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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting material Pursuant to Rule 14a-11(c) or Rule 14a-12
BALLY TOTAL FITNESS HOLDING CORPORATION
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(Name of Registrant as Specified In Its Charter)
PARDUS EUROPEAN SPECIAL OPPORTUNITIES MASTER FUND L.P., PARDUS CAPITAL
MANAGEMENT L.P., PARDUS CAPITAL MANAGEMENT LLC, KARIM SAMII,
JOSEPH R. THORNTON, CHARLES J. BURDICK, BARRY R. ELSON
AND DON R. KORNSTEIN
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(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:____________
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.:______________________________
3) Filing Party:
4) Date Filed:_______________________________________________
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PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED DECEMBER 5, 2005
PARDUS EUROPEAN SPECIAL OPPORTUNITIES MASTER FUND L.P., PARDUS CAPITAL
MANAGEMENT L.P., PARDUS CAPITAL MANAGEMENT LLC, KARIM SAMII,
JOSEPH R. THORNTON, CHARLES J. BURDICK, BARRY R. ELSON AND DON R. KORNSTEIN
C/O PARDUS CAPITAL MANAGEMENT L.P.
1001 AVENUE OF THE AMERICAS, SUITE 1100
NEW YORK, NY 10018
December [ ], 2005
Dear Fellow Stockholders:
Pardus European Special Opportunities Master Fund L.P. (the "Fund") is
the holder of an aggregate of 5,311,000 shares of common stock, par value $0.01
per share ("Common Stock"), of Bally Total Fitness Holding Corporation, a
Delaware corporation (the "Company" or "Bally"), representing approximately
[14%] of the issued and outstanding shares of Common Stock as of the Record Date
(hereinafter defined). The Fund does not believe that the current board of
directors of the Company is acting in the best interests of the Company's
stockholders and, therefore, the Fund and certain of its affiliates and
associates are seeking your support at the 2005 Annual Meeting of stockholders,
including any adjournments or postponements thereof and any special meeting that
may be called in lieu thereof (the "2005 Annual Meeting"), which is presently
scheduled to be held at [ ] on January 26, 2005 at [ ], to take the following
actions:
(1) To elect Charles J. Burdick, Barry R. Elson and Don R. Kornstein
to serve as Class III directors on the Bally board of directors;
and
(2) To approve and adopt a binding resolution to repeal each
provision or amendment of the By-laws of the Company, if any,
adopted by the board of directors without the approval of the
Company's stockholders subsequent to May 25, 2005 (purportedly
the last date of reported changes) and prior to the approval and
adoption of such resolution at the 2005 Annual Meeting.
The attached Proxy Statement and the enclosed GREEN proxy card are
first being furnished to the stockholders of the company on or about [ ], 2005.
Messrs. Burdick, Elson and Kornstein are each committed to acting in
the best interest of the Company's stockholders and has each consented, if
elected, to serve as a director on Bally's board of directors. We believe that
your voice in the future of Bally can best be expressed through the election of
Messrs. Burdick, Elson and Kornstein and the approval and adoption of the
resolution to repeal each provision or amendment of the By-laws of the Company,
if any, adopted by the board of directors without the approval of the Company's
stockholders subsequent to May 25, 2005 (purportedly the last date of reported
changes) and prior to the approval and adoption of such resolution at the 2005
Annual Meeting. ACCORDINGLY, THE FUND URGES YOU TO CAREFULLY CONSIDER THE
INFORMATION CONTAINED IN THE ATTACHED PROXY STATEMENT AND THEN SUPPORT THE
FUND'S EFFORTS BY SIGNING, DATING AND RETURNING THE ENCLOSED GREEN PROXY CARD
TODAY.
IF YOUR SHARES ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK, BANK
NOMINEE OR OTHER INSTITUTION ON THE RECORD DATE, ONLY IT CAN VOTE SUCH SHARES
AND ONLY UPON RECEIPT OF YOUR SPECIFIC INSTRUCTIONS. ACCORDINGLY, PLEASE VOTE
YOUR SHARES ACCORDING TO THE ENCLOSED VOTING INSTRUCTION FORM OR CONTACT THE
PERSON RESPONSIBLE FOR YOUR ACCOUNT AND INSTRUCT THAT PERSON TO EXECUTE ON YOUR
BEHALF THE GREEN PROXY CARD AS SOON AS POSSIBLE.
IMPORTANT
The election of Messrs. Burdick, Elson and Kornstein requires the
affirmative vote of the holders of a majority of the shares represented in
person or by proxy at the 2005 Annual Meeting and entitled to vote generally in
the election of directors. The approval and adoption of the proposal to repeal
each provision or amendment of the By-laws of the Company, if any, adopted by
the board of directors without the approval of the Company's stockholders
subsequent to May 25, 2005 (purportedly the last date of reported changes) and
prior to the approval and adoption of such proposal at the 2005 Annual Meeting
requires the affirmative vote of the holders of 75% of the shares represented in
person or by proxy at the 2005 Annual meeting and entitled to vote generally in
the election of directors. As a result, your vote is extremely important in
deciding the future of Bally. WE URGE YOU TO MARK, SIGN, DATE AND RETURN THE
ENCLOSED GREEN PROXY CARD TO VOTE (A) "FOR" THE ELECTION OF CHARLES J. BURDICK,
BARRY R. ELSON AND DON R. KORNSTEIN TO CLASS III OF THE COMPANY'S BOARD OF
DIRECTORS, (B) "FOR" THE APPROVAL AND ADOPTION OF THE BY-LAW RESOLUTION TO
REPEAL EACH PROVISION OR AMENDMENT OF THE BY-LAWS OF THE COMPANY, IF ANY,
ADOPTED BY THE BOARD OF DIRECTORS WITHOUT THE APPROVAL OF THE COMPANY'S
STOCKHOLDERS SUBSEQUENT TO MAY 25, 2005 (PURPORTEDLY THE LAST DATE OF REPORTED
CHANGES) AND PRIOR TO THE APPROVAL AND ADOPTION OF SUCH RESOLUTION AT THE 2005
ANNUAL MEETING AND (C) IN THE PROXY HOLDERS' DISCRETION AS TO OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE 2005 ANNUAL MEETING.
WE URGE YOU NOT TO SIGN ANY PROXY CARD SENT TO YOU BY BALLY. IF YOU
HAVE ALREADY DONE SO, YOU MAY REVOKE YOUR PROXY BEFORE IT IS VOTED BY DELIVERING
A LATER-DATED GREEN PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE, OR BY
VOTING IN PERSON AT THE 2005 ANNUAL MEETING, OR BY DELIVERING TO THE CORPORATE
SECRETARY OF BALLY A WRITTEN NOTICE, BEARING A DATE LATER THAN THE DATE OF THE
PROXY, STATING THAT THE PROXY IS REVOKED. YOU SHOULD SEND ANY NOTICE OF
REVOCATION TO THE CORPORATE SECRETARY OF BALLY AT BALLY'S EXECUTIVE OFFICES
LOCATED AT 8700 WEST BRYN MAWR, CHICAGO, ILLINOIS 60631. SEE "QUESTIONS AND
ANSWERS ABOUT THIS PROXY SOLICITATION", "VOTING PROCEDURES" AND "PROXY
PROCEDURES" IN THE PROXY STATEMENT ATTACHED HERETO.
If you have any questions or require any assistance with your vote,
please contact:
[GRAPHIC OMITTED]
[LOGO - D.F. KING & CO., INC.]
48 Wall Street, New York, NY 10005
(212) 269-5550
CALL TOLL FREE: 888-644-6071
OR
BANKS AND BROKERS, CALL COLLECT: 212-269-5550
Only holders of record of Bally's Common Stock as of the close of
business on December 20, 2005 (the "Record Date") are entitled to notice of, and
to attend and to vote at, the 2005 Annual Meeting. According to the proxy
statement of Bally filed with the Securities and Exchange Commission on December
[ ], 2005, as of the Record Date there were [ ] shares of Common Stock issued
and outstanding. Stockholders of record at the close of business on the Record
Date will be entitled to one vote at the 2005 Annual Meeting for each share of
Common Stock held on the Record Date.
SEND THE BALLY BOARD OF DIRECTORS A MESSAGE IT CAN'T IGNORE! PLEASE
VOTE BY COMPLETING AND RETURNING THE ENCLOSED GREEN PROXY CARD TODAY FOR THE
ELECTION OF CHARLES J. BURDICK, BARRY R. ELSON AND DON R. KORNSTEIN AND FOR THE
APPROVAL AND ADOPTION OF THE BY-LAW RESOLUTION TO REPEAL EACH PROVISION OR
AMENDMENT OF THE BY-LAWS OF THE COMPANY, IF ANY, ADOPTED BY THE BOARD OF
DIRECTORS WITHOUT THE APPROVAL OF THE COMPANY'S STOCKHOLDERS SUBSEQUENT TO MAY
25, 2005 (PURPORTEDLY THE LAST DATE OF REPORTED CHANGES) AND PRIOR TO THE
APPROVAL AND ADOPTION OF SUCH RESOLUTION AT THE 2005 ANNUAL MEETING.
Thank you for your support.
PARDUS EUROPEAN SPECIAL
OPPORTUNITIES MASTER FUND L.P.
PARDUS CAPITAL MANAGEMENT L.P.
PARDUS CAPITAL MANAGEMENT LLC
MR. KARIM SAMII
MR. JOSEPH R. THORNTON
MR. CHARLES J. BURDICK
MR. BARRY R. ELSON
MR. DON R. KORNSTEIN
PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED DECEMBER 5, 2005
PROXY STATEMENT
OF
PARDUS EUROPEAN SPECIAL OPPORTUNITIES MASTER FUND L.P., PARDUS CAPITAL
MANAGEMENT L.P., PARDUS CAPITAL MANAGEMENT LLC, KARIM SAMII, JOSEPH R.
THORNTON, CHARLES J. BURDICK, BARRY R. ELSON AND DON R. KORNSTEIN
-------------------------------
2005 ANNUAL MEETING OF STOCKHOLDERS
OF
BALLY TOTAL FITNESS HOLDING CORPORATION
-------------------------------
This proxy statement and the enclosed GREEN proxy card are being
furnished to you, the stockholders of Bally Total Fitness Holding Corporation, a
Delaware corporation (the "Company" or "Bally"), by Pardus European Special
Opportunities Master Fund L.P., a limited partnership formed under the laws of
the Cayman Islands and a stockholder of record of the Company (the "Fund"), and
certain of the Fund's affiliates and associates in connection with the
solicitation of proxies from the Company's stockholders to be used at the 2005
Annual Meeting of the stockholders, including any adjournments or postponements
thereof and any special meeting that may be called in lieu thereof (the "2005
Annual Meeting"). The 2005 Annual Meeting is scheduled to be held at [ ] on
January 26, 2005 at [ ]. The principal executive offices of the Company are
located at 8700 West Bryn Mawr, Chicago, Illinois 60631 (Telephone:
773-380-3000).
This proxy statement and the GREEN proxy card are first being furnished
to the Company's stockholders on or about [ ], 2005. Stockholders who are record
holders of common stock, par value $0.01 per share ("Common Stock"), of the
Company at the close of business on December 20, 2005 (the "Record Date") will
be entitled to vote at the 2005 Annual Meeting. According to the proxy statement
of Bally filed with the Securities and Exchange Commission on December [ ], 2005
("Bally's Proxy Statement"), as of the Record Date there were [ ] shares of
Common Stock issued and outstanding and entitled to vote at the 2005 Annual
Meeting.
This proxy statement and the enclosed GREEN proxy card are being
furnished to the Company's stockholders by the Fund and certain of its
affiliates and associates in connection with the solicitation of proxies for the
following:
(1) To elect Charles J. Burdick, Barry R. Elson and Don R. Kornstein
(the "Pardus Nominees") to serve as Class III directors of the
board of directors of the Company; and
(2) To approve and adopt a binding resolution (the "Proposal") to
repeal each provision or amendment of the By-laws of the Company,
if any, adopted by the board of directors without the approval of
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the Company's stockholders subsequent to May 25, 2005
(purportedly the last date of reported changes) and prior to the
approval and adoption of such resolution at the 2005 Annual
Meeting.
THIS SOLICITATION IS BEING MADE BY THE FUND AND CERTAIN OF ITS
AFFILIATES AND ASSOCIATES AND NOT ON BEHALF OF THE BOARD OF DIRECTORS OR
MANAGEMENT OF THE COMPANY.
The Fund is the holder of 5,311,000 shares of the Company's Common
Stock, representing approximately [14]% of the shares of Common Stock issued and
outstanding as of the Record Date (based on information publicly disclosed by
the Company). The Fund intends to vote all of its shares of Common Stock FOR the
election of the Pardus Nominees and FOR the approval and adoption of a binding
resolution to repeal each provision or amendment of the By-laws of the Company,
if any, adopted by the board of directors without the approval of the Company's
stockholders subsequent to May 25, 2005 (purportedly the last date of reported
changes) and prior to the approval and adoption of such resolution at the 2005
Annual Meeting. One thousand (1,000) of the Fund's shares of Common Stock are
owned of record by the Fund directly in its own name and one thousand (1,000) of
such shares are owned of record by the Fund in the name of Pardus Capital A/C
Pardus European Special Opportunities Master Fund L.P. Pardus Capital Management
L.P., a Delaware limited partnership ("PCM"), in its capacity as the investment
manager of the Fund, is the beneficial owner of all of the shares of Common
Stock held by the Fund. Pardus Capital Management LLC, a Delaware limited
liability company ("PCM LLC"), as the general partner of PCM, and Mr. Karim
Samii, as the sole member of PCM LLC, may be deemed to be the beneficial owners
of the shares of Common Stock held by the Fund; however, PCM LLC and Mr. Samii
disclaim beneficial ownership of such shares. For purposes of this proxy
statement, references to "Pardus" shall include the Fund, PCM, PCM LLC, Mr.
Samii and Mr. Joseph R. Thornton, a portfolio manager of PCM.
The solicitation for the election of the Pardus Nominees and the
approval and adoption of a binding resolution to repeal each provision or
amendment of the By-laws of the Company, if any, adopted by the board of
directors without the approval of the Company's stockholders subsequent to May
25, 2005 (purportedly the last date of reported changes) and prior to the
approval and adoption of such resolution at the 2005 Annual Meeting is being
made by the Fund and certain of its affiliates and associates. Pardus and the
Pardus Nominees will be considered participants in the solicitation under
federal securities laws. Information concerning Pardus and the Pardus Nominees
is provided in this proxy statement under the headings "BACKGROUND OF THE PARDUS
NOMINEES", "OTHER INFORMATION ABOUT THE DIRECTOR NOMINEES AND PARDUS" and
"ADDITIONAL INFORMATION" and in Annex A to this proxy statement. All information
relating to any person other than Pardus is given only to the knowledge of
Pardus.
2
QUESTIONS AND ANSWERS ABOUT THIS PROXY SOLICITATION
WHAT AM I BEING ASKED TO VOTE ON?
You are being asked to vote to elect three independent Class III
directors to the board of directors of the Company, each to serve a term ending
at the annual meeting (or special meeting in lieu thereof) of stockholders for
the year 2008 or until a successor has been duly qualified and elected.
You are also being asked to vote to approve and adopt a binding
resolution to repeal certain provisions of the By-laws of the Company, if any,
which have been adopted by the board of directors without the approval of the
Company's stockholders subsequent to May 25, 2005 (purportedly the last date of
reported changes) and prior to the approval and adoption of the resolution at
the 2005 Annual Meeting.
You may also be asked to vote on any other business that properly comes
before the 2005 Annual Meeting and any adjournment or postponement of the 2005
Annual Meeting.
WHAT IS THE RECOMMENDATION OF THE FUND AND CERTAIN OF ITS AFFILIATES AND
ASSOCIATES WHO ARE PARTICIPANTS IN THIS PROXY SOLICITATION?
The Fund and certain of its affiliates and associates who are
participants in this proxy solicitation believe that it is in the best interest
of the Company's stockholders to elect the Pardus Nominees and approve and adopt
the Proposal to repeal certain provisions of the By-laws of the Company, if any,
which have been adopted by the board of directors without the approval of the
Company's stockholders subsequent to May 25, 2005 (purportedly the last date of
reported changes) and prior to the approval and adoption of the resolution at
the 2005 Annual Meeting. The Fund strongly recommends a vote "FOR" the election
of each Pardus Nominee and "FOR" the approval and adoption of the Proposal.
WHAT DO I NEED TO DO NOW?
This proxy statement contains important information about Pardus and
the Pardus Nominees. We urge you to read this proxy statement carefully,
including its appendices. After carefully reading and considering the
information set forth herein, please vote your shares of Common Stock owned on
the Record Date "FOR" the election of each Pardus Nominee and "FOR" the approval
and adoption of the Proposal, or provide proper voting instructions with respect
to such shares to your broker or other nominee as soon as possible so that your
shares will be represented at the 2005 Annual Meeting.
WHO CAN VOTE?
You are eligible to vote or to execute a proxy only if you owned shares
of Common Stock on December 20, 2005 (the Record Date) for the 2005 Annual
Meeting. Even if you sell your shares of Common Stock after the Record Date, you
will retain the right to execute a proxy in connection with such shares owned as
3
of the Record Date for the 2005 Annual Meeting. It is important that you grant a
proxy regarding shares you held on the Record Date, or vote those shares in
person, even if you no longer own those shares of Common Stock.
Based on information provided in Bally's Proxy Statement, at the close
of business on the Record Date, [ ] shares of the Company's Common Stock were
entitled to vote.
WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS SET FORTH IN THIS PROXY
STATEMENT?
If a quorum is present, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy at the 2005 Annual
Meeting and entitled to vote generally in the election of directors is required
to elect each of the Pardus Nominees.
If a quorum is present, the affirmative vote of the holders of 75% of
the shares represented in person or by proxy at the 2005 Annual meeting and
entitled to vote generally in the election of directors is required to approve
and adopt the binding resolution to repeal each provision or amendment of the
By-laws of the Company, if any, adopted by the board of directors of the Company
without the approval of the Company's stockholders subsequent to May 25, 2005
(purportedly the last date of reported changes) and prior to the approval and
adoption of such resolution at the 2005 Annual Meeting.
We urge you to complete, execute and return the enclosed GREEN proxy
card to assure the representation of your shares at the 2005 Annual Meeting. A
properly executed proxy marked "ABSTAIN" with respect to any matter will not be
voted with respect to such matter, although it will be counted for purposes of
determining whether there is a quorum. Accordingly, an abstention will have the
effect of a negative vote with respect to such matter. If you hold your shares
in "street name" through a broker or other nominee, your broker or nominee will
not be permitted to exercise voting discretion with respect to any of the
contested matters to be acted upon. Thus, if you do not give your broker or
nominee specific instructions, or you do not vote your shares according to the
enclosed voting instruction form, your shares will not be voted on those
matters. Shares represented by such "broker non-votes" will, however, be counted
in determining whether there is a quorum.
WHAT IS A "QUORUM" AND WHY IS IT NECESSARY?
The presence at the 2005 Annual Meeting, in person or by proxy, of the
holders of a majority of the shares of Common Stock issued and outstanding on
December 20, 2005 (the Record Date) will constitute a quorum, permitting the
meeting to conduct its business. According to Bally's Proxy Statement, as of the
Record Date [ ] shares of Common Stock were issued and outstanding and entitled
to vote at the 2005 Annual Meeting. Proxies received but marked "ABSTAIN" and
broker non-votes will be included in the calculation of the number of shares
considered to be present at the 2005 Annual Meeting for purposes of determining
whether or not a quorum is present.
4
HOW MANY VOTES DO I HAVE?
With respect to each matter to be considered at the 2005 Annual
Meeting, each stockholder of the Company will have one vote for each share of
Common Stock held by such stockholder on the Record Date.
HOW WILL MY SHARES BE VOTED?
If you give a proxy on the accompanying GREEN proxy card, your shares
will be voted as you direct. If you submit a GREEN proxy card without
instructions, the Fund's representatives listed on the GREEN proxy card will
vote your shares in favor of each of the proposals described in this proxy
statement. Submitting a GREEN proxy card will also entitle the Fund's
representatives listed on the proxy card to vote your shares in accordance with
their discretion on matters not described in this proxy statement that may arise
at the 2005 Annual Meeting. As of the date of this proxy statement, the Fund
does not know of any such additional matters other than the stockholder proposal
described in the Schedule 14A filed by Liberation Investments, L.P. and
Liberation Investments Ltd. on November 22, 2005, as amended.
Unless the proxy specifies otherwise, it will be presumed to relate to
all shares of Common Stock held of record on the Record Date by the person who
submitted it.
HOW DO I VOTE IN PERSON?
If you owned shares of the Company's Common Stock on the Record Date,
you may attend the 2005 Annual Meeting and vote in person. If you are not the
record holder of your shares, please refer to the discussion following the
question "What if I am not the record holder of my shares?" If you hold your
shares in the name of a bank, broker or other nominee, you will not be able to
vote in person at the 2005 Annual Meeting, unless you have previously specially
requested and obtained a "legal proxy" from your bank, broker or other nominee
and present it at the 2005 Annual Meeting.
HOW DO I VOTE BY PROXY?
You may vote before the 2005 Annual Meeting in one of the following
ways:
(1) Use the toll-free number, if any, shown on your proxy card;
(2) Visit the website, if any, shown on your proxy card to vote via
the Internet; or
(3) Complete, sign, date and return the enclosed GREEN proxy card in
the enclosed postage-paid envelope.
5
WHAT IF I AM NOT THE RECORD HOLDER OF MY SHARES?
If your shares are held in the name of a brokerage firm, bank nominee
or other institution (a "custodian"), only it can give a proxy with respect to
your shares. You may have received either a blank, executed proxy card from your
custodian (which you can complete and send directly to our proxy solicitor, D.F.
King & Co., Inc., 48 Wall Street, New York, NY 10005) or an instruction card
(which you can complete and return to the custodian to direct its voting of your
shares). If your custodian has not sent you either a blank, executed proxy card
or an instruction card, you may contact the custodian directly to provide it
with instructions. If you need assistance, please contact our proxy solicitor,
D.F. King & Co. Inc., toll-free at (888) 644-6071.
CAN I CHANGE MY VOTE?
You may change your proxy instructions at any time prior to the vote at
the 2005 Annual Meeting for shares held directly in your name. You may
accomplish this by completing and submitting a later-dated GREEN proxy card to
our proxy solicitor, D.F. King & Co., Inc. (48 Wall Street, New York, NY 10005),
or by attending the 2005 Annual Meeting and voting in person, or by delivering
to the Corporate Secretary of Bally a written notice, bearing a later-date than
the date of your proxy instructions provided to Bally, stating that your proxy
provided to Bally is revoked. You should send any notice of revocation to the
Corporate Secretary of Bally at Bally's executive offices located at 8700 West
Bryn Mawr, Chicago, Illinois 60631. Attendance at the 2005 Annual Meeting alone
will not cause your previously-granted proxy to be revoked unless you vote in
person. For shares held in "street name," you may accomplish this by submitting
new voting instructions to your broker or nominee or contacting the person
responsible for your account and instructing that person to execute on your
behalf the GREEN proxy card as soon as possible.
WHAT DO I DO IF I RECEIVE A [BLUE] PROXY CARD FROM BALLY?
Proxies on the [blue] proxy card are being solicited by the incumbent
management and board of directors of the Company. If you submit a proxy to us by
signing and returning the enclosed GREEN proxy card, do not sign or return the
[blue] proxy card or follow any voting instructions provided by the incumbent
management and board of directors of the Company unless you intend to change
your vote, because only your latest-dated proxy will be counted at the 2005
Annual Meeting.
If you have already sent a [blue] proxy card to the Company, you may
revoke it and provide your support for our nominees and Proposal by signing,
dating and returning the enclosed GREEN proxy card.
SHOULD I SUBMIT A PROXY IF I PLAN TO ATTEND THE 2005 ANNUAL MEETING?
Whether you plan to attend the 2005 Annual Meeting or not, we urge you
to complete and submit a GREEN proxy card. Returning the enclosed GREEN proxy
card completed will not affect your right to attend the 2005 Annual Meeting and
vote in person.
WHO CAN HELP ANSWER MY QUESTIONS?
If you would like additional copies of this document, or if you would
like to ask any additional questions, you should contact our proxy solicitor:
[GRAPHIC OMITTED]
[LOGO - D.F. KING & CO., INC.]
48 Wall Street, New York, NY 10005
(212) 269-5550
CALL TOLL FREE: 888-644-6071
OR
BANKS AND BROKERS, CALL COLLECT: 212-269-5550
BACKGROUND TO THE SOLICITATION
The Fund has been an investor in the Company since July 11, 2005 and is
the holder of 5,311,000 shares of Common Stock, representing approximately [14%]
of the issued and outstanding Common Stock as of the Record Date. The following
is a chronology of events leading up to this proxy solicitation.
Since the Fund invested in the Company in July 2005 and throughout the
fall of 2005, representatives of Pardus on behalf of the Fund have communicated
with the Company's management and certain members of the Company's board of
directors regarding Pardus' belief that the board has failed to take sufficient
action and should be devoting more time and attention to the pursuit of sound
measures to enhance stockholder value. Pardus has expressed that such measures
are necessary to restore public confidence and support in the Company's
corporate governance and future prospects. To this end, Pardus informally
proposed several candidates with broad, relevant turnaround experience for
election to the board of directors to both fill existing vacancies in the two
classes of directors not up for election at the 2005 Annual Meeting and for the
board of directors to support for election in the class of directors whose term
expires at the 2005 Annual Meeting. Each of the candidates proposed by Pardus
were ultimately interviewed by the Company's management and certain members of
the Company's board of directors. Pardus continued to have discussions in good
faith with Company representatives following these interviews in an effort to
have highly qualified independent candidates appointed to the board to fill
existing vacancies and nominated by the Company's incumbent management and
directors for election at the 2005 Annual Meeting. Despite Pardus' efforts and
discussions with Company representatives, no agreement was reached between
Pardus and the Company with respect to the appointment of Pardus' proposed
candidates to either fill the existing vacancies on the board of directors or
for management to support in the upcoming election of directors at the 2005
Annual Meeting.
Upon hearing news items and speculation in the public marketplace about
the Company having entered into discussions with third parties to consummate a
strategic transaction, including, without limitation, a sale of all or part of
7
the assets or stock of the Company or some other strategic business combination
or capital restructuring transaction, Pardus became increasingly concerned that
the board of directors would authorize the Company to enter into a strategic
transaction either before, or shortly following, the Company's release of its
restated financial statements on November 30, 2005. In our opinion, this concern
was validated following the Company's engagement of J.P. Morgan Securities Inc.
on November 29, 2005 to advise the Company, together with The Blackstone Group,
in exploring strategic alternatives, including potential equity transactions or
the sale of businesses or assets. Pardus is still very concerned that the board
of directors may take decisive action without giving adequate consideration and
deference to a full, fair and open process designed to maximize stockholder
value.
On October 17, 2005, Pardus, on behalf of the Fund, sent a letter to
the board of directors of the Company advising of the Fund's intent to nominate
highly qualified independent candidates for election to the board of directors
of the Company at the 2005 Annual Meeting.
On October 18, 2005, the board of directors unilaterally adopted a
Stockholder Rights Plan with a 15% threshold trigger (the "Poison Pill"),
conveniently one day after Pardus expressed the Fund's intent to nominate a
slate of candidates for election to the board of directors at the 2005 Annual
Meeting.
On October 24, 2005, after having received a letter from the board of
directors dated October 18, 2005 responding to Pardus' October 17th letter and
addressing the process for nominating directors to the board and the adoption of
the Poison Pill, Pardus sent a follow-up letter on behalf of the Fund to the
Company's board of directors expressing the Fund's perception of, and
dissatisfaction with, the nomination process and the board's sluggish actions
and reluctance to interview the Fund's proposed nominees as of the date such
response letter was sent on behalf of the Fund to the board.
On November 9, 2005, representatives of Pardus met by telephone
conference call with representatives of the Company, including Paul A. Toback,
Chief Executive Officer of the Company, and Marc D. Bassewitz, Senior Vice
President, Secretary and General Counsel of the Company, about the Company's
consideration of the candidates informally proposed by Pardus for election to
the board. As a result of the November 9, 2005 discussions, the Company agreed
to follow up with and interview each of the five candidates proposed by Pardus
for election to the Company's board of directors.
On November 15, 2005 and November 16, 2005, representatives of the
Company, including the incumbent members on the nominating committee of the
board of directors, interviewed the five candidates proposed by Pardus for
election to the Company's board of directors.
On November 17, 2005, after further discussions with respect to the
composition of the Company's board of directors between representatives of
Pardus, on the one hand, and representatives of the Company, on the other hand,
failed to result in a mutually acceptable agreement in an effort to avoid a
protracted proxy fight, the Fund delivered a formal notice of nomination for the
2005 Annual Meeting nominating Charles J. Burdick, Barry R. Elson and Don R.
Kornstein for election to the class of directors whose term expires at the 2005
8
Annual Meeting and to present a stockholder proposal for the approval and
adoption of a binding resolution to repeal each provision or amendment of the
By-laws of the Company, if any, adopted by the board of directors without the
approval of the Company's stockholders subsequent to May 25, 2005 (purportedly
the last date of reported changes) and prior to the approval and adoption of
such resolution at the 2005 Annual Meeting. The notice of nomination was
accompanied by a letter addressed to the board of directors of the Company
recommending that the board appoint two additional candidates proposed by the
Fund, David R. Van Valkenburg and Thomas J. Albani, to fill the existing
vacancies in the other classes of directors not up for election at the 2005
Annual Meeting. At the time the formal notice of nomination for the 2005 Annual
Meeting was submitted by the Fund, the Fund was cognizant of the potential
implications a successful nomination of four or more candidates could have on
the Company in light of the change of control provisions set forth in the
Company's credit facility and outstanding senior and subordinated indebtedness.
As a result, the Fund elected to nominate only three highly qualified
independent candidates, the Pardus Nominees, in the formal notice of nomination
for election to the class of directors whose term expires at the 2005 Annual
Meeting.
Each of the Pardus Nominees is committed to acting in the best interest
of the Company's stockholders and has consented, if elected, to serve as a
director on the Company's board. The Fund expects that each of the Pardus
Nominees, if elected, would, subject to his fiduciary duties to all of the
Company's stockholders, bring greater accountability and discipline to the
management of the Company, and restore investor confidence. Each of the Pardus
Nominees has broad, relevant turnaround experience and a vote in favor of each
of the Pardus Nominees will enable the stockholders of Bally to send a clear and
strong message to the board of directors that you agree with Pardus' belief that
change is necessary and Pardus' objectives to implement sound corporate
governance practices for the Company in an effort to maximize stockholder value.
Pardus believes that it is in the best interests of the Company and its
stockholders for the incumbent Class III directors to be replaced as members of
the board of directors of the Company. The reasons supporting this belief
include the following:
o Pardus believes that the incumbent members of the board of
directors of the Company, including the Class III directors, have
not demonstrated a sufficient willingness to challenge, oversee
and direct the Company's management or to hold management
accountable for its actions and inactions.
o Pardus believes that the incumbent members of the board of
directors of the Company, including the Class III directors, do
not fully understand and appreciate the urgency of the issues
facing the Company and the need for significant change in the
manner in which the Company conducts its business.
o In November 2005, the Company amended employment contracts with
certain named executive officers to, among other things,
eliminate an exception from the definition of "Change of Control"
for issuances of equity by the Company. As a result, in the event
the Company engages in a strategic capital restructuring
transaction, any equity issued in connection therewith will not
be carved out from the definition of "Change of Control" under
such employment agreements and, therefore, certain "Change of
Control" payments may be triggered. Pardus does not believe it is
a proper use of Company resources at a time when the board of
directors and management should be focusing on rebuilding and
restoring stockholder value and confidence to provide for such
payments given the likelihood of a capital restructuring or
strategic transaction on the horizon as evidenced by the
Company's retention of financial advisors.
o Pardus believes that the current management and incumbent board
has presided over significant value destruction for the Company's
stockholders. This incumbent team has made a series of
well-publicized missteps, culminating in the release on November
30, 2005 of restated financial statements dating back to fiscal
year 2000, as stockholders have suffered substantial losses.
Consider the Company's stock price as Paul Toback, the current
Chairman and Chief Executive Officer of the Company, has risen
through management's ranks:
9
o March 1998 - Mr. Toback is elevated to Senior Vice
President, Corporate Development. The stock closed at $27.94
per share on March 1, 1998.
o June 2001 - Mr. Toback becomes Chief Operating Officer. The
stock closed at $24.61 per share on June 1, 2001.
o February 2002 - Mr. Toback is elevated to Executive Vice
President. The stock closed at $19.20 per share on February
1, 2002.
o December 2002 - Mr. Toback is elected President and Chief
Executive Officer. The stock closed at $9.08 per share on
December 1, 2002.
o May 2003 - Mr. Toback assumes the Chairmanship of the board
of directors. The stock closed at $6.24 per share on May 1,
2001.
o September 2, 2005 - On the business day BEFORE Pardus filed
its Schedule 13D, after more than SEVEN years of Mr.
Toback's involvement with the management of the Company, the
stock closed at $3.86 per share.
In percentage terms, this represents a stunning loss of more than
86% of the value of the Common Stock as Mr. Toback assumed ever
more management responsibility.
o By contrast, since September 6, the day Pardus filed its Schedule
13D with the United States Securities Exchange Commission, Pardus
has worked publicly and through private discussions with Company
management to encourage the Company to take steps necessary to
10
improve transparency, corporate governance, and operational and
financial performance through December 1, 2005. In connection
with this process, Pardus has also taken steps to nominate three
highly qualified independent candidates for election to the
Company's board of directors at the 2005 Annual Meeting. Pardus
believes that there is a direct correlation between its actions
and the Company's equity market capital INCREASING to $7.72 per
share as of December 1, 2005, a 100% return to stockholders since
Pardus' original Schedule 13D was filed.
o Pardus expects that, if elected to the Company's board, the
Pardus Nominees will work to further enhance stockholder value on
several fronts, including:
o Represent the current stockholder base in reviewing and
assisting the work of J.P. Morgan Securities Inc. and The
Blackstone Group to ensure that, if a sale of the Company or
its assets occurs, the process will be best designed to
result in the highest consideration for all stockholders.
o Review and oversee management's work and assist in
developing a business plan that will provide direction to
and challenge management to enhance the Company's value for
the benefit of all stockholders. Importantly, the Pardus
Nominees would seek to tie management's compensation,
including any equity plan, to the Company's performance and
return to stockholders.
o Provide specific guidance on a number of operational and
financial improvements, such as increasing customer
satisfaction and retention, improving product mix and
profitability, reducing sales force turnover and correcting
their compensation scheme to align it with selling the
Company's most profitable product mixes, rationalizing the
Company's real estate portfolio, and determining the best
course for returning the Company to full financial health
and prosperity, whether through asset sales, debt and equity
financings or other strategic alternatives.
o Work to improve corporate governance on a range of issues.
For example, Pardus believes the stockholders would benefit
from separating the roles of CEO and Chairman, as many
leading public companies have done following the
implementation of Sarbanes Oxley. Further, Pardus believes
that the process undertaken by J.P. Morgan Securities Inc.
and Blackstone should be led and directed by a board
committee comprised solely of independent directors and not
members of the management team.
The Pardus Nominees will, if elected, constitute a minority of the
board of directors, at least until the next meeting of the Company's
stockholders for the election of directors or some other change in the
composition of the board. Accordingly, the Pardus Nominees, even if they act
together, will not be able to adopt any measures proposed by any particular
stockholder, including the Fund, without the support of at least some incumbent
members of the current board of directors. The Pardus Nominees should be
11
expected to articulate and raise their concerns about the Company's business
activities with the all of the members of the board of directors of the Company.
The Fund may, depending on future events, seek to nominate additional directors
to the Company's board of directors in the future.
PROPOSAL 1: ELECTION OF THE PARDUS NOMINEES TO
CLASS III OF THE BOARD OF DIRECTORS
According to publicly available information, three Class III directors
are to be elected to the Company's board of directors at the 2005 Annual
Meeting. The Fund proposes that the Company's stockholders elect Charles J.
Burdick, Barry R. Elson, and Don R. Kornstein as the three Class III directors
of the Company at the 2005 Annual Meeting. Each of the Pardus Nominees, if
elected, would hold office for a term ending at the annual meeting (or special
meeting in lieu thereof) of stockholders for the year 2008 or until a successor
has been duly elected and qualified.
BACKGROUND OF THE PARDUS NOMINEES
The following table sets forth the name, age, present principal
occupation, business and residential address and business experience for the
past five years and certain other information with respect to the Pardus
Nominees. This information has been furnished to the Fund by the Pardus
Nominees.
--------------------------------------------------------------------------------------------------------
NAME, AGE AND BUSINESS AND RESIDENTIAL ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE
LAST FIVE YEARS; PUBLIC COMPANY DIRECTORSHIPS
--------------------------------------------------------------------------------------------------------
CHARLES J. BURDICK (Age 54) Charles J. Burdick is presently a member of the
PCM Advisory Board and a non executive director
Business Address: of Singer & Friedlander, a financial services
group providing its clients with banking, asset
Singer & Friedlander finance, treasury and investment management
21 New Street services. From January 2005 until summer of 2005
London EC2M 4HR he was the Chief Executive Officer of HIT
United Kingdom Entertainment Plc, the leading provider of
pre-school children's entertainment listed on the
Residential Address: London Stock Exchange with a market
capitalization of $1.0 billion. Mr. Burdick
27 Princes Gate Court stepped down from his position as CEO of HIT
London SW7 2QJ Entertainment after providing transition support
United Kingdom to the new management team following the
successful sale of HIT Entertainment in May
2005. From 1996 until 2002, he was the Chief
Financial Officer and then from August 2002 until
July 2004 he was the Chief Executive Officer and
a director of Telewest Communications, the second
largest cable company in the United Kingdom. He
has held a series of financial positions with
Time Warner, US WEST, and MediaOne, specializing
in corporate finance, mergers and acquisitions,
and international treasury. Mr. Burdick received
his M.B.A. from UCLA and B.A. in Economics from
UC Santa Barbara.
12
--------------------------------------------------------------------------------------------------------
NAME, AGE AND BUSINESS AND RESIDENTIAL ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE
LAST FIVE YEARS; PUBLIC COMPANY DIRECTORSHIPS
--------------------------------------------------------------------------------------------------------
BARRY R. ELSON (Age 64) Barry R. Elson is the Acting Chief Executive
Officer and a director of Telewest Global, Inc.,
Business Address: a provider of entertainment and communication
services. Mr. Elson became Chairman and a
c/o Telewest Global director of Telewest in November 2003 and then in
160 Great Portland Street February 2004 he resigned as Chairman, although
London W1 W5 QA not as a director, and was appointed as the
United Kingdom Acting Chief Executive Officer of Telewest
Communications and the Acting Chief Executive
Residential Address: Officer of Telewest Global, Inc. From July 2001
to October 2003, he was the President of Pilot
4245 Merriweather Woods Associates, a management consulting/coaching firm
Alpharetta, GA 30022 specializing in the broadband-telephony-video
industry for Wall Street clients. From November
2000 to June 2001, he was Chief Operating Officer
of Urban Media, a Silicon Valley venture capital
backed building centric CLEC start-up with
nationwide operations. From September 1997 to
November 2000, he was President of Conectiv
Enterprises and Corporate Executive Vice
President of Conectiv, a diversifying $4.2
billion energy company in the middle Atlantic
states. From February 1983 until September 1997,
he was a senior executive with Cox Communications
where he rose through a series of senior line
operating positions to be Executive Vice
President of Operations with company-wide $1.4
billion profit and loss responsibility. Mr.
Elson earned his M.B.A. with distinction from
Cornell University and earned his B.A. with
honors from Dartmouth College.
DON R. KORNSTEIN (Age 53) Don R. Kornstein has been a consultant for the
past five years specializing in strategic,
Business Address: financial and management advisory services.
Since 2002, Mr. Kornstein has been the founder
Alpine Advisors LLC and managing member of Alpine Advisors LLC which
825 Lakeshore Blvd. provides value enhancing strategic, management,
Incline Village, NV 89451 operational and financial consulting services to
a wide range of companies with varying needs.
Residential Address: From 2000 until 2001, in his capacity as a
consultant, Mr. Kornstein served as the interim
825 Lakeshore Blvd. Chief Operating Officer to First World
Incline Village, NV 89451 Communications, Inc. where he was brought in by
Texas Pacific Group to restructure and stabilize
three telecom and internet businesses in
anticipation of a sale, which was successfully
completed within 12 months. From 1994 until
2000, Mr. Kornstein served as the Chief Executive
13
--------------------------------------------------------------------------------------------------------
NAME, AGE AND BUSINESS AND RESIDENTIAL ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT DURING THE
LAST FIVE YEARS; PUBLIC COMPANY DIRECTORSHIPS
--------------------------------------------------------------------------------------------------------
Officer, President and a director of Jackpot
Enterprises, Inc., an NYSE listed company engaged
in the gaming industry through the operation of
over 5000 gaming devices in a variety of retail
establishments and casinos. From 1977 until
1994, Mr. Kornstein was an investment banker with
Bear, Stearns & Co. Inc. At the time of his
departure in 1994 from Bear, Stearns & Co., Inc.,
he was a Senior Managing Director, the Group Head
of the Gaming & Leisure Group and a member of the
Investment Banking Commitment Committee. From
2003 until 2005, Mr. Kornstein was a member of
the board of directors of Shuffle Master, Inc.
(NASDAQ) where he was a member of the Audit,
Compensation and Governance Committees. From
1995 until 2003 he was a member of the board of
directors of Varsity Brands, Inc. (AMEX) where he
served as the Chairman of the Compensation
Committee, past Chairman of the Audit Committee
and the Chairman of the Exploratory and
Negotiating Committee where he had primary
responsibility for successfully reviewing,
evaluating and negotiating strategic alternatives
on behalf of the board. Mr. Kornstein earned his
M.B.A. in finance and accounting from Columbia
University Graduate School of Business, attended
the Stanford Law School's Directors' College, and
earned his B.A. with honors in Economics from the
University of Pennsylvania.
None of the Pardus Nominees has carried on an occupation or employment,
during the past five years, with the Company or any corporation or organization
which is or was a parent, subsidiary or other affiliate of the Company, and none
of the Pardus Nominees has ever served on the board of directors of the Company.
No family relationships exist between any Pardus Nominee and any director or
executive officer of the Company.
Other than as set forth on Annex A, none of the Pardus Nominees owns
beneficially, directly or indirectly, or of record but not beneficially, any
securities of the Company, or any parent or subsidiary of the Company, nor has
any Pardus Nominee purchased or sold any securities of the Company within the
last two years.
WE STRONGLY URGE YOU TO VOTE "FOR" THE ELECTION OF CHARLES J. BURDICK, BARRY R.
ELSON, AND DON R. KORNSTEIN BY SIGNING, DATING AND RETURNING THE ENCLOSED GREEN
PROXY CARD IN THE POSTAGE PAID ENVELOPE PROVIDED TO YOU WITH THIS PROXY
STATEMENT. IF YOU HAVE SIGNED THE GREEN PROXY CARD AND NO MARKING IS MADE, YOU
14
WILL BE DEEMED TO HAVE GIVEN A DIRECTION TO VOTE ALL THE SHARES REPRESENTED BY
THE GREEN PROXY CARD "FOR" THE ELECTION OF ALL NOMINEES NAMED ON THE GREEN PROXY
CARD.
OTHER INFORMATION ABOUT THE DIRECTOR NOMINEES AND PARDUS
The Pardus Nominees stand committed to pursuing and implementing
strategies for enhancing stockholder value and restoring public confidence and
support in the Company. However, there can be no assurance that the actions the
Pardus Nominees intend to take will be implemented if they are elected or that
the election of the Pardus Nominees will improve the Company's business,
prospects or otherwise enhance stockholder value. Your vote to elect the Pardus
Nominees does not constitute a vote in favor of any value enhancing plans of
Pardus for the Company. Your vote to elect the Pardus Nominees will have the
legal effect of replacing two incumbent directors and filling one existing
vacancy on the Company's board in the class of directors whose term expires at
the 2005 Annual Meeting with the Pardus Nominees. Neither Pardus nor, to the
knowledge of Pardus, any other person on behalf of Pardus has made or undertaken
any analysis or reports as to whether stockholder value will be maximized as a
result of the solicitation described in this proxy statement or obtained reports
from consultants or other outside parties as to whether the proposals presented
herein would have an effect on stockholder value. There can be no assurance that
stockholder value will be maximized as a result of this solicitation or the
election of the Pardus Nominees.
According to the Company's public filings, if elected as a director of
the Company, each of the Pardus Nominees would receive an annual retainer of
$30,000 for board membership and an additional stipend for service on committees
of the board of directors of $1,000 per year for committee members, as well as
fees of $2,000 per board meeting and $1,000 for attendance at any committee
meeting. The chairman of a committee receives an additional annual stipend of
$7,500 and the chairman of the audit committee receives an additional annual
stipend of $25,000. In addition, pursuant to the Company's 1996 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"), each non-employee director
of the Company is granted an option to purchase 5,000 shares of Common Stock
upon the commencement of service on the board of directors, with another option
to purchase 5,000 shares of Common Stock granted on the second anniversary
thereof. Additional grants of options may be made from time to time pursuant to
the Directors' Plan. Options under the Directors' Plan are generally granted
with an exercise price equal to the fair market value of the Common Stock at the
date of grant. Option grants under the Directors' Plan become exercisable in
three equal annual installments commencing one year from the date of grant and
have a 10-year term. The Pardus Nominees, if elected, will be indemnified for
service as directors of the Company to the same extent indemnification is
provided to the current directors of the Company under the Company's Restated
Certificate of Incorporation and By-laws. In addition, subject to stockholder
approval at the 2005 Annual Meeting of an equity compensation plan, if elected
as a director of the Company, each of the Pardus Nominees would receive for
15
fiscal years ending after December 31, 2005 an annual grant of $30,000 of equity
compensation in the form of restricted stock and/or options and a grant of
$20,000 of restricted stock in 2006 and 2007. The Fund also believes that upon
election, the Pardus Nominees will be covered by the Company's officer and
director liability insurance. The Fund disclaims any responsibility for the
accuracy of the foregoing information extracted from the Company's public
filings.
The Pardus Nominees will not receive any compensation from Pardus to
serve as a nominee for election or as a director, if elected, of the Company.
The Fund has agreed to indemnify the Pardus Nominees against losses incurred in
connection with their service as nominees for election as directors of the
Company and in connection with the solicitation of proxies in respect thereof.
The Fund has also agreed to reimburse the Pardus Nominees for out-of-pocket
expenses incurred in their capacity as nominees, including, without limitation,
reimbursement for reasonable travel expenses. Each Pardus Nominee has executed a
written consent agreeing to be a nominee for election as a director of the
Company and to serve as a director if so elected.
Other than as set forth herein (including in Annex A hereto), none of
Pardus, the Pardus Nominees or any of their respective associates, has any
arrangements or understandings with any person or persons with respect to any
future employment by the Company or its affiliates or with respect to any future
transactions to which the Company or any of its affiliates will or may be a
party.
Other than as described herein (including in Annex A hereto), there are
no arrangements or understandings between the Pardus Nominees and any other
party pursuant to which any such nominee was or is to be selected as a director
or nominee.
There are no material proceedings in which the Pardus Nominees or any
of their associates is a party adverse to the Company or any of its
subsidiaries, or material proceedings in which such nominee or any such
associate has a material interest adverse to the Company or any of its
subsidiaries.
None of the Pardus Nominees, their immediate family members, any
corporation or organization of which the Pardus Nominee is an executive officer
or partner or is, directly or indirectly, the beneficial owner of ten percent or
more of any class of equity securities, or any trust or other estate in which
any Pardus Nominee has a substantial beneficial interest or serves as a trustee
or in a similar capacity, has been indebted to the Company or its subsidiaries,
at any time since the beginning of the Company's last fiscal year, in an amount
in excess of $60,000.
Neither the Pardus Nominees nor any of their associates has received
any cash compensation, cash bonuses, deferred compensation, compensation
pursuant to plans, or other compensation, from, or in respect of, services
rendered on behalf of the Company.
During the last five years, the Pardus Nominees were not involved in
any of the events described in Item 401(f) of Regulation S-K and that are
material to an evaluation of the ability or integrity of any such nominee to
become a director of the Company.
None of the relationships regarding the Pardus Nominees described under
Item 404(b) of Regulation S-K exists or has existed during the Company's last
fiscal year.
16
The Fund does not expect that the Pardus Nominees will be unable to
stand for election, but, in the event that such persons are unable to serve or
for good cause will not serve, the shares represented by the enclosed GREEN
proxy card will be voted for substitute nominees. In addition, the Fund reserves
the right to nominate substitute persons if the Company makes or announces any
changes to its By-laws or takes or announces any other action that has, or if
consummated would have, the effect of disqualifying the Pardus Nominees. In any
such case, shares of Common Stock represented by the enclosed GREEN proxy card
will be voted for such substitute nominees. The Fund reserves the right to
nominate additional persons if the Company increases the size of the board of
directors above its existing size or increases the number of directors whose
terms expire at the 2005 Annual Meeting. Additional nominations made pursuant to
the preceding sentence are without prejudice to the position of the Fund that
any attempt to increase the size of the current board of directors or to
reconstitute or reconfigure the classes on which the current directors serve may
constitute an unlawful manipulation of the Company's corporate machinery.
YOU ARE URGED TO VOTE FOR THE ELECTION OF EACH OF THE PARDUS
NOMINEES ON THE ENCLOSED GREEN PROXY CARD.
PROPOAL 2: THE PROPOSAL TO REPEAL CERTAIN PROVISIONS
OF THE BALLY BY-LAWS
The Fund and certain of its affiliates and associates are soliciting
proxies to take the following action at the 2005 Annual Meeting:
Proposal: To present a resolution for approval and adoption by
the stockholders of the Company to repeal each
provision or amendment of the By-Laws of the Company,
if any, adopted by the board of directors without the
approval of the Company's stockholders subsequent to
May 25, 2005 (purportedly the last date of the
reported changes) and prior to the adoption of the
resolution at the 2005 Annual Meeting. Based on
publicly available information, no amendments to the
By-laws after May 25, 2005 have been publicly
disclosed. The text of the resolution is set forth on
Annex B attached hereto.
Purpose: The proposal is being brought before the 2005 Annual
Meeting pursuant to Section 109 of the Delaware
General Corporation Law, which empowers stockholders
to adopt, amend or repeal bylaws. The Proposal is
intended to deter the current members of the board of
directors from amending the Company's By-laws in a
manner that would create obstacles to the election of
the Pardus Nominees who the Fund believes will act in
the best interests of all of the Company's
stockholders.
17
The adoption of this Proposal 2 could result in the repeal of certain
provisions of the Company's By-laws which may be in the best interest of Company
stockholders. In Pardus' view, however, such a possibility is unlikely because
Pardus believes that the Company's incumbent board of directors has failed to
act in the best interest of the Company's stockholders with respect to the
operation of the business. If the Company's incumbent board of directors adopts
any material amendments to the Company's By-laws that would be subject to repeal
under this Proposal 2 and such amendments are made available to Pardus or the
general public, Pardus will provide you with additional materials regarding such
amendments.
The accompanying GREEN proxy card will be voted in accordance with your
instruction on such card. You may vote for or vote against, or abstain from
voting on, Proposal 2 described above by marking the proper box on the GREEN
proxy card.
YOU ARE URGED TO VOTE "FOR" THE APPROVAL AND ADOPTION OF THE RESOLUTION TO
REPEAL EACH PROVISION OR AMENDMENT OF THE BY-LAWS OF THE COMPANY, IF ANY,
ADOPTED BY THE BOARD OF DIRECTORS WITHOUT THE APPROVAL OF THE COMPANY'S
STOCKHOLDERS SUBSEQUENT TO MAY 25, 2005 (PURPORTEDLY THE LAST DATE OF REPORTED
CHANGES) AND PRIOR TO THE APPROVAL AND ADOPTION OF SUCH RESOLUTION AT THE 2005
ANNUAL MEETING ON THE ENCLOSED GREEN PROXY CARD.
OTHER MATTERS (1)
Except for the stockholder proposals described in the Schedule 14A
filed by Liberation Investments, L.P. and Liberation Investments Ltd. on
November 22, 2005, as amended, the participants of the solicitation of proxies
described in this proxy statement know of no other business to be presented at
the 2005 Annual Meeting. If any other matters should properly come before the
2005 Annual Meeting, it is intended that the persons named on the enclosed GREEN
proxy card will vote that proxy on such other matters in accordance with such
persons' sole discretion. Other than the proposals described in the Schedule 14A
filed by Liberation Investments, L.P. and Liberation Investments Ltd. on
November 22, 2005, as amended, the participants of the solicitation of proxies
described in this proxy statement will not use such discretionary authority to
vote the proxies for any matters that any of the participants know of a
reasonable time before the 2005 Annual Meeting.
VOTING PROCEDURES
According to Bally's Proxy Statement, the voting procedures are as set
forth below.
------------
(1) Note to Draft: Proposals to be presented by Bally to be added to this
proxy statement and the GREEN proxy card following the filing of Bally's
Proxy Statement.
18
The presence at the 2005 Annual Meeting, in person or by proxy, of the
holders of a majority of the shares of Common Stock issued and outstanding on
December 20, 2005 (the Record Date) will constitute a quorum, permitting the
meeting to conduct its business. Stockholders of record at the close of business
on the Record Date will be entitled to one vote at the 2005 Annual Meeting for
each share of Common Stock held on the Record Date. Abstentions and broker
non-votes are considered to be shares present for the purpose of determining
whether a quorum exists. A broker non-vote occurs when a nominee holding shares
for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that item and
has not received voting instructions from the beneficial owner. If you hold your
shares in "street name" through a broker or other nominee, your broker or
nominee will not be permitted to exercise voting discretion with respect to any
of the contested matters to be acted upon. Thus, if you do not give your broker
or nominee specific instructions, or you do not vote your shares according to
the enclosed voting instruction form, your shares will not be voted on those
matters. A properly executed proxy marked "ABSTAIN" with respect to any matter
will not be voted with respect to such matter. Accordingly, an abstention will
have the effect of a negative vote with respect to such matter.
If a quorum is present, directors shall be elected by the affirmative
vote of the holders of a majority of the shares represented in person or by
proxy at the 2005 Annual Meeting and entitled to vote generally in the election
of directors. Votes may be cast in favor of or withheld with respect to each
Pardus Nominee.
If a quorum is present, the affirmative vote of the holders of 75% of
the shares represented in person or by proxy at the 2005 Annual meeting and
entitled to vote generally in the election of directors is required to approve
and adopt the binding resolution to repeal each provision or amendment of the
By-laws of the Company, if any, adopted by the board of directors of the Company
without the approval of the Company's stockholders subsequent to May 25, 2005
(purportedly the last date of reported changes) and prior to the approval and
adoption of such resolution at the 2005 Annual Meeting.
For more details regarding such procedures and the related matters
please refer to Bally's Proxy Statement.
WHETHER OR NOT YOU ARE ABLE TO ATTEND THE 2005 ANNUAL MEETING, YOU ARE URGED TO
COMPLETE THE ACCOMPANYING GREEN PROXY CARD AND RETURN IT IN THE ENCLOSED
SELF-ADDRESSED, PREPAID ENVELOPE. ALL VALID PROXIES RECEIVED PRIOR TO THE
MEETING WILL BE VOTED. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED (A)
"FOR" THE ELECTION OF CHARLES J. BURDICK, BARRY R. ELSON AND DON R. KORNSTEIN TO
CLASS III OF THE COMPANY'S BOARD OF DIRECTORS, (B) "FOR" THE APPROVAL AND
ADOPTION OF THE BY-LAW RESOLUTION TO REPEAL EACH PROVISION OR AMENDMENT OF THE
BY-LAWS OF THE COMPANY, IF ANY, ADOPTED BY THE BOARD OF DIRECTORS WITHOUT THE
APPROVAL OF THE COMPANY'S STOCKHOLDERS SUBSEQUENT TO MAY 25, 2005 (PURPORTEDLY
19
THE LAST DATE OF REPORTED CHANGES) AND PRIOR TO THE APPROVAL AND ADOPTION OF
SUCH RESOLUTION AT THE 2005 ANNUAL MEETING AND (C) IN THE PROXY HOLDERS'
DISCRETION AS TO OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE 2005 ANNUAL
MEETING.
If you have any questions or require any additional information
concerning this proxy statement, please contact our proxy solicitor, D.F. King &
Co., Inc., at the address or telephone number set forth below.
[GRAPHIC OMITTED]
[LOGO - D.F. KING & CO., INC.]
48 Wall Street, New York, NY 10005
(212) 269-5550
CALL TOLL FREE: 888-644-6071
OR
BANKS AND BROKERS, CALL COLLECT: 212-269-5550
PROXY PROCEDURES
IN ORDER FOR YOUR VIEWS TO BE REPRESENTED AT THE 2005 ANNUAL MEETING,
PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING GREEN PROXY CARD IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE.
The accompanying GREEN proxy card will be voted at the 2005 Annual
Meeting in accordance with your instructions on such card.
REVOCATION OF PROXIES
You may change your proxy instructions at any time prior to the vote at
the 2005 Annual Meeting for shares held directly in your name. You may
accomplish this by completing and submitting a later-dated GREEN proxy card to
our proxy solicitor, D.F. King & Co., Inc. (48 Wall Street, New York, NY 10005),
or by attending the 2005 Annual Meeting and voting in person, or by delivering
to the Corporate Secretary of Bally a written notice, bearing a later date than
the date of your proxy instructions provided to Bally, stating that your proxy
provided to Bally is revoked. You should send any notice of revocation to the
Corporate Secretary of Bally at Bally's executive offices located at 8700 West
Bryn Mawr, Chicago, Illinois 60631. Attendance at the 2005 Annual Meeting alone
will not cause your previously-granted proxy to be revoked unless you vote in
person. For more details regarding such procedures and the related matters
please refer to Bally's Proxy Statement. If your shares are held in "street
name," you must either vote your shares according to the enclosed voting
instruction form or contact your broker or other nominee and follow the
directions provided to you in order to change your vote.
20
Only holders of record as of the close of business on the Record Date
will be entitled to vote. If you were a stockholder of the Company on the Record
Date, you will retain your voting rights at the 2005 Annual Meeting even if you
sell such shares after the Record Date. Accordingly, it is important that you
vote the shares held by you on the Record Date, or grant a proxy to vote such
shares on the accompanying GREEN proxy card, even if you sell such shares after
the Record Date.
DISSENTERS' RIGHT OF APPRAISAL
Stockholders do not have appraisal or similar rights of dissenters
under Delaware law with respect to the matters described in this proxy
statement.
SOLICITATION OF PROXIES
In connection with the solicitation of proxies by the Fund and certain
of its affiliates and associates for use at the 2005 Annual Meeting, proxies may
be solicited by mail, facsimile, telephone, telegraph, electronic mail, in
person and by advertisements. The Pardus Nominees may make solicitations of
proxies but will not receive compensation for acting as nominees. Solicitations
may be made by certain directors, officers, members and employees of the Fund,
PCM or PCM LLC, none of whom will receive additional compensation for such
solicitation.
None of the Pardus Nominees has individually retained any person to
provide proxy solicitation or advisory services in connection with the
solicitation. The Fund has retained D.F. King & Co., Inc. for solicitation and
advisory services in connection with the solicitation, for which D.F. King &
Co., Inc. has received a fee of $10,000 (creditable toward the final fee in an
amount not to exceed $105,000), together with reimbursement for its reasonable
out-of-pocket expenses, and will be indemnified against certain liabilities and
expenses. D.F. King & Co., Inc. will solicit proxies from individuals, brokers,
banks, bank nominees and other institutional holders. The Fund will request
banks, brokerage houses and other custodians, nominees and fiduciaries to
forward all solicitation materials to the beneficial owners of the shares of
Common Stock they hold of record. The Fund will reimburse these record holders
for their reasonable out-of-pocket expenses in so doing. It is anticipated that
D.F. King & Co., Inc. will employ approximately 50 persons to solicit the
Company's stockholders for the Annual Meeting.
The entire expense of soliciting proxies is being borne by the Fund.
The Fund does not currently intend to seek reimbursement of the costs of this
solicitation from the Company. The costs of this solicitation of proxies, and
other costs specifically related to this solicitation, are currently estimated
to be approximately $300,000. The Fund estimates that through the date hereof,
its total expenditures in connection with this solicitation are approximately
$[150,000].
21
ADDITIONAL INFORMATION
The information concerning the Company contained in this proxy
statement and the Annexes attached hereto has been taken from, or is based upon,
publicly available information. To date, the participants of the solicitation of
proxies described in this proxy statement have not had access to the books and
records of the Company. Although the participants of the solicitation of proxies
described in this proxy statement do not have any information that would
indicate that any information contained in this proxy statement concerning the
Company is inaccurate or incomplete, the participants do not take any
responsibility for the accuracy or completeness of such information.
Please refer to Bally's proxy statement and annual report for certain
information and disclosure required by applicable law. This information and
disclosure includes, among other things, securities of Bally held by Bally's
directors, nominees, management and 5% stockholders, certain biographical
information on the Company's directors and executive officers, information
concerning executive compensation, an analysis of cumulative total returns on an
investment in shares of Common Stock during the past five years and procedures
for submitting proposals for inclusion in the Company's proxy statement at the
next annual meeting. Information concerning the date by which proposals of
security holders intended to be presented at the next annual meeting of the
Company's stockholders must be received by the Company for inclusion in the
Company's proxy statement and form of proxy for that meeting is also contained
in Bally's Proxy Statement. This information is contained in Bally's public
filings and Bally stockholders should refer to Bally's Proxy Statement and
public filings in order to review this disclosure. The participants of the
solicitation of proxies described in this proxy statement take no responsibility
for the accuracy or completeness of such information.
December [__], 2005
PARDUS EUROPEAN SPECIAL OPPORTUNITIES
MASTER FUND L.P.
PARDUS CAPITAL MANAGEMENT L.P.
PARDUS CAPITAL MANAGEMENT LLC
MR. KARIM SAMII
MR. JOSEPH R. THORNTON
MR. CHARLES J. BURDICK
MR. BARRY R. ELSON
MR. DON R. KORNSTEIN
22
ANNEX A
INFORMATION CONCERNING CERTAIN PARTICIPANTS
Pardus and the Pardus Nominees are deemed to be "participants" in the
solicitation of proxies from the Company's stockholders to vote in favor of the
election of the Pardus Nominees to serve in Class III on the Company's board of
directors and the approval of the Proposal described in this proxy statement to
repeal each provision or amendment of the By-laws of the Company, if any,
adopted by the board of directors without the approval of the Company's
stockholders subsequent to May 25, 2005 (purportedly the last date of reported
changes) and prior to the approval and adoption of such resolution at the 2005
Annual Meeting. The business address of each of the Fund, PCM, PCM LLC, Mr.
Karim Samii, and Mr. Jospeh R. Thornton, and the record address of the Fund as
an owner of record of the Company, is 1001 Avenue of the Americas, Suite 1100,
New York, New York 10018.
PCM serves as the investment manager of the Fund and possesses sole
power to vote and direct the disposition of all shares of Common Stock held by
the Fund. PCM, through one or more funds and/or accounts managed by it and/or
its affiliates, is engaged in the investment in property of all kinds, including
but not limited to capital stock, depository receipts, investment companies,
mutual funds, subscriptions, warrants, bonds, notes, debentures, options and
other securities and instruments of various kind and nature. PCM LLC is the
general partner of PCM, and Mr. Karim Samii is the sole member of PCM LLC and
the President of PCM. Mr. Joseph R. Thornton is a portfolio manager of PCM.
The Pardus Nominees do not beneficially own any securities of the
Company and the Pardus Nominees do not have any personal ownership interest,
direct or indirect, in any securities of the Company. Charles J. Burdick
currently serves on the PCM Advisory Board which advises PCM and its affiliates
from time to time with respect to investment strategies, assessing business
viability, sourcing transactions and valuing potential investments. The PCM
Advisory Board members do not have any oversight responsibility or discretion
over the investments made by or on behalf of PCM and its affiliates and the PCM
Advisory Board members do not (except to the extent publicly disclosed by the
Fund) have any knowledge of the investments held by PCM and its affiliates from
time to time. Mr. Burdick does not receive and is not entitled to any
compensation or remuneration for serving on the PCM Advisory Board from the Fund
or any of its affiliates. The PCM Advisory Board members have the ability to
invest up to an aggregate of $10,000,000 in the Fund and certain of its
affiliates. Mr. Burdick does not have any investment interest in the Fund or any
of its affiliates.
The Pardus Nominees may be deemed to have an interest in their
nominations for election to the board of directors by virtue of compensation the
Pardus Nominees will receive from the Company as directors, if elected to the
board of directors.
Annex A-1
During the past ten years, neither any member of Pardus nor any Pardus
Nominee has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
The direct and indirect security holdings of Pardus are as follows: the
Fund is the direct holder of 5,311,000 shares of Common Stock (including 1,000
shares of Common Stock owned of record by Pardus directly in its own name and
1,000 shares of Common Stock owned of record by the Fund in the name of Pardus
Capital A/C Pardus European Special Opportunities Master Fund L.P.) and
$10,500,000 principal amount (the "Debt") of the Company's 9 7/8% Senior
Subordinated Notes due 2007 (the "Notes"); PCM, in its capacity as investment
manager of Pardus, has sole voting and dispositive power with respect to all of
the shares of Common Stock and Debt held by the Fund; PCM LLC, as the general
partner of PCM, and Mr. Karim Samii, as the sole member of PCM LLC, may be
deemed to be the beneficial owners of all of the shares of Common Stock and Debt
held by Fund; however, PCM LLC and Mr. Samii disclaim beneficial ownership of
the all such shares of Common Stock and Debt. PCM LLC, and in turn Mr. Samii,
may earn fees and incentive allocations on account of the Fund's investment in
the Common Stock. Mr. Thornton, in his capacity as a portfolio manager of PCM,
may also earn fees and incentive allocations on account of the Fund's investment
in the Common Stock. Except as set forth herein, no other person or entity of
Pardus owns of record any securities of the Company.
On November 3, 2005, PCM caused 1,000 shares of Common Stock owned by
the Fund to be registered in the name of Pardus Capital A/C Pardus European
Special Opportunities Master Fund L.P. as the record owner. On November 14,
2005, PCM caused an additional 1,000 shares owned by the Fund to be registered
Annex A-2
directly in the name of the Fund as the record owner. The remainder of the
shares owned by the Fund are held in street name. Other than as set forth above
in this Annex A and in the attached proxy statement, neither Pardus nor any
Pardus Nominee is the record or beneficial owner of any securities of the
Company, or any parent or subsidiary of the Company. Other than as set forth
herein, neither Pardus nor any Pardus Nominee has effected any transactions in
any securities of the Company in the last two years. The Fund used its own
assets to purchase the shares of Common Stock (other than the shares of Common
Stock the Fund received as consideration from the Company in the consent
solicitation commenced by the Company on October 18, 2005, which expired at 5:00
p.m. on November 1, 2005) and Debt owned by the Fund. Such shares of Common
Stock and Debt held by the Fund were purchased through and are held in brokerage
custodian accounts which, from time to time in the ordinary course, may utilize
margin borrowing in connection with purchasing, borrowing, or holding of
securities, and such shares of Common Stock and Debt may thereby be, or in the
future become, subject to the terms and conditions of such margin debt and
terms, together with all other securities held therein. As of the date hereof,
no part of the purchase price or market value of any of the shares of Common
Stock or Debt held by the Fund is represented by funds borrowed or otherwise
obtained for the purpose of acquiring or holding such shares or Debt.
Neither any member of Pardus nor any Pardus Nominee is, or has been
within the past year, a party to any contract, arrangement or understanding with
any person with respect to any securities of the Company, including, but not
limited to, joint ventures, loan or option arrangements, puts or calls,
guarantees against loss or guarantees of profit, division of losses or profit,
or the giving or withholding of proxies.
Except as set forth herein or in the Proxy Statement, no associate of
Pardus or of any Pardus Nominee owns beneficially, directly or indirectly, any
securities of the Company. Other than as set forth herein, the Pardus Nominees
do not possess beneficial ownership of any securities of the Company, directly
or indirectly.
Other than as set forth herein, none of Pardus, any Pardus Nominee or
any of their respective associates or immediate family members have had or will
have a direct or indirect material interest in any transaction or series of
similar transactions since the beginning of the Company's last fiscal year or
any currently proposed transactions, or series of similar transactions, to which
the Company or any of its subsidiaries was or is to be a party in which the
amount involved exceeds $60,000.
The Fund's transactions in securities of the Company during the past
two years are as follows:
PARDUS EUROPEAN SPECIAL OPPORTUNITIES MASTER FUND L.P.
-----------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
Common Stock 07/11/05 Buy 10,000 $3.20
-----------------------------------------------------------------------------------------------------------
Common Stock 07/12/05 Buy 3,800 $3.29
-----------------------------------------------------------------------------------------------------------
Common Stock 07/12/05 Buy 15,100 $3.28
-----------------------------------------------------------------------------------------------------------
Common Stock 07/12/05 Buy 12,200 $3.27
-----------------------------------------------------------------------------------------------------------
Common Stock 07/12/05 Buy 7,100 $3.26
-----------------------------------------------------------------------------------------------------------
Common Stock 07/12/05 Buy 39,500 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 07/12/05 Buy 11,700 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 07/12/05 Buy 600 $3.23
-----------------------------------------------------------------------------------------------------------
Common Stock 07/13/05 Buy 1,600 $3.26
-----------------------------------------------------------------------------------------------------------
Common Stock 07/13/05 Buy 5,000 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 07/13/05 Buy 100 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 07/13/05 Buy 800 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 07/13/05 Buy 600 $3.21
-----------------------------------------------------------------------------------------------------------
Common Stock 07/13/05 Buy 1,700 $3.20
-----------------------------------------------------------------------------------------------------------
Common Stock 07/13/05 Buy 200 $3.19
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 2,100 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 1,400 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 5,000 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 6,500 $3.21
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 13,000 $3.20
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 200 $3.19
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 1,000 $3.18
-----------------------------------------------------------------------------------------------------------
Common Stock 07/14/05 Buy 800 $3.16
-----------------------------------------------------------------------------------------------------------
Common Stock 07/19/05 Buy 2,600 $3.28
-----------------------------------------------------------------------------------------------------------
Common Stock 07/19/05 Buy 17,000 $3.27
-----------------------------------------------------------------------------------------------------------
Common Stock 07/19/05 Buy 300 $3.26
-----------------------------------------------------------------------------------------------------------
Common Stock 07/19/05 Buy 100 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 100 $3.55
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 300 $3.52
-----------------------------------------------------------------------------------------------------------
Annex A-3
-----------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 19,300 $3.50
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 800 $3.48
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 3,500 $3.47
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 700 $3.46
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 1,300 $3.45
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 100 $3.44
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 10,200 $3.43
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 38,900 $3.42
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 8,000 $3.41
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 4,200 $3.40
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 1,700 $3.39
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 700 $3.38
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 5,800 $3.37
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 1,800 $3.36
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 500 $3.35
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 800 $3.34
-----------------------------------------------------------------------------------------------------------
Common Stock 07/25/05 Buy 1,300 $3.33
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 200 $3.62
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 2,800 $3.61
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 2,800 $3.60
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 8,700 $3.59
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 2,200 $3.58
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 2,000 $3.57
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 3,900 $3.56
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 5,000 $3.55
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 3,800 $3.54
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 3,000 $3.53
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 100 $3.52
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 1,000 $3.51
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 4,400 $3.50
-----------------------------------------------------------------------------------------------------------
Common Stock 07/26/05 Buy 100 $3.49
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 800 $3.69
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 700 $3.67
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 1,000 $3.66
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 700 $3.65
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 100 $3.63
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 100 $3.62
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 100 $3.61
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 100 $3.60
-----------------------------------------------------------------------------------------------------------
Annex A-4
-----------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 6,400 $3.58
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 2,400 $3.57
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 2,100 $3.56
-----------------------------------------------------------------------------------------------------------
Common Stock 07/27/05 Buy 500 $3.55
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 1,200 $3.74
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 3,400 $3.73
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 2,900 $3.72
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 5,200 $3.71
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 1,400 $3.70
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 2,700 $3.69
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 1,700 $3.67
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 2,600 $3.62
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 9,500 $3.60
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 4,200 $3.59
-----------------------------------------------------------------------------------------------------------
Common Stock 07/29/05 Buy 200 $3.58
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 1,100 $3.70
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 1,600 $3.68
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 22,000 $3.67
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 11,400 $3.66
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 29,200 $3.65
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 10,300 $3.64
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 2,900 $3.63
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 1,200 $3.62
-----------------------------------------------------------------------------------------------------------
Common Stock 08/02/05 Buy 300 $3.61
-----------------------------------------------------------------------------------------------------------
Common Stock 08/03/05 Buy 28,300 $3.66
-----------------------------------------------------------------------------------------------------------
Common Stock 08/03/05 Buy 2,700 $3.65
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 1,300 $3.61
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 21,500 $3.60
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 1,600 $3.59
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 2,200 $3.58
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 8,700 $3.57
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 3,500 $3.56
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 100 $3.54
-----------------------------------------------------------------------------------------------------------
Common Stock 08/04/05 Buy 100 $3.50
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 7,000 $3.73
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 5,000 $3.72
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 2,700 $3.71
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 1,900 $3.70
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 13,300 $3.69
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 8,700 $3.68
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 19,900 $3.67
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 7,900 $3.66
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 14,100 $3.65
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 1,300 $3.64
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 1,300 $3.63
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 2,800 $3.62
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 1,400 $3.61
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 200 $3.57
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 100 $3.56
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 400 $3.55
-----------------------------------------------------------------------------------------------------------
Common Stock 08/05/05 Buy 700 $3.54
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 4,900 $3.40
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 300 $3.39
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 10,100 $3.38
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,000 $3.36
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,100 $3.34
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 600 $3.32
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 4,800 $3.30
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,900 $3.29
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 500 $3.28
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 2,800 $3.27
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,000 $3.26
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 4,600 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 2,600 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,000 $3.23
-----------------------------------------------------------------------------------------------------------
Annex A-5
-----------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 3,300 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 7,000 $3.20
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 2,000 $3.18
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 900 $3.15
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 10,500 $3.14
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,000 $3.12
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 2,400 $3.00
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,100 $2.96
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 11,700 $2.95
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 2,500 $2.94
-----------------------------------------------------------------------------------------------------------
Common Stock 08/08/05 Buy 1,700 $2.90
-----------------------------------------------------------------------------------------------------------
Common Stock 08/09/05 Buy 4,000 $3.00
-----------------------------------------------------------------------------------------------------------
Common Stock 08/09/05 Buy 2,200 $2.99
-----------------------------------------------------------------------------------------------------------
Common Stock 08/09/05 Buy 2,300 $2.99
-----------------------------------------------------------------------------------------------------------
Common Stock 08/09/05 Buy 3,900 $2.97
-----------------------------------------------------------------------------------------------------------
Common Stock 08/09/05 Buy 300 $2.96
-----------------------------------------------------------------------------------------------------------
Common Stock 08/09/05 Buy 4,500 $2.95
-----------------------------------------------------------------------------------------------------------
Common Stock 08/09/05 Buy 1,100 $2.92
-----------------------------------------------------------------------------------------------------------
Common Stock 08/11/05 Buy 37,000 $3.15
-----------------------------------------------------------------------------------------------------------
Common Stock 08/11/05 Buy 98,300 $3.14
-----------------------------------------------------------------------------------------------------------
Common Stock 08/11/05 Buy 13,700 $3.06
-----------------------------------------------------------------------------------------------------------
Common Stock 08/11/05 Buy 1,000 $3.04
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 400 $3.27
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 7,000 $3.26
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 13,500 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 30,700 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 14,700 $3.23
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 1,600 $3.19
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 200 $3.18
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 2,000 $3.17
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 9,600 $3.15
-----------------------------------------------------------------------------------------------------------
Common Stock 08/12/05 Buy 1,600 $3.14
-----------------------------------------------------------------------------------------------------------
Common Stock 08/15/05 Buy 2,800 $3.31
-----------------------------------------------------------------------------------------------------------
Common Stock 08/15/05 Buy 28,200 $3.30
-----------------------------------------------------------------------------------------------------------
Common Stock 08/15/05 Buy 40,000 $3.29
-----------------------------------------------------------------------------------------------------------
Common Stock 08/15/05 Buy 91,700 $3.28
-----------------------------------------------------------------------------------------------------------
Common Stock 08/15/05 Buy 7,900 $3.27
-----------------------------------------------------------------------------------------------------------
Common Stock 08/15/05 Buy 300 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 39,900 $3.23
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 2,800 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 48,500 $3.21
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 14,500 $3.20
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 1,200 $3.19
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 800 $3.18
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 200 $3.17
-----------------------------------------------------------------------------------------------------------
Common Stock 08/16/05 Buy 1,600 $3.14
-----------------------------------------------------------------------------------------------------------
Common Stock 08/17/05 Buy 1,500 $3.32
-----------------------------------------------------------------------------------------------------------
Common Stock 08/17/05 Buy 200 $3.27
-----------------------------------------------------------------------------------------------------------
Common Stock 08/17/05 Buy 3,100 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 08/17/05 Buy 200 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 08/18/05 Buy 600 $3.27
-----------------------------------------------------------------------------------------------------------
Common Stock 08/18/05 Buy 1,600 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 08/18/05 Buy 1,300 $3.23
-----------------------------------------------------------------------------------------------------------
Common Stock 08/18/05 Buy 5,900 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 08/18/05 Buy 600 $3.21
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 2,000 $3.48
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 500 $3.47
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 800 $3.45
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 600 $3.39
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 8,200 $3.35
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 21,100 $3.34
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 2,400 $3.33
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 1,600 $3.31
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 400 $3.28
-----------------------------------------------------------------------------------------------------------
Common Stock 08/19/05 Buy 2,400 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 08/23/05 Buy 37,400 $3.25
-----------------------------------------------------------------------------------------------------------
Annex A-6
-----------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
Common Stock 08/23/05 Buy 4,300 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 08/23/05 Buy 100 $3.23
-----------------------------------------------------------------------------------------------------------
Common Stock 08/23/05 Buy 14,400 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 08/23/05 Buy 300 $3.21
-----------------------------------------------------------------------------------------------------------
Common Stock 08/24/05 Buy 6,700 $3.26
-----------------------------------------------------------------------------------------------------------
Common Stock 08/24/05 Buy 25,100 $3.25
-----------------------------------------------------------------------------------------------------------
Common Stock 08/24/05 Buy 4,400 $3.24
-----------------------------------------------------------------------------------------------------------
Common Stock 08/24/05 Buy 177,100 $3.28
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 200,000 $3.38
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 15,000 $3.37
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 28,400 $3.35
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 150,000 $3.33
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 175,000 $3.23
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 125,000 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 15,000 $3.37
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 28,400 $3.35
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 150,000 $3.33
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 175,000 $3.23
-----------------------------------------------------------------------------------------------------------
Common Stock 08/25/05 Buy 125,000 $3.22
-----------------------------------------------------------------------------------------------------------
Common Stock 08/26/05 Buy 163,700 $3.36
-----------------------------------------------------------------------------------------------------------
Common Stock 08/26/05 Buy 5,500 $3.35
-----------------------------------------------------------------------------------------------------------
Common Stock 08/26/05 Buy 56,800 $3.34
-----------------------------------------------------------------------------------------------------------
Common Stock 08/29/05 Buy 1,500 $3.33
-----------------------------------------------------------------------------------------------------------
Common Stock 08/29/05 Buy 25,200 $3.32
-----------------------------------------------------------------------------------------------------------
Common Stock 08/30/05 Buy 88,700 $3.34
-----------------------------------------------------------------------------------------------------------
Common Stock 08/30/05 Buy 48,800 $3.33
-----------------------------------------------------------------------------------------------------------
Common Stock 08/31/05 Buy 15,300 $3.54
-----------------------------------------------------------------------------------------------------------
Common Stock 08/31/05 Buy 53,600 $3.53
-----------------------------------------------------------------------------------------------------------
Common Stock 08/31/05 Buy 10,000 $3.44
-----------------------------------------------------------------------------------------------------------
Common Stock 08/31/05 Buy 3,600 $3.38
-----------------------------------------------------------------------------------------------------------
Common Stock 08/31/05 Buy 3,500 $3.33
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 180,700 $3.83
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 12,800 $3.81
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 6,600 $3.80
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 16,600 $3.79
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 12,700 $3.78
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 7,400 $3.77
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 22,300 $3.76
-----------------------------------------------------------------------------------------------------------
Annex A-7
-----------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 900 $3.73
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 7,100 $3.72
-----------------------------------------------------------------------------------------------------------
Common Stock 09/01/05 Buy 5,500 $3.71
-----------------------------------------------------------------------------------------------------------
Common Stock 09/02/05 Buy 14,200 $3.88
-----------------------------------------------------------------------------------------------------------
Common Stock 09/02/05 Buy 3,500 $3.86
-----------------------------------------------------------------------------------------------------------
Common Stock 09/06/05 Buy 108,300 $3.83
-----------------------------------------------------------------------------------------------------------
Common Stock 09/06/05 Buy 1,075,000 $3.93
-----------------------------------------------------------------------------------------------------------
Common Stock 09/14/05 Buy 200,000 $4.61
-----------------------------------------------------------------------------------------------------------
Common Stock 09/14/05 Buy 10,000 $4.62
-----------------------------------------------------------------------------------------------------------
Common Stock 09/14/05 Buy 80,000 $4.63
-----------------------------------------------------------------------------------------------------------
Common Stock 09/14/05 Buy 20,000 $4.59
-----------------------------------------------------------------------------------------------------------
Common Stock 09/14/05 Buy 8,000 $4.68
-----------------------------------------------------------------------------------------------------------
Common Stock 09/14/05 Buy 8,000 $4.69
-----------------------------------------------------------------------------------------------------------
Common Stock 09/14/05 Buy 24,000 $4.73
-----------------------------------------------------------------------------------------------------------
Common Stock 09/20/05 Buy 25,000 $4.48
-----------------------------------------------------------------------------------------------------------
Common Stock 09/20/05 Buy 50,000 $4.51
-----------------------------------------------------------------------------------------------------------
Common Stock 09/20/05 Buy 155,000 $4.53
-----------------------------------------------------------------------------------------------------------
Common Stock 09/21/05 Buy 50,000 $4.43
-----------------------------------------------------------------------------------------------------------
Common Stock 09/22/05 Buy 68,800 $4.33
-----------------------------------------------------------------------------------------------------------
Common Stock 09/22/05 Buy 100,000 $4.28
-----------------------------------------------------------------------------------------------------------
Common Stock 09/22/05 Buy 25,000 $4.27
-----------------------------------------------------------------------------------------------------------
Common Stock 09/22/05 Buy 2,000 $4.30
-----------------------------------------------------------------------------------------------------------
Common Stock 09/22/05 Buy 6,200 $4.29
-----------------------------------------------------------------------------------------------------------
Common Stock 11/18/05 Buy(2) 87,692 See Footnote
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 2,500 $6.84
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 100 $6.84
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 1,000 $6.84
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 10,000 $6.84
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 600 $6.84
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 10,800 $6.85
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 11,308 $6.85
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 14,000 $6.85
-----------------------------------------------------------------------------------------------------------
Common Stock 11/29/05 Buy 25,000 $6.85
-----------------------------------------------------------------------------------------------------------
Common Stock 11/30/05 Buy 900 $6.85
-----------------------------------------------------------------------------------------------------------
Common Stock 11/30/05 Buy 100 $6.88
-----------------------------------------------------------------------------------------------------------
Common Stock 11/30/05 Buy 200 $6.89
-----------------------------------------------------------------------------------------------------------
Common Stock 11/30/05 Buy 8,800 $6.90
-----------------------------------------------------------------------------------------------------------
Common Stock 11/30/05 Buy 10,000 $7.01
-----------------------------------------------------------------------------------------------------------
Common Stock 11/30/05 Buy 5,000 $7.01
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 500 $6.61
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,500 $6.57
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 1,000 $6.57
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,500 $6.60
-----------------------------------------------------------------------------------------------------------
----------
(2) Shares received by the Fund as consideration the Fund elected to receive in
the consent solicitation commenced by the Company on October 18, 2005
(which expired at 5:00 p.m. on November 1, 2005).
Annex A-8
-----------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 500 $6.57
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 5,000 $6.65
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 500 $6.65
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,500 $6.65
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 1,300 $6.60
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 500 $6.64
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 36,000 $6.65
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 10,700 $6.65
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 1,300 $6.66
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,000 $6.72
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,000 $6.67
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,000 $6.70
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 20,000 $6.81
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 6,000 $6.83
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,000 $6.83
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 2,000 $6.90
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 3,000 $6.91
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 5,200 $6.90
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 900 $6.86
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 200 $6.87
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 100 $6.87
-----------------------------------------------------------------------------------------------------------
Common Stock 12/02/05 Buy 12,800 $6.85
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
DEBT TRADE DATE BUY/SELL AMOUNT PRICE
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 07/12/05 Buy 500,000 $89.50
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 07/14/05 Buy 500,000 $88.50
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 07/19/05 Buy 1,000,000 $89.25
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 07/27/05 Buy 1,000,000 $88.75
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 08/08/05 Buy 1,000,000 $87.25
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 08/09/05 Buy 750,000 $87.25
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 08/11/05 Buy 500,000 $87.75
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 08/18/05 Buy 4,250,000 $89.50
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
9 7/8% Senior 09/30/05 Buy 1,000,000 $90.75
Subordinated Notes due
2007
-----------------------------------------------------------------------------------------------------------
Annex A-9
ANNEX B
RESOLUTION TO REPEAL CERTAIN PROVISIONS OF OR AMENDMENTS
TO THE COMPANY'S BY-LAWS
Following is the text of the resolution to be presented for adoption by
the stockholders of the Company at the 2005 Annual Meeting:
"RESOLVED, that each provision or amendment of the By-laws of Bally
Total Fitness Holding Corporation (the "Company"), if any, adopted by
the board of directors of the Company without the approval of the
Company's stockholders subsequent to May 25, 2005 (purportedly the last
date of reported changes) and prior to the approval of this resolution
be, and they hereby are, repealed, effective as of the time this
resolution is approved and adopted by the Company's stockholders."
Annex B-1
IMPORTANT
Tell your board of directors what you think! Your vote is important. No
matter how many shares of Common Stock you own, please give the Fund and certain
of its affiliates and associates your proxy at the Annual Meeting to vote FOR
the election of the Pardus Nominees and FOR approval and adoption of the
proposed resolution to repeal each provision or amendment of the By-laws of the
Company, if any, adopted by the board of directors without the approval of the
Company's stockholders subsequent to May 25, 2005 (purportedly the last date of
reported changes) and prior to the approval and adoption of such resolution at
the 2005 Annual Meeting, by taking three steps:
1. SIGNING the enclosed GREEN proxy card,
2. DATING the enclosed GREEN proxy card, and
3. MAILING the enclosed GREEN proxy card TODAY in the envelope
provided (no postage is required if mailed in the United States).
If any of your shares are held in the name of a brokerage firm, bank,
bank nominee or other institution, only it can vote such shares of Common Stock
and only upon receipt of your specific instructions. Accordingly, please vote
your shares according to the enclosed voting instruction form or contact the
person responsible for your account and instruct that person to execute the
GREEN proxy card representing your shares. Pardus urges you to confirm in
writing your instructions to Pardus in care of the address provided below so
that Pardus will be aware of all instructions given and can attempt to ensure
that such instructions are followed.
If you have any questions or require any additional information
concerning our proxy statement or this proxy solicitation, please contact our
proxy solicitor, D.F. King & Co., Inc., at the address or telephone number set
forth below.
[GRAPHIC OMITTED]
[LOGO - D.F. KING & CO., INC.]
48 Wall Street, New York, NY 10005
(212) 269-5550
CALL TOLL FREE: 888-644-6071
OR
BANKS AND BROKERS, CALL COLLECT: 212-269-5550
GREEN PROXY CARD
----------------
BALLY TOTAL FITNESS HOLDING CORPORATION
2005 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF
PARDUS EUROPEAN SPECIAL OPPORTUNITIES MASTER FUND L.P.,
PARDUS CAPITAL MANAGEMENT L.P., PARDUS CAPITAL MANAGEMENT LLC, KARIM SAMII,
JOSEPH R. THORNTON, CHARLES J. BURDICK, BARRY R. ELSON AND DON R. KORNSTEIN
The undersigned appoints and constitutes Karim Samii and Joseph R. Thornton, and
each of them, as proxies, with full power of substitution, to represent the
undersigned at the Annual Meeting of Stockholders of Bally Total Fitness Holding
Corporation, a Delaware corporation (the "Company"), to be held on January 26,
2006 at [ ] at [ ], and at any adjournment, postponement or any special meeting
that may be called in lieu thereof (the "2005 Annual Meeting"), hereby revoking
any proxies previously given, to vote all shares of common stock of the Company
held or owned by the undersigned as directed below, and in their discretion upon
such other matters as may come before the meeting. IF NO SPECIFICATION IS MADE,
THE SHARES WILL BE VOTED (A) "FOR" THE ELECTION OF CHARLES J. BURDICK, BARRY R.
ELSON AND DON R. KORNSTEIN TO CLASS III OF THE COMPANY'S BOARD OF DIRECTORS, (B)
"FOR" THE APPROVAL AND ADOPTION OF THE BY-LAW RESOLUTION TO REPEAL EACH
PROVISION OR AMENDMENT OF THE BY-LAWS OF THE COMPANY, IF ANY, ADOPTED BY THE
BOARD OF DIRECTORS WITHOUT THE APPROVAL OF THE COMPANY'S STOCKHOLDERS SUBSEQUENT
TO MAY 25, 2005 (PURPORTEDLY THE LAST DATE OF REPORTED CHANGES) AND PRIOR TO THE
APPROVAL AND ADOPTION OF SUCH RESOLUTION AT THE 2005 ANNUAL MEETING AND (C) IN
THE PROXY HOLDERS' DISCRETION AS TO OTHER MATTERS THAT MAY PROPERLY COME BEFORE
THE 2005 ANNUAL MEETING.
SIGN, DATE AND MAIL YOUR PROXY TODAY
(Continued and to be signed on the reverse side)
Pardus European Special Opportunities Master Fund, L.P. and certain of its
affiliates and associates recommends a vote "FOR" the election of all of the
nominees listed in Proposal 1 below and "FOR" Proposal 2 below. (Please mark
each matter with an "X" in the appropriate box.)
1. Election of Directors:
Nominees: Charles J. Burdick, Barry R. Elson and Don R. Kornstein
[ ] FOR ALL
[ ] WITHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
[ ] FOR ALL EXCEPT NOMINEE WRITTEN BELOW
INSTRUCTION: To withhold authority to vote for any
individual nominee, mark the "FOR ALL EXCEPT' box and
write the name(s) of the nominee(s) you do not
support on the line below. Your shares will be voted
for the remaining nominee(s).
------------------------------------------------
2. Proposal to repeal provisions in the Company's By-laws that were
adopted after May 25, 2005 (purportedly the last date of reported
changes) and prior to the approval and adoption of this Proposal 2 at
the 2005 Annual Meeting of stockholders:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In the discretion of the persons named on this GREEN proxy card with
respect to any other matters as may properly come before the 2005
Annual Meeting.
Please be sure to sign and date this Proxy
DATED:
---------------------
--------------------------------
(Signature)
--------------------------------
(Signature, if held jointly)
--------------------------------
(Title)
Please sign exactly as name appears on this Proxy. When shares are held jointly,
joint owners should each sign. Executors, administrators, trustees, etc., should
indicate the capacity in which signing.
IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY!
(Reverse Side of GREEN Proxy Card)