enclosed form of proxy to vote FOR the re-
election of the two nominees listed below. The persons designated as proxies
will have discretion to cast votes for other persons in the event any nominee
for director is unable to serve. At present, it is not anticipated that any
nominee will be unable to serve.
The names and certain information concerning the persons to be nominated as
directors by the Board of Directors at the Annual Meeting are set forth below.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEES
LISTED BELOW.
R. HAL DEAN. Mr. Dean has served as a director of the Company since June 1993
and is chairman of the Human Resources Committee. Mr. Dean retired in 1982 from
the Ralston Purina Company, having served 44 years in various capacities
including Chairman of the Board (1968-1982) and Chief Executive Officer
(1964-1982). Mr. Dean has served on several other Boards of Directors including
those of Gulf Oil Corp., Pittsburgh, Pennsylvania (1970-1985), Chase Manhattan
Bank International Advisory Group, New York, New York (1965-1970), Mercantile
Trust Co., St. Louis, Missouri (1969-1987), General American Life
2
<PAGE>
Insurance Co., St. Louis, Missouri (1972-1987), Barnes Hospital, St. Louis,
Missouri (1979-1985), LaBarge, Inc., St. Louis, Missouri (1984-1998) and Chevron
Corp., San Francisco, California (1985-1989).
LOWELL H. LEBERMANN, JR. Mr. Lebermann has served as a director of the Company
since October 1993 and is chairman of the Audit Committee. He is also a director
of Valero Energy Corporation, San Antonio, serving as a member of the executive
committee and a director of Myriad Development, Inc. He is a former director of
Franklin Federal Bancorp, Austin (acquired by Norwest), and founding member of
the Board of Directors of the Texas Workers' Compensation Fund. He is president
and CEO of Centex Beverage, Inc., a wholesale distributor of Miller beer and
imported beverages. From 1993 to 1999, he was a member of the Board of Regents
of The University of Texas System. He was a Council Member on the Austin City
Council from 1971-1977.
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the directors, executive officers and certain
key management personnel of the Company and certain of its subsidiaries. All
directors hold their positions until their terms expire and until their
respective successors are elected and qualified. Executive officers are elected
by and serve at the discretion of the Board of Directors until their successors
are duly chosen and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Frank J. Fertitta III(*).......... 38 Chairman of the Board, President, Chief Executive
Officer and Director
Glenn C. Christenson.............. 50 Executive Vice President, Chief Financial Officer,
Chief
Administrative Officer, Treasurer and Director
Scott M Nielson................... 42 Executive Vice President, General Counsel and Secretary
Blake L. Sartini(*)............... 41 Executive Vice President, Chief Operating Officer and
Director
Mark E. Brown..................... 39 Executive Vice President
William W. Warner................. 35 Vice President of Finance
R. Hal Dean....................... 83 Director
Lorenzo J. Fertitta(*)............ 31 Director
Richard J. Heckmann............... 56 Director
Lowell H. Lebermann, Jr........... 60 Director
Delise F. Sartini(*).............. 40 Director
</TABLE>
- ------------------------
(*) Frank J. Fertitta III and Lorenzo J. Fertitta are brothers and Delise F.
Sartini is their sister. Delise F. Sartini is married to Blake L. Sartini.
Set forth below are the Class II and Class III directors whose terms do not
expire this year together with non-director executive officers and certain key
management personnel of the Company, along with certain information regarding
these individuals.
FRANK J. FERTITTA III. Mr. Fertitta has served as Chairman of the Board of the
Company since February 1993, Chief Executive Officer since July 1992 and
President of the Company since 1989. He has held senior management positions
since 1985, when he was named General Manager of Palace Station. He was elected
a director of the Company in 1986, at which time he was also appointed Executive
Vice President and Chief Operating Officer. In 1992, he co-founded Station
Casino St. Charles and has served as Chairman of the Board of Directors of that
company since that time.
GLENN C. CHRISTENSON. Mr. Christenson was appointed Chief Administrative
Officer in March 1997 and has served as Executive Vice President of the Company
since February 1994. From 1989 to 1993, he served as Vice President of the
Company. He has served as Chief Financial Officer since 1989, as Treasurer since
1992 and as a director of the Company since 1993. Mr. Christenson is a Certified
Public Accountant. From 1983 to 1989, he was a partner of the international
accounting firm of Deloitte Haskins & Sells (now Deloitte & Touche), where he
served as partner-in-charge of audit services for the Nevada practice and
National Audit partner for the Hospitality Industry. Mr. Christenson has served
on the Board of Directors of the Nevada Resort Association and was Chairman of
the Nevada Resort Association's IRS Liaison Committee. He currently serves on
the Executive Committee and Board of Directors of the Boulder Dam Area Boy
Scouts Council.
SCOTT M NIELSON. Mr. Nielson was appointed Executive Vice President of the
Company in June 1994. In 1991 he was appointed General Counsel and in 1992 he
was appointed Secretary of the Company. From 1991 through June 1994, he served
as Vice President of the Company. From 1986 to 1991, Mr. Nielson was in private
legal practice, most recently as a partner in the Las Vegas firm of Schreck,
Jones, Bernhard, Woloson & Godfrey (now Schreck Morris), where he specialized in
gaming law and land use planning and
4
<PAGE>
zoning. Mr. Nielson is a member of the American Bar Association, the Nevada Bar
Association and the International Association of Gaming Attorneys.
BLAKE L. SARTINI. Mr. Sartini was appointed Chief Operating Officer in March
1997 and has served as Executive Vice President of the Company since February
1994. From February 1994 to March 1997 he also served as President-Nevada
Operations for the Company. From 1991 to 1993, he served as Vice President of
Gaming Operations for the Company. He has served as a director of the Company
since 1993 and has over 17 years of experience in the hotel and casino industry.
From 1985 to 1990, Mr. Sartini held various management positions at the Company
and served as President of Southwest Gaming Services, Inc., a subsidiary of the
Company, until November 1995. In 1992, he co-founded Station Casino St. Charles
and serves as a director.
MARK E. BROWN. Mr. Brown was appointed Executive Vice President of the Company
in August 1999. Prior to his employment by the Company, Mr. Brown served as
Senior Vice President for The Howard Hughes Corporation from 1994 to 1999 and
from 1991 to 1994 he was President of the Carrara Group. He currently serves as
Chairman of the Board of the YMCA and as a member of the Board of Directors for
the America West Airlines Education Foundation.
WILLIAM W. WARNER. Mr. Warner has served as Vice President of Finance of the
Company since January 1996 and from August 1993 to January 1996 he served as
Director of Finance. Prior to his employment by the Company, Mr. Warner served
as Controller of Kentco Capital Corporation from 1991 to 1993 and from 1986 to
1991 he served with the international accounting firm of Arthur Andersen LLP,
most recently as an Audit Manager.
LORENZO J. FERTITTA. Mr. Fertitta has served as a director of the Company since
1991. He has served as President and Chief Executive Officer of Fertitta
Enterprises, Inc. since June 1993, where he is responsible for managing an
investment portfolio consisting of marketable securities and real property. From
time to time, the investment portfolio contains investments in other gaming
operations. Mr. Fertitta was a co-founder of Southwest Gaming in 1990 and of
Station Casino St. Charles in 1992. From 1991 to 1993, he served as Vice
President of the Company. Mr. Fertitta has served as a commissioner on the
Nevada State Athletic Commission since November 1996. In February 1999, the
Company entered into a consulting agreement with Mr. Fertitta to provide
financial advisory services.
RICHARD J. HECKMANN. Mr. Heckmann was appointed a director of the Company in
April 1999 and serves as a member of its Human Resource and Audit Committees.
Mr. Heckmann founded US Filter in July 1990 and currently serves as its Chairman
of the Board and Chief Executive Officer. Mr. Heckmann is a founding shareholder
of Callaway Golf Company and is a member of the Board of Directors of K-2, Inc.
and United Rentals, Inc.
DELISE F. SARTINI. Ms. Sartini was appointed a director of the Company in
August 1995. She has served as Vice President of Community Affairs at Palace
Station in excess of nine years. Ms. Sartini was a co-founder of Southwest
Gaming in 1990 and of Station Casino St. Charles in 1992. Ms. Sartini is
involved in various charitable organizations and serves on the Board of
Directors of St. Jude's Ranch for Children.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met ten times during the 1999 fiscal year. The Board
of Directors has standing Audit and Human Resources Committees. The Board of
Directors does not have a standing Nominations Committee. None of the members of
the Board of Directors attended less than 75% of the meetings of the Board of
Directors held or of the total number of meetings held by all committees of the
Board of Directors on which various members served during the 1999 fiscal year.
The current members of each of the Board of Directors' committees are listed
below.
5
<PAGE>
THE AUDIT COMMITTEE
The current members of the Audit Committee are Lowell H. Lebermann, Jr.,
Chairman, R. Hal Dean and Richard J. Heckmann. During the 1999 fiscal year, the
Audit Committee met twice.
The Audit Committee, comprised solely of outside directors, meets
periodically with the Company's independent public accountants, management and
internal auditors to discuss accounting principles, financial and accounting
controls, the scope of the annual audit, internal controls, regulatory
compliance and other matters. The Audit Committee also advises the Board of
Directors on matters related to accounting and auditing and reviews management's
selection of independent public accountants. The independent public accountants
and the internal auditors have complete access to the Audit Committee without
management present to discuss results of their audit and their opinions on
adequacy of internal controls, quality of financial reporting and other
accounting and auditing matters.
THE HUMAN RESOURCES COMMITTEE
The Human Resources Committee, currently comprised solely of outside
directors, reviews and takes action regarding terms of compensation, employment
contracts and pension matters that concern officers and key employees of the
Company. The Human Resources Committee also reviews and takes action regarding
grants of options and restricted shares to employees that are issued under the
Stock Compensation Program other than awards under the Nonemployee Directors
Plan. The Human Resources Committee met six times during the 1999 fiscal year.
COMPENSATION OF DIRECTORS
Directors who are not directly or indirectly affiliated with the Company
received a fee of $1,500 for each board meeting attended, $1,000 for each
committee meeting attended, and a monthly fee of $3,000. In January 2000, the
fee for each committee meeting attended was increased to $1,500, the monthly fee
was increased to $3,333 and an annual fee of $1,500 was added for each committee
chairman. All directors are reimbursed for expenses connected with attendance at
meetings of the Board of Directors. All directors are eligible to participate in
the Stock Compensation Program. See "Stock Compensation Program" as described
hereinafter.
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In the 1999 fiscal year, the Human Resources Committee consisted of R. Hal
Dean, Chairman, Lowell H. Lebermann, Jr. and Richard J. Heckmann. Each such
person is an outside director of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who own more than 10% of the Company's Common Stock to
file reports of ownership on Forms 3, 4 and 5 with the Commission. Executive
officers, directors and 10% stockholders are required by the Commission to
furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all its executive officers, directors and
greater than 10% beneficial owners complied with all the filing requirements
applicable to them with respect to transactions during the 1999 fiscal year with
the following exception: Mr. Heckmann filed one late report covering one
transaction.
LEGAL PROCEEDINGS INVOLVING DIRECTORS, OFFICERS, AFFILIATES OR BENEFICIAL OWNERS
No director, officer, affiliate or beneficial owner of the Company, or any
associate thereof, is a party adverse to the Company or any of its subsidiaries
in any lawsuit nor has a material adverse interest to the Company.
6
<PAGE>
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table sets forth, as of February 29, 2000, certain information
regarding the shares of Common Stock beneficially owned by each stockholder who
is known by the Company to beneficially own in excess of 5% of the outstanding
shares of Common Stock (solely based on information reported on Forms 13D or 13G
filed with the Securities and Exchange Commission), by each director and named
executive officer and by all executive officers and directors as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF SHARES
-----------------------
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1)(2) NUMBER (3) CLASS
- ------------------------------------------- ---------- ----------
<S> <C> <C>
Frank J. Fertitta III....................................... 7,104,041 16.7
Blake L. Sartini(4)......................................... 5,346,580 13.0
Lorenzo J. Fertitta......................................... 4,787,902 11.8
Delise F. Sartini(4)........................................ 4,597,415 11.4
Par Capital Management, Inc.(5)............................. 2,238,400 5.5
Glenn C. Christenson (6).................................... 414,799 1.0
Scott M Nielson (7)......................................... 330,622 *
Mark E. Brown............................................... 30,000 *
William W. Warner........................................... 25,652 *
R. Hal Dean................................................. 41,000 *
Lowell H. Lebermann, Jr..................................... 31,000 *
Richard J. Heckmann......................................... 30,000 *
Executive Officers and Directors as a Group (11 persons).... 18,215,181 41.6
</TABLE>
- ------------------------
* Less than one percent
(1) Of the total number of shares reported in this table, the following are the
approximate number of vested options beneficially owned by each individual
in the table: Frank J. Fertitta III 2,073,821; Blake L. Sartini 657,750;
Lorenzo J. Fertitta 119,000; Delise F. Sartini 14,627; Glenn C. Christenson
307,342; Scott M Nielson 233,968; Mark E. Brown 0; William W. Warner 10,000;
R. Hal Dean 30,000; Lowell H. Lebermann, Jr. 30,000 and Richard J. Heckmann
15,000. Of the total number of shares reported in this table, 417 shares
beneficially owned by Mr. Warner are held by the Company's 401(k) Plan.
(2) The address of each of the stockholders named in this table other than Par
Capital Management, Inc. is: c/o Station Casinos, Inc., 2411 West Sahara
Avenue, Las Vegas, Nevada 89102.
(3) Unless otherwise indicated in the footnotes to this table and subject to the
community property laws where applicable, each of the stockholders named in
this table has sole voting and investment power with respect to the shares
shown as beneficially owned.
(4) Reflects beneficial ownership shared by Blake and Delise Sartini. Blake and
Delise Sartini do not, however, share beneficial ownership of the vested
options reflected in note (1), restricted stock granted to Mr. Sartini and
shares of stock owned by family trusts of which Delise Sartini is trustee
and thus have different total ownership figures.
(5) The address of Par Capital Management, Inc. is One Financial Center, Suite
1600, Boston, Massachusetts, 02111. The SEC filing date is February 10, 2000
for Par Capital Management, Inc.
(6) Includes 57,457 shares owned by Mr. Christenson who shares with his wife
voting and investment power.
(7) Includes 50,954 shares owned by Mr. Nielson who shares with his wife voting
and investment power and 200 shares in which his wife has sole voting and
investment power.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to the Chief Executive Officer of the Company and to each of the four
most highly compensated executive officers of the Company (other than the Chief
Executive Officer) (collectively, the "Executive Officers") for services
rendered to the Company in all capacities during the fiscal year ended December
31, 1999, the nine month period ended December 31, 1998 (the "Transition Period
1998" or "1998T") and the fiscal year ended March 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL --------------------------------------
COMPENSATION(4) RESTRICTED
--------------------- STOCK SECURITIES ALL OTHER
SALARY BONUS AWARDS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION PERIOD(1) ($)(2) ($)(3) ($)(5) OPTIONS(#) ($)(6)
- --------------------------- --------- --------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Frank J. Fertitta III.............. 1999 1,236,539 1,750,000 3,440,625 150,000 252,348
Chairman of the Board, 1998T 765,962 790,000 -- 250,000 271,647
President and Chief Executive 1998 1,000,000 750,000 -- 160,000 293,313
Officer
Glenn C. Christenson............... 1999 611,385 700,000 1,146,875 50,000 270,814
Executive Vice President, 1998T 409,965 325,000 -- 150,000 237,937
Chief Financial Officer, 1998 472,885 321,000 -- 180,000 284,861
Chief Administrative Officer
and Treasurer
Scott M Nielson.................... 1999 474,500 550,000 917,500 40,000 177,625
Executive Vice President, 1998T 302,025 260,000 -- 100,000 99,079
General Counsel and 1998 380,385 240,000 -- 130,000 155,137
Secretary
Blake L. Sartini................... 1999 606,462 700,000 1,146,875 50,000 162,491
Executive Vice President 1998T 398,300 325,000 -- 150,000 137,678
and Chief Operating 1998 446,923 312,000 -- 110,000 165,240
Officer
William W. Warner.................. 1999 358,653 375,000 -- 25,000 74,228
Vice President of Finance(7) 1998T 199,616 150,000 -- 50,000 58,767
1998 206,250 150,000 -- 100,000 8,205
</TABLE>
- --------------------------
(1) On November 6, 1998, the Company filed a Form 8-K announcing its change in
fiscal year end from March 31 of each year to December 31 of each year. This
change is effective for the Transition Period 1998.
(2) For the fiscal year ended December 31, 1999, the Transition Period 1998 and
the fiscal year ended March 31, 1998, amounts include salary deferred under
the Company's Deferred Compensation Plan of $0, $43,462, and $34,615 for Mr.
Fertitta, $177,444, $105,775, and $75,298 for Mr. Christenson, $0, $0 and
$25,961 for Mr. Nielson and $35,865, $19,135 and $12,596 for Mr. Warner (a
portion of the amounts for the fiscal year ended March 31, 1998 for Mr.
Warner, were deferred under the Company's Deferred Compensation Plan for
Management Employees).
(3) Amounts shown are the bonus amounts earned for the fiscal years without
consideration as to the year of payment. For the fiscal year ended December
31, 1999, the Transition Period 1998 and the fiscal year ended March 31,
1998 amounts include bonuses deferred under the Company Deferred
Compensation Plan of $600,000, $320,288 and $0 for Mr. Christenson,
$275,000, $250,000 and $0 for Mr. Nielson, and $37,500, $15,000 and $15,000
for Mr. Warner.
(4) For the fiscal year ended December 31, 1999, the Transition Period 1998 and
the fiscal year ended March 31, 1998, Other Annual Compensation did not
exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported. The Company provides certain perquisites, including certain
personal services, to the named executive officers.
8
<PAGE>
(5) As of December 31, 1999, the total number of shares of restricted stock held
by Messrs. Fertitta, Christenson, Nielson, and Sartini, and the value of
such shares as of the close of trading on such date, was 150,000, 50,000,
40,000, and 50,000, and $3,365,625, $1,121,875, $897,500, and $1,121,875,
respectively.
(6) These amounts represent premiums for life and disability insurance policies
provided by the Company and the Company's matching contribution to the
Executive Officers' Deferred Compensation Plan for the Executive's account,
and for Mr. Warner, the Company's matching contributions to Mr. Warner's
401(k) and Management Employee's Deferred Compensation Plan accounts. For
the fiscal year ended December 31, 1999, the Transition Period 1998 and the
fiscal year ended March 31, 1998 these amounts include "split-dollar" life
insurance premiums for Messrs. Fertitta, Christenson, Nielson, Sartini and
Warner. The policy premiums will be returned to the Company through the cash
surrender value upon termination of the agreement or in the form of death
benefit proceeds.
(7) In September 1997, the Company replaced certain outstanding options to
purchase Common Stock, including those of Mr. Warner. The Company replaced
27,055 of Mr. Warner's options which carried exercise prices ranging from
$12.00 to $14.625 with options carrying an exercise price of $7.50.
OPTIONS GRANTED IN FISCAL 1999
The following table provides information related to options to purchase
Common Stock granted to the Executive Officers during the fiscal year ended
December 31, 1999 and the number and value of such options held as of the end of
such fiscal year. For the last fiscal year the Company did not grant any SARs.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
SECURITIES OF STOCK PRICE
UNDERLYING % OF TOTAL APPRECIATION OPTION FOR
OPTIONS OPTIONS GRANTED EXERCISE OR OPTION TERM
GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME (#)(1) FISCAL 1999 ($/SHARE) DATE 5 %($) 10%($)
- ---- ---------- --------------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Frank J. Fertitta III..... 150,000 22.6 22.94 12/7/2009 2,163,795 5,483,490
Glenn C. Christenson...... 50,000 7.5 22.94 12/7/2009 721,265 1,827,830
Scott M Nielson........... 40,000 6.0 22.94 12/7/2009 577,012 1,462,264
Blake L. Sartini.......... 50,000 7.5 22.94 12/7/2009 721,265 1,827,830
William W. Warner......... 25,000 3.8 22.94 12/7/2009 360,633 913,915
</TABLE>
- ------------------------
(1) Executive Officers receive options pursuant to the Stock Compensation
Program described elsewhere in this Proxy Statement. The material terms of
that program related to recipients, grant timing, number of options, option
price and duration are determined by the Program Administrators (as defined
herein), subject to certain limitations.
9
<PAGE>
FISCAL 1999 OPTION VALUES
The following table provides information related to options to purchase
Common Stock held by the Executive Officers at the end of the fiscal year ended
December 31, 1999. None of the Executive Officers exercised options to purchase
Common Stock during the fiscal year ended December 31, 1999.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999 AND
THE FISCAL YEAR 1999 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999(#) DECEMBER 31, 1999($)(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Frank J. Fertitta III..................... 2,073,821 467,206 12,503,307 4,517,473
Glenn C. Christenson...................... 307,342 312,371 3,473,737 3,631,366
Scott M Nielson........................... 233,968 221,255 2,626,626 2,513,618
Blake L. Sartini.......................... 657,750 243,813 4,885,297 2,796,336
William W. Warner......................... 10,000 165,000 155,625 2,116,250
</TABLE>
- ------------------------
(1) Options are "in-the-money" if, on December 31, 1999, the market price of the
Common Stock ($22.44) exceeded the exercise price of such options. The value
of such options is calculated by determining the difference between the
aggregate market price of the Common Stock covered by the options on
December 31, 1999, and the aggregate exercise price of such options.
EMPLOYMENT AGREEMENTS
The Company and each of Frank J. Fertitta III, Glenn C. Christenson, Scott M
Nielson, Blake L. Sartini and William W. Warner entered into employment
agreements, dated as of December 1, 1999 (the "Employment Agreements"). Pursuant
to the terms of the Employment Agreements, Mr. Fertitta has agreed to serve as
the President, Chief Executive Officer and Chairman of the Board; Mr.
Christenson has agreed to serve as the Executive Vice President, Chief Financial
Officer, Chief Administrative Officer and Treasurer of the Company; Mr. Nielson
has agreed to serve as Executive Vice President, General Counsel and Secretary
of the Company; Mr. Sartini has agreed to serve as Executive Vice President and
Chief Operating Officer of the Company; and Mr. Warner has agreed to serve as
Vice President of Finance. Each of the Employment Agreements terminates on
November 30, 2004, but is subject to automatic 5-year extensions unless the
Company or the Executive Officer who is party thereto gives notice at least one
year prior to the end of the then-current term or unless the Employment
Agreement is otherwise terminated pursuant to the terms of such agreement. The
Employment Agreements provide that the Executive Officers shall devote
reasonable time and attention to the business and affairs of the Company.
Mr. Fertitta's Employment Agreement does not prohibit Mr. Fertitta from engaging
in any business or assisting any other entity in competition with the Company
during the term of his employment or at any time thereafter.
Each Employment Agreement provides for a base salary (to be reviewed
annually for increase but not decrease), an annual cash bonus in an amount
determined based on achievement of predetermined goals set by the Human
Resources Committee of the Board, and the inclusion of the Executive Officer in
all benefit plans and programs of the Company made available to the Company's
Executive Officers or salaried employees generally, including group life
insurance, accidental death and dismemberment insurance, hospitalization,
surgical and major medical coverage, long-term disability, vacations and
holidays. The Executive Officers' current annual base salaries under the
Employment Agreements are as follows: $1,250,000 for Mr. Fertitta, $600,000 for
Mr. Christenson, $475,000 for Mr. Nielson, $600,000 for Mr. Sartini and $375,000
for Mr. Warner. The Executive Officers are also entitled to certain other
benefits and perquisites in addition to those made available to Company
management generally. These other
10
<PAGE>
benefits include participation in the Supplemental Executive Retirement Plan in
the case of Mr. Fertitta, and participation in the Supplemental Management
Retirement Plan in the case of Messrs. Christenson, Nielson, Sartini and Warner,
participation in the Company's Special Long-Term Disability Plan and
supplemental life insurance in the following amounts: not less than $30 million
aggregate coverage for Mr. Fertitta, $7.5 million for Mr. Christenson, $7.5
million for Mr. Nielson, $5.5 million for Mr. Sartini and $4 million for Mr.
Warner. Each of the Executive Officers is also entitled to 4 weeks vacation per
year, reimbursement for membership in a country club, luncheon club and physical
fitness program of Executive's choice, and reimbursement for legal fees to have
the Employment Agreement reviewed, and in the case of Mr. Fertitta, an
automobile. Mr. Christenson, Mr. Nielson, Mr. Sartini and Mr. Warner also
participate in the Company's Long-Term Stay-On Performance Incentive Plan.
In the event that an Executive Officer's employment is terminated as a
result of his death or Disability (as defined in his Employment Agreement), the
Executive Officer or his legal representative will receive, among other
payments, all salary due to the Executive Officer under his Employment Agreement
as of the date of his death or Disability, and, in the case of Mr. Fertitta, his
then current salary for 24 months. In addition, each Executive Officer will
receive any awarded but unpaid annual bonus and a pro-rated bonus for the year
of death or Disability, plus, in the event of death, payment of any deferred
compensation, and, in the event of Disability, immediate vesting of any deferred
compensation or bonuses, and in the case of Mr. Fertitta, immediate vesting of
restricted stock and unvested stock options and continuation of health and
welfare benefits for 60 months. In the event an Executive Officer's employment
is terminated without Cause (as defined in his Employment Agreement), other than
due to death or Disability, prior to a Change in Control (as defined in his
Employment Agreement), the Executive Officer will receive, among other payments,
a payment equal to three times 160% of such Executive Officer's base salary, a
portion of which is conditioned upon the Executive Officer not engaging in
certain competitive acts. In the event of Mr. Fertitta's termination without
Cause or for Good Reason (as defined in Mr. Fertitta's Employment Agreement)
prior to a Change in Control, he will receive five times 175% of his base
salary, regardless of whether he engages in competitive activities. If the
Executive Officers are terminated without cause, other than due to death or
Disability prior to a Change in Control, they will also receive any bonus
awarded but not yet paid, any deferred compensation, 180 days to exercise all
vested options, expense reimbursement and continuation for 18 months of health
and welfare benefits at the level in effect at the time of termination of
employment. If Mr. Fertitta is terminated without Cause or for good reason prior
to a Change in Control, he will receive any bonus awarded but not yet paid, any
deferred compensation, continuation of health and welfare benefits for 60 months
and immediate vesting of all restricted stock and unvested stock options awards
and the ability to exercise the vested options for the remaining term.
Immediately upon the occurrence of a Change in Control, without regard to
continued employment or termination thereof, each Executive Officer, with the
exception of Mr. Fertitta, will receive a payment equal to three times 160% of
his base salary. Under such circumstances, Mr. Fertitta will receive a payment
of three times 175% of his base salary, minimum salary increases of at least 5%,
annual bonuses of at least 75% of base salary, immediate vesting of all
benefits, immediate eligibility for retirement and continued funding of
insurance policies. Additionally, in the event the termination of the employment
of any Executive Officer, except Mr. Fertitta, following a Change in Control,
either by the Company for any reason other than for Cause or by the Executive
Officer for Good Reason (as defined in the applicable Employment Agreement), the
Executive Officer will be entitled to, among other payments, an amount of cash
equal to the greater of five times 160% of his base salary at the time of the
Change in Control or at the time of termination, a portion of which is
conditioned upon the Executive Officer not engaging in certain competitive acts,
immediate vesting of unrestricted stock, immediate vesting of any stock options
and/or stock appreciation rights, which will continue to be exercisable until
the earlier of five years and the remaining term of such stock options and stock
appreciation rights as set forth in the agreement granting such options or
appreciation rights, immediate vesting and cash-out of any phantom stock,
immediate vesting and payout of shares awarded under the Long-Term Stay-On
Performance Incentive Plan, immediate vesting of the Executive Officer's
supplemental retirement benefits as set forth in the Executive
11
<PAGE>
Officer's Supplemental Management Retirement Benefits Plan, continuation of
funding for split life insurance policy, and continuation of group medical
insurance for 18 months. In the event that Mr. Fertitta's employment is
terminated following a Change in Control, either by the Company for any reason
other than for Cause or by Mr. Fertitta for Good Reason (as defined in Mr.
Fertitta's Employment Agreement), Mr. Fertitta will be entitled to the greater
of (i) five times 175% of his Base Salary at the time of the Change in Control
or (ii) five times 175% of his Base Salary at the time of termination,
continuation of all employee benefits and perquisites for five years. Under such
circumstances, Mr. Fertitta will also be entitled to an additional amount which,
after the payment of federal, state and local income taxes attributable to such
additional amount, equals the positive difference, if any, of (i) $20 million,
minus (ii) the product of (A) five times 175% of his Base Salary, plus three
times 175% of his Base Salary, plus an amount equal to the greater of (x) five
times 175% of his Base Salary at the time of the Change in Control or (y) five
times 175% of his Base Salary at the time of termination of his employment,
multiplied by (B) the difference of one, minus Mr. Fertitta's combined marginal
income tax rate.
If any payment or benefit paid or payable, or received or to be received, by
or on behalf of the Executive Officer in connection with a Change in Control or
the termination of the Executive Officer's employment following a Change in
Control, will be subject to the excise tax imposed by Section 4999 of the Code,
the Company will pay the Executive Officer an additional amount such that, after
payment by the Executive of all taxes, the Executive retains an amount of such
additional payment equal to the excise tax imposed on such payments and benefits
paid or payable or received or to be received.
STOCK COMPENSATION PROGRAM
The Company has adopted the Stock Compensation Program which includes (i) an
Incentive Stock Option Plan under which incentive stock options are granted,
(ii) a Nonqualified Stock Option Plan under which nonqualified stock options are
granted, (iii) a Restricted Shares Plan under which restricted shares of Common
Stock are granted and (iv) a Nonemployee Directors Stock Option Plan under which
nonemployee directors are granted nonqualified stock options. Officers, key
employees, directors (whether employees or nonemployees) and independent
contractors or consultants of the Company or its Subsidiaries are eligible to
participate in the Nonqualified Stock Option Plan and the Restricted Shares
Plan. Only employees of the Company and its Subsidiaries, however, are eligible
to participate in the Incentive Stock Option Plan. Only nonemployee directors
are eligible to participate in the Nonemployee Directors Stock Option Plan.
The Stock Compensation Program is administered by a committee of at least
two nonemployee directors (as defined in Rule 16b-3 of the Exchange Act (the
"Program Administrators")) appointed by the Board of Directors. Subject to the
provisions of the Stock Compensation Program, the Program Administrators have
sole authority, in their absolute discretion to determine, except with regard to
awards under the Nonemployee Directors Plan: (a) the individuals to whom options
and restricted shares shall be granted under the Program; (b) the time or times
at which the options and restricted shares may be granted under the Program; (c)
the number of shares subject to each option and restricted share, the option
price and the duration of each option granted under the Program; and (d) all of
the other terms and conditions of options and restricted shares granted under
the Stock Compensation Program.
Under the Nonemployee Directors Plan, each nonemployee director receives
options to acquire shares of Common Stock pursuant to the following formula: (a)
10,000 shares of Common Stock upon the effective date of his or her initial
appointment to serve as a member of the Board of Directors and (b) an additional
2,500 shares of Common Stock (which was increased to 5,000 shares of Common
Stock in January 2000) upon each anniversary of such date if the nonemployee
director is a member of the Board of Directors on such anniversary. Nonemployee
directors are also eligible for discretionary option grants. The options are
exercisable immediately and will expire on the tenth anniversary of the grant.
The exercise price of the options is the fair market value of the shares at the
time of the grant of the option.
12
<PAGE>
A maximum of 10,807,000 shares of Common Stock have been reserved for
issuance under the Stock Compensation Program. As of December 31, 1999, options
to purchase an aggregate of 6,605,662 shares of Common Stock under the Program
were outstanding, 3,768,443 of which were exercisable as of such date. The Stock
Compensation Program will terminate on June 1, 2003, unless terminated earlier
by the Board of Directors, and no options or restricted shares may be granted
under the Stock Compensation Program after such date.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Table I below sets forth the total benefits payable to the Chief Executive
Officer as the sole participant in the Supplemental Executive Retirement Plan
(the "SERP"). Amounts shown in Table I represent the annual benefits to which
the Chief Executive Officer is entitled under the SERP.
TABLE I*
<TABLE>
<CAPTION>
10 OR MORE
REMUNERATION($) YEARS OF SERVICE
- --------------- ----------------
<S> <C> <C>
1,250,000................................................... 625,000
1,275,000................................................... 637,500
1,300,000................................................... 650,000
1,325,000................................................... 662,500
1,350,000................................................... 675,000
1,375,000................................................... 687,500
1,400,000................................................... 700,000
</TABLE>
- ------------------------
* Assumes normal retirement
The SERP, which went into effect on November 30, 1994, is a defined benefit
plan that covers only the Chief Executive Officer of the Company. The SERP
provides a monthly supplemental retirement benefit (the "SERP SRB"), in addition
to any other qualified or non-qualified retirement plan of the Company, equal to
one-twelfth of the product of (a) 50% and (b) the Chief Executive Officer's
final annual compensation, as determined under the SERP (equal to the amount
reported as annual salary in the Summary Compensation Table). Amounts shown in
Table I represent the annual benefits to which the Chief Executive Officer is
entitled under the SERP, which amounts are then reduced by monthly benefits
payable under all qualified and non-qualified defined benefit retirement plans
of the Company. The amounts listed in Table I are not currently subject to any
deductions for social security because the Company currently has no other
defined benefit plans. The Chief Executive Officer will become vested in accrued
SERP SRBs upon the later of (a) the attainment of age 45 and (b) the completion
of ten years of service after the effective date of the plan, or, if a Change of
Control (as defined in the SERP) occurs, the Chief Executive Officer will become
fully vested in the SERP SRB.
The SERP SRB is payable upon the later of the date on which the Chief
Executive Officer attains age 55 or the Chief Executive Officer's termination of
employment. Alternatively, the Chief Executive Officer may elect to commence
receiving the SERP SRB upon the later of the date on which the Chief Executive
Officer attains age 45 or the Chief Executive Officer's termination of
employment. In the event of such an early retirement election, the SERP SRB
shall be reduced by 6% of such otherwise payable benefit for each year that the
Chief Executive Officer is less than age 55.
The SERP SRB payments will be made for no less than 15 years after the date
on which the Chief Executive Officer begins to receive payments. If the Chief
Executive Officer dies after the Chief Executive Officer becomes vested and
prior to the date on which the Chief Executive Officer begins to receive SERP
SRB payments, the Company will pay a survivors benefit to the Chief Executive
Officer's spouse equal to the amount that would have been payable to such spouse
if the Chief Executive Officer had commenced
13
<PAGE>
receiving the SERP SRB at age 55 in the form of a joint and 50% survivor
annuity. The Company has no duty to set aside or invest any amounts under or in
respect of the SERP. As of December 31, 1999, Frank J. Fertitta III had five
years of credited service under the SERP.
SUPPLEMENTAL MANAGEMENT RETIREMENT PLAN
Table II below sets forth the total benefits payable to Executive Officers,
other than the Chief Executive Officer, selected by the Human Resources
Committee of the Board of Directors to participate in the Company's Supplemental
Management Retirement Plan (the "SMRP"). Amounts shown in Table II represent the
annual benefits to which the covered Executive Officers are entitled under the
SMRP.
TABLE II*
<TABLE>
<CAPTION>
10 OR MORE
REMUNERATION($) YEARS OF SERVICE
- --------------- ----------------
<S> <C> <C>
350,000..................................................... 140,000
400,000..................................................... 160,000
450,000..................................................... 180,000
500,000..................................................... 200,000
550,000..................................................... 220,000
600,000..................................................... 240,000
650,000..................................................... 260,000
700,000..................................................... 280,000
750,000..................................................... 300,000
</TABLE>
- ------------------------
* Assumes normal retirement
The SMRP, which went into effect on November 30, 1994, is a defined benefit
plan for the Executive Officers, other than the Chief Executive Officer,
selected by the Human Resources Committee of the Board of Directors. The SMRP
provides a monthly supplemental retirement benefit (the "SMRP SRB"), in addition
to any other qualified or non-qualified retirement plan of the Company, equal to
one-twelfth of the product of (a) 40% and (b) the Executive Officer's final
annual compensation, as determined under the SMRP (equal to the amount reported
as annual salary in the Summary Compensation Table), which amounts are then
reduced by monthly benefits payable under all qualified and non-qualified
defined benefit retirement plans of the Company. The amounts shown in Table II
are not currently subject to any deductions for social security or other offset
amounts because the Company currently has no other defined benefit plans. The
Executive Officer will become vested in the accrued SMRP SRBs upon the later of
(a) the attainment of age 55 and (b) the completion of ten years of service
after the effective date of the plan, or, if a Change of Control (as defined in
the SMRP) occurs, the Executive Officer will become fully vested in the SMRP
SRB.
The SMRP SRB is payable upon the later of the date on which the Executive
Officer attains age 60 or the Executive Officer's termination of employment.
Alternatively, the Executive Officer may elect to commence receiving the SMRP
SRB upon the later of the date on which the Executive Officer attains age 55 or
the Executive Officer's termination of employment. In the event of such an early
retirement election, the SMRP SRB shall be reduced by 6% of such otherwise
payable benefit for each year that the Executive Officer is less than age 60.
The SMRP SRB payments will be made for no less than 15 years after the date
on which the Executive Officer begins to receive payments. If the Executive
Officer dies after becoming vested and prior to the date on which the Executive
Officer begins to receive SMRP SRB payments, the Company will pay a survivor's
benefit to the Executive Officer's spouse equal to the amount that would have
been payable to such spouse if the Executive Officer had commenced receiving the
SMRP SRB at age 60 in the form of a
14
<PAGE>
joint and 50% survivor annuity. The Company has no duty whatsoever to set aside
or invest any amounts under or in respect to the SMRP. As of December 31, 1999
Messrs. Glenn C. Christenson, Scott M Nielson and Blake L. Sartini have five
years of service credited under the SMRP and William W. Warner has three years
of credited service.
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
The Deferred Compensation Plan For Executives (the "DCPE"), in effect as of
November 30, 1994, is a deferred compensation plan for Executive Officers whose
base salaries are at a rate in excess of the amount specified in Section
401(a)(17) of the Code, and who are selected for participation by the Human
Resources Committee of the Board of Directors. Executive Officers may defer up
to 50% of their regular base salary and 100% of any special and/or discretionary
bonuses. The Company has agreed to match 100% of the first 10% of any base
salary and bonus deferred under the plan, pursuant to retroactive modifications
of the DCPE adopted by the Company on March 15, 1996. Additionally, the Company
may, in its sole discretion, credit supplemental contributions to an Executive
Officer's account. Earnings on deferrals are required to equal the greater of
(i) the return on Common Stock or (ii) an instrument paying 4% interest per
annum. Each participant's deferred compensation account will be adjusted at the
end of the plan year to reflect earnings and the account balance will be
reinvested for the next plan year. An Executive Officer's accrued balance in a
deferred compensation account will be fully vested at all times. The accrued
balance in an Executive Officer's matching and supplemental contributions
account will vest 20% each year and will be fully vested after five years of
continuous service. If a Change in Control (as defined in the DCPE) occurs, the
Executive Officer's accrued balance in the Matching Contributions Account and
the Supplemental Contributions Account (both as defined in the DCPE) become
fully vested as of the date of any such Change in Control. Vested accrued
balances shall be paid in shares of Common Stock within 15 days of the
termination of employment. If the Executive Officer is terminated for any reason
(other than death) prior to completion of five years of continuous service, any
accrued balance existing under the matching and supplemental accounts shall be
paid in shares of Common Stock. Hardship distributions are permitted under the
plan in the event of an unforeseeable emergency, and will be limited to the
amount shown to be necessary to meet the emergency.
SPECIAL LONG-TERM DISABILITY PLAN
The Special Long-Term Disability Plan provides disability benefits equal to
a combined monthly benefit amount of 66% of the average of base salary plus
bonus for the two plan years immediately preceding (but not including) the plan
year in which the participant's employment is terminated due to disability
divided by twelve; provided, however, that the monthly benefit will be reduced
by any benefit the participant receives from all other disability plans
sponsored by the Company, if any. Benefits begin on the first day of the second
month succeeding the month in which the participant's termination of employment
due to disability occurs. Individuals eligible to participate in the plan
consist of the Executive Officers as chosen by the Human Resources Committee of
the Board of Directors from key executives nominated by the Chief Executive
Officer. The Human Resources Committee may, in its sole discretion, terminate
the participation of any participant prior to the disability of such
participant. Each of the Executive Officers is a participant in this plan.
LONG-TERM STAY-ON PERFORMANCE INCENTIVE PLAN
The Long-Term Stay-On Performance Incentive Plan, as amended as of June 19,
1997, will pay $1,000,000 to each of Messrs. Christenson, Nielson and Sartini
for continuous employment by all three Executive Officers through March 31,
2001. Failure by any such Executive Officer, for any reason, to complete the
length of service specified will result in the forfeiture of such Executive
Officers' award and will reduce each of the remaining two Executive Officers'
awards by 25%. The award will be issued on April 1, 2001 in shares of Common
Stock, valued at the award date, if available, or otherwise in cash. The
15
<PAGE>
award will be restricted from April 1, 2001 through April 1, 2004 (the
"Restriction Period"). Each Executive Officer must continue in employment during
the Restriction Period to receive the full amount of his award. The award
becomes unrestricted as follows: (1) 50% of the total number of shares on April
1, 2003 and (2) 50% of the total number of shares on April 1, 2004. Termination
of employment, for any reason during the Restriction Period, will result in
forfeiture of any remaining restricted shares of the Company. In April 1999, a
Long-Term Stay-On Performance Incentive Plan was entered into which will pay
$500,000 to Mr. Warner for continuous employment through April 1, 2006. One-half
of the payment will be paid on April 1, 2003 and the remaining half will be paid
on April 1, 2006. Termination of employment, will forfeit any and all rights to
the payments.
SPLIT-DOLLAR INSURANCE PROGRAM
In August 1995, split-dollar life insurance agreements were entered into for
the Chief Executive Officer and the Executive Officers other than Mr. Warner. A
policy was entered into for Mr. Warner in April 1998. Under the terms of the
policies, the Company will pay the premiums for such life insurance policies and
the Company will have an interest in the insurance benefits equal to the amount
of unreimbursed premiums it has paid, with the balance payable to the
beneficiary as named by the Executive Officer. The face value of each Executive
Officer's individual policy and second-to-die policy is as follows: $10 million
and $30 million for Mr. Fertitta, $7.5 million and $0 for Mr. Christenson, $7.5
million and $0 for Mr. Nielson, $5.5 million and $10 million for Mr. Sartini and
$4.0 million and $0 for Mr. Warner.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles eliminate liability of its directors and officers for damages
for breach of fiduciary duty as directors and officers, except to the extent
otherwise required by the NRS and in cases in which the breach involves
intentional misconduct, fraud or a knowing violation of the law.
Sections 78.7502 and 78.751 of Chapter 78 of the NRS and the Bylaws contain
provisions for indemnification of officers and directors of the Company and, in
certain cases, employees and other persons. The Bylaws require the Company to
indemnify such persons to the full extent permitted by Nevada law. Each such
person will be indemnified in any proceeding if such person acted in good faith
and in a manner which such person reasonably believed to be in, or not opposed
to, the best interest of the Company and, with respect to any criminal action,
had no reasonable cause to believe was unlawful. Indemnification would cover
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement.
Section 78.752 of Chapter 78 of the NRS and the Bylaws also provide that the
Board of Directors may cause the Company to purchase and maintain insurance on
behalf of any present or past director or officer insuring against any liability
asserted against such person incurred in the capacity of director or officer or
arising out of such status, whether or not the Company would have the power to
indemnify such person. The Company maintains directors' and officers' liability
insurance.
The Company has entered into indemnification agreements (the
"Indemnification Agreements") with each director and certain officers, employees
and agents of the Company. Each Indemnification Agreement provides for, among
other things: (i) indemnification to the fullest extent permitted by law for an
indemnified party (the "Indemnitee") unless it is determined, as provided in the
Indemnification Agreement, that indemnification is not permitted under law; and
(ii) prompt advancement of expenses to any Indemnitee in connection with his or
her defense against any claim.
16
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
This report is provided by the Human Resources Committee of the Board of
Directors to assist stockholders in understanding the Company's objectives and
procedures in establishing the compensation of the Company's Chief Executive
Officer and other executive officers. The Human Resources Committee is
responsible for (i) reviewing and approving all elements of the total
compensation program for the Company, (ii) aligning the total compensation
program with the Company's business strategy and (iii) assuring stockholders
that the pay delivery programs are effective, responsible, and competitive when
compared to similarly situated organizations.
EXECUTIVE COMPENSATION PROGRAM PHILOSOPHY AND OBJECTIVES(1)
The Human Resources Committee's primary objectives in setting compensation
policies are to develop a program designed to retain the current management
team, reward them for outstanding performance, and attract those individuals
needed to implement its strategy. The Human Resources Committee sets
compensation policies to account for continued significant growth and to retain
highly talented, motivated individuals with a long-term vision for the Company.
The Human Resources Committee also seeks to align the financial interest of the
Company's executives with that of its stockholders. The Human Resources
Committee believes to achieve this goal a significant portion of the Company's
executives' compensation should be "at risk" and tied to the achievement of
annual and long-term corporate performance criteria. The Human Resources
Committee retains an outside consultant to assist with the design,
implementation and communication of its compensation program.
BASE SALARY
Base salaries are reviewed annually and may be adjusted based on an
evaluation of the executive's performance in conjunction with a review of
compensation normally received by other individuals holding similar positions at
other organizations with similar revenues and scope of business. For the fiscal
year ended December 31, 1999, the Human Resources Committee identified a group
of similar casino and gaming companies that it believes are the Company's
competition for executive level employees. As part of its strategy to attract
and retain high quality executive employees, the Human Resources Committee has
established a policy to pay executive base salaries between the 50th and 75th
percentile of the range of the base salaries paid by these similar casino and
gaming companies. Actual salaries are determined based upon an assessment of the
individual's contribution and value to the organization and the competitive
market for that position.
ANNUAL INCENTIVES
The Human Resources Committee also sets executive compensation in a manner
designed to make it dependent upon the performance of the Company. To create
incentives for superior performance and to allow executives to share in the
success of the Company, the Human Resources Committee has made a portion of an
executive's compensation dependent upon the annual and long-term performance of
the Company.
Annual incentive awards for the fiscal year 1999 performance were based upon
the Company's performance and assessments of the individual executive's
contribution to the success of the Company during the fiscal year 1999. The
Human Resources Committee targeted total cash compensation paid to the Company's
executives to be between the 50th and 75th percentile of that paid by its
competitors for executive level employees. Actual annual incentive payouts were
adjusted for the Company's performance and the individual's contribution during
the performance period.
- ------------------------
(1) Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act or the Exchange Act, the
Report on Executive Compensation shall not be incorporated by reference in
any such filings.
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Executives participate in an annual incentive plan administered by the Human
Resources Committee that was implemented on April 1, 1994. This plan makes a
portion of the participant's compensation dependent upon the annual performance
of the Company and also has a component to reward the individual for superior
performance in the event targets are not met, but the individual's performance
has been exemplary. The purpose of this plan is to focus each executive on the
attainment of financial objectives that the Human Resources Committee believes
are primary determinants of the Company's share price over time. Each year,
specific cash flow and earnings per share goals are approved by the Human
Resources Committee under the plan. To ensure that the award amounts under the
plan are competitive, target award amounts are set at the beginning of each
performance period for each executive based upon the 50th percentile of
comparable award amounts paid by the Company's competitors for executive
employees. The amount of the target award is determined by comparison of actual
earnings before interest, taxes, depreciation and amortization (EBITDA) less
maintenance capital expenditures versus the goal EBITDA less maintenance capital
expenditures. The actual award may vary from zero to 233% of the target award.
The Human Resources Committee has retained the ability to award a discretionary
bonus.
LONG-TERM INCENTIVES
The Company has provided stock-based incentives to its officers since its
inception. The Human Resources Committee attempts to give the Company's
executives a stake in the long-term success of the business, and to pay a
considerable portion of the Company's executives total compensation in stock, to
give the executive a long-term stake in the business and to align the
executive's interests with those of the Company's stockholders. These grants of
stock options and restricted stock align the executive's interests with the
stockholder's interests as the size of the executive's reward is dependent on
the Company's stock performance. Grants made to the Company's executives
approximate the 75th percentile of expected grant values for those companies
that the Human Resources Committee has identified as the Company's competition
for executive level employees, with the value of any awards estimated using the
Black-Scholes valuation model. Awards have generally been granted with a vesting
schedule of 20% of the award each anniversary from the date of grant until fully
vested. The restricted shares granted in the fiscal year ended December 31, 1999
were granted with a vesting schedule of 10% of the award each anniversary from
the date of grant until fully vested.
OTHER EXECUTIVE PROGRAMS
The Company also maintains certain executive benefits and perquisites that
are considered necessary to offer fully competitive opportunities to its
executives. These include, but are not limited to, supplemental retirement
arrangements, employment agreements, and change in control contracts. The
details of these programs are explained under the "Executive Compensation"
section of this proxy statement.
1999 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
The same philosophies described above for each executive position were used
by the Human Resources Committee to determine the compensation for the Chairman
of the Board, President, and Chief Executive Officer, Mr. Frank J. Fertitta III.
THE CHIEF EXECUTIVE OFFICER'S 1999 BASE SALARY
The Human Resources Committee established Mr. Fertitta's annual base salary
for the fiscal year 1999 based upon a review of compensation by casino and
gaming companies identified as having similar revenues and scope of operations
together with an evaluation of the Company's results in fiscal year 1999. Mr.
Fertitta's annual base salary was increased during the fiscal year 1999 from
$1,050,000 to $1,250,000.
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THE CHIEF EXECUTIVE OFFICER'S 1999 ANNUAL INCENTIVE
The annual incentive earned by the Chief Executive Officer for the fiscal
year 1999 performance was $1,750,000. This annual incentive award reflects the
Company's performance and the Chief Executive Officer's individual contribution
to the Company as evaluated by the Human Resources Committee for the year.
LIMITATION OF TAX DEDUCTION FOR EXECUTIVE COMPENSATION
Internal Revenue Code Section 162(m) prevents publicly traded companies from
receiving a tax deduction on compensation paid to proxy-named executive officers
in excess of $1 million in any taxable year, effective for compensation paid
after 1993. The Human Resources Committee believes that there will be
approximately $2.9 million of non-deductible compensation in the fiscal year
1999. While the Human Resources Committee is mindful of the provisions of
Section 162(m), the Human Resources Committee does not allow Section 162(m) to
drive compensation decisions.
Respectfully Submitted,
Station Casinos, Inc.
Human Resources Committee
R. Hal Dean, Chairman
Lowell H. Lebermann, Jr.
Richard J. Heckmann
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STOCK PERFORMANCE GRAPH(2)
The graph below compares the cumulative total stockholder return of the
Company, with the cumulative total return of the Standard & Poor's 500 Stock
Index ("S&P 500") and the cumulative total return of a new peer group with
comparable market capitalization and an old peer group. A new peer group was
selected as certain companies in the old peer group from the prior year have
been acquired and, as a result, are no longer reflected in the cumulative total
return of the old peer group. The new peer group consists of Ameristar Casinos,
Inc., Argosy Gaming Co., Aztar Corp., Boyd Gaming Corp., Harrah's Entertainment,
Inc., Hollywood Park, Inc., Isle of Capri Casinos, Inc., Mandalay Resort Group,
MGM Grand, Inc., Mirage Resorts, Inc., and Park Place Entertainment Corp. The
old peer group consisted of Ameristar Casinos, Inc., Argosy Gaming Corp., Aztar
Corp., Boyd Gaming Corp., Hollywood Casino Corp., Jackpot Enterprises, Inc.,
Mandalay Resort Group, and President Casinos, Inc. The performance graph assumes
that $100 was invested on March 31, 1995 in each of the Common Stock, common
stock of the selected peer group, and the S&P 500. The stock price performance
shown in this graph is neither necessarily indicative of nor intended to suggest
future stock price performance.
COMPARISON OF 57 MONTH CUMULATIVE TOTAL RETURN(*)
AMONG STATION CASINOS, INC., THE S&P 500 INDEX,
A NEW PEER GROUP AND AN OLD PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C> <C> <C>
STATION NEW OLD
CASINOS, INC PEER GROUP PEER GROUP S & P 500
3/95 100.00 100.00 100.00 100.00
3/96 101.09 105.60 93.67 132.11
3/97 70.65 84.47 69.09 158.30
3/98 128.26 91.14 62.96 234.27
12/98 71.20 57.79 33.87 264.35
12/99 195.11 95.84 66.54 319.98
</TABLE>
* $100 INVESTED ON 3/31/95 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS.
(2) Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act or the Exchange Act,
this Performance Graph shall not be incorporated by reference in any such
filings.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
BOULDER STATION LEASE
Boulder Station is situated on 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.
TEXAS STATION LEASE
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 no later than one year after the first to occur
of (a) a change of control (as defined in the lease), or (b) delivery of written
notice that such a change of control is anticipated, at a purchase price equal
to fair market value as determined by negotiation. The Company believes that the
terms of the ground lease are as fair to the Company as could be obtained from
an independent third party.
GORDON BIERSCH BREWING COMPANY
The Company owns a 50% interest in Town Center Amusements, Inc., a Limited
Liability Company, a Nevada limited liability company, doing business as
Barley's Casino & Brewing Company ("Barley's"), which operates a casino and brew
pub located in southeast Las Vegas. Barley's commenced operations in January
1996. Barley's had entered into a consulting agreement with Gordon Biersch
Brewing Company ("Gordon Biersch"). Frank J. Fertitta III, Blake L. and Delise
F. Sartini and Lorenzo J. Fertitta collectively owned a 15.7% interest in Gordon
Biersch. The Frank J. Fertitta and Victoria K. Fertitta Revocable Family Trust
dated June 17, 1989 (the "Fertitta Trust") owned another 21.0% interest and
trusts for the children of the above named individuals collectively owned a 7.9%
interest in Gordon Biersch. The consulting agreement required Barley's to pay
Gordon Biersch $25 for each barrel of beer brewed. The consulting agreement with
Gordon Biersch ended in January 1999. Barley's paid Gordon Biersch approximately
$19,000 and $45,000 during the fiscal year ended December 31, 1999 and the
Transition Period 1998, respectively. In addition Gordon Biersch was a tenant at
Sunset Station until March 1998. Gordon Biersch
21
<PAGE>
paid monthly rental amounts of $13,395 under the lease at Sunset Station. During
the fiscal year ended December 31, 1999, the Company paid $575,000 to purchase
the assets of Gordon Biersch previously located at Sunset Station. All Gordon
Biersch restaurant locations were sold in December 1999 to an unaffiliated
company.
DIRECTORS
The Company employs Delise F. Sartini as Vice President of Community Affairs
at Palace Station. During the fiscal year ended December 31, 1999 and the
Transition Period 1998, the Company paid salary to Delise F. Sartini of $69,525
and $48,872, respectively.
In February 1999, the Company entered into a consulting agreement with
Lorenzo J. Fertitta to provide financial and strategic advisory services to the
Company. The consulting agreement is for a term of five years and provides for
an annual fee of $240,000, payable in equal monthly installments and monthly
premium payments necessary to maintain $15 million in term life insurance
coverage. Under the provisions of his consulting services agreement, Mr.
Fertitta was granted 100,000 options to purchase the Company's Common Stock at
$7.88 in December 1998 and 50,000 options to purchase the Company's Common Stock
at $22.94 in December 1999.
TRAVELSCAPE.COM, INC.
The Company has maintained a wholesale travel agent contract to provide
varying amounts of hotel rooms to Las Vegas Reservation Systems since 1993. The
Company received hotel revenue of approximately $345,431 and $145,378 during the
fiscal year ended December 31, 1999 and the Transition Period 1998, respectively
from Las Vegas Reservation Systems. Zucchero, LLC, a Nevada limited liability
company, beneficially owned by the Fertitta Trust, Frank J. Fertitta, III, Blake
L. Sartini and Lorenzo J. Fertitta currently holds a 10% investment in
Travelscape.com, Inc. which is an affiliate of Las Vegas Reservation Systems.
Lorenzo J. Fertitta is a director of Travelscape.com, Inc.
ITEM II
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP ("AA") to serve as
the Company's independent public accountants to audit the financial statements
of the Company for the 2000 fiscal year. AA has served as the Company's
independent public accountants since fiscal year 1991. A representative of AA
will attend the Annual Meeting and will be given an opportunity to make a
statement and will be available to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS, ON THE ADVICE OF ITS AUDIT COMMITTEE,
THAT THE STOCKHOLDERS VOTE FOR RATIFICATION OF THE APPOINTMENT OF ARTHUR
ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL 2000.
Unless a contrary indication is made on the enclosed proxy card, it is the
intention of the persons named therein to vote FOR the selected accountants.
ITEM III
PROPOSED APPROVAL OF THE STATION CASINOS, INC.
SENIOR EXECUTIVE ANNUAL BONUS PLAN
The Board of Directors of the Company has adopted the Senior Executive
Annual Bonus Plan (the "Plan"), subject to approval by shareholders. The Board
recommends that shareholders approve the Plan at the Annual Meeting. Shareholder
approval is requested to ensure that annual incentive awards paid to senior
executives will be fully tax deductible as performance-based compensation, as
defined by the
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regulations under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). A summary of the principal features of the Plan is set
forth below.
A general description of the basic features of the Plan is set forth below.
Such description is qualified in its entirety by reference to the full text of
the Plan, as set forth in Appendix A to this Proxy Statement.
Under Section 162(m) of the Code, the amount which the Company may deduct on
its tax returns for compensation paid, or accrued with respect, to certain
"covered employees" (generally the chief executive officer and the four highest
paid executive officers other than the chief executive officer) in any taxable
year is generally limited to $1 million per individual. However, compensation
that qualifies as "qualified performance-based compensation" is not subject to
the $1 million deduction limit. In order for compensation to qualify as
"qualified performance-based compensation" for this purpose, it must meet
certain conditions, one of which is that the material terms of the performance
goals under which the compensation is to be paid must be disclosed to and
approved by shareholders. Payment of any awards pursuant to the Plan is
contingent on shareholder approval of the Plan. If such approval is not
obtained, no awards will be paid under this Plan.
The persons who are eligible to be selected to participate in the Plan are
employees of the Company and its subsidiaries who are executive officers of the
Company. Under the Plan, the Human Resources Committee of the Board of
Directors, or another committee designated by the Board and consisting
exclusively of "outside directors" within the meaning of Section 162(m) of the
Code (the "Committee"), selects participants in the Plan, determines the amount
of their award opportunities, selects the performance criteria and the
performance goals for each year, and administers and interprets the Plan. An
eligible employee may (but need not) be selected to participate in the Plan each
year.
No later than 90 days after the commencement of each year (or by such other
deadline as may apply under Code Section 162(m)(4)(C) or the Treasury
Regulations thereunder), the Committee will select the persons who will
participate in the Plan in such year and establish in writing the performance
goals for that year as well as the method for computing the amount of
compensation which each such participant will be paid if such goals are attained
in whole or in part. Such method will be stated in terms of an objective formula
or standard that precludes discretion to increase the amount that will be due
upon attainment of the goals. The Committee retains discretion under the Plan to
reduce an award at any time before it is paid.
The maximum amount of compensation that may be paid under the Plan to any
participant for any year is $6 million.
Under the Plan, the performance goals for any year may be based on any of
the following criteria, either alone or in any combination, and on either a
consolidated or individual property level, and may include or exclude
discontinued operations and acquisition expenses (e.g., pooling of interests),
as the Committee may in each case determine: level of revenues, earnings per
share, income before income taxes and the cumulative effect of accounting
changes, income before the cumulative effect of accounting changes, net income,
earnings before interest and taxes, return on assets, return on equity, return
on capital employed, total shareholder return, market valuation, cash flow,
earnings before interest, taxes, depreciation and amortization, capital
expenditures and completion of acquisitions. The foregoing terms shall have any
reasonable definitions that the Committee may specify, which may include or
exclude any or all of the following items, as the Committee may specify:
extraordinary, unusual or non-recurring items; effects of accounting changes;
effects of currency fluctuations; effects of financing activities (e.g., effect
on earnings per share of issuing convertible debt securities); expenses for
restructuring or productivity initiatives; non-operating items; acquisition
expenses (e.g., pooling of interests); and effects of divestitures. Any of the
foregoing criteria may apply to a participant's award opportunity for any year
in its entirety or to any designated portion of the award opportunity, as the
Committee may specify.
23
<PAGE>
Awards may be paid under the Plan for any year only if and to the extent the
awards are earned on account of the attainment of the performance goals
applicable to such year and the participant is continuously employed by the
Company throughout such year. The only exceptions to the continued employment
requirement are if employment terminates by reason of death, disability or
retirement during a year, in which case a prorated award may be paid after the
close of the year. If a participant's employment terminates for any reason other
than death, disability or retirement during a year, any award for such year will
be forfeited.
All payments pursuant to the Plan are to be made in cash, only after the
Committee certifies that the performance goals for the year have been satisfied.
The Plan is in effect for the fiscal year commencing January 1, 2000 and
will continue in effect for subsequent years unless and until terminated by the
Committee in accordance with the provisions of the Plan. The Board may terminate
the Plan without shareholder approval at any time.
Approval of the Plan requires the affirmative vote of the holders of a
majority of the Common Shares represented in person or by proxy and entitled to
vote at the Annual Meeting. A copy of the Plan is attached as Appendix A.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF
THIS PROPOSAL.
Unless a contrary indicator is made on the enclosed proxy card, it is the
intention of the persons named to vote FOR approval.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be presented at
the Annual Meeting. If any other matters should properly come before the Annual
Meeting, the persons named in the proxy will vote the proxies according to their
best judgment.
STOCKHOLDER PROPOSALS
Stockholder proposals, if any, that may be considered for inclusion in the
Company's proxy materials for the fiscal 2000 Annual Meeting must be received by
the Company at its offices at 2411 West Sahara Avenue, Las Vegas, Nevada 89102
not later than December 1, 2000.
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APPENDIX A
STATION CASINOS, INC.
SENIOR EXECUTIVE ANNUAL BONUS PLAN
1. PURPOSE This annual incentive plan (the "Plan") is applicable to those
employees of Station Casinos, Inc. (the "Company") and its subsidiaries who are
executive officers of the Company ("Covered Employees"), including members of
the Board of Directors who are such employees.
The Plan is designed to reward, through additional cash compensation,
Covered Employees for their significant contribution toward improved
profitability and growth of the Company.
2. ELIGIBILITY All Covered Employees shall be eligible to be selected to
participate in this Plan. The Committee shall select the Covered Employees who
shall participate in this Plan in any year no later than 90 days after the
commencement of the fiscal year of the Company (or no later than such earlier or
later date as may be the applicable deadline (the "Determination Date") for the
establishment of performance goals permitting the compensation payable to such
Covered Employee for such year hereunder to qualify as "qualified
performance-based compensation" under Treasury Regulation 1.162-27(e).
3. ADMINISTRATION The Plan shall be administered by the Human Resources
Committee of the Board of Directors (the "Board"), or by another committee
appointed by the Board (the Human Resources Committee of the Board or such other
committee, the "Committee"). The Committee shall be comprised exclusively of
members of the Board who are "outside directors" within the meaning of Section
162(m)(4)(C) of the Internal Revenue Code of 1986, as amended (the "Code") and
Treasury Regulation 1.162-27(e)(3). The Committee shall have the authority,
subject to the provisions herein, (a) to select employees to participate herein;
(b) to establish and administer the performance goals and the award
opportunities applicable to each participant and certify whether the goals have
been attained; (c) to construe and interpret the Plan and any agreement or
instrument entered into under the Plan; (d) to establish, amend, and waive rules
and regulations for the Plan's administration; and (e) to make all other
determinations which may be necessary or advisable for the administration of the
Plan. Any determination by the Committee pursuant to the Plan shall be final,
binding and conclusive on all employees and participants and anyone claiming
under or through any of them.
4. ESTABLISHMENT OF PERFORMANCE GOALS AND AWARD OPPORTUNITIES No later
than the Determination Date for each year, the Committee shall establish in
writing the method for computing the amount of compensation which will be
payable under the Plan to each participant in the Plan for such year if the
performance goals established by the Committee for such year are attained in
whole or in part and if the participant's employment by the Company or a
subsidiary continues without interruption during that year. Such method shall be
stated in terms of an objective formula or standard that precludes discretion to
increase the amount of the award that would otherwise be due upon attainment of
the goals and may be different for each participant. No provision of this Plan
shall preclude the Committee from exercising negative discretion with respect to
any award hereunder, within the meaning of Treasury Regulation
1.162-27(e)(2)(iii)(A).
No later than the Determination Date for each year, the Committee shall
establish in writing the performance goals for such year, which shall be based
on any of the following performance criteria, either alone or in any
combination, on either a consolidated or individual property level, and which
shall include or exclude discontinued operations and acquisition expenses (e.g.,
pooling of interests), as the Committee may determine: level of revenues,
earnings per share, income before income taxes and cumulative effect of
accounting changes, income before cumulative effect of accounting changes, net
income, earnings before interest and taxes, return on assets, return on equity,
return on capital employed, total stockholder return,
A-1
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market valuation, cash flow, earnings before interest, taxes, depreciation and
amortization, capital expenditures and completion of acquisitions. The foregoing
criteria shall have any reasonable definitions that the Committee may specify,
which may include or exclude any or all of the following items, as the Committee
may specify: extraordinary, unusual or non-recurring items; effects of
accounting changes; effects of currency fluctuations; effects of financing
activities (e.g., effect on earnings per share of issuing convertible debt
securities); expenses for restructuring or productivity initiatives;
non-operating items; acquisition expenses (e.g., pooling of interests); and
effects of divestitures. Any such performance criterion or combination of such
criteria may apply to the participant's award opportunity in its entirety or to
any designated portion or portions of the award opportunity, as the Committee
may specify.
5. MAXIMUM AWARD The maximum amount of compensation that may be paid under
the Plan to any participant for any year is $6 million.
6. ATTAINMENT OF PERFORMANCE GOALS REQUIRED Awards shall be paid under
this Plan for any year solely on account of the attainment of the performance
goals established by the Committee with respect to such year. Awards shall also
be contingent upon the participant remaining employed by the Company or a
subsidiary of the Company during such year. In the event of termination of
employment by reason of death, disability or retirement (each as determined by
the Committee) during the Plan year, an award shall be payable under this Plan
to the participant or the participant's estate for such year, which shall be
paid at the same time as the award the participant would have received for such
year had no termination of employment occurred, and which shall be equal to the
amount of such award multiplied by a fraction the numerator of which is the
number of full or partial calendar months elapsed in such year prior to
termination of employment and the denominator of which is the number twelve. A
participant whose employment terminates prior to the end of a Plan year for any
reason not excepted above shall not be entitled to any award under the Plan for
that year.
7. SHAREHOLDER APPROVAL AND COMMITTEE CERTIFICATION CONTINGENCIES; PAYMENT
OF ANY AWARDS Payment of any awards under this Plan shall be contingent upon
the affirmative vote of the shareholders of at least a majority of the votes
cast (including abstentions) at the annual meeting of shareholders held in 2000.
Unless and until such shareholder approval is obtained, no award shall be paid
pursuant to this Plan. Subject to the provisions of Paragraph 6 above relating
to death, disability and retirement, payment of any award under this Plan shall
also be contingent upon the Compensation Committee's certifying in writing that
the performance goals and any other material terms applicable to such award were
in fact satisfied, in accordance with applicable treasury regulations under Code
Section 162(m). Unless and until the Committee so certifies, such award shall
not be paid. Unless the Committee provides otherwise, (a) earned awards shall be
paid promptly following such certification, and (b) such payment shall be made
in cash (subject to any payroll tax withholding the Company may determine
applies).
To the extent necessary for purposes of Code Section 162(m), this Plan shall
be resubmitted to shareholders for their reapproval with respect to awards
payable for the taxable year of the Company commencing on and after 5th
anniversary of initial shareholder approval.
8. AMENDMENT, TERMINATION AND TERM OF PLAN The Board of Directors may
amend, modify or terminate this Plan at any time. The Plan will remain in effect
until terminated by the Board.
9. INTERPRETATION AND CONSTRUCTION Any provision of this Plan to the
contrary notwithstanding, (a) awards under this Plan are intended to qualify as
"qualified performance-based compensation" under Treasury Regulation 1.162-27(e)
and (b) any provision of the Plan that would prevent an award under the Plan
from so qualifying shall be administered, interpreted and construed to carry out
such intention and any provision that cannot be so administered, interpreted and
construed shall to that extent be disregarded. No provision of the Plan, nor the
selection of any eligible employee to participate in the Plan, shall constitute
an employment agreement or affect the duration of any participant's employment,
which shall remain "employment at will" unless an employment agreement between
the Company and the participant provides otherwise. Both the participant and the
Company shall remain free to terminate employment at any time to the same extent
as if the Plan had not been adopted.
10. GOVERNING LAW The terms of this Plan shall be governed by the laws of
the State of Nevada, without reference to the conflicts of laws principles
thereof.
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TO BE COMPLETED BY HOLDERS OF STATION COMMON STOCK, PAR VALUE $0.01 PER SHARE
STATION CASINOS, INC.
2411 WEST SAHARA AVENUE, LAS VEGAS, NEVADA 89102
The undersigned hereby appoints FRANK J. FERTITTA III and SCOTT M NIELSON,
and each of them, proxies each with full power of substitution, to vote all
stock of the undersigned at the annual meeting (the "Meeting") of stockholders
of Station Casinos, Inc. (the "Company") to be held May 23, 2000 at 10:00 a.m.
local time at Sunset Station Hotel & Casino, 1301 West Sunset Road, Henderson,
Nevada and/or at any adjournment of the Meeting, in the manner indicated below;
all in accordance with and as more fully described in the Notice of Annual
Meeting and accompanying Proxy Statement for the Meeting, receipt of which is
hereby acknowledged.
THE SHARES REPRESENTED BY THIS PROXY SHALL BE VOTED AS INDICATED BELOW:
(1) To elect two directors to serve until the 2003 annual meeting of the Company
and until their respective successors have been duly elected and qualified.
<TABLE>
<S> <C>
/ / FOR all nominees listed below (except as / / WITHHOLD AUTHORITY to vote for all nominees
marked to the contrary below). listed below.
</TABLE>
(INSTRUCTIONS: TO WITHHOLD AUTHORITY FOR AN INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME BELOW.)
R. Hal Dean Lowell H. Lebermann, Jr.
(2) To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the Company's 2000 fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
(3) To approve the Company's Senior Executive Annual Bonus Plan.
/ / FOR / / AGAINST / / ABSTAIN
(4) To vote in their discretion on such other business as may properly come
before the Meeting or any adjournment thereof.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED ON REVERSE SIDE)
<PAGE>
UNLESS AUTHORITY TO VOTE THEREFORE IS WITHHELD IN THIS PROXY CARD, IT IS THE
INTENTION OF THE PROXIES TO VOTE FOR THE PROPOSALS. IF ANY OTHER BUSINESS IS
PRESENTED, THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE AFOREMENTIONED PROXIES.
DATE _______________________________________________
SIGNATURE __________________________________________
PLEASE MARK, DATE AND SIGN AS YOUR NAME APPEARS TO
THE LEFT AND RETURN IN THE ENCLOSED ENVELOPE. IF
ACTING AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, STATE YOUR FULL TITLE AND AUTHORITY WHEN
SIGNING. IF THE SIGNER IS A CORPORATION, PLEASE SIGN
THE FULL CORPORATE NAME BY A DULY AUTHORITY OFFICER.
IF SHARES ARE HELD JOINTLY, EACH STOCKHOLDER NAMED
SHOULD SIGN.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR AN ANNUAL MEETING--MAY 23, 2000,
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PRE-PAID
ENVELOPE.
