SECOND AMENDMENT TO
PROJECT CONSULTING AND MANAGEMENT AGREEMENT
This Second Amendment to Project Consulting and Management Agreement
(this "Amendment") is made as of December 29, 2000, by and between
DOVER DOWNS, INC., a Delaware corporation ("Owner") and XXXXXXX XXXXX
GAMING DEVELOPMENT CORPORATION, a Nevada corporation ("Operator").
RECITALS
A. Owner and Operator are parties to that certain Project
Consulting and Management Agreement dated May 10, 1995 as amended by
the First Amendment dated October 25, 1996 (the "Agreement"),
pursuant to which, inter alia, Owner hired Operator to provide
certain consulting and management services with respect to the
construction of certain gaming facilities and operation of certain
Gaming Activities within the Project (as such terms are defined in
the Agreement or amended in this Amendment) at the Dover Downs
racetrack facility owned by Owner and located in Dover, Delaware.
Capitalized terms used herein without definition have the meanings
given to them in the Agreement.
B. The Project described in the Agreement contained 1,000
Gaming Devices. Owner has increased the number of Gaming Devices to
2,000 (the "Second Expansion").
C. On or after August 1998, a dispute arose between Owner and
Operator regarding the number of Gaming Devices and the appropriate
amount of the percentage of Owner's pre-tax accounting income due to
Operator as the Management Fee under Section 8.2 of the Agreement as
amended ("the Dispute").
D. On or after July 26, 1999, Operator submitted the Dispute to
the American Arbitration Association ("the AAA") pursuant to Article
22 of the Agreement ("the Arbitration"). The Arbitration is presently
pending before the AAA as Xxxxxxx Xxxxx Gaming Development Corp. and
Dover Downs, Inc. 14 181 00220 99 C/K, Philadelphia Office.
E. Owner and Operator have now determined to resolve the
Dispute by entering into this Amendment and to clarify and amend the
Agreement hereby.
F. The parties desire to adjust the compensation paid to
Operator and make certain other modifications to the Agreement as set
forth herein.
NOW THEREFORE, for and in consideration of the premises, the
mutual agreements of the parties contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Amendment. The Agreement is hereby amended as follows:
(a) Second Expansion. Owner and Operator agree that the
term "Project" and all other defined terms used in the Agreement, for
all purposes with respect to all provisions of the Agreement, shall
be deemed amended to mean and include the Second Expansion and any
Future Expansions (as defined below).
(b) Future Expansions. The terms of the Agreement, as amended by
this Amendment, shall also extend to any increases in the number of
Gaming Devices beyond 2000, if permitted by new legislation (the
"Future Expansions").
(c) Compensation. Article 8 is amended and restated in its
entirety as follows effective January 1, 2001:
"Article 8. Operations Management Fee.
8.1 During the Term of this Agreement, Operator shall be paid an
operations Management Fee (the "Management Fee"). This Management Fee
for each Fiscal Year shall be equal to pre-tax accounting income
determined in accordance with Generally Accepted Accounting
Principles ("GAAP") before actual interest expense associated with
capital expenditures and less an annual deduction calculated as
provided in 8.2 (the "Allowed Deduction"). Such fee shall be due and
payable monthly in arrears. The Management Fee shall be adjusted
quarterly based on actual reported results for each such Fiscal
Quarter. A partial Fiscal Year at the beginning and end of this
Agreement shall result in a proration of the Management Fee or the
Allowed Deduction as applicable.
8.2 The Allowed Deduction, as defined in Section 1.30 of Exhibit
A of the Agreement, shall be deemed amended to be $885,000.00
effective as of January 1,2001, plus the "Additional Amount"
calculated as follows:
Additional = .0538 x Capital Expenditures Amount
where Capital Expenditures shall be slot loads plus capital
expenditures incurred with respect to any Future Expansions, as
determined in accordance with GAAP. With respect to each Expansion,
the Additional Amount shall be added to the Allowed Deduction after
the opening date associated with such Expansion. The parties
acknowledge that the Project and any Future Expansion will not
encompass the hotel currently under construction by Owner and that
Capital Expenditures referred to in Section 8.2 will not extend to
the hotel or any of Owner's future non-gaming activities or
facilities.
8.3 Expansion Consulting Expenses.
8.3.1 Operator shall not be paid a consulting fee for the
Second Expansion.
8.4 Access to Owner's Information.
Owner shall provide Operator with any information
reasonably requested to determine the amount of Interest Expense or
any other information necessary to determine the basis of the
Management Fee."
2. Past Management Fee Dispute:
(a) Operator accepts the sum of $3,000,000.00 in full
satisfaction of any claim for underpayment of the Management Fee
for all periods prior to January 1, 2001. Owner agrees to the wire
transfer of such amount upon the execution hereof by all parties.
(b) The parties agree to dismiss with prejudice the
Arbitration with each party to bear its own costs and expenses
(including legal fees) associated therewith.
3. Support Services. Owner is constructing a hotel and
entertainment complex which is not part of the Project but with
respect to which Owner has requested certain expertise from Operator.
Operator shall use its best efforts to provide Owner with access to
Operator's senior management officer to be designated by Operator who
will determine the appropriate individuals within Operator's
organization to assist in developing marketing programs and other
synergies between Owner's non-gaming facilities and Operator's
management of the Project and the Gaming Activities.
4. Owner's Representation and Warranties. Owner represents and
warrants to Operator as follows:
(a) All representations and warranties made and given by
Owner in the Agreement are true, accurate and correct as if made
on the date of this Amendment with respect to the Agreement and
the Amendment.
(b) No Default or Event of Default by Owner or, to Owner's
knowledge, by Operator has occurred and is continuing under the
Agreement, and no event has occurred and is continuing which, with
notice or the passage of time or both, would be a Default or an
Event of Default. Without limiting the generality of the
foregoing, Owner acknowledges Operator's present ownership by Park
Place Entertainment Corporation ("PPE") in no way constitutes a
Default or Event of Default by Operator. Further, Owner agrees
that such ownership by PPE does not require the consent of either
party under Section 15 of the Agreement.
(c) The making, execution, delivery and performance of this
Amendment by Owner has been duly authorized and approved by all
requisite action of the Board of Directors of Owner, and this
Amendment has been duly executed and delivered by Owner and
constitutes a valid and binding obligation of Owner, enforceable
in accordance with its terms.
5. Operator's Renresentation and Warranties. Operator
represents and warrants to Owner as follows:
(a) All representations and warranties made and given by
Operator in the Agreement are true, accurate and correct as if
made on the date of this Amendment with respect to the Agreement
and the Amendment.
(b) No Default or Event of Default by Operator or, to
Operator's knowledge, by Owner has occurred and is continuing
under the Agreement, and no event has occurred and is continuing
which, with notice or the passage of time or both, would be a-
Default or an Event of Default.
(c) The making, execution, delivery and performance of this
Amendment by Operator has been duly authorized and approved by all
requisite action of the Board of Directors of Operator, and this
Amendment has been duly executed and delivered by Operator and
constitutes a valid and binding obligation of Operator,
enforceable in accordance with its terms.
6. Incorporation. This Amendment, including the recitals
hereto, shall form a part of the Agreement, and all references to the
Agreement therein shall mean that document as hereby amended and
modified.
7. No Prejudice: Reservation of Rights. Except as provided
herein, this Amendment shall not prejudice any rights or remedies of
either Owner or Operator under the Agreement existing as of the date
hereof.
8. No Impairment. Except as specifically hereby amended, the
Agreement shall remain unaffected by this Amendment and the Agreement
shall remain in full force and effect.
9. Intepration. The Agreement, as amended by this Amendment:
(a) constitutes and integrated agreement; (b) supersedes all oral
negotiations and prior and other writings with respect to its subject
matter; and (c) is intended by the parties as the final expression of
the agreement with respect to the terms and conditions set forth
therein and as the complete and exclusive statement of the terms
agreed to by the parties. If there is any conflict between the terms,
conditions and provisions of this Amendment and those of the
Agreement, the terms, conditions and provisions of this Amendment
shall prevail.
10. Miscellaneous. This Amendment may be executed in
counterparts, and all counterparts shall constitute but one and the
same document. If any arbitrator determines any provision of this
Amendment to be invalid, illegal or unenforceable, that portion shall
be deemed severed from the rest, which shall remain in full force and
effect as thought the invalid, illegal or unenforceable portion had
never been a part of this Amendment. This Amendment shall be governed
by laws of the State of Delaware, without regard to the choice of law
rules of that State.
11. Notices. Section 23.3 of the Agreement, as to Operator, is
amended as follows:
If to Operator: Xxxxxxx Xxxxx Gaming Development Corp.
Park Place Entertainment Corporate Offices
0000 Xxxxxx Xxxxxx Xxxxxxx Xxx Xxxxx, Xxxxxx 00000
Attn: Xxxxxxx X. Xxxx, President
Telephone: (000) 000-0000 or (000) 000-0000
Fax: (000) 000-0000
with a copy to: Park Place Entertainment Corporation-East Region
Park Place and the Boardwalk
Xxxxxxxx Xxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxx XxXxxx, Xx.,
Senior VP & General Counsel
Telephone: (000) 000-0000
Fax: (000) 000-0000
If to Owner: Dover Downs, Inc.
0000 Xxxxx XxXxxx Xxxxxxx
Xxxxx, Xxxxxxxx 00000
Attn: Xxxxx XxXxxxx, President & CEO
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Dover Downs, Inc.
0000 Xxxxxxx Xxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxxx, VP & General Counsel
Telephone: (000) 000-0000
Fax: (000) 000-0000
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to Project Consulting and Management Agreement as of the
date first above-written.
OWNER:
DOVER DOWNS, INC., a
Delaware corporation
By: /s/ Xxxxx XxXxxxx
Xxxxx XxXxxxx
President
OPERATOR:
XXXXXXX XXXXX GAMING DEVELOPMENT
CORPORATION, a Nevada corporation
By: /s/ Xxxxxxx X. Xxxx
Xxxxxxx X. Xxxx
President
