Dover Downs, Inc

Video Lottery Advisory Council Meeting Minutes October 25th, 2016

Members present: Vernon Kirk – Director - Delaware State Lottery Bill Fasy - President - Delaware Park Patti Key – Chief Executive Officer - Harrington Raceway & Casino Mike Ordille –IGT Ed Sutor –President & CEO - Dover Downs Hotel & Casino Kathy Wayne – General Manager – Scientific Games

Members absent: Mike Nickolich – Scientific Games

Attendees: Lloyd Boulter – Scientific Games Salvatore DiMario – Delaware Standardbred Owners Assoc. Jayne Gooden – State of Delaware – Attorney General’s Office Bessie Gruwell – Thoroughbred Horsemen’s Assoc. Art Jenkins – State of Delaware – Controller General’s Office Steve Keener – Dover Downs Hotel & Casino

Rebecca Kidner – Rebecca Batson Kidner, PA C. Scott Kidner – C.S. Kidner Associates Michelle Lewis - Aristocrat Jim Logue – Delaware State Lottery Richard MacDonald – Delaware State Lottery Lenny Tranchitella – Harrington Raceway & Casino

Opening of the Meeting  Ed Sutor - Today’s meeting was posted on the State’s public meeting website. This is the 4th and final meeting being held for the year, fulfilling VLAC requirements. The primary purpose of this meeting will be to discuss and vote on legislative items to be included in the 2016 VLAC Report to the State. - The minutes from the previous meetings held on September 25th have been distributed for review and approved by the members and posted on the State’s public meeting website.

Review of Competitive Situation  Ed Sutor - The mid-Atlantic casino market continues to be a tough environment to operate in competitively. For the first 9 months of 2016, slot revenue for the entire mid-Atlantic region grew by only 1% over the first nine months

1 of the prior year. Maryland’s slot revenue for the same time period grew 4%, while Delaware lost a little over 1%. - MGM National Harbor is set to open its $1.4 billion property on December 8th, boasting over 3600 slot machines, over 120 table games, and class A entertainment scheduled to perform within the first few months of opening; including Bruno Mars, Duran Duran, and Cher. Every casino in our region, especially Maryland Live, is preparing for the negative impact this new competitor will have on revenues. While initial results are expected to be dramatic, we will not know the full impact this new operator will have on the mid-Atlantic market until later in calendar 2017. - Delaware casinos look forward to working with the new governor and legislature being voted into office on November 8th, with hopes that the recommendations included in this report will be reviewed and considered by the new administration and legislature.

Review of Lottery Initiatives:  Vernon Kirk - Sports Betting season is underway. We are down a bit in handle compared to 2015, but our hold is up considerably. We are evaluating if we have hit our saturation point with retailers in Delaware. - Jim Logue and I were recently at a conference in Atlanta where the Multi- State Lottery’s Video Lottery Game Group (DE-Chair, WV, RI, MD, OH) arranged for a presentation by IGT on ways to invigorate the MegaHits game.  Jim Logue - We installed new MegaHits games at Dover Downs and Harrington today. These new games have been proven successful, and are based on the MegaBucks platform. - We also have new Wheel of Fortune 3D games in at all 3 tracks.

Review of Scientific Games Initiatives  Kathy Wayne - Scientific Games is primarily focused on this Sports Betting season.

Review of Video Lottery Agents Recent Activities  Patti Key – Harrington Casino - At Harrington we’re working on the parking lot and on renovations in the Café.

 Bill Fasy – Delaware Park - Delaware Park is finishing up our casino system upgrade and planting new trees along our entryway to enhance our landscaping and create a more welcoming ambience.

 Ed Sutor – Dover Downs

2 - Dover Downs recently completed our upgraded casino slot system installation. This project was very expensive so we’re cutting back on other expenditures planned for the rest of the year.

Review of Manufacturers New Products:  Michelle Lewis - Aristocrat - New games from Aristocrat include Walking Dead 2, Elvira, Wonder Wheels, Dumb and Dumber, and Mr. Cashman. - Aristocrat has a new Fast Cash link that could be set up as a multi-state progressive game, or be linked to just the 3 Delaware casinos. - We are in the process of evaluating the slots at all 3 tracks and removing old hybrid games that are under-performing.

 Mike Ordille - IGT - IGT had a successful showing at G2E. We displayed 6 new hardware cabinets and our new 4-D technology. We also have new skill-based gaming, cardless connect technology, and a virtual reality product which will be ready to hit the market in 2017.

Review of Draft VLAC Recommendations for 2016 Report:  Ed Sutor - This year’s report includes only major items to be considered, as in prior years, in hopes that the current and future Administration will focus on these items that need to be addressed for the viability of the Delaware gaming industry.

1. Return to a graduated revenue share structure: . This revenue share structure worked for many years for the state and the casinos, then was changed to a higher flat rate structure, which has had a debilitating effect on Delaware’s 3 casinos when combined with the vast increase in regional competition. 2. Recommend 15% table game tax rate and elimination of annual license fee: . When the current table game tax rate is combined with payroll, license fee, and marketing costs to bring players to Delaware, we are operating at a loss. . In Delaware, table game revenue makes up only 10% of total gaming revenue. In Maryland and in New Jersey, where the table game tax rate is much more competitive, table game revenue makes up 25-30% of gaming revenue. 3. Recommend incentives for Marketing and Capital Investment . This is not a new concept; New York, New Jersey and West Virginia all have programs where the state offers incentives to casinos for marketing and capital expenditures.  New York – 8% of gaming revenue goes back to the casinos for marketing

3  New Jersey – Hundreds of millions of dollars is returned to the casino properties for capital expenditures via the CRDA.  West Virginia – More than $100 million is returned to the casino for reinvestment in fixed assets and a marketing subsidy where out of state marketing is matched.

4. Share 100% of slot vendor fees . Several years ago the state agreed to share 75% of slot vendor fees with the casinos. We propose 100% of slot vendor fees be shared between the state and the casinos.

- Sal DiMario asked for clarification of recommendation #4, and it was restated as written above.

A motion to clarify the wording of recommendation #4 was recommended by Bill Fasy. With that motion granted, all recommendations were adopted for inclusion in the 2016 VLAC Report to the State. (Members Vernon Kirk and Kathy Wayne abstained from the vote.)

Public Comments:  Sal DiMario - I would like to commend the VLAC for their recommendations in this year’s VLAC Report to the State and as executive director of the Delaware Standardbred Owner’s Association I support all of the recommendations in this Report.  Bessie Gruwell - I echo the same sentiments on behalf of the Thoroughbred Horsemen’s Association.