Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of the
20th day of May, 2003, by and between Station Casinos, Inc., a Nevada
corporation, with its principal offices located at 2411 West Sahara Avenue, Las
Vegas, Nevada  89102 (the “Company”), and FRANK J. FERTITTA III (the
“Executive”).

 

WHEREAS, the Company and the Executive are parties to an Amended and Restated
Employment Agreement dated as of December 1, 1999 (the “Former Agreement”); and

 

WHEREAS, the Executive has agreed to continue his employment with the Company on
the terms and conditions set forth herein; and

 

WHEREAS, the parties to this Agreement desire to replace the Former Agreement in
its entirety with this Agreement, and the Former Agreement shall no longer be of
any force or effect;

 

NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein and for other good and valuable consideration, the Company and the
Executive (each individually a “Party” and together the “Parties”) agree as
follows.

 

1.                                       DEFINITIONS.  In addition to certain
terms defined elsewhere in this Agreement, the following terms shall have the
following respective meanings:

 

1.1                                 “Affiliate” shall mean any Person
controlling, controlled by or under common control with the Company,

 

1.2                                 “Base Salary” shall mean the greater of (a)
the salary provided for in Subsection 3.1 of this Agreement, or (b) any
increased salary granted to the Executive (a) by the Board or (b) pursuant to
the provisions of Subsection 3.1 or Subsection 7.1(b).

 

1.3                                 “Board” shall mean the Board of Directors of
the Company, including any successor of the Company in the event of a Change in
Control.

 

1.4                                 “Cause” shall mean that the Executive:

 

(a)                                  has been convicted of a felony;

 

(b)                                 has been found unsuitable to hold a gaming
license by final, non-appealable decision of the Nevada Gaming Commission; or

 

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(c)                                  in carrying out his duties under this
Agreement, has engaged in acts or omissions constituting gross negligence or
willful misconduct resulting, in either case, in material economic harm to the
Company, unless such act, or failure to act, was believed by the Executive in
good faith to be in the best interests of the Company or any Affiliate.

 

1.5                                 A “Change in Control”

 

(a)                                  shall be deemed to have occurred if:

 

(1)  any Person, corporation, entity or group (other than the Existing Equity
Holders) is or becomes the beneficial owner, directly or indirectly, of
securities representing 50% or more of the combined voting power of the
Company’s Voting Stock (an “Acquisition Event”), or

 

(2)  the Company consolidates with or merges into another corporation or entity,
or any corporation or entity consolidates with or merges into the Company, with
the effect that the beneficial owners of the Company’s Voting Stock held
immediately prior to the consummation of such consolidation or merger cease to
beneficially own, directly or indirectly, securities representing 50% or more of
the combined voting power of the Company’s Voting Stock (or if the Company is
not the surviving entity, the surviving company’s voting securities) upon the
consummation of such consolidation or merger (a “Merger Event”), or

 

(3)  the Company sells, conveys, transfers or leases to any person, corporation,
entity or group, directly or indirectly, in one transaction or series of related
transactions, properties and/or assets that accounted for 75% or more of the
earnings (before interest, taxes, depreciation and amortization) of the Company,
on a consolidated basis for the four-fiscal quarter period immediately preceding
the date of consummation of such transaction (a “Sale Event”).

 

(b)                                 Notwithstanding the foregoing, a
reincorporation, spin-off, split-off or other reorganization transaction (a
“Reorganization Event”), or series of related transactions, in which either the
“beneficial owners” of the Company’s Voting Stock or the Existing Equity Holders
beneficially own securities representing 50% or more of the combined voting
power of the Company’s Voting Stock upon the consummation of such transaction
shall not constitute an Acquisition Event, Merger Event or Sale Event for
purposes of this definition.  For purposes of this definition, “beneficial
ownership” shall have the same meaning as defined in Rules 13d-3 and 13d-5 under
the Securities Exchange Act of 1934, as amended, except that a Person shall be
deemed to have “beneficial ownership” of all shares that any such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time.

 

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(c)                                  For the purposes of this definition, upon
consummation of an Acquisition Event, Merger Event, Sale Event or Reorganization
Event, the “Company’s Board” and the “Company’s Shareholders” shall refer to
(i) in the case of an Acquisition Event, the Company, (ii) in the case of a
Merger Event, the company surviving the merger or consolidation, (iii) in the
case of a Sale Event, the transferee of the properties, and/or assets, and (iv)
in the case of a Reorganization Event, the entity or entities surviving such
Reorganization Event on a consolidated basis.

 

1.6                                 “Code” shall mean the Internal Revenue Code
of 1986, as amended.

 

1.7                                 “Company Property” shall mean all items and
materials provided by the Company to the Executive, or to which the Executive
has access, in the course of his employment, including, without limitation, all
files, records, documents, drawings, specifications, memoranda, notes, reports,
manuals, equipment, computer disks, videotapes, drawings, blueprints and other
documents and similar items relating to the Company, its Affiliates or their
respective customers, whether prepared by the Executive or others, and any and
all copies, abstracts and summaries thereof.

 

1.8                                 “Confidential Information” shall mean all
nonpublic and/or proprietary information respecting the business of the Company
or any Affiliate, including, without limitation, its products, programs,
projects, promotions, marketing plans and strategies, business plans or
practices, business operations, employees, research and development,
intellectual property, software, databases, trademarks, pricing information and
accounting and financing data.  Confidential Information also includes
information concerning the Company’s or any Affiliate’s customers, such as their
identity, address, preferences, playing patterns and ratings or any other
information kept by the Company or any Affiliate concerning its customers
whether or not such information has been reduced to documentary form. 
Confidential Information does not include information that is, or becomes,
available to the public unless such availability occurs through an unauthorized
act on the part of the Executive.

 

1.9                                 “Deferred Compensation Plan for Executives”
shall mean the Company’s Deferred Compensation Plan for Executives, effective as
of November 30, 1994, as the same may be amended from time to time.

 

1.10                           “Disability” shall mean a physical or mental
incapacity that prevents the Executive from performing the essential functions
of his position with the Company for a minimum period of ninety (90) days as
determined (a) in accordance with any long-term disability plan provided by the
Company of which the Executive is a participant, or (b) by the following
procedure:  The Executive agrees to submit to medical examinations by a licensed
healthcare professional selected by the Company, in its sole discretion, to
determine whether a Disability exists.  In addition, the Executive may submit to
the Company documentation of a Disability, or lack thereof, from a licensed
healthcare professional of his choice.  Following a determination of a
Disability or lack of Disability by the Company’s or the Executive’s licensed
healthcare professional, the other Party may submit subsequent documentation
relating to the existence of a Disability from a licensed healthcare
professional selected by such other party.  In the event that the medical
opinions of such licensed healthcare professionals conflict, such

 

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licensed healthcare professionals shall appoint a third licensed healthcare
professional to examine the Executive, and the opinion of such third licensed
healthcare professional shall be dispositive.

 

1.11                           “ERISA” shall mean the Employee Retirement Income
Security Act of 1974, as amended.

 

1.12                           “Existing Equity Holders” shall mean, in addition
to the Executive, Blake L. Sartini, Delise F. Sartini, Lorenzo J. Fertitta,
Glenn C. Christenson and Scott M Nielson and their executors, administrators or
the legal representatives of their estates, their heirs, distributees and
beneficiaries, and any trust as to which any of the foregoing is a settlor or
co-settlor and any corporation, partnership or other entity which is an
Affiliate of any of the foregoing, and any lineal descendants of such persons
(but only to the extent that the beneficial ownership of the Voting Stock held
by such lineal descendants was directly received by gift, trust or sale from any
such person).

 

1.13                           “Good Reason” shall mean and exist if, without
the Executive’s prior written consent, one or more of the following events
occurs:

 

(a)                                  the Executive is not appointed to or is
otherwise removed from the office(s) provided for in Subsection 2.3, for any
reason other than the termination of his employment;

 

(b)                                 the Executive is assigned any duties or
responsibilities that are inconsistent with the scope of duties and
responsibilities associated with the Executive’s position as described in
Subsection 2.3;

 

(c)                                  the Company gives the Executive notice
pursuant to Subsection 2.2 that it does not intend to extend the Term of
Employment for an additional five year period;

 

(d)                                 the Executive is not appointed to or is
removed from membership on the Board;

 

(e)                                  the Executive is required to relocate from,
or maintain his principal office outside of, Las Vegas, Nevada;

 

(f)                                    the Executive suffers a material
reduction in the authorities, duties or responsibilities associated with his
position as described in Subsection 2.3;

 

(g)                                 the Executive’s Base Salary is decreased by
the Company or is not increased as provided for in Subsection 3.1 and/or
Subsection 7.1(b),

 

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(h)                                 the Executive is excluded from participation
in any employee benefit or incentive plan or program offered to other executives
of the Company or his benefits or opportunities under any employee benefit or
incentive plan or program of the Company is or are materially reduced;

 

(i)                                     the Executive is not permitted to
participate in the Deferred Compensation Plan for Executives or any other
incentive compensation plans or programs offered by the Company to senior
executives;

 

(j)                                     the Company fails to pay the Executive
any deferred payments that have become payable under the Deferred Compensation
Plan for Executives or any other bonus or incentive plans;

 

(k)                                  the Company fails to reimburse the
Executive for business expenses in accordance with the Company’s policies,
procedures or practices;

 

(l)                                     the Company fails to agree to or to
actually indemnify the Executive for his actions and/or inactions, as either a
director or officer of the Company, to the fullest extent permitted by Nevada
law and the Company’s by-laws, and/or the Company fails to maintain reasonably
sufficient levels of directors’ and officers’ liability insurance coverage for
the Executive when such insurance is available;

 

(m)                               the Company fails to make any of the payments
or to provide any of the benefits required under Subsection 7.1.

 

(n)                                 the Company fails to obtain a written
agreement satisfactory to the Executive from any successor or assign of the
Company to assume and perform this Agreement; or

 

(o)                                 the Company purports to terminate the
Executive’s employment for Cause but such purported termination is not effected
in accordance with Section 6.2 of this Agreement.

 

For purposes of this Agreement, a determination by the Executive that the
Executive has “Good Reason” shall be final and binding on the Company and the
Executive absent a showing of bad faith on the part of the Executive.

 

1.14                           “Person” shall mean any individual, firm,
partnership, association, trust, company, corporation or other entity.

 

1.15                           “Pro Rata Bonus” shall mean an amount equal to
one hundred twenty percent (120%) of the Executive’s current Base Salary,
multiplied by a fraction, the numerator of which is the number of days in such
year during which the Executive was actually employed by the Company and the
denominator of which is 365.

 

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1.16                           “Special Long-Term Disability Plan” shall mean
the Company’s Special Long-Term Disability Plan, effective as of November 30,
1994, as the same may be amended from time to time.

 

1.17                           “Supplemental Executive Retirement Plan” shall
mean the Company’s Supplemental Executive Retirement Plan, effective as of
November 30, 1994, as the same may be amended from time to time.

 

1.18                           “Term of Employment” shall mean the period
specified in Subsection 2.2.

 

1.19                           “Voting Stock” shall mean capital stock of any
class or classes having general voting power under ordinary circumstances, in
the absence of contingencies, to elect the directors of a corporation.

 

2.                                       TERM OF EMPLOYMENT, POSITIONS AND
RESPONSIBILITIES.

 

2.1                                 Employment Accepted.  The Company hereby
employs the Executive, and the Executive hereby accepts employment with the
Company, for the Term of Employment, in the positions and with the duties and
responsibilities set forth in Subsection 2.3, and upon such other terms and
conditions as are stated in this Agreement.

 

2.2                                 Term of Employment.  The initial Term of
Employment shall commence upon the date of this Agreement and, unless earlier
terminated pursuant to the provisions of this Agreement, shall terminate upon
the close of business on the day immediately preceding the fifth anniversary of
the date of this Agreement; provided, however, that the initial Term of
Employment shall automatically be extended for successive five-year periods if
neither Party has advised the other in writing in accordance with Section 13 at
least twelve (12) months prior to the end of the then current Term of Employment
that such Term of Employment will not be extended for an additional five (5)
year period.  In the event that such notice is given, the Executive’s employment
shall terminate upon the close of business on the day immediately preceding the
fifth anniversary of the date that such notice is given.

 

2.3                                 Title and Responsibilities.  During the Term
of Employment, the Executive shall be employed as the Chief Executive Officer
and Chairman of the Board of the Company and shall serve as a member of the
Board. In carrying out his duties under this Agreement, the Executive shall only
report to the Board.  During the Term of Employment, the Executive shall devote
reasonable time and attention to the business and affairs of the Company and
shall use his best efforts, skills and abilities to promote the Company’s
interests.  Anything herein to the contrary notwithstanding, the Executive shall
not be precluded from engaging in charitable and community affairs and managing
his personal investments.  It is expressly understood and agreed that, to the
extent any such activities have been conducted by the Executive prior to the
date of this Agreement and disclosed to the Board, the continued conduct of such
activities (or activities similar in nature and scope thereto) after the date of
this Agreement shall be deemed not to interfere with the Executive’s duties and
obligations to the Company under this Agreement.  The Executive may serve as a
member of the board of directors

 

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of other corporations, subject to the approval of a majority of the Board, which
approval shall not be unreasonably withheld or delayed.

 

3.                                       COMPENSATION.

 

3.1                                 Base Salary.  During the Term of Employment,
the Executive shall be entitled to receive a base salary (the “Base Salary”)
payable no less frequently than in equal bi-weekly installments at an annualized
rate of no less than $1,495,000.  Such Base Salary shall be reviewed annually
for increase (but not decrease) in the discretion of the Human Resources
Committee of the Board.  In conducting any such annual review, the Human
Resources Committee shall take into account any change in the Executive’s
responsibilities, increases in the compensation of other executives of the
Company or any Affiliate (or any competitor(s) of either or both), the
performance of the Executive and/or other pertinent factors.  Such increased
Base Salary shall then constitute the Executive’s “Base Salary” for purposes of
this Agreement.

 

3.2                                 Annual Bonus.  The Company may pay the
Executive an annual discretionary bonus for each calendar year ending during the
Term of Employment in an amount that will be determined by the Human Resources
Committee based on the Executive’s performance.  Any annual bonus that may be
awarded to the Executive shall be paid at the same time as annual bonuses are
paid to other senior officers of the Company, unless the Executive has elected
to defer receipt of all or part of the bonus amounts to which he is entitled in
respect of any such calendar year, in accordance with the terms and provisions
of any deferred compensation program maintained by the Company.

 

3.3                                 Deferred Compensation.  The Executive shall
be eligible to participate in the Company’s Deferred Compensation Plan for
Executives, and any other deferred compensation plans that the Company may adopt
for executives, pursuant to the terms of the plans.

 

4.                                       EMPLOYEE BENEFIT PROGRAMS.

 

4.1                                 Pension and Welfare Benefit Plans.  During
the Term of Employment, the Executive shall be entitled to participate in all
employee benefit programs made available to the Company’s executives or salaried
employees generally, as such programs may be in effect from time to time,
including, without limitation, pension and other retirement plans, profit
sharing plans, group life insurance, group health insurance, accidental death
and dismemberment insurance, long-term disability, sick leave (including salary
continuation arrangements), vacations, holidays and other employee benefit
programs sponsored by the Company.

 

4.2                                 Additional Pension and Welfare Benefits.  In
addition to the foregoing, the Company shall provide the Executive with the
following benefits:

 

(a)                                  Executive Group Health Insurance coverage
pursuant to such plan or plans as the Company may select and which shall be
fully paid for by the Company;

 

(b)                                 full salary continuation during the first
ninety (90) days of any physical or mental incapacity that prevents the
Executive from performing his duties

 

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and, for any Disability that continues thereafter, benefits pursuant to the
Company’s Special Long-Term Disability Plan and any other long-term disability
benefits pursuant to any other disability plan of which the Executive is a
participant;

 

(c)                                  an annual supplemental retirement benefit
as set forth in the Supplemental Executive Retirement Plan, in addition to any
other benefit pursuant to any other retirement plan under which the Executive is
covered;

 

(d)                                 life insurance coverage in an aggregate
amount of not less than $70,000,000 through individual and/or group policies,
including split dollar policies and term life policies; and

 

(e)                                  the Executive shall be eligible to
participate in any long-term compensation programs maintained by the Company to
the extent provided in the applicable plan documents.

 

5.                                       BUSINESS EXPENSE REIMBURSEMENT AND
PERQUISITES.

 

5.1                                 Expense Reimbursement; Security
Arrangements.  During the Term of Employment, the Executive shall be entitled to
receive reimbursement by the Company for all reasonable out-of-pocket expenses
incurred by him in performing services under this Agreement, subject to
providing the proper documentation of said expenses.  During the Term of
Employment, the Company shall also provide the Executive, if he so chooses, with
appropriate security arrangements (as approved by the Board) at his residences;
provided, however, that any security equipment installed at such residences
shall become the sole property of the Executive upon the expiration or earlier
termination of this Agreement.

 

5.2                                 Perquisites.  During the Term of Employment,
the Executive shall also be entitled to any of the Company’s executive
perquisites in accordance with the terms and provisions of the applicable
policies, including, without limitation:

 

(a)                                  use of an automobile;

 

(b)                                 payment or reimbursement of the cost of an
annual physical examination;

 

(c)                                  vacation of at least four weeks per year;

 

(d)                                 payment or reimbursement of initiation fees
and annual membership fees and assessments for a country club, a luncheon club
and a physical fitness program of the Executive’s choice; and

 

(e)                                  payment or reimbursement of fees and
expenses, up to a maximum amount of $10,000.00, incurred in connection with
having this Agreement reviewed by legal counsel prior to execution.

 

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6.                                       TERMINATION OF EMPLOYMENT.

 

6.1                                 Termination Due to Death or Disability.  The
Executive’s employment shall be terminated immediately in the event of his death
or Disability.  In the event of a termination due to the Executive’s death or
Disability, the Executive or his estate, as the case may be, shall be entitled,
in lieu of any other compensation whatsoever, to:

 

(a)                                  Base Salary at the rate in effect at the
time of his termination, in the case of death, for a period of twenty-four (24)
months following the termination of employment;

 

(b)                                 any annual bonus awarded but not yet paid;

 

(c)                                  a Pro Rata Bonus for the fiscal year in
which death or Disability occurs;

 

(d)                                 any deferred compensation or bonuses,
including interest or other credits on the deferred amounts to the extent
provided in the plans or programs providing for deferral;

 

(e)                                  immediate vesting of all restricted stock
stock options, phantom stock units, stock appreciation rights and similar
stock-based or performance-based interests, which stock options, stock
appreciation rights and similar exercisable interests shall continue to be and
shall remain exercisable for the remaining term of such stock options, stock
appreciation rights and similar exercisable interests, as applicable, as set
forth in the agreement granting or otherwise awarding such stock option, stock
appreciation right or similar exercisable interest as if no termination of
employment had occurred;

 

(f)                                    reimbursement for expenses incurred but
not paid prior to such termination of employment;

 

(g)                                 in the case of Disability, (i) continuation
of the Executive’s health and welfare benefits at the level in effect on the
date of termination through the end of the 60th month following the termination
of the Executive’s employment, or (ii) at the Executive’s option, a lump-sum
payment to the Executive of the economic equivalent thereof, as if the
Executive’s employment had continued during such period; and

 

(h)                                 such rights to other compensation and
benefits as may be provided in applicable plans and programs of the Company,
including, without limitation, applicable employee benefit plans and programs,
according to the terms and provisions of such plans and programs.

 

6.2                                 Termination by the Company for Cause.  The
Company may terminate the Executive’s employment for Cause at any time during
the Term of Employment by giving written notice to the Executive, authorized by
a vote of at least a majority of the members of the Board, that the Company
intends to terminate his employment for Cause.  Such written notice

 

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shall specify the particular act or acts, or failure to act, providing the basis
for termination.  The Executive shall be given the opportunity within thirty
(30) days of the receipt of such notice to meet with the Board to defend such
act or acts, or failure to act.  If at the conclusion of the Executive’s
presentation of his defense, a majority of the Board, nonetheless, determines
that the Executive’s employment is terminable for Cause, the Executive shall be
given thirty (30) days after such meeting to correct such acts or failure to
act, unless the Board also determines that the Executive’s acts or failure to
act are incapable of correction.  Upon failure of the Executive, within thirty
(30) days, to correct such acts or failure to act, or upon the Board’s
determination that correction is not possible, the Executive’s employment by the
Company shall automatically be terminated under this Subsection 6.2 for Cause. 
During the pendency of the foregoing process, the Executive shall continue to be
paid his Base Salary but shall be placed on leave of absence status.

 

In the event of a termination for Cause, the Executive shall be entitled, in
lieu of any other compensation whatsoever, to:

 

(a)                                  Base Salary at the rate in effect at the
time of his termination through the date of termination of employment;

 

(b)                                 any bonus awarded but not yet paid;

 

(c)                                  any deferred compensation or bonuses,
including interest or other credits on the deferred amounts to the extent
provided in the plans or programs providing for deferral;

 

(d)                                 reimbursement for expenses incurred but not
paid prior to such termination of employment; and

 

(e)                                  such rights to other benefits as may be
provided in applicable plans and programs of the Company, including, without
limitation, applicable employee benefit plans and programs, according to the
terms and conditions of such plans and programs.

 

Notwithstanding anything to the contrary in this Subsection 6.2, if the
Executive’s employment is terminated for Cause due to his having been convicted
pursuant to Subsection 1.4(a) but said conviction is subsequently overturned on
appeal and he is not required to submit to re-trial within six (6) months
thereafter, the Executive shall be entitled to the payments and the economic
equivalent of the benefits he would have received if his employment had been
terminated without Cause under Subsection 6.4.

 

6.3                                 Termination by the Executive Without Good
Reason Prior to a Change in Control.  The Executive may terminate his employment
on his own initiative for any reason prior to a Change in Control upon thirty
(30) days prior written notice to the Company.  Such termination shall have the
same consequences as a termination for Cause under Subsection 6.2.

 

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6.4                                 Termination by the Company Without Cause
Prior to Change in Control.  Notwithstanding any other provision of this
Agreement, the Company may terminate the Executive’s employment without Cause,
other than due to death or Disability, at any time during the Term of Employment
by giving written notice to the Executive.  In the event that the Company
terminates the Executive’s employment without Cause prior to a Change in
Control, the Executive shall be entitled, in lieu of any other compensation
whatsoever, to:

 

(a)                                  a lump-sum payment equal to four times two
hundred twenty percent (220%) of the Executive’s Base Salary at the rate in
effect at the time of his termination;

 

(b)                                 any bonus awarded but not yet paid;

 

(c)                                  a Pro-Rata Bonus for the fiscal year in
which such termination of employment occurs;

 

(d)                                 any deferred bonus, including interest or
other credits on the deferred amounts, to the extent provided in the Deferred
Compensation Plan for Executives;

 

(e)                                  immediate vesting of all restricted stock,
stock options, phantom stock units, stock appreciation rights and similar
stock-based or performance-based interests, which stock options, stock
appreciation right and similar exercisable interests shall continue to be and
shall remain exercisable for the remaining term of such stock options, stock
appreciation rights and similar exercisable interests, as applicable, as set
forth in the agreement granting or otherwise awarding such stock option, stock
appreciation right or similar exercisable interest as if no termination of
employment had occurred;

 

(f)                                    reimbursement of expenses incurred but
not paid prior to such termination of employment;

 

(g)                                 (i) continuation of all benefits provided to
the Executive pursuant to Subsection 4.2, including, without limitation, the
Executive’s group health insurance and participation in the Company’s Special
Long-Term Disability Plan and any other long-term disability insurance generally
provided to senior executives of the Company, at the level in effect at the time
of his termination of employment, through the end of the 60th month following
such termination, or (ii) at the Executive’s option, a lump-sum payment to the
Executive of the economic equivalent thereof, as if such Executive were employed
during such period; and

 

(h)                                 such rights to other benefits as may be
provided in applicable plans and programs of the Company, including, without
limitation, applicable employee benefit plans and programs, according to the
terms and conditions of such plans and programs.

 

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6.5                                 Termination by the Executive With Good
Reason Prior to a Change in Control.  The Executive may terminate his employment
on his own initiative for Good Reason prior to a Change in Control upon thirty
(30) days prior written notice to the Company.  Such termination shall have the
same consequences as a termination without Cause under Subsection 6.4.

 

7.                                       CHANGE IN CONTROL.

 

7.1                                 Change in Control.  Immediately upon a
Change in Control, in addition to any other compensation or benefits payable
pursuant to this Agreement or otherwise, the Executive shall be entitled to:

 

(a)                                  minimum annual increases in the Executive’s
Base Salary equal to the greater of (i) five percent, or (ii) the percentage of
increase in the Consumer Price Index for the Las Vegas, Nevada, metropolitan
area as reported by the United States Department of Labor for the immediately
preceding calendar year;

 

(b)                                 annual bonuses of at least one hundred
twenty percent (120%) of his Base Salary;

 

(c)                                  immediate vesting of all benefits, without
penalty or reduction in rights or benefits, including, without limitation,
immediate vesting of all restricted stock, stock options, phantom stock units,
stock appreciation rights and similar stock-based or performance-based
interests, which stock options, stock appreciation rights and similar
exercisable interests shall continue to be and shall remain exercisable for the
remaining term of such stock options, stock appreciation rights and similar
exercisable interests, as applicable, as set forth in the agreement granting or
otherwise awarding such stock option, stock appreciation right, or similar
exercisable interest;

 

(d)                                 reimbursement of expenses incurred but not
paid prior to such termination of employment;

 

(e)                                  (i) immediate eligibility for retirement
under the Supplemental Executive Retirement Plan without penalty for early
retirement, or (ii) at the Executive’s option, a lump-sum payment to the
Executive of the economic equivalent thereof, as if the Executive received
payments under such Plan for a period of fifteen (15) years;

 

(f)                                    immediate vesting of any deferred
compensation or bonuses, including interest or other credits on the deferred
amount to the extent provided in the plans or programs providing for deferral;

 

(g)                                 (i) continued funding of the Executive’s
split dollar and term life insurance policies and any other life insurance
policies maintained by the Company on behalf of the Executive as of the date of
the Change in Control, as if the Executive were employed by the Company through
the maturity date of such

 

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policies or payment in full of all premium obligations under such policies, or
(ii) at the Executive’s option, a lump-sum payment to the Executive of the
economic equivalent thereof, as if the Executive were employed by the Company
through the maturity date of such policies; and

 

(h)                                 such rights to other benefits as may be
provided in applicable plans and programs of the Company, including, without
limitation, applicable employee benefit plans and programs, according to the
terms and conditions of such plans and programs.

 

7.2                                 Termination of the Executive’s Employment
After a Change in Control.  If subsequent to a Change in Control, the
Executive’s employment is terminated by the Company without Cause or by
Executive for Good Reason, the Executive shall be entitled, in addition to any
compensation and benefits provided pursuant to Subsection 7.1 above, to:

 

(a)                                  a lump-sum payment equal to the greater of
(i) four times two hundred twenty percent (220%) of his Base Salary at the time
of the Change in Control or (ii) four times two hundred twenty percent (220%) of
his Base Salary at the time of the termination of his employment;

 

(b)                                 any annual bonus awarded but not yet paid;

 

(c)                                  a Pro Rata Bonus for the fiscal year in
which such termination of employment occurs; and

 

(d)                                 (i) continuation of all employee benefits
provided to the Executive pursuant to Subsection 4.2 for a period of sixty (60)
months following such termination of employment, or (ii) at the Executive’s
option, a lump-sum payment to the Executive of the economic equivalent thereof,
as if the Executive were an employee of the Company during such period.

 

7.3                                 Termination by Executive without Good Reason
After a Change in Control.  If the Executive terminates his employment without
Good Reason following a Change in Control, in addition to any compensation and
benefits provided pursuant to Subsection 7.1, but in lieu of any other
compensation and benefits whatsoever, he shall be entitled to the following:

 

(a)                                  if such termination occurs in the first
twelve (12) months following a Change in Control, the Executive shall be
entitled to (i) a lump-sum payment equal to eighty percent (80%) of the amount
payable to the Executive pursuant to Subsection 7.2(a), and (ii) all of the
benefits provided in Subsection 6.4(b), (c), (f) and (g);

 

(b)                                 if such termination occurs at any time after
the first twelve (12) months following a Change in Control, the Executive shall
be entitled to (i) one hundred percent (100%) of the amount payable to the
Executive pursuant to Subsection 7.2(a), and (ii) all of the benefits provided
in Subsections 6.4 (b), (c), (f) and (g), and

 

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(c)                                  in either instance, the Executive shall be
entitled to such rights to benefits as may be provided in applicable plans and
programs of the Company, including, without limitation, applicable employee
benefit plans and programs, according to the terms and conditions of such plans
and programs.

 

7.4                                 Termination for Other Reasons After a Change
in Control.  If the Executive’s employment is terminated by the Company for any
reason not provided by Subsection 7.2 or Subsection 7.3, his rights shall be
determined in accordance with the applicable Subsection of Section 6.

 

7.5                                 Funding of Payments.  All payments payable
to the Executive pursuant to this Section 7, except for payments payable as a
lump sum, shall be made to a trust which shall be established for such purpose
and shall provide for Towers Perrin (or such other trustee mutually acceptable
to the Company and the Executive) to serve as the trustee thereof.

 

8.                                       CONDITIONS TO PAYMENTS.

 

8.1                                 Timing of Payments.  Unless otherwise
provided herein, any payments to which the Executive shall be entitled under
Sections 6 and 7 following the termination of his employment shall be made as
promptly as possible and in no event later than five business days following
such termination of employment.

 

8.2                                 No Mitigation; No Offset.  In the event of
any termination of employment under Sections 6 or 7, the Executive shall be
under no obligation to seek other employment and there shall be no offset
against amounts due to the Executive on account of any remuneration attributable
to any subsequent employment that the Executive may obtain.  Any amounts payable
to the Executive are in the nature of severance payments, or liquidated damages,
or both, and are not in the nature of a penalty.

 

9.                                       SPECIAL REIMBURSEMENT. 

 

9.1                                 If any payment or benefit paid or payable,
or received or to be received, by or on behalf of the Executive, whether any
such payments or benefits are pursuant to the terms of this Agreement or any
other plan, program, arrangement or agreement of or with the Company, any
Affiliate, any Person, or otherwise (the “Total Payments”), will or would be
subject to the excise tax imposed under Section 4999 of the Code (the “Excise
Tax”), the Company shall pay to the Executive an additional amount (the
“Gross-Up Payment”) such that, after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes) imposed
upon or in respect of the Total Payments and the Gross-Up Payments, including,
without limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and any Excise Tax imposed thereon, the Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Total
Payments.

 

9.2                                 For purposes of determining whether any of
the Total Payments will be subject to the Excise Tax and the amount of such
Excise Tax,

 

(a)                                  the Total Payments shall be treated as
“parachute payments” within the meaning of Section 280G(b)(2) of the Code, and
all “excess parachute

 

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payments” within the meaning of Section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, unless in the opinion of tax counsel selected by
the Company and reasonably acceptable to the Executive (which opinion shall be
provided to the Executive) such Total Payments (in whole or in part) (i) do not
constitute parachute payments, including (without limitation) by reason of
Section 280G(b)(4)(A) of the Code, (ii) such excess parachute payments (in whole
or in part) represent reasonable compensation for services actually rendered,
within the meaning of Section 280G(b)(4)(B) of the Code, or (iii) are not, in
the opinion of legal counsel, otherwise subject to the Excise Tax, and

 

(b)                                 the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company’s independent
auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the
Code.

 

9.3                                 In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder,
the Executive shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code.  In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of the Executive’s employment
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the initial Gross-Up Payment), the Company shall make
an additional Gross-Up Payment in accordance with Subsection 9.1 in respect of
such excess Excise Tax (plus any interest, penalties or additions payable by the
Executive with respect to such excess Excise Tax) at the time that the amount of
such excess Excise Tax is finally determined.  The Executive and the Company
shall each reasonably cooperate with each other in connection with any
administrative or judicial proceedings concerning the existence or amount of any
such subsequent liability for Excise Tax with respect to the Total Payments.

 

10.                                 INDEMNIFICATION.

 

10.1                           General.  The Company agrees that if the
Executive is made a party or is threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative or investigative (an
“Indemnifiable Action”), by reason of the fact that he is or was a director or
officer of the Company or is or was serving at the request of the Company as a
director, officer, member, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether or not the basis of such
Indemnifiable Action is alleged action in an official capacity as a director,
officer, member, employee or agent he shall be indemnified and held harmless by
the Company to the fullest extent authorized by Nevada law and the Company’s
by-laws, as the same exist or may hereafter be amended (but, in the case of any
such amendment to the Company’s by-laws, only to the extent such amendment
permits the Company to provide broader indemnification rights than the Company’s
by-laws permitted the Company to provide before such amendment), against all
expense, liability and loss (including, without limitation, attorneys’ fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) incurred or suffered by the Executive in connection therewith.

 

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10.2                           Procedure.  The indemnification provided pursuant
to this Section 10 shall be subject to the following conditions:

 

(a)                                  The Executive must promptly give the
Company written notice of any actual or threatened Indemnifiable Action and,
upon providing such notice, the Executive shall be presumed to be entitled to
indemnification under this Agreement and the Company shall have the burden of
proof to overcome that presumption in reaching any contrary determination;
provided, however, that the Executive’s failure to give such notice shall not
affect the Company’s obligations hereunder;

 

(b)                                 The Company will be permitted, at its
option, to participate in, or to assume, the defense of any Indemnifiable
Action, with counsel approved by the Executive; provided, however, that (i) the
Executive shall have the right to employ his own counsel in such Indemnifiable
Action at the Executive’s expense; and (ii) if (A) the retention of counsel by
the Executive has been previously authorized by the Company, (B) the Executive
shall have concluded, based on the advice of his legal counsel, that there may
be a conflict of interest between the Company and the Executive in the conduct
of any such defense, or (C) the Company shall not, in fact, have retained
counsel to assume the defense of such Indemnifiable Action, the fees and
expenses of the Executive’s counsel shall be at the expense of the Company; and
provided, further, that the Company shall not settle any action or claim that
would impose any limitation or penalty on the Executive without obtaining the
Executive’s prior written consent, which consent shall not be unreasonably
withheld;

 

(c)                                  The Executive must provide reasonable
cooperation to the Company in the defense of any Indemnifiable Action; and

 

(d)                                 The Executive must refrain from settling any
Indemnifiable Action without obtaining the Company’s prior written consent,
which consent shall not be unreasonably withheld.

 

10.3                           Advancement of Costs and Expenses.  The Company
agrees to advance all costs and expenses referred to in Subsection 10.1 and
10.6; provided, however, that the Executive agrees to repay to the Company any
amounts so advanced only if, and to the extent that, it shall ultimately be
determined by a court of competent jurisdiction that the Executive is not
entitled to be indemnified by the Company as authorized by this Agreement.  The
advances to be made hereunder shall be paid by the Company to or on behalf of
the Executive within twenty (20) days following delivery of a written request
therefor by the Executive to the Company.  The Executive’s entitlement to
advancement of costs and expenses hereunder shall include those incurred in
connection with any action, suit or proceeding by the Executive seeking a
determination, adjudication or arbitration in award with respect to his rights
and/or obligations under this Section 10.

 

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10.4                           Non-Exclusivity of Rights.  The right to
indemnification and the payment of expenses incurred in defending an
Indemnifiable Action in advance of its final disposition conferred in this
Section 10 shall not be exclusive of any other right which the Executive may
have or hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the Company, agreement, vote of stockholders or
disinterested directors or otherwise.

 

10.5                           D&O Insurance.  The Company will maintain a
directors’ and officers’ liability insurance policy covering the Executive that
provides coverage that is reasonable in relation to the Executive’s position
during the Term of Employment.

 

10.6                           Witness Expenses.  Notwithstanding any other
provision of this Agreement, the Company shall indemnify the Executive if and
whenever he is a witness or threatened to be made a witness to any action, suit
or proceeding to which the Executive is not a party, by reason of the fact that
the Executive is or was a director or officer of the Company or its Affiliates
or by reason of anything done or not done by him in such capacity, against all
expense, liability and loss incurred or suffered by the Executive in connection
therewith; provided, however, that if the Executive is no longer employed by the
Company, the Company will compensate him, on an hourly basis, for all time
spent, at either his then current compensation rate or his Base Salary at the
rate in effect as of the termination of his employment, whichever is higher.

 

10.7                           Survival.  The provisions of this Section 10
shall survive the expiration or earlier termination of this Agreement,
regardless of the reason for such termination.

 

11.                                 CONFIDENTIAL INFORMATION AND COMPANY
PROPERTY.

 

11.1                           Confidential Information.  The Executive
understands and acknowledges that Confidential Information constitutes a
valuable asset of the Company and its Affiliates and may not be converted to the
Executive’s own or any third party’s use.  Accordingly, the Executive hereby
agrees that he shall not, directly or indirectly, during the Term of Employment
or for a period of twelve (12) months after the termination of his employment,
disclose any Confidential Information to any Person not expressly authorized by
the Company to receive such Confidential Information.  The Executive further
agrees that he shall not directly or indirectly, during the Term of Employment
or for a period of twelve (12) months after the termination of his employment,
use or make use of any Confidential Information in connection with any business
activity other than that of the Company.  The Parties acknowledge and agree that
this Agreement is not intended to, and does not, alter either the Company’s
rights or the Executive’s obligations under any state or federal statutory or
common law regarding trade secrets and unfair trade practices.

 

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11.2                           Company Property.  All Company Property is and
shall remain exclusively the property of the Company.  Unless authorized in
writing to the contrary, the Executive shall promptly, and without charge,
deliver to the Company on the termination of employment hereunder, or at any
other time the Company may so request, all Company Property that the Executive
may then possess or have under his control.

 

11.3                           Required Disclosure.  In the event the Executive
is required by law or court order to disclose any Confidential Information or to
produce any Company Property, the Executive shall promptly notify the Company of
such requirement and provide the Company with a copy of any court order or of
any law which requires such disclosure and, if the Company so elects, to the
extent permitted by applicable law, give the Company an adequate opportunity, at
its own expense, to contest such law or court order prior to any such required
disclosure or production by the Executive.

 

11.4                           Survival.  The Executive agrees that the
provisions of this Section 11 shall survive the termination of this Agreement
and the termination of the Executive’s employment.

 

12.                                 DISPUTE RESOLUTION.  Except as otherwise
provided in Subsection 10.3, the Company agrees that in the event the Executive
finds it necessary to initiate any legal action to obtain any payments, benefits
or rights provided by this Agreement to him, the Company shall reimburse the
Executive for all attorney’s fees and other related expenses incurred by him to
the extent the Executive is successful in such action.

 

13.                                 NOTICES.  All notices, demands and requests
required or permitted to be given to either Party under this Agreement shall be
in writing and shall be deemed to have been given when delivered personally or
sent by certified or registered mail, postage prepaid, return receipt requested,
duly addressed to the Party concerned at the address indicated below or to such
changed address as such Party may subsequently give notice of:

 

If to the Company:

Station Casinos, Inc.

 

2411 West Sahara Avenue

 

Las Vegas, NV  89102

 

Attn:  Scott M Nielson

 

 

With a copy to:

Milbank, Tweed, Hadley & McCloy

 

601 South Figueroa Street, 30th Floor

 

Los Angeles, CA  90017

 

Attn:  Kenneth J. Baronsky

 

 

If to the Executive:

Frank J. Fertitta III

 

2411 West Sahara Avenue

 

Las Vegas, NV 89102

 

14.                                 EMPLOYEE BENEFIT PLAN DOCUMENTS.  In the
event that any provision of this Agreement conflicts with the terms and
provisions of any employee benefit plan document, the provisions of this
Agreement shall govern; and the Company shall take any and all

 

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actions that may be necessary, including amendment of any plan document, to the
extent necessary to effect the provision of benefits expressly provided upon
termination of the Executive’s employment pursuant to Sections 6 and 7.

 

15.                                 BENEFICIARIES/REFERENCES.  The Executive
shall be entitled to select a beneficiary or beneficiaries to receive any
compensation or benefit payable hereunder following the Executive’s death, and
may change such election, by giving the Company written notice thereof.  In the
event of the Executive’s death or a judicial determination of his incompetence,
reference in this Agreement to the Executive shall be deemed, where appropriate,
to refer to his beneficiary, estate or other legal representative.

 

16.                                 SURVIVORSHIP.  The respective rights and
obligations of the Parties hereunder shall survive any termination of this
Agreement to the extent necessary to the intended preservation of such rights
and obligations.  The provisions of this Section 16 are in addition to the
survivorship provisions of any other Section of this Agreement.

 

17.                                 REPRESENTATIONS AND WARRANTIES.  Each Party
represents and warrants that he or it is fully authorized and empowered to enter
into this Agreement and that the performance of his or its obligations under
this Agreement will not violate any agreement between that Party and any other
Person.

 

18.                                 ENTIRE AGREEMENT.  This Agreement contains
the entire agreement between the Parties concerning the subject matter hereof
and supersedes all prior agreements, understandings, discussions, negotiations
and undertakings, whether written or oral, between the Parties with respect
thereto. No representations, inducements, promises or agreements not embodied
herein shall be of any force or effect.

 

19.                                 ASSIGNABILITY; BINDING NATURE.  This
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors, heirs and assigns; provided, however, that no
rights or obligations of the executive under this Agreement may be assigned or
transferred by the Executive, other than rights to compensation and benefits
hereunder, which may be transferred only by will or operation of law and subject
to the limitations of this Agreement; and provided, further, that no rights or
obligations of the Company under this Agreement may be assigned or transferred
by the Company, except that such rights or obligations may be assigned or
transferred pursuant to a merger or consolidation in which the Company is not
the continuing entity, or the sale or liquidation of all or substantially all of
the assets of the Company, provided that the assignee or transferee is the
successor to all or substantially all of the assets of the Company and such
assignee or transferee assumes the liabilities, obligations and duties of the
Company under this Agreement, either contractually or as a matter of law.

 

20.                                 AMENDMENT OR WAIVER.  No provision in this
Agreement may be amended or waived unless such amendment or waiver is agreed to
in writing, signed by both Parties.  No waiver by one Party of any breach by the
other Party of any condition or provision of this Agreement to be performed by
such other Party shall be deemed a waiver of a similar or dissimilar condition
or provision at the same or any prior or subsequent time.  No failure of the

 

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Company to exercise any power given it hereunder or to insist upon strict
compliance by the Executive with any obligation hereunder, and no custom or
practice at variance with the terms hereof, shall constitute a waiver of the
right of the Company to demand strict compliance with the terms hereof.

 

21.                                 SEVERABILITY.  In the event that any
provision or portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, in whole or in part, the remaining provisions of
this Agreement shall be unaffected thereby and shall remain in full force and
effect to the fullest extent permitted by law.

 

22.                                 GOVERNING LAW.  This Agreement shall be
governed by and construed and interpreted in accordance with the laws of the
State of Nevada without reference to the principles of conflict of laws
thereof.  In the event of any dispute or controversy arising out of or relating
to this Agreement, the Parties mutually and irrevocably consent to, and waive
any objection to, the exclusive jurisdiction of any court of competent
jurisdiction in Clark County, Nevada, to resolve such dispute or controversy.

 

23.                                 HEADINGS.  The headings of the Sections and
Subsections contained in this Agreement are for convenience only and shall not
be deemed to control or affect the meaning or construction of any provision of
this Agreement.

 

24.                                 COUNTERPARTS.  This Agreement may be
executed in counterparts, each of which shall be deemed an original and all of
which shall constitute one and the same Agreement with the same effect as if all
Parties had signed the same signature page.  Any signature page of this
Agreement may be detached from any counterpart of this Agreement and reattached
to any other counterpart of this Agreement identical in form hereto but having
attached to it one or more additional signature pages.

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.

 

 

STATION CASINOS, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

FRANK J. FERTITTA III

 

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