Dear Board Members,
In conjunction with the 2009 Annual Meeting of Stockholders of Dover Motorsports, Inc. ("the Company") which took place on April 29, 2009, we believe it is important for the Board Members to review in greater detail the voting results of the Shareholder Proposal and the re-election of Directors, including Chairman Henry B. Tippie. As per our discussion at the annual meeting, we reiterate our opposition to the Company's ban of the question and answer segment on its quarterly conference calls and continue to believe certain aspects of the Company's executive compensation plan are flawed.
Re-election of Directors
At face value, it appears that the 96% vote "For" the re-election of Henry B. Tippie as Director was an overwhelming show of support for Mr. Tippie. However, this is not the case. If one were to reasonably assume that all insiders (Directors and Officers as a group), Michele Rollins and Gary Rollins voted "For" the re-election of Mr. Tippie, the vote of the non-insiders reflects a much different outcome: 65.2% "Withheld."
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Based upon the above tally, it is obvious that the non-insider vote is a reflection of the displeasure and frustration the outside shareholders feel regarding the direction of the Company under the leadership of Mr. Tippie. The two additional Directors who stood for re-election this year were not immune either. R. Randall Rollins and Patrick J. Bagley each had a significant number of "Withheld" votes cast by outside shareholders, with 28% and 33% votes "Withheld" respectively. To put this year's results in historical perspective, the total number of "Withheld" votes (16,901,289) cast by non-insiders for the three Directors this year alone is far greater than the total number of "Withheld" votes (10,401,834) for Directors in the prior six elections combined.
In fact, the number of "Withheld" votes related to the re-election of Chairman Tippie to the Board of Directors over his past three re-election periods is very striking and speaks to what we believe is a 'no confidence' vote by the outside shareholders.
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Shareholder Proposal
As you are aware, we submitted a Shareholder Proposal that sought to eliminate the Company's Shareholder Rights Agreement, or poison pill. We argued that since Mr. Tippie already had voting control of the Company, the Rights Agreement served no other purpose than to arbitrarily limit the number of shares a current or prospective shareholder could own at 10% of the combined classes of stock. Similar to the results of Mr. Tippie's re-election, the vote of the non-insiders was dramatically different than those of the insiders.
SHAREHOLDER PROPOSAL
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The outside shareholders have clearly and publicly have voiced their position. While not bound by the voting results of the outside shareholders, the Board of Directors should consider the overwhelming response to the Shareholder Proposal and the re-election of Henry B. Tippie when determining the strategic direction of the Company. Clearly, we are not the only shareholders that are very concerned about the direction of Dover Motorsports. Board members that are not responsive to their shareholders have difficulty in claiming their fiduciary obligations are being satisfied.
Elimination of Q&A during Quarterly Conference Calls
Yet another quarterly earnings release and conference call was conducted last week with no question and answer session. As we stressed during the annual meeting, we believe this is a poor, short-sighted decision made by Mr. Tippie and the management team. We believe the question and answer session of quarterly conference calls is an integral part of open communication between companies and shareholders. While we do not know if Dover's Board Members have listened to the Company's conference calls in the past, such communication can serve as a method to receive both positive and negative feedback on performance and strategy. Additionally, it is inconsistent and insulting that sister-company Dover Downs permits question and answer sessions on its calls while Dover Motorsports does not. Legitimate criticism and debate should be met head-on by Board Members. Shareholders deserve more than a silent retreat by Board Members concerning these critical issues.
Change in Control and Non-Compete Agreements
Another point we stressed during the annual meeting was the unusual nature of Mr. Tippie's and other executives' change in control payouts and non-compete agreements especially given the nature of the racing business and the destruction of shareholder value over the past seven years. At the annual meeting, Mr. Tippie mentioned that these arrangements are not unusual; however, both International Speedway and Speedway Motorsports do not have such a plan in place. To set the record straight, we think the Directors should be aware that this arrangement is unusual in the industry. We believe the non-compete agreements are particularly egregious given the Company's inability to secure a Sprint Cup race for the Nashville facility and the Company's significant financial underperformance versus its peers. In the event of a change in control, how are these payments truly justified?
Lastly, we are encouraged at the Company's recent efforts to divest its money-losing operations. We encourage Board Members to stay the course on divesting the Midwest assets.
I attempted to contact Mr. Tippie last week in order to discuss some of these issues. So far, I have not heard from him. Please do not hesitate to contact us if we can be of any assistance. Thank you.
Sincerely,
Mario D. Cibelli
Managing Member