<PAGE>
DOVER DOWNS ENTERTAINMENT, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 30, 1998
----------------
TO THE HOLDERS OF COMMON STOCK:
PLEASE TAKE NOTICE that the 1998 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 30, 1998,
at 9:00 A.M. (Eastern Standard Time) for the following purposes:
1. To elect three Class II 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 25, 1998 is attached.
The Board of Directors has fixed the close of business on September 18, 1998
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/Secretary
Dated: Dover, Delaware
September 25, 1998
----------------
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 30, 1998
----------------
The information concerning the enclosed proxy and the matters to be acted
upon at the Annual Meeting of Shareholders to be held on October 30, 1998 (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
September 25, 1998.
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 II 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 18, 1998 consisted
of 11,111,474 shares of Common Stock, par value $.10 per share (the "Common
Stock"), and 24,428,760,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, 1998, 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 and the officers and directors of the Company
as a group (according to information received by the Company) are set forth
below. All numbers have been adjusted to reflect the Company's 2 for 1 stock
split effective September 15, 1998.
2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAMES AND ADDRESSES TITLE OF AND NATURE OF PERCENT OF
OF BENEFICIAL OWNERS CLASS BENEFICIAL OWNERSHIP(1) CLASS
- -------------------- -------- ----------------------- ----------
<S> <C> <C> <C>
John W. Rollins......... Common Stock -- --
One Rollins Plaza Class A Common Stock 11,967,860(2) 49.0%
Wilmington, DE 19803
Henry B. Tippie......... Common Stock --(3) --
P.O. Box 26557 Class A Common Stock 3,150,000 12.9%
Austin, TX 78755
Eugene W. Weaver........ Common Stock -- --
One Rollins Plaza Class A Common Stock 1,560,000(4) 6.4%
Wilmington, DE 19803
Gary W. Rollins......... Common Stock -- --
2170 Piedmont Street, NE Class A Common Stock 2,030,000 8.3%
Atlanta, GA 30301
R. Randall Rollins...... Common Stock -- --
2170 Piedmont Street, NE Class A Common Stock 2,030,000 8.3%
Atlanta, GA 30301
Jeffrey W. Rollins...... Common Stock --(5) --
One Rollins Plaza Class A Common Stock 1,317,500 5.4%
Wilmington, DE 19803
Denis McGlynn........... Common Stock 200 --
1131 North DuPont High-
way Class A Common Stock 509,000 2.1%
Dover, DE 19901
Timothy R. Horne........ Common Stock -- --
1131 North DuPont High-
way Class A Common Stock -- --
Dover, DE 19901
Robert M. Comollo....... Common Stock 2,000 --
1131 North DuPont High-
way Class A Common Stock -- --
Dover, DE 19901
All Directors and Offi-
cers Common Stock 396,958 3.6%
as a Group (13 per-
sons).................. Class A Common Stock 21,733,360 88.9%
</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
Exchange Act: Denis McGlynn, 10,000 shares; Eugene W. Weaver, 5,000
shares; Robert M. Comollo, 4,000; Timothy R. Horne, 5,000; and all
directors and officers as a group, 248,788 shares. The above numbers also
exclude the following shares of Class A Common Stock subject to options
granted under the Company's 1991 Stock Option Plan which the listed
beneficial owner has the right to acquire beneficial ownership as
specified in Rule 13d of the Exchange Act: Denis McGlynn, 180,000 shares;
and all directors and officers as a group, 225,000 shares.
(Footnotes on next page)
3
<PAGE>
(Footnotes from previous page)
(2) Does not include 18,400 shares of Class A Common Stock held by his wife
and 15,200 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 50,000 shares of Common Stock held as Co-Trustee, as to
which Mr. Tippie disclaims any beneficial interest.
(4) Does not include 40,000 shares of Class A Common Stock held by his wife
and 600,000 shares of Class A Common Stock owned by a partnership over
which Mr. Weaver has sole voting power, as to which Mr. Weaver disclaims
beneficial interest in 76.14% of the partnership.
(5) Does not include 900 shares of Class A Common Stock held by his wife and
5,400 shares held by his wife as Custodian for his minor children, as to
which Mr. Rollins disclaims any beneficial interest.
ELECTION OF DIRECTORS
Three individuals are to be elected at the Annual Meeting to serve as Class
II Directors for a term of three years, and until the election and
qualification of their successors. Seven 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.
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, 1998 (according
to information received by the Company), are set forth below. All numbers have
been adjusted to reflect the Company's 2 for 1 stock split effective September
15, 1998. Similar information is also provided for those directors whose terms
expire in future years.
4
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
NAMES OF PRINCIPAL SERVICE AS SHARES OF OUTSTANDING
NOMINEES OCCUPATION(1) DIRECTOR AGE CAPITAL STOCK(2) SHARES
-------- ------------- ------------ --- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Class II (Term Expires
2001)
John W. Rollins, Jr. ... President, Chief Operating 1996 to date 56 Common Stock:
Officer and Director, 900(4) --
Rollins Truck Leasing Corp.; Class A Common
Chairman of the Board, Stock: 474,000 1.9%
Matlack Systems, Inc.(3)
Eugene W. Weaver........ Senior Vice President-- 1971 to date 65 Common Stock:
Administration; Financial -- --
Vice President, John W. Class A Common 6.4%
Rollins & Associates; Vice Stock:
Chairman and Financial Vice 1,560,000(5)
President, Rollins Jamaica,
Ltd.; Vice President and
Director, Brandywine Sports,
Inc.
Melvin L. Joseph........ Vice President and Director 1969 to date 76 Common Stock:
of Auto Racing, Dover Downs -- --
International Speedway, Class A Common 3.0%
Inc.; President, Melvin Stock: 725,000
Joseph Construction Company
<CAPTION>
NAMES OF DIRECTORS WHOSE
TERMS HAVE NOT EXPIRED
- ------------------------
<S> <C> <C> <C> <C> <C>
Class III (Term Expires 1999)
John W. Rollins......... Chairman of the Board; 1967 to date 81 Common Stock:
Chairman of the Board and -- --
Chief Executive Officer, Class A Common 49.0%
Rollins Truck Leasing Stock:
Corp.(3) 11,967,860(6)
Denis McGlynn........... President and Chief 1979 to date 52 Common Stock:
Executive Officer 200 --
Class A Common 2.1%
Stock: 509,000
Jeffrey W. Rollins...... Vice President--Operations, 1993 to date 33 Common Stock:
Brandywine Center --(7) --
Management, L.L.C.(3) Class A Common 5.4%
Stock: 1,317,500
Class I (Term Expires
2000)
Henry B. Tippie......... Vice Chairman of the Board; 1996 to date 71 Common Stock:
Chairman of the Executive --(8) --
Committee and Vice Chairman Class A Common 12.9%
of the Board, Rollins Truck Stock: 3,150,000
Leasing Corp.; Chairman of
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 1996 to date 66 Common Stock:
Chief Executive Officer, -- --
Rollins, Inc.; Chairman of Class A Common 8.3%
the Board and Chief Stock: 2,030,000
Executive Officer, RPC,
Inc.(3)
Patrick J. Bagley....... Vice President--Finance, 1996 to date 51 Common Stock:
Treasurer and Director, 1,000 --
Rollins Truck Leasing Corp.; Class A Common --
Vice President--Finance, Stock:--
Treasurer and Director,
Matlack Systems, Inc.
Christopher R. Pook..... President & Chief Executive 1998 to date 57 Common Stock:
Officer, Grand Prix 390,858(9) 3.5%,
Association of Long Beach, Class A Common
Inc. Stock:-- --
</TABLE>
- --------
(l) 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., Safety-Kleen Corp., RPC,
(Footnotes on next page)
5
<PAGE>
(Footnotes from previous page)
Inc. and FPA Corp.; Henry B. Tippie, Rollins, Inc., Safety-Kleen Corp. and
RPC, Inc.; R. Randall Rollins, SunTrust Banks Inc. and SunTrust Banks of
Georgia; John W. Rollins, Jr., Safety-Kleen Corp.; Eugene W. Weaver, 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., now a
subsidiary of Safety-Kleen Corp. 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. Dover Downs
International Speedway, Inc. and Grand Prix Association of Long Beach, Inc.
are both wholly-owned subsidiaries of the Company. 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. Safety-Kleen Corp. 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, 10,000; Eugene W. Weaver,
5,000; Christopher R. Pook, 219,788; and Melvin L. Joseph, 5,000. The above
numbers also exclude the following shares of Class A Common Stock subject
to options granted under the Company's 1991 Stock Option Plan which the
listed beneficial owner has the right to acquire beneficial ownership as
specified in Rule 13d of the Exchange Act: Denis McGlynn, 180,000 shares
and Melvin L. Joseph, 45,000 shares.
(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 900 shares of Common Stock held by his wife and 1,900
shares of Common Stock held as trustee, as to which Mr. Rollins disclaims
any beneficial interest.
(5) Does not include 40,000 shares of Class A Common Stock held by his wife, as
to which Mr. Weaver disclaims any beneficial interest, and 600,000 shares
of Class A Common Stock owned by a partnership over which Mr. Weaver has
sole voting power, as to which Mr. Weaver disclaims beneficial interest in
76.14% of the partnership.
(6) Does not include 18,400 shares of Class A Common Stock held by his wife and
15,200 shares of Common Stock held by his wife as Custodian for his minor
children, as to which Mr. Rollins disclaims any beneficial interest.
(7) Does not include 900 shares of Class A Common Stock held by his wife and
5,400 shares held by his wife as Custodian for his minor children, as to
which Mr. Rollins disclaims any beneficial interest.
(8) Does not include 50,000 shares of Common Stock held as Co-Trustee, as to
which Mr. Tippie disclaims any beneficial interest.
(9) Does not include 82,914 shares of Common Stock held by his wife, as to
which Mr. Pook disclaims any beneficial interest.
6
<PAGE>
BOARD OF DIRECTORS AND BOARD COMMITTEES
The Board of Directors held four regularly scheduled meetings and one
special meeting during fiscal year 1998. All meetings were attended by at
least eighty percent of the Board.
Audit Committee. The Audit Committee consists of Patrick J. Bagley,
Chairman, and Henry B. Tippie. The Audit Committee held two meetings 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 six
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 five 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.
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 1998, 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.
7
<PAGE>
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.
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 1998 all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with.
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., International Speedway Corporation, Penske
Motorsports, Inc., 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. Grand
Prix Association of Long Beach, Inc., which was in the peer group in last
year's proxy statement, has been omitted due to its acquisition by the
Company, effective July 1, 1998. 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.
COMPARISON OF 21 MONTH CUMULATIVE TOTAL RETURN*
AMONG DOVER DOWNS ENTERTIANMENT, INC., THE S & P 500 INDEX
AND A PEER GROUP
LOGO
*$100 INVESTED ON 10/3/96 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS, FISCAL YEAR ENDING JUNE 30.
<TABLE>
<CAPTION>
YEARS
--------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Dover Downs Entertainment, Inc. .............................. 100 107 187
S&P 500....................................................... 100 128 166
Peer Group.................................................... 100 86 98
</TABLE>
Assumes $100 invested on October 3, 1996
9
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following directors serve on the Company's Compensation and Stock Option
Committee: Henry B. Tippie, Chairman and John W. Rollins. Both Henry B. Tippie
and John W. Rollins are members of the Executive Committees of Rollins Truck
Leasing Corp. and Matlack Systems, Inc. The Executive Committee of each of
these two Companies performs the functions of a Compensation Committee.
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,
June 30, 1997, and June 30, 1998 of those persons who were, at June 30, 1998,
(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
---------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ------------------- -------
RESTRICTED STOCK ALL OTHER
NAME AND OTHER ANNUAL STOCK OPTIONS LTIP COMPEN-
PRINCIPAL SALARY INCENTIVE COMP.(2) AWARDS(3) /SARS(4) PAYOUTS SATION
POSITION YEAR(1) $ $ $ $ # $ $
--------- ------- ------- --------- ------------ ---------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Denis McGlynn........... 1998 350,000 217,087 -- -- -- -- --
President and CEO 1997 320,833 289,659 -- -- 63,528 -- --
1996 350,000 314,351 -- -- -- -- --
Eugene W. Weaver........ 1998 100,000 29,687 -- -- -- -- --
Senior Vice President-- 1997 91,667 37,958 -- -- 30,000 -- --
Administration 1996 59,584 337,970 -- -- -- -- --
Robert M. Comollo....... 1998 125,000 29,687 -- -- -- -- --
Treasurer 1997 114,583 47,447 -- -- 24,000 -- --
1996 86,920 337,970 -- -- -- -- --
Timothy R. Horne........ 1998 100,000 40,821 -- -- -- -- --
Vice President--Finance
and CFO
</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.
(4) All numbers have been adjusted to reflect the Company's 2 for 1 stock
split effective September 15, 1998.
OPTION AND STOCK APPRECIATION RIGHTS GRANTS IN LAST FISCAL YEAR
For fiscal year ending June 30, 1998, the Company did not grant any stock
options or issue any stock appreciation rights to any of the Company's Named
Executives.
10
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table summarizes option exercises during fiscal year 1998 by
the Company's Named Executives, and the value of the options held by such
persons as of June 30, 1998. The Company has not granted and does not have any
Stock Appreciation Rights outstanding.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES ACQUIRED VALUE FY-END (#)(1) FY-END ($)(2)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Denis McGlynn........... -- -0- 190,000 /413,528 $2,740,003 /$5,714,702
Eugene W. Weaver........ -- -0- 5,000 / 25,000 $ 35,000 /$ 175,000
Robert M. Comollo....... -- -0- 4,000 / 20,000 $ 28,000 /$ 140,000
Timothy R. Horne........ -- -0- 5,000 / 25,000 $ 32,500 /$ 162,500
</TABLE>
- --------
(1) All numbers have been adjusted to reflect the Company's 2 for 1 stock
split effective September 15, 1998.
(2) The value of the Company's Common Stock on June 30, 1998 was $31.00 per
share or $15.50 per share on a split adjusted basis.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
There were no Long-Term Incentive Plan Awards to the Named Executives during
fiscal year 1998.
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 is defined in the Plan, and 1.7% of
earnings above covered compensation. Pensionable earnings 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, 1998 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, $172,758; Eugene W. Weaver,
$21,701; Robert M. Comollo, $61,494; and Timothy R. Horne, $84,378.
11
<PAGE>
401(K) RETIREMENT PLAN
The Company has a deferred compensation plan pursuant to section 401(k) of
the Internal Revenue Code for all its full time employees who have completed
ninety (90) days 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 100% of the first $250 of compensation
contributed by any covered employee to the plan. An employee's maximum annual
contribution to the plan is $10,000. 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, 1998. 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, 1998, 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 May 26,
1998 for inclusion in the Proxy Statement and form of proxy relating to that
meeting.
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, 1998, 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.
12
<PAGE>
The Company's Annual Report for the fiscal year ended June 30, 1998 is
included with this mailing.
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/Secretary
Dover, Delaware
September 25, 1998
13
<PAGE>
DOVER DOWNS ENTERTAINMENT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, OCTOBER 30, 1998, 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 30, 1998 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 25, 1998, as follows:
(MARK ONLY ONE BOX)
1. ELECTION OF DIRECTORS
Nominees: John W. Rollins, Jr., Eugene W. Weaver, Melvin L. Joseph
[] 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)
(CONTINUED FROM OTHER SIDE)
<PAGE>
The undersigned acknowledges receipt of the aforesaid Notice of Annual
Meeting and Proxy Statement, each dated September 25, 1998, 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 _____, 1998
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.
