DEF 14A 1 a2044598zdef14a.txt DEF 14A 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. ----------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) ----------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box): /X/ No fee required. / / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: ---------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ---------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ---------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ---------------------------------------------------------- (5) Total fee paid: ---------------------------------------------------------- / / Fee paid previously with preliminary materials. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ---------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ---------------------------------------------------------- (3) Filing Party: ---------------------------------------------------------- (4) Date Filed: ----------------------------------------------------------
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 ------------------------ 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. ------------------------ (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. ------------------------ (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 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- 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] ------- ------- 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. ------- -------