<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 Section240.14a-11(c) or
Section240.14a-12
MTR GAMING GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
REGISTRANT
- --------------------------------------------------------------------------------
(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:
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(4) Date Filed:
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<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 August 21, 1998 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
Chester, West Virginia
July 17, 1998
<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 August 21, 1998 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 five persons to serve as directors of the Corporation until the
next annual meeting of stockholders;
2. To ratify the adoption of the Corporation's 1998 Stock Incentive Plan;
3. To ratify the grant of stock options to the Corporation's independent
directors;
4. To confirm Corbin & Wertz as the Corporation's accountants and
independent auditors; and
5. 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 July 13, 1998, the record date fixed
by the Board of Directors for such purposes. A list of such Stockholders will be
open for examination by any Stockholder for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
Meeting at the offices of the Company's transfer agent Continental Stock
Transfer & Trust Company, 2 Broadway, New York, New York, 10004.
By order of the Board of Directors,
ROSE MARY WILLIAMS, SECRETARY
Chester, West Virginia
July 17, 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 August 21, 1998.
A copy of the Company's report for the year ended December 31, 1997,
containing financial statements for such fiscal year is enclosed herewith. The
approximate mailing date of this Proxy Statement and form of proxy is July 17,
1998.
Only stockholders of record as of the close of business on July 13, 1998
will be entitled to notice of and to vote at the meeting and any postponement or
adjournments thereof. As of that date, 20,021,049 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 1998 Stock Incentive Plan, (iii) the ratification of the grant of
stock options to the Company's independent directors, and (iv) 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, but in no event less than 33 1/3
percent of the outstanding shares of the Company's voting stock. The election of
directors requires a plurality of the votes cast at the meeting. The
ratification of the adoption of the Company's 1998 Stock Incentive Plan, the
ratification of the grant of stock options to the Company's independent
directors, and the confirmation of the auditors require 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
1
<PAGE>
counted as present at the meeting for quorum purposes, but will not be counted
as part of the vote necessary to approve the proposals for the election of
directors or the confirmation 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 seven. However, the Board has nominated five 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 1999:
EDSON R. ARNEAULT , 51, has been a director of the Company since January
1992 and has served as the Company's President and Chief Executive Officer since
April 26, 1995. He also serves as Chairman of the Company's Audit Committee. He
is also an officer and director of the Company's subsidiaries, Mountaineer Park,
Golden Palace, ExCal, Speakeasy Reno and Speakeasy Las Vegas. Mr. Arneault is
also a principal in numerous ventures directly or indirectly engaged in the
development, production and transportation of oil and gas. Since becoming the
2
<PAGE>
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 has 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 was employed as a certified
public account by Arthur Andersen in the tax department of its Cleveland office
from 1972 to 1976. 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. Mr. Arneault also serves as a member of the Hospitality and
Tourism Management Board of Visitors of Robert Morris College in Pittsburgh,
Pennsylvania.
ROBERT L. RUBEN , 36, has been a director of the Company since September
1995 and is a partner in Ruben & Aronson, LLP, a Washington, D.C. law firm.
Previously, Mr. Ruben was a principal in Freer, McGarry, Bodansky & Rubin, P.C.,
a Washington, D.C. law firm, where he practiced from 1991 until 1997. 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. served as
counsel to the Company from November of 1991 to December of 1997. Ruben &
Aronson, LLP currently serves as counsel to the Company, and Mr. Ruben has
represented Mr. Arneault and various of his affiliates since 1987.
ROBERT A. BLATT, 57, has been a director of the Company since September
1995. Mr. Blatt is the Chief Executive Officer and managing member of CGE
Shattuck, L.L.C., and of New England National, L.L.C. and a member of the board
of directors of AFP Imaging Corporation. Mr. Blatt is also a director and
assistant secretary of Mountaineer Park, Chairman of the Company's Finance
Committee and a member of the Company's Compensation 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 and a Registered General
Principal, of the NASD.
JAMES V. STANTON , 65, has been a director of the Company since February,
1998 and serves on the Company's Audit Committee. Mr. Stanton has his own law
and lobbying firm, Stanton &
3
<PAGE>
Associates, in Washington, D.C. From 1971 to 1978, Mr. Stanton represented the
20th Congressional District of Ohio in the United States House of
Representatives. While in Congress Mr. Stanton served on the Select Committee on
Intelligence, the Government Operations Committee, and the Public Works and
Transportation Committee. Mr. Stanton has held a wide variety of public service
positions, including service as the youngest City Council President in the
history of Cleveland, Ohio and membership on the Board of Regents of the
Catholic University of America in Washington, D.C. Mr. Stanton is also former
Executive Vice President of Delaware North, a privately held international
company which, during Mr. Stanton's tenure, had annual sales of over $1 billion
and became the leading parimutuel wagering company in the United States, with
worldwide operations including horse racing, harness racing, dog racing, and
Jai-Lai. Delaware North also owned the Boston Garden and the Boston Bruins
hockey team. From 1985 to 1994 Mr. Stanton was a principal and co-founder of
Western Entertainment Corporation, which pioneered one of the first Native
American Gaming operations in the United States, a 90,000 square foot bingo and
casino gaming operation located on the San Manuel Indian Reservation in
California, which generated annual revenues in excess of $50 million. Mr.
Stanton also serves on the boards of CCA Companies Incorporated, and Saf T Lok,
Inc.
WILLIAM D. FUGAZY, JR. , 47, has been a director of the Company since
February, 1998 and serves on the Company's Audit Committee. He is presently
Chairman of Camelot Ventures, Inc. which is a financial advisory firm based in
New York City. Mr. Fugazy is a former Regional President of Koll Real Estate
Service, a company which provided real estate services throughout the United
States and internationally. Koll was one of the largest real estate services
companies in the world and in August, 1997 merged with CB Commercial Real Estate
Group, Inc. Mr. Fugazy served in this capacity since January 1993. Prior to
joining Koll, Mr. Fugazy was President of Tishman Management and Leasing
Services Corporation, also a national real estate service company which was sold
to Koll in 1992. Mr. Fugazy served in that capacity since September 1989. Prior
to joining Tishman, Mr. Fugazy was Senior Vice President of Muller and Company,
a national investment banking and securities brokerage operation. Mr. Fugazy is
also a partner and officer of the Beacon Hotel and Resort Corporation, a hotel
management company with offices in New York, Los Angeles, California and Miami
Beach, Florida. Mr. Fugazy holds a B.S. Degree from Fordham University in New
York.
The Board held four regular meetings and two special meetings during the
fiscal year ended December 31, 1997. All directors attended at least 75% of the
total number of meetings of the Board except for Thomas Russell, who no longer
serves on the Board. The Board does not have a standing nominating committee.
Mr. Ruben and Mr. Blatt make up the Board's Compensation Committee. On February
18, 1998, the Board formed an Audit Committee of which Messrs. Arneault,
Stanton, and Fugazy are the members. 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, 1997, the Compensation Committee held
three meetings. As a matter of policy, and to assure compliance with Rule
16b-3(d)(1) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")
4
<PAGE>
the decisions of the Compensation Committee are subject to ratification by a
majority of the Board.
EXECUTIVE OFFICERS; 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 of the Company and
7199 Thornapple River Drive President, Chief its subsidiaries; oil and
Ada, MI 49306 Executive Officer, gas exploration.
Chief Financial Officer
and Treasurer
ROBERT L. RUBEN** Director, Assistant Law
3299 K Street, N.W. Secretary
Suite 403
Washington, D.C. 20007
ROBERT A. BLATT** Director, Assistant Commercial Development
1890 Palmer Avenue Secretary
Suite 303
Larchmont, NY 10538
ROSE MARY WILLIAMS Secretary Business Administration
State Route 2
Chester, West Virginia 26034
</TABLE>
- ------------------------
* Also an officer and director of Mountaineer Park, Inc., Speakeasy Gaming of
Las Vegas, Inc., Speakeasy Gaming of Reno, Inc., ExCal Energy Corporation
and Golden Palace Casinos, Inc., the Company's subsidiaries.
** Also a director and assistant secretary of Mountaineer Park.
5
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of July 13, 1998, 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 July 13, 1998 there were 20,021,049 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) 3,275,567 15.10%
MTR Gaming Group, Inc.
State Route 2 South
P.O. Box 356
Chester, WV 26034
Robert L. Ruben(2) 338,228 1.66%
Ruben & Aronson, LLP
3299 K Street, N.W.
Suite 403
Washington, DC 20007
Robert A. Blatt(3) 667,684 3.29%
The CRC Group
Larchmont Plaza
1890 Palmer Avenue,
Suite 303
Larchmont, NY 10538
James V. Stanton(4) 10,000 *
Stanton & Associates
1310 19th Street, N.W.
Washington, D.C. 20036
William D. Fugazy, Jr.(4) 14,000 *
140 East 45th Street, Suite 4000
New York, New York 10017
Amount and Nature
Bennett Management and 1,530,000 7.64%
Development Corp.(5)
2 Clinton Square
Syracuse, NY 13202
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------------------------ ---------------------- -------------
<S> <C> <C>
Madeleine LLC(6) 2,884,302 12.82%
450 Park Avenue
New York, NY 10022
Donald G. Saunders(7) 1,587,665 7.72%
900 East Desert Inn Road
Suite 521
Las Vegas, NV 89109
Total Officers and Directors as a Group 4,305,479 19.29%
(5 persons)(8)
</TABLE>
* Less than 1%.
- ------------------------
1) Includes 1,605,818 shares and options to acquire beneficial ownership of
1,669,749 shares within 60 days held by Mr. Arneault or his affiliates. Does
not include options to purchase 300,000 shares granted to Mr. Arneault in
January 1998 under the Company's 1998 Stock Incentive Plan (the "1998 Plan")
which was approved by the Company's Board of Directors in January 1998. The
1998 Plan and all options granted under that plan are subject to shareholder
approval.
2) Includes 38,228 shares and options to acquire beneficial ownership of
300,000 shares within 60 days held by Mr. Ruben. Does not include options to
purchase 200,000 shares granted to Mr. Ruben in January 1998 under the 1998
Plan. The 1998 Plan and all options granted under that plan are subject to
shareholder approval.
3) Includes 392,684 shares and options to acquire beneficial ownership of
275,000 shares exercisable within 60 days held by Mr. Blatt. Does not
include options to purchase 200,000 shares granted to Mr. Blatt in January
1998 under the 1998 Plan. The 1998 Plan and all options granted under that
plan are subject to shareholder approval.
4) For each year of service on the Company's Board of Directors, Mr. Stanton
and Mr. Fugazy will each receive options to purchase 25,000 shares of common
stock of the Company. Such options will be exercisable for a term of five
years from the date of grant. For the first year of service, the grant date
was February 18, 1998. The options will vest and be deemed earned in
tranches of 6,250 for each quarterly board meeting, audit committee meeting,
or annual or special meeting of shareholders attended in person (for up to
four meetings in any calendar year). Any options that have not vested at the
end of each calendar year will be deemed cancelled. The options are subject
to shareholder approval at the meeting.
5) Includes 780,000 shares for which voting rights have been assigned to the
Board to satisfy licensing requirements of the Lottery Commission.
6) Includes 412,428 shares and options to acquire beneficial ownership of
2,471,874 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
7
<PAGE>
would result in its ownership of 5% or more of the then issued and
outstanding shares of common stock of the Company without the prior approval
of the West Virginia State Lottery Commission.
7) Includes 1,051,816 shares and options to acquire beneficial ownership of
515,849 shares within 60 days.
8) Includes Messrs. Arneault, Blatt, Ruben, Stanton and Fugazy.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the provisions of Section 16(a) of the Exchange Act, 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, except for Messrs. Russell and Arneault (with respect
to one report).
8
<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 $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------------- ----------------------------------------
Awards Payouts
---------------------- ----------------
Other Restricted
Annual Stock Options LTIP All
Salary Bonus Comp. Awards SARs Payouts Other
Name Year ($) ($) ($) ($) ($) ($) Comp.
- ------------------------------ --------- ------- ------ --------- ---------- ------- ------- -------
(1) (2) (3) (4) (5) (6)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EDSON R. ARNEAULT(5) 1997 300,643 67,500 4,517 -- 150,000 -- --
Chairman, President and
Chief Executive
Officer of MTR Gaming Group,
Inc. 1996 230,521 67,500 24,590 2,748 300,000 -- --
1995 68,985 23,000 -- 144,667 378,415 -- --
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
THOMAS K. RUSSELL(5) 1997 170,697 -- -- -- -- -- --
Secretary, Treasurer, Chief
Financial Officer, General 1996 162,729 -- 7,496 619 100,000 -- --
Counsel and Director of MTR
Gaming Group, Inc. 1995 105,734 -- -- 41,554 223,316 -- --
</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 a per diem allowance of $4,157 paid to Mr. Arneault in 1997. Also
includes accrued 1996 vacation compensation of $13,618 and 1996 per diem
allowance of $10,972 paid to Mr. Arneault, and accrued 1996 vacation
compensation of $7,469 paid to Mr. Russell.
(3) 1996 payments to Messrs. Arneault and Russell include interest paid on
accrued 1995 salaries; 1995 payments to Messrs. Arneault and Russell
represent the value of common stock paid to them in lieu of accrued 1995
salaries.
(4) All options granted by the board of directors in 1997 were approved by vote
of the stockholders at the Company's annual meeting of stockholders held
October 8, 1997.
(5) See "Employment Agreements" below.
9
<PAGE>
The following table contains information concerning the grant of stock
options during fiscal 1997 to the Company's executive officers named in the
Summary Compensation Table.
OPTIONS/SAR GRANTS IN 1997
<TABLE>
<CAPTION>
Potential Realized Value
At Assumed
Annual Rates of Stock
Number of Price
Securities % of Total Appreciation for Option
Underlying Options Term(2)
Options Granted In Exercise Expiration ------------------------
Name Granted (#)(1) Fiscal Year Price Date 5% ($) 10% ($)
- ------------------------------------ ----------------- ----------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Edson R. Arneault 150,000 20% $ 1.3438 Sep. 2002 55,688 123,056
Thomas K. Russell -- -- -- -- --
</TABLE>
- ------------------------
(1) In September 1997, the Board of Directors granted options to certain
executive officers, key personnel and employees to purchase, in the
aggregate, 750,000 shares of the Company's common stock for a price of
$1.3438 per share, the market price of the stock on the date of grant. Such
stock options were approved by the shareholders in October 1997.
(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 $1.3438 per share, at annual compounded rates of
5% and 10%, respectively.
The following table sets forth information regarding the number and value
of options held by each of the Company's executive officers named in the Summary
Compensation Table during fiscal 1997. None of the named executive officers
exercised any stock options during fiscal 1997.
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS AT FISCAL YEAR
OPTIONS AT FISCAL YEAR END END ($)(1)
--------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Edson R. Arneault 969,749 -- $1,474,552.43 --
Thomas K. Russell 401,816 -- $ 693,526.38 --
</TABLE>
- ------------------------
(1) Based on the market price of the Company's Common Stock of $2.75 on March
20, 1997, as reported by Nasdaq.
10
<PAGE>
EMPLOYMENT AGREEMENTS
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 which he assumed on April 26, 1995. 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 at the discretion of the Compensation Committee of the Board of
Directors. As of March 1, 1997, Mr. Arneault's base salary is $315,000 an
increase of 31% and he was awarded performance bonuses of $67,500 in December
1996 and July 1997. In January of 1998, Mr. Arneault was awarded a bonus of
$50,000. The Compensation Committee obtained the consent of the Company's lender
for the increase and bonuses to the extent required.
Mr. Arneault's agreement provides that if his employment is terminated by
reason of death or physical or mental incapacity, the Company will continue to
pay him or his estate the compensation otherwise payable to him for a period of
two years. If his 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 compensation that otherwise would have been due to him for the
remaining period of employment. If Mr. Arneault's period of employment is
terminated for cause, the Company will have no further obligation to pay him,
other than compensation unpaid at the date of termination.
In the event that the termination of Mr. Arneault's period of employment
occurs after there has been a change of control (as defined in the agreement) of
the Company and the termination is (i) not for cause, (ii) by reason of the
death or physical or mental disability of Mr. Arneault or (iii) Mr. Arneault
terminates his employment for good reason (as defined in the agreement), then
Mr. Arneault 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.
The term "change of control" means (i) any change of control of the Company that
would be required to be reported on Schedule 14A under the Exchange Act, (ii)
any person becoming the direct or indirect beneficial owner of 20% or more of
the Company's outstanding voting securities, other than a person who was an
officer or director of the Company on the date of the agreement or (iii) the
circumstance in which the present directors do not constitute a majority of the
Board. The term "good reason" means (i) the assignment to Mr. Arneault of any
duties that in his judgment are inconsistent with, or constitute a diminution
of, Mr. Arneault's position, authority, duties or responsibilities, (ii) Mr.
Arneault's involuntary relocation or (iii) the Company's failure to comply with
the compensation provisions of the agreement.
Mr. Arneault's agreement provides that, during the term of the agreement,
he 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 locations at which the Company does business or at which Mr. Arneault
knows that the Company contemplates doing business.
11
<PAGE>
On February 16, 1998, the Company entered into an Amendment of Employment
Agreement with Thomas K. Russell (the "Amendment Agreement") which governs, as
of such date, the terms of Mr. Russell's employment with the Company. The
Amendment Agreement replaced a May 10, 1994 agreement pursuant to which Mr.
Russell served as an officer and director of the Company. As of February 16,
1998 neither the Company nor Mr. Russell have any further rights or obligations
under the May 10, 1994 agreement. Pursuant to the terms of the Amendment
Agreement (i) Mr. Russell resigned from all directorships and offices that he
held with the Company and its affiliates (the "Companies") prior to February 16,
1998 and from membership on any committees of the Companies; (ii) the Company
agreed to pay Mr. Russell the sum of $99,676.94 offset by any advances or
payroll received by him from the Company after December 31, 1997 (such offsets
totaling $48,000); (iii) the Company agreed to employ Mr. Russell as an
Assistant to the President for a term of 20 months commencing on January 1, 1998
and terminating on September 15, 1999 (during which time Mr. Russell will not be
expected to devote more than 15 hours per month to the business of the Company
in consideration of a salary of $1,000 per month); and (iv) the Company and Mr.
Russell agreed on certain other provisions including a release and
indemnification, medical insurance, non- disclosure and confidentiality. In
addition, the Company and Mr. Russell agreed that all of their respective
obligations under the Amendment Agreement are expressly conditioned on the
compliance by the other party with its obligations under such agreement.
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 January 1, 1993, the date on which
the Company's Common Stock was first quoted on NASDAQ. The following graph
assumes $100 invested in each of the above groups and the reinvestment of
dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MTR GAMING INDUSTRY NASDAQ
<S> <C> <C> <C>
GROUP, INC. INDEX MARKET INDEX
1992 $100.00 $100.00 $100.00
1993 $60.00 $162.12 $119.95
1994 $17.27 $128.62 $125.94
1995 $10.91 $185.49 $163.35
1996 $14.55 $194.30 $202.99
1997 $29.09 $202.79 $248.30
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
COMPANY 1992 1993 1994 1995 1996 1997
- ------------------------------------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
MTR Gaming Group, Inc......................... 100.00 60.00 17.27 10.91 14.55 29.09
Industry Index................................ 100.00 162.12 128.62 185.49 194.30 202.79
NASDAQ Market Index........................... 100.00 119.95 125.94 163.35 202.99 248.30
</TABLE>
(1) The peer group consists of the following companies: American Bingo & Gaming;
American Wagering; Argosy Gaming Co.; Boyd Gaming Co.; Casino America, Inc.;
Crown Group, Inc.; Dover Downs Entertainment; Gametech International, Inc.;
Grand Casinos, Inc.; Imax Co.; Inland Entertainment Corp.; Interactive
Entertainment; Lady Luck Gaming Corp.; Malibu Entertainment; MGM Grand, Inc.
Mirage Resorts, Inc.; Multimedia Games Inc.; N-Vision, Inc.; Netlive
Communications; President Casinos, Inc.; Quintel Entertainment; Renaissance
Entertainment; Sands Regent; Santa Fe Gaming Corp.; Skyline Multimedia
Entertainment; Ticketmaster Group; Vail Resorts; and Visual Edge Systems,
Inc.
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. Mr. Blatt is
also entitled to a fee of $3,000 per month for serving as Chairman of the
Finance Committee. During 1997, Mr. Blatt also earned $32,000 in consulting
fees. 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. Blatt and Ruben were each granted
non-qualified options to purchase 75,000 shares of the Company's common stock at
the fair market value on the date of grant of $1.06 per share. On September 19,
1997, Messrs. Blatt and Ruben were each granted non-qualified options to
purchase 150,000 shares of the Company's common stock at the fair market value
on the date of grant of $1.34375 per share. All of the foregoing options were
granted to Messrs. Ruben and Blatt as compensation for their services as
directors and are exercisable at any time and from time to time in whole or in
part for a period of five years from the date of grant.
On February 18, 1998, the Company entered into agreements with Mr. Stanton
and Mr. Fugazy to provide certain compensation for their services on the
Company's Board of Directors. Specifically, each agreement provided for: (i) the
grant of options to purchase 25,000 shares of common stock of the Company for
each year of service subject to Shareholder ratification at the next annual
meeting of Shareholders; (ii) the registration by the Company, at its sole cost,
of the shares underlying such options by including such shares in any
registration statement the Company determines to file with the Securities and
Exchange Commission with respect to employee compensation; (iii) the adjustment
of the terms of such options in certain
13
<PAGE>
events as set forth in the agreement; and (iv) a fee of $2,500 for each regular
meeting of the Board, audit committee or shareholders attended and reimbursement
of expenses for travel, food and lodging incurred in attending such meetings.
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 Exchange
Act, 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 are
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 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 and resort businesses, 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. The Committee intends to employ a combination of cash
incentives, stock and option awards.
During 1997, Mr. Russell's compensation was determined by a May 10, 1994
Employment Agreement. His compensation after annual cost of living increases
provided by the Employment Agreement was $171,000.
Chief Executive Officer Compensation; Employment Agreement.
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 over his compensation under a May 10, 1994 Employment Agreement.
In July of 1997, Mr. Arneault received a cash bonus of $67,500 which was awarded
in 1996. In addition, in September of 1997,
14
<PAGE>
the Committee recommended, and the Board approved, a grant to Mr. Arneault of
non-qualified options to purchase 150,000 shares of the Company's common stock
at the fair market value on the date of grant of $1.34375 per share. In deciding
upon Mr. Arneault's bonus and the award of options, the Committee took into
account (i) Mr. Arneault's success in substantially increasing the Company's
revenues; (ii) his continued good work with West Virginia regulators; and (iii)
his contribution to the Company's overall financial results, including the
quadrupling of Company's net profits. The Committee believed that the total
compensation was warranted by Mr. Arneault's overall performance and necessary
to assure that Mr. Arneault's compensation was competitive with CEOs of similar
companies.
Respectfully submitted,
Robert A. Blatt
Robert L. Ruben
CERTAIN TRANSACTIONS
On December 16, 1994, ExCal Energy Corporation, a subsidiary of the
Company, 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. With its June,
1998 payment, the buyer brought the note current through July, 1997, but is
delinquent for the period thereafter. The Company believes the matter will be
resolved amicably and satisfactorily.
Mr. Robert Ruben, a member of the Company's board, is a partner in the law
firm Ruben & Aronson, LLP, which has performed legal services for the Company.
The Company and Ruben & Aronson anticipate that the law firm will perform legal
services for the Company in the future. Mr. Ruben was a principal in the law
firm of Freer, McGarry, Bodansky & Rubin, P.C., which performed legal services
for the Company from 1991 until 1997. During the fiscal year ended December 31,
1997, the Company paid Freer, McGarry, Bodansky & Rubin the sum of $360,457 for
legal services.
15
<PAGE>
RATIFICATION OF ADOPTION OF 1998
STOCK INCENTIVE PLAN
The Company's Board of Directors has adopted, subject to the approval of
the Company's stockholders, the Company's 1998 Stock Incentive Plan (the
"Plan"). The Board has reserved 800,000 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.
SUMMARY OF THE PLAN
Under the terms of the Plan, the Board or a Committee designated by the
Board may issue options or shares of stock to those persons whom the Board deems
to be "key employees" of the Company or any of its subsidiaries and who may
include officers and directors of the Company and to consultants and directors
who are not employees of the Company. However, no director may vote upon the
grant to himself. The awards to be granted under the Plan may be incentive stock
options eligible for favored treatment under Section 422 of the Internal Revenue
Code of 1986 (the "Code"), non-qualified options that are not eligible for such
treatment or stock of the Company which may be subject to contingencies or
restrictions. Approximately twenty employees, officers and directors of the
Company are currently eligible to participate in the Plan.
The exercise price for any incentive stock option ("ISO") 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 shall be in the
sole discretion of the Committee. The aggregate fair market value of the shares
that may be subject to any ISO granted to any participant may not exceed
$100,000. There is no comparable limitation with respect to non-qualified stock
options.
The term of all options granted under the Plan will be determined by the
Committee in its sole discretion; PROVIDED, HOWEVER, that the term of each ISO
shall not exceed 10 years from the date of grant thereof; and FURTHER, PROVIDED,
that if, at the time an ISO is granted, the optionee owns (or is deemed to own
under Section 424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, of any of its
Subsidiaries or of a Parent, the term of the ISO shall not exceed five years
from the date of grant. The right of exercise will be cumulative, so that shares
that are not purchased in one year may be purchased in a subsequent year. The
options may not be assigned. Upon exercise of any option, in whole or in part,
payment in full is required (unless the applicable award contract permits
installment payments) 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 (in which case reload options will be issued) or by any other form
of legal consideration that is acceptable to the Board.
In addition to ISOs and non-qualified options, the Plan permits the
Committee, consistent with the purposes of the Plan, to grant shares of Common
Stock to such key employees (including officers and directors who are key
employees) of, or consultants to, the Company or any of its Subsidiaries, as the
Committee may determine, in its sole discretion. The grant may
16
<PAGE>
require the holder to pay such price per share therefor, if any, as the
Committee may determine. Such shares may be subject to such contingencies and
restrictions as the Committee may determine.
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 a Plan participant's relationship with the
Company is terminated by reason other than death or disability and other than
for cause or without the Company's consent (in which case the option shall
terminate immediately), he or she may, for a period of three months, exercise
the option to the extent that it was exercisable on the date of termination, but
in no event after the date the award would otherwise have expired.
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 Exchange Act.
FEDERAL INCOME TAX CONSEQUENCES
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
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.
A grant of shares of common stock that is subject to no vesting
restrictions will result in taxable income for federal income tax purposes to
the recipient at the time of grant in an amount
17
<PAGE>
equal to the fair market value of the shares awarded. The Company would be
entitled to a corresponding deduction at that time for the amount included in
the recipient's income.
Generally, a grant of shares of common stock under the Plan subject to
vesting and transfer restrictions will not result in taxable income to the
recipient for federal income tax purposes or a tax deduction to the Company in
the year of the grant. The value of the shares will generally be taxable to the
recipient as compensation income in the years in which the restrictions on the
shares lapse. Such value will be the fair market value of the shares on the
dates the restrictions terminate. Any recipient, however, may elect pursuant to
Section 83(b) of the Code to treat the fair market value of the shares on the
date of such grant as compensation income in the year of the grant of restricted
shares, provided the recipient makes the election within 30 days after the date
of the grant. In any case, the Company will receive a deduction for federal
income tax purposes corresponding in amount to the amount of compensation
included in the recipient's income in the year in which that amount is so
included.
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.
AWARDS GRANTED UNDER THE PLAN
Subject to stockholder approval of the Plan, the Board granted options
under the Plan in January of 1998 to the Company's Chief Executive Officer, two
current directors who are not executive officers, and a group of eight employees
who are not executive officers. If the Plan is not approved by the Company's
stockholders on or before January 27, 1999, the Plan and any grants thereunder
shall terminate. The following table shows the options granted under the new
Plan in January of 1998.
OPTIONS GRANTED UNDER THE 1998 STOCK INCENTIVE PLAN(1)
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING
OPTIONS(2)
-------------------
<S> <C>
Edson R. Arneault............................................................................ 300,000
All current directors who are not Executive Officers as a group (2 persons).................. 400,000(3)
All employees who are not Executive Officers as a group (8 persons).......................... 100,000
</TABLE>
- ------------------------
(1) As of July 13, 1998, the market value of the securities underlying the
options is $2.3125 per share of common stock. The Company will receive no
consideration for the granting of the options.
(2) The options to purchase common stock of the Company are exercisable, subject
to stockholder approval, as of the grant date, January 27, 1998, and for a
period of five years thereafter at a price per share of $2.15625, the fair
market value on the date of grant.
(3) Includes Messrs. Blatt and Ruben.
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.
18
<PAGE>
RATIFICATION OF GRANT OF STOCK OPTIONS
TO THE COMPANY'S INDEPENDENT DIRECTORS
On February 18, 1998, the Company entered into separate agreements with
James V. Stanton and William D. Fugazy, Jr. to provide certain compensation for
their services on the Company's Board of Directors and the Board's Audit
Committee. Specifically, each agreement provided for: (i) the grant of options
to purchase 25,000 shares of common stock of the Company for each year of
service; (ii) the registration by the Company, at its sole cost, of the shares
underlying such options by including such shares in any registration statement
the Company determines to file with the Securities and Exchange Commission with
respect to employee compensation; (iii) the adjustment of the terms of such
options in certain events as set forth in the agreement; and (iv) a fee of
$2,500 for each regular meeting of the Board, audit committee or shareholders
attended and reimbursement of expenses for travel, food and lodging incurred in
attending such meetings. Pursuant to the agreements, the grant of options (but
no other terms of the agreements) was expressly made subject to ratification by
the Company's stockholders at the meeting. Copies of the agreements are attached
as Exhibits B-1 and B-2.
Under the terms of the agreements, for each year of service Messrs.
Stanton and Fugazy will receive options to purchase 25,000 shares of common
stock of the company (the "Options"). The Options will be exercisable for a term
of five (5) years from the date of grant. For the first year of service, the
grant date is February 18, 1998 (the date on which the nominations were
accepted) and the exercise price is $2.50 per share, the fair market value of
the Company's common stock on the date of grant. The Options will vest and be
deemed earned in tranches of 6,250 for each quarterly board meeting, audit
committee meeting, or annual or special meeting of shareholders attended in
person (for up to four meetings in any calendar year). The Options are
non-qualified options within the meaning of the Code. Any Options that have not
vested at the end of each calendar year shall be deemed cancelled.
The favorable vote, either in person or by proxy, of the holders of a
majority of the common shares is necessary for the ratification of the grant of
options made under the agreements. The Board recommends a vote FOR the
ratification of the agreements.
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, 1998,
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.
19
<PAGE>
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.
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 1999 must be received by
the Company's executive offices not later than March 19, 1999. 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.
<TABLE>
<S> <C>
Chester, West Virginia By Order of the Board of Directors,
July 17, 1998 Rose Mary Williams, SECRETARY
</TABLE>
20
<PAGE>
Exhibit A
1998 STOCK INCENTIVE PLAN
OF
MTR GAMING GROUP, INC.
1. PURPOSES OF THE PLAN. This stock incentive plan (the "Plan") is
designed to provide an incentive to key employees (including directors and
officers who are key employees) and to consultants and directors who are not
employees of MTR GAMING GROUP, INC., a Delaware corporation (the "Company"), or
any of its Subsidiaries (as defined in Paragraph 17), and to offer an additional
inducement in obtaining the services of such persons. The Plan provides for the
grant of "incentive stock options" ("ISOs") within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), nonqualified stock
options which do not qualify as ISOs ("NQSOs"), and stock of the Company which
may be subject to contingencies or restrictions (collectively, "Awards"). The
Company makes no representation or warranty, express or implied, as to the
qualification of any option as an "incentive stock option" under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph 10,
the aggregate number of shares of Common Stock, $.0001 par value per share, of
the Company ("Common Stock") for which Awards may be granted under the Plan
shall not exceed 800,000. Such shares of Common Stock may, in the discretion of
the Board of Directors of the Company (the "Board of Directors"), consist either
in whole or in part of authorized but unissued shares of Common Stock or shares
of Common Stock held in the treasury of the Company. Subject to the provisions
of Paragraph 11, any shares of Common Stock subject to an option which for any
reason expires, is canceled or is terminated unexercised or which ceases for any
reason to be exercisable or a restricted stock Award which for any reason is
forfeited, shall again become available for the granting of Awards under the
Plan. The Company shall at all times during the term of the Plan reserve and
keep available such number of shares of Common Stock as will be sufficient to
satisfy the requirements of the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board
of Directors or a committee of the Board of Directors consisting of not less
than two directors, each of whom shall be a "non-employee director" within the
meaning of Rule 16b-3 (as defined in Paragraph 17) (collectively, the
"Committee"). Unless otherwise provided in the By-laws of the Company or by
resolution of the Board of Directors, a majority of the members of the Committee
shall constitute a quorum, and the acts of a majority of the members present at
any meeting at which a quorum is present, and any acts approved in writing by
all members without a meeting, shall be the acts of the Committee. Subject to
the express provisions of the Plan, the Committee shall have the authority, in
its sole discretion, to determine: the key employees, consultants and directors
who shall be granted Awards; the type of Award to be granted; the times when an
Award shall be granted; the number of shares of Common Stock to be subject to
each Award; the term of each option; the date each option shall become
exercisable; whether an option shall be exercisable in whole or in installments
and, if in installments, the number of shares of Common Stock to be subject to
each installment, whether the installments shall be cumulative, the date each
installment shall become exercisable and the term of each installment;
<PAGE>
whether to accelerate the date of exercise of any option or installment thereof;
whether shares of Common Stock may be issued upon the exercise of an option as
partly paid and, if so, the dates when future installments of the exercise price
shall become due and the amounts of such installments; the exercise price of
each option; the price, if any, to be paid for a share Award; the form of
payment of the exercise price of an option; whether to restrict the sale or
other disposition of a stock Award or the shares of Common Stock acquired upon
the exercise of an option and, if so, to determine whether such contingencies
and restrictions have been met and whether and under what conditions to waive
any such contingency or restriction; whether and under what conditions to
subject all or a portion of the grant or exercise of an option , the vesting of
a stock Award or the shares acquired pursuant to the exercise of an option to
the fulfillment of certain contingencies or restrictions as specified in the
contract referred to in Paragraph 9 hereof (the "Contract"), including without
limitation, contingencies or restrictions relating to entering into a covenant
not to compete with the Company, any of its Subsidiaries or a Parent (as defined
in Paragraph 17), to financial objectives for the Company, any of its
Subsidiaries or a Parent, a division of any of the foregoing, a product line or
other category, and/or to the period of continued employment of the Award holder
with the Company, any of its Subsidiaries or a Parent, and to determine whether
such contingencies or restrictions have been met; whether an Award holder is
Disabled (as defined in Paragraph 17); the amount, if any, necessary to satisfy
the obligation of the Company, a Subsidiary or Parent to withhold taxes or other
amounts; the Fair Market Value (as defined in Paragraph 17) of a share of Common
Stock; to construe the respective Contracts and the Plan; with the consent of
the Award holder, to cancel or modify an Award, PROVIDED, that the modified
provision is permitted to be included in an Award granted under the Plan on the
date of the modification, and FURTHER, PROVIDED, that in the case of a
modification (within the meaning of Section 424(h) of the Code) of an ISO, such
Award as modified would be permitted to be granted on the date of such
modification under the terms of the Plan; to prescribe, amend and rescind rules
and regulations relating to the Plan; to approve any provision which under Rule
16b-3 requires the approval of the Board of Directors, a committee of
non-employee directors or the stockholders to be exempt (unless otherwise
specifically provided herein); and to make all other determinations necessary or
advisable for administering the Plan. Any controversy or claim arising out of or
relating to the Plan, any Award granted under the Plan or any Contract shall be
determined unilaterally by the Committee in its sole discretion. The
determinations of the Committee on the matters referred to in this Paragraph 3
shall be conclusive and binding on the parties. No member or former member of
the Committee shall be liable for any action, failure to act or determination
made in good faith with respect to the Plan or any Award or Contract hereunder.
Prior to the creation and designation of the Committee by the Board of
Directors, all powers and authority allocated hereby to the Committee shall be
allocated to the Board of Directors and all references to the Committee shall be
deemed to be references to the Board of Directors.
4. OPTIONS
(a) GRANT. The Committee may from time to time, consistent with the
purposes of the Plan, grant options to such key employees (including officers
and directors who are key employees) of, and consultants to, the Company or any
of its Subsidiaries, and such Outside Directors, as the Committee may determine,
in its sole discretion. Such options granted shall
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cover such number of shares of Common Stock as the Committee may determine, in
its sole discretion, as set forth in the applicable Contract; PROVIDED, HOWEVER,
that the maximum number of shares subject to options that may be granted to any
employee during any calendar year under the Plan (the "162(m) Maximum") shall be
350,000 shares; and FURTHER, PROVIDED, that the aggregate Fair Market Value
(determined at the time the option is granted) of the shares of Common Stock for
which any eligible employee may be granted ISOs under the Plan or any other plan
of the Company, of any of its Subsidiaries or of a Parent, which are exercisable
for the first time by such optionee during any calendar year shall not exceed
$100,000. Such ISO limitation shall be applied by taking ISOs into account in
the order in which they were granted. Any option granted in excess of such ISO
limitation amount shall be treated as a NQSO to the extent of such excess.
(b) EXERCISE PRICE. The exercise price of the shares of Common Stock under
each option shall be determined by the Committee, in its sole discretion, as set
forth in the applicable Contract; PROVIDED, HOWEVER, that the exercise price per
share of an ISO shall not be less than the Fair Market Value of a share of
Common Stock on the date of grant; and FURTHER, PROVIDED, that if, at the time
an ISO is granted, the optionee owns (or is deemed to own under Section 424(d)
of the Code) stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company, of any of its Subsidiaries or of a
Parent, the exercise price per share of such ISO shall not be less than 110% of
the Fair Market Value of a share of Common Stock on the date of grant.
(c) TERM. The term of each option granted pursuant to the Plan shall be
determined by the Committee, in its sole discretion, and set forth in the
applicable Contract; PROVIDED, HOWEVER, that the term of each ISO shall not
exceed 10 years from the date of grant thereof; and FURTHER, PROVIDED, that if,
at the time an ISO is granted, the optionee owns (or is deemed to own under
Section 424(d) of the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company, of any of its Subsidiaries
or of a Parent, the term of the ISO shall not exceed five years from the date of
grant. Options shall be subject to earlier termination as hereinafter provided.
(d) EXERCISE. An option (or any part or installment thereof), to the
extent then exercisable, shall be exercised by giving written notice to the
Company at its then principal office stating which option is being exercised,
specifying the number of shares of Common Stock as to which such option is being
exercised and accompanied by payment in full of the aggregate exercise price
therefor (or the amount due upon exercise if the Contract permits installment
payments) (a) in cash or by certified check or (b) if the applicable Contract
permits, with previously acquired shares of Common Stock having an aggregate
Fair Market Value on the date of exercise equal to the aggregate exercise price
of all options being exercised, or with any combination of cash, certified check
or shares of Common Stock having such value. The Company shall not be required
to issue any shares of Common Stock pursuant to any such option until all
required payments, including any required withholding, have been made.
The Committee may, in its sole discretion, permit payment of all or a
portion of the exercise price of an option by delivery by the optionee of a
properly executed notice, together with a copy of his irrevocable instructions
to a broker acceptable to the Committee to deliver
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promptly to the Company the amount of sale or loan proceeds sufficient to pay
such exercise price. In connection therewith, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
An optionee entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a stockholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate for such shares
or, in the case of uncertificated shares, until an entry is made on the books of
the Company's transfer agent representing such shares; PROVIDED, HOWEVER, that
until such stock certificate is issued or book entry is made, any optionee using
previously acquired shares of Common Stock in payment of an option exercise
price shall continue to have the rights of a stockholder with respect to such
previously acquired shares.
In no case may an option be exercised with respect to a fraction of a
share of Common Stock. In no case may a fraction of a share of Common Stock be
purchased or issued under the Plan.
(e) RELOAD OPTIONS. An optionee who, at a time when he is eligible to be
granted options under the Plan, uses previously acquired shares of Common Stock
to exercise an option granted under the Plan (the "prior option"), shall, upon
such exercise, be automatically granted an option (the "reload option") to
purchase the same number of shares of Common Stock so used (or if there is not a
sufficient number of shares available for grant under the Plan remaining, such
number of shares as are then available). Such reload options shall be of the
same type and have the same terms as the prior option (except to the extent
inconsistent with the terms of the Plan); PROVIDED, HOWEVER, that the exercise
price per share of the reload option shall be equal to the Fair Market Value of
a share of Common Stock on the date of grant of the reload option, and FURTHER,
PROVIDED, that if the prior option was an ISO and at the time the reload option
is granted, the optionee owns (or is deemed to own under Section 424(d) of the
Code) stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company, of any of its Subsidiaries or of a Parent, the
exercise price per share shall be equal to 110% of the Fair Market Value of a
share of Common Stock on the date of grant and the term of such option shall not
exceed five years.
5. RESTRICTED STOCK. The Committee may from time to time, consistent with
the purposes of the Plan, grant shares of Common Stock to such key employees
(including officers and directors who are key employees) of, or consultants to,
the Company or any of its Subsidiaries, as the Committee may determine, in its
sole discretion. The grant may cover such number of shares as the Committee may
determine, in its sole discretion, and require the Award holder to pay such
price per share therefor, if any, as the Committee may determine, in its sole
discretion. Such shares may be subject to such contingencies and restrictions as
the Committee may determine, as set forth in the Contract. Upon the issuance of
the stock certificate for a share Award, or in the case of uncertificated
shares, the entry on the books of the Company's transfer agent representing such
shares, notwithstanding any contingencies or restrictions to which the shares
are subject, the Award holder shall be considered to be the record owner of the
shares, and subject to the contingencies and restrictions set forth in the
Award, shall have all rights of a stockholder of record with respect to such
shares, including the right to vote and to receive distributions. Upon the
occurrence of any such contingency or restriction, the Award holder may
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be required to forfeit all or a portion of such shares back to the Company. The
shares shall vest in the Award holder when all of the restrictions and
contingencies lapse. Accordingly, the Committee may require that such shares be
held by the Company, together with a stock power duly endorsed in blank by the
Award holder, until the shares vest in the Award holder.
6. TERMINATION OF RELATIONSHIP. Except as may otherwise be expressly
provided in the applicable Contract, if an Award holder's relationship with the
Company, its Subsidiaries and Parent as an employee or a consultant has
terminated for any reason (other than as a result of his death or Disability),
the Award holder may exercise the options granted to him as an employee of, or
consultant to, the Company or any of its Subsidiaries, to the extent exercisable
on the date of such termination, at any time within three months after the date
of termination, but not thereafter and in no event after the date the Award
would otherwise have expired; PROVIDED, HOWEVER, that if such relationship is
terminated either (a) for Cause (as defined in Paragraph 17), or (b) without the
consent of the Company, such option shall terminate immediately.
For the purposes of the Plan, an employment relationship shall be deemed
to exist between an individual and the Company, any of its Subsidiaries or a
Parent if, at the time of the determination, the individual was an employee of
such corporation for purposes of Section 422(a) of the Code. As a result, an
individual on military, sick leave or other bona fide leave of absence shall
continue to be considered an employee for purposes of the Plan during such leave
if the period of the leave does not exceed 90 days, or, if longer, so long as
the individual's right to reemployment with the Company, any of its Subsidiaries
or a Parent is guaranteed either by statute or by contract. If the period of
leave exceeds 90 days and the individual's right to reemployment is not
guaranteed by statute or by contract, the employment relationship shall be
deemed to have terminated on the 91st day of such leave.
Except as may otherwise be expressly provided in the applicable Contract,
options granted under the Plan shall not be affected by any change in the status
of the Award holder so long as he continues to be an employee of, or a
consultant to, the Company, or any of its Subsidiaries or a Parent (regardless
of having changed from one to the other or having been transferred from one
corporation to another).
Except as may otherwise be expressly provided in the applicable Contract,
if an Award holder's relationship with the Company as an Outside Director ceases
for any reason (other than as a result of his death or Disability) then options
granted to such holder as an Outside Director may be exercised, to the extent
exercisable on the date of such termination, at any time within three months
after the date of termination, but not thereafter and in no event after the date
the Award would otherwise have expired; PROVIDED, HOWEVER, that if such
relationship is terminated for Cause, such Award shall terminate immediately. An
Award granted to an Outside Director, however, shall not be affected by the
Award holder becoming an employee of, or consultant to, the Company, any of its
Subsidiaries or a Parent.
Except as may otherwise be expressly provided in the Contract, upon the
termination of the relationship of an Award holder as an employee of, or
consultant to, the Company, and its Subsidiaries and Parent, or as an Outside
Director, for any reason (including his death or
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Disability), the share Award shall cease any further vesting and the unvested
portion of such Award as of the date of such termination shall be forfeited to
the Company for no consideration.
Nothing in the Plan or in any Award granted under the Plan shall confer on
any Award holder any right to continue in the employ of, or as a consultant to,
the Company, any of its Subsidiaries or a Parent, or as a director of the
Company, or interfere in any way with any right of the Company, any of its
Subsidiaries or a Parent to terminate the Award holder's relationship at any
time for any reason whatsoever without liability to the Company, any of its
Subsidiaries or a Parent.
7. DEATH OR DISABILITY. Except as may otherwise be expressly provided in
the applicable Contract, if an Award holder dies (a) while he is an employee of,
or consultant to, the Company, any of its Subsidiaries or a Parent, (b) within
three months after the termination of such relationship (unless such termination
was for Cause or without the consent of the Company) or (c) within one year
following the termination of such relationship by reason of his Disability, the
options that were granted to him as an employee of, or consultant to, the
Company or any of its Subsidiaries, may be exercised, to the extent exercisable
on the date of his death, by his Legal Representative (as defined in Paragraph
17) at any time within one year after death, but not thereafter and in no event
after the date the option would otherwise have expired.
Except as may otherwise be expressly provided in the applicable Contract,
if an Award holder's relationship as an employee of, or consultant to, the
Company, any of its Subsidiaries or a Parent has terminated by reason of his
Disability, the options that were granted to him as an employee of, or
consultant to the Company or any of its Subsidiaries may be exercised, to the
extent exercisable upon the effective date of such termination, at any time
within one year after such date, but not thereafter and in no event after the
date the option would otherwise have expired.
Except as may otherwise be expressly provided in the applicable Contract,
if an Award holder's relationship as an Outside Director terminates as a result
of his death or Disability, the options granted to him as an Outside Director
may be exercised, to the extent exercisable on the date of such termination, at
any time within one year after the date of termination, but not thereafter and
in no event after the date the Award would otherwise have expired. In the case
of the death of the Award holder, the Award may be exercised by his Legal
Representative.
8. COMPLIANCE WITH SECURITIES LAWS. It is a condition to the issuance of
any share Award and exercise of any option that either (a) a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of Common Stock to be issued upon such grant or
exercise shall be effective and current at the time of exercise, or (b) there is
an exemption from registration under the Securities Act for the issuance of the
shares of Common Stock upon such exercise. Nothing herein shall be construed as
requiring the Company to register shares subject to any Award under the
Securities Act or to keep any Registration Statement effective or current.
The Committee may require, in its sole discretion, as a condition to the
receipt of an Award or the exercise of any option that the Award holder execute
and deliver to the Company his representations and warranties, in form,
substance and scope satisfactory to the Committee, which the Committee
determines are necessary or convenient to facilitate the perfection of an
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exemption from the registration requirements of the Securities Act, applicable
state securities laws or other legal requirement, including, without limitation,
that (a) the shares of Common Stock to be received under the Award or issued
upon the exercise of the option are being acquired by the Award holder for his
own account, for investment only and not with a view to the resale or
distri-bution thereof, and (b) any subsequent resale or distribution of shares
of Common Stock by such Award holder will be made only pursuant to (i) a
Registration Statement under the Securities Act which is effective and current
with respect to the shares of Common Stock being sold, or (ii) a specific
exemption from the registration requirements of the Securities Act, but in
claiming such exemption, the Award holder shall prior to any offer of sale or
sale of such shares of Common Stock provide the Company with a favorable written
opinion of counsel satisfactory to the Company, in form, substance and scope
satisfactory to the Company, as to the applicability of such exemption to the
proposed sale or distribution.
In addition, if at any time the Committee shall determine, in its sole
discretion, that the listing or qualification of the shares of Common Stock
subject to any Award or option on any securities exchange, Nasdaq or under any
applicable law, or the consent or approval of any governmental agency or
regulatory body, is necessary or desirable as a condition to, or in connection
with, the granting of an Award or the issuing of shares of Common Stock
thereunder, such Award may not be granted and such option may not be exercised
in whole or in part unless such listing, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
9. AWARD CONTRACTS. Each Award shall be evidenced by an appropriate
Contract which shall be duly executed by the Company and the Award holder, and
shall contain such terms, provisions and conditions not inconsistent herewith as
may be determined by the Committee. The terms of each Award and Contract need
not be identical.
10. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any other
provision of the Plan, in the event of a stock dividend, recapitalization,
merger in which the Company is the surviving corporation, spin-off, split-up,
combination or exchange of shares or the like which results in a change in the
number or kind of shares of Common Stock which is outstanding immediately prior
to such event, the aggregate number and kind of shares subject to the Plan, the
aggregate number and kind of shares subject to each outstanding Award, the
exercise price of each option, any contingencies and restrictions based on the
number or kind of shares, and the 162(m) Maximum shall be appropriately adjusted
by the Board of Directors, whose determination shall be conclusive and binding
on all parties. Such adjustment may provide for the elimination of fractional
shares which might otherwise be subject to Awards without payment therefor.
In the event of (a) the liquidation or dissolution of the Company, (b) a
merger in which the Company is not the surviving corporation or a consolidation,
or (c) any transaction (or series of related transactions) in which (i) more
than 50% of the outstanding Common Stock is transferred or exchanged for other
consideration or (ii) shares of Common Stock in excess of the number of shares
of Common Stock outstanding immediately preceding the transaction are issued
(other than to stockholders of the Company with respect to their shares of stock
in the
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Company), any outstanding options, unvested stock shall terminate upon the
earliest of any such event, unless other provision is made therefor in the
transaction.
11. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by the
Board of Directors on as of January 27, 1998. No ISO may be granted under the
Plan after January 27, 2008. The Board of Directors, without further approval of
the Company's stockholders, may at any time suspend or terminate the Plan, in
whole or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that ISOs granted hereunder
meet the requirements for "incentive stock options" under the Code, to comply
with the provisions of Rule 16b-3, Section 162(m) of the Code, or any change in
applicable law, regulations, rulings or interpretations of any governmental
agency or regulatory body; PROVIDED, HOWEVER, that no amendment shall be
effective without the requisite prior or subsequent stockholder approval which
would (a) except as contemplated in Paragraph 10, increase the maximum number of
shares of Common Stock for which Awards may be granted under the Plan or the
162(m) Maximum, (b) change the eligibility requirements to receive Awards
hereunder, or (c) make any change for which applicable law, regulation, ruling
or interpretation by the applicable governmental agency or regulatory authority
requires stockholder approval. No termination, suspension or amendment of the
Plan shall adversely affect the rights of any Award holder under an Award
without his prior consent. The power of the Committee to construe and administer
any Awards granted under the Plan prior to the termination or suspension of the
Plan nevertheless shall continue after such termination or during such
suspension.
12. NON-TRANSFERABILITY. No option granted under the Plan shall be
transferable otherwise than by will or the laws of descent and distribution, and
options may be exercised, during the lifetime of the Award holder, only by him
or his Legal Representatives. Except as may otherwise be expressly provided in
the Contract, a stock Award, to the extent not vested, shall not be transferable
otherwise than by will or the laws of descent and distribution. Except to the
extent provided above, Awards may not be assigned, transferred, pledged,
hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process,
and any such attempted assignment, transfer, pledge, hypothecation or
disposition shall be null and void ab initio and of no force or effect.
13. WITHHOLDING TAXES. The Company, a Subsidiary or Parent may withhold
(a) cash or (b) with the consent of the Committee, shares of Common Stock to be
issued under a stock Award or upon exercise of an option having an aggregate
Fair Market Value on the relevant date, or a combination of cash and shares
having such value, in an amount equal to the amount which the Committee
determines is necessary to satisfy the obligation of the Company, any of its
Subsidiaries or a Parent to withhold federal, state and local taxes or other
amounts incurred by reason of the grant, vesting, exercise or disposition of an
Award, or the disposition of the underlying shares of Common Stock.
Alternatively, the Company may require the holder to pay to the Company such
amount, in cash, promptly upon demand.
14. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend or
legends upon the certificates for shares of Common Stock issued under a stock
Award or upon exercise of an option under the Plan and may issue such "stop
transfer" instructions to its
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transfer agent in respect of such shares as it determines, in its discretion, to
be necessary or appropriate to (a) prevent a violation of, or to perfect an
exemption from, the registration requirements of the Securities Act and any
applicable state securities laws, (b) implement the provisions of the Plan or
any agreement between the Company and the Award holder with respect to such
shares of Common Stock, or (c) permit the Company to determine the occurrence of
a "disqualifying disposition," as described in Section 421(b) of the Code, of
the shares of Common Stock issued or transferred upon the exercise of an ISO
granted under the Plan.
The Company shall pay all issuance taxes with respect to the issuance of
shares of Common Stock under a stock Award or upon the exercise of an option
granted under the Plan, as well as all fees and expenses incurred by the Company
in connection with such issuance.
15. USE OF PROCEEDS. The cash proceeds received upon the exercise of an
option, or grant of a stock Award under the Plan shall be added to the general
funds of the Company and used for such corporate purposes as the Board of
Directors may determine.
16. SUBSTITUTIONS AND ASSUMPTIONS OF AWARDS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
Awards for prior options, or restricted stock of a Constituent Corporation (as
defined in Paragraph 17) or assume the prior options or restricted stock of such
Constituent Corporation.
17. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below:
(a) "Cause" shall mean (i) in the case of an employee or consultant, if
there is a written employment or consulting agreement between the Award holder
and the Company, any of its Subsidiaries or a Parent which defines termination
of such relationship for cause, cause as defined in such agreement, and (ii) in
all other cases, cause as defined by applicable state law.
(b) "Constituent Corporation" shall mean any corporation which engages with
the Company, any of its Subsidiaries or a Parent in a transaction to which
Section 424(a) of the Code applies (or would apply if the option assumed or
substituted were an ISO), or any Subsidiary or Parent of such corporation.
(c) "Disability" shall mean a permanent and total disability within the
meaning of Section 22(e)(3) of the Code.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(e) "Fair Market Value" of a share of Common Stock on any day shall mean (i)
if the principal market for the Common Stock is a national securities exchange,
the average of the highest and lowest sales prices per share of Common Stock on
such day as reported by such exchange or on a composite tape reflecting
transactions on such exchange, (ii) if the principal market for the Common Stock
is not a national securities exchange and the Common Stock is quoted on Nasdaq,
and (A) if actual sales price information is available with respect to the
Common Stock, the average of the highest and lowest sales prices per share of
Common Stock on such day on Nasdaq, or (B) if such information is not available,
the average of the highest bid and lowest asked prices per share of Common Stock
on such day on Nasdaq, or (iii) if the
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principal market for the Common Stock is not a national securities exchange and
the Common Stock is not quoted on Nasdaq, the average of the highest bid and
lowest asked prices per share of Common Stock on such day as reported on the OTC
Bulletin Board Service or by National Quotation Bureau, Incorporated or a
comparable service; PROVIDED, HOWEVER, that if clauses (i), (ii) and (iii) of
this subparagraph are all inapplicable, or if no trades have been made or no
quotes are available for such day, the Fair Market Value of a share of Common
Stock shall be determined by the Board of Directors by any method consistent
with applicable regulations adopted by the Treasury Department relating to stock
options.
(f) "Legal Representative" shall mean the executor, administrator or other
person who at the time is entitled by law to exercise the rights of a deceased
or incapacitated optionee with respect to an option granted under the Plan.
(g) "Nasdaq" shall mean the Nasdaq Stock Market.
(h) "Outside Director" shall mean a person who is a director of the Company,
but on the date of grant is not an employee of, or consultant to, the Company,
any of its Subsidiaries or a Parent.
(i) "Parent" shall have the same definition as "parent corporation" in
Section 424(e) of the Code.
(j) "Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange Act,
as the same may be in effect and interpreted from time to time.
(k) "Subsidiary" shall have the same definition as "subsidiary corporation"
in Section 424(f) of the Code.
18. GOVERNING LAW; CONSTRUCTION. The Plan, the Awards and Contracts
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflict
of law provisions that would defer to the substantive laws of another
jurisdiction.
Neither the Plan nor any Contract shall be construed or interpreted with
any presumption against the Company by reason of the Company causing the Plan or
Contract to be drafted. Whenever from the context it appears appropriate, any
term stated in either the singular or plural shall include the singular and
plural, and any term stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter.
19. PARTIAL INVALIDITY. The invalidity, illegality or unenforceability of
any provision in the Plan, any Award or Contract shall not affect the validity,
legality or enforceability of any other provision, all of which shall be valid,
legal and enforceable to the fullest extent permitted by applicable law.
20. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by a
majority of the votes present in person or by proxy and entitled to vote hereon
at the next duly held meeting of the Company's stockholders at which a quorum is
present. No Award granted hereunder may vest or be exercised prior to such
approval; PROVIDED, HOWEVER, that the date of grant of any Award shall be
determined as if the Plan had not been subject to such approval.
Notwith-standing the foregoing, if the Plan is not approved by a vote of the
stockholders of the Company on or before January 27, 1999, the Plan and any
Awards granted hereunder shall terminate.
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Exhibit B-1
MTR GAMING GROUP, INC.
STATE ROUTE 2 SOUTH
P.O. BOX 356
CHESTER, WEST VIRGINIA 26034
TELEPHONE: (304) 387-2400
FACSIMILE: (304) 387-1598
February 18, 1998
James V. Stanton, Esq.
Stanton & Associates
1310 19th Street, N.W.
Washington, D.C. 20036
Re: Nomination to Board of Directors
Dear Mr. Stanton:
On behalf of MTR Gaming Group, Inc., I am pleased to let you know that the
board of directors has nominated you for membership as an independent member of
the board and the newly formed Audit Committee of the Board.
Your compensation for service on the board will be as follows:
1. STOCK PURCHASE OPTIONS. Upon your acceptance of the nomination (the
"Commencement Date"), for each year of service you will receive options to
purchase 25,000 shares of common stock of the company (the "Options"). The
Options will be exercisable for a term of five (5) years from the date of grant.
For the first year of service, the grant date will be the Commencement Date. The
Options will vest and be deemed earned in tranches of 6,250 for each quarterly
board meeting, audit committee meeting, or annual or special meeting of
shareholders that you attend in person (for up to four meetings in any calendar
year). Any Options that have not vested at the end of each calendar year shall
be deemed cancelled.
2. SHAREHOLDER RATIFICATION. Pursuant to the new rules for the Nasdaq
Small Cap Market, the Options are subject to shareholder approval. For purposes
of those rules as well as Rule 16b-3(d)(2) of the Securities Exchange Act of
1934, as amended, the company will submit to its shareholders for ratification
at the next annual meeting of shareholders the grant of the Options.
3. REGISTRATION. At its sole cost, the company will register the
shares of common stock underlying the Options for public sale by including such
shares in any registration statement the company determines to file with the
Securities and Exchange Commission with respect to employee compensation.
<PAGE>
James V. Stanton
February 18, 1998
Page 2
4. RECAPITALIZATION. If the company declares a forward or reverse
split of its common stock, determines to exchange the common stock of the
company for the equity securities of another issuer, or otherwise undergoes a
recapitalization, then the terms of the Options shall be adjusted or exchanged
equitably.
5. MEETING FEES. For each regular meeting of the board of directors,
audit committee, or shareholders you attend, you will receive a fee of $2,500
and reimbursement of expenses for travel, food, and lodging you incur in
attending such meetings.
6. If these terms are acceptable to you, please sign where indicated
below and return this letter to me, at which time the Commencement Date, as
defined above, will have occurred. We look forward to your joining our company.
Very truly yours,
/s/ EDSON R. ARNEAULT
--------------------------------------
Edson R. Arneault
PRESIDENT
ACCEPTED:
/s/ JAMES V. STANTON
- ---------------------------------
James V. Stanton, Esquire
2
<PAGE>
Exhibit B-2
MTR GAMING GROUP, INC.
STATE ROUTE 2 SOUTH
P.O. BOX 356
CHESTER, WEST VIRGINIA 26034
TELEPHONE: (304) 387-2400
FACSIMILE: (304) 387-1598
February 18, 1998
Re: Nomination to Board of Directors
Dear Mr. Fugazy:
On behalf of MTR Gaming Group, Inc., I am pleased to let you know that the
board of directors has nominated you for membership as an independent member of
the board and the newly formed Audit Committee of the Board.
Your compensation for service on the board will be as follows:
1. STOCK PURCHASE OPTIONS. Upon your acceptance of the nomination (the
"Commencement Date"), for each year of service you will receive options to
purchase 25,000 shares of common stock of the company (the "Options"). The
Options will be exercisable for a term of five (5) years from the date of grant.
For the first year of service, the grant date will be the Commencement Date. The
Options will vest and be deemed earned in tranches of 6,250 for each quarterly
board meeting, audit committee meeting, or annual or special meeting of
shareholders that you attend in person (for up to four meetings in any calendar
year). Any Options that have not vested at the end of each calendar year shall
be deemed cancelled.
2. SHAREHOLDER RATIFICATION. Pursuant to the new rules for the Nasdaq
Small Cap Market, the Options are subject to shareholder approval. For purposes
of those rules as well as Rule 16b-3(d)(2) of the Securities Exchange Act of
1934, as amended, the company will submit to its shareholders for ratification
at the next annual meeting of shareholders the grant of the Options.
3. REGISTRATION. At its sole cost, the company will register the
shares of common stock underlying the Options for public sale by including such
shares in any registration statement the company determines to file with the
Securities and Exchange Commission with respect to employee compensation.
4. RECAPITALIZATION. If the company declares a forward or reverse
split of its common stock, determines to exchange the common stock of the
company for the equity securities of another issuer, or otherwise undergoes a
recapitalization, then the terms of the Options shall be adjusted or exchanged
equitably.
<PAGE>
William D. Fugazy
February 18, 1998
Page 2
5. MEETING FEES. For each regular meeting of the board of directors,
audit committee, or shareholders you attend, you will receive a fee of $2,500
and reimbursement of expenses for travel, food, and lodging you incur in
attending such meetings.
If these terms are acceptable to you, please sign where indicated below
and return this letter to me, at which time the Commencement Date, as defined
above, will have occurred. We look forward to your joining our company.
Very truly yours,
/s/ EDSON R. ARNEAULT
--------------------------------------
Edson R. Arneault
PRESIDENT
ACCEPTED:
/s/ WILLIAM D. FUGAZY, JR.
- ---------------------------------
William D. Fugazy, Jr.
2
<PAGE>
REVOCABLE PROXY
MTR GAMING GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 21, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Edson R. Arneault and Robert L. Ruben and
each of them, with full power of substitution, as the proxies 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 August 21, 1998 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:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, AND 4.
1. ELECTION OF DIRECTORS
FOR all nominees listed below / / WITHHOLD AUTHORITY / /
<TABLE>
<S> <C> <C> <C> <C>
Edson R. Arneault Robert L. Ruben Robert A. Blatt James V. Stanton William D. Fugazy, Jr.
</TABLE>
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 CORPORATION'S 1998 STOCK INCENTIVE
PLAN.
<TABLE>
<S> <C> <C>
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>
3. PROPOSAL TO RATIFY GRANT OF STOCK OPTIONS TO THE CORPORATION'S INDEPENDENT
DIRECTORS.
<TABLE>
<S> <C> <C>
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>
<PAGE>
4. PROPOSAL TO CONFIRM THE SELECTION OF CORBIN & WERTZ, AS INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE CORPORATION FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
<TABLE>
<S> <C> <C>
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>
5. 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, 3 AND 4.
<TABLE>
<CAPTION>
DATED: , 1998.
<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>
