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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Check the appropriate box:
/ / Preliminary Proxy Statement
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14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material under Rule 14a-12
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)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Common
Stock, par value $.01 per share
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
June 4, 2003
DAVE & BUSTER'S, INC.
2003 ANNUAL MEETING
INSTITUTIONAL
SHAREHOLDER PRESENTATION
DOLPHIN BELIEVES
THIS CONTEST IS ALL ABOUT CREDITIBLITY, BREACHED TRUST, POOR
PERFORMANCE AND NO ACCOUNTABILITY
DOLPHIN'S DEFINATIVE PROXY STATEMENT CONTAINS A MORE FULL PRESENTATION OF
THE MATTERS CONTAINED IN THIS ABBREVIATED DOCUMENT.
INCUMBENT BOARD'S ACTIONS DEMONSTRATE NECESSITY FOR
A STRONG, INDEPENDENT SHAREHOLDER VOICE
Breaches of fiduciary duty and trust in three year failed sale process.
o Six continuing directors (a super majority) were either actively
involved in the self-interested LBO, or served on the Special
Committee that should have been protecting shareholder interests
Expanded board without shareholder approval in the face of this proxy contest
o Filled vacancy with director closely aligned with incumbent director
and not subject to election at 2003 Annual Meeting
Last minute appropriation of Dolphin's governance reforms as board's own
"initiatives".
o The board's claim that "the planned corporate governance initiatives"
were product of a "proactive thorough review" is not reflected in the
board's own minutes
o The board's "initiatives" are Form over Substance, NOT a commitment to
real reform
Misaligned and excessive top management compensation
Continued poor operating share price performance
1
OUR SLATE WILL BE A STRONG, INDEPENDENT
SHAREHOLDER VOICE ON THE BOARD
Dolphin owns 9.5% of the stock, a $12 million investment.
Our nominees are highly qualified and complementary:
o Donald T. Netter, Dolphin's Senior Managing Director - 20 years of
investment experience with record of value creation.
o Edward A. Weinstein, retired senior partner, Deloitte & Touche - 40
years of public auditing experience with M&A and Restructuring focus.
o Edward E. Hartline, attorney specializing in tax, corporate and M&A -
director of two private restaurant chains.
Our nominees are independent:
o We are not seeking a self-interested transaction.
o We are not seeking control of the board; our nominees will be three of
nine.
o Our only objective in this contest is to deliver value for all
shareholders.
Electing our nominees empower shareholders to determine board control at the
2004 Annual Meeting if the board fails on its recent promises.
2
FIVE OF EIGHT DIRECTORS
PRIOR TO APRIL 17, 2003 WERE CONFLICTED
CONFLICTED NON-CONFLICTED
---------- --------------
1. Corriveau - Co-Chairman/CEO 6. Levy
2. Corley - Co-Chairman/CEO 7. Bernstein
3. Henrion(1) -- Paid Consultant 8. Edison*
4. Maguire(2) - Involved in DAB's R/E
5. Hallett(3) - Legal work
* Director of DAB since 1995 spin-off from Edison Bros Stores; formerly a D & O
of Edison Bros. Stores.
Since 1990 has had a business relationship with DAB's top management.
- ---------------------
1 Business relationship with Corley and Corriveau since 1989; under five
year consulting agreement
received $150K in FY 2002.
2 His firm collected $1.3 million in rent and brokerage commissions in FY
2002.
3 Hallett & Perrin was Company's legal advisor in failed buyout -
received $158K in FY 2002.
3
SEVEN OF EIGHT DIRECTORS PRIOR TO APRIL 17, 2003
INVOLVED IN OR PRESIDED OVER SELF-INTERESTED SALE PROCESS
LBO PARTICIPANTS SPECIAL COMMITTEE MEMBERS
---------------- -------------------------
1. Corriveau - Co-Chairman/CEO 4. Levy (Chairman)
2. Corley - Co-Chairman/CEO 5. Maguire(1)
3. Henrion 6. Bernstein(2) (left in April 2002)
7. Edison
DIRECTOR
8. Hallett
- ---------------------
1 Maguire should not have been a committee member as a result of his
significant involvement with DAB's real estate.
2 Mr. Bernstein is the chairman and CEO of Morton's Restaurant Group, Inc.
Left in April 2002 to devote more time and attention to the LBO of
Morton's.
4
KEY BREACHES OF FIDUCIARY DUTY AND TRUST IN
SELF-INTERESTED AND ULTIMATELY FAILED SALE PROCESS
In December 1999 after being approached by top management-directors, "the Board
resolved to constitute a Special Committee of directors to evaluate and
negotiate on behalf of the Company, any merger and acquisition proposals which
might be received from a financial buyer that included management
participation(1)".
The Special Committee initially consisted of directors Maguire, Bernstein, Levy
and Edison:
o Director Maguire's company, Cypress Equities, in December 2002
executed sale leaseback transactions obligating DAB to pay $23.2
million over 20 years.
o Cypress Equities received rental payments from DAB of $167K in 2000,
$1.2 million in 2001 and $1.3 million in 2002.(2)
o Director Bernstein, Chairman/CEO of Morton's Restaurant Group,
resigned from the Special Committee in April 2002 to pursue an LBO of
his company, which was consummated only after its board did not accept
a significantly higher third party offer by BFMA Holding.
- -----------------------
Sources: SEC and court filings as well as minutes of the board and Special
Committee meetings obtained by Dolphin under Missouri law.
1 Emphasis added by Dolphin.
2 Might be included in the $23.2 million.
5
(Continued)
o Director Levy was briefly appointed "Lead Director" on March 5,
2003. That position subsequently vanished with little public
explanation.
o Director Edison was recently appointed non-executive Chairman of the
Board -- Since 1990 he has had a business relationship with top
management.
o Directors Levy and Bernstein were the members of the compensation
committee that approved excessive and misaligned top management
compensation including sizeable option grants at depressed prices.
The Special Committee was paid an additional $175,000 to oversee the sale
process.
The Special Committee and its investment banker remained passive - never sought
acquisition proposals.
Directors Corriveau, Corley and Henrion initially reviewed all acquisition
proposals while they were seeking an LBO of DAB.
6
(Continued)
Only two proposals were presented to the Special Committee - both had financial
stakes for Corley, Corriveau and Henrion.
Top management discouraged Landry's Restaurants - a credible, publicly traded
strategic acquiror that might have offered a better deal for shareholders.
Material information concerning Landry's interest in acquiring DAB was disclosed
only after the facts came out in a shareholder lawsuit.
- ----------------------
Sources: SEC and court filings as well as minutes of the Board and Special
Committee meetings obtained by Dolphin under Missouri law.
7
THE LANDRY'S EPISODE DOCUMENTS CLEAR
BREACHES OF FIDUCIARY DUTY AND TRUST
When Landry's, a publicly-traded(1) strategic buyer, emerged and might have
offered more to DAB shareholders, directors Corriveau, Corley and Henrion
discouraged this buyer - no Landry's proposal ever reached the Special
Committee.
According to a deposed Landry's representative --
Once a confidentiality agreement was executed, "DAB had no interest in
providing Landry's with any confidential information."
Directors Corriveau, Corley and Henrion informed Landry's CEO that they
"intended to take the Company private themselves and they wanted Landry's
to sign a standstill agreement to preclude it from interfering with their
going private plan."
- ------------------
Sources: July 2, 2002 litigation filed in the Texas District Court, captioned
L.J. Parnes v. Corriveau et. Al., cause no. 02-4912, Dallas County; corroborated
in DAB October 2, 2002 preliminary merger proxy.
1 Landry's is a Houston, Texas based diversified restaurant and entertainment
Company with an equity market capitalization of $560 million in May 2003.
8
THE LANDRY'S EPISODE (Continued)
Later, director Corriveau sent Landry's CEO "an outline of the kind of deal
a merger would require for management to obtain its goals..." in which the
DAB shareholders "would receive only $9 per share and the D&B `management
earnouts' would be `10% of EBITDA contributed by D&B operations for the
next five years..."'
"Since it was Landry's view that no one would be entitled to 10% of EBITDA
other than its shareholders, Landry's was uninterested in such a
transaction."
Directors Corriveau, Corley and Henrion had accomplished their goal by pushing
away Landry's.
DAB transaction documents omitted these references to Landry's until October 2,
2002, after they had come out in the shareholder litigation.
- ---------------------
Sources: July 2, 2002 litigation filed in the Texas District Court, captioned
L.J. Parnes v. Corriveau et. Al., cause no. 02-4912, Dallas County; corroborated
in DAB October 2, 2002 preliminary merger proxy.
9
THE FAILED LBO
May 30, 2002 -- The Special Committee and board approved a $12/share tender
offer (not subject to financing) with significant financial
stakes for top management-directors.
-- Contributing 1.2 million shares/options in the LBO entity.
-- Options on 13% of the acquiror.
-- $2.5 million insider loans.
July 10,2002 -- Failed to obtain enough shareholder support.
July 15,2002 -- Special Committee and board approved a bumped $13.50 merger with
same financial stakes for top management-directors.
-- Subject to financing and without any financing commitments.
Board declined to secure available financing by paying $3.0 million.
October 24, 2002 -LBO collapsed due to "continuing adverse conditions in the
debt financing market".
Failed LBO cost Company $1.3 million in 2002 alone*.
*Company has not disclosed what earlier transaction costs were.
10
DAB PACKED THE BOARD IN THE FACE OF DOLPHIN'S PROXY CONTEST
After Dolphin notified the board on March 3, 2003 of its intention to wage a
proxy contest at the 2003 Annual Meeting, the board was expanded from eight to
nine without seeking shareholder approval.
The board later appointed David Pittaway, to fill the vacancy and shielded him
from a shareholder vote until 2004. We do not believe that Mr. Pittaway could be
expected to be an independent voice on the board.
o Mr. Pittaway is a Senior Managing Director of Castle Harlan, Inc.,
which sponsored the July 2002 Morton's LBO with DAB director
Bernstein.
o Mr. Pittaway and his partner, John Castle, were directors of Morton's
when the opportunistic March 2002 Morton's LBO proposal was made.
o Castle Harlan continues to be Morton's majority shareholder and Mr.
Bernstein continues to be its CEO.
o With the appointment of Mr. Pittaway to fill the expanded vacancy we
now have two directors on the DAB board that backed the Morton's LBO
and have a significant continuing business relationship.
11
LAST MINUTE APPROPRIATION OF DOLPHIN'S GOVERNANCE REFORMS
The board's "initiatives" were adopted one day after Dolphin's March 3, 2003
letter stating intention to wage a proxy contest and advocating many of these
"initiatives".
The board's March 5, 2003 announcement of its "planned corporate governance
initiatives," stated that the "initiatives" were the product of a "proactive",
"thorough review of our governance practices and procedures" commenced in 2002.
The board's minutes for the past two years, prior to our March 3, 2003 letter,
reveal only one brief reference to corporate governance:
"Mr. Corley than 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 propose rule changes."
No announcement of any governance "initiatives" on December 5, 2002 Earnings
Call.
Source: Minutes of board meetings obtained by Dolphin under Missouri law.
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KEY EVENTS
Dolphin's MARCH 3, 2003 LETTER TO BOARD DAB'S ANNOUNCEMENTS:
- --------------------------------------- --------------------
PROXY CONTEST PLATFORM: March 5, 2003
o Aggressively improve DAB's operating results o Appoints director Levy as "Lead Director"
o Create a "lead director" position o Forms nominating and governance committee
o Eliminate director conflicts - promote independence APRIL 8, 2003
-------------
o Correct prior sale process Missed EPS; additional cost cuts
o Reconstitute special committee to explore methods APRIL 10, 2003
to maximize value --------------
o Destagger board/other governance reforms o Corley and Corriveau step down as Co-Chairman/CEO's
o Realign top management compensation o Director Edison appointed Chairman
o Warns against expanding board o Director Henrion "retires," remains a consultant
APRIL 14, 2003 o Corley and Corriveau to take 20% pay "cuts"
- --------------
APRIL 17, 2003
DOLPHIN ANNOUNCES ITS DIRECTORS: --------------
Weinstein, Netter, Hartline EXPANDS BOARD, APPOINTS THREE DIRECTORS
o During proxy contest, expands board from eight to nine
o Fills vacancy with Pittaway
o Hallett retires
o Realigns board committees
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BOARD'S GOVERNANCE "INITIATIVES" DID NOT ADDRESS ANY OF THESE PROVISIONS
WHICH IMPEDE SHAREHOLDER PARTICIPATION AND FRUSTRATE ACCOUNTABILITY:
STAGGERED BOARD
POISON PILL
WRITTEN CONSENT MUST BE UNANIMOUS
SHAREHOLDERS MAY NOT CALL SPECIAL MEETING
SHAREHOLDERS MAY NOT AMEND BYLAWS
85% VOTE OF OUTSTANDING SHARES TO AMEND CRITICAL CHARTER PROVISIONS
14
THE BOARD'S GOVERNANCE "INITIATIVES" ARE FORM OVER SUBSTANCE
NOT A COMMITMENT TO REAL REFORM
The board says that it now has a "super majority" of independent directors:
o Each of the six continuing directors (a "super majority") were either
actively involved in the LBO or served on the Special Committee.
Director Levy was recently appointed "Lead Director" with fanfare:
o Director Levy was Chairman of the Special Committee
o This position was quickly abolished with only a brief reference tucked
in the Company's 2003 proxy.
Director Edison recently appointed non-executive Chairman:
o Director Edison was a member of the Special Committee
o As an officer and a director of the former parent, he has had a
business relationship with top management since 1990 and represents a
continuation of the regime.
15
(Continued)
Mr. Pittaway was recently appointed to fill the expanded vacancy.
o Can director Pittaway be a truly independent voice with his
significant continuing business relationship with director Bernstein?
DAB has numerous governance provisions which impede shareholder participation
and frustrate accountability.
16
THE RECENT 20% SALARY "CUTS" FOR CORLEY AND CORRIVEAU ARE ILLUSORY
April 10 Company announces 20% cuts for balance of FY 2003.
We learn in April 21, 2003 proxy that salaries were raised in April 2002 from
$500K -> $600K,each.
20% cut = $480K vs. $498K in FY 2001.
At 150% of 2002 EPS (assume $.40) they get back 50%.
At 200% of 2002 EPS they get back 100%.
150% of $.40 is $.60 -> way below $.77 -$.85 FY 2003 guidance. Earnbacks pretty
certain! FY 1999 EPS = $.751.
Source: DAB's proxy statements and public EPS guidance.
1 Before accounting change.
17
TOP MANAGEMENT COMPENSATION HAS CLIMBED
DESPITE POOR OPERATING AND SHARE PRICE PERFORMANCE
Declining same store revenue, profit margins and E.P.S.
Growth, margins and profitability at bottom of peer group(1).
Missed EPS target caused share price collapse (August 1999) well before market
downturn in mid-2000. Initiated trend of missed EPS targets.
Share price has remained stagnant trading at significant discounts to key peer
benchmarks.
Despite this poor performance, top management total compensation increased
66%(2) from FY 1999 to FY 2002 with significant additional wealth transferred
from owners to executives through stock options.
Sources: DAB financial documents and proxy statements
1 We define DAB's "peer group" as the 15 stocks that make up the S&P SmallCap
Restaurant Index that the Company uses in its proxy for comparative
purposes. (One of the companies, AFC Enterprises (NASDAQ: AFCEE), is
currently in the process of restating its financial statements. We have
excluded AFC Enterprises from our analysis.)
2 Base salary + cash bonuses + other cash +restricted stock.
18
FOUR YEARS OF POOR OPERATING AND SHARE PRICE PERFORMANCE
(FY 1999 -FY 2002)
Declining DAB same store revenue:
o DAB (5%)
o Peer Group1 +11.5%
DAB EBITDA margins have steadily declined from 15.7% ->12.1%. oPeer Group EBITDA
margins range from 11% to 29%(2)
Average per store EBITDA has declined from $1.7 million to $1.4 million.
Net debt has risen from $38.0 million to $65.0 million; breaking bank covenants
and preventing new store openings(3).
From Aug. 26, 1999 (date preceding missed EPS target) to
May 23, 2003:
$1 invested in DAB is worth $0.38
$1 invested in S&P SmallCap Restaurant Index(1) is worth $1.59
* Source: Company financial data: peer group financials.
1 DAB's "peer group" is the 15 stocks that make up the S&P SmallCap
Restaurant Index that the Company uses in its proxy for comparative
purposes. (One of the companies, AFC Enterprises (NASDAQ: AFCEE), is
currently in the process of restating its financial statements. We have
excluded AFC Enterprises from our analysis.)
2 Based on forward FY 2003 available analyst estimates as of March 3, 2003.
3 Four amendments to stay in compliance.
19
TOP MANAGEMENT COMPENSATION NOT ALIGNED WITH POOR OPERATING AND SHARE PRICE
PERFORMANCE
Total compensation for two Co-Chairmen/CEO's increased 66%:
FY 1999: $ 775,000
FY 2002: $1,285,000
After share price collapse - options issued at depressed prices on 13% of fully
diluted shares in FY's 2000 - 2002:
o 2.0 million options issued @ $7.14 average.
Currently outstanding options on 16% of fully diluted shares.
Additional 2001"Retention Bonus" for Corley and Corriveau during pursuit of LBO.
* Source: DAB financial statements and proxy statements.
20
A Picture Is Worth A Thousand Words!
$1.00 invested in DAB stocks is now worth $0.38!(1)
$1.00 invested in S&P Small Cap Restaurant Index(2) is now worth $1.59!(1)
[Graphic Omitted -
the following data was represented as a line chart in the printed material.]
Month end closes
S&P
SmallCap
Restaurant
Date Price Index
---- ----- ----------
12/31/98 23.06 165.26
1/29/99 22.00 157.32
2/26/99 19.69 157.16
3/31/99 20.50 156.02
4/30/99 20.50 159.16
5/31/99 27.00 167.52
6/30/99 29.00 169.53
7/30/99 26.13 167.46
8/31/99 11.75 148.93
9/30/99 11.94 150.25
10/29/99 9.69 144.29
11/30/99 10.31 140.04
12/31/99 8.19 138.04
1/31/00 6.75 131.05
2/29/00 6.44 127.73
3/31/00 10.00 136.78
4/28/00 7.38 148.05
5/31/00 6.88 139.58
6/30/00 6.25 143.90
7/31/00 6.44 139.59
8/31/00 8.00 147.47
9/29/00 7.94 150.83
10/31/00 8.31 167.67
11/30/00 9.25 173.44
12/29/00 11.00 170.97
1/31/01 9.75 179.23
2/28/01 9.80 183.97
3/30/01 8.62 190.12
4/30/01 8.65 200.07
5/31/01 8.61 190.56
6/29/01 8.41 207.80
7/31/01 8.28 207.31
8/31/01 7.55 213.56
9/28/01 5.92 189.20
10/31/01 6.70 202.02
11/30/01 6.16 218.27
12/31/01 6.28 232.64
1/31/02 8.15 257.76
2/28/02 9.00 251.90
3/29/02 10.40 263.55
4/30/02 10.69 283.40
5/31/02 12.13 276.18
6/28/02 12.14 262.69
7/31/02 13.05 242.61
8/30/02 13.12 234.02
9/30/02 11.21 220.51
10/31/02 7.98 223.01
11/29/02 7.87 228.61
12/31/02 8.65 220.16
1/31/03 8.14 218.88
2/28/03 8.24 211.02
3/31/03 9.05 222.10
4/30/03 9.08 240.42
5/23/03 9.42 243.03
1 Measured from August 26, 1999 through May 23, 2003.
2 Company uses this index in its proxy for comparative purposes. Stock and
index data source Bloomberg.
3 Dave & Buster's misses estimates or lowers guidance (i) mid-1999; (ii) late
2001; (iii) early 2002; and (iv) late 2002.
4 Deal blows up October 2002.
5 March 3, 2003 Dolphin: (i) sends letter to the Board; and (ii) announces
proxy contest.
21
DOLPHIN'S INDEPENDENT DIRECTOR NOMINEES ARE HIGHLY
QUALIFIED, COMPLEMENTARY AND HAVE NO CONFLICTS
Netter (41) - Senior Managing Director, Dolphin. 20 years of investment
experience. Dolphin is the largest shareholder with a 9.5% stake ($12 million).
Weinstein (65) - Retired Senior Partner, Deloitte & Touche. Head of New York M&
A and restructuring unit. 40 years public auditing experience - qualifies as "an
audit committee financial expert".
Hartline (56) - Founder and Managing Partner of Brown McCarroll, Texas-based law
firm. Specializes in tax, corporate and M&A. Director of two Texas-based private
restaurant chains.
Weinstein/Hartline on slate as a "public service". No prior business
relationship with Dolphin.
22
NETTER
Since 1994 - Senior Managing Director of Dolphin, 9th year of operation.
1989-1993 - Co-General Partner of RLR Partners, L.P. (joined in 1987), the
General Partner of Ballantrae Partners, L.P., a New York city-based private
investment partnership.
Director and Senior Officer of three public companies:
o Damon Corporation (1989 - 1993; public 1991; acquired 1993)
o Independence Holding Co. (INHO) (1993-1999)
o Aristotle Corporation (ARTL) - Present
23
SUMMARY
DAVE & BUSTER'S BOARD:
CONTAINS SUPER MAJORITY OF TAINTED DIRECTORS
BREACHED FIDUCIARY DUTIES AND SHAREHOLDER TRUST
ORCHESTRATED A DUBIOUS AFTER-THE-FACT BOARDROOM "CLEAN-UP"
PRESIDED OVER POOR OPERATING AND SHARE PERFORMANCE
AWARDED MIS-ALIGNED, EXCESSIVE TOP MANAGEMENT COMPENSATION
NEEDS DIRECTORS COMMITTED TO PROMOTING ACCOUNTABILITY FOR SHAREHOLDERS
ELECTING DOLPHIN'S INDEPENDENT SLATE TO THE
BOARD WILL PROVIDE THAT ACCOUNTABILITY!
24
"There has to be an atmosphere of constructive skepticism."
-- Arthur Levitt
"In order to restore their trust, American investors must see
businesses shift from constantly searching for loopholes and
skating up to the line of legally acceptable behavior. They must
see a new respect for honesty, integrity, transparency,
accountability, and for the good of shareholders...."
-- William Donaldson
25