MTR GAMING GROUP INC (Form: 10-Q, Received: 08/09/2010 13:40:19)

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MTR GAMING GROUP, INC. TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q


ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NO.: 000-20508

(Exact name of registrant as specified in its charter)


DELAWARE (State or other jurisdiction of incorporation)		84-1103135 (I.R.S. Employer Identification Number)

STATE ROUTE 2 SOUTH, P.O. BOX 356, CHESTER, WEST VIRGINIA 26034
(Address of principal executive offices)

(304) 387-8000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer o		Accelerated filer ý		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

COMMON STOCK, $.00001 PAR VALUE
Class
27,475,260
Outstanding at August 9, 2010

Table of Contents

MTR GAMING GROUP, INC.
TABLE OF CONTENTS


PART I—FINANCIAL INFORMATION		3
Item 1—Financial Statements		3
Consolidated Balance Sheets at June 30, 2010 and December 31, 2009		3
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2010 and 2009		4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009		5
Notes to Consolidated Financial Statements		6
Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3—Quantitative and Qualitative Disclosures about Market Risk		44
Item 4—Controls and Procedures		44
PART II—OTHER INFORMATION		45
Item 1—Legal Proceedings		45
Item 1A—Risk Factors		45
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds		45
Item 3—Defaults upon Senior Securities		45
Item 4—Removed and Reserved		45
Item 5—Other Information		45
Item 6—Exhibits		46
SIGNATURE PAGE		47
EXHIBIT INDEX		48

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PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

MTR GAMING GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

		JUNE 30 2010			DECEMBER 31 2009

		(unaudited)
ASSETS
Current assets:
	Cash and cash equivalents	$	48,587		$	44,755
	Restricted cash		1,040			483
	Accounts receivable, net of allowance for doubtful accounts of $303 in 2010 and $458 in 2009		3,335			2,641
	Inventories		3,672			3,794
	Deferred financing costs		3,979			3,606
	Prepaid income taxes		632			8,663
	Deferred income taxes		139			37
	Prepaid expenses and other current assets		6,256			8,181

Total current assets			67,640			72,160
Property and equipment, net			325,921			332,351
Goodwill			494			494
Other intangibles			85,529			69,021
Deferred financing costs, net of current portion			9,949			10,616
Deposits and other			2,861			4,632
Non-operating real property			12,215			13,554
Assets of discontinued operations			185			185

Total assets		$	504,794		$	503,013

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable	$	2,054		$	2,150
	Accounts payable—gaming taxes and assessments		3,309			7,030
	Accrued payroll and payroll taxes		4,372			3,373
	Accrued interest		16,736			14,247
	Other accrued liabilities		9,402			11,641
	Construction project and equipment liabilities		2,337			583
	Current portion of long-term debt and capital lease obligations		2,913			6,618
	Liabilities of discontinued operations		216			237

Total current liabilities			41,339			45,879
Long-term debt and capital lease obligations, net of current portion			386,175			375,885
Deferred income taxes			7,849			7,976

Total liabilities			435,363			429,740

Stockholders' equity:
	Common stock		—			—
	Additional paid-in capital		61,836			61,882
	Retained earnings		7,678			11,475
	Accumulated other comprehensive loss		(300	)		(300	)

Total stockholders' equity of MTR Gaming Group, Inc.			69,214			73,057
Non-controlling interest of discontinued operations			217			216

Total stockholders' equity			69,431			73,273

Total liabilities and stockholders' equity		$	504,794		$	503,013

The accompanying notes are an integral part of the consolidated financial statements.

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MTR GAMING GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share amounts)

(unaudited)

			THREE MONTHS ENDED JUNE 30						SIX MONTHS ENDED JUNE 30

			2010			2009			2010			2009
Revenues:
	Gaming		$	99,732		$	108,930		$	191,591		$	209,496
	Pari-mutuel commissions			3,634			4,126			4,947			6,091
	Food, beverage and lodging			8,514			8,493			15,487			16,103
	Other			2,256			2,569			3,865			4,265

Total revenues				114,136			124,118			215,890			235,955
	Less promotional allowances			(2,514	)		(2,986	)		(4,909	)		(5,123	)

Net revenues				111,622			121,132			210,981			230,832

Operating expenses:
	Expenses of operating departments:
		Gaming		62,167			68,599			119,607			131,381
		Pari-mutuel commissions		3,488			3,835			5,288			6,120
		Food, beverage and lodging		6,135			6,155			11,583			11,887
		Other		1,740			1,807			3,131			3,196
	Marketing and promotions			3,514			6,503			6,399			10,948
	General and administrative			13,547			14,318			27,219			27,932
	Project-opening costs			1,023			—			1,098			—
	Depreciation			7,073			7,314			14,365			14,588
	Loss on the sale or disposal of property			57			130			123			138

Total operating expenses				98,744			108,661			188,813			206,190

Operating income				12,878			12,471			22,168			24,642
Other income (expense):
	Interest income			8			—			12			439
	Interest expense			(13,528	)		(9,956	)		(27,070	)		(19,880	)

(Loss) income from continuing operations before income taxes				(642	)		2,515			(4,890	)		5,201
Benefit (provision) for income taxes				132			(1,598	)		1,243			(2,782	)

(Loss) income from continuing operations				(510	)		917			(3,647	)		2,419

Discontinued operations:
	Loss from discontinued operations before income taxes and non-controlling interest			(10	)		(660	)		(229	)		(2,002	)
	Benefit for income taxes			3			92			80			681

	Loss from discontinued operations before non-controlling interest			(7	)		(568	)		(149	)		(1,321	)
	Non-controlling interest			—			3			(1	)		6

Loss from discontinued operations				(7	)		(565	)		(150	)		(1,315	)

Net (loss) income			$	(517	)	$	352		$	(3,797	)	$	1,104

Net (loss) income per share—basic:
	(Loss) income from continuing operations		$	(0.02	)	$	0.03		$	(0.13	)	$	0.09
	Loss from discontinued operations			—			(0.02	)		(0.01	)		(0.05	)

	Net (loss) income		$	(0.02	)	$	0.01		$	(0.14	)	$	0.04

Net (loss) income per share—diluted:
	(Loss) income from continuing operations		$	(0.02	)	$	0.03		$	(0.13	)	$	0.09
	Loss from discontinued operations			—			(0.02	)		(0.01	)		(0.05	)

	Net (loss) income		$	(0.02	)	$	0.01		$	(0.14	)	$	0.04

Weighted average number of shares outstanding:
	Basic			27,475,260			27,475,260			27,475,260			27,475,260

	Diluted			27,475,260			27,475,260			27,475,260			27,475,260

The accompanying notes are an integral part of the consolidated financial statements.

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MTR GAMING GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

				SIX MONTHS ENDED JUNE 30

				2010			2009
Cash flows from operating activities:
	Net (loss) income			$	(3,797	)	$	1,104
	Adjustments to reconcile net (loss) income to net cash provided by operating activities:
		Depreciation			14,365			14,588
		Amortization of deferred financing fees			3,341			2,317
		Bad debt expense			73			271
		Stock-based compensation expense			229			43
		Deferred income taxes			(450	)		(2	)
		Decrease in long-term deferred compensation			—			(20	)
		Loss on the sale or disposal of property			123			138
		Change in operating assets and liabilities:
			Accounts receivable		(767	)		2,432
			Prepaid income taxes		8,031			7,059
			Other current assets		2,047			10,247
			Accounts payable		(3,817	)		(1,971	)
			Accrued liabilities		2,949			(9,588	)

			Net cash provided by continuing operating activities		22,327			26,618
			Net cash used in discontinued operating activities		(20	)		(257	)

Net cash provided by operating activities					22,307			26,361

Cash flows from investing activities:
	(Increase) decrease in restricted cash				(557	)		93
	Decrease in deposits and other				1,771			412
	Proceeds from sale of non-operating real property				1,370			—
	Proceeds from sale of property and equipment				162			205
	Reimbursement of capital expenditures from West Virginia Racing Commission				2,270			—
	Capital expenditures				(10,521	)		(7,070	)
	Payment of Pennsylvania table games license				(16,508	)		—

	Net cash used in continuing investing activities				(22,013	)		(6,360	)
	Net cash used in discontinued investing activities				—			—

Net cash used in investing activities					(22,013	)		(6,360	)

Cash flows from financing activities:
	Proceeds from credit facility				10,000			—
	Proceeds from equipment financing				679			—
	Principal payments on long-term debt and capital lease obligations				(5,344	)		(8,077	)
	Financing cost paid				(1,797	)		(224	)

	Net cash provided by (used in) continuing financing activities				3,538			(8,301	)
	Net cash provided by (used in) discontinued financing activities				—			—

Net cash provided by (used in) financing activities					3,538			(8,301	)

Net increase in cash and cash equivalents					3,832			11,700
Cash and cash equivalents, beginning of year					44,755			29,011

Cash and cash equivalents, end of year				$	48,587		$	40,711

Cash paid (refunded) during the period for:
Interest paid				$	21,241		$	17,502

Income taxes refunded				$	(8,906	)	$	(7,752	)

The accompanying notes are an integral part of the consolidated financial statements.

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MTR GAMING GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1—BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of MTR Gaming Group, Inc. and Subsidiaries ("the Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included herein. Operating results for the three and six months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

The consolidated balance sheet at December 31, 2009 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

The Company, through our wholly-owned subsidiaries, owns and operates Mountaineer Casino, Racetrack & Resort in Chester, West Virginia; Presque Isle Downs & Casino in Erie, Pennsylvania; and Scioto Downs in Columbus, Ohio. Scioto Downs, through its subsidiary RacelineBet, Inc., also operates Racelinebet.com, a national account wagering service that offers online and telephone wagering on horse races as a marketing affiliate of AmericaTab LTD.

Discontinued operations, as discussed in Note 4, include (i) MTR-Harness, Inc. and its interest in North Metro Harness Initiative, LLC; (ii) Jackson Racing, Inc. and its interest in Jackson Trotting Association, LLC; (iii) Binion's Gambling Hall & Hotel; and (iv) Ramada Inn and Speedway Casino.

Certain other reclassifications have been made to the prior year's consolidated financial statement presentation to conform to the current presentation. These reclassifications did not affect our consolidated net income (loss) or cash flows.

We have evaluated all subsequent events through the date the financial statements were issued. No material recognized or non-recognized subsequent events were identified.

For further information, refer to our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009.

NOTE 2—RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In April 2010, Accounting Standards Update No. 2010-16, Entertainment—Casinos (Topic 924): Accruals for Casino Jackpot Liabilities ("ASU 2010-16"), was issued. ASU 2010-16 codifies the consensus reached in Emerging Issues Task Force Issue No. 09-F, "Casino Base Jackpot Liabilities." ASU 2010-16 amends the FASB Accounting Standards Codification™ to clarify that an entity should not accrue jackpot liabilities, or portions thereof, before a jackpot is won if the entity can avoid paying the jackpot. Jackpots should be accrued and charged to revenue when an entity has the obligation to pay the jackpot. The guidance in this ASU applies to both base and progressive jackpots. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The amendments should be applied by recording a cumulative-effect adjustment to opening retained earnings in the period of adoption. We are currently evaluating the requirements of ASU 2010-16 and have not yet determined the impact on our consolidated financial statements.

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MTR GAMING GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 2—RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)

In January 2010, Accounting Standards Update No. 2010-06, Improving Disclosures About Fair Value Measurements ("ASU 2010-06"), was issued as an amendment to ASC 820, Fair Value Measurements and Disclosures . ASU 2010-06 did not change any accounting requirements, but added new disclosures for transfers between hierarchy levels and clarified existing disclosure requirements. The adoption of this accounting standard did not have a material impact on our consolidated financial statements.

NOTE 3—FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurements and Disclosures (formerly SFAS No. 157), provides guidance for measuring the fair value of assets and liabilities and requires expanded disclosures about fair value measurements. ASC 820 indicates that fair value should be determined based on the assumptions marketplace participants would use in pricing the asset or liability and provides additional guidelines to consider in determining the market-based measurement.

ASC 820 requires fair value measurement be classified and disclosed in one of the following categories:


	Level 1:		Unadjusted quoted market prices for identical assets and liabilities.
	Level 2:		Inputs other than Level 1 that are observable, either directly or indirectly, for the asset or liability through corroboration with market data for substantially the full term of the asset or liability.
	Level 3:		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities (management's own assumptions about what market participants would use in pricing the asset or liability at the measurement date).

The fair value of our cash equivalents approximates the carrying value at June 30, 2010 and December 31, 2009. The fair value was determined based on Level 1 inputs.

The carrying value of amounts outstanding under our Credit Facility (see Note 8) at June 30, 2010 approximate fair value based on the prevailing interest rates. There were no amounts outstanding on the Amended and Restated Credit Facility at December 31, 2009. The fair value of our $260 million 12.625% Senior Secured Notes was $260.7 million at June 30, 2010 and $249.6 million at December 31, 2009 compared to carrying values of $249.9 million and $248.6 million at June 30, 2010 and December 31, 2009, respectively. The fair value of our $125 million 9% Senior Subordinated Notes was $95.0 million at June 30, 2010 and $98.8 million at December 31, 2009 compared to a carrying value of $125 million at June 30, 2010 and December 31, 2009. The fair value was determined based on Level 2 inputs including quoted market prices and bond terms and conditions.

Our Senior Secured Notes, Senior Subordinated Notes, and amounts outstanding under our other debt financing arrangements were stated at carrying value as long-term debt in our consolidated balance sheets as of June 30, 2010 and December 31, 2009.

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MTR GAMING GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 4—DISCONTINUED OPERATIONS

North Metro Harness Initiative, LLC (d/b/a Running Aces Harness Park)

Our wholly-owned subsidiary MTR-Harness, Inc. previously held a 50% interest in North Metro Harness Initiative, LLC (d/b/a Running Acres Harness Park) that operates a harness racetrack in Minneapolis, Minnesota. The racetrack was constructed with financing provided by Black Diamond Commercial Finance, LLC as agent (collectively "Black Diamond").

On April 3, 2009, we received notification that Black Diamond, as a result of North Metro's default under the Black Diamond credit agreement, was pursuing legal action seeking (i) enforcement of our payment of our $1 million guarantee of North Metro's indebtedness and certain additional costs, and (ii) foreclosure of our subsidiary's pledged equity interest in North Metro. Pursuant to a settlement agreement with Black Diamond executed on May 27, 2009, we relinquished our interest in North Metro (the value of which we had already determined was impaired and written down to $0 during 2008) and paid $1 million to satisfy our obligations under the guarantee. Concurrently, MTR Gaming Group, Inc. entered into a Signal and Consulting Agreement with North Metro pursuant to which North Metro paid us $250,000 to provide consulting services with respect to its racing operations for a term of three years. On June 3, 2009, Black Diamond terminated the litigation with prejudice and we and Black Diamond executed mutual releases.

The assets and liabilities of MTR-Harness, Inc. have been reflected as assets and liabilities of discontinued operations in our consolidated balance sheets as of June 30, 2010 and December 31, 2009, and the operating results and cash flows have been reflected as discontinued operations for the three and six months ended June 30, 2010 and 2009.

Summary operating results for the discontinued operations for the three and six months ended June 30 were as follows:

	Three Months Ended June 30						Six Months Ended June 30

	2010			2009			2010			2009
	(unaudited, in thousands)
Net revenues	$	—		$	—		$	—		$	—
Loss from discontinued operations before income taxes		(5	)		(369	)		(8	)		(1,215	)
Loss from discontinued operations, net of income taxes		(3	)		(327	)		(5	)		(801	)

Jackson Trotting Association, LLC (d/b/a Jackson Harness Raceway)

Jackson Trotting Association, LLC, in which our wholly-owned subsidiary Jackson Racing, Inc. holds a 90% interest, operated Jackson Harness Raceway in Jackson, Michigan, and offered harness racing, simulcast wagering and casual dining. During 2008, we concluded that the Jackson Trotting intangible asset (value assigned to racing licenses) was impaired and, accordingly, recorded an impairment loss. On December 4, 2008, Jackson Trotting ceased the racing and simulcast wagering operations at Jackson Harness Raceway and surrendered its racing license to the Michigan Racing Commission.

The assets and liabilities of Jackson Racing, Inc. and Jackson Trotting have been reflected as assets and liabilities of discontinued operations in our consolidated balance sheets as of June 30, 2010 and

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MTR GAMING GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 4—DISCONTINUED OPERATIONS (Continued)

December 31, 2009, and the operating results and cash flows have been reflected as discontinued operations for the three and six months ended June 30, 2010 and 2009.

Summary operating results for the discontinued operations for the three and six months ended June 30 were as follows:

	Three Months Ended June 30					Six Months Ended June 30

	2010		2009			2010		2009
	(unaudited, in thousands)
Net revenues	$	—	$	—		$	—	$	—
Loss (income) from discontinued operations before income taxes and non-controlling interest		—		(95	)		12		(171	)
Loss (income) from discontinued operations, net of non-controlling interest and income taxes		—		(68	)		7		(109	)

Binion's Gambling Hall & Hotel

On March 7, 2008, we sold 100% of the stock of our wholly-owned subsidiaries, Speakeasy Gaming of Fremont, Inc., which owned and operated Binion's Gambling Hall & Hotel, and Speakeasy Fremont Experience Operating Company in accordance with the terms of a Stock Purchase Agreement dated June 26, 2007 (as subsequently amended), executed between the Company and TLC Casino Enterprises, Inc. ("TLC"). In January 2009, we settled a post-closing purchase price adjustment in the amount of approximately $1.5 million, which we deposited into an escrow account that was utilized to pay a portion of land lease obligations guaranteed by the Company as discussed below. The balance of the escrow account was expended in July 2009.

Since July 2009, TLC paid only a portion of total monthly rent with respect to one of the leases we guaranteed. Upon the demand of the landlord that we make monthly payments pursuant to our guarantee, we paid the amounts demanded (approximately $0.7 million in the aggregate through March 2010, including $0.2 million during the three months ended March 31, 2010), thus curing the events of default that existed. We have demanded reimbursement from TLC, and on August 5, 2009 commenced legal action for indemnification pursuant to the Stock Purchase Agreement. On October 27, 2009, we reached a settlement with TLC whereby TLC agreed to confess judgment as to amounts we paid and amounts that may be paid by us through the expiration of the guarantees, certain legal fees and interest at the rate of 10% on amounts actually paid by us with respect to the rental payments. We agreed to forbear from enforcing the judgment for two years, provided however that the forbearance will terminate under certain conditions, including if TLC fails to timely make any of the agreed payments or there is a change in control of TLC. During the forbearance period, TLC is also obligated to make payments in partial satisfaction of the judgment in the event TLC raises any capital through debt or

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MTR GAMING GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 4—DISCONTINUED OPERATIONS (Continued)

equity. Through June 30, 2010, TLC has reimbursed us $25,000 for legal fees that we had incurred in connection with our collection efforts.

Also in connection with our original acquisition of Binion's, we obtained title to the property and equipment subject to an increase in purchase price by $5.0 million if, at the termination of a Joint Operating License Agreement with HHLV Management Company, LLC, an affiliate of Harrah's Entertainment, Inc., certain operational milestones were achieved. Harrah's claimed it had met the milestones, however we disputed such claim. During the first quarter of 2009, the parties agreed in principle to settle the accounts due between the parties resulting in an adjustment to previously recorded amounts and a charge to discontinued operations of approximately $0.4 million. On June 11, 2009, we settled this dispute by finalizing the previous agreement in principle and paid HHLV Management Company approximately $0.7 million, which represented $1.75 million of purchase price adjustment less approximately $1.1 million for other amounts HHLV Management Company owed us.

Binion's operating results and cash flows have been reflected as discontinued operations for the three and six months ended June 30, 2010 and 2009.

Summary operating results for the discontinued operations for the three and six months ended June 30 were as follows:

	Three Months Ended June 30						Six Months Ended June 30

	2010			2009			2010			2009
	(unaudited, in thousands)
Net revenues	$	—		$	—		$	—		$	—
Loss from discontinued operations before income taxes		(5	)		(201	)		(233	)		(660	)
Loss from discontinued operations, net of income taxes		(4	)		(178	)		(152	)		(435	)

Ramada Inn and Speedway Casino

On June 3, 2008, our wholly-owned subsidiary, Speakeasy Gaming of Las Vegas, Inc., sold the gaming assets of the Ramada Inn and Speedway Casino to Lucky Lucy D, LLC in accordance with the terms of an Asset Purchase and Sale Agreement dated January 11, 2008. Pursuant to the terms of the agreement, Lucky Lucy paid $2.0 million in cash for the gaming assets and is obligated to pay an additional amount of up to $4.775 million subject to an earn-out provision based on the property's gross revenues over the four-year period that commenced January 11, 2008. In July 2009, Speakeasy Gaming of Las Vegas, Inc. assigned to the Company its right to any payment under the earn-out provision. Any proceeds that are received will be recorded as the amounts are realized.

The assets and liabilities of Speedway have been reflected as assets and liabilities of discontinued operations in our consolidated balance sheets as of June 30, 2010 and December 31, 2009, and the operating results and cash flows have been reflected as discontinued operations for the three and six months ended June 30, 2010 and 2009.

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MTR GAMING GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 4—DISCONTINUED OPERATIONS (Continued)

Summary operating results for the discontinued operations for the three and six months ended June 30 were as follows:

	Three Months Ended June 30				Six Months Ended June 30

	2010		2009		2010		2009
	(unaudited, in thousands)
Net revenues	$	—	$	—	$	—	$	—
Income from discontinued operations before income taxes		—		5		—		44
Income from discontinued operations, net of income taxes		—		8		—		30

NOTE 5—PROPERTY AND EQUIPMENT

Dispositions

In January 2010, we completed the sale of three acres associated with the 14.3 acre, off-track wagering facility in Erie, Pennsylvania for approximately $1.2 million, after closing costs. The transaction resulted in a gain on sale of approximately $76,000. At December 31, 2009, the acreage to be sold met the criteria for classification as held for sale as contemplated within ASC 360, Property, Plant & Equipment . The carrying value of this property was included in non-operating real properties in our consolidated balance sheet as of December 31, 2009.

In February 2010, we completed the sale of certain parcels of non-operating real property land holdings in West Virginia for approximately $157,000, after closing costs, which approximated its carrying value. At December 31, 2009, the land parcels to be sold met the criteria for classification as held for sale as contemplated within ASC 360. The carrying value of these properties was included in non-operating real properties in our consolidated balance sheet as of December 31, 2009.

In June 2010, we completed the sale of a certain parcel of a non-operating real property land holding in West Virginia for approximately $9,000, after closing costs. The transaction resulted in a loss on sale of approximately $41,000. The carrying value of this property was included in non-operating real properties in our consolidated balance sheet as of December 31, 2009.

In February 2010, we agreed in principle to a listing agreement with a commercial real estate broker to actively market our non-operating real properties. Based upon the determination in 2009 of our intent to sell the properties and changes in market conditions, we performed an evaluation to determine that the properties were carried at the lower of carrying value or fair value, as determined by an independent appraisal, less cost to sell. As a result, the carrying values were adjusted and included in non-operating real properties in our consolidated balance sheet as of December 31, 2009. The remaining properties, other than the recently completed sales in 2010 as discussed above, do not meet the classification criteria established in ASC 360 and as such are not classified as held for sale at June 30, 2010 and December 31, 2009. These properties are included in non-operating real properties in our consolidated balance sheets at June 30, 2010 and December 31, 2009.

During the three and six months ended June 30, 2010, we disposed of gaming equipment resulting in a loss on disposal of approximately $17,000 and $157,000, respectively.

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MTR GAMING GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 5—PROPERTY AND EQUIPMENT (Continued)

Other

The West Virginia Racing Commission has provided reimbursement for capital expenditures aggregating $2.3 million, including $1.2 million related to capital expenditures that were incurred in prior years. These amounts have been applied against the applicable acquisition costs which resulted in corresponding adjustments to depreciation expense. Such adjustments did not have a material impact on our consolidated financial statements.

NOTE 6—EQUITY TRANSACTIONS AND EARNINGS PER SHARE

We account for stock-based compensation in accordance with ASC 718 Compensation—Stock Compensation (formerly SFAS No. 123(R), Share-Based Payment ). ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the consolidated statement of operations based on their fair values and that compensation expense be recognized for awards over the requisite service period of the award or to an employee's eligible retirement date, if earlier. This accounting standard also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow.

On January 22, 2010, we amended certain of our stock incentive plans to provide for the grants of restricted stock units ("RSUs") and cash awards to key employees (including officers and directors) of or consultants to the Company, or its subsidiaries, as the Compensation Committee of the Company's Board of Directors may determine. Pursuant to the amended plans, on January 22, 2010, we granted a total of 520,000 RSUs with a fair value of $1.78 per unit, the NASDAQ Official Close Price per share of common stock on that date, and cash awards totaling $390,000 to certain key employees. Additionally, on May 17, 2010, we granted 50,000 RSUs with a fair value of $1.90 per unit, the NASDAQ Official Close Price per share of common stock on that date, and a cash award of $37,500 to a key employee; and on June 9, 2010, we granted a total of 75,000 RSUs with a fair value of $1.75 per unit, the NASDAQ Official Close Price per share of common stock on that date, to two key employees. The RSUs will vest at the rate of one-third upon each of the first, second and third anniversaries of the date of the grants. Unvested RSUs shall vest on the date of a change of control (as defined).

On August 5, 2010, our stockholders approved the Company's 2010 Long-Term Incentive Plan (the "2010 Plan") which provides for grants of stock options, stock appreciation rights, restricted stock, restricted stock units and other equity and non-equity based awards to employees, officers and non-employee members of the Board. Pursuant to the 2010 Plan, on August 5, 2010 each of the Company's six non-employee directors were granted 30,000 RSUs with a fair value of $2.14 per unit, the NASDAQ Official Close Price per share of common stock on that date. The grants of such RSUs were previously approved by the Board of Directors, pending the approval of the 2010 Plan by our stockholders. The RSUs vest immediately and will be delivered upon the date that is the earlier of termination of service on the Board of Directors or the consummation of a change of control of the Company.

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MTR GAMING GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 6—EQUITY TRANSACTIONS AND EARNINGS PER SHARE (Continued)

The restricted stock unit and stock option activity for the six months ended June 30, 2010 was as follows:

	Restricted Stock Units					Stock Options

	Number of RSUs			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Exercise Price
Outstanding December 31, 2009		—		$	—		1,209,500		$	6.91
Granted		645,000			1.79		—			—
Exercised		—			—		—			—
Expired		—			—		(470,000	)		2.50
Forfeited		(50,000	)		1.78		(71,500	)		9.81

Outstanding June 30, 2010		595,000		$	1.79		668,000		$	9.71

Exercisable June 30, 2010		—			—		618,000		$	10.19

Total stock compensation expense recognized during the three and six months ended June 30, 2010 was $130,000 ($84,000 net of tax) and $229,000 ($149,000 net of tax), including $23,000 and $45,000, respectively, related to stock options and $107,000 and $184,000 related to RSUs, respectively. During the three and six month periods of 2009, we recognized stock compensation expense of $5,000 ($3,000 net of tax) and $43,000 ($28,000 net of tax), respectively, for stock options. As of June 30, 2010, we had approximately $20,300 and $932,500 of unrecognized compensation cost related to non-vested stock options and RSUs, respectively, that is expected to be recognized over a weighted-average period of approximately 0.22 years and 2.65 years, respectively.

We utilize the treasury stock method in determining the dilutive effect of outstanding stock options and RSUs. Our basic earnings per share is computed as net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding during the respective periods. Diluted earnings per share reflects the potential dilution that could occur from common shares issuable through stock options and RSUs utilizing the treasury stock method. Diluted earnings per share is calculated by using the weighted average number of common shares outstanding adjusted to include the potentially dilutive effect of these occurrences. Options to purchase 668,000 and 1,343,500 shares of common stock and RSUs of 595,000 and -0- were outstanding for the six months ended June 30, 2010 and 2009, respectively, but were not included in the computation of dilutive earnings per share because the effect would be anti-dilutive.

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MTR GAMING GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 7—INCOME TAXES

The effective income tax rate is reflective of permanent non-deductible expenses plus an additional state income tax provision (benefit), if any, associated with the operations of Presque Isle Downs & Casino. The effective income tax rate for continuing operations for the six months ended June 30, 2010 was approximately 25.6%. The difference between the effective rate and the statutory rate is due to permanent items not deductible for income tax purposes.

We recognize interest expense and penalties related to uncertain tax positions in income tax expense. During each of the three months ended June 30, 2010 and 2009, we recognized interest expense of approximately $6,000 and $4,000, respectively. During the six months ended June 30, 2010 and 2009, we recognized interest expense of $12,000 and $7,000, respectively.

The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $0.1 million. We do not expect a significant increase or decrease to the total amounts of unrecognized tax benefits within the next twelve months.

During the six months ended June 30, 2010, deferred tax assets of approximately $221,000 related to the expiration or forfeiture of stock options were reversed. The reversal is reflected in the consolidated balance sheet as of June 30, 2010 as a reduction of additional paid-in capital.

The Company and its subsidiaries file a consolidated federal income tax return and consolidated and separate income tax returns in various state jurisdictions. We are no longer subject to federal or state income tax examinations for years before 2004. We are currently under examination by the Internal Revenue Service for tax years ended December 31, 2007 and 2008. We do not expect the results of the audit to have a material impact on our consolidated financial statements.

NOTE 8—LONG-TERM DEBT

Senior Secured Notes

On August 12, 2009, we completed the offering of $250 million in aggregate principal amount of 12.625% Senior Secured Notes due July 15, 2014, at an issue price of 95.248% of the principal amount of the Senior Secured Notes. The net proceeds of the sale of the Senior Secured Notes, together with cash on hand, were utilized to (i) repurchase all of our outstanding $130 million 9.75% Senior Unsecured Notes that were due April 1, 2010; (ii) repay $100.2 million outstanding under our existing senior secured revolving credit facility; and (iii) pay consent fees in connection with the solicitation of consents to certain amendments to the indenture governing the Senior Subordinated Notes.

On October 13, 2009, we completed an additional offering of $10 million in aggregate principal amount of 12.625% Senior Secured Notes due July 15, 2014, at an issue price of 96.000% of the principal amount of the Senior Secured Notes. The additional notes form a part of the same series as our previously issued and outstanding Senior Secured Notes. The net proceeds of this offering were used for general corporate purposes.

Our $260 million 12.625% Senior Secured Notes will mature on July 15, 2014, with interest payable semi-annually on January 15 and July 15 of each year. On or after July 15, 2011, we may redeem some or all of the Senior Secured Notes at any time at redemption prices that will decrease from 106.313% for redemptions after July 15, 2011 to 103.156% after July 15, 2012 to 100% after July 15, 2013. In addition, if we experience certain change of control events (as defined in the indenture governing the Senior Secured Notes), we must offer to repurchase the notes at 101% of their principal amount, plus accrued and unpaid interest. The Senior Secured Notes (and our Senior

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MTR GAMING GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 8—LONG-TERM DEBT (Continued)

Subordinated Notes) are jointly and severally, fully and unconditionally guaranteed by each of our present subsidiaries consisting of Mountaineer Park, Inc., Presque Isle Downs, Inc. and Scioto Downs, Inc., as well as future subsidiaries other than our immaterial subsidiaries, our unrestricted subsidiaries (as defined in the indenture governing the Senior Secured Notes) and Speakeasy Gaming of Las Vegas, Inc., MTR-Harness, Inc. and Jackson Racing, Inc. The Senior Secured Notes and the subsidiary guarantees are secured on a second priority basis (subject to permitted prior liens including borrowings under the Credit Facility discussed below) by a security interest in substantially all of the assets (other than excluded assets, including capital stock of our subsidiaries, cash and deposit accounts, certain real property, gaming licenses and certain gaming equipment that cannot be pledged pursuant to applicable law) of the Company and the guarantors. The originally issued Senior Secured Notes were exchanged for equivalent registered securities on March 18, 2010.

Senior Subordinated Notes

Our $125 million 9% Senior Subordinated Notes mature in their entirety on June 1, 2012. At any time on or after June 1, 2009, we may redeem all or a portion of the notes at a premium that will decrease over time (104.5% to 100%) as set forth in the agreement, plus accrued and unpaid interest.

Commencing in the second quarter of 2008 and until the Senior Subordinated Notes are no longer outstanding, we are required to pay consent fees of $5.00 per $1,000 of principal to the holders of our Senior Subordinated Notes if we do not satisfy certain quarterly financial ratios. We have not met these ratios and therefore recorded additional expense of $625,000 during each of the three months ended June 30, 2010 and 2009 and $1,250,000 during each of the six months ended June 30, 2010 and 2009.

Credit Agreement

On March 18, 2010, the Company and Mountaineer Park, Inc., Presque Isle Downs, Inc. and Scioto Downs, Inc. (each a wholly-owned subsidiary of the Company) and Aladdin Credit Advisors, L.P., as administrative agent, entered into a Credit Agreement (the "Credit Agreement") which provides for a $20.0 million senior secured delayed-draw term loan credit facility (the "Credit Facility"), $10.0 million of which has been drawn by the Company and currently remains outstanding. The Credit Agreement and related Credit Facility replaces our former Amended and Restated Credit Facility, which was undrawn, except for letters of credit aggregating $0.4 million, and would have matured on March 31, 2010. In connection with the termination of our former Amended and Restated Credit Facility, the outstanding letters of credit remained outstanding but were cash collateralized. The cash collateralized letters of credit are included in restricted cash in our consolidated balance sheet as of June 30, 2010. Financing costs of approximately $1.7 million were incurred in connection with entering into the Credit Agreement.

The Credit Facility matures on the third year anniversary of the closing date. The purpose of the Credit Facility is to finance (i) ongoing working capital and general corporate needs of the Company and its subsidiaries and (ii) capital expenditures, including the development of the Presque Isle Downs property for table gaming operations in Erie, Pennsylvania. Security for the Credit Facility includes substantially all of the real, personal and mixed property owned by the Company and its subsidiaries that are party to the Credit Agreement, including the capital stock of Mountaineer Park, Inc. and Scioto Downs, Inc., other than assets that may not be pledged pursuant to applicable gaming laws. Borrowings under the Credit Facility bear interest at a rate equal to LIBOR plus 7.00% per annum

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MTR GAMING GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 8—LONG-TERM DEBT (Continued)

(with a LIBOR floor of 2.50% per annum) or based on the prime rate plus 6.00% per annum (with a prime rate floor of 3.50% per annum). The Credit Agreement contains customary covenants limiting, among other things, our ability and the ability of our subsidiaries (other than our unrestricted subsidiaries as defined) to pay dividends, redeem stock or make other distributions or restricted payments; incur additional indebtedness or issue preferred shares; make certain investments; create liens; consolidate or merge; sell or otherwise transfer or dispose of assets; enter into sale-leaseback transactions; enter into transactions with affiliates of the Company; use the proceeds of permitted sales of our assets; and change our line of business. These covenants are subject to a number of exceptions and qualifications as set forth in the Credit Agreement. We are also required to maintain a maximum leverage ratio ranging from 7.00:1.00 to 4.50:1.00 per quarter, a minimum interest coverage ratio ranging from 1.10:1.00 to 1.50:1.00 per quarter and a minimum consolidated EBITDA covenant ranging from $54.0 million to $65.0 million per annum. In addition, we are restricted from making capital expenditures in excess of (i) $32.0 million in 2010; (ii) $23.0 million in 2011 and 2012; and (iii) $5.6 million in the first quarter of 2013, plus 50% of the amount not previously expended in the immediately prior year. Measurement of compliance with the covenants commenced with the quarter ended June 30, 2010 and the Company was in compliance.

A payment default or an acceleration of indebtedness in excess of $10 million, including as a result of an event of default under the Credit Facility, may give rise to an event of default under the indentures governing the Senior Secured Notes and the Senior Subordinated Notes which would entitle the holders of the notes to exercise the remedies provided in the indentures, subject to the restrictions set forth in the inter-creditor agreement between the Company, note holders and lenders participating in the Credit Facility.

Obligations under the Credit Facility are guaranteed by each of our operating subsidiaries. Borrowings under the Credit Facility and the subsidiary guarantees are secured by substantially all of our assets and the assets of the subsidiary guarantors. Future subsidiaries will be required to enter into similar pledge agreements and guarantees.

Currently, our additional borrowing capacity under the Credit Facility is limited to a total of $10 million, and the Credit Facility matures on March 18, 2013. The term loan commitment under the Credit Agreement terminates at the earliest of the eighteen-month anniversary of the closing date or the date the term loan commitment is permanently reduced to zero pursuant to optional prepayments or mandatory commitment or prepayment reductions. Mandatory commitment or prepayment reductions shall result from net asset sale proceeds (as defined) and insurance/condemnation proceeds to the extent either such proceeds amounts are not reinvested in the business; proceeds from the issuance of equity securities other than capital stock issued pursuant to employee stock or stock option compensation plans or proceeds which shall be utilized in connection with the construction of a future gaming facility at Scioto Downs; issuance of debt other than permitted indebtedness and; 50% of consolidated excess cash flow (as defined) provided that such prepayment would not cause the aggregate amount of our cash and cash equivalents to be less than $25.0 million. Permitted indebtedness under the Credit Agreement includes furniture and equipment financing provided that the aggregate principal amounts of such indebtedness outstanding at any time shall not exceed $15.0 million; other unsecured indebtedness at any time not to exceed $5.0 million and; other indebtedness provided that (i) such indebtedness shall be unsecured and subordinated to the Credit Facility, (ii) no part of the principal or interest of such indebtedness is required to be paid prior to six

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MTR GAMING GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 8—LONG-TERM DEBT (Continued)

months after the maturity date of the Credit Facility and (iii) upon the incurrence of such indebtedness and after giving pro forma effect thereto there shall be no default or event of default and that we shall be in pro forma compliance with the financial covenants.

Other Debt Financing Arrangements

In 1999, Scioto Downs, Inc. entered into a term loan agreement that provides for monthly payments of principal and interest through September 2013. The term loan is collateralized by a first mortgage on Scioto Downs' real property facilities, as well as other personal property, and an assignment of the rents from lease arrangements. At June 30, 2010 and December 31, 2009, there was $1.1 million and $1.3 million, respectively, outstanding under the term loan.

Throughout 2007 and 2008, both Presque Isle Downs and Mountaineer Casino executed various promissory notes and capital lease arrangements to finance the purchase of equipment including slot machines and surveillance equipment. Aggregate amounts due under these arrangements approximated $1.7 million and $6.5 million at June 30, 2010 and December 31, 2009, respectively. Property, plant and equipment subject to capital lease arrangements had net book values of approximately $2.7 million and $3.3 million at June 30, 2010 and December 31, 2009, respectively.

On December 31, 2009, both Presque Isle Downs and Mountaineer Casino purchased slot machines whereby the machine suppliers provided payment terms of two years with no interest. We recorded the long-term obligations net of imputed interest at 6.75%, or approximately $79,000. Aggregate amounts due under these agreements approximated $0.8 million and $1.1 million at June 30, 2010 and December 31, 2009, respectively.

During the six months ended June 30, 2010, we entered into equipment financing arrangements, whereby the slot machine suppliers provided payment terms of two years with no interest. We are required to make 24 monthly installments in the aggregate monthly amount of approximately $30,000 beginning in the first quarter of 2010. We recorded the long-term obligations in the aggregate amount of $679,000, which is net of imputed interest at 6.75%, or approximately $49,000. At June 30, 2010, the aggregate amounts due under the agreements approximated $0.6 million.

NOTE 9—COMMITMENTS AND CONTINGENCIES

Presque Isle Downs & Casino

We commenced table gaming operations at Presque Isle Downs on July 8, 2010. Expenditures for the table games expansion at Presque Isle Downs are expected to total approximately $25 million (which is net of a $3.5 million deposit returned to the Company by the Commonwealth of Pennsylvania) including capital expenditures of approximately $9 million, a licensing fee of $16.5 million and other costs including project-opening costs. Through June 30, 2010, expenditures included $7.0 million related to construction and equipment, $16.5 million for the licensing fee and $1.1 million in project-opening costs. The licensing fee was included in other intangibles in our consolidated balance sheet as of June 30, 2010.

Litigation

On October 8, 2009, Edson R. Arneault, former Chairman, President and Chief Executive Officer of the Company, initiated a legal action which named as defendants the Company, certain of its

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MTR GAMING GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

NOTE 9—COMMITMENTS AND CONTINGENCIES (Continued)

affiliates and various other parties regarding a dispute under Mr. Arneault's deferred compensation and employment agreements. The complaint alleged, among other things, that we were required to continue to pay annual premiums on insurance policies under the deferred compensation and employment agreements between the Company and Mr. Arneault.

Effective March 1, 2010, the Company and named defendants and Mr. Arneault entered into a Settlement Agreement and Release (the "Settlement Agreement"), pursuant to which we agreed to and paid on March 2, 2010, an aggregate of $1.6 million to Mr. Arneault to, among other things, (a) terminate the obligations of the parties under a consulting agreement between the Company and Mr. Arneault, other than an agreement by Mr. Arneault not to compete with the Company by owning, operating, joining, controlling, participating in, or being connected as an officer, director, employee, partner, stockholder, consultant or otherwise with any gaming business within 100 miles of any facility owned or leased by the Company, and a non-solicitation agreement by Mr. Arneault, (b) satisfy in full any obligations that the Company may have had under a deferred compensation agreement with Mr. Arneault (in his capacity as our former Chairman, President and Chief Executive Officer), and (c) resolve, compromise and settle any and all claims related to the action filed by Mr. Arneault against the Company, its affiliates and other named parties. The settlement in the aggregate amount of $1.6 million was included as a component of other accrued liabilities in our consolidated balance sheet as of December 31, 2009. In addition, pursuant to the terms of the Settlement Agreement, Mr. Arneault disclaimed all rights in the life insurance policies, and the proceeds and cash surrender value of such policies, that were designed to fund any deferred compensation obligations owed by the Company to Mr. Arneault. In conjunction with the settlement, we surrendered the life insurance policies and in April 2010 we received the cash surrender value of such policies in the aggregate amount of approximately $1.8 million.

Employment Agreement

On March 30, 2010, we entered into an amended and restated employment agreement with Robert F. Griffin, the Company's President and Chief Executive Officer, for a term of three years. The agreement provides for an annual base salary of $577,500 (as adjusted from time to time with the approval of the Compensation Committee of the Company's Board of Directors) and annual performance-based incentive compensation as determined by the Compensation Committee based on mutually agreed upon performance goals with a target amount of not less than 50% of Mr. Griffin's annual base compensation and a maximum annual amount of not less than 120% of Mr. Griffin's annual base compensation. The agreement also provides for the grant, in the first year, of 200,000 restricted stock units ("RSUs") and a cash retention award payable in the aggregate amount of $150,000. The RSUs and the cash retention award vest ratably over three years. The agreement also includes provisions for compensation in the event of termination for circumstances as defined in the agreement and in the event the Company does not offer to extend the employment agreement for an additional three years.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Cautionary Statement Regarding Forward-Looking Information

This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding our strategies, objectives and plans for future development or acquisitions of properties or operations, as well as expectations, future operating results and other information that is not historical information. When used in this report, the terms or phrases such as "anticipates", "believes", "projects", "plans", "intends", "expects", "estimates", "could", "would", "will likely continue", and variations of such words or similar expressions are intended to identify forward-looking statements. Although our expectations, beliefs and projections are expressed in good faith and with what we believe is a reasonable basis, there can be no assurance that these expectations, beliefs and projections will be realized.

There are a number of risks and uncertainties that could cause our actual results to differ materially from those expressed in the forward-looking statements which are included elsewhere in this report. Such risks, uncertainties and other important factors include, but are not limited to:

•: changes in, or failure to comply with, laws, regulations or the conditions of our West Virginia and Pennsylvania gaming licenses (or the failure to obtain renewals thereof), accounting standards or environmental laws (including adverse changes in the rates of taxation on gaming revenues) and delays in regulatory licensing processes;
•: competitive and general economic conditions in our markets, including the impact of the Rivers Casino, which opened in August 2009 in downtown Pittsburgh, Pennsylvania, the impact of The Meadows Racetrack & Casino, which opened its permanent casino in April 2009 in Washington, Pennsylvania, the implementation of casino gaming in Cleveland and Columbus, Ohio which was approved on November 3, 2009 by referendum, and the implementation of table gaming in Pennsylvania which commenced on July 8, 2010 at our casino, Presque Isle Downs, and our competitors the Rivers Casino and The Meadows Racetrack & Casino;
•: the enactment of future gaming legislation in the jurisdictions in which we operate our casinos or in competing jurisdictions, particularly the recent developments regarding gaming in Ohio and table games at casinos in Pennsylvania;
•: the success and growth of table gaming at our West Virginia and Pennsylvania casinos;
•: the success of non-taxable promotional credits (commonly referred to as "free play"), which was implemented September 1, 2009 at our West Virginia casino;
•: construction factors relating to maintenance and expansion of operations;
•: volatility and disruption of the capital and credit markets;
•: dependence on our West Virginia and Pennsylvania casinos for the majority of our revenues and cash flows;
•: dependence upon key personnel and the ability to attract new personnel;
•: the ability to retain and attract customers;
•: weather or road conditions limiting access to our properties;
•: our substantial indebtedness;
•: the ability to obtain additional financing, if and when needed, and the impact of leverage and debt service requirements;

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•: certain covenants in our debt documents;
•: the integration and performance of acquired businesses;
•: the effect of war, terrorism, natural disasters and other catastrophic events;
•: the effect of disruptions to our systems and infrastructure:
•: general economic and market conditions; and
•: the other factors as set forth in Part II Item 1A Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2009.

Additional factors that could cause our actual performance to differ materially from that contemplated by such forward-looking statements are detailed in our Annual Report on Form 10-K for the year ended December 31, 2009, as well as other recent filings with the Securities and Exchange Commission. We do not intend to publicly update any forward-looking statements, except as may be required by law.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes which are contained elsewhere in this report.

Overview

We were incorporated in March 1988 in Delaware under the name "Secamur Corporation," a wholly-owned subsidiary of Buffalo Equities, Inc. In 1996, we were renamed MTR Gaming Group, Inc and since 1998, we have operated only in the racing, gaming and entertainment businesses.

We own and operate Mountaineer Casino, Racetrack & Resort in Chester, West Virginia; Presque Isle Downs & Casino in Erie, Pennsylvania; and Scioto Downs in Columbus, Ohio. We consider these three properties, which are located in contiguous states, to be our core assets. Scioto Downs, through its subsidiary RacelineBet, Inc., also operates Racelinebet.com, a national account wagering service that offers online and telephone wagering on horse races as a marketing affiliate of AmericaTab LTD.

Mountaineer currently operates approximately 2,800 slot machines, 26 poker tables and 66 casino table games, including blackjack, craps, roulette and other games, and offers live thoroughbred horse racing and on-site pari-mutuel wagering.

Presque Isle Downs currently operates approximately 2,000 slot machines and live thoroughbred horse racing during the months of May through September with pari-mutuel wagering year-round. In addition, Presque Isle Downs commenced table gaming operations on July 8, 2010 with 48 casino table games.

Scioto Downs conducts live harness horse racing with pari-mutuel wagering generally during the months of May through September.

Through May 27, 2009, our wholly-owned subsidiary, MTR-Harness, Inc., owned a 50% interest in North Metro Harness Initiative, LLC, which operates Running Aces Harness Park in Anoka County, Minnesota. We relinquished our interest in North Metro to North Metro's lender pursuant to a settlement agreement with North Metro's lender executed on May 27, 2009. The assets, liabilities, operating results and cash flows of MTR-Harness, Inc. and its interest in North Metro are reflected as discontinued operations.

Through our wholly-owned subsidiary, Jackson Racing, Inc., we own a 90% interest in Jackson Trotting Association LLC, which had operated Jackson Harness Raceway in Jackson, Michigan. On December 4, 2008, Jackson Trotting ceased the racing and simulcast wagering operations at Jackson Harness Raceway and surrendered its racing license to the Michigan Racing Commission. The assets,

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liabilities, operating results and cash flows of Jackson Racing, Inc. and its interest in Jackson Trotting are reflected as discontinued operations.

Through March 7, 2008 and June 3, 2008, we owned and operated Binion's Gambling Hall & Hotel in Las Vegas, Nevada, and the Ramada Inn and Speedway Casino in North Las Vegas, Nevada, respectively. We sold Binion's on March 7, 2008, pursuant to a Stock Purchase Agreement executed between the Company and TLC Casino Enterprises, Inc., and on June 3, 2008, we completed the sale of the Speedway pursuant to the terms of an Asset Purchase and Sale Agreement executed between the Company and Lucky Lucy D, LLC. The assets, liabilities, operating results and cash flows of Binion's and Speedway are reflected as discontinued operations.

Results of Operations

The following table sets forth a reconciliation of income (loss) from continuing operations, a generally accepted accounting principles ("GAAP") financial measure, to Adjusted EBITDA from continuing operations, a non-GAAP measure, and income (loss) from discontinued operations, a GAAP financial measure, to Adjusted EBITDA from discontinued operations, a non-GAAP measure, for each of the three and six months ended June 30, 2010 and 2009.

	Three Months Ended June 30,					Six Months Ended June 30,

	2010			2009		2010			2009
	(unaudited, in thousands)
*Continuing Operations:*
*MTR Gaming Group, Inc. (consolidated)—continuing operations:*
(Loss) income from continuing operations	$	(510	)	$	917	$	(3,647	)	$	2,419
Interest expense, net of interest income		13,520			9,956		27,058			19,441
(Benefit) provision for income taxes		(132	)		1,598		(1,243	)		2,782
Depreciation		7,073			7,314		14,365			14,588
Loss on the sale or disposal of property		57			130		123			138

Adjusted EBITDA from continuing operations	$	20,008		$	19,915	$	36,656		$	39,368

*Mountaineer Casino, Racetrack & Resort:*
Income from continuing operations	$	7,987		$	2,365	$	14,202		$	6,096
Interest expense, net of interest income		47			2,224		101			4,466
Provision for income taxes		2,670			4,053		4,882			6,985
Depreciation		3,334			3,591		6,852			7,177
Loss on the sale or disposal of property		40			110		130			93

Adjusted EBITDA from continuing operations	$	14,078		$	12,343	$	26,167		$	24,817

*Presque Isle Downs & Casino:*
Income from continuing operations	$	4,132		$	2,450	$	7,267		$	5,587
Interest (income) expense, net		(57	)		253		15			122
Provision for income taxes		1,381			3,937		2,497			6,402
Depreciation		3,528			3,514		7,093			6,999
Loss (gain) on the sale or disposal of property		17			—		(7	)		—

Adjusted EBITDA from continuing operations	$	9,001		$	10,154	$	16,865		$	19,110

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	Three Months Ended June 30,						Six Months Ended June 30,

	2010			2009			2010			2009
	(unaudited, in thousands)
*Scioto Downs:*
Loss from continuing operations	$	(388	)	$	(188	)	$	(915	)	$	(599	)
Interest expense, net of interest income		19			26			37			48
Benefit for income taxes		(126	)		(362	)		(314	)		(686	)
Depreciation		200			204			400			405

Adjusted EBITDA from continuing operations	$	(295	)	$	(320	)	$	(792	)	$	(832	)

*Corporate:*
Loss from continuing operations	$	(12,241	)	$	(3,710	)	$	(24,201	)	$	(8,665	)
Interest expense, net of interest income		13,511			7,453			26,905			14,805
Benefit for income taxes		(4,057	)		(6,030	)		(8,308	)		(9,919	)
Depreciation		11			5			20			7
Loss on the sale or disposal of property		—			20			—			45

Adjusted EBITDA from continuing operations	$	(2,776	)	$	(2,262	)	$	(5,584	)	$	(3,727	)

*Discontinued operations:*
*MTR-Harness/Running Aces Harness Park:*
Loss from discontinued operations	$	(3	)	$	(327	)	$	(5	)	$	(801	)
Interest expense		2			2			3			5
Benefit for income taxes		(2	)		(42	)		(3	)		(414	)
Equity in loss of unconsolidated joint venture		—			250			—			1,000

Adjusted EBITDA from discontinued operations	$	(3	)	$	(117	)	$	(5	)	$	(210	)

*Jackson Racing/Jackson Harness Raceway:*
(Loss) income from discontinued operations	$	—		$	(68	)	$	7		$	(109	)
(Benefit) provision for income taxes, net of non-controlling interest		—			(24	)		4			(56	)

Adjusted EBITDA from discontinued operations	$	—		$	(92	)	$	11		$	(165	)

*Ramada Inn and Speedway Casino:*
Income from discontinued operations	$	—		$	8		$	—		$	30
Interest expense (income)		—			1			—			(1	)
(Benefit) provision for income taxes		—			(3	)		—			14

Adjusted EBITDA from discontinued operations	$	—		$	6		$	—		$	43

*Binion's Gambling Hall & Hotel:*
Loss from discontinued operations	$	(4	)	$	(178	)	$	(152	)	$	(435	)
Benefit for income taxes		(1	)		(23	)		(81	)		(225	)

Adjusted EBITDA from discontinued operations	$	(5	)	$	(201	)	$	(233	)	$	(660	)

Adjusted EBITDA represents earnings (losses) before interest expense (income), income tax expense (benefit), depreciation and amortization, loss on debt modification and extinguishment, equity in loss of unconsolidated joint venture, (gain) loss on the sale or disposal of property and loss on asset impairment. Adjusted EBITDA is not a measure of performance or liquidity calculated in accordance with GAAP, is unaudited and should not be considered an alternative to, or more meaningful than, net

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income (loss) or income (loss) from operations as an indicator of our operating performance, or cash flows from operating activities, as a measure of liquidity. Adjusted EBITDA has been presented as a supplemental disclosure because it is a widely used measure of performance and basis for valuation of companies in our industry. Management of the Company uses Adjusted EBITDA as the primary measure of the Company's operating performance and as a component in evaluating the performance of operating personnel. Uses of cash flows that are not reflected in Adjusted EBITDA include capital expenditures, interest payments, income taxes and debt principal repayments, which can be significant. Moreover, other companies that provide EBITDA information may calculate EBITDA differently than we do. The definition of Adjusted EBITDA may not be the same as the definitions used in any of our debt agreements.

Three and Six Months Ended June 30, 2010 Compared to Three and Six Months Ended June 30, 2009

The following tables set forth information concerning our results of operations by property for continuing operations.

		Three Months Ended June 30,				Six Months Ended June 30,

		2010		2009		2010		2009
		(unaudited, in thousands)
Net revenues—continuing operations:
	Mountaineer Casino, Racetrack & Resort	$	61,916	$	72,221	$	120,496	$	138,834
	Presque Isle Downs & Casino		48,614		47,834		89,235		90,812
	Scioto Downs		1,070		1,068		1,153		1,177
	Corporate		22		9		97		9

Consolidated net revenues		$	111,622	$	121,132	$	210,981	$	230,832

		Three Months Ended June 30,						Six Months Ended June 30,

		2010			2009			2010			2009
		(unaudited, in thousands)
Operating income (loss)—continuing operations:
	Mountaineer Casino, Racetrack & Resort	$	10,704		$	8,641		$	19,185		$	17,546
	Presque Isle Downs & Casino(1)		5,458			6,640			9,780			12,111
	Scioto Downs		(496	)		(524	)		(1,192	)		(1,237	)
	Corporate		(2,788	)		(2,286	)		(5,605	)		(3,778	)

Consolidated operating income		$	12,878		$	12,471		$	22,168		$	24,642

(1): Presque Isle Downs' operating income for the three and six months ended June 30, 2010 includes project-opening costs of $1.0 million and $1.1 million, respectively, related to table gaming operations which commenced on July 8, 2010.

Mountaineer's Operating Results:

During the three months ended June 30, 2010, Mountaineer's operating results were affected by competition, primarily from slot operations in Pennsylvania, and general economic conditions. Net revenues decreased by $10.3 million, or 14.3%, compared to the three months ended June 30, 2009, which included a $9.8 million decrease in gaming revenues. Revenues earned from food, beverage and lodging operations decreased by $0.6 million, and revenues earned from other sources, including pari-mutuel commissions decreased by $0.4 million. Promotional allowances decreased by $0.5 million.

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However, Mountaineer's overall operating margin increased to 17.3% in 2010 from 12.0% in 2009 due to Mountaineer's cost containment initiatives.

During the six months ended June 30, 2010, Mountaineer's operating results were affected by competition, primarily from slot operations in Pennsylvania, general economic conditions and by unusually severe weather conditions in February 2010. Net revenues decreased by $18.3 million, or 13.2%, compared to the six-month period of 2009, primarily due to a $16.3 million decrease in gaming revenues. Revenues earned from pari-mutuel commissions decreased by $0.9 million and revenues earned from food, beverage and lodging operations decreased by $1.1 million. Promotional allowances decreased by $0.4 million. However, Mountaineer's overall operating margin increased to 15.9% in 2010 from 12.6% in 2009.

Significant factors contributing to Mountaineer's 2010 operating results were:

•: overall decreases in compensation and benefits of $1.1 million and $2.7 million during the three- and six-month periods of 2010, respectively, as well as other cost savings programs; and
•: decreases in marketing promotions and advertising costs of $3.4 million and $5.1 million during the three- and six-month periods of 2010, respectively, related to 2009 cash promotions that were eliminated as a result of the implementation of non-taxable promotional credits on September 1, 2009.

A discussion of Mountaineer's key operations follows.

Gaming Operations. Revenues from gaming operations during the three months ended June 30, 2010 decreased by $9.8 million, or 15.1%, to $54.7 million compared to the three months ended June 30, 2009; and gross profit decreased by $3.0 million, or 12.5%. The decline in the gross profit resulted primarily from the total gaming revenue decline. Revenues from slot operations decreased by $9.6 million to $42.7 million in 2010 compared to $52.3 million in 2009, and table gaming and poker revenue decreased by $0.2 million, generating revenues of $10.7 million and $1.2 million, respectively, in 2010 compared to $10.6 million and $1.5 million, respectively, in 2009.

During the six months ended June 30, 2010, revenues from gaming operations decreased by $16.3 million, or 13.1%, to $108.2 million compared to the same period of 2009; and gross profit decreased by $5.7 million, or 12.0%. The decrease in gaming revenues related primarily to slot operations, which decreased by $15.4 million to $84.9 million in 2010 compared to $100.3 million in 2009. Table gaming and poker revenue decreased by $0.8 million, generating revenues of $20.8 million and $2.5 million, respectively, in 2010 compared to $20.7 million and $3.4 million, respectively, in 2009.

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The following tables set forth statistical information concerning Mountaineer's gaming operations.

		Three Months Ended June 30,						Six Months Ended June 30,

		2010			2009			2010			2009
		(unaudited)
Slots:
	Total gross wagers	$	568,794,000		$	573,561,000		$	1,091,603,000		$	1,100,279,000
	Less winning patron payouts		526,017,000			521,279,000			1,006,721,000			999,976,000

	Gaming revenues (slot net win)	$	42,777,000		$	52,282,000		$	84,882,000		$	100,303,000
	Average daily net win per slot machine	$	169		$	192		$	168		$	180
	Hold percentage		7.5	%		9.1	%		7.8	%		9.1	%
	Average number of slot machines		2,789			2,986			2,791			3,071
Tables:
	Total table drop	$	57,708,000		$	54,730,000		$	109,340,000		$	109,147,000
	Average daily net win per table	$	1,787		$	2,129		$	1,740		$	2,085
	Hold percentage		18.6	%		19.5	%		19.0	%		19.0	%
	Average number of tables		66			55			66			55
Poker:
	Average daily poker rake per table	$	380		$	417		$	450		$	466
	Average number of tables		35			40			31			40

Management attributes the decrease in slot revenue to unusually severe weather conditions in February 2010 (as compared to 2009), general economic conditions and increased competitive pressures. On August 9, 2009, the Rivers Casino in downtown Pittsburgh, Pennsylvania, approximately a one-hour drive from Mountaineer, opened with 3,000 slot machines and various food, beverage and entertainment venues. Additionally, The Meadows Racetrack & Casino, a harness racetrack in Washington, Pennsylvania, which is approximately 40 miles southeast of Mountaineer, opened its permanent casino on April 15, 2009, with over 3,700 slot machines and various food and beverage outlets.

On September 1, 2009, Mountaineer began to offer its patrons the ability to play slot machines with promotional credits (commonly referred to as "free play"). Promotional credits are not subject to taxes and assessments. Management believes that free play allows Mountaineer to compete more effectively with gaming operations in Pennsylvania which already have free play. Mountaineer's ability to offer promotional credits is subject to revision and review at any time by the West Virginia Lottery Commission. Currently, the maximum percentage of allowable promotional credits to be redeemed is 2% of credits played during the preceding calendar year. In the event that this maximum is exceeded, Mountaineer may be assessed gaming taxes and assessments on the amount of the excess. In addition, the West Virginia Lottery Commission has the ability to discontinue promotional credits at its discretion.

To-date, we have converted 2,047 of our slot machines and the state's central monitoring system to accommodate free play. Capital expenditures related to the conversion of our slot machines to accommodate free play is expected to aggregate approximately $2.5 million, of which approximately $1.9 million was expended through June 30, 2010. We believe the implementation of free play at Mountaineer will continue to enhance Mountaineer's competitive position by drawing new customers and driving increased play from our existing customers. During the three- and six-month periods of 2010, our patrons redeemed promotional credits of $13.2 million and $21.7 million, respectively.

On July 8, 2010, table games commenced at Pennsylvania casinos. Therefore, gaming operations at Mountaineer during 2010 will continue to be impacted by competitive pressures from the Rivers Casino in downtown Pittsburgh, Pennsylvania, The Meadows Racetrack & Casino in Washington, Pennsylvania,

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and to a lesser extent Presque Isle Downs. In addition, on November 3, 2009, the voters of Ohio approved a proposal for a casino to be located in each of Cleveland, Cincinnati, Toledo, and Columbus. A casino in Cleveland will increase competition at Mountaineer commencing in approximately 2013. We intend to be proactive in our efforts to mitigate the effects of such competition, which includes continuing to provide first-class customer service at all of our facilities and further reducing our costs.

During the three-month periods in 2010 and 2009, gaming taxes and assessments as a percentage of slot revenues was 56.0% and 57.8%, respectively. For poker and table gaming operations, the tax rate is 35% plus amortization of an annual licensing fee of $2.5 million. Gaming taxes and assessments decreased overall by $6.4 million to $28.8 million during the three-month period of 2010 compared to the same period of 2009 as a result of the decrease in gaming revenues. Additionally, gaming compensation and benefits decreased by $0.3 million during 2010 compared to 2009 principally as a result of cost containment efforts.

During the six-month periods in 2010 and 2009, gaming taxes and assessments as a percentage of slot revenues was 55.7% and 56.7%, respectively. Gaming taxes and assessments decreased overall by $9.9 million to $56.7 million during the six-month period of 2010 compared to the same period of 2009 as a result of the decrease in gaming revenues. Additionally, gaming compensation and benefits decreased by $0.7 million during 2010 compared to 2009 principally as a result of cost containment efforts.

Pari-mutuel Commissions. Pari-mutuel commissions is a predetermined percentage of the total amount wagered (wagering handle), with a higher commission earned on a more exotic wager, such as a trifecta, than on a single horse wager, such as a win, place or show. In pari-mutuel wagering, patrons bet against each other rather than against the operator of the facility or with pre-set odds. The total wagering handle is comprised of the amounts wagered by each individual according to the wagering activity. The total amounts wagered form a pool of funds, from which winnings are paid based on odds determined solely by the wagering activity. The racetrack acts as a stakeholder for the wagering patrons and deducts a "take-out" or gross commission from the amounts wagered, from which the racetrack pays state and county taxes and racing purses. Mountaineer's pari-mutuel commission rates are fixed as a percentage of the total wagering handle or total amounts wagered.

Pari-mutuel commissions for Mountaineer, detailing gross handles less patron payouts and deductions, for the three and six months ended June 30 were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,

	2010			2009			2010			2009
	(unaudited, in thousands)
Import simulcast racing pari-mutuel handle	$	3,332		$	3,785		$	6,268		$	7,280
Live racing pari-mutuel handle		1,914			2,247			2,400			3,365
Less patrons' winning tickets		(4,135	)		(4,774	)		(6,821	)		(8,407	)

		1,111			1,258			1,847			2,238
Revenues—export simulcast		2,804			3,035			3,628			4,877

		3,915			4,293			5,475			7,115
Less:
State and county pari-mutuel tax		(115	)		(118	)		(184	)		(210	)
Purses and Horsemen's Association		(1,715	)		(1,884	)		(2,348	)		(3,096	)

Revenues—pari-mutuel commissions	$	2,085		$	2,291		$	2,943		$	3,809

Overall, Mountaineer's pari-mutuel commissions decreased by 9.0% and 22.8% during the three- and six-month periods of 2010, respectively, compared to the same periods during 2009 as a result of

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20 fewer live racing days in 2010 compared to 2009. Beginning in 2010, Mountaineer ceased live racing during the winter months of January and February. As a result, Mountaineer expects to run live racing for 210 days during 2010 compared to 225 live racing days in 2009. The decrease in import simulcast handle, as well as export simulcast, is also due to a decline in on-track and off-track wagering, which is consistent with the national average decline in wagering and purses of 8.0% and 5.6%, respectively, during the first six months of 2010 compared to 2009, as reported by Equibase Company and the National Thoroughbred Racing Association .

Live racing and import simulcast may continue to be impacted by the conversion of some live racing patrons to export simulcast patrons (whether through traditional off track wagering facilities or growth in the utilization of telephone and/or internet wagering) and increased competition from Pennsylvania's racetracks. Mountaineer currently simulcasts its live races to over 1,000 sites.

Food, beverage and lodging operations. Revenues from food, beverage and lodging operations during the three months ended June 30, 2010 were $5.3 million, which decreased by $0.6 million, or 9.5%, compared to the three months ended June 30, 2009; and gross profit from these operations decreased by 15.0%. During the six months ended June 30, 2010, revenues from food, beverage and lodging operations decreased by $1.1 million, or 9.8%, compared to the same period of 2009; and gross profit from these operations decreased by 15.7%.

The decrease in revenues was reflective of the decline in patron traffic and a shift in marketing strategies designed to reduce food and beverage offers to patrons and increase free play programs. Additionally, the decrease in gross profit was due in part to a 2% increase in food costs as a percentage of revenues during 2010 compared to 2009.

The average daily room rate ("ADR") for the Grande Hotel (exclusive of complimentary rooms provided to gaming patrons) decreased to $79.10 during the second quarter of 2010 from $89.86 during the same period of 2009. The ADR (inclusive of complimentary rooms) decreased to $55.23 from $64.52 during the same three-month periods, respectively. However, the average occupancy rate increased to 85.1% from 82.0% during the same periods, respectively. Year-to-date, the ADR (exclusive of complimentary rooms provided to gaming patrons) decreased to $74.66 during the first six months of 2010 from $82.91 during the same period of 2009. The ADR (inclusive of complimentary rooms) decreased to $51.65 from $63.63 during the same six-month periods, respectively. However, the average occupancy rate increased to 84.9% from 76.9% during the same periods, respectively.

The decrease in daily room rates and increase in occupancy primarily reflects a shift in marketing strategies to market the hotel to gaming patrons and grant complimentary rooms to such patrons.

Other operations. Other operating revenues were primarily derived from operations of the Spa, Fitness Center, retail outlets and golf course; from the sale of programs, admission fees, and lottery tickets; from check cashing and ATM services and from entertainment events. Mountaineer's earned revenues from other operations decreased by $0.3 million and $0.4 million, respectively, during the three- and six-month periods of 2010 compared to the same periods of 2009, while operating expenses decreased by $0.2 million and $0.4 million, respectively, during the same periods.

Presque Isle Downs' Operating Results:

During the three months ended June 30, 2010, Presque Isle Downs' net revenues increased by $0.8 million, or 1.6%, compared to the three months ended June 30, 2009, which included a $0.5 million increase in gaming revenues and a $0.3 million increase in revenues earned from food and beverage operations. Presque Isle Downs' operating margin (exclusive of project-opening costs of $1.0 million) decreased to 13.3% in 2010 from 13.9% in 2009.

During the six months ended June 30, 2010, Presque Isle Downs experienced a decline in net revenues compared to the same period in 2009. Net revenues decreased by $1.6 million, or 1.7%, due

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primarily to a decrease in slot revenues. Revenues earned from all other sources remained consistent with the prior year period. Presque Isle Downs' operating margin (exclusive of project-opening costs of $1.1 million) decreased to 12.2% in 2010 from 13.3% in 2009 due primarily to the decline in revenues.

Significant factors contributing to Presque Isle Downs' 2010 operating results were:

•: an increase in gross profit from food and beverage operations (as discussed below); and
•: overall decreases in compensation and benefits of $0.2 million during the three- and six-month periods of 2010; offset by
•: an increase in marketing promotions of $0.5 million during the second quarter of 2010;
•: increases in real estate taxes of $0.3 million and $0.7 million during the three- and six-month periods of 2010, respectively;
•: severance costs of $0.3 million; and
•: project-opening costs related to the implementation of table gaming operations on July 8, 2010 in the amounts of $1.0 million and $1.1 million during the three-and six-month periods, respectively.

Gaming Operations. Revenues from gaming operations during the three months ended June 30, 2010 increased by $0.5 million, or 1.2%, to $45.0 million compared to the three months ended June 30, 2009; and gross profit increased by $0.3 million, or 1.6%. During the six months ended June 30, 2010, revenues from gaming operations decreased by $1.6 million, or 1.9%, to $83.4 million compared to the same period of 2009; and gross profit decreased by $0.4 million, or 1.3%.

The following tables set forth statistical information concerning Presque Isle Downs' gaming operations.

		Three Months Ended June 30,						Six Months Ended June 30,

		2010			2009			2010			2009
		(unaudited)
Slots:
	Total gross wagers	$	619,534,000		$	553,702,000		$	1,124,568,000		$	1,070,403,000
	Less winning patron payouts		574,531,000			509,231,000			1,041,140,000			985,343,000

	Gaming revenues (slot net win)	$	45,003,000		$	44,471,000		$	83,428,000		$	85,060,000
	Average daily net win per slot machine	$	256		$	244		$	235		$	235
	Hold percentage		7.3	%		8.0	%		7.4	%		7.9	%
	Average number of slot machines		1,929			2,000			1,965			2,000

Overall, the increase in revenues from gaming operations during three-month period of 2010 resulted in increased gaming taxes and assessments in the amount of $0.5 million to $27.4 million compared to the three-month period of 2009. Presque Isle Downs' gaming taxes and assessments approximated 60.9% of slot revenues during 2010 compared to 60.6% during 2009. However, both slot machine lease expenses and gaming compensation and benefits each decreased by $0.1 million during the second quarter.

During the six-month periods in 2010 and 2009, gaming taxes and assessments as a percentage of slot revenues was 60.8% and 60.5%, respectively. Gaming taxes and assessments decreased overall by $0.8 million to $50.7 million during the six-month period of 2010 compared to the same period of 2009 as a result of the decrease in gaming revenues. However, slot machine lease expenses decreased by

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$0.2 million and gaming compensation and benefits decreased by $0.3 million during the first six months of 2010.

On January 7, 2010, Pennsylvania amended its gaming law, permitting table games at Pennsylvania casinos; and on April 29, 2010, the Pennsylvania Gaming Control Board approved our petition to conduct table gaming at Presque Isle Downs. Therefore, we implemented table gaming operations with 48 casino table games at Presque Isle Downs on July 8, 2010. However, on November 3, 2009, the voters of Ohio approved a proposal for a casino to be located in each of Cleveland, Cincinnati, Toledo, and Columbus. A casino in Cleveland will increase competition at Presque Isle Downs commencing in approximately 2013. We intend to be proactive in our efforts to mitigate the effects of such competition, which includes maximizing benefits of table gaming operations at Presque Isle Downs, continuing to provide first-class customer service at all of our facilities and further reducing our costs.

Pari-mutuel Commissions. Revenues from pari-mutuel commissions during the three months ended June 30, 2010 decreased by $0.1 million to $0.9 million compared to the three months ended June 30, 2009; and operating expenses decreased by $0.1 million to $1.2 million. During the six months ended June 30, 2010, revenues from pari-mutuel commissions decreased by $0.1 million to $1.3 million compared to the same period of 2009; and operating expenses decreased by $0.2 million to $1.7 million. Live racing at Presque Isle Downs commenced on May 7, 2010.

In May 2009, the horsemen granted Presque Isle Downs approval to simulcast its live racing signal to advance deposit wagering sites. Currently, Presque Isle Downs simulcasts its live races to approximately 500 sites.

Food and beverage operations. Revenues from food and beverage operations during the three months ended June 30, 2010 were $3.0 million, which increased by $0.4 million, or 14.0%, compared to the same period in 2009. However, operating expenses remained consistent at $2.4 million, primarily as a result of the property's cost containment efforts. As a result, the gross profit from food and beverage operations was 18.4% in 2010 compared to 9.4% in 2009. During the six months ended June 30, 2010, revenues from food and beverage operations were $5.2 million, which increased by $0.3 million, or 5.6%, compared to the same period in 2009. However, operating expenses remained consistent at $4.5 million. As a result, the gross profit from food and beverage operations was 12.7% in 2010 compared to 8.6% in 2009.

Scioto Downs' Operating Results:

During the three months and six months ended June 30, 2010, the property's net revenues and operating loss remained consistent compared to the same period during 2009. In order to reduce expenses and operating losses, Scioto Downs and Beulah Park, the other racetrack in Columbus, Ohio, have an agreement, which was approved by the Ohio Racing Commission, whereby Scioto operates its simulcasting only during its live race meet (generally May through September); and during the remaining periods, Scioto Downs' simulcasting is closed and Beulah Park operates its simulcasting. Similarly, when Scioto is open for live racing and simulcasting, Beulah Park is closed. Live racing at Scioto Downs commenced on May 7, 2010.

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video lottery terminals at Ohio's seven commercial horse racetracks, including Scioto Downs. On July 19, 2010, the Ohio Lottery Commission voted to (i) establish preliminary new rules governing the operation of video lottery terminals; (ii) withdraw the previous rules; and (iii) pursue a declaratory judgment action from the courts relative to the Lottery Commission's ability to move forward with a plan to put video lottery terminals at the racetracks.

On November 3, 2009, the voters of Ohio approved a proposal for a casino to be located in each of Cleveland, Cincinnati, Toledo, and Columbus. A casino in Columbus will increase competition at Scioto Downs commencing in approximately 2013. We intend to be proactive in our efforts to mitigate the effects of such competition, including continuing our efforts to introduce gaming at Scioto Downs as the Governor of Ohio has proposed, providing first-class customer service at all of our facilities, and further reducing our costs.

Corporate Operating Results:

During the three months ended June 30, 2010, corporate general and administrative expenses were $2.8 million compared to $2.3 million during the same period of 2009. During the six-month periods, corporate general and administrative expenses were $5.6 million in 2010 compared to $3.7 million in 2009. Significant factors contributing to the increase in general and administrative expenses in 2010 were:

•: increases in compensation and benefits of $0.6 million and $1.1 million during the three- and six-month periods of 2010, respectively, related to changes in corporate staffing levels and incentive compensation;
•: increases in consulting and other professional fees of $0.2 million and $0.4 million during the three- and six-month periods of 2010, respectively, primarily related to executive compensation and legislative matters; and
•: the reversal of deferred compensation costs of $0.3 million during first quarter of 2009 related to a former executive; offset by
•: decreases in legal-related costs of $0.2 million and $0.1 million during the three- and six-month periods of 2010, respectively.

Depreciation Expense:

Depreciation expense decreased by $0.2 million during both the three- and six-month periods of 2010 compared to 2009, primarily due to decreased depreciation for Mountaineer. Total depreciation expense was $7.1 million during the three months ended June 30, 2010 and $14.4 million during the six months ended June 30, 2010.

Loss on the Sale or Disposal of Property:

During the three and six months ended June 30, 2010, we incurred net losses on the sale or disposal of property in the aggregate amounts of $57,000 and $123,000, respectively. Mountaineer and Presque Isle Downs incurred losses of $90,000 and $67,000, respectively, on the disposal of outdated slot machines. During the first quarter of 2010, Mountaineer and Presque Isle Downs each sold parcels of non-operating real property resulting in an aggregate gain of $74,000; and in the second quarter of 2010, Mountaineer sold a parcel of non-operating real property which resulted in a loss of $41,000.

During the six months ended June 30, 2009, Mountaineer incurred a loss of $136,000 on the sale of a parcel of land holdings not directly associated with the operation of the property.

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Interest:

Interest expense, net of interest income, increased by $3.6 million to $13.6 million during the three months ended June 30, 2010, compared to the same period of 2009. During the six-month periods, interest expense, net of interest income, increased by $7.6 million to $27.1 million in 2010 compared to 2009. The increase is primarily attributable to:

•: incremental interest of $3.2 million and $6.5 million during the three- and six-month periods of 2010, respectively, incurred on our $260 million 12.625% Senior Secured Notes which proceeds were used to payoff $100.9 million under our former credit facility and our $130 million 9.75% Senior Unsecured Notes; and
•: increased amortization of deferred financing fees in the amounts of $0.5 million in both of the first and second quarters of 2010 compared to 2009.

Income Taxes:

Continuing Operations: The income tax benefit during the six months ended June 30, 2010 for continuing operations was computed based on an effective income tax rate of approximately 25.6% plus interest expense related to uncertain tax positions in income tax expense. During the same period of 2009, the income tax benefit was computed based on an effective income tax rate of approximately 53.4%. The effective income tax rates for 2010 and 2009 are reflective of permanent non-deductible items for which we are not able to recognize a tax benefit.

Discontinued Operations: The income tax benefit during the six months ended June 30, 2010 and 2009 for discontinued operations was computed based on an effective income tax rate of 35.0% and 34.1%, respectively.

Discontinued Operations:

North Metro (d/b/a Running Aces Harness Park) Operating Results: Our wholly-owned subsidiary MTR-Harness, Inc. previously held a 50% interest in North Metro Harness Initiative, LLC (d/b/a Running Acres Harness Park) that operates a harness racetrack in Minneapolis, Minnesota. The racetrack was constructed with financing provided by Black Diamond Commercial Finance, LLC as agent (collectively "Black Diamond").

On April 3, 2009, we received notification that Black Diamond, as a result of North Metro's default under the Black Diamond credit agreement, was pursuing legal action seeking (i) enforcement of our payment of the $1 million guarantee of North Metro's indebtedness and certain additional costs, and (ii) foreclosure of our subsidiary's pledged equity interest in North Metro. Pursuant to a settlement agreement with Black Diamond executed on May 27, 2009, we relinquished our interest in North Metro (the value of which we had already determined was impaired and written down to $0 during 2008) and paid $1 million to satisfy our obligations under the guarantee. Concurrently, MTR Gaming Group, Inc. entered into a Signal and Consulting Agreement with North Metro pursuant to which North Metro paid us $250,000 to provide consulting services with respect to its racing operations for a term of three years. On June 3, 2009, Black Diamond terminated the litigation with prejudice and we and Black Diamond executed mutual releases.

During the three and six months ended June 30, 2010, we incurred pre-tax losses on discontinued operations of approximately $5,000 and $8,000, respectively. During the three and six months ended June 30, 2009, we incurred pre-tax losses on discontinued operations of approximately $369,000 and $1.2 million, respectively.

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Jackson Racing (d/b/a Jackson Harness Raceway): Jackson Trotting Association, LLC, in which our wholly-owned subsidiary Jackson Racing, Inc. holds a 90% interest, operated Jackson Harness Raceway in Jackson, Michigan, and offered harness racing, simulcast wagering and casual dining. On December 4, 2008, Jackson Trotting ceased the racing and simulcast wagering operations at Jackson Harness Raceway and surrendered its racing license to the Michigan Racing Commission.

During the six months ended June 30, 2010, we earned pre-tax income on the discontinued operations, before the 10% non-controlling interest in Jackson Trotting not owned by us, of approximately $12,000. There was no activity in the three-month period ended June 30, 2010. During the three and six months ended June 30, 2009, we incurred pre-tax losses on the discontinued operations, before the 10% non-controlling interest in Jackson Trotting not owned by us, of approximately $95,000 and $171,000.

Ramada Inn and Speedway Casino: On June 3, 2008, our wholly-owned subsidiary, Speakeasy Gaming of Las Vegas, Inc., sold the gaming assets of the Ramada Inn and Speedway Casino to Lucky Lucy D, LLC in accordance with the terms of an Asset Purchase and Sale Agreement dated January 11, 2008.

During the six months ended June 30, 2010, we had no income or expenses related to the discontinued operations of Speedway. During the three and six months ended June 30, 2009, we earned pre-tax income on discontinued operations of approximately $5,000 and $44,000, respectively.

Binion's Gambling Hall & Hotel: On March 7, 2008, we sold 100% of the stock of our wholly-owned subsidiaries, Speakeasy Gaming of Fremont, Inc., which owned and operated Binion's Gambling Hall & Hotel, and Speakeasy Fremont Experience Operating Company in accordance with the terms of a Stock Purchase Agreement dated June 26, 2007 (as subsequently amended), executed between the Company and TLC Casino Enterprises, Inc. ("TLC").

In connection with our original acquisition of Binion's on March 11, 2004, we provided limited guarantees on certain land leases. The guarantees expired in March 2010. TLC was obligated to use its reasonable best efforts to, among other things, pay the rent underlying the leases we guaranty on a timely basis, and to indemnify us in the event we were required to pay the land lease obligations pursuant to the guarantees. Since July 2009, TLC paid only a portion of total monthly rent with respect to one of the leases we guaranteed. Upon the demand of the landlord that we make monthly payments pursuant to our guarantee, we paid the amounts demanded (approximately $0.7 million in the aggregate through March 31, 2010, including $0.2 million during the three months ended March 31, 2010), thus curing the events of default that existed.

During the three and six months ended June 30, 2010, we incurred pre-tax losses on discontinued operations of approximately $5,000 and $233,000, respectively. During the three and six months ended

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June 30, 2009, we incurred pre-tax losses on discontinued operations of approximately $201,000 and $660,000, respectively.

Cash Flows

Net cash provided by operating activities approximated $22.3 million during the six months ended June 30, 2010, compared to $26.4 million during the same period of 2009. Current period non-cash expenses included $17.7 million of depreciation and amortization. In 2009, operating activities included depreciation and amortization of $16.9 million. Included in cash flows from operating activities for 2010 was $20,000 used in discontinued operations compared to $0.3 million used in discontinued operations for 2009.

Net cash used in investing activities was $22.0 million during the six months ended June 30, 2010, comprised primarily of the Pennsylvania table games license fee of $16.5 million, capital expenditures of $10.5 million offset by the reimbursement of capital expenditures from the West Virginia Racing Commission of $2.3 million and proceeds from the sale of property of $1.5 million. During the six-month period of 2009, net cash used in investing activities was $6.4 million, comprised primarily of capital expenditures of $7.1 million.

Net cash provided by financing activities was $3.5 million during the six months ended June 30, 2010, compared to $8.3 million used in financing activities during the six-month period of 2009. Financing activities for 2010 included proceeds of $10.0 million from the credit agreement entered into on March 18, 2010 and proceeds of $0.7 million from equipment financing, offset by payment of financing-related costs of $1.8 million. Principal payments on long-term obligations aggregated $5.3 million during the six months ended June 30, 2010. Financing activities for 2009 included principal payments on long-term obligations aggregating $8.1 million.

Inflation

We do not believe that inflation has had a significant impact on our revenues, results of operations or cash flows.

Liquidity and Sources of Capital

We had working capital of $26.3 million as of June 30, 2010, and our unrestricted cash balance amounted to $48.6 million. At June 30, 2010, the balances in bank accounts owned by Mountaineer's horsemen, but to which we contribute funds for racing purses, exceeded our purse payment obligations by $4.6 million. This amount is available for payment of future purse obligations at our discretion and in accordance with the terms of its agreement with the Horsemen's Benevolent & Protective Association (the "HBPA").

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property for table gaming operations in Erie, Pennsylvania. Security for the Credit Facility includes substantially all of the real, personal and mixed property owned by the Company and its subsidiaries that are party to the Credit Agreement, including the capital stock of Mountaineer Park, Inc. and Scioto Downs, Inc., other than assets that may not be pledged pursuant to applicable gaming laws. Borrowings under the Credit Facility bear interest at a rate equal to LIBOR plus 7.00% per annum (with a LIBOR floor of 2.50% per annum) or based on the prime rate plus 6.00% per annum (with a prime rate floor of 3.50% per annum). The Credit Agreement contains customary covenants limiting, among other things, our ability and the ability of our subsidiaries (other than our unrestricted subsidiaries as defined) to pay dividends, redeem stock or make other distributions or restricted payments; incur additional indebtedness or issue preferred shares; make certain investments; create liens; consolidate or merge; sell or otherwise transfer or dispose of assets; enter into sale-leaseback transactions; enter into transactions with affiliates of the Company; use the proceeds of permitted sales of our assets; and change our line of business. These covenants are subject to a number of exceptions and qualifications as set forth in the Credit Agreement. We are also required to maintain a maximum leverage ratio ranging from 7.00:1.00 to 4.50:1.00 per quarter, a minimum interest coverage ratio ranging from 1.10:1.00 to 1.50:1.00 per quarter and a minimum consolidated EBITDA covenant ranging from $54.0 million to $65.0 million per annum. In addition, we are restricted from making capital expenditures in excess of (i) $32.0 million in 2010; (ii) $23.0 million in 2011 and 2012; and (iii) $5.6 million in the first quarter of 2013, plus 50% of the amount not previously expended in the immediately prior year. Measurement of compliance with the covenants commenced with the quarter ended June 30, 2010 and the Company was in compliance.

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and after giving pro forma effect thereto there shall be no default or event of default and that we shall be in pro forma compliance with the financial covenants.

Our $260 million 12.625% Senior Secured Notes, issued during 2009, will mature on July 15, 2014, with interest payable semi-annually on January 15 and July 15 of each year. On or after July 15, 2011, we may redeem some or all of the Senior Secured Notes at any time at redemption prices that will decrease from 106.313% for redemptions after July 15, 2011 to 103.156% after July 15, 2012 to 100% after July 15, 2013. In addition, if we experience certain change of control events (as defined in the indenture governing the Senior Secured Notes), we must offer to repurchase the notes at 101% of their principal amount, plus accrued and unpaid interest. The Senior Secured Notes (and our Senior Subordinated Notes) are jointly and severally, fully and unconditionally guaranteed by each of our present subsidiaries consisting of Mountaineer Park, Inc., Presque Isle Downs, Inc. and Scioto Downs, Inc., as well as future subsidiaries, other than our immaterial subsidiaries, our unrestricted subsidiaries (as defined in the indenture governing the Senior Secured Notes) and Speakeasy Gaming of Las Vegas, Inc., MTR-Harness, Inc. and Jackson Racing, Inc. The Senior Secured Notes and the subsidiary guarantees are secured on a second priority basis (subject to permitted prior liens including borrowings under the Credit Facility discussed above) by a security interest in substantially all of the assets (other than excluded assets, including capital stock of our subsidiaries, cash and deposit accounts, certain real property, gaming licenses and certain gaming equipment that cannot be pledged pursuant to applicable law) of the Company and the guarantors. The originally issued Senior Secured Notes were exchanged for equivalent registered securities on March 18, 2010.

The indentures governing the Senior Secured Notes and Senior Subordinated Notes permit equipment financing for existing gaming facilities outstanding at any one time of up to the greater of $20 million or 4.5% of consolidated tangible assets (as defined) of the Company. The indentures also permit (i) financing under credit agreements of up to $20 million and (ii) equipment financing for gaming equipment to be installed in future gaming facilities or for additional gaming operations as a result of the approval of additional permitted gaming activities by applicable gaming authorities. However, additional borrowings, including amounts permitted under the indentures, are limited by the terms of the Credit Agreement. In order to borrow amounts in excess of the amended permitted debt basket under the indentures governing the Senior Secured Notes and Senior Subordinated Notes (subject to limitations under our Credit Facility), we must either satisfy the debt incurrence tests provided by the indentures or obtain the prior consents of the holders of at least a majority in aggregate principal amount of those notes that are not owned by the Company or any of its affiliates. While the indentures for the Senior Secured Notes and the Senior Subordinated Notes, as amended, will allow us to incur indebtedness to fund development of future gaming operations, like slot gaming at Scioto Downs, the indentures governing those notes require us to obtain equity financing in the amount of 40% and 50%, respectively, of the total financed costs in excess of the permitted indebtedness.

At June 30, 2010, borrowings outstanding under the Credit Facility aggregated $10 million. Additionally, cash collateralized letters of credit for approximately $0.4 million were also outstanding. At December 31, 2009, there were no borrowings outstanding under our former Amended and Restated Credit Facility, except for letters of credit for approximately $0.6 million.

During the six months ended June 30, 2010, we purchased 50 slot machines at an aggregate $0.7 million utilizing two-year vendor repayment terms with no interest.

At June 30, 2010, we had total debt in aggregate principal amount of $399.2 million (exclusive of discounts), $274.2 million in aggregate principal amount which is secured. Our substantial debt could have significant effects on our business. See "Part I, Item 1A. Risk Factors—Risks Related to Our Capital Structure" which is included in our Annual Report on Form 10-K for the year ended December 31, 2009.

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Commencing in the second quarter of 2008 and until the Senior Subordinated Notes are no longer outstanding, we are required to pay consent fees of $5.00 per $1,000 of principal to the holders of our Senior Subordinated Notes if we do not satisfy certain quarterly financial ratios. We have not met these ratios and therefore recorded additional expense of $625,000 and $1,250,000 for the three and six months ended June 30, 2010. We also anticipate that we will have to pay these fees for the remaining portion of 2010 depending upon the level of our outstanding debt.

During 2010, Mountaineer completed the sale of certain non-operating real property holdings including 194 acres of land for $166,000, after closing costs, which resulted in a loss of approximately $41,000.

In January 2010, Presque Isle Downs sold three acres of non-operating real property land holdings associated with the 14.3 acre, off-track wagering facility which was purchased in July 2007. The net proceeds on the sale were approximately $1.2 million, after closing costs, which resulted in a gain on the sale in the amount of $76,000.

In June 2010, we received federal income tax refunds of approximately $8.9 million resulting from the carryback of 2009 net operating losses to prior periods.

The following contractual cash obligations have been updated from those which were disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009 (see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Sources of Capital" which is included in our Annual Report on Form 10-K for the year ended December 31, 2009).

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years

	(in millions)
Contractual cash obligations:
Long-term debt(1)	$	399.2	$	2.9	$	136.2	$	260.1	$	—
Employment agreements(2)		6.7		3.1		3.3		0.3		—

Total	$	405.9	$	6.0	$	139.5	$	260.4	$	—

(1): These amounts, exclusive of the interest component, are included on our consolidated balance sheets. See Note 7 to our consolidated financial statements in our Annual Report of Form 10-K for the year ended December 31, 2009 for additional information about our debt and related matters.
(2): Includes base salaries and guaranteed payments but not incentive amounts that cannot be calculated.

Capital Expenditures:

During the six months ended June 30, 2010, additions to property and equipment and other capital projects for continuing operations aggregated $10.5 million. Expenditures included approximately $1.5 million related to environmental control facilities, specifically Concentrated Animal Feeding Operations ("CAFO"), $0.6 million related to new slot machines at Mountaineer, and $7.0 million and $0.9 million related to the table gaming expansion and new slot machines, respectively, at Presque Isle Downs.

We anticipate spending up to a total of approximately $15.0 million during 2010 on capital expenditures, exclusive of amounts related to table gaming expansion in Pennsylvania. Capital expenditures for 2010 will include approximately $3.6 million for CAFO associated with our horseracing facilities in West Virginia. It is anticipated that these expenditures will be reimbursed from funds

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provided by the West Virginia Racing Commission. Through June 30, 2010, we have been reimbursed approximately $1.1 million of our 2010 CAFO expenditures. Such reimbursement has been accounted for as a reduction of the cost of CAFO expenditures. In addition, we also received approximately $1.2 million from the West Virginia Racing Commission for reimbursement of capital expenditures that were incurred in prior years. These amounts have also been reflected as a reduction of the applicable acquisition costs which resulted in corresponding adjustments to depreciation expense. Such adjustments did not have a material impact on our consolidated financial statements.

Expenditures for the table games expansion at Presque Isle Downs are expected to total approximately $25 million (which is net of a $3.5 million deposit returned to the Company by the Commonwealth of Pennsylvania) including capital expenditures of approximately $9 million, a licensing fee of $16.5 million and other costs including project-opening costs. Through June 30, 2010, expenditures included $7.0 million related to construction and equipment, $16.5 million for the licensing fee and $1.1 million in project-opening costs.

Commitments and Contingencies:

On July 13, 2009, the Governor of Ohio signed an executive order directing the Ohio Lottery to take action to implement, and the Ohio legislature approved a budget bill which included language to enable video lottery terminals at Ohio's seven commercial horse racetracks, including Scioto Downs. However, on September 21, 2009, the Ohio Supreme Court issued an opinion finding that the video lottery provisions of the budget bill were subject to voter referendum. On June 28, 2010, a committee designated by the petitioners for the "Let Ohio Vote" referendum petition, that would have required voter approval for video lottery terminals at Ohio's racetracks, requested that the referendum petition be withdrawn from consideration in the November 2010 general election, or any subsequent election. The elimination of the referendum removes one of the obstacles to the Governor of Ohio's plan to add video lottery terminals at Ohio's seven commercial horse racetracks, including Scioto Downs. On July 19, 2010, the Ohio Lottery Commission voted to (i) establish preliminary new rules governing the operation of video lottery terminals; (ii) withdraw the previous rules; and (iii) pursue a declaratory judgment action from the courts relative to the Lottery Commission's ability to move forward with a plan to put video lottery terminals at the racetracks.

The Ohio legislation enabling video lottery was also subject to a lawsuit filed on September 3, 2009 asserting that expanded gaming activities at racetracks violates the Ohio constitution and requires voter approval. The lawsuit alleges that slot machines are not lottery games that were approved by Ohio voters in authorizing the lottery and that the allocation of profits between the state of Ohio and racetracks violates Ohio constitutional provisions earmarking lottery proceeds for education. The Ohio legislation enabling video lottery was also subject to a lawsuit filed on September 14, 2009 asserting, in addition to the assertions in the prior lawsuit, that the legislation is unconstitutional, because, among other things, it violates the Ohio constitution's requirements that no bill shall contain more than one subject, that every bill shall be considered by each House on three different days, that the state's credit not be used in aid of any individual, association or corporation, and that all proceeds generated by the lottery be used to support education in the state. These lawsuits were dismissed in October 2009. Each of these lawsuits may be refiled.

On November 3, 2009, the voters of Ohio approved a proposal for a casino to be located in each of Cleveland, Cincinnati, Toledo, and Columbus. A casino in Cleveland will increase competition at both Mountaineer Casino and Presque Isle Downs commencing in approximately 2013. A casino in Columbus will increase competition at Scioto Downs. We intend to be proactive in our efforts to mitigate the effects of such competition, including continuing our efforts to introduce gaming at Scioto Downs as the Governor of Ohio has proposed, maximizing benefits of table gaming operations at Presque Isle Downs, continuing to provide first-class customer service at all of our facilities, and further reducing our costs.

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Even if gaming is permitted at Scioto Downs following the resolution of any litigation and the Governor of Ohio's ability to move forward with his plan, the passage of the referendum permitting casino gaming in Ohio may materially adversely affect our ability to obtain financing to pay the license fees and otherwise make necessary investments at Scioto Downs to permit gaming and comply with the conditions to licensing. Additionally, tax rates on the revenue from such casinos could be substantially lower than the tax rates that may be imposed by the Governor of Ohio on video lottery at the racetracks, resulting in a competitive advantage for the casinos. Such new competition may have a material adverse effect on our business, financial condition and results of operations. See "Part I, Item 1A, Risk Factors—Risks Related to Our Business— We face significant competition from other gaming and racing facilities, and increased competition could have a material adverse effect on us; recent passage of a referendum authorizing four casinos in Ohio will create significant new competition " which is included in our Annual Report filed on Form 10-K for the year ended December 31, 2009. We intend to lobby for lower licensing fees and taxes in light of the anticipated competition from casinos authorized by the November 3, 2009 referendum, but we cannot assure you that we will be successful. We believe that approval of slot gaming or video lottery at Ohio racetracks will positively impact our business prospects and financial condition because we expect that slot gaming or video lottery at Scioto Downs will, if approved, increase our revenues and operating margins at that property. If slot gaming and video lottery are permitted at Ohio racetracks, we expect to expand and construct a slot machine casino at Scioto Downs and purchase or lease the necessary video lottery terminals, which will require additional debt and equity financing that may not be available or on terms that are acceptable to us. See "Part I, Item 1A, Risk Factors—Risks Related to Our Capital Structure— The indenture governing the Senior Secured and Senior Subordinated Notes and our other debt agreements contain covenants that significantly restrict our operations" and "—Risks Related to Our Business— The future of slot gaming and video lottery at Scioto Downs is uncertain " both of which are included in our Annual Report filed on Form 10-K for the year ended December 31, 2009.

In addition, the conditions applicable to slot gaming at Ohio racetracks are expected to require, if approved, the payment of a license fee, an investment in the gaming facilities including the purchase or lease of the video lottery terminals and a requirement that the State of Ohio retain a yet undetermined portion of the revenues from video lottery terminals. The previous regulations, until withdrawn by the Ohio Lottery Commission on July 19, 2010, would have required the payment of a $65.0 million license fee, an investment of $80.0 million in the gaming facilities over a five year period and that the State of Ohio retain 50% of the revenues from video lottery terminals. We may also be required to share a portion of our revenues with horse owners and trainers at Scioto Downs. Accordingly, even if slot gaming is approved at Scioto Downs, we cannot assure you that the revenues generated from slot gaming at Scioto Downs will yield an adequate return on our investment or that we will be able to operate slot gaming at Scioto Downs profitably because of the significant investment required and the retention of revenues by the State of Ohio. Finally, we will require additional financing to, among other things, pay required license fees and fund the expansion and improvement of the Scioto Downs facilities to comply with licensing requirements and accommodate casino gaming.

We have agreed in principle to contract terms to engage a commercial real estate broker, and correspondingly reviewed our non-operating real property land holdings to determine which properties should be considered for sale. Properties that are to be disposed of or considered held for sale were reviewed to determine if impairment in value was indicated based upon fair value estimates as determined by independent appraisal. Impairment is measured based on a comparison of the carrying value of the property to its fair value less costs of disposal. As discussed in Note 4 to our consolidated financial statements included in our Annual Report filed on Form 10-K for the year ended December 31, 2009, an impairment loss was recorded at December 31, 2009.

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In connection with our original acquisition of Binion's on March 11, 2004, we provided limited guarantees, on certain land leases. The guarantees expired in March 2010. Since July 2009, TLC Casino Enterprises, Inc. ("TLC"), who acquired Binion's from us on March 7, 2008, paid only a portion of total monthly rent with respect to one of the leases we guaranteed. Upon the demand of the landlord that we make monthly payments pursuant to our guarantee, we paid the amounts demanded (approximately $705,000 in the aggregate through March 2010), thus curing the events of default that existed. We have demanded reimbursement from TLC, and on August 5, 2009 commenced legal action for indemnification pursuant to the Stock Purchase Agreement. On October 27, 2009, we reached a settlement with TLC whereby TLC agreed to confess judgment as to amounts we paid and amounts that may be paid by us through the expiration of the guarantees, certain legal fees and interest at the rate of 10% on amounts actually paid by us with respect to the rental payments. We agreed to forbear from enforcing the judgment for two years, provided however that the forbearance will terminate under certain conditions, including if TLC fails to timely make any of the agreed payments or there is a change in control of TLC. During the forbearance period, TLC is also obligated to make payments in partial satisfaction of the judgment in the event TLC raises any capital through debt or equity. Through June 30, 2010, TLC has reimbursed us $25,000 for legal fees that we had incurred in connection with our collection efforts.

Upon commencement of slot operations at Presque Isle Downs, Presque Isle Downs was required to make deposits in the aggregate amount of $5.0 million to establish accounts with the Commonwealth of Pennsylvania. In January 2010, in conjunction with the table games legislation, the Commonwealth of Pennsylvania returned $3.5 million of the deposit to us. Additionally upon commencement of slot operations, the Pennsylvania Gaming Control Board (the "PGCB") advised Presque Isle Downs that it would receive a one-time assessment of $0.8 million required of each slot machine licensee after commencement of gaming operations. These funds are a prepayment toward the total borrowings of the PGCB, Pennsylvania Department of Revenue and the Pennsylvania State Police (collectively "the borrowers"), required to fund the costs incurred as a result of gaming operations. Once all of Pennsylvania's fourteen slot machine licensees are operational, the Pennsylvania Department of Revenue will assess all licensees, including Presque Isle Downs, their proportionate share of the total borrowings incurred by the borrowers, as a result of gaming operations. The amount to be assessed to Presque Isle Downs is unknown at this time but is likely to exceed the $0.8 million that was previously advanced.

In October 2004, we acquired 229 acres of real property, known as the International Paper site, as an alternative site to build Presque Isle Downs. In October 2005, we sold all but approximately 24 acres of this site for $4.0 million to the Greater Erie Industrial Development Corporation, a private, not-for-profit entity that is managed by the municipality (the "GEIDC"). Although the sales agreement was subject to, among other things, our affirmative release (by International Paper Company and the Pennsylvania Department of Environmental Protection (the "PaDEP") from our obligations under the consent order (as discussed below), we waived this closing condition.

In connection with our acquisition of the International Paper site, we entered into a consent order and decree (the "Consent Order") with the PaDEP and International Paper insulating the company from liability for certain pre-existing contamination, subject to compliance with the Consent Order, which included a proposed environmental remediation plan for the site, which was tied specifically to the use of the property as a racetrack. The proposed environmental remediation plan in the Consent Order was based upon a "baseline environmental report" and management estimated that such remediation would be subsumed within the cost of developing the property as a racetrack. The racetrack was never developed. The GEIDC assumed primary responsibility for the remediation obligations under the Consent Order relating to the property they acquired (approximately 205 acres). The GEIDC has agreed to indemnify us for the breach of its obligations under the Consent Order. However, we have been advised by the PaDEP that we have not been released from liability and

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responsibility under the Consent Order. The GEIDC has begun the necessary remediation activities. A revised estimate of the remaining remediation costs cannot be determined at this time. We also purchased an Environmental Risk Insurance Policy in the amount of $10 million expiring in 2014 with respect to the property.

The GEIDC has claimed that Presque Isle Downs is obligated to supply approximately 50,500 cubic yards of "clean fill dirt" for the parcel of land of the International Paper site that was previously sold to the GEIDC. Presque Isle Downs has taken the position that it has no such obligation because (i) any such requirement contained in the sales agreement was merged into the deed delivered at the time of the sale; and (ii) the GEIDC had expressly waived this requirement.

We are faced with certain contingencies involving litigation and environmental remediation and compliance. These commitments and contingencies are discussed in greater detail in "Part I, Item 3. Legal Proceedings" and Note 8 to our consolidated financial statements, both of which are included in our Annual Report on Form 10-K for the year ended December 31, 2009. In addition, new competition may have a material adverse effect on our revenues, and could have a similar adverse effect on our liquidity. See "Part I, Item 1A. Risk Factors—Risks Related to Our Business" which is included in our Annual Report on Form 10-K for the year ended December 31, 2009.

Our level of indebtedness and our working capital present other risks to investors, including the possibility that we may be unable to generate cash sufficient to pay the principal of and interest on our indebtedness when due; and that we may not be able to meet tests and covenants of such debt agreements and achieve satisfactory resolution of such non-compliance with the lenders. In such an event, the holders of our indebtedness may be able to declare all indebtedness owing to them to be due and payable immediately, and proceed against any collateral securing such indebtedness. These actions could limit our ability to borrow additional funds and would likely have a material adverse effect on our business and results of operations. Debt rating downgrades do not impact the terms of borrowings under our Credit Agreement, the Senior Secured Notes or the Senior Subordinated Notes. However, a debt rating downgrade could impact the terms of and our ability to refinance existing debt or to obtain new financing, particularly in light of the downturn in the national and worldwide economies and the current state of the credit markets. Additionally, changes in the regulatory environment or restriction on or prohibition of our gaming or racing operations, whether arising out of legislation or litigation, could have a material adverse effect on our liquidity. See "Part I, Item 1A. Risk Factors—Risks Related to Our Business" which is in our Annual Report on Form 10-K for the year ended December 31, 2009.

We believe that our cash balances on hand, cash flow from operations, extended payment terms from gaming equipment vendors, availability under permitted equipment financing and availability under the Credit Facility, and any proceeds from the sale of non-core assets will be sufficient to fund our liquidity needs, including any capital required to fund maturing debt obligations, any other contemplated capital expenditures and short-term funding requirements for the next twelve months, with the exception of amounts required for the licensing and construction of a video lottery facility at Scioto Downs if permitted by law. We cannot assure you that estimates of our liquidity needs are accurate or that new business developments or other unforeseen events will not occur, resulting in the need to raise additional funds and increased difficulties with respect to our ability to raise such funds. See "Part I, Item 1A. Risk Factors—Risks Related to Our Business and—Risks Related to Our Capital Structure," both of which are included in our Annual Report on Form 10-K for the year ended December 31, 2009.

We will require additional financing to pay required license fees and fund the expansion and improvement of the Scioto Downs facilities to comply with licensing requirements and accommodate video lottery gaming if it is ultimately successful. The indenture governing our Senior Secured Notes, the indenture governing our Senior Subordinated Notes and our Credit Agreement limit our ability to

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incur additional indebtedness and pay the required license fees. As such, we would be required to seek the consent of the lenders under our Credit Agreement, to incur the indebtedness necessary to fund our cash needs in connection with commencing slot gaming at Scioto Downs and to sell equity securities without repaying amounts outstanding under the Credit Facility. We cannot assure you that such lenders would grant the necessary consents. While the indentures for the Senior Secured Notes and the Senior Subordinated Notes, as amended, will allow us to incur indebtedness to fund development of future gaming operations, like slot gaming at Scioto Downs, the indentures governing those notes require us to obtain equity financing in the amount of 40% and 50%, respectively, of the total financed costs in excess of the permitted indebtedness. We cannot assure you that the necessary debt or equity financing will be available or on terms that are acceptable to us.

If we are unable to generate sufficient cash flow in the future, we may be unable to fund our operations or satisfy our debt obligations. Further, if we are unable to raise additional capital, we may be unable to make timely payments toward license fees and other required expenditures if video gaming at Ohio racetracks is permitted, which could have a material adverse effect on our liquidity position, business, financial condition and results of operations.

On August 5, 2010, our stockholders approved an amendment to the Company's Restated Certificate of Incorporation to increase the total number of shares of common stock which the Company will have authority to issue from 50,000,000 shares to 100,000,000 shares, par value $0.00001 per share. On August 5, 2010, the stockholders did not approve the proposal to amend the Company's Restated Certificate of Incorporation to authorize the issuance of 10,000,000 shares of preferred stock. Accordingly, the amendment which is included as Appendix A to our Proxy Statement filed with the Securities and Exchange Commission on June 25, 2010, was revised prior to filing with the Delaware Secretary of State.

Employment Agreements:

In the event of a termination of Mr. Griffin's employment by the Company without cause, or by Mr. Griffin for good reason (as defined in the employment agreement), Mr. Griffin will receive (i) unpaid base compensation earned through the date of termination and incentive compensation earned with respect to completed fiscal periods, (ii) his then-applicable monthly base compensation, payable each month for a period of two years, (iii) any amounts in excess of amounts permitted under Section 162 of the Internal Revenue Code that Mr. Griffin has previously elected to defer (the "Section 162 Deferred Amounts"), (iv) his monthly bonus amount (as defined in the employment agreement), payable each month for a period of two years, (v) a monthly amount so that Mr. Griffin can continue to receive health benefits coverage for a period to end on the earlier of (a) the second anniversary of the termination, or (b) the date on which Mr. Griffin accepts employment by, or renders services to, any other business or entity providing Mr. Griffin with health benefits coverage (such period, the "Health Benefits Period"), and (vi) any outstanding and unvested portions of RSUs, stock options and cash retention awards, each of which shall vest upon such termination. The calculation of

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the incentive compensation amount will be prorated for the amount of time Mr. Griffin was employed during the calendar year of termination.

In the event of a termination of Mr. Griffin's employment by the Company without cause, or by Mr. Griffin for good reason, within one (1) year after a change in control (as defined in the employment agreement), Mr. Griffin will receive a severance payment equal to (i) unpaid base compensation earned through the date of termination and incentive compensation earned with respect to completed fiscal periods, (ii) the Section 162 Deferred Amount, if any, (iii) a lump sum payment equal to two times Mr. Griffin's then-applicable base compensation, (iv) a lump sum payment equal to two times Mr. Griffin's annual bonus amount, and (v) a monthly amount so that Mr. Griffin can continue to receive health benefits coverage for the Health Benefits Period. The agreement also provides that upon a change in control all unvested RSUs, stock options and cash retention awards shall vest in full on the date of the change in control.

In the event of a termination of Mr. Griffin's employment by the Company for cause, or by Mr. Griffin without good reason (as defined in the Employment agreement), Mr. Griffin will be entitled to receive unpaid base compensation earned through the date of termination and incentive compensation earned with respect to completed fiscal periods, the Section 162 Deferred Amounts, if any, and all unvested portions of RSUs, stock options and cash retention awards shall be forfeited.

In the event of a termination of Mr. Griffin's employment by the Company by reason of disability, Mr. Griffin will receive (i) unpaid base compensation earned through the date of termination and incentive compensation earned with respect to completed fiscal periods, (ii) the Section 162 Deferred Amounts, if any, (iii) a monthly amount so that Mr. Griffin can continue to receive health benefits coverage for the Health Benefits Period, (iv) his monthly bonus amount, payable each month for a period of two years, (v) his then-applicable monthly base compensation, payable each month for a period of two years, and (vi) any outstanding and unvested portions of RSUs, stock options and cash retention awards, each of which shall vest upon such termination. In the event of a termination of Mr. Griffin's employment by the Company by reason of death, Mr. Griffin will receive the compensation identified under items (i),(ii) and (vi) of this paragraph.

If, by 90 days prior to the end of the Employment agreement's term, the Company does not offer to extend the employment agreement on substantially comparable terms for an additional three years, Mr. Griffin will be entitled to receive a severance payment equal to (i) an amount equal to two times Mr. Griffin's then-applicable annual base compensation, payable in 12 monthly installments, provided, however, that the amount paid will be discounted by any amount(s) paid to Mr. Griffin as compensation for employment by, or services rendered to, any other business or entity, and (ii) a monthly amount so that Mr. Griffin can continue to receive health benefits coverage for the Health Benefits Period.

On June 9, 2010, we approved amendments to the employment agreements of Robert Norton, the Chief Operating Officer of the Company, and John W. Bittner, the Executive Vice President of Finance and Accounting of the Company. Pursuant to such amendments, Mr. Norton will receive a severance payment equal to 24 times his monthly base salary and Mr. Bittner will receive a severance payment equal to 18 times his monthly base salary, in each case in the event of a termination of the employment of such executive officer by the Company without cause within one year of a change of control of the Company.

Outstanding Options and Restricted Stock Units:

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total of 520,000 RSUs with a fair value of $1.78 per unit, the NASDAQ Official Close Price per share of common stock on that date, and cash awards totaling $390,000 to certain key employees. Additionally, on May 17, 2010, we granted 50,000 RSUs with a fair value of $1.90 per unit, the NASDAQ Official Close Price per share of common stock on that date, and a cash award of $37,500 to a key employee; and on June 9, 2010, we granted a total of 75,000 RSUs with a fair value of $1.75 per unit, the NASDAQ Official Close Price per share of common stock on that date, to two key employees. The RSUs will vest at the rate of one-third upon each of the first, second and third anniversaries of the date of the grants. Unvested RSUs shall vest on the date of a change of control (as defined).

As of August 9, 2010, there were outstanding 775,000 RSUs and options to purchase 668,000 shares of our common stock. If all such stock options were exercised, we would receive proceeds of approximately $6.5 million. We utilize the treasury stock method in determining the dilutive effect of outstanding stock options and RSUs. Our basic earnings per share is computed as net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding during the respective period. Diluted earnings per share reflects the potential dilution that could occur from common shares issuable through stock options and RSUs utilizing the treasury stock method. Diluted earnings per share is calculated by using the weighted average number of common shares outstanding adjusted to include the potentially dilutive effect of these occurrences.

Critical Accounting Policies

Our critical accounting policies disclosures are included in our Annual Report on Form 10-K for the year ended December 31, 2009. Management believes that there have been no material changes since December 31, 2009. We have not substantively changed the application of our policies and there have been no material changes in assumptions or estimation techniques used as compared to prior periods.

Recent Accounting Pronouncements

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are exposed to changes in interest rates primarily from our variable rate long-term debt arrangements. However, with the issuance of the fixed rate Senior Secured Notes in August and October 2009 and Senior Subordinated Notes in May 2006, our exposure to interest rate changes will be limited to amounts which may be outstanding under our Credit Facility. (See Liquidity and Sources of Capital included elsewhere within this report and "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and Sources of Capital " which is included in our Annual Report on Form 10-K for the year ended December 31, 2009).

Depending upon the amounts outstanding under our Credit Facility, a hypothetical 100 basis point (1%) change in interest rates would result in an annual interest expense change of up to approximately $200,000.

At June 30, 2010, the fair value of our Credit Facility and other long-term debt approximates the carrying value, except for our $260 million Senior Secured Notes and $125 million Senior Subordinated Notes for which the fair value was determined based upon level 2 inputs (as defined by ASC 820, Fair Value Measurements and Disclosures ) including quoted market prices and bond terms and conditions. The aggregate fair value of the Senior Secured Notes and Senior Subordinated Notes was $355.7 million at June 30, 2010.

ITEM 4. CONTROLS AND PROCEDURES.

(a): Evaluation of Disclosure Controls and Procedures

We have established and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports that we file under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized, evaluated and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission ("SEC"), and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Form 10-Q Quarterly Report (the "Evaluation Date"). They have concluded that our disclosure controls and procedures are effective to ensure that the information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized, evaluated and reported within the time periods specified in SEC rules and forms.

(b): Changes in Internal Controls

There were no significant changes in our internal control over financial reporting identified in connection with the above evaluation that occurred during the period covered by this Form 10-Q Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are a party to various lawsuits, which have arisen in the normal course of our business. The liability arising from unfavorable outcomes of those lawsuits is not expected to have a material impact on our consolidated financial position or results of operations. Legal matters are discussed in greater detail in "Part I, Item 3. Legal Proceedings" and Note 8 to our Consolidated Financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2009.

ITEM 1A. RISK FACTORS.

A description of our risk factors can be found in "Part I, Item 1A. Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2009. There were no material changes to those risk factors during the six months ended June 30, 2010.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not Applicable.

ITEM 4. REMOVED AND RESERVED.

ITEM 5. OTHER INFORMATION.

Not Applicable.

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ITEM 6. EXHIBITS.

Exhibits			Item Title

	3.1		Certificate of Amendment to the Restated Certificate of Incorporation of MTR Gaming Group, Inc. dated August 5, 2010 (filed herewith).
	10.1		Amended and Restated Employment Agreement by and between MTR Gaming Group, Inc. and Robert F. Griffin dated March 30, 2010 (incorporated by reference to our report on Form 8-K filed on March 31, 2010).
	10.2		Amendment to Employment Agreement by and between MTR Gaming Group, Inc. and John W. Bittner, Jr. dated June 9, 2010 (filed herewith).
	10.3		Amendment to Employment Agreement by and between MTR Gaming Group, Inc. and Robert Norton dated June 9, 2010 (filed herewith).
	10.4		2010 Long Term Incentive Plan (filed herewith).
	10.5		Form of Restricted Stock Unit Award Agreement for Non-Employee Directors (2010 Long Term Incentive Plan) (filed herewith).
	31.1		Certification of Robert F. Griffin pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
	31.2		Certification of David R. Hughes pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
	32.1		Certification of Robert F. Griffin pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
	32.2		Certification of David R. Hughes pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date: August 9, 2010	MTR GAMING GROUP, INC.
	By:	/s/ ROBERT F. GRIFFIN Robert F. Griffin PRESIDENT AND CHIEF EXECUTIVE OFFICER
	By:	/s/ DAVID R. HUGHES David R. Hughes CORPORATE EXECUTIVE VICE-PRESIDENT AND CHIEF FINANCIAL OFFICER

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Exhibit Index

Exhibits			Item Title

	3.1		Certificate of Amendment to the Restated Certificate of Incorporation of MTR Gaming Group, Inc. dated August 5, 2010 (filed herewith).
	10.1		Amended and Restated Employment Agreement by and between MTR Gaming Group, Inc. and Robert F. Griffin dated March 30, 2010 (incorporated by reference to our report on Form 8-K filed on March 31, 2010).
	10.2		Amendment to Employment Agreement by and between MTR Gaming Group, Inc. and John W. Bittner, Jr. dated June 9, 2010 (filed herewith).
	10.3		Amendment to Employment Agreement by and between MTR Gaming Group, Inc. and Robert Norton dated June 9, 2010 (filed herewith).
	10.4		2010 Long Term Incentive Plan (filed herewith).
	10.5		Form of Restricted Stock Unit Award Agreement for Non-Employee Directors (2010 Long Term Incentive Plan) (filed herewith).
	31.1		Certification of Robert F. Griffin pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
	31.2		Certification of David R. Hughes pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
	32.1		Certification of Robert F. Griffin pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
	32.2		Certification of David R. Hughes pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

EXHIBIT 3.1

CERTIFICATE OF AMENDMENT

TO THE

RESTATED CERTIFICATE OF INCORPORATION
OF
MTR GAMING GROUP, INC.

MTR Gaming Group, Inc. (the “ Corporation ”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “ DGCL ”), does hereby certify:

1. The name of the Corporation is MTR Gaming Group, Inc. The date of filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware was March 7, 1988.

2. The effective date of this Certificate of Amendment to the Restated Certificate of Incorporation shall be the date it is filed with the Secretary of State of the State of Delaware.

3. This Certificate of Amendment to the Restated Certificate of Incorporation has been duly proposed by resolutions, adopted and declared advisable unanimously by the Board of Directors of the Corporation, duly adopted at an annual meeting of the stockholders of the Corporation, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment, and duly executed and acknowledged by the officers of the Corporation in accordance with the provisions of the DGCL.

4. Article IV of the Restated Certificate of Incorporation is hereby amended by changing Article IV thereof so that, as amended, said Article shall be and read as follows:

“ Article IV

The total number of shares of stock which the Corporation shall have authority to issue is one hundred million (100,000,000) shares of common stock, par value $0.00001 per share (hereinafter referred to as “Common Stock”).

Each holder of Common Stock shall have one vote in respect of each share of Common Stock held by such holder of record on the books of the Corporation for the election of directors and on all other matters on which stockholders of the Corporation are entitled to vote. The holders of shares of Common Stock shall be entitled to receive, when and if declared by the Board of Directors, out of the assets of the Corporation which are by law available therefor, dividends payable either in cash, in stock or otherwise.”

IN WITNESS WHEREOF, MTR Gaming Group, Inc. has caused this Certificate of Amendment to the Restated Certificate of Incorporation to be duly executed on August 5, 2010.

	MTR GAMING GROUP, INC.


	By:	/s/ David R. Hughes
		Name: David R. Hughes
		Title: Corporate Executive Vice President and Chief Financial Officer

[Signature Page to Certificate of Amendment]

Exhibit 10.2

EMPLOYMENT AGREEMENT — AMENDMENT

THIS AMENDMENT is made and entered into by and between MTR Gaming Group, Inc. (“MTR” or the “Company”, having an address of State Route 2, South, Chester, West Virginia 26034) and John W. Bittner (“Executive”) , collectively referred to as the “Parties;” and

WHEREAS , the Parties entered into an employment agreement on or about November 1, 2009 (the “employment agreement”); and

WHEREAS , on or about June 9, 2010 the Compensation Committee of the Company agreed to modify the “Change in Control” provisions of Executive’s employment agreement with the Company; and

NOW, THEREFORE , the Parties stipulate and agree, that until such time as a new employment agreement is executed by the Parties, the following provisions regarding shall take full effect and control the conduct of the parties:

Change in Control: If during the Period of Employment and at any time within twelve (12) months following a Change in Control, (i) Executive is terminated by the Company or any resulting entity without Cause, or (ii) Executive is not offered the position of Executive Vice President of Finance and Accounting, and Treasurer of the Company, or an equivalent position with the resulting entity, and Executive voluntarily terminates his employment with the Company or resulting entity within 30 days therefrom (“Constructive Termination”), then Executive shall be entitled to eighteen (18) months salary following the effective date of the termination. Executive shall concurrently with such payments execute a release in form and substance acceptable to the Company in its sole discretion (and any revocation periods contained in such release have expired) and Executive shall have complied with the Company’s termination procedures.

“Change in Control” shall mean a change in 50% or more of the ownership or the combined voting power of the Company’s outstanding voting securities or a sale of substantially all of the assets of the Company.

IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of this 27 day of July, 2010.

	MTR GAMING GROUP, INC.


By:	/S/ ROBERT F. GRIFFIN
	ROBERT F. GRIFFIN, PRESIDENT & CEO


Accepted by:		/S/ JOHN W. BITTNER
		JOHN W. BITTNER, JR.

Exhibit 10.3

EMPLOYMENT AGREEMENT — AMENDMENT

THIS AMENDMENT is made and entered into by and between MTR Gaming Group, Inc. (“MTR” or the “Company”, having an address of State Route 2, South, Chester, West Virginia 26034) and Robert Norton (“Executive”) , collectively referred to as the “Parties;” and

WHEREAS , the Parties entered into an employment agreement on or about May 6, 2009 (the “employment agreement”); and

WHEREAS , on or about June 9, 2010 the Compensation Committee of the Company agreed to modify the “Change in Control” provisions of Executive’s employment agreement with the Company; and

Change in Control: If during the Period of Employment and at any time within twelve (12) months following a Change in Control, (i) Executive is terminated by the Company or any resulting entity without Cause, or (ii) Executive is not offered the position of C.O.O. or an equivalent position with the resulting entity, and Executive voluntarily terminates his employment with the Company or resulting entity within 30 days therefrom (“Constructive Termination”), then Executive shall be entitled to two years salary following the effective date of the termination. Executive shall concurrently with such payments execute a release in form and substance acceptable to the Company in its sole discretion (and any revocation periods contained in such release have expired) and Executive shall have complied with the Company’s termination procedures.

IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of this 27 day of July, 2010.

	MTR GAMING GROUP, INC.


By:	/S/ ROBERT F. GRIFFIN
	ROBERT F. GRIFFIN, PRESIDENT & CEO


Accepted by:		/S/ ROBERT J. NORTON
		ROBERT J. NORTON

Exhibit 10.4

MTR Gaming Group, Inc.

2010 Long Term Incentive Plan

1. Purpose. The purpose of the MTR Gaming Group, Inc. 2010 Long Term Incentive Plan is to further align the interests of eligible participants with those of the Company’s shareholders by providing long-term incentive compensation opportunities tied to the performance of the Company and its Common Stock. The Plan is intended to advance the interests of the Company and its shareholders by attracting, retaining and motivating key personnel upon whose judgment, initiative and effort the successful conduct of the Company’s business is largely dependent.

2. Definitions. Wherever the following capitalized terms are used in the Plan, they shall have the meanings specified below:

“ Award ” means an award of a Stock Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit, Performance Award or Stock Award granted under the Plan.

“ Award Agreement ” means an agreement entered into between the Company and a Participant setting forth the terms and conditions of an Award granted to a Participant, as provided in Section 15.1 hereof.

“ Board ” means the Board of Directors of the Company.

“Cause” shall have the meaning set forth in Section 14.2(b) hereof.

“Change in Control” shall have the meaning set forth in Section 13.2 hereof.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Committee ” means the Compensation Committee of the Board, or such other committee of the Board appointed by the Board to administer the Plan.

“ Common Stock ” means the Company’s Class A common stock, par value $0.00001 per share.

“ Company ” means MTR Gaming Group, Inc., a Delaware corporation.

“ Date of Grant ” means the date on which an Award under the Plan is granted by the Committee, or such later date as the Committee may specify to be the effective date of an Award.

“ Effective Date” means the date the Plan is approved by the Company’s shareholders in accordance with Section 16.1 hereof.

“ Eligible Person ” means any person who is an employee, officer, or Non-Employee Director of the Company or any of its Subsidiaries.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Fair Market Value ” means, with respect to a share of Common Stock as of a given date, the average of the highest and lowest sales prices per share of Common Stock on such date (or if such date is not a trading day, then on the next preceding trading date), as reported on the NASDAQ Stock Market or other principal exchange on which the Common Stock is then listed, or if not so listed, “Fair Market Value” shall be such value as determined by the Board in its discretion and, to the extent necessary, shall be determined in a manner consistent with Section 409A of the Code and the regulations thereunder.

“ Incentive Stock Option ” means a Stock Option granted under Section 6 hereof that is intended to meet the requirements of Section 422 of the Code and the regulations thereunder.

“ Non-Employee Director ” means any member of the Board who is not an employee of the Company.

“ Nonqualified Stock Option ” means a Stock Option granted under Section 6 hereof that is not an Incentive Stock Option.

“ Participant ” means any Eligible Person who holds an outstanding Award under the Plan.

“Performance Award” means an Award that is denominated by a cash amount to an Eligible Person under Section 10 hereof and payable based upon the attainment of pre-established business and/or individual performance goals.

“ Plan ” means the MTR Gaming Group, Inc. Long Term Incentive Plan as set forth herein, effective as provided in Section 16.1 hereof, and as may be amended from time to time.

“ Prior Plans ” means, collectively, the Company’s 2000 Stock Incentive Plan, 2001 Stock Incentive Plan, 2002 Stock Incentive Plan, 2004 Stock Incentive Plan, 2005 Stock Incentive Plan and 2007 Stock Incentive Plan.

“ Restricted Stock Award ” means a grant of shares of Common Stock to an Eligible Person under Section 8 hereof that are issued subject to such vesting and transfer restrictions as the Committee shall determine, and such other conditions, as are set forth in the Plan and the applicable Award Agreement.

“ Restricted Stock Unit ” means a grant to an Eligible Person under Section 9 hereof representing notional unit interests equal in value to a share of Common Stock to be paid or distributed at such times, and subject to such conditions, as set forth in the Plan and the applicable Award Agreement.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Service ” means, as applicable, a Participant’s employment with the Company or any Subsidiary, or a Participant’s service as a Non-Employee Director with the Company or any Subsidiary.

“ Stock Award ” means a grant of shares of Common Stock to an Eligible Person under Section 11 hereof, which may be free of transfer restrictions and forfeiture conditions.

“ Stock Appreciation Right ” means a grant to an Eligible Person under Section 7 hereof entitling such Eligible Person to receive a payment, representing the difference between the base price per share of the right and the Fair Market Value of a share of Common Stock at such time, and subject to such conditions, as are set forth in the Plan and the applicable Award Agreement.

“ Stock Option ” means a grant to an Eligible Person under Section 6 hereof to purchase shares of Common Stock at such time and price, and subject to such conditions, as are set forth in the Plan and the applicable Award Agreement.

“ Subsidiary” means an entity (whether or not incorporated) that is wholly or majority owned or controlled, directly or indirectly, by the Company; provided , however , that with respect to Incentive Stock Options, the term “Subsidiary” shall include only an entity that qualifies under Section 424(f) of the Code as a “subsidiary corporation” with respect to the Company.

3. Administration.

3.1 Committee Members. The Plan shall be administered by a Committee comprised of no fewer than two members of the Board who are appointed by the Board to administer the Plan. To the extent deemed necessary by the Board, each Committee member shall satisfy the requirements for (i) an “independent director” under rules adopted by the NASDAQ Stock Market, (ii) a “nonemployee

director” for purposes of such Rule 16b-3 under the Exchange Act and (iii) an “outside director” under Section 162(m) of the Code. No member of the Committee will be liable for any action or determination made in good faith by the Committee with respect to the Plan or any Award thereunder.

3.2 Committee Authority. It shall be the duty of the Committee to administer the Plan in accordance with the Plan’s provisions. The Committee shall have all powers and discretion necessary or appropriate to administer the Plan and to control its operation, including, but not limited to, the power to (i) determine the Eligible Persons to whom Awards shall be granted under the Plan, (ii) determine the types of Awards that may be granted, the time or times at which Awards may be granted, and the number of shares of Common Stock, units or other rights subject to each Award, (iii) prescribe the terms and conditions of all Awards, (iv) interpret the Plan and terms of the Awards, (v) adopt rules for the administration, interpretation and application of the Plan as are consistent therewith, and interpret, amend or revoke any such rules, (vi) make all determinations with respect to a Participant’s Service and the termination of such Service for purposes of any Award, and (vii) adopt such procedures and subplans as are necessary or appropriate to permit participation in the Plan by Eligible Person who are foreign nationals or employed outside of the United States. The Committee’s determinations under the Plan need not be uniform and may be made by the Committee selectively among Participants and Eligible Persons, whether or not such persons are similarly situated. The Committee shall, in its discretion, consider such factors as it deems relevant in making its interpretations, determinations and actions under the Plan including, without limitation, the recommendations or advice of any officer or employee of the Company or such attorneys, consultants, accountants or other advisors as it may select. All interpretations, determinations, and actions by the Committee shall be final, conclusive, and binding upon all parties.

3.3 Delegation of Authority. The Committee, in its discretion, and on such terms and conditions as it may provide, may delegate all or any part of its authority and powers under the Plan to the Company’s Chief Executive Officer or to a committee of officers of the Company; provided , however , that no delegate will have the authority to grant or amend Awards to executive officers of the Company, nor, to grant or amend Awards that are intended to qualify as performance-based compensation under Section 162(m) of the Code, to the extent necessary for such qualification.

4. Shares Subject to the Plan.

4.1 Number of Shares Reserved. Subject to adjustment as provided in Section 4.3 hereof, the total number of shares of Common Stock that are reserved for issuance under the Plan shall be the sum of (i) 2,511,800 (inclusive of 511,800 shares of Common Stock that remain authorized for issuance under the Prior Plans as of the Effective Date), and (ii) the number of shares subject to awards granted under the Prior Plans that become canceled, expired, forfeited, surrendered, or otherwise terminated in accordance with their terms and the applicable Prior Plan up to a maximum of 1,263,000 shares. The entire pool of shares of Common Stock available under the Plan is available for the grant of Incentive Stock Options. Any shares of Common Stock delivered under the Plan shall consist of authorized and unissued shares, or treasury shares.

4.2 Share Replenishment. To the extent that any Award under the Plan is canceled, expired, forfeited, surrendered, settled in cash, or otherwise terminated without delivery of shares of Common Stock to the Participant, in whole or in part, the shares of Common Stock retained by or returned to the Company will not be deemed to have been delivered under the Plan, and will be available for future Awards under the Plan. Shares that are (i) withheld from an Award or separately surrendered by the Participant in payment of the exercise or purchase price or taxes relating to such an Award or (ii) not issued or delivered as a result of the net settlement of an outstanding Stock Option or Stock Appreciation Right shall be deemed to constitute delivered shares and will not be available for future Awards under the Plan.

4.3 Adjustments and Other Corporate Changes. If there shall occur any change with respect to the outstanding shares of Common Stock by reason of any recapitalization, reclassification, stock dividend, extraordinary dividend, stock split, reverse stock split or other distribution with respect to the shares of Common Stock, or any merger, reorganization, consolidation, combination, spin-off, or other similar corporate change, or any other change affecting the Common Stock, the Committee shall, in the manner and to the extent it considers equitable to the Participants and consistent with the terms of the Plan, cause an adjustment to be made to (i) the maximum number and kind of shares of Common Stock provided in Sections 4.1, 6.1, 7.1, 8.1, 9.1 and 11.1 hereof, (ii) the number and kind of shares of Common Stock, units, or other rights subject to then outstanding Awards, (iii) the exercise price or base price for each share or unit or other right subject to then outstanding Awards, and (iv) any other terms of an Award that are affected by the event. Notwithstanding the foregoing, (a) any such adjustments shall, to the extent necessary, be made in a manner consistent with the requirements of Section 409A of the Code, and (b) in the case of Incentive Stock Options, any such adjustments shall, to the extent practicable, be made in a manner consistent with the requirements of Section 424(a) of the Code. In the event of (i) the liquidation or dissolution of the Company, (ii) a merger in which the Company is not the surviving corporation, or (iii) any transaction (or series of related transactions) in which (x) more than 50% of the outstanding Common Stock is transferred or exchanged for other consideration, or (y) shares of Common Stock in excess of the number of shares of Common Stock outstanding immediately preceding the transaction are issued (other than to shareholders of the Company with respect to their shares in the Company), then the Board, in its discretion, may provide that each Award then-outstanding shall terminate in exchange for an equitable payment as determined by the Board in good faith (including, without limitation, in the case of Stock Options and Stock Appreciation rights, a cash payment to the extent of the excess, if any, of the then-Fair Market Value of a share of Common Stock, over the exercise or base price per share of Common Stock subject to the Award).

5. Eligibility and Awards.

5.1 Designation of Participants. Any Eligible Person may be selected by the Committee to receive an Award and become a Participant under the Plan in accordance with the Committee’s authority under Section 3.2 hereof. In selecting Eligible Persons to be Participants, and in determining the type and amount of Awards to be granted under the Plan, the Committee shall consider any and all factors that it deems relevant or appropriate.

5.2 Determination of Awards. The Committee shall determine the terms and conditions of all Awards granted to Participants in accordance with its authority under Section 3.2 hereof. An Award may consist of one type of right or benefit hereunder or of two or more such rights or benefits granted in tandem. The terms of all Awards under the Plan will be specified by the Committee and will be set forth in individual Award Agreements as described in Section 15.1 hereof.

6. Stock Options.

6.1 Grant of Stock Options. Stock Options may be granted to any Eligible Person selected by the Committee, except that an Incentive Stock Option may only be granted to an Eligible Person satisfying the conditions of Section 6.7(a) hereof. Each Stock Option shall be designated, in the discretion of the Committee, as an Incentive Stock Option or as a Nonqualified Stock Option. The maximum number of shares of Common Stock that may be subject to Stock Options granted to any Participant during any calendar year shall be limited to 500,000 shares of Common Stock (subject to adjustment as provided in Section 4.3 hereof). All Stock Options granted under the Plan are intended to comply with the requirements for exemption under Section 409A of the Code.

6.2 Exercise Price. The exercise price per share of a Stock Option shall not be less than one hundred percent (100%) of the Fair Market Value of a share of Common Stock on the Date of Grant.

The Committee may, in its discretion, specify an exercise price per share that is higher than the Fair Market Value of a share of Common Stock on the Date of Grant.

6.3 Vesting of Stock Options. The Committee shall, in its discretion, provide in an Award Agreement the time or times at which, or the conditions upon which, a Stock Option or portion thereof shall become vested and/or exercisable. The requirements for vesting and exercisability of a Stock Option may be based on the continued Service of the Participant for a specified time period (or periods), on the attainment of a specified Performance Goal (or goals) or on such other terms and conditions as approved by the Committee in its discretion. The Committee may accelerate the vesting or exercisability of any Stock Option upon termination of Service under certain circumstances, as set forth in the Award Agreement or otherwise. If the vesting requirements of a Stock Option are not satisfied, the Award shall be forfeited.

6.4 Term of Stock Options. The Committee shall, in its discretion, provide in an Award Agreement the period during which a vested Stock Option may be exercised, provided , however , that the maximum term of a Stock Option shall be ten (10) years from the Date of Grant. The Stock Option of a Participant whose Service is terminated for any reason shall terminate on the earlier of (A) the maximum term of the Stock Option or (B) unless otherwise provided in an Award Agreement, except as otherwise provided in Section 6.7(c) hereof with respect to Incentive Stock Options, and except for termination for Cause (as described in Section 14.2 hereof), the date that is one hundred eighty (180) days following the termination of Service of the Participant.

6.5 Stock Option Exercise. Subject to such terms and conditions as specified in an Award Agreement, a Stock Option may be exercised in whole or in part at any time during the term thereof by notice in the form required by the Company, together with payment of the aggregate exercise price therefor and applicable withholding tax. Payment of the exercise price shall be made in the manner set forth in the Award Agreement, and unless otherwise provided by the Committee at the time of payment: (i) in cash or by cash equivalent acceptable to the Committee, (ii) by payment in shares of Common Stock valued at the Fair Market Value of such shares on the date of exercise, (iii) through an open-market, broker-assisted sales transaction pursuant to which the Company is promptly delivered the amount of proceeds necessary to satisfy the exercise price, (iv) by a combination of the methods described above or (v) by such other method as may be approved by the Committee and set forth in the Award Agreement. In addition to, and at the time of payment of the exercise price, a Stock Option shall be subject to applicable tax withholding requirements as provided in Section 15.11 hereof.

6.6 Limited Transferability of Nonqualified Stock Options. All Stock Options shall be nontransferable except (i) upon the Participant’s death, in accordance with Section 15.3 hereof or (ii) subject to prior approval by the Committee, in the case of Nonqualified Stock Options only, for the transfer of all or part of the Stock Option to a Participant’s “family member” (as defined for purposes of the Form S-8 registration statement under the Securities Act), as may be approved by the Committee, in its discretion, at the time of the proposed transfer. The transfer of a Nonqualified Stock Option may be subject to such terms and conditions as the Committee may, in its discretion, impose from time to time. Subsequent transfers of a Nonqualified Stock Option shall be prohibited.

6.7 Additional Rules for Incentive Stock Options.

(a) Eligibility. An Incentive Stock Option may only be granted to an Eligible Person who is considered an employee for purposes of Treasury Regulation §1.421-7(h) with respect to the Company or any Subsidiary that qualifies as a “subsidiary corporation” with respect to the Company for purposes of Section 424(f) of the Code.

(b) Annual Limits. No Incentive Stock Option shall be granted to a Participant as a result of which the aggregate Fair Market Value (determined as of the Date of Grant) of Common Stock with respect to which incentive stock options under Section 422 of the Code are exercisable for the

first time in any calendar year under the Plan and any other stock option plans of the Company or any subsidiary or parent corporation, would exceed $100,000, determined in accordance with Section 422(d) of the Code. This limitation shall be applied by taking stock options into account in the order in which granted.

(c) Termination of Employment. An Award of an Incentive Stock Option may provide that such Stock Option may be exercised not later than three (3) months following termination of employment of the Participant with the Company and all Subsidiaries, or not later than one (1) year following a permanent and total disability within the meaning of Section 22(e)(3) of the Code, as and to the extent determined by the Committee to comply with the requirements of Section 422 of the Code.

(d) Other Terms and Conditions; Nontransferability. Any Incentive Stock Option granted hereunder shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as are deemed necessary or desirable by the Committee, which terms, together with the terms of the Plan, shall be intended and interpreted to cause such Incentive Stock Option to qualify as an “incentive stock option” under Section 422 of the Code. An Award Agreement for an Incentive Stock Option may provide that such Stock Option shall be treated as a Nonqualified Stock Option to the extent that certain requirements applicable to “incentive stock options” under the Code shall not be satisfied. An Incentive Stock Option shall by its terms be nontransferable other than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of a Participant only by such Participant.

(e) Disqualifying Dispositions. If shares of Common Stock acquired by exercise of an Incentive Stock Option are disposed of within two (2) years following the Date of Grant or one (1) year following the transfer of such shares to the Participant upon exercise, the Participant shall, promptly following such disposition, notify the Company in writing of the date and terms of such disposition and provide such other information regarding the disposition as the Company may reasonably require.

6.8 Repricing Prohibited. Subject to the anti-dilution adjustment provisions contained in Section 4.3 hereof, without the prior approval of the Company’s shareholders, neither the Committee nor the Board shall cause the cancellation, substitution or amendment of a Stock Option that would have the effect of reducing the exercise price of such a Stock Option previously granted under the Plan, or otherwise approve any modification to such a Stock Option that would be treated as a “repricing” under the then applicable rules, regulations or listing requirements adopted by the NASDAQ Stock Market or other principal exchange on which the Common Stock is then listed.

7. Stock Appreciation Rights.

7.1 Grant of Stock Appreciation Rights. Stock Appreciation Rights may be granted to any Eligible Person selected by the Committee. Stock Appreciation Rights may be granted on a basis that allows for the exercise of the right by the Participant or that provides for the automatic payment of the right upon a specified date or event. The maximum number of shares of Common Stock that may be subject to Stock Appreciation Rights granted to any Participant during any calendar year shall be limited to 500,000 shares of Common Stock (subject to adjustment as provided in Section 4.3 hereof). Stock Appreciation Rights shall be non-transferable, except as provided in Section 15.3 hereof. All Stock Appreciation Rights granted under the Plan are intended to comply with the requirements for exemption under Section 409A of the Code. A Stock Appreciation Right may, in the discretion of the Committee, be granted in tandem with a Stock Option, and in such event, shall (i) have a base price per share equal to the per share exercise price of the Stock Option, (ii) be vested and exercisable at the same time or times that a related Stock Option is vested and exercisable, and (iii) expire no later than the time at which the related Stock Option expires.

7.2 Base Price. The base price of a Stock Appreciation Right shall not be less than one hundred percent (100%) of the Fair Market Value of a share of Common Stock on the Date of Grant. The Committee may, in its discretion, specify a base price per share that is higher than the Fair Market Value of a share of Common Stock on the Date of Grant.

7.3 Vesting of Stock Appreciation Rights. The Committee shall, in its discretion, provide in an Award Agreement the time or times at which, or the conditions upon which, a Stock Appreciation Right or portion thereof shall become vested and/or exercisable. The requirements for vesting and exercisability of a Stock Appreciation Right may be based on the continued Service of a Participant for a specified time period (or periods), on the attainment of a specified Performance Goal (or goals) or on such other terms and conditions as approved by the Committee in its discretion. The Committee may accelerate the vesting or exercisability of any Stock Appreciation Right upon termination of Service under certain circumstances as set forth in the Award Agreement or otherwise. If the vesting requirements of a Stock Appreciation Right are not satisfied, the Award shall be forfeited.

7.4 Term of Stock Appreciation Rights. The Committee shall, in its discretion, provide in an Award Agreement the period during which a vested Stock Appreciation Right may be exercisable or payable, provided , however , that the maximum term of a Stock Appreciation Right shall be ten (10) years from the Date of Grant. The Stock Appreciation Right of a Participant whose Service is terminated for any reason shall terminate on the earlier of (A) the maximum term of the Stock Appreciation Right or (B) unless otherwise provided in an Award Agreement, and except for termination for Cause (as described in Section 14.2 hereof), the date that is one hundred eighty (180) days following the termination of Service of the Participant.

7.5 Payment of Stock Appreciation Rights. Subject to such terms and conditions as specified in an Award Agreement, a Stock Appreciation Right will entitle the holder, upon exercise or other payment of the Stock Appreciation Right, as applicable, to receive an amount determined by multiplying: (i) the excess of the Fair Market Value of a share of Common Stock on the date of exercise or payment of the Stock Appreciation Right over the base price of such Stock Appreciation Right, by (ii) the number of shares as to which such Stock Appreciation Right is exercised or paid. Payment of the amount determined under the foregoing may be made, as approved by the Committee and set forth in the Award Agreement, in shares of Common Stock valued at their Fair Market Value on the date of exercise or payment, in cash, or in a combination of shares of Common Stock and cash, subject to applicable tax withholding requirements as provided in Section 15.11 hereof.

7.6 Repricing Prohibited. Subject to the anti-dilution adjustment provisions contained in Section 4.3 hereof, without the prior approval of the Company’s shareholders, neither the Committee nor the Board shall cause the cancellation, substitution or amendment of a Stock Appreciation Right that would have the effect of reducing the base price of such a Stock Appreciation Right previously granted under the Plan, or otherwise approve any modification to such Stock Appreciation Right that would be treated as a “repricing” under the then applicable rules, regulations or listing requirements adopted by the NASDAQ Stock Market or other principal exchange on which the Common Stock is then listed.

8. Restricted Stock Awards.

8.1 Grant of Restricted Stock Awards. A Restricted Stock Award may be granted to any Eligible Person selected by the Committee. The maximum number of shares of Common Stock that may be subject to Restricted Stock Awards granted to a Participant during any one calendar year shall be limited to 500,000 shares of Common Stock (subject to adjustment as provided in Section 4.3 hereof). The Committee may require the payment by the Participant of a specified purchase price in connection with any Restricted Stock Award.

8.2 Vesting Requirements. The restrictions imposed on shares granted under a Restricted Stock Award shall lapse in accordance with the vesting requirements specified by the Committee in the Award Agreement. The requirements for vesting of a Restricted Stock Award may be based on the continued Service of the Participant for a specified time period (or periods), on the attainment of a specified Performance Goal (or goals) designed to meet the requirements for exemption under Section 162(m) of the Code or on such other terms and conditions as approved by the Committee in its discretion. The Committee may accelerate the vesting of a Restricted Stock Award upon termination of Service under certain circumstances, as set forth in the Award Agreement. If the vesting requirements of a Restricted Stock Award shall not be satisfied, the Award shall be forfeited and the shares of Common Stock subject to the Award shall be returned to the Company.

8.3 Transfer Restrictions. Shares granted under any Restricted Stock Award may not be transferred, assigned or subject to any encumbrance, pledge, or charge until all applicable restrictions are removed or have expired, unless otherwise allowed by the Committee. Failure to satisfy any applicable restrictions shall result in the subject shares of the Restricted Stock Award being forfeited and returned to the Company. The Committee may require in an Award Agreement that certificates representing the shares granted under a Restricted Stock Award bear a legend making appropriate reference to the restrictions imposed, and that certificates representing the shares granted or sold under a Restricted Stock Award will remain in the physical custody of an escrow holder until all restrictions are removed or have expired.

8.4 Rights as Shareholder. Subject to the foregoing provisions of this Section 8 and the applicable Award Agreement, unless otherwise determined by the Committee, the Participant shall have all rights of a shareholder with respect to the shares granted to the Participant under a Restricted Stock Award, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto. Any Common Stock received as a stock dividend or distribution will be subject to the same restrictions as the underlying Restricted Stock Award.

8.5 Section 83(b) Election. If a Participant makes an election pursuant to Section 83(b) of the Code with respect to a Restricted Stock Award, the Participant shall file, within thirty (30) days following the Date of Grant, a copy of such election with the Company and with the Internal Revenue Service, in accordance with the regulations under Section 83 of the Code. The Committee may provide in an Award Agreement that the Restricted Stock Award is conditioned upon the Participant’s making an election with respect to the Award under Section 83(b) of the Code.

9. Restricted Stock Units.

9.1 Grant of Restricted Stock Units. A Restricted Stock Unit may be granted to any Eligible Person selected by the Committee. The maximum number of units that may be subject to Restricted Stock Units granted to a Participant during any one calendar year shall be limited to 500,000 units (subject to adjustment as provided in Section 4.3 hereof). The value of each Restricted Stock Unit is equal to the Fair Market Value of one share of Common Stock on the applicable date or time period of determination, as specified by the Committee. Restricted Stock Units shall be subject to such restrictions and conditions as the Committee shall determine.

9.2 Vesting of Restricted Stock Units. On the Date of Grant, the Committee shall, in its discretion, determine any vesting requirements with respect to Restricted Stock Units, which shall be set forth in the Award Agreement. The requirements for vesting of a Restricted Stock Unit may be based on the continued Service of the Participant for a specified time period (or periods), on the attainment of a specified Performance Goal (or goals) designed to meet the requirements for exemption under Section 162(m) of the Code or on such other terms and conditions as approved by the Committee in its discretion. The Committee may accelerate the vesting of a Restricted Stock Unit upon termination of Service under certain circumstances, as set forth in the Award Agreement.

9.3 Payment of Restricted Stock Units. Restricted Stock Units shall become payable to a Participant at the time or times determined by the Committee and set forth in the Award Agreement, which may be upon or following the vesting of the Award. Payment of a Restricted Stock Unit may be made, as approved by the Committee and set forth in the Award Agreement, in cash or in shares of Common Stock, or in a combination thereof, subject to applicable tax withholding requirements as provided in Section 15.11 hereof. Any cash payment of a Restricted Stock Unit shall be made based upon the Fair Market Value of the Common Stock, determined on such date or over such time period as determined by the Committee in its discretion.

9.4 Dividend Equivalent Rights. Restricted Stock Units may be granted together with a dividend equivalent right with respect to the shares of Common Stock subject to the Award, which may be accumulated and may be deemed reinvested in additional Restricted Stock Units or may be accumulated in cash, as determined by the Committee in its discretion, and will be paid at the time the underlying Restricted Stock Unit is payable. Dividend equivalent rights shall be subject to forfeiture under the same conditions as apply to the underlying Restricted Stock Units.

9.5 No Rights as Shareholder. The Participant shall not have any rights as a shareholder with respect to the shares of Common Stock subject to a Restricted Stock Unit until such time as such shares are delivered to the Participant pursuant to the terms of the Award Agreement.

10. Cash-Based Performance Awards.

10.1 Grant of Cash-Based Performance Awards. A Cash-Based Performance Award may be granted to any Eligible Person selected by the Committee. The maximum amount of cash compensation that may be paid to a Participant during any one calendar year under Cash-Based Performance Awards shall be $1,000,000.

10.2 Vesting of Cash-Based Performance Awards. Each Cash-Based Performance Award shall be evidenced by an Award Agreement that shall specify the performance period, and such other terms and conditions as the Committee, in its discretion, shall determine. Payment amounts may be based on the achievement of specified levels of performance with respect to a performance goal (or goals), including, if applicable, specified threshold, target and maximum performance levels. The requirements for vesting may also be based upon the continued Service of the Participant or on such other conditions as determined by the Committee and set forth in an Award Agreement. The Committee may accelerate the vesting of a Cash-Based Performance Award upon termination of Service under certain circumstances, as set forth in the Award Agreement.

10.3 Payment of Cash-Based Performance Awards. Payment of Cash-Based Performance Awards will be made as soon as practicable, but not later than sixty (60) days, after the expiration of the applicable performance period. Payment of the Cash-Based Performance Awards may be made in cash or in shares of Common Stock, or in a combination thereof, subject to applicable tax withholding requirements as provided in Section 15.11 hereof. Any payment of a Cash-Based Performance Award in Common Stock shall be made based upon the Fair Market Value thereof.

11. Stock Awards.

11.1 Grant of Stock Awards. A Stock Award may be granted to any Eligible Person selected by the Committee. A Stock Award may be granted for past services, in lieu of bonus or other cash compensation, as compensation for Non-Employee Directors or for any other valid purpose as determined by the Committee. The Committee shall determine the terms and conditions of such Awards, and such Awards may be made without vesting requirements. In addition, the Committee may, in connection with any Stock Award, require the payment of a specified purchase price. The maximum number of shares of Common Stock that may be subject to Stock Awards granted to a Participant during any one calendar year shall be limited to 100,000 shares (subject to adjustment as provided in Section 4.3 hereof).

11.2 Rights as Shareholder. Subject to the foregoing provisions of this Section 11 and the applicable Award Agreement, upon the issuance of Common Stock under a Stock Award, the Participant shall have all rights of a shareholder with respect to the shares of Common Stock, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto.

12. Section 162(m) Awards.

12.1 Awards. Awards of Stock Options and Stock Appreciation Rights are intended by their design pursuant to the terms of the Plan to qualify for the performance-based compensation exception under Section 162(m) of the Code and the regulations promulgated thereunder. Restricted Stock Awards, Restricted Stock Units, Cash-Based Performance Awards and Stock Awards may qualify for such exception if the Awards are granted or become payable or vested based upon pre-established performance goals in accordance with this Section 12.

12.2 Performance Criteria. In the case of a Restricted Stock Award, Restricted Stock Units, Cash-Based Performance Award or Stock Award that is intended to qualify for the performance-based compensation exception under Section 162(m) of the Code, the performance criteria upon which the grant, payment or vesting may be based shall be limited to one or more of the following performance measures, which may be applied on a Company-wide, departmental, or individual basis, or any other basis determined by the Committee in its discretion: 1) net earnings; 2) earnings per share; 3) dividend ratio; 4) net sales growth; 5) income or net income (before taxes); 6) operating profit or net operating profit; 7) return measures (including, but not limited to, return on assets, capital, equity or sales); 8) cash flow (including, but not limited to, operating cash flow, cash from operations and free cash flow); 9) earnings before or after taxes, interest, depreciation and/or amortization; 10) share price (including, but not limited to growth measures and total shareholder return); 11) expense targets; 12) customer satisfaction; 13) market share; 14) economic value added; 15) the formation of joint ventures or the completion of other corporate transactions; 16) market capitalization; 17) debt leverage (debt to capital); 18) operating income or net operating income; 19) operating margin or profit margin; 20) return on operating revenue; 21) operating ratio; 22) integration and/or penetration of the market; and/or 23) any combination of or a specified increase in any of the foregoing. The Committee may adjust, change, or eliminate the performance goals or the applicable performance period of the Award as it deems appropriate, in its discretion. The foregoing performance measures may be determined on an absolute basis or relative to internal goals or relative to levels attained in prior years, or related to other companies or indices, or as ratios expressing relationships between two or more performance measures.

12.3 Section 162(m) Requirements. For purposes of qualifying Awards as performance-based compensation under Section 162(m) of the Code, the performance goals shall be set by the Committee on or before the latest date permissible to enable the Awards to so qualify. In granting such Awards, the Committee shall (i) interpret this Plan in a manner consistent with Section 162(m) of the Code; (ii) have no discretion to adjust any performance goal in any way that would adversely affect the treatment of the Award under Section 162(m) of the Code; and (iii) certify that the performance goals applicable to the Award are met before any payment with respect to such Award. With respect to any Awards intended to comply with the requirements of Section 162(m) of the Code, adjustments to performance goals shall only be made to the extent consistent with Section 162(m) of the Code, and the Committee may appropriately adjust any evaluation of performance under a performance goal to exclude any of the following events that occurs during a performance period, to the extent consistent with Section 162(m) of the Code: (i) asset write-downs, (ii) litigation, claims, judgments or settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) mergers, acquisitions and divestitures, (v) accruals for reorganization and restructuring programs and (vi) any extraordinary, unusual or non-recurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of

financial condition and results of operations appearing in the Company’s Forms 10-K or 10-Q for the applicable year. At the discretion of the Board, for purposes of compliance with Section 162(m) of the Code, the performance goals shall be subject to re-approval by the Company’s shareholders no later than the first shareholder meeting that occurs in the year following the fifth (5 th ) anniversary of the date on which the Plan first becomes effective.

13. Change in Control.

13.1 Effect of Change in Control. In the event of a Change in Control, all Awards then-outstanding under the Plan shall fully vest, and shall, as applicable, be fully exercisable as of, or paid out on, the date of the Change in Control. With respect to any Award the vesting of which is subject to the attainment of performance goals, upon a Change in Control, payout of cash or securities under such Award shall be determined as if the performance goals were achieved at the target level of performance.

13.2 Definition of Change in Control. For purposes of the Plan, unless otherwise defined in an Award Agreement, “ Change in Control ” shall mean: (i) a change in ownership of the Company under paragraph (a) below, or (ii) a change in effective control of the Company under paragraph (b) below, or (iii) a change in the ownership of a substantial portion of the assets of the Company under paragraph (c) below.

(a) Change in the Ownership of the Company. A change in the ownership of the Company shall occur on the date that any one person, or more than one person acting as a group (as defined in paragraph (d)), acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company. However, if any one person or more than one person acting as a group, is considered to own more than 50 percent of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the Company (or to cause a change in the effective control of the corporation (within the meaning of paragraph (b) below)). An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for property will be treated as an acquisition of stock for purposes of this section. This paragraph (a) applies only when there is a transfer of stock of the Company and stock in the Company remains outstanding after the transaction.

(b) Change in the Effective Control of the Company. A change in the effective control of the Company shall occur on the date that either (i) any one person or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30 percent or more of the total voting power of the stock of the Company; or (ii) a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election.

(c) Change in the Ownership of a Substantial Portion of the Company’s Assets. A change in the ownership of a substantial portion of the Company’s assets shall occur on the date that any one person, or more than one person acting as a group (as defined in paragraph (d) below), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. There is no

Change in Control event under this paragraph (c) when there is a transfer to an entity that is controlled by the shareholders of the transferring corporation immediately after the transfer. A transfer of assets by the Company is not treated as a change in the ownership of such assets if the assets are transferred to (i) a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock, (ii) an entity, 50 percent or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (iii) a person, or more than one person acting as a group, that owns, directly or indirectly, 50 percent or more of the total value or voting power of all the outstanding stock of the Company, or (iv) an entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a person described in paragraph (d). For purposes of this paragraph (c), a person’s status is determined immediately after the transfer of the assets.

(d) Persons Acting As a Group. For the purposes of paragraphs (a), (b), and (c), persons will not be considered to be acting as a group solely because they purchase or own assets or stock of the same corporation at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of assets or stock, or similar business transaction with the corporation. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of assets or stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

(e) Each of the sub-paragraphs (a) through (d) above shall be construed and interpreted consistent with the requirements of Section 409A of the Code and the regulations thereunder.

14. Forfeiture Events.

14.1 General. The Committee may specify in an Award Agreement at the time of the Award that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events shall include, but shall not be limited to, termination of Service for Cause, breach of noncompetition, confidentiality or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is materially detrimental to the business or reputation of the Company.

14.2 Termination for Cause.

(a) General. Unless otherwise provided by the Committee and set forth in an Award Agreement, if a Participant’s Service is terminated for Cause, such Participant’s rights, payments and benefits with respect to an Award shall be subject to cancellation, forfeiture and/or recoupment. The Company shall have the power to determine whether the Participant has been terminated for Cause and the date upon which such termination for Cause occurs. Any such determination shall be final, conclusive and binding upon the Participant. In addition, if the Company shall reasonably determine that a Participant has committed or may have committed any act which could constitute the basis for a termination of such Participant’s employment for Cause, the Committee may, subject to compliance with Section 409A of the Code and the regulations thereunder, suspend the Participant’s rights to exercise any option, receive any payment or vest in any right with respect to any Award pending a determination by the Company of whether an act has been committed which could constitute the basis for a termination for “Cause” as provided in this Section 14.2.

(b) Definition of “Cause”. For purposes of the Plan, unless otherwise defined in an Award Agreement, “Cause” means the Participant’s termination of Service due to: (i) persistent neglect or

negligence in the performance of the Participant’s Service duties; (ii) conviction (including pleas of guilty or no contest) for any act of fraud, misappropriation or embezzlement, or for any criminal offense related to the Participant’s Service; (iii) any deliberate and material breach of fiduciary duty to the Company or other conduct that leads to the material damage or prejudice of the Company, or (iv) a material breach of an essential Company policy, such as the Company’s code of conduct.

15. General Provisions.

15.1 Award Agreement. To the extent deemed necessary by the Committee, an Award under the Plan shall be evidenced by an Award Agreement in a written or electronic form approved by the Committee setting forth the number of shares of Common Stock, units or other rights subject to the Award, the exercise price, base price, or purchase price of the Award, the time or times at which an Award will become vested, exercisable or payable and the term of the Award. The Award Agreement may also set forth the effect on an Award of a Change in Control or a termination of Service under certain circumstances. The Award Agreement shall be subject to and incorporate, by reference or otherwise, all of the applicable terms and conditions of the Plan, and may also set forth other terms and conditions applicable to the Award as determined by the Committee consistent with the limitations of the Plan. The grant of an Award under the Plan shall not confer any rights upon the Participant holding such Award other than such terms, and subject to such conditions, as are specified in the Plan as being applicable to such type of Award (or to all Awards) or as are expressly set forth in the Award Agreement. An Award Agreement may be in the form of an agreement to be executed by both the Participant and the Company (or an authorized representative of the Company) or certificates, notices or similar instruments as approved by the Committee. The Committee need not require the execution of an Award Agreement by a Participant, in which case, acceptance of the Award by the Participant shall constitute agreement by the Participant to the terms, conditions, restrictions and limitations set forth in the Plan and the Award Agreement as well as any administrative guidelines of the Company in effect from time to time.

15.2 Determinations of Service. The Committee shall make all determinations relating to the Service of a Participant with the Company or any Subsidiary in connection with an Award, including with respect to the continuation, suspension or termination of such Service. A Participant’s Service shall not be deemed terminated if the Committee determines that (i) a transition of employment to service with a partnership, joint venture or corporation not meeting the requirements of a Subsidiary in which the Company or a Subsidiary is a party is not considered a termination of Service, or (ii) the Participant transfers between service as an employee and that of a Non-Employee Director (or vice versa). The Committee may determine whether any corporate transaction, such as a sale or spin-off of a division or subsidiary that employs a Participant, shall be deemed to result in a termination of Service for purposes of any affected Awards, and the Committee’s decision shall be final and binding.

15.3 No Assignment or Transfer; Beneficiaries. Except as provided in Section 6.6 hereof, Awards under the Plan shall not be assignable or transferable by the Participant, and shall not be subject in any manner to assignment, alienation, pledge, encumbrance or charge. Notwithstanding the foregoing, in the event of the death of a Participant while employed by the Company or any of its Subsidiaries, except as otherwise provided by the Committee in an Award Agreement, an outstanding Award may be exercised by or shall become payable to the Participant’s beneficiary as designated by the Participant in the manner prescribed by the Committee or, in the absence of an authorized beneficiary designation, by the legatee or legatees of such Award under the Participant’s last will, or by such Participant’s executors, personal representatives or distributees of such Award in accordance with the Participant’s will or the laws of descent and distribution. The Committee may provide in the terms of an Award Agreement or in any other manner prescribed by the Committee that the Participant shall have the right to designate a beneficiary or beneficiaries who shall be entitled to any rights, payments or other benefits specified under an Award following the Participant’s death.

15.4 Deferrals of Payment. The Committee may, in its discretion, permit a Participant to defer the receipt of payment of cash or delivery of shares of Common Stock that would otherwise be due to the Participant by virtue of the exercise of a right or the satisfaction of vesting or other conditions with respect to an Award, provided , however , that such discretion shall not apply in the case of a Stock Option or Stock Appreciation Right. If any such deferral is to be permitted by the Committee, the Committee shall establish rules and procedures relating to such deferral in a manner intended to comply with the requirements of Section 409A of the Code, including, without limitation, the time when an election to defer may be made, the time period of the deferral and the events that would result in payment of the deferred amount, the interest or other earnings attributable to the deferral and the method of funding, if any, attributable to the deferred amount.

15.5 No Right to Continued Service. Nothing in the Plan, in the grant of any Award or in any Award Agreement shall confer upon any Eligible Person or any Participant any right to continue in the Service of the Company or any of its Subsidiaries, or interfere in any way with the right of the Company or any of its Subsidiaries to terminate the employment or other service relationship of an Eligible Person or a Participant for any reason at any time.

15.6 Rights as Shareholder. A Participant shall have no rights as a holder of shares of Common Stock with respect to any unissued securities covered by an Award until the date the Participant becomes the holder of record of such securities. Except as provided in Section 4.3 hereof, no adjustment or other provision shall be made for dividends or other shareholder rights, except to the extent that the Award Agreement provides for dividend payments or dividend equivalent rights. The Committee may determine, in its discretion, the manner of delivery of Common Stock to be issued under the Plan, which may be by delivery of stock certificates, electronic account entry into new or existing accounts or any other means as the Committee, in its discretion, deems appropriate. The Committee may require that the stock certificates be held in escrow by the Company for any shares of Common Stock or cause the shares to be legended in order to comply with the securities laws or other applicable restrictions, or should the shares of Common Stock be represented by book or electronic account entry rather than a certificate, the Committee may take such steps to restrict transfer of the shares of Common Stock as the Committee considers necessary or advisable.

15.7 Section 409A Compliance. To the extent applicable, it is intended that the Plan and all Awards hereunder comply with the requirements of Section 409A of the Code and the regulations and other guidance issued thereunder, and that the Plan and all Award Agreements shall be interpreted and applied by the Committee in a manner consistent with this intent in order to avoid the imposition of any additional tax under Section 409A of the Code. In the event that any provision of the Plan or an Award Agreement is determined by the Committee to not comply with the applicable requirements of Section 409A of the Code and the regulations and other guidance issued thereunder, the Committee shall have the authority to take such actions and to make such changes to the Plan or an Award Agreement as the Committee deems necessary to comply with such requirements, provided that no such action shall adversely affect any outstanding Award without the consent of the affected Participant. No payment that constitutes deferred compensation under Section 409A of the Code that would otherwise be made under the Plan or an Award Agreement upon a termination of Service will be made or provided unless and until such termination is also a “separation from service,” as determined in accordance with Section 409A of the Code. Notwithstanding the foregoing or anything elsewhere in the Plan or an Award Agreement to the contrary, if a Participant is a “specified employee” as defined in Section 409A of the Code at the time of termination of Service with respect to an Award, then solely to the extent necessary to avoid the imposition of any additional tax under Section 409A of the Code, the commencement of any payments or benefits under the Award shall be deferred until the date that is six months following the Participant’s termination of Service (or such other period as required to comply with Section 409A). In no event whatsoever shall the Company be

liable for any additional tax, interest or penalties that may be imposed on a Participant by Section 409A of the Code or any damages for failing to comply with Section 409A of the Code.

15.8 Securities Law Compliance. No shares of Common Stock will be issued or transferred pursuant to an Award unless and until all then applicable requirements imposed by Federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any exchanges upon which the shares of Common Stock may be listed, have been fully met. As a condition precedent to the issuance of shares pursuant to the grant or exercise of an Award, the Company may require the Participant to take any reasonable action to meet such requirements. The Committee may impose such conditions on any shares of Common Stock issuable under the Plan as it may deem advisable, including, without limitation, restrictions under the Securities Act, under the requirements of any exchange upon which such shares of the same class are then listed, and under any blue sky or other securities laws applicable to such shares. The Committee may also require the Participant to represent and warrant at the time of issuance or transfer that the shares of Common Stock are being acquired only for investment purposes and without any current intention to sell or distribute such shares.

15.9 Non-United States Participants and Jurisdictions. Notwithstanding any provision in the Plan to the contrary, in order to foster and promote achievement of the purposes of the Plan or to comply with provisions of laws in other countries in which the Company operates or has employees, the Committee, in its discretion, shall have the power and authority, to the extent not inconsistent with the intent of the Plan, to (i) determine which Eligible Persons who are foreign nationals or who are employed outside of the United States are eligible to participate in the Plan, (ii) modify the terms and conditions of any Awards made to such Eligible Persons, and (iii) establish subplans and modify exercise and payment procedures and other Award terms and procedures to the extent such actions may be necessary or advisable to comply with any tax, securities, regulatory or other laws of other jurisdictions with respect to Awards that may be subject to such laws. Moreover, the Committee may approve such supplements to or amendments, restatements or alternative versions of the Plan, not inconsistent with the intent of the Plan, as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of the Plan as in effect for any other purpose.

15.10 Substitute Awards in Corporate Transactions. Nothing contained in the Plan shall be construed to limit the right of the Committee to grant Awards under the Plan in connection with the acquisition, whether by purchase, merger, consolidation or other corporate transaction, of the business or assets of any corporation or other entity. Without limiting the foregoing, the Committee may grant Awards under the Plan to an employee or director of another corporation who becomes an Eligible Person by reason of any such corporate transaction in substitution for awards previously granted by such corporation or entity to such person. The terms and conditions of the substitute Awards may vary from the terms and conditions that would otherwise be required by the Plan solely to the extent the Committee deems necessary for such purpose.

15.11 Tax Withholding. The Participant shall be responsible for payment of any taxes or similar charges required by law to be paid or withheld from an Award or an amount paid in satisfaction of an Award. Any required withholdings shall be paid or, in the discretion of the Committee, otherwise satisfied (including, without limitation, by reduction of the number of shares of Common Stock subject to the Award), by the Participant on or prior to the payment or other event that results in taxable income in respect of an Award. The Award Agreement may specify the manner in which the withholding obligation shall be satisfied with respect to the particular type of Award.

15.12 Unfunded Plan. The adoption of the Plan and any reservation of shares of Stock or cash amounts by the Company to discharge its obligations hereunder shall not be deemed to create a trust or other funded arrangement. Except upon the issuance of Common Stock pursuant to an Award, any rights of a Participant under the Plan shall be those of a general unsecured creditor of the Company,

and neither a Participant nor the Participant’s permitted transferees or estate shall have any other interest in any assets of the Company by virtue of the Plan. Notwithstanding the foregoing, the Company shall have the right to implement or set aside funds in a grantor trust, subject to the claims of the Company’s creditors or otherwise, to discharge its obligations under the Plan.

15.13 Other Compensation and Benefit Plans. The adoption of the Plan shall not affect any other share incentive or other compensation plans in effect for the Company or any Subsidiary, nor shall the Plan preclude the Company from establishing any other forms of share incentive or other compensation or benefit program for employees of the Company or any Subsidiary. The amount of any compensation deemed to be received by a Participant pursuant to an Award shall not constitute includable compensation for purposes of determining the amount of benefits to which a Participant is entitled under any other compensation or benefit plan or program of the Company or a Subsidiary, including, without limitation, under any pension or severance benefits plan, except to the extent specifically provided by the terms of any such plan.

15.14 Plan Binding on Transferees. The Plan shall be binding upon the Company, its successors, transferees and assigns, and the Participant, the Participant’s executor, administrator and permitted transferees and beneficiaries.

15.15 Severability. If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.

15.16 Governing Law. The Plan and all rights hereunder shall be subject to and interpreted in accordance with the laws of the State of Delaware, without reference to the principles of conflicts of laws, and to applicable Federal securities laws.

16. Term; Amendment and Termination.

16.1 Term. The Plan was adopted by the Board on May 19, 2010, and shall be subject to approval by a majority of the votes present in person or by proxy and entitled to vote thereon at the next duly held meeting of the Company’s shareholders at which a quorum is present. The Plan shall be effective as of the Effective Date and shall automatically terminate on ten years from its adoption by the Board, unless sooner terminated in accordance with Section 16.2 hereof.

16.2 Amendment and Termination. The Board may from time to time and in any respect, amend, modify, suspend or terminate the Plan. Notwithstanding the foregoing, no amendment, modification, suspension or termination of the Plan shall adversely affect any Award theretofore granted without the consent of the Participant or the permitted transferee of the Award. The Board may seek the approval of any amendment, modification, suspension or termination by the Company’s shareholders to the extent it deems necessary or advisable in its discretion for purposes of compliance with Section 162(m) or Section 422 of the Code, the listing requirements of the NASDAQ Stock Market, New York Stock Exchange, or other exchange or securities market or for any other purpose.

EXHIBIT 10.5

RESTRICTED STOCK UNIT AWARD AGREEMENT

(for Non-Employee Directors)

MTR Gaming, Inc.

2010 Long Term Incentive Plan

This RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”), made as of the [ ] day of [ ], 2010 (the “Date of Grant”), between MTR Gaming, Inc. a Delaware corporation (the “Company”), and [NAME], a Non-Employee Director (the “Participant”), is made pursuant to the terms of the Company’s 2010 Long Term Incentive Plan (the “Plan”). Capitalized terms used herein but not defined shall have the meanings set forth in the Plan.

Section 1 . Restricted Stock Unit Award . The Company grants to the Participant, on the terms and conditions hereinafter set forth, an award of 30,000 Restricted Stock Units (the “RSUs”). The RSUs are notional, non-voting units, which will entitle the Participant to receive payments, subject to the terms hereof, in shares of Common Stock on the payments dates specified in Section 2 hereof.

Section 2 . Payment of Award . The RSUs shall at all times be fully vested and nonforfeitable, and shall be paid upon the earlier to occur of (i) the Participant’s termination of Service, and (ii) a Change in Control. The RSUs shall be paid by the Company by delivering to the Participant a number of shares of Common Stock equal to the number of RSUs that become payable upon that applicable payment date.

Section 3. Restrictions on Transfer . Neither this Agreement nor any RSUs covered hereby may be sold, assigned, transferred, encumbered, hypothecated or pledged by the Participant, other than to the Company.

Section 4 . Investment Representation . Upon the acquisition of the RSUs or Common Stock at a time when there is not in effect a registration statement under the Securities Act of 1933 relating to the Common Stock, the Participant hereby represents and warrants, and by virtue of such acquisition shall be deemed to represent and warrant, to the Company that the RSUs or Common Stock shall be acquired for investment and not with a view to the distribution thereof, and not with any present intention of distributing the same, and the Participant shall provide the Company with such further representations and warranties as the Company may require in order to ensure compliance with applicable federal and state securities, blue sky and other laws. No RSUs or Common Stock shall be acquired unless and until the Company and/or the Participant shall have complied with all applicable federal or state registration, listing and/or qualification requirements and all other requirements of law or of any regulatory agencies having jurisdiction, unless the Committee has received evidence satisfactory to it that the Participant may acquire the RSUs or Common Stock pursuant to an exemption from registration under the applicable securities laws. Any determination in this connection by the Committee shall be final, binding and conclusive. The Company reserves the right to legend any certificate or book entry representation of the Common Stock conditioning sales of such shares upon compliance with applicable federal and state securities laws and regulations.

Section 5 . Adjustments . The RSUs granted hereunder shall be subject to the provisions of Section 4.3 of the Plan relating to adjustments for recapitalizations, reclassifications and other changes in the Company’s corporate structure.

Section 6 . No Right of Continued Service . Nothing in the Plan or this Agreement shall confer upon the Participant any right to continued Service.

Section 7 . Limitation of Rights . The Participant shall not have any privileges of a shareholder of the Company with respect to the RSUs awarded hereunder, including without limitation any right to vote shares underlying the RSUs or to receive dividends or other distributions in respect thereof until the date of the issuance to the Participant of a share of Common Stock in payment of the RSUs.

Section 8 . Construction . This Agreement and the RSUs granted hereunder are granted by the Company pursuant to the Plan and are in all respects subject to the terms and conditions of the Plan. The Participant hereby acknowledges that a copy of the Plan has been delivered to the Participant and accepts the RSUs hereunder subject to all terms and provisions of the Plan, which are incorporated herein by reference. In the event of a conflict or ambiguity between any term or provision contained herein and a term or provision of the Plan, the Plan will govern and prevail. The construction of and decisions under the Plan and this Agreement are vested in the Committee, whose determinations shall be final, conclusive and binding upon the Participant.

Section 9 . Governing Law . This Agreement shall be construed and enforced in accordance with, the laws of the State of Delaware, without giving effect to the choice of law principles thereof.

Section 10 . Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

Section 11 . Binding Effect . This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.

Section 12 . Entire Agreement . This Agreement and the Plan constitute the entire agreement between the parties with respect to the subject matter hereof and thereof, merging any and all prior agreements.

[SIGNATURES ON FOLLOWING PAGE]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first above written.


	MTR GAMING, INC.


	By:
	Name:
	Title:


	PARTICIPANT



	Participant’s Signature			Date


	Participant’s Name
	address
	address

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Robert F. Griffin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of MTR Gaming Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and we have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2010

	/s/ ROBERT F. GRIFFIN

	Robert F. Griffin
	President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) AND 15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

I, David R. Hughes, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of MTR Gaming Group, Inc.;

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2010

	/s/ DAVID R. HUGHES

	David R. Hughes
	Corporate Executive Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATION

Robert F. Griffin

President and Chief Executive Officer

I, Robert F. Griffin, President and Chief Executive Officer of MTR Gaming Group, Inc. (the “Company”), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2010 (the “Periodic Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d); and

2. The information contained in the Periodic Report fairly represents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2010

	/s/ ROBERT F. GRIFFIN

	Robert F. Griffin
	President and Chief Executive Officer

Exhibit 32.2

CERTIFICATION

David R. Hughes

Chief Financial Officer

I, David R. Hughes, Chief Financial Officer of MTR Gaming Group, Inc. (the “Company”), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

2. The information contained in the Periodic Report fairly represents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2010

	/s/ DAVID R. HUGHES

	David R. Hughes
	Corporate Executive Vice President and Chief Financial Officer