PROXY STATEMENT
INDEPENDENT SHAREHOLDER SOLICITATION
for Annual Shareholders Meeting
STATION CASINOS, INC.
May 18, 2005
[LOCATION]
[TIME]
First released to Shareholders ________ ___, 2005
UNITE HERE
1630 S. Commerce St.
Las Vegas, NV 89102
Tel. (702) 386-5188
Fax: (702) 386 5241
To Fellow Station Casinos, Inc. Shareholders:
We are writing to urge you to support our shareholder proposals
recommending reforms to enhance shareholder rights at Station
Casinos, Inc. (the Company).
Station Casinos has been one of the leading performers in the gaming
industry. However, we are concerned about the Company's poor
corporate governance practices and restrictions on shareholder
rights. We believe the Company's arsenal of anti-takeover
devices--a classified board, a stockholder rights plan (or "poison
pill"), blank check preferred stock, supermajority voting
requirements, and restrictions on shareholders' ability to call
special meetings or act by written consent--serve to potentially
entrench management and our Board of Directors from shareholders.
It is our opinion that enhancing shareholder rights at Station
Casinos, rather than maintaining the Company's current entrenchment
devices, is the best guarantee to ensure the continuing success of
the Company.
Removing the Company's draconian anti-takeover devices is especially
important given the unprecedented merger-and-acquisition activity in
the gaming industry. In 2004, over $22 billion in gaming deals were
announced, and Boyd Gaming completed its $1.4 billion acquisition of
Coast Resorts, a major Station Casinos' competitor.
We believe the trend of consolidation among gaming operators is
likely to continue, a view backed by top gaming industry analysts:
"We believe that the industry could continue to
experience consolidation, particularly among the small-cap
operators, as the gap between them and the large caps
continues to widen." (Lehman Brothers Global Equity Research,
"Opportunity Knocks", Aug. 24, 2004)
-------------------------------------------------------------------
None of the publications or authors cited in this proxy
statement are participants in this proxy solicitation. We have not
requested nor obtained the consent of any of these sources
for referring to these materials in our proxy statement.
----------------------------------------------------------------------
"We expect consolidation to continue as smaller operators
need scale to compete with the larger casino operators,
although we anticipate that the rate of M&A will slow from
2004's torrid pace." (Bear Stearns Equity Research, "U.S.
Gaming: Let the Games Begin," January, 2005)
"Casino operators remain in a period of strong
secular growth but are likely to face momentum concerns as
growth slows....In this environment, consolidation will
likely become an increasingly important component of growth,
which presents both opportunity and risk." (Citigroup Smith
Barney Equity Research, United States, Gaming and Lodging,
"2004 Midyear Update: What's Next?" Jun. 18, 2004)
Given this environment, we believe that the Company's current
anti-takeover devices provide our Board of Directors and management
with too much power to potentially reject offers that may be in the
best interests of shareholders.
ACCORDINGLY, WE URGE SHAREHOLDERS TO VOTE FOR OUR PROPOSALS
RECOMMENDING THE BOARD TO DO THE FOLLOWING:
1. Strengthen shareholder rights by changing the "supermajority"
voting provisions in the bylaws to simple majority.
2. Declassify the Board and institute annual election of Directors.
3. Allow shareholders to vote on the Company's "poison pill" or
redeem it.
Below is the full text of our proposals, along with supporting
statements for each proposal.
1. ESTABLISH SIMPLE MAJORITY VOTING BY SHAREHOLDERS
RESOLVED, that the shareholders of Station Casinos, Inc.
urge the Board of Directors to increase shareholder rights by
lowering the voting requirement to amend the Company's
Restated Bylaws from the current "supermajority" to a simple
majority.
Supporting Statement:
We believe shareholders' ability to exercise their rights to be
fundamental to good corporate governance, including the ability of
shareholders to enact bylaw amendments or take other action by a
majority of shares outstanding. A simple majority of shareholder
votes should be sufficient to mandate changes to the Company's
bylaws.
Currently, the Company has a "supermajority" (66 2/3%) requirement
for bylaw amendments. We believe this requirement unduly limit
shareholders' influence and role in our company, particularly given
the significant insider ownership (more than 20%) of the Company's
common stock. The supermajority requirement creates an unreasonably
high threshold for outside shareholders to affect fundamental
changes to the Company's Restated Bylaws.
We believe the restoration of simple majority rule by shareholders
is the first step toward meaningful corporate governance reform at
the Company. We urge the Board of Directors to increase shareholder
rights and establish simple majority voting by shareholders with
respect to amending the Company's Restated Bylaws.
2. INSTITUTE ANNUAL ELECTION OF DIRECTORS
RESOLVED, that shareholders of Station Casinos, Inc. urge
the Board of Directors to take necessary steps, in compliance
with state law, to declassify the board and institute annual
election of directors. The board's new election system shall
be instituted in a manner that does not affect the unexpired
terms of directors previously elected.
Supporting Statement:
Station Casinos' Board of Directors is divided into three classes
of directors serving staggered three-year terms. This means an
individual director faces election only once every three years, and
shareholders only vote on approximately a third of the board each year.
We believe this director classification system is not in the best
interests of shareholders because it reduces the accountability of
the board to shareholders and is an unnecessary takeover defense.
Shareholders should have the opportunity to vote on the performance
of the entire Board each year. Replacing the current classification
system with annual elections of all directors would give
shareholders an opportunity to register their views on the
performance of the board collectively and each director
individually.
A study by researchers at Harvard Business School and the University
of Pennsylvania's Wharton School titled "Corporate Governance and
Equity Prices" (Quarterly Journal of Economics, February 2003)
looked at the relationship between corporate governance practices
(including classified boards) and firm performance. The study found
a significant positive link between governance practices favoring
shareholders (such as annual director elections) and firm value,
though the study did not break out the impact of individual
governance practices.
Many institutional investors increasingly favor requiring annual
elections for all directors. The Council of Institutional
Investors, the California Public Employees' Retirement System, and
Institutional Shareholder Services support this reform.
We urge shareholders to demand that Station Casinos, Inc. declassify
its Board of Directors and adopt annual director elections.
3. SHAREHOLDER APPROVAL OF POISON PILLS
RESOLVED, that shareholders of Station Casinos, Inc. urge the
Board of Directors to submit the Company's Rights Agreement
to shareholders for approval or, if such approval is not
granted by a majority vote of shareholders, redeem it, and to
seek shareholder approval for extending this "poison pill" or
adopting other similar plans in the future.
Supporting Statement:
On October 6, 1997, the Company's Board of Directors adopted,
without shareholder approval, a "Rights Agreement" (which was last
amended on December 1, 1998). The agreement provides that the Board
can thwart a potential takeover bid by giving all other shareholders
an additional one one-hundredth share of preferred stock for each
share owned. The Board adopted this agreement unilaterally and
without seeking prior approval of shareholders. Unless redeemed,
the share purchase rights set forth in the Rights Agreement will
expire on October 21, 2007, unless the expiration date is extended
or the rights are earlier redeemed.
We do not believe the possibility of an unsolicited bid justifies
the unilateral implementation of such a device by the board.
Therefore, we urge the board to submit the Rights Agreement to a
shareholder vote for approval and not to extend it or adopt other
poison pills in the future without first seeking shareholder approval.
According to the 1991 book Power and Accountability by Nell Minow
and Robert Monks: "All poison pills raise questions of shareholder
democracy and the robustness of the corporate governance process.
They amount to major de facto shifts of voting rights away from
shareholders to management, on matters pertaining to the sale of the
corporation. They give target boards of directors absolute veto
power over any proposed business combination, no matter how
beneficial it might be for the shareholders. "
We urge all shareholders to vote FOR this resolution.
II. PROXY VOTING:
PLEASE USE THE ENCLOSED PROXY CARD TO VOTE FOR THE
PROPOSALS. YOU WILL ALSO RECEIVE A PROXY CARD FROM
MANAGEMENT. IF YOU SUPPORT ANY OF THE PROPOSALS, DO NOT SEND
BACK MANAGEMENT'S CARD (UNLESS THAT CARD GIVES YOU A CHANCE TO
VOTE ON SUCH PROPOSALS). ANY PROXY CARD YOU HAVE SIGNED IS
CANCELLED OUT BY SUBMITTING A LATER-DATED PROXY CARD.
We intend to solicit at least a majority of the voting power the
outstanding stock. You can revoke any proxy vote prior to the tally
at the shareholders meeting by signing and submitting new proxy
card, by sending written notice of revocation to the proxy holder,
or by appearing at the meeting and voting in person. The record
date for eligibility to vote is _____, 2005.
Our proposals are non-binding recommendations to the board. Passage
of these proposals requires approval of a majority of votes cast.
We seek no discretionary voting authority for the meeting: we will
vote your stock as you instruct us. If you return the enclosed card
but give us no instructions, we will vote your stock FOR our
proposals and not vote the card in the director selection nor on
any other matter. The Company's bylaws require 35 days' advance
notice before any matter may be raised at the meeting, and therefore
we do not expect any matter to be raised at the meeting that is not
addressed in this proxy statement. We incorporate by reference all
information concerning the board of directors [and management's
proposal to _____ ] and voting procedures contained in management's
proxy statement at pages ___.
III. INFORMATION ON PARTICIPANTS IN
THIS SOLICITATION:
The participants in this solicitation will be UNITE HERE, its
research analyst Chris Bohner, Culinary Workers Union Local 226 (a
UNITE HERE affiliate commonly known as "The Culinary") and its
research analyst Ken Liu. All have offices at the above address.
UNITE HERE represents approximately 440,000 active members and more
than 400,000 retirees throughout North America. UNITE HERE owns 262
shares of Station Casino Inc. common stock. UNITE HERE and its
affiliates have engaged in shareholder solicitations on corporate
governance issues at several companies over the past decade.
Station Casino Inc.'s workforce is not unionized. The Culinary,
which represents approximately 50,000 employees of Las Vegas resorts
in collective bargaining, has an ongoing organizing drive at Station
properties in Las Vegas. Neither UNITE HERE nor the Culinary have
undertaken picketing or boycott activities against the Company. We
do not seek your support in labor matters, and do not believe that
enactment of the proposals would have any impact on such matters.
The proposals and UNITE HERE's proxy cards will be presented at the
meeting regardless of any developments in such matters.
UNITE HERE and the Culinary will bear all solicitation costs
(anticipated at $10,000) and will not seek reimbursement from the
Company. They will solicit proxies by mail, phone, e-mail, fax and
in person using its regular staff, who shall not receive any
additional compensation, but they may also hire an outside
solicitor. They will reimburse banks, brokers, and other custodians,
nominees or fiduciaries for reasonable expenses incurred in forwarding
proxy material to beneficial owners.
IV. YOUR RIGHT TO MAKE SHAREHOLDER PROPOSALS:
If a shareholder has owned more than $2000 worth of stock for more
than a year and meets the other criteria of SEC Rule 14a 8, then
he or she has the legal right to have a proposal appear in
management's proxy statement and proxy card. The deadline for
shareholders to submit proposals for inclusion in management's proxy
materials for the year 2005 is December 15, 2004.
V. EXECUTIVE COMPENSATION/SECURITY OWNERSHIP OF
MANAGEMENT AND 5% OWNERS:
We incorporate by reference the information contained in
management's proxy statement at pages ____________.
PLEASE RETURN THE ENCLOSED PROXY CARD TODAY.
For more information, contact UNITE HERE at (702) 386 5188.
VOTE FOR THE CORPORATE GOVERNANCE REFORM PROPOSALS.
[page break]
PROXY CARD
solicited by UNITE HERE for Annual Shareholders
Meeting of Station Casino, Inc., May _____, 2005
The undersigned hereby designates Chris Bohner and Ken Liu, with
full power of substitution, as the proxies of the undersigned for
the sole purpose of voting all stock of the undersigned in the
manner marked below at the Station Casinos, Inc. annual shareholders
meeting for 2005. This proxy card grants no discretionary voting
authority: if matters come before the meeting other than the items
below, the stock of the undersigned will not be voted on such matters.
1. ELECTION OF DIRECTORS
For: [ ] MANAGEMENT NOMINEES:
01 __________________
02 ___________________
To withhold authority for individual candidates, cross out name(s).
Withhold Authority as to all above: [ ]
UNITE HERE MAKES NO RECOMMENDATION
ON THE DIRECTORS ELECTION
UNITE HERE URGES A VOTE FOR
SHAREHOLDER PROPOSALS RECOMMENDING
THE FOLLOWING :
2. Increase shareholder rights by changing the "supermajority"
voting provisions to simple majority.
FOR THIS PROPOSAL:
AGAINST THIS PROPOSAL:
ABSTAIN:
3. Declassify the board and institute annual election of
directors.
FOR THIS PROPOSAL:
AGAINST THIS PROPOSAL:
ABSTAIN:
4. Submit the Company's "poison pill" to shareholders for approval.
FOR THIS PROPOSAL:
AGAINST THIS PROPOSAL:
ABSTAIN:
If no direction is made above, UNITE HERE will vote this card FOR
the proposals and not vote it in the directors' election.
Dated: _____________
SIGNATURE:_______________________________________
PRINT: _____________________________________________
NAME:_____________________________________________
TITLE (if shares not held in above name): ________________
Optional information so we can make sure your vote gets
counted and provide you more info about shareholder issues
at Station Casinos (your info will not be put to any other use):
Telephone _________ Fax
____________ E-mail address:
____________
This card can be returned in the enclosed envelope or by fax to
(702) 386 5241.