SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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-12
STATION CASINOS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(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):
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/ / 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:
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STATION CASINOS, INC.
2411 WEST SAHARA AVENUE
LAS VEGAS, NEVADA 89102
(702) 367-2411
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD: MAY 22, 2001
TO BE HELD AT: TEXAS STATION GAMBLING HALL & HOTEL
------------------------
To the Stockholders:
NOTICE is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Station Casinos, Inc., a Nevada corporation (the "Company") will be
held at Texas Station Gambling Hall & Hotel on May 22, 2001, beginning at
10:00 a.m. local time, for the following purposes:
1. To elect three directors to serve for a term of three years until the
2004 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 2001 fiscal year;
3. To consider and transact such other business as may properly come before
the Annual Meeting or any adjournment thereof;
all as more fully described in the accompanying Proxy Statement.
Holders of Common Stock, par value $.01 per share, at the close of business
on March 26, 2001, 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, OR VOTE BY
TELEPHONE AT THE TOLL-FREE NUMBER INCLUDED ON THE ACCOMPANYING PROXY CARD.
Your prompt response will be appreciated.
By Order of the Board of Directors
Scott M Nielson
SECRETARY
Las Vegas, Nevada
April 16, 2001
STATION CASINOS, INC.
2411 WEST SAHARA AVENUE
LAS VEGAS, NEVADA 89102
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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 22, 2001 (the "Annual Meeting") to be held at
10:00 a.m. local time at Texas Station Gambling Hall & Hotel, 2101 Texas Star
Lane, North Las Vegas, Nevada. This Proxy Statement and the enclosed form of
proxy are being sent to Stockholders on or about April 16, 2001.
At the Annual Meeting, stockholders will be asked to consider and vote upon
the following matters:
ITEM I The election of three directors to serve until the 2004
Annual Meeting.
ITEM II A proposal to ratify the appointment of Arthur Andersen LLP
as the Company's independent public accountants for the
Company's 2001 fiscal year.
Any stockholder giving a proxy may revoke it at any time prior to its
exercise at the Annual Meeting by giving notice of such revocation either
personally or in writing to the Secretary of the Company at the Company's
executive offices, by subsequently executing and delivering another proxy or by
voting in person at the Annual Meeting.
The Board of Directors believes that the election of its director nominees
and the ratification of the appointment of the independent public accountants
are in the best interests of the Company and its stockholders and recommends the
approval of each of the proposals contained in this Proxy Statement.
VOTING
Shares represented by duly executed and unrevoked proxies in the enclosed
form received by the Board of Directors will be voted at the Annual Meeting in
accordance with the specifications made therein by the stockholders, unless
authority to do so is withheld. If no specification is made, shares represented
by duly executed and unrevoked proxies in the enclosed form will be voted FOR
the election as directors of the nominees listed herein, FOR the ratification of
the appointment of independent public accountants and, with respect to any other
matter that may properly come before the Annual Meeting, in the discretion of
the persons voting 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 26, 2001 (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 57,725,121 shares of Common Stock outstanding. Each share of Common
Stock is entitled to one vote on all matters presented at the Annual Meeting.
VOTE REQUIRED
The election of the director nominees requires a plurality of the votes cast
in person or by proxy at the Annual Meeting. Under Nevada law, the Company's
Restated Articles of Incorporation (the "Articles") and the Company's Restated
Bylaws (the "Bylaws"), shares as to which a stockholder abstains or withholds
from voting on the election of directors and shares to which a broker indicates
that it does not have discretionary authority to vote ("broker non-votes") on
the election of directors
will not be counted as voting thereon and therefore will not affect the election
of the nominees receiving a plurality of the votes cast.
Ratification of the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the Company's 2001 fiscal year requires 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 or II.
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). 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 James E. Nave, D.V.M. Dr. Nave was
nominated on March 14, 2001 by the members of the Board of Directors to fill the
vacancy created by the resignation of Richard J. Heckmann pursuant to a letter
dated March 1, 2001. 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 2003. Class II consists of Glenn C. Christenson, Blake L. Sartini and James
E. Nave, D.V.M., 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 three directors are to be elected to serve until the
2004 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
election of the three nominees listed below. The persons designated as proxies
will have discretion to cast votes for other persons in the event any nominee
for director is unable to serve. At present, it is not anticipated that any
nominee will be unable to serve.
The names and certain information concerning the persons to be nominated as
directors by the Board of Directors at the Annual Meeting are set forth below.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEES
LISTED BELOW.
GLENN C. CHRISTENSON. Mr. Christenson was appointed Chief Administrative
Officer in March 1997 and has served as Executive Vice President of the Company
since February 1994. From 1989 to 1993, he served as Vice President of the
Company. He has served as Chief Financial Officer since 1989, as Treasurer since
1992 and as a director of the Company since 1993. Mr. Christenson is a Certified
Public Accountant. From 1983 to 1989, he was a partner of the international
accounting firm of Deloitte Haskins & Sells (now Deloitte & Touche), where he
served as partner-in-charge of audit services for the Nevada practice and
National Audit partner for the Hospitality Industry. Mr. Christenson has served
on the Board of Directors of the Nevada Resort Association and was Chairman of
the Nevada Resort Association's IRS Liaison Committee. He currently serves as a
director of Nevada Community Bank. He recently served on the Executive Committee
and Board of Directors of the Boulder Dam Area Boy Scouts Council.
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 18 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.
JAMES E. NAVE, D.V.M. Dr. Nave has been a partner in the Tropicana Animal
Hospital since 1974, and has been the owner and manager of multiple veterinary
hospitals since 1976. Dr. Nave has also served on the Board of Directors for
Bank West of Nevada since 1994. Dr. Nave is a member of the American Veterinary
Association and currently serves as its president, the Nevada Veterinary
Association, the Clark County Veterinary Medical Association, the National
Academy of Practitioners, the Western Veterinary Conference, and was a member of
the University of Missouri, College of Veterinary Medicine Development Committee
from 1984 to 1992. He was also a member of the Nevada State Athletic Commission
from 1988 to 1999 and served as its chairman from 1989 to 1992 and from 1994 to
1996.
1
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.
NAME AGE POSITION
- ---- --- --------
Frank J. Fertitta III(*).......... 39 Chairman of the Board, Chief Executive
Officer and Director
Lorenzo J. Fertitta(*)............ 32 President and Director
Glenn C. Christenson.............. 51 Executive Vice President, Chief Financial Officer,
Chief
Administrative Officer, Treasurer and Director
Scott M Nielson................... 43 Executive Vice President, General Counsel and Secretary
Blake L. Sartini(*)............... 42 Executive Vice President, Chief Operating Officer and
Director
R. Hal Dean....................... 84 Director
James E. Nave, D.V.M.............. 56 Director
Lowell H. Lebermann, Jr........... 61 Director
Delise F. Sartini(*).............. 41 Director
- ------------------------
(*) Frank J. Fertitta III and Lorenzo J. Fertitta are brothers and Delise F.
Sartini is their sister. Delise F. Sartini is married to Blake L. Sartini.
Set forth below are the Class I and Class III directors whose terms do not
expire this year together with non-director executive officers and certain key
management personnel of the Company, along with certain information regarding
these individuals.
R. HAL DEAN. Mr. Dean has served as a director of the Company since
June 1993 and is chairman of the Human Resources Committee. Mr. Dean retired in
1982 from the Ralston Purina Company, having served 44 years in various
capacities including Chairman of the Board (1968-1982) and Chief Executive
Officer (1964-1982). Mr. Dean has served on several other Boards of Directors
including those of Gulf Oil Corp., Pittsburgh, Pennsylvania (1970-1985), Chase
Manhattan Bank International Advisory Group, New York, New York (1965-1970),
Mercantile Trust Co., St. Louis, Missouri (1969-1987), General American Life
Insurance Co., St. Louis, Missouri (1972-1987), Barnes Hospital, St. Louis,
Missouri (1979-1985), LaBarge, Inc., St. Louis, Missouri (1984-1998) 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, 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.
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.
Mr. Fertitta also served as President of the Company from 1989 until July 2000.
He has held senior management positions since 1985, when he was
2
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.
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 Brignone Godfrey), where he
specialized in gaming law and land use planning and zoning. Mr. Nielson is a
member of the American Bar Association, the Nevada Bar Association and the
International Association of Gaming Attorneys.
LORENZO J. FERTITTA. Mr. Fertitta has served as President of the Company
since July 2000 and has served as a director since 1991. He served as President
and Chief Executive Officer of Fertitta Enterprises, Inc. from June 1993 to
July 2000, where he was responsible for managing an investment portfolio
consisting of marketable securities and real property. Mr. Fertitta was a
co-founder of Southwest Gaming in 1990. From 1991 to 1993, he served as Vice
President of the Company. Mr. Fertitta served as a commissioner on the Nevada
State Athletic Commission from November 1996 until July 2000. In February 1999,
the Company entered into a consulting agreement with Mr. Fertitta to provide
financial advisory services, which terminated concurrently with his appointment
as President in July 2000.
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 ten years. Ms. Sartini was a co-founder of Southwest Gaming
in 1990. 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 18 times during the 2000 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 2000 fiscal year.
The current members of each of the Board of Directors' committees are listed
below.
THE AUDIT COMMITTEE
The current members of the Audit Committee are Lowell H. Lebermann, Jr.,
Chairman, R. Hal Dean and James E. Nave, D.V.M. Mr. Heckmann served as a member
of the Audit Committee prior to his resignation from the Board of Directors in
March 2001. During the 2000 fiscal year, the Audit Committee met six times.
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.
3
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 stock options and restricted shares to employees that are issued under
the Stock Compensation Programs other than awards under the Nonemployee
Directors Plan. The Human Resources Committee met ten times during the 2000
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, $1,500 for each
committee meeting attended, a monthly fee of $3,333 and an annual fee of $1,500
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 Programs" as described hereinafter.
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In the 2000 fiscal year, the Human Resources Committee consisted of R. Hal
Dean, Chairman, Lowell H. Lebermann, Jr. and Richard J. Heckmann. James E. Nave,
D.V.M. replaced Mr. Heckmann on the Human Resources Committee in March 2001.
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 2000 fiscal year with
the following exception: Mark Brown, a former executive of the Company, 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.
4
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table sets forth, as of March 15, 2001, 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 (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.
BENEFICIAL OWNERSHIP
OF SHARES
-----------------------
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1)(2) NUMBER(3) CLASS
- ------------------------------------------ --------- ----------
Frank J. Fertitta III....................................... 10,292,910 16.9
Blake L. Sartini(4)......................................... 7,415,461 12.6
Lorenzo J. Fertitta......................................... 6,594,018 11.4
Delise F. Sartini(4)........................................ 6,122,926 10.7
Janus Capital Corporation(5)................................ 3,885,074 6.8
Par Capital Management, Inc.(6)............................. 3,204,000 5.6
Wanger Asset Management(7).................................. 2,888,500 5.1
Glenn C. Christenson(8)..................................... 843,252 1.4
Scott M Nielson(9).......................................... 623,262 1.1
R. Hal Dean................................................. 69,000 *
Lowell H. Lebermann, Jr..................................... 54,000 *
James E. Nave, D.V.M........................................ 15,000 *
Executive Officers and Directors as a Group (9 persons)..... 26,028,212 41.0
- --------------------------
* 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 3,310,540; Blake L. Sartini 1,091,344;
Lorenzo J. Fertitta 223,500; Delise F. Sartini 21,940; Glenn C. Christenson
607,067; Scott M Nielson 454,831; R. Hal Dean 52,500; Lowell H. Lebermann,
Jr. 52,500 and James E. Nave, D.V.M. 15,000.
(2) The address of each of the stockholders named in this table other than Janus
Capital Corporation, Par Capital Management, Inc. and Wanger Asset
Management 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 Janus Capital Corporation is 100 Fillmore Street, Denver,
Colorado 80206. The SEC filing date is February 15, 2001 for Janus Capital
Corporation.
(6) The address of Par Capital Management, Inc. is One Financial Center, Suite
1600, Boston, Massachusetts 02111.
(7) The address of Wanger Asset Management is 227 West Monroe, Suite 3000,
Chicago, Illinois 60606.
(8) Includes 86,185 shares owned by Mr. Christenson who shares voting and
investment power with his wife.
(9) Includes 58,431 shares owned by Mr. Nielson who shares voting and investment
power with his wife and 300 shares in which his wife has sole voting and
investment power.
5
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to the Chief Executive Officer of the Company and to each of the four
most highly compensated executive officers of the Company (other than the Chief
Executive Officer) (collectively, the "Executive Officers") for services
rendered to the Company in all capacities during the fiscal years ended
December 31, 2000, December 31, 1999 and the nine month period ended
December 31, 1998 (the "Transition Period 1998" or "1998T").
SUMMARY COMPENSATION TABLE
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)
- --------------------------- --------- --------- --------- ---------- ---------- ------------
Frank J. Fertitta III.............. 2000 1,286,538 487,500 -- -- 652,197
Chairman of the Board 1999 1,236,539 1,750,000 3,440,625 150,000 252,348
and Chief Executive Officer 1998T 765,962 790,000 -- 250,000 271,647
Lorenzo J. Fertitta................ 2000 343,269 297,500 -- 750,000 10,445
President
Glenn C. Christenson............... 2000 636,538 195,000 -- -- 531,527
Executive Vice President, Chief 1999 611,385 700,000 1,146,875 50,000 270,814
Financial Officer, 1998T 409,965 325,000 -- 150,000 237,937
Chief Administrative Officer
and
Treasurer
Scott M Nielson.................... 2000 493,269 150,000 -- -- 320,771
Executive Vice President, 1999 474,500 550,000 917,500 40,000 177,625
General Counsel and 1998T 302,025 260,000 -- 100,000 99,079
Secretary
Blake L. Sartini................... 2000 636,538 195,000 -- -- 324,284
Executive Vice President 1999 606,462 700,000 1,146,875 50,000 162,491
and Chief Operating Officer 1998T 398,300 325,000 -- 150,000 137,678
- --------------------------
(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 years ended December 31, 2000, December 31, 1999, and the
Transition Period 1998, amounts include salary deferred under the Company's
Deferred Compensation Plan of $0, $0 and $43,462 for Frank Fertitta,
$227,543, $177,444 and $105,775 for Mr. Christenson, and $43,846, $0 and $0
for Mr. Nielson.
(3) Amounts shown are the bonus amounts earned for the fiscal years without
consideration as to the year of payment. For the fiscal years ended
December 31, 2000, December 31, 1999, and the Transition Period 1998,
amounts include bonuses deferred under the Company Deferred Compensation
Plan of $195,000, $600,000 and $320,288 for Mr. Christenson, and $30,000,
$275,000 and $250,000 for Mr. Nielson.
(4) For the fiscal years ended December 31, 2000, December 31, 1999, and the
Transition Period 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.
(5) As of December 31, 2000, the total number of shares of restricted stock held
by Messrs. Frank Fertitta, Christenson, Nielson, and Sartini, and the value
of such shares as of the close of trading on such date, was 225,000, 75,000,
60,000 and 75,000, and $3,360,938, $1,120,313, $896,250 and $1,120,313,
respectively.
(6) These amounts represent premiums for life and disability insurance policies
provided by the Company, the Company's matching contribution to the
Executive Officers' Deferred Compensation Plan for the Executive's account
and expenses paid by the Company for country club memberships and physical
fitness programs. For the fiscal years ended December 31, 2000,
December 31, 1999, and the Transition Period 1998, these amounts include
"split-dollar" life insurance premiums for Messrs. Frank Fertitta,
Christenson, Nielson, and Sartini. The policy premiums will be returned to
the Company through the cash surrender value upon termination of the
agreement or in the form of death benefit proceeds.
6
OPTIONS GRANTED IN FISCAL 2000
The following table provides information related to options to purchase
Common Stock granted to the Executive Officers during the fiscal year ended
December 31, 2000, and the number and value of such options held as of the end
of such fiscal year. For the last fiscal year the Company did not grant any
SARs.
OPTION GRANTS IN FISCAL 2000
INDIVIDUAL GRANTS
-------------------------------------------------------
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES AT ASSUMED ANNUAL RATES
UNDERLYING % OF TOTAL OF STOCK PRICE APPRECIATION
OPTIONS OPTIONS GRANTED EXERCISE OR OPTION FOR OPTION TERM
GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------
NAME (#)(1) FISCAL 2000 ($/SHARE) DATE 5%($) 10%($)
- ---- ---------- --------------- ----------- ---------- ------------ -------------
Lorenzo J. Fertitta...... 750,000 42.3 13.50 7/23/2010 6,367,558 16,136,642
- ------------------------
(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.
FISCAL 2000 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, 2000. None of the Executive Officers exercised options to purchase
Common Stock during the fiscal year ended December 31, 2000.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000 AND
THE FISCAL YEAR 2000 OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 2000(#) DECEMBER 31, 2000($)(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
Frank J. Fertitta III..................... 3,310,540 501,000 13,812,370 3,133,688
Lorenzo Fertitta.......................... 223,500 900,000 759,469 1,950,000
Glenn C. Christenson...................... 607,067 322,500 4,605,072 2,482,219
Scott M Nielson........................... 454,831 228,000 3,418,001 1,709,250
Blake L. Sartini.......................... 1,091,344 261,000 5,691,363 1,963,688
- ------------------------
(1) Options are "in-the-money" if, on December 31, 2000, the market price of the
Common Stock ($14.94) 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, 2000, 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 and Blake L. Sartini entered into employment agreements, dated as of
December 1, 1999, and the Company and Lorenzo J. Fertitta entered into an
employment agreement dated as of July 31, 2000 (the "Employment Agreements").
Pursuant to the terms of the Employment Agreements, Frank Fertitta has agreed to
serve as the Chief Executive Officer and Chairman of the Board; Lorenzo Fertitta
has agreed to serve as President of the Company; Mr. Christenson has agreed to
serve as the Executive Vice President,
7
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; and Mr. Sartini has agreed to serve as
Executive Vice President and Chief Operating Officer of the Company. Each of the
Employment Agreements terminates on November 30, 2004, except for Lorenzo
Fertitta's Employment Agreement which terminates on July 30, 2005, 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. Frank Fertitta's Employment Agreement does
not prohibit Frank 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. Lorenzo Fertitta's Employment Agreement does not prohibit
him from engaging in charitable and community affairs, managing his personal
investments and, subject to approval by a majority of the Board of Directors,
serving as a member of the board of directors of other corporations during the
term of his employment.
Each Employment Agreement provides for a base salary (to be reviewed
annually for increase but not decrease), an annual cash bonus in an amount
determined 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 Frank Fertitta, $850,000
for Lorenzo Fertitta, $600,000 for Mr. Christenson, $475,000 for Mr. Nielson and
$600,000 for Mr. Sartini. However, the Human Resources Committee of the Board
and each of the Executive Officers have agreed to the following base salaries
for 2001: $1,144,000 for Frank Fertitta, $748,000 for Lorenzo Fertitta, $572,000
for Mr. Christenson, $440,000 for Mr. Nielson and $572,000 for Mr. Sartini. The
Executive Officers are also entitled to certain other benefits and perquisites
in addition to those made available to Company management generally. These other
benefits include participation in the Supplemental Executive Retirement Plan in
the case of Frank Fertitta, and participation in the Supplemental Management
Retirement Plan in the case of Messrs. Christenson, Nielson, Sartini and Lorenzo
Fertitta, participation in the Company's Special Long-Term Disability Plan,
group health insurance coverage through the Company's Exec-U-Care Medical Plan
and supplemental life insurance in the following amounts: not less than
$30 million aggregate coverage for Frank Fertitta, $7.5 million for
Mr. Christenson, $7.5 million for Mr. Nielson, $5.5 million for Mr. Sartini and
$5.5 million for Lorenzo Fertitta. 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 Frank Fertitta, an automobile. Mr. Christenson, Mr. Nielson, and
Mr. Sartini also participate in the Company's Long-Term Stay-On Performance
Incentive Plan.
In the event that an Executive Officer's employment is terminated as a
result of his death or Disability (as defined in his Employment Agreement), the
Executive Officer or his legal representative will receive, among other
payments, all salary due to the Executive Officer under his Employment Agreement
as of the date of his death or Disability, and, in the case of Frank 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 Lorenzo Fertitta, reimbursement of
the expenses incurred but not paid prior to such termination, and in the case of
Frank Fertitta, immediate vesting of restricted stock and unvested stock options
and continuation of health and welfare benefits for
8
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, and, in the
case of Lorenzo Fertitta, a payment equal to three times 170% of his base
salary, a portion of which is conditioned upon the Executive Officer not
engaging in certain competitive acts. In the event of Frank Fertitta's
termination without Cause or for Good Reason (as defined in Frank 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 Frank 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 Frank Fertitta and Lorenzo Fertitta, will receive a payment equal
to three times 160% of his base salary. Under such circumstances, Frank 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, and Lorenzo Fertitta will receive a
payment equal to three times 170% of his base salary. Additionally, in the event
the termination of the employment of any Executive Officer, except Frank
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,
and in the case of Lorenzo Fertitta, an amount of cash equal to the greater of
five times 170% 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 Lorenzo
Fertitta's execution of a general release and covenant not to sue, 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 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 Frank Fertitta's
employment is terminated following a Change in Control, either by the Company
for any reason other than for Cause or by Frank Fertitta for Good Reason (as
defined in Frank Fertitta's Employment Agreement), Frank 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, Frank 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
9
employment, multiplied by (B) the difference of one, minus Frank 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 PROGRAMS
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.
The Company also has adopted the 1999 Stock Compensation Program (combined with
the Stock Compensation Program "the Programs") which includes (i) the 1999
Compensatory Stock Option Plan providing for the grant of nonqualified stock
options to employees who are not officers or directors of the Company and
(ii) the 1999 Share Plan which grants shares of common stock to employees based
on their length of service with the Company. 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 Programs are 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 Programs, 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 Programs; (b) the time or times
at which the options and restricted shares may be granted under the Programs;
(c) the number of shares subject to each option and restricted share, the option
price and the duration of each option granted under the Programs; 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) 15,000 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
7,500 shares of Common Stock per year. The nonemployee directors who served in
fiscal 2000 did not receive their annual grant in fiscal 2000 and will receive
15,000 shares each in 2001. 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.
A maximum of 17,710,500 shares of Common Stock have been reserved for
issuance under the Programs. As of December 31, 2000, options to purchase an
aggregate of 10,765,592 shares of Common Stock under the Programs were
outstanding, 6,479,932 of which were exercisable as of such date. The Stock
Compensation Program will terminate on June 1, 2003 and the 1999 Stock
Compensation Program will terminate on December 7, 2009, unless terminated
earlier by the Board of Directors, and no options or restricted shares may be
granted under the Programs after such dates.
10
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*
AT LEAST
55 YEARS OLD
AND 10 OR MORE
REMUNERATION($) YEARS OF SERVICE
- --------------- ----------------
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
- ------------------------
* 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 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,
2000, Frank J. Fertitta III had six years of credited service under the SERP.
11
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*
AT LEAST
60 YEARS OLD
AND 10 OR MORE
REMUNERATION($) YEARS OF SERVICE
- --------------- ----------------
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
- ------------------------
* 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 joint and 50% survivor annuity. The Company
has no duty whatsoever to set aside
12
or invest any amounts under or in respect to the SMRP. As of December 31, 2000
Messrs. Glenn C. Christenson, Scott M Nielson and Blake L. Sartini have six
years of service credited under the SMRP.
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 award
will be restricted from April 1, 2001 through April 1, 2004 (the "Restriction
Period").
13
Each Executive Officer must continue in employment during the Restriction Period
to receive the full amount of his award. The award becomes unrestricted as
follows: (1) 50% of the total number of shares on April 1, 2003 and (2) 50% of
the total number of shares on April 1, 2004. Termination of employment, for any
reason during the Restriction Period, will result in forfeiture of any remaining
restricted shares of the Company.
SPLIT-DOLLAR INSURANCE PROGRAM
In August 1995, split-dollar life insurance agreements were entered into for
the Chief Executive Officer and the Executive Officers. 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 Frank Fertitta, $7.5 million and $0 for Mr. Christenson,
$7.5 million and $0 for Mr. Nielson, and $5.5 million and $10 million for
Mr. Sartini.
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.
14
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, 2000, 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 based on 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 2000 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 2000. The
Human Resources Committee targeted total cash compensation paid to the Company's
executives to 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.
15
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 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 are
based on the 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.
2000 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 2000 BASE SALARY
The Human Resources Committee established Mr. Fertitta's annual base salary
for the fiscal year 2000 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 2000.
Mr. Fertitta's annual base salary was increased during the fiscal year 2000 from
$1,250,000 to $1,300,000. Effective January 1, 2001, Mr. Fertitta's annual base
salary was decreased to $1,144,000.
16
THE CHIEF EXECUTIVE OFFICER'S 2000 ANNUAL INCENTIVE
The annual incentive earned by the Chief Executive Officer for the fiscal
year 2000 performance was $487,500. 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 $.3 million of non-deductible compensation in the fiscal year
2000. 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.
James E. Nave, D.V.M.
17
REPORT OF AUDIT COMMITTEE(2)
During Fiscal 2000, the Audit Committee of the Board of Directors developed
a charter for the Committee, which was approved by the full Board on March 28,
2000. The complete text of the new charter, which reflects standards set forth
in new SEC regulations and New York Stock Exchange rules, is reproduced in the
appendix to this Proxy Statement.
In conjunction with its activities during the Company's fiscal year, the
Audit Committee has reviewed and discussed the Company's audited financial
statements with management of the Company. The members of the Audit Committee
have also discussed with the Company's independent auditors the matters required
to be discussed by SAS 61 (Codification of Statements on Auditing Standards, AU
Section 380). The Audit Committee has received from the Company's independent
accountants the written disclosures and the letter required by Independence
Standards Board Standard No. 1, and has discussed with the independent
accountants the independent accountants' independence. Based on the foregoing
review and discussions, the Audit Committee recommended to the Board of
Directors of the Company that the audited financial statements be included in
the Company's Annual Report on Form 10-K for the Company's fiscal year ended
December 31, 2000.
Audit Committee
Lowell H. Lebermann, Jr., Chairman
R. Hal Dean
James E. Nave, D.V.M.
FEES PAID TO INDEPENDENT PUBLIC ACCOUNTANTS
In addition to performing the audit of the Company's consolidated financial
statements, Arthur Andersen, LLP provided various other services during 2000.
The aggregate fees billed for 2000 for each of the following categories of
services are set forth below:
Audit and review of the Company's
2000 financial statements................................. $162,000
All other services.......................................... $360,000
Arthur Andersen, LLP did not provide any services related to financial
information systems design and implementation during 2000.
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(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, the
Report of Audit Committee shall not be incorporated by reference in any such
filings.
18
STOCK PERFORMANCE GRAPH(3)
The graph below compares the cumulative total stockholder return of the
Company, with the cumulative total return of the Standard & Poor's 500 Stock
Index ("S&P 500") and the cumulative total return of a peer group with
comparable market capitalization. The new peer group consists of Ameristar
Casinos, Inc., Argosy Gaming Co., Aztar Corp., Boyd Gaming Corp., Harrah's
Entertainment, Inc., Pinnacle Entertainment, Inc., Isle of Capri Casinos, Inc.,
Mandalay Resort Group, MGM Grand, Inc. and Park Place Entertainment Corp. The
performance graph assumes that $100 was invested on March 31, 1996 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 AND A PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
STATION CASINOS, INC. S & P 500 PEER GROUP
3/96 100.00 100.00 100.00
3/97 69.89 119.82 73.15
3/98 126.88 177.34 76.50
12/98 70.43 210.07 49.34
12/99 193.02 247.77 94.88
12/00 192.74 220.16 95.60
* $100 INVESTED ON 3/31/96 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS.
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(3) 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.
19
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 $287,500 through
June 2010. In July 2010, 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.
DIRECTORS
The Company employs Delise F. Sartini as Vice President of Community Affairs
at Palace Station. During the fiscal years ended December 31, 2000 and
December 31, 1999, the Company paid salary to Delise F. Sartini of $67,575 and
$69,525, 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 was for a term of five years and provided 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. This contract was terminated when Mr. Fertitta was appointed President
of the Company in July 2000. During the year ended December 31, 2000,
Mr. Fertitta was paid $140,000 under this contract. Under the provisions of his
consulting services agreement, Mr. Fertitta was granted 150,000 options to
20
purchase the Company's Common Stock at $5.25 in December 1998 and 75,000 options
to purchase the Company's Common Stock at $15.29 in December 1999.
TRAVELSCAPE.COM, INC.
Zucchero, LLC, a Nevada limited liability company, beneficially owned by the
Fertitta Trust, Frank J. Fertitta, III, Blake L. Sartini and Lorenzo J. Fertitta
held a 10% investment in Travelscape.com, Inc. (formerly Las Vegas Reservation
Systems), which was sold to a third party in March 2000. From 1993 through the
sale date, the Company maintained a wholesale travel agent contract to provide
varying amounts of hotel rooms to Travelscape.com, Inc. The Company received
hotel revenue of approximately $334,000 and $345,000 for the three months ended
March 31, 2000 and the fiscal year ended December 31, 1999, respectively.
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 2001 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 2001.
Unless a contrary indication is made on the enclosed proxy card, it is the
intention of the persons named therein to vote FOR the selected accountants.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be presented at
the Annual Meeting. If any other matters should properly come before the Annual
Meeting, the persons named in the proxy will vote the proxies according to their
best judgment.
STOCKHOLDER PROPOSALS
Stockholder proposals, if any, that may be considered for inclusion in the
Company's proxy materials for the fiscal 2001 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, 2001.
21
APPENDIX A
STATION CASINOS, INC.
AUDIT COMMITTEE CHARTER
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OVERVIEW
Audit Committees are required for all New York Stock Exchange companies. The
Station Casinos, Inc. Audit Committee (the Committee) is designated by, and
reports to, the Board of Directors (the Board). The Committee's purpose is to
assist the Board in fulfilling its fiduciary responsibilities by evaluating the
Company's overall control environmental and corporate governance, including, but
not limited to, reviews of: financial information that will be published, the
system of internal accounting controls established by management, surveillance
and internal security requirements and procedures, and the internal and external
audit processes. The Committee is the Board's principal agent in monitoring the
independence and performance of the Company's independent public accountants,
the integrity of management, and appropriateness of accounting and other
policies, and the adequacy of disclosure to shareholders. The Committee's
directives and authority are summarized in this Audit Committee Charter which is
approved by the Board. The Committee shall review and reassess the adequacy of
the Charter annually.
MEMBERSHIP
The Committee shall be composed of three or more members of the Board of
Directors who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company. Each of such
members of the Committee shall be financially literate or must achieve such
status through training within six months of being appointed to the Committee
and at least one of such members shall have an accounting or related financial
management experience. As used herein, financial literacy means the ability to
read and understand fundamental financial statements, including the balance
sheet, income statement and cash flow statement. Members of the Committee shall
be appointed and removed by the Board and shall have a term of one year.
Committee members may serve successive one-year terms without limitation. The
Chairperson of the Committee will be selected by the Board and will serve in
that capacity for one year. The Chairperson may serve successive one-year terms
without limitation.
AUTHORITY
The Committee is granted the authority to perform the duties enumerated in
this charter and to investigate any activity of the Company it deems necessary
or appropriate in the performance of its duties hereunder. Without limiting the
generality of the foregoing and for purposes of clarification, the Company's
independent public accountants is ultimately accountable to the Board and the
Committee, and the Committee and Board have the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the
independent public accountants (or to nominate the independent public
accountants to be proposed for shareholder approval in any proxy statement). All
Company employees and all outside advisors of the Company shall cooperate with
requests of the Committee made in the course of performance of the Committee's
duties hereunder. The Committee is also empowered to retain at the expense of
the Company persons and firms whose services are necessary or appropriate to
assist the Committee in fulfilling its responsibilities described in this
Charter. However, the Committee will notify the Board of such actions.
A-1
MEETINGS
The Committee shall meet at least three times per year and as many
additional times as the Committee deems necessary or appropriate.
ATTENDANCE
The Chairperson of the Committee may request that members of management, the
Vice President of Internal Audit, representatives of the independent public
accounting firm of the Company and other advisors and/or employees be present at
meetings of the Company and/or provide such information to the Committee as may
be reasonably requested by the Committee.
MINUTES
Minutes of each meeting are to be prepared and subsequently distributed to
the Board. The Secretary will retain a copy of such minutes in the Company's
permanent files.
DUTIES
The Committee's responsibilities shall include, but not be limited to, the
following, which may be revised by the Board from time to time.
A. General
1. Inform the independent public accountants and management that the
independent public accountants, management and the Committee may
communicate with each other at any and all times and that the
Committee shall have access to all information reasonably necessary
to permit the Committee to fulfill its duties and responsibilities
under this Charter. The Committee Chairperson may call a meeting
whenever deemed necessary or appropriate.
2. Assure that Committee members have familiarity with the accounting
and reporting principles included in the Company's financial
statements and with other significant compliance requirements of the
Company.
3. Review significant reports on the results of regulatory and other
audits and monitor management's corrective action, where applicable.
B. Independent Public Accountants
1. Recommend to the Board the selection of independent public
accountants for the quarterly reviews and the annual audit, giving
full consideration to independence, effectiveness and cost.
2. Review the scope and general extent of the independent public
accountants' annual audit, including the independent public
accountants' engagement letter. The Committee's review shall
encompass an understanding of factors considered in determining the
audit scope, including:
- Industry and business risk characteristics of the Company
- External reporting requirements
- Materiality of the various business segments of the Company
- Quality of internal accounting controls
- Involvement of and reliance on the work of internal auditors
A-2
3. Ensure that the independent public accountants submits on a periodic
basis to the Committee a formal written statement delineating all
relationships between the independent public accountant and the
Company and actively engage in a dialogue with the independent public
accountants with respect to any disclosed relationships or services
that may impact the objectivity and independence of the independent
public accountants. Recommend that the Board of Directors take
appropriate action in response to the independent public accountant's
report to satisfy itself of the independent public accountant's
independence. Review significant non-audit services to be performed
by the independent public accountants to ensure that such services
will not impair the objectivity required for the audit.
4. Review with management and the independent public accountants,
financial results for each quarter and the fiscal year. This review
shall include:
- The Company's reports on Form 10Q and 10K, including the financial
statements and supplemental disclosures required by generally
accepted accounting principles and the Securities and Exchange
Commission before release to the public
- Significant transactions which have not previously been reviewed
and approved by the Board of Directors
- Any limitations in scope or significant disagreements with
management encountered during the course of the audit or review, as
applicable
- Significant adjustments proposed by the independent public
accountants
5. Review comments and recommendations on changes in internal controls
and management's responses thereto.
C. Accounting, Reporting and Internal Audit
1. Review with management the adequacy of the Company's system of
internal controls for providing reasonable assurance that the
Company's prescribed policies and procedures are followed and that
transactions are properly recorded and reported.
2. Review and approve major changes in the Company's accounting
policies, principles or practices.
3. Review and approve major changes in the accounting, financial
reporting or internal control related duties of the Chief Financial
Officer and Vice President of Internal Audit.
4. Review recommendations from management regarding changes in the Vice
President of Internal Audit position for approval by the Committee.
5. Review the activities, annual plan and budget of the internal audit
function and assure that he annual plan adequately focuses on
significant risk areas.
6. Ascertain that internal audit has unrestricted access to all relevant
records, properties and personnel.
7. Review recommendations and reportable findings of the internal
auditors and assure that appropriate actions are taken by management.
D. Security
1. Ascertain that the Company has adequate policies and practices for
assuring the security of the Company's assets and proprietary
information.
A-3
2. Periodically meet with the General Counsel, the Gaming
Surveillance/Internal Security Officer and Vice President of
Regulatory Compliance, where deemed necessary by the Committee for
the purpose of reviewing any significant criminal acts or
noncompliance with regulatory matters.
E. Reporting Requirements
1. The Committee Chairperson will update the full Board regarding the
significant items of discussion at each Committee meeting. Additional
reports on matters of special interest will be submitted to the Board
as appropriate. In addition to Board communication, the following
information will be reported to the shareholders of the Company in
the annual proxy statement: (1) confirmation that the Company has a
formal, documented Audit Committee Charter, (2) confirmation that the
Committee satisfied its obligations under the charter in the prior
year, (3) the full text of the Audit Committee Charter at least once
every three years and after any significant modification is approved
by the Board of Directors, and (4) the report required by the rules
of the Securities Exchange Commission
F. Other
1. While the Committee has the responsibilities and authority set forth
in this Charter, it is not the duty of the Committee to plan or
conduct audits or to determine that the Company's financial
statements are complete and accurate and are in accordance with
generally accepted accounting principles. This is the responsibility
of management and the independent public accountants.
A-4
STATION CASINOS, INC.
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MAY 22, 2001
10:00 A.M. LOCAL TIME
TEXAS STATION GAMBLING HALL & HOTEL
2101 TEXAS STAR LANE
NORTH LAS VEGAS, NEVADA
STATION CASINOS, INC.
2411 WEST SAHARA AVENUE
LAS VEGAS, NV 89102 PROXY
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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 22, 2001 at 10:00 a.m. local time
at Texas Station Gambling Hall & Hotel, 2101 Texas Star Lane, North Las Vegas,
Nevada and/or at any adjournment of the Meeting, in the manner indicated on the
reverse side; 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.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR AN ANNUAL MEETING -- MAY 22, 2001
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PRE-PAID
ENVELOPE.
SEE REVERSE FOR VOTING INSTRUCTIONS.
THERE ARE TWO WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME
MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK --- EASY --- IMMEDIATE
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week, until 12:00 p.m. (ET) on May 21, 2001.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
o Follow the simple instructions the voice provides you.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Station Casinos, Inc., c/o Shareowner Services-,
P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE, PLEASE DO NOT MAIL YOUR PROXY CARD
COMPANY #
CONTROL #
[GRAPHIC OMITTED]
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
1. Election of three directors
to serve until the
2004 annual meeting:
01 Glenn C. Christenson
02 Blake L. Sartini
03 James E. Nave
[ ] Vote FOR all nominees (except as marked)
[ ] Vote WITHHELD from all nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE,
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the Company's 2001 fiscal year.
For [ ] Against [ ] Abstain [ ]
3. To vote in their discretion on such other business as may properly come
before the Meeting or any adjournment thereof.
For [ ] Against [ ] Abstain [ ]
UNLESS AUTHORITY TO VOTE THEREFOR 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.
Address Change? Mark Box [ ]
Indicate changes below:
Date
-----------------------------------------------------------------
Signature(s) in Box
Please sign exactly as your name(s) appears on Proxy. If held in joint tenancy,
all persons must sign. Trustees, administrators, etc., should include title and
authority. Corporations should provide full name of corporation and title of
authorized officer signing the proxy.
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