Exhibit 10.2

 

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 LORENZO J. FERTITTA (the “Executive”).

 

WHEREAS, the Company and the Executive are parties to an Employment Agreement
dated as of December 17, 2001 (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 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 any felony;

 

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

 

(c)                                  in carrying out his duties under this
Agreement, has engaged in acts or omissions constituting gross negligence or
willful misconduct resulting, in either case, in material economic harm to the
Company, 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              “Change in Control” shall be deemed to have occurred if:

 

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

 

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

 

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

 

(b)                                 within thirty-six (36) months following an
Acquisition Event, Merger Event or Sale Event, individuals who immediately prior
to such Acquisition Event, Merger Event or Sale Event constituted the Company’s
Board, together with any new or replacement directors whose election by the
Company’s Board, or whose nomination for election by the Company’s stockholders
was approved by a vote of at least a majority of the directors then in office
who were either directors on the Company’s Board immediately prior to such
Acquisition Event, Merger Event or Sale Event (or whose election or nomination
for election was previously so approved), cease for any reason to constitute a
majority of the directors of the Company’s Board then in office.

 

Notwithstanding the foregoing, a reincorporation, spin-off, split-off or other
reorganization transaction (a “Reorganization Event”), or series of related
transactions, in which either the “beneficial owners” of the Company’s Voting
Stock or the Existing Equity Holders beneficially own securities representing
50% or more of the combined voting power of the Company’s Voting Stock upon the
consummation of such transaction shall not constitute an Acquisition Event,
Merger Event or Sale Event for purposes of this definition.  For purposes of
this

 

2

--------------------------------------------------------------------------------

 

definition, “beneficial ownership” shall have the same meaning as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended,
except that a Person shall be deemed to have “beneficial ownership” of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time.  For the purposes of
this definition, upon consummation of an Acquisition Event, Merger Event, Sale
Event or Reorganization Event, the “Company’s Board” and the “Company’s
Shareholders” shall refer to (i) in the case of an Acquisition Event, the
Company, (ii) in the case of a Merger Event, the company surviving the merger or
consolidation, (iii) in the case of a Sale Event, the transferee of the
properties, and/or assets, and (iv) in the case of a Reorganization Event, the
entity or entities surviving such Reorganization Event on a consolidated basis.

 

1.6              “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 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

 

3

--------------------------------------------------------------------------------

 

professional, the other Party may submit subsequent documentation relating to
the existence of a Disability from a licensed healthcare professional selected
by such other Party.  In the event that the medical opinions of such licensed
healthcare professionals conflict, such licensed healthcare professionals shall
appoint a third licensed healthcare professional to examine the Executive, and
the opinion of such third licensed healthcare professional shall be dispositive.

 

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

 

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

 

1.13        “Good Reason,” as used in Subsection 7.2, shall mean and exist if
there has been a Change in Control and, thereafter, without the Executive’s
prior written consent, one or more of the following events occurs:

 

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

 

(f)                                    the Executive is required to relocate
from, or maintain his principal office outside of, Clark County, Nevada;

 

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

 

4

--------------------------------------------------------------------------------

 

(h)                                 the Executive is excluded from participation
in any employee benefit or short-term incentive plan or program offered to other
similarly executives of the Company or his benefits under such plans or programs
are materially reduced;

 

(i)                                     the Company fails to pay the Executive
any deferred payments that have become payable under the Deferred Compensation
Plan for Executives;

 

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

 

(k)                                  the Company fails to agree to or to
actually indemnify the Executive for his actions and/or inactions, as either a
director or an officer of the Company, in accordance with Section 10, and/or the
Company fails to maintain reasonably sufficient levels of directors’ and
officers’ liability insurance coverage for the Executive when such insurance is
available;

 

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

 

(m)                               the Company fails to obtain a written
agreement from any successor or assign of the Company to assume the obligations
under this Agreement upon a Change in Control; or

 

(n)                                 the Company purports to terminate the
Executive’s employment for Cause, but such purported termination is not effected
in accordance with Subsection 6.2.

 

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        “Long-Term Stay-On Performance Incentive Agreement” shall mean that
Long-Term Stay-On Performance Incentive Agreement dated March 15, 2002, between
the Company and the Executive, as the same may be amended from time to time.

 

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

 

1.16        “Pro Rata Bonus” shall mean an amount equal to ninety percent (90%)
of the Executive’s current Base Salary, multiplied by a fraction, the numerator
of which is the number of days in such year during which the Executive was
actually employed by the Company and the denominator of which is 365.

 

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

 

5

--------------------------------------------------------------------------------

 

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

 

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

 

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

 

2.                                       TERM OF EMPLOYMENT, POSITION AND
RESPONSIBILITIES.

 

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

 

2.2              Term of Employment.  The initial Term of Employment shall
commence upon the date of this Agreement and, unless earlier terminated pursuant
to the provisions of this Agreement, shall terminate upon the close of business
on the day immediately preceding the fifth anniversary of the date of this
Agreement; provided, however, that the initial Term of Employment shall
automatically be extended for successive five-year periods if neither Party has
advised the other in writing in accordance with Section 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 year period.  In the
event that such notice is given, the Executive’s employment shall terminate upon
the close of business on the day immediately preceding the fifth anniversary of
the then current Term of Employment.

 

2.3              Responsibilities.  During the Term of Employment, the Executive
shall be employed as President of the Company and shall have such
responsibilities as the Company may direct from time to time.  During the Term
of Employment, the Executive shall also serve as a member of the Board.  During
the Term of Employment, the Executive shall also devote his full time and
attention to the business and affairs of the Company and shall use his best
efforts, skills and abilities to promote the Company’s interests.  Anything
herein to the contrary notwithstanding, the Executive shall not be precluded
from engaging in charitable and community affairs and managing his personal
investments.  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 also may serve
as a member of the board of directors of other corporations, subject to the
approval of a majority of the Board, which approval shall not be unreasonably
withheld or delayed.

 

6

--------------------------------------------------------------------------------

 

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 $1,095,000.  The Base Salary shall be reviewed annually for increase (but
not decrease) in the discretion of the Human Resources Committee of the Board. 
In conducting any such annual review, the Human Resources Committee shall take
into account any change in the Executive’s responsibilities, increases in the
compensation of other executives of the Company or any Affiliate (or any
competitor(s) of either or both), the performance of the Executive and/or other
pertinent factors.  Such increased Base Salary shall then constitute the
Executive’s “Base Salary” for purposes of this Agreement.

 

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

 

3.3              Stay-On Incentives.  The Executive shall be eligible to receive
a long-term stay-on performance incentive payment pursuant to the terms of the
Long-Term Stay-On Performance Incentive Agreement.

 

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

 

4.                                       EMPLOYEE BENEFIT PLANS AND PROGRAMS.

 

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

 

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

 

(a)               group health insurance coverage through the Company’s
Exec-U-Care Medical Plan, effective as of July 1, 1994, or pursuant to such
other plan

 

7

--------------------------------------------------------------------------------

 

or plans as the Company may select from time to time, and which shall be fully
paid for by the Company;

 

(b)              full salary continuation during the first ninety (90) days of
any physical or mental incapacity that prevents the Executive from performing
his duties and, for any Disability that continues thereafter, benefits pursuant
to the Company’s Special Long-Term Disability Plan and any other long-term
disability benefits pursuant to any other disability plan of which the Executive
is a participant;

 

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

 

(d)              supplemental life insurance coverage, through an individual
policy, a group policy or a combination thereof, in an aggregate amount of not
less than $35 million.

 

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 selected by the Executive;

 

(b)              vacation of four weeks per year;

 

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

 

(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

 

8

--------------------------------------------------------------------------------

 

(e)               payment or reimbursement of fees and expenses, up to a maximum
amount of $2500.00, incurred in connection with having this Agreement reviewed
by legal counsel of his own choosing prior to execution.

 

6.                                       TERMINATION OF EMPLOYMENT.

 

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

 

(a)               in the case of death, his Base Salary at the rate in effect at
the time of his termination 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)              in the case of death, any deferred compensation or bonuses,
including interest or other credits on the deferred amounts to the extent
provided in the plans or programs providing for deferral, and in the case of
Disability, immediate vesting of any deferred compensation or bonuses, including
interest or other credits on the deferred amounts;

 

(e)               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 of 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
for a period of sixty (60) months 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

 

9

--------------------------------------------------------------------------------

 

(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 provisions of
such plans and programs.

 

6.2              Termination by the Company for Cause.  The Company may
terminate the Executive’s employment for Cause at any time during the Term of
Employment by giving written notice to the Executive, authorized by a vote of at
least a majority of the members of the Board, that the Company intends to
terminate his employment for Cause.  Such written notice shall specify the
particular act or acts, or failure to act, providing the basis for termination. 
The Executive shall be given the opportunity within thirty (30) days of the
receipt of such notice to meet with the Board to defend such act or acts, or
failure to act.  If at the conclusion of the Executive’s presentation of his
defense, a majority of the Board, nonetheless, determines that the Executive’s
employment is terminable for Cause, the Executive shall be given thirty (30)
days after such meeting to correct such acts or failure to act, unless the Board
also determines that the Executive’s acts or failure to act are incapable of
correction.  Upon failure of the Executive 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 and benefits whatsoever, to:

 

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

 

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

 

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

 

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

 

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

 

Notwithstanding anything to the contrary in this Subsection 6.2, if the
Executive’s employment is terminated for Cause (i) due to his having been
formally charged pursuant to Subsection 1.4(a) but thereafter said charges are
dismissed or the Executive is acquitted, or (ii) due to his having

 

10

--------------------------------------------------------------------------------

 

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 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.

 

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 and benefits whatsoever, to:

 

(a)               a lump-sum payment equal to three (3) times one hundred ninety
percent (190%) of the Executive’s Base Salary at the rate in effect at the time
of his termination;

 

(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;

 

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

 

11

--------------------------------------------------------------------------------

 

(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 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 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.

 

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 (5%), 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 ninety percent (90%) 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;

 

12

--------------------------------------------------------------------------------

 

(e)               (i) immediate eligibility for retirement under the
Supplemental Management 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)              immediate vesting and payout of all amounts set forth in the
Long-Term Stay-On Performance Incentive Agreement, as if the Executive had fully
satisfied the terms and conditions thereof;

 

(h)              (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
policies or payments 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

 

(i)                  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 by the Company Without Cause or by the Executive
for Good Reason After a Change in Control.  If at any time subsequent to a
Change in Control, the Executive’s employment is terminated by the Company
without Cause or by the Executive for Good Reason, the Executive shall be
entitled, in addition to any compensation and benefits provided pursuant to
Subsection 7.1, but in lieu of any other compensation and benefits whatsoever,
to:

 

(a)               a lump-sum payment equal to the greater of (i) four (4) times
one hundred ninety percent (190%) of the Executive’s Base Salary at the time of
the Change in Control or (ii) four (4) times one hundred ninety percent (190%)
of the Executive’s 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

 

13

--------------------------------------------------------------------------------

 

(d)              (i) continuation of all employee benefits provided to the
Executive pursuant to Subsection 4.2, at the level in effect at the time of his
termination of employment, 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, the Executive shall be entitled, in addition to
any compensation and benefits provided pursuant to Subsection 7.1, but in lieu
of any other compensation and benefits whatsoever, to:

 

(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
Subsections 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 (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

 

(c)               in either instance, the Executive shall also 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 after a Change in Control for any
reason not otherwise provided for in this Section 7, his rights shall be
determined in accordance with the applicable subsection of Section 6.

 

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 UPON
TERMINATION.

 

8.1              Timing of Payments.  Unless otherwise provided herein, any
payments to which the Executive shall be entitled pursuant to Sections 6 and 7
following the termination of

 

14

--------------------------------------------------------------------------------

 

his employment shall be made as promptly as possible and in no event later than
five (5) business days following the termination of his employment.

 

8.2              No Mitigation; No Offset.  In the event of any termination of
the Executive’s employment under Sections 6 or 7, the Executive shall be under
no obligation to seek other employment and there shall be no offset against
amounts due to the Executive on account of any remuneration attributable to any
subsequent employment that the Executive may obtain.  Any amounts payable to the
Executive under Sections 6 or 7 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
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.

 

15

--------------------------------------------------------------------------------

 

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
permitted 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.

 

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;

 

16

--------------------------------------------------------------------------------

 

(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 Subsections 10.1 and 10.6; provided,
however, that the Executive agrees to repay to the Company all 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.

 

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.

 

17

--------------------------------------------------------------------------------

 

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.

 

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.

 

18

--------------------------------------------------------------------------------

 

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:

Lorenzo J. Fertitta

 

2411 W. Sahara Avenue

 

Las Vegas, NV  89102

 

14.                                 EMPLOYEE BENEFIT PLAN DOCUMENTS.  In the
event that any terms and provisions of this Agreement conflict with the terms
and provisions of any employee benefit plan document, the terms and provisions
of this Agreement shall govern, and the Company shall take any and all actions
that may be necessary, including amendment of any plan document, to effect the
provision of benefits expressly provided upon termination of the Executive’s
employment pursuant to Sections 6 and 7.

 

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 beneficiaries, estate or other legal representative.

 

19

--------------------------------------------------------------------------------

 

16.                                 SURVIVORSHIP.  The respective rights and
obligations of the Parties hereunder shall survive the expiration or earlier
termination of this Agreement to the extent necessary to the intended
preservation of such rights and obligations.  The provisions of this Section 18
are in addition to the survivorship provisions of any other section of this
Agreement.

 

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, express or implied, between the
Parties with respect hereto.  No representations, inducements, promises or
agreements not embodied herein shall be of any force or effect.

 

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

 

20.                                 AMENDMENT OR WAIVER.  No provision in this
Agreement may be amended or waived unless such amendment or waiver is agreed to
in writing, signed by both Parties.  No waiver by one Party of any breach by the
other Party of any condition or provision of this Agreement to be performed by
such other Party shall be deemed a waiver of a similar or dissimilar condition
or provision at the same or any prior or subsequent time.  No failure of the
Company to exercise any power given it hereunder or to insist upon strict
compliance by the Executive with any obligation hereunder, and no custom or
practice at variance with the terms hereof, shall constitute a waiver of the
right of the Company to demand strict compliance with the terms hereof.

 

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

 

20

--------------------------------------------------------------------------------

 

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 that is not an arbitrable claim, the Parties mutually and
irrevocably consent to, and waive any objection to, the exclusive jurisdiction
of any court of competent jurisdiction in Clark County, Nevada, to resolve such
dispute or controversy.

 

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:

 

 

 

 

 

 

 

 

 

 

LORENZO J. FERTITTA

 

21

--------------------------------------------------------------------------------