<PAGE>
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Mandalay Resort Group
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO]
MANDALAY RESORT GROUP
Proxy Statement
And
Notice Of 2000 Annual
Meeting of Stockholders
<PAGE>
Mandalay Resort Group
3950 Las Vegas Boulevard South
Las Vegas, Nevada 89119
----------------
Notice of Annual Meeting of Stockholders
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TIME: 10:30 A.M., EDT, on Thursday, June 15, 2000
PLACE: The Pavilion located on the parking lot adjacent to
MotorCity Casino, 2901 Grand River Avenue,
Detroit, Michigan 48201
ITEMS OF BUSINESS: . To elect three directors.
. To approve the 2000 Executive Officers' Bonus Plan.
. To approve the 2000 Stock Incentive Plan.
. To ratify the appointment of Arthur Andersen LLP as
independent auditors to examine and report on our
financial statements for the fiscal year ending
January 31, 2001.
. To transact any other business properly brought
before the meeting.
WHO MAY VOTE: You can vote at the meeting or any adjournment(s) of
the meeting if you were a stockholder of record at the
close of business on April 20, 2000.
ANNUAL REPORT: A copy of the Annual Report to Stockholders is
enclosed.
By Order of the Board of
Directors
Michael S. Ensign
Chairman of the Board
Las Vegas, Nevada
April 28, 2000
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<PAGE>
Mandalay Resort Group
3950 Las Vegas Boulevard South
Las Vegas, Nevada 89119
-------------------------
Proxy Statement
-------------------------
This proxy statement is being furnished to our stockholders in connection
with the solicitation of proxies on behalf of our Board of Directors for use at
our Annual Meeting of Stockholders to be held in the Pavilion located on the
parking lot adjacent to MotorCity Casino, 2901 Grand River Avenue, Detroit,
Michigan, at 10:30 A.M., EDT, on Thursday, June 15, 2000, and at any and all
adjournments of the meeting, for the purpose of considering and acting upon the
matters referred to in the accompanying Notice of Annual Meeting of
Stockholders and more fully discussed below. The terms "we," "our," "us," and
"Mandalay," as used in this proxy statement, refer to Mandalay Resort Group.
This proxy statement and the accompanying form of proxy are first being
mailed to stockholders on or about May 5, 2000.
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Information Concerning the Annual Meeting
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What matters will be voted on at the meeting?
At the meeting stockholders will vote on four matters. They are:
. The election of nominees to serve on our Board of
Directors;
. Approval of the 2000 Executive Officers' Bonus Plan;
. Approval of the 2000 Stock Incentive Plan; and
. Ratification of the appointment of our independent
auditors for our fiscal year ending January 31, 2001.
How does the Board recommend I vote on the proposals?
The Board recommends that you vote:
. FOR each of the three nominees named in this proxy
statement;
. FOR approval of the 2000 Executive Officers' Bonus
Plan;
. FOR approval of the 2000 Stock Incentive Plan; and
. FOR ratification of the appointment of Arthur Andersen
LLP as our independent auditors for our fiscal year
ending January 31, 2001.
Who is entitled to vote?
Our stockholders of record as of the close of business on April 20,
2000, the record date for the meeting, are entitled to vote at the
meeting or any adjournment(s) of the meeting.
How do I cast my vote?
There are two different ways you may cast your vote. You can vote by:
. marking, signing and dating a proxy card and returning
it in the envelope provided; or
<PAGE>
. attending the meeting (if you are the registered owner
of your shares, or, if your shares are held through a
broker, bank or other nominee, you bring to the
meeting a copy of a brokerage statement reflecting
your stock ownership as of April 20, 2000).
If I have given a proxy, how do I revoke that proxy?
Your presence at the meeting will not revoke any proxy you may have
given. However, you may revoke your proxy (to the extent it has not
already been voted at the meeting) if you:
. give written notice of the revocation to Mandalay's
Corporate Secretary, Yvette E. Landau, at 3950 Las
Vegas Boulevard South, Las Vegas, Nevada 89119, which
will not be effective until it is received;
. submit a properly signed proxy with a later date; or
. vote in person at the meeting (if your shares are
registered directly on Mandalay's books and not held
through a broker, bank, or other nominee).
How will my proxy be voted?
If your proxy in the accompanying form is properly executed, returned to
and received by us prior to the meeting and is not revoked, it will be
voted in accordance with your instructions. If you return your signed
proxy but do not mark the boxes to show how you wish to vote on one or
more of the proposals, the shares for which you have given your proxy
will, in the absence of your instructions to the contrary, be voted
"FOR" each of the nominees named in the proxy and "FOR" each of the
other proposals described in this proxy statement.
Will my shares be voted if I do not provide my proxy?
Your shares may be voted under certain circumstances if they are held in
the name of a brokerage firm or nominee. Brokerage firms and nominees
that are members of the New York Stock Exchange have the authority under
the exchange's rules to vote their customers' unvoted shares on certain
"routine" matters if the customers have not furnished voting
instructions within a specified period prior to the meeting. Under these
rules, the election of directors, approval of the 2000 Executive
Officers' Bonus Plan, approval of the 2000 Stock Incentive Plan and
ratification of the appointment of the independent accountants are all
considered to be "routine" matters. If you hold your shares directly in
your own name, they will not be voted if you do not provide a proxy or
attend the meeting and vote the shares yourself.
How many votes are needed to elect directors?
The three nominees receiving the highest number of "FOR" votes will be
elected as directors. This is referred to as a plurality.
What if a nominee is unwilling or unable to serve?
That is not expected to occur. If it does, proxies will be voted for a
substitute nominee designated by our Board of Directors.
-2-
<PAGE>
How many votes are needed to approve the 2000 Executive Officers' Bonus Plan
and the 2000 Stock Incentive Plan and to ratify the selection of Arthur
Andersen LLP to examine and report on our financial statements for the fiscal
year ending January 31, 2001?
Each of these three proposals will be considered separately. The
approval of each of these proposals requires that the number of shares
voted "FOR" the proposal exceed the number of shares voted "AGAINST" the
proposal.
Are dissenters' rights applicable to any of the proposals?
No. Dissenters' rights do not apply to any of the proposals.
Who will count the vote?
Representatives of First Chicago Trust Company of New York (a division
of EquiServe), our transfer agent, will tabulate the votes cast at the
meeting.
What does it mean if I get more than one proxy card?
If you have your shares registered in multiple accounts with one or more
brokers and/or our transfer agent, you will receive more than one card.
Please complete and return each of the proxy cards you receive to ensure
that all of your shares are voted.
How many shares can be voted?
As of April 20, 2000, the record date for the meeting, 78,008,229 shares
of Mandalay common stock were issued and outstanding. Every holder of
Mandalay common stock is entitled to one vote for each share held of
record on the record date.
What is a "quorum"?
A "quorum," for purposes of the meeting, means a majority of the shares
of Mandalay common stock outstanding on the record date. This quorum of
our shares must be present at the meeting in order for the meeting to be
held. For purposes of determining the presence of a quorum, shares will
be counted if they are present in person or by proxy. Shares present by
proxy will be counted as present for purposes of determining the
presence of a quorum even if the proxy does not have authority to vote
on all matters.
Abstentions: Abstentions are not counted in the tally of votes "FOR" or
"AGAINST" a proposal. A "WITHHELD" vote is the same as an abstention.
Abstentions and withheld votes are counted as shares present at the
meeting for purposes of determining the presence of a quorum.
Broker Non-Votes: Broker non-votes occur when shares held by a broker
are not voted with respect to a proposal because (1) the broker has not
received voting instructions from the stockholder, and (2) the broker
lacks the authority to vote the shares at his/her discretion. Broker
non-votes will not affect the outcome of any of the matters being voted
upon at the meeting, but will be counted as shares present and entitled
to be voted for purposes of determining the presence of a quorum.
Who can attend the Annual Meeting?
All stockholders of Mandalay who owned shares on April 20, 2000 can
attend. Just check the box on your proxy and bring the Admission Ticket
included in your proxy statement with you to the meeting.
-3-
<PAGE>
Please note that the Admission Ticket will be required in order to
obtain admission to the meeting. Accordingly, the Admission Ticket
should not be returned with your proxy. If your shares are held in a
brokerage account, you will also need to bring a copy of your brokerage
account statement (which you can obtain from your broker) reflecting
your stock ownership as of April 20, 2000.
How will voting on any other business be conducted?
We do not know of any business to be considered at the meeting other
than the proposals described in this proxy statement. However, if any
other business is presented at the meeting, a proxy in the accompanying
form will give authority to Michael S. Ensign and Yvette E. Landau to
vote on such matters at their discretion and they intend to do so in
accordance with their best judgment on any such matter.
Who will pay the cost of this proxy solicitation and how will the solicitation
be conducted?
Mandalay will pay the expenses of soliciting proxies in the form
included with this proxy statement, including the cost of preparing,
assembling and mailing material in connection with the solicitation. In
addition to the use of the mail, Mandalay's directors, executive
officers and employees may solicit proxies personally or by telephone or
telegraph. Mandalay has also hired Altman Group, Inc. to assist in the
solicitation of votes at an estimated cost of $5,000, plus its out-of-
pocket expenses. We also reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy and solicitation materials to
stockholders.
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Item 1 - Election of Directors and Nominee Biographies
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What is the makeup of the Board of Directors?
Our Board of Directors has not less than six and not more than 11
members as determined from time to time by the Board of Directors. The
directors, which currently number eight, are divided into three classes,
with each class serving for a three-year period. The stockholders elect
the members of one of the three classes each year.
Are there any members of the class of directors to be elected at the meeting
who are not standing for re-election?
No. Each incumbent director whose term expires this year has been
nominated for election to serve for an additional three-year term and
has agreed to serve if elected.
Who are the Board's nominees this year?
Michael S. Ensign, Glenn W. Schaeffer and Michael D. McKee are our
nominees for election to the Board of Directors. Each nominee, if
elected, would hold office until our 2003 annual meeting of stockholders
and until his successor is elected and qualified.
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<PAGE>
What is the background of this year's nominees?
Our nominees for election to the Board are:
MICHAEL S. ENSIGN
Director since 1995
Age 62
. Chairman of the Board and Chief Executive Officer of Mandalay since January
16, 1998
. Chief Operating Officer of Mandalay since June 1, 1995
. Vice Chairman of the Board of Mandalay from June 1, 1995 until January 16,
1998
. Involved in an executive capacity in the management and operations of the
entities we refer to as the "Gold Strike Entities" for a period of more than
five years prior to Mandalay's acquisition of those entities and their hotel
and casino properties in June 1995
GLENN W. SCHAEFFER
Director since 1996
Age 46
. President, Chief Financial Officer and Treasurer of Mandalay since June 1,
1995
. Member of the Board of Directors of Mandalay since March 4, 1996
. Involved in an executive capacity in the management and operations of the
entities we refer to as the "Gold Strike Entities" from 1993 until Mandalay's
acquisition of those entities and their hotel and casino properties in June
1995
. President of Mandalay from June 1991 until February 1993
. Chief Financial Officer and a director of Mandalay from 1984 until February
1993
. Member of the Board of Directors:
. Weider Nutrition International, Inc.
. Del Webb Corporation
MICHAEL D. McKEE
Director since 1996
Age 54
. Vice Chairman of The Irvine Company, a real estate development and investment
company, since July 1999
. Executive Vice President of The Irvine Company from April 1994 until July
1999
. Chief Financial Officer of The Irvine Company since December 1997
. Chief Legal Officer of The Irvine Company from April 1994 until December 1997
. Managing Partner of the Orange County, California office of the law firm of
Latham & Watkins, of which he was a partner from 1987 until April 1994
. Member of the Board of Directors:
. Health Care Property Investors, Inc.
. Realty Income Corporation
-5-
<PAGE>
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Biographies of Directors Not Standing For Election This Year
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Our incumbent directors whose terms expire in 2001 are:
ARTHUR H. BILGER
Director since 1997
Age 47
. Private investor
. President and Chief Operating Officer of New World Communications Group
Incorporated, a television broadcasting and production company, for a period
of two years until January 1997
. Principal of Apollo Advisors, L.P. and Lion Advisors, L.P., entities engaged
in the investment of capital in acquisitions and corporate restructurings,
from 1990 until he assumed his position with New World Communications Group
Incorporated
. Director of Mandalay from 1983 until 1989
WILLIAM E. BANNEN, M.D.
Director since 1998
Age 50
. Vice President/Chief Medical Officer with Anthem Blue Cross Blue Shield ,
formerly Blue Cross Blue Shield of Nevada ("Blue Cross Nevada"), since
January 1998
. Medical Director with Blue Cross Nevada since 1991
. Director - Network Administration and Health Management with Blue Cross
Nevada since 1993
. Current positions with Blue Cross Nevada include responsibility for medical
management and network contracting in the State of Nevada
ROSE McKINNEY-JAMES
Director since 1999
Age 48
. President and Chief Executive Officer of the Corporation for Solar Technology
and Renewable Resources, a not-for-profit corporation engaged in the
development of solar technology, since January 1996
. Director of the Nevada Department of Business and Industry, which has
administrative oversight of 29 state regulatory agencies, boards and
commissions, from October 1993 until December 1995
. Member of the Nevada Public Service Commission from January 1989 until
October 1993
. Member of the board of directors of a number of community and civic
organizations including United Way
-6-
<PAGE>
Our incumbent directors whose terms expire in 2002 are:
WILLIAM A. RICHARDSON
Director since 1995
Age 53
. Vice Chairman of the Board of Mandalay since June 18, 1998
. Member of the Board of Directors of Mandalay since June 1, 1995
. Executive Vice President of Mandalay from June 1, 1995 until June 18, 1998
. Involved in an executive capacity in the management and operations of the
entities we refer to as the "Gold Strike Entities" for a period of more than
five years prior to Mandalay's acquisition of those entities and their hotel
and casino properties in June 1995
DONNA B. MORE
Director since 1998
Age 42
. Partner in the Chicago, Illinois law firm of Freeborn & Peters since July
1994
. Chief Legal Counsel for the Illinois Gaming Board, where she participated in
the development and administration of the regulatory process for riverboat
casinos in Illinois, from November 1990 to July 1994
. Assistant United States Attorney, Criminal Division of the United States
Attorney's Office for the Northern District of Illinois from May 1989 to
November 1990
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Executive Officers Other Than Nominees and Directors
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Our executive officers serve in that capacity at the pleasure of our
Board of Directors. Set forth below is information concerning each of the
individuals (other than those who are also directors of Mandalay) currently
serving as our executive officers.
YVETTE E. LANDAU
Age 43
. Vice President, General Counsel and Secretary of Mandalay since June 1996
. Member of the Executive Committee of the Circus and Eldorado Joint Venture,
in which Mandalay owns a 50% interest
. Member of the Management Committee of Detroit Entertainment, L.L.C., in which
Mandalay owns a 53.5% interest
. Associate General Counsel of Mandalay from January 1993, when she joined
Mandalay, until June 1996
. Private practice of law in Phoenix, Arizona as a partner in the law firm of
Snell & Wilmer from 1984 until January 1993
LES MARTIN
Age 43
. Vice President and Chief Accounting Officer of Mandalay since June 1997
. Corporate Controller of Mandalay since November 1994
. Manager of Financial Reports of Mandalay from April 1984, when he joined
Mandalay, until June 1997
. Certified public accountant with a national public accounting firm prior to
joining Mandalay
-7-
<PAGE>
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Compensation of Directors
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Any director who is also an employee of Mandalay or one of its
subsidiaries is not separately compensated for his or her services as a
director.
Each director who is not an employee of Mandalay or one of our
subsidiaries receives $35,000 each year. Each nonemployee director also
receives $1,500 for each meeting of the Board he or she attends and $1,000
($1,500 in the case of the committee chairperson) for each meeting of a
committee of the Board attended. They are also reimbursed for out-of-pocket
expenses associated with attending meetings.
Our 1991 Stock Incentive Plan provides for the annual grant of formula
awards in the form of stock options to our nonemployee directors during the
term of the plan, which expires on June 19, 2001. Under this plan, each of our
nonemployee directors received an option to purchase 10,000 shares of Mandalay
common stock on June 17, 1999, the date of our 1999 annual meeting of
stockholders (each a "1999 award"). The exercise price for each 1999 award is
$21.125 per share, representing the average of the Fair Market Values (as
defined) for the fifth (5th) through the ninth (9th) "business days" following
the date of grant. Each 1999 award will become exercisable when, and only if,
the optionee continues to serve as a director until this year's annual meeting
of stockholders. Unless forfeited in accordance with its terms, each 1999 award
will become exercisable as to 4,000 shares on June 15, 2000, as to another
3,000 shares on the date of our 2001 annual meeting of stockholders, and as to
the remaining 3,000 shares on the date of our 2002 annual meeting of
stockholders. Unless earlier exercised or forfeited, each 1999 award will
remain exercisable until June 17, 2009. In the event of the termination of a
1999 award holder's service as a director, other than "by reason of retirement"
(as defined), total and permanent disability or death, his or her 1999 award
and any other formula awards received under the plan in prior years (whether or
not then vested and whether or not then exercisable) will automatically expire
on (and may not be exercised on) the effective date of the termination. As
defined, the phrase "by reason of retirement" means mandatory retirement
pursuant to Board policy or termination of service at a time when the optionee
would, if an employee of Mandalay, be entitled to receive a retirement benefit
under the 401(k) plan for our employees. If a termination of service is by
reason of retirement, total and permanent disability or death, the terminated
director's 1999 award and any other then-outstanding formula awards that have
vested (including any awards which vest on the date of termination) will become
exercisable, whether or not they were previously exercisable, and each such
award will expire one year after the date of termination or on its stated
expiration date, whichever is earlier.
On February 12, 1999, our Board of Directors adopted a stock option plan
providing for the issuance of up to 100,000 shares of Mandalay common stock
pursuant to the exercise of stock options granted under the plan to Mandalay's
nonemployee directors. On that date, the Board granted to each of the
individuals then serving as nonemployee directors, William E. Bannen, Arthur H.
Bigler, Michael D. McKee and Donna B. More, an option to purchase 25,000 shares
at a per share exercise price of $14.50, representing the closing price of our
common stock on the New York Stock Exchange Composite Tape on the date of the
grants. Each option, which has a term of ten years subject to earlier
termination upon the occurrence of certain events, became exercisable as to
8,333 shares on February 12, 2000 and will become exercisable as to 8,333
shares on February 12, 2001 and as to the remaining 8,334 shares on February
12, 2002.
-8-
<PAGE>
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Board Committees and Meeting Attendance
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Our Board of Directors has five committees. They are the Executive,
Audit, Compensation, Directors' Nominating and Compliance Review Committees.
Each committee reports its actions to the full Board at its next regular
meeting. A description of the duties of each committee follows the table below.
<TABLE>
<CAPTION>
Committee Membership and Meetings Held in Fiscal 2000
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Directors' Compliance
Name Executive Audit Compensation Nominating Review
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<S> <C> <C> <C> <C> <C>
Michael S. Ensign X
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William A. Richardson X
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Glenn W. Schaeffer X
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William E. Bannen X X*
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Arthur H. Bilger X* X
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Rose McKinney-James X* X
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Michael D. McKee X* X
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Donna B. More X*
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Number of Meetings in
Fiscal 2000** 0 7 6 0 4
</TABLE>
X Member
* Chairperson
** The Board held seven meetings in fiscal 2000. Each director attended at
least 75% of the meetings of the Board and its committees of which he or she
was a member held during fiscal 2000.
The Executive Committee:
. Has the full power of the Board during the period between meetings of the
Board, except those powers reserved to the Board or delegated by our Bylaws
or by the Board to another standing or special committee of the Board or as
may be prohibited by law.
The Audit Committee:
. Examines the activities of our independent auditors and internal audit
department to determine whether these activities are reasonably designed to
assure the soundness of accounting and financial procedures;
. Reviews our accounting policies and the objectivity of our financial
reporting;
. Receives reports from our internal auditors and reviews the scope of our
internal audit program; and
-9-
<PAGE>
. Considers annually the qualifications of our independent auditors and the
scope of their audit and makes recommendations to the Board as to their
selection.
The Compensation Committee:
. Reviews on a periodic basis, as it determines, the compensation of our
officers;
. Recommends to the Board appropriate levels (and the appropriate forms) of
compensation for our officers; and
. Performs such additional functions as the Board may authorize from time to
time relating to any stock option, incentive or other benefit plan approved
by the Board, including the administration of each of our stock option and
stock incentive plans currently in effect.
The Directors' Nominating Committee:
. Evaluates and presents to the Board for its consideration candidates to fill
positions on the Board; and
. Will consider individuals recommended by stockholders. Any stockholder who
wishes to recommend to the committee for its consideration a prospective
nominee for election to the Board may write to Yvette E. Landau, General
Counsel, Mandalay Resort Group, 3950 Las Vegas Boulevard South, Las Vegas,
NV 89119.
The Compliance Review Committee:
. Assists the Board in the implementation and administration of our Gaming
Compliance Program;
. Performs due diligence in respect of proposed transactions and associations;
and
. Advises the Board of any gaming law compliance problems or situations which
may adversely affect the objectives of gaming control.
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Item 2 - Proposal to Approve the 2000 Executive Officers' Bonus Plan
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Background
Mandalay has employment agreements with Michael S. Ensign, Glenn W.
Schaeffer and William A. Richardson, which were originally entered into in 1995
and are more fully described under "Management Remuneration-Employment
Agreements." Each agreement provides for the employee's eligibility to receive
an annual bonus under a bonus plan established for Mandalay's senior executive
officers which provides for the payment of bonus compensation that is intended
to constitute "qualified performance-based compensation" under Section 162(m)
of the Internal Revenue Code (the "Code"). Each agreement also provides that
the employee's targeted annual bonus shall not be less than 100% of his then
current base salary.
-10-
<PAGE>
Bonuses constituting "qualified performance-based compensation" under
Section 162(m) have been paid to Messrs. Ensign, Schaeffer and Richardson in
accordance with their employment agreements since 1996 under the Executive
Officer Bonus Plan approved by stockholders in 1995 (the "1995 Plan"). Because
the approval of the Original Plan by stockholders in 1995 ceases to satisfy the
stockholder approval requirement of Section 162(m) for performance-based
compensation for the fiscal year ending January 31, 2001, or subsequent fiscal
years, stockholders are being asked to approve the 2000 Executive Officers'
Bonus Plan (the "Bonus Plan") which, if approved, will meet the stockholder
approval and other plan requirements of Section 162(m) for bonuses Mandalay
pays in accordance with the provisions of the plan in fiscal 2001 and the next
four fiscal years. The Bonus Plan is an amendment and restatement of the 1995
Plan and, except as otherwise indicated, is similar in all material respects to
the 1995 Plan.
Description of the Bonus Plan
Our Compensation Committee approved the Bonus Plan on January 18, 2000
and, on April 26, 2000 it was adopted by our Board of Directors, subject to
approval of the plan by our stockholders, for the purpose of permitting us to
pay bonuses to our executives for the current fiscal year and the next four
fiscal years that constitute "qualified performance-based compensation" under
Section 162(m). According to its terms, however, no bonus awards will be
payable under the Bonus Plan unless and until it is approved by stockholders.
The Bonus Plan is a performance bonus plan which is designed to provide
certain senior executives with incentive compensation based upon the
achievement of pre-established performance goals. The Bonus Plan is intended to
provide an incentive for superior work and to motivate participating officers
toward even higher achievement and business results, to tie their goals and
interests to those of Mandalay and its stockholders and to enable Mandalay to
attract and retain highly qualified executive officers. Executive officers at
the level of vice president or above may be eligible to participate in the
Bonus Plan. Prior to, or at the time of, establishment of the performance
objectives for a performance period, which will generally be the fiscal year,
the Committee designated under the Bonus Plan (initially the Compensation
Committee (the "Committee")) will designate the specific executive officers who
will participate in the Bonus Plan for such performance period. Subject to the
approval of the Bonus Plan by stockholders, Messrs. Ensign, Schaeffer and
Richardson will participate in the Bonus Plan for the fiscal year ending
January 31, 2001.
The Bonus Plan is designed to comply with Section 162(m) of the Code, as
that section relates to performance-based compensation. Section 162(m)
generally limits to $1,000,000 the amount of tax deductible compensation that
may be paid by Mandalay in a fiscal year to each of the officers named in the
compensation table of its proxy statement for that fiscal year. Performance-
based compensation which is paid pursuant to a plan which is approved by
stockholders and which satisfies other requirements of Section 162(m) relating
to performance-based compensation is excluded for purposes of determining
compliance with this limitation. Accordingly, in order for compensation payable
under the Bonus Plan to be fully deductible by Mandalay, the Board of Directors
has adopted the Bonus Plan subject to its approval by stockholders. Pursuant to
the terms of the Bonus Plan, no bonuses may be paid under the Bonus Plan unless
and until Mandalay's stockholders have approved the Bonus Plan.
At the beginning of each performance period and subject to the
requirements of Section 162(m), the Committee will establish performance goals,
specific performance objectives and objectively determinable computation
formulae or methods for determining each participant's bonus under the Bonus
Plan for that performance period. The performance goals may include any one or
more of the following corporate business criteria: stock price, market share,
gross revenue, net revenue, pretax income, operating income, cash flow,
earnings per share, return on equity, return on invested capital or assets,
cost reductions and savings, return on revenues, productivity or any variations
of the preceding criteria. In addition, to the extent consistent with the goal
of providing for deductibility under Section 162(m) of the Code, performance
goals may include a participant's attainment of personal objectives with
respect to any of the foregoing performance goals or
-11-
<PAGE>
implementing policies and plans, negotiating transactions and sales, developing
long-term business goals or exercising managerial responsibility.
At or after the end of each performance period, the Committee is required
by the terms of the Bonus Plan to certify in writing whether the pre-
established performance goals and objectives have been satisfied in such
performance period. The actual bonus award for any participant for a
performance period will then be determined based upon the pre-established
computation formulae or methods. In no event will any bonus award for any
fiscal year exceed the lesser of 150% of the participant's annual base salary
as in effect at the beginning of the fiscal year or $2,500,000. The annual
dollar limitation on individual awards under the 1995 Plan was $1,500,000. The
Committee has no discretion to increase the amount of any participant's bonus
under the Bonus Plan as so determined, but may reduce the amount of, or totally
eliminate, the bonus if the Committee determines, in its absolute and sole
discretion, that such a reduction or elimination is appropriate in order to
reflect the participant's performance or unanticipated factors. In no event
will the aggregate amount of all bonuses payable in any plan year under the
Bonus Plan exceed 10% of Mandalay's average annual income before taxes during
its preceding five fiscal years.
The following table sets forth the amounts paid under the 1995 Plan to
the individuals and groups indicated for fiscal 2000. Except as described
above, the 1995 Plan is similar to the Bonus Plan in all material respects.
<TABLE>
<CAPTION>
Name and Position Bonus Amount($)
- -----------------------------------------------------------------------------------
<S> <C>
Michael S. Ensign 800,000
Chairman of the Board and Chief Executive Officer
- -----------------------------------------------------------------------------------
Glenn W. Schaeffer 600,000
President, Chief Financial Officer and Treasurer
- -----------------------------------------------------------------------------------
William A. Richardson 700,000
Vice Chairman of the Board
- -----------------------------------------------------------------------------------
Yvette E. Landau 0
Vice President, General Counsel and Secretary
- -----------------------------------------------------------------------------------
Les Martin 0
Vice President and Chief Accounting Officer
- -----------------------------------------------------------------------------------
All Current Executive Officers, as a group 2,100,000
- -----------------------------------------------------------------------------------
All Current Directors who are not Executive Officers, as a group 0
- -----------------------------------------------------------------------------------
Nonexecutive Officer Employees, as a group 0
</TABLE>
Approved awards under the Bonus Plan are payable in cash as soon as is
practicable after the end of each performance period and after the Committee
has certified in writing that the relevant performance goals were achieved.
Awards that are otherwise payable to a participant who is not employed by
Mandalay as of the last day of a performance period will be prorated or
eliminated pursuant to specified provisions of the Bonus Plan. A participant
will recognize ordinary taxable income upon receipt of payments under the Bonus
Plan.
The foregoing description of the Bonus Plan is qualified in all respects
by the actual provisions of the Bonus Plan, a copy of which is included with
this proxy statement as Appendix A.
Vote Required for Approval of the Bonus Plan
Your Board of Directors has approved the Bonus Plan. However, the Bonus
Plan will become null and void unless at the meeting the number of shares of
common stock voted "FOR" approval of the Bonus Plan exceeds the number of
shares voted "AGAINST" such approval.
Your Board of Directors recommends a vote "FOR" approval of the Bonus
Plan.
-12-
<PAGE>
- --------------------------------------------------------------------------------
Item 3 - Proposal to Approve the 2000 Stock Incentive Plan
- --------------------------------------------------------------------------------
In the opinion of our Board of Directors, Mandalay and its stockholders
have in the past benefited substantially from having certain of its directors,
officers and key employees acquire shares of Mandalay common stock pursuant to
stock options granted as part of our compensation of those individuals. Those
awards, in the opinion of the Board, have been a highly effective incentive,
reinforcing the identity of interest of our directors, officers and other key
employees with that of our stockholders with respect to our strategies for
profitable growth and share-value appreciation. At the present time, we have
approximately 1.1 million shares, representing approximately 1.4% of our shares
currently outstanding, available for issuance of stock options. Our ability to
provide share-value incentives to our directors, officers, key employees,
consultants and advisors in the future will, in the opinion of our Board,
benefit our long-term financial performance and assist us in continuing to
compete for, motivate and retain the services of high caliber executive,
managerial and professional employees, directors, consultants, and advisors.
On April 26, 2000, our Board of Directors adopted the 2000 Stock
Incentive Plan (the "Incentive Plan"), subject to the approval of the plan by
our stockholders. If the Incentive Plan is not approved by our stockholders at
the meeting, any stock options or other awards granted under the plan will be
null and void. As of the date of this proxy statement, no stock options or
other awards have been granted under the Incentive Plan.
Description of the Incentive Plan
The purposes of the Incentive Plan are to enable Mandalay and its
affiliates to attract and retain the services of individuals with managerial,
professional or supervisory skills as employees, officers, directors,
consultants or advisors of Mandalay or any of its affiliates, and to motivate
them to use their best efforts on behalf of Mandalay and its affiliates by
granting them stock options and/or other awards permitted by the plan. The
Incentive Plan authorizes grants of stock options, including options that are
intended to qualify as "incentive stock options", as defined under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), as well as
options that are not intended to so qualify. The Incentive Plan also authorizes
the grant of restricted stock awards, which may, but need not, be linked to the
achievement of performance goals. Subject to adjustment in certain events,
described below, the maximum number of shares of Mandalay common stock that may
be issued under the Incentive Plan is 3,500,000, and the maximum number of such
shares for which stock options or other awards may be granted under the plan to
any individual in any calendar year is 1,500,000.
If a stock option granted under the Incentive Plan or a portion thereof
expires or is terminated, canceled or surrendered for any reason without being
exercised in full, or if an award of restricted stock is forfeited, in part or
in full, the shares of common stock which were subject to the unexercised
portion of the stock option and the restricted stock which was forfeited under
the terms of the plan or the applicable award agreement will again become
available for issuance under the plan.
The Incentive Plan will initially be administered by our Compensation
Committee, but the Board may subsequently designate one or more other
committees of our directors for this purpose, or may designate itself to
administer the plan, either alone or along with one or more committees. Our
Compensation Committee's current members are William E. Bannen and Michael D.
McKee, each of whom is a "non-employee director" (as that term is defined for
purposes of Rule 16b-3) and an "outside director" (as that term is defined for
purposes of Section 162(m) of the Code). In the event the administration of the
Incentive Plan is from time to time shared by the Board and/or one or more
committees of the Board, the Board will designate the respective
responsibilities of
-13-
<PAGE>
each body sharing in the plan's administration. In the description of the
Incentive Plan which follows, our references to the "Administrator" refer to
the body or bodies from time to time administering the plan.
The Administrator (which currently is our Compensation Committee) has
full power, within the limits of the Incentive Plan, to determine the persons
to whom stock options or other awards are to be granted, the number of shares
to be subject to each award, and to establish the terms and conditions of each
award. Stock options and other awards under the Incentive Plan may be granted
by the Administrator to those employees, officers, members of the Board,
consultants or advisors of Mandalay or any of its affiliates that the
Administrator determines, at its sole discretion, qualify for such stock
options or awards. Approximately 28,500 employees of Mandalay and its
affiliates, including our five executive officers, and our directors are
currently eligible to receive grants of stock options or other awards under the
Incentive Plan, at the Administrator's discretion.
Each stock option granted under the Incentive Plan will be designated as
either an "incentive stock option" or as an option that is not an "incentive
stock option" (a "nonqualified stock option"). Options will generally be
granted with an exercise price that is set by the Administrator at an amount at
least equal to the fair market value of the stock subject to the option as of
the date the option is granted. The term of each option will be set by the
Administrator, but cannot extend for more than ten years from the date the
option is granted. Each option will become exercisable at the time or times
established by the Administrator for that option, which need not be the same
for all options under the plan. An option may be exercised, to the extent it is
then exercisable, in whole or in part by notice of exercise accompanied by
payment of the purchase price for the shares as required under the terms of the
option grant. The Incentive Plan generally permits the payment of the purchase
price in cash or by the delivery or withholding of Mandalay common stock having
a fair market value on the date of payment equal to the purchase price required
to be paid, or by a combination of cash and shares. The Administrator may,
however, impose limitations, conditions and prohibitions on the use of shares
of Mandalay common stock for these purposes. The Administrator may amend the
terms of any option granted under the Incentive Plan in a manner consistent
with the plan's terms but
. the optionee's consent will be required if the amendment is not
favorable to the optionee; and
. the approval of our stockholders will be required if the amendment would
constitute a repricing of the option.
In general, if an optionee's employment terminates, options that are then
exercisable will continue to be exercisable for a period of up to three months
(but not beyond the expiration of the original option term), while any options
that are not then exercisable will expire immediately upon termination of
employment. If, however, an optionee's employment terminates as a result of the
optionee's total disability, because of the optionee's death, because of the
optionee's retirement in accordance with Mandalay's policies, or because of a
termination of the optionee without "cause" or because the optionee terminates
for "good reason" (as these terms are defined in an optionee's employment
agreement or in the agreement evidencing the option) the optionee's outstanding
options will immediately become fully exercisable and may be exercised for a
period of up to six months (but not beyond the expiration of the original
option term). The Administrator may, however, vary any or all of the terms and
conditions relating to the termination or continuation of any option granted
under the Incentive Plan by including other terms and conditions in the
applicable option grant, at its discretion.
Under the terms of the Incentive Plan, any option not previously
exercised will, unless the terms of the grant provide otherwise, terminate
immediately if the participant ceases to be the employee, director, consultant
or advisor of Mandalay or an affiliate of Mandalay for certain stated reasons,
including but not limited to (i) dishonesty, (ii) breach of a material
provision of any employment or other written agreement with Mandalay or an
affiliate of Mandalay, or (iii) the inability to continue under any law or
governmental regulation, including any Nevada gaming law or regulation.
-14-
<PAGE>
Any restricted stock award granted under the Incentive Plan may, at the
Administrator's discretion, require the payment of a purchase price by the
recipient, and may be subject to restrictions and conditions which will cause
the award to be forfeited if the conditions are not met. Any restricted stock
award may restrict transfer prior to the satisfaction of the terms and
conditions established for the award. The terms and conditions of each
restricted stock award will be established at the Administrator's discretion
and can be varied for each restricted stock award granted. The recipient of a
restricted stock award will, on the grant of the award and compliance with any
requirements for transfer of the shares subject to the award, have all of the
rights of a stockholder with respect to the shares subject to the award,
including the right to vote the shares and receive any dividends and other
distributions attributable to the shares, unless the Administrator, in its sole
discretion, establishes different terms or conditions.
The Administrator also has the authority to make restricted stock awards
under a performance-based arrangement that may be established under the
Incentive Plan and which is intended to result in compensation that is exempt
from the limitations otherwise imposed on the deduction of certain executive
compensation under Section 162(m) of the Code, as discussed below. If a
determination is made to grant such performance based stock awards, the
Administrator will consist exclusively of two or more members of the Board who
are "outside directors," as that term is defined for purposes of Section
162(m). That Administrator will establish performance goals with respect to the
specific performance period for which the award is to be made. This action will
be in writing and will be within or prior to the first 90 days (or within the
first 25%, if that is less than 90 days) of the performance period. If that
performance goal is not achieved during the performance period, the stock award
will either be forfeited, or if the issuance of the stock was contingent on the
achievement of the performance goal, the award will not be made. In general,
the performance period will be Mandalay's fiscal year, unless some other period
is selected as a performance period by the Administrator. The performance goals
will be based on one or more of the following: stock price, market share, gross
revenue, net revenue, pretax income, operating income, cash flow, earnings per
share, return on equity, return on invested capital or assets, cost reductions
and savings, return on revenues, productivity, or any variations of the
preceding criteria. The Administrator may also, to the extent consistent with
the performance based compensation rules applicable under Code Section 162(m),
include in the performance goal the attainment by the award recipient of
personal objectives with respect to the criteria noted above or with respect to
the implementation of policies and plans, negotiating transactions and sales,
developing long-term business goals or exercising managerial responsibility.
The achievement of the performance goals established with respect to an award
must be certified in writing before the award can vest or the grant can be
made, if the grant itself is contingent on achievement of the performance
goals. The Administrator also has the discretion to place other terms,
conditions or restrictions on performance awards that are not inconsistent with
the specific provisions that relate to performance awards or to awards
generally under the Incentive Plan.
The Incentive Plan may be suspended, terminated or reinstated, in whole
or in part, at any time by the Board, and may be amended at the Board's
discretion, but the amendment will require the approval of Mandalay's
stockholders if it:
. increases the maximum number of shares of common stock which may be
issued under the plan;
. extends the term of the plan;
. increases the period during which a stock option may be exercised
beyond ten years from the date of grant;
. materially increases the benefits accruing to participants under the
plan; or
. materially modifies the requirements for eligibility to receive
options or restricted stock awards under the plan.
-15-
<PAGE>
In addition, the Board generally cannot amend or terminate the Incentive Plan
without the consent of the optionee or recipient of any outstanding stock
option or restricted stock award adversely affected by the Board's action.
With limited exceptions, options and restricted stock awards (other than
awards that have vested and as to which all restrictions have lapsed) granted
pursuant to the Incentive Plan cannot be transferred or assigned except by will
or by the laws of descent and distribution and such options cannot be exercised
during the optionee's lifetime by any person other than the optionee or the
optionee's guardian or legal representative. Any option that is not an
incentive stock option (an "ISO") will be transferable pursuant to a "domestic
relations order" as defined in the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder, and may, at the Administrator's
discretion, be transferable without payment of consideration to one or more of
the optionee's immediate family members (i.e., spouse or former spouse,
parents, issue, including adopted and "step" issue, or siblings), trusts for
the benefit of one or more immediate family members, partnerships whose
partners are immediate family members, or to any transferee permitted by a rule
adopted by the Administrator or approved by the Administrator in an individual
case. Any transferee will be subject to all of the conditions set forth in the
agreement evidencing the option.
The purchase price, if applicable, and the number and kind of shares that
may be purchased upon exercise of options or acquired under restricted stock
awards granted pursuant to the Incentive Plan, and the number of shares which
may be issued pursuant to the Incentive Plan, are subject to adjustment in
certain events, including any stock splits, recapitalizations and
reorganizations.
On April 26, 2000, the closing price of the Mandalay common stock, as
reported on the New York Stock Exchange Composite Tape, was $18 7/16 per share.
Certain Federal Income Tax Aspects of the Plan
Incentive Stock Options. In general, the grantee of an ISO will not
recognize regular taxable income upon either the grant or the exercise of the
option. The grantee will recognize capital gain or loss on a disposition of the
shares acquired upon exercise of an ISO, provided the grantee does not dispose
of the shares within two years after the date the option was granted or within
one year after the date the shares were transferred to the grantee. For regular
federal income tax purposes, the maximum rate of tax applicable to capital
gains is dependent on the length of time the shares have been held at the time
of sale. If the shares have been held for more than one year, the maximum
regular federal tax rate applicable to the gain on the sale will be 20%. If the
shares have been held for one year or less, the gain on the sale will be taxed
at the same tax rate (a maximum of 39.6%) applicable to other taxable income
generally. If the option holder satisfies both of the foregoing holding
periods, then Mandalay will not be allowed a deduction by reason of the grant
or exercise of an ISO.
As a general rule, if the grantee disposes of shares acquired through
exercise of an ISO before satisfying both holding period requirements (a
"disqualifying disposition"), the gain recognized by the grantee on the
disposition will be taxed as ordinary income to the extent of the difference
between the fair market value of the shares on the date of exercise and the
adjusted basis of the shares, and Mandalay will be entitled to a deduction in
that amount. The income recognized will not, however exceed the difference
between the amount actually realized on the disposition and the adjusted basis
of the shares (which would limit the amount of income recognized if, for
example, the value of the shares declined subsequent to the date the option was
exercised). The gain (if any) in excess of the amount treated as ordinary
income will be treated as a long or short term capital gain (based on the
length of time the grantee held the shares as of the date of the disposition).
The amount by which the fair market value of a share at the time of
exercise exceeds the option exercise price will be included in the computation
of the option holder's "alternative minimum taxable income" in the year the ISO
is exercised. Currently, the maximum alternative minimum tax rate is 28%. If
the holder of an ISO pays alternative minimum tax with respect to the exercise
of an incentive stock option, then
-16-
<PAGE>
the amount of such tax paid will be allowed as a credit against regular tax
liability in subsequent years. The option holder's basis in the shares for
purposes of the alternative minimum tax will be adjusted when income from a
disposition of the shares is included in alternative minimum taxable income.
Nonqualified Stock Options. A grantee of a nonqualified stock option
(which is an option other than an option that qualifies as an ISO or which is
designated as not intended to be an ISO) will not recognize taxable income at
the time the option is granted, and Mandalay will not be allowed a deduction by
reason of the grant. The grantee will generally recognize ordinary income in
the taxable year in which he or she exercises the option. The amount of income
will be generally equal to the excess of the fair market value of the shares
received upon exercise (determined at the time of exercise) over the option
exercise price paid for the shares. Mandalay will, subject to various
limitations, be allowed a deduction in the same amount. Upon disposition of
these shares, the grantee will recognize a long or short term capital gain or
loss equal to the difference between the amount realized on disposition and his
or her basis in the share (which ordinarily would be the fair market value of
the shares on the date the option was exercised).
Other Awards. The recipient of a restricted stock award will become
vested as provided for by the Administrator when making the award. Under
applicable provisions of the Code, the recipient will, for federal income tax
purposes, be required to include in his or her taxable income (as ordinary
compensation income) the value of the shares subject to the award as of the
time they become vested (reduced by the amount, if any, that was required to be
paid for the shares). The fair market value of the shares as of the vesting
date establishes the basis for determining capital gains or losses on a
subsequent sale of the shares, and the holding period for purposes of
determining the long or short-term character of a capital gain starts on the
vesting date (not on the date the shares were granted).
If a recipient of a restricted stock award makes a special election under
Section 83(b) of the Code, however, he or she will recognize as ordinary income
the fair market value of the stock subject to the award as of the date the
shares are granted, even though the shares have not yet vested. An election
under this Code provision must be made within 30 days of the transfer of the
shares, and the fair market value of the shares must be determined without
regard to the vesting restrictions that otherwise could cause the shares to be
forfeited. If the shares are forfeited, the award recipient will not be able to
claim a tax loss for the forfeiture except to the extent he or she was required
to pay a purchase price for the shares. As a consequence of making an Section
83(b) election, however, the award recipient will have no income as a result of
the later vesting of the shares, and when the shares are sold, the difference
between the amount realized from the sale and the fair market value on the date
of grant (i.e., the value used in reporting income as a result of the Section
83(b) election), will be a capital gain or loss, and will be either long or
short term by reference to the original grant date.
Deductibility of Executive Compensation Under Code Section
162(m). Section 162(m) of the Code sets limits on the deductibility of
compensation in excess of $1,000,000 paid by publicly held companies to certain
employees (the "million dollar cap"). The IRS has also issued Treasury
Regulations which provide rules for the application of the "million dollar cap"
deduction limitations. Income which is treated as "performance-based
compensation" under these rules will not be subject to the limitation on
deductibility imposed by Code Section 162(m).
The Incentive Plan has been designed to permit option grants to qualify
under the performance-based compensation rules so that income attributable to
the exercise of a nonqualified option may be exempt from the million dollar cap
limits on deduction. The Plan's provisions are consistent in form with the
performance-based compensation rules, so that if the Administrator that grants
options consists exclusively of members of the Board who qualify as "outside
directors" the compensation income arising on exercise of those options should
qualify as performance-based compensation which is deductible even if that
income would be in excess of the otherwise applicable limits on deductible
compensation income under Code Section 162(m). In addition, if the
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<PAGE>
Administrator determines to make performance-based stock awards, as described
above, the income attributable to those stock awards should also be treated as
performance-based compensation that is exempt from the limitations of Code
Section 162(m).
The foregoing description of the Incentive Plan is qualified in all
respects by the actual provisions of the plan, a copy of which is included with
this proxy statement as Appendix B.
Vote Required for Approval of the Incentive Plan
Your Board of Directors has approved the Incentive Plan. However, the
Incentive Plan will become null and void unless at the meeting the number of
shares of common stock voted "FOR" approval of the Incentive Plan exceeds the
number of shares voted "AGAINST" such approval.
Your Board of Directors recommends a vote "FOR" approval of the Incentive
Plan.
- --------------------------------------------------------------------------------
Item 4 - Ratification of Selection of Independent Auditors
- --------------------------------------------------------------------------------
The Board of Directors has selected Arthur Andersen LLP as Mandalay's
independent auditors for the fiscal year ending January 31, 2001. Although not
required by law or otherwise, the selection is being submitted to the
stockholders as a matter of corporate policy for their approval. Arthur
Andersen LLP, an international firm of certified public accountants, has
audited Mandalay's financial statements since 1980.
We anticipate that a representative of Arthur Andersen LLP will be
present at the meeting and, if present, this representative will be given the
opportunity to make a statement if he desires to do so. We also anticipate that
this representative will be available to respond to appropriate questions from
stockholders.
-18-
<PAGE>
- --------------------------------------------------------------------------------
Executive Compensation
- --------------------------------------------------------------------------------
Summary Compensation Table
This table indicates, for each of our last three fiscal years, the cash and
other compensation paid to our executive officers who are named in the table.
In this proxy statement, we sometimes refer to this group of individuals as our
"Named Executive Officers."
<TABLE>
<CAPTION>
Annual Compensation (1) Long Term Compensation
-------------------------------------------------
Securities
Name and Fiscal Salary Bonus Restricted Underlying All Other
Principal Year ($) ($) Stock Awards Options(2) Compensa-
Position ($) tion
(#) ($)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael S. Ensign 2000 900,000 900,000 0 1,000,000 500(3)
Chairman of the Board 1999 900,000 855,000 0 0 438
and Chief Executive 1998 678,125 0 0 0 375
Officer
- ---------------------------------------------------------------------------------------------------
Glenn W. Schaeffer 2000 800,000 800,000 0 350,000 25,837(4)
President, Chief 1999 800,000 760,000 0 533,333 26,162
Financial
Officer and Treasurer 1998 651,000 0 0 0 26,462
- ---------------------------------------------------------------------------------------------------
William A. Richardson 2000 850,000 850,000 0 1,000,000 500(5)
Vice Chairman of the 1999 850,000 807,500 0 0 350
Board 1998 678,125 0 0 0 375
- ---------------------------------------------------------------------------------------------------
Yvette E. Landau 2000 181,250 225,000 0 72,500 750(6)
Vice President, General 1999 175,000 175,000 0 27,500 625
Counsel and Secretary 1998 133,333 133,424 0 0 500
- ---------------------------------------------------------------------------------------------------
Les Martin 2000 137,000 137,000 0 25,000 6,677(7)
Vice President and 1999 137,000 137,000 0 50,000 6,349
Chief Accounting 1998 128,501 130,875 0 25,000 1,000
Officer
</TABLE>
(1) Certain of the individuals named in this table received personal benefits
that are not reflected in their salary and bonus amounts. The value of the
personal benefits received by each of these individuals did not, in any of our
last three fiscal years, exceed $50,000 or 10% of the individual's total annual
salary and bonus for that fiscal year.
(2) We have not granted any stock appreciation rights ("SARs").
(3) This amount represents a contribution we made to our 401(k) Plan for Mr.
Ensign's benefit.
(4) Of this amount, $1,338 represents the premium we paid for the term life
portion of a split-dollar life insurance policy, $18,591 represents the present
value (more fully described in Note 8) of the nonterm portion of the premium we
paid for that split-dollar policy, $5,408 represents disability insurance
premiums we paid, and $500 represents a contribution we made to our 401(k) Plan
for Mr. Schaeffer's benefit.
(5) This amount represents a contribution we made to our 401(k) Plan for Mr.
Richardson's benefit.
(footnotes continued on next page)
-19-
<PAGE>
(6) This amount represents a contribution we made to our 401(k) Plan for Ms.
Landau's benefit.
(7) Of this amount, $138 represents the premium we paid for the term life
portion of a split-dollar life insurance policy, $3,967 represents the present
value (more fully described in Note 8) of the nonterm portion of the premium
paid for that split-dollar policy, $1,572 represents disability insurance
premiums we paid, and $1,000 represents a contribution we made to our 401(k)
Plan for Mr. Martin's benefit.
(8) The present value of the premium we paid on the nonterm portion of each of
the split-dollar life insurance policies referred to in Notes 4 and 7
represents a value equivalent to the interest-free use of that premium over the
period from the date we paid the premium to the earliest date we are expected
to receive a refund of the premium, based on an interest rate of 8.2% per
annum. For fiscal 1999 and fiscal 1998 we reported the amount in the same
manner.
Option Grants In Last Fiscal Year (1)
This table shows the number and value of stock options granted to each of our
Named Executive Officers in fiscal 2000.
<TABLE>
<CAPTION>
Potential Realizable
Number of % of Total Value at Assumed
Securities Options Exercise Annual Rate of
Underlying Granted to or Base Stock Price
Options Employees in Price (2) Expiration Appreciation for
Name Granted (#) Fiscal Year ($/Sh) Date (3) Option Term (4)
5% ($) 10% ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael S. Ensign 1,000,000 30.44 13.00 2/9/09 8,175,630 20,718,652
- -------------------------------------------------------------------------------------------
Glenn W. Schaeffer 350,000 10.66 13.00 2/9/09 2,861,471 7,251,528
- -------------------------------------------------------------------------------------------
William A. Richardson 1,000,000 30.44 13.00 2/9/09 8,175,630 20,718,652
- -------------------------------------------------------------------------------------------
Yvette E. Landau 72,500 2.21 13.00 2/9/09 592,733 1,502,102
- -------------------------------------------------------------------------------------------
Les Martin 25,000 0.76 13.00 2/9/09 204,391 517,966
</TABLE>
(1) No SARs were granted.
(2) Options may be exercised with cash, other shares of our common stock or a
combination of cash and such shares at the discretion of the committee which
administers our stock option plans. By its terms, each option first becomes
exercisable as to approximately one-third of the shares covered by the option
on the first, second and third anniversaries of the grant date.
(3) Options are subject to termination prior to their stated expiration dates
in certain instances relating to termination of employment.
(4) These amounts represent assumed rates of appreciation and are not intended
to forecast future appreciation in the price of our common stock. Actual gains,
if any, on stock option exercises are dependent on the future performance of
our stock. There can be no assurance that the amounts reflected in these
columns will be achieved or, if achieved, that they will exist at the time of
any option exercise.
-20-
<PAGE>
Aggregated Option Exercises In The Last Fiscal Year And Fiscal Year-End Option
Values (1)
This table shows the number and value of stock options exercised in fiscal
2000, and the value of unexercised options as of the end of fiscal 2000, for
each of our Named Executive Officers.
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money Options at
on Value Options at Fiscal Fiscal Year-End(2)
Exercise Realized Year-End (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael S. Ensign 0 N/A 0/1,000,000 0/2,437,500
- ----------------------------------------------------------------------------------------------
Glenn W. Schaeffer 0 N/A 426,667/456,666 1,786,668/1,299,789
- ----------------------------------------------------------------------------------------------
William A. Richardson 0 N/A 0/1,000,000 0/2,437,500
- ----------------------------------------------------------------------------------------------
Yvette E. Landau 0 N/A 24,500/75,500 102,594/189,281
- ----------------------------------------------------------------------------------------------
Les Martin 20,000 196,044 24,444/30,556 102,359/84,203
</TABLE>
(1)No SARs were exercised during fiscal 2000 or held as of January 31, 2000.
(2)Represents, with respect to each share, the closing price for our common
stock on the New York Stock Exchange on January 31, 2000, less the exercise
price payable for the share.
Employment Agreements
Mandalay employs Michael S. Ensign, Glenn W. Schaeffer and William A.
Richardson pursuant to employment agreements which became effective on June 1,
1995. Each employment agreement, as amended, provides for an initial base
salary with a mandatory increase of 5% per year during the term of the
agreement, plus any discretionary increases that are determined by the Board of
Directors. Each agreement also provides for the employee's eligibility to
receive an annual bonus with a targeted annual bonus of not less than 100% of
the employee's then-current base salary. Each agreement obligates Mandalay to
pay the employee's then-current base salary and targeted bonus (plus any other
amounts due to, or for the benefit of, the employee) for the greater of the
remainder of the agreement's then-current term or a period of 12 months if the
employee's employment is terminated under certain circumstances, including a
"Change in Control" or for other "Good Reason" (including his removal from his
position as an executive officer of Mandalay), or is terminated by Mandalay
without "Cause," as those terms are defined in the agreement (each, a
"Designated Termination") or (in the case of an employee who has not previously
made a "Continuation Election", as that term is defined in the agreement) if
Mandalay fails to consent to any automatic one-year extension of the agreement.
Upon any such termination of employment, any options to purchase Mandalay's
common stock then held by the terminated employee will become exercisable
immediately in accordance with the terms of his employment agreement. Each
employment agreement provides that Mandalay may, with or without cause, and
without terminating the employee's employment, remove the employee from his
position as an executive officer of Mandalay upon 60 days' notice. In that
event, the employee may, during the 60-day period, elect to continue as an
employee in a nonexecutive capacity in accordance with the other terms of his
employment agreement (a "Continuation Election"), or may elect to terminate the
agreement for "Good Reason."
Mr. Ensign's employment agreement provides for a current expiration date
of May 31, 2001, with subsequent one-year renewal terms, subject to early
termination by Mr. Ensign or Mandalay with six months' notice prior to renewal.
The agreement also provides for a current minimum base salary and minimum
annual target bonus of $759,692 each, increasing to $797,677 effective June 1,
2000.
Mr. Schaeffer's employment agreement provides for a current expiration
date of May 31, 2001, with subsequent one-year renewal terms, subject to early
termination by Mr. Schaeffer or Mandalay with six months' notice prior to
renewal. The agreement also provides for a current minimum base salary and
minimum annual target bonus of $729,304 each, increasing to $765,769 effective
June 1, 2000.
-21-
<PAGE>
Mr. Richardson's employment agreement provides for a current expiration
date of May 31, 2001, with subsequent one-year renewal terms, subject to early
termination by Mr. Richardson or Mandalay with six months' notice prior to
renewal. The agreement also provides for a current minimum base salary and
minimum annual target bonus of $759,692 each, increasing to $797,677 effective
June 1, 2000.
Executive Officers' Bonus Plan
We have an Executive Officers' Bonus Plan which, in its original form,
was adopted by our Board of Directors on March 19, 1995 and approved by our
stockholders on June 22, 1995. For a description of this plan, as it has been
amended and restated subject to our stockholders' approval, see the discussion
which we have included in this proxy statement under "Item 2--Proposal to
Approve the 2000 Executive Officers' Bonus Plan--Description of the Bonus
Plan."
Pension Plan
The following table shows the estimated annual benefits payable to "Tier
I" participants under Mandalay's Supplementary Executive Retirement Plan (the
"SERP") at normal retirement (which is age 65), based on years of service
credited under the SERP and the participant's final compensation, as determined
under the SERP. The amounts payable to "Tier I" participants represent the
highest level of benefits available under the SERP.
<TABLE>
<CAPTION>
Estimated Annual Benefits
Upon Retirement at Age 65
After Completion of the Following Years of Service*
- -----------------------------------------------------------------------------------------
Years of Service
------------------------------------------------------------------------------
Remuneration** Less than 4 4 or 5 6 or 7 8 or 9 10 or 11 12 or 13 14 or more
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 0 $ 40,000 $ 50,000 $ 60,000 $ 80,000 $ 100,000 $ 120,000
- -----------------------------------------------------------------------------------------
$ 450,000 $ 0 $ 90,000 $112,500 $ 135,000 $180,000 $ 225,000 $ 270,000
- -----------------------------------------------------------------------------------------
$ 700,000 $ 0 $140,000 $175,000 $ 210,000 $280,000 $ 350,000 $ 420,000
- -----------------------------------------------------------------------------------------
$ 950,000 $ 0 $190,000 $237,500 $ 285,000 $380,000 $ 475,000 $ 570,000
- -----------------------------------------------------------------------------------------
$1,200,000 $ 0 $240,000 $300,000 $ 360,000 $480,000 $ 600,000 $ 720,000
- -----------------------------------------------------------------------------------------
$1,450,000 $ 0 $290,000 $362,500 $ 435,000 $580,000 $ 725,000 $ 870,000
- -----------------------------------------------------------------------------------------
$1,700,000 $ 0 $340,000 $425,000 $ 510,000 $680,000 $ 850,000 $1,020,000
- -----------------------------------------------------------------------------------------
$1,950,000 $ 0 $390,000 $487,500 $ 585,000 $780,000 $ 975,000 $1,170,000
- -----------------------------------------------------------------------------------------
$2,200,000 $ 0 $440,000 $550,000 $ 660,000 $880,000 $1,100,000 $1,320,000
</TABLE>
*The amounts set forth in the table are computed as an annual benefit
payable in the form of a straight-life annuity, commencing following the
participant's attainment of age 65, the normal retirement age under the SERP.
The benefits listed in the table are not subject to any deduction for Social
Security or other offset amounts.
**The amount of a participant's remuneration for purposes of determining
benefits under the table is his or her highest annual compensation during the
five-year period ending on the participant's termination of employment with
Mandalay (or a shorter period if the participant has not worked for five years
at the time of terminating his or her employment). Annual compensation for this
purpose is the participant's base salary plus his or her bonus. The SERP limits
the amount of bonus that may be taken into account for this purpose to 150% of
base salary. A participant is credited with a year of service under the SERP
for each period of 12 full months of employment with Mandalay, but service
credit for periods prior to enrollment in the plan is limited to ten years.
-22-
<PAGE>
For purposes of determining their respective benefits pursuant to the
SERP, each of our Named Executive Officers will have 14 or more credited years
of service if he or she continues to be employed by Mandalay until age 65, the
normal retirement age under the SERP. The credited years of service under the
SERP for our Named Executive Officers as of January 31, 2000 were as follows:
<TABLE>
<CAPTION>
Name Credited Years of Service
---------------------------------------------
<S> <C>
Michael S. Ensign 12
---------------------------------------------
Glenn W. Schaeffer 12
---------------------------------------------
William A. Richardson 12
---------------------------------------------
Yvette E. Landau 7
---------------------------------------------
Les Martin 12
</TABLE>
- --------------------------------------------------------------------------------
Certain Transactions
- --------------------------------------------------------------------------------
Donna B. More, a member of our Board of Directors, is a partner in the
Chicago, Illinois law firm of Freeborn & Peters. During the fiscal year ended
January 31, 2000, this firm provided legal services to the Elgin, Illinois
joint venture entity in which Mandalay is a 50% participant. It has also
provided legal services to this joint venture entity during the current fiscal
year and it is anticipated that it will do so in the future.
As reported in our proxy statement last year, in June 1999, bottles of
wine selected from five world class wine collections owned by William A.
Richardson, Vice Chairman of Mandalay, were purchased for sale at Aureole, an
independently managed restaurant located in Mandalay Bay Resort & Casino, and
at other venues owned and operated by Mandalay within the resort. Aureole,
which features a four-story wine tower, is owned by Mandalay and operated by
Aureole Swan Court LLC (the "Manager"), an unaffiliated third party which
supervises the management and operation of this restaurant. The value of the
collections was determined by an independent third party. The decision to
purchase the wine acquired for resale at Aureole, representing approximately
95% of the total purchase price, was made by the restaurant's wine master, who
is an independent consultant hired by the Manager. The decision to purchase the
balance of the wine was made by the food and beverage director for Mandalay
Bay. The aggregate price paid for the wine was $877,910, which was
approximately $104,278 below the independent third party's valuation. The terms
of the transaction were reviewed and approved by the Audit Committee of the
Board of Directors.
For information concerning another transaction during the fiscal year
ended January 31, 2000 to which Mandalay was a party and certain directors or
executive officers of Mandalay and their immediate family members had an
interest, see "Compensation Committee Interlocks and Insider Participation."
-23-
<PAGE>
- --------------------------------------------------------------------------------
Report of the Board of Directors and the Compensation Committee on Executive
Compensation
- --------------------------------------------------------------------------------
Filings we make with the Securities and Exchange Commission (the "SEC")
sometimes "incorporate information by reference." This means we are referring
you to information that has been previously filed with the SEC and that the
information should be considered as part of the filing you are reading. The
Report of the Board of Directors and the Compensation Committee on Executive
Compensation which follows and the Stock Performance Graph included in this
proxy statement are not incorporated by reference into any of our other filings
with the SEC.
Our Board of Directors and the Compensation Committee of our Board of
Directors have furnished the following report on executive compensation:
Introduction
The Compensation Committee of Mandalay's Board of Directors (the
"Committee") was responsible for establishing the policies and procedures
relating to the compensation of Mandalay's executive officers for the fiscal
year ended January 31, 2000 ("fiscal 2000") and the decisions relating to the
respective levels and forms of their compensation, including the awards made
pursuant to Mandalay's Executive Officer Bonus Plan (the "Bonus Plan") and
stock option plans, except as we have otherwise indicated in this report. The
individuals who served on the Committee during fiscal 2000 were selected by
Mandalay's Board of Directors from those directors who are "non-employee
directors" for purposes of Rule 16b-3 under the Securities Exchange Act of 1934
and are "outside directors" for purposes of Section 162(m) of the Internal
Revenue Code of 1986 (the "Code"). The only individuals who served on the
Committee or participated in its deliberations relating to executive
compensation during fiscal 2000 were William E. Bannen and Michael D. McKee,
each of whom served as a member of the Committee for the entire fiscal year.
Neither Mr. Bannen nor Mr. McKee has ever been an officer or employee of
Mandalay or any subsidiary of Mandalay.
Compensation Policies
The Committee's principal objective is to promote growth in stockholder
value through the establishment and implementation of compensation policies
designed to attract, retain and motivate skilled and talented executives. The
Committee's review of the compensation of Mandalay's executives and the actions
taken by the Committee with respect to executive compensation in fiscal 2000
were guided by the following compensation policies:
. To establish compensation programs designed to attract
and retain highly qualified executives;
. To provide motivation to Mandalay's executives through
compensation that is correlated to the performance of
the individual and to the performance of Mandalay;
. To compensate executives in a manner that rewards both
current performance and longer-term performance; and
. To provide executives with a financial interest in the
success of Mandalay similar to the interests of
Mandalay's stockholders.
-24-
<PAGE>
Fiscal 2000 Compensation
Consistent with the compensation policies of the Committee, the cash
compensation of Mandalay's executive officers for fiscal 2000 included a
combination of salary and bonuses to reward short-term performance. To
encourage and reward longer-term performance, our executives were also awarded
stock options.
In order to more nearly align the compensation of Michael S. Ensign,
Mandalay's Chief Executive Officer, Glenn W. Schaeffer, Mandalay's President
and Chief Financial Officer, and William A. Richardson, Vice Chairman of
Mandalay's Board of Directors, with their counterparts at comparable gaming
companies, their respective salaries for fiscal 1999 were increased by the
Committee above the minimum increases required under the terms of their
employment agreements following the Committee's review of publicly available
information concerning executive compensation at comparable gaming companies.
For fiscal 2000, the Committee elected to maintain the salaries of Messrs.
Ensign, Schaeffer and Richardson at the same levels established for fiscal
1999. The base salary of each of the other named executive officers for fiscal
2000 was fixed by Michael S. Ensign without reference to any specific criteria
at a level intended to make the base salary of each of these officers equal to
approximately 50% of his or her total compensation that would be earned for the
year if the full amount of his or her target bonus was paid.
The fiscal 2000 target bonus of each executive officer whose total cash
compensation could exceed $1 million in fiscal 2000 (including Michael S.
Ensign, who is discussed under "Compensation of the Chief Executive Officer,"
below) was fixed by the Committee at a level equal to his base salary. The
bonus paid to each officer for fiscal 2000 was determined in part under the
terms of the Bonus Plan and in part at the discretion of the Committee. One-
half of the bonus determined under the Bonus Plan was based on a comparison of
Mandalay's actual to targeted adjusted net revenue for fiscal 2000. The other
half was based on a comparison of Mandalay's cash flow margin for fiscal 2000
to the average composite cash flow margin of a predetermined group of its
competitors, based on publicly available information. The discretionary portion
of each executive's bonus was based on the Committee's subjective evaluation of
the executive's performance without reference to any specific measure of
corporate performance. For fiscal 2000, each of the executive officers eligible
for bonuses under the Bonus Plan received 100% of the bonus payable under the
Bonus Plan and received a discretionary bonus. Together, each executive's bonus
components totaled 100% of his target bonus for fiscal 2000, and did not exceed
the limitation applicable to deductible compensation under Section 162(m) of
the Code.
Bonus awards to the executives not covered by the Bonus Plan are
currently paid quarterly and in fiscal 2000 were determined by the Chief
Executive Officer based on his subjective evaluation of these executives
without reference to any specific measure of corporate performance.
In order to retain our executives in the more competitive environment in
which Mandalay operates and to recognize their increased responsibilities and
further motivate and encourage their long-term performance on behalf of our
stockholders, the Committee awarded stock options in fiscal 2000 to each of
Mandalay's executives, including the Chairman of the Board. Each stock option
has a term of ten years and was granted with an exercise price equal to the
closing price of Mandalay's common stock on the date of the grant in order to
make the receipt of any benefit from the options dependent on an appreciation
in the value of the common stock, thereby giving the optionee an interest in
Mandalay's performance similar to that of its stockholders. None of the options
was exercisable during the first year following the date of grant but, by its
terms, each option first becomes exercisable as to approximately one-third of
the shares covered by the grant on the first, second and third anniversaries of
the grant. Each award of stock options was based on the Committee's subjective
evaluation of the recipient's level of supervisory or management
responsibilities and his or her potential contribution to Mandalay's long-term
success. In arriving at its decisions regarding the stock options awarded to
each recipient, the Committee considered, among other factors, the number and
terms of the options already held by the recipient. Mandalay's past performance
was not a factor in the Committee's decision.
-25-
<PAGE>
Compensation of the Chief Executive Officer
The compensation of Michael S. Ensign, Mandalay's Chief Executive Officer
who served in that capacity throughout fiscal 2000, consisted of a base salary
and bonus which were determined by the Committee. In order to more nearly align
his compensation with the compensation of similarly situated executives at
comparable gaming companies, Mr. Ensign's salary for fiscal 1999 was increased
by the Committee above the minimum base salary level established under the
terms of his employment agreement for fiscal 1999 or fiscal 2000 following the
Committee's review of publicly available information concerning executive
compensation at comparable gaming companies. For fiscal 2000, the Committee
elected to maintain the salary of Mr. Ensign at the same level established for
fiscal 1999.
The Committee fixed Mr. Ensign's fiscal 2000 target bonus at a level
equal to his base salary. The bonus paid to Mr. Ensign for fiscal 2000 was
determined in part under the terms of the Bonus Plan and in part at the
discretion of the Committee. One half of the portion of his bonus determined
under the Bonus Plan was determined based on a comparison of Mandalay's
adjusted net revenues for fiscal 2000 with certain predetermined target levels.
The other one half was determined based on a comparison of Mandalay cash flow
margin for fiscal 2000 to the average composite cash flow margin achieved by a
predetermined group of other gaming companies, based on publicly available
financial information. The portion of Mr. Ensign's target bonus reserved for
determination on a discretionary basis was fixed by the Committee at the amount
which, if fully paid, would not exceed the limitations applicable to deductible
compensation under Section 162(m) of the Code.
Following the end of fiscal 2000, the Committee certified that the
performance targets established for fiscal 2000 had been met or exceeded,
permitting a payment of 100% of the bonuses payable under the Bonus Plan. Based
on the performance targets established under the Bonus Plan, Mr. Ensign
received a bonus for fiscal 2000 under the Bonus Plan of $800,000. Based on the
Committee's subjective evaluation of his level of management responsibilities
without reference to any specific measure of corporate performance, a
discretionary bonus was awarded for fiscal 2000 to Mr. Ensign such that his
total bonus for fiscal 2000 was equal to 100% of his target bonus for the
period. The Committee believes that the method of measuring operating
performance utilized in fiscal 2000 to determine the levels of bonuses under
the Bonus Plan, including that of Mr. Ensign, is more appropriate than criteria
based upon the market price of Mandalay's common stock. This view is based on
the Committee's belief that while the performance of Mandalay's common stock is
a meaningful measure for compensation awards intended to reward executives for
long-term performance, over the period of a single fiscal year, an officer's
annual compensation should not generally be so closely tied to the vagaries of
the stock market.
To encourage and reward Mr. Ensign's long-term performance on behalf of
our stockholders, the Committee awarded him options to purchase 1,000,000
shares of Mandalay common stock in February 1999. The options have a ten-year
term and were granted with an exercise price of $13 per share, representing the
closing price of Mandalay's common stock on the date of the grant, as reported
on the New York Stock Exchange Composite Tape, thus making Mr. Ensign's receipt
of any benefit from the options dependent on an increase in the market value of
the common stock. None of Mr. Ensign's options were exercisable during the
first year following the date of grant but, by their terms, became exercisable
as to 333,333 shares on the first anniversary of the grant and become
exercisable as to 333,333 and 333,334 shares on the second and third
anniversaries. The number of shares for which Mr. Ensign was granted stock
options was based on the Committee's subjective evaluation of his levels of
supervisory and management responsibilities and his potential contribution to
Mandalay's long-term success. In arriving at its decision with respect to Mr.
Ensign's stock options, the Committee considered, among other factors, that he
had not been granted any stock options since he joined Mandalay in 1995.
Mandalay's past performance was not a factor in the Committee's decision.
-26-
<PAGE>
Policy Regarding Deductibility of Compensation for Tax Purposes--Compliance
with Code Section 162(m)
Section 162(m) of the Code generally disallows a tax deduction to a
public company for compensation over $1 million paid to its chief executive
officer and four other most highly compensated executive officers. Performance-
based compensation will not be subject to the deduction limitation if certain
requirements set forth in the Code and applicable Treasury Regulations are met.
The Committee's policy during fiscal 2000 was to structure the performance-
based portion of the compensation of the executive officers whose compensation
might be subject to the limitations of Code Section 162(m) so as to permit the
compensation paid to these executives to be allowed as a deduction. This was
done by establishing a portion of the possible bonuses for these officers'
compensation in fiscal 2000 under the Bonus Plan, administered in a manner that
complies with the requirements for a performance-based compensation exemption
under Code Section 162(m), and by establishing a separate portion of the
possible bonus awards for these executives at a level that was anticipated to
be fully deductible under Section 162(m) without regard to the exemption for
performance-based compensation. The 2000 Executive Officers' Bonus Plan which
stockholders are being asked to approve at the meeting, like the current
Executive Officers' Bonus Plan approved by stockholders in 1995, has been
designed to meet the requirements of Section 162(m).
To the extent possible, the Committee intends to continue to structure
the compensation of Mandalay's executives to permit the compensation paid to
these individuals to be allowed as a deduction for federal income tax purposes.
But, we may choose to provide compensation that is not deductible in order to
retain or to secure the services of key executives when we determine that it is
in the best interest of Mandalay to do so.
<TABLE>
<CAPTION>
Compensation Committee Board of Directors
<S> <C>
William E. Bannen, Chairman Michael S. Ensign, Chairman
Michael D. McKee William E. Bannen
Arthur H. Bilger
Michael D. McKee
Rose McKinney-James
Donna B. More
William A. Richardson
Glenn W. Schaeffer
</TABLE>
-27-
<PAGE>
- --------------------------------------------------------------------------------
Compensation Committee Interlocks and Insider Participation
- --------------------------------------------------------------------------------
The only individuals who served as members of Mandalay's Compensation
Committee during the fiscal year ended January 31, 2000 are the committee's
current members, William E. Bannen and Michael D. McKee, each of whom served
for all of fiscal 2000. Neither member of the Compensation Committee is an
officer or other employee, or former officer, of Mandalay or any subsidiary of
Mandalay.
The only individual who served on the Board of Directors during the
fiscal year ended January 31, 2000 and participated in the determination of the
compensation of Mandalay's executive officers for such fiscal year while also
serving as an officer or employee of Mandalay was Michael S. Ensign. See
"Report of the Board of Directors and the Compensation Committee on Executive
Compensation." Mr. Ensign served as Mandalay's Chief Executive Officer and as
its Chief Operating Officer for all of fiscal 2000. Glenn W. Schaeffer, who
served as Mandalay's President, Chief Financial Officer and Treasurer for all
of fiscal 2000, and William A. Richardson, who served as Mandalay's Vice
Chairman of the Board for all of fiscal 2000, did not participate in
deliberations concerning the compensation of Mandalay's executive officers for
fiscal 2000.
Circus Circus Casinos, Inc. ("CCC"), a wholly owned subsidiary of
Mandalay, and Lakeview Company ("Lakeview"), a Nevada general partnership of
entities owned by Michael S. Ensign, William A. Richardson and their family
members and another individual, are parties to a consulting agreement, dated as
of June 1, 1995 (the "Consulting Agreement"), pursuant to which Lakeview is
provided executive level management services with respect to a hotel and casino
it owns which is located near Boulder City, Nevada (the "Lakeview Property").
For these services, Lakeview is obligated to pay an annual consulting fee of
$120,000, which is intended to compensate Mandalay for the services rendered by
its executive officers and is subject to renegotiation if CCC determines that
the executive level of management services required by the Consulting Agreement
exceed contemplated levels. The Consulting Agreement also obligates Lakeview to
reimburse CCC for compensation or other out-of-pocket expenses (other than the
compensation of executive officers of Mandalay and its subsidiaries) associated
with the services provided to the Lakeview Property under the Consulting
Agreement. The purpose of the Consulting Agreement is to compensate Mandalay
for any time devoted by Messrs. Ensign, Richardson or other company personnel
to the Lakeview Property, which Messrs. Ensign and Richardson elected to retain
at the time of Mandalay's acquisition of their interests in a group of other
entities known as the Gold Strike Entities. The Lakeview Property was retained
by Messrs. Ensign and Richardson because of their intention to transfer their
interests in the property to various members of their respective families.
-28-
<PAGE>
- --------------------------------------------------------------------------------
Comparative Stock Price Performance Graph
- --------------------------------------------------------------------------------
This graph compares the cumulative total return (assuming reinvestment of
dividends) from January 31, 1995 to January 31, 2000 for (i) our common stock,
(ii) the Dow Jones Industry Group (Casinos), which we refer to as the "Casino
Group," and (iii) the Standard & Poor's 500 Composite Stock Index, which we
refer to as the "S&P 500 Index." The graph assumes the investment of $100 on
January 31, 1995 in each of our common stock, the stocks comprising the Casino
Group and the stocks comprising the S&P 500 Index.
[COMPARISON GRAPH APPEARS HERE]
1/31/95 1/31/96 1/31/97 1/31/98 1/31/99 1/31/00
Mandalay $100.00 119.16 131.78 85.98 50.93 57.71
Casino Group $100.00 118.19 121.29 113.43 78.62 102.67
S&P 500 Index $100.00 138.67 175.20 222.34 294.58 325.06
-29-
<PAGE>
- --------------------------------------------------------------------------------
Stock Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------------------------
Certain Beneficial Owners
The following table shows how much of our common stock is beneficially
owned by each person known to us to be the beneficial owner of more than 5% of
Mandalay's common stock. This information is as of April 20, 2000, unless we
have indicated otherwise.
<TABLE>
<CAPTION>
Number of Shares Approximate
Name and Address Beneficially Owned Percentage of Class
- --------------------------------------------------------------------------------
<S> <C> <C>
Michael S. Ensign 6,823,033(1) 8.71%
3950 Las Vegas Blvd. South
Las Vegas, Nevada 89119
- --------------------------------------------------------------------------------
William A. Richardson 6,736,571(2) 8.60%
3950 Las Vegas Blvd. South
Las Vegas, Nevada 89119
- --------------------------------------------------------------------------------
Legg Mason, Inc. 10,587,972(3) 13.57%
100 Light Street
Baltimore, Maryland 21202
- --------------------------------------------------------------------------------
Trimark Financial Corporation 4,967,600(4) 6.37%
One First Canadian Place
Suite 5600, P.O. Box 487
Toronto, Ontario M5X 1E5
</TABLE>
(1) Includes 333,333 shares which may be acquired pursuant to currently
exercisable stock options and 6,489,700 shares as to which Mr. Ensign has sole
voting and dispositive power.
(2) Includes 333,333 shares which may be acquired pursuant to currently
exercisable stock options and 6,403,238 shares as to which Mr. Richardson has
sole voting and dispositive power.
(3) Based on information provided by Legg Mason, Inc. This number includes
10,215,246 shares as to which affiliates of Legg Mason have sole voting and
dispositive power.
(4) This is the number of shares beneficially owned by Trimark Financial
Corporation, as reported in its Schedule 13-G/A dated February 1, 2000, as to
all of which shares sole voting and dispositive power was reported.
-30-
<PAGE>
Management
The following table shows how much of our common stock is beneficially
owned by each director of Mandalay, each executive officer of Mandalay who is
named in the Summary Compensation Table on p. 19, and by all of Mandalay's
directors and executive officers as a group. The information in the table is as
of April 20, 2000. The "aggregate number of shares beneficially owned" listed
in the second column includes the number of shares listed in the third column.
<TABLE>
<CAPTION>
Aggregate Number Right to Acquire Approximate
of Shares Within 60 days Percentage
Name Beneficially Owned(1) (Number of Shares) of Class
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Michael S. Ensign 6,823,033 333,333 8.71%
- --------------------------------------------------------------------------------
William A. Richardson 6,736,571 333,333 8.60%
- --------------------------------------------------------------------------------
Glenn W. Schaeffer 1,058,294 649,999 1.35%
- --------------------------------------------------------------------------------
Yvette E. Landau 48,692 48,666 *
- --------------------------------------------------------------------------------
Les Martin 33,638 32,777 *
- --------------------------------------------------------------------------------
William E. Bannen 40,833 19,333 *
- --------------------------------------------------------------------------------
Arthur H. Bilger 30,333 29,333 *
- --------------------------------------------------------------------------------
Michael D. McKee 33,433 29,333 *
- --------------------------------------------------------------------------------
Rose McKinney-James 4,000 4,000 *
- --------------------------------------------------------------------------------
Donna B. More 19,333 19,333 *
- --------------------------------------------------------------------------------
All directors and
executive officers
as a group (10 persons) 14,828,160 1,499,440 18.71%
</TABLE>
* Less than one percent.
(1) With the exception of Michael D. McKee, who shares with his wife the voting
and dispositive power with respect to the shares he owns, the individuals and
group named in the table have sole voting and investment power with respect to
the shares they own.
- --------------------------------------------------------------------------------
General
- --------------------------------------------------------------------------------
Availability of Form 10-K and Annual Report to Stockholders
SEC rules require us to provide an Annual Report to Stockholders to each
stockholder who receives this Proxy Statement. We will also provide copies of
the Annual Report to brokers, dealers, banks, voting trustees and their
nominees for the benefit of their beneficial owners of record. Additional
copies of the Annual Report, along with copies of our Annual Report on Form 10-
K for the fiscal year ended January 31, 2000 (not including documents
incorporated by reference), are available without charge to stockholders upon
written request to Mandalay Resort Group, 3950 Las Vegas Boulevard South, Las
Vegas, Nevada 89119, Attention: Chief Financial Officer.
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Stockholder Proposals
To be considered for inclusion in next year's proxy statement,
stockholder proposals must be submitted in writing by December 29, 2000. Any
stockholder proposal to be considered at next year's meeting, but not included
in the proxy statement, must be submitted in writing by March 14, 2001, or the
persons appointed as proxies may exercise their discretionary voting authority
with respect to the proposal. All written proposals should be submitted to
Mandalay Resort Group, 3950 Las Vegas Boulevard South, Las Vegas, Nevada 89119,
Attention: General Counsel.
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A form of proxy is enclosed for your use. Please complete, date, sign and
return the proxy at your earliest convenience in the enclosed envelope, which
requires no postage if mailed in the United States. A prompt return of your
proxy will be appreciated.
By Order of the Board of Directors
Michael S. Ensign
Chairman of the Board
Las Vegas, Nevada
April 28, 2000
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Appendix A
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Mandalay Resort Group
2000 Executive Officers'
Bonus Plan
PURPOSE
The Mandalay Resort Group 2000 Executive Officers' Bonus Plan (the
"Plan"), which is a complete amendment and restatement of the plan previously
known as the Circus Circus Enterprises, Inc. Executive Officer Bonus Plan, is
designed to reward executive officers of the Mandalay Resort Group (the
"Company") for achieving corporate performance objectives. The Plan is intended
to provide an incentive for superior work and to motivate participating
officers toward even higher achievement and business results, to increase
shareholder value, to tie their goals and interests to those of the Company and
its shareholders, and to enable the Company to attract and retain highly
qualified executive officers. The Plan is also intended to secure the full
deductibility under the provisions of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code") of the bonus compensation paid under the
Plan to the Company's Covered Employees (as hereinafter defined).
ARTICLE I--DEFINITIONS
1.1 "Board" shall mean the Board of Directors of the Company.
1.2 "Code" shall mean the Internal Revenue Code of 1986, as amended (the
"Code").
1.3 "Committee" shall mean the Compensation Committee of the Board.
1.4 "Company" shall means the Mandalay Resort Group, a Nevada
corporation.
1.5 "Covered Employee" shall mean the chief executive officer (or the
individual acting in such a capacity) of the Company and any other officer of
the Company whose total compensation is required to be reported to shareholders
under the Securities Exchange Act of 1934 by reason of their being among the
four highest compensated officers for a taxable year.
1.6 "Participant" shall mean, with respect to each Performance Period,
each executive officer who has been designated by the Committee as a
Participant in the Plan for such Performance Period.
1.7 "Performance Goal" shall mean, with respect to a Performance Period,
an objective performance goal or goals that have been established by the
Committee, consistent with the express terms of the Plan, which must be met in
order for any bonus payments to be payable to any Participant in the Plan with
respect to such Performance Period.
1.8 "Performance Period" shall mean the Plan Year or such other period as
may be established as a Performance Period by the Committee from time to time.
1.9 "Plan" shall mean the Mandalay Resort Group Executive Officer Bonus
Plan as set forth herein and as may be amended from time to time.
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1.10 "Plan Year" shall mean the Company's fiscal year, beginning on
February 1 and ending on January 31.
ARTICLE II--ELIGIBILITY AND PARTICIPATION
2.1 Those executive officers of the Company who are officers at the level
of vice president or above and who are designated as Participants in the Plan
from time to time by the Committee shall be eligible to participate in the
Plan. Prior to or at the time performance objectives are established for a
specified Performance Period, the Committee shall, at its sole discretion,
designate in writing which executive officers are to be participants in the
Plan with respect to such Performance Period.
2.2 If no specific designation with respect to participation in the Plan
is made by the Committee at the time performance goals are established for a
specified Performance Period, those officers who participated in the Plan with
respect to the immediately prior Performance Period shall be deemed to have
been designated as Participants by the Committee.
ARTICLE III--PERFORMANCE GOALS
3.1 Prior to or within the first ninety (90) days of a Performance Period
the Committee shall establish in writing with respect to such Performance
Period, one or more specific Performance Goals and an objective formula or
method for computing the amount of bonus compensation payable to each
Participant if the specified Performance Goals are attained. Notwithstanding
the foregoing sentence, the Performance Goals for any Performance Period may
not be established after 25 percent of the period of service represented by the
Performance Period has elapsed.
3.2 Performance goals shall be based upon one or more of the following
business criteria for the Company as a whole or any of its subsidiaries,
operating divisions or other operating units: Stock price, market share, gross
revenue, net revenue, pretax income, operating income, cash flow, earnings per
share, return on equity, return on invested capital or assets, cost reductions
and savings, return on revenues or productivity, or any variations of the
preceding business criteria, which may be modified at the discretion of the
Committee, to take into account extraordinary items or which may be adjusted to
reflect such costs or expense as the Committee deems appropriate. In addition,
to the extent consistent with the goal of providing for deductibility under
Section 162(m) of the Code, performance goals may be based upon a participant's
attainment of personal objectives with respect to any of the foregoing
performance goals or implementing policies and plans, negotiating transactions
and sales, developing long-term business goals or exercising managerial
responsibility. Measurements of the Company's or a participant's performance
against the Performance Goals established by the Committee shall be objectively
determinable and shall be determined according to generally accepted accounting
principles as in existence on the date on which the Performance Goals are
established and without regard to any changes in such principles after such
date.
ARTICLE IV--DETERMINATION OF BONUS AWARDS
4.1 As soon as practicable following the end of a Performance Period, the
Committee shall determine whether and to what extent the Company and/or the
Participants have achieved the Performance Goal or Performance Goals
established for such Performance Period, including the specific target
objective or objectives and the satisfaction of any other material terms of the
bonus award, and shall certify such determination in writing, which
certification may take the form of minutes of the Committee documenting such
determination. In addition, the Committee shall calculate the amount of each
Participant's bonus for such Performance Period based upon the levels of
achievement of the relevant Performance Goals and the objective formula or
formulae established for such purposes with respect to such Performance Period.
The Committee shall have no discretion to increase the amount any Participant's
bonus payable under the Plan, but may, notwithstanding anything contained
herein to the contrary, reduce the amount of or totally eliminate such
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bonus, if it determines, in its absolute and sole discretion, that such a
reduction or elimination is appropriate in order to reflect the Participant's
individual performance or to take into account any other factors the Committee
deems appropriate.
4.2 No Participant shall be entitled to receive a bonus or bonuses during
any one Plan Year in an amount that is, in the aggregate, in excess of one
hundred fifty percent (150%) of such Participant's base annual salary as in
effect as of the first day of such Plan Year or two million five hundred
thousand dollars ($2,500,000), whichever is less.
4.3 In no event shall the aggregate amount of all bonuses payable in any
Plan Year under the Plan exceed ten percent (10%) of the Company's average
annual income before taxes for the preceding five fiscal years of the Company.
ARTICLE V--PAYMENT OF AWARDS
5.1 Approved bonus awards shall be payable by the Company in cash to each
participant, or to his estate in the event of his death, as soon as
practicable after the end of each Performance Period and after the Committee
has certified in writing pursuant to Section 3.1 that the relevant performance
goals were achieved.
5.2 A bonus award that would otherwise be payable to a participant who is
not employed by the Company or one of its subsidiaries on the last day of a
Performance Period shall be prorated, or not paid, as follows:
(a) Terminated due to disability: Prorated based on active service
during Performance Period.
(b) Retirement in accordance with the Company's retirement policies:
Prorated based on active service during Performance Period.
(c) Voluntary or involuntary resignation or termination prior to
retirement without mutual written agreement: No award.
(d) Resignation pursuant to mutual written agreement: Prorated based
on active service during Performance Period.
(e) Leave of absence: Prorated based on active service during
Performance Period.
(f) Death of participant: Prorated based on active service during
Performance Period.
ARTICLE VI--OTHER TERMS AND CONDITIONS
6.1 No bonus awards shall be paid under the Plan unless and until the
material terms (within the meaning of Section 162(m)(4)(C) of the Code) of the
Plan, including the business criteria described in Section 2.3 of the Plan,
are disclosed to and approved by the Company's shareholders by a majority of
votes cast in a separate vote, either in person or by proxy, including
abstentions to the extent abstentions are counted as voting under applicable
state law.
6.2 No person shall have any legal claim to be granted an award under the
Plan and the Committee shall have no obligation to treat participants
uniformly. Except as may be otherwise required by law, bonus awards under the
Plan shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or
levy of any kind, either voluntary or involuntary. Bonuses awarded under the
Plan shall be payable from the general assets of the Company and no
participant shall have any claim with respect to any specific assets of the
Company.
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6.3 Neither the Plan nor any action taken under the Plan shall be
construed as giving any employee the right to be retained in the employ of the
Company or any subsidiary or to maintain any participant's compensation at any
level.
6.4 The Company or any of its subsidiaries may deduct from any award any
applicable withholding taxes or any amounts owed by the employee to the Company
or any of its subsidiaries.
ARTICLE VII--ADMINISTRATION
7.1 All members of the Committee shall be persons who qualify as "outside
directors" as defined under Section 162(m) of the Code. Until changed by the
Board, the Compensation Committee of the Board shall constitute the Committee
hereunder.
7.2 The Committee shall have full power and authority to administer and
interpret the provisions of the Plan and to adopt such rules, regulations,
agreements, guidelines and instruments for the administration of the Plan and
for the conduct of its business as the Committee deems necessary or advisable.
7.3 Except with respect to matters which under Section 162(m)(4)(C) of
the Code are required to be determined in the sole and absolute discretion of
the Committee, the Committee shall have full power to delegate to any officer
or employee of the Company the authority to administer and interpret the
procedural aspects of the Plan, subject to the Plan's terms, including adopting
and enforcing rules to decide procedural and administrative issues.
7.4 The Committee may rely on opinions, reports or statements of officers
or employees of the Company or any subsidiary thereof and of Company counsel
(inside or retained counsel), public accountants and other professional or
expert persons.
7.5 The Board reserves the right to amend or terminate the Plan in whole
or in part at any time. Unless otherwise prohibited by applicable law, any
amendment required to conform the Plan to the requirements of Section 162(m) of
the Code may be made by the Committee. No amendment may be made to the class of
individuals who are eligible to participate in the Plan, the performance
criteria specified in Section 2.3 or the maximum bonus payable to any
participant as specified in Section 3.2 without shareholder approval unless
shareholder approval is not required in order for bonuses paid to Covered
Employees to constitute qualified performance-based compensation under Section
162(m) of the Code.
7.6 No member of the Committee shall be liable for any action taken or
omitted to be taken or for any determination made by him or her in good faith
with respect to the Plan, and the Company shall indemnify and hold harmless
each member of the Committee against any cost or expense (including counsel
fees) or liability (including any sum paid in settlement of a claim with the
approval of the Committee) arising out of any act or omission in connection
with the administration or interpretation of the Plan, unless arising out of
such person's own fraud or bad faith.
7.7 The place of administration of the Plan shall be in the State of
Nevada, and the validity, construction, interpretation, administration and
effect of the Plan and of its rules and regulations, and rights relating to the
Plan, shall be determined solely in accordance with the laws of the State of
Nevada.
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Appendix B
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Mandalay Resort Group
2000 Stock Incentive Plan
ARTICLE I--PURPOSE OF THE PLAN
The purposes of the Mandalay Resort Group 2000 Stock Incentive Plan (the
"Plan") are to enable Mandalay Resort Group (the "Company") and its Affiliates
to attract and retain the services of individuals with managerial,
professional or supervisory skills as employees, officers, members of the
Board, consultants or advisors of the Company and its Affiliates, and to
motivate such persons to use their best efforts on behalf of the Company by
the grant of Stock Options and/or Awards to such individuals as provided under
the terms of the Plan.
ARTICLE II--GENERAL PROVISIONS
2.1 Definitions. As used in the Plan:
(a) "Affiliate" means a corporation which is a parent corporation or a
subsidiary corporation with respect to the Company within the meaning of
Section 424(e) or (f) of the Code, of any successor provision and any other
entity which would be an Affiliate but for the fact that such entity is not a
corporation.
(b) "Award" means a grant of shares of Common Stock pursuant to the
provisions of the Plan, which may or may not be subject to restrictions, and
which may or may not consist of a grant of Performance Shares.
(c) "Award Agreement" means the written agreement establishing the terms
of an Award, as required under Article IV hereof.
(d) "Board of Directors" or "Board" means the Board of Directors of the
Company.
(e) "Code" means the Internal Revenue Code of 1986, including any and
all amendments thereto.
(f) "Committee" means the Board acting in its capacity as administrator
of the Plan or the committee or committees appointed by the Board from time to
time to administer the Plan pursuant to Section 2.2.
(g) "Common Stock" means the Company's Common Stock, $.01 2/3 par value.
(h) "Fair Market Value" means, with respect to a specific date, the last
reported sale price of the Common Stock on the NYSE Composite Tape on the date
such Fair Market Value is being determined, and, in the absence of any sale on
such day, the Fair Market Value as determined in good faith by the Committee
on the basis of such quotations and other considerations as the Committee
deems appropriate.
(i) "ISO" means a Stock Option that is intended to qualify as an
"incentive stock option" as that term is used for purposes of Code Section
422.
(j) "Non-qualified Stock Option" means a Stock Option that is not
intended or designated to be an ISO.
(k) "NYSE" means the New York Stock Exchange.
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(l) "Option" means either an "ISO" or a "Non-qualified Stock Option."
(m) "Optionee" means the recipient of an "Option."
(n) "Participant" means a person to whom a Stock Option or Award has been
granted under the Plan.
(o) "Performance Goal" means, with respect to a Performance Period, an
objective performance goal or goals established by the Committee, consistent
with the express terms of the Plan, which must be met as a precondition to the
vesting of any Performance Shares granted with respect to a Performance Period
under the Plan.
(p) "Performance Period" means the Company's fiscal year or such other
period as may be established as a Performance Period by the Committee from
time to time.
(q) "Performance Shares" means the shares of Common Stock granted
pursuant to an Award and designated as Performance Shares by the Committee.
(r) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended from time to time, or any successor rule.
(s) "Stock Option" means a stock option granted under the Plan which may
or may not be intended to qualify as an ISO.
(t) "Stock Option Agreement" means the written agreement evidencing the
terms and conditions of a Stock Option Granted under the Plan, as required
under Article III hereof.
2.2 Administration of the Plan.
(a) The Plan shall be administered by the Board or by any committee or
committees as may be designated by the Board for this purpose, or by a
combination of the Board and one or more such committees, each such committee
and the Board in its capacity as administrator of the Plan being referred to
herein as the "Committee." The Board may, at its discretion, establish a
committee that consists of two (2) or more members of the Board, each of whom
qualifies as a "non-employee director" (as that term is used for purposes of
Rule 16b-3) and an "outside director" (as that term is used for purposes of
Section 162(m) of the Code). In the event the Board establishes more than one
committee under this Section 2.2, the Board shall establish as of the time
more than one such committee is established, and from time to time thereafter,
at its discretion, guidelines that establish the groups of employees,
consultants or advisors whose grants under the Plan are to be administered by
such committees. The Board of Directors may from time to time remove members
from, or add members to, the Committee. Vacancies on the Committee, howsoever
caused, shall be filled by the Board of Directors. The Committee shall select
one of its members as Chairman, and shall hold meetings at such times and
places as it may determine.
(b) The Committee shall have the full power, subject to and within the
limits of the Plan, to: (i) interpret and administer the Plan, and Stock
Options and Awards granted under it; (ii) make and interpret rules and
regulations for the administration of the Plan and to make changes in and
revoke such rules and regulations (and in the exercise of this power, shall
generally determine all questions of policy and expediency that may arise and
may correct any defect, omission, or inconsistency in the Plan or any
agreement evidencing the grant of any Stock Option or Award in a manner and to
the extent it shall deem necessary to make the Plan fully effective); (iii)
determine those persons to whom Stock Options or Awards shall be granted and
the number of Stock Options or Awards to be granted to any person; (iv)
determine the terms of Stock Options and Awards granted under the Plan,
consistent with the provisions of the Plan; and (v) generally, exercise such
powers and perform such acts in connection with the Plan as are deemed
necessary or expedient to promote the best
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interests of the Company. The interpretation and construction by the Committee
of any provisions of the Plan or of any Stock Option or Award shall be final,
binding and conclusive.
(c) The Committee may act only by a majority of its members then in
office; however, the Committee may authorize any one (1) or more of its members
or any officer of the Company to execute and deliver documents on behalf of the
Committee.
(d) No member of the Committee shall be liable for any action taken or
omitted to be taken or for any determination made by him or her in good faith
with respect to the Plan, and the Company shall indemnify and hold harmless
each member of the Committee against any cost or expense (including counsel
fees) or liability (including any sum paid in settlement of a claim with the
approval of the Committee) arising out of any act or omission in connection
with the administration or interpretation of the Plan, unless arising out of
such person's own fraud or bad faith.
2.3 Effective Date. The Plan shall become effective upon its adoption by
the Board of Directors, and Stock Options and Awards may be granted upon such
adoption and from time to time thereafter, provided, however, that the
exercisability of Stock Options and the vesting of Awards granted hereunder
shall be subject to approval of the Plan by the stockholders of the Company,
within 12 months after the adoption of the Plan by the Board of Directors, in a
manner consistent with applicable state law prescribing the method and degree
of stockholder approval required for the issuance of corporate stock or
options. If the Plan is not so approved, this Plan and all Stock Options and
Awards previously granted hereunder shall become null and void.
2.4 Duration. If approved by the stockholders of the Company, as provided
in Section 2.3, unless sooner terminated by the Board of Directors, the Plan
shall remain in effect for a period of ten (10) years following its adoption by
the Board of Directors.
2.5 Shares Subject to the Plan. The maximum number of shares of Common
Stock which may be subject to Stock Options and Awards granted under the Plan
shall be 3,500,000, subject to adjustment in accordance with Section 5.1, as
appropriate. Stock Options and Awards shall be subject to adjustment in
accordance with Section 5.1, as appropriate, and shares to be issued upon
exercise of Stock Options or in connection with Awards may be either authorized
and unissued shares of Common Stock or authorized and issued shares of Common
Stock purchased or acquired by the Company for any purpose. If a Stock Option
or portion thereof shall expire or is terminated, canceled or surrendered for
any reason without being exercised in full, or if an Award is forfeited under
the terms of the Plan or an Award Agreement, the unpurchased shares of Common
Stock which were subject to such Stock Option or portion thereof and the
forfeited shares of Common Stock that had been granted as an Award shall be
available for future grants of Stock Options or Awards under the Plan.
2.6 Limitations on Annual Grants. Notwithstanding anything to the
contrary contained herein, the maximum number of shares of Common Stock which
may, in the aggregate, be subject to Stock Options or Awards granted under the
Plan to any individual in any calendar year shall not exceed 1,500,000, subject
to adjustment in accordance with Section 5.1, as appropriate. The method of
counting such shares shall conform to any requirements applicable to
performance-based compensation under Section 162(m) of the Code.
2.7 Amendments. The Plan may be suspended, terminated or reinstated, in
whole or in part, at any time by the Board of Directors. The Board of Directors
may from time to time make such amendments to the Plan as it may deem
advisable; provided, however, that without the approval of the Company's
stockholders no amendment shall be made which:
(a) Increases the maximum number of shares of Common Stock which
may be subject to Stock Options or Awards granted under the Plan (other
than as provided in Section 5.1, as appropriate); or
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(b) Extends the term of the Plan; or
(c) Increases the period during which a Stock Option may be
exercised beyond ten years from the date of grant; or
(d) Otherwise materially increases the benefits accruing to
Participants under the Plan; or
(e) Materially modifies the requirements as to eligibility for
Participants in the Plan.
Except as otherwise provided herein, termination or amendment of the Plan shall
not, without the consent of a Participant, affect such Participant's rights
under any Stock Option or Award previously granted to such Participant.
2.8 Participants and Grants. Stock Options and Awards under this Plan may
be granted by the Committee to those employees, officers, members of the Board,
consultants or advisors of the Company or any of its Affiliates that the
Committee determines, at its sole discretion, qualify for such Stock Options or
Awards. Subject to the limitations on Options and Awards and on the total
number of shares of Common Stock available for grants under the Plan, the
Committee may grant Stock Options and Awards for such number of shares of
Common Stock as the Committee may, in its sole discretion, determine, which may
be established on an individual basis, and may vary from Participant to
Participant, all as the Committee may determine in its sole discretion. The
Committee may amend or modify any term or condition of any Stock Option or
Award Agreement at its discretion; provided, however, that no such amendment or
modification shall be permitted that is detrimental to a grantee without the
grantee's consent; and provided, further, that no such amendment or
modification may be made to an Award Agreement with respect to a Performance
Share that is intended to constitute a grant of performance-based compensation
for purposes of Code Section 162(m), except as is expressly permitted under the
terms of the Plan.
ARTICLE III--STOCK OPTIONS
3.1 General. All Stock Options granted under the Plan shall be evidenced
by a Stock Option Agreement executed by the Company and the Participant to whom
granted, which agreement shall state the number of shares of Common Stock which
may be purchased upon the exercise thereof and shall contain such investment
representations and other terms and conditions as the Committee may from time
to time determine. To the extent required by Section 162(m) of the Code, shares
subject to Stock Options which are canceled shall continue to be counted
against the award limit set forth in Section 2.6 and if, after grant of a Stock
Option, the price of shares subject to such Stock Options is reduced, the
transaction shall be treated as a cancellation of the Stock Option and a grant
of a new Stock Option and both the Stock Option deemed to be canceled and the
Stock Option deemed to be granted shall be counted against the foregoing award
limit.
3.2 Designation as ISO or Non-qualified Stock Option. Each Stock Option
granted shall be designated in the Stock Option Agreement as constituting
either an ISO or a Non-qualified Stock Option. Any Stock Option that is not
designated shall be deemed to have been designated as a Non-qualified Stock
Option. Any Stock Option that is intended to qualify as an ISO shall meet the
following requirements:
(a) In the event an ISO is granted to an employee who then owns,
directly or by attribution under Section 424(d) of the Code, shares
possessing more than ten percent of the total combined voting power of
all classes of stock of the Company or an Affiliate, then, to the extent
required by Section 424(d) of the Code, the option exercise price shall
not be less than 110% of the Fair Market Value of the shares subject to
the ISO on the date the ISO is granted.
(b) In the event an ISO is granted to an employee who then owns,
directly or by attribution under Section 424(d) of the Code, shares
possessing more than ten percent of the total combined
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voting power of all classes of stock of the Company or an Affiliate,
such ISO shall not be exercisable more than five years from the date of
grant of such ISO.
(c) An ISO shall only become exercisable with respect to shares
having a Fair Market Value of $100,000 or less during any one calendar
year. To the extent any Stock Option that is designated as an ISO
becomes exercisable during any one calendar year with respect to shares
of Common Stock with an aggregate Fair Market Value in excess of
$100,000, such Stock Option shall, to the extent of such excess, be
treated as a Stock Option that is not an ISO. For purposes of the
determinations in this paragraph (c), the Fair Market Value of shares of
Common Stock shall be determined at the time the Stock Option is
granted, and in determining the Fair Market Value of the shares as to
which a Stock Option that is intended to be an ISO first becomes
exercisable during any one calendar year, that Stock Option shall be
considered as aggregated with all ISOs granted under any other plan of
the Company or its Affiliates.
3.3 Exercise and Purchase Prices. Subject to the provisions of Section
5.1, the purchase price per share of Common Stock subject to a Stock Option
shall be set by the Committee; provided, however, that such price shall be no
less than the Fair Market Value of a share of Common Stock on the date the
Stock Option is granted.
3.4 Period. The duration or term of each Stock Option granted under the
Plan shall be for such period as the Committee shall determine but in no event
more than ten (10) years from the date of grant thereof.
3.5 Exercise. Subject to Sections 2.3 and 5.4, Stock Options may be
exercisable immediately upon granting of the Stock Option or at such other time
or times as the Committee shall specify when granting the Stock Option, or at
such other time or times as may be provided for pursuant to an amendment or
modification of a Stock Option Agreement, as permitted under the Plan. Once
exercisable, a Stock Option shall be exercisable, in whole or in part, by
delivery of a written notice of exercise to the Secretary of the Company at the
principal office of the Company specifying the number of shares of Common Stock
as to which the Stock Option is then being exercised together with payment of
the full purchase price for the shares being purchased upon such exercise.
Until the shares of Common Stock as to which a Stock Option is exercised are
issued, the Participant shall have none of the rights of a stockholder of the
Company with respect to such shares.
3.6 Payment. The purchase price for shares of Common Stock as to which a
Stock Option has been exercised and any amount required to be withheld, as
contemplated by Section 5.3, may be paid:
(a) In United States dollars in cash, or by check, bank draft or
money order payable in United States dollars to the order of the
Company; or
(b) By the delivery by the Participant to the Company of whole
shares of Common Stock having an aggregate Fair Market Value on the date
of payment equal to the aggregate of the purchase price of Common Stock
as to which the Stock Option is then being exercised or by the
withholding of whole shares of Common Stock having such Fair Market
Value upon the exercise of such Stock Option; or
(c) By a combination of both (a) and (b) above.
The Committee may, in its discretion, impose limitations, conditions and
prohibitions on the use by a Participant of shares of Common Stock to pay the
purchase price payable by such Participant upon the exercise of a Stock Option.
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3.7 Termination of Employment or other Relationship.
(a) In the event a Participant's employment by, or other service
relationship with, the Company or an Affiliate shall terminate for any reason
other than those reasons specified in Sections 3.7(b), (c), (d), (e) or (f)
hereof while such Participant holds Stock Options granted under the Plan, then
all rights of any kind under any outstanding Stock Option held by such
Participant which shall not have previously lapsed or terminated and which are
exercisable on the date of the termination of employment or other service
relationship shall remain so exercisable by the Optionee for a period of three
months after such termination unless such Stock Option expires earlier by its
terms.
(b) If a Participant's employment by, or other service relationship with,
the Company or its Affiliates shall terminate as a result of such Participant's
total disability, each Stock Option held by such Participant (which has not
previously lapsed or terminated) shall immediately become fully exercisable as
to the total number of shares of Common Stock subject thereto (whether or not
exercisable to that extent at the time of such termination) and shall remain so
exercisable by such Participant for a period of six months after termination
unless such Stock Option expires earlier by its terms. For purposes of the
foregoing sentence, "total disability" shall mean permanent mental or physical
disability as determined by the Committee.
(c) In the event of the death of a Participant, each Stock Option held by
such Participant (which has not previously lapsed or terminated) shall
immediately become fully exercisable as to the total number of shares of Common
Stock subject thereto (whether or not exercisable to that extent at the time of
death) by the executor or administrator of the Participant's estate or by the
person or persons to whom the deceased Participant's rights thereunder shall
have passed by will or by the laws of descent or distribution, and shall remain
so exercisable for a period of six months after such Participant's death unless
such Stock Option expires earlier by its terms.
(d) If a Participant's employment by or other service relationship with
the Company or an Affiliate shall terminate by reason of such Participant's
retirement in accordance with Company policies, each Stock Option held by such
Participant at the date of termination (which has not previously lapsed or
terminated) shall immediately become fully exercisable as to the total number
of shares of Common Stock subject hereto (whether or not exercisable to that
extent at the time of such termination) and shall remain so exercisable by such
Participant for a period of six months after termination, unless such Stock
Option expires earlier by its terms.
(e) In the event a Participant's relationship with the Company is subject
to an employment or other service agreement that defines a termination without
"Cause" and a termination by the Participant for "Good Reason," and such
Participant's employment or other service relationship is either terminated by
the Company without "Cause" or by the Participant for "Good Reason," (as such
terms are defined in the applicable employment or other service agreement
between the Company and the Participant), each Stock Option held by such
Participant (which has not previously lapsed or terminated) shall immediately
become fully exercisable as to the total number of shares of Common Stock
subject thereto (whether or not exercisable to that extent at the time of such
termination) and shall remain so exercisable for a period of six months after
such termination unless such Stock Option expires earlier by its terms.
(f) If a Participant (i) shall cease to be employed by, or have a
relationship of consultant or advisor to, the Company or an Affiliate because
of his discharge or termination for dishonesty, or because he violated any
material provision of any employment or other agreement between him and the
Company or an Affiliate, or (ii) shall voluntarily resign or terminate his
employment with or relationship as a consultant or advisor to the Company or an
Affiliate under or followed by such circumstances as would constitute a breach
of any material provision of any employment or other agreement between him and
the Company or an Affiliate, or (iii) shall have committed an act of dishonesty
not discovered by the Company or an Affiliate prior to the cessation of his
employment with or relationship as a consultant or advisor to the Company or an
Affiliate, but which would
B-6
<PAGE>
have resulted in his discharge or termination if discovered prior to such date,
or (iv) shall, either before or after cessation of his employment with or
relationship as a consultant or advisor to the Company or an Affiliate, without
the written consent of the Company or an Affiliate, use (except for the benefit
of the Company or an Affiliate) or disclose to any other person any
confidential information relating to the continuation or proposed continuation
of the business or any trade secrets of the Company or an Affiliate obtained as
a result of or in connection with such employment or relationship as a
consultant or advisor, or (v) shall, either before or after the cessation of
his employment with or relationship as a consultant or advisor to the Company
or an Affiliate, without the written consent of the Company or an Affiliate,
directly or indirectly, give advice to, or serve as an employee, director,
officer, or trustee of, or in any similar capacity with, or otherwise directly
or indirectly participate in the management, operation, or control of, or have
any direct or indirect financial interest in, any corporation, partnership, or
other organization which directly or indirectly competes in any respect with
the Company or its Affiliates, or (vi) shall cease to be employed by or have a
relationship as a consultant or advisor to the Company or an Affiliate because
of his inability to continue as an employee, consultant or advisor, as the case
may be, under any law or governmental regulation, including any Nevada gaming
law or regulation, or (vii) shall voluntarily resign or terminate his
employment with or relationship as a consultant or advisor to the Company or an
Affiliate under or followed by such circumstances as would have rendered him
unable to have continued as an employee, consultant or advisor, as the case may
be, under any law or governmental regulation, including any Nevada gaming law
or regulation, then forthwith from the happening of any such event, any Stock
Options then held by such Participant shall terminate and become void to the
extent that they then remain unexercised. Additional forfeiture provisions may
be included within the terms of any Stock Option grant to a Participant as may
be determined by the Committee in its discretion, provided such provisions are
set forth in the written agreement evidencing such Stock Option.
Notwithstanding anything to the contrary in this Section 3.7, the
Committee may vary the time at which any Stock Option granted under the Plan
shall terminate by including contrary provisions in the Stock Option Agreement,
at its discretion.
3.8 Effect of Leaves of Absence. Except as provided in the next sentence,
it shall not be considered a termination of employment or other service
relationship when a Participant is on military or sick leave or such other type
of leave of absence which is considered a continuing intact of the employment
or other service relationship of the Participant with the Company or any of its
Affiliates. In case of such leave of absence, the employment or other service
relationship shall be deemed to have continued until the later of (i) the date
when such leave shall have lasted ninety days in duration, or (ii) the date as
of which the Participant's right to reemployment shall have no longer been
guaranteed either by statute or contract.
3.9 Amendment of Outstanding Options. Subject to such other explicit
limitations as may be set forth in the Plan, the Committee shall have the right
to amend the option documents issued to an Optionee, at its discretion;
provided, however, that no such amendment may be made without the Optionee's
consent if such amendment is not favorable to the Optionee; and provided,
further, that no amendment to an Option that has the effect of adjusting or
amending the purchase price otherwise provided under the terms of such Option,
and no other action by the Committee, whether by cancellation and replacement
of Options, or otherwise, that would be treated as resulting in an adjustment
or amendment of the purchase price under the Option, shall be permitted without
the consent of the stockholders of the Company.
ARTICLE IV--AWARDS
4.1 Terms and Conditions of Awards. Awards granted pursuant to the Plan
shall be evidenced by written Award Agreements in such form as the Committee
shall from time to time approve, which Award Agreements shall comply with and
be subject to the following terms and conditions and such other terms and
conditions which the Committee shall from time to time require which are not
inconsistent with the terms of the Plan.
B-7
<PAGE>
(a) Number of Shares. Each Award Agreement shall state the number
of shares of Common Stock to which it pertains.
(b) Purchase Price. Each Award Agreement shall specify the
purchase price, if any, which applies to the shares subject to the
Award. If the Committee specifies a purchase price, the grantee of such
Award shall be required to make payment on or before the payment date
specified in the Award Agreement in cash, by certified check payable to
the order of the Company, or by such other mode of payment as the
Committee may approve.
(c) Grant. In the case of an Award which provides for a grant of
shares of Common Stock without any payment, the grant shall take place
on the date or dates or on the occurrence of such event or events as may
be specified in the Award Agreement. In the case of an Award which
provides for a payment, the grant shall take place on the date the
initial payment is delivered to the Company, unless the Committee or the
Award Agreement otherwise specifies. Stock certificates evidencing
shares of Common Stock granted pursuant to an Award shall be issued in
the sole name of the grantee.
(d) Conditions. The Committee may specify in an Award Agreement
any conditions under which the grantee of that Award shall be required
to convey to the Company the shares of Common Stock covered by the
Award. Upon the occurrence of any such specified condition, the grantee
of such Award shall forthwith surrender and deliver to the Company the
certificates evidencing such shares as well as completely executed
instruments of conveyance. The Committee, in its discretion, may provide
that certificates for shares of Common Stock transferred pursuant to an
Award be held in escrow by the Company or its designee until such time
as each and every condition has lapsed and that the grantee of an Award
be required, as a condition of the Award, to deliver to such escrow
agent or an officer of the Company duly endorsed transfer powers
covering the shares granted by such Award. Dividends and other
distributions made on shares held in escrow shall, except to the extent
otherwise provided by the Committee or in the Award Agreement, be
deposited in escrow, to be distributed to the party becoming entitled to
the Shares on which the distribution was made. Stock certificates
evidencing shares of Common Stock subject to conditions shall bear a
legend to the effect that the shares evidenced thereby are subject to
repurchase by, or conveyance to, the Company in accordance with the
terms applicable to such shares under an Award made pursuant to the
Plan, and that the shares of Common Stock may not be sold or otherwise
transferred, except to the Company in accordance with such conditions.
(e) Lapse of Conditions. Upon termination or lapse of all
forfeiture conditions, the Company shall cause certificates without the
legend referring to the Company's repurchase or acquisition right (but
with any other legends that may be appropriate) evidencing the shares
covered by the Award to be issued to the grantee upon the grantee's
surrender to the Company of the legended certificates held by the
grantee.
(f) Rights as Stockholder. Upon payment of the purchase price, if
any, for shares of Common Stock covered by an Award and compliance with
any other requirements for transfer of such shares, the grantee shall
have all of the rights of a stockholder with respect to the shares of
Common Stock covered thereby, including the right to vote such shares
and receive all dividends and other distributions paid or made with
respect thereto, except to the extent otherwise provided by the
Committee or in the Award Agreement.
4.2 Performance Shares. The Committee may, from time to time, and at its
sole discretion, make an Award of Performance Shares with respect to a
Performance Period, in which case the Committee shall establish in writing
prior to or within the first ninety (90) days of such Performance Period (but
in no event after 25 percent of the period of service represented by the
Performance Period has elapsed) one or more specific Performance Goals which
must be met in order for the Performance Shares to be granted or to become
B-8
<PAGE>
vested. In connection with an Award of Performance Shares, the Committee shall
specify in the applicable Award Agreement the terms and conditions applicable
to such Award, which shall include the extent to which the Common Stock subject
to such Award shall be granted or shall be eligible to become vested on the
achievement of the applicable Performance Goals, and which may or may not
include such additional terms and conditions, including conditions of
forfeiture and additional vesting requirements, as the Committee deems
appropriate, at its sole discretion.
4.3 Performance Goals. Performance Goals shall be based upon one or more
of the following business criteria for the Company as a whole or any of its
Affiliates, operating divisions or other operating units: Stock price, market
share, gross revenue, net revenue, pretax income, operating income, cash flow,
earnings per share, return on equity, return on invested capital or assets,
cost reductions and savings, return on revenues or productivity, or any
variations of the preceding business criteria, which may be modified at the
discretion of the Committee, to take into account extraordinary items or which
may be adjusted to reflect such costs or expense as the Committee deems
appropriate. In addition, to the extent consistent with the goal of providing
for deductibility under Section 162(m) of the Code, Performance Goals may be
based upon a Participant's attainment of personal objectives with respect to
any of the foregoing Performance Goals or implementing policies and plans,
negotiating transactions and sales, developing long-term business goals or
exercising managerial responsibility. Measurements of the Company's or a
Participant's performance against the Performance Goals established by the
Committee shall be objectively determinable and shall be determined according
to generally accepted accounting principles as in existence on the date on
which the Performance Goals are established and without regard to any changes
in such principles after such date.
4.4 Certification of Achievement of Performance Goals. As soon as
practicable following the end of a Performance Period, the Committee shall
determine whether and to what extent the Company and/or the Participants have
achieved the Performance Goal or Goals established for such Performance Period,
shall determine whether and to what extent the Performance Shares under the
terms of the applicable Award Agreement are to be granted or are vested or
become eligible to be vested, and shall certify such determination in writing,
which certification may take the form of minutes of the Committee documenting
such determination. The Committee shall have the discretion to limit, but not
increase, the extent to which Performance Shares are to be granted or are
eligible to become vested under the terms of an Award and the Plan, in order to
reflect the Participant's individual performance or to take into account any
other factors the Committee deems appropriate.
4.5 Interpretation. The provisions of this Article IV relating to
Performance Shares are intended to permit the grant of Awards that are treated
as meeting the requirements to be treated as performance-based compensation
under Section 162(m) of the Code, and the provisions of this Article IV, and
the other provisions of the Plan as they relate to the grant of Awards that are
Performance Shares, are to be interpreted in a manner that is consistent with
the requirements of Section 162(m) and Treasury Regulations promulgated
pursuant thereto, as they relate to the definition of performance-based
compensation.
ARTICLE V--MISCELLANEOUS PROVISIONS
5.1 Adjustments Upon Changes in Capitalization. In the event of changes
to the outstanding shares of Common Stock of the Company through
reorganization, merger, consolidation, recapitalization, reclassification,
stock split-up, stock dividend, stock consolidation or otherwise, or in the
event of a sale of all or substantially all of the assets of the Company, an
appropriate and proportionate adjustment shall be made in the number and kind
of shares as to which Stock Options and Awards may be granted, including with
respect to the share limit provided in Section 2.5 and the award limit provided
in Section 2.6. A corresponding adjustment changing the number or kind of
shares and/or the purchase price per share of unexercised Stock Options or
Awards or, in either case, portions thereof which shall have been granted prior
to any such change shall likewise be made. Notwithstanding the foregoing, in
the case of a reorganization, merger or consolidation, or sale of all or
substantially all of the assets of the Company, in lieu of adjustments as
aforesaid, the Committee may in its discretion accelerate the date after which
a Stock Option may or may not be exercised or
B-9
<PAGE>
the stated expiration date thereof and may, in its discretion, accelerate the
vesting or grant of any Award. Adjustments or changes under this Section shall
be made by the Committee, whose determination as to what adjustments or changes
shall be made, and the extent thereof, shall be final, binding and conclusive.
5.2 Non-Transferability. Except as otherwise provided herein, no Stock
Option and no rights under an Award shall be transferable except by will or the
laws of descent and distribution, nor shall any Stock Option be exercisable
during the Participant's lifetime by any person other than the Participant or
his guardian or legal representative. Notwithstanding the foregoing, any Option
that is not an ISO shall be transferable pursuant to a "domestic relations
order" as defined in the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder, and also, if so provided in the option
document by the Committee, at its discretion, shall be transferable without
payment of consideration, to any of the following: immediate family members of
the holder (i.e., spouse or former spouse, parents, issue, including adopted
and "step" issue, or siblings); trusts for the benefit of such immediate family
members; partnerships whose only partners are such immediate family members; or
to any transferee permitted by a rule adopted by the Committee or approved by
the Committee in an individual case. Any transferee will be subject to all of
the conditions set forth in the option document with respect to the Option
prior to its transfer.
5.3 Withholding. The Company's obligations under this Plan shall be
subject to applicable federal, state and local tax withholding requirements.
Federal, state and local withholding tax due at the time of a grant or upon the
exercise of any Stock Option or in connection with an Award may, in the
discretion of the Committee, be paid in shares of Common Stock already owned by
the Participant or through the withholding of shares otherwise issuable to such
Participant, upon such terms and conditions as the Committee shall determine.
If the Participant shall fail to pay, or make arrangements satisfactory to the
Committee for the payment, to the Company of all such federal, state and local
taxes required to be withheld by the Company, then the Company shall, to the
extent permitted by law, have the right to deduct from any payment of any kind
otherwise due to such Participant an amount equal to any federal, state or
local taxes of any kind required to be withheld by the Company.
5.4 Compliance with Law and Approval of Regulatory Bodies. No Stock
Option shall be exercisable and no shares will be delivered under the Plan
except in compliance with all applicable federal and state laws and regulations
including, without limitation, compliance with all federal and state securities
laws and withholding tax requirements and with the rules of the NYSE and of all
other domestic stock exchanges on which the Common Stock may be listed. Any
share certificate which evidences shares issued upon the exercise of a Stock
Option or granted pursuant to an Award may bear legends and statements the
Committee shall deem advisable to assure compliance with federal and state laws
and regulations. No Stock Option shall be exercisable and no shares will be
delivered under the Plan, until the Company has obtained consent or approval
from regulatory bodies, federal or state, having jurisdiction over such matters
as the Committee may deem advisable. In the case of the acquisition of a Stock
Option or an Award by a person or estate acquiring the right to such Stock
Option or Award as a result of the death of the Participant, the Committee may
require reasonable evidence as to the ownership of the Stock Option or Award
and may require consents and releases of taxing authorities that it may deem
advisable.
5.5 No Right to Employment or other Service. Neither the adoption of the
Plan nor its operation, nor any document describing or referring to the Plan,
or any part thereof, nor the granting of any Stock Options or Awards hereunder,
shall confer upon any Participant under the Plan any right to continue in the
employ or other service of the Company or any Affiliate, or shall in any way
affect the right and power of the Company or any Affiliate to terminate the
employment or other service relationship of any Participant at any time with or
without assigning a reason therefor, to the same extent as might have been done
if the Plan had not been adopted.
5.6 Exclusion from Pension Computations. By acceptance of a grant of a
Stock Option or an Award under the Plan, the recipient shall be deemed to agree
that any income realized upon the receipt or
B-10
<PAGE>
exercise thereof or upon the disposition of the shares received upon the
exercise thereof or in accordance with the terms thereof will not be taken into
account as "base remuneration," "wages," "salary" or "compensation" in
determining the amount of any contribution to or payment or any other benefit
under any pension, retirement, incentive, profit-sharing or deferred
compensation plan of the Company or any Affiliate.
5.7 Abandonment of Stock Options and Awards. A Participant may at any
time abandon a Stock Option or Award prior to its expiration date. The
abandonment shall be evidenced in writing, in such form as the Committee may
from time to time prescribe. A Participant shall have no further rights with
respect to any Stock Option or Award so abandoned.
5.8 Severability. If any of the terms or provisions of the Plan conflict
with the requirements of Rule 16b-3, then such terms or provisions shall be
deemed inoperative to the extent they so conflict with the requirements of Rule
16b-3.
5.9 Interpretation of the Plan. Headings are given to the Sections of the
Plan solely as a convenience to facilitate reference, and headings, numbering
and paragraphing shall not in any case be deemed in any way material or
relevant to the construction of the Plan or any provision hereof. The use of
the masculine gender shall also include within its meaning the feminine. The
use of the singular shall also include within its meaning the plural and vice
versa.
5.10 Use of Proceeds. Funds received by the Company upon the exercise of
Stock Options or payments made in connection with Awards shall be used for the
general corporate purposes of the Company.
5.11 Construction of Plan. The place of administration of the Plan shall
be in the State of Nevada, and the validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined solely in accordance with the
laws of the State of Nevada.
B-11
<PAGE>
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- - - - - - - - - - - - - - - - - - - - - - -
/\ DETACH AND RETAIN THIS ADMISSION TICKET /\
ADMISSION TICKET
MANDALAY RESORT GROUP
2000 Annual Meeting
Thursday, June 15, 2000
10:30 A.M., EDT
STOCKHOLDER NAME(S): _____________________________________
(PLEASE PRINT)
__________________________________________________________
STOCKHOLDER ADDRESS: _____________________________________
__________________________________________________________
If you plan to attend the Annual Meeting of Stockholders, please
so indicate by marking the appropriate box on your proxy card. The
meeting will be held in the Pavilion on the parking lot adjacent to
MotorCity Casino, 2901 Grand River Avenue, Detroit, Michigan. Space
limitations make it necessary to limit attendance to stockholders.
Registration will begin at 9:30 A.M., EDT. "Street name" holders
will need to bring a copy of a brokerage statement reflecting stock
ownership as of April 20, 2000.
--------------
This Admission Ticket should not be returned with your proxy but should be
retained and brought with you to the Annual Meeting.
<PAGE>
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- -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - -
/\ DETACH AND RETAIN THIS ADMISSION TICKET /\
ADMISSION TICKET
2000 Annual Meeting
of
MANDALAY RESORT GROUP
------------------------------------
Agenda
1. To elect three directors;
2. To approve the 2000 Executive Officers' Bonus
Plan;
3. To approve the 2000 Stock Incentive Plan;
4. To ratify the appointment of Arthur Andersen
LLP as independent auditors to examine and
report on the financial statements for the
fiscal year ending January 31, 2001; and
5. To transact such other business as may properly
be brought before the meeting or any
adjournment(s) thereof.
(See Reverse Side)
<PAGE>
MANDALAY RESORT GROUP
Proxy Solicited on Behalf of the Board of Directors of the Company
The undersigned, a stockholder of Mandalay Resort Group (the "Company"),
a Nevada corporation, hereby appoints Michael S. Ensign and Yvette E. Landau,
and each of them, as the true and lawful attorneys and proxies of the
undersigned, with full power of substitution, for and in the name of the
undersigned, to vote and otherwise act on behalf of the undersigned at the
Annual Meeting of Stockholders of the Company to be held in the Pavilion located
on the parking lot adjacent to MotorCity Casino, 2901 Grand River Avenue,
Detroit, Michigan, on Thursday, June 15, 2000 at 10:30 A.M., EDT, or at any
adjournment or adjournments thereof, with respect to all shares of the Company's
Common Stock which the undersigned would be entitled to vote, with all powers
the undersigned would possess if personally present, on the following matters:
The election of three directors to serve (Change of address-Comments)
until their respective successors are
elected and shall qualify. __________________________________
Nominees: __________________________________
Michael S. Ensign, Glenn W. Schaeffer and __________________________________
Michael D. McKee
__________________________________
This proxy will be voted as specified on the reverse side. If no specification
is made, this proxy will be voted FOR each nominee for director named above, FOR
approval of the 2000 Executive Officers' Bonus Plan, FOR approval of the 2000
Stock Incentive Plan and FOR ratification of the appointment of Arthur Andersen
LLP.
-----------
SEE REVERSE
SIDE
-----------
- --------------------------------------------------------------------------------
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/\ DETACH AND RETURN PROXY CARD; RETAIN ADMISSION TICKET /\
ADMISSION TICKET
2000 Annual Meeting
of
MANDALAY RESORT GROUP
------------------------------------
Agenda
1. To elect three directors;
2. To approve the 2000 Executive Officers' Bonus
Plan;
3. To approve the 2000 Stock Incentive Plan;
4. To ratify the appointment of Arthur Andersen
LLP as independent auditors to examine and
report on the financial statements for the
fiscal year ending January 31, 2001; and
5. To transact such other business as may properly
be brought before the meeting or any
adjournment(s) thereof.
(See Reverse Side)
<PAGE>
X Please mark your 1834
votes as in this
example.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is given, this proxy will
be voted FOR each nominee listed on the reverse side and FOR Proposals 2, 3 and
4.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR each nominee listed on the reverse side and FOR Proposals 2, 3 and 4.
- ------------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Election of 2. Approval of the 3. Approval of the 2000
Directors 2000 Executive Stock Incentive Plan.
(see reverse) Officers' Bonus Plan
For, except vote withheld from the following nominee(s): 4. Ratification of the appointment
of Arthur Andersen LLP as inde-
- -------------------------------------------------------- pendent auditors to examine and
report on the Company's financial
statements for the fiscal year
ending January 31, 2001.
- ------------------------------------------------------------------------------------------------------------------------------------
5. In the descretion of the proxies on any other
matters that may properly come before the meeting or
any adjournment thereof.
Change of Address/Comments on reverse side
-----------------------------------------------------------------
I/We plan to attend the Annual Meeting (Admission Ticket attached).
------------------------------------------------------------------
------------------------------------------------------------------
If more than one of the proxies listed on the reverse side
shall be present at the meeting or any adjournment thereof, the
majority of said proxies so present and voting shall exercise all
of the powers conferred hereby.
The undersigned hereby revokes any proxy heretofore given to
vote upon or act with respect to such shares and hereby ratifies
and confirms all that the proxies listed on the reverse side, or
either of them, may lawfully do by virtue hereof.
SIGNATURE(S) DATE
-------------------------------------------------------- ------------------
Please date this proxy and sign your name as it appears hereon. When there is more than one owner, each should sign. When signing
as an attorney, administrator, executor, guardian or trustee, please add your title as such. If executed by a corporation, give
title as such.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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/\ DETACH AND RETURN PROXY CARD; RETAIN ADMISSION TICKET /\
ADMISSION TICKET
MANDALAY RESORT GROUP
2000 Annual Meeting
Thursday, June 15, 2000
10:30 A.M., EDT
If you plan to attend the Annual Meeting of Stockholders, please so
indicate by marking the appropriate box on your proxy card. The meeting will be
held in the Pavilion on the parking lot adjacent to MotorCity Casino, 2901 Grand
River Avenue, Detroit, Michigan. Space limitations make it necessary to limit
attendance to stockholders. Registration will begin at 9:30 A.M., EDT. "Street
name" holders will need to bring a copy of a brokerage statement reflecting
stock ownership as of April 20, 2000.
--------------
This Admission Ticket should not be returned with your proxy but should be
retained and brought with you to the Annual Meeting.
