-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QcScowSCCuQIFDngdYEq8bmrMUn/MoiPp/8ozhL8N1wVdnHAotPqWs+AEPvfRkMD pf5grcHsKUfTOX9R2/ccxA== 0001017673-97-000008.txt : 19970912 0001017673-97-000008.hdr.sgml : 19970912 ACCESSION NUMBER: 0001017673-97-000008 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970905 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOVER DOWNS ENTERTAINMENT INC CENTRAL INDEX KEY: 0001017673 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AMUSEMENT & RECREATION SERVICES [7900] IRS NUMBER: 510357525 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11929 FILM NUMBER: 97675996 BUSINESS ADDRESS: STREET 1: 1131 N DUPONT HIGHWAY CITY: DOVER STATE: DE ZIP: 19901 BUSINESS PHONE: 3024262806 MAIL ADDRESS: STREET 1: 2200 CONCORD PIKE CITY: WILMINGTON STATE: DE ZIP: 19803 10-K 1 _____________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________________________________________________ FORM 10-K (Mark One) / X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended June 30, 1997 or /__/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ________________ to _______________ Commission file number 1-11929 DOVER DOWNS ENTERTAINMENT, INC. (Exact name of registrant as specified in its charter) DELAWARE 51-0357525 (State of Incorporation) (I.R.S. Employer Identification Number) 1131 North DuPont Highway, Dover, Delaware 19901 (Address of principal executive offices) Registrant's telephone number including area code (302) 674-4600 Securities registered pursuant to Section 12(b) of the Act: Title of Class Name of exchange on which registered Common Stock, $.10 Par Value NEW YORK STOCK EXCHANGE Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /___/ The aggregate market value of the voting stock held by non- affiliates of the registrant was $51,588,250 as of July 31, 1997. As of July 31, 1997, the number of shares of each class of the Registrant's common stock outstanding is as follows: Commom Stock - 2,939,000 shares Class A Common Stock - 12,286,830 shares The following documents are incorporated by reference: Part of this form into which Document incorporated Proxy Statement in connection with Annual Meeting of Shareholders to be held October 31, 1997 III ITEM 1. BUSINESS Dover Downs Entertainment, Inc. (Dover Downs or the Company) owns and operates the Dover Downs International Speedway, the Dover Downs Raceway and a video lottery casino at a multi-purpose gaming and entertainment complex. The facility is located in close proximity to the major metropolitan areas of Philadelphia, Baltimore and Washington, D.C. on approximately 825 acres of land owned by the Company in Dover, Delaware. Dover Downs International Speedway offers a modern, state-of-the-art, concrete superspeedway for top-rated NASCAR-sanctioned auto racing events. Dover Downs Raceway offers traditional harness horse racing and year-round satellite-linked pari-mutuel wagering on simulcast harness and thoroughbred horse racing from regional and national tracks. The Company also simulcasts live races at Dover Downs to tracks and other off-track betting locations across North America. The Company expanded into video lottery (slot) machine gaming in December of 1995. The video lottery operations are managed by Caesars World Gaming Development Corporation (Caesars), a wholly-owned subsidiary of Caesars World, Inc., the casino gaming arm of ITT Corporation. Dover Downs offers a unique gaming and entertainment experience. Management believes it to be the only facility in the country that combines in one location NASCAR Winston Cup/Busch Series stock car racing, harness horse racing, pari-mutuel wagering on both live and simulcast horse races, and video lottery (slot) machine gaming. (a) General Development of Business On October 3, 1996, the Company completed its initial public offering. The Company issued 1,075,000 shares of the Company's Common Stock and received proceeds of approximately $16,360,000, net of issuance costs of approximately $1,913,000. In October of 1996 the Company completed the expansion of the video lottery casino increasing the number of video lottery (slot) machines from 572 to 1,000, which is the maximum number permitted by law. In November of 1996 the Company began satellite transmission of its live harness races from Dover Downs Raceway to tracks and other off- track betting locations across North America. (b) Financial Information About Industry Segments. The Company's principal operations are grouped into two segments: motorsports and gaming. Financial information concerning these businesses is included on pages 9 through 13 of this 1997 Annual Report on Form 10-K. (c) Narrative Description of Business Motorsports Dover Downs has presented NASCAR-sanctioned racing events for 29 consecutive years. The Company currently conducts four major NASCAR- sanctioned events annually. Two races are associated with the Winston Cup professional stock car racing circuit and two races are associated with the Busch Series, Grand National Division racing circuit. Each of the Busch Series events at the Company's tracks is conducted on the day before a Winston Cup event. Dover Downs is one of only six speedways in the country that presents two Winston Cup events and also conducts two Busch Series events each year. The June and September dates have historically allowed Dover Downs to hold the first and last Winston Cup events in the Maryland to Maine region each year. The auto racing track is a high-banked, one mile long, concrete superspeedway. Current seating capacity at Dover Downs is approximately 100,000 seats. Unlike some speedways, substantially all grandstand seats at Dover Downs, including indoor, air-conditioned grandstand and skybox seats, offer an unobstructed view of the entire track. The recently completed installation of a concrete racing surface created the only concrete superspeedway (one mile or greater in length) that conducts NASCAR-sanctioned events. In recent years, television coverage and corporate sponsorship have increased for NASCAR-sanctioned events. The Company's NASCAR- sanctioned events are currently televised live by TNN to a nationwide audience and broadcast nationally to a network of over 450 radio stations affiliated with the Motor Racing Network (over 250 stations for Busch Series events). Gaming Dover Downs has presented harness racing events for 29 consecutive years. On December 29, 1995, the Company introduced video lottery (slot) machines to its entertainment mix. Under an agreement with Caesars, a leader in the gaming industry, Caesars supervises, manages, markets and operates the Company's video lottery operations. The newly expanded, air-conditioned "video lottery casino" housing the gaming operations was designed and built using expertise from Caesars. Dover Downs is a "Licensed Agent" authorized to conduct video lottery operations under the Delaware State Lottery Code. Pursuant to Delaware's Horse Racing Redevelopment Act enacted in 1994, the Delaware State Lottery Office administers and controls the operation of the video lottery operations. Unless the Act is extended or reenacted, it will terminate on March 15, 2000, in which event the Company will be required to discontinue its video lottery operations. The video lottery machines are leased by and operated under the auspices of the Delaware State Lottery Office. In October 1996, 428 machines were added to bring the total number of slot machines to 1,000, which is the maximum presently permitted by law. Dover Downs is permitted by law to set its payout to customers between 87% and 95%. Prior approval from the Director of the Delaware State Lottery Office would be required for any payout in excess of 95%. Since inception of its operations on December 29, 1995, Dover Downs has maintained an average payout of 90.5%. By law, video lottery operations in Delaware are limited to the three locations in the State where thoroughbred horse racing or harness horse racing was held in 1993. In addition to the Dover Downs complex in Dover, Delaware, there are only two other locations permitted by law: Delaware Park, a northern Delaware thoroughbred track; and Harrington Raceway, a south central Delaware fairgrounds track. Dover Downs and Delaware Park began video lottery operations in December 1995; Harrington Raceway began video lottery operations in August 1996. The harness horse racing track is a five-eighths mile track and is lighted for nighttime harness horse racing. The track is located inside the one-mile auto racing superspeedway. The configuration offers turns with a wider than normal turning radius and 4 degree banking. This allows trotting and pacing horses to remain in full stride through the turns. The result has been higher than normal speeds attained by horses in competition. With the start of the race season beginning November 1996, live harness races conducted at Dover Downs were simulcast to tracks and other off-track betting locations across North America. The Company has facilities for pari-mutuel wagering on both live harness horse racing and on simulcast thoroughbred and harness horse racing received from numerous tracks across North America. Within the main grandstand is the simulcast parlor where patrons can wager on harness and thoroughbred races received by satellite into Dover Downs. Television monitors throughout the parlor area provide views of all races simultaneously and the parlor's betting windows are tied into a central computer allowing bets to be received on all races from all tracks. With the recent expansion of its simulcasting operations, pari-mutuel wagering is now on a year-round basis. For the fiscal years ended June 30, 1995, 1996, and 1997, the Company had 90, 201 and 363 simulcast racing dates, respectively. Harness racing in the State of Delaware is governed by the Delaware Harness Racing Commission. The Company holds a license from the Commission by which it is authorized to hold harness race meetings on its premises and to make, conduct and sell pools by the use of pari- mutuel machines or totalizators. Pari-mutuel wagering refers to pooled betting or wagering on harness horse racing by means of a totalizator. Through pooled betting, the wagering public, not the track, determines the odds and the payoff. The track retains a percentage of the amount wagered. Simulcasting refers to the transmission of live horse racing by television, cable or satellite signal from one race track to another with pari-mutuel wagering being conducted at the sending and receiving track and a portion of the handle being shared by the sending and receiving tracks. Competition Motorsports The Company's racing events compete with other racing events sanctioned by various racing bodies, such as CART (Championship Auto Racing Teams), IRL (Indy Racing League), and NHRA (National Hot Rod Association), and with other sports and other recreational events scheduled on the same dates. Racing events sanctioned by different organizations are often held on the same dates at separate tracks, in competition with the NASCAR-sanctioned event dates. In addition, motorsports facilities compete with one another for the patronage of motor racing spectators, and with other sports and entertainment businesses. The quality of the competition, type of racing event, caliber of the events, sight lines, ticket pricing, location, and customer conveniences, among other things, distinguish the motorsports facilities. The two closest speedways that currently sponsor Winston Cup races are in Richmond, Virginia (approximately four hours to the South) and Pocono International Raceway in Long Pond, Pennsylvania (approximately three and a half hours to the North). Nazareth Speedway in Nazareth, Pennsylvania (approximately two hours to the North) currently conducts Busch Series, NASCAR Craftsman Truck and Indy races. Based on historical data, management does not believe that any of these facilities significantly impact operations at Dover Downs International Speedway. In recent years, the Company's NASCAR-sanctioned Winston Cup events have all sold out well in advance of the race. Gaming The legalization of additional casino and other gaming venues in states close to Delaware, particularly Maryland, Pennsylvania and New Jersey, may have a material adverse effect on the Company's business. From time to time, legislation has been introduced in these states that would further expand gambling opportunities, including video lottery (slot) machines at horse-tracks. At present, video lottery (slot) machines are only permitted at two other locations in Delaware: Delaware Park and Harrington Raceway. Delaware Park and Harrington Raceway presently have in operation 1,000 and 580 machines, respectively. The neighboring states of Pennsylvania and Maryland do not presently permit video lottery operations. Pennsylvania, Maryland and New Jersey all have state-run lotteries. Atlantic City, New Jersey is located approximately 100 miles from Dover Downs and a certain amount of market overlap should be expected. Casinos in Atlantic City offer a full range of gaming products. Dover Downs does not expect to compete directly with Atlantic City because of the Company's inability to offer a full range of casino gaming products, but it does expect to capture a portion of the existing Atlantic City slot market in the Dover area, due to the facility's proximity, convenience and multiple attractions. The Company also competes for attendance with a wide range of other entertainment and recreational activities available in the region, including professional and collegiate sporting events. Competition in horse racing is varied since race tracks in the surrounding area differ in many respects. Some tracks only offer thoroughbred or harness horse racing; others have both. Tracks have live racing seasons that may or may not overlap with neighboring tracks. Depending on the purse structure, tracks that are farther apart may compete with each other more for quality horses than for patrons. Live harness racing also competes with simulcasts of thoroughbred and harness racing. All race tracks in the region are involved with simulcasting. In addition, a number of off-track betting parlors compete with track simulcasting activities. With respect to the Company simulcasting its live harness races to tracks and other locations, its simulcast signals are in direct competition with live races at the receiving track and other races being simulcast to the receiving location. Within the State of Delaware, Dover Downs faces little direct live competition from the State's other two tracks. Harrington Raceway, a south central Delaware fairgrounds track, conducts harness horse racing periodically between May and November. There is no overlap presently with Dover Downs' live race season. Delaware Park, a northern Delaware track, conducts thoroughbred horse racing from April through mid- November. Its race season only overlaps with Dover Downs for approximately five to six weeks each year. The neighboring states of Pennsylvania, Maryland and New Jersey all have harness and thoroughbred racing and simulcasting. Dover Downs competes with Rosecroft Raceway in Maryland, Philadelphia Park in Pennsylvania, Garden State Park and The Meadowlands in New Jersey and a number of other race tracks in the surrounding area. The Company also receives simulcast harness and thoroughbred races from approximately 30 race tracks, including the tracks noted above. Seasonality The Company derives a substantial portion of its total revenues from admissions and event-related revenue attributable to four NASCAR- sanctioned events which are currently held in June and September. As a result, the Company's business has been, and is expected to remain, highly seasonal. The seasonality was offset to some degree by the year-round video lottery (slot) machine gaming operations and year- round simulcasting. At June 30, 1997, the Company had a total of 367 full-time employees and 43 part-time employees. The Company hires temporary employees to assist during its auto racing events and its live harness racing season. ITEM 2. PROPERTIES The Company maintains its headquarters, motorsports speedway, harness racetrack, and video lottery casino all on approximately 825 acres of land owned by the Company in Dover, Delaware. ITEM 3. LEGAL PROCEEDINGS Neither the Company nor any of its subsidiaries is a party to any material legal proceedings. The Company and its subsidiaries are engaged in ordinary routine litigation incidental to the business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Common Stock of Dover Downs Entertainment, Inc. has traded on the New York Stock Exchange under the symbol "DVD" since the Company's initial public offering on October 3, 1996. There is no established public trading market for the Company's Class A Common Stock. As of July 31, 1997, there were 2,939,000 shares of Common Stock and 12,286,830 shares of Class A Common Stock outstanding. There were 480 record holders of Common Stock and 13 record holders of Class A Common Stock at July 31, 1997. For the fiscal year ended June 30, 1997, the range of share prices for the Common Stock on the New York Stock Exchange is as follows: 1997 Fiscal Quarter High Low First - - Second 26 7/8 17 1/4 Third 20 1/2 16 5/8 Fourth 19 7/8 16 1/8 The Company declared a quarterly dividend of $.08 per share on all classes of Common Stock in the third and fourth quarters of fiscal 1997. ITEM 6. SELECTED FINANCIAL DATA Five Year Selected Financial Data (Dollars in thousands, except per share data)
Year Ended June 30, 1997 1996 1995 1994 1993 Revenues: Motorsports 20,516 18,110 16,282 13,561 11,984 Gaming (1) 81,162 31,980 1,250 796 2,058 101,678 50,090 17,532 14,357 14,042 Earnings before income taxes 28,239 15,593 7,239 5,791 4,791 Net earnings 16,472 9,196 4,284 3,562 2,908 Earnings per common share 1.08 .63 .30 .26 .21 Dividends per common share .16 - - - - At June 30, 1997 1996 1995 1994 1993 Total assets 71,261 42,311 25,422 19,776 17,208 Long-term debt, less current portion 760 766 698 776 878 Shareholders' equity 54,300 23,715 14,225 9,923 6,361 (1) Gaming revenues from the Company's video lottery (slot) machine gaming operations include the total win from such operations. The Delaware State Lottery Office collects the win and remits a portion thereof to the Company as its commission for acting as a Licensed Agent. The difference between total win and the amount remitted to the Company is reflected in operating expenses.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Fiscal Year 1997 Compared With Fiscal Year 1996 Revenues increased by $51,588,000 to $101,678,000 from $50,090,000 in the prior year. The significant increase in revenues was principally due to the introduction of video lottery (slot) machines which were in operation for the entire fiscal year 1997 compared with six months in fiscal 1996. Video lottery revenues also increased as a result of expanding the casino facility and increasing the number of video lottery (slot) machines from 572 to 1,000 in October of 1996. Motorsports revenues increased by $2,406,000 or 13.3%. Approximately $999,000 of the total motorsports revenue increase resulted from increased attendance and $663,000 resulted from increased ticket prices. The remainder of the revenue increase of $744,000 was principally due to increased marketing and sponsorship revenues. Operating expenses increased by $37,860,000 of which $34,695,000 was due to the video lottery (slot) machines in operation for the entire fiscal year 1997 compared with six months in fiscal 1996. Payments to the State of Delaware, fees to the manager who operates the video lottery (slot) machine operation, and payments to the vendors who provide the video lottery (slot) machines were $32,674,000 in fiscal 1997 and $12,188,000 in fiscal 1996. Amounts allocated from the video lottery operation for harness horse racing purses were $9,157,000 in fiscal 1997 and $3,550,000 in fiscal 1996. Wages and benefits for employees of the video lottery (slot) machine operation were $4,035,000 in fiscal 1997 and $2,277,000 in fiscal 1996. Advertising, promotional and customer complimentary costs of $4,251,000 and costs associated with casino food and beverage sales of $1,923,000 were the other significant operating costs of the video lottery (slot) machine operations. For the horse racing and simulcasting operations, wage and benefit cost increases of $467,000, simulcasting cost increases of $537,000 and purse increases of $155,000 (exclusive of the $9,157,000 of harness horse racing purses allocated from video lottery operations in fiscal 1997) accounted for the most significant operating cost increases. The cost increases were primarily the result of increasing the number of live harness racing days to 97 from 67 in 1996 and from increasing the number of simulcasting days to 363 from 201 in 1996. Motorsports' operating expenses increased principally due to a $394,000 increase in purse obligation expenses. Sanction fees increased by $80,000 and advertising increased by $145,000 during the 1997 fiscal year. Depreciation increased by $615,000 or 41.9% to $2,084,000 from $1,469,000 as a result of a full year of depreciation expense related to the Company's video lottery casino being recognized in 1997 compared with six months of depreciation in 1996. Capital expenditures for the expansion of the Company's motorsports facilities also contributed to the increase in depreciation. General and administrative expenses increased by $992,000 to $3,065,000 from $2,073,000. Wage and benefit costs increased by $363,000 and contracted services increased by $205,000, principally due to the Company's expansion of video lottery (slot) machine and simulcasting operations. The Company's effective income tax rates for fiscal 1997 and fiscal 1996 were 41.7% and 41.0%, respectively. Net earnings increased by $7,276,000 due to the inclusion of video lottery (slot) machine operations for the entire fiscal year 1997 compared with six months in fiscal 1996 and also due to higher attendance and related revenues at the Company's NASCAR-sanctioned events in September 1996 and June 1997. Fiscal Year 1996 Compared With Fiscal Year 1995 Revenues increased by $32,558,000 to $50,090,000 from $17,532,000 in the prior year. The significant increase in revenues was principally due to the introduction of video lottery (slot) machine operations in late December 1995. Fiscal year 1996 revenues include six months of video lottery revenues of $28,818,000 compared with none in fiscal 1995. Motorsports revenues increased by $1,828,000 or 11.2%. Approximately $1,028,000 of the total motorsports revenue increase resulted from increased attendance and $345,000 resulted from increased ticket prices. The remainder of the revenue increase of $455,000 was principally due to increased marketing and sponsorship revenues. Operating expenses increased by $23,302,000 of which $20,952,000 was due to the introduction of video lottery (slot) machine operations. Payments to the State of Delaware, fees to the manager who operates the video lottery (slot) machine operation, and payments to the vendors who provide the video lottery machines were $12,188,000 in fiscal 1996 and none in fiscal 1995. Amounts allocated from the video lottery operation for harness horse racing purses were $3,550,000 in fiscal 1996 and none in fiscal 1995. Wages and benefits of newly hired employees for the video lottery (slot) machine operation were $2,277,000. Advertising, promotional and customer complimentary costs of $636,000, costs associated with casino food and beverage sales of $611,000 and building service costs of $229,000 were some of the other significant operating costs of the video lottery (slot) machine operations. For the horse racing and simulcasting operations, increased purses of $451,000 (exclusive of the $3,550,000 of harness horse racing purses allocated from video lottery operations), higher wage and benefit costs of $444,000 and increased simulcasting costs of $285,000 accounted for the most significant operating cost increases. Motorsports' operating expenses increased principally due to a $505,000 increase in purse obligation expenses. Sanction fees increased by $91,000 and wages and related benefits increased by $66,000 during the 1996 fiscal year. Depreciation increased by $426,000 or 40.8% to $1,469,000 from $1,043,000 due to the capital expenditures related to the Company's newly constructed video lottery casino and to the further expansion of its motorsports facilities. General and administrative expenses increased by $368,000 to $2,073,000 from $1,705,000. Wage and benefit costs increased by $616,000 principally due to the Company's introduction of video lottery (slot) machine operations and expansion of simulcasting operations. The Company's effective income tax rates for fiscal 1996 and fiscal 1995 were 41.0% and 40.8%, respectively. Net earnings increased by $4,912,000 due to the inclusion of video lottery (slot) machine operations for six months in fiscal 1996 and also due to higher attendance and related revenues at the Company's NASCAR-sanctioned events in September 1995 and June 1996. Liquidity and Capital Resources Cash flow from operations for the three years ended June 30, 1997, 1996 and 1995 was $18,600,000, $15,317,000 and $4,802,000, respectively. The significant increase from fiscal 1995 to fiscal 1996 reflected the Company's higher net earnings and increased non-cash charges, as well as deferred revenue, which is cash received in advance for NASCAR-sanctioned event tickets. Deferred revenue amounted to $7,542,000 and $6,003,000 at June 30, 1997 and 1996, respectively. The Company has an annually renewable, $20,000,000 committed revolving line of credit from a bank to provide seasonal funding needs and to finance capital improvements. The Company was in compliance with all terms of the facility and there were no amounts outstanding at June 30, 1997. Capital expenditures for the year ended June 30, 1997 were $16,841,000. Purchases of land for $1,060,000 were completed to provide for additional parking and other future expansion. Construction of the 17,000 square foot casino facility expansion for $5,124,000 and construction of additional permanent grandstand seating and luxury suites for motorsports events of approximately $8,061,000 represented the more significant capital projects in fiscal 1997. The capital expenditures were financed with the proceeds from the initial public offering and cash from operations. Capital expenditures were $18,936,000 in fiscal 1996 compared with $6,166,000 in fiscal 1995. Construction of the Company's video lottery gaming facility was begun in fiscal 1995 with $1,790,000 expended during the year. The higher level of capital spending in fiscal 1996 compared with fiscal 1995 also reflected the construction of additional grandstand seating, new skyboxes, the acquisition and improvement of land, the resurfacing of the auto race track, and improvements to the horse racing facilities. In fiscal 1998, the Company expects to make capital expenditures of approximately $12,500,000 which will include additional permanent grandstand and skybox seating and renovations to the existing harness racing grandstand. The Company anticipates that cash from operations and funds expected to be available under its bank credit facility will satisfy the Company's cash requirements in fiscal 1998. Impact of Recent Accounting Pronouncements In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. This statement, which is effective in fiscal 1998, simplifies the standards for computing earnings per share ("EPS") by replacing the presentation of primary EPS with a presentation of basic EPS. The Company has determined that SFAS 128 will not have a material effect on its financial statements. In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income. This statement requires that comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The Company plans to adopt this standard on July 1, 1998, as required. The adoption of this standard will not impact results of operations or financial condition. In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. This statement established standards for reporting information about operating segments and related disclosures about products and services, geographic areas and major customers. The Company plans to adopt this standard on July 1, 1998, as required. The adoption of this standard will not impact results of operations or financial condition. Forward Looking Statements Matters discussed in this annual report on Form 10-K contain estimates and forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934, including statements regarding the Company's expectations, hopes, intentions, beliefs or strategies regarding the future. All forward looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward looking statements. It is important to note that the Company's actual results could differ materially from those in such forward looking statements. Among the factors that could cause results to differ materially are weather, the Company's relationship with NASCAR, the motorsports sanctioning body, changes in state and local laws and regulations, the ability to keep purses at a competitive level and the ability to increase on-track and simulcast handle. ITEM 8.. . FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of the Company and the Independent Auditors' Reports included in this report are shown on the Index to the Consolidated Financial Statements on page 19. ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. In June 1996, the Board of Directors of the Company engaged KPMG Peat Marwick LLP as its outside auditors and notified Siegfried Schieffer & Seitz that the Company elected not to engage that firm to perform the 1996 audit. The reports of Siegfried Schieffer & Seitz on the Company's financial statements for 1994 and 1995 contained no disclaimers, adverse opinions, or qualifications or modifications as to uncertainty, audit scope or accounting principles. During the period of those audits and through the Company's decision in June 1996 to change auditors, there were no disagreements between the Company and Siegfried Schieffer & Seitz. ITEM 10. . DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Except as presented below, the information called for by this Item 10 is incorporated by reference from the Company's Proxy Statement to be filed pursuant to Regulation 14A for the Annual Meeting of Shareholders to be held on October 31, 1997. Executive Officers of the Registrant. As of June 30, 1997, the Executive Officers of the registrant were: Name Position Age Term of Office Robert M. Comollo Treasurer and Secretary 49 11/81 to date Timothy R. Horne Vice President-Finance 31 11/96 to date Michael B. Kinnard Vice President-General Counsel 39 6/94 to date Denis McGlynn President and 51 11/79 to date Chief Executive Officer John W. Rollins, Sr. Chairman of the Board 81 10/96 to date Eugene W. Weaver Senior Vice President- 64 10/96 to date Administration Vice President-Finance 1970 to 10/96 Robert M. Comollo has been employed by the Company for 17 years, of which 16 years have been in the capacity of Treasurer and Secretary. Timothy R. Horne became Vice President-Finance in November of 1996. From 1988 until 1996, Mr. Horne was employed by KPMG Peat Marwick LLP, where he most recently served as an assurance senior manager. Michael B. Kinnard has been Vice President-General Counsel to the Company since 1995. Mr. Kinnard also serves as Vice President-General Counsel and Secretary to Matlack Systems, Inc. and Vice President- General Counsel and Secretary to Rollins Truck Leasing Corp. Prior to 1995, Mr. Kinnard was a partner in the law firm of Baker, Worthington, Crossley, Stansberry & Woolf (now known as Baker, Donelson, Bearman & Caldwell). ITEM 11. EXECUTIVE COMPENSATION. The information called for by this Item 11 is incorporated by reference from the Company's Proxy Statement to be filed pursuant to Regulation 14A for the Annual Meeting of Shareholders to be held on October 31, 1997. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information called for by this Item 12 is incorporated by reference from the Company's Proxy Statement filed pursuant to Regulation 14A for the Annual Meeting of Shareholders to be held on October 31, 1997. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. During the year ended June 30, 1997, the following officers and/or directors of the Company were also officers and/or directors of Rollins Truck Leasing Corp.; Patrick J. Bagley, Michael B. Kinnard, John W. Rollins, John W. Rollins, Jr. and Henry B. Tippie. The following officers and/or directors of the Company were also officers and/or directors of Matlack Systems, Inc.; Patrick J. Bagley, Michael B. Kinnard, John W. Rollins, John W. Rollins, Jr. and Henry B. Tippie. John W. Rollins owns directly and of record 11.6% and 11.5% of the outstanding shares of common stock of Rollins Truck Leasing Corp. and Matlack Systems, Inc., respectively, at June 30, 1997. The description of transactions between the Company and Rollins Truck Leasing Corp. appears under the caption "Transactions with Related Parties" on page ___ of this 1997 Annual Report on Form 10-K. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Financial Statements, Financial Statement Schedules and Exhibits (1) Financial Statements - See accompanying Index to Consolidated Financial Statements on page 19. (2) Financial Statement Schedules - None. (3) Exhibits: Exhibit No. 2.1 Share Exchange Agreement and Plan of Reorganization dated June 14, 1996 between Dover Downs Entertainment, Inc., Dover Downs, Inc., Dover Downs International Speedway, Inc. and the shareholders of Dover Downs, Inc. as filed with the Company's Registration Statement Number 333-8147 on Form S-1 dated July 15, 1996, which was declared effective on October 3, 1996, is incorporated herein by reference. 3.1 Certificate of Incorporation of Dover Downs Entertainment, Inc., amended June 14, 1996, and further amended on June 28, 1996 as filed with the Company's Registration Statement Number 333-8147 on Form S-1 dated July 15, 1996, which was declared effective on October 3, 1996, is incorporated herein by reference. 3.2 Amended and Restated Bylaws of Dover Downs Entertainment, Inc. 4.2 Rights Agreement dated as of June 14, 1996 between Dover Downs Entertainment, Inc. and ChaseMellon Shareholder Services, L.L.C. as filed with the Company's Registration Statement Number 333-8147 on Form S-1 dated July 15, 1996, which was declared effective on October 3, 1996, is incorporated herein by reference. 10.1 Credit Agreement between PNC Bank and Dover Downs Entertainment, Inc. dated January 31, 1997 10.2 Dover Downs Entertainment, Inc. $20 Million Dollar Committed Line of Credit Note in favor of PNC Bank dated January 31, 1997 10.5 Guaranty and Suretyship Agreement dated July 31, 1996 in favor of PNC Bank as filed with the Company's Registration Statement Number 333-8147 on Form S-1 dated July 15, 1996, which was declared effective on October 3, 1996, is incorporated herein by reference. 10.7 Project Consulting and Management Agreement between Dover Downs, Inc. and Caesars World Gaming Development Corporation dated May 10, 1995 as filed with the Company's Registration Statement Number 333-8147 on Form S-1 dated July 15, 1996, which was declared effective on October 3, 1996, is incorporated herein by reference.(1) 10.9 Dover Downs Entertainment, Inc. 1996 Stock Option Plan as filed with the Company's Registration Statement Number 333- 8147 on Form S-1 dated July 15, 1996, which was declared effective on October 3, 1996, is incorporated herein by reference. 10.10 Dover Downs Entertainment, Inc. 1991 Stock Option Plan as filed with the Company's Registration Statement Number 333- 8147 on Form S-1 dated July 15, 1996, which was declared effective on October 3, 1996, is incorporated herein by reference. 10.11 NASCAR Sanction Application and Agreement Form, NASCAR Busch Series, Grand National Division, with Dover Downs International Speedway, Inc. dated December 17, 1996. 10.12 NASCAR Sanction Application and Agreement Form, NASCAR Winston Cup Series, with Dover Downs International Speedway, Inc. dated December 17, 1996. 21.1 Subsidiaries 27 Financial Data Schedule __________________________ (1) Portions of this exhibit have been deleted pursuant to the Company's request for confidential treatment pursuant to Rule 406 promulgated under the Securities Act of 1993. (b) Reports on Form 8-K A Form 8-K was filed by Dover Downs Entertainment, Inc. on July 17, 1997 to disclose that the Company had changed its fiscal year from July 31 to June 30. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DATED: September 5, 1997 DOVER DOWNS ENTERTAINMENT, INC. Registrant BY:_____________________________________ Denis McGlynn President and Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: ________________________ Vice President-Finance _______________ Timothy R. Horne ________________________ Chairman of the Board _______________ John W. Rollins _______________________ Vice Chairman of the Board ______________ Henry B. Tippie _______________________ Senior Vice President- ______________ Eugene W. Weaver Administration and Director _______________________ Director ______________ John W. Rollins, Jr. _______________________ Director ______________ Patrick J. Bagley SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DATED: September 5, 1997 DOVER DOWNS ENTERTAINMENT, INC. Registrant BY:/s/ Denis McGlynn Denis McGlynn President and Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: /s/ Timothy R. Horne Vice President-Finance September 5, 1997 Timothy R. Horne /s/ John W. Rollins Chairman of the Board September 5, 1997 John W. Rollins /s/ Henry B. Tippie Vice Chairman of the Board September 5, 1997 Henry B. Tippie /s/ Eugene W. Weaver Senior Vice President- September 5, 1997 Eugene W. Weaver Administration and Director /s/ John W. Rollins, Jr. Director September 5, 1997 John W. Rollins, Jr. /s/ Patrick J. Bagley Director September 5, 1997 Patrick J. Bagley INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page(s) Independent Auditors' Reports on Financial Statements 20 & 21 Consolidated Statement of Earnings for the years ended June 30, 1997, 1996 and 1995 22 Consolidated Balance Sheet at June 30, 1997, 1996 and 1995 23 Consolidated Statement of Cash Flows for the years ended June 30, 1997, 1996 and 1995 25-26 Notes to Consolidated Financial Statements 27-35 The Board of Directors and Shareholders of Dover Downs Entertainment, Inc. We have audited the accompanying consolidated statements of earnings and cash flows of Dover Downs Entertainment, Inc. and its subsidiaries for the year ended June 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Dover Downs Entertainment, Inc. and its subsidiaries for the year ended June 30, 1995 in conformity with generally accepted accounting principles. Siegfried Schieffer & Seitz Wilmington, DE August 18, 1997 The Board of Directors and Shareholders of Dover Downs Entertainment, Inc.: We have audited the accompanying consolidated balance sheet of Dover Downs Entertainment, Inc. and subsidiaries as of June 30, 1997 and 1996, and the related consolidated statements of earnings and of cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dover Downs Entertainment, Inc. and subsidiaries as of June 30, 1997 and 1996 and the results of their operations and their cash flows for the two years then ended, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Philadelphia, Pennsylvania July 18, 1997 CONSOLIDATED STATEMENT OF EARNINGS Year ended June 30, 1997 1996 1995 Revenues: Motorsports $ 20,516,000 $18,110,000 $16,282,000 Gaming 81,162,000 31,980,000 1,250,000 Total revenues 101,678,000 50,090,000 17,532,000 Expenses: Operating 68,559,000 30,699,000 7,397,000 Depreciation 2,084,000 1,469,000 1,043,000 General and administrative 3,065,000 2,073,000 1,705,000 73,708,000 34,241,000 10,145,000 Operating earnings 27,970,000 15,849,000 7,387,000 Interest (income) expense (269,000) 256,000 148,000 Earnings before income taxes 28,239,000 15,593,000 7,239,000 Income taxes 11,767,000 6,397,000 2,955,000 Net earnings $ 16,472,000 $ 9,196,000 $ 4,284,000 Earnings per common share $ 1.08 $ .63 $ .30 Weighted average common shares and common share equivalents outstanding 15,275,000 14,511,000 14,511,000 The Notes to the Consolidated Financial Statements are an integral part of these statements. CONSOLIDATED BALANCE SHEET June 30, 1997 1996 ASSETS Current assets: Cash and cash equivalents $15,503,000 $ 3,140,000 Accounts receivable 1,613,000 1,221,000 Due from State of Delaware 1,983,000 901,000 Inventories 402,000 356,000 Prepaid expenses 775,000 533,000 Deferred income taxes 124,000 56,000 Total current assets 20,400,000 6,207,000 Property, plant and equipment, at cost Land 10,563,000 9,481,000 Casino facility 11,566,000 6,442,000 Racing facility 38,546,000 28,872,000 Machinery and equipment 5,357,000 4,101,000 Furniture and fixtures 573,000 413,000 Construction in progress 83,000 538,000 66,688,000 49,847,000 Less accumulated depreciation (15,827,000) (13,743,000) 50,861,000 36,104,000 Total assets $71,261,000 $42,311,000 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable to bank $ - $ 3,500,000 Accounts payable 1,860,000 1,189,000 Purses due horsemen 1,387,000 1,436,000 Accrued liabilities 2,280,000 2,368,000 Income taxes payable 2,507,000 2,836,000 Current portion of long-term debt 19,000 22,000 Deferred revenue 7,542,000 6,003,000 Total current liabilities 15,595,000 17,354,000 Long-term debt 760,000 766,000 Deferred income taxes 606,000 476,000 Commitments (see Notes to the Consolidated Financial Statements) Shareholders' equity: Preferred stock, $.10 par value; 1,000,000 shares authorized; issued and outstanding: none Common stock, $.10 par value; 35,000,000 shares authorized; issued and outstanding: 1997-2,939,000; 1996-none 294,000 - Class A common stock, $.10 par value; 30,000,000 shares authorized; issued and outstanding: 1997-12,286,830 shares; 1996-13,925,830 shares 1,229,000 1,393,000 Additional paid-in capital 21,081,000 4,669,000 Retained earnings 31,696,000 17,653,000 Total shareholders' equity 54,300,000 23,715,000 Total liabilities and shareholders' equity $71,261,000 $42,311,000 The Notes to the Consolidated Financial Statements are an integral part of these statements. CONSOLIDATED STATEMENT OF CASH FLOWS Years ended June 30,
1997 1996 1995 Cash flows from operating activities: Net earnings $16,472,000 $ 9,196,000 $4,284,000 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 2,084,000 1,469,000 1,043,000 Loss on disposition of property - - 135,000 (Increase) decrease in assets: Accounts receivable (392,000) 48,000 (418,000) Due from affiliate - 333,000 44,000 Due from State of Delaware (1,082,000) (901,000) - Inventories (46,000) (250,000) 17,000 Prepaid expenses (242,000) (39,000) (205,000) Increase (decrease) in liabilities: Accounts payable 671,000 152,000 (542,000) Purses due horsemen (49,000) 1,436,000 - Accrued liabilities (88,000) 1,497,000 (668,000) Current and deferred income taxes (267,000) 1,927,000 (146,000) Deferred revenue 1,539,000 449,000 1,258,000 Net cash provided by operating activities 18,600,000 15,317,000 4,802,000 Cash flows from investing activities: Sale of short-term investments - 3,200,000 3,038,000 Capital expenditures (16,841,000) (18,936,000) (6,166,000) Net cash used in investing activities (16,841,000) (15,736,000) (3,128,000) Cash flows from financing activities: Short-term borrowings (repayments) (3,500,000) 3,500,000 - Repayment of long-term debt (9,000) (786,000) (77,000) Repayment to shareholder _ (200,000) (1,016,000) Net proceeds from initial public offering 16,360,000 - - Dividends paid (2,429,000) - - Proceeds from stock options exercised, including related tax benefit 182,000 294,000 18,000 Net cash provided by (used in) financing activities 10,604,000 2,808,000 (1,075,000) Net increase in cash and cash equivalents 12,363,000 2,389,000 599,000 Cash and cash equivalents, beginning of year 3,140,000 751,000 152,000 Cash and cash equivalents, end of year $15,503,000 $ 3,140,000 $ 751,000 Supplemental disclosures of cash flow information: Interest paid $ 168,000 $ 373,000 $1,173,000 Income taxes paid $12,034,000 $ 4,413,000 $3,113,000 Non-cash investing and financing activities: Land acquired $ 1,300,000 Cash paid (500,000) Mortgage incurred $ 800,000 The Notes to the Consolidated Financial Statements are an integral part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1-Business Operations Dover Downs Entertainment, Inc. (the Company or Dover Downs) owns and operates the Dover Downs International Speedway and the Dover Downs Raceway at a multi-purpose gaming and entertainment complex located on approximately 825 acres owned by the Company in Dover, Delaware. The Company hosts a variety of NASCAR-sanctioned events and harness horse racing events throughout the year. With expanded facilities completed at the end of 1995, the Company is now open 363 days per year both for video lottery (slot) machine gaming and for pari-mutuel wagering on simulcast harness and thoroughbred horse races across the country. Video lottery (slot) machine gaming began on December 29, 1995 pursuant to video lottery legislation enacted in the State of Delaware. Dover Downs, Inc. is authorized to conduct video lottery operations as a "Licensed Agent" under the Delaware State Lottery Code. Pursuant to Delaware's Horse Racing Redevelopment Act, enacted in 1994, the Delaware State Lottery Office administers and controls the operation of the video lottery operations. Unless the Act is extended or reenacted, it will terminate on March 15, 2000, in which event the Company will be required to discontinue its video lottery operations. In addition, under the Act, no payments can be made to Dover Downs beyond December 29, 1998 unless new legislation is enacted, in which event the Company would be required to discontinue its video lottery operations. The video lottery operations account for a significant portion of the Company's revenues and operating earnings. For the video lottery operations, the difference between the amount wagered by bettors and the amount paid out to bettors is referred to as the win. The win is included in the amount recorded in the Company's financial statements as gaming revenue. The Delaware State Lottery Office sweeps the winnings from the video lottery operations, collects the State's share of the winnings and the amount due to the vendors under contract with the State who provide the video lottery machines and associated computer systems, collects the amount allocable to purses for harness horse racing, and remits the remainder to the Company as its commission for acting as a Licensed Agent. Operating expenses include the amounts collected by the State (i) for the State's share of the winnings, (ii) for remittance to the providers of the video lottery machines and associated computer systems, and (iii) for harness horse racing purses. The Company's license from the Delaware Harness Racing Commission must be renewed on an annual basis. In order to maintain its license to conduct video lottery operations, the Company is required to maintain its harness horse racing license. Due to the nature of the Company's business activities, it is subject to various federal, state and local regulations. NOTE 2-Reorganization On June 14, 1996, Dover Downs Entertainment, Inc. effected a tax-free restructuring pursuant to which all former shareholders of Dover Downs, Inc. exchanged each share of common stock held in Dover Downs, Inc. for 4,500 shares of Class A Common Stock of the Company. As a result of this share exchange, Dover Downs, Inc. became a wholly-owned subsidiary of the Company and the former shareholders of Dover Downs, Inc. acquired an equal percentage of the equity of the Company. As part of the restructuring, the Company acquired by dividend from Dover Downs, Inc. all of the outstanding capital stock of Dover Downs International Speedway, Inc. (which was not operational), and the motorsports operation of Dover Downs, Inc. was transferred to Dover Downs International Speedway, Inc. Additionally, in June 1996, the Company formed Dover Downs Properties, Inc. for the initial purpose of holding some or all of the real estate of the Company. This reorganization has been accounted for on an as if pooled basis. All common share and per share amounts have been restated to give effect to the reorganization assuming the transaction had occurred on June 30, 1994. Results of operations for all prior years were not affected by the reorganization. On July 14, 1997, the Company changed its fiscal year-end from July 31 to June 30 and has restated the results for the three years ended June 30, 1997. Certain amounts in the 1996 and 1995 consolidated financial statements have been reclassified to conform to the 1997 presentation. The change in year-end did not have a significant effect upon previously reported earnings. NOTE 3-Summary of Significant Accounting Policies Consolidation-The consolidated financial statements include the accounts of all subsidiaries. Intercompany transactions and balances among these subsidiaries have been eliminated. Revenue and expense recognition-Tickets to motorsports races are sold and certain expenses are incurred in advance of the race date. Such advance sales and corresponding expenses are recorded as deferred revenue and prepaid expenses, respectively, until the race is held. Gaming revenues represent the net win from video lottery (slot) machine wins and losses and commissions from pari-mutuel wagering. Payments to the State of Delaware pursuant to the lottery legislation are reported in operating expenses. Advertising costs-Subsequent to the opening of the Company's casino facility in December of 1995, all advertising costs are expensed as incurred. Earnings per share-Earnings per common share are computed assuming the conversion of all potentially dilutive outstanding stock options, using the treasury stock method. Cash and cash equivalents-The Company considers as cash equivalents all highly liquid investments with an original maturity of three months or less. Pre-opening costs-The Company deferred costs in the amount of $760,000 associated with the opening of its new casino facility in fiscal 1996. Such costs were principally related to the wages and fringe benefits of newly hired personnel during a training period prior to opening, casino management and consulting fees, advertising and promotional expenses and supply items. All such costs were amortized during the period from the casino's opening on December 29, 1995 through July 31, 1996 in order to match such costs with associated gaming revenues. Pre-opening costs deferred at June 30, 1996 were $108,000. Inventories-Inventories, primarily items held for sale at concession and novelty stands, are stated at the lower of cost or market with cost being determined on the first-in, first-out (FIFO) basis. Property, plant and equipment-Property, plant and equipment is stated at cost. Depreciation is computed on a straight-line basis over the following estimated useful lives: Racing and casino facilities 10 - 40 years Machinery and equipment 5 - 10 years Furniture and fixtures 5 years Income taxes-Deferred income taxes are provided in accordance with the provisions of Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes" on all differences between the tax bases of assets and liabilities and their reported amounts in the financial statements based upon enacted statutory tax rates in effect at the balance sheet date. Use of estimates-The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Values of Financial Instruments-The carrying amount reported in the balance sheet for current assets and current liabilities approximates their fair value at June 30, 1997. Recently Adopted Accounting Standards-The Company adopted the provisions of SFAS No. 123, Accounting for Stock-Based Compensation, on July 1, 1996. SFAS No. 123 defines a fair-value based method of accounting for stock-based compensation plans, however, it allows the continued use of the intrinsic value method under Accounting Principles Board Opinion, No. 25, Accounting for Stock Issued to Employees. The Company has elected to continue to use the intrinsic value method. NOTE 4-Indebtedness The Company has an annually renewable, $20,000,000 committed revolving line of credit from a bank to satisfy seasonal funding needs and to finance capital improvements. The Company must pay an annual commitment fee of 7.5 basis points on the average unused portion of the commitment and interest monthly on amounts outstanding at the bank's prime minus three-quarters of one percent. There were no amounts outstanding at June 30, 1997. Long-term debt consists of an 8% mortgage note payable in quarterly principal and interest installments through January 2006, and collateralized by land with a carrying value of $1,300,000. The mortgage note matures as follows: 1998-$19,000; 1999-$20,000; 2000-$22,000; 2001-$24,000; 2002-$26,000; and thereafter $668,000. NOTE 5-Income Taxes The current and deferred income tax provisions are as follows: Years ended June 30, 1997 1996 1995 Current: Federal $ 9,207,000 $4,971,000 $2,306,000 State 2,498,000 1,329,000 631,000 11,705,000 6,300,000 2,937,000 Deferred: Federal 49,000 81,000 14,000 State 13,000 16,000 4,000 62,000 97,000 18,000 Total income taxes $11,767,000 $6,397,000 $2,955,000 Deferred income taxes relate to the temporary differences between financial accounting income and taxable income and are primarily attributable to depreciation using different methods for tax purposes. A reconciliation of the effective income tax rate with the applicable statutory federal income tax rate is as follows: Years ended June 30, 1997 1996 1995 Federal tax at statutory rate 35.0% 35.0% 34.0% State taxes, net of federal benefit 5.7% 5.7% 5.7% Other 1.0% .3% 1.1% Effective income tax rate 41.7% 41.0% 40.8% NOTE 6-Pension Plan Prior to August 1, 1996, the Company participated in a multiple employer defined-benefit pension plan covering substantially all full-time employees. On August 1, 1996, the Dover Downs Entertainment, Inc. Pension Plan was established and the related assets were transferred from the multiple employer pension plan to the new Dover Downs Entertainment, Inc. Trust. The provisions of the Dover Downs Entertainment, Inc. Pension Plan are identical to those of the aforementioned multiple employer defined-benefit pension plan. Plan benefits are based on years of service and employees' remuneration over their employment with the Company. Pension costs are funded in accordance with the provisions of the Internal Revenue Code. The following table sets forth the plan's funded status and amounts recognized in the Company's consolidated balance sheet at June 30, 1997: Actuarial present value of accumulated benefit obligation: Vested $ 289,254 Non-vested 41,570 $ 330,824 Projected benefit obligation $ 530,761 Plan assets at market value 463,844 Funded status (66,917) Unrecognized net gain (35,760) Unrecognized prior service cost 205,442 Prepaid pension cost $ 102,765 At June 30, 1997, the assets of the plan were invested 81% in equity securities, 18% in fixed income securities and the balance in other short-term interest-bearing accounts. The discount rate and the assumed rate of compensation increase were 8% and 5%, respectively. The expected long-term rate of return on assets was 9% for 1997. The components of net periodic pension cost for 1997 are as follows: Service cost $ 61,129 Interest cost 32,087 Return on plan assets (68,385) Net amortization 16,416 Deferral of net gain 35,760 $ 77,007 Net periodic pension costs for 1996 and 1995 were $24,000 and $32,000, respectively. The Company also maintains a nonqualified, noncontributory defined benefit pension plan for certain employees to restore pension benefits reduced by federal income tax regulations. The cost associated with the plan is determined using the same actuarial methods and assumptions as those used for the Company's qualified pension plan. The Company also maintains a defined contribution 401(k) plan which permits participation by substantially all employees. NOTE 7-Shareholders' Equity Changes in the components of shareholders' equity are as follows:
$.10 Par $.10 Par Value Value Class A Additional Common Common Paid-in Retained Stock Stock Capital Earnings Balance at June 30, 1994 $ - $1,371,000 $ 4,379,000 $ 4,173,000 Net earnings 4,284,000 Issuance of common stock 1,000 17,000 Balance at June 30, 1995 - 1,372,000 4,396,000 8,457,000 Net earnings 9,196,000 Exercise of stock options 21,000 171,000 Tax benefit related to stock option plans 102,000 Balance at June 30, 1996 - 1,393,000 4,669,000 17,653,000 Net earnings 16,472,000 Issuance of common stock, net 288,000 (180,000) 16,252,000 Dividends on common stock, $.16 per share (2,429,000) Exercise of stock options 22,000 160,000 Conversion of Class A shares 6,000 (6,000) Balance at June 30, 1997 $ 294,000 $1,229,000 $21,081,000 $31,696,000
Holders of Common Stock have one vote per share and holders of Class A Common Stock have ten votes per share. Shares of Class A Common Stock are convertible at any time into shares of Common Stock on a share for share basis at the option of the holder thereof. Dividends on Class A Common Stock cannot exceed dividends on Common Stock on a per share basis. Dividends on Common Stock may be paid at a higher rate than dividends on Class A Common Stock. The terms and conditions of each issue of Preferred Stock are determined by the Board of Directors. No Preferred shares have been issued. The Company has adopted Rights Plans with respect to its Common Stock and Class A Common Stock which include the distribution of Rights to holders of such stock. The Rights entitle the holder, upon the occurrence of certain events, to purchase additional stock of the Company. The Rights are exercisable if a person, company or group acquires 10% or more of the outstanding combined equity of Common Stock and Class A Common Stock or engages in a tender offer. The Company is entitled to redeem each Right for one cent. On October 3, 1996, the Company completed its initial public offering. The Company issued 1,075,000 shares of the Company's Common Stock and received proceeds of approximately $16,360,000, net of issuance costs of approximately $1,913,000. The Company has two stock option plans pursuant to which the Company's Board of Directors may grant stock options to officers and key employees at not less than 100% of the fair market value at the date of the grant. Options granted under the 1991 Stock Option Plan are exercisable for Class A Common Stock while options granted under the 1996 Stock Option Plan are exercisable for Common Stock. The 1991 Stock Option Plan has been amended so that no additional options may be granted thereunder. The 1991 and 1996 stock options have 7 and 8 year terms, respectively, and generally vest equally over a period of 5 and 6 years from the date of grant, respectively. In all other material respects, the 1991 Stock Option Plan is structured the same as the 1996 Stock Option Plan. The Company applies APB Opinion No. 25 and related interpretations in accounting for its stock option plans. Accordingly, no compensation cost has been recognized for its stock option plans. For disclosure purposes, the Company determined compensation cost for its stock options based upon the fair value at the grant date using the Black Scholes option-pricing model with the following assumptions: expected dividend yield - .46%, risk-free interest rate - 5.3%, an expected life of six years and volatility of 26%. Had compensation cost been recognized in accordance with SFAS No. 123, the Company's earnings per share disclosed in the basic financial statements would be reduced by less than $.01 per share in 1997 and 1996. Option activity is as follows: June 30 1997 1996 1995 Number of options: Outstanding at beginning of year 585,000 787,500 225,000 Granted 112,764 - 562,500 Exercised (225,000) (202,500) - Outstanding at June 30 472,764 585,000 787,500 At June 30: Options available for grant 637,236 750,000 - Options exercisable 22,500 90,000 135,000 Weighted Average Exercise Price Options granted $17.13 - $1.33 Options exercised $ .81 $ .95 - Options outstanding $ 5.10 $1.13 $1.08 Options exercisable $ 1.33 $ .46 $ .46 NOTE 8-Related Party Transactions In prior years, management services were provided to a company principally-owned by the majority shareholder. Management fees for the years ended June 30, 1995 and 1996 were $176,000 and $122,000,respectively. At June 30, 1995 accounts receivable due from related party were $333,000 related to such services. There was no balance due the Company at June 30, 1996 or 1997 as the management service agreement was cancelled. In June 1996, the Company acquired for cash several tracts of undeveloped land comprising a total of 206 acres for $6,200,000 from a company wholly-owned by the majority shareholder. The purchase price was determined on the basis of an independent appraisal performed in 1996. During the year ended June 30, 1997 and 1996, the Company purchased certain paving, site work and construction services involving total payments of $584,000 and $586,000 from a company wholly-owned by an employee/director. The Company purchased administrative services from Rollins Truck Leasing Corp. and affiliated companies in 1997 and 1996. The total cost of these services, which have been included in general and administrative expenses in the Consolidated Statement of Earnings, was $178,000 and $36,000 in 1997 and 1996, respectively. In the opinion of management of the Company, the foregoing transactions were effected at rates which approximate those which the Company would have realized or incurred had such transactions been effected with independent third parties. NOTE 9-Business Segment Information The Company's operations are in motorsports and gaming. Revenues, operating earnings, identifiable assets, capital expenditures and depreciation pertaining to these business segments are presented below: Motorsports Gaming Consolidated Year ended June 30, 1997 Revenue $20,516,000 $81,162,000 $101,678,000 Operating earnings 11,079,000 16,891,000 27,970,000 Identifiable assets at year-end 34,801,000 36,460,000 71,261,000 Capital expenditure 9,496,000 7,345,000 16,841,000 Depreciation $ 981,000 $ 1,103,000 $ 2,084,000 Year ended June 30, 1996 Revenue $18,110,000 $31,980,000 $ 50,090,000 Operating earnings 10,040,000 5,809,000 15,849,000 Identifiable assets at year-end 26,489,000 15,822,000 42,311,000 Capital expenditures 10,119,000 8,817,000 18,936,000 Depreciation $ 952,000 $ 517,000 $ 1,469,000 Year ended June 30, 1995 Revenue $16,282,000 $ 1,250,000 $ 17,532,000 Operating earnings (loss) 8,372,000 (985,000) 7,387,000 Identifiable assets at year-end 17,109,000 6,363,000 23,472,000 Capital expenditures 5,749,000 417,000 6,166,000 Depreciation $ 712,000 $ 331,000 $ 1,043,000 NOTE 10-Commitments In May 1995, Dover Downs, Inc., a subsidiary of the Company, entered into a long-term management agreement with Caesars World Gaming Development Corporation (Caesars). The initial term of the agreement expires in December 1998 and Caesars has two additional three-year renewal options which Dover Downs may void if certain financial results are not achieved. Caesars acts as the exclusive agent to supervise, market, manage and operate the Company's video lottery operations. Caesars has been properly licensed by the Delaware State Lottery Office to perform these functions. Caesars' performance-based fee for such services was $5,184,908 in fiscal 1997 and $2,260,909 in fiscal 1996. Amounts due to Caesars at June 30, 1997 and 1996 totaled $431,464 and $401,117, respectively and are included in accrued liabilities. The Company currently holds licenses to conduct four NASCAR-sanctioned events in 1997 (two of which were held in June 1997 and two of which will be held in September 1997). NASCAR sanctions are issued on an annual basis and require the payment of sanction fees, prize money and point funds to NASCAR. The Company has held NASCAR-sanctioned events for 29 consecutive years. Nonrenewal of a NASCAR event license would have a material adverse effect on the Company's financial condition and results of operations. NOTE 11-Quarterly Results (unaudited)
September 30 December 31 March 31 June 30 1997 Revenues $27,226 $17,246 $21,684 $35,522 Gross profit 10,624 2,836 4,548 13,027 Net earnings 5,659 1,291 2,322 7,200 Earnings per common share $ .39 $ .08 $ .15 $ .46 1996 Revenues $ 8,632 $ 980 $14,482 $25,996 Gross profit (loss) 5,165 (488) 3,339 9,906 Net earnings (loss) 2,913 (644) 1,682 5,245 Earnings (loss) per common share $ .20 $ (.04) $ .11 $ .36
EX-3 2 BY-LAWS OF DOVER DOWNS ENTERTAINMENT, INC. ------------------------------------------------------------------ ARTICLE I The Corporation Section 1.1 Name. The title of this Corporation is Dover Downs Entertainment, Inc. Section 1.2 Office. The registered office of this Corporation shall be located at P. O. Box 843, Dover, Delaware, or at such other place as the Board of Directors may designate in accordance with Section 133 of the Delaware Corporation Law. Section 1.3 Seal. The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation and the year of its creation (1994) and the words "Incorporated Delaware". ARTICLE II Stockholders Section 2.1 Annual Meeting. The annual meeting of stockholders shall be held at such place within or without the State of Delaware as the Board of Directors from time to time determine. A majority of the amount of the stock issued and outstanding and entitled to vote shall constitute a quorum for the transaction of all business, except as otherwise provided by law, the charter of the corporation or these by-laws. Each stockholder of Common Stock shall be entitled to one vote and each stockholder of Class A Common Stock shall be entitled to ten votes, either in person or by proxy, for each share of stock standing registered in his or her name on the books of the Corporation on the record date selected by the Board of Directors in accordance with these by-laws, unless different voting is, by law or by the terms of the instrument creating special or preferred shares, conferred upon the holders thereof. Notice of the annual meeting shall be mailed by the Secretary to each stockholder at his or her last known post office address no less than ten days and no more than sixty days prior thereto. Section 2.2 Special Meetings. Special meetings of stockholders for any purpose or purposes may be called at any time by the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, the Chairman of the Executive Committee or the President and not by any other person. Section 2.3 Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. Section 2.4 Adjournments. Any meeting of the stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 2.5 Quorum. At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation or these by-laws, the holders of a majority of the outstanding shares of stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum. In the absence of a quorum, the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided in Section 2.4 of these by-laws until a quorum shall attend. Section 2.6 Organization. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in his absence by the Vice Chairman of the Board, if any, or in his absence by the President, or in his absence by the Chairman of the Executive Committee, if any, or in his absence by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.7 Voting; Proxies. Unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock of Common Stock and ten votes for each share of Class A Common Stock held by such shareholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy at such meeting shall so determine. At all meetings of stockholders for the election of directors a plurality of the votes cast shall be sufficient to elect. All other elections and questions shall, unless otherwise provided by law or by the certificate of incorporation or these by-laws, be decided by the vote of the holders of a majority of the outstanding shares of stock entitled to vote thereon present in person or by proxy at the meeting, provided that (except as otherwise required by law or by the certificate of incorporation or these by-laws) the Board of Directors may require a larger vote upon any election or question. Section 2.8 Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion of exchange or stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 2.9 List of Stockholders Entitled To Vote. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. Section 2.10 Action by Consent Of Stockholders. Unless prohibited by law or the rules and regulations of any national securities exchange on which securities of the Corporation are listed, action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and stockholders shall have the power to consent in writing, without a meeting, to the taking of any action. ARTICLE III Board of Directors Section 3.1 Number; Qualifications. The Board of Directors shall consist up to nine members. Directors need not be stockholders. Section 3.2 Election; Resignation; Removal; Vacancies. At each annual meeting of stockholders, the stockholders shall elect Directors to replace those Directors whose terms then expire. Any Director may resign at any time upon written notice to the Corporation. Stockholders may remove Directors only for cause. Any vacancy occurring in the Board of Directors for any cause may be filled only by the Board of Directors, acting by vote of a majority of the Directors then in office, although less than quorum. Each Director so elected shall hold office until the expiration of the term of office of the Director whom he has replaced. Section 3.3 Notice Of Nomination Of Directors. Nominations for the election of directors may be made by the Chairman acting on behalf of the Board of Directors or by any stockholder entitled to vote for the election of directors. Such nominations shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation not less than fourteen days nor more than sixty days prior to any meeting of the stockholders called for the election of directors; provided, however, that if less than twenty-one days' notice of the meeting is given to stockholders, such written notice shall be delivered or mailed, as prescribed, to the Secretary of the Corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to stockholders. Notice of nominations which are proposed by the Board of Directors shall be given by the Chairman on behalf of the Board. Each such notice shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee and (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee. The Chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Section 3.4 Non-Discrimination Statement. Consistent with the Corporation's equal employment opportunity policy, nominations for the election of directors shall be made by the Board of Directors and accepted from stockholders in a manner consistent with these By-Laws and without regard to the nominee's race, color, ethnicity, religion, sex, age, national origin, veteran status, handicap or disability. Section 3.5 Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board of Directors may from time to time determine, and if so determined notices thereof need not be given. Section 3.6 Special Meetings. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, the Chairman of the Executive Committee, or by the President. Reasonable notice thereof shall be given by the person calling the meeting, not later than the second day before the date of the special meeting. Section 3.7 Telephonic Meetings Permitted. Members of the Board of Directors, or any committee designated by the Board, may participate in any meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting. Section 3.8 Quorum; Vote Required For Action; Informal Action. At all meetings of the Board of Directors a majority of the whole Board shall constitute a quorum for the transaction of business. Except in cases in which the certificate of incorporation or these by-laws otherwise provide, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board or committee. Section 3.9 Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in his absence by the Vice Chairman of the Board, if any, or in his absence by the President, or in his absence by the Chairman of the Executive Committee, if any, or in his absence by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as a secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 3.10 Compensation Of Directors. The Directors and members of standing committees shall receive such fees or salaries as fixed by resolution of the Executive Committee and in addition will receive expenses in connection with attendance or participation in each regular or special meeting. ARTICLE IV Committees Section 4.1 Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have power or authority in reference to amending the certificate of incorporation of the Corporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange or all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of dissolution, or amending these by-laws. The Board of Directors shall, at the annual organization meeting thereof, elect an Executive Committee which shall consist of not more than four members, all of whom shall be members of the Board of Directors. The Executive Committee shall have and may exercise all of the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation to the fullest extent permitted by law (as presently allowed under Section 141 (c) to the Delaware General Corporation Law as revised effective July 1, 1996, and as may be allowed in the future pursuant to amendments or revisions to applicable law). Section 4.2 Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article III of these by-laws. ARTICLE V Officers Section 5.1 Executive Officers; Election; Qualifications; Term of Office; Resignation; Removal; Vacancies. The officers of the Corporation shall consist of a Chairman, Vice Chairmen, President, Vice Presidents, Secretary, Assistant Secretaries, Treasurer, Assistant Treasurers, General Counsel, and such other officers as may from time to time be elected or appointed by the Board of Directors. The President shall be elected from the Board of Directors. Any officer may resign at any time upon written notice to the Corporation. The Board of Directors may remove any officer with or without cause at any time, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation. Any number of offices may be held by the same person, except that the offices of President and Chairman of the Board shall be separate. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting. In the absence of any officer, the Board of Directors may delegate his power and duties to any other officer or to any director for the time being. Section 5.2 President. The President shall be the Chief Executive Officer of the Corporation, shall execute in the name of the Corporation all contracts and agreements authorized by the Board or the Executive Committee, and shall affix the seal to any instrument requiring the same, which shall always be attested by the signature of the President, the Vice President or the Secretary or any Assistant Secretary or the Treasurer. He may sign certificates of stock; he shall have general supervision and direction of all the other officers of the Corporation; he shall submit a complete report of the operations and condition of the Corporation for the year to the Chairman and to the directors at their regular meetings, and from time to time shall report to the directors all matters which the interest of the Corporation may require to be brought to their notice. He shall have the general powers and duties usually vested in the office of a President of a corporation. Section 5.3 Vice President - Finance. The Vice President - Finance shall be the Chief Accounting and Chief Financial Officer of the Corporation and shall be responsible to the Board of Directors, the Executive Committee and the President for all financial control and internal audit of the Corporation and its subsidiaries. He shall perform such other duties as may be assigned to him by the Board of Directors, the Executive Committee or the President. Section 5.4 Vice Presidents. The Vice Presidents elected or appointed by the Board of Directors shall perform such duties and exercise such powers as may be assigned to them from time to time by the Board of Directors, the Executive Committee or the President. In the absence or disability of the President, the Vice President designated by the Board of Directors, the Executive Committee, or the President shall perform the duties and exercise the powers of the President. A Vice President may sign and execute contracts and other obligations pertaining to the regular course of his duties. Section 5.5 Secretary. The Secretary shall be ex-officio Secretary of the Board of Directors and of the standing committees. He shall attend all sessions of the Board, act as clerk thereof, record all votes and keep the minutes of all proceedings in a book to be kept for that purpose. He shall perform like duties for the standing committees when required. He shall see that the proper notices are given of all meetings of stockholders and directors, and perform such other duties as may be prescribed from time to time by the Board of Directors, the Executive Committee, the Chairman or the President, and shall be sworn to the faithful discharge of his duties. He shall keep the accounts of stock registered and transferred in such form and manner and under such regulations as the Board of Directors or Executive Committee may prescribe. Section 5.6 Treasurer. The Treasurer shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors or Executive Committee. He shall disburse the funds of the Corporation as may be ordered by the Board, the Executive Committee or the President, taking proper vouchers therefor, and shall render to the President and the Executive Committee and Directors, whenever they may require it, an account of all his transactions as Treasurer, and of the financial condition of the Corporation, and at the annual organization meeting of the Board a like report for the preceding year. Section 5.7 General Counsel. The General Counsel shall be the legal adviser of the Corporation and shall perform such services as the Chairman, President, Board of Directors or Executive Committee may require. ARTICLE VI Stock Section 6.1 Certificates. Every holder of stock shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the President of the Corporation, certifying the number of shares owned by him in the Corporation. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate, shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Section 6.2 Lost, Stolen Or Destroyed Stock Certificates; Issuance Of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. ARTICLE VII Indemnification Section 7.1. General. The Company shall indemnify, and advance Expenses (as hereinafter defined) to, Indemnitee (as hereinafter defined) to the fullest extent permitted by applicable law in effect on the adoption of these By-Laws, and to such greater extent as applicable law may thereafter from time to time permit. The rights of Indemnitee provided under the preceding sentence shall include, but shall not be limited to, the rights set forth in the other Sections of this Article. Section 7.2. Proceedings Other Than Proceedings By Or In The Right Of The Company. Indemnitee shall be entitled to the indemnification rights provided in this Section 7.2 if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to any threatened, pending, or completed Proceeding (as hereinafter defined), other than a Proceeding by or in the right of the Company. Pursuant to this Section 7.2, Indemnitee shall be indemnified against Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful. Section 7.3. Proceedings By Or In The Right Of The Company. Indemnitee shall be entitled to the indemnification rights provided in this Section 7.3 to the fullest extent permitted by law if, by reason of his Corporate Status, he is, or is threatened to be made, a party to any threatened, pending or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 7.3, Indemnitee shall be indemnified against Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Company. Section 7.4. Indemnification For Expenses Of A Party Who Is Wholly Or Partly Successful. Notwithstanding any other provision of this Article, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. Section 7.5. Indemnification For Expenses Of A Witness. Notwithstanding any other provision of this Article, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. Section 7.6. Advancement Of Expenses. The Company shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding within twenty days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Section 7.7. Procedure For Determination Of Entitlement To Indemnification. (a) To obtain indemnification under this Article, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The determination of Indemnitee's entitlement to indemnification shall be made not later than 60 days after receipt by the Company of the written request for indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification. (b) Indemnitee's entitlement to indemnification under any of Sections 7.2, 7.3 or 7.4 of this Article shall be determined in the specific case: (i) by the Board of Directors by a majority vote of a quorum of the Board consisting of Disinterested Directors (as hereinafter defined); or (ii) by Independent Counsel (as hereinafter defined), in a written opinion, if (A) a Change of Control (as hereinafter defined) shall have occurred and Indemnitee so requests, or (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs; or (iii) by the stockholders of the Company; or (iv) as provided in Section 7.8 of this Article. (c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 7.7(b) of this Article, the Independent Counsel shall be selected as provided in this Section 7.7(c). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred, and if so requested by Indemnitee in his written request for indemnification, the Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within 7 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 7.13 of this Article, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, the Independent Counsel so selected shall be disqualified from acting as such. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 7.7(a) hereof, no Independent Counsel shall have been selected, or if selected shall have been objected to, in accordance with this Section 7.7(c), either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person so appointed shall act as Independent Counsel under Section 7.7(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in acting pursuant to Section 7.7(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 7.7(c), regardless of the manner in which such Independent Counsel was selected or appointed. Section 7.8. Presumptions And Effect Of Certain Proceedings. If a Change of Control shall have occurred, Indemnitee shall be presumed (except as otherwise expressly provided in this Article) to be entitled to indemnification under this Article upon submission of a request for indemnification in accordance with Section 7.7(a) of this Article, and thereafter the Company shall have the burden of proof to overcome that presumption in reaching a determination contrary to that presumption. Whether or not a Change of Control shall have occurred, if the person or persons empowered under Section 7.7 of this Article to determine entitlement to indemnification shall not have made a determination within 60 days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification unless (i) Indemnitee misrepresented or failed to disclose a material fact in making the request for indemnification, or (ii) such indemnification is prohibited by law. The termination of any Proceeding described in any of Sections 7.2, 7.3, or 7.4 of this Article, or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Article) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful. Section 7.9. Remedies Of Indemnitee. (a) In the event that (i) a determination is made pursuant to Section 7.7 of this Article that Indemnitee is not entitled to indemnification under this Article, (ii) advancement of Expenses is not timely made pursuant to Section 7.6 of this Article, or (iii) payment of indemnification is not made within five (5) days after a determination of entitlement to indemnification has been made or deemed to have been made pursuant to Sections 7.7 or 7.8 of this Article, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. The Company shall not oppose Indemnitee's right to seek any such adjudication or award in arbitration. (b) In the event that a determination shall have been made pursuant to Section 7.7 of this Article that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 7.9 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. If a Change of Control shall have occurred, in any judicial proceeding or arbitration commenced pursuant to this Section 7.9 the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. (c) If a determination shall have been made or deemed to have been made pursuant to Sections 7.7 or 7.8 of this Article that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 7.9, unless (i) Indemnitee misrepresented or failed to disclose a material fact in making the request for indemnification, or (ii) such indemnification is prohibited by law. (d) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 7.9 that the procedures and presumptions of this Article are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Article. (e) In the event that Indemnitee, pursuant to this Section 7.9, seeks a judicial adjudication of, or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Article, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all expenses (of the types described in the definition of Expenses in Section 7.13 of this Article) actually and reasonably incurred by him in such judicial adjudication or arbitration, but only if he prevails therein. If it shall be determined in said judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated. Section 7.10. Non-Exclusivity And Survival Of Rights. The rights of indemnification and to receive advancement of Expenses as provided by this Article shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the By-Laws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. Notwithstanding any amendment, alteration or repeal of any provision of this Article, Indemnitee shall, unless otherwise prohibited by law, have the rights of indemnification and to receive advancement of Expenses as provided by this Article in respect of any action taken or omitted by Indemnitee in his Corporate Status and in respect of any claim asserted in respect thereof at any time when such provision of this Article was in effect. The provisions of this Article shall continue as to an Indemnitee whose Corporate Status has ceased and shall inure to the benefit of his heirs, executors and administrators. Section 7.11. Severability. If any provision or provisions of this Article shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Article (including without limitation, each portion of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article (including, without limitation, each portion of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. Section 7.12. Certain Persons Not Entitled To Indemnification Or Advancement Of Expenses. Notwithstanding any other provision of this Article, no person shall be entitled to indemnification or advancement of Expenses under this Article with respect to any Proceeding, or any claim therein, brought or made by him against the Company. Section 7.13. Definitions. For purposes of this Article: (a) "Change in Control" means a change in control of the Company of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934 (the "Act"), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial owner") (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage interest; (ii) the Company is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors. (b) "Corporate Status" describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company. (c) "Disinterested Director" means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee. (d) "Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding. (e) "Indemnitee" includes any person who is, or is threatened to be made, a witness in or a party to any Proceeding as described in Sections 7.2, 7.3 or 7.4 of this Article by reason of his Corporate Status. (f) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Article. (g) "Proceeding" includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether civil, criminal, administrative or investigative, except one initiated by an Indemnitee pursuant to Section 7.9 of this Article to enforce his rights under this Article. Section 7.14. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. ARTICLE VIII Miscellaneous Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board of Directors. Section 8.2 Waiver Of Notice Of Meetings Of Stockholders, Directors, And Committees. Any written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice. Section 8.3 Interested Directors; Quorum. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (1) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or the committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. Section 8.4 Form Of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs, or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. Section 8.5 Amendment Of By-Laws. The Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the by-laws of the Corporation by a vote of a majority of the entire Board. The stockholders may make, alter or repeal any by-law whether or not adopted by them, provided however, that any such additional by-laws, alterations or repeal may be adopted only by the affirmative vote of the holders of 75% or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class), unless such additional by-laws, alterations or repeal shall have been recommended to the stockholders for adoption by a majority of the Board of Directors, in which event such additional by-laws, alterations or repeal may be adopted by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class). Section 8.6 Restrictive Gaming Legend. All certificates issued for Shares of the $.10 par value Common Stock of the Corporation shall bear the following legend: "Any and all shares of Common Stock of the Corporation are held subject to the condition that if (a) any regulatory authority should request, determine or otherwise advise that the holder or owner is disqualified, or unsuitable, must qualify for or obtain a license, or must submit an application and satisfy a review process, including background checks, in order for the Corporation or any subsidiary to obtain or retain a license or a relicense, or otherwise avoid significant penalties or business disadvantage, and (b) such holder or owner shall fail to submit to qualification within fifteen (15) days following such request, determination or advice, or fail to be found qualified or suitable, then (c) such holder or owner, at the request of the Corporation or the appropriate regulatory authority, shall promptly dispose of such holder's or owner's interest in the Corporation's Common Stock and shall be subject to any order of such regulatory body limiting such holder's or owner's rights pending such disposition. Without limiting the foregoing, any holder or owner that intends to acquire, directly or indirectly, ten percent (10%) or more of the outstanding common stock of the Corporation (regardless of class or series) shall first notify the Corporation and obtain prior written approval from the Delaware State Lottery Office. Since money damages are inadequate to protect the Corporation, it shall be entitled to injunctive relief to enforce the foregoing provision." Section 8.7 Restrictions on Transfer of Class A Common Stock. (a) Restriction. Shares of the Company's Class A Common Stock (the "Shares") may be sold, transferred or disposed of only in accordance with the following: (i) Shares may be sold or transferred to any other holder of Shares, provided that such holder has not acquired Shares in contravention of these Bylaws; or (ii) Shares may be sold, transferred or pass by intestacy, will or inheritance to: (A) one or more members of the immediate family of a holder of Shares, provided that such holder has not acquired Shares in contravention of these Bylaws; (B) a corporation all of the shares of which are owned by holders of Shares (or one or more members of the immediate family of a holder of Shares), provided that no such holder has acquired Shares in contravention of these Bylaws; (C) a trust all of the beneficial interests of which are owned by holders of Shares (or one or more members of the immediate family of a holder of Shares), provided that no such holder has acquired Shares in contravention of these Bylaws; or (D) a general or limited partnership all of the partnership interests in which are owned by holders of Shares (or one or more members of the immediate family of a holder of Shares), provided that no such holder has acquired Shares in contravention of these Bylaws. (b) Family Member Defined. For purposes of clause (a)(ii) above, "members of the immediate family" shall be limited to any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships. (c) Evidence of Compliance. Prior to any sale, transfer or disposition of Shares, the holder may be required, at the option of the Company, to furnish appropriate evidence of compliance with these Bylaws, including but not limited to an opinion of counsel. (d) Conversion. Shares may be converted to shares of the Company's Common Stock and sold, transferred or disposed of without regard to the limitations set forth in clause (a) above. (e) Pledge. The bona fide pledge of Shares as collateral security for indebtedness to the pledgee shall not be deemed to violate clause (a) above, provided that the pledgee provides to the Company a written undertaking not to sell, transfer or dispose of the Shares in violation of these Bylaws. (f) Legend. All certificates evidencing the Shares (and replacement certificates issued in their stead) shall be inscribed with the following legend (in addition to any other legends required hereunder or under federal or state securities laws): "The Shares of Class A Common Stock represented by this certificate may be sold, transferred or otherwise disposed of only in accordance with the terms and conditions set forth in the Company's Bylaws, which terms and conditions restrict, and in some instances prohibit, the transfer or other disposition of such Shares and which terms and conditions may only be amended by shareholders owning 75% or more of the outstanding shares of Class A Common Stock. The terms and conditions set forth in the Company's Bylaws are incorporated herein by reference and copies thereof are available for inspection or will be mailed by the Company to any holder without charge within five days after the Company's receipt of a written request therefor." (g) Vote Required to Amend. This Section 8.7 may only be amended by shareholders owning 75% or more of the outstanding Shares. (h) Injunctive Relief. Since money damages would be inadequate, the Company or any holder of Shares shall be entitled to injunctive relief to enforce this Section 8.7. EX-10 3 CREDIT AGREEMENT THIS CREDIT AGREEMENT (the "Agreement") is dated effective as of the 31st day of January , 1997 by and between DOVER DOWNS ENTERTAINMENT, INC. (the "Borrower") and PNC BANK, DELAWARE (the "Bank"). Recitals: R1. Dover Downs Entertainment, Inc. is a Delaware corporation created and existing as a holding company for one hundred percent of the stock of a group of companies which own and/or operate the facilities and various businesses known as "Dover Downs" located on North duPont Highway in Dover, Delaware; R2. The Dover Downs group of operating companies (each of which is a Delaware corporation) consists of Dover Downs, Inc., Dover Downs International Speedway, Inc. and Dover Downs Properties, Inc. (collectively, the "Affiliated Companies"); R3. The Affiliated Companies are organized and structured as follows: (i) Dover Downs, Inc. is the operating company for the Dover Downs slot machine and harness racing businesses; (ii) Dover Downs International Speedway, Inc. is the operating company for the Dover Downs automobile racing business and, (iii) Dover Downs Properties, Inc. is a real estate holding company which is the record owner of certain real property, fixtures and improvements at which these business operations are conducted. Agreement: Now therefore, the Borrower with the intent to be legally bound agrees with the Bank as follows: A. Agreement to Lend. The Bank will provide the credit facility described hereinbelow, subject to and governed by this Agreement. 1. Type of Facility and Use of Proceeds. This facility is a committed, revolving line of credit under which the Borrower may request and the Bank will, subject to the terms and conditions of this Agreement, make advances from time to time until the Expiration Date, in an amount in the aggregate at any time outstanding not to exceed TWENTY MILLION AND 00/100 DOLLARS ($20,000,000.00) (the "Line of Credit"). The "Expiration Date" means January 29, 1998 or such later date as may be designated by the Bank by written notice to the Borrower. The purpose of the Line of Credit is to provide for financing needs to support the Borrower's acquisition of additional facilities or companies related to the gaming and entertainment industry and working capital for the Borrower and the Affiliated Companies. 2. Interest Rate. Advances under the Line of Credit will bear interest at a rate per annum which is at all times equal to the sum of the Prime Rate minus three-quarters of one percent (0.75%). 3. Repayment. Subject to the terms and conditions of this letter, the Borrower may borrow, repay and reborrow under the Line of Credit until the Expiration Date, on which date the outstanding principal balance of the Line of Credit and any accrued but unpaid interest thereon shall be due and payable in full. Interest will be due and payable on a monthly basis, and will be computed on the basis of a year of 360 days and paid on the actual number of days elapsed. 4. Note. The obligation of the Borrower to repay loans under the Line of Credit shall be evidenced by a promissory note (the "Note"), in form and content satisfactory to the Bank. 5. Depository. The Borrower and the Affiliated Companies will establish and maintain at the Bank their primary depository accounts. 6. Guarantys. The Line of Credit will be jointly and severally guaranteed by the Affiliated Companies. Each guaranty will be evidenced by a guaranty and suretyship agreement in form and content satisfactory to the Bank. 7. Commitment Fee. The Borrower will pay a commitment fee of 7.50 basis points per annum on the average unused portion of the Line of Credit. This fee will be payable quarterly in arrears. The Line of Credit supersedes and replaces three lines of credit referred to, respectively, as Facilities A, B and C in a credit agreement dated July 31, 1996. B. Covenants. Unless compliance is waived in writing by the Bank, or until payment in full and termination of all the Line of Credit: 1. Financial Reporting. The Borrower will promptly submit to the Bank the following financial information: a. Financial Statements for its fiscal year, within 120 days after fiscal year end, audited and certified without disclaimer or adverse opinion by a certified public accountant who is (i) a member in good standing of the Private Company's Practice Sessions (PCPS) of the AICPA, or (ii) otherwise acceptable to the Bank. b. Financial Statements for each fiscal quarter within 45 days after quarter end, certified as true and correct by the Borrower's chief financial officer. With each delivery of Financial Statements, the Borrower's chief financial officer shall also deliver a certificate as to the Borrower's compliance with the financial covenants for the period then ended and whether any known Event of Default (as defined in the Note) exists to the best of the Borrower's knowledge, and, if so, the nature thereof and the corrective measures the Borrower proposes to take. "Financial Statements" means the consolidated balance sheet and statements of income and cash flows of the Borrower and the Affiliated Companies prepared in accordance with generally accepted accounting principles in effect from time to time ("GAAP") applied on a consistent basis (subject in the case of interim statements to normal year-end adjustments). The Borrower will also cause each of the Affiliated Companies to concurrently submit their separate annual (audited) and quarterly financial statements prepared in accordance with the standards applicable to the Borrower's submissions. 2. Financial Performance. The Borrower will have and maintain on a consolidated basis with the Affiliated Companies: a. As of the end of each fiscal quarter, a ratio of total liabilities to Tangible Net Worth of not greater than 1.25 to 1.00, and; b. At all times, a minimum Tangible Net Worth of $25,000,000.00. c. At all times, a total net worth of not less than $40,000,000.00. "Tangible Net Worth" means stockholders' equity less loans or advances to officers, shareholders or other related parties and all items properly classified as intangibles, in accordance with GAAP. Any accounting term not defined in this Agreement and each accounting term partly defined herein, to the extent not defined, shall have the meaning given such term under generally accepted accounting principles. 3. Negative Covenants. a. The Borrower will not make or permit any change in its equity ownership which results in John W. Rollins, Rollins family members or principal officers listed in the Addendum having an equity ownership, in the aggregate, of less than 55%. b. The Borrower will not create, assume, incur or suffer to exist any mortgage, pledge, encumbrance, security interest, lien or charge of any kind upon any of its property, now owned or hereafter acquired, or acquire or agree to acquire any kind of property under conditional sales or other title retention agreements; provided, however, that the foregoing restrictions shall not prevent the Borrower from: (i) incurring liens for taxes, assessments or governmental charges or levies which shall not at the time be due and payable or can thereafter be paid without penalty or are being contested in good faith by appropriate proceedings diligently conducted and with respect to which it has created adequate reserves; (ii) making pledges or deposits to secure obligations under workers' compensation laws or similar legislation; (iii) granting liens or security interests in favor of the Bank; (iv) maintaining existing acquisition-related mortgages on its real estate, as disclosed on the Financial Statements of the Borrower and/or the Affiliated Companies dated as of 7/31/96; (v) granting any security interest, mortgage, encumbrance or other lien (collectively, a "Lien") in or upon any item of real or personal property, or interest therein, hereafter acquired, which Lien is created or assumed contemporaneously with such acquisition to secure or provide for the payment or financing of any part of the purchase price thereof, or the assumption of any Lien in or upon any such property hereafter acquired, existing at the time of such acquisition, or the acquisition of any such property subject to any Lien without the assumption thereof; provided, however, that: a) the indebtedness secured by any such Lien so created, assumed or existing shall not exceed 100% of the lower of the actual cost or fair market value of the property covered thereby; b) each such Lien shall attach only to the property so acquired; and; c) the acquisition to which any such Lien relates shall not result in a default under any provision of any other agreements with the Bank. c. The Borrower will not create, incur, guarantee, endorse (except endorsements in the course of collection), assume or suffer to exist any indebtedness, except (i) indebtedness incurred to finance the actual cost of acquiring real property used, or to be used, to expand the Borrower's existing operations , (ii) indebtedness to the Bank, (iii) open account trade debt incurred in the ordinary course of business and not past due, (iv) other indebtedness disclosed on the Borrower's Financial Statements dated as of 7/31/96, or (v) additional indebtedness that is made expressly subordinate to the Bank indebtedness. d. The Borrower will not liquidate, merge or consolidate with any person, firm, corporation or other entity. e. The Borrower will not in any fiscal year make acquisitions of all or substantially all of the property or assets of any person, firm, corporation or other entity, unless the contract price or actual value given for such property or assets is in the aggregate, on a consolidated basis with the Affiliated Companies $20,000,000.00 or less. f. The Borrower will not make or have outstanding any loans or advances to or otherwise extend credit to any person, firm or corporation, except in the ordinary course of business. The Borrower further agrees that (i) the Borrower will cause each of the Affiliated Companies to comply with the foregoing negative covenants and, (ii) a violation of any such covenant by any of the Affiliated Companies will be an event of default under this Agreement. C. Representations and Warranties. To induce the Bank to provide the Line of Credit, the Borrower represents and warrants on behalf of itself and each of the Affiliated Companies as follows: 1. All advances received from the Bank under the Line of Credit will be used solely by, or for the direct benefit of, the Affiliated Companies. 2. There are no actions, suits, proceedings or governmental investigations pending or, to the knowledge of the Borrower, threatened against the Borrower or any of the Affiliated Companies, none of which could result in a material adverse change in its or their business, assets, operations, financial condition or results of operations and there is no basis known to the Borrower for any action, suit, proceedings or investigation which could result in such a material adverse change. All pending or threatened litigation against the Borrower or any of the Affiliated Companies is listed on the Addendum attached hereto and incorporated by reference (the "Addendum"). 3. The Borrower and each of the Affiliated Companies have filed all returns and reports that are required to be filed in connection with any federal, state or local tax, duty or charge levied, assessed or imposed upon it or its property or withheld by it, including unemployment, social security and similar taxes and all of such taxes, have been either paid or adequate reserve or other provision has been made. 4. The Borrower and each of the Affiliated Companies are in compliance, in all material respects, with all Environmental Laws, including, without limitation, all applicable Environmental Laws in jurisdictions in which each entity owns or operates, or has owned or operated, a facility or site, or holds or has held any interest in real property. Except as otherwise disclosed on the Addendum, no litigation or proceeding arising under, relating to or in connection with any Environmental Law is pending or, to the best of the Borrower's knowledge, threatened against the Borrower or any of the Affiliated Companies, any real property which such entity holds or has held an interest or any past or present operation of the Borrower or any of the Affiliated Companies. No release, threatened release or disposal of hazardous waste, solid waste or other wastes is occurring, or to the best of the Borrower's knowledge has occurred, on, under or to any real property in which the Borrower or any of the Affiliated Companies holds any interest or performs any of its operations, in violation of any Environmental Law. As used in this Section, "litigation or proceeding" means any demand, claim notice, suit, suit in equity, action, administrative action, or investigation brought by a governmental authority, and "Environmental Laws" means all provisions of laws, statutes, ordinances, rules, regulations, permits, licenses, judgments, writs, injunctions, decrees, orders, awards and standards promulgated by any governmental authority concerning health, safety and protection of, or regulation of the discharge of substances into, the environment. 5. The Borrower and each of the Affiliated Companies maintains and will continue to maintain books and records in accordance with GAAP. The Borrower and each of the Affiliated Companies will give representatives of the Bank access thereto at all reasonable times, including permission to examine, copy and make abstracts from any of such books and records and such other information as the Bank may from time to time reasonably request, and the Borrower and each of the Affiliated Companies will make available to the Bank for examination copies of any reports, statements or returns which they may make to or file with any governmental department, bureau or agency, federal or state. 6. As of the date of this Agreement, the individuals named in the attached Addendum, having the titles indicated, are the principal managing officers of the Borrower and the Affiliated Companies. D. Additional Provisions. 1. Before the first advance under the Line of Credit, the Borrower agrees to sign and deliver to the Bank the Note, and other required documents and to provide such other instruments and documents as the Bank may reasonably request, such as certificates of good standing for the Borrower and the Affiliated Companies, certified resolutions, incumbency certificates or other evidence of authority. 2. The Bank will not be obligated to make any advance under the Line of Credit if any Event of Default (as defined in the Note or as provided in this Agreement), or event which with the passage of time, provision of notice or both would constitute an Event of Default, shall have occurred and be continuing. 3. The Borrower represents and warrants that the Borrower (i) is the legal owner of one hundred percent of the outstanding shares of stock of each of the Affiliated Companies and, (ii) will remain the sole stockholder of each of the Affiliated Companies until payment in full and termination of the Line of Credit. 4. The Borrower will promptly inform the Bank in writing from time to time of (i) any material change in the nature of its business as carried on as of the date of this Agreement or its senior management, and (ii) any such changes occurring with respect to any of the Affiliated Companies. 5. If, at any point during any fiscal year, the Borrower and/or any of the Affiliated Companies shall have sold, leased, transferred or otherwise disposed of property or assets having an aggregate book value on a consolidated basis in excess of $1,000,000.00, the Borrower shall promptly notify the Bank in writing of such fact and provide such information concerning the transaction as the Bank may reasonably require. 6. The Borrower and the Bank acknowledge a duty of good faith and fair dealing in connection with the terms, covenants and conditions of the Line of Credit as set forth in this Agreement. 7. Each of the Borrower and the Bank irrevocably waive any and all rights they may have to a trial by jury in any action, proceeding or claim of any nature relating to this agreement, any documents executed in connection with this agreement or any transaction contemplated in any of such documents. Each party acknowledges that the foregoing waiver is knowing and voluntary. WITNESS the due execution hereof as a document under seal, as of the date first written above. ATTEST/WITNESS: DOVER DOWNS ENTERTAINMENT, INC. __________________________ By:______________________(SEAL) Denis McGlynn President __________________________ By:______________________(SEAL) Robert M. Comollo Treasurer PNC BANK, DELAWARE _________________________ By:______________________(SEAL) Paul L. Frick Assistant Vice President Each of the undersigned guarantors hereby reaffirms its guaranty agreement dated 7/31/96 and acknowledges and agrees that the above- referenced line of credit is secured by such guaranty agreement. ATTEST/WITNESS: DOVER DOWNS, INC. _________________________ By:______________________(SEAL) Denis McGlynn President _________________________ By:______________________(SEAL) Robert M. Comollo Treasurer DOVER DOWNS INTERNATIONAL SPEEDWAY, INC. _________________________ By:______________________(SEAL) Denis McGlynn President _________________________ By:______________________(SEAL) Robert M. Comollo Treasurer DOVER DOWNS PROPERTIES, INC. _________________________ By:______________________(SEAL) Denis McGlynn President _________________________ By:______________________(SEAL) Robert M. Comollo Treasurer ADDENDUM TO CREDIT AGREEMENT Litigation: Describe pending or threatened litigation, proceedings, etc. below: Legal Proceedings There are various claims and legal actions pending against the Company. In the opinion of management, based on the advice of counsel, it is only remotely likely that the ultimate resolution of these claims and actions will be material. Directors, Executive Officers, and other Senior Officers: Dover Downs Entertainment, Inc. Dover Downs, Inc. Dover Downs International Speedway, Inc. Dover Downs Properties, Inc. Name Position John W. Rollins Chairman of the Board of Directors Henry B. Tippie Vice Chairman of the Board of Directors Denis McGlynn Director, President and Chief Executive Officer Eugene W. Weaver Director and Senior Vice President - Administration Melvin L. Joseph Director, Vice President and Director of Auto Racing for Dover Downs International Speedway, Inc. Robert M. Comollo Treasurer and Secretary Tim Horne Vice President - Finance John W. Rollins, Jr. Director R. Randall Rollins Director Patrick J. Bagley Director Jeffrey W. Rollins Director Michael B. Kinnard Vice President and General Counsel EX-10 4 COMMITTED LINE OF CREDIT NOTE $20,000,000.00 January 31, 1997 FOR VALUE RECEIVED, DOVER DOWNS ENTERTAINMENT, INC., a Delaware corporation (the "Borrower"), promises to pay to the order of PNC BANK, DELAWARE (the "Bank"), in lawful money of the United States of America in immediately available funds at its offices located at 222 Delaware Avenue, Wilmington, Delaware 19801, or at such other location as the Bank may designate from time to time, the principal sum of TWENTY MILLION AND 00/100 DOLLARS ($20,000,000.00) (the "Facility") or such lesser amount as may be advanced to or for the benefit of the Borrower hereunder, together with interest accruing on the outstanding principal balance from the date hereof, as provided below: 1. Rate of Interest. Amounts outstanding under this Note will bear interest at a rate per annum which is at all times equal to the sum of the Prime Rate minus three quarters of one percent (.75%). Interest will be calculated on the basis of a year of 360 days for the actual number of days in each interest period. As used herein, "Prime Rate" shall mean the rate publicly announced by the Bank from time to time as its prime rate. The Prime Rate is not tied to any external rate or index and does not necessarily reflect the lowest rate of interest actually charged by the Bank to any particular class or category of customers. If and when the Prime Rate changes, the rate of interest on this Note will change automatically without notice to the Borrower, effective on the date of any such change. In no event will the rate of interest hereunder exceed the maximum rate allowed by law. 2. Advances. The Borrower may borrow, repay and reborrow hereunder until the Expiration Date, subject to the terms and conditions of this Note and the Loan Documents (as defined herein). The "Expiration Date" shall mean January 29, 1998, or such later date as may be designated by the Bank by written notice from the Bank to the Borrower. The Borrower acknowledges and agrees that in no event will the Bank be under any obligation to extend or renew the Facility or this Note beyond the initial Expiration Date. 3. Advance Procedures. A request for advance made by telephone must be promptly confirmed in writing by such method as the Bank may require. The Borrower authorizes the Bank to accept telephonic requests for advances, and the Bank shall be entitled to rely upon the authority of any person providing such instructions. The Borrower hereby indemnifies and holds the Bank harmless from and against any and all damages, losses, liabilities, costs and expenses (including reasonable attorneys' fees and expenses) which may arise or be created by the acceptance of such telephone requests or making such advances. The Bank will enter on its books and records, which entry when made will be presumed correct, the date and amount of each advance, as well as the date and amount of each payment made by the Borrower. 4. Payment Terms. Accrued interest will be due and payable on the first day of each month, as billed by the Bank. The outstanding principal balance and any accrued but unpaid interest shall be due and payable in full on the Expiration Date. If any payment under this Note shall become due on a Saturday, Sunday or public holiday under the laws of the state of Delaware, such payment shall be made on the next succeeding business day and such extension of time shall be included in computing interest in connection with such payment. Payments received will be applied to charges, fees and expenses (including attorneys' fees), accrued interest and principal in any order the Bank may choose, in its sole discretion. 5. Late Payments; Default Rate. If the Borrower fails to make any payment of principal, interest or other amount becoming due pursuant to the provisions of this Note within 15 calendar days of the date due and payable, the Borrower also shall pay to the Bank a late charge equal to five percent (5.0%) of the amount of such payment. Such 15-day period shall not be construed in any way to extend the due date of any such payment. The late charge is imposed for the purpose of defraying the Bank's expenses incident to the handling of delinquent payments and is in addition to, and not in lieu of, the exercise by the Bank of any rights and remedies hereunder, under the other Loan Documents or under applicable laws, and any fees and expenses of any agents or attorneys which the Bank may employ. Upon maturity, whether by acceleration, demand or otherwise, and at the option of the Bank upon the occurrence of any Event of Default (as hereinafter defined) and during the continuance thereof, this Note shall bear interest at a rate per annum (based on a year of 360 days and actual days elapsed) which shall be three percentage points (3.0%) in excess of the interest rate in effect from time to time under this Note but not more than the maximum rate allowed by law (the "Default Rate"). The contract interest rate(s) herein shall continue to apply whether or not judgment shall be entered on this Note. 6. Prepayment. The indebtedness evidenced by this Note may be prepaid in whole or in part at any time without penalty. 7. Other Loan Documents; Assumption of Obligations. This Note is issued in connection with a Credit Agreement bearing even date herewith, guaranties and related documents, the terms of which are incorporated herein by reference (the "Loan Documents"). 8. Events of Default. The occurrence of any of the following events will be deemed to be an "Event of Default" under this Note: (i) the nonpayment of any principal, interest or other indebtedness under this Note when due; (ii) the occurrence of any event of default or default and the lapse of any notice or cure period under any other debt, liability or obligation to the Bank of any Borrower or any Guarantor of this Note, including but not limited to any of the foregoing arising under the Loan Documents or any other documents now or in the future securing the obligations of any Borrower or any Guarantor to the Bank; (iii) the filing by or against any Borrower or any Guarantor of any proceeding in bankruptcy, receivership, insolvency, reorganization, liquidation, conservatorship or similar proceeding, or any assignment by any Borrower or any Guarantor for the benefit of creditors, or any levy, garnishment, attachment or similar proceeding is instituted against any property of any Borrower or any Guarantor held by or deposited with the Bank; (iv) a default with respect to any other indebtedness of any Borrower or any Guarantor for borrowed money in excess of $500,000 in the aggregate, if the effect of such default is to cause or permit the acceleration of such debt; (v) [omitted intentionally]; (vi) the entry of a final judgment against any Borrower or any Guarantor in excess of $500,000 in the aggregate and the failure of such Borrower or Guarantor to discharge the judgment within ten days of the entry thereof; (vii) [omitted intentionally]; (viii) any material adverse change in the business, assets, operations, financial condition or results of operations of any Borrower or any Guarantor (ix) the revocation or attempted revocation, in whole or in part, of any guarantee by any Guarantor; (x) the death of any individual Borrower or Guarantor or, if any Borrower is a partnership, the death of any individual general partner; (xi) any representation or warranty made by any Borrower or any Guarantor to the Bank in any document, including but not limited to the Loan Documents or any other documents now or in the future securing the obligations of any Borrower or any Guarantor to the Bank, is false, erroneous or misleading in any material respect; or (xii) the failure of any Borrower or any Guarantor to observe or perform any covenant or other agreement with the Bank contained in any document, including but not limited to the Loan Documents or any documents now or in the future securing the obligations of any Borrower or any Guarantor to the Bank. As used herein, the term "Guarantor" will mean any guarantor of the obligations of the Borrower to the Bank existing on the date of this Note or arising in the future. Upon the occurrence of an Event of Default: (a) the Bank shall be under no further obligation to make advances hereunder unless and until the default is cured to the Bank's satisfaction; (b) if an Event of Default specified in clause (iii) above shall occur, the outstanding principal balance and accrued interest hereunder together with any additional amounts payable hereunder, shall be immediately due and payable without demand or notice of any kind; (c) if an Event of Default specified in clause (i) shall occur and Borrower shall fail to effect a cure of such Event of Default within ten (10) days of notice thereof from the Bank, the outstanding principal balance and accrued interest hereunder, together with any additional amounts payable hereunder, at the option of the Bank and without demand or notice of any kind may be accelerated and become immediately due and payable; (d) if any other Event of Default shall occur and Borrower shall fail to effect a cure of such Event of Default within thirty (30) days of notice thereof from the Bank, the outstanding principal balance and accrued interest hereunder together with any additional amounts payable hereunder, at the option of the Bank and without further demand or notice of any kind may be accelerated and become immediately due and payable; (e) at the option of the Bank, this Note will bear interest at the Default Rate from the date after the lapse of any applicable cure period with respect to the Event of Default; and (f) the Bank may exercise from time to time any of the rights and remedies available to the Bank under the Loan Documents or under applicable law. 9. Power to Confess Judgment. The Borrower hereby empowers any attorney of any court of record within the State of Delaware, after the occurrence of any Event of Default hereunder, to appear for the Borrower and confess judgment, or a series of judgments, against the Borrower in favor of the Bank or any holder hereof for the entire principal balance of this Note and all accrued interest, together with costs of suit and an attorney's commission of $2,500.00 added as a reasonable attorney's fee, and for doing so this Note or a copy verified by affidavit shall be a sufficient warrant. Interest on any such judgment shall accrue at the Default Rate. No single exercise of the foregoing power to confess judgment, or a series of judgments, shall be deemed to exhaust the power, whether or not any such exercise shall be held by any court to be invalid, voidable, or void, but the power shall continue undiminished and it may be exercised from time to time as often as the Bank shall elect until such time as the Bank shall have received payment in full of the debt, interest and costs. 10. Miscellaneous. No delay or omission of the Bank to exercise any right or power arising hereunder shall impair any such right or power or be considered to be a waiver of any such right or power or any acquiescence therein nor shall the action or inaction of the Bank impair any right or power resulting therefrom. The Borrower agrees to pay on demand, to the extent permitted by law, all costs and expenses incurred by the Bank in the enforcement of its rights in this Note and any security therefor, including without limitation reasonable fees and expenses of the Bank's counsel. If any provision of this Note is found to be invalid by a court, all the other provisions of this Note will remain in full force and effect. Except for notices of default as provided in Section 8 above, the Borrower hereby forever waives presentment, demand, protest, notice of dishonor, notice of nonpayment or default and any other notices of any kind. The Borrower also waives all defenses based on suretyship or impairment of collateral. If this Note is executed by more than one Borrower, the obligations of such persons or entities hereunder will be joint and several. This Note shall bind the Borrower and the heirs, executors, administrators, successors and assigns of the Borrower, and the benefits hereof shall inure to the benefit of Bank and its successors and assigns. All references herein to the "Borrower" and "Bank" shall be deemed to apply to the Borrower and Bank and their respective heirs, executors, administrators, successors and assigns. This Note has been delivered to and accepted by the Bank and will be deemed to be made in the state of Delaware. This Note will be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws of the state of Delaware, excluding its conflict of laws rules. The Borrower hereby agrees to the jurisdiction of any state or federal court located within the state of Delaware, and consents that all service of process be sent by nationally recognized overnight courier service directed to Borrower at the Borrower's address set forth herein and service so made will be deemed to be completed on the date of actual delivery to the Borrower; provided that nothing contained herein will prevent the Bank from bringing any action or exercising any rights against any security or against the Borrower individually, or against any property of the Borrower within any other state or nation to enforce any award or judgment obtained in the venue specified above, or such other venue as the Bank chooses. The Borrower waives any objection to venue and any objection based on a more convenient forum in any action instituted hereunder. 12. Waiver of Jury Trial. Each of the Borrower and the Bank irrevocably waive any and all rights they may have to a trial by jury in any action, proceeding or claim of any nature relating to this Note, any documents executed in connection with this note or any transaction contemplated in any of such documents. Each party acknowledges that the foregoing waiver is knowing and voluntary. The Borrower acknowledges that it has read and understood all the provisions of this Note, including the confession of judgment and waiver of jury trial, and has been advised by counsel as necessary or appropriate. WITNESS the due execution and sealing hereof with the intent to be legally bound hereby. WITNESS/ATTEST: DOVER DOWNS ENTERTAINMENT, INC. __________________________ By:__________________________(SEAL) Denis McGlynn President ___________________________ By:__________________________(SEAL) Robert M. Comollo Treasurer Borrower's Address: 1131 N. duPont Highway, Dover, DE 19901. EX-10 5 Date Received 12-17-96 Sanction No. NBSGND #15 & NBSGND #21 NASCAR Official /s/ Ray Hill GM GOODWRENCH/DELCO BATTERY "200" - May 31, 1997 MBNA "200" - September 20, 1997 SANCTION APPLICATION AND AGREEMENT FORM NASCAR BUSCH SERIES, GRAND NATIONAL DIVISION INSTRUCTIONS: (1) All NASCAR Busch Series, Grand National Division Championship Events for which PROMOTER seeks a NASCAR sanction must be listed in a single application form. Please sign the original and forward to NASCAR; upon acceptance and approval by NASCAR, a copy will be returned to the PROMOTER. (2) "PROMOTER" means the individual, partnership, corporation, joint venture or other entity that, in connection with the Event (as defined below), is ultimately responsible (financially and otherwise) for the organization and promotion of the Event and the facility at which the Event is to be run. If two or more entities are acting together in such capacity, all such entities should be listed as "PROMOTER" and the authorized officer of each should sign this form. (3) This form when signed by the PROMOTER is only an application for a NASCAR sanction. NASCAR is under no obligation to accept or approve the application. Upon being accepted and approved in writing by NASCAR, this form becomes an agreement binding on both parties. (4) Application for a NASCAR Busch Series, Grand National Division Championship Event must be received at NASCAR no later than ten business days after the PROMOTER receives this form from NASCAR. * * * * * * * * * * * The undersigned PROMOTER, designated below, applies to the National Association for Stock Car Auto Racing, Inc. ("NASCAR") for a NASCAR sanction to organize and promote a NASCAR-sanctioned NASCAR Busch Series, Grand National Division Championship Event(s) in accordance with the terms and conditions set forth hereafter, as follows: POST OFFICE BOX 2875 . DAYTONA BEACH, FLORIDA 32120-2875 - 904/253-0611 EXHIBIT 1 To Sanction Application and Agreement Form NASCAR and PROMOTER agree as follows: DEFINITIONS (1) "Event" means the Event(s) designated in the Sanction Application and Agreement Form, as well as all periods for registration, inspections, time trials, practice runs, post-race inspections and postponed dates related thereto. Whenever the word "Event" appears in the singular, it shall apply to all Events designated on the Sanction Application and Agreement Form, unless the context requires otherwise. All provisions in the Sanction Application and Agreement Form and in Exhibits 1, 2 and 2a apply to the Event(s) designated in the Sanction Application and Agreement Form, unless the context requires otherwise. (2) "Additional Award" as used herein includes any monetary or non-monetary award by, or contracted through, the PROMOTER, for distribution based upon the Event(s), other than (a) purse, (b) point fund, (c) Winner's Circle and Plan awards, (d) television income and (e) the entry award for the current NASCAR Busch Series, Grand National Division Champion. PROMOTER understands and acknowledges that the above-listed awards may or may not be applicable to or available in connection with the Event, and that NASCAR makes no representation as to the availability or amounts of such awards. (3) "Television Income", as used herein, means all monies and things of value received by PROMOTER as a result of and in connection with any television contract(s), including but not limited to payments received from networks, stations, packages, brokers, advertisers, advertising agencies, and the like. In computing all monies and things of value received, it is intended that the gross amount set forth in all television contract(s) as payable by the other contracting entity or entities shall be included and that any applicable commissions, fees or expenses paid to or deducted by sales agents, consultants and other parties shall not be deducted therefrom. (4) "Television Contract", as used herein, means any contract, agreement or understanding, whether oral or written, entered into between PROMOTER and any other entity or entities, whether or not they are broadcasters, for the sale, assignment or other transferral of the rights of PROMOTER in the live or delayed televised broadcast of, rebroadcast of, tape or film production of, and/or any other use of, the Event, whether by cable TV, pay TV, theater TV, video tape cassettes, and/or satellite transmissions, and whether local, regional national or worldwide. PROMOTER'S GENERAL OBLIGATIONS (5) PROMOTER warrants to NASCAR that in connection with the Event it has sole control of the racetrack, the premises upon which the racetrack is located and surrounding same, and all facilities thereon, that it has obtained all necessary licenses, permits or other approvals required, and that it has full authority to conduct the Event at the racetrack pursuant to the terms of this agreement. PROMOTER further warrants that it will comply with all local, state and federal laws and regulations in connection with the organization and promotion of the Event. PROMOTER, at its expense, will make all appropriate filings of forms or other documents as required by federal, state or local laws. (6) PROMOTER at its expense assumes sole responsibility for furnishing the racetrack, the premises upon which the racetrack is located and surrounding same, and all facilities thereon in good repair, ready for use by competitors and officials. PROMOTER is solely responsible and liable for the safety of such competitors and officials while on, entering or leaving such racetrack, premises and facilities. PROMOTER warrants that the racetrack, premises and facilities are and will remain in a condition suitable for the conduct of the Event, and that the racing surface of the track will not be altered, resurfaced or otherwise substantially changed during the term of this Agreement without the express written consent of NASCAR. PROMOTER will provide NASCAR or its designated representative full access to the racetrack, premises and facilities as requested by NASCAR during the term of this Agreement. (7) If NASCAR in its sole discretion determines that the racetrack, the premises or any facilities are in an unsatisfactory condition, PROMOTER agrees to repair or resurface the racetrack and to repair the premises or facilities, at PROMOTER's expense and to the satisfaction of NASCAR prior to any NASCAR-sanctioned Event. If NASCAR in its sole discretion determines that it is necessary to resurface the racetrack, such resurfacing shall be completed by PROMOTER with adequate time prior to the Event to allow for tire and private car testing. If NASCAR in its sole discretion determines that there is insufficient time to place the racetrack in a condition suitable for the conduct of the Event, NASCAR in its sole discretion may postpone or cancel the Event. (8) PROMOTER at its expense will furnish adequate facilities, personnel, equipment and services for accommodating and controlling the public during the Event. PROMOTER is solely responsible and liable for the safety of the public during the Event. PROMOTER is solely responsible for the condition, actions and operations of such facilities, personnel, equipment and services before, during and after the Event. (9) PROMOTER at its expense will furnish adequate facilities, support personnel, equipment, and related security, for use by NASCAR in the performance of NASCAR's duties, as they may be requested by NASCAR from time to time, including but not limited to facilities for office administration, registration, timing, scoring, car inspection, race direction, officiating and prize money distribution. Without in any way limiting the foregoing, PROMOTER at its expense will: a. provide one or more television monitors, in locations to be specified by NASCAR, with all related equipment necessary for such monitors to be connected to video and audio equipment used by the television producer under contract for the Event, in order to provide to NASCAR Officials live video on such monitors and the ability to switch instantaneously its view on the monitors among the different camera locations used by the television producer, at all times during the Event when all or a portion of the Event is being videotaped, broadcast, monitored and/or recorded; b. provide NASCAR with two (2) pace vehicles, each with the NASCAR logo (as set forth under paragraph 21 below) displayed on the side in a manner and size which is visible to all persons on the racetrack, in the viewing area and in all locations where NASCAR Officials are visually monitoring the Event; c. provide NASCAR prior to the Event with a list of the track radio frequencies to be used for the Event, including but not limited to frequencies to be used for maintenance, police and security personnel; d. cooperate with NASCAR in pre-race and victory lane ceremonies, awards presentations and photographs; e. have readily available quantities of oil dry acceptable to NASCAR when the track opens for practice and at all other times during the Event, and adequate personnel to spread the oil dry at NASCAR's direction; f. certify and recertify the scales as requested by NASCAR upon arrival for the first day of inspection and at all other times during the Event, and provide written certifications to the NASCAR Busch Series, Grand National Division Director as to the results of the certifications; g. provide personnel to secure the entry into the pits and garage areas during competition periods; h. provide personnel to secure the garage area on a continuous, 24-hour/day basis beginning the first day the track is open for inspection and ending when released by the NASCAR Busch Series, Grand National Division Director; i. deliver to the garage area before the morning of race day twice the number of chairs as cars starting in the race for use by drivers and crew chiefs at the pre-race meeting; j. line and number each pit with appropriate paint, line and paint traffic lanes in the garage and garage area when and where needed, and repaint all start/finish, scoring, third turn and re-entry cutoff lines; k. place portable toilets along pit road and in the garage area as directed by NASCAR; l. coordinate with NASCAR all tours of the garage areas, including the times, number of participants and other arrangements; m. provide adequate electricity (including without limitation 220 volts 50 amps service with female range outlet for the NASCAR trailer), air conditioning, heat, telephone (including a track phone extension) and water facilities as requested by NASCAR; n. coordinate with NASCAR to ensure that it has a minimum of ten (10) minutes immediately before, during or after driver introductions for NASCAR awards presentations; o. coordinate with NASCAR to ensure that it has a reasonable period of time immediately following the Event for victory lane ceremonies, awards presentations and sponsor recognitions; p. provide a control tower of adequate size with electricity, air conditioning, heat, telephone (including a track phone extension), chairs with cushions, a television monitor (as set forth above), water facilities and other utilities, supplies and equipment as requested by NASCAR; q. provide a registration facility of adequate size outside the track and in the garage area, with electricity, air conditioning, heat, telephone (including a track phone extension), chairs with cushions, water facilities and other utilities, supplies and equipment as requested by NASCAR; r. provide adequate trash receptacles in the garage and pit area and coordinate with the NASCAR Busch Series, Grand National Division Director the times for trash pick up by track personnel; s. provide adequate personnel to sweep and clean-up the garage and pit areas on a daily basis; t. provide adequate parking areas for all competitors (including car owners, drivers and crew members) and NASCAR Officials adjacent to or near the garage area; Exhibit 1 to Sanction Application and Agreement Form Page 2 of 7 u. provide NASCAR with a track suite, including the customary number of admission tickets for admission to said suite, and 100 grandstand general admission tickets, such tickets to be delivered to NASCAR no later than thirty (30) days prior to the Event. (10) PROMOTER at its expense will provide adequate facilities, personnel, equipment and services for, and assumes sole responsibility to provide, fire protection equipment and on-site medical services for competitors, officials, the public and others, including without limitation cleanup crews, towing and flatbed wreckers. PROMOTER at its expense will make advance arrangements with local hospitals and physicians for the prompt and efficient treatment of any and all injuries occurring during the Event. (11) PROMOTER at its expense will furnish adequate security personnel (in addition to the requirements of paragraph 9) in the pit and garage area, and will limit access to such areas before, during and after the Event to authorized individuals and equipment. PROMOTER is solely responsible and liable for the actions of security personnel. (12) PROMOTER at its expense assumes and will perform all business responsibilities in connection with the Event (except as otherwise provided by this Agreement), including but not limited to business organization, promotional activities, management, general business affairs, ticket sales, track operation and press accommodations. NASCAR does not warrant, either expressly or by implication, nor is it responsible for, the financial or other success of the Event or the number or identity of vehicles or competitors participating in the Event. (13) PROMOTER will not schedule or permit any private race car practice or test runs for the seven days immediately preceding the first day of official practice for the Event without prior written approval by NASCAR. PROMOTER will not schedule any ancillary events or activities on the same day as registration or inspection, or on any days during the Event, without prior written approval by NASCAR. The ancillary events or activities covered by this paragraph include without limitation other motorsports events, thrill shows, live performances and/or helicopter rides. PROMOTER further agrees to notify NASCAR of any private race car testing and/or practice done at the racetrack pursuant to and in accordance with the 1997 NASCAR Busch Series, Grand National Division Private Race Car Testing Policy. OFFICIAL ENTRY BLANK (14) An Official Entry Blank for the Event will be composed, printed, published and distributed by NASCAR, and will constitute the sole official statement as to the date, place, schedule and length of the Event, eligibility requirements for competitors, and monetary and non-monetary awards. (15) PROMOTER will notify NASCAR prior to contracting for any Additional Award. NASCAR may reject a proposed Additional Award in its entirety, require different terms for the proposed Additional Award, or require a reallocation of the distribution of such an award among competitors, if in NASCAR's sole judgment the proposed award will not advance the nature of the competition, will have an adverse impact on the Event, or will be detrimental to the sport of automobile racing, NASCAR, any sponsors of the Event, or any sponsors of the NASCAR Busch Series, Grand National Division. NASCAR's determination in that regard will be binding on PROMOTER. PROMOTER assumes full responsibility for, and will indemnify NASCAR against, any liability or costs incurred as a result of NASCAR's determination with respect to any proposed award arranged by or through PROMOTER. All Additional Awards are subject to independent verification by NASCAR. (16) PROMOTER will submit to NASCAR, no later than sixty (60) calendar days before the date of the Event, a list of any and all proposed Additional Awards (as defined above) for the Event not previously included in Exhibit 2 and Exhibit 2a of this Agreement. If either PROMOTER or NASCAR contracts for Additional Awards after publication of the Official Entry Blank, then, subject to the provisions of paragraph 15, NASCAR in its sole discretion may publish and distribute a supplement to the Official Entry Blank posting the Additional Awards. (17) PROMOTER will not publish an official or unofficial entry blank or supplement, or any other form setting forth monetary or non-monetary awards, without prior written approval from NASCAR. PROMOTER will not advertise or otherwise disseminate any information as to monetary or non-monetary awards for the Event other than those specified in the Official Entry Blank or NASCAR-approved supplement. (18) NASCAR will use its best efforts to consult with the PROMOTER regarding postponement of an Event, but the decision to postpone an Event and the selection of the postponed date will be made by NASCAR in its sole Exhibit 1 to Sanction Application and Agreement Form Page 3 of 7 discretion and will be binding on PROMOTER. Publication by PROMOTER of a postponement and/or postponed date that has not been approved by NASCAR is not binding upon NASCAR. PROMOTER'S FINANCIAL AND INSURANCE OBLIGATIONS (19) PROMOTER will pay to NASCAR at Daytona Beach, Florida, not later than the Payment Date set forth in the Sanction Application and Agreement Form, by wire transfer of funds, an amount equal to the sum of the PROMOTER's Purse and Point Fund and the Sanction Fee, plus any other monies due NASCAR for the Event pursuant to this agreement, unless otherwise directed by NASCAR in writing. Time is of the essence. If said monies and fees are not paid to NASCAR in the manner and by the Payment Date, NASCAR at its option may (a) cancel and rescind this Agreement, or (b) enforce collection of said monies and fees by suit or action, in which case PROMOTER will pay all costs incurred by NASCAR in connection therewith, including reasonable attorney's fees. (20) PROMOTER at its expense will obtain and maintain public liability insurance for the Event that is acceptable to NASCAR, with a minimum combined single limit of $10,000,000.00 per occurrence, for (i) spectator injury and property damage and (ii) PROMOTER's legal, pit, track and product liability. In the event that PROMOTER cannot obtain such insurance with $10,000,000.00 per occurrence limits, PROMOTER shall obtain and maintain such insurance at the highest available per occurrence limit, but in no event shall PROMOTER obtain such insurance with a per occurrence limit (for all categories of liability specified above) less than $5,000,000.00. PROMOTER will deliver to NASCAR at Daytona Beach, Florida no later than the Notification Date set forth in the Sanction Application and Agreement Form, a certified true copy of all public liability insurance policies in force for the Event, regardless of the total amount of coverage. In all such policies and in all other public liability policies obtained and maintained by the PROMOTER or PROMOTER'S parent, the following will be named as insured or additional insured: National Association for Stock Car Auto Racing, Inc., its shareholders, directors, officers, employees, agents, officials, and members; all drivers, car owners, car sponsors, mechanics, and all sponsors for the Event or the series of which the Event is a part. All policies shall also contain a cross liability endorsement acceptable to NASCAR. If PROMOTER fails to deliver such policies to NASCAR by the date provided, or if PROMOTER fails to maintain such policies with the required minimum coverage throughout the Event, NASCAR may cancel and rescind this Agreement immediately and without notice to the PROMOTER. If the policy or policies are not acceptable to NASCAR, then NASCAR may obtain the required insurance from an acceptable insurance company, with acceptable terms, at the PROMOTER's expense. ADVERTISING AND USE OF REGISTERED MARK (21) Each party authorizes the use of its name and registered mark by the other for publicizing, promoting or advertising the Event. The NASCAR name and registered mark will only be used as follows: NASCAR (R) The symbol (R) will appear as indicated with the NASCAR logo. In all publicity, advertising and promotion relating to the Event, including, but not limited to news releases, advertisements and brochures, PROMOTER will display the registered trademark and the phrase "NASCAR-sanctioned NASCAR Busch Series, Grand National Division Championship Event". (22) All competitors, including car owners and drivers, when they execute the NASCAR Official Entry Blank in connection with the Event, grant to NASCAR certain rights to their name(s), picture(s), likeness(es) or performance(s). Subject to the next sentence, NASCAR hereby assigns to PROMOTER the non-exclusive right to use such competitors' name(s), picture(s), likeness(es) or performance(s) for the purpose of publicizing, promoting or advertising the Event, but only to the extent such rights have been released to NASCAR pursuant to the NASCAR Official Entry Blank. Notwithstanding the foregoing, NASCAR retains the right to disapprove and prohibit the PROMOTER's actual or intended use of a competitor's name, picture, likeness or performance if NASCAR determines in its sole discretion that such use is or will be detrimental to NASCAR, to the Event, to the series of which the Event is a part, or to the sport. (23) PROMOTER will make no misrepresentations of fact in connection with publicizing, promoting or advertising the Event. If such a misrepresentation is made (a) the PROMOTER promptly will correct the misrepresentation through a subsequent PROMOTER publication, (b) NASCAR may correct the misrepresentation itself through NASCAR publication at PROMOTER's expense and/or (c) NASCAR may cancel and rescind this Agreement. Exhibit 1 to Sanction Application and Agreement Form Page 4 of 7 (24) PROMOTER acknowledges that the Event is part of the NASCAR Busch Series, Grand National Division. PROMOTER will cooperate fully with NASCAR, with the series sponsor(s), and with any other company that has contracted with NASCAR to sponsor awards or programs (including without limitation the Busch Beer Pole Award or the Rookie-of-the-Year Award) that are based in whole or in part on a competitor's performance in the Event or over a number of NASCAR Busch Series, Grand National Division events, in connection with those sponsors' activities, if any, during the Event. PROMOTER, on its own and at the request of NASCAR, will use its best efforts to feature such sponsors prominently in all of PROMOTER's advertising, publicity and promotion in connection with the Event, and no competitor of such a sponsor shall be featured therein as prominently as such sponsor. PROMOTER will take no action that, in NASCAR's sole judgment, will jeopardize the maintenance or continuation of such sponsorships. (25) PROMOTER acknowledges that the sale or use, for advertising purposes, of space at the racetrack, the premises upon which the racetrack is located and surrounding same, the facilities thereon, or in any publications distributed in connection with the Event, is an action that could have an impact upon the existing sponsorships described in paragraph 24 above. Such sale to or use by competitors of such sponsors shall be subject to prior written approval by NASCAR, which NASCAR may provide or withhold in its sole discretion. (26) NASCAR reserves the right to approve or disapprove any advertising, sponsorship or similar agreement in connection with any Event. (27) PROMOTER will use the NASCAR NATIONAL PROGRAM PACKAGE, if provided by NASCAR. TELEVISION AND SIMILAR RIGHTS (28) PROMOTER will pay to NASCAR at Daytona Beach, Florida not later than the Payment Date set forth in the Sanction Application and Agreement Form, or within twenty-four (24) hours of the consummation or execution of the television contract (whichever occurs later), by wire transfer, ten percent (10%) of all television income received or contracted to be received (whichever is greater) by the PROMOTER in connection with the Event. (29) In addition to the sum to be paid in accordance with paragraph 28, PROMOTER will pay into the NASCAR event purse trust account, not later than the Payment Date set forth in the Sanction Application and Agreement Form, or within twenty-four (24) hours of the consummation or execution of the television contract (whichever occurs later), by wire transfer, twenty-five percent (25%) of all television income received or contracted to be received (whichever is greater) by the PROMOTER in connection with the Event. (30) PROMOTER will maintain for a period of six years from the date of the Event (1) true and complete copies of any written television contract, any document evidencing such contract, and any document relating to such contract, and (2) accurate and complete records of all receipts and disbursements of television income received in connection with the Event. PROMOTER will permit NASCAR or its authorized agent at all reasonable times to request, receive, inspect and audit any or all such records and documents, wherever they may be located or at any other mutually agreeable location. PROMOTER will forward to NASCAR upon its execution true and complete copies of any written television contract. (31) PROMOTER will require, in any new or renewed television contract, the following language (or language having the same legal and practical effect): "The parties hereto agree to defer to the requests of NASCAR or its authorized agent in the placement and use of television cameras, crews, supporting equipment and personnel, and in the establishment of the starting time, for the Event." "Parties hereto agree to permit NASCAR or its authorized agent at all reasonable times, to request, and receive, true and complete copies of any written television contract, any document evidencing such contract, and any document relating to such contract." "Parties hereto agree that NASCAR shall have the non-exclusive right to use any and all sounds, images, pictures, audiotape, videotape, information and other digital data relating to the Event, including without limitation Event standings and results, for the purpose of distribution via the Internet, NASCAR Online or any other NASCAR-authorized public online service." Exhibit 1 to Sanction Application and Agreement Form Page 5 of 7 (32) PROMOTER, at no expense to NASCAR, will provide NASCAR in any new or renewed television contract, for NASCAR's exclusive use, two (2) thirty-second (30) commercial advertising segments, not to be resold by NASCAR. (33) If the television contract, after its publication in any form, becomes or is found to be unenforceable or is not performed by one or all parties thereto for any reason other than those mentioned in paragraph 34 below, the PROMOTER will perform its obligations as set forth herein as if the television contract were fully enforceable and in fact fully performed. (34) If the Event or the performance of the television contract is prevented or postponed due to an act of God, force majeure, inevitable accident, strike or other labor dispute, fire, riot or civil commotion, government action or decree, inclement weather, failure of technical facilities beyond the control of the broadcaster, the recapture of any time period scheduled for the live broadcast of the Event for an event of national importance or emergency, or for any similar reason beyond the control of the parties to this Agreement or to the television contract the PROMOTER will perform its obligations as set forth herein, except that the monies due under paragraphs 28 and 29 shall be the respective percentages of television income actually received. If any monies in excess of those due under this paragraph have been paid before the prevention or postponement of the Event as set forth in this paragraph, NASCAR will refund the excess to the PROMOTER within thirty (30) days of the prevention or the delayed staging of the Event. (35) PROMOTER warrants that it is authorized to grant, and hereby grants, to NASCAR the non-exclusive right to use any and all sounds, images, pictures, audiotape, videotape, information and other digital data relating to the Event, including without limitation Event standings and results, for the purpose of distribution via the Internet, NASCAR Online or any other NASCAR-authorized public online service. GENERAL PROVISIONS (36) The Event will be conducted in accordance with the NASCAR Busch Series, Grand National Division Rule Book, as it may be amended from time to time, any special rules that may be published by NASCAR specifically for the Event, and this Agreement. NASCAR may cancel or rescind this Agreement if NASCAR determines in its sole discretion that PROMOTER has failed to abide by the provisions of this Agreement, the NASCAR Busch Series, Grand National Division Rule Book, amendments thereto, or any special rules as set forth herein. Notice to PROMOTER is effective as set forth in paragraph 44. (37) PROMOTER's rights and obligations under this Agreement, and the sanction given pursuant to it, are not transferable or assignable. NASCAR may cancel or rescind this Agreement if (a) there is a change, material or otherwise, in the ownership, control or management of PROMOTER, (b) if the PROMOTER admits that it is not or will not be able to pay its debts as they become due, applies for or agrees to the appointment of a receiver or trustee in liquidation, makes a general assignment for the benefit of creditors, files a voluntary petition in bankruptcy or a petition seeking reorganization or an arrangement of creditors under any bankruptcy law, becomes a party against whom a petition under any bankruptcy law is filed, or is adjudicated a bankrupt under any bankruptcy law, or (c) if the PROMOTER engages in activity of any kind that NASCAR determines in its sole discretion to be detrimental to the sport or to NASCAR. (38) This Agreement and the sanction granted herein relate solely to the Event(s) and the date or dates set forth on the Sanction Application and Agreement Form. Nothing in this Agreement, or in the course of dealing between the parties, will be construed to require the PROMOTER or NASCAR to enter into a sanction agreement or to issue a sanction for this or any other Event in the future. (39) Nothing in this Agreement will be construed to place NASCAR in the relationship of a partner or joint venturer with the PROMOTER. The PROMOTER will not, and has no power to, obligate or bind NASCAR in any manner other than as provided expressly in this Agreement. (40) If an Event is postponed or cancelled for any reason (other than a strike, war, declaration of a state of national emergency, act of God or the public enemy, or any other cause beyond the control of the PROMOTER) without either (1) the prior written approval of NASCAR, or (2) during the Event, the prior oral approval of the NASCAR Official in charge of the Event, or if NASCAR cancels and rescinds this Agreement pursuant to paragraphs 19, 20, 23, 36 or 37, NASCAR may elect to retain all or any part of the PROMOTER's Purse and Point Fund, and other fees and monies received by NASCAR pursuant to this Agreement, and to utilize the same to reimburse, in whole or in part, NASCAR as well as the drivers and car owners, and each of them, for expenses incurred in connection with the Event, which Exhibit 1 to Sanction Application and Agreement Form Page 6 of 7 include but are not limited to salaries, transportation, lodging, and payments to the pit crew. NASCAR's determination as to what is or is not a proper expense or as to the manner or the amount of disbursement or as to whom disbursement is made in this regard is binding on the PROMOTER, as well as on all drivers and car owners entered in the Event. Nothing in this paragraph or in paragraphs 19, 20, 23, 36 or 37 shall be construed to limit or otherwise affect any right of action by NASCAR for damages, or any other available remedy, for breach of this Agreement. (41) NASCAR may modify, alter, change or replace the name of the series of which the Event is a part, at any time. In that event, PROMOTER shall use the new name in all communications, advertising, publicity and promotion relating to the Event. (42) In the event of litigation arising out of the enforcement of this Agreement, its terms and conditions, attorney's fees and costs shall be awarded to the prevailing party. (43) PROMOTER shall indemnify and hold NASCAR harmless from any and all claims, allegations, demands, obligations, suits, actions, causes of action, proceedings, rights, damages, and costs of any nature arising out of the Event or this Agreement, unless such claim, allegation, demand, obligation, suit, action, cause of action, proceeding, right, damage or cost arises solely out of the act or omission of NASCAR. With respect to any matter falling within the scope of the PROMOTER's obligation to defend and hold NASCAR harmless, NASCAR shall be entitled to select counsel to represent it in such matter at PROMOTER's expense, and that counsel's duties and obligations in all respects shall be to NASCAR. (44) Unless otherwise permitted herein, notice required by the Agreement shall be given by facsimile/telecopy, and by overnight mail or other express service, postage prepaid, addressed as follows: TO NASCAR: National Association for Stock Car Auto Racing, Inc. P.O. Box 2875 Daytona Beach, Florida 32120-2875 TO PROMOTER: The Address set forth immediately below the name of the PROMOTER first listed in the Sanction Application and Agreement Form. (45) This agreement shall be construed according to the laws of Florida and may not be amended except in writing and signed by both parties. Venue shall lie solely in Volusia County, Florida, and all parties hereto consent to service of process by, and the personal and subject matter jurisdiction of, the courts in and for Volusia County, Florida. (46) The Sanction Application and Agreement Form, including Exhibits 1, 2 and 2a thereto, constitutes the entire agreement between NASCAR and the PROMOTER. All previous communications and negotiations between NASCAR and the PROMOTER, whether oral or written, not contained herein are hereby withdrawn and annulled. End of Exhibit 1 * * * * * * * * * * * * * * Exhibit 1 to Sanction Application and Agreement Form Page 7 of 7 EXHIBIT 2a TO SANCTION APPLICATION AND AGREEMENT FORM FOR THE MBNA ~200" NASCAR and PROMOTER agree as follows: RACING PURSE $ BONUS AWARDS NASCAR POINT FUND NASCAR BUSCH SERIES, GRAND NATIONAL DIVISION CHAMPION NASCAR BUSCH SERIES, GRAND NATIONAL DIVISION PLAN WINNERS' CIRCLE AWARDS TELEVISION AWARDS MINIMUM PROMOTER'S PURSE AND POINT FUND $ NASCAR TELEVISION FEE TOTAL ................................................. $ EXHIBIT 2 TO SANCTION APPLICATION AND AGREEMENT FORM FOR THE GM GOODWRENCH/DELCO BATTERY "200" NASCAR and PROMOTER agree as follows: RACING PURSE $ BONUS AWARDS NASCAR POINT FUND NASCAR BUSCH SERIES, GRAND NATIONAL DIVISION CHAMPION NASCAR BUSCH SERIES, GRAND NATIONAL DIVISION PLAN WINNERS' CIRCLE AWARDS TELEVISION AWARDS MINIMUM PROMOTER'S PURSE AND POINT FUND $ NASCAR TELEVISION FEE TOTAL ................................................ $ EVENT NUMBER 1 PROMOTER: Dover Downs International Speedway, Inc. ADDRESS: P. O. Box 843, Dover, DE 19903 NAME OF EVENT: GM GOODWRENCH/DELCO BATTERY "200" TRACK: Dover Downs International Speedway LOCATION: Dover, DE TELEPHONE #: (302) 674-4500 TRACK LENGTH: 1 Mile, Paved EVENT DISTANCE: 200 Miles (200 laps) DATE OF EVENT: May 31, 1997 STARTING TIME: TBD POSTPONED DATE: Next Raceable Day TIME TRIAL DATE(S) AND HOURS: PRACTICE DATE(S) AND HOURS: Friday, May 30-Per Entry Blank Friday, May 30-Per Entry Blank REGISTRATION & INSPECTION - Friday, May 30-Per Entry Blank MINIMUM PROMOTER'S PURSE AND POINT FUND TOTAL (See Exhibit 2): $ SANCTION FEE: $ PAYMENT DATE 12 Noon on INSURANCE NOTIFICATION DATE (See Exhibit 1, May 21, 1997 (See Exhibit 1, May 21, 1997 Para. 19) Para. 20) Sanction Application and Agreement Form Page 2 of 4 EVENT NUMBER 2 PROMOTER: Dover Downs International Speedway, Inc. ADDRESS: P. O. Box 843, Dover, DE 19903 NAME OF EVENT: MBNA "200" TRACK: Dover Downs International Speedway LOCATION: Dover, DE TELEPHONE #: (302) 674-4500 TRACK LENGTH: 1 Mile, Paved EVENT DISTANCE: 200 Miles (200 laps) DATE OF EVENT: September 20, 1997 STARTING TIME: TBD POSTPONED DATE: Next Raceable Day TIME TRIAL DATE(S) AND HOURS: PRACTICE DATE(S) AND HOURS: Friday, Sept. 19-Per Entry Blank Friday, Sept. 19-Per Entry Blank REGISTRATION & INSPECTION - Friday, September 19-Per Entry Blank MINIMUM PROMOTER'S PURSE AND POINT FUND TOTAL (See Exhibit 2): $ SANCTION FEE: $ PAYMENT DATE 12 Noon on INSURANCE NOTIFICATION DATE (See Exhibit 1, Sept. 10, 1997 (See Exhibit 1, Sept. 10, 1997 Para. 19) Para. 20) Sanction Application and Agreement Form Page 3 of 4 Upon written acceptance and approval of the above application, in consideration for the mutual promises set forth herein, NASCAR and PROMOTER agree as follows: (1) NASCAR hereby grants its sanction to PROMOTER for the Event(s) listed, and NASCAR agrees to conduct the Event(s), through its officers and designated officials, in accordance with the NASCAR Busch Series, Grand National Division Rule Book, as it may be amended from time to time, and special rules that may be published by NASCAR specifically for the Event(s), and this agreement. Interpretation and application of the NASCAR Busch Series, Grand National Division Rule Book, as it may be amended from time to time, and any special rules that may be published by NASCAR specifically for the Event(s), are committed to NASCAR's sole discretion, and are final and unreviewable except to the extent provided in the NASCAR Busch Series, Grand National Division Rule Book. (2) Exhibits 1, 2 and 2a, attached hereto, are incorporated herein and made a part of this agreement. (3) NASCAR will retain for its own account all inspection fees. (4) Additional Provisions: Submitted this _____________ day of __________________, 19____. Dover Downs Int'l Speedway, Inc. Promoter By: /s/ Denis McGlynn President (an authorized officer) (title) Witnessed By: /s/ Jerry Dunning Gen Mang (title) Accepted and Approved this 17th day of December, 1996. National Association for Stock Car Auto Racing, Inc. By: /s/ Michael G. Helton Vice President for Competition (an authorized officer) (title) Witnessed By: /s/ Dawn K. Brown Asst. Event Coord. (title) Sanction Application and Agreement Form Page 4 of 4 EX-10 6 NASCAR Date Received 12-17-96 Sanction No. NWCS#12 & NWCS #26 NASCAR Official /s/ Gary Nelson MILLER "500" - June 1, 1997 MBNA "400~ - September 21, 1997 SANCTION APPLICATION AND AGREEMENT FORM NASCAR WINSTON CUP SERIES INSTRUCTIONS: (1) All NASCAR Winston Cup Series Championship Events for which PROMOTER seeks a NASCAR sanction must be listed in a single application form. Please sign the original and forward to NASCAR; upon acceptance and approval by NASCAR, a copy will be returned to the PROMOTER. (2) "PROMOTER" means the individual, partnership, corporation, joint venture or other entity that, in connection with the Event (as defined below), is ultimately responsible (financially and otherwise) for the organization and promotion of the Event and the facility at which the Event is to be run. If two or more entities are acting together in such capacity, all such entities should be listed as "PROMOTER" and the authorized officer of each should sign this form. (3) This form when signed by the PROMOTER is only an application for a NASCAR sanction. NASCAR is under no obligation to accept or approve the application. Upon being accepted and approved in writing by NASCAR, this form becomes an agreement binding on both parties. (4) Application for a NASCAR Winston Cup Series Championship Event must be received at NASCAR no later than ten business days after the PROMOTER receives this form from NASCAR. * * * * * * * * * * * * * * The undersigned PROMOTER, designated below, applies to the National Association for Stock Car Auto Racing, Inc. ("NASCAR") for a NASCAR sanction to organize and promote a NASCAR-sanctioned NASCAR Winston Cup Series Championship Event(s) in accordance with the terms and conditions set forth hereafter. as follows: POST OFFICE BOX 2875 - DAYTONA BEACH, FLORIDA 32120-2875 .904/253-0611 EXHIBIT 1 To Sanction Application and Agreement Form NASCAR and PROMOTER agree as follows: DEFINITIONS (1) "Event" means the Event(s) designated in the Sanction Application and Agreement Form, as well as all periods for registration, inspections, time trials, practice runs, post-race inspections and postponed dates related thereto. Whenever the word "Event" appears in the singular, it shall apply to all Events designated on the Sanction Application and Agreement Form, unless the context requires otherwise. All provisions in the Sanction Application and Agreement Form and in Exhibits 1, 2 and 2a apply to the Event(s) designated in the Sanction Application and Agreement Form, unless the context requires otherwise. (2) "Additional Award" as used herein includes any monetary or non-monetary award by, or contracted through, the PROMOTER, for distribution based upon the Event(s), other than (a) purse, (b) point fund, (c) Winner's Circle and Plan awards, (d) television income and (e) the entry award for the current NASCAR Winston Cup Series Champion. PROMOTER understands and acknowledges that the above-listed awards may or may not be applicable to or available in connection with the Event, and that NASCAR makes no representation as to the availability or amounts of such awards. (3) "Television Income", as used herein, means all monies and things of value received by PROMOTER as a result of and in connection with any television contract(s), including but not limited to payments received from networks, stations, packages, brokers, advertisers, advertising agencies, and the like. In computing all monies and things of value received, it is intended that the gross amount set forth in all television contract(s) as payable by the other contracting entity or entities shall be included and that any applicable commissions, fees or expenses paid to or deducted by sales agents, consultants and other parties shall not be deducted therefrom. (4) "Television Contract", as used herein, means any contract, agreement or understanding, whether oral or written, entered into between PROMOTER and any other entity or entities, whether or not they are broadcasters, for the sale, assignment or other transferral of the rights of PROMOTER in the live or delayed televised broadcast of, rebroadcast of, tape or film production of, and/or any other use of, the Event, whether by cable TV, pay TV, theater TV, video tape cassettes, and/or satellite transmissions, and whether local, regional, national or worldwide. PROMOTER'S GENERAL OBLIGATIONS (5) PROMOTER warrants to NASCAR that in connection with the Event it has sole control of the racetrack, the premises upon which the racetrack is located and surrounding same, and all facilities thereon, that it has obtained all necessary licenses, permits or other approvals required, and that it has full authority to conduct the Event at the racetrack pursuant to the terms of this agreement. PROMOTER further warrants that it will comply with all local, state and federal laws and regulations in connection with the organization and promotion of the Event. PROMOTER, at its expense, will make all appropriate filings of forms or other documents as required by federal, state or local laws. (6) PROMOTER at its expense assumes sole responsibility for furnishing the racetrack, the premises upon which the racetrack is located and surrounding same, and all facilities thereon in good repair, ready for use by competitors and officials. PROMOTER is solely responsible and liable for the safety of such competitors and officials while on, entering or leaving such racetrack, premises and facilities. PROMOTER warrants that the racetrack, premises and facilities are and will remain in a condition suitable for the conduct of the Event, and that the racing surface of the track will not be altered, resurfaced or otherwise substantially changed during the term of this Agreement without the express written consent of NASCAR. PROMOTER will provide NASCAR or its designated representative full access to the racetrack, premises and facilities as requested by NASCAR during the term of this Agreement. (7) If NASCAR in its sole discretion determines that the racetrack, the premises or any facilities are in an unsatisfactory condition, PROMOTER agrees to repair or resurface the racetrack and to repair the premises or facilities, at PROMOTER's expense and to the satisfaction of NASCAR prior to any NASCAR-sanctioned Event. If NASCAR in its sole discretion determines that it is necessary to resurface the racetrack, such resurfacing shall be completed by PROMOTER with adequate time prior to the Event to allow for tire and private car testing. If NASCAR in its sole discretion determines that there is insufficient time to place the racetrack in a condition suitable for the conduct of the Event, NASCAR in its sole discretion may postpone or cancel the Event. (8) PROMOTER at its expense will furnish adequate facilities, personnel, equipment, and services for accommodating and controlling the public during the Event. PROMOTER is solely responsible and liable for the safety of the public during the Event. PROMOTER is solely responsible for the condition, actions and operations of such facilities, personnel, equipment and services before, during and after the Event. (9) PROMOTER at its expense will furnish adequate facilities, support personnel, equipment, and related security, for use by NASCAR in the performance of NASCAR's duties, as they may be requested by NASCAR from time to time, including but not limited to facilities for office administration, registration, timing, scoring, car inspection, race direction, officiating and prize money distribution. Without in any way limiting the foregoing, PROMOTER at its expense will: a. provide one or more television monitors, in locations to be specified by NASCAR, with all related equipment necessary for such monitors to be connected to video and audio equipment used by the television producer under contract for the Event, in order to provide to NASCAR Officials live video on such monitors and the ability to switch instantaneously its view on the monitors among the different camera locations used by the television producer, at all times during the Event when all or a portion of the Event is being videotaped, broadcast, monitored and/or recorded; b. provide NASCAR with two (2) pace vehicles, each with the NASCAR logo (as set forth under paragraph 21 below) displayed on the side in a manner and size which is visible to all persons on the racetrack, in the viewing area and in all locations where NASCAR Officials are visually monitoring the Event; c. provide NASCAR prior to the Event with a list of the track radio frequencies to be used for the Event, including but not limited to frequencies to be used for maintenance, police and security personnel; d. cooperate with NASCAR in pre-race and victory lane ceremonies, awards presentations and photographs; e. have readily available quantities of oil dry acceptable to NASCAR when the track opens for practice and at all other times during the Event, and adequate personnel to spread the oil dry at NASCAR's direction; f. certify and recertify the scales as requested by NASCAR upon arrival for the first day of inspection and at all other times during the Event, and provide written certifications to the NASCAR Winston Cup Series Director as to the results of the certifications; g. provide personnel to secure the entry into the pits and garage areas during competition periods; h. provide personnel to secure the garage area on a continuous, 24-hour/day basis beginning the first day the track is open for inspection and ending when released by the NASCAR Winston Cup Series Director; i. deliver to the garage area before the morning of raceday twice the number of chairs as cars starting in the race for use by drivers and crew chiefs at the pre-race meeting; j. line and number each pit with appropriate paint, line and paint traffic lanes in the garage and garage area when and where needed, and repaint all start/finish, scoring, third turn and re-entry cutoff lines; k. place portable toilets along pit road and in the garage area as directed by NASCAR; l. coordinate with NASCAR all tours of the garage areas, including the times, number of participants and other arrangements; m. provide adequate electricity (including without limitation 220 volts 50 amps services with female range outlets for the NASCAR trailers), air conditioning, heat, telephone (including a track phone extension) and water facilities as requested by NASCAR; n. coordinate with NASCAR to ensure that it has a minimum of ten (10) minutes immediately before, during or after driver introductions for NASCAR awards presentations; o. coordinate with NASCAR to ensure that it has a reasonable period of time immediately following the Event for victory lane ceremonies, awards presentations and sponsor recognitions; p. provide a control tower of adequate size with electricity, air conditioning, heat, telephone (including a track phone extension), chairs with cushions, a television monitor (as set forth above), water facilities and other utilities, supplies and equipment as requested by NASCAR; q. provide a registration facility of adequate size outside the track and in the garage area, with electricity, air conditioning, heat, telephone (including a track phone extension), chairs with cushions, water facilities and other utilities, supplies and equipment as requested by NASCAR; r. provide adequate trash receptacles in the garage and pit area and coordinate with the NASCAR Winston Cup Series Director the times for trash pick up by track personnel; s. provide adequate personnel to sweep and clean-up the garage and pit areas on a daily basis; t. provide adequate parking areas for all competitors (including car owners, drivers and crew members) and NASCAR Officials adjacent to or near the garage area; Exhibit 1 to Sanction Application and Agreement Form Page 2 of 7 u. provide NASCAR with a track suite, including the customary number of admission tickets for admission to said suite, and 100 grandstand general admission tickets, such tickets to be delivered to NASCAR no later than thirty (30) days prior to the Event. (10) PROMOTER at its expense will provide adequate facilities, personnel, equipment and services for, and assumes sole responsibility to provide, fire protection equipment and on-site medical services for competitors, officials, the public and others, including without limitation cleanup crews, towing and flatbed wreckers. PROMOTER at its expense will make advance arrangements with local hospitals and physicians for the prompt and efficient treatment of any and all injuries occurring during the Event. (11) PROMOTER at its expense will furnish adequate security personnel (in addition to the requirements of paragraph 9) in the pit and garage area, and will limit access to such areas before, during and after the Event to authorized individuals and equipment. PROMOTER is solely responsible and liable for the actions of security personnel. (12) PROMOTER at its expense assumes and will perform all business responsibilities in connection with the Event (except as otherwise provided by this Agreement), including but not limited to business organization, promotional activities, management, general business affairs, ticket sales, track operation and press accommodations. NASCAR does not warrant, either expressly or by implication, nor is it responsible for, the financial or other success of the Event or the number or identity of vehicles or competitors participating in the Event. (13) PROMOTER will not schedule or permit any private race car practice or test runs for the seven days immediately preceding the first day of official practice for the Event without prior written approval by NASCAR. PROMOTER will not schedule any ancillary events or activities on the same day as registration or inspection, or on any days during the Event, without prior written approval by NASCAR. The ancillary events or activities covered by this paragraph include without limitation other motorsports events, thrill shows, live performances and/or helicopter rides. PROMOTER further agrees to notify NASCAR of any private race car testing and/or practice done at the racetrack pursuant to and in accordance with the 1997 NASCAR Winston Cup Series Private Race Car Testing Policy. OFFICIAL ENTRY BLANK (14) An Official Entry Blank for the Event will be composed, printed, published and distributed by NASCAR, and will constitute the sole official statement as to the date, place, schedule and length of the Event, eligibility requirements for competitors, and monetary and non-monetary awards. (15) PROMOTER will notify NASCAR prior to contracting for any Additional Award. NASCAR may reject a proposed Additional Award in its entirety, require different terms for the proposed Additional Award, or require a reallocation of the distribution of such an award among competitors, if in NASCAR's sole judgment the proposed award will not advance the nature of the competition, will have an adverse impact on the Event, or will be detrimental to the sport of automobile racing, NASCAR, any sponsors of the Event, or any sponsors of the NASCAR Winston Cup Series. NASCAR's determination in that regard will be binding on PROMOTER. PROMOTER assumes full responsibility for, and will indemnify NASCAR against, any liability or costs incurred as a result of NASCAR's determination with respect to any proposed award arranged by or through PROMOTER. All Additional Awards are subject to independent verification by NASCAR. (16) PROMOTER will submit to NASCAR, no later than sixty (60) calendar days before the date of the Event, a list of any and all proposed Additional Awards (as defined above) for the Event not previously included in Exhibit 2 and Exhibit 2a of this Agreement. If either PROMOTER or NASCAR contracts for Additional Awards after publication of the Official Entry Blank, then, subject to the provisions of paragraph 15, NASCAR in its sole discretion may publish and distribute a supplement to the Official Entry Blank posting the Additional Awards. (17) PROMOTER will not publish an official or unofficial entry blank or supplement, or any other form setting forth monetary or non-monetary awards, without prior written approval from NASCAR. PROMOTER will not advertise or otherwise disseminate any information as to monetary or non-monetary awards for the Event other than those specified in the Official Entry Blank or NASCAR-approved supplement. (18) NASCAR will use its best efforts to consult with the PROMOTER regarding postponement of an Event, but the decision to postpone an Event and the selection of the postponed date will be made by NASCAR in its sole discretion and will be binding on PROMOTER. Publication by Exhibit 1 to Sanction Application and Agreement Form Page 3 of 7 PROMOTER of a postponement and/or postponed date that has not been approved by NASCAR is not binding upon NASCAR. PROMOTER'S FINANCIAL AND INSURANCE OBLIGATIONS (19) PROMOTER will pay to NASCAR at Daytona Beach, Florida, not later than the Payment Date set forth in the Sanction Application and Agreement Form, by wire transfer of funds, an amount equal to the sum of the PROMOTER's Purse and Point Fund and the Sanction Fee, plus any other monies due NASCAR for the Event pursuant to this agreement, unless otherwise directed by NASCAR in writing. Time is of the essence. If said monies and fees are not paid to NASCAR in the manner and by the Payment Date, NASCAR at its option may (a) cancel and rescind this Agreement, or (b) enforce collection of said monies and fees by suit or action, in which case PROMOTER will pay all costs incurred by NASCAR in connection therewith, including reasonable attorney's fees. (20) PROMOTER at its expense will obtain and maintain public liability insurance for the Event that is acceptable to NASCAR, with a minimum combined single limit of $10,000,000.00 per occurrence, for (i) spectator injury and property damage and (ii) PROMOTER's legal, pit, track and product liability. In the event that PROMOTER cannot obtain such insurance with $10,000,000.00 per occurrence limits, PROMOTER shall obtain and maintain such insurance at the highest available per occurrence limit, but in no event shall PROMOTER obtain such insurance with a per occurrence limit (for all categories of liability specified above) less than $5,000,000.00. PROMOTER will deliver to NASCAR at Daytona Beach, Florida no later than the Notification Date set forth in the Sanction Application and Agreement Form, a certified true copy of all public liability insurance policies in force for the Event, regardless of the total amount of coverage. In all such policies and in all other public liability policies obtained and maintained by the PROMOTER or PROMOTER'S parent, the following will be named as insured or additional insured: National Association for Stock Car Auto Racing, Inc., its shareholders, directors, officers, employees, agents, officials, and members; all drivers, car owners, car sponsors, mechanics, and all sponsors for the Event or the series of which the Event is a part. All policies shall also contain a cross liability endorsement acceptable to NASCAR. If PROMOTER fails to deliver such policies to NASCAR by the date provided, or if PROMOTER fails to maintain such policies with the required minimum coverage throughout the Event, NASCAR may cancel and rescind this Agreement immediately and without notice to the PROMOTER. If the policy or policies are not acceptable to NASCAR, then NASCAR may obtain the required insurance from an acceptable insurance company, with acceptable terms, at the PROMOTER's expense. ADVERTISING AND USE OF REGISTERED MARK (21) Each party authorizes the use of its name and registered mark by the other for publicizing, promoting or advertising the Event. The NASCAR name and registered mark will only be used as follows: NASCAR (R) The symbol (R) will appear as indicated with the NASCAR logo. In all publicity, advertising and promotion relating to the Event, including, but not limited to news releases, advertisements and brochures, PROMOTER will display the registered trademark and the phrase "NASCAR-sanctioned NASCAR Winston Cup Series Championship Event". (22) All competitors, including car owners and drivers, when they execute the NASCAR Official Entry Blank in connection with the Event, grant to NASCAR certain rights to their name(s), picture(s), likeness(es) or performance(s). Subject to the next sentence, NASCAR hereby assigns to PROMOTER the non-exclusive right to use such competitors' name(s), picture(s), likeness(es) or performance(s) for the purpose of publicizing, promoting or advertising the Event, but only to the extent such rights have been released to NASCAR pursuant to the NASCAR Official Entry Blank. Notwithstanding the foregoing, NASCAR retains the right to disapprove and prohibit the PROMOTER's actual or intended use of a competitor's name, picture, likeness or performance if NASCAR determines in its sole discretion that such use is or will be detrimental to NASCAR, to the Event, to the series of which the Event is a part, or to the sport. (23) PROMOTER will make no misrepresentations of fact in connection with publicizing, promoting or advertising the Event. If such a misrepresentation is made (a) the PROMOTER promptly will correct the misrepresentation through a subsequent PROMOTER publication, (b) NASCAR may correct the misrepresentation itself through NASCAR publication at PROMOTER's expense and/or (c) NASCAR may cancel and rescind this Agreement. Exhibit 1 to Sanction Application and Agreement Form Page 4 of 7 (24) PROMOTER acknowledges that the Event is part of the NASCAR Winston Cup Series. PROMOTER will cooperate fully with NASCAR, with the series sponsor(s), and with any other company that has contracted with NASCAR to sponsor awards or programs (including without limitation the Busch Beer Pole Award or the Rookie-of-the-Year Award) that are based in whole or in part on a competitor's performance in the Event or over a number of NASCAR Winston Cup Series events, in connection with those sponsors' activities, if any, during the Event. PROMOTER, on its own and at the request of NASCAR, will use its best efforts to feature such sponsors prominently in all of PROMOTER's advertising, publicity and promotion in connection with the Event, and no competitor of such a sponsor shall be featured therein as prominently as such sponsor. PROMOTER will take no action that, in NASCAR's sole judgement, will jeopardize the maintenance or continuation of such sponsorships. (25) PROMOTER acknowledges that the sale or use, for advertising purposes, of space at the racetrack, the premises upon which the racetrack is located and surrounding same, the facilities thereon, or in any publications distributed in connection with the Event, is an action that could have an impact upon the existing sponsorships described in paragraph 24 above. Such sale to or use by competitors of such sponsors shall be subject to prior written approved by NASCAR, which NASCAR may provide or withhold in its sole discretion. (26) NASCAR reserves the right to approve or disapprove any advertising, sponsorship or similar agreement in connection with any Event. (27) PROMOTER will use the NASCAR NATIONAL PROGRAM PACKAGE, if provided by NASCAR. TELEVISION AND SIMILAR RIGHTS (28) PROMOTER will pay to NASCAR at Daytona Beach, Florida not later than the Payment Date set forth in the Sanction Application and Agreement Form, or within twenty-four (24) hours of the consummation or execution of the television contract (whichever occurs later), by wire transfer, ten percent (10%) of all television income received or contracted to be received (whichever is greater) by the PROMOTER in connection with the Event. (29) In addition to the sum to be paid in accordance with paragraph 28, PROMOTER will pay into the NASCAR event purse trust account, not later than the Payment Date set forth in the Sanction Application and Agreement Form, or within twenty-four (24) hours of the consummation or execution of the television contract (whichever occurs later), by wire transfer, twenty-five percent (25%) of all television income received or contracted to be received (whichever is greater) by the PROMOTER in connection with the Event. (30) PROMOTER will maintain for a period of six years from the date of the Event (1) true and complete copies of any written television contract, any document evidencing such contract, and any document relating to such contract, and (2) accurate and complete records of all receipts and disbursements of television income received in connection with the Event. PROMOTER will permit NASCAR or its authorized agent at all reasonable times to request, receive, inspect and audit any or all such records and documents, wherever they may be located or at any other mutually agreeable location. PROMOTER will forward to NASCAR upon its execution true and complete copies of any written television contract. (31) PROMOTER will require, in any new or renewed television contract, the following language (or language having the same legal and practical effect): "The parties hereto agree to defer to the requests of NASCAR or its authorized agent in the placement and use of television cameras, crews, supporting equipment and personnel, and in the establishment of the starting time, for the Event." "Parties hereto agree to permit NASCAR or its authorized agent at all reasonable times, to request, and receive, true and complete copies of any written television contract, any document evidencing such contract, and any document relating to such contract." "Parties hereto agree that NASCAR shall have the non-exclusive right to use any and all sounds, images, pictures, audiotape, videotape, information and other digital data relating to the Event, including without limitation Event standings and results, for the purpose of distribution via the Internet, NASCAR Online or any other NASCAR-authorized public online service." Exhibit 1 to Sanction Application and Agreement Form Page 5 of 7 (32) PROMOTER, at no expense to NASCAR, will provide NASCAR in any new or renewed television contract, for NASCAR's exclusive use, two (2) thirty-second (30) commercial advertising segments, not to be resold by NASCAR. (33) If the television contract, after its publication in any form, becomes or is found to be unenforceable or is not performed by one or all parties thereto for any reason other than those mentioned in paragraph 34 below, the PROMOTER will perform its obligations as set forth herein as if the television contract were fully enforceable and in fact fully performed. (34) If the Event or the performance of the television contract is prevented or postponed due to an act of God, force majeure, inevitable accident, strike or other labor dispute, fire, riot or civil commotion, government action or decree, inclement weather, failure of technical facilities beyond the control of the broadcaster, the recapture of any time period scheduled for the live broadcast of the Event for an event of national importance or emergency, or for any similar reason beyond the control of the parties to this Agreement or to the television contract the PROMOTER will perform its obligations as set forth herein, except that the monies due under paragraphs 28 and 29 shall be the respective percentages of television income actually received. If any monies in excess of those due under this paragraph have been paid before the prevention or postponement of the Event as set forth in this paragraph, NASCAR will refund the excess to the PROMOTER within thirty (30) days of the prevention or the delayed staging of the Event. (35) PROMOTER warrants that it is authorized to grant, and hereby grants, to NASCAR the non-exclusive right to use any and all sounds, images, pictures, audiotape, videotape, information and other digital data relating to the Event, including without limitation Event standings and results, for the purpose of distribution via the Internet, NASCAR Online or any other NASCAR-authorized public online service. GENERAL PROVISIONS (36) The Event will be conducted in accordance with the NASCAR Winston Cup Series Rule Book, as it may be amended from time to time, any special rules that may be published by NASCAR specifically for the Event, and this Agreement. NASCAR may cancel or rescind this Agreement if NASCAR determines in its sole discretion that PROMOTER has failed to abide by the provisions of this Agreement, the NASCAR Winston Cup Series Rule Book, amendments thereto, or any special rules as set forth herein. Notice to PROMOTER is effective as set forth in paragraph 44. (37) PROMOTER's rights and obligations under this Agreement, and the sanction given pursuant to it, are not transferable or assignable. NASCAR may cancel or rescind this Agreement if (a) there is a change, material or otherwise, in the ownership, control or management of PROMOTER, (b) if the PROMOTER admits that it is not or will not be able to pay its debts as they become due, applies for or agrees to the appointment of a receiver or trustee in liquidation, makes a general assignment for the benefit of creditors, files a voluntary petition in bankruptcy or a petition seeking reorganization or an arrangement of creditors under any bankruptcy law, becomes a party against whom a petition under any bankruptcy law is filed, or is adjudicated a bankrupt under any bankruptcy law, or (c) if the PROMOTER engages in activity of any kind that NASCAR determines in its sole discretion to be detrimental to the sport or to NASCAR. (38) This Agreement and the sanction granted herein relate solely to the Event(s) and the date or dates set forth on the Sanction Application and Agreement Form. Nothing in this Agreement, or in the course of dealing between the parties, will be construed to require the PROMOTER or NASCAR to enter into a sanction agreement or to issue a sanction for this or any other Event in the future. (39) Nothing in this Agreement will be construed to place NASCAR in the relationship of a partner or joint venturer with the PROMOTER. The PROMOTER will not, and has no power to, obligate or bind NASCAR in any manner other than as provided expressly in this Agreement. (40) If an Event is postponed or cancelled for any reason (other than a strike, war, declaration of a state of national emergency, act of God or the public enemy, or any other cause beyond the control of the PROMOTER) without either (1) the prior written approval of NASCAR, or (2) during the Event, the prior oral approval of the NASCAR Official in charge of the Event, or if NASCAR cancels and rescinds this Agreement pursuant to paragraphs 19, 20, 23, 36 or 37, NASCAR may elect to retain all or any part of the PROMOTER's Purse and Point Fund, and other fees and monies received by NASCAR pursuant to this Agreement, and to utilize the same to reimburse, in whole or in part, NASCAR as well as the drivers and car owners, and each of them, for expenses incurred in connection with the Event, which Exhibit 1 to Sanction Application and Agreement Form Page 6 of 7 include but are not limited to salaries, transportation, lodging, and payments to the pit crew. NASCAR's determination as to what is or is not a proper expense or as to the manner or the amount of disbursement or as to whom disbursement is made in this regard is binding on the PROMOTER, as well as on all drivers and car owners entered in the Event. Nothing in this paragraph or in paragraphs 19, 20, 23, 36 or 37 shall be construed to limit or otherwise affect any right of action by NASCAR for damages, or any other available remedy, for breach of this Agreement. (41) NASCAR may modify, alter, change or replace the name of the series of which the Event is a part, at any time. In that event, PROMOTER shall use the new name in all communications, advertising, publicity and promotion relating to the Event. (42) In the event of litigation arising out of the enforcement of this Agreement, its terms and conditions, attorney's fees and costs shall be awarded to the prevailing party. (43) PROMOTER shall indemnify and hold NASCAR harmless from any and all claims, allegations, demands, obligations, suits, actions, causes of action, proceedings, rights, damages, and costs of any nature arising out of the Event or this Agreement, unless such claim, allegation, demand, obligation, suit, action, cause of action, proceeding, right, damage or cost arises solely out of the act or omission of NASCAR. With respect to any matter falling within the scope of the PROMOTER's obligation to defend and hold NASCAR harmless, NASCAR shall be entitled to select counsel to represent it in such matter at PROMOTER's expense, and that counsel's duties and obligations in all respects shall be to NASCAR. (44) Unless otherwise permitted herein, notice required by the Agreement shall be given by facsimile/telecopy, and by overnight mail or other express service, postage prepaid, addressed as follows: TO NASCAR: National Association for Stock Car Auto Racing, Inc. P.O. Box 2875 Daytona Beach, Florida 32120-2875 TO PROMOTER: The Address set forth immediately below the name of the PROMOTER first listed in the Sanction Application and Agreement Form. (45) This agreement shall be construed according to the laws of Florida and may not be amended except in writing and signed by both parties. Venue shall lie solely in Volusia County, Florida, and all parties hereto consent to service of process by, and the personal and subject matter jurisdiction of, the courts in and for Volusia County, Florida. (46) The Sanction Application and Agreement Form, including Exhibits 1, 2 and 2a thereto, constitutes the entire agreement between NASCAR and the PROMOTER. All previous communications and negotiations between NASCAR and the PROMOTER, whether oral or written, not contained herein are hereby withdrawn and annulled. End of Exhibit 1 * * * * * * * * * * * * * * Exhibit 1 to Sanction Application and Agreement Form Page 7 of 7 EXHIBIT 2a TO SANCTION APPLICATION AND AGREEMENT FORM FOR THE MBNA "400" NASCAR and PROMOTER agree as follows: RACING PURSE $ TIME TRIALS NASCAR POINT FUND NASCAR WINSTON CUP SERIES CHAMPION NASCAR ROOKIE OF THE RACE AWARD NASCAR WINSTON CUP SERIES PLAN 1 NASCAR WINSTON CUP SERIES PLAN 1c WINNERS' CIRCLE AWARDS TELEVISION AWARDS MINIMUM PROMOTER'S PURSE AND POINT FUND $ NASCAR TELEVISION FEE TOTAL $ EXHIBIT 2 TO SANCTION APPLICATION AND AGREEMENT FORM FOR THE MILLER "500" NASCAR and PROMOTER agree as follows: RACING PURSE $ TIME TRIALS NASCAR POINT FUND NASCAR WINSTON CUP SERIES CHAMPION NASCAR ROOKIE OF THE RACE AWARD NASCAR WINSTON CUP SERIES PLAN 1 NASCAR WINSTON CUP SERIES PLAN 1c WINNERS' CIRCLE AWARDS TELEVISION AWARDS MINIMUM PROMOTER'S PURSE AND POINT FUND $ NASCAR TELEVISION FEE TOTAL ............................................... $ EVENT NUMBER 1 PROMOTER: Dover Downs International Speedway, Inc. ADDRESS: P. O. Box 843, Dover, DE 19903 NAME OF EVENT: MILLER "500" TRACK: Dover Downs International Speedway LOCATION: Dover, DE TELEPHONE #: (302) 674-4500 TRACK LENGTH: 1 Mile, Paved EVENT DISTANCE: 500 Miles (500 laps) DATE OF EVENT: June 1, 1997 STARTING TIME: TBD POSTPONED DATE: Next Raceable Day TIME TRIAL DATE(S) AND HOURS: PRACTICE DATE(S) AND HOURS: Friday, May 30-Per Entry Blank Friday, May 30-Per Entry Blank Saturday, May 31-Per Entry Blank Saturday, May 31-Per Entry Blank REGISTRATION & INSPECTION - Friday, May 30-Per Entry Blank MINIMUM PROMOTER'S PURSE AND POINT FUND TOTAL (See Exhibit 2): $ SANCTION FEE: $ PAYMENT DATE 12 Noon on INSURANCE NOTIFICATION DATE (See Exhibit 1, May 21, 1997 (See Exhibit 1, May 21, 1997 Para. 19) Para. 20) Sanction Application and Agreement Form Page 2 of 4 EVENT NUMBER 2 PROMOTER: Dover Downs International Speedway, Inc. ADDRESS: P. O. Box 843, Dover, DE 19903 NAME OF EVENT: MBNA "400" TRACK: Dover Downs International Speedway LOCATION: Dover, DE TELEPHONE #: (302) 674-4500 TRACK LENGTH: 1 Mile, Paved EVENT DISTANCE: 400 Miles (400 laps) DATE OF EVENT: September 21, 1997 STARTING TIME: TBD POSTPONED DATE: Next Raceable Day TIME TRIAL DATE(S) AND HOURS: PRACTICE DATE(S) AND HOURS: Friday, Sept. 19-Per Entry Blank Friday, Sept. 19-Per Entry Blank Saturday, Sept. 20-Per Entry Blank Saturday, Sept. 20-Per Entry Blank REGISTRATION & INSPECTION - Friday, September 19-Per Entry Blank MINIMUM PROMOTER'S PURSE AND POINT FUND TOTAL (See Exhibit 2): $ SANCTION FEE: $ PAYMENT DATE 12 Noon on INSURANCE NOTIFICATION DATE (See Exhibit 1, Sept. 10, 1997 (See Exhibit 1, Sept. 10, 1997 Para. 19) Para. 20) Sanction Application and Agreement Form Page 3 of 4 Upon written acceptance and approval of the above application, in consideration for the mutual promises set forth herein, NASCAR and PROMOTER agree as follows: (1) NASCAR hereby grants its sanction to PROMOTER for the Event(s) listed, and NASCAR agrees to conduct the Event(s), through its officers and designated officials, in accordance with the NASCAR Winston Cup Series Rule Book, as it may be amended from time to time, and special rules that may be published by NASCAR specifically for the Event(s), and this agreement. Interpretation and application of the NASCAR Winston Cup Series Rule Book, as it may be amended from time to time, and any special rules that may be published by NASCAR specifically for the Event(s), are committed to NASCAR's sole discretion, and are final and unreviewable except to the extent provided in the NASCAR Winston Cup Series Rule Book. (2) Exhibits 1, 2 and 2a, attached hereto, are incorporated herein and made a part of this agreement. (3) NASCAR will retain for its own account all inspection fees. (4) Additional Provisions: Submitted this _____________ day of __________________, 19____. Dover Downs Int'l Speedway, Inc. Promoter By: /s/ Denis McGlynn President (an authorized officer) (title) Witnessed By: /s/ Jerry Dunning Gen Mang (title) Accepted and Approved this 17th day of December, 1996. National Association for Stock Car Auto Racing, Inc. By: /s/ Michael G. Helton Vice President for Competition (an authorized officer) (title) Witnessed By: /s/ Dawn K. Brown Asst. Event Coord. (title) Sanction Application and Agreement Form Page 4 of 4 EX-21 7 Exhibit 21.1 Dover Downs Entertainment, Inc. Subsidiaries Dover Downs, Inc. Dover Downs International Speedway, Inc. Dover Downs Properties, Inc. EX-27 8
5 1,000 12-MOS JUN-30-1997 JUN-30-1997 15,503 0 3,596 0 402 20,400 66,688 15,827 71,261 15,595 760 0 0 1,523 52,777 71,261 101,678 101,678 0 70,643 0 0 (269) 28,239 11,767 16,472 0 0 0 16,472 1.08 0
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