<PAGE>
SCHEDULE 14A INFORMATION
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 Section 240.14a-11(c) or Section
240.14a-12
MTR GAMING GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
MTR GAMING GROUP, INC.
STATE ROUTE 2
CHESTER, WEST VIRGINIA 26034
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
MTR Gaming Group, Inc. to be held on October 8, 1997 at 8:30 a.m. local time, at
the Princeton Club, 15 West 43d Street, New York, New York 10036.
The Notice of Annual Meeting and Proxy Statement which follow describe the
business to be conducted at the meeting. There will also be a brief report on
the current status of our business.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. After reading the Notice of Annual
Meeting and Proxy Statement, please complete, sign and date your proxy ballot,
and return it in the envelope provided.
On behalf of the Officers and Directors of MTR Gaming Group, Inc., I thank
you for your interest in the Company and hope that you will be able to attend
our Annual Meeting.
For the Board of Directors,
EDSON R. ARNEAULT
CHAIRMAN OF THE BOARD OF DIRECTORS AND
PRESIDENT
September 1, 1997
<PAGE>
MTR GAMING GROUP, INC.
STATE ROUTE 2
CHESTER, WEST VIRGINIA 26034
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of MTR
Gaming Group, Inc. will be held on October 8, 1997 at 8:30 a.m. local time at
the Princeton Club, 15 West 43d Street, New York, New York 10036 for the
following purposes:
1. To elect three persons to serve as directors of the Company until the
next annual meeting of stockholders;
2. To ratify the adoption of the Company's 1996 Amended Stock Option Plan;
3. To confirm Corbin & Wertz as the Company's accountants and independent
auditors; and
4. To transact such other business as may properly come before the meeting.
Stockholders entitled to notice and to vote at the meeting will be
determined as of the close of business on August 20, 1997, the record date fixed
by the Board of Directors for such purposes.
By order of the Board of Directors,
THOMAS K. RUSSELL, SECRETARY
September 1, 1997
Please sign the enclosed proxy and return it promptly in the enclosed
envelope. If mailed in the United States, no postage is required.
<PAGE>
MTR GAMING GROUP, INC.
STATE ROUTE 2
CHESTER, WEST VIRGINIA 26034
------------
PROXY STATEMENT
------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the management of MTR Gaming Group, Inc. (the "Company") for use at
the Annual Meeting of Stockholders to be held on October 8, 1997.
A copy of the Company's report for the year ended December 31, 1996,
containing financial statements for such fiscal year is enclosed herewith. This
proxy statement and form of proxy were first sent to stockholders on or about
the date stated on the accompanying Notice of Annual Meeting of Stockholders.
Only stockholders of record as of the close of business on August 20, 1997
will be entitled to notice of and to vote at the meeting and any postponement or
adjournments thereof. As of that date, 19,532,192 shares of Common Stock of the
Company were issued and outstanding. Each share outstanding as of the record
date will be entitled to one vote, and stockholders may vote in person or by
proxy. Execution of a proxy will not in any way affect a stockholder's right to
attend the meeting and vote in person. Any stockholder giving a proxy has the
right to revoke it at any time before it is exercised by written notice to the
Secretary of the Company or by submission of another proxy bearing a later date.
In addition, stockholders attending the meeting may revoke their proxies at any
time before they are exercised.
If no contrary instructions are indicated, all properly executed proxies
returned in time to be cast at the meeting will be voted FOR (i) the election of
the directors nominated herein, (ii) the ratification of the adoption of the
Company's 1996 Amended Stock Option Plan, and (iii) the ratification of the
auditors. Members of the Company's management intend to vote their shares in
favor of each of the proposals. A quorum for the meeting requires the presence
in person or by proxy of stockholders entitled to cast a majority of the votes
entitled to be cast at the meeting. The election of directors requires a
plurality of the votes cast at the meeting. The ratification of the adoption of
the Company's 1996 Amended Stock Option Plan and the ratification of the
auditors requires the affirmative vote of a majority of the shares present at
the meeting.
Stockholders will vote at the meeting by ballot and votes cast at the
meeting in person or by proxy will be tallied by the Company's transfer agent.
Shares held by stockholders present in person at the meeting who do not vote and
Ballots marked "abstain" or "withheld" will be counted as present at the meeting
for quorum purposes, but will not be counted as part of the
1
<PAGE>
vote necessary to approve the proposals for the election of directors or the
ratification of the auditors.
The solicitation of proxies will be made primarily by mail. Proxies may
also be solicited personally and by telephone or telegraph by regular employees
of the Company, without any additional remuneration. The cost of soliciting
proxies will be borne by the Company. In addition, the Company may also retain a
proxy solicitation firm to solicit proxies, in which case, the fees of any such
firm will be paid by the Company. Arrangements will also be made with brokerage
houses and other custodians, nominees and fiduciaries to forward solicitation
material to beneficial owners of such stock held of record by such persons, and
the Company will reimburse such persons for reasonable out-of-pocket expenses in
so doing.
The Company knows of no other matter to be presented at the meeting. If
any other matter should be presented at the meeting upon which a vote properly
may be taken, shares represented by proxies received by the Company will be
voted with respect thereto in accordance with the judgment of the persons named
as proxies.
ELECTION OF DIRECTORS
The directors of the Company are elected annually and hold office until
the next annual meeting and until their successors have been elected and have
qualified. The Company's Board of Directors (the "Board") has fixed the number
of Directors at four. However, because Thomas Russell, who served on the Board
since 1989, is not standing for reelection and the Board has not selected a
replacement, the Board has nominated three candidates for service, each of whom
serves for a term of one year, or until their successors are elected and
qualify. PROXIES CANNOT BE VOTED FOR A GREATER NUMBER OF PERSONS THAN THE NUMBER
OF NOMINEES NAMED.
Any stockholder submitting a proxy has the right to withhold authority to
vote for an individual nominee to the Board by writing that nominee's name in
the space provided on the proxy. Shares represented by all proxies received by
the Company and not so marked as to withhold authority to vote for any
individual director or for all directors will be voted FOR the election of the
nominees named below. The Company knows of no reason why any such nominee should
be unable to serve, but if such should be the case, proxies will be voted for
the election of some other person.
NOMINEES FOR DIRECTORS
The Board has nominated the following persons to serve as the Company's
directors, and all proxies not marked otherwise will be voted for the such
nominees, for a term expiring at the Annual Meeting in 1998:
EDSON R. ARNEAULT, 50, has served as the Company's President and Chief
Executive Officer since April 26, 1995. He is also a member of the Board and an
officer and director of the Company's subsidiaries Mountaineer Park, Inc.
("Mountaineer Park"), ExCal Energy Corporation ("ExCal"), and Golden Palace
Casinos, Inc. ("Golden Palace"). He has served as a member of the Board since
1992, when he was elected President of ExCal. Mr. Arneault is also a principal
2
<PAGE>
in numerous ventures directly or indirectly engaged in the development,
production and transportation of oil and gas. Since becoming President of the
Company and Mountaineer Park, however, Mr. Arneault has devoted virtually all
his time and attention to the business of the Company. Mr. Arneault is a
certified public accountant, and served as a tax partner with Seidman and
Seidman (now "BDO Seidman"), a public accounting firm, in Grand Rapids,
Michigan, from 1977 to 1980. Mr. Arneault is a member of the Independent
Producers Association of America, the Ohio Oil and Gas Association, the Michigan
Oil and Gas Association and the Michigan Association of Certified Public
Accountants. Mr. Arneault received his Bachelor of Science in Business
Administration from Bowling Green University in 1969; his Master of Arts from
Wayne State University in 1971; and his Masters in Business Administration from
Cleveland State University in 1978.
ROBERT L. RUBEN, 35, is a principal in Freer, McGarry, Bodansky & Rubin,
P.C., a Washington, D.C. law firm, where he has practiced since 1991. Mr. Ruben
is also a director of Mountaineer Park and serves as assistant secretary of the
Company and Mountaineer Park and as Chairman of the Compensation Committee. From
1986 to 1988, Mr. Ruben was associated with the firm of Bishop, Cook, Purcell &
Reynolds, which later merged with Winston & Strawn, and from 1989 to 1991, Mr.
Ruben was associated with the firm of Wickens, Koches & Brooks. Mr. Ruben
practices principally in the areas of commercial litigation and
corporate/securities law. Mr. Ruben received his Bachelor of Arts from the
University of Virginia in 1983 and his Juris Doctor from the Dickinson School of
Law in 1986. He is a member of the bars of the District of Columbia and the
Commonwealth of Pennsylvania. Freer, McGarry, Bodansky & Rubin, P.C. has served
as counsel to the Company since November of 1991, and Mr. Ruben has represented
Mr. Arneault and various of his affiliates since 1987.
ROBERT A. BLATT, 56, is the Chief Executive Officer of Island Golf
Resorts, L.L.C., Championship Golf Enterprises, L.L.C., Championship Golf
Antigua, Limited of St. John's Antigua, CGE Shattuck, L.L.C., and CGE Niantic,
L.L.C., and a member of the board of directors of AFP Imaging Corporation. Mr.
Blatt is also a director of Mountaineer Park and Chairman of the Company's
Finance Committee. Since 1979 he has been chairman and majority owner of CRC
Group, Inc. and related entities, a developer, owner, and operator of shopping
centers and other commercial properties, and since 1985, a member (seat owner)
of the New York Stock Exchange, Inc. From 1959 through 1991, Mr. Blatt served as
director, officer or principal of numerous public and private enterprises. Mr.
Blatt received his Bachelor of Science in Finance from the University of
Southern California in 1962 and his Juris Doctor from the University of
California at Los Angeles in 1965. He is a member of the State Bar of California
(inactive) and a Registered General Principal, NASD and New York Stock Exchange,
Inc.
The Board held four regular meetings and two special meetings during the
fiscal year ended December 31, 1996. All directors attended at least 75% of the
total number of meetings of the Board. The Board does not have a standing audit
or nominating committee. Mr. Ruben and Mr. Blatt make up the Board's
Compensation Committee. The Compensation Committee makes recommendations with
respect to salaries, bonuses, restricted stock, and deferred compensation for
the Company's executive officers as well as the policies underlying the methods
by which the Company compensates its executives. During the fiscal year ended
December 31, 1996, the
3
<PAGE>
Compensation Committee held four meetings. As a matter of policy, and to assure
compliance with Rule 16b-3(d)(1) of the Securities Exchange Act of 1934, the
decisions of the Compensation Committee are subject to ratification by a
majority of the Board.
EXECUTIVE OFFICERS
The following persons serve as the officers indicated:
<TABLE>
<CAPTION>
Principal
Occupation
Name and Address Position Last 5 Years
- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C>
EDSON R. ARNEAULT* Director, President, Excal Energy
State Route 2 President, Chief Corp. and Century
Chester, WV 26034 Executive Officer Energy Management Co.,
Inc.
THOMAS K. RUSSELL** Director, Secretary and Law, corporate finance
32 Antibes Treasurer
Laguna Niguel,
CA 92651
ROBERT L. RUBEN*** Director, Assistant Attorney
1000 Thomas Jefferson Secretary
Street, N.W., 6th Floor
Washington,
D.C. 20007
ROBERT A. BLATT**** Director Developer
1890 Palmer Avenue
Suite 303
Larchmont,
NY 10538
</TABLE>
- ------------------------
* Also an officer and director of ExCal, Golden Palace and Mountaineer Park,
the Company's subsidiaries.
** Also an officer and director of ExCal and Mountaineer Park.
*** Also a director and assistant secretary of Mountaineer Park.
****Also a director and assistant secretary of Mountaineer Park.
4
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of August 20, 1997, the ownership of
the presently issued and outstanding shares of the Company's Common Stock by
persons owning more than 5% of such stock, and the ownership of such stock by
the Company's officers, directors and key employees, individually and as a
group. As of August 20, 1997 there were 19,532,192 shares of common stock
outstanding. All such shares were owned both beneficially and of record, except
as otherwise noted.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------------------------ ---------------------- -------------
<S> <C> <C>
Edson R. Arneault(1) 2,675,067 12.82
State Route 2
Chester, WV 26034
Donald G. & Bonnie Saunders 1,677,685 8.21
1987 Family Trust(2)
900 East Desert Inn Road, Suite 521
Las Vegas, Nevada 89109
Bennett Management & Development 1,530,000 7.72
Corp.(3)
2 Clinton Square
Syracuse, NY 13202
Thomas K. Russell(4) 640,626 3.15
32 Antibes
Laguna Niguel, CA 92677
Robert A. Blatt(5) 517,684 2.60
The CRC Group
Larchmont Plaza
1890 Palmer Avenue, Suite 303
Larchmont, NY 10538
Robert L. Ruben(6) 188,228 0.94
Freer, McGarry, Bodansky &
Rubin, P.C.
1000 Thomas Jefferson Street, N.W.
Washington, D.C. 20007
Madeleine LLC(7) 2,540,109 11.54
450 Park Avenue, 28th Floor
New York, New York 10022
All officers and directors as a
group (4 persons)(8)
</TABLE>
5
<PAGE>
- ------------------------
(1) Includes 1,615,318 shares and options to acquire beneficial ownership of
1,059,749 shares within 60 days held by Mr. Arneault or his affiliates.
(2) Includes 1,051,816 shares and options to acquire beneficial ownership of
625,869 shares within 60 days.
(3) Includes 780,000 shares for which voting rights have been assigned to the
Board to satisfy licensing requirements of the West Virginia Lottery
Commission.
(4) Includes 103,810 shares and options to acquire beneficial ownership of
536,816 shares within 60 days held by Mr. Russell.
(5) Includes 392,684 shares and options to acquire beneficial ownership of
125,000 shares within 60 days held by Mr. Blatt.
(6) Includes 38,228 shares and options to acquire beneficial ownership of
150,000 shares within 60 days held by Mr. Ruben.
(7) Includes 341,031 shares and options to acquire beneficial ownership of
2,199,078 shares within 60 days held by Madeleine LLC; provided, however,
that pursuant to an agreement with the Company, Madeleine LLC may not
exercise its warrant to the extent such exercise would result in its
ownership of 5% or more of the then issued and outstanding shares of the
common stock of the Company without the prior approval of the West Virginia
State Lottery Commission.
(8) Includes Messrs. Arneault, Russell, Blatt and Ruben.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the provisions of Section 16(a) of the Securities Exchange Act of
1934, the Company's officers, directors and 10% beneficial stockholders are
required to file with the SEC reports of their transactions in the Company's
securities. Based solely on a review of the Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, the Company believes that all forms were filed timely by the
Company's officers, directors and 10% beneficial stockholders.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded, paid to or earned
by the most highly compensated executive officers of the Company whose
compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS
-------------------------------------------- ------------------------ PAYOUTS
OTHER RESTRICTED -----------
ANNUAL STOCK OPTIONS LTIP
SALARY BONUS COMP. AWARDS SARS PAYOUTS
NAME YEAR ($) ($) ($) ($) ($) ($)
- -------------------------------------------- --------- --------- --------- ----------- ----------- ----------- -----------
(1) (2) (3) (4) (5)
<S> <C> <C> <C> <C> <C> <C> <C>
EDSON R. ARNEAULT 1996 230,521 67,500 24,590 2,748 300,000 --
President, Chief Executive Officer
and Chairman of MTR Gaming 1995 68,985 23,000 -- 144,667 68,415 --
1994 188,729 -- 4,021 46,000 -- --
THOMAS K. RUSSELL 1996 162,750 -- 7,496 619 100,000 --
Secretary, Treasurer, Chief
Financial Officer, General 1995 105,734 -- -- 41,554 357,316 --
Counsel and Director of MTR
Gaming Group 1994 134,075 -- 2,898 -- -- --
<CAPTION>
ALL
OTHER
NAME COMP.
- -------------------------------------------- ---------
(6)
<S> <C>
EDSON R. ARNEAULT --
President, Chief Executive Officer
and Chairman of MTR Gaming --
--
THOMAS K. RUSSELL --
Secretary, Treasurer, Chief
Financial Officer, General --
Counsel and Director of MTR
Gaming Group --
</TABLE>
- ------------------------
(1) Mr. Arneault's salary was $213,652 in 1995, of which $144,667 was paid in
the form of a stock award on February 9, 1996. Mr. Russell's salary was
$147,288 in 1995, of which $41,554 was paid in the form of a stock award on
February 9, 1996. During 1996, said amounts, together with interest at the
rate of 10% per annum, were converted to shares of the Company's common
stock at the market value of the shares on February 9, 1996, the effective
date of the conversion.
(2) Includes accrued 1996 vacation compensation of $13,618 and 1996 pre diem
allowances of $10,972 paid to Mr. Arneault, and accrued 1996 vacation
compensation of $7,496 paid to Mr. Russell.
(3) 1996 payments to Messrs. Arneault and Russell include interest paid on
accrued 1995 salaries; 1995 payments to Messrs. Arneault and Russell
represent the value of common stock paid to them in lieu of accrued 1995
salaries.
7
<PAGE>
The following table of contains information concerning the grant of stock
options during fiscal 1996 to the Company's executive officers named in the
Summary Compensation Table.
OPTIONS/SAR GRANTS IN 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE
APPRECIATION FOR
OPTION TERM (2)
----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ------------------------------------ ----------------- ----------------- ------------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Edson R. Arneault 300,000 60% .5625 Jan. 2001 $ 46,622 103,024
Thomas K. Russell 100,000 20% .5625 Jan. 2001 $ 15,541 34,341
</TABLE>
- ------------------------
(1) In January 1996, the Board of Directors granted incentive stock options to
certain executive officers, key personnel and employees to purchase, in the
aggregate, 500,000 shares of the company's common stock for a price of
$.5625 per share, the market price of the stock on the date of grant. Such
incentive stock potions were approved by the shareholders in October 1996.
(2) In accordance with the rules of the Securities and Exchange Commission,
"Potential Realizable Value" has been calculated assuming an aggregate five
year appreciation of the fair market value of the Company's common stock on
the date of the grant, or $.5625 per share, at annual compounded rates of 5%
and 10%, respectively.
The following table sets forth information regarding the number and value
of options held by each of the Company's executive officers named in the Summary
Compensation Table during fiscal 1996. None of the named executive officers
exercised any stock options during fiscal 1996.
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL FISCAL
YEAR END YEAR END ($)(1)
------------------- ---------------------
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------- --------------------- ------------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
Edson R. Arneault 0 0 1,059,749/0 270,247
Thomas K. Russell 0 0 536,816/0 103,203
</TABLE>
- ------------------------
(1) Based on the market price of the Company's common stock at $1.281 on March
20, 1996, as reported by NASDAQ.
8
<PAGE>
EMPLOYMENT AGREEMENTS
Messrs. Arneault and Russell each have an employment agreement with the
Company. On March 1, 1997, the Company entered into a new three year employment
agreement with Mr. Arneault to reflect Mr. Arneault's responsibilities as
president and chairman of the Company. The new agreement replaced a May 10, 1994
agreement pursuant to which Mr. Arneault served as president of ExCal Energy
Corporation and vice president in charge of political relations for the Company.
The new agreement provides that Mr. Arneault will receive a base salary with
annual cost of living adjustments and bonuses and stock options at the
discretion of the Board of Directors. As of March 1, 1997, Mr. Arneault's base
salary is $315,000.
Mr. Russell has a three year employment agreement with the Company that
has been in effect since May 10, 1994. Pursuant to that agreement, Mr. Russell
receives a base salary with annual cost of living adjustments, and bonuses and
stock options at the discretion of the Board. Mr. Russell's employment agreement
with the Company will expire May 9, 1998. Mr. Russell's base salary, giving
effect to prior cost of living adjustments, is $173,643.
Each agreement provides that if the employee's period of employment is
terminated by reason of death or physical or mental incapacity the Company will
continue to pay the employee or his estate the compensation otherwise payable to
the employee for a period of two years. If the employee's period of employment
is terminated for a reason other than death or physical or mental incapacity or
for cause, the Company will continue to pay the employee the compensation that
otherwise would have been due to him for the remaining period of employment. If
the employees' period of employment is terminated for cause, the Company will
have no further obligation to pay the employee, other than compensation unpaid
at the date of termination.
In the event that the termination of the employee's period of employment
occurs after there has been a change of control (as defined in the agreement) of
the Company and (i) the termination is not for cause or by reason of the death
or physical or mental disability of the employee or (ii) the employee terminates
his employment for good reason (as defined in the agreement), then the employee
will have the right to receive within thirty days of the termination a sum that
is three times his annual base salary, but not to exceed the amount deductible
by the Company under the Internal Revenue Code of 1986.
Each agreement provides that, during the term of the agreement, the
employee will not compete with the business or any contemplated business of the
Company either individually or as an officer, director, stockholder, employee,
agent, partner or consultant of any entity at any location within ninety miles
of any location at which the Company does business or at which the employee
knows that the Company contemplates doing business.
STOCK PERFORMANCE GRAPH
The following graph demonstrates a comparison of cumulative total returns
of the Company, the NASDAQ Market Index (which is considered to be a broad
index) and an industry peer group index based upon companies which are publicly
traded with the same four digit standard industrial classification code ("SIC")
as the Company (SIC 7999 Amusement and Recreational Services) for the past five
years. The beginning date for the graph is December 7, 1992, the date on which
the Company's Common Stock was first quoted on NASDAQ. The
9
<PAGE>
following graph assumes $100 invested in each of the above groups and the
reinvestment of dividends.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG MTR GAMING GROUP, INC,
NASDAQ MARKET INDEX AND SIC CODE INDEX
[GRAPH]
ASSUMES $100 INVESTED ON DEC. 7, 1992
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1996
<TABLE>
<CAPTION>
COMPANY 1992 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
MTR Gaming Group, Inc........................ 100.00 88.71 53.23 15.32 9.68 12.90
Industry Index............................... 100.00 98.50 159.70 126.70 182.72 191.39
NASDAQ Market Index.......................... 100.00 102.56 123.02 129.17 167.54 208.19
</TABLE>
(1) The peer group consists of the following companies: American Bingo & Gaming;
American Wagering; Argosy Gaming Co.; Boomtown, Inc.; Boyd Gaming Co.;
Casino America, Inc.;
10
<PAGE>
Childrobics, Inc.; Cinema Ride, Inc.; Crown Casino Corp.; Dover Downs; Global
Outdoors, Inc.; Grand Casinos, Inc.; Imax Co.; Jillian's Entertainment
Corp.; Mirage Resorts, Inc.; Multimedia Game; N-Vision, Inc.; Netlive
Communications; President Casinos, Inc.; Quintel Entertainment; Renaissance
Entertainment; Sands Regent; Santa Fe Gaming Corp.; SYK Games International,
Ltd.; Skyline Multimedia Entertainment; Ticketmaster Group; Vail Resorts;
and Visual Edge.
COMPENSATION OF DIRECTORS
Mr. Ruben and Mr. Blatt are entitled to receive a fee of $2,500 for each
quarterly Board meeting that they attend and are also entitled to be reimbursed
for out-of-pocket expenses incurred in attending Board meetings. Directors who
are employees of the Company do not receive compensation for attendance at Board
meetings, but are entitled to reimbursement for expenses that they incur in
attending such meetings.
On January 23, 1996, Mr. Ruben and Mr. Blatt were granted non-qualified
options to purchase 75,000 and 50,000 shares of the Company's Common Stock,
respectively, at the fair market value on the date of the grant of $0.5625 per
share. On October 2, 1996, Messrs. Ruben and Blatt were each granted
non-qualified options to purchase 75,000 shares of the Company's common stock
for $1.06 per share, the fair market value on the date of grant. The options are
exercisable at any time and from time to time in whole of in part for a period
of five years from the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On November 8, 1995, the Board voted to form an executive compensation
committee consisting of Mr. Ruben and Mr. Blatt (the "Committee"). The Committee
is authorized to review all compensation matters involving directors and
executive officers and Committee approval is required for any compensation to be
paid to executive officers or directors who are employees of the Company. As a
matter of policy and to assure compliance with Rule 16b-3(d)(1) of the
Securities Exchange Act of 1934, the decisions of the Compensation Committee are
subject to ratification by a majority of the Board.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Policy
The Committee's decisions with respect to executive compensation will be
guided by the general principle that compensation be designed (i) to assure that
the Company's executives receive fair compensation relative to their peers at
similar companies; (ii) to assure that the Company's shareholders are receiving
fair value for the compensation paid to the Company's executives; and (iii) to
allow the Company to secure and retain the services of high quality executives.
The Company's compensation program will consist of three elements: a base
salary; annual incentives in the form of cash or restricted stock bonuses; and
long-term incentives in the
11
<PAGE>
form of stock options. The Committee believes that annual incentives, or
bonuses, should be used to reward an executive for exceptional performance. The
determination of what constitutes exceptional performance is, at this stage, a
subjective judgment by the Committee based on the executive's contribution to
the Company's revenues, legislative and regulatory efforts, recruitment of high
quality personnel, elevating public awareness and perception of the Company's
gaming resort, and development of the Company's prospects.
Stock options allow the Company to motivate executives to increase
stockholder value. This type of incentive also allows the Company to recruit
members of the management team whose contributions and skills are important to
its long-term success. In the past, the Company's history of operating losses
and periodic cash flow shortages dictated that stock options be used as the
principal method of increasing an executive's overall compensation. Now that the
Company is profitable, however, the Committee intends to rely more on cash
incentives, which will also decrease dilution.
For the next three years, the base salary for the Company's executives,
Mr. Arneault and Mr. Russell, has been established, subject to annual cost of
living adjustments, pursuant to employment contracts. Mr. Russell's base salary
is currently 173,643, and his employment agreement is due to expire May 9, 1998.
Mr. Arneault's base salary is $315,000.
Chief Executive Officer Compensation
For 1996, Mr. Arneault's base salary pursuant to the May 10, 1994
employment agreement was $240,000. Mr. Arneault was also awarded a bonus of
$67,500 payable during 1996 and a like amount payable in July of 1997. In
addition, in January of 1996, the Committee recommended, and the Board and the
Company's shareholders approved a grant to Mr. Arneault of options to purchase
300,000 shares of the Company's Common Stock pursuant to the Company's 1996
Stock Option Plan. In deciding upon Mr. Arneault's bonus and the award of
options, the Committee took into account (i) Mr. Arneault's increased
responsibilities as chief executive officer; (ii) his success in substantially
increasing the Company's revenues; (iii) his successful management of the
Company's relationship with West Virginia racing and lottery officials; and (iv)
his contribution to the Company's overall financial results, including the
Company's first year having net profits.
As of March 1, 1997, the Company entered a new three year employment
agreement with Mr. Arneault at a base salary of $315,000, which represents a
31.25% increase. The Committee believed that the increase was warranted by Mr.
Arneault's overall performance and necessary to assure that Mr. Arneault's
compensation was competitive with CEOs of similar companies. The Committee
obtained the necessary consent of the Company's mortgage lender for the increase
and bonuses.
Respectfully submitted,
Robert A. Blatt
Robert L. Ruben
12
<PAGE>
CERTAIN TRANSACTIONS
On December 16, 1994, ExCal entered into an agreement to sell its Ohio oil
and gas leases pursuant to the Company's March 1993 plan of orderly liquidation
to Development & Acquisition Ventures in Energy, Inc., a corporation that is
controlled by David T. Arneault, the brother of Edson R. Arneault. The buyer
agreed to pay ExCal a total of $450,000 in the form of (i) a promissory note in
the amount of $300,000 bearing interest at 8% per annum and payable in monthly
installments of $10,000 beginning six months after the sale and (ii) $150,000
payable from the portion of the monthly net revenues of the wells in excess of
$10,000. In addition, if the leases are sold, ExCal is to receive any unpaid
balance of the $150,000 plus 50% of the payments received from the sale. The bid
submitted by the buyer was the highest of four independent bids received by the
Company. The buyer is delinquent with respect to four payments due for the first
six months of 1997 under the notes. The Company and the buyer are negotiating
arrangements to bring the account current, and the Company believes the matter
will be resolved amicably.
Mr. Robert Ruben is a principal in the law firm of Freer, McGarry,
Bodansky & Rubin, P.C., which has performed legal services for the Company since
1991. During the fiscal year ended December 31, 1996, the Company paid Freer,
McGarry, Bodansky & Rubin the sum of $334,340 for legal services and costs
related thereto. The Company and Freer, McGarry, Bodansky & Rubin anticipate
that the law firm will perform legal services for the Company in the future.
RATIFICATION OF ADOPTION OF EMPLOYEE
STOCK OPTION PLAN
The Company's Board of Directors has adopted, subject to the approval of
the Company's stockholders, the Company's 1996 Amended Stock Option Plan (the
"Plan"). The Board has reserved 750,000 shares of the Company's Common Stock for
issuance pursuant to the exercise of options issued under the Plan. A copy of
the proposed Plan is attached as Exhibit A.
Under the terms of the Plan, the Board may issue options to those persons
whom the Board deems to be "key employees" of the Company and who may include
officers of the Company. However, no director may vote upon the grant of options
to himself. The options to be granted under the Plan may be either incentive
stock options eligible for favored treatment under Section 422 of the Internal
Revenue Code of 1986 (the "Code") or non-qualified options that are not eligible
for such treatment. Approximately ten employees of the Company are eligible to
participate in the Plan.
The exercise price for any incentive stock option may not be less than
100% of the fair market value of the stock on the date the option is granted,
except that with respect to a participant who owns more than 10% of the
Company's common stock the exercise price must be not less than 110% of fair
market value. The exercise price of any non-qualified option may not be less
than 85% of the fair market value of the stock on the date of grant. The
aggregate fair
13
<PAGE>
market value of the shares that may be subject to any incentive stock option
granted to any participant may not exceed $100,000. There is no comparable
limitation with respect to non-qualified stock options.
All incentive stock options granted under the Plan will be exercisable in
whole or in part during the period beginning on the date the option is granted
and ending five years from such date. Non-qualified stock options may be
granted, in the discretion of the Board, having an exercise period of up to ten
years and may be exercised in whole or in part at any time within such period.
The right of exercise will be cumulative, so that shares that are not purchased
in one year may be purchased in a subsequent year. No incentive stock option
granted to any employee may be exercised while any incentive stock option
previously granted to such employee is outstanding. Upon exercise of any option,
in whole or in part, payment in full is required for the number of shares
purchased. Payment may be made in cash, by delivery of shares of the Company's
common stock of equivalent fair market value or by any other form of legal
consideration that is acceptable to the Board.
If an employee's employment is terminated by reason of death or
disability, either the employee or his or her beneficiary will have the right
for one year to exercise the option to the extent the option was exercisable on
the date of death or disability. If an employee retires after age 60, he or she
may, for a period of three months, exercise the option to the extent that it was
exercisable on the date of retirement. If an employee's employment is terminated
for any reason other than death, disability or retirement, any option held by
such employee shall terminate on the same date.
The Plan will be administered by the Board, which is authorized to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan and to determine the employees to whom, and the time, terms
and conditions under which, options may be granted. The Board is also authorized
to adjust the number of shares available under the Plan, the number of shares
subject to outstanding options and the option prices to take into account the
Company's capitalization by reason of a stock dividend, recapitalization,
merger, consolidation, stock split, combination or exchange of shares or
otherwise.
The Board may amend, suspend or terminate the Plan in any respect at any
time. However, no amendment may (i) increase the number of shares reserved for
options under the Plan, (ii) modify the requirements for participation in the
Plan, or (iii) modify the Plan in any way that would require stockholder
approval under the rules and regulations under the Securities Exchange Act of
1934.
Under current Federal law, no taxable income will be recognized by the
recipient of an incentive stock option within the meaning of Section 422 of the
Code upon either the grant or exercise of the incentive stock option (provided
the exercise occurs while the participant is an employee of the Company or
within three months after termination of employment), nor will a deduction be
allowed the Company by reason of the grant or exercise, provided the employee
14
<PAGE>
does not dispose of the shares issued upon exercise within two years from the
date the option was granted and within one year from the date the shares were
issued. If the recipient fails to satisfy these holding period requirements, the
difference between the amount realized upon disposition of the shares and the
adjusted basis of the shares is includible as compensation in the recipient's
gross income and the Company will be entitled to a deduction in that amount.
Under current law, the holder of a non-qualified stock option is taxable
at the time of exercise on the difference between the exercise price and the
fair market value of the shares on the date of exercise. Upon disposition of the
stock, the stockholder is taxable upon the difference between the basis of the
stock (which is equal to the fair market value at the time the option was
exercised) and the amount realized upon the disposition.
The Board believes the Plan will further the growth and development of the
Company by issuing options to certain key employees as an incentive for stock
ownership. It is contemplated that the Plan will provide such persons with
increased interest in the Company's success as they increase their proprietary
stake in the Company.
The favorable vote, either in person or by proxy, of the holders of a
majority of the common shares is necessary for the adoption of the Plan. The
Board recommends a vote FOR the adoption of the Plan.
RATIFICATION OF SELECTION OF AUDITORS
The Board has selected the firm of Corbin & Wertz, independent public
accountants, to serve as auditors for the fiscal year ending December 31, 1997,
subject to ratification by the stockholders. Corbin & Wertz has served as the
Company's auditors since 1991.
The Board recommends a vote FOR ratification of this selection.
It is not expected that a member of the firm Corbin & Wertz will be
present at the Annual Meeting.
FINANCIAL INFORMATION
The Financial Statements of the Company included in the Company's Annual
Report to Stockholders that accompanies this Proxy Statement are incorporated
herein by reference.
15
<PAGE>
OTHER MATTERS
STOCKHOLDER PROPOSALS FOR NEXT MEETING
Proposals of stockholders intended for inclusion in the proxy statement
for the Annual Meeting of Stockholders to be held in 1998 must be received by
the Company's executive offices not later than May 9, 1998. Proponents should
submit their proposals by Certified Mail--Return Receipt Requested.
NO OTHER BUSINESS
Management is not aware at this date that any other business matters will
come before the meeting. If, however, any other matters should properly come
before the meeting, it is the intention of the persons named in the proxy to
vote thereon in accordance with their judgment.
September 1, 1997 MTR GAMING GROUP, INC.
Thomas K. Russell, SECRETARY
16
<PAGE>
Exhibit A
MTR GAMING GROUP, INC.
1996 AMENDED STOCK OPTION PLAN
---------------------------------
1. PURPOSE. The purpose of this Plan (the "Plan") is to further the
growth and development of MTR Gaming Group, Inc. (the "Company") and related
corporations, by issuing to certain key employees (including officers) of the
Company and any parent or subsidiary corporation, as an incentive and
encouragement to stock ownership, options to purchase shares of the Company's
common stock. It is contemplated that the Plan will provide such persons with
increased interest in the Company's success as they increase their proprietary
stake in the Company.
2. ADMINISTRATION. The Plan shall be administered by the Company's
Board of Directors (the "Board"). Subject to the provisions of this Plan, the
Board shall have plenary authority to administer the Plan, including authority
to determine the officers and key employees to whom options pursuant to this
Plan ("Options") should be granted, and the time or times at which Options
should be granted and the period for which they should be exercisable; to
interpret the Plan and to prescribe, amend, and rescind rules and regulations
relating thereto as it may deem appropriate; provided that no member of the
Board shall vote with respect to the issuance of Options to himself.
3. GRANT OF OPTIONS. Options to purchase shares of the Company's
common stock conforming to the provisions of this Plan ("Options") may from time
to time be granted on behalf of the Company by the Board. The officers and other
key employees of the Company or of any subsidiary corporation to whom Options
are to be granted, the number of shares to be optioned to each, and the Option
price shall be determined by the Board. Options granted under this Plan may be
either non-qualified stock options or incentive stock options ("Incentive Stock
Options") as defined by Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). At the time each Option is granted, the Board shall
designate such Option as either a non-qualified stock option or an Incentive
Stock Option.
4. SHARES SUBJECT TO THE PLAN. The shares to be optioned (the
"Shares") shall consist of authorized and unissued shares of common stock of the
Company or shares of its common stock reacquired by the Company, not to exceed
in the aggregate 750,000 shares. Any Shares subject to Options that shall have
terminated for any reason other than by exercise shall be available for
subsequent optioning.
5. ANNUAL LIMIT. To the extent that the aggregate fair market value
(determined as of the time the Option is granted) of stock with respect to which
Incentive Stock Options (determined without regard to this Section 5) are
exercisable for the first time by any employee
<PAGE>
during any calendar year, under this Plan or any other Incentive Stock Option
Plan of the Company and/or any parent or subsidiary of the Company, exceeds
$100,000 (or such higher amount as may be permitted by applicable provisions of
the Code now or as hereafter amended), such options will be treated as options
which are not Incentive Stock Options.
6. ELIGIBILITY. All officers and key employees of the Company and
officers and key employees of any subsidiary corporation shall be eligible to
receive Options. In granting Options, the Board may include or exclude previous
participants in the Plan. No director shall be eligible to receive Options
unless such director is also an officer or employee of the Company or a parent
or subsidiary corporation. As used herein, the term "subsidiary" shall mean a
"subsidiary corporation" as defined in Section 424(f) of the Code.
7. OPTION PRICE. (a) The price of each Incentive Stock Option shall be
not less than 100% of the fair market value of the stock subject to the Option
on the date the Option is granted. The price of each non-qualified stock option
shall be not less than 85% of the fair market value of the stock subject to the
option on the date the option is granted. In the case of any grant of Incentive
Stock Options to a holder of more than 10% of the voting power or value of all
classes of the Company's stock (or that of its parent or subsidiary), the price
at which such Shares may be optioned shall be not less than 110% of their fair
market value at the time such Options are granted, and such Options by their
terms shall not be exercisable after the expiration of five years from the date
of issuance.
(b) Fair Market Value. For purposes of the Plan, the "fair market value"
of a share of the Company's common stock as of a given date shall be (i) the
closing price of a share of the Company's common stock on the principal exchange
on which shares of the Company's common stock are then traded, if any, on such
date, or, if shares were not traded on such date, then on the next preceding
trading day during which a sale occurred; or (ii) if the Company's common stock
is not traded on an exchange but is quoted on NASDAQ or a successor quotation
system, (1) the last sales price (if the common stock is then listed as a
National Market Issue under the NASD National Market System) or (2) the mean
between the closing representative bid and asked prices (in all other cases) for
the common stock on such date as reported by NASDAQ or such successor quotation
system; or (iii) if the Company's common stock is not publicly traded on an
exchange and not quoted on NASDAQ or a successor quotation system, the mean
between the closing bid and asked prices for the common stock on such date as
determined in good faith by the Board; or (iv) if the Company's common stock is
not publicly traded, the fair market value established by the Board acting in
good faith at each time such Options are granted by it. In addition, with
respect to any Incentive Stock Option, the fair market value on any given date
shall be determined in a manner consistent with any regulations issued by the
Secretary of the Treasury for the purpose of determining fair market value of
securities subject to an Incentive Stock Option Plan under the Code.
8. OPTION PERIOD. (a) Subject to Section 15, the period for exercising
an Incentive Stock Option (the "Exercise Period") granted under this Plan shall
be the period beginning on
2
<PAGE>
the date the Option is granted and ending five years from the date the Option is
granted; except that:
(i) If a participant, being over the age of 60 years, retires during
the Exercise Period, such Option shall be exercisable by him or
her only during the three months following his or her retirement,
but in no event after the expiration of the Exercise Period.
(ii) In the case of the death or permanent and total disability of a
participant, such Option shall be exercisable by the executors,
administrators, legatees or distributees of his or her estate only
during the 12 months following his or her death or disability, but
in no event after the expiration of the Exercise Period.
(iii) If a participant voluntarily ceases to be an employee of the
Company or is dismissed for cause, such Option shall terminate as
of the date of the cessation of his or her employment.
Subject to clauses (i), (ii) and (iii) of this Subsection (a), an Option may be
exercised at any time and from time to time, in whole or in part, during the
Exercise Period.
(b) At the discretion of the Board, non-qualified stock options may be
granted for a duration not to exceed 10 years from the date the Option is
granted and may be exercisable in whole or in part at such time or times as the
Board shall designate at the time of grant.
9. PAYMENT FOR SHARES. Full payment for shares purchased, together
with the amount of any tax or excise due in respect of the sale and issue
thereof, shall be made (i) in cash or by certified or bank cashier's check at
the time the Option is exercised, or (ii) at the discretion of the Board, either
at the time of the grant or exercise of the Option, (A) by delivery to the
Company of other common stock of the Company, (B) according to a deferred
payment or other arrangement (which may include, without limiting the generality
of the foregoing, the use of other common stock of the Company) with the person
to whom the Option is granted or to whom the Option is transferred pursuant to
Section 10 of this Plan, or (C) in any other form of legal consideration that
may be acceptable to the Board. A participant shall have none of the rights of a
stockholder until certificates for the Shares purchased are issued to him or
her, and no certificates shall be issued until full payment for the shares
subject thereof has been made.
10. NON-ASSIGNABILITY. (a) Options granted pursuant to this Plan shall
be non-transferrable except by will or pursuant to laws of descent and
distribution, and shall be exercisable, during a participant's lifetime, only by
him or her.
(b) Shares issued upon exercise of these Options shall, unless a
registration statement under the Securities Act of 1933 (the "Act") is effective
with respect to such shares, containing such current information as is required
by the rules and regulations under the Act, bear a legend
3
<PAGE>
to the effect that such Shares have not been registered under the Act and may
not be transferred unless the Company shall have received an opinion of counsel
satisfactory to the Company that such registration is not required.
11. CONDITIONS TO EXERCISE OF OPTIONS. (a) No Option shall be
exercisable for less than 100 Shares at any one time (or the remaining Shares
then purchasable under the Option, if less than 100 Shares).
(b) No Option shall be granted or exercised if the grant of such Option or
the exercise and the issuance of Shares pursuant thereto would be contrary to
law or the regulations of any duly constituted authority having jurisdiction
over either the Company or the grant of options. The Board may, in its
discretion, as a condition to the issuance of any Shares, require that the
participant shall execute a certificate, in form and substance satisfactory to
the Company and its counsel, representing, warranting and agreeing that he or
she is acquiring the Shares for his or her own account, for investment and not
with a view to or in connection with any distribution, and that he or she will
not transfer such Shares unless, in the opinion of counsel to the Company, such
transfer would not result in any violation of state or federal securities laws,
either in connection with the transfer of such Shares or their issuance.
12. AMENDMENT. (a) The Board may at any time, and from time to time,
amend the Plan. However, except as provided in Section 14 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company within 12 months before or after the
adoption of the amendment, where the amendment will: (i) increase the number of
shares reserved for Options under the Plan; (ii) modify the requirements as to
eligibility for participation in the Plan (to the extent such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422(b) of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Securities Exchange Act of 1934); or (iii) modify the Plan
in any other way if such modification requires stockholder approval in order for
the Plan to satisfy the requirements of Section 422(b) of the Code or to comply
with the requirements of Rule 16b-3 promulgated under the Securities Exchange
Act of 1934.
(b) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide the participants with
the maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to employee incentive stock
options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith.
(c) Rights and obligations under any Option granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Option was
granted and (ii) such person consents in writing.
4
<PAGE>
13. TERMINATION OR SUSPENSION. (a) The Board may suspend or terminate
the Plan at any time. Unless sooner terminated, the Plan shall terminate on
March 1, 2006. No Options shall be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the Plan
without the consent of the participant, except as provided by Sections 14 and 15
of the Plan.
14. ADJUSTMENTS IN COMMON STOCK. If the Company shall combine,
subdivide or reclassify its shares of common stock generally (including those
Shares which have been or may be optioned), or shall declare thereon any
dividend payable in shares of common stock, or shall reclassify or take any
other action of a similar nature affecting its common stock, then the number and
class of shares of stock which may thereafter be optioned (in the aggregate and
to any participant) shall be adjusted accordingly and, in the case of Options
outstanding at the time of any such action, the number and class of Shares which
may thereafter be purchased pursuant to such Options and the Option price per
Share shall be adjusted to such extent as the Board shall determine to be
necessary to preserve unimpaired the rights of the participants, and each and
every such determination shall be conclusive and binding upon each participant.
15. REORGANIZATION. (a) In case of any one or more reclassifications,
changes or exchanges of outstanding shares of common stock or other stock (other
than as provided in Section 14), or consolidations of the Company with, or
mergers of the Company into, other corporations, or other recapitalizations or
reorganizations (other than transactions in which the Company continues to exist
and which do not result in any reclassification, change or exchange of
outstanding shares of the Company), or in case of any one or more sales or
conveyances to another corporation of the property of the Company as an
entirety, or substantially as an entirety (any and all of which are hereinafter
called "Reorganization"), the holder of each Option then outstanding shall have
the right, upon any subsequent exercise thereof, to acquire the same kind and
amount of securities and property which such holder would then hold if such
holder had exercised such Option immediately before the first of any such
Reorganizations, and had continued to hold all securities and property which
came to such holder as a result of that and subsequent Reorganizations, less all
securities and property surrendered or cancelled pursuant to any of the same,
the adjustment rights in Section 14 and this Section 15 being continuing and
cumulative, except that, notwithstanding any provisions of Section 8(a) to the
contrary, the Board shall have the right in connection with any such
Reorganization, to terminate the Exercise Period upon not less than 30 days
written notice to the holders of outstanding Options, and in such event all
outstanding Options, other than Options as to which one of the events referred
to in Section 8(a) have occurred, may be exercised only to the extent thereby
permitted, in each case only at a time prior to such Reorganization. A
liquidation shall be deemed a Reorganization for the foregoing purposes.
(b) In the event of a Reorganization in which more than 50% of the shares
of the Company entitled to vote are exchanged, then at the sole discretion of
the Board and to the
5
<PAGE>
extent permitted by applicable law: (i) any surviving corporation shall assume
any Options outstanding under the Plan or shall substitute similar Options for
those outstanding under the Plan, or (ii) such Options shall continue in full
force and effect. In the event any surviving corporation refuses to assume or
continue such Options, or to substitute similar Options for those outstanding
under the Plan, then, with respect to Options held by persons then employed by
the Company, the time during which such Options may be exercised shall be
accelerated and the Options terminated if not exercised prior to such event as
provided in paragraph (b) of this Section 15.
16. SHARES TO BE RESERVED. The Company shall at all times during the
term of this Plan reserve and keep available such number of shares of its common
stock as will be sufficient to satisfy the requirements of the Plan, and shall
pay all fees and expenses necessarily incurred by the Company in connection with
the exercise of Options granted hereunder.
17. OTHER TERMS. Any Option granted hereunder shall contain such other
and additional terms, not inconsistent with the terms of this Plan, which are
deemed necessary or desirable by the Board or by legal counsel to the Company,
and with respect to Incentive Stock Options, such other terms shall include
those which, together with the terms of this Plan, shall qualify such Option
under Section 422 of the Code.
6
<PAGE>
REVOCABLE PROXY
MTR GAMING GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 8, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Edson R. Arneault, with full power of
substitution, as the proxy of the undersigned to vote all the undersigned's
shares of the Common Stock of MTR Gaming Group, Inc. (the "Corporation") at the
Annual Meeting of the Corporation's Stockholders to be held at the Princeton
Club, 15 West 43d Street, New York, New York 10036 on October 8, 1997 at 8:30
a.m. and at any adjournments or postponements thereof, with the same force and
effect as the undersigned might or could do if personally present thereat:
1. ELECTION OF DIRECTORS
FOR all nominees listed below / / WITHHOLD AUTHORITY / /
<TABLE>
<CAPTION>
<S> <C> <C>
Edson R. Arneault Robert L. Ruben Robert A. Blatt
</TABLE>
(THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR.)
This proxy will be voted in the Election of Directors in the manner
described in the Proxy Statement for the Annual Meeting of Stockholders.
(INSTRUCTION: To withhold authority to vote for one or more individual nominees,
write such name or names in the space provided below.)
2. PROPOSAL TO RATIFY THE ADOPTION OF THE COMPANY'S 1996 AMENDED STOCK OPTION
PLAN. (The Board of Directors recommends a Vote FOR.)
<TABLE>
<CAPTION>
/ / FOR / / AGAINST / / ABSTAIN
<S> <C> <C>
</TABLE>
<PAGE>
3. PROPOSAL TO CONFIRM THE SELECTION OF CORBIN & WERTZ, AS INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE CORPORATION FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
(THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR.)
<TABLE>
<CAPTION>
/ / FOR / / AGAINST / / ABSTAIN
<S> <C> <C>
</TABLE>
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, AND 3.
<TABLE>
<CAPTION>
DATED:, 1997.
<S> <C>
---------------------------------------------------
Signature
---------------------------------------------------
Signature if held jointly
Please sign exactly as name appears below. When
shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such. If a corporation, please sign in full
corporate name by President or other authorized
person. If a partnership, please sign in full
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
</TABLE>
