SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12.
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DAVE & BUSTER'S, INC.
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
DOLPHIN LIMITED PARTNERSHIP I, L.P.
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
- --------------------------------------------------------------------------------
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previously. Identify the previous filing by registration statement number, or
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2003 ANNUAL MEETING OF
SHAREHOLDERS OF DAVE & BUSTER'S, INC.
PROXY STATEMENT
OF
DOLPHIN LIMITED PARTNERSHIP I, L.P.
This proxy statement and the enclosed BLUE proxy card are being
furnished to you, the holders of shares of common stock, par value $.01 per
share, of Dave & Buster's, Inc., a Missouri corporation, in connection with the
solicitation by Dolphin Limited Partnership I, L.P. for use at the 2003 annual
meeting of shareholders of the Company, and at any adjournments or postponements
of the meeting. Dolphin is the Company's largest shareholder, owning
approximately 9.5% of the Company's stock. Our interests are squarely aligned
with those of our fellow shareholders, and our only goal is to maximize value
for all shareholders in which we expect to share proportionately.
Dolphin is soliciting proxies to elect its three nominees to the
Company's board of directors. Our objective is to install directors that are
independent of management, untainted by what we believe was the improper and
conflicted past conduct of the board of directors in the Company's ultimately
failed sale process, and elected by you, the shareholders. Our nominees will
also be committed to addressing what we believe have been the Company's
disappointing operating results and share performance over the past few years.
We explain in detail in this proxy statement the basis for our beliefs and why
we think you should support our nominees. See "Dolphin's Reasons For Seeking
Board Representation" below.
The Company recently expanded the size of its board from eight to
nine directors despite Dolphin's admonishments not to do so. The Company has
also recently added three directors to the board, one to fill a recently created
director position and two to replace retiring board directors. Even with the
addition of three directors, six of the remaining directors who presided over
the improper sale process and disappointing operating results constitute a
supermajority of the nine member board. Our nominees, if elected, will
constitute three of the nine directors on the board. If shareholders elect our
nominees and continue to be dissatisfied with the board, they will be in a
position at next year's annual meeting to replace an additional three directors
and thereby effect a change in board control.
Although our nominees, if elected, will constitute only a minority of
the Company's board of directors, they will be strong advocates for advancing
shareholder interests, maximizing shareholder value, implementing operating
improvements, and promoting board independence and management accountability.
Specifically, our nominees will promote a platform in the boardroom that
includes--
o conducting a thorough review of the Company's prior sale process;
o reconstituting the board's special committee that should have actively
supervised the sale process but ceded that role to management
directors who we believe had a conflicted agenda;
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o exploring avenues for maximizing shareholder value, which may include
a sale of the Company;
o destaggering the board to provide for the annual election of all
directors, thereby enhancing the board's accountability to the
shareholders;
o eliminating the Company's poison pill rights plan;
o designating board leadership unconnected with the prior sale process;
o focusing closely on financial performance, with a thorough review of
the Company's operations and business model; and
o aligning management compensation with operating results and
shareholder return.
The terms of three of the Company's directors expire at the 2003
annual meeting. Dolphin is nominating three directors, Edward A. Weinstein,
Donald T. Netter and Edward E. Hartline, for election to this class for terms
expiring in 2006.
As we set out in this proxy statement, our nominees collectively have
extensive backgrounds in public company financial oversight and accounting, the
promotion of investor value and corporate law and governance. We believe our
nominees will bring to the board the judgment, experience, energy, independence
and objectivity that shareholders can trust and that will be applied exclusively
and disinterestedly in the interests of all shareholders.
See "Information About Dolphin" and "Certain Other Information
Regarding Dolphin's Nominees" for information about Dolphin and about our
nominees.
Dolphin recommends that you vote to elect each of our three nominees.
The Company has announced that the 2003 annual meeting will be held
at ____ a.m. local time on June __, 2003 at 10727 Composite Drive, Dallas, Texas
and that the record date for determining shareholders entitled to notice of and
to vote at the 2003 annual meeting is April 18, 2003.
Your vote is important, no matter how many or how few shares of
common stock you own. Dolphin urges you to mark, sign, date and return the
enclosed BLUE proxy card promptly in accordance with the instructions set forth
below. Please do NOT sign any proxy card you may receive from the Company even
though it allows you to vote in favor of certain proposals that Dolphin
supports. You can vote for those proposals on the BLUE Dolphin card.
You are urged to mark, sign and date the enclosed BLUE proxy card and
return it in the enclosed envelope whether or not you plan to attend the 2003
annual meeting. If you need assistance in voting your shares of common stock,
please call Dolphin's information agent, Innisfree M&A Incorporated, toll-free
at 1-888-750-5834 or, if you are a bank or broker, please call collect at
1-212-750-5833.
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This proxy statement and the accompanying BLUE proxy card are first
being furnished to the Company's shareholders on or about _________, 2003.
DOLPHIN'S REASONS FOR SEEKING BOARD REPRESENTATION
Dolphin seeks to maximize value for all of the Company's shareholders
in which we, as the Company's largest shareholder, expect to share in
proportionately. We do not trust the current board to act disinterestedly to
promote shareholder value because of what we believe is the past misconduct with
which a supermajority of the current board was associated. In this section we
explain to you the basis for our belief that a supermajority of the current
board is tainted by an improper and flawed process to sell the Company that
began in 1999, and ended in failure in the fall of 2002. We also explain our
disappointment with the Company's recent operating results, and top management
compensation that, in our view, is excessive and not aligned with operating
performance, for which we believe the board must be held accountable.
Composition of the Board
Until recently, the Company's board of directors had eight members.
Three of these members--David O. Corriveau and James W. Corley, then the
Company's two co-chairmen and co-CEOs, and Walter S. Henrion, then a consultant
to the Company since 1989 and a member of the board's executive committee--were
participants in a failed attempt to buyout the Company. Four of the directors--
Mark A. Levy, Allen J. Bernstein, Peter A. Edison and Christopher C.
Maguire--served on the special committee of the board charged with the
responsibility for evaluating and negotiating acquisition proposals, including
the buyout attempt. The eighth director was Bruce H. Hallett, whose firm
provided legal services to the Company.
In March and April 2003--beginning almost immediately after Dolphin
publicly criticized the conduct of the board--the Company announced a series of
what it referred to as governance initiatives. See "The Company's governance
reforms" below. As part of these initiatives, the Company reported that Mr.
Henrion, whose term of office was to expire in 2003, and Mr. Hallett, whose term
of office was to expire in 2004, were retiring from the board. The board
appointed Patricia P. Priest to fill the vacancy in the 2003 class created by
the resignation of Mr. Henrion. The board also expanded the 2004 class by one
director and appointed David B. Pittaway and Walter J. Humann to fill the
vacancies created in this class by the resignation of Mr. Hallett and the
recently created directorship. Dolphin has publicly opposed the increase in the
size of the board. We feel that the board was wrong to create an additional
directorship in the midst of a proxy contest, where the incumbent board rather
than the shareholders filled the vacancy.
Even with three recently appointed directors, the current board is
still heavily weighted towards the old regime. Six of the nine directors, a
supermajority, were either members of the senior management buyout group that we
believe placed its interests ahead of the shareholders, or members of the
special committee, that failed to check this self-interest. We cannot place
trust and confidence to manage the affairs of our Company in a board that has a
supermajority of the old directors. We also believe that if a decision is made
to sell the Company, credible financial and strategic buyers are less likely to
come forward if the old board members were to
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remain in control of the sale process and the special committee remains
comprised of the same members.
Our nominees have no connection with the incumbent board. By electing
our three nominees in 2003, the shareholders will get vigorous, independent
advocates for their interests in the boardroom this year. Also, shareholders
will be positioned to change control of the board at the 2004 annual meeting by
election of three additional independent directors, even if the board remains
classified at that time.
The flawed sale process and its implications
Beginning in October 1999, following a significant decline in the
Company's stock price, the Company began to explore various strategic
alternatives. The exploration ultimately led to a proposed buyout transaction by
an Investcorp affiliate with the participation of the Company's senior
management. This transaction first took the form of a $12.00 per share tender
offer launched in June 2002, which failed to close because of insufficient
shareholder response, and then a proposed $13.50 per share merger to be voted
upon by shareholders, which was withdrawn in October 2002. We characterize this
process as flawed, conflicted and failed--
o flawed, because, as we describe below, the special committee that
should have taken an active role in conducting the process only
reacted to transactions that were pre-screened by senior management;
o conflicted, because, as we describe below, senior management was
apparently only prepared to consider transactions in which it would
have an interest, regardless of what may have been best for
shareholders; and
o failed, because, despite the time, energy and substantial
expense--$1.3 million in 2002 alone--that the Company and its
management apparently devoted to this process, it failed to result in
an acquisition transaction or to otherwise bring value to
shareholders.
Unless we note otherwise, the information that we present concerning
this process is derived from the Company's preliminary proxy statement filed
with the Securities and Exchange Commission on October 2, 2002 under cover of
Amendment Number 2 to the Company's Schedule 14A. This document is publicly
available on the website of the SEC at www.sec.gov. Please see in particular
"Background of the Merger," found at pages 16 through 22 of that document.
The special committee
In December 1999, the board of the Company established a special
committee of allegedly independent directors to evaluate and negotiate proposals
"in the event that any of the existing or future unsolicited inquiries developed
into a credible proposal." The board took this action after being advised by one
of the Company's then co-chairmen and chief executive officers that the Company
had received unsolicited inquiries from financial buyers and that the Company
was "exploring management's interest in participating in any such transaction."
Thus,
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we believe the board was on notice from the very outset that senior management
had an interest in any potential transaction that was not shared by all
shareholders.
The board initially appointed to the special committee four
directors, Mr. Levy, who served as chair, and Messrs. Bernstein, Edison and
Maguire.
Mr. Maguire is chief executive officer and president of Cypress
Equities, Inc. Cypress Equities, Inc. or its affiliates lease space to the
Company, for which Cypress received from the Company $522,000 in 1999, $167,000
in 2000, $1,242,400 in 2001 and $1,332,000 (including brokerage commissions on
sale-leaseback transactions) in 2002. In addition, in December 2000, the Company
and an affiliate of Cypress Equities entered into a sale-leaseback transaction
whereby the Company received $8.0 million in exchange for committing to lease
payments of approximately $23.2 million over 20 years with options for renewal.
Please see the Company's annual proxy statements for the years 2000, 2001, 2002
and 2003 under "Certain Transactions," which are available on the SEC's website.
In light of these relationships, in our view, Mr. Maguire had financial ties to
the Company that cast serious doubt on Mr. Maguire's independence from
management and therefore Mr. Maguire should not have served on the special
committee.
Mr. Bernstein resigned from the special committee in April 2002,
citing the need to "devote more of his time and attention to the sale of
Morton's Restaurant Group, Inc., of which he was then the Chairman and Chief
Executive Officer." In fact, Morton's concluded a going private transaction in
2002 with the participation of its management. Dolphin owned 6.1% of the
Morton's outstanding common stock at the time, communicated with Morton's
management and expressed its own interest in acquiring Morton's. By reason of
our involvement, we had a unique vantage point from which to observe the
transaction. Please see Morton's definitive proxy statement, filed with the SEC
under cover of Schedule 14A on June 18, 2002 and available on the SEC's website,
for a discussion of the background of this transaction, including various
communications and expressions of interest of Dolphin in respect of the
transaction.
In a lengthy sale process beginning in May 2001, in which Morton's
received expressions of interest from approximately 30 parties, the transaction
consummated by Morton's was one in which certain members of senior management
participated. Also of note, Morton's failed in our view to diligently pursue an
independent acquisition proposal of $28.25 per share made in May 2001, at the
outset of the process. This was over twice the price of $12.60 per share offered
in the transaction with management participation later accepted by the Morton's
board in March 2002. That price was subsequently increased to $17.00 in July
2002, but only as a result of a bidding war with a third party.
We believe that the Morton's transaction was disturbingly similar to
key elements of the Company's sale process. This raises questions for us as to
whether Mr. Bernstein could have exercised objective judgment during his tenure
on the Company's special committee or the board with respect to any proposed
transactions not involving management.
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The integrity of the sale process; Landry's expression of interest
In our view, given the expressly stated interest of senior management
in participating in any buyout of the Company, it was incumbent on the special
committee to take an active role in managing the Company's sale process. From
publicly available sources, it appears that this was not the case. Rather, as
belatedly described in the Company's October 2002 preliminary proxy statement,
it was the very management group that expected to participate in the buyout that
screened third-party expressions of interest in acquiring the Company. This
group consisted of directors Corriveau, Corley and Henrion. As disclosed in the
October 2002 preliminary proxy statement, Messrs. Corriveau, Corley and/or
Henrion met with seven interested buyers without reported involvement of the
special committee. The two transactions reportedly referred to the special
committee were ones in which senior management had proposed participation. To
us, this suggests that Messrs. Corriveau, Corley and/or Henrion were not
inclined to present to the special committee a transaction without senior
management involvement and that the special committee passively acquiesced in
this improper clearance procedure. We think this behavior was a dereliction by
the special committee of its duties which undercut the entire sale process. This
view is reinforced by the treatment of Landry's Restaurants, Inc. which
expressed interest in acquiring the Company in 2001, in circumstances which we
describe below.
With the exception of the Landry's expression of interest in
mid-2001, the public record does not provide extensive particulars on those
expressions of interest to acquire the Company that failed to pass the
management screen. Details of Landry's negotiations with the Company's
management initially came to light as a result of a class action litigation
filed in the Texas District Court in July 2002, captioned L.J. Parnes v.
Corriveau et al., cause no. 02-4912 (July 9, 2002 Dallas County). The complaint
in that action is publicly available from the court. It alleges, based on
statements made by a deposed representative of Landry's, that after a
confidentiality agreement was executed by Landry's, "D&B had no interest in
providing Landry's with any confidential information." According to the
complaint, Messrs. Corriveau, Corley and Henrion did meet in late August 2001
with Tillman Fertitta, Landry's chairman and chief executive officer. However,
at the meeting, Mr. Fertitta "was informed that they [Corriveau, Corley and
Henrion] intended to take the Company private themselves and they wanted
Landry's to sign a standstill agreement to preclude it from interfering with the
going private plan." Similar disclosure exists in the Company's October 2002
preliminary proxy statement--
"Among other topics discussed at the [August 2001] meeting,
Messrs. Corriveau and Corley disclosed to Mr. Fertitta that D&B's
management, including themselves, preferred a management-led
buyout of D&B to a sale transaction with a strategic buyer such
as Landry's."
The complaint further recites--
"Two months later, on October 23, 2001, defendant Corriveau sent
Fertitta an `outline of the kind of deal a merger would require
for management to obtain its goals' and questioned whether this
would work for Landry's. That document
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indicated that the D&B shareholders would receive only $9 per
share and that the D&B `management earnouts' would be `10% of
EBITDA contributed by D&B operations for the next 5 years. Paid
annually and structured as a capital gains transaction.'"
This demand is corroborated in the Company's October 2002 preliminary proxy
statement. The disclosure in the proxy statement adds that management also
sought "assurances that D&B management would participate in stock option, stock
grant and other incentive programs offered by Landry's."
We are deeply troubled by these disclosures, and we think that other
shareholders should be as well. First, the disclosures demonstrate to us that
the Company's senior management had as a primary goal the furthering of their
own financial interests, which they appear to have pursued regardless of whether
shareholders would receive greater benefit from a transaction that did not have
senior management participation. As directors of the Company, Messrs. Corriveau,
Corley and Henrion were bound by fiduciary duties to the Company and its
shareholders. We believe, based on the recited disclosures, that these directors
breached their fiduciary duties to shareholders by placing their personal
interests ahead of the interests of shareholders. We cannot ascertain whether
Messrs. Corriveau, Corley and Henrion conducted exchanges with other parties
interested in an acquisition of the Company that were similar to the exchange
with Landry's. However, it seems to us a fair inference that senior management
may have evaluated other expressions of interest through the same prism of
self-interest.
Second, we are troubled by the delay in the Company's disclosure of
the special benefits that senior management sought for itself in any transaction
with Landry's. The demand for special benefits was made in October 2001. The
discussions with Landry's were not disclosed at all in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 filed in June 2002 in
response to the management supported tender offer for the Company launched in
that month. On July 29, 2002, the Company filed its initial preliminary proxy
materials in respect of the management supported buyout transaction, briefly
mentioning contacts with "a company engaged in restaurant ownership and
operations," but failing to disclose any substance of those negotiations,
including references to management benefits. A similar reference is contained in
the Company's revised proxy materials filed on September 11, 2002.
It seems to us a fair inference that, were it not for disclosures in
the class action litigation, which was filed at the beginning of July 2002, the
Company may never have disclosed the details of the Landry's encounter. We
believe that the failure to disclose management directors' demands of a
potential acquiror for personal financial benefits as a condition of an
acquisition transaction is a serious omission. This is particularly so, in our
view, where the Company purports to provide the background of a buyout
transaction in which senior management is participating. To us, this lack of
candor in the Company's public disclosures goes to the issue of shareholder
trust in the Company's senior management and in its board of directors, which
has the ultimate responsibility for the conduct of the Company's affairs. The
current board continues to be comprised of a supermajority of directors who were
members of the old board and are therefore responsible for this failure to
disclose.
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The Company's governance reforms
On March 5 and 17, 2003, the Company announced that it was
undertaking certain governance and business initiatives. This announcement came
almost immediately after Dolphin delivered an open letter to the board on
governance issues, as noted below. The Company's initiatives included formation
of a nominating and corporate governance committee whose chairman would be Mr.
Edison. Also, the Company announced that Mr. Levy had been designated lead
director, "to head executive sessions of the board and also serve as the primary
liaison between management and the Board." The appointment of a lead director
was one of the governance reforms advocated in Dolphin's March 3 letter. On
April 10, 2003, the Company disclosed that Messrs. Corriveau and Corley would no
longer serve as co-chairmen and that instead Mr. Edison would be chairman of the
Company's board.
In its March announcements, the Company stated to its shareholders,
"[A]s you know, public companies are subject to new laws
regarding corporate governance, including composition of
the Board and Board committees. With this in mind, last
year we proactively undertook a thorough review of our
governance practices and procedures with the goal of not
only meeting the requirements of the new laws, but also
enhancing our overall corporate governance policies. We
made this issue a top priority, and set it as an agenda
item for our regularly scheduled Board meeting on March 4,
2003. Our objective is to institute Board changes in an
orderly and constructive way."
(emphasis supplied by us). We have reviewed the minutes of the Company's board
of directors provided to us by the Company following a demand that we made under
Missouri law. Prior to March 4, 2003, only one brief reference to corporate
governance reform appeared in these minutes, from a board meeting on November
12, 2002. This reference reads in its entirety as follows:
"Mr. Corley then asked Mr. Gary Singer and Mr. Tom Leary of
O'Melveny and Myers LLP to join the meeting to give a
presentation on recent corporate governance developments in
light of the Sarbanes-Oxley legislation and recent NYSE
proposed rule changes."
This does not seem to us as a mandate for a "thorough review of governance
practices and procedures."
We note, moreover, that the actions taken at the March 4, 2003 board
meeting followed by one day our delivery on March 3, 2003 of a letter to the
board. In this letter, we challenged the independence and credibility of the
board and the special committee, primarily for the reasons described above, and
advocated the appointment of an independent, lead director and other reforms
included in our platform. We question, therefore, if the Company is being fully
candid with its shareholders on the impetus for and timing of the Company's
governance reform measures. We think the answer is NO.
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Mr. Edison was a member of the special committee formed to evaluate
and negotiate acquisition proposals. For the reasons we describe above, we
believe that this committee did not act properly to protect and promote the
interests of shareholders, where senior management who were also directors may
have reasonably been suspected of placing their own financial benefit ahead of
shareholder interests. We ask shareholders to consider whether Mr. Edison is an
appropriate choice to lead a board where one of the key objectives is to promote
independence from management. We think the answer is NO.
As noted, in March 2003, the Company announced to shareholders that
Mr. Levy had been appointed lead director. This designation is not mentioned in
the Company's 2003 preliminary proxy materials. Based upon our review of board
minutes furnished to us pursuant to our request under Missouri law, we
understand that this designation was withdrawn when Mr. Edison was appointed
chairman of the board. The Company touted the designation of a lead director as
a governance initiative but withdrew the designation without public disclosure.
We ask shareholders to consider whether the Company has acted here with the
appropriate openness and candor. We think the answer is NO.
David B. Pittaway is one of the recently appointed directors that the
Company selected to fill one of the vacancies in the class of directors whose
term expires in 2004. The Company discloses in its 2003 preliminary proxy
materials that Mr. Pittaway is a senior managing director of Castle Harlan, Inc.
The Company does not disclose in its materials that--
o Castle Harlan was the investment firm that acquired Morton's
Restaurant Group (see "The special committee" above);
o John Castle, a founder of Castle Harlan, had originally been on the
special committee of the Morton's board formed to evaluate acquisition
proposals;
o approximately three months after Mr. Castle resigned from the special
committee--but not the board--Castle Harlan made its bid for Morton's
Restaurant Group;
o Mr. Pittaway was a director of Morton's at the time; and
o Mr. Bernstein, as a member of Morton's senior management, participated
in that buyout.
In light of the Company's recent experience with a proposed buyout
involving senior management, we ask shareholders to consider whether the
omission of this information, which we believe is relevant to the suitability of
Mr. Pittaway for membership on the Company's board, from the Company's proxy
materials was proper . We think the answer is NO.
In summary
For the reasons set forth in this section, we believe that:
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o the Company's sale process, in which the Company received various
expressions of interest but focused only on those that allowed for
senior management participation, was flawed and improper;
o the Landry's exchange demonstrates that the management directors acted
improperly and in contravention of their fiduciary duties to
shareholders by placing their financial interests ahead of the
interests of shareholders;
o the special committee, which reacted only to proposals that had been
screened by senior management and which apparently catered to
management's personal financial objectives, did not properly discharge
its duties to shareholders;
o the members of the special committee should be held accountable for
ceding to the clearly interested management directors significant
aspects of the sale process and failing to actively implement
procedures designed to achieve the best and highest value for
shareholders; and
o the directors who served on the special committee and the board during
this process should not be entrusted with the responsibility of
promoting governance reform, board independence and maximizing
shareholder value.
The improprieties that characterized the Company's sale process
undermine the trust that we, as the Company's largest shareholder, and all other
shareholders are entitled to place in the Company's board of directors. We
believe that the only way to restore this trust is to elect new directors who
are truly independent and whose only agenda is to advance shareholder interests
and maximize shareholder value.
Recent financial performance compared with management compensation
The Company's operating income, net income, diluted earnings per
share, EBITDA and EBITDA margin have all declined for the second consecutive
year, while compensation of the Company's top management personnel, Messrs.
Corriveau and Corley, remains substantially in excess of the compensation
awarded these executives in fiscal 1999. We think that this is wrong and
undermines our confidence in the business judgment and oversight of the current
board.
The following information for fiscal years 1999 through 2002 (other
than per share prices) is derived from the Company's press release of April 8,
2003, its annual report on form 10-K for the year ended February 3, 2002, its
proxy statement for the Company's 2002 annual meeting of shareholders and the
Company's preliminary proxy statement for the 2003 annual meeting. We compare
the Company's results beginning in fiscal 1999, because in that year the
Company's stock price experienced a precipitous decline--the effects of which
continue to be felt--well in advance of the general downturn in the securities
markets.
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Fiscal Year Ended(1)
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January 30, 2000 February 4, 2001 February 3, 2002 February 2, 2003 Change--
(F1999) (F2000) (F2001) (F2002) (2) 2002 compared to
1999
- ------------------------ --------------------- ---------------------- --------------------- -------------------- -----------------
Number of complexes at 23 27 31 32 9
fiscal year end
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
Operating Income $18,955,000 $27,966,000 $19,697,000 $15,246,000 (19.6%)
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
EBITDA(3) $38,839,000 $53,682,000 $48,390,000 $45,302,000 16.6%
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
EBITDA margin(4) 15.7% 16.2% 13.5% 12.1% (3.6%)
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
Net income $5,205,000 $12,245,000 $7,578,000 $5,348,000 2.7%
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
Diluted earnings per $0.39 $ 0.94 $0.58 $0.40 (46.7%)
share (EPS)
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
High/low share price $29.00 /$5.50 $11.875 /$6.0625 $10.80 /$5.45 $13.25 /$7.40
of the Company's
common stock during
the fiscal year
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
Total compensation of $775,000 $1,743,000(5) $1,427,000 $1,285,000 65.9%
Messrs. Corriveau and
Corley
- ------------------------ --------------------- ---------------------- --------------------- -------------------- ----------------
1 The Company's fiscal year ends on the Sunday after the Saturday closest to
January 31.
2 Before the effect of change in accounting principle in fiscal 2002; after
change in accounting principle, the Company reported a net loss of
$1,748,000 and diluted net loss per share of $0.13. Inclusive of merger
related expenses incurred in fiscal 2002 of $1.3 million.
3 Defined as earnings before interest expense, income taxes, depreciation and
amortization, as derived from the Company's consolidated statements of
income.
4 Defined as EBITDA as a percentage of sales.
5 Includes restricted stock award valued at $960,000.
The Company's operating income, net income, diluted earnings per
share, EBITDA and EBITDA margin have all declined since fiscal 2000, even after
excluding merger related expenses in fiscal 2002 and despite the opening of
four new complexes in fiscal 2001 and one new complex in fiscal 2002. Operating
income and EBITDA margins were both lower in fiscal 2002 than they were in
fiscal 1999. The Company's per share price has declined from fiscal 1999,
without meaningful recovery. In contrast, the S&P Small Cap Restaurant Index,
which the
11
Company uses as its peer group index for the stock price performance graph
contained in its proxy statements, has risen from fiscal 1999 by approximately
55%.
We believe that the public companies whose business is most
comparable to the Company's are CEC Entertainment Inc. (operator of Chuck E.
Cheese's restaurants) and Total Entertainment Restaurant Corp. (operator of Fox
and Hound and Bailey's restaurants). Both are restaurant companies which derive
a significant portion of their revenues from entertainment operations. The
Company's diluted earnings per share, before change in accounting principle in
fiscal 2002, were essentially the same in fiscal 2002 compared to fiscal 1999.
In contrast and despite recent adverse economic conditions, diluted earnings per
share of CEC Entertainment and Total Entertainment were higher in fiscal 2002 by
approximately 55% and 386%, respectively, than they were in fiscal 1999.
Notwithstanding the recent decline in the Company's financial
performance, the combined total annual compensation of Messrs. Corriveau and
Corley has risen by approximately 66% from fiscal 1999 to fiscal 2002. Their
compensation as a percentage of the Company's net income was 14.9% in fiscal
1999 compared to 24.0% in fiscal 2002. Although this compensation modestly
declined in absolute terms from fiscal 2000 to fiscal 2002, compensation as a
percentage of the Company's net income rose in each of fiscal 2001 and 2002.
At a time when the deterioration in the Company's business should
have been readily apparent, the compensation committee of the board recommended,
and the board approved, an increase in the base salary of Messrs. Corriveau and
Corely from $500,000 to $600,000, effective as of April 1, 2002. In our letter
to the board of March 3, 2003, we strongly criticized the increases in senior
management compensation at a time when the Company's financial performance was
trending in the opposite direction. We now read in the Company's 2003
preliminary proxy materials that Messrs. Corriveau and Corley agreed to reduce
their base salary by 20% in fiscal 2003, from $600,000 to $480,000 each. We
believe that this reduction is largely illusory. The reduced base salary is only
slightly lower than the base salary of $498,000 earned by each of Messrs.
Corriveau and Corley in fiscal 2001 and substantially above what they earned in
fiscal 1999. Moreover, Messrs. Corriveau and Corley can earn back half of their
pay cuts if the Company's earnings per share in fiscal 2003 increase by 50% over
fiscal 2002 and their entire pay cuts if the increase equals 100%. A 50%
increase would be almost the same as the Company's earnings per share in 2001
and substantially less than the Company's published guidance of $0.77 to $0.85
in diluted earnings per share for fiscal 2003; a 100% increase would still be
less than the Company's earnings per share in fiscal 2000.
We believe that the board of directors is ultimately answerable to
the shareholders for the operating performance of the Company. The board and its
compensation committee are certainly accountable for the compensation awarded to
the Company's senior executive officers. In light of the Company's recent
financial performance, and the compensation of its senior executives compared to
those results, we believe that change is needed in the boardroom.
Even with the Company's recent addition of three directors, the
continuing directors, who presided over the Company's prior sale process and its
recent disappointing operating results, remain a supermajority--six of nine
directors-- of the board. We do not know if the directors recently appointed by
the incumbent board will act vigorously to expose and correct the serious
12
governance and oversight deficiencies that we have identified. We cannot tell if
they are incentivized to guide the Company towards improved operating results
and to maximize shareholder value. We can assure you, however, that our
independent director slate will be resolute in pursuing these goals. As the
Company's largest shareholder, we have the ultimate financial incentive of
bringing value to all shareholders.
THE DOLPHIN PLATFORM
Dolphin is focused on the goal of maximizing shareholder value in
which we will share proportionately. We think this can be accomplished by
improving the Company's operating results and by exploring potential
transactions to bring value to shareholders. We also think that it is important
to promote trust in the leadership of the board. We think that this should be
done through the election of directors whose independence and integrity is
unquestioned, who have the necessary financial and business acumen, who will
champion initiatives to improve corporate democracy and who will oppose any
conduct that furthers the personal benefits of management directors at
shareholder expense.
Our nominees
We believe that our nominees are committed to pursuing these goals
and collectively have the background, experience and incentive to see them
through. Our slate includes--
o Edward A. Weinstein, a retired senior partner of Deloitte & Touche,
LLP from its New York merger, acquisitions and restructuring unit;
o Donald T. Netter, Dolphin's senior managing director; and
o Edward E. Hartline, the managing partner of the Texas-based law firm
of Brown McCarroll, LLP.
Mr. Weinstein brings to our slate over 40 years' experience in public
company financial and accounting matters, including mergers and acquisitions.
His credentials and experience clearly qualify him as a "financial expert" for
purposes of the recent corporate governance reforms. Mr. Netter, representing
the Company's largest shareholder, has 20 years experience in managing
investments in public and private companies. Mr. Hartline is a leading corporate
attorney in the region where the Company is headquartered, has restaurant
company board experience and brings to our slate the legal expertise for
implementing needed governance reforms. Together these nominees are dedicated to
promoting Dolphin's platform of maximizing shareholder value and bringing
independence to the board and its committees
For additional information concerning our nominees, see "Certain
Information Regarding Dolphin's Nominees" below.
Our platform
13
If elected, our nominees will work with other committed, independent
members of the board to expose and correct the flaws of the prior sale process;
explore the possible sale of the Company and other strategic transactions with
the sole objective of maximizing shareholder value; dismantle the Company's
anti-takeover devices; install truly independent directors in leadership
positions on the board; and focus on improving operating results and instituting
a management compensation structure that rewards performance. Specifically, our
nominees will advocate--
o conducting a thorough review of the Company's prior sale process. We
believe that to restore trust and credibility to the Company, it is
important to fully investigate and to correct the conflicts that we
believe beset the prior sale process;
o reconstituting the board's special committee. According to statements
of management on the last two earnings calls, the special committee
continues to exist but is not active. We think this is wrong. We
believe that this committee should be active and that it should be
composed solely of newly elected, independent directors who have not
previously served in this capacity. We also believe that, if a
decision is made to sell the Company, a credible financial or
strategic buyer will not be likely to come forward unless the special
committee is composed of new members unconnected with the prior
process. We intend to seek substantial representation for our nominees
on this committee;
o explore methods to maximize shareholder value, which may include a
sale of the Company. We believe that the special committee, together
with professional advisors that it may retain in the future, should
examine all possible methods of maximizing shareholder value, which
may include a sale of the Company. If a decision is made to sell the
Company, the newly constituted special committee, and not senior
management, should conduct the process.
o destaggering the board to provide for the annual election of all
directors. We believe that directors should be held accountable to
shareholders for their performance on an annual basis and that a
staggered board improperly shields directors from scrutiny.
Eliminating the Company's staggered board requires an amendment to the
Company's charter, which under Missouri law must be approved by
shareholders. Under the Company's charter, 85% of the outstanding
shares must vote to approve this amendment.
o eliminating the Company's poison pill rights plan. We believe that
Missouri law provides adequate protection against coercive takeover
proposals. A poison pill goes beyond these protections. It tends to
chill discourse among shareholders and inhibit collective action in
the exercise of the shareholder franchise for fear of forming a
"group" that triggers the draconian dilution apparatus of the pill.
The board of directors may redeem or otherwise terminate the rights
plan without shareholder action.
o designating a board chairman and a lead director unconnected to the
prior sale process. We believe that these positions should be filled
by directors, such as our nominees, who are new, independent and
unconnected with the prior sale process. In
14
all events, we believe that the board must conduct regular meetings
without the participation of management directors.
o focusing on operating performance. We believe that the board must
conduct a thorough review of the Company's operations and business
model, with a view to improving financial performance. This review
should include further opportunities for reducing the Company's $23
million in corporate overhead for fiscal 2002 (excluding merger
expenses) and ways to optimize use of the Company's facilities. We
also believe that the Company should engage an outside industry
consultant to assist in the review process. We expect that our
nominees may have other specific proposals for improving the Company's
performance, after they are elected and have access to the Company's
non-public operating data.
o aligning management compensation with operating results and
shareholder return. We do not believe that management should be
rewarded with increased compensation unless the increase is justified
by improved operating results, a higher share price and/or other
measures of enhanced shareholder value.
THE PROPOSALS
Dolphin is soliciting proxies from the holders of shares of common
stock to elect three nominees to fill the seats of the Company's directorships
that expire at the 2003 annual meeting. The directors whose terms expire at the
annual meeting are Messrs. Corley and Edison and Patricia P. Priest, who was
appointed by the board to fill a vacancy occasioned by the retirement of Mr.
Henrion in April 2003. Dolphin is also seeking proxy authority to vote on two
other proposals that, according to the Company's preliminary proxy materials,
will also be brought before the 2003 annual meeting.
The election of directors requires a plurality of the votes cast in
the election. The other proposals require a majority of the votes cast on the
particular matter. See "Voting Procedures" below.
Dolphin recommends that you vote FOR each of Proposal Nos. 1, 2 and 3
by checking the appropriate boxes and signing, dating and returning the enclosed
BLUE proxy card.
Election of Directors to Terms Expiring in 2006
Proposal No. 1 -- Election of Dolphin's Nominees as Directors to Terms Expiring
in 2006
Proposal No. 1 provides for the election of Edward E. Hartline,
Donald T. Netter and Edward A. Weinstein to serve as directors until the 2006
annual meeting of shareholders. See "Certain Other Information Regarding
Dolphin's Nominees" for information concerning the background and experience of
Messrs. Weinstein, Netter and Hartline. If elected, Dolphin's nominees would
constitute three of the Company's nine directors.
Each of Dolphin's nominees has consented to being named herein as a
nominee for director of the Company and has agreed to stand for election as a
director.
15
Although we have no reason to believe that any of our nominees will
be unable to serve as a director, if any Dolphin nominee is not available to
serve, we expect that the remaining Dolphin nominees, upon taking office, would
seek to work with the other non-conflicted members of the Company's board to
fill the vacancy with an individual willing to consider and implement our
platform to maximize shareholder value.
Ratification of the Appointment of Independent Accountants (Company
Proposal)
Proposal No. 2 -- Ratification of Ernst & Young LLP as the Company's Independent
Accountants
Proposal No. 2 provides for the ratification of the appointment by
the Company's board of directors of Ernst & Young LLP as the Company's
independent auditors to audit the Company's financial statements for fiscal
2003. See "Auditors" for further information regarding Ernst & Young LLP.
Sale of the Company (Shareholder Proposal)
Proposal No. 3 -- Shareholder Proposal Regarding Sale of the Company
Proposal No. 3 provides for the Company's board of directors to
pursue a sale of the Company, or all or substantially all of its business and
assets, with the assistance of a nationally recognized investment banking firm,
with the intent to consummate such transactions no later than February 28, 2004.
Proposal No. 3 is being presented by Renaissance Capital Group, Inc., one of the
Company's shareholders. Based on information that we have received from the
Company, we understand that Renaissance beneficially owns a total of 619,700
shares of the Company's common stock or approximately 4.6% of the outstanding
shares. This percentage, and other shareholder percentages in this proxy
statement, are based upon 13,362,785 shares of common stock that the Company has
informed us were issued and outstanding as of April 18, 2003, the record date
for the shares entitled to vote at the 2003 annual meeting.
The Company's board of directors recommends a vote against Proposal
No. 3. Dolphin recommends a vote in favor of this proposal.
By supporting the Renaissance proposal, we are not necessarily
advocating a sale of the Company by February 28, 2004. We believe, however, that
this proposal sends a strong message to management that shareholders expect
immediate action to turn the Company around and to maximize shareholder value.
Given the operating results of the Company in recent years and the performance
of its share price, shareholders are justified in expecting management to take
vigorous action to implement operational improvements and install drivers for
growth. If management is unable to do this within a year's time, then a properly
conducted sale process may be the appropriate way to achieve value. We also
identify with the supporting statement of Renaissance set forth in the Company's
2003 proxy materials, which highlights the disappointing performance of the
Company's share price, the decline in its market capitalization and the decline
in its financial and business performance.
We therefore intend to vote our shares, along with all shares
represented by any proxy signed and returned to Dolphin without instructions to
the contrary, in favor of Proposal No. 3.
16
Shareholders are referred to the Company's proxy statement for the
2003 annual meeting for a detailed description of Proposal No. 3, the reasons
that Renaissance is making this proposal and the Company's reasons for opposing
it.
INFORMATION ABOUT DOLPHIN
Dolphin's nominees and certain other persons named below may be
deemed to be "participants" in this proxy solicitation, as the term participant
is defined in Schedule 14A promulgated under the Securities Exchange Act of
1934. Dolphin is a Delaware limited partnership that is engaged in the business
of investing in corporate securities, including both active investment and
investment arbitrage. The address of the principal business and principal
offices of Dolphin is c/o Dolphin Holdings Corporation, 96 Cummings Point Road,
Stamford, Connecticut 06902.
The general partner of Dolphin is Dolphin Associates, LLC, a Delaware
limited liability company that is engaged in the business of investing in
corporate securities, including both active investment and investment arbitrage.
The address of the principal business and principal offices of Dolphin
Associates, LLC is c/o Dolphin Holdings Corporation, 96 Cummings Point Road,
Stamford, Connecticut 06902.
The managing member of Dolphin Associates LLC is Dolphin Holdings
Corporation, a Delaware corporation engaged in managing partnerships that
directly and indirectly invest in publicly traded corporate securities,
including both active investments and investment arbitrage. The address of the
principal business and principal offices of Dolphin Holdings Corporation is 96
Cummings Point Road, Stamford, Connecticut 06902. Donald T. Netter is Chairman,
Chief Executive Officer, President and Senior Managing Director of Dolphin
Holdings Corporation. The business address of Mr. Netter is c/o Dolphin Holdings
Corporation, 96 Cummings Point Road, Stamford, Connecticut 06902. The other
officers Dolphin Holdings Corporation and their principal occupations and
business addresses are set forth on Schedule I to this proxy statement. These
persons may also solicit proxies on Dolphin's behalf so that they may be deemed
participants in our solicitation.
As of the date of this proxy statement, Dolphin owns an aggregate of
1,262,800 shares of common stock representing approximately 9.5% of the
outstanding shares.
Additional information about Dolphin and Dolphin's nominees including
information regarding the beneficial ownership of common stock is set forth
under the heading "Certain Other Information Regarding Dolphin's Nominees" and
in Annex A attached to this proxy statement.
Dolphin has retained Innisfree to act as an advisor and to provide
consulting and analytic services and solicitation services in connection with
this proxy solicitation. Innisfree is a proxy service company. It mails
documents to shareholders, responds to shareholder questions and solicits
shareholder votes for many companies. Innisfree does not believe that it or any
of its directors, officers, employees, affiliates or controlling persons, if
any, is a "participant" in this proxy solicitation or that Schedule 14A requires
the disclosure of certain information concerning Innisfree. The business address
of Innisfree is 501 Madison Avenue, New York, New York
17
10022. Innisfree has informed Dolphin that, as of the date of this proxy
statement, it does not hold any shares of the Company's common stock for its own
account or for the accounts of others.
BACKGROUND OF AND REASONS FOR THE PROXY SOLICITATION
Background
On various dates from June 14, 2002 through March 26, 2003 Dolphin
purchased a total of 1,327,800 shares of common stock in the open market for a
total purchase price of $12,589,218 and sold in July 2002 a total of 65,000
shares of common stock in the open market for a total sales price of $865,563,
in each case including commissions and related costs. The details of these
purchases and sales are set forth in Annex A attached to this proxy statement.
All of the purchases were funded by working capital.
In September 2002, Mr. Netter sought a meeting with the Company's
senior management, while the Investcorp acquisition proposal with the
participation of management was pending, but his request was not honored. On
October 4, 2002, Mr. Netter sent a letter to the Company for distribution to its
board. In the letter, Mr. Netter voiced concerns about the Company's sale
process based upon the complaint in the Texas class action litigation referred
to above. Mr. Netter's believed that the sale process had been slanted in favor
of senior management participation, as described above under "Dolphin's Reasons
For Seeking Board Representation." Mr. Levy, in his capacity as chairman of the
special committee, responded to Mr. Netter by letter dated October 9, 2002, in
which he stated that the members of the special committee were aware of their
fiduciary obligations and had fulfilled and would continue to fulfil those
obligations. Mr. Netter responded to Mr. Levy by letter dated October 22, 2002
and in a subsequent telephone conversation. Mr. Netter told Mr. Levy that he
found Mr. Levy's statements difficult to justify on the basis of publicly
available information. On October 24, 2002, Investcorp requested, and the
special committee subsequently agreed, to terminate the then pending merger
agreement between an Investcorp affiliate and the Company citing "continuous
adverse conditions in the debt financing market," according to a press release
issued by the Company on the same day.
On December 5, 2002, the Company held its earnings call for the third
quarter of fiscal 2002. The Company reported a 3.5% decline in comparable store
sales, and management acknowledged a disappointing quarter. The Company provided
guidance on diluted earnings per share for fiscal 2003 of $0.77 to $0.85. In
response to an investor question, management said that the special committee
continued in existence but was inactive.
On January 27, 2003, Mr. Netter and Brett Buckley, a vice president
of Dolphin Holding Corporation, on their own toured the Company's facilities in
Dallas. The following day, Mr. Netter and Mr. Buckley met with William C.
Hammett, Jr., the Company's chief financial officer, at the Company's
headquarters in Dallas. Although the Dolphin representatives had been told that
at least one of the co-chief executive officers would be present, neither was
available to attend the meeting. In the meeting with Mr. Hammett, the parties
discussed the Company's historical results, the Company's previously announced
guidance, the Company's general business model and the actions of senior
management during the course of the
18
Company's sale process. On February 11, 2003, Mr. Buckley had a follow-on
telephone conversation with Mr. Hammett to discuss these same subjects.
On March 3, 2003, Dolphin sent a letter to the Company's board of
directors stating that it intended to nominate a slate of three independent
directors at the Company's 2003 annual meeting. The letter, which was filed with
Dolphin's Statement on Schedule 13D on that day, made many of the same points
set forth above under "Dolphin's Reasons For Seeking Board Representation." On
March 5, 2003, the Company issued a press release describing corporate
governance initiatives that its board had adopted on the previous day.
On March 10, 2003, Mr. Edison left a telephone message for Mr.
Netter, which Mr. Netter returned later that day. Mr. Edison informed Mr. Netter
that he was calling in his capacity as chairman of the Company's new nominating
and corporate governance committee. According to Mr. Edison, the board had
suggested calling Mr. Netter for recommendations on candidates for new board
members. Mr. Netter inquired concerning the board's timing for selecting the
candidates and requested that Mr. Edison call him again when the board's
deadline was approaching. Mr. Edison said that he would do so.
On March 11, 2003, Dolphin sent a letter to the Company requesting
minutes of board and shareholder meetings and shareholder information
customarily made available in proxy contests. Also on this date, Dolphin issued
a press release disclosing its requests and characterizing the Company's
announced corporate governance initiatives as "too little, too late." In the
release, Dolphin admonished the Company not to expand the board without a
shareholder vote.
On March 17, 2003, the Company sent an open letter to shareholders,
reiterating the governance initiatives that it had described in its March 5,
2003 press release.
On March 18, 2003, the Company responded to Dolphin's request for
information by offering to provide only a record list of shareholders following
the record date. On March 20, 2003, Dolphin sent a letter to the Company and
issued a press release stating that it was establishing a deadline of the close
of business on March 21, 2003 for the Company to comply with Dolphin's request
for shareholder and other information. On March 21, 2003, the Company sent a
letter to Dolphin's counsel stating that the Company would comply with Dolphin's
information request. The Company subsequently furnished to Dolphin requested
information.
On March 24, 2003, the Company issued a press release announcing that
April 18, 2003 had been selected as the record date for the 2003 annual meeting
of the Company's shareholders and that June 10, 2003 had been selected as the
date of this meeting.
On April 8, 2003, the Company conducted its fourth quarter and fiscal
year end earnings call. The Company again reported a drop-off in comparable
store revenues for the quarter, this time of 4.8%. Management confirmed the
previously announced diluted earnings per share guidance for fiscal 2003, but
withdrew any quarterly guidance. In response to an investor question, management
again stated that the special committee continued to exist but was not active.
19
Mr. Edison called Mr. Netter again on April 8, 2003, to state that
the board was ready to "lock in" new board members and to inquire whether
Dolphin had selected its nominees. Mr. Netter responded that Dolphin would
identify its nominees in advance of the April 12, 2003 deadline imposed under
the Company's by-laws. On April 10, 2003, Dolphin delivered a letter to the
Company notifying the Company of the Dolphin nominees and providing the required
information concerning the nominees.
Also on April 10, 2003, the Company sent a letter to shareholders and
issued a press release describing additional governance and business
initiatives.
On April 11, 2003, Mr. Netter telephoned Mr. Edison, who was now
chairman of the Company's board as well as chairman of its nominating and
corporate governance committee, to inform him that Dolphin had submitted its
slate of nominees to the Company. Mr. Netter also inquired of Mr. Edison about
the contemplated size of the board, and Mr. Edison replied that it was likely
that two directors would be added. This would bring the size of the board to
nine, taking into account Mr. Henrion's retirement as director, which was
announced by the Company in its release on the previous day. Mr. Edison called
Mr. Netter back, and Mr. Netter, who was then travelling, returned the call
several hours later. In their conversation, Mr. Edison stated that he would like
to interview the Dolphin nominees. Mr. Netter responded that he wanted to
discuss Mr. Edison's request with the other nominees over the weekend and would
get back to Mr. Edison on Monday.
On April 14, 2003, Dolphin issued a press release, publicly
disclosing its slate of nominees and their qualifications. In the release,
Dolphin reiterated its demand that the board not be expanded without a
shareholder vote. As promised, Mr. Netter called Mr. Edison, and the two
discussed the board's selection of additional directors, the Dolphin nominees,
the role of the special committee and the prior sale process. Later in the day,
Mr. Edison called back Mr. Netter saying that he continued to be interested in
interviewing the other two Dolphin nominees and in working out a mutually
acceptable arrangement. Mr. Edison suggested that the nominating committee might
be prepared to include one of the Dolphin nominees among the board's appointed
directors but that the nominee could not be Mr. Netter. Mr. Edison explained
that a number of directors were opposed to Mr. Netter because of what he had
written in his March 3, 2003 letter to the board and that it had become a
"personal" issue with some of the directors.
Also on this date, Mr. Edison sent a letter to Mr. Netter reiterating
Mr. Edison's request to interview the Dolphin nominees. Mr. Netter responded by
letter of April 15, 2003 that Dolphin was not proposing candidates for cherry
picking by the board. Mr. Netter stated that Dolphin did not have confidence
that any single candidate selected by the board, regardless of qualification,
would be able to achieve the necessary reforms. Rather, Mr. Netter said, Dolphin
was hoping to elect a slate of highly qualified directors, with complementary
skills, background and expertise, who were committed to Dolphin's platform of
business, transactional and governance reforms. On April 17, 2003, the Company
publicly announced the selection of three additional directors, the retirement
of director Bruce Hallett and the expansion of the board to nine directors. Mr.
Edison wrote to Mr. Netter on April 18, 2003 expressing regret that his
committee had not had the opportunity to interview the Dolphin candidates and
informing Mr. Netter of the appointment of the board directors and the expansion
of the board announced the previous day.
20
On April 23, 2003, Dolphin sent a "stop, look and listen" letter to
shareholders, informing them of Dolphin's intention to solicit their proxies for
the election of the Dolphin slate and requesting that they not return any proxy
card furnished to them by the Company. In the letter, Dolphin noted particularly
that, notwithstanding the three recently appointed directors, the incumbent
directors constituted a supermajority of the board, occupying six of the nine
positions.
CERTAIN OTHER INFORMATION REGARDING
DOLPHIN'S NOMINEES
Set forth below are the name, age, business address, present
principal occupation, employment history and directorships of each of Dolphin's
nominees for at least the past five years. This information has been furnished
to Dolphin by the respective Dolphin nominees. Each of Dolphin's nominees has
consented to serve as a director of the Company. Each of Dolphin's nominees is
at least 18 years of age. None of the entities referenced below is a parent or
subsidiary of the Company.
Present Principal Occupation,
Five Year Employment History
Name, Age and Business Address and Directorships
- ------------------------------------ -----------------------------
Edward A. Weinstein, 67 Mr. Weinstein is a retired
433 East 56 Street partner of Deloitte & Touche
Apt. 15A LLP where he served, among
New York, New York 10022 other things, as head of the
New York merger and
acquisitions and restructuring
unit. Prior to his retirement
from Deloitte & Touche
in 1998, he served as an audit
partner and auditor for 40
years. Mr. Weinstein has
extensive experience with
publicly traded retail
specialty, discount,
supermarket and department
store chains. His practice
also included publicly traded
clients in manufacturing,
financial services,
telecommunications, computer
services and real estate. Mr.
Weinstein has managed, planned
and directed tax, accounting,
consulting, actuarial and
valuation support for mergers,
acquisitions, business
divestitures and the offering
of public securities. He also
has consulted on financial and
tax restructurings, provided
accounting and financial
consulting services in
commercial litigation and
arbitration and served as an
arbitrator in commercial
accounting disputes. Since
1998, Mr. Weinstein has been
an independent consultant and
advisor to industry,
not-for-profit organizations
and government and an
arbitrator to the securities
industry. Mr. Weinstein has
been an adjunct professor of
accounting and auditing at New
York
21
University and has lectured on
accounting and auditing at the
Columbia University Graduate
School of Business. He has
also written extensively on
accounting and auditing and
spoken on these matters in the
USA, Japan, the United
Kingdom, and Israel. Mr.
Weinstein is a member of the
American Institute of
Certified Public Accountants
and a former President of the
New York State Society of
Certified Public Accountants.
Donald T. Netter, 41 For more than five years, Mr.
c/o Dolphin Holdings Corporation Netter has been Chairman,
96 Cummings Point Road Chief Executive Officer,
Stamford, Connecticut 06902 President and Senior Managing
Director of Dolphin Holdings
Corporation, a private company
engaged in managing
partnerships that directly
and indirectly invest in
publicly traded corporate
securities, including both
active investments and
investment arbitrage. Dolphin
Holdings Corporation is the
managing member of the general
partner of Dolphin. From 1989
through 1993, Mr. Netter was
co-general partner of RLR
Partners L.P., the general
partner of Ballantrae
Partners, L.P., a New York
based private investment
partnership that was engaged
in acquiring significant
stakes in public companies,
merger arbitrage and leveraged
acquisitions. Following
Ballantrae's leveraged
acquisition of Damon
Corporation in 1989 and until
its sale in 1993, Mr. Netter
was a director and held
officerships of Damon, a
significant participant in the
clinical laboratory testing
business. He currently serves
as a director of The Aristotle
Corporation (NASDAQ: ARTLP), a
holding company which, through
its subsidiaries, is a leading
manufacturer and global
distributor of educational,
health and agricultural
products. From 1993 to 1999,
Mr. Netter was a director and
officer of Independence
Holding Company (NASDAQ:
INHO), a holding company
engaged through its
subsidiaries principally in
the life and health insurance
business. He also is an
officer of Geneve Corporation,
a family-held private
investment concern, and a
member of the Executive
Council of The Rockefeller
University, New York, New
York.
22
Edward E. Hartline, 56 Mr. Hartline was a founder and
c/o Brown McCarroll, L.L.P. since 1991 has been a Managing
1111 Bagby Partner of Brown McCarroll,
47th Floor L.L.P., a law firm with
Houston, Texas 77030 offices in Houston, Austin,
Dallas and Longview, Texas. He
specializes in tax, corporate
and mergers and acquisitions
law. Mr. Hartline is a member
of the board of directors of
two Texas-based private
companies, Cordua Restaurants
and 1776, Inc. Cordua operates
restaurants serving Latin
American and South American
fare and offers catering
services with a variety of
themes and price points. 1776,
Inc. operates family eating
establishments offering
breakfast, lunch and dinner
and catering services. Mr.
Hartline has served as a board
member and as chairman of the
board of the Houston Law
Review since 1973 and 2001
respectively. He also serves
as a judge for the Police
Civil Service Commission of
the City of Houston.
Each of Messrs. Weinstein, Netter and Hartline has entered into a
nominee agreement with Dolphin, pursuant to which Dolphin has agreed to
indemnify the nominee for certain liabilities, losses, claims, damages and
expenses, including reasonable attorneys' fees and expenses, in connection with
any action, investigation or other proceeding involving the nominee as a result
of his nomination as a director of the Company. Also, in connection with the
nomination of Messrs. Weinstein and Hartline, Mr. Netter has agreed to direct up
to $10,000 to a qualifying charity designated by each of Mr. Weinstein and Mr.
Hartline.
The number of shares of the Company's common stock beneficially owned
and the percentage of beneficial ownership of each of Dolphin's nominees as of
the date of this proxy statement are as follows:
Number of Shares Percentage
Dolphin Nominee Beneficially Owned (1) (2) Ownership (3)
- -------------------------- ---------------------------- ------------------
Edward E. Hartline -- --
Donald T. Netter 1,262,800(4) 9.5%
Edward A. Weinstein -- --
---------------------------- ------------------
Total 1,262,800(5) 9.5%
23
- --------------------
(1) Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or investment power with respect to
securities. Shares of common stock subject to stock options and
warrants currently exercisable or exercisable within 60 days are
deemed outstanding for purposes of computing the percentage ownership
of any group of which the holder is a member, but are not deemed
outstanding for computing the percentage ownership of any other
person. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table have
sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them.
(2) Under the rules of the SEC, Dolphin's nominees may be deemed to be
members of a group and, as a result, each Dolphin nominee may be
deemed to beneficially own shares of common stock beneficially owned
by each of the other Dolphin nominees. Each of Dolphin's nominees
disclaims beneficial ownership of the shares of common stock
beneficially owned by any of the other Dolphin nominees.
(3) Calculated based on based upon 13,362,785 shares of common stock that
the Company has informed us were issued and outstanding as of April
18, 2003, the record date for the shares entitled to vote at the 2003
annual meeting.
(4) Consists of 1,262,800 shares of common stock owned by Dolphin Limited
Partnership I, L.P. Mr. Netter is the Chairman, Chief Executive
Officer, President and Senior Managing Director of Dolphin Holdings
Corporation, the managing member of Dolphin Associates LLC. Dolphin
Associates LLC is the general partner of Dolphin Limited Partnership
I, L.P. Mr. Netter has sole voting and dispositive power with respect
to the 1,262,800 shares of common stock owned by Dolphin Limited
Partnership I, L.P.
(5) Consists of 1,262,800 shares of common stock owned by Dolphin Limited
Partnership I, L.P.
All of Dolphin's nominees are citizens of the United States.
Except as set forth in this proxy statement or in the Annexes hereto,
to the best knowledge of Dolphin, none of Dolphin, any of the persons
participating in this proxy solicitation on behalf of Dolphin, Dolphin's
nominees and, with respect to items (i), (vii) and (viii) of this paragraph, any
associate (within the meaning of Rule 14a-1 of the Securities Exchange Act of
1934) of the foregoing persons (i) owns beneficially, directly or indirectly,
any securities of the Company, (ii) owns beneficially, directly or indirectly,
any securities of any parent or subsidiary of the Company, (iii) owns any
securities of the Company of record but not beneficially, (iv) has purchased or
sold any securities of the Company within the past two years, (v) has incurred
indebtedness for the purpose of acquiring or holding securities of the Company,
(vi) is or has within the past year been a party to any contract, arrangement or
understanding with respect to any securities of the Company, (vii) since the
beginning of the Company's last fiscal year has been indebted to the Company or
any of its subsidiaries in excess of $60,000 or (viii)
24
has any arrangement or understanding with respect to future employment by the
Company or with respect to any future transactions to which the Company or any
of its affiliates will or may be a party. In addition, except as set forth in
this proxy statement or in the Annexes hereto, to the best knowledge of Dolphin,
none of Dolphin, any of the persons participating in this proxy solicitation on
behalf of Dolphin, Dolphin's nominees and any associates of the foregoing
persons, has had or is to have a direct or indirect material interest in any
transaction or proposed transaction with the Company in which the amount
involved exceeds $60,000, since the beginning of the Company's last fiscal year.
Except as set forth in this proxy statement or in the Annexes hereto,
to the best knowledge of Dolphin, none of Dolphin's nominees, since the
beginning of the Company's last fiscal year, has been affiliated with (i) any
entity that made or received, or during the Company's current fiscal year
proposes to make or receive, payments to or from the Company or its subsidiaries
for property or services in excess of five percent of either the Company's or
such entity's consolidated gross revenues for its last full fiscal year, or (ii)
any entity to which the Company or its subsidiaries were indebted at the end of
the Company's last full fiscal year in an aggregate amount exceeding five
percent of the Company's total consolidated assets at the end of such year. None
of Dolphin's nominees is, or during the Company's last fiscal year has been,
affiliated with any law or investment banking firm that has performed or
proposes to perform services for the Company.
To the best knowledge of Dolphin, none of the corporations or
organizations in which the Dolphin's nominees have conducted their principal
occupation or employment was a parent, subsidiary or other affiliate of the
Company, and Dolphin's nominees do not hold any employment position or office
with the Company or have any family relationship with any executive officer or
director of the Company or have been involved in any proceedings, legal or
otherwise, of the type required to be disclosed by the rules governing this
solicitation.
AUDITORS
According to information contained in the Company's proxy statement,
the Company's board of directors has appointed Ernst & Young LLP as the
independent accountants to audit the Company's financial statements for fiscal
2003. Ernst & Young LLP has audited the Company's financial statements since
1995. The Company has stated in its proxy statement that representatives of
Ernst & Young LLP are expected to be available at the 2003 annual meeting and
will have an opportunity to make a statement if such representatives so desire
and are expected to be available to respond to appropriate questions.
Dolphin recommends that you vote FOR the ratification of the
appointment of Ernst & Young LLP as the Company's independent auditors for
fiscal 2003. See Proposal No. 2 under "The Proposals."
SOLICITATION OF PROXIES
Dolphin has retained Innisfree to act as an advisor in connection
with this proxy solicitation. In connection with its retention by Dolphin,
Innisfree has agreed to provide consulting and analytic services and
solicitation services with respect to banks, brokers,
25
institutional investors and individual shareholders. Dolphin has agreed to pay
Innisfree a fee for its services estimated to be not more than $25,000 and to
reimburse Innisfree for its reasonable out-of-pocket expenses. Dolphin also has
agreed to indemnify Innisfree against certain liabilities and expenses in
connection with this proxy solicitation, including liabilities under the federal
securities laws. Approximately __ employees of Innisfree will engage in the
solicitation. Proxies may be solicited by mail, advertisement, telephone,
facsimile or in person. Solicitations may be made by persons employed by or
affiliated with Dolphin. However, no person will receive additional compensation
for such solicitation other than Innisfree.
Banks, brokerage houses and other custodians, nominees and
fiduciaries will be requested to forward the proxy materials to the beneficial
owners of shares of common stock for which they hold of record and Dolphin will
reimburse them for their reasonable out-of-pocket expenses.
The expenses related directly to this proxy solicitation are expected
to aggregate approximately $__________ and will be borne by Dolphin. These
expenses include fees and expenses for attorneys, proxy solicitors, printing,
postage, filing expenses and other costs incidental to the solicitation. Of this
estimated amount, approximately $________ has been spent to date. The actual
costs and expenses could be materially different than the estimated amounts and,
in particular, could be substantially higher if for any reason litigation is
instituted in connection with the matters related to this proxy statement.
The purpose of the proposals in this proxy statement is to advance
the interests of all the Company's shareholders. Therefore, Dolphin believes
that its expenses related to this proxy solicitation should be borne by the
Company and it intends to seek reimbursement of such expenses from the Company
whether or not this proxy solicitation is successful. The question of
reimbursement of the expenses of Dolphin by the Company will not be submitted to
a shareholder vote.
If you have any questions about this proxy solicitation or voting
your shares or require assistance, please contact:
Innisfree M&A Incorporated
501 Madison Avenue
New York, New York 10022
Toll Free: (888) 750-5834
Banks and Brokers call collect: (212) 750-5833
OTHER MATTERS
This proxy solicitation is being made by Dolphin and not on behalf of
the board of directors or management of the Company. Dolphin is not aware of any
other matters to be brought before the Company's 2003 annual meeting, except as
set forth herein. Should other matters be brought before the 2003 annual
meeting, by having signed and returned the enclosed BLUE proxy card, you will
have authorized the persons named as proxies in the enclosed BLUE proxy card to
vote on all such matters in their discretion.
26
The Company's filings with the SEC contains information regarding (1)
financial information of the Company; (2) securities ownership of certain
beneficial owners and management of the Company; (3) the committees of the board
of directors; (4) the meetings of the board of directors and all committees
thereof; (5) the business background and employment biographies of the Company's
nominees for election to the board of directors; (6) the compensation and
remuneration paid and payable to the Company's directors and management; and (7)
the Company's stock price performance in relation to an assumed group of "peers"
or market-based indices. Shareholders are referred to the Company's filings for
this information.
SHAREHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
The Company's proxy statement with respect to the 2003 annual meeting
indicates that proposals of the Company's shareholders intended to be presented
at the Company's 2004 annual meeting must be received by the Company no later
than _________, 2004 in order for them to be considered for inclusion in the
Company's proxy statement. The Company's shareholders are hereby referred to the
Company's proxy statement in connection with the 2003 annual meeting for such
information.
INFORMATION REGARDING THE COMPANY
The information concerning the Company contained in this proxy
statement has been taken from or is based upon documents and records on file
with the SEC and other publicly available information. Dolphin has no knowledge
that would indicate that statements relating to the Company contained in this
proxy statement in reliance upon publicly available information are inaccurate
or incomplete. Dolphin, however, has not been given access to the books and
records of the Company, was not involved in the preparation of such information
and statements, and is not in a position to verify, or make any representation
with respect to the accuracy or completeness of, any such information or
statements.
VOTING PROCEDURES
Who is entitled to vote?
If the Company's stock records show that you are a shareholder as of
the close of business on the record date for the 2003 annual meeting, you are
entitled to vote the shares of common stock that you held on such date. Even if
you sell your shares after the record date for the 2003 annual meeting, you will
retain the right to execute a proxy in connection with the 2003 annual meeting.
Each outstanding share of common stock entitles its holder to cast one vote for
each matter to be voted upon.
Can I attend the meeting?
All shareholders of record of the Company's common stock at the close
of business on April 18, 2003, the record date for the 2003 annual meeting, or
their designated proxies, are authorized to attend the 2003 annual meeting. If
your shares are held of record by a bank, broker or other nominee, you will need
to obtain a "legal proxy" form from your bank or broker if you wish to vote at
the 2003 annual meeting.
27
What constitutes a quorum? How will abstentions and broker non-votes be counted?
The holders of a majority of the Company's common stock outstanding
and entitled to vote, present in person or represented by proxy, will constitute
a quorum at the 2003 annual meeting. Votes cast in person or by proxy at the
2003 annual meeting will be tabulated by the inspector of elections appointed
for the 2003 annual meeting to determine whether or not a quorum is present. The
inspector of elections will treat abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum, but
abstentions will neither be counted as votes for, nor the withholding of
authority for, the election of our three nominees (Proposal No. 1), but will
have the effect of a vote against all other matters submitted to a vote of
shareholders.
Shares as to which voting instructions are given as to at least one
of the matters to be voted on or which the nominee has the discretion to vote on
at least one of the matters presented at the 2003 annual meeting will be deemed
to be represented at the meeting and be counted for purposes of determining
whether a quorum is present, even if the nominee may not exercise discretionary
voting power with respect to other matters and voting instructions have not been
received from the beneficial owner (a "broker non-vote"). Shares as to which a
proxy is submitted to us without instructions will deemed to be represented at
the meeting and be counted for purposes of determining the presence of a quorum,
and our representatives will vote your shares in favor of Proposals Nos. 1, 2,
and 3.Broker non-votes will not be counted as votes for, nor the withholding of
authority for, the election of our three nominees (Proposal No. 1), the
ratification of accountants (Proposal No. 2), or the shareholder proposal
regarding the sale of the Company (Proposal No. 3).
How do I vote?
Voting by proxy for holders of shares registered in the name of a
brokerage firm or bank. If your shares are held by a broker, bank or other
nominee (i.e., in "street name"), only your bank or broker can give a proxy with
respect to your shares. You should receive a proxy card from your bank or broker
which you must return in the envelope provided in order to have your shares
voted. If you have not received a proxy card from your bank or broker, you may
contact it directly to provide it with instructions on how you wish to vote. If
you need assistance in dealing with your bank or broker, please contact
Innisfree at (888) 750-5834 or collect at (212) 750-5833.
Voting by proxy for holders of shares registered directly in the name
of the shareholder. If you hold your shares in your own name as a holder of
record, you may vote your shares by marking, signing, dating and mailing the
BLUE proxy card in the postage-paid envelope that has been provided to you by
Dolphin. To vote your shares in accordance with your instructions at the 2003
annual meeting, we must receive your proxy as soon as possible but, in any
event, prior to the 2003 annual meeting.
Vote in person. If you are a registered shareholder and attend the
2003 annual meeting, you may vote in person by completing a ballot provided for
this purpose at the meeting. You may also deliver your completed BLUE proxy card
at the meeting to a representative of Dolphin. "Street name" shareholders who
wish to vote at the 2003 annual meeting will need to obtain a "legal proxy" form
from the broker, bank or other nominee that holds their shares of record and
must bring that document to the meeting in order to vote in person at the 2003
annual meeting. If you need assistance, please contact Innisfree at (888)
750-5834 or collect at (212) 750-5833.
28
What should I do if I receive a proxy card which is not BLUE?
If you submit a proxy to us by signing and returning the enclosed
BLUE proxy card, do NOT sign or return the proxy card or follow any voting
instructions provided by the Company's board of directors unless you intend to
change your vote, because only your latest-dated proxy will be counted.
Can I revoke my proxy instructions?
You may revoke your proxy at any time before it has been exercised
by:
o submitting a written revocation with the Corporate Secretary of the
Company or Innisfree;
o submitting a duly executed proxy bearing a later date with the
Corporate Secretary of the Company or Innisfree; or
o appearing in person and voting by ballot at the 2003 annual meeting as
described above under "How do I vote? -- Vote in Person."
Any shareholder of record as of the record date of the 2003 annual
meeting attending the 2003 annual meeting may vote in person whether or not a
proxy has been previously given, but the presence (without further action) of a
shareholder at the 2003 annual meeting will NOT constitute revocation of a
previously given proxy.
If you choose to revoke a proxy by giving written notice or a
later-dated proxy to the Corporate Secretary of the Company, we would appreciate
if you would assist us in representing the interests of shareholders on an
informed basis by sending us a copy of your revocation or proxy or by calling
Innisfree, at (888) 750-5834 or collect at (212) 750-5833. Remember, your
latest-dated proxy is the only one that counts.
Will other matters be voted on at the annual meeting?
We are not now aware of any matters to be presented at the 2003
annual meeting other than the election of directors, the ratification of the
appointment of the Company's independent auditors and the shareholder proposal
regarding the sale of the Company. If any other matters not described in the
proxy statement are properly presented at the 2003 annual meeting, including
matters incidental to the conduct of the 2003 annual meeting, proxies will be
voted in accordance with the best judgment of the proxy holders.
If I plan to attend the annual meeting, should I still submit a proxy?
Whether you plan to attend the 2003 annual meeting or not, we urge
you to submit a proxy. Returning the enclosed BLUE proxy card will not affect
your right to attend the 2003 annual meeting.
29
How will my shares be voted?
If you give a proxy on the accompanying BLUE proxy card, your shares
will be voted as you direct. If you submit a proxy to us without instructions,
our representatives will vote your shares in favor of Proposal Nos. 1, 2 and 3.
Submitting a BLUE proxy card will entitle our representatives to vote your
shares in accordance with their discretion on matters not described in this
proxy statement that may arise at the 2003 annual meeting, including matters
incident to the conduct of the 2003 annual meeting. Unless a proxy specifies
otherwise, it will be presumed to relate to all shares held of record on the
record date for the 2003 annual meeting by the person who submitted it.
How can I receive more information?
If you have any questions about giving your proxy or about our
solicitation, or if you require assistance, please call Innisfree at (888)
750-5834 or collect at (212) 750-5833.
--------------------------------------
Your vote is important. No matter how many or how few shares you own, please
vote to elect Dolphin's nominees by marking, signing, dating and mailing the
enclosed BLUE proxy card promptly.
DOLPHIN LIMITED PARTNERSHIP I, L.P.
________, 2003
30
SCHEDULE I
Directors and Officers of Dolphin Holding Corporation
Name and Position Principal Occupation Principal Business Address
- ----------------- -------------------- --------------------------
Donald T. Netter Chairman, Chief Executive Officer, 96 Cummings Point Road
Chairman, Chief Executive Officer, President and Senior Managing Stamford, Connecticut 06902
President and Senior Managing Director Director, Dolphin Holdings Corporation
Theodore A. De Blanco Managing Director and Senior Vice 96 Cummings Point Road
Managing Director and Senior Vice President President, Dolphin Holdings Stamford, Connecticut 06902
Corporation
Brett J. Buckley Vice President, Dolphin Holdings 96 Cummings Point Road
Vice President Corporation Stamford, Connecticut 06902
31
ANNEX A
TRANSACTIONS IN COMMON STOCK
The following table sets forth information with respect to all
purchases and sales of common stock of the Company by Dolphin during the past
two years. Except as set forth below, to the knowledge of Dolphin, no
participant in this solicitation or Dolphin has purchased or sold securities of
the Company within the past two years.
Transaction Number
Date Type of Shares Price Per Share*
---------- ---------- --------- ---------------
6/14/02 Purchase 5,100 $12.01
6/17/02 Purchase 6,900 $12.01
6/18/02 Purchase 56,700 $12.01
6/19/02 Purchase 31,300 $12.01
6/20/02 Purchase 4,000 $12.00
6/21/02 Purchase 73,000 $12.014
6/24/02 Purchase 23,000 $12.047
7/10/02 Purchase 70,000 $11.008
7/11/02 Purchase 20,000 $11.103
7/12/02 Purchase 31,900 $11.444
7/15/02 Sale 65,000 $13.316
7/19/02 Purchase 62,000 $12.817
7/24/02 Purchase 600 $12.66
7/29/02 Purchase 10,000 $13.01
9/11/02 Purchase 20,500 $13.02
9/26/02 Purchase 50,000 $10.212
10/25/02 Purchase 70,000 $8.123
10/28/02 Purchase 20,000 $8.118
10/29/02 Purchase 10,000 $8.142
10/30/02 Purchase 5,000 $7.86
11/19/02 Purchase 2,500 $7.66
11/20/02 Purchase 2,500 $7.76
11/21/02 Purchase 2,500 $7.756
32
Transaction Number
Date Type of Shares Price Per Share*
---------- ---------- --------- ---------------
11/25/02 Purchase 1,000 $7.62
11/27/02 Purchase 5,000 $7.951
11/29/02 Purchase 5,000 $8.023
12/2/02 Purchase 3,300 $7.837
12/3/02 Purchase 5,000 $7.871
12/4/02 Purchase 2,500 $8.008
12/5/02 Purchase 15,800 $8.14
12/6/02 Purchase 20,000 $8.297
12/9/02 Purchase 2,900 $8.449
12/10/02 Purchase 300 $8.66
12/11/02 Purchase 10,300 $8.747
12/12/02 Purchase 10,100 $8.821
12/13/02 Purchase 8,500 $8.656
12/16/02 Purchase 5,000 $8.66
12/17/02 Purchase 4,500 $8.77
12/18/02 Purchase 5,000 $8.71
12/19/02 Purchase 5,000 $8.61
12/20/02 Purchase 5,000 $8.559
1/2/03 Purchase 800 $8.593
1/3/03 Purchase 2,500 $8.613
1/6/03 Purchase 5,000 $8.81
1/7/03 Purchase 2,500 $8.81
1/8/03 Purchase 2,500 $8.71
1/9/03 Purchase 1,000 $8.72
1/10/03 Purchase 1,000 $8.72
1/13/03 Purchase 1,000 $8.72
1/13/03 Purchase 1,000 $8.66
1/14/03 Purchase 2,000 $8.71
1/15/03 Purchase 2,000 $8.69
33
Transaction Number
Date Type of Shares Price Per Share*
---------- ---------- --------- ---------------
1/15/03 Purchase 2,000 $8.423
1/16/03 Purchase 2,000 $8.463
1/17/03 Purchase 2,000 $8.55
1/21/03 Purchase 1,000 $8.50
1/22/03 Purchase 1,000 $8.40
1/23/03 Purchase 1,000 $8.36
1/23/03 Purchase 1,000 $8.23
1/24/03 Purchase 1,000 $8.17
1/24/03 Purchase 500 $8.01
1/27/03 Purchase 500 $8.083
2/10/03 Purchase 200 $7.613
2/11/03 Purchase 800 $7.713
2/14/03 Purchase 1,000 $7.683
2/20/03 Purchase 20,000 $7.76
2/20/03 Purchase 6,000 $7.733
2/20/03 Purchase 1,500 $7.723
2/20/03 Purchase 2,400 $7.713
2/20/03 Purchase 3,000 $7.71
2/20/03 Purchase 12,100 $7.668
2/20/03 Purchase 2,900 $7.658
2/20/03 Purchase 4,300 $7.638
2/20/03 Purchase 11,000 $7.618
2/20/03 Purchase 1,000 $7.598
2/20/03 Purchase 1,200 $7.588
2/20/03 Purchase 1,800 $7.578
2/20/03 Purchase 500 $7.568
2/20/03 Purchase 200 $7.558
2/21/03 Purchase 400 $8.223
2/21/03 Purchase 1,300 $8.213
34
Transaction Number
Date Type of Shares Price Per Share*
---------- ---------- --------- ---------------
2/21/03 Purchase 1,300 $8.203
2/21/03 Purchase 4,500 $8.193
2/21/03 Purchase 500 $8.183
2/21/03 Purchase 1,600 $8.173
2/21/03 Purchase 1,300 $8.171
2/21/03 Purchase 1,600 $8.163
2/21/03 Purchase 2,000 $8.153
2/21/03 Purchase 9,100 $8.143
2/21/03 Purchase 800 $8.133
2/21/03 Purchase 300 $8.06
2/21/03 Purchase 6,800 $8.04
2/21/03 Purchase 200 $7.94
2/21/03 Purchase 5,500 $7.883
2/21/03 Purchase 7,000 $7.83
2/24/03 Purchase 2,700 $8.263
2/24/03 Purchase 2,000 $8.26
2/24/03 Purchase 2,900 $8.256
2/24/03 Purchase 4,200 $8.253
2/24/03 Purchase 2,800 $8.25
2/24/03 Purchase 13,900 $8.243
2/24/03 Purchase 5,200 $8.24
2/24/03 Purchase 4,900 $8.233
2/24/03 Purchase 300 $8.23
2/24/03 Purchase 3,700 $8.213
2/24/03 Purchase 2,000 $8.211
2/24/03 Purchase 400 $8.183
2/24/03 Purchase 1,900 $8.17
2/24/03 Purchase 2,200 $8.163
2/24/03 Purchase 2,900 $8.153
35
Transaction Number
Date Type of Shares Price Per Share*
---------- ---------- --------- ---------------
2/24/03 Purchase 7,700 $8.32
2/25/03 Purchase 2,300 $8.31
2/25/03 Purchase 2,200 $8.293
2/25/03 Purchase 10,000 $8.29
2/25/03 Purchase 7,000 $8.283
2/25/03 Purchase 5,000 $8.273
2/25/03 Purchase 3,400 $8.27
2/25/03 Purchase 11,000 $8.263
2/25/83 Purchase 3,800 $8.26
2/25/03 Purchase 600 $8.259
2/25/03 Purchase 9,000 $8.253
2/25/03 Purchase 4,200 $8.25
2/25/03 Purchase 7,600 $8.243
2/25/03 Purchase 1,400 $8.24
2/25/03 Purchase 2,000 $8.223
2/26/03 Purchase 11,900 $8.31
2/26/03 Purchase 6,600 $8.30
2/26/03 Purchase 5,800 $8.29
2/26/03 Purchase 4,200 $8.28
2/26/03 Purchase 2,000 $8.273
2/26/03 Purchase 2,500 $8.27
2/26/03 Purchase 2,900 $8.263
2/26/03 Purchase 7,800 $8.26
2/26/03 Purchase 500 $8.253
2/26/03 Purchase 6,400 $8.243
2/26/03 Purchase 1,000 $8.242
2/26/03 Purchase 4,400 $8.24
2/26/03 Purchase 500 $8.23
2/26/03 Purchase 2,200 $8.223
36
Transaction Number
Date Type of Shares Price Per Share*
---------- ---------- --------- ---------------
2/26/03 Purchase 1,100 $8.22
2/26/03 Purchase 1,000 $8.213
2/27/03 Purchase 1,200 $8.313
2/27/03 Purchase 32,100 $8.27
2/27/03 Purchase 37,600 $8.263
2/27/03 Purchase 100 $8.26
2/27/03 Purchase 500 $8.253
2/27/03 Purchase 1,400 $8.25
2/27/03 Purchase 200 $8.24
2/27/03 Purchase 1,000 $8.233
2/27/03 Purchase 1,000 $8.223
2/27/03 Purchase 4,200 $8.22
2/27/03 Purchase 3,000 $8.213
2/28/03 Purchase 20,000 $8.31
2/28/03 Purchase 5,900 $8.293
2/28/03 Purchase 7,000 $8.292
2/28/03 Purchase 5,000 $8.29
2/28/03 Purchase 7,000 $8.283
2/28/03 Purchase 20,000 $8.27
2/28/03 Purchase 8,900 $8.263
2/28/03 Purchase 3,700 $8.26
2/28/03 Purchase 1,000 $8.253
2/28/03 Purchase 2,000 $8.243
3/3/03 Purchase 14,900 $8.36
3/3/03 Purchase 1,000 $8.33
3/3/03 Purchase 10,400 $8.32
3/3/03 Purchase 4,500 $8.313
3/3/03 Purchase 1,600 $8.31
3/3/03 Purchase 400 $8.303
37
Transaction Number
Date Type of Shares Price Per Share*
---------- ---------- --------- ---------------
3/3/03 Purchase 2,100 $8.293
3/3/03 Purchase 200 $8.29
3/3/03 Purchase 500 $8.28
3/3/03 Purchase 7,900 $8.27
3/3/03 Purchase 4,500 $8.253
3/11/03 Purchase 35,000 $8.15
3/17/03 Purchase 26,000 $8.773
3/20/03 Purchase 15,900 $8.935
3/21/03 Purchase 5,400 $9.02
3/25/03 Purchase 1,500 $8.986
3/26/03 Purchase 4,100 $8.99
* Includes commissions and execution related costs.
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ANNEX B
OWNERSHIP OF COMMON STOCK
Each share of common stock is entitled to one vote on each of the
proposals and the common stock is the only class of securities of the Company
entitled to vote on the proposals. The Company has informed us that there were
13,362,785 shares of common stock that were issued and outstanding as of April
18, 2003, the record date for the shares entitled to vote at the 2003 annual
meeting.
The following table sets forth the share ownership of all persons
who, to the knowledge of Dolphin, beneficially own more than 5% of the
outstanding shares of common stock as of the date of this proxy statement. The
information with respect to each shareholder, other than Dolphin and except as
otherwise indicated, is derived from the preliminary proxy materials filed by
the Company with the SEC with respect to the 2003 annual meeting.
Number of Shares Percentage
Shareholder Beneficially Owned (1) Ownership
- ------------------------------------- ------------------------ -------------
Dolphin Limited Partnership I, L.P. 1,262,800 9.5%
Barclays Global Investors, NA (2) 1,019,010 7.6
Dimensional Fund Advisors, Inc. (3) 735,780 5.5
David O. Corriveau (4) 799,384 5.8
James W. Corley (5) 814,385 5.9
- ----------------------
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. Shares of common stock subject to stock options and warrants
currently exercisable or exercisable within 60 days are deemed outstanding
for purposes of computing the percentage ownership of the person holding
the options and the percentage ownership of any group of which the holder
is a member, but are not deemed outstanding for computing the percentage
ownership of any other person. Subject to community property laws where
applicable, to the knowledge of Dolphin, the persons named in the table
have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them.
(2) Based upon a Schedule 13G filed with the SEC on February 12, 2003. The
address of Barclays Global Investors, N.A. is 45 Fremont Street, San
Francisco, California 94105.
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(3) Based upon a Schedule 13F filed with the SEC for the quarter ending March
31, 2003. The address of Dimensional Fund Advisors is 1299 Ocean Avenue,
11th Floor, Santa Monica, California 90401.
(4) Includes 326,667 shares subject to options exercisable within 60 days and
60,000 shares of restricted stock for which Mr. Corriveau has sole voting
power only. Mr. Corriveau shares voting and dispositive power with respect
to 74,545 shares owned of record by a family limited partnership. Mr.
Corriveau disclaims beneficial ownership with respect to such shares.
Substantially, all of the shares owned directly by Mr. Corriveau have been
pledged as collateral to secure various personal bank loans and margin
trading in personal brokerage accounts.
(5) Includes 326,667 shares subject to options exercisable within 60 days and
60,000 shares of restricted stock for which Mr. Corley has sole voting
power only. Mr. Corley shares voting and dispositive power with respect to
99,559 shares owned of record by a family limited partnership. Mr. Corley
disclaims beneficial ownership with respect to such shares.
40
FORM OF PROXY SOLICITED ON BEHALF OF
DOLPHIN LIMITED PARTNERSHIP I, L.P.
The undersigned shareholder of Dave & Buster's, Inc., a Missouri
corporation (the "Company"), on April 18, 2003 (the "record date"), hereby
appoints Donald T. Netter or Brett Buckley or either of them, each with full
power of substitution, to act as proxies for the undersigned, and to vote all
shares of common stock, par value $.01 per share, of the Company, which the
undersigned would be entitled to vote if personally present at the 2003 Annual
Meeting of Shareholders of the Company to be held on June ___, 2003, and at any
and all postponements and adjournments thereof as indicated on this proxy.
IF YOU SIGN, DATE AND RETURN THIS CARD WITHOUT INDICATING YOUR VOTE
ON ONE OR MORE OF THE FOLLOWING PROPOSALS, YOU WILL BE DEEMED TO HAVE VOTED IN
FAVOR OF PROPOSAL NOS. 1, 2 AND 3. IF YOU VOTE OR ABSTAIN WITH RESPECT TO ONE OR
MORE OF THE FOLLOWING PROPOSALS, THIS PROXY CARD WILL REVOKE ANY PREVIOUSLY
EXECUTED REVOCATION OF PROXY WITH RESPECT TO SUCH PROPOSALS.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
DOLPHIN STRONGLY RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF
PROPOSAL NOS. 1, 2 AND 3.
Proposal No. 1 -- Election of Edward A. Weinstein, Donald T. Netter
and Edward E. Hartline as Directors with Terms Expiring in 2006
FOR [ ] AGAINST [ ] ABSTAINS [ ]
(Instruction: If you wish to vote for the election of certain of the
nominees, but not all of them, check the "FOR" box above and write the name of
the person(s) you do not wish elected in the following space:
________________________________________. If no box is marked above with respect
to this Proposal, the undersigned will be deemed to vote for such Proposal,
except that the undersigned will not be deemed to vote for the election of any
candidate whose name is written in the space provided above.)
Proposal No. 2 -- Ratification of Appointment of Ernst & Young LLP as
Independent Accountants
FOR [ ] AGAINST [ ] ABSTAINS [ ]
Proposal No. 3 -- Shareholder Proposal on Sale of the Company
FOR [ ] AGAINST [ ] ABSTAINS [ ]
41
And in the discretion of the proxies appointed hereunder, on such
other business as may properly come before the meeting.
IMPORTANT: THIS PROXY MUST BE SIGNED AND DATED TO BE VALID.
Dated:
---------------------------
---------------------------
Signature:
---------------------------
Signature (if held jointly):
---------------------------
Title or Authority
Please sign exactly as name appears hereon. If shares are registered in more
than one name, the signature of all such persons should be provided. A
corporation should sign in its full corporate name by a duly authorized officer,
stating his or her title. Trustees, guardians, executors and administrators
should sign in their official capacity, giving their full title as such. If a
partnership, please sign in the partnership name by an authorized person. The
proxy card votes all shares in all capacities.
PLEASE MARK, SIGN AND DATE THIS PROXY BEFORE MAILING THE PROXY IN THE ENCLOSED
ENVELOPE.
If you have any questions or need assistance in voting your shares,
please contact Innisfree M&A Incorporated toll-free at 1-888-750-5834 or if you
are a bank or broker please call collect at 1-212-750-5833.
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