SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
DOVER DOWNS ENTERTAINMENT, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
[INSERT NAME OF FILER WHEN APPLICABLE]
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
DOVER DOWNS ENTERTAINMENT, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 31, 1997
------------------------
TO THE HOLDERS OF COMMON STOCK:
PLEASE TAKE NOTICE that the 1997 Annual Meeting of Shareholders of DOVER
DOWNS ENTERTAINMENT, INC., a Delaware corporation, will be held on the First
Floor, 1209 Orange Street, Wilmington, Delaware, on Friday, October 31, 1997, at
9:00 A.M. (Eastern Standard Time) for the following purposes:
1. To elect three Class I Directors to the Board of Directors;
2. To consider and act upon such other business as may properly come
before the Annual Meeting or any adjournment thereof.
The Proxy Statement dated September 24, 1997 is attached.
The Board of Directors has fixed the close of business on September 19,
1997 as the record date for the determination of shareholders entitled to notice
of and to vote at the meeting.
You are cordially invited to attend the Annual Meeting. If you cannot be
present in person, please sign and date the enclosed proxy and promptly mail it
in the enclosed return envelope which requires no United States postage. Any
shareholder giving a proxy has the right to revoke it any time before it is
voted.
BY ORDER OF THE BOARD OF DIRECTORS
MICHAEL B. KINNARD, General Counsel
Dated: Dover, Delaware
September 24, 1997
------------------------
YOU ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO UNITED STATES POSTAGE.
<PAGE>
PROXY STATEMENT
DOVER DOWNS ENTERTAINMENT, INC.
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 31, 1997
------------------------
The information concerning the enclosed proxy and the matters to be acted
upon at the Annual Meeting of Shareholders to be held on October 31, 1997 (the
"Annual Meeting") is submitted to the shareholders for their information.
SOLICITATION OF AND POWER TO REVOKE PROXY
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of DOVER DOWNS ENTERTAINMENT, INC.,
a Delaware corporation (the "Company"). Proxies solicited hereby are to be voted
at the Annual Meeting or at any adjournment thereof.
The mailing address for the Company's principal executive office is 1131
North DuPont Highway, Route 13, Dover, Delaware 19901. This Proxy Statement and
the form of proxy were first sent to the Company's shareholders on or about
September 24, 1997.
A form of proxy is enclosed. Each proxy submitted will be voted as directed
but, if not otherwise specified, proxies solicited by the Board of Directors of
the Company will be voted in favor of the candidates for election to the Board
of Directors as Class I Directors.
The solicitation of proxies will be by mail. It may be that further
solicitation of proxies will be made by telephone, telegram or interview with
some shareholders of the Company, following the original solicitation. All such
further solicitations will be made by regular officers and employees of the
Company, who will not be additionally compensated therefor, or its Transfer
Agent. The Company will bear the entire cost of all such solicitations, which
will be nominal and include reimbursements paid to brokerage firms and others
for their expenses in forwarding solicitation material regarding the meeting to
beneficial owners.
Each shareholder has the right to revoke his or her proxy at any time
before it is voted. A proxy may be revoked by filing with the General Counsel of
the Company a written revocation or a duly executed proxy bearing a later date
or by voting in person at the Annual Meeting. Any shareholder may attend the
Annual Meeting and vote in person, whether or not such shareholder has
previously given a proxy.
1
<PAGE>
CAPITAL STOCK
The outstanding capital stock of the Company on September 19, 1997
consisted of 2,979,000 shares of Common Stock, par value $.10 per share (the
"Common Stock"), and 12,269,330 shares of Class A Common Stock, par value $.10
per share (the "Class A Common Stock"). Shares of Class A Common Stock are
convertible at any time into shares of Common Stock on a share-for-share basis
at the option of the holders thereof.
Each holder of Common Stock is entitled to one vote for each share of
Common Stock held and each holder of Class A Common Stock is entitled to ten
votes for each share of Class A Common Stock held, except to the extent that
voting by class is required by law. At a meeting of stockholders at which a
quorum is present, a majority of the votes cast decides all questions, unless
the matter is one upon which a different vote is required by express provision
of law or the Company's Certificate of Incorporation or Bylaws. Under the
General Corporation Law of the State of Delaware, holders of Common Stock and
Class A Common Stock are entitled to vote as a class with respect to certain
matters, including mergers and amendments to the Certificate of Incorporation of
the Company which would have certain specified effects on the Common Stock and
Class A Common Stock, respectively. There is no class voting or cumulative
voting with respect to the election of directors.
A majority of the outstanding shares will constitute a quorum at the Annual
Meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
In accordance with the General Corporation Law of the State of Delaware, the
election of the nominees named herein as Directors will require the affirmative
vote of a plurality of the votes cast by the shares entitled to vote in the
election provided that a quorum is present at the Annual Meeting. In the case of
a plurality vote requirement (as in the election of directors), where no
particular percentage vote is required, the outcome is solely a matter of
comparing the number of votes cast in favor of a proposal to the number of votes
cast against the proposal, and hence only votes for or against the proposal (and
not abstentions or broker non-votes) are relevant to the outcome.
As of July 31, 1997, only six persons were known to the Company to own
beneficially more than five percent (5%) of the outstanding shares of the Common
Stock or Class A Common Stock. The name and address of each such person,
together with the number of shares owned and the percentage of outstanding
shares that ownership represents and information as to Common Stock and Class A
Common Stock ownership of the Named Executives identified in the Summary
Compensation Table
2
<PAGE>
and the officers and directors of the Company as a group (according to
information received by the Company) are set forth below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
AND NATURE OF
NAME AND ADDRESS TITLE OF BENEFICIAL PERCENT OF
OF BENEFICIAL OWNERS CLASS OWNERSHIP(1) CLASS
- ------------------------------------------------ ---------------------------- --------------------- -------------
<S> <C> <C> <C>
John W. Rollins ................................ Common Stock -- --
One Rollins Plaza Class A Common Stock 6,000,330(2) 48.8%
Wilmington, DE 19803
Henry B. Tippie ................................ Common Stock -- --
P.O. Box 26557 Class A Common Stock 1,640,000 13.3%
Austin, TX 78755
Eugene W. Weaver ............................... Common Stock -- --
One Rollins Plaza Class A Common Stock 800,000(3) 6.5%
Wilmington, DE 19803
Gary W. Rollins ................................ Common Stock -- --
2170 Piedmont Street, NE Class A Common Stock 1,015,000 8.3%
Atlanta, GA 30301
R. Randall Rollins ............................. Common Stock -- --
2170 Piedmont Street, NE Class A Common Stock 1,015,000 8.3%
Atlanta, GA 30301
Jeffrey W. Rollins ............................. Common Stock -- --
One Rollins Plaza Class A Common Stock 665,500 5.4%
Wilmington, DE 19803
Denis McGlynn .................................. Common Stock 100 --
1131 North DuPont Highway Class A Common Stock 254,500 2.1%
Dover, DE 19901
Robert M. Comollo .............................. Common Stock 1,000 --
1131 North DuPont Highway Class A Common Stock -- --
Dover, DE 19901
Pilgrim Baxter & Associates, Ltd. .............. Common Stock 549,814 18.7%
11255 Drummers Lane, Ste. 300 Class A Common Stock -- --
Wayne, PA 19087
T. Rowe Price .................................. Common Stock 150,000(4) 5.1%
100 East Pratt Street Class A Common Stock -- --
Baltimore, MD 21202
All Directors and Officers as a Group (12 Common Stock 4,600 0.2%
persons)...................................... Class A Common Stock 10,974,830 89.3%
</TABLE>
- ------------------
(1) As to officers and directors, shares are owned directly and of record. Class
A Common Stock is convertible, at any time, on a share-for-share basis into
Common Stock at the option of the holders thereof. As a result, pursuant to
Rule 13d of the Securities Exchange Act of 1934, a stockholder is deemed to
have beneficial ownership of the shares of Common Stock which such
stockholder may acquire upon conversion of the Class A Common Stock. In
order to avoid overstatement, the amount of Common Stock beneficially owned
does not take into account such shares of Common Stock which may be acquired
upon conversion (an amount which is equal to the number of shares of Class A
Common Stock held by a stockholder). The above numbers exclude the following
shares of Common Stock subject to options granted under the Company's 1996
Stock Option Plan which the listed beneficial owner has the right to acquire
beneficial ownership as specified in Rule 13d of the Securities Exchange Act
of 1934: Denis McGlynn, 5,000 shares; Eugene W. Weaver, 2,500 shares; and
all directors and officers as a group, 12,000 shares.
(Footnotes continued on next page)
3
<PAGE>
(Footnotes continued from previous page)
(2) Does not include 6,000 shares of Class A Common Stock held by his wife and
4,000 shares of Common Stock held by his wife as Custodian for his minor
children, as to which Mr. Rollins disclaims any beneficial interest.
(3) Does not include 300,000 shares of Class A Common Stock owned by a
partnership over which Mr. Weaver has sole voting power, as to which Mr.
Weaver disclaims any beneficial interest.
(4) Shares are owned by the T. Rowe Price New Horizons Fund for which T. Rowe
Price Associates, Inc. ("Price Associates") serves as investment adviser.
Price Associates has sole dispositive power for the entire holding of
150,000 shares. For purposes of the reporting requirements of the Securities
Exchange Act of 1934, Price Associates is deemed to be a beneficial owner of
such securities; however, Price Associates expressly disclaims that it is,
in fact, the beneficial owner of such securities.
ELECTION OF DIRECTORS
Three individuals are to be elected at the Annual Meeting to serve as Class
I Directors for a term of three years, and until the election and qualification
of their successors. Six other individuals serve as directors but are not
standing for re-election because their terms as directors extend past the Annual
Meeting pursuant to provisions of the Company's Certificate of Incorporation
which provide for the election of directors for staggered terms, with each
director serving a three year term.
Unless a shareholder WITHHOLDS AUTHORITY, the proxy holders will vote FOR
the election of each of the persons named below to a three year term as a
director. Although the Board of Directors does not contemplate the possibility,
in the event a nominee is not a candidate or is unable to serve as director at
the time of the election, unless the shareholder WITHHOLDS AUTHORITY, the
proxies will be voted for such nominee as is designated by the present Board of
Directors to fill such vacancy.
4
<PAGE>
The name and age of each of the nominees, his principal occupation, the
period during which he has served as a director, together with the number of
shares of Common Stock and Class A Common Stock beneficially owned by him,
directly or indirectly, and the percentage of outstanding shares that ownership
represents, all as at the close of business July 31, 1997 (according to
information received by the Company), are set forth below. Similar information
is also provided for those directors whose terms expire in future years.
<TABLE>
<CAPTION>
SHARES OF PERCENT OF
NAMES OF PRINCIPAL SERVICE AS CAPITAL OUTSTANDING
NOMINEES OCCUPATION(1) DIRECTOR AGE STOCK(2) SHARES
- -------------------------- ------------------------------------ ----------- --------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Class I (Term Expires
2000)
Henry B. Tippie........... Vice Chairman of the Board; Chairman 1996 to 70 Common Stock:
of the Executive Committee and date -- --
Vice Chairman of the Board, Rollins Class A Common Stock:
Truck Leasing Corp.; Chairman of 1,640,000 13.3%
the Executive Committee and
Director, Matlack Systems, Inc.;
Chairman of the Board and Chief
Executive Officer, Tippie
Services, Inc.
R. Randall Rollins........ Chairman of the Board and Chief 1996 to 65 Common Stock:
Executive Officer, Rollins, date -- --
Inc.; Chairman of the Board and Class A Common Stock:
Chief Executive Officer, RPC, 1,015,000 8.3%
Inc.(3)
Patrick J. Bagley......... Vice President--Finance and 1996 to 50 Common Stock:
Treasurer, Rollins Truck Leasing date 500 --
Corp.; Vice President--Finance, Class A Common Stock:
Treasurer and Director, Matlack -- --
Systems, Inc.
<CAPTION>
NAMES OF DIRECTORS WHOSE
TERMS HAVE NOT EXPIRED
- --------------------------
<S> <C> <C> <C> <C> <C>
Class II (Term Expires
1998)
John W. Rollins, Jr....... President, Chief Operating Officer 1996 to 55 Common Stock:
and Director, Rollins Truck date -- --
Leasing Corp.; Chairman of the Class A Common Stock:
Board, Matlack Systems, Inc.(3) 237,000 1.9%
Eugene W. Weaver.......... Senior Vice President-- 1971 to 64 Common Stock:
Administration; Financial date -- --
Vice President, John W. Rollins Class A Common Stock:
& Associates; Vice Chairman and 800,000(4) 6.5
Financial Vice President,
Rollins Jamaica, Ltd.; Financial
Vice President and Director,
Brandywine Sports, Inc.
Melvin L. Joseph.......... Vice President and Director of Auto 1969 to 75 Common Stock:
Racing, Dover Down International date -- --
Speedway, Inc.; President, Class A Common Stock:
Melvin Joseph Construction 362,500 2.9%
Company
Class III (Term Expires
1999)
John W. Rollins........... Chairman of the Board; Chairman of 1967 to 81 Common Stock:
the Board and Chief Executive date -- --
Officer, Rollins Truck Leasing Class A Common Stock:
Corp.(3) 6,000,330(5) 48.8%
Denis McGlynn............. President and Chief Executive 1979 to 51 Common Stock:
Officer date 100 --
Class A Common Stock:
254,500 2.1%
Jeffrey W. Rollins........ Vice President--Operations, 1993 to 32 Common Stock:
Brandywine Center Management, date -- --
L.L.C.(3) Class A Common Stock:
665,500 5.4%
</TABLE>
(Footnotes on next page)
5
<PAGE>
(Footnotes from previous page)
- ------------------
(1) Except as noted, the nominees and other directors have held the positions of
responsibility set out in the above column (but not necessarily their
present titles) for more than five years. In addition to the directorships
listed in the above column, the following individuals also serve on the
board of directors of the following companies: John W. Rollins, Rollins,
Inc., Matlack Systems, Inc., Laidlaw Environmental Services, Inc., RPC, Inc.
and FPA Corp.; Henry B. Tippie, Rollins, Inc., Laidlaw Environmental
Services, Inc. and RPC, Inc.; R. Randall Rollins, SunTrust Banks Inc. and
SunTrust Banks of Georgia; John W. Rollins, Jr., Laidlaw Environmental
Services, Inc. Eugene W. Weaver is an advisor to the Board of Directors,
WSFS Financial Corp. Jeffrey W. Rollins has been Vice President - Operations
for Brandywine Center Management, L.L.C. since 1997. Previously he was Vice
President of the Eastern Region of Rollins Environmental, Inc., a subsidiary
of Laidlaw Environmental Services, Inc. John W. Rollins has been a director
and major stockholder of the Company since 1967 and was appointed to the
newly created position of Chairman of the Board of Directors in 1996.
Rollins Truck Leasing Corp. is engaged in the business of truck leasing and
logistics. Matlack Systems, Inc. provides transportation services. Rollins,
Inc. is a consumer services company engaged in residential and commercial
termite and pest control and security systems. Laidlaw Environmental
Services, Inc. is engaged in the business of industrial waste disposal. RPC,
Inc. is a diversified company engaged in oil and gas field services and boat
manufacturing. WSFS Financial Corp., SunTrust Banks Inc., and SunTrust Banks
of Georgia are all financial institutions. John W. Rollins & Associates and
Tippie Services, Inc. provide management services. Rollins Jamaica, Ltd.,
Brandywine Sports, Inc. and Brandywine Center Management, L.L.C. are
involved in real estate development or management.
(2) All shares are owned directly and of record. Class A Common Stock is
convertible, at any time, on a share-for-share basis into Common Stock at
the option of the holders thereof. As a result, pursuant to Rule 13d of the
Securities Exchange Act of 1934, a stockholder is deemed to have beneficial
ownership of the shares of Common Stock which such stockholder may acquire
upon conversion of the Class A Common Stock. In order to avoid
overstatement, the amount of Common Stock beneficially owned does not take
into account such shares of Common Stock which may be acquired upon
conversion (an amount which is equal to the number of shares of Class A
Common Stock held by a stockholder). The above numbers exclude the following
shares of Common Stock subject to options granted under the Company's 1996
Stock Option Plan which the listed beneficial owner has the right to acquire
beneficial ownership as specified in Rule 13d of the Securities Exchange Act
of 1934: Denis McGlynn, 5,000; Eugene W. Weaver, 2,500; and Melvin L.
Joseph, 2,500.
(3) John W. Rollins is the uncle of R. Randall Rollins and the father of John W.
Rollins, Jr. and Jeffrey W. Rollins.
(4) Does not include 300,000 shares of Class A Common Stock owned by a
partnership over which Mr. Weaver has sole voting power, as to which Mr.
Weaver disclaims any beneficial interest.
(5) Does not include 6,000 shares of Class A Common Stock held by his wife and
4,000 shares of Common Stock held by his wife as Custodian for his minor
children, as to which Mr. Rollins disclaims any beneficial interest.
BOARD OF DIRECTORS AND BOARD COMMITTEES
The Board of Directors held two regularly scheduled meetings and one
special meeting during fiscal year 1997. All members of the Board attended each
meeting.
Audit Committee. The Audit Committee consists of Patrick J. Bagley,
Chairman, and Henry B. Tippie. The Audit Committee held one meeting during the
last fiscal year. The Committee's functions include consulting with the
Company's independent public accountants concerning the scope and results of the
audit, reviewing the evaluation of internal accounting controls and inquiring
into special accounting-related matters.
Executive Committee. The Executive Committee consists of John W. Rollins,
Chairman, Denis McGlynn and Eugene W. Weaver. The Executive Committee held two
meetings during the last fiscal year. The Executive Committee has the power to
exercise all of the powers and authority of the Board of Directors in the
management of the business and affairs of the Company in accordance with the
provisions of the by-laws of the Company.
Compensation and Stock Option Committee. The Compensation and Stock Option
Committee consists of Henry B. Tippie, Chairman, and John W. Rollins. The
Compensation and Stock Option Committee held three meetings during the last
fiscal year. The Committee performs all of the functions of a compensation
committee, such as establishing compensation and benefits for the Company's
directors, officers and employees and administers the Company's outstanding
Stock Option Plans including the granting of options to various employees of the
Company and its subsidiaries.
6
<PAGE>
The Company does not have a nominating committee of the Board of Directors.
DIRECTORS' COMPENSATION
Directors who are not full-time employees of the Company or any of its
subsidiaries are each paid an annual retainer for Board service of $10,000 and
an attendance fee of $1,000 for each Board of Directors or committee meeting
attended.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following report and
the Performance Graph on page 9 shall not be incorporated by reference into any
such filings.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
During fiscal year 1997, the members of the Compensation and Stock Option
Committee of the Board of Directors held primary responsibility for determining
executive compensation levels.
The Company is engaged in a highly competitive industry. As a consequence,
the Company views its ability to attract and retain qualified executives as the
cornerstone of its future success. In order to accomplish this objective, the
Company has endeavored to structure its executive compensation in a fashion that
takes into account the Company's operating performance and the individual
performance of the executive. Of necessity, this analysis is subjective in
nature and not based upon a structured formula. The factors referred to above
are not weighted in an exact fashion.
Pursuant to the above compensation philosophy, the total annual
compensation of executive officers of the Company is made up of one or more of
three elements. The three elements are salary, an annual incentive compensation
package and, in some years, grants of stock options.
The salary of each executive officer is determined by the Compensation and
Stock Option Committee. As previously stated, in making its determinations the
Committee gives consideration to the Company's operating performance for the
prior fiscal year and the individual executive's performance.
The annual incentive compensation package for the executive officers is
developed by the Chief Executive Officer of the Company prior to the end of each
fiscal year. It is based upon a performance formula for the ensuing fiscal year.
That performance formula and incentive package is then reviewed by the Committee
and is either accepted, amended or modified.
Awards under the Company's Stock Option Plans are purely discretionary, are
not based upon any specific formula and may or may not be granted in any given
fiscal year. Grants are made under the Plans and the Plans are administered
pursuant to Rule 16b-3 of the Securities Exchange Act of 1934. When considering
the grant of stock options, the Committee gives consideration to the overall
performance of the Company and the performance of individual employees.
7
<PAGE>
CEO COMPENSATION
The CEO's compensation is determined by the Compensation and Stock Option
Committee. As is the case with respect to the executive officers, the CEO's
compensation is based upon the Company's operating performance and his
individual performance. The CEO's compensation consists of the same three
elements identified above with respect to executive officers: salary; an annual
incentive; and, in some years, grants of stock options. The determination of
salary and the award of stock options, if any, are subjective and not based upon
any specific formula or guidelines. The determination of an annual incentive is
based on the amount by which the Company's pre-tax earnings exceed a target
established by the Committee prior to the beginning of the fiscal year. The
target is revised annually. The CEO is not a member of the Committee and does
not participate in the deliberations of the Committee when his salary or
incentive is determined.
Compensation and
Stock Option Committee
----------------------
Henry B. Tippie - Chairman
John W. Rollins
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than ten percent of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC").
Officers, directors and greater than ten percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based on its review of the copies of such forms received by it, the Company
believes that during its fiscal year ended 1997 all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with except as follows: Timothy R. Horne, Vice President -
Finance, inadvertently filed a late Form 3 upon becoming an executive officer of
the Company and Denis McGlynn inadvertently filed a late Form 4 with regard to
shares he acquired through the exercise of stock options.
8
<PAGE>
COMMON STOCK PERFORMANCE
The following graph reflects a comparison of the cumulative total
shareholder return on the Company's common stock with the S&P Composite 500
Index and an index of peer companies selected by the Company consisting of
companies engaged in one or more of the following businesses: motorsports, horse
racing and gaming. In addition to the Company, the peer group includes Speedway
Motorsports, Inc., Penske Motorsports, Inc., Grand Prix Association of Long
Beach, Penn National Gaming, Inc., Argosy Gaming Company, The Sands Regent,
Showboat, Inc., President Casinos, Inc., Casino America, Inc., Lady Luck Gaming
Corp., Churchill Downs, Inc. and Hollywood Park, Inc. The graph assumes that the
value of the investment in the Company's common stock and each index was 100 at
October 3, 1996 [the Company's initial public offering date] and all
dividends were reinvested. The comparisons in this table are required by the
Securities and Exchange Commission and, therefore, are not intended to forecast
or be necessarily indicative of any future return on the Company's common stock.
In the printed version of this document a graph appears that depicts
the following plot points:
10/03/96 6/30/97
-------- -------
Dover Downs
Entertainment, Inc. 100 107
Peer Group 100 88
S & P 500 100 128
9
<PAGE>
EXECUTIVE COMPENSATION
Shown below is information concerning the annual compensation for services
in all capacities to the Company for the fiscal years ended July 31, 1996 and
June 30, 1997, of those persons who were, at June 30, 1997, (i) the Chief
Executive Officer and (ii) the other most highly compensated executive officers
of the Company whose total annual salary exceeded $100,000 (the "Named
Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ------------------- -------
-------------------------------- RESTRICTED STOCK
NAME OF OTHER ANNUAL STOCK OPTIONS LTIP ALL OTHER
PRINCIPAL SALARY INCENTIVE COMP.(2) AWARDS(3) /SARS PAYOUTS COMPENSATION
POSITION YEAR(1) $ $ $ $ # $ $
- -------------------------- ------- ------- --------- ------------ ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Denis McGlynn ............ 1997 320,833 289,659 -- -- 31,764 -- --
President and CEO 1996 350,000 314,351 -- -- -- -- --
Eugene W. Weaver ......... 1997 91,667 37,958 -- -- 15,000 -- --
Senior Vice President-- 1996 59,584 337,970 -- -- -- -- --
Administration
Robert M. Comollo ........ 1997 114,583 47,447 -- -- 12,000 -- --
Treasurer and Secretary 1996 86,920 337,970 -- -- -- -- --
</TABLE>
- ------------------
(1) In 1997, the Company changed its fiscal year end from July 31 to June 30.
Accordingly, the numbers for 1997 reflect compensation for eleven months.
(2) The only type of Other Annual Compensation for each of the named officers
was in the form of perquisites and was less than the level required for
reporting.
(3) No awards have ever been made.
OPTION AND STOCK APPRECIATION RIGHTS GRANTS IN LAST FISCAL YEAR
The following table sets forth stock options granted in the fiscal year
ending June 30, 1997 to each of the Company's Named Executives. Employees of the
Company and its subsidiaries are eligible for stock option grants based on
individual performance. The Company did not issue any stock appreciation rights.
The table also sets forth the hypothetical gains that would exist for the
options at the end of their eight-year terms, assuming compound rates of stock
appreciation of 0%, 5% and 10%. The actual future value of the options will
depend on the market value of the Company's Common Stock. All option exercise
prices are based on the market price on the grant date.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS(1) OPTION TERM(2)
----------------------------------------------- ---------------------------------------
% OF TOTAL
OPTIONS
GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#) YEAR ($/SH) DATE 0% 5% 10%
- ---------------------------------------- --------- ------------- --------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Denis McGlynn........................... 31,764 28.2% $ 17.00 08/04/04 -- $ 257,823 $ 617,525
Eugene W. Weaver........................ 15,000 13.3% $ 17.00 08/04/04 -- $ 121,752 $ 291,615
Robert M. Comollo....................... 12,000 10.6% $ 17.00 08/04/04 -- $ 97,402 $ 233,292
All employees as a group(3)............. 112,764 100.0% $ 17.00 08/04/04 -- $ 922,447 $ 2,209,402
to to
$ 18.00 11/04/04
</TABLE>
(Footnotes on next page)
10
<PAGE>
(Footnotes from previous page)
(1) Options for the Named Executives were granted on August 5, 1996.
(2) These amounts, based on assumed appreciation rates of 0% and the 5% and 10%
rates prescribed by the Securities and Exchange Commission rules, are not
intended to forecast possible future appreciation, if any, of the Company's
stock price. These numbers do not take into account certain provisions of
options providing for termination of the option following termination of
employment, nontransferability or phased-in vesting.
(3) Based on 97,764 options granted on August 5, 1996 and 15,000 options granted
on November 4, 1996. All options relate to shares of Common Stock and have
an exercise price ranging from $17.00 to $18.00.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table summarizes option exercises during the eleven months
ended June 30, 1997(1) by the Company's Named Executives, and the value of the
options held by such persons as of June 30, 1997. The Company has not granted
and does not have any Stock Appreciation Rights outstanding.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED VALUE OPTIONS AT OPTIONS AT
ON EXERCISE REALIZED FY-END (#) FY-END ($)
NAME(2) (#) ($)(3) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(4)
- ------------------------------ -------------- ------------- ----------------------- -------------------------
<S> <C> <C> <C> <C>
Denis McGlynn................. 112,500 $ 1,782,103 -0- /301,764 -0- /$4,531,773
Eugene W. Weaver.............. 22,500 $ 372,100 -0- / 15,000 -0- /$ 15,000
Robert M. Comollo............. -- -0- -0- / 12,000 -0- /$ 12,000
</TABLE>
- ------------------
(1) In 1997, the Company changed its fiscal year end from July 31 to June 30.
Accordingly, the numbers for 1997 reflect option exercises for eleven
months.
(2) John W. Rollins and Henry B. Tippie did not acquire or have any outstanding
Incentive Stock Options.
(3) Fair market value of underlying security at exercise date less the exercise
price. Shares acquired were shares of Class A Common Stock. Shares of Class
A Common Stock are convertible at any time into shares of Common Stock on a
share-for-share basis at the option of the holders thereof. Class A Common
Stock does not trade on any securities exchange and does not have a readily
ascertainable market value. For purposes of this table, the fair market
value of Common Stock was used.
(4) The value of the Company's Common Stock on June 30, 1997 was $18.00 per
share.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
There were no Long-Term Incentive Plan Awards to the Named Executives
during fiscal year 1997.
BENEFIT PLANS
PENSION PLANS
The Company's Pension Plan is a non-contributory qualified employee defined
benefit plan. All full time employees of the Company are eligible to participate
in the Pension Plan. Up to September 30, 1989, retirement benefits were equal to
the sum of from 1% to 1.5% of an employee's annual cash compensation for each
year of service to age 65. Commencing October 1, 1989 and thereafter, retirement
benefits are equal to the sum of 1.35% of earnings up to covered compensation,
as that term
11
<PAGE>
is defined in the Plan, and 1.7% of earnings above covered compensation. Covered
compensation includes regular salaries or wages, commissions, bonuses, overtime
earnings and short-term disability income protection benefits.
Retirement benefits are not subject to any reduction for Social Security
benefits or other offset amounts. An employee's benefits may be paid in certain
alternative forms having actuarially equivalent values. Retirement benefits are
fully vested after the completion of five years of credited service or, if
earlier, upon reaching age 55. The maximum annual benefit under a qualified
pension plan is currently $120,000 beginning at the Social Security retirement
age (currently age 65).
The Company maintains a non-qualified, defined benefit plan, called the
Excess Benefit Plan, which covers those participants of the Pension Plan whose
benefits are limited by the Internal Revenue Code. A participant in the Excess
Benefit Plan is entitled to a benefit equaling the difference between the amount
of the benefit payable without limitation and the amount of the benefit payable
under the Pension Plan.
Annual pension benefit projections for the Named Executives assume: (a)
that the participant remains in the service of the Company until age 65; (b)
that the participant's earnings continue at the same rate as paid in the fiscal
year ended June 30, 1997 during the remainder of his service until age 65; and
(c) that the Plans continue without substantial modification.
The estimated annual benefit at retirement for each of the following Named
Executives of the Company is: Denis McGlynn, $228,722; Eugene W. Weaver, $7,290;
and Robert M. Comollo, $88,193.
401(K) RETIREMENT PLAN
Since October 1994, the Company has had a deferred compensation plan
pursuant to section 401(k) of the Internal Revenue Code for all its full time
employees who have completed one year of service. Covered employees may
contribute up to 9% of their compensation for each calendar year. In addition,
the Company contributes up to an additional 5% of the first 3% of compensation
contributed by any covered employee to the plan (an employee's maximum
contribution is $9,500 factored for inflation annually). All contributions are
funded currently.
AUDITORS
The Board of Directors has not selected or recommended the name of an
independent public accounting firm for approval or ratification by the
shareholders. The Board of Directors believes that it will be in the best
interests of the shareholders if it is free to make such determination based
upon all factors that are then relevant.
KPMG Peat Marwick LLP served as the Company's auditors for the fiscal year
ended June 30, 1997. A representative of KPMG Peat Marwick LLP will be present
at the Annual Meeting and will have the opportunity to make a statement should
such representative so desire. Such representative also will be available to
answer questions raised orally.
During the fiscal year ended June 30, 1997, KPMG Peat Marwick LLP's
services rendered to the Company consisted of auditing the Company's financial
statements. In this connection, KPMG Peat Marwick LLP performed such tests of
the Company's accounting records and other auditing procedures as were required
by generally accepted auditing standards.
SHAREHOLDER PROPOSALS
Appropriate proposals of eligible shareholders (an eligible shareholder
must be a record or beneficial owner of at least l% or $l,000 in market value of
securities entitled to be voted at the meeting and have held such securities for
at least one year) intended to be presented at the Company's next Annual Meeting
of Shareholders must be received by the Company no later than July 3, 1998 for
inclusion in the Proxy Statement and form of proxy relating to that meeting.
12
<PAGE>
MISCELLANEOUS
ON WRITTEN REQUEST OF ANY RECORD OR BENEFICIAL SHAREHOLDER OF THE COMPANY,
THE COMPANY WILL PROVIDE, FREE OF CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 1997, WHICH INCLUDES THE
FINANCIAL STATEMENTS. REQUESTS FOR A COPY OF FORM 10-K SHOULD BE MADE IN WRITING
AND ADDRESSED TO:
TIMOTHY R. HORNE
VICE PRESIDENT-FINANCE
DOVER DOWNS ENTERTAINMENT, INC.
1131 NORTH DUPONT HIGHWAY
DOVER, DE 19901
THE COMPANY WILL CHARGE REASONABLE OUT-OF-POCKET EXPENSES FOR THE
REPRODUCTION OF EXHIBITS TO FORM 10-K SHOULD A SHAREHOLDER REQUEST COPIES OF
SUCH EXHIBITS.
The Company's Annual Report for the fiscal year ended June 30, 1997 has
been mailed to shareholders under separate cover.
The Board of Directors knows of no business other than the matters set
forth herein which will be presented at the meeting. Inasmuch as matters not
known at this time may come before the meeting, the enclosed proxy confers
discretionary authority with respect to such matters as may properly come before
the meeting and it is the intention of the persons named in the proxy to vote in
accordance with their judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
MICHAEL B. KINNARD,
General Counsel
Dover, Delaware
September 24, 1997
13
<PAGE>
DOVER DOWNS ENTERTAINMENT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, OCTOBER 31, 1997, 9:00 A.M., E.S.T.
The undersigned hereby constitutes and appoints John W. Rollins and Denis
McGlynn, and each of them jointly and severally, proxies with full power of
substitution, to vote all shares of Common Stock and Class A Common Stock which
the undersigned is entitled to vote at the Annual Meeting of Shareholders of the
Company to be held on October 31, 1997 at 9:00 A.M. Eastern Standard Time, First
Floor, 1209 Orange Street, Wilmington, Delaware, or at any adjournment thereof,
on all matters set forth in the Notice of Annual Meeting and Proxy Statement
dated September 24, 1997, as follows:
(MARK ONLY ONE BOX)
1. ELECTION OF DIRECTORS
Nominees: Henry B. Tippie, R. Randall Rollins, and Patrick J. Bagley
/ / VOTE FOR all nominees listed above; except vote withheld from
following nominee (if any):
---------------------------------------------------------------------------
/ / VOTE WITHHELD FROM all nominees.
2. At their discretion, upon such matters as may properly come before the
Annual Meeting or any adjournment thereof.
(OVER)
<PAGE>
(CONTINUED FROM OTHER SIDE)
The undersigned acknowledges receipt of the aforesaid Notice of Annual
Meeting and Proxy Statement, each dated September 24, 1997, grants authority to
any of said proxies, or their substitutes, to act in the absence of others, with
all the powers which the undersigned would possess if personally present at such
meeting, and hereby ratifies and confirms all that said proxies, or their
substitutes, may lawfully do in the undersigned's name, place and stead.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DOVER DOWNS
ENTERTAINMENT, INC. AND THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH YOUR INSTRUCTIONS. IF NO CHOICE IS SPECIFIED BY YOU, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1.
Please sign below, date and return
promptly.
___________________________________
___________________________________
Signature(s) of Shareholder(s)
DATED: October , 1997
Signature(s) should conform to
name(s) and title(s) stenciled
hereon. Executors, administrators,
trustees, guardians and attorneys
should add their title(s) on
signing.
NO POSTAGE IS REQUIRED IF THIS PROXY IS RETURNED IN THE ENCLOSED ENVELOPE AND
MAILED IN THE UNITED STATES.
