SCHEDULE 14A INFORMATION
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MTR GAMING GROUP, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
|_| Fee paid previously with preliminary materials:
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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 Thursday, July 22, 2004, at 10:00 a.m.
local time, at the New York Marriott East Side, 525 Lexington Avenue, New York,
New York 10017.
The accompanying Notice of Annual Meeting and Proxy Statement describe the
business to be conducted at the meeting. There will 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
June 18, 2004
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 July 22, 2004, at 10:00 a.m. local time, at
the New York Marriott East Side, 525 Lexington Avenue, New York, New York 10017
for the following purposes:
1. To elect six persons to serve as directors of the Corporation until
their successors are duly elected and qualified;
2. To ratify the adoption of the Company's 2004 Stock Incentive Plan;
3. To ratify the selection of Ernst & Young LLP as the Corporation's
accountants and independent auditors; and
4. To transact such other business as may properly come before the
meeting.
Stockholders entitled to notice and to vote at the meeting will be
determined as of the close of business on June 11, 2004, the record date fixed
by the Board of Directors for such purposes.
By order of the Board of Directors
Rose Mary Williams, Secretary
June 18, 2004
Please sign the enclosed proxy and return it promptly in the enclosed envelope.
If mailed in the United States, no postage required.
MTR GAMING GROUP, INC.
State Route 2
Chester, West Virginia 26034
(304) 387-8300
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of MTR Gaming Group, Inc. (the "Company") for
use at the Annual Meeting of Stockholders to be held July 22, 2004.
A copy of the Company's report with financial statements for the year
ended December 31, 2003 is enclosed. This proxy statement and form of proxy were
first sent to stockholders on or about the date stated on the accompanying
Notice of Annual Meeting of Stockholders.
Only stockholders of record as of the close of business on June 11, 2004,
will be entitled to notice of and to vote at the meeting and any postponement or
adjournments thereof. As of that date, 28,538,760 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 2004 Stock Incentive Plan, and (iii) the ratification of the selection
of the auditors. Members of the Company's management intend to vote their shares
in favor of each of the proposals. The holders of a majority of the shares of
Common Stock outstanding and entitled to vote at the Annual Meeting will
constitute a quorum for the transaction of business at the Annual Meeting.
Shares of Common Stock represented in person or by proxy (including shares which
abstain or do not vote with respect to one or more of the matters presented for
stockholder approval) will be counted for purposes of determining whether a
quorum is present at the Annual Meeting.
Stockholders will vote at the meeting by ballot and votes cast at the
meeting in person or by proxy will be tallied by the Company's transfer agent.
Shares held by stockholders present in person at the meeting who do not vote and
ballots marked "abstain" or "withheld" will be counted as present at the meeting
for quorum purposes, but will not be counted as part of the 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. The Company may also retain a proxy
solicitation firm to solicit proxies, in which case, the Company will pay the
solicitation firm's fees. The Company will also make arrangements with brokerage
houses and other custodians, nominees and fiduciaries to forward solicitation
material to beneficial owners of stock held of record by such persons, and the
Company will reimburse such persons for their reasonable out-of-pocket expenses
in forwarding solicitation material.
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, then the persons named as proxies will use their own judgment in
voting shares represented by proxies.
ITEM 1
ELECTION OF DIRECTORS
The directors of the Company are currently 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 six
candidates for service, each of whom serves for a term of one year, or until
their successors are elected and qualify. Directors elected at this Annual
Meeting shall serve until the 2005 annual meeting or until their successors are
duly elected and qualified.
Unless you instruct otherwise or withhold authority to vote, the enclosed
proxy, if signed and returned, will be voted for the election of the nominees
listed below. If for any reason any nominee is unable to accept the nomination
or to serve as a director, an event not currently anticipated, the persons named
as proxies reserve the right to exercise their discretionary authority to
nominate someone else or to reduce the number of management nominees to such
extent as the persons named as proxies may deem advisable.
A plurality of the votes cast in person or by proxy of holders of Common
Stock is required to elect a director. Accordingly, abstentions and "broker
non-votes" will have no effect on the outcome of the election of directors
assuming a quorum is present or represented by proxy at the Annual Meeting. A
broker non-vote occurs if a broker or other nominee does not have discretionary
authority and has not received instructions with respect to a particular item.
Stockholders may not cumulate their votes in the election of directors.
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 marked to withhold authority to vote for any individual director
or for all directors will be voted FOR the election of all of the nominees named
below. Proxies cannot be voted for a greater number of persons than the number
of nominees named.
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Nominees for Directors
The following persons have been nominated to serve as directors: Edson R.
Arneault, Robert A. Blatt, Donald J. Duffy, James V. Stanton, LC Greenwood and
Richard Delatore. Each of the nominees for director currently serves as a
director of the Company.
Edson R. Arneault, 57, has been a director of the Company since January
1992 and has served as our President and Chief Executive Officer since April 26,
1995. He is also an officer and director of our subsidiaries. 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
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 LLP"), a public accounting firm, in Grand
Rapids, Michigan, from 1977 to 1980. Mr. Arneault was employed as a certified
public accountant 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. He also serves on the Board of Directors of Make a Wish
Foundation of Northern West Virginia, West Virginia Independent Colleges and
Universities, Inc., West Virginia Jobs Investment Trust (a gubernatorial
appointment) and the West Virginia Hospitality and Tourism Association. Mr.
Arneault also serves as a member of the Advisory Board of Visitors of the Robert
Morris College Hospitality and Tourism Management Program in Pittsburgh,
Pennsylvania.
Robert A. Blatt, 63, has been a director of the Company since September
1995 and a Vice President since February 1999. Mr. Blatt is also a Director and
Assistant Secretary of Mountaineer Park, and Chairman of our Finance Committee.
Mr. Blatt is the Chief Executive Officer and managing member of New England
National, L.L.C. ("NEN") and a member of the board of directors of AFP Imaging
Corporation. 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. In
July 1999, certain creditors of CGE Shattuck, LLC ("CGE") filed an involuntary
bankruptcy petition against CGE in the United States Bankruptcy Court for the
District of New Hampshire (In Re: CGE Shattuck, LLC). Although Mr. Blatt reports
that he was no longer an executive with CGE at the time of the filing, he was
the Chief Executive Officer and Managing Member of CGE within the two-year
period prior to the commencement of that action, which case was closed in
January 2004. Mr. Blatt informed the Company that CGE's inability to satisfy its
obligations to creditors in July 1999 resulted from a bank's wrongful refusal to
release certain residential land held as collateral by the bank. In August of
2002, NEN filed a voluntary petition under Chapter 11 in the U.S. Bankruptcy
Court for the District of Connecticut, which is still pending. Mr. Blatt
informed the Company that the filing was necessitated by a court's upholding the
imposition of real estate taxes at rates applicable to golf courses (rather than
vacant land) for periods prior to NEN's
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acquisition or development of the property. 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.
James V. Stanton, 72, has been a director of the Company since February,
1998 and serves on our Audit Committee and as Chairman of our Compliance
Committee. Mr. Stanton is also a director of Try It Distributing Co., a
privately held corporation. Mr. Stanton has his own law and lobbying firm,
Stanton & Associates, in Washington, D.C. From 1971-1978, 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 1985-1994, 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 Directors of the Federal Home Loan Bank of
Atlanta and of Lottery and Wagering Solutions, Inc.
Donald J. Duffy, 36, has been a director of the Company since June 2001
and serves as Chairman of our Compensation Committee and as a member of the
Audit Committee. Mr. Duffy will become the Chairman of the Audit Committee
immediately following the Annual Meeting. Mr. Duffy is presently the President
of Integrated Corporate Relations, a consulting firm. Mr. Duffy co-founded
Meyer, Duffy & Associates in 1994 and Meyer Duffy Ventures in 1999. At Meyer
Duffy, Mr. Duffy played an integral role in numerous seed and early stage
companies. His expertise is focusing on the development and implementation of
business plans including financial forecasting and analysis, management team
development, corporate strategy and capital formation. Prior to co-founding
Meyer, Duffy & Associates, Mr. Duffy was a Senior Vice President at Oak Hall
Capital Advisors where he specialized in investments in the leisure, gaming and
technology markets. Prior to Oak Hall, Mr. Duffy was an investment fund partner
at Sloate, Weisman, Murray & Company, specializing in investments in the
leisure, gaming, technology and retail markets. Mr. Duffy is a graduate of St.
John's University.
LC Greenwood, 57, has been a director of the Company since November 2002
and serves on our Compensation Committee. Mr. Greenwood was born in Canton
Mississippi, went to Roger High, in Canton, Mississippi and was granted an
Academic Athletic Scholarship to Arkansas AM & N in Pine Bluff, Arkansas where
he received the Bachelor of Science Degree. After college Mr. Greenwood played
thirteen years as a Defensive End with the World Champion Pittsburgh Steelers,
won four Super Bowls, was named a member of every All Pro Team during the 1970s,
was also All Pro seven times, and played in six Pro Bowls. Today Mr. Greenwood
is President of Greenwood Enterprises, a Coal and Natural Gas Marketing Company;
Greenwood/McDonald Supply Co., an Electrical Supply Company; and President/Owner
of
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Greenwood Manufacturing Co., Manufacturer & Distributor of packing products.
Among Mr. Greenwood's awards are the Worthen Sport Award, Professional Athlete
of the Year in Little Rock, Arkansas, Outstanding Achievement Award, Canton,
Mississippi, 1975, Key to the City of Canton, MS and to the State of
Mississippi, Key to the State of West Virginia, 25th Anniversary Super Bowl
Team, 100 Year Black College All American Team, Arkansas Hall of Fame, A member
of the 75th Silver Anniversary Super Bowl Team. In 1975, March 24th was declared
LC Greenwood day in Canton, Mississippi. Mr. Greenwood is a Life Member of the
N.A.A.C.P., Member of AFTRA-American Federation of Television and Radio Artists,
worked on the Miller Lite Campaign doing commercials and promotions for ten
years, has been involved in numerous commercials and industrial films since 1971
to the present, and over ten National commercials as well as numerous local
commercials.
Richard Delatore, 64, has been a director of the Company since June 2004.
Mr. Delatore will serve as a member of the Audit Committee of the Company
commencing upon the completion of the Annual Meeting. Mr. Delatore is presently
a Vice President with Schiappa & Company which is involved in the coal mining
and hauling business and located in Wintersville, Ohio (since 2002). Mr.
Delatore is also a commissioner on the Board of Commissioners in Jefferson
County, Ohio (since 2000), and is a coal and timber consultant in Steubenville,
Ohio (since 1990). Mr. Delatore was a member of the Ohio State Racing Commission
from 1995 to 1999. Mr. Delatore chaired the Medication Committee of the Ohio
State Racing Commission in 1999. He was also a member of the Steubenville City
School Board of Education from 1993 to 2000 and a member of the Jefferson County
Joint Vocational School Board of Education from 1995 to 1998. Mr. Delatore
received his Bachelor of Science degree in Business Administration from
Franciscan University of Steubenville, Ohio.
The Board held five (5) meetings and acted fifteen (15) times by written
consent during the fiscal year ended December 31, 2003. All directors attended
all of the meetings except for Mr. Stanton who missed one meeting. Messrs.
Stanton, Duffy and Brosig, all of whom are independent directors, make up the
Board's Audit Committee. Mr. Brosig is not standing for reelection as a director
of the Company; accordingly, his tenure on the Audit Committee will end on July
22, 2004 (at which time Mr. Delatore will become a member of the Audit
Committee). During the fiscal year ended December 31, 2003, the Audit Committee
met six times. In June of 2000, the Board of Directors established a formal
Charter for the Audit Committee which was amended and restated in June 2004. A
copy of the Amended and Restated Charter of the Audit Committee is attached
hereto as Exhibit A.
Messrs. Duffy and Greenwood, both of whom are independent directors, make
up the Board's Compensation Committee. Mr. Duffy joined the Committee in April
of 2002, and Mr. Greenwood joined the Committee in November of 2002, when he
joined the Board. 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, 2003, the Compensation Committee held three meetings.
The Finance Committee monitors the Company's relationships with its
lenders and investment bankers and negotiates on behalf of the Company with
respect to proposed financing arrangements. Mr. Blatt is the sole member of the
Board's Finance Committee.
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The Nominating Committee of the Company currently consists of the
Company's independent directors and operates under a written charter adopted by
our Board of Directors, which is available on our Internet website. Our Board of
Directors has determined that each of the members of the Nominating Committee is
"independent" within the meaning of the general independence standards in the
listing standards of The Nasdaq Stock Market, Inc. During 2003, this committee
did not meet because the Committee was not established until June 2004. The
primary purposes and responsibilities of the Nominating Committee are to (1)
identify individuals qualified to become directors, consistent with the criteria
approved by our Board of Directors set forth in the Nominating Committee
Charter, (2) nominate qualified individuals for election to the Board of
Directors at the next annual meeting of shareholders, and (3) recommend to our
Board of Directors the individual directors to serve on the committees of our
Board of Directors.
Director Candidate Recommendations and Nominations by Shareholders. The
Nominating Committee's Charter provides that the Nominating Committee will
consider director candidate nominations by shareholders. In evaluating
nominations received from shareholders, the Nominating Committee will apply the
same criteria and follow the same process set forth in its Charter as it would
with its own nominations.
Nominating Committee Process for Identifying and Evaluating Director
Candidates. The Nominating Committee evaluates all director candidates in
accordance with the director qualification standards described in its Charter.
The Nominating Committee evaluates any candidate's qualifications to serve as a
member of our Board of Directors based on the totality of the merits of the
candidate and not based on minimum qualifications or attributes. In evaluating a
candidate, the Nominating Committee takes into account the background and
expertise of individual Board members as well as the background and expertise of
our Board of Directors as a whole. In addition, the Nominating Committee will
evaluate a candidate's independence and his or her background and expertise in
the context of our Board's needs. The Nominating Committee did not receive any
recommendations from any shareholders in connection with the annual meeting.
As a publicly traded corporation registered with and licensed by the
Nevada Gaming Commission, the Company has a Compliance Committee which
implements and administers the Company's Compliance Plan. The Committee's duties
include investigating key employees, consultants, lobbyists and others who wish
to do substantial business with the Company or its subsidiaries and making
recommendations to the Company's management concerning suitability. Nevada
gaming regulators require that one member of the committee be a member of the
Company's board. Mr. Stanton is the Chairman of the Compliance Committee. The
other members include the Company's Chief Financial Officer, Director of
Internal Security, Director of Administration and internal auditor.
Shareholders may communicate with the Board of Directors by sending
written correspondence to the Chairman of the Nominating Committee at the
following address: MTR Gaming Group, Inc., State Route 2, South, P.O. Box 356,
Chester, West Virginia 26034, Attention: Corporate Secretary. The Chairman of
the nominating Committee and his or her duly authorized representatives shall be
responsible for collecting and organizing shareholder
6
communications. Absent a conflict of interest, the Corporate Secretary is
responsible for evaluating the materiality of each shareholder communication and
determining whether further distribution is appropriate, and, if so, whether to
(i) the full Board, (ii) one or more Board members and/or (iii) other
individuals or entities.
All directors, except for Mr. Greenwood, attended the Company's annual
meeting of shareholders in July 2003.
Report of the Audit Committee
The purpose of the Audit Committee is to oversee the accounting and
financial reporting processes of the Company and the financial statements of the
Company. The Board of Directors, in its business judgment, has determined that
all members of the Committee are "independent," as required by applicable
listing standards of Nasdaq and the Sarbanes-Oxley Act of 2002 and the rules
promulgated thereunder. The Committee operates pursuant to a Charter that was
last amended and restated by the Board on June 1, 2004, a copy of which is
attached to this Proxy Statement as Exhibit A. As set forth in the Charter,
management of the Company is responsible for the preparation, presentation and
integrity of the Company's financial statements and for the effectiveness of
internal control over financial reporting. Management is responsible for
maintaining the Company's accounting and financial reporting principles and
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent auditors are
responsible for auditing the Company's financial statements, expressing an
opinion as to their conformity with generally accepted accounting principles and
annually auditing management's assessment of the effectiveness of internal
control over financial reporting (commencing in the fiscal year ending December
31, 2004).
In the performance of its oversight function, the Committee has considered
and discussed the audited financial statements with management and the
independent auditors. The Committee has also discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees, as currently in effect. Finally,
the Committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, as currently in effect, and has
discussed with the auditors the auditors' independence.
The members of the Audit Committee are not full-time employees of the
Company and are not performing the functions of auditors or accountants. As
such, it is not the duty or responsibility of the Audit Committee or its members
to conduct "field work" or other types of auditing or accounting reviews or
procedures or to set auditor independence standards. Members of the Committee
necessarily rely on the information provided to them by management and the
independent accountants. Accordingly, the Audit Committee's considerations and
discussions referred to above do not assure that the audit of the Company's
financial statements has been carried out in accordance with generally accepted
accounting standards, that the financial statements are presented in accordance
with generally accepted accounting principles or that the Company's auditors are
in fact "independent."
7
Based upon the reports and discussions described in this report, and
subject to the limitations on the role and responsibilities of the Committee
referred to above and in the Charter, the Committee recommended to the Board
that the audited financial statements be included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2003 as filed with the Securities
and Exchange Commission.
Submitted by the Audit Committee of the Company's Board of Directors,
Thomas J. Brosig
James V. Stanton
Donald J. Duffy
Executive Officers; Officers
The following persons serve as the officers indicated:
Principal Occupation Last
Name and Address Position 5 Years
EDSON R. ARNEAULT* Director, President, President of the Company
MTR Gaming Group, Inc. Chief Executive Officer and its subsidiaries
State Route 2 South and Treasurer
P.O. Box 356
Chester, WV 26034
ROBERT A. BLATT** Director, Vice Commercial Development
1890 Palmer Avenue President,
Suite 303 Assistant Secretary
Larchmont, NY 10538
ROSE MARY WILLIAMS*** Secretary Horse Racing Management
MTR Gaming Group, Inc.
State Route 2 South
Chester, WV 26034
ROGER M. SZEPELAK**** Vice President, Nevada Properties Hotel
3227 Civic Center Drive Chief Operating Officer and Casino Management
North Las Vegas, NV 89030
JOHN W. BITTNER, JR.***** Chief Financial Officer Accounting and Finance
MTR Gaming Group, Inc. Accounting
State Route 2 South
Chester, WV 26034
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Principal Occupation Last
Name and Address Position 5 Years
DAVID R. HUGHES Chief Operating Officer Casino Management
Mountaineer Park, Inc.
State Route 2 South
P.O. Box 358
Chester, WV 26034
PATRICK J. ARNEAULT Vice President; Oil and Gas;
Mountaineer Park, Inc. Mountaineer Facilities Facilities Management and
State Route 2 South Management and Construction
P.O. Box 358 Construction
Chester, WV 26034
- ----------
* Also an officer and director of Mountaineer Park, Inc., Speakeasy Gaming
of Las Vegas, Inc., Speakeasy Gaming of Reno, Inc., Speakeasy Gaming of
Fremont, Inc., Scioto Downs, Inc., MTR-Harness, Inc., Keystone State
Development, Inc., Keystone State Gaming, Inc., Keystone Downs, LLC, ExCal
Energy Corporation and Presque Isle Downs, Inc., the Company's
subsidiaries.
** Also assistant secretary of Mountaineer Park, Inc.
*** Also secretary of Mountaineer Park, Inc. and MTR-Harness, Inc. Officer of
Speakeasy Gaming of Las Vegas, Inc., Speakeasy Gaming of Reno, Inc. and
Speakeasy
**** Gaming of Fremont, Inc.
***** Also Chief Financial Officer of Scioto Downs, Inc.
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 11, 2004, the ownership of the
presently issued and outstanding shares of our common stock by persons owning
more than 5% of such stock, and the ownership of such stock by our officers and
directors, individually and as a group. As of June 11, 2004, there were
28,538,760 shares of common stock outstanding. Unless otherwise indicated, the
address for each of the stockholders listed below is c/o MTR Gaming Group, Inc.,
State Route 2 South, P.O. Box 356, Chester, WV 26034.
Number of Percentage
Name Shares of Class
- ---- ------ --------
Edson R Arneault(1) ............................................... 3,827,074 13.41%
Robert A. Blatt(2) ................................................ 1,052,225 3.69%
James V. Stanton(3) ............................................... 81,900 *
Donald J. Duffy(4) ................................................ 50,000 *
LC Greenwood(5) ................................................... 0 *
Thomas J. Brosig(6) ............................................... 0 *
Richard Delatore(7) ............................................... 0 *
Patrick J. Arneault(8) ............................................ 5,200 *
Rose Mary Williams(9) ............................................. 60,000 *
John W. Bittner, Jr.(10) .......................................... 50,000 *
Roger Szepelak(11) ................................................ 77,500 *
David R. Hughes ................................................... 0 *
Total officers and directors as a group (12 persons) .............. 5,179,232 18.21%
FMR Corp(12) ...................................................... 2,020,500 7.08%
- -----------
* Indicates less than one percent.
(1) Includes 3,308,532 shares and options to acquire beneficial ownership of
300,000 shares within 60 days held by Mr. Arneault. Also includes 199,333
shares held by a corporation of which Mr. Arneault is the sole shareholder
and 19,209 shares held by a partnership of which Mr. Arneault is a general
partner.
(2) Includes 899,225 shares held by Mr. Blatt, 3,000 shares held by Mr.
Blatt's wife, and options to acquire beneficial ownership of 150,000
shares exercisable within 60 days held by Mr. Blatt. Mr. Blatt's mailing
address is c/o The CRC Group, Larchmont Plaza, 1890 Palmer Avenue, Suite
303, Larchmont, NY 10538.
(3) Includes 56,900 shares held by Mr. Stanton and options to acquire
beneficial ownership of 25,000 shares exercisable within 60 days held by
Mr. Stanton. Mr. Stanton's mailing address is 815 Connecticut Avenue, NW,
Suite 620, Washington, DC 20006.
(4) Mr. Duffy's business mailing address is c/o Integrated Corporate
Relations, 24 Post Road, Westport, CT 06880. Includes no shares and
includes options to acquire beneficial ownership of 50,000 shares
exercisable within 60 days held by Mr. Duffy.
(5) Mr. Greenwood's business mailing address is c/o Greenwood McDonald Supply
Company, Inc., 313 West Main Street Carnegie, PA 15106.
(6) Mr. Brosig's mailing address is 1174 Glendale Place, Gulfport, MS 39507.
Mr. Brosig is not standing for reelection as a director. His tenure as a
director will cease on the date of the annual meeting.
10
(7) Mr. Delatore's business mailing address is c/o the Company at State Route
2 South, P.O. Box 356, Chester, West Virginia 26034.
(8) Includes 200 shares held by Mr. Arneault's minor children and options to
acquire ownership of 15,000 shares within 60 days held by Mr. Arneault
(10,000 of which vested on May 13, 2004).
(9) Includes no shares and includes options to acquire beneficial ownership of
68,333 shares within 60 days held by Ms. Williams (8,333 of which vested
on May 13, 2004).
(10) Includes no shares and includes options to acquire beneficial ownership of
50,000 shares within 60 days held by Mr. Bittner.
(11) Includes 2,500 shares and options to acquire beneficial ownership of
50,000 shares exercisable within 60 days by Mr. Szepelak. Mr. Szepelak's
mailing address is 3227 Civic Center Drive, North Las Vegas, Nevada 89030.
(12) FMR Corp. has indicated in a Schedule 13G joint filing with the SEC on
February 17, 2004, that various persons have the right to receive or the
power to direct the receipt of dividends from, or the proceeds from the
sale of, the Common Stock of the Company and that the interest of one
person, Fidelity Low Priced Stock Fund, an investment company registered
under the Investment Company Act of 1940, in the Common Stock of the
Company, amounted to 2,020,500 shares or 7.08% of the total outstanding
Common Stock at December 31, 2003.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the provisions of Section 16(a) of the Exchange Act, the Company's
executive officers, directors and 10% beneficial stockholders are required to
file reports of their transactions in the Company's securities with the
Commission. 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 as of June 11, 2004, all of its executive
officers, directors and greater than 10% beneficial stockholders complied with
all filing requirements applicable to them during 2003.
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 $100,000 in the fiscal year ended December 31, 2003.
11
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Awards
Compensation Other ---------------------- Payouts
------------------ Annual Restricted Options --------------------------
Salary Bonus Comp. Stock SARS LTIP All Other
Name Year ($) ($) ($)(1) Awards ($) (#)(2) Payouts ($) Comp. ($)(4)
- ---- ---- ------- ------- ------- ---------- ------- ----------- ------------
Edson R. Arneault(3)...... 2003 880,466 100,000 505,042 -- -- -- 125,931
Chairman, President and 2002 804,023 100,000 365,686 -- -- -- 229,193
Chief Executive Officer 2001 830,326 100,000 336,339 -- 100,000 -- 84,568
MTR Gaming Group, Inc.
Robert A. Blatt(3)........ 2003 180,157 -- 19,594 -- -- -- --
Vice President 2002 292,115 -- 1,393 -- 50,000 -- 19,594
2001 213,857 -- 1,288 -- -- -- 19,594
Roger M. Szepelak(3)...... 2003 172,733 25,000 12,788 --
Vice-President and Chief 2002 163,209 -- -- --
Operating Officer 2001 151,154 -- -- --
Nevada Properties
John W. Bittner(3)........ 2003 205,481 -- 1,300 -- 25,000 -- --
Chief Financial Officer 2002 184,077 1,300 25,000
David R. Hughes........... 2003 243,647 6,300
Chief Operating Officer
Mountaineer Park, Inc.
- ----------
(1) As to Mr. Arneault, for 2003, includes $419,174 performance bonus earned
but not paid in 2003, $84,568 annual insurance premiums treated as
compensation and an estimated pension contribution of $1,300; for 2002,
includes $359,194 performance bonus earned but not paid in 2002 and an
estimated pension plan contribution of $6,492; for 2001, includes $330,111
performance bonus earned but not paid in 2001 and an estimated pension
plan contribution of $6,228; As to Mr. Blatt consists of $19,594 annual
insurance premiums treated as compensation in 2003 and an estimated
pension plan contribution of $0, $1,393 and $1,288 in 2003, 2002 and 2001,
respectively. As to Mr. Szepelak, includes a $12,788 performance bonus
earned but not paid in 2003. As to Mr. Bittner, consists of an estimated
pension contribution of $1,300 in 2003 and 2002; As to Mr. Hughes consists
of an estimated pension contribution of $1,300 in 2003 and includes a
$5,000 performance bonus earned but not paid in 2003.
(2) Grants in 2003, 2002 and 2001 consisted of non-qualified stock options for
a term of ten years. The options are fully vested and have an exercise
price of $8.00, $15.00 and $7.30 per share, respectively.
(3) See "Employment Agreements" below. Mr. Arneault's employment agreement
requires him to defer receipt of all compensation over the amount set
forth in Section 162(m) of the Internal Revenue Code.
(4) Consists of premiums for life insurance pursuant to a qualified plan in
accordance with Section 419 of Internal Revenue Code for 2002 and 2001. In
2003 such premiums were treated as compensation. In 2003 and 2002 as to
Mr. Arneault includes $125,931 and $144,625, respectively for use of
Company owned housing. The incremental cost to the Company of providing
perquisites and other personal benefits during the indicated periods did
not exceed, as to any Named Executive Officer, the lesser of $50,000 or
10% of the total salary and bonus paid to such executive officer for any
such year and, accordingly, is omitted from the table.
12
OPTION GRANTS IN 2003
The following table contains information concerning the grant of stock
options during fiscal year 2003 to the Company's executive officers named in the
Summary Compensation Table.
Potential Realizable
Value at
Assumed Annual Rates
Number of of Stock Price
Securities % of Total Appreciation
Underlying Options for Option Term(1)
Options Granted in Exercise Expiration ----------------------
Name Granted Fiscal Year Price Date 5% 10%
- ---- ---------- ----------- -------- ---------- ---------- ---------
John W. Bittner, Jr................. 25,000 7.04% 8.00 5/13/2013 $ 125,780 $ 318,740
Roger M. Szepelak................... 25,000 7.04% 9.85 10/15/2013 154,867 392,449
- ----------
(1) In accordance with the rules of the Securities and Exchange Commission,
"Potential Realizable Value" has been calculated assuming an aggregate
ten-year appreciation of the fair market value of the Company's common
stock on the date of the grant at annual compounded rates of 5% and 10%,
respectively. These amounts represent hypothetical gains that could be
achieved. Actual gains, if any, on the exercise of stock options will
depend on the future performance of the Company's stock and the date on
which the options are exercised. Moreover, the gains shown are net of the
option exercise price, but do not include deductions for taxes or other
expenses associated with the exercise of the option or the sale of the
underlying shares.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
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 as of December 31, 2003.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at Fiscal Year End Year End ($)(1)
Acquired on Value ----------------------------- ----------------------------
Name Exercise Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
Edson R. Arneault............... 1,000,000 3,744,125 800,000 -- 6,490,000 --
Robert A. Blatt................. 200,000 1,068,750 300,000 -- 2,415,000 --
Roger M. Szepelak............... -- -- 75,000 --(2) 112,500 --
John W. Bittner, Jr............. -- -- 50,000 -- 57,500 --
- ----------
(1) Based on the market price of the Company's Common Stock of $10.30 on
December 31, 2003, as reported by Nasdaq.
(2) Excludes a total of 50,000 options which will be granted by the company
during 2004 and 2005 in accordance with the terms of the employment
agreement
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2003 with
respect to compensation plans under which equity securities of the Company are
authorized for issuance.
Number of securities
remaining available for future
Number of securities to Weighted-average issuance under equity
be issued upon exercise exercise price of compensation plans(excluding
of outstanding options, outstanding options, securities reflected
Plan Category warrants and rights warrants and rights in column (a))
- ------------- ----------------------- -------------------- ------------------------------
(a) (b) (c)
----------------------- -------------------- ------------------------------
Equity compensation plans approved by
security holders(1).................. 1,199,500 2.2286 55,000
Equity compensation plans not approved
by security holders(1)............... 627,000 7.9946 70,000
--------- -------
Total.............................. 1,826,500 125,000
========= =======
- ----------
(1) Excludes 200,000 shares issuable under the Company's 2004 Stock Incentive
Plan which is subject to shareholder approval.
13
The Company's equity compensation plans that were not approved by security
holders (as no such approval was required) consist of (i) grants of NQSOs as
inducement for initial employment by the Company or its subsidiaries; (ii)
grants of NQSOs to non-executive employees; and (iii) NQSOs granted under our
2001 Employee Stock Incentive Plan or available for grant under our 2002
Employee Stock Incentive Plan, both of which are "broad-based plans" as defined
by the Nasdaq Market Place Rules (i.e., ones in which not more than half of the
options/shares may be awarded to officers and directors). In the case of all
such plans, the exercise price of options must be not less than fair market
value of the common stock on the date of grant. Options granted under the plans
may be for terms of up to ten years. The 2001 and 2002 Employee Stock Incentive
Plans are to be administered by the board or a committee of the board consisting
of not fewer than two non-employee directors. Repricing under the 2001 plan is
limited to 10% of the number of options then outstanding thereunder; repricing
under the 2002 plan is prohibited. The terms of the 2004 Plan are substantially
the same as the 2002 Plan.
EMPLOYMENT AGREEMENTS
We have entered into a five-year employment agreement, effective January
1, 2001, with our President and Chief Executive Officer, Edson R. Arneault. The
employment agreement replaces an agreement entered into in February 1999 and
provides for, among other things, an annual base salary of $750,000 (subject to
automatic annual cost of living increases of 5%), semi-annual cash awards and an
annual performance bonus tied to EBITDA growth. The Employment Agreement
entitles Mr. Arneault, at our expense, to lease living and/or office quarters
for himself and the Company in any state or jurisdiction in which the Company is
currently doing business or commences substantial business operations. The
Company may choose to purchase such living or office quarters. In 2001, the
Company purchased living quarters for use by Mr. Arneault. The employment
agreement also provides for a long-term incentive bonus, subject to a cap,
payable at the end of the five-year term based upon growth compared to year 2000
in a variety of objective measurements, including earnings per share, the market
price of our common stock, EBITDA and gross revenues. Other factors affecting
the long-term bonus are acquisitions of other racetracks and parimutuel
facilities, acquisitions of gaming venues that generate positive EBITDA in their
first full year of operation, and successful legislative initiatives.
The agreement provides that if Mr. Arneault's period of employment is
terminated by reason of death or physical or mental incapacity, we will continue
to pay Mr. Arneault or his estate the compensation otherwise payable to Mr.
Arneault for a period of two years. If Mr. Arneault's period of employment is
terminated for a reason other than death or physical or mental incapacity or for
cause, we will continue to pay Mr. Arneault the compensation that otherwise
would have been due him for the remaining period of employment. If Mr.
Arneault's period of employment is terminated for cause, we will have no further
obligation to pay Mr. Arneault, 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 of the Company, as defined, and
(i) the termination is not for cause or by reason of the death or physical or
mental disability of Mr. Arneault or (ii) Mr. Arneault terminates his employment
for good reason, as defined in the agreement, then Mr. Arneault will
14
have the right to receive within thirty days of the termination, a sum that is
three times his annual base salary and payment by us of the next five annual
premium payments for the insurance policy called for by the deferred
compensation plan described below.
In February 1999, we entered into an employment agreement with Robert A.
Blatt. The agreement was for a term of five years, called for an annual base
salary of $46,000 (subject to automatic annual cost of living increases of 5%)
and additional compensation of $2,500 per day in the event Mr. Blatt performed
additional services. The employment agreement also entitled Mr. Blatt to
participate in our various benefit plans for health insurance, life insurance
and the like. The employment agreement expired in February of 2004, but it is
anticipated that we will enter a new employment agreement with Mr. Blatt.
We also have deferred compensation agreements with Messrs. Arneault and
Blatt, which provide for certain benefits upon retirement. We currently fund
these obligations through the purchase of "split dollar" life insurance
policies.
In October 2003, we entered into a three-year employment agreement with
Roger Szepelak as Vice President and Chief Operating Officer for Speakeasy
Gaming of Las Vegas, Inc. and Speakeasy Gaming of Reno, Inc. The agreement calls
for an annual base salary of $182,000 with annual automatic cost of living
increases of 5% and shall be subject to periodic increase by the Board of
Directors and entitles Mr. Szepelak to a car allowance as well as to participate
in our various employee benefit plans. In the event Mr. Szepelak brings the
Company an acquisition candidate during the period of employment, and the
Company in its discretion, consummates the acquisition, Mr Szepelak shall be
entitled, subject to any necessary regulatory approvals, to a cash bonus ranging
from $25,000 to $100,000 depending on the acquisition purchase price. In the
event Mr. Szepelak's employment is terminated by us other than for cause or a
permanent and total disability, he will be entitled to the compensation
otherwise payable to him under the employment agreement. In the event Mr.
Szepelak is terminated in connection with a change of control of the Company, as
defined in the agreement, Mr. Szepelak would be entitled to a cash payment in
the amount of his then current annual base salary.
In January 2002, we entered into a three-year employment agreement with
John W. Bittner, Jr. as Chief Financial Officer. The agreement calls for an
annual salary of $160,000, subject to increase by the Board of Directors, and
entitles Mr. Bittner to a car allowance as well as to participate in our various
employee benefit plans. In the event Mr. Bittner's employment is terminated by
us other than for cause or permanent disability, he will be entitled to the
compensation otherwise payable to him under the employment agreement. Further,
in the event Mr. Bittner is discharged during the last year of the term of the
agreement in connection with a change in control of the Company, as defined in
the agreement, Mr. Bittner would be entitled to a cash payment in the amount of
one year of Mr. Bittner's then current salary.
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 since December 31, 1998. The following graph assumes $100 invested in
each of the above groups and the reinvestment of dividends.
15
[LINE GRAPH OMITTED]
Year Ended
Index Description 12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003
================= =========== ========== ========== ========== ========== ==========
MTR GAMING GROUP, INC. 100.00 125.64 194.87 656.41 326.56 422.56
SIC CODE INDEX(1) 100.00 126.42 88.53 102.54 114.63 140.20
NASDAQ MARKET INDEX 100.00 176.37 110.86 88.37 61.64 92.68
- ----------
(1) The peer group consists of the following companies: American Skiing Co.;
American Wagering, Inc.; Argosy Gaming Co.; Assistglobal Technologies
Corp.; Boyd Gaming Corp.; Cirmaker Technology Corp; Dover Motorsports,
Inc.; Exploration Group, Inc.; Gametech International, Inc.; Gwin Inc.;
Imax Corp.; Isle of Capris Casinos; Lakes Gaming Inc.; Las Vegas From
Home.com; Littlefield Corporation; MGM Mirage, Inc.; Multimedia Games,
Inc.; Rascals International Inc.; Redhand International Inc.; Renaissance
Entertainment Corp.; Sands Regent; Skyline Multimedia Entertainment;
Sungold Entertainment; TBA Entertainment Corp.; Ticketmaster Inc.;
Tickets.com, Inc.; Trans World Corp.; Vail Resorts, Inc.; Winter Sports,
Inc.; WinWin Gaming Inc.; and Youbet.com, Inc.
16
Compensation of Directors
The Company's non-employee directors receive an annual stipend of $24,000
and a per meeting fee of $1,500. Directors who are employees of the Company do
not receive compensation for attendance at Board meetings. All board members are
reimbursed for expenses they incur in attending meetings.
Compensation Committee Interlocks and Insider Participation
On November 8, 1995, the Board voted to form an executive compensation
committee consisting of Mr. Robert L. Ruben (a director at the time) and Mr.
Blatt, (the "Committee"). In April of 2002, the Board elected Mr. Duffy to the
Committee, and Mr. Ruben resigned from the Committee. In November of 2002, Mr.
Greenwood joined the Board of Directors and the Compensation Committee, and Mr.
Blatt resigned from the Committee. Since that time, the Committee has consisted
entirely of independent directors. See "Certain Transactions."
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.
Board Compensation Committee Report on Executive Compensation
Policy
The Committee's decisions with respect to executive compensation will be
guided by the general principle that compensation be designed: (i) to assure
that the Company's executives receive fair compensation relative to their peers
at similar companies; (ii) to assure that the Company's shareholders are
receiving fair value for the compensation paid to the Company's executives; and
(iii) to allow the Company to secure and retain the services of high quality
executives.
The Company's compensation program currently consists 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 and/or cash. 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 generally 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. With respect to compensation for the
Company's current CEO, annual and long-term performance bonuses are calculated
pursuant to a formula tied to objective criteria.
17
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.
Chief Executive Officer Compensation; Employment Agreement
During the fiscal year ended December 31, 2003, Mr. Arneault's base salary
and bonuses were based upon a September 2001 employment agreement, which was
effective as of January 1, 2002, and replaced an agreement entered into in
February 1999. The performance bonus for 2003 is based upon an objective formula
tied to growth in the Company's EBITDA for 2003 compared to 2000 as set forth in
Mr. Arneault's employment agreement.
Donald J. Duffy
LC Greenwood
CERTAIN TRANSACTIONS
Mr. Patrick J. Arneault serves as Vice President of Development of
Mountaineer. During the year ended December 31, 2003, Mr. Arneault's total
compensation was $169,000. Patrick J. Arneault is the brother of Edson R.
Arneault, our president, chairman and chief executive officer. Mr. Arneault has
worked for Mountaineer since February 2000.
Ms. Aimee Zildjian serves as director of development for Presque Isle
Downs. During the year ended December 31, 2003, Ms. Zildjian's total
compensation was $107,000. Ms. Zildjian is the daughter of Edson R. Arneault,
our president, chairman and chief executive officer.
RATIFICATION OF ADOPTION OF 2004
STOCK INCENTIVE PLAN
The Company's Board of Directors has adopted, subject to the approval of
the Company's stockholders, the Company's 2004 Stock Incentive Plan (the
"Plan"). The Board has reserved 200,000 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 B.
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
18
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 require the
holder to pay such price per share, 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; provided,
however, that in the event an employee's employment is terminated in connection
with a change in control of the Company, then the employee will have the right
to exercise the option until the date the award otherwise have expired.
19
The Plan will be administered by the Board, which is authorized to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan and to determine the employees to whom, and the time, terms
and conditions under which, options may be granted. The Board is also authorized
to adjust the number of shares available under the Plan, the number of shares
subject to outstanding options and the option prices to take into account the
Company's capitalization by reason of a stock dividend, recapitalization,
merger, consolidation, stock split, combination or exchange of shares or
otherwise.
The Board may amend, suspend or terminate the Plan in any respect at any
time. However, no amendment may (i) increase the number of shares reserved for
options under the Plan, (ii) modify the requirements for participation in the
Plan, or (iii) modify the Plan in any way that would require stockholder
approval under the rules and regulations under the Securities Exchange Act of
1934.
FEDERAL INCOME TAX CONSEQUENCES
No taxable income is realized by the participant upon the grant or
exercise of an incentive stock option. However, the exercise of an incentive
stock option may result in alternative minimum tax liability for the
participant. If no disposition of the shares issued to a participant pursuant to
the exercise of an incentive stock option is made by the participant within two
years from the date of grant or within one year after the issuance of such
shares to the participant, then upon the sale of such shares, any amount
realized in excess of the option price (the amount paid for the shares) will be
taxed to the participant as a long-term capital gain and any loss sustained will
be a long-term capital loss, and no deduction will be allowed to the Company for
Federal income tax purposes.
If shares of the Company's common stock acquired upon the exercise of an
incentive stock option are disposed of prior to the expiration of the two-year
and one-year holding periods described above (a "disqualifying disposition"),
generally the participant will realize ordinary income in the year of
disposition in an amount equal to the excess, if any, of the fair market value
of the shares at exercise (or, if less, the amount realized on an arms-length
sale of such shares) over the option price thereof, and the Company will be
entitled to deduct such amount. Any further gain realized will be taxed as a
short-term or long-term capital gain and will not result in any deduction by the
Company. Special rules will apply where all or a portion of the exercise price
of the incentive stock option is paid by tendering shares of the Company's
common stock.
If an incentive stock option is exercised at a time when it no longer
qualifies for the tax treatment described above, the option is treated as a
non-qualified stock option. Generally, an incentive stock option will not be
eligible for the tax treatment described above if it is exercised more than
three months following termination of employment (one year following termination
of employment by reason of total and permanent disability), except in certain
cases where the incentive stock option is exercised after the death of the
participant.
With respect to non-qualified stock options, no income is realized by the
participant at the time the option is granted. Generally, at exercise, ordinary
income is realized by the
20
participant in an amount equal to the difference between the option price and
the fair market value of the common stock on the date of exercise, and the
Company receives a tax deduction for the same amount. At disposition, any
appreciation or depreciation after the date of exercise is treated either as a
short-term or long-term capital gain or loss depending on how long the shares
have been held.
A grant of shares of common stock that is subject to no vesting
restrictions will result in taxable compensation income for federal income tax
purposes to the recipient at the time of grant in an amount 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
As of June 18, 2004, no options have been granted under the Plan.
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.
ITEM 3
RATIFICATION OF SELECTION OF AUDITORS
The Board has selected the firm of Ernst & Young LLP ("E&Y"), independent
public accountants, to serve as auditors for the fiscal year ending December 31,
2004, subject to ratification by the stockholders.
21
The following table summarizes principal accounting fees and services
billed for calendar 2003.
2003 2002
-------- --------
Audit Fees:
Annual Audit of the Financial Statements (including expenses totaling $16,383 and
$46,629 billed in 2003 and 2002, respectively) ................................... $310,383 $244,329
Other Audit-Specific Matters ........................................................ 92,179 29,209
Audit Related Services:
$ -- $ 27,527
Tax Services:
Tax Compliance ...................................................................... $ 32,723 $ 32,808
Other Tax Services .................................................................. 172,507 195,060
All Other Services:
Benefit Plan Research-Scioto Downs, Inc. ............................................ $ 21,199 --
It is expected that a member of E&Y will be present at the Annual Meeting
and will have an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
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 2005 must be received by
the Company's executive offices not later than February 18, 2005. Proponents
should submit their proposals by Certified Mail-Return Receipt Requested.
Proposals received after that date will be deemed untimely.
Notice Regarding Abandoned Property Law of New York State
The Company has been informed by its Transfer Agent, Continental Stock
Transfer & Trust Company, that New York State now requires the Company's
Transfer Agent to report and escheat all shares held by the Company's record
shareholders if there has been no written communication received from the
shareholder for a period of five years. This regulation pertains specifically to
corporate issuers who do not pay dividends and their shareholders with New York,
foreign or unknown addresses. The law mandates escheatment of shares even though
the certificates are not in the Transfer Agent's possession, and even though the
shareholder's address of record is apparently correct.
22
The Transfer Agent has advised the Company that the law requires the
Transfer Agent to search its records as of June 30 each year in order to
determine those New York resident shareholders from whom it has had no written
communication within the past five years. Written communication would include
transfer activity, voted proxies, address changes or other miscellaneous written
inquiries. For those shareholders who have not contacted the Transfer Agent in
over five years, a first-class letter must be sent notifying them that their
shares will be escheated in November if they do not contact the Transfer Agent
in writing prior thereto. All written responses will be entered in the Transfer
Agent's files, but those who do not respond will have their shares escheated.
Shareholders will be able to apply to New York State for the return of their
shares.
Accordingly, shareholders that may be subject to New York's Abandoned
Property Law should make their inquiries and otherwise communicate, with respect
to the Company, in writing. Shareholders should contact their attorneys with any
questions they may have regarding this matter.
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.
June 18, 2004 MTR GAMING GROUP, INC.
Rose Mary Williams, Secretary
23
EXHIBIT A
MTR GAMING GROUP, INC.
AUDIT COMMITTEE CHARTER
(As Amended and Restated)
Commencing June 1, 2004, the date this Audit Committee Charter (as amended
and restated) was approved and authorized by the Board of Directors of MTR
Gaming Group, Inc. (the "Company"), the Audit Committee (the "Committee") of the
Company will have the oversight responsibility, authority and specific duties as
described below:
Committee Membership
The Committee shall be comprised of at least three directors each of whom
(i) is "independent" under the rules of the SEC and the Nasdaq Stock Market,
Inc., except as permitted by Nasdaq Rule 4350(d) and the Sarbanes-Oxley Act of
2002, and the rules promulgated thereunder, (ii) does not accept any consulting,
advisory or other compensatory fee from the issuer other than in his or her
capacity as a member of the Board or any committee of the Board, (iii) is not an
"affiliate" of the Company or any subsidiary of the Company, as such term is
defined in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and (iv) has not participated in the preparation of the
financial statements of the Company or any current subsidiary of the Company at
any time during the past three years. All members of the Committee must be able
to read and understand fundamental financial statements, including a company's
balance sheet, income statement, and cash flow statement, and the Committee
shall have at least one member who has past employment experience in finance or
accounting, requisite professional certification in accounting, or other
comparable experience or background which results in the member's financial
sophistication.
Notwithstanding the immediately preceding paragraph, one director who is
not "independent" under the rules of the Nasdaq Stock Market, Inc., who does not
accept any consulting, advisory or other compensatory fee from the issuer other
than in his or her capacity as a member of the Board or any committee of the
Board, who is not an "affiliate" of the Company or any subsidiary of the
Company, as such term is defined in Rule 10A-3 under the Exchange Act, and who
is not a current officer or employee, or a spouse, parent, child or sibling,
whether by blood, marriage or adoption, of, or a person who has the same
residence as, any current officer or employee, may be appointed to the Committee
if the Board, under exceptional and limited circumstances, shall have determined
that such individual's membership on the Committee is required by the best
interests of the Company and its stockholders, and the Board discloses, in the
next annual meeting proxy statement (or Form 10-K if no proxy statement is
filed) subsequent to such determination, the nature of the relationship, and the
reasons for the determination. Any such member appointed to the Committee may
only serve for up to two years and may not chair the Committee.
Members shall be appointed by the Board based on nominations recommended
by the Company's Nominating Committee and shall serve at the pleasure of the
Board and for such term or terms as the Board may determine.
Committee Purposes
The purpose of the Committee is to oversee the accounting and financial
reporting processes of the Company and the audits of the financial statements of
the Company.
The independent auditors shall submit to the Committee annually a formal
written statement (the "Auditors' Statement") describing: the auditors' internal
quality-control procedures; any material issues raised by the most recent
internal quality-control review or peer review of the auditors, or by any
inquiry or investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits carried out by
the auditors, and any steps taken to deal with any such issues; and (to assess
the auditors' independence) all relationships between the independent auditors
and the Company including each non-audit service provided to the Company and at
least the matters set forth in Independence Standards Board No. 1.
The independent auditors shall submit to the Committee annually a formal
written statement of the fees billed in each of the last two fiscal years for
each of the following categories of services rendered by the independent
auditors: (i) the audit of the Company's annual financial statements and the
reviews of the financial statements included in the Company's Quarterly Reports
on From 10-Q or services that are normally provided by the independent auditors
in connection with statutory and regulatory filings or engagements; (ii)
assurance and related services not included in clause (i) that are reasonably
related to the performance of the audit or review of the Company's financial
statements, in the aggregate and by each service; (iii) tax compliance, tax
advice and tax planning services, in the aggregate and by each service; and (iv)
all other products and services rendered by the independent auditors, in the
aggregate and by each service.
Committee Duties and Responsibilities
To carry out its purposes, the Committee shall have the following duties
and responsibilities:
1. With respect to the independent auditors,
(i) to be directly responsible for the appointment, compensation,
retention and oversight of the work of the independent
auditors (including the resolution of disagreements between
management and the independent auditors regarding financial
reporting), who shall report directly to the Committee,
provided that the auditor appointment shall be subject to
shareholder approval;
(ii) to be directly responsible for the appointment, compensation,
retention and oversight of the work of any other registered
public accounting firm engaged for the purpose of preparing or
issuing an audit report or to perform audit, review or
attestation services, which firm shall also report directly to
the Committee;
(iii) to pre-approve, or to adopt appropriate procedures to
pre-approve, all audit and non-audit services to be provided
by the independent auditors;
2
(iv) to ensure that the independent auditors prepare and deliver
annually an Auditors' Statement (it being understood that the
independent auditors are responsible for the accuracy and
completeness of this Statement), and to discuss with
independent auditors any relationships or services disclosed
in this Statement that may impact the quality of audit
services or the objectivity and independence of the Company's
independent auditors;
(v) to obtain from the independent auditors in connection with any
audit a timely report relating to the Company's annual audited
financial statements describing all critical accounting
policies and practices used, all alternative treatments within
generally accepted accounting principles for policies and
practices related to material items that have been discussed
with management, ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the
independent auditors, and any material written communications
between the independent auditors and management, such as any
"management" letter or schedule of unadjusted differences;
(vi) to discuss with management the timing and process for
implementing the rotation of the lead audit partner, the
concurring partner and any other active audit engagement team
partner; and
(vii) to review and approve all related party transactions of the
Company.
2. With respect to the internal auditing department,
(i) to review the appointment and replacement of the director of
the internal auditing department; and
(ii) to advise the director of the internal auditing department
that he or she is expected to provide to the Committee
summaries of and, as appropriate, the significant reports to
management prepared by the internal auditing department and
management's responses thereto.
3. With respect to accounting principles and policies, financial
reporting and internal control over reporting,
(i) to advise management, the internal auditing department and the
independent auditors that they are expected to provide to the
Committee a timely analysis of significant issues and
practices relating to accounting principles and policies,
financial reporting and internal control over financial
reporting;
(ii) to consider any reports or communications (and management's
and/or the internal audit department's response thereto)
submitted to the Committee by the independent auditors
required by or referred to in SAS 61 (as codified by AU
Section 380), as it may be modified or supplemented, or other
professional standards, including reports and communications
related to:
3
o deficiencies, including significant deficiencies or
material weaknesses, in internal control identified
during the audit or other matters relating to internal
control over financial reporting;
o consideration of fraud in a financial statement audit;
o detection of illegal acts;
o the independent auditors' responsibility under generally
accepted auditing standards;
o any restriction on audit scope;
o significant accounting policies;
o significant issues discussed with the national office
respecting auditing or accounting issues presented by
the engagement;
o management judgments and accounting estimates;
o any accounting adjustments arising from the audit that
were noted or proposed by the auditors but were passed
(as immaterial or otherwise);
o the responsibility of the independent auditors for other
information in documents containing audited financial
statements;
o disagreements with management;
o consultation by management with other accountants;
o major issues discussed with management prior to
retention of the independent auditors;
o difficulties encountered with management in performing
the audit;
o the independent auditors' judgments about the quality of
the entity's accounting principles;
o reviews of interim financial information conducted by
the independent auditors; and
o the responsibilities, budget and staffing of the
Company's internal audit function.
4
(iii) to meet with management, the independent auditors and, if
appropriate, the director of the internal auditing department;
(iv) to inquire of the Company's chief executive officer and chief
financial officer as to the existence of any significant
deficiencies or material weaknesses in the design or operation
of internal control over financial reporting which are
reasonably likely to adversely affect the Company's ability to
record, process, summarize and report financial information,
and as to the existence of any fraud, whether or not material,
that involves management or other employees who have a
significant role in the Company's internal control over
financial reporting;
(v) to establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters,
and for the confidential, anonymous submission by Company
employees of concerns regarding questionable accounting or
auditing matters;
(vi) to review and discuss any reports concerning material
violations submitted to it by Company attorneys or outside
counsel pursuant to the SEC attorney professional
responsibility rules or otherwise; procedures for the receipt
and treatment of material violations reports by the Committee
shall be adopted by the Committee; and
(vii) to establish hiring policies for employees or former employees
of the independent auditors.
4. with respect to reporting and recommendations,
(i) to prepare any report or other disclosures, including any
recommendation of the Committee, required by the rules of the
SEC to be included in the Company's annual proxy statement;
and
(ii) to review and reassess the adequacy of this Charter at least
annually and recommend any changes to the full Board of
Directors.
Committee Structure and Operations
The Board shall designate one member of the Committee as its chairperson.
In the event of a tie vote on any issue, the chairperson's vote shall decide the
issue. The Committee shall meet once every fiscal quarter or more frequently if
circumstances dictate, to discuss with management the annual audited financial
statements and quarterly financial statements, as applicable. The Committee
should meet separately periodically with management, the director of the
internal auditing department and the independent auditors to discuss any matters
that the Committee or any of these persons or firms believe should be discussed
privately. The Committee may request any officer of the Company or the Company's
outside counsel or independent auditors to attend a meeting of the Committee or
to meet with any members of, or
5
consultants to, the Committee. Members of the Committee may participate in a
meeting of the Committee by means of conference call or similar communications
equipment by means of which all persons participating in the meeting can hear
each other.
Delegation to Subcommittee
The Committee may, in its discretion, delegate all or a portion of its
duties and responsibilities to a subcommittee of the Committee. The Committee
may, in its discretion, delegate to one or more of its members the authority to
pre-approve any audit or non-audit services to be performed by the independent
auditors, provided that any such approvals are presented to the Committee at its
next scheduled meeting.
Resources and Authority of the Committee
The Committee shall have the resources and authority appropriate to
discharge its duties and responsibilities, including the authority to select,
retain, terminate, and approve the fees and other retention terms of special or
independent counsel, accountants or other experts and advisors, as it deems
necessary or appropriate, without seeking approval of the Board or management.
The Company shall provide appropriate funding, as determined by the
Committee, in its capacity as a committee of the Board, for payment of:
1. Compensation to the independent auditors and any other public
accounting firm engaged for the purpose of preparing or issuing an
audit report or performing other audit, review or attest services
for the Company;
2. Compensation of any advisers employed by the Committee; and
3. Ordinary administrative expenses of the Committee that are necessary
or appropriate in carrying out its duties.
6
EXHIBIT B
2004 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 nonqualified stock options ("NQSOs") which do not qualify as incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and stock of the Company which may be subject to
contingencies or restrictions (collectively, "Awards"). The Plan does not
provide for the granting of any "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, $.00001 par value per share, of
the Company ("Common Stock") for which Awards may be granted under the Plan
shall not exceed 200,000 shares, provided, however, that not more than 49% of
such shares may be issued to Directors and Executive Officers of the Company.
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 fewer
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; 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
1
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; 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.
Notwithstanding any provision in the Plan to the contrary, an Award granted to a
consultant or director who is not an employee of the Company shall be based upon
a formula or other criteria established by the Committee at least ninety (90)
days prior to the grant of such Award.
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 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 100,000 SHARES.
(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. Notwithstanding any provision in this
Plan to the contrary, the exercise price per share of a NQSO shall not be less
than the Fair Market Value of a share of Common Stock on the date that the NQSO
was granted.
(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. Options shall be subject to earlier termination as
hereunder provided.
2
(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, and
applicable law and regulation do not prohibit, 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.
Subject to applicable law, 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 (provided, however, that such optionee is
neither an executive officer, director nor other person whose participation in
such an arrangement would constitute a violation of the Sarbanes-Oxley Act of
2002 by the Company) of a properly executed notice, together with a copy of his
irrevocable instructions to a broker acceptable to the Committee to deliver
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.
(f) REPRICING. Options granted pursuant to the Plan may not be
repriced.
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
3
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 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. Contracts with respect to the grant of shares of Common Stock shall
require that the Award holder agree not to transfer the Common Stock for (a) one
year following the grant in the case of Awards based on performance and (b)
three years following the grant in the case of Awards based on the passage of
time. The Contracts may provide for the waiver of this restriction in the event
of death, disability, retirement, change of control or other similar
circumstances specified by the Committee.
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; and PROVIDED
FURTHER that in the event an employee's employment is terminated in connection
with a change in control of the Company, then the employee will have the right
to exercise the option until the date the award otherwise would have expired.
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
4
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 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
5
Committee determines are necessary or convenient to facilitate the perfection of
an 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
distribution 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 Company), any outstanding and unvested stock
options 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 May 6, 2004, subject to the approval of the Company's
shareholders. The Board of Directors 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 to comply with the
provisions of Rule 16b-3, Section 162(m) of the Code, or any change in
applicable law, regulations,
6
rulings or interpretations of any governmental agency or regulatory body. 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;
PROVIDED, HOWEVER, that a contract may provide that non-qualified Awards may be
donated to charity or assigned to a family trust or similar vehicle.
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 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, or (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.
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, and subject
to the requirements and prohibitions of applicable law and regulation, 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:
7
(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 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 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.
8
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. Notwithstanding
the foregoing, if the Plan is not approved by a vote of the stockholders of the
Company on or before May 6, 2005, the Plan and any Awards granted hereunder
shall terminate.
9
APPENDIX
REVOCABLE PROXY
MTR GAMING GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
July 22, 2004
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints Edson R. Arneault and Robert A. Blatt and each
of them, with full power of substitution as the proxies of the undersigned to
vote all 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 New York Marriott East Side, 525 Lexington Avenue, New York, New York
10017 on July 22, 2004 at 10:00 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:
The Board of Directors recommends a vote FOR ITEMS 1, 2 and 3.
1. ELECTION OF DIRECTORS
FOR all nominees listed below |_| WITHHOLD AUTHORITY |_|
Edson R. Arneault Robert A. Blatt James V. Stanton Donald J. Duffy
LC Greenwood Richard Delatore
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.)
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2. PROPOSAL TO RATIFY THE ADOPTION OF THE CORPORATION'S 2004 STOCK INCENTIVE
PLAN
|_| FOR |_| AGAINST |_| ABSTAIN
3. PROPOSAL TO CONFIRM THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT
PUBLIC ACCONTANTS FOR THE CORPORATION FOR THE FISCAL YEAR ENDING DECEMBER
31, 2004.
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner described
herein by the undersigned stockholder. If no direction is made, this proxy
will be voted FOR Proposals 1, 2 and 3.
DATED , 2004
------------------------
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Signature
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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