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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MANDALAY RESORT GROUP
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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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Notes:
[LOGO OF MANDALAY RESORT GROUP]
Proxy Statement
And
Notice Of 2001 Annual
Meeting of Stockholders
Mandalay Resort Group
3950 Las Vegas Boulevard South
Las Vegas, Nevada 89119
----------------
Notice of 2001 Annual Meeting of Stockholders
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- --------------------------------------------------------------------------------
TIME: 10:00 A.M., Las Vegas time, on Friday, June 15, 2001
PLACE: The Islander Ballroom at Mandalay Bay Resort & Casino,
3950 Las Vegas Boulevard South,
Las Vegas, Nevada 89119
ITEMS OF BUSINESS: . To elect three directors.
. To ratify the appointment of Arthur Andersen LLP as
independent auditors to examine and report on our
financial statements for the fiscal year ending
January 31, 2002.
. To transact any other business properly brought
before the meeting.
WHO MAY VOTE: You can vote at the meeting or any adjournment(s) of
the meeting if you were a stockholder of record at
the close of business on April 20, 2001.
ANNUAL REPORT: A copy of the Annual Report to Stockholders is
enclosed.
By Order of the Board of Directors
/s/ Michael S. Ensign
Michael S. Ensign
Chairman of the Board
Las Vegas, Nevada
April 30, 2001
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- --------------------------------------------------------------------------------
Mandalay Resort Group
3950 Las Vegas Boulevard South
Las Vegas, Nevada 89119
-------------------------
Proxy Statement
-------------------------
This proxy statement is being furnished to our stockholders in connection
with the solicitation of proxies on behalf of our Board of Directors for use at
our Annual Meeting of Stockholders to be held in the Islander Ballroom at
Mandalay Bay Resort & Casino, 3950 Las Vegas Boulevard South, Las Vegas,
Nevada, at 10:00 A.M., Las Vegas time, on Friday, June 15, 2001, and at any and
all adjournments of the meeting, for the purpose of considering and acting upon
the matters referred to in the accompanying Notice of Annual Meeting of
Stockholders and more fully discussed below. The terms "we," "our," "us," and
"Mandalay," as used in this proxy statement, refer to Mandalay Resort Group.
This proxy statement and the accompanying form of proxy are first being
mailed to stockholders on or about May 7, 2001.
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Information Concerning the Annual Meeting
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What matters will be voted on at the meeting?
At the meeting stockholders will vote on two matters. They are:
. The election of nominees to serve on our Board of
Directors; and
. Ratification of the appointment of Arthur Andersen LLP
as our independent auditors for our fiscal year ending
January 31, 2002.
How does the Board recommend I vote on the proposals?
The Board recommends that you vote:
. FOR each of the three nominees named in this proxy
statement; and
. FOR ratification of the appointment of Arthur Andersen
LLP as our independent auditors for our fiscal year
ending January 31, 2002.
Who is entitled to vote?
Our stockholders of record as of the close of business on April 20,
2001, the record date for the meeting, are entitled to vote at the
meeting or any adjournment(s) of the meeting.
How do I cast my vote?
There are two different ways you may cast your vote. You can vote by:
. marking, signing and dating a proxy card and returning
it in the envelope provided; or
. attending the meeting (if you are the registered owner
of your shares, or, if your shares are held through a
broker, bank or other nominee, you bring to the
meeting a copy of a brokerage statement reflecting
your stock ownership as of April 20, 2001).
If I have given a proxy, how do I revoke that proxy?
Your presence at the meeting will not revoke any proxy you may have
given. However, you may revoke your proxy (to the extent it has not
already been voted at the meeting) if you:
. give written notice of the revocation to Mandalay's
Corporate Secretary, Yvette E. Landau, at 3950 Las
Vegas Boulevard South, Las Vegas, Nevada 89119, which
will not be effective until it is received;
. submit a properly signed proxy with a later date; or
. vote in person at the meeting (if your shares are
registered directly on Mandalay's books and not held
through a broker, bank, or other nominee).
How will my proxy be voted?
If your proxy in the accompanying form is properly executed, returned to
and received by us prior to the meeting and is not revoked, it will be
voted in accordance with your instructions. If you return your signed
proxy but do not mark the boxes to show how you wish to vote on one or
both of the proposals, the shares for which you have given your proxy
will, in the absence of your instructions to the contrary, be voted
"FOR" each of the nominees named in the proxy and "FOR" ratification of
the appointment of Arthur Andersen LLP as our independent auditors for
our fiscal year ending January 31, 2002.
Will my shares be voted if I do not provide my proxy?
Your shares may be voted under certain circumstances if they are held in
the name of a brokerage firm or nominee. Brokerage firms and nominees
that are members of the New York Stock Exchange have the authority under
the exchange's rules to vote their customers' unvoted shares on certain
"routine" matters if the customers have not furnished voting
instructions within a specified period prior to the meeting. Under these
rules, the election of directors and ratification of the appointment of
Arthur Andersen LLP as our independent auditors are considered to be
"routine" matters. If you hold your shares directly in your own name,
they will not be voted if you do not provide a proxy or attend the
meeting and vote the shares yourself.
How many votes are needed to elect directors?
The three nominees receiving the highest number of "FOR" votes will be
elected as directors. This is referred to as a plurality.
What if a nominee is unwilling or unable to serve?
That is not expected to occur. If it does, proxies will be voted for a
substitute nominee designated by our Board of Directors.
-2-
How many votes are needed to ratify the selection of Arthur Andersen LLP to
examine and report on our financial statements for the fiscal year ending
January 31, 2002?
The approval of this proposal requires that the number of shares voted
"FOR" the proposal exceed the number of shares voted "AGAINST" the
proposal.
Are dissenters' rights applicable to either of the matters to be voted on at
the meeting?
No. Dissenters' rights do not apply to either matter.
Who will count the vote?
Representatives of First Chicago Trust Company of New York (a division
of EquiServe), our transfer agent, will tabulate the votes cast at the
meeting.
What does it mean if I get more than one proxy card?
If you have your shares registered in multiple accounts with one or more
brokers and/or our transfer agent, you will receive more than one card.
Please complete and return each of the proxy cards you receive to ensure
that all of your shares are voted.
How many shares can be voted?
As of April 20, 2001, the record date for the meeting, 75,526,236 shares
of Mandalay common stock were issued and outstanding. Every holder of
Mandalay common stock is entitled to one vote for each share held of
record on the record date.
What is a "quorum"?
A "quorum," for purposes of the meeting, means a majority of the shares
of Mandalay common stock outstanding on the record date. This quorum of
our shares must be present at the meeting in order for the meeting to be
held. For purposes of determining the presence of a quorum, shares will
be counted if they are present in person or by proxy. Shares present by
proxy will be counted as present for purposes of determining the
presence of a quorum even if the proxy does not have authority to vote
on all matters.
Abstentions: Abstentions are not counted in the tally of votes "FOR" or
"AGAINST" a proposal. A "WITHHELD" vote is the same as an abstention.
Abstentions and withheld votes are counted as shares present at the
meeting for purposes of determining the presence of a quorum.
Broker Non-Votes: Broker non-votes occur when shares held by a broker
are not voted with respect to a proposal because (1) the broker has not
received voting instructions from the beneficial owner of the shares,
and (2) the broker lacks the authority to vote the shares at the
broker's discretion. Broker non-votes will not affect the outcome of
either of the matters being voted upon at the meeting, but will be
counted as shares present and entitled to be voted for purposes of
determining the presence of a quorum.
Who can attend the Annual Meeting?
All stockholders of Mandalay who owned shares on April 20, 2001 can
attend. Just check the box on your proxy and bring the Admission Ticket
included in your proxy statement with you to the meeting.
-3-
Please note that the Admission Ticket will be required in order to
obtain admission to the meeting. Accordingly, the Admission Ticket
should not be returned with your proxy. If your shares are held in a
brokerage account, you will also need to bring a copy of your brokerage
account statement (which you can obtain from your broker) reflecting
your stock ownership as of April 20, 2001.
How will voting on any other business be conducted?
We do not know of any business to be considered at the meeting other
than the proposals described in this proxy statement. However, if any
other business is presented at the meeting, a proxy in the accompanying
form will give authority to Michael S. Ensign and Yvette E. Landau to
vote on such matters at their discretion and they intend to do so in
accordance with their best judgment on any such matter.
Who will pay the cost of this proxy solicitation and how will the solicitation
be conducted?
Mandalay will pay the expenses of soliciting proxies in the form
included with this proxy statement, including the cost of preparing,
assembling and mailing material in connection with the solicitation. In
addition to the use of the mail, Mandalay's directors, executive
officers and employees may solicit proxies personally or by telephone or
telegraph. Mandalay has also hired Altman Group, Inc. to assist in the
solicitation of votes at an estimated cost of $5,000, plus its out-of-
pocket expenses. We will also reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy and solicitation materials to
stockholders.
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Item 1 - Election of Directors and Nominee Biographies
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What is the makeup of the Board of Directors?
Our Board of Directors has not less than six and not more than 11
members as determined from time to time by the Board of Directors. The
directors, which currently number eight, are divided into three classes,
with each class serving for a three-year period. The stockholders elect
the members of one of the three classes each year.
Are there any members of the class of directors to be elected at the meeting
who are not standing for re-election?
No. Each incumbent director whose term expires this year has been
nominated for election to serve for an additional three-year term and
has agreed to serve if elected.
Who are the Board's nominees this year?
Arthur H. Bilger, William E. Bannen and Rose McKinney-James are our
nominees for election to the Board of Directors. Each nominee, if
elected, would hold office until our 2004 annual meeting of stockholders
and until his or her successor is elected and qualified.
-4-
What is the background of this year's nominees?
Our nominees for election to the Board are:
ARTHUR H. BILGER
Director since 1997
Age 48
. Private investor
. Managing Member of Shelter Capital Partners LLC, a venture capital firm of
which he is a founder, since December 2000
. President and Chief Operating Officer of New World Communications Group
Incorporated, a television broadcasting and production company, for a period
of two years until January 1997
. Principal of Apollo Advisors, L.P. and Lion Advisors, L.P., entities engaged
in the investment of capital in acquisitions and corporate restructurings,
from 1990 until he assumed his position with New World Communications Group
Incorporated
. Director of Mandalay from 1983 until 1989
. Member of the Board of Directors:
. Akamai Technologies, Inc.
WILLIAM E. BANNEN, M.D.
Director since 1998
Age 51
. Vice President of Nevada Health Care Management, a division of Anthem Blue
Cross Blue Shield ("Blue Cross Nevada"), since April 2001
. Vice President of Blue Cross Nevada from January 1998 until April 2001
. Medical Director with Blue Cross Nevada since 1991
. Director - Network Administration and Health Management with Blue Cross
Nevada since 1993
. Current positions with Blue Cross Nevada include responsibility for medical
management and network contracting in the State of Nevada
ROSE McKINNEY-JAMES
Director since 1999
Age 49
. President--Government Affairs of Faiss Foley Merica, a public relations and
government affairs firm, since May 2000
. President and Chief Executive Officer of the Corporation for Solar Technology
and Renewable Resources, a not-for-profit corporation engaged in the
development of solar technology, from January 1996 until May 2000
. Director of the Nevada Department of Business and Industry, which has
administrative oversight of 29 state regulatory agencies, boards and
commissions, from October 1993 until December 1995
. Member of the Nevada Public Service Commission from January 1989 until
October 1993
. Member of the board of directors of a number of community and civic
organizations including United Way
-5-
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Biographies of Directors Not Standing For Election This Year
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Our incumbent directors whose terms expire in 2002 are:
WILLIAM A. RICHARDSON
Director since 1995
Age 54
. Vice Chairman of the Board of Mandalay since June 18, 1998
. Member of the Board of Directors of Mandalay since June 1, 1995
. Executive Vice President of Mandalay from June 1, 1995 until June 18, 1998
. Involved in an executive capacity in the management and operations of the
entities we refer to as the "Gold Strike Entities" for a period of more than
five years prior to Mandalay's acquisition of those entities and their hotel
and casino properties in June 1995
DONNA B. MORE
Director since 1998
Age 43
. Sole stockholder of More Law Group, P.C., a Chicago, Illinois law firm, since
May 2000
. Partner in the Chicago, Illinois law firm of Freeborn & Peters from July 1994
until May 2000
. Chief Legal Counsel for the Illinois Gaming Board, where she participated in
the development and administration of the regulatory process for riverboat
casinos in Illinois, from November 1990 until July 1994
. Assistant United States Attorney, Criminal Division of the United States
Attorney's Office for the Northern District of Illinois from May 1989 until
November 1990
. Member of the Board of Directors:
. WMS Industries, Inc.
Our incumbent directors whose terms expire in 2003 are:
MICHAEL S. ENSIGN
Director since 1995
Age 63
. Chairman of the Board and Chief Executive Officer of Mandalay since January
16, 1998
. Chief Operating Officer of Mandalay since June 1, 1995
. Vice Chairman of the Board of Mandalay from June 1, 1995 until January 16,
1998
. Involved in an executive capacity in the management and operations of the
entities we refer to as the "Gold Strike Entities" for a period of more than
five years prior to Mandalay's acquisition of those entities and their hotel
and casino properties in June 1995
GLENN W. SCHAEFFER
Director since 1996
Age 47
. President, Chief Financial Officer and Treasurer of Mandalay since June 1,
1995
. Member of the Board of Directors of Mandalay since March 4, 1996
. Involved in an executive capacity in the management and operations of the
entities we refer to as the "Gold Strike Entities" from 1993 until Mandalay's
acquisition of those entities and their hotel and casino properties in June
1995
. President of Mandalay from June 1991 until February 1993
. Chief Financial Officer and a director of Mandalay from 1984 until February
1993
. Member of the Board of Directors:
. Del Webb Corporation
-6-
MICHAEL D. McKEE
Director since 1996
Age 55
. Vice Chairman of The Irvine Company, a real estate development and investment
company, since July 1999
. Chief Financial Officer of The Irvine Company since December 1997
. Executive Vice President of The Irvine Company from April 1994 until July
1999
. Chief Legal Officer of The Irvine Company from April 1994 until December 1997
. Partner in the law firm of Latham & Watkins from 1987 until April 1994
. Member of the Board of Directors:
. Health Care Property Investors, Inc.
. Realty Income Corporation
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Executive Officers Other Than Nominees and Directors
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Our executive officers serve in that capacity at the pleasure of our
Board of Directors. Set forth below is information concerning each of the
individuals (other than those who are also directors of Mandalay) currently
serving as our executive officers.
YVETTE E. LANDAU
Age 44
. Vice President, General Counsel and Secretary of Mandalay since June 1996
. Member of the Executive Committee of the Circus and Eldorado Joint Venture,
in which Mandalay owns a 50% interest
. Member of the Management Committee of Detroit Entertainment, L.L.C., in which
Mandalay owns a 53.5% interest
. Associate General Counsel of Mandalay from January 1993, when she joined
Mandalay, until June 1996
. Private practice of law in Phoenix, Arizona as a partner in the law firm of
Snell & Wilmer from 1984 until January 1993
LES MARTIN
Age 44
. Vice President and Chief Accounting Officer of Mandalay since June 1997
. Corporate Controller of Mandalay since November 1994
. Manager of Financial Reports of Mandalay from April 1984, when he joined
Mandalay, until June 1997
. Certified Public Accountant with a national public accounting firm prior to
joining Mandalay
-7-
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Compensation of Directors
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Any director who is also an employee of Mandalay or one of its
subsidiaries is not separately compensated for his or her services as a
director.
Each director who is not an employee of Mandalay or one of its
subsidiaries receives $35,000 each year for his or her services as a director.
Each nonemployee director also receives $1,500 for each meeting of the Board he
or she attends and $1,000 ($1,500 in the case of the committee chairperson) for
each meeting of a committee of the Board attended. They are also reimbursed for
out-of-pocket expenses associated with attending meetings.
Our 1991 Stock Incentive Plan provides for the annual grant of formula
awards in the form of stock options to our nonemployee directors during the
term of the plan, which expires on June 19, 2001. Under this plan, each of our
nonemployee directors received an option to purchase 10,000 shares of Mandalay
common stock on June 15, 2000, the date of our 2000 annual meeting of
stockholders (each a "2000 award"). The exercise price for each 2000 award is
$21.05 per share, representing the average of the Fair Market Values (as
defined) for the fifth (5th) through the ninth (9th) "business days" following
the date of grant. Each 2000 award will become exercisable when, and only if,
the optionee continues to serve as a director until this year's annual meeting
of stockholders. Unless forfeited in accordance with its terms, each 2000 award
will become exercisable as to 4,000 shares on June 15, 2001, as to another
3,000 shares on the date of our 2002 annual meeting of stockholders, and as to
the remaining 3,000 shares on the date of our 2003 annual meeting of
stockholders. Unless earlier exercised or forfeited, each 2000 award will
remain exercisable until June 15, 2010. In the event of the termination of a
2000 award holder's service as a director, other than "by reason of retirement"
(as defined), total and permanent disability or death, his or her 2000 award
and any other formula awards received under the plan in prior years (whether or
not then vested and whether or not then exercisable) will automatically expire
on (and may not be exercised on) the effective date of the termination. As
defined, the phrase "by reason of retirement" means mandatory retirement
pursuant to Board policy or termination of service at a time when the optionee
would, if an employee of Mandalay, be entitled to receive a retirement benefit
under our 401(k) plan. If a termination of service is by reason of retirement,
total and permanent disability or death, the terminated director's 2000 award
and any other then-outstanding formula awards that have vested (including any
awards which vest on the date of termination) will become exercisable, whether
or not they were previously exercisable, and each such award will expire one
year after the date of termination or on its stated expiration date, whichever
is earlier.
On June 26, 2000, the Compensation Committee of our Board of Directors
granted to Rose McKinney-James, an option to purchase 25,000 shares of Mandalay
common stock at a per share exercise price of $20.75, representing the closing
price of our common stock on the New York Stock Exchange Composite Tape on the
date of the grant. The option, which has a term of ten years subject to earlier
termination upon the occurrence of certain events, becomes exercisable as to
8,333 shares on June 26, 2001, as to an additional 8,333 shares on June 26,
2002 and as to the remaining 8,334 shares on June 26, 2003. The award was made
for the purpose of giving Ms. McKinney-James an option for the same number of
shares as, and with a vesting schedule similar to, the options we granted to
each of our other nonemployee directors in February 1999, prior to Ms.
McKinney-James becoming a member of the Board.
-8-
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Board Committees and Meeting Attendance
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Our Board of Directors has five committees. They are the Executive,
Audit, Compensation, Directors' Nominating and Compliance Review Committees.
The Board of Directors has adopted a charter for the Audit Committee, a copy of
which is included as Appendix A to this proxy statement. Each committee reports
its actions to the full Board at the Board's next regular meeting. A
description of the duties of each committee follows the table below.
Committee Membership and Meetings Held in Fiscal 2001
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Directors' Compliance
Name Executive Audit* Compensation Nominating Review
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Michael S. Ensign X
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William A. Richardson X
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Glenn W. Schaeffer X
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William E. Bannen X X**
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Arthur H. Bilger X** X
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Rose McKinney-James X** X
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Michael D. McKee X** X
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Donna B. More X**
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Number of Meetings in
Fiscal 2001*** 0 4 4 0 4
X Member
* Each member of the Audit Committee is "independent" as the term
"independence" is defined in Section 303.01(B)(2)(a) and (3) of the New
York Stock Exchange listing standards.
** Chairperson
*** The Board of Directors held seven meetings in fiscal 2001. Each director
other than Arthur H. Bilger attended at least 75% of the meetings of the
Board and its committees of which he or she was a member held during fiscal
2001.
The Executive Committee:
. Has the full power of the Board during the period between meetings of the
Board, except those powers reserved to the Board or delegated by our Bylaws
or by the Board to another standing or special committee of the Board or as
may be prohibited by law.
The Audit Committee:
. Examines the activities of our independent auditors and internal audit
department to determine whether these activities are reasonably designed to
assure the soundness of accounting and financial procedures;
. Reviews our accounting policies and the objectivity of our financial
reporting;
. Receives reports from our internal auditors and reviews the scope of our
internal audit program; and
-9-
. Considers annually the qualifications of our independent auditors and the
scope of their audit and makes recommendations to the Board as to their
selection.
The Compensation Committee:
. Reviews on a periodic basis, as it determines, the compensation of our
officers;
. Recommends to the Board appropriate levels (and the appropriate forms) of
compensation for our officers; and
. Performs such additional functions as the Board may authorize from time to
time relating to any stock option, incentive or other benefit plan approved
by the Board, including the administration of each of our stock option and
stock incentive plans currently in effect.
The Directors' Nominating Committee:
. Evaluates and presents to the Board for its consideration candidates to fill
positions on the Board; and
. Will consider individuals recommended by stockholders. Any stockholder who
wishes to recommend to the committee for its consideration a prospective
nominee for election to the Board may write to Yvette E. Landau, General
Counsel, Mandalay Resort Group, 3950 Las Vegas Boulevard South, Las Vegas,
NV 89119.
The Compliance Review Committee:
. Assists the Board in the implementation and administration of our Gaming
Compliance Program;
. Performs due diligence in respect of proposed transactions and associations;
and
. Advises the Board of any gaming law compliance problems or situations which
may adversely affect the objectives of gaming control.
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Item 2 - Ratification of Selection of Independent Auditors
- --------------------------------------------------------------------------------
The Board of Directors has selected Arthur Andersen LLP as Mandalay's
independent auditors for the fiscal year ending January 31, 2002. Although not
required by law or otherwise, the selection is being submitted to the
stockholders for ratification as a matter of corporate policy. Arthur Andersen
LLP, an international firm of certified public accountants, has audited
Mandalay's financial statements since 1980.
We anticipate that a representative of Arthur Andersen LLP will be
present at the meeting and, if present, this representative will be given the
opportunity to make a statement if he desires to do so. We also anticipate that
this representative will be available to respond to appropriate questions from
stockholders.
Audit Fees
Audit fees billed to Mandalay by Arthur Andersen LLP during the fiscal
year ended January 31, 2001 for the audit of our annual financial statements
and the review of the financial statements included in our quarterly reports on
Form 10-Q totaled $439,000.
-10-
Financial Information Systems Design and Implementation Fees
Mandalay did not engage Arthur Andersen LLP to provide advice regarding
financial information systems design and implementation during the fiscal year
ended January 31, 2001.
All Other Fees
Fees billed to Mandalay by Arthur Andersen LLP during the fiscal year
ended January 31, 2001 for all non-audit services rendered to us, including tax
related services, totaled $402,000. The Audit Committee of the Board of
Directors has considered whether the provision of these services by Arthur
Andersen LLP is compatible with maintaining that firm's independence.
The Board of Directors recommends a vote "FOR" ratification of the
selection of Arthur Andersen LLP as our independent auditors for the fiscal
year ending January 31, 2002.
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Executive Compensation
- --------------------------------------------------------------------------------
Summary Compensation Table
This table indicates, for each of our last three fiscal years, the cash and
other compensation paid to our executive officers who are named in the table.
In this proxy statement, we sometimes refer to this group of individuals as our
"Named Executive Officers."
Annual Compensation (1) Long Term Compensation
-----------------------------------------------------------
Name and Fiscal Salary Bonus Restricted Securities All Other
Principal Year ($) ($) Stock Awards Underlying Compensa-
Position ($) Options(2) tion
(#) ($)
- ----------------------------------------------------------------------------------------------
Michael S. Ensign 2001 900,000 900,000 0 0 625(3)
Chairman of the Board 2000 900,000 900,000 0 1,000,000 500
and Chief Executive 1999 900,000 855,000 0 0 438
Officer
- ----------------------------------------------------------------------------------------------
Glenn W. Schaeffer 2001 733,333 800,000 0 0 25,519(4)
President, Chief 2000 800,000 800,000 0 350,000 25,837
Financial
Officer and Treasurer 1999 800,000 760,000 0 533,333 26,162
- ----------------------------------------------------------------------------------------------
William A. Richardson 2001 850,000 850,000 0 0 625(5)
Vice Chairman of the 2000 850,000 850,000 0 1,000,000 500
Board 1999 850,000 807,500 0 0 350
- ----------------------------------------------------------------------------------------------
Yvette E. Landau 2001 200,000 281,250 0 0 875(6)
Vice President, General 2000 181,250 225,000 0 72,500 750
Counsel and Secretary 1999 175,000 175,000 0 27,500 625
- ----------------------------------------------------------------------------------------------
Les Martin 2001 174,500 137,000 0 0 6,716(7)
Vice President and 2000 137,000 137,000 0 25,000 6,677
Chief Accounting 1999 137,000 137,000 0 50,000 6,349
Officer
(1) Certain of the individuals named in this table received personal benefits
that are not reflected in their salary and bonus amounts. The value of the
personal benefits received by each of these individuals did not, in any of our
last three fiscal years, exceed $50,000 or 10% of the individual's total annual
salary and bonus for that fiscal year.
(footnotes continued on next page)
-11-
(2) We have not granted any stock appreciation rights ("SARs").
(3) This amount represents a contribution we made to our 401(k) Plan for Mr.
Ensign's benefit.
(4) Of this amount, $1,322 represents the premium we paid for the term life
portion of a split-dollar life insurance policy, $18,164 represents the present
value (more fully described in Note 8) of the nonterm portion of the premium we
paid for that split-dollar policy, $5,408 represents disability insurance
premiums we paid, and $625 represents a contribution we made to our 401(k) Plan
for Mr. Schaeffer's benefit.
(5) This amount represents a contribution we made to our 401(k) Plan for Mr.
Richardson's benefit.
(6) This amount represents a contribution we made to our 401(k) Plan for Ms.
Landau's benefit.
(7) Of this amount, $149 represents the premium we paid for the term life
portion of a split-dollar life insurance policy, $3,995 represents the present
value (more fully described in Note 8) of the nonterm portion of the premium
paid for that split-dollar policy, $1,572 represents disability insurance
premiums we paid, and $1,000 represents a contribution we made to our 401(k)
Plan for Mr. Martin's benefit.
(8) The present value of the premium we paid on the nonterm portion of each of
the split-dollar life insurance policies referred to in Notes 4 and 7
represents a value equivalent to the interest-free use of that premium over the
period from the date we paid the premium to the earliest date we are expected
to receive a refund of the premium, based on an interest rate of 8.2% per
annum. For fiscal 2000 and fiscal 1999 we reported the amount in the same
manner.
Option Grants In Last Fiscal Year
During the fiscal year ended January 31, 2001, no stock options or stock
appreciation rights were granted to any of our Named Executive Officers.
Aggregated Option Exercises In The Last Fiscal Year And Fiscal Year-End Option
Values (1)
This table shows the number and value of stock options exercised in fiscal
2001, and the value of unexercised options as of the end of fiscal 2001, for
each of our Named Executive Officers.
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money Options at
on Value Options at Fiscal Fiscal Year-End(2)
Exercise Realized Year-End (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ----------------------------------------------------------------------------------------------
Michael S. Ensign 0 0 333,333/666,667 2,903,330/5,806,670
- ----------------------------------------------------------------------------------------------
Glenn W. Schaeffer 0 0 649,999/233,334 6,594,824/2,032,339
- ----------------------------------------------------------------------------------------------
William A. Richardson 0 0 333,333/666,667 2,903,330/5,806,670
- ----------------------------------------------------------------------------------------------
Yvette E. Landau 0 0 50,166/49,834 482,446/436,679
- ----------------------------------------------------------------------------------------------
Les Martin 38,333 586,659 0/16,667 0/145,170
(1)No SARs were exercised during fiscal 2001 or held as of January 31, 2001.
(2)Represents, with respect to each share, the closing price for our common
stock on the New York Stock Exchange on January 31, 2001, less the exercise
price payable for the share.
-12-
Employment Agreements
Mandalay employs Michael S. Ensign, Glenn W. Schaeffer and William A.
Richardson pursuant to employment agreements which became effective on June 1,
1995. Each employment agreement, as amended, provides for an initial base
salary with a mandatory increase of 5% per year during the term of the
agreement, plus any discretionary increases that are determined by the Board of
Directors. Each agreement also provides for the employee's eligibility to
receive an annual bonus with a targeted annual bonus of not less than 100% of
the employee's then-current base salary. Each agreement obligates Mandalay to
pay the employee's then-current base salary and targeted bonus (plus any other
amounts due to, or for the benefit of, the employee) for the greater of the
remainder of the agreement's then-current term or a period of 12 months if the
employee's employment is terminated under certain circumstances, including a
"Change in Control" or for other "Good Reason" (including his removal from his
position as an executive officer of Mandalay), or is terminated by Mandalay
without "Cause," as those terms are defined in the agreement (each, a
"Designated Termination") or (in the case of an employee who has not previously
made a "Continuation Election," as that term is defined in the agreement) if
Mandalay fails to consent to any automatic one-year extension of the agreement.
Upon any such termination of employment, any options to purchase Mandalay's
common stock then held by the terminated employee will become exercisable
immediately in accordance with the terms of his employment agreement. Each
employment agreement provides that Mandalay may, with or without cause, and
without terminating the employee's employment, remove the employee from his
position as an executive officer of Mandalay upon 60 days' notice. In that
event, the employee may, during the 60-day period, elect to continue as an
employee in a nonexecutive capacity in accordance with the other terms of his
employment agreement (a "Continuation Election"), or may elect to terminate the
agreement for "Good Reason."
Mr. Ensign's employment agreement provides for a current expiration date
of May 31, 2002, with subsequent one-year renewal terms, subject to early
termination by Mr. Ensign or Mandalay with six months' notice prior to renewal.
The agreement also provides for a current minimum base salary and minimum
annual target bonus of $797,677 each, increasing to $837,561 effective June 1,
2001.
Mr. Schaeffer's employment agreement provides for a current expiration
date of May 31, 2002, with subsequent one-year renewal terms, subject to early
termination by Mr. Schaeffer or Mandalay with six months' notice prior to
renewal. The agreement also provides for a current minimum base salary and
minimum annual target bonus of $765,769 each, increasing to $804,057 effective
June 1, 2001.
Mr. Richardson's employment agreement provides for a current expiration
date of May 31, 2002, with subsequent one-year renewal terms, subject to early
termination by Mr. Richardson or Mandalay with six months' notice prior to
renewal. The agreement also provides for a current minimum base salary and
minimum annual target bonus of $797,677 each, increasing to $837,561 effective
June 1, 2001.
Executive Officers' Bonus Plan
We have an Executive Officers' Bonus Plan which was adopted by our Board
of Directors on April 26, 2000 and approved by our stockholders on June 15,
2000.
The Bonus Plan is a performance bonus plan which is designed to provide
certain senior executives with incentive compensation based upon the
achievement of pre-established performance goals. The Bonus Plan is intended to
provide an incentive for superior work and to motivate participating officers
toward even higher achievement and business results, to tie their goals and
interests to those of Mandalay and its stockholders and to enable Mandalay to
attract and retain highly qualified executive officers. Executive officers at
the level of vice president or above may be eligible to participate in the
Bonus Plan. Prior to, or at the time of, establishment of the performance
objectives for a performance period, which will generally be the fiscal year,
the Committee designated under the Bonus Plan (currently the Compensation
Committee (the "Committee")) designates the specific executive officers who
will participate in the Bonus Plan for that
-13-
performance period. Messrs. Ensign, Schaeffer and Richardson have been
designated to participate in the Bonus Plan for the fiscal year ending January
31, 2002.
The Bonus Plan is designed to comply with Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), as that section relates to
performance-based compensation. Section 162(m) generally limits to $1,000,000
the amount of tax deductible compensation that may be paid by Mandalay in a
fiscal year to each of the officers named in the compensation table of its
proxy statement for that fiscal year. At the beginning of each performance
period and subject to the requirements of Section 162(m), the Committee
establishes performance goals, specific performance objectives and objectively
determinable computation formula or methods for determining each participant's
bonus under the Bonus Plan for that performance period. The performance goals
may include any one or more of the following corporate business criteria: stock
price, market share, gross revenue, net revenue, pretax income, operating
income, cash flow, earnings per share, return on equity, return on invested
capital or assets, cost reductions and savings, return on revenues,
productivity or any variations of the preceding criteria. In addition, to the
extent consistent with the goal of providing for deductibility under Section
162(m) of the Code, performance goals may include a participant's attainment of
personal objectives with respect to any of the foregoing performance goals or
implementing policies and plans, negotiating transactions and sales, developing
long-term business goals or exercising managerial responsibility.
At or after the end of each performance period, the Committee is required
by the terms of the Bonus Plan to certify in writing whether the pre-
established performance goals and objectives have been satisfied in such
performance period. The actual bonus award for any participant for a
performance period will then be determined based upon the pre-established
computation formulae or methods. In no event will any bonus award for any
fiscal year exceed the lesser of 150% of the participant's annual base salary
as in effect at the beginning of the fiscal year or $2,500,000. The Committee
has no discretion to increase the amount of any participant's bonus under the
Bonus Plan as so determined, but may reduce the amount of, or totally
eliminate, the bonus if the Committee determines, in its absolute and sole
discretion, that such a reduction or elimination is appropriate in order to
reflect the participant's performance or unanticipated factors. In no event
will the aggregate amount of all bonuses payable in any plan year under the
Bonus Plan exceed 10% of Mandalay's average annual income before taxes during
its preceding five fiscal years.
Approved awards under the Bonus Plan are payable in cash as soon as is
practicable after the end of each performance period and after the Committee
has certified in writing that the relevant performance goals were achieved.
Awards that are otherwise payable to a participant who is not employed by
Mandalay as of the last day of a performance period will be prorated or
eliminated pursuant to specified provisions of the Bonus Plan. A participant
will recognize ordinary taxable income upon receipt of payments under the Bonus
Plan.
-14-
Pension Plan
The following table shows the estimated annual benefits payable to "Tier
I" participants under Mandalay's Supplementary Executive Retirement Plan (the
"SERP") at normal retirement (which is age 65), based on years of service
credited under the SERP and the participant's final compensation, as determined
under the SERP. The amounts payable to "Tier I" participants represent the
highest level of benefits available under the SERP.
Estimated Annual Benefits
Upon Retirement at Age 65
After Completion of the Following Years of Service*
- -----------------------------------------------------------------------------------------
Years of Service
------------------------------------------------------------------------------
Remuneration** Less than 4 4 or 5 6 or 7 8 or 9 10 or 11 12 or 13 14 or more
- -----------------------------------------------------------------------------------------
$ 200,000 $ 0 $ 40,000 $ 50,000 $ 60,000 $ 80,000 $ 100,000 $ 120,000
- -----------------------------------------------------------------------------------------
$ 450,000 $ 0 $ 90,000 $112,500 $ 135,000 $180,000 $ 225,000 $ 270,000
- -----------------------------------------------------------------------------------------
$ 700,000 $ 0 $140,000 $175,000 $ 210,000 $280,000 $ 350,000 $ 420,000
- -----------------------------------------------------------------------------------------
$ 950,000 $ 0 $190,000 $237,500 $ 285,000 $380,000 $ 475,000 $ 570,000
- -----------------------------------------------------------------------------------------
$1,200,000 $ 0 $240,000 $300,000 $ 360,000 $480,000 $ 600,000 $ 720,000
- -----------------------------------------------------------------------------------------
$1,450,000 $ 0 $290,000 $362,500 $ 435,000 $580,000 $ 725,000 $ 870,000
- -----------------------------------------------------------------------------------------
$1,700,000 $ 0 $340,000 $425,000 $ 510,000 $680,000 $ 850,000 $1,020,000
- -----------------------------------------------------------------------------------------
$1,950,000 $ 0 $390,000 $487,500 $ 585,000 $780,000 $ 975,000 $1,170,000
- -----------------------------------------------------------------------------------------
$2,200,000 $ 0 $440,000 $550,000 $ 660,000 $880,000 $1,100,000 $1,320,000
*The amounts set forth in the table are computed as an annual benefit
payable in the form of a straight-life annuity, commencing following the
participant's attainment of age 65, the normal retirement age under the SERP.
The benefits listed in the table are not subject to any deduction for Social
Security or other offset amounts.
**The amount of a participant's remuneration for purposes of determining
benefits under the table is his or her highest annual compensation during any
of the last five full calendar years the participant is employed (or such
smaller number of full calendar years if the participant has not worked for
five years at the time of terminating his or her employment) or the 12-month
period ending on the participant's termination of employment with Mandalay.
Annual compensation for this purpose is the participant's base salary plus his
or her bonus. The SERP limits the amount of bonus that may be taken into
account for this purpose to 150% of base salary. A participant is credited with
a year of service under the SERP for each period of 12 full months of
employment with Mandalay, but service credit for periods prior to enrollment in
the plan is limited to ten years.
-15-
For purposes of determining their respective benefits pursuant to the
SERP, each of our Named Executive Officers will have 14 or more credited years
of service if he or she continues to be employed by Mandalay until age 65, the
normal retirement age under the SERP. The credited years of service under the
SERP for our Named Executive Officers as of January 31, 2001 were as follows:
Name Credited Years of Service
------------------------------------------------
Michael S. Ensign 13
------------------------------------------------
Glenn W. Schaeffer 13
------------------------------------------------
William A. Richardson 13
------------------------------------------------
Yvette E. Landau 8
------------------------------------------------
Les Martin 13
------------------------------------------------
- --------------------------------------------------------------------------------
Certain Transactions
- --------------------------------------------------------------------------------
Donna B. More, a member of our Board of Directors, is the sole
stockholder of More Law Group, P.C., a Chicago, Illinois law firm which she
formed in May 2000. During the fiscal year ended January 31, 2001, this law
firm provided legal services to the Elgin, Illinois joint venture entity in
which Mandalay is a 50% participant. Of the fees paid for these services,
$60,500 was borne by Mandalay. More Law Group, P.C. has also provided legal
services to this joint venture entity during the current fiscal year and it is
anticipated that it will do so in the future. During the period from January
31, 2000 until May 2000, Freeborn & Peters, the Chicago, Illinois law firm of
which Ms. More was then a partner, also provided legal services to the Elgin,
Illinois joint venture.
-16-
- --------------------------------------------------------------------------------
Report of the Board of Directors and the Compensation Committee on Executive
Compensation
- --------------------------------------------------------------------------------
Introduction
The Compensation Committee of Mandalay's Board of Directors (the
"Committee") was responsible for establishing the policies and procedures
relating to the compensation of Mandalay's executive officers for the fiscal
year ended January 31, 2001 ("fiscal 2001") and the decisions relating to the
respective levels and forms of their compensation, including the awards made
pursuant to Mandalay's Executive Officer Bonus Plan (the "Bonus Plan") and
stock option plans, except as we have otherwise indicated in this report. The
individuals who served on the Committee during fiscal 2001 were selected by
Mandalay's Board of Directors from those directors who are "nonemployee
directors" for purposes of Rule 16b-3 under the Securities Exchange Act of 1934
and are "outside directors" for purposes of Section 162(m) of the Internal
Revenue Code of 1986 (the "Code"). The only individuals who served on the
Committee or participated in its deliberations relating to executive
compensation during fiscal 2001 were William E. Bannen and Michael D. McKee,
each of whom served as a member of the Committee for the entire fiscal year.
Neither Mr. Bannen nor Mr. McKee has ever been an officer or employee of
Mandalay or any subsidiary of Mandalay.
Compensation Policies
The Committee's principal objective is to promote growth in stockholder
value through the establishment and implementation of compensation policies
designed to attract, retain and motivate skilled and talented executives. The
Committee's review of the compensation of Mandalay's executives and the actions
taken by the Committee with respect to executive compensation in fiscal 2001
were guided by the following compensation policies:
. To establish compensation programs designed to attract and retain
highly qualified executives;
. To provide motivation to Mandalay's executives through compensation
that is correlated to the performance of the individual and to the
performance of Mandalay;
. To compensate executives in a manner that rewards both current
performance and longer-term performance; and
. To provide executives with a financial interest in the success of
Mandalay similar to the interests of Mandalay's stockholders.
Fiscal 2001 Compensation
Consistent with the compensation policies of the Committee, the
compensation of Mandalay's executive officers for fiscal 2001 included a
combination of salary and bonuses to reward short-term performance. To
encourage and reward longer-term performance, our executives are also awarded
stock options from time to time. After evaluating the stock option awards made
to our executives during fiscal 2000 and the respective numbers of stock
options held by them, the Committee determined that its compensation policies
would not be served by the grant of additional stock options to Mandalay's
executive officers during fiscal 2001.
In order to more nearly align the compensation of Michael S. Ensign,
Mandalay's Chief Executive Officer, Glenn W. Schaeffer, Mandalay's President
and Chief Financial Officer, and William A. Richardson,
-17-
Vice Chairman of Mandalay's Board of Directors, with their counterparts at
comparable gaming companies, their respective salaries for fiscal 1999 were
increased by the Committee above the minimum increases required under the terms
of their employment agreements following the Committee's review of publicly
available information concerning executive compensation at comparable gaming
companies, and the same salaries were paid to these individuals again in fiscal
2000. For fiscal 2001, the Committee elected to maintain the salaries of
Messrs. Ensign, Schaeffer and Richardson for a third consecutive year at the
respective levels established for fiscal 1999. The base salary of each of the
other named executive officers for fiscal 2001 was fixed by Michael S. Ensign
without reference to any specific criteria at a level intended to make such
officer's attainment of a level of total compensation at or above that received
for the prior year significantly dependent on the amount of his or her bonus
for the year.
The fiscal 2001 target bonus of each executive officer whose total cash
compensation could exceed $1 million in fiscal 2001 (including Michael S.
Ensign, who is discussed under "Compensation of the Chief Executive Officer,"
below) was fixed by the Committee at a level equal to his base salary. The
bonus paid to each officer for fiscal 2001 was determined in part under the
terms of the Bonus Plan and in part at the discretion of the Committee. One-
half of the bonus determined under the Bonus Plan was based on a comparison of
Mandalay's actual to targeted adjusted net revenue for fiscal 2001. The other
half was based on a comparison of Mandalay's cash flow margin for fiscal 2001
to the average composite cash flow margin of a predetermined group of its
competitors, based on publicly available information. The discretionary portion
of each executive's bonus was based on the Committee's subjective evaluation of
the executive's performance without reference to any specific measure of
corporate performance. For fiscal 2001, each of the executive officers eligible
for bonuses under the Bonus Plan received 100% of the bonus payable under the
Bonus Plan and received a discretionary bonus. Together, each executive's bonus
components totaled 100% of his target bonus for fiscal 2001, and did not exceed
the limitation applicable to deductible compensation under Section 162(m) of
the Code.
Bonus awards to the executives not covered by the Bonus Plan are
currently paid quarterly and in fiscal 2001 were determined by the Chief
Executive Officer based on his subjective evaluation of these executives
without reference to any specific measure of corporate performance.
Compensation of the Chief Executive Officer
The compensation of Michael S. Ensign, Mandalay's Chief Executive Officer
who served in that capacity throughout fiscal 2001, consisted of a base salary
and bonus which were determined by the Committee. In order to more nearly align
his compensation with the compensation of similarly situated executives at
comparable gaming companies, Mr. Ensign's salary for fiscal 1999 was increased
by the Committee above the minimum base salary level established under the
terms of his employment agreement for that year following the Committee's
review of publicly available information concerning executive compensation at
comparable gaming companies. For fiscal 2001, the Committee elected to maintain
the salary of Mr. Ensign for a third consecutive year at the level established
for fiscal 1999.
The Committee fixed Mr. Ensign's fiscal 2001 target bonus at a level
equal to his base salary. The bonus paid to Mr. Ensign for fiscal 2001 was
determined in part under the terms of the Bonus Plan and in part at the
discretion of the Committee. One half of the portion of his bonus determined
under the Bonus Plan was determined based on a comparison of Mandalay's
adjusted net revenues for fiscal 2001 with certain predetermined target levels.
The other one half was determined based on a comparison of Mandalay cash flow
margin for fiscal 2001 to the average composite cash flow margin achieved by a
predetermined group of other gaming companies, based on publicly available
financial information. The portion of Mr. Ensign's target bonus reserved for
determination on a discretionary basis was fixed by the Committee at the amount
which, if fully paid, would not exceed the limitations applicable to deductible
compensation under Section 162(m) of the Code.
-18-
Following the end of fiscal 2001, the Committee certified that the
performance targets established for fiscal 2001 had been met or exceeded,
permitting a payment of 100% of the bonuses payable under the Bonus Plan. Based
on the performance targets established under the Bonus Plan, Mr. Ensign
received a bonus for fiscal 2001 under the Bonus Plan of $800,000. Based on the
Committee's subjective evaluation of his level of management responsibilities
without reference to any specific measure of corporate performance, a
discretionary bonus was awarded for fiscal 2001 to Mr. Ensign such that his
total bonus for fiscal 2001 was equal to 100% of his target bonus for the
period. The Committee believes that the method of measuring operating
performance utilized in fiscal 2001 to determine the levels of bonuses under
the Bonus Plan, including that of Mr. Ensign, is more appropriate than criteria
based upon the market price of Mandalay's common stock. This view is based on
the Committee's belief that while the performance of Mandalay's common stock is
a meaningful measure for compensation awards intended to reward executives for
long-term performance, over the period of a single fiscal year, an officer's
annual compensation should not generally be so closely tied to the vagaries of
the stock market.
Consistent with its policies of rewarding long-term performance and
providing executives with a financial interest in Mandalay's success similar to
that of stockholders, the Committee grants stock options to Mandalay's
executive officers from time to time. Mr. Ensign was granted stock options in
fiscal 2000. After evaluating the terms of these options, which vest over a
three-year period beginning in fiscal 2001, the Committee determined not to
grant Mr. Ensign additional stock options in fiscal 2001.
Policy Regarding Deductibility of Compensation for Tax Purposes--Compliance
with Code Section 162(m)
Section 162(m) of the Code generally disallows a tax deduction to a
public company for compensation over $1 million paid to its chief executive
officer and four other most highly compensated executive officers. Performance-
based compensation will not be subject to the deduction limitation if certain
requirements set forth in the Code and applicable Treasury Regulations are met.
The Committee's policy during fiscal 2001 was to structure the performance-
based portion of the compensation of the executive officers whose compensation
might be subject to the limitations of Code Section 162(m) so as to permit the
compensation paid to these executives to be allowed as a deduction. This was
done by establishing a portion of the possible bonuses for these officers'
compensation in fiscal 2001 under the Bonus Plan, administered in a manner that
complies with the requirements for a performance-based compensation exemption
under Code Section 162(m), and by establishing a separate portion of the
possible bonus awards for these executives at a level that was anticipated to
be fully deductible under Section 162(m) without regard to the exemption for
performance-based compensation. The Bonus Plan, which has been approved by
stockholders, has been designed to meet the requirements of Section 162(m).
To the extent possible, the Committee intends to continue to structure
the compensation of Mandalay's executives to permit the compensation paid to
these individuals to be allowed as a deduction for federal income tax purposes.
But, we may choose to provide compensation that is not deductible in order to
retain or to secure the services of key executives when we determine that it is
in the best interest of Mandalay to do so.
Compensation
Committee Board of Directors
William E. Bannen,
Chairman Michael S. Ensign, Chairman
Michael D. McKee William E. Bannen
Arthur H. Bilger
Michael D. McKee
Rose McKinney-James
Donna B. More
William A. Richardson
Glenn W. Schaeffer
-19-
- --------------------------------------------------------------------------------
Compensation Committee Interlocks and Insider Participation
- --------------------------------------------------------------------------------
The only individuals who served as members of Mandalay's Compensation
Committee during the fiscal year ended January 31, 2001 are the committee's
current members, William E. Bannen and Michael D. McKee, each of whom served
for all of fiscal 2001. Neither member of the Compensation Committee is an
officer or other employee, or former officer, of Mandalay or any subsidiary of
Mandalay.
The only individual who served on the Board of Directors during the
fiscal year ended January 31, 2001 and participated in the determination of the
compensation of Mandalay's executive officers for such fiscal year while also
serving as an officer or employee of Mandalay was Michael S. Ensign. See
"Report of the Board of Directors and the Compensation Committee on Executive
Compensation." Mr. Ensign served as Mandalay's Chief Executive Officer and as
its Chief Operating Officer for all of fiscal 2001. Glenn W. Schaeffer, who
served as Mandalay's President, Chief Financial Officer and Treasurer for all
of fiscal 2001, and William A. Richardson, who served as Mandalay's Vice
Chairman of the Board for all of fiscal 2001, did not participate in
deliberations concerning the compensation of Mandalay's executive officers for
fiscal 2001.
- --------------------------------------------------------------------------------
Report of the Audit Committee
- --------------------------------------------------------------------------------
The Audit Committee oversees Mandalay's financial reporting process on
behalf of the Board of Directors. Each member of the Audit Committee, which
acts pursuant to an Audit Committee Charter approved by Mandalay's Board of
Directors, qualifies as an "independent" director under the current listing
standards of the New York Stock Exchange.
In fulfilling its oversight responsibilities, the Audit Committee
reviewed and discussed with management Mandalay's audited financial statements
for the fiscal year ended January 31, 2001. The Audit Committee has discussed
with Arthur Andersen LLP, our independent auditors, the matters required to be
discussed by Statement of Auditing Standards No. 61, Communication with Audit
Committees, which includes, among other items, matters related to the conduct
of the audit of Mandalay's financial statements. The Audit Committee has
received written disclosures and the letter from Arthur Andersen LLP required
by Independence Standards Board Standard No. 1, which relates to the auditor's
independence from Mandalay and its related entities, and has discussed with
Arthur Andersen LLP their independence from Mandalay. The Audit Committee has
also considered whether the performance of the nonaudit services performed for
Mandalay by Arthur Andersen LLP during the fiscal year ended January 31, 2001
is compatible with maintaining that firm's independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that Mandalay's audited
financial statements be included in its Annual Report on Form 10-K for the
fiscal year ended January 31, 2001.
Audit Committee
Michael D. McKee, Chairman
William E. Bannen
Arthur H. Bilger
-20-
- --------------------------------------------------------------------------------
Comparative Stock Price Performance Graph
- --------------------------------------------------------------------------------
This graph compares the cumulative total return (assuming reinvestment of
dividends) from January 31, 1996 to January 31, 2001 for (i) our common stock,
(ii) the Dow Jones Industry Group (Casinos), which we refer to as the "Casino
Group," and (iii) the Standard & Poor's 500 Composite Stock Index, which we
refer to as the "S&P 500 Index." The graph assumes the investment of $100 on
January 31, 1996 in each of our common stock, the stocks comprising the Casino
Group and the stocks comprising the S&P 500 Index.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPH]
Mandalay Casino Group S&P 500 Index
1/31/96 $100.00 $100.00 $100.00
1/31/97 110.59 95.17 126.34
1/31/98 72.16 88.71 160.34
1/31/99 42.75 62.26 212.43
1/31/00 48.43 89.50 234.41
1/31/01 68.11 109.60 232.30
-21-
- --------------------------------------------------------------------------------
Stock Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------------------------
Certain Beneficial Owners
The following table shows how much of our common stock is beneficially
owned by each person known to us to be the beneficial owner of more than 5% of
Mandalay's common stock. This information is as of April 20, 2001, unless we
have indicated otherwise.
Number of Shares Approximate
Name and Address Beneficially Owned Percentage of Class
- --------------------------------------------------------------------------------
Michael S. Ensign 7,156,366(1) 9.39%
3950 Las Vegas Blvd. South
Las Vegas, Nevada 89119
- --------------------------------------------------------------------------------
William A. Richardson 7,069,904(2) 9.28%
3950 Las Vegas Blvd. South
Las Vegas, Nevada 89119
- --------------------------------------------------------------------------------
Bank of America Corporation 6,162,072(3) 8.16%
NMS Services Inc.
NMS Services (Cayman) Inc.
MBG Trust-Wilmington Trust Owner
Trustee
100 North Tryon Street
Charlotte, North Carolina 28255
- --------------------------------------------------------------------------------
Legg Mason, Inc. 8,191,160(4) 10.85%
100 Light Street
Baltimore, Maryland 21202
- --------------------------------------------------------------------------------
Iridian Asset Management LLC 8,186,900(5) 10.84%
LC Capital Management, LLC
CL Investors, Inc.
COLE Partners LLC
Iridian Partners Fund, L.P.
Iridian Investors, L.P.
Iridian Private Business Value
Equity Fund, L.P.
David L. Cohen
Harold J. Levy
(collectively the "Note 5 Filers")
276 Post Road West
Westport, Connecticut 06880-4704
- --------------------------------------------------------------------------------
FMR Corp. 11,237,550(6) 14.88%
82 Devonshire Street
Boston, Massachusetts 02109
(1) Includes 6,489,700 shares as to which Mr. Ensign has sole voting and
dispositive power and 666,666 shares which he may acquire pursuant to currently
exercisable stock options.
(2) Includes 6,403,238 shares as to which Mr. Richardson has sole voting and
dispositive power and 666,666 shares which he may acquire pursuant to currently
exercisable stock options.
-22-
(3) Based on information provided by Bank of America Corporation ("B of A"), as
of April 20, 2001, it had shared voting and dispositive power with respect to
all of these shares, and NMS Services Inc. and NMS Services (Cayman) Inc. each
had shared voting and dispositive power, and MBG Trust-Wilmington Trust Owner
Trustee had sole voting and dispositive power, with respect to 6,102,098 of
these shares. The 6,102,098 shares are held under a Trust Agreement, dated as
of September 8, 2000, between NMS Services (Cayman) Inc. and Wilmington Trust
Company, as trustee, pursuant to which the trustee is obligated to vote the
shares at the meeting in the same proportion as the votes cast by the holders
of our other shares.
(4) This is the number of shares beneficially owned by Legg Mason, Inc., as
reported in its Schedule 13G/A filed with the Securities and Exchange
Commission on March 14, 2001. In such filing, shared dispositive power was
reported as to all of the shares, sole voting power was reported as to
6,373,090 shares and shared voting power was reported as to 1,818,070 shares.
(5) In Amendment No. 1, dated February 7, 2001, to the Schedule 13G of the Note
5 Filers, David L. Cohen and Harold J. Levy each reported shared voting and
dispositive power with respect to all of these shares, Iridian Asset Management
LLC, LC Capital Management, LLC and CL Investors, Inc. each reported shared
voting and dispositive power with respect to 7,741,400 of these shares, COLE
Partners LLC reported shared voting and dispositive power with respect to
219,300 of these shares, Iridian Partners Fund, L.P. reported shared voting and
dispositive power with respect to 55,700 of these shares, Iridian Investors,
L.P. reported shared voting and dispositive power with respect to 35,700 of
these shares and Iridian Private Business Value Equity Fund, L.P. reported
shared voting and dispositive power with respect to 127,900 of these shares.
Each of the Note 5 Filers reported as beneficially owned by such filer the
number of these shares as to which such filer reported having shared voting and
dispositive power.
(6) This is the number of shares beneficially owned by FMR Corp., as reported
in its Schedule 13G/A filed with the Securities and Exchange Commission on
March 14, 2001. In this filing, FMR Corp. reported sole voting power as to
1,089,100 of the shares and sole dispositive power as to all of the shares.
-23-
Management
The following table shows how much of our common stock is beneficially
owned by each director of Mandalay, each executive officer of Mandalay who is
named in the Summary Compensation Table on page 11, and by all of Mandalay's
directors and executive officers as a group. The information in the table is as
of April 20, 2001. The "aggregate number of shares beneficially owned" listed
in the second column includes the number of shares listed in the third column.
Aggregate Number Right to Acquire Approximate
of Shares Within 60 days Percentage
Name Beneficially Owned(1) (Number of Shares) of Class
- --------------------------------------------------------------------------------
Michael S. Ensign 7,156,366 666,666 9.39%
- --------------------------------------------------------------------------------
William A. Richardson 7,069,904 666,666 9.28%
- --------------------------------------------------------------------------------
Glenn W. Schaeffer 1,174,961 766,666 1.54%
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Yvette E. Landau 74,359 74,333 *
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Les Martin 9,194 8,333 *
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William E. Bannen 59,166 37,666 *
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Arthur H. Bilger 48,666 47,666 *
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Michael D. McKee 51,766 47,666 *
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Rose McKinney-James 19,333 19,333 *
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Donna B. More 37,666 37,666 *
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All directors and
executive officers
as a group (10 persons) 15,701,381 2,372,661 20.16%
* Less than one percent.
(1) With the exception of Michael D. McKee, who shares with his wife the voting
and dispositive power with respect to the shares he owns, the individuals and
group named in the table have sole voting and investment power with respect to
the shares they own.
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General
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Availability of Form 10-K and Annual Report to Stockholders
Rules of the Securities and Exchange Commission require us to provide our
Annual Report to Stockholders for fiscal 2001 to each stockholder who receives
this Proxy Statement. We will also provide copies of the Annual Report to
brokers, dealers, banks, voting trustees and their nominees for the benefit of
their beneficial owners of record. Additional copies of the Annual Report,
along with copies of our Annual Report on Form 10-K for the fiscal year ended
January 31, 2001 (not including documents incorporated by reference), are
available without charge to stockholders upon written request to Mandalay
Resort Group, 3950 Las Vegas Boulevard South, Las Vegas, Nevada 89119,
Attention: Chief Financial Officer.
-24-
Stockholder Proposals
To be considered for inclusion in next year's proxy statement, a
stockholder proposal must be in writing and received by us no later than
December 31, 2001. If a stockholder proposal to be considered at next year's
meeting, but not included in the proxy statement, is not received by us on or
before March 23, 2002, the persons appointed as proxies may exercise their
discretionary voting authority with respect to the proposal. All proposals
should be submitted in writing to Mandalay Resort Group, 3950 Las Vegas
Boulevard South, Las Vegas, Nevada 89119, Attention: General Counsel.
- --------------------------------------------------------------------------------
A form of proxy is enclosed for your use. Please complete, date, sign and
return the proxy at your earliest convenience in the enclosed envelope, which
requires no postage if mailed in the United States. A prompt return of your
proxy will be appreciated.
By Order of the Board of Directors
/s/ Michael S. Ensign
Michael S. Ensign
Chairman of the Board
Las Vegas, Nevada
April 30, 2001
-25-
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Appendix A
- --------------------------------------------------------------------------------
Mandalay Resort Group
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board to assist the Board in
monitoring the integrity of the financial statements of the Company, and the
independence and performance of the Company's internal and external auditors.
The members of the Audit Committee shall meet the requirements relating
to independence and expertise, and any other applicable requirements of the
national stock exchange(s) on which the Company's Common Stock is listed. The
members of the Audit Committee, which shall consist of at least three
directors, shall be appointed by the Board.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee
may request any officer or employee of the Company or the Company's outside
counsel or independent auditor to attend a meeting of the Committee or to meet
with any members of, or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and submit
it to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles and
practices as well as the adequacy of internal controls that could significantly
affect the Company's financial statements.
3. Discuss with management and the independent auditor significant
financial reporting issued and judgments made in connection with the
preparation of the Company's financial statements.
4. Review with management and the independent auditor in person, at a
meeting, or by conference telephone call, the Company's quarterly financial
statements prior to the release of quarterly earnings. The chair may represent
the entire Committee for the purposes of these discussions.
5. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor and
control such exposures.
6. Review major changes to the Company's auditing and accounting
principles and practices as suggested by the independent auditor, internal
auditors or management.
7. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Board and the Audit Committee that
have the ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the independent auditor (or to nominate the outside
auditor to be proposed for stockholder approval in any proxy statement).
8. Approve the fees to be paid to the independent auditor.
A-1
9. Require the submission to the Audit Committee by the independent
auditor on a periodic basis of formal written reports delineating all
relationships between the auditor and the Company, actively engage in a
dialogue with the auditor with respect to any disclosed relationships or
services that may impact the objectivity and independence of the auditor and,
if so determined by the Audit Committee, recommend that the Board take
appropriate action to satisfy itself of the independence of the auditor.
10. Evaluate the performance of the independent auditor and, if so
determined by the Audit Committee, recommend that the Board replace the
independent auditor.
11. Review the appointment and replacement of the senior internal
auditing executive.
12. Review the significant reports to management prepared by the internal
auditing department and management's responses.
13. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
14. Obtain from the independent auditor assurance that Section 10A of the
Private Securities Litigation Reform Act of 1995 has not been implicated.
15. Obtain reports from management, the Company's senior internal
auditing executive and the independent auditor that the Company's
subsidiary/foreign affiliated entities are in conformity with applicable legal
requirements.
16. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct of
the audit.
17. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the auditor
and the Company's response to that letter. Such review should include:
(a) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information.
(b) Any changes required in the planned scope of the internal
audit.
(c) The internal audit department responsibilities, budget and
staffing.
18. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy statement.
19. Review with the Company's General Counsel legal matters that may have
a material impact on the financial statements.
20. Meet at least annually with the chief financial officer, the senior
internal auditing executive and the independent auditor in separate executive
sessions.
While the Audit Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with Generally Accepted Accounting Principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the Company's compliance
policies.
A-2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
/\ DETACH AND RETAIN THIS ADMISSION TICKET /\
ADMISSION TICKET
MANDALAY RESORT GROUP
2001 Annual Meeting
Friday, June 15, 2001
10:00 A.M., Las Vegas time
STOCKHOLDER NAME(S): _____________________________________
(PLEASE PRINT)
__________________________________________________________
STOCKHOLDER ADDRESS: _____________________________________
__________________________________________________________
If you plan to attend the Annual Meeting of Stockholders, please
so indicate by marking the appropriate box on your proxy card. The
meeting will be held in the Islander Ballroom at Mandalay Bay Resort
& Casino, 3950 Las Vegas Boulevard South, Las Vegas, Nevada. Space
limitations make it necessary to limit attendance to stockholders.
Registration will begin at 8:30 A.M., Las Vegas time. "Street name"
holders will need to bring a copy of a brokerage statement
reflecting stock ownership as of April 20, 2001. You are cordially
invited to attend a brunch, which will be held in the adjacent South
Pacific Ballroom, beginning at 8:30 A.M., Las Vegas time.
--------------
This Admission Ticket should not be returned with your proxy but should
be retained and brought with you to the Annual Meeting.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
/\ DETACH AND RETAIN THIS ADMISSION TICKET /\
ADMISSION TICKET
2001 Annual Meeting
of
MANDALAY RESORT GROUP
------------------------------------
Agenda
1. To elect three directors;
2. To ratify the appointment of Arthur Andersen
LLP as independent auditors to examine and
report on the Company's financial statements
for the fiscal year ending January 31, 2002;
and
3. To transact such other business as may properly
be brought before the meeting or any
adjournment(s) thereof.
(See Reverse Side)
P
R
O
X
Y
MANDALAY RESORT GROUP
Proxy Solicited on Behalf of the Board of Directors of the Company
The undersigned, a stockholder of Mandalay Resort Group (the "Company"),
a Nevada corporation, hereby appoints Michael S. Ensign and Yvette E. Landau,
and each of them, as the true and lawful attorneys and proxies of the
undersigned, with full power of substitution, for and in the name of the
undersigned, to vote and otherwise act on behalf of the undersigned at the
Annual Meeting of Stockholders of the Company to be held in the Islander
Ballroom at Mandalay Bay Resort & Casino, 3950 Las Vegas Boulevard South, Las
Vegas, Nevada on Friday, June 15, 2001 at 10:00 A.M., Las Vegas time, or at any
adjournment or adjournments thereof, with respect to all shares of the Company's
Common Stock which the undersigned would be entitled to vote, with all powers
the undersigned would possess if personally present, on the following matters:
The election of three directors to serve (Change of Address-Comments)
until their respective successors are
elected and shall qualify. __________________________________
Nominees: __________________________________
Arthur H. Bilger, William E. Bannen __________________________________
and Rose McKinney-James
__________________________________
This proxy will be voted as specified on the reverse side. If no specification
is made, this proxy will be voted FOR each nominee for director named above and
FOR ratification of the appointment of Arthur Andersen LLP.
SEE REVERSE
SIDE
-----------
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/\ DETACH AND RETURN PROXY CARD; RETAIN ADMISSION TICKET /\
ADMISSION TICKET
2001 Annual Meeting
of
MANDALAY RESORT GROUP
------------------------------------
Agenda
1. To elect three directors;
2. To ratify the appointment of Arthur Andersen
LLP as independent auditors to examine and
report on the Company's financial statements
for the fiscal year ending January 31, 2002; and
3. To transact such other business as may properly
be brought before the meeting or any
adjournment(s) thereof.
(See Reverse Side)
X Please mark your 1834
votes as in this
example.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is given, this proxy will
be voted FOR each nominee listed on the reverse side and FOR Proposal 2.
- ------------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR each nominee listed on the reverse side and FOR Proposal 2.
- ------------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Ratification of the appointment
Directors of Arthur Andersen LLP as inde-
(see reverse) pendent auditors to examine and
report on the Company's financial
For, except vote withheld from the following nominee(s): statements for the fiscal year
ending January 31, 2002.
- --------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
3. In the discretion of the proxies on any other
matters that may properly come before the meeting or
any adjournment thereof.
Change of Address/Comments on reverse side
---------------------------------------
I/We plan to attend the Annual Meeting.
---------------------------------------
---------------------------------------
If more than one of the proxies listed on the reverse side
shall be present at the meeting or any adjournment thereof, the
majority of said proxies so present and voting shall exercise all
of the powers conferred hereby.
The undersigned hereby revokes any proxy heretofore given to
vote upon or act with respect to such shares and hereby ratifies
and confirms all that the proxies listed on the reverse side, or
either of them, may lawfully do by virtue hereof.
SIGNATURE(S) DATE
-------------------------------------------------------- ------------------
Please date this proxy and sign your name as it appears hereon. When there is more than one owner, each should sign. When signing
as an attorney, administrator, executor, guardian or trustee, please add your title as such. If executed by a corporation, give
title as such.
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/\ DETACH AND RETURN PROXY CARD; RETAIN ADMISSION TICKET /\
ADMISSION TICKET
MANDALAY RESORT GROUP
2001 Annual Meeting
Friday, June 15, 2001
10:00 A.M., Las Vegas time
If you plan to attend the Annual Meeting of Stockholders, please so
indicate by marking the appropriate box on your proxy card. The meeting will be
held in the Islander Ballroom at Mandalay Bay Resort & Casino, 3950 Las Vegas
Boulevard South, Las Vegas, Nevada. Space limitations make it necessary to
limit attendance to stockholders. Registration will begin at 8:30 A.M., Las
Vegas time. "Street name" holders will need to bring a copy of a brokerage
statement reflecting stock ownership as of April 20, 2001. You are cordially
invited to attend a brunch, which will be held in the adjacent South Pacific
Ballroom, beginning at 8:30 A.M., Las Vegas time.
--------------
This Admission Ticket should not be returned with your proxy but should be
retained and brought with you to the Annual Meeting.