EXHIBIT 10.8


 


 


 


Standardbred
Horsemen’s Agreement


 


between
Colonial Downs, L.P.,


Stansley
Racing Corp. and


The
Virginia Harness Horse Association


 


 


March 1,
2006


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Scope of Agreement

  	
  2

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Exclusive Representation

  	
  2

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Accounts

  	
  3

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Standardbred Partners’ Account

  	
  3

  
	
   

  	
  B.

  	
  Horsemen’s Account

  	
  4

  
	
   

  	
  C.

  	
  Availability of Information on Accounts

  	
  4

  
	
   

  	
  D.

  	
  Distribution of Interest and Other Earnings on
  Accounts; Disbursement to Colonial Downs

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Administration of Accounts

  	
  5

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Amounts To Be Deposited

  	
  5

  
	
   

  	
  B.

  	
  Transfers from the Standardbred Partners’ Account to
  the Horsemen’s Account and Colonial Downs’ Account

  	
  5

  
	
   

  	
  C.

  	
  Signal Sales

  	
  5

  
	
   

  	
  D.

  	
  Account Wagering

  	
  6

  
	
   

  	
  E.

  	
  Stakes Race Purses

  	
  7

  
	
   

  	
  F.

  	
  Administrative Fee

  	
  7

  
	
   

  	
  G.

  	
  Other Legalized Wagering

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Purse Mechanics

  	
  8

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Purse Schedules and Condition Sheets

  	
  8

  
	
   

  	
  B.

  	
  Overpayment of Purses

  	
  9

  
	
   

  	
  C.

  	
  Underpayment of Purses

  	
  9

  
	
   

  	
  D.

  	
  Purse Notices

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Live Standardbred Racing

  	
  9

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Number of Days, Dates and Average Daily Purses

  	
  9

  
	
   

  	
  B.

  	
  Promotion of the Colonial Downs Meet

  	
  11

  
	
   

  	
  C.

  	
  Sponsorships

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Races and Awards for Virginia-Bred, Virginia-Owned
  and Virginia-Sired Horses

  	
  12

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Satellite Wagering Facility Expansion

  	
  12

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Stalls and Track Facilities

  	
  15

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Availability of Stalls and Track Facilities Before,
  During and After Race Meetings

  	
  15

  
	
   

  	
  B.

  	
  Vendors

  	
  16

  
	
   

  	
  C.

  	
  Stall Applications

  	
  16

  
	
   

  	
  D.

  	
  Racetrack Kitchen

  	
  17

  



 

















 


	
  11.

  	
  Racing Committee

  	
  18

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Representations and Warranties

  	
  18

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  VHHA

  	
  18

  
	
   

  	
  B.

  	
  Colonial Downs

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  Racing Officials

  	
  20

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Governmental Approval

  	
  20

  
	
   

  	
   

  	
   

  
	
  15.

  	
  Authorization for Out-of-State Simulcasting

  	
  20

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Copies of Documents

  	
  21

  
	
   

  	
   

  	
   

  
	
  17.

  	
  Horsemen’s Backstretch Improvements and Programs

  	
  21

  
	
   

  	
   

  	
   

  
	
  18.

  	
  Right to Terminate

  	
  22

  
	
   

  	
   

  	
   

  
	
  19.

  	
  Indemnification

  	
  22

  
	
   

  	
   

  	
   

  
	
  20.

  	
  Mediation; Arbitration

  	
  22

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Attempt to Resolve Disputes

  	
  22

  
	
   

  	
  B.

  	
  Administration

  	
  23

  
	
   

  	
  C.

  	
  Notice to Arbitrate

  	
  23

  
	
   

  	
  D.

  	
  Selection of Arbitrator(s)

  	
  23

  
	
   

  	
  E.

  	
  Pre-Hearing Conference

  	
  24

  
	
   

  	
  F.

  	
  Discovery

  	
  24

  
	
   

  	
  G.

  	
  Additional Conference

  	
  25

  
	
   

  	
  H.

  	
  Arbitration Hearing

  	
  25

  
	
   

  	
  I.

  	
  Arbitration Award

  	
  26

  
	
   

  	
  J.

  	
  Default

  	
  26

  
	
   

  	
  K.

  	
  Costs

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  21.

  	
  Contribution Adjustments

  	
  27

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Changes in Applicable Law

  	
  27

  
	
   

  	
  B.

  	
  Duration

  	
  28

  



 


ii

















 


	
  22.

  	
  Additional License

  	
  28

  
	
   

  	
   

  	
   

  
	
  23.

  	
  Consents, Approvals, Agreements or Assurances

  	
  28

  
	
   

  	
   

  	
   

  
	
  24.

  	
  Counterparts

  	
  29

  
	
   

  	
   

  	
   

  
	
  25.

  	
  Notices

  	
  29

  
	
   

  	
   

  	
   

  
	
  26.

  	
  Waivers

  	
  30

  
	
   

  	
   

  	
   

  
	
  27.

  	
  Applicable Law; Venue

  	
  30

  
	
   

  	
   

  	
   

  
	
  28.

  	
  Headings

  	
  30

  
	
   

  	
   

  	
   

  
	
  29.

  	
  Severability

  	
  31

  
	
   

  	
   

  	
   

  
	
  30.

  	
  Entire Agreement; Modification

  	
  31

  
	
   

  	
   

  	
   

  
	
  31.

  	
  Conditions Precedent to Effectiveness of this
  Agreement

  	
  31

  



 


 


	
  Exhibit A

  	
   

  	
  Form of Trust Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Annual Transfers of
  Funds from Standardbred Partners’ Account to Horsemen’s Account

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Central-Southside
  Virginia Region

  



 


 


iii

















 


STANDARDBRED
HORSEMEN’S AGREEMENT


 


THIS AGREEMENT is entered
into this 1st day of March 2006, effective as of January 1,
2006, by and among COLONIAL DOWNS, L.P., a Virginia limited partnership,
STANSLEY RACING CORP., a Virginia corporation (collectively, “Colonial Downs”),
and the VIRGINIA HARNESS HORSE ASSOCIATION, a Virginia not-for-profit
corporation (the “VHHA”).


 


WHEREAS, Colonial Downs
owns and operates in New Kent County, Virginia, the facility known as the
Colonial Downs racetrack (the “Racetrack”) and nine (9) satellite wagering
facilities located in Brunswick, Chesapeake (on Military Highway, the “Existing
Chesapeake SWF”), Chesapeake (on Indian River Road, the “New Chesapeake SWF”),
Hampton, Henry County (the “Henry County SWF”) and Richmond (on Broad Street),
Richmond (on Hull Street, the “New Richmond SWF”), Scott County (scheduled to
open January 2006, the “Scott County SWF”), and Vinton, Virginia (the “Vinton
SWF,” and collectively with the foregoing, the “SWFs”);


 


WHEREAS, the VHHA is a
trade organization composed of owners, trainers, drivers, grooms, breeders,
owner-trainers, and owner-breeders, or any combination thereof, (its “Members”)
of standardbred racehorses;


 


WHEREAS, the VHHA
develops and provides programs and other services for its Members, their
employees and other participants in standardbred horse racing who are and will
be engaged in live racing at the Racetrack (such racing a “Race Meeting”);


 


WHEREAS, the
parties have entered into the Standardbred Horsemen’s Agreement, dated as of
April 2, 2003, (the “Existing Agreement”), portions of which expired on
midnight on December 31, 2005 and have been extended to the date hereof and are
superceded hereby and other portions which continue to remain in effect;


 

















 


WHEREAS, the
parties hereto desire to continue and enhance a close and understanding
relationship among breeders, owners, trainers, drivers and grooms of
standardbred race horses (the “Horsemen”), including VHHA Members, the VHHA,
Colonial Downs, and the public; and


 


WHEREAS, the
parties desire to collaborate to increase the purse funds available to the
Horsemen for the Race Meetings and to improve the financial return to Colonial
Downs associated with conducting the Race Meetings and operating the SWFs;


 


NOW, THEREFORE, in
consideration of the promises and the mutual covenants contained herein, the
parties desiring to be legally bound agree as follows:


 


1.             Effective
Date and Term of Agreement.  Upon the
satisfaction or waiver of all conditions set forth in Section 31 hereof, this
Agreement shall become effective as of 12:01 a.m. on January 1, 2006, and
shall remain in effect through midnight on December 31, 2008 (the “Term”),
unless otherwise terminated as provided herein, with the exception of
Subsection 5.B., Section 9, and Section 21, which shall continue in effect
as stated therein.


 


2.             Scope
of Agreement.  This Agreement shall
be applicable to (i) revenues generated from pari-mutuel wagering on live standardbred
races at the Racetrack and on all simulcast standardbred races, including
simulcast broadcasts of live standardbred races held at the Racetrack,
broadcast to the Racetrack and to all SWFs owned and operated by Colonial Downs
in Virginia, to (ii) revenues generated by simulcast broadcasts to locations
outside the Commonwealth of Virginia of live standardbred races held at the
Racetrack, and to (iii) the live standardbred race meetings conducted at the
Racetrack, during the Term of this Agreement.


 


3.             Exclusive
Representation.  During the Term of
this Agreement, the VHHA shall be the exclusive representative of its Members
with respect to the matters set forth herein. 
The VHHA hereby warrants and represents that it is the Horsemen’s
organization representing a


 


2

















 


majority of the Horsemen
racing at the Racetrack, and Colonial Downs hereby recognizes it as such.


 


4.             Accounts.


 


A.            Standardbred
Partners’ Account.  Colonial Downs
and the VHHA currently maintain an account at Citizens and Farmers Bank in
Providence Forge, Virginia (the “Standardbred
Partners’ Account” or the “Account”). 
The parties agree that the financial institution(s) at which the
Standardbred Partners’ Account is maintained may be changed at any time by
agreement of the parties.  Colonial Downs
and the VHHA agree that all funds maintained in the Standardbred Partners’
Account are funds that are to be maintained in trust on behalf of and for the
benefit of the Horsemen, less those funds to be distributed to Colonial Downs,
as provided herein, and distributed according to regulations promulgated by the
Virginia Racing Commission (the “Commission”) from time to time or by agreement
between the parties to this Agreement. 
In furtherance of such purpose, the parties hereto have executed the
trust agreement attached as Exhibit A and have had the Standardbred Partners’
Account designated a trust account by the financial institution at which the
Standardbred Partners’ Account is maintained. 
The parties shall take similar steps to have the Standardbred Partners’
Account designated as a trust account by any other financial institution(s) to
which the Account is moved.  In addition,
either party may elect upon written notice to the other party to have a
third-party trustee, acceptable to both parties, appointed as trustee of the
Account.  All interest and other earnings
whatsoever on the amounts paid or deposited into the Standardbred Partners’
Account shall accrue solely to the benefit of the Standardbred Partners’
Account.  All funds paid or deposited
into the Standardbred Partners’ Account (i) shall be invested in an
interest-bearing account that provides market rates of return, or government or
bank securities, and (ii) shall be


 


3

















 


used for purses and for
such other purposes as the parties may agree and the Commission may approve.


 


B.            Horsemen’s
Account.  Monies payable to Horsemen
as purses under this Agreement shall be deposited from the Standardbred
Partners’ Account into a separate account (the “Horsemen’s Account”) as needed
to pay purses.  The amounts to be
transferred from the Standardbred Partners’ Account to the Horsemen’s Account
are set forth herein.  The transfer of
funds from the Standardbred Partners’ Account to the Horsemen’s Account shall
be made, and the appropriate portions of purse money
shall be made available to the earners thereof, within seventy-two (72) hours
(dark days and Sundays excluded) after the result of the race in which such
money was earned has been declared official; provided, that in the event of any
dispute as to the result of a race due to a drug test or other regulatory
inquiry, the purse money shall not be made available until final resolution of
the dispute by the stewards, the Commission or the courts, as the case may
be.  No portion of such money payable as
purses to any earner thereof shall be deducted by Colonial Downs unless
requested in writing by the person to whom such monies are payable or his duly
authorized representative or as required by order of the stewards or a court.


 


C.            Availability
of Information on Accounts.  The
Standardbred Partners’ Account and the Horsemen’s Account and the investment or
deposit schedules of Colonial Downs with respect to such accounts shall be
subject to examination at any reasonable time by the President of the VHHA or
his or her designee.


 


D.            Distribution
of Interest and Other Earnings on Accounts; Disbursement to Colonial Downs.  All interest or earnings whatsoever on the
amounts paid or deposited into the Standardbred Partners’ Account and the
Horsemen’s Account shall accrue solely to the benefit of


 


4

















 


Colonial Downs.  Additionally, to help defray the costs of the
Horsemen’s bookkeeper and of providing year-round office space to the VHHA,
Colonial Downs shall be entitled to disburse from funds in the Standardbred
Partner Account to itself $7,500 each calendar year, such funds to be disbursed
on the last business day of each month in the amount of $625 per month.  A final accounting of this disbursement shall
be made on January 31 of each year for the prior calendar year.


 


5.             Administration
of Accounts.


 


A.            Amounts
To Be Deposited.  Colonial Downs
shall deposit into the Standardbred Partners’ Account the amounts specified in
paragraph 13 of § 59.1-369 of the Code of Virginia and shall deposit into the
Horsemen’s Account the amounts specified for purses in Subsections D(1) and
G(1) of § 59.1-392 of the Code of Virginia.


 


B.            Transfers
from the Standardbred Partners’ Account to the Horsemen’s Account and Colonial
Downs’ Account.  With respect to all
deposits to the Standardbred Partners’ Account derived from handle at all
satellite wagering facilities, the parties agree that transfer of funds from
the Standardbred Partners’ Account to the Horsemen’s Account shall be made as
set forth in Exhibit B hereto, subject to the terms and conditions set forth in
Section 9 hereof, and shall continue for the term of Colonial Downs’
licenses for such facilities.  The VHHA
shall authorize the weekly payment from the Standardbred Partners’ Account to
Colonial Downs of an amount equal to the difference between (i) the amounts
deposited into the Standardbred Partners’ Account pursuant to Paragraph 13 of
§ 59.1-369 of the Code of Virginia and (ii) the amounts transferred to the
Horsemen’s Account as set forth in Exhibit B.


 


C.            Signal
Sales.  Colonial Downs shall
calculate the revenues attributable to the sale of the live standardardbred
race signal to entities outside Virginia. 
In calculating such


 


5

















 


amount, revenues from
signal sales shall be based on information provided to Colonial Downs and shall
be calculated using accounting practices generally accepted in the horse racing
industry.  Such calculation of revenues
from signal sales shall be provided to the VHHA for its approval, such approval
not to be unreasonably withheld, conditioned or delayed.  For the term hereof, Colonial Downs shall
deposit into an account designated and exclusively controlled by the VHHA (the “Signal
Sales Account”) an amount calculated as (a) total revenue from the sale of the
live standardbred race signal to entities outside of Virginia less (b) the
product of $2,100, multiplied by the number of standardbred race days in the
given year, multiplied by (c) 50%, with such calculated amount not to exceed
the product of (x) $457.73 multiplied by (y) the number of standardbred race
days in the given year. Colonial Downs shall retain solely for its own account
and benefit revenues from the sale of the live standardbred race signal to
entities outside of Virginia in excess of the product of $3,015.46 multiplied
by the number of standardbred race days in a given year, up to the amount equal
to the product of $18,015.46 multiplied by the number of race days in the given
year.  The balance of signal sale revenue
in excess of the product of $18,015.46 multiplied by the number of race days in
the given year shall be equally divided between Colonial Downs and the VHHA,
and the VHHA’s share shall be deposited into the Signal Sales Account.


 


D.            Account
Wagering.  Neither Colonial Downs nor
the VHHA shall enter into an agreement, without the prior written consent of
the other, which consent shall not be unreasonably withheld, delayed or
conditioned, regarding telephone account or other electronic media wagering
systems pursuant to which Colonial Downs or the VHHA would receive any fee from
any advance deposit account wagering licensee or any other telephone or other
electronic media account wagering entities for the right to accept wagers from
account holders located in


 


6

















 


Virginia on standardbred
races simulcast from within or outside of Virginia.  The foregoing sentence shall not apply to
Colonial Downs’ existing and future agreements for the sale of its live
standardbred racing signals to simulcast venues to which the VHHA’s consent is
governed by Section 15 of this Agreement.


 


E.             Stakes
Race Purses.  The percentage of the
purse monies available under Subsections A through D of this Section, excluding
promotional fees and sponsorships, to be paid to Horsemen participating in
stakes races held at the Racetrack shall be limited to eight percent (8%) of
the total purses paid.  The parties agree
that the foregoing eight-percent (8%) limit may be increased by one dollar for
every one dollar that Colonial Downs secures for additional purse monies from
sponsors of live standardbred races at the Racetrack, up to a total of twelve
percent (12%) of total purses paid; provided, however, that not more than ten
percent (10%) of the amounts payable as purses under Subsections A through D of
this Section shall be used for purses for stakes races.  Notwithstanding the foregoing, a higher
percentage may be agreed upon by the parties in good faith negotiations.  For purposes of this subsection, the term “stakes
races” shall not include early or late closure races or Virginia Standardbred
Breeder’s Fund stakes.


 


F.             Administrative
Fee.  The
administrative fee paid to the VHHA for services rendered to Horsemen as the
majority Horsemen’s group shall be as provided in Subsection S of § 59.1-392 of
the Code of Virginia.  The parties shall
agree on advance payments of the administrative fee between live standardbred
Race Meetings at the Racetrack in recognition of the VHHA’s year-round service
to Horsemen, obligations with respect to Horsemen’s interests before the
Commission, and the VHHA’s efforts to assist Colonial Downs on legislative
issues.


 


7

















 


G.            Other
Legalized Wagering.  Except as
otherwise specifically provided herein, in the event that wagers other than on
standardbred horse racing, including, but not limited to, the sale of lottery
tickets and/or participation in other wagering enterprises at the Racetrack
and/or the SWFs (but excluding any use of the Racetrack or SWFs for charitable
gaming that does not result in net revenue for Colonial Downs above fair market
rent for the facilities), are authorized by legislative action and a portion of
the proceeds is provided by that legislation for standardbred racing, the
parties shall be bound by the allocations in such legislation.  In the event the allocation of revenues is
not addressed by such legislative action, the parties shall negotiate in good
faith a written agreement governing the allocation between them of the revenues
to be received for standardbred racing from that legislative action.


 


6.             Purse
Mechanics.


 


A.            Purse
Schedules and Condition Sheets. 
Colonial Downs shall use its reasonable judgment to estimate attendance,
pari-mutuel handle and breakage for standardbred racing.  Using that information and after consultation
with a designated representative of the VHHA, Colonial Downs shall establish a
tentative average daily overnight purse schedule and a tentative stakes purse
schedule for each Race Meeting in accordance with the terms of this
Agreement.  Nomination, sustaining,
starting, and entry fees paid by standardbred Horsemen, and funds provided by
the Virginia Breeders Fund or by race sponsors shall not be considered to be
portions of the purses paid by Colonial Downs. 
Colonial Downs shall exercise reasonable care to avoid significant
underpayments or overpayments of purses at all Race Meetings.  Colonial Downs shall send to the VHHA its
first condition sheet and proposed purse schedules for each Race Meeting before
they are sent to the printer.


 


8

















 


B.            Overpayment
of Purses.  Colonial Downs and the
VHHA shall cooperate to the fullest extent possible to avoid overpayment of
purses to Horsemen as of the end of any year during the Term of this
Agreement.  If Colonial Downs makes an
overpayment in excess of the amount computed under Section 5 hereof, the
overpayment shall be repaid to Colonial Downs from funds accruing to the
Standardbred Partners’ Account commencing on January 1 of the following
calendar year on a “first dollar in first dollar out” basis.


 


C.            Underpayment
of Purses.  During any Race Meeting,
Colonial Downs shall increase purses as reasonable and appropriate based upon
deposits to the Horsemen’s Account pursuant to Subsections D(1) and G(1) of
§ 59.1-392 of the Code of Virginia to minimize the possibility of
underpayment of purses to Horsemen. 
Colonial Downs shall use its reasonable best efforts to help assure that
there are no underpayments of purses at any Race Meeting based upon deposits to
the Horsemen’s Account pursuant to Subsections D(1) and G(1) of § 59.1-392
of the Code of Virginia.  In the event
that funds remain in (i) the Standardbred Partners’ Account that are subject to
transfer to the Horsemen’s Account pursuant to Exhibit B, or (ii) the Horsemen’s
Account after payment of purses, such funds shall be applied to the next Race
Meeting.


 


D.            Purse
Notices.  The pari-mutuel handle,
pari-mutuel handle commission, and purse distribution figures, as well as the
percentage figures that represent the relationship between purses and the total
of pari-mutuel income and breakage shall be posted on the bulletin board in the
Racing Secretary’s office each day of a Race Meeting.


 


7.             Live
Standardbred Racing.


 


A.            Number
of Days, Dates and Average Daily Purses. 
For 2006, Colonial Downs has been approved to conduct thirty-six (36)
days of live standardbred racing with


 


9

















 


targeted average daily purses of at least $50,000 per
day.  Such 36 days of live standardbred
racing shall be conducted from September 4 to November 3, 2006, at
the Racetrack four days a week which generally will be Tuesday through Friday
(the “Colonial Downs Meet”), unless the parties otherwise agree and the
Commission approves, to the extent necessary, those other agreed upon
dates.  For 2007 and 2008, Colonial Downs
and the VHAA intend to apply for race dates with the meet commencing on Labor
Day and ending in November, assuming that this time frame is successful in
2006, with a 5:00 p.m. post time for racing (or such other time as the parties agree).  In determining whether the 2006 meet was “successful,”
the parties agree that they will focus upon (i) increases in signal sale
handle; (ii) increases in handle attributable to commencing the Race
Meeting on Labor Day, conducting racing in conjunction with the New Kent County
Fair and a possible steeplechase day during Breeder’s Cup; (iii) increases
in group sales; and (iv) coordination of racing with Rosecroft Raceway in
Maryland.  Not less than thirty (30) days
prior to the deadline for submission of a race day request to the Commission,
Colonial Downs and the VHHA shall make reasonable efforts to agree upon the
number of days of standardbred racing based upon an average daily purse amount
for the following calendar year pursuant to the foregoing formula, and shall
then present such agreed upon schedule and average daily purse amount to the
Commission for approval.  If the parties
are unable to agree upon an targeted average daily purse amount for live standardbred
racing for any such calendar year, Colonial Downs shall submit to the
Commission its requested number of days of, dates for, and targeted average
daily purse amount for live standardbred racing for that calendar year, and the
VHHA also shall convey to the Commission its requested number of days of, dates
for, and targeted average daily purse amount for live standardbred racing for
that calendar year.


 


10

















 


B.            Promotion
of the Colonial Downs Meet; Programs for Standardbred Races .  Colonial Downs and the VHHA shall collaborate
to market and promote the Colonial Downs Meet. 
Colonial Downs shall devote $75,000 to market and promote the Colonial
Downs Meet at the track.   Colonial Downs
shall devote an additional $75,000 to marketing standardbred racing in the SWFs
and marketing the sale of the export simulcast signal from the Race Meetings to
simulcast facilities outside of Virginia. 
Such marketing efforts may include, but not be limited to, offering free
decoders to simulcast facilities that have not historically received Colonial
Downs’ Race Meetings’ signals, marketing Colonial Downs’ thoroughbred and
harness signals as a package, dispatching a Colonial Downs’ representative on
the road to out-of-state simulcast facilities to  promote a Colonial Downs harness racing day
at such facilities, and conducting special harness racing nights at the SWFs
with contests and harness related promotions. 
Additionally, Colonial Downs shall focus its marketing efforts for the
Race Meetings on increasing the number of group outings to the Racetrack
through its group sales personnel.


 


Additionally, Colonial
Downs hereby agrees to continue to:  (i)
place in the front portion of each standardbred horse race program distributed
at the Racetrack and its SWFs (the “Program”) an information section entitled “How
to Read a Harness Program”; (ii) include driver and trainer rankings in the
Program; (iii) provide comparative speed ratings of every standardbred track
listed in the Program; and (iv) carry a minimum of two (2) standardbred race
signals at all times at each SWF, provided at least two (2) such signals are
available.


 


C.            Sponsorships.  Colonial Downs agrees to use commercially
reasonable efforts to secure sponsorships for major stakes races.  The VHHA agrees to provide such assistance to
Colonial Downs’ efforts as Colonial Downs may reasonably request and to use its
best efforts to secure sponsorships for smaller stakes races.


 


11

















 


D.            Jumbotron.  Colonial Downs agrees to use a portable Video
Display Screen approximately 19.68 feet high by 26.20 feet wide (“Jumbotron”)
as referenced in the agreement dated February 3, 2006 between Transit Image,
Inc. and Colonial Downs during the live standardbred meet in 2006.  The cost of the Jumbotron for 2006 is $1,000
per live standardbred race day.  Colonial
Downs agrees to use a Jumbotron during the 2007 and 2008 live standardbred
meets if the cost of the Jumbotron does not exceed $1,000 per live standardbred
race day.  If the cost of the Jumbotron
exceeds $1,000 per live standardbred race day in either 2007 or 2008, the VHHA
shall have the option to pay any cost in excess of $1,000 per live standardbred
race day and upon receipt of the VHHA’s written commitment to pay such excess costs,
Colonial Downs will use a Jumbotron during the live standardbred meet in that
year.


 


8.             Races
and Awards for Virginia-Bred, Virginia-Owned and Virginia-Sired Horses.  Colonial Downs shall include in its condition
sheets opportunities to race for Virginia-bred, Virginia-owned and
Virginia-sired standardbred horses, including those that typically race for
lower purses as well as those that typically race for higher purses.  To the extent reasonably possible, in filling
races, Colonial Downs shall give preference to Virginia-bred and Virginia-sired
horses that are stabled at the Racetrack or elsewhere in Virginia.  Awards from the Virginia Breeders Fund for
Virginia-bred, Virginia-owned and Virginia-sired horses shall continue to be
distributed according to guidelines approved by the Commission.


 


9.             Satellite
Wagering Facility Expansion.  The
parties agree that a goal of achieving $45,000,000 of total standardbred handle
within three (3) years from the effective date of this Agreement is reasonable
and desire to set forth certain actions intended to lead to the achievement of
this goal to which they are committed. 
Accordingly, the parties agree:


 


12

















 


A.            Distribution
of Funds.  Colonial Downs and the
VHBPA agree to distribute funds from the Standardbred Partners’ Account in such
a fashion as set forth in Exhibit B hereto with respect to the Henry
County SWF, the Scott County SWF, the New Richmond SWF, the Vinton SWF, the
Existing Chesapeake SWF, and the New Chesapeake SWF, and such distributions
shall continue for the term of Colonial Downs’ licenses for such facilities.


 


B.            SWF
Referenda in Northern Virginia.  In
2006 Colonial Downs and the VHHA shall organize an industry task force to
explore strategies for a successful statutory referendum in Northern Virginia
with the goal of conducting at least one Northern Virginia statutory referendum
by December 31, 2007. For purposes of this Agreement Northern Virginia is
defined as the counties of Loudoun, Prince William, Fairfax, Arlington, and
Fauquier, the cities of Manassas, Manassas Park, Fairfax City, Falls Church,
and Alexandria and the towns with population of 5,000 or more located within
the foregoing counties.


 


(1)           Upon
winning a referendum in Northern Virginia, Colonial Downs shall use its
commercially reasonable efforts to apply expeditiously for licenses to own and
operate an SWF in the locality in which the referendum was won; provided,
however, if more than one referendum is won in adjacent localities or in
localities in which two SWFs would compete with each other, Colonial Downs
shall be obligated to apply for licenses in only one such locality.  Upon the grant of the licenses, Colonial
Downs shall use its commercially reasonable efforts to open the licensed
facility expeditiously.


 


(2)           Colonial
Downs and the VHHA agree to distribute funds from the Standardbred Partners’
Account in such a fashion as set forth in Exhibit B hereto for any SWF


 


13

















 


opened by Colonial Downs
in Northern Virginia, as defined above, during the three-year period commencing
on the effective date of this Agreement.


 


C.            Additional
SWFs in the Central-Southside Virginia Region.  Colonial Downs shall conduct  two (2) referenda during the period from
January 1, 2005 to December 31, 2006, and one (1) referendum during the period
from January 1, 2007 to December 31, 2007 in the Central-Southside Virginia
region as set forth in Exhibit D hereto (the “Central-Southside Virginia Region”);
provided however, upon standardbred handle (as calculated as provided in
Subsection C (3)) equaling or exceeding $45,000,000, Colonial Downs’
obligations to conduct additional referenda in the Central-Southside Virginia
Region shall automatically terminate. 
Colonial Downs’ obligation to conduct the foregoing referenda in the
time periods specified shall be temporarily suspended, but not terminated, for
each year in which there are no statutorily authorized SWFs available for
initial licensing.


 


(1)           If
Colonial Downs conducts and wins such a referendum it shall proceed in the
manner described in Section 9.B (1) hereof with respect to such
referendum.  Upon the opening of any SWF
in Central-Southside Virginia Region, Colonial Downs and the VHHA agree to
distribute funds from the Standardbred Partners’ Account in such a fashion as
set forth in Exhibit B hereto for any SWF in the Central-Southside
Virginia Region for which a license application has been made within the
eight-year period commencing on the effective date of this Agreement or, if
later, the date on which all conditions set forth in Section 31 are satisfied
or waived.


 


(2)           On or
before December 1, 2006, and on or before each December 1 thereafter,
the parties shall determine if Colonial Downs has conducted the minimum number
of referenda required by this Agreement. 
In the event Colonial Downs fails to conduct the three (3)


 


14

















 


Central-Southside referenda in the time periods
specified above, the contribution rate for standardbred handle to the payment
of purses set forth in Exhibit B hereto shall be suspended for all SWFs
operating in the Central-Southside Virginia Region and for the New Richmond
SWF, the Existing Chesapeake SWF, and the New Chesapeake SWF, and the purse
contribution rate shall be that rate specified in Exhibit B hereto for “All
Other SWFs” until such time as Colonial Downs conducts the number of referenda
specified in this Subsection C regardless of the time periods specified above
(e.g. conducting an additional referendum in 2007 after conducting only one in
the period from January 1, 2005 to December 31, 2006).  Upon Colonial Downs conducting the specified
number of referenda, the purse contribution rates shall be reinstated to the
rates set forth in Exhibit B hereto for SWFs located in Central-Southside
Virginia Region, the New Richmond SWF, the Existing Chesapeake SWF, and the New
Chesapeake SWF. No adjustment (either higher or lower) to the purse
contribution rate shall be retroactive.


 


(3)           For
purposes of determining whether total standardbred handle equates to
$45,000,000 for a particular calendar year, the following calculation shall be
made:  (i) total live standardbred
handle; plus (ii) total SWF standardbred handle from all SWFs operating for at
least 12 months; plus (iii) for each SWF open less than 12 months, the product
of (a) the last three (3) months’ standardbred handle and (b) four (4); and
plus total standardbred handle from account wagering.


 


10.           Stalls
and Track Facilities.


 


A.            Availability
of Stalls and Track Facilities Before, During and After Race Meetings.  Colonial Downs shall make available at least
one thousand (1,000) stalls to Horsemen during each Race Meeting.  Access to the racing strip, barns, track
kitchen facilities, dormitories, and related backside facilities at the
Racetrack (collectively, the “Backside Facilities”) necessary


 


15

















 


for training purposes
shall be made available by Colonial Downs without charge (i) prior to each live
Race Meeting, to Horsemen who have horses training for that live Race Meeting,
and (ii) following each live Race Meeting, to Horsemen who have raced at the
Racetrack during that Race Meeting.  The
Backside Facilities shall be made available by Colonial Downs prior to and
following each Race Meeting for an aggregate total of 20 days, the exact number
of days before and number of days after each Race Meeting to be agreed upon
each year by Colonial Downs and the VHHA. 
Notwithstanding the foregoing, such periods (prior to or following) may
be shortened if the Backside Facilities are needed for a live thoroughbred race
meeting, and Colonial Downs shall provide advance notice to the Horsemen in any
such event.  During the aforesaid
periods, Colonial Downs, at its own expense, shall make water and electricity
available to each barn in use and keep the racing surfaces properly harrowed
and watered.


 


B.            Vendors.  Except as expressly provided elsewhere in
this Agreement, Colonial Downs shall not impose upon Horsemen any exclusive
arrangement concerning farriers, feedmen, tack supplies, or any other suppliers
or providers of services customarily used by owners and trainers; provided,
however, that if Colonial Downs permits the use of bedding material other than
straw, it may require the use of an exclusive supplier in order to facilitate
removal of such used material. 
Notwithstanding the foregoing, Colonial Downs reserves the right to
impose reasonable non-discriminatory requirements for security, safety and
environmental reasons.  Colonial Downs
shall use its reasonable best efforts to keep unlicensed persons in the above
categories off its premises.


 


C.            Stall
Applications.  Colonial Downs shall
publish and distribute stall applications to the Horsemen.  Each completed application will contain the
name, permanent address, telephone number, and electronic mail (e-mail) address
of the owner and trainer of each


 


16

















 


horse expected to be
stabled on the grounds of the Racetrack during that Race Meeting.  Colonial Downs shall, in the exercise of its
sole business judgment, determine the terms for and approve or disapprove
applications for stalls, but to the extent reasonably possible, preference
shall be given to stall applications for Virginia-bred horses, Virginia-owned
horses, and Virginia-sired horses. 
Colonial Downs may consider, among other things, the following criteria
in allocating stalls to Horsemen for use during Race Meetings:


 


(1)           The
financial and professional integrity of the trainer listed on the stall
application;


 


(2)           The
total number of stalls requested by a trainer in relation to the number of
available stalls; and


 


(3)           The
best interests of Colonial Downs and standardbred racing. Each Horsemen accepting
a stall at the Racetrack shall be required to use his or her best efforts to
run his or her horses at the Racetrack during the Race Meeting consistent with
the horses’ physical condition and fitness, and race conditions.


 


D.            Racetrack
Kitchen.  Colonial Downs shall
provide a Racetrack kitchen for use by Horsemen and others, with the terms,
conditions and provisions thereof to be mutually agreed upon on an annual basis
by the VHHA and Colonial Downs.  Joint
approval of Colonial Downs and the VHHA shall be required concerning, but not
limited to, management of the facility, cleanliness of the facility,
palatability and cost of food, adequacy of hours of operation, and adequacy of
premises insurance coverage.


 


E.             Suite.  Colonial Downs shall also provide the VHHA a
grandstand suite, free of charge except for food service, for use by its
members and guests on each race day of the live standardbred meet in 2006, 2007
and 2008, unless the parties agree otherwise.


 


17

















 


11.           Racing
Committee.  Colonial Downs and the
VHHA have organized and shall maintain a joint committee to be known as the “Standardbred
Racing Committee.”  The VHHA and Colonial
Downs shall each continue to appoint not more than four (4) representatives to
the Racing Committee.  The Racing
Committee (i) shall meet at the request of either Colonial Downs or the VHHA on
at least five (5) days notice to the other party, and (ii) may consider such
matters as the stable area, barns, tack rooms, dormitories, promotion,
publicity, track conditions (bad weather closing), racing-related programs,
reserved seats and passes for Horsemen, number of races, purse schedules, track
kitchen, other matters related to attendance, pari-mutuel handle or the quality
of racing, and health benefit programs, death benefits, drug and alcohol abuse
programs, and any other program that will aid and assist the racing industry in
Virginia in hiring, retaining and caring for its personnel at the highest
level.


 


12.           Representations
and Warranties.


 


A.            VHHA.  In addition to the representations and
warranties contained elsewhere in this Agreement, the VHHA warrants, represents
to and covenants with Colonial Downs that during the Term of this Agreement:


 


(l)            This
Agreement has been approved by the Board of Directors of the VHHA as authorized
by the Bylaws of the VHHA;


 


(2)           This
Agreement is valid and enforceable against the VHHA according to its terms;


 


(3)           Each
VHHA officer, director and other official shall utilize all of his or her powers
of persuasion and shall take all reasonable action within their power,
including all legal means at their disposal, to ensure that all VHHA Members,
their employees, other related personnel, and other backstretch personnel
comply with the terms of this Agreement;


 


18

















 


(4)           The
VHHA shall seek to alter its share of the amounts described in Section 5 above
only through good faith negotiations with Colonial Downs and shall not engage
in or support, directly or indirectly, any action to influence the Commission,
the Governor of Virginia or the General Assembly of Virginia to increase its
share of the amounts described in Section 5 above or contained in any
applicable provision of the Code of Virginia or the Commission’s regulations by
rule, regulation, order, executive order, statute, amendment of statute, or
otherwise;


 


(5)           The
VHHA shall use its best efforts to ensure that the backstretch area of the
Racetrack is maintained in a safe, clean, and orderly condition; and


 


(6)           This
Agreement shall be made available for review and copying by Members of the VHHA
and all other licensed owners, trainers, employees and backside personnel at
the VHHA office.


 


B.            Colonial
Downs.  In addition to the
representations and warranties contained elsewhere in this Agreement, Colonial
Downs warrants, represents to and covenants with the VHHA that during the Term
of this Agreement:


 


(1)           This
Agreement has been approved by its General Partner;


 


(2)           This
Agreement is valid and enforceable against Colonial Downs according to its
terms;


 


(3)           Colonial
Downs shall seek to alter the VHHA’s share of the amounts described in Section
5 above only through good faith negotiations with the VHHA and shall not engage
in or support, directly or indirectly, any action to influence the Commission,
the Governor of Virginia or the General Assembly of Virginia to decrease the
VHHA’s share of the amounts described in Section 5 above or contained in any
applicable provision of the Code of


 


19

















 


Virginia or the
Commission’s regulations by rule, regulation, order, executive order, statute,
amendment of statute, or otherwise;


 


(4)           Colonial
Downs shall use its reasonable best efforts to ensure that the backside area of
the Racetrack is maintained in a safe, clean and orderly condition when in use;
and


 


(5)           Colonial
Downs shall use its reasonable best efforts to assist the VHHA in developing
health and welfare programs for backstretch personnel; provided that, this Section
imposes no obligation on either party to fund any such program.


 


13.           Racing
Officials.  Colonial Downs shall send
to the President of the VHHA a written list of the persons whom Colonial Downs
has requested the Commission to approve as racing officials for each Race
Meeting at the same time it submits that list to the Commission in accordance
with the Commission’s regulations.


 


14.           Governmental
Approval.  Nothing contained in this
Agreement shall be construed as requiring either party to perform any term when
such performance is contrary to law or requires prior governmental approval;
provided, however, both parties shall use their best efforts to obtain
governmental approval if such is required.


 


15.           Authorization
for Out-of-State Simulcasting.  During
the Term of this Agreement, the VHHA as the authorized representative of the
Horsemen for interstate simulcasting purposes, hereby consents and authorizes
Colonial Downs to negotiate and contract with simulcast and receiving
facilities, including off-track wagering facilities outside the Commonwealth of
Virginia, for (i) the conduct of off-track wagering at the Racetrack and the
SWFs, and (ii) off-track wagering on live standardbred races emanating from the
Racetrack, pursuant to the Interstate Horse Racing Act of 1978, P.L. 95-515
(the “Interstate Horse Racing Act”).  The


 


20

















 


foregoing consent and
authorization shall constitute all consents required from the VHHA for
simulcast wagering under the Interstate Horse Racing Act, and all simulcast
wagering shall conform to that Act.


 


16.           Copies
of Documents.  Colonial Downs shall
send a copy of its stall application form, stakes purse program, and condition
sheet for each Race Meeting to the VHHA on or before the first day they are
distributed to Horsemen.


 


17.           Horsemen’s
Backstretch Improvements and Programs . 
Colonial Downs and the VHHA agree to expend for the benefit of Horsemen
certain funds during calendar years 2006 and 2007 for the improvement of
backstretch working and living conditions and for educational, recreational,
and counseling programs.  Pursuant to the
Thoroughbred Horsemen’s Agreement, dated as of January 1, 2005 (the “Thoroughbred
Agreement”), Colonial Downs has agreed to provide $50,000 to be used solely for
capital improvements and to be provided no later than June 1 of each year.  Similar to Colonial Downs’ agreement with the
Virginia Horsemen’s Benevolent and Protective Association, Inc. (the “VHBPA”)
as reflected in the Thoroughbred Agreement, the VHHA and Colonial Downs shall
use their best efforts to ensure that at least $175,000 is provided annually
from the legitimate breakage deposited into the Racing Benevolence Fund
pursuant to § 59.1-392(T)(2) of the Code of Virginia for the foregoing
improvements and programs.  Regarding the
latter Fund, the VHHA and Colonial Downs agree to use their best efforts to
obtain any necessary authorization to use part of the legitimate breakage for
such improvements and programs as agreed to by the VHBPA and otherwise
described in the Thoroughbred Agreement. 
All of the above funds shall be deposited into the Backstretch
Improvement Escrow Account, which shall be established at a financial
institution mutually acceptable to Colonial Downs, the VHBPA and the VHHA, and
shall be expended as mutually


 


21

















 


agreed by Colonial Downs
and the VHHA and subject to Commission approval pursuant to Section 31
hereof.  At the conclusion of each Race
Meeting, Colonial Downs shall within sixty (60) days provide the VHHA with an
accounting of all expenditures made from the Backstretch Improvement Escrow
Account.


 


18.           Right
to Terminate.  Either party may
terminate this Agreement upon the other party’s failure to substantially perform
as required under this Agreement and such failure continues for thirty (30)
days following the date written notice of default detailing the perceived
failure to perform is sent to and received by the allegedly defaulting party in
accordance with Section 25 below.  Such
termination shall not constitute an election of remedy, nor shall it constitute
a waiver of a party’s other remedies at law or in equity.  Additionally, Colonial Downs may terminate
this Agreement upon written notice to the VHHA if the Racetrack and all the
SWFs are closed for ninety (90) continuous days.


 


19.           Indemnification.  The VHHA shall indemnify and save harmless
Colonial Downs, its agents, representatives, employees, officers, directors and
stockholders, their respective successors and assigns, and all persons acting
by, through, under, or in concert with any of them, from and against any and
all demands, liabilities, loss, costs, damages, or expenses of whatever nature
or kind, including fees of attorneys and all other expenses, arising out of or
in any way related to or occasioned by Colonial Downs’ performance under
Subsection 5.F. hereof (Administrative Fee).


 


20.         Mediation;
Arbitration.


 


A.            Attempt
to Resolve Disputes.  In the event of
any disputes or differences arising out of this Agreement, which the parties
have been unable to resolve after reasonable efforts to do so, either party may
refer the dispute or difference to a mediator mutually


 


22

















 


acceptable to the
parties.  The parties shall split equally
the cost of the mediator.  In the event
such mediation is unsuccessful, or the parties are unable to agree on a
mediator, either party may refer the dispute or difference for final settlement
to arbitration in accordance with the following procedures.


 


B.            Administration.  The arbitration shall be administered by the
American Arbitration Association (“AAA”), or its successor, pursuant to the
expedited procedures (irrespective of the amount in controversy) of the AAA’s
then-prevailing Commercial Arbitration Rules (the “Rules”), subject to the
limitations and modifications set forth herein. 
The laws of the Commonwealth of Virginia will govern all matters arising
from the arbitration without giving effect to the choice of law principles
thereunder.  The arbitration will be held
in Virginia unless the parties otherwise agree.


 


C.            Notice
to Arbitrate.  Notice of a demand for
arbitration pursuant to this procedure (the “Notice to Arbitrate”) shall be
made in writing and delivered to all other affected parties as provided in
Section 25 hereof.  The Notice to
Arbitrate shall be accompanied by a short and plain statement of the party’s
claim(s), the grounds for same and the relief sought.  Within ten (10) days of receipt of the Notice
to Arbitrate, the other party shall set forth in writing and deliver to all
other affected parties as provided in Section 25 hereof, an answer setting
forth its response to the claim for relief, as well as any affirmative defenses
and counterclaims.


 


D.            Selection
of Arbitrator(s).  The arbitration
shall be before one (1) neutral arbitrator (the “Arbitrator”) to be selected in
accordance with the Rules (as modified herein). 
In the event the parties cannot agree upon an Arbitrator within ten (10)
business days from receipt of the Notice to Arbitrate, each party shall select
one (1) Arbitrator.  The Arbitrators so
selected


 


23

















 


shall select a third
arbitrator at the Pre-Hearing Conference (as defined herein), who shall be the
chairperson of the three member panel.


 


E.             Pre-Hearing
Conference.  The Arbitrator(s),
within ten (10) days of his, her or their appointment, shall conduct a
pre-hearing conference (the “Pre-Hearing Conference”).  The parties shall be prepared to discuss
discovery matters, schedule the Additional Conference and Arbitration Hearing
(as defined herein), decide procedural matters and address all other questions
that may be presented.


 


F.             Discovery.  The parties shall have the right to conduct
and enforce pre-hearing discovery in accordance with the Federal Rules of Civil
Procedure then in effect for the Eastern District of Virginia (Richmond
Division), including any Local Rules for the Eastern District of Virginia
(Richmond Division) (collectively, the “Court Rules”), subject to the
following:


 


(1)           The
parties shall make the voluntary disclosures described in the Court Rules
(except those applicable to expert witnesses) within fifteen (15) days after
the appointment of the Arbitrator(s). 
The identity and report of each expert witness, as well as all other
disclosures described in the Court Rules, shall be disclosed to the other
parties no later than thirty (30) days after the appointment of the
Arbitrator(s).


 


(2)           Each
party may serve a request for production of tangible and documentary
evidence.  Responses to a request for
production shall be due fifteen (15) days after receipt.


 


(3)           Each
party may serve no more than one set of interrogatories limited to no more than
thirty (30) questions, including subparts. 
Answers to interrogatories shall be due fifteen (15) days after receipt.


 


24

















 


(4)           Each
party may depose up to, but no more than, three (3) witnesses; provided,
however, that each party is limited to no more than a total of eighteen (18)
hours of deposition time in the aggregate.


 


(5)           All
discovery must be completed within forty-five (45) days after appointment of
the Arbitrator(s) (the “Discovery Deadline”).


 


(6)           The
Arbitrator(s), for good cause shown, upon motion and three (3) days’ notice to
all parties, may extend any of the discovery deadlines set forth herein for a
period not to exceed fourteen (14) days. 
The Arbitrator(s) shall have the right and authority to decide any and
all discovery disputes.  The
Arbitrator(s) shall be empowered to issue subpoenas and any and all process and
orders permitted under the Rules to compel cooperation in discovery and
otherwise enforce the discovery rights and obligations of the parties.


 


G.            Additional
Conference.  Within ten (10) days
after the Discovery Deadline, the Arbitrator(s) shall hold an additional
conference (the “Additional Conference”) to set dates for the exchange of
witness and exhibit lists, deposition testimony designations, testimony
summaries and arbitration briefs; determine the length of the Arbitration
Hearing; and address any and all other questions that may be presented.


 


H.            Arbitration
Hearing.  The arbitration hearing
(the “Arbitration Hearing”) shall commence within twenty (20) days after the
date of the Additional Conference, unless otherwise agreed by the parties.  For good cause shown, the Arbitrator(s) may
grant no more than one (1) continuance per party of a duration not to exceed
ten (10) days each; provided, however, no party shall be entitled to any other
continuances.  Unless otherwise agreed by
the parties or ordered by the Arbitrator(s) for good cause shown, the
Arbitration Hearing shall continue from day-to-day for such period of time (not
to exceed five (5) days) as may be set by the


 


25

















 


Arbitrator(s).  Each party shall have equal time for
presentation and rebuttal, unless otherwise agreed by the parties.  The parties may present evidence, at their
option, in the form of testimony (live and/or by deposition), documents and
other tangible evidence, or testimony summaries, or any combination
thereof.  The Arbitrator(s), upon timely
request by a party or if otherwise required by law, shall require witnesses to
testify under oath administered by any duly qualified person.  Any party, at its own cost and three (3) days’
notice to all other parties, may arrange for a stenographic record of the
proceedings.  Such record shall be made
available for inspection and copying by all other parties and the
Arbitrator(s).


 


I.              Arbitration
Award.  Notwithstanding the
foregoing, it is the parties’ intent that the arbitration shall be completed
and resolved within one hundred and twenty (120) days of the commencement of
such proceeding.  The Arbitrator(s) shall
issue and deliver to each party a written and signed award (the “Arbitration
Award”) within thirty (30) days of the closing of the record.   The Arbitration Award shall contain the
factual and legal bases for such award. 
The Arbitration Award, in addition to the relief granted therein, may
award attorneys’ fees and costs to the prevailing party as the Arbitrator(s)
may determine in light of all of the circumstances.  The Arbitration Award shall be final and
binding upon the parties in accordance with its terms and Section 8.01-577 et
seq. of the Code of Virginia.


 


J.             Default.  If a party fails to proceed with arbitration
or defaults in his obligation to arbitrate, such default shall not prevent the
other party from proceeding with such arbitration and the party who fails to
proceed with such arbitration shall be bound by the arbitration.


 


K.            Costs.  The costs of the arbitration incurred by the
parties for hearing reporting fees, rental of a hearing room and all AAA fees,
costs and services charges and of the


 


26

















 


arbitrator shall be paid
by Colonial Downs, except that hearing postponement or cancellation fees or
charges by the AAA or the arbitrator(s) shall be borne exclusively by the
canceling or postponing party. 
Conversely, with respect to all other matters, unless the arbitrator(s)
otherwise so determines and provides in the arbitration award, each party shall
bear its own costs and expenses incurred by that party in connection with the
arbitration, including without limitation each party’s own travel expenses,
hearing witness expenses and attorneys’ fees.


 


21.           Contribution
Adjustments.


 


A.            Changes
in Applicable Law.  The parties have
negotiated the relevant transfers from the Standardbred Partners’ Account to
the Horsemen’s Account (the “Purse Amounts”) from expected handle at the New
Richmond SWF, the Existing Chesapeake SWF, the New Chesapeake SWF, the Vinton
SWF, the Henry County SWF, the Scott County SWF, and any future SWFs located in
the Central-Southside Virginia Region and Northern Virginia based upon those
statutes, regulations, administrative proceedings, common law and other
accepted sources of rules and regulations applicable to the parties that are in
effect as of the date hereof (collectively, “Applicable Law”).  Under Applicable Law, certain allocations of
rights and entitlements have been made to Colonial Downs (such as uncashed
tickets) and the VHHA (such as a portion of breakage), and the parties do not
intend to alter such existing rights and entitlements by this Agreement
generally or by application of this Section 21, in particular, to future
events.  Nonetheless, in the event there
is a change in Applicable Law or a ruling or action of the Commission that
alters contributions to the Standardbred Partners’ Account or transfers to the
Horsemen’s Account, or otherwise inures to the benefit or detriment of the VHHA
or its successors in the form of purses, operating funds or awards, then the
parties agree that the Purse Amounts shall be adjusted to restore the parties
to the economic terms set forth in this


 


27

















 


Agreement.  By way of example and not limitation, if
Applicable Law is changed to provide that a percentage of breakage or uncashed
tickets is applied to increase purses for standardbred racing, then the Purse
Amounts shall be adjusted downward such that in any fiscal year the amount
contributed to purses pursuant to the terms hereof shall be reduced by an
amount equal to the contribution to purses from breakage.   By way of further example, if the percentage
of handle paid to the Commonwealth of Virginia as a pari-mutuel tax increases,
there shall be no change in the Purse Amounts under this Agreement unless such
increased pari-mutuel tax is used to supplement purses or is used for the
exclusive activities of the representative horsemen group or groups for
Horsemen racing at Colonial Downs.


 


B.            Duration.  The terms and provisions of this Section 21 shall remain in full force and effect for as long as the
licenses for the New Richmond SWF, the Existing Chesapeake SWF, the New
Chesapeake SWF, the Vinton SWF, the Henry County SWF, the Scott County SWF, or
any future SWFs located in the Central-Southside Virginia Region or Northern
Virginia remain in effect.


 


22.           Additional
License.  Colonial Downs hereby
reserves the right, and the VHHA hereby recognizes such right, of Colonial Down’s
to apply for licenses from the Commission enabling Colonial Downs to seek an
available racetrack devoted to standardbred racing, subject to consultation
with the VHHA.  Once Colonial Downs
obtains the necessary licenses, the VHHA hereby agrees to (i) race standardbred
horses at, and promote, such racetrack and (ii) to cease racing the New Kent
Racetrack.  Colonial Downs shall be under
no obligation to obtain, or attempt to obtain, such licenses.


 


23.           Consents,
Approvals, Agreements or Assurances. 
Wherever this Agreement requires the consent, approval, agreement, or
assurance of Colonial Downs and/or the VHHA,


 


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(1) a request for such
consent, approval, agreement, or assurance from one party shall be responded to
by the other party in a timely and businesslike manner, and (ii) such consent,
approval, agreement, or assurance shall not be unreasonably withheld, delayed
or conditioned unless otherwise specifically provided in this Agreement.


 


24.           Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.


 


25.           Notices.  All notices, requests, demands or other
communications as may be required by this Agreement shall be in writing, shall
be signed by an authorized representative of the party providing the
communication, shall be sent to each of the persons listed below, may be sent
by certified mail, return receipt requested, or by telephone facsimile, and
shall be deemed to have been given or made when received by personal delivery
or otherwise.  A courtesy hard copy of
any communication that is sent by telephone facsimile also shall be sent by
certified mail, return receipt requested. 
The current addresses of persons to whom communications are to be sent
are as follows:


 


	
  Colonial Downs:

  	
   

  	
  Mr. Jeffrey P. Jacobs

  
	
   

  	
   

  	
  Colonial Downs, L.P.

  
	
   

  	
   

  	
  10515 Colonial Downs
  Parkway

  
	
   

  	
   

  	
  New Kent, VA  23124

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Mr. Ian M. Stewart

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
  Colonial Downs, L.P.

  
	
   

  	
   

  	
  10515 Colonial Downs
  Parkway

  
	
   

  	
   

  	
  New Kent, VA  23124

  



 


29

















 


	
  Copy to:

  	
   

  	
  James L. Weinberg, Esq.

  
	
   

  	
   

  	
  Hirschler Fleischer

  
	
   

  	
   

  	
  The Federal Reserve
  Bank Building

  
	
   

  	
   

  	
  P. O. Box 500
  (23218-0500)

  
	
   

  	
   

  	
  701 E. Byrd Street, 15th
  floor

  
	
   

  	
   

  	
  Richmond, VA  23219

  
	
   

  	
   

  	
   

  
	
  VHHA:

  	
   

  	
  R. C. Dunavant, Jr., D.V.M., President

  
	
   

  	
   

  	
  Virginia Harness Horse
  Association

  
	
   

  	
   

  	
  c/o Lunenburg Animal
  Hospital

  
	
   

  	
   

  	
  Highway 40

  
	
   

  	
   

  	
  Kenbridge, Virginia
  23944

  
	
   

  	
   

  	
   

  
	
  Copy to:

  	
   

  	
  Gerald C. Canaan, Esq.

  
	
   

  	
   

  	
  Hancock, Daniel,
  Johnson & Nagle, P.C.

  
	
   

  	
   

  	
  4112 Innslake Drive

  
	
   

  	
   

  	
  Glen Allen, VA 23060

  



 


26.           Waivers.  No waiver by a party to this Agreement of any
breach of this Agreement or any of its terms shall be effective unless, and
only to the extent, such waiver is in writing signed by the party providing or
making such waiver and delivered to the other party as provided in Section 25
above.  No waiver of any breach shall be
deemed to be a waiver of any other or any subsequent breach.


 


27.           Applicable
Law; Venue.  This Agreement is being
executed and delivered in the Commonwealth of Virginia and shall be construed
and enforced in accordance with the law of Virginia without regard to its
conflict of laws rules and provisions. 
In all court proceedings brought in connection with this Agreement, the
parties hereto irrevocably consent to exclusive personal jurisdiction by, and
venue in, the Circuit Court for the City of Richmond, Virginia, or the United
States District Court for the Eastern District of Virginia, Richmond Division.


 


28.           Headings.  Any headings preceding the text of the
several sections, subsections, paragraphs and subparagraphs hereof are inserted
solely for convenience of reference and shall not constitute a part of this
Agreement, nor shall they affect its meaning, construction, or effect.


 


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29.           Severability.  If any provision of this Agreement is
declared invalid by any tribunal, or becomes invalid or inoperative by
operation of law, the remaining provisions of this Agreement shall not be
affected thereby and shall remain in full force and effect.


 


30.           Entire
Agreement; Modification.  This
Agreement contains the entire Agreement between the parties and supersedes all
prior agreements, including, but not limited to, the Existing Agreement, and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement.  This
Agreement shall be binding upon and inure to the benefit of each party hereto,
its legal representatives and successors, including, but not limited to, any
successor group to the VHHA that is the recognized majority standardbred
horsemen’s group.  No modification,
variation or amendment of this Agreement or of any attachment or exhibit to
this Agreement shall be effective unless such modification, variation or
amendment is in writing and has been signed by the parties to this
Agreement.  This Agreement may be
assigned by Colonial Downs in its sole discretion, subject to applicable law.


 


31.           Conditions
Precedent to Effectiveness of this Agreement.  The parties acknowledge that this Agreement
and the expenditures from the Racing Benevolence Fund detailed in Section 17
above are subject to the approval of the Commission.  If this Agreement in its entirety and such
expenditures are not approved by the Commission, this Agreement shall be null
and void.


 


Upon satisfaction or waiver
of the foregoing conditions, this Agreement shall be effective as of
January 1, 2005, regardless of the date of the satisfaction or waiver of
such conditions.


 


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IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date first stated above.


 


	
  VIRGINIA HARNESS HORSE

  	
   

  	
  COLONIAL DOWNS, L.P.

  
	
  ASSOCIATION

  	
   

  	
  By:

  	
  Stansley Racing Corp.,
  its General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ R. C. Dunavant, Jr.

  	
   

  	
   

  	
  By:

  	
  /s/ Ian M. Stewart

  
	
   

  	
  R. C. Dunavant, Jr.,
  D.V.M., President

  	
   

  	
   

  	
  Ian
  M. Stewart, President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  STANSLEY RACING CORP.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Ian M. Stewart

  
	
   

  	
   

  	
   

  	
  Ian M. Stewart,
  President

  
						



 


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