EXHIBIT 10.18


 


Execution Version


 


Thoroughbred Horsemen’s Agreement


 


between Colonial Downs, L.P.,


Stansley Racing Corp. and


The Virginia Horsemen’s Benevolent


and Protective Association, Inc.


 


as of January 1, 2005


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Effective Date and Term of Agreement

  	
  2

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Exclusive Representation

  	
  2

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Accounts

  	
  3

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Thoroughbred Partners’ Account

  	
  3

  
	
   

  	
  B.

  	
  Horsemen’s Account

  	
  4

  
	
   

  	
  C.

  	
  Availability of Information on Accounts

  	
  4

  
	
   

  	
  D.

  	
  Distribution of Interest and Other Earnings on
  Accounts

  	
  4

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Administration of Accounts

  	
  5

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Amounts To Be Deposited

  	
  5

  
	
   

  	
  B.

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

  	
  5

  
	
   

  	
  C.

  	
  Signal Sales

  	
  5

  
	
   

  	
  D.

  	
  Account Wagering

  	
  6

  
	
   

  	
  E.

  	
  Virginia Derby

  	
  6

  
	
   

  	
  F.

  	
  Virginia Turf Festival Stakes Races

  	
  6

  
	
   

  	
  G.

  	
  National Thoroughbred Racing Association (“NTRA”)
  Dues

  	
  7

  
	
   

  	
  H.

  	
  Stakes Race Purses

  	
  8

  
	
   

  	
  I.

  	
  Administrative Fee

  	
  8

  
	
   

  	
  J.

  	
  Other Legalized Wagering

  	
  8

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Purse Mechanics

  	
  9

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Purse Schedules and Condition Books

  	
  9

  
	
   

  	
  B.

  	
  Funding of Purses

  	
  9

  
	
   

  	
  C.

  	
  Overpayment of Purses

  	
  10

  
	
   

  	
  D.

  	
  Underpayment of Purses

  	
  10

  
	
   

  	
  E.

  	
  Purse Notices

  	
  11

  
	
   

  	
  F.

  	
  Collection of Nomination, Starter and Similar Fees

  	
  11

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Number of Days of, and Dates and Average Daily
  Purses for, Live Thoroughbred Racing

  	
  12

  
	
   

  	
   

  	
   

  
	
  7.

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

  	
  13

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Satellite Wagering Facility Expansion

  	
  13

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Licensing and Opening of New SWFs in Henry County
  and Scott County

  	
  14

  
	
   

  	
  B.

  	
  Distribution of Funds from the Henry County SWF and
  the Scott County SWF

  	
  15

  



 

















 


	
   

  	
  C.

  	
  Chesapeake SWF

  	
  16

  
	
   

  	
  D.

  	
  SWF Referenda in Northern Virginia

  	
  17

  
	
   

  	
  E.

  	
  Additional SWFs in the Central-Southside Virginia
  Region

  	
  18

  
	
   

  	
  F.

  	
  Funding of Virginia Turf Festival

  	
  19

  
	
   

  	
  G.

  	
  Incorporation of Terms in SWF Licenses

  	
  20

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Stalls and Track Facilities

  	
  20

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

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

  	
  20

  
	
   

  	
  B.

  	
  Vendors

  	
  21

  
	
   

  	
  C.

  	
  Stall Applications

  	
  21

  
	
   

  	
  D.

  	
  Racetrack Kitchen

  	
  23

  
	
   

  	
  E.

  	
  VHBPA Accommodations

  	
  23

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Racing Committee

  	
  23

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Representations and Warranties

  	
  24

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  VHBPA

  	
  24

  
	
   

  	
  B.

  	
  Colonial Downs

  	
  25

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Racing Officials

  	
  26

  
	
   

  	
   

  	
   

  
	
  13.

  	
  Governmental Approval

  	
  26

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Authorization for Out-of-State Simulcasting

  	
  26

  
	
   

  	
   

  	
   

  
	
  15.

  	
  Copies of Documents; Database

  	
  27

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Horsemen’s Backstretch Improvements and Programs

  	
  27

  
	
   

  	
   

  	
   

  
	
  17.

  	
  Right to Terminate

  	
  28

  
	
   

  	
   

  	
   

  
	
  18.

  	
  Indemnification

  	
  29

  
	
   

  	
   

  	
   

  
	
  19.

  	
  Mediation; Arbitration

  	
  29

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Attempt to Resolve Disputes

  	
  29

  
	
   

  	
  B.

  	
  Administration

  	
  29

  
	
   

  	
  C.

  	
  Notice to Arbitrate

  	
  30

  
	
   

  	
  D.

  	
  Selection of Arbitrator(s)

  	
  30

  
	
   

  	
  E.

  	
  Pre-Hearing Conference

  	
  30

  
	
   

  	
  F.

  	
  Discovery

  	
  30

  
	
   

  	
  G.

  	
  Additional Conference

  	
  32

  
	
   

  	
  H.

  	
  Arbitration Hearing

  	
  32

  
	
   

  	
  I.

  	
  Arbitration Award

  	
  33

  
	
   

  	
  J.

  	
  Default

  	
  33

  
	
   

  	
  K.

  	
  Costs

  	
  33

  



 


ii

















 


	
  20.

  	
  Contribution Adjustments

  	
  34

  
	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Changes in Applicable Law

  	
  34

  
	
   

  	
  B.

  	
  Changes in MVRC Management Fee

  	
  35

  
	
   

  	
  C.

  	
  Termination of Management Fee

  	
  36

  
	
   

  	
  D.

  	
  Duration

  	
  36

  
	
   

  	
   

  	
   

  
	
  21.

  	
  Consents, Approvals, Agreements or Assurances

  	
  36

  
	
   

  	
   

  	
   

  
	
  22.

  	
  Counterparts

  	
  36

  
	
   

  	
   

  	
   

  
	
  23.

  	
  Notices

  	
  37

  
	
   

  	
   

  	
   

  
	
  24.

  	
  Waivers

  	
  38

  
	
   

  	
   

  	
   

  
	
  25.

  	
  Applicable Law; Venue

  	
  38

  
	
   

  	
   

  	
   

  
	
  26.

  	
  Headings

  	
  38

  
	
   

  	
   

  	
   

  
	
  27.

  	
  Severability

  	
  38

  
	
   

  	
   

  	
   

  
	
  28.

  	
  Entire Agreement; Modification

  	
  39

  
	
   

  	
   

  	
   

  
	
  29.

  	
  Conditions Precedent to Effectiveness of this
  Agreement

  	
  39

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of Trust Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit B

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
  Anticipated Development Schedule

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
  Central Southside Virginia Region

  	
   

  



 


iii

















 


THOROUGHBRED HORSEMEN’S AGREEMENT


 


THIS
AGREEMENT is entered into as of this 1st day of January 2005 by
and among COLONIAL DOWNS, L.P., a Virginia limited partnership, STANSLEY RACING
CORP., a Virginia corporation (collectively, “Colonial Downs”), and the
VIRGINIA HORSEMEN’S BENEVOLENT AND PROTECTIVE ASSOCIATION, INC., a Virginia
not-for-profit corporation (the “VHBPA”).


 


WHEREAS,
Colonial Downs owns and operates in New Kent County, Virginia, the facility
known as the Colonial Downs racetrack (the “Racetrack”) and six satellite wagering facilities
located in Brunswick, Chesapeake, Hampton, Richmond (Broad Street), Richmond (Hull Street), and Vinton,
Virginia (the “SWFs”);


 


WHEREAS,
the VHBPA is a trade organization composed of owners, trainers, owner-trainers,
and owner-breeders of thoroughbred race horses (its “Members”);


 


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


 


WHEREAS,
the Maryland-Virginia Racing Circuit, Inc. (“MVRC”), a subsidiary of
Maryland Jockey Club, manages the Racetrack and SWFs pursuant to an Amended and
Restated Management and Consulting Agreement, effective January 15, 1999,
as amended (the “Management and Consulting Agreement”);


 


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


 

















 


WHEREAS,
the parties have entered into the Thoroughbred Horsemen’s Agreement, dated as
of December 23, 2002, as amended by a First Amendment thereto, dated as of
January 1, 2004 (as so amended, the “Existing Agreement”), portions of
which expired on midnight on December 31, 2004 and other portions which
continue to remain in effect; and


 


WHEREAS,
the parties desire to expand the network of SWFs throughout the Commonwealth of
Virginia beyond the six
existing SWFs and the currently statutorily authorized ten SWFs to support more days of live quality thoroughbred
racing at the Racetrack, including the promotion and development of a Virginia
Turf Festival; and


 


WHEREAS,
the parties agree that a
goal of achieving $200,000,000 of total thoroughbred handle (which is
approximately 50 days of live thoroughbred racing at current purse levels)
within three 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.


 


NOW,
THEREFORE, in consideration of the premises 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 29 hereof, this Agreement shall
become effective as of 12:01 a.m. on January 1, 2005, and shall remain in effect through
midnight on December 31, 2007
(the “Term”), unless otherwise terminated as provided herein, with the
exception of Subsections 4.B. and F.,
Section 8, and Section 20,
which shall continue in effect as stated therein.


 


2.                                       Exclusive
Representation.  During the Term of
this Agreement, the VHBPA shall be the exclusive representative of its Members
with respect to the matters set forth herein. 
The VHBPA 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.


 


3.                                       Accounts.


 


A.                                   Thoroughbred
Partners’ Account.  Colonial Downs
and the VHBPA currently maintain an account at the Middleburg, Virginia branch
of BB&T Bank, N.A. (the “Thoroughbred Partners’ Account” or the “Account”).  The parties agree that the financial
institution(s) at which the Thoroughbred Partners’ Account is maintained may be
changed at any time by agreement of the parties.  Colonial Downs and the VHBPA agree that all
funds maintained in the Thoroughbred Partners’ Account are funds that are to be
maintained in trust on behalf of and for the benefit of 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 Thoroughbred Partners’ Account designated a trust account by the
financial institution at which the Thoroughbred Partners’ Account is
maintained.  The parties shall take
similar steps to have the Thoroughbred 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 Thoroughbred Partners’ Account shall
accrue solely to the benefit of the Thoroughbred Partners’ Account.  All funds paid or deposited into the Thoroughbred
Partners’ Account (i) shall be invested in an interest-bearing account
that


 


3

















 


provides market rates of
return, or government or bank securities, and (ii) shall be 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 Thoroughbred
Partners’ Account into a separate account (the “Horsemen’s Account”) as needed
to pay purses.  The amounts to be
transferred from the Thoroughbred Partners’ Account to the Horsemen’s Account
are set forth herein.  The transfer of
funds from the Thoroughbred 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 (other than jockey and gate fees) 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
Thoroughbred Partners’ Account and the Horsemen’s Account and the investment or
deposit schedules of Colonial Downs with respect to such accounts during any
Race Meeting shall be subject to examination at any reasonable time by the
President of the VHBPA or his or her designee.


 


D.                                    Distribution
of Interest and Other Earnings on Accounts. 
Interest and any other earnings on the Thoroughbred Partners’ Account
and Horsemen’s Account shall be distributed fifty percent (50%) thereof to each
of (a) Colonial Downs, to help defray the costs of


 


4

















 


maintaining such
accounts, including, but not limited to, the Horsemen’s bookkeeper and any
third-party trustee fees; and (b) the VHBPA for the benefit of Horsemen in
its sole and absolute discretion.


 


4.                                       Administration
of Accounts.


 


A.                                   Amounts
To Be Deposited.  Colonial Downs
shall deposit into the Thoroughbred 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 Thoroughbred Partners’ Account to the Horsemen’s Account and Colonial
Downs’ Account.  With respect to all
deposits to the Thoroughbred Partners’ Account derived from handle at all
satellite wagering facilities, the parties agree that transfer of funds from
the Thoroughbred 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 8 hereof, and
shall continue for the term of Colonial Downs’ licenses for such facilities.
The balance of all deposits to the Thoroughbred Partners’ Account derived from
handle at all satellite wagering facilities after giving effect to the
foregoing sentence shall be transferred to an account designated by Colonial
Downs.


 


C.                                     Signal
Sales.  For 2005, 2006, and 2007 Colonial Downs shall deposit into an account
designated and exclusively controlled by the VHBPA fifty percent (50%) of all
revenues it receives from the sale of its live thoroughbred race signal to
entities outside Virginia less twenty-one percent (21%) of such amount to cover
Colonial Downs’ direct operational costs associated with that sale.  Revenues from signal sales shall be based on
information provided by


 


5

















 


Colonial Downs to the
VHBPA using accounting practices generally accepted in the horse racing
industry.


 


D.                                    Account
Wagering.  Neither Colonial Downs nor
the VHBPA 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 VHBPA 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 Virginia on thoroughbred 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 thoroughbred racing signals to simulcast venues to
which the VHBPA’s consent is governed by Section 14 of this Agreement.


 


E.                                      Virginia
Derby and the Colonial Turf Cup. 
Colonial Downs and the VHBPA agree that the purse for the Virginia Derby
for 2005 shall be $750,000, which shall consist of $600,000 contributed from
the Thoroughbred Partners’ Account and $150,000 contributed by Colonial Downs
or its affiliates.  The purse for the
Colonial Turf Cup for 2005 shall be $500,000, all of which shall be contributed
from the Thoroughbred Partners’ Account. 
Any funds generated by sponsorship(s) or promotional fees paid to
Colonial Downs with respect to the Virginia Derby, from whatever source
derived, shall be paid in their entirety to the Thoroughbred Partners’ Account
in addition to the amounts specified in Subsection A of this Section ,
unless the parties agree otherwise


 


F.                                      Virginia
Turf Festival Stakes Races.  Colonial
Downs desires to continue to develop a premier event for turf course racing in
order to distinguish itself as the Mid-Atlantic


 


6

















 


center for thoroughbred
turf racing.  To achieve this goal,
Colonial Downs desires to continue to structure a series of stakes races in conjunction
with the Virginia Derby in order to develop more fully the Virginia Turf
Festival.  The Virginia Turf Festival
shall consist of high quality races.  For
2005, total stake purses for the Virginia Turf Festival shall be $1,700,000,
which shall include the Virginia Derby ($750,000), the Colonial Turf Cup
($500,000), the All Along Breeder’s Cup Stakes ($200,000), the Virginia Oaks
($200,000), the Zeke Ferguson Memorial ($50,000), and such other races as the parties agree.  For 2006 and 2007, total stake purses for the
Virginia Turf Festival shall increase by $750,000 to $2,450,000, which shall
include the Virginia Derby ($1,000,000 with $150,000 contributed by Colonial
Downs or its affiliates in 2006, and no contribution from Colonial Downs or its
affiliates in 2007), the Colonial Turf Cup ($1,000,000), the All Along Breeder’s
Cup Stakes ($200,000), the Virginia Oaks ($200,000), and the Zeke Ferguson
Memorial ($50,000); provided that
forty-one and one-half percent (41.5%) of additional purse money provided by
the Richmond (Hull Street SWF), the SWFs in Chesapeake (for combined handle in
excess of $22,347,000), the new SWFs in the Central-Southside Region
(including, but not limited to, the Vinton SWF, the Henry County SWF, and the
Scott County SWF), and any Northern Virginia SWFs equals or exceeds $750,000 in
calendar year 2006 and $900,000 in calendar year 2007. For 2006 and
2007, the first $750,000 and $900,000, respectively, of such additional purse
money shall be used to fund the increase in purses for the Virginia Derby and
the Colonial Turf Cup.  For 2006 and
2007, purse money contributions in excess of $750,000 and $900,000,
respectively, as calculated and referred to above, shall be used to fund
overnight purses.


 


G.                                     National
Thoroughbred Racing Association (“NTRA”) Dues.  The VHBPA may, in its discretion, designate a
portion of the funds deposited into the Thoroughbred


 


7

















 


Partners’ Account to be
paid as the VHBPA’s dues payable to the NTRA. 
If so designated, those dues shall be paid from funds available in the
Thoroughbred Partners’ Account.


 


H.                                    Stakes
Race Purses.  The percentage of the
purse monies available under Subsections A through F 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 twenty percent (20%) of
the total purses paid unless the VHBPA in its sole and absolute discretion
consents to a higher percentage.  Such
consent shall be granted by the VHBPA as necessary to assist Colonial Downs in
its attempts to maintain and improve the graded status of the Virginia Derby
and is hereby granted to develop the Virginia Turf Festival as set forth in
Sections 4.F. and 6 hereof.


 


I.                                         Administrative
Fee.  The
administrative fee paid to the VHBPA 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
thoroughbred Race Meetings at the Racetrack in recognition of the VHBPA’s
year-round service to Horsemen, obligations with respect to Horsemen’s
interests before the Commission, and the VHBPA’s efforts to assist Colonial
Downs on legislative issues.


 


J.                                        Other
Legalized Wagering.  Except as
otherwise specifically provided herein, in the event that wagers other than on
thoroughbred 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 thoroughbred racing, the
parties shall be bound by the allocations in such


 


8

















 


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 thoroughbred racing from that legislative action.


 


5.                                       Purse
Mechanics.


 


A.                                   Purse
Schedules and Condition Books. 
Colonial Downs shall use its reasonable judgment to estimate attendance,
pari-mutuel handle and breakage for thoroughbred racing. Using that information
and after consultation with a designated representative of the VHBPA, 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.  Colonial
Downs shall exercise reasonable care to avoid significant underpayments or
overpayments of purses at all Race Meetings. 
Colonial Downs shall send to the VHBPA its first condition book and
proposed purse schedules for each Race Meeting before they are sent to the
printer.


 


B.                                     Funding
of Purses.


 


(1)                                  Colonial
Downs shall pre-fund to the Thoroughbred Partners’ Account the sum needed in 2005, and up to
$1.7 million of the sums needed each year in 2006, and 2007, to pay the purse amounts for the days of live
thoroughbred racing, as determined in Section 6 below, if there is a
temporary shortfall in that Account.  The
amount of such pre-funding shall bear interest at the prime rate (as announced
from time to time in the Eastern edition of the Wall Street Journal)
plus 0.25%.  Any funds provided pursuant
to this Subsection, and interest accruing thereon prior to October 15 of
any year, shall be repaid to Colonial Downs from funds accruing to the
Thoroughbred Partners’ Account for the remainder of the calendar year in which
such funds are provided on a “first dollar in first dollar out” basis and, if
there is


 


9

















 


any pre-funded sum that
has not yet been repaid by the end of that calendar year, from funds accruing
to the Thoroughbred Partners’ Account commencing on January 1 of the
following calendar year on a “first dollar in first dollar out” basis.  Any interest on any funds provided pursuant
to this Subsection by Colonial Downs that accrues on or after October 15th
of any given year shall be borne by Colonial Downs.


 


(2)                                  The
VHBPA and Colonial Downs agree to use all reasonable efforts, including
recommendations to the Virginia Racing Commission for race days and purses and
the use of portions of increased revenue resulting from the opening of SWFs in Richmond (Hull Street), Vinton, and
other locations in 2005 and
thereafter, to reduce and eliminate temporary shortfalls as described above.


 


C.                                     Overpayment
of Purses.  Colonial Downs and the
VHBPA 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 4 hereof, the
overpayment shall be repaid to Colonial Downs from funds accruing to the
Thoroughbred Partners’ Account commencing on January 1 of the following
calendar year on a “first dollar in first dollar out” basis.


 


D.                                    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.


 


10

















 


E.                                      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.


 


F.                                      Collection
of Nomination, Starter and Similar Fees. 
Colonial Downs shall use its commercially reasonable efforts to collect
promptly all nomination, starter and similar fees that are, or prior to 2002
were, incurred by participants.  If such
fees attributable to the 2002, 2003, 2004, 2005, 2006 and 2007 Race Meetings remain unpaid six months after
the conclusion of the relevant Race Meeting, then Colonial Downs shall be
entitled to assign the accounts receivable for such fees to the VHBPA for
collection and to be reimbursed from the Thoroughbred Partners’ Account for the
aggregate amount of such fees; provided, however, that fees arising from
nominations or entries which the parties agree, acting reasonably and in good
faith, were accepted by the Racing Secretary for promotional or marketing
purposes shall not be included in the amounts for which reimbursement is sought
and shall not be assigned to the VHBPA. 
Anything contained in this Subsection F to the contrary
notwithstanding, Colonial Downs shall not be entitled to reimbursement for any
fee for which Colonial Downs has not met the following requirements: (i) Colonial
Downs shall have invoiced the debtor at least three times between the close of
the Race Meeting during which the debt was incurred and the end of the calendar
year in which that Race Meeting was conducted, and (ii) Colonial Downs
shall have furnished written notice to the VHBPA of the debtor’s name, address,
and the amount owed by that debtor within ninety (90) days of the close of the
Race Meeting at which the debt was incurred.


 


11

















 


6.                                       Number
of Days of, and Dates and Average Daily Purses for, Live Thoroughbred Racing.  Not less than thirty (30) days prior to the
deadline for submission to the Commission, Colonial Downs and the VHBPA shall
make reasonable efforts to agree upon the number of days of, and the dates and
average daily purses for, live thoroughbred racing at the Racetrack for the
following calendar year, and shall then present such agreed upon schedule and
average daily purses to the Commission for approval.  Such schedule shall take into account
the average daily purses for the Virginia Turf Festival and the amount that
shall be applied to reduce the need for Colonial Downs’ funding pursuant to Subsection 5.B.
hereof.   If the parties are unable to
agree upon a particular number of days of, dates for and/or average daily
purses for live thoroughbred racing for any such calendar year, Colonial Downs
shall submit to the Commission its requested number of days of, dates for
and/or average daily purses for live thoroughbred racing for that calendar
year, and the VHBPA shall also convey to the Commission its requested number of
days of, dates for and/or average daily purses for live thoroughbred racing for
that calendar year.  For 2005, Colonial Downs and the VHBPA submitted a request to the Commission for forty (40) days of
thoroughbred racing, with average daily purses of at least $200,000 per
day, to be conducted from June 17
to August 9, 2005 at the
Racetrack.  Such request was approved by
the Commission.  For 2006, Colonial Downs and the VHBPA agree to submit a request to the
Commission for at least forty-two (42) days of thoroughbred racing, with
average daily purses of at least $200,000 per day, including the Virginia Turf
Festival, provided that on or before November 15, 2005, purse projections
for the twelve months of calendar 2006 support such a request.  Similarly, if on or before November 15,
2006, purse projections for the twelve months of calendar 2007 support it,
Colonial Downs and the VHBPA shall request fifty (50) days of thoroughbred
racing in 2007 with average daily purses of at least $200,000, including the


 


12

















 


Virginia
Turf Festival.  A Turf Festival Planning
Committee made up of representatives from Colonial Downs, the VHBPA, the MVRC,
and the Virginia Breeders Fund shall assist the parties in formulating the
details of the 2006 and 2007 race dates request to be submitted to the
Commission for its approval (such request to be consistent with the terms and
provisions of Section 4.F. and this Section) and shall consider what
improvements, if any, may be necessary to the Racetrack’s facilities to support
and promote the Virginia Turf Festival.


 


7.                                       Races
and Awards for Virginia-Bred, Virginia-Owned and Virginia-Sired Horses.  Colonial Downs shall include in its condition
book opportunities to race for Virginia-bred, Virginia-owned and Virginia-sired
thoroughbred 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, Virginia-owned,  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.


 


8.                                       Satellite
Wagering Facility Expansion. 
Colonial Downs and the VHBPA agree that a greater dollar volume in
annual handle is necessary to increase the number of days of quality
thoroughbred racing in Virginia, and that increased handle will most likely
occur by opening additional SWFs beyond the six existing SWFs.  The
parties further agree that a goal of achieving $200,000,000 of total
thoroughbred handle (which is approximately 50 days of live thoroughbred racing
at current purse levels) within three
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:


 


13

















 


A.                                   Licensing
and Opening of New SWFs in Henry
County and Scott County. 
Colonial Downs shall pursue simultaneously the opening of new SWFs in Henry County and Scott County as set
forth herein, either one of which may open before the other.


 


(1)                                  Colonial
Downs shall open in 2005 a new SWF in
each of Henry County and Scott County, subject to Force Majeure Events
(as defined herein).  Upon approval of
this Agreement by the Commission, Colonial Downs shall seek to secure sites and address any concerns relating
to compliance with all municipal laws and regulations (including zoning
compliance).  Upon securing sites and satisfying all applicable
municipal laws and regulations, Colonial Downs shall apply expeditiously to the
Commission for owner’s and operator’s licenses for the two new SWFs.  Upon
issuance of the licenses, Colonial Downs shall immediately commence build out
or construction of the new SWFs
and prosecute completion using all commercially reasonable means.  It is anticipated that the new SWFs will open no later than four
to six months after the Commission issues Colonial Downs licenses to own and
operate each new SWF, subject
to Force Majeure Events.  An anticipated
development schedule is set forth in Exhibit C hereto.


 


(2)                                  “Force Majeure Events”
shall mean:  (a) acts of God
(including flood, landslide, earthquake, hurricane, or tornado); (b) delay
caused by acts or neglect of the Commission or the Commonwealth in issuing
required permits or other administrative approvals regarding Colonial Downs’
proposed SWF; (c) acts of war or terrorism; (d) strikes or labor
disputes affecting the proposed SWF; (e) any legal action initiated by
third parties that challenges any permit, approval, license, or similar
governmental action that is necessary for the renovation, construction, or
operation of an SWF or any such action initiated by Colonial Downs to overturn
a ruling denying any permit, approval, license, or similar necessary
governmental


 


14

















 


action; (f) materially
adverse weather conditions at the site not reasonably anticipated; (g) fire
or other unavoidable casualties at the site; (h) Colonial Downs’ inability
to obtain materials or the unavailability of specified materials where there
are no reasonable substitutes available or no alternative methods or means
available of obtaining such materials on a timely basis; (i) construction
delays caused by subsurface or otherwise concealed physical conditions at the
site differing materially from those indicated in the plans and specifications,
or from those originally encountered, which were not ascertainable by Colonial
Downs prior to the grant of the licenses; and (j) delays caused solely by the
failure of any governmental agency, department, or organization to timely issue
building permits or other construction-related permits that could not be
secured prior to the date of the licenses or to timely perform inspections that
cannot be completed prior to construction on matters necessary for the proper
execution and completion of the work necessary to build or complete the SWF,
provided that Colonial Downs has taken all actions reasonably available to it,
including the filing and aggressive prosecution of legal action, to compel such
agencies, departments, or organizations to issue such permits and to timely
perform such inspections.


 


(3)                                  The deadlines
specified in this Subsection A shall be suspended for each day that a
delay specified in this Subsection A(2) occurs
and continues, provided that Colonial Downs exercises all reasonable diligence
during such time to overcome the delay.


 


B.                                     Distribution
of Funds from the Henry County SWF and
the Scott County SWF. 
Colonial Downs and the VHBPA agree to distribute funds from the
Thoroughbred Partners’ Account in such a fashion as set forth in Exhibit B
hereto with respect to the Henry County SWF and the Scott County SWF.  If Colonial Downs is unsuccessful in 2005 in
opening the second Chesapeake SWF referred to below, other than as a result of
Force Majeure Events,


 


15

















 


then the Richmond (Hull
Street) SWF, the Vinton SWF, the Henry County SWF, and the Scott County SWF
shall be treated as “All Other SWFs” for purposes of the distribution of funds
from the Thoroughbred Partners’ Account as set forth in Exhibit B hereto
until the second Chesapeake SWF opens. 
Once the second Chesapeake SWF opens, the effective contribution rates
for the Richmond (Hull Street) SWF, the Vinton SWF, the Henry County SWF, the Scott
County SWF, the existing Chesapeake SWF, and the second Chesapeake SWF
shall be as set forth in Exhibit B hereto and shall continue for the term
of Colonial Downs’ licenses for such facilities.


 


C.                                     Chesapeake
SWF.  Pursuant to Section 8 of the
Existing Agreement, Colonial Downs is obligated to relocate the existing
Chesapeake SWF to a location closer to Virginia Beach, subject to Force Majeure
Events, on or before December 31, 2005. 
The VHBPA and Colonial Downs agree that Colonial Downs will satisfy this
obligation by opening an additional Chesapeake SWF before December 31,
2005 (the “Second Chesapeake SWF”). 
Colonial Downs has applied to the Commission for owner’s and operator’s
licenses for the Second Chesapeake SWF. 
Upon issuance of the licenses, Colonial Downs shall immediately commence
build out or construction of the Second Chesapeake SWF and prosecute completion
using all commercially reasonable means. 
It is anticipated that the Second Chesapeake SWF will open no later than
four to six months after the Commission issues Colonial Downs licenses to own
and operate the Second Chesapeake SWF. 
If Colonial Downs opens a Second Chesapeake SWF in 2005, Colonial Downs
and the VHBPA agree to distribute funds from the Thoroughbred Partners’ Account
in such a fashion as set forth in Exhibit B hereto with respect to the
existing Chesapeake Facility and the Second Chesapeake SWF.  If Colonial Downs is unsuccessful in opening
the Second Chesapeake SWF in 2005 (other than as a result of Force Majeure
events), no handle generated at the existing Chesapeake SWF shall be included
in the calculation of the


 


16

















 


$22,375,000 threshold set
forth on Exhibit B until such time as the Second Chesapeake SWF opens for
business.  The effective contribution
rates for the existing Chesapeake Facility and the Second Chesapeake SWF set
forth in Exhibit B hereto shall continue for the term of Colonial Downs’
licenses for such facilities.


 


D.                                    SWF
Referenda in Northern Virginia.  In
2005 Colonial Downs and the VHBPA 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 VHBPA agree to distribute funds from the Thoroughbred Partners’ Account in
such a fashion as set forth in Exhibit B hereto for any SWF opened by
Colonial Downs in Northern Virginia, as
defined above, during
the three-year period
commencing on the effective date of this Agreement.


 


17

















 


E.                                      Additional
SWFs in the Central-Southside Virginia Region.  Colonial Downs shall conduct two referenda
during the period from January 1, 2005 to December 31, 2006, and one
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
thoroughbred handle (live plus SWF) equaling or exceeding $200,000,000,
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 8.D (1) hereof with respect to such
referendum.  Upon the opening of any SWF
in Central-Southside Virginia Region, Colonial Downs and the VHBPA agree to
distribute funds from the Thoroughbred 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 29 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 Central-Southside referenda in the time periods
specified above, the contribution rate for thoroughbred handle to the payment
of purses set forth in Exhibit B hereto shall be suspended for


 


18

















 


all SWFs operating in the
Central-Southside Virginia Region and for the Richmond (Hull Street) SWF, the
existing Chesapeake SWF, and the Second Chesapeake SWF, and the purse
contribution rate shall be that specified in Exhibit B hereto for “All
Other SWFs” until such time as Colonial Downs conducts the number of referenda
specified in this Subsection E 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 Richmond (Hull Street) SWF, the existing Chesapeake SWF,
and the Second Chesapeake SWF. No adjustment (either higher or lower) to the
purse contribution rate shall be retroactive.


 


F.                                      Funding
of Virginia Turf Festival.  The
amount of purse funds devoted to the Virginia Turf Festival shall increase by
an amount equal to between thirty-three percent (33%) and fifty percent (50%)
of additional purse money provided by the Richmond (Hull Street) SWF, the SWFs in Chesapeake (for combined handle
in excess of $22,375,000), new SWFs in the Central-Southside Virginia Region,
including, but not limited to, the Vinton
SWF, the Henry County SWF, and
the Scott County SWF, and any Northern Virginia SWFs.  Such funding of the Virginia Turf Festival
shall continue for the term of Colonial Downs’ licenses for the foregoing
facilities.  For 2006 and 2007, the
parties have agreed to the allocation of such additional purse funds to the
Virginia Turf Festival and overnight purses as set forth in Section 4.F.  Such allocation shall be applicable only for
2006 and 2007, unless the parties otherwise agree.  The allocation of days for the Virginia Turf
Festival and purses per day shall be based on the goal of maintaining an
average purse per day for the Virginia Turf Festival within the top


 


19

















 


five percent (5%) of
purses per day at thoroughbred racetracks nationally.  Colonial Downs may supplement the purses for
the Virginia Turf Festival from its own funds, in its sole discretion, to
achieve this purse per day result.  For
2006 and 2007, the parties have agreed to seek a Virginia Turf Festival on the
terms set forth in Sections 4.F. and 6. 
Thereafter, upon the Virginia Turf Festival growing to ten (10) days
under the foregoing criteria, following discussions with the Turf Festival
Planning Committee (established pursuant to Section 6 hereof), Colonial
Downs may separate the Virginia Turf Festival from the summer thoroughbred
meet, in which event the Virginia Derby may cease to be included in the
Virginia Turf Festival, in Colonial Downs’ discretion, and remain a part of the
summer meet.  Funding for the Virginia
Turf Festival shall remain at the levels set forth herein, however, in such
event.


 


G.                                     Incorporation
of Terms in SWF Licenses.  Colonial
Downs and the VHBPA agree that in order for any and all owner’s and operator’s
licenses for the additional SWFs referenced herein (including but not limited
to the new SWFs in Henry and Scott
Counties, the Second Chesapeake SWF, and SWFs in Northern Virginia) to
be effective for purposes of this Agreement, such licenses shall contain or
incorporate the provisions of this Agreement relating to adjustments to
contributions from the Thoroughbred Partners’ Account to the Horsemen’s Account
and Section 20 hereof.  The parties
agree to use their best efforts to have the SWF licenses issued by the Commission
contain or incorporate such provisions.


 


9.                                       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


 


20

















 


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
VHBPA.  Notwithstanding the foregoing,
such periods may be shortened if the Backside Facilities are then needed for a
live standardbred race meeting, and Colonial Downs shall provide advance notice
to the Horsemen in any such event. 
During the aforesaid periods, Colonial Downs shall, at its own expense,
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.  Not less than seventy-five
(75) days prior to each Race Meeting, Colonial Downs shall publish and
distribute stall applications to horsemen. 
Colonial Downs shall use its commercially reasonable efforts to ensure
that: (i) the stall application


 


21

















 


contains notice of the
cut-off date for the submission of stall applications; (ii) the stall
application contains in bold face type any rules of entry preference for
Virginia-bred, Virginia-sired, Virginia-owned, or Virginia-stabled horses; (iii) the
stall application provides on the front cover that no dogs will be allowed in
the stable area, that no children will be allowed to stay in the backstretch
dormitories, and that the other rules applicable to the backside
anticipated by Colonial Downs to be enforced at each Race Meeting will be
posted at the Track and will be mailed upon request to trainers and others; and
(iv) each completed application contains the name, permanent address,
telephone number, and electronic mail (e-mail) address of the owner and trainer
of each 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
overall quality of the horses listed on the stall application;


 


(2)                                  The
quality of the racetrack(s) where the horses listed on the stall applications
have previously raced;


 


(3)                                  The
number of starts a trainer listed on the application has made at past Colonial
Downs Race Meetings, where applicable;


 


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


 


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


 


22

















 


(6)                                  The
best interests of Colonial Downs and thoroughbred 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 VHBPA and Colonial Downs.  Joint
approval of Colonial Downs and the VHBPA 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.                                      VHBPA Accommodations. Colonial
Downs shall provide a suitable location on the backstretch for construction of a permanent building by the VHBPA, to be used during the
Race Meetings for a classroom facility, an office for the chaplaincy program, a
counseling office, a chapel, recreation, and a secure office and storage facility for the VHBPA.  Colonial Downs
shall furnish electrical service, telephone hook-up, and television race simulcasting for the
building.  The VHBPA shall save and hold
harmless and shall indemnify Colonial Downs against any expenses, costs,
claims, or demands, including attorney’s fees, arising out of the construction and use of the building,
electrical service, telephone hook-up, and
television race simulcasting. Colonial Downs shall also provide the
VHBPA a grandstand suite, free of charge except for food service, for use by
its members and guests on each race day (except for the Virginia Derby) in
2005, 2006, and 2007, unless the parties agree otherwise.


 


10.                                 Racing
Committee.  Colonial Downs and the
VHBPA have organized and shall maintain a joint committee to be known as the “Racing
Committee.”  The VHBPA and Colonial


 


23

















 


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 VHBPA 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.


 


11.                                 Representations
and Warranties.


 


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


 


(1)                                  This
Agreement has been approved by the Board of Directors of the VHBPA;


 


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


 


(3)                                  Except
as provided in Section 14
below, the VHBPA and its officials shall not acquiesce or actively participate
in any attempt to delay, interrupt, or bring about the temporary or permanent
cessation or suspension of racing or other activities at the Racetrack,
including simulcasting, or activities at the SWFs at any time during the Term
of this Agreement;


 


24

















 


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


 


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


 


(6)                                  The
VHBPA 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.


 


B.                                     Colonial
Downs.  In addition to the representations
and warranties contained elsewhere in this Agreement, Colonial Downs warrants,
represents to and covenants with the VHBPA 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 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


 


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


 


25

















 


12.                                 Racing Officials.  Colonial Downs shall send to the President of
the VHBPA 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.


 


13.                                 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.


 


14.                                 Authorization for
Out-of-State Simulcasting.  During
the Term of this Agreement, the VHBPA 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 thoroughbred races emanating
from the Racetrack, pursuant to the Interstate Horse Racing Act of 1978, P.L. 95-515
(the “Interstate Horse Racing Act”). 
This Agreement constitutes the contract required by Section 3004(a) of
the Interstate Horse Racing Act. 
Colonial Downs shall consider the best interests of live racing when
simulcasting.  To the extent required by
law, out-of-state simulcasting for all of Colonial Downs’ races at the
Racetrack shall be subject to the consent of the VHBPA, which consent shall not
be unreasonably withheld, delayed or conditioned.  In the event consent is withheld, the VHBPA
shall set forth its reasons for withholding its consent within a reasonable
time after notice from Colonial Downs in advance of the intended simulcast.


 


26

















 


15.                                 Copies of
Documents; Database.  Colonial Downs
shall send a copy of its stall application form, stakes purse program, and
condition book for each Race Meeting to the VHBPA on or before the first day
they are distributed to Horsemen.  Additionally, Colonial Downs shall provide the
VHBPA copies of all filings, if any, it makes with the U. S. Securities and
Exchange Commission promptly after such filings are made.  Colonial Downs shall share and coordinate all
information and data on Horsemen racing at the track with the VHBPA.  The parties shall work jointly to develop and
maintain an effective database of Horsemen racing in Virginia.  Not later than thirty (30) days following the
close of each Race Meeting, Colonial Downs shall provide the VHBPA a list of
all owners and trainers who participated in that Race Meeting, including
addresses, telephone numbers, and e-mail addresses to the extent collected by
Colonial Downs pursuant to Subsection 9.C. and otherwise.


 


16.                                 Horsemen’s
Backstretch Improvements and Programs. 
Colonial Downs and the VHBPA agree to expend for the benefit of Horsemen
certain funds during calendar years 2005,
2006 and 2007 for the
improvement of backstretch working and living conditions and for educational,
recreational, and counseling programs. 
Colonial Downs shall provide $75,000 in 2005 and $50,000 in 2006 and 2007 (subject to adjustment as provided
in Subsection 20.B.
hereof) to be used solely for capital improvements and to be provided no later
than June 1st of each year.  
In addition, the VHBPA 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 VHBPA 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.  All of the above funds shall
be deposited into


 


27

















 


the Backstretch
Improvement Escrow Account, which shall be established at a financial
institution mutually acceptable to both Colonial Downs and the VHBPA, and shall
be expended as mutually agreed by Colonial Downs and the VHBPA and subject to
Commission approval pursuant to Section 30 hereof.  To the extent funds are available, the
improvements and programs shall include the following: (1) training and
educational programs such as the Groom Elite Program, which is a formal program
developed in cooperation with Texas A & M University to train grooms
in equine science concepts and practices; (2) chaplaincy and counseling,
including health and drug abuse programs; (3) participation in the
national Kids To The Cup program to encourage young people to learn about the
horse industry by participation in backstretch activities; (4) after-work
recreational programs for backstretch personnel, such as picnics, evening
television and videos, etc.; (5) expansion and improvement to dormitory facilities to better serve
the health needs of backstretch personnel; (6) implementation of a plan to
eliminate from all barns the water runoff problem that in the past has resulted
in standing water, which plan shall include appropriate landscaping and
pesticide spraying and installation of gutters; (7) structural modification to the Receiving Barn to improve
ventilation; and (8) construction of the office/classroom facility,
identified in Section 9.E. above. 
At the conclusion of each Race Meeting, the VHBPA shall within sixty
(60) days provide Colonial Downs with an accounting of all expenditures made
from the Backstretch Improvement Escrow Account.


 


17.                                 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 23 below.  Such termination shall not constitute an
election of remedy, nor shall it


 


28

















 


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 VHBPA if the Racetrack and all the SWFs are closed for ninety
(90) continuous days.


 


18.                                 Indemnification.  The VHBPA 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 4.I.
hereof (Administrative Fee).


 


19.                           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 acceptable to the
parties.  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
under the arbitration


 


29

















 


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 23 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 23 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 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 Arbitrator.  The Arbitrators so selected 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


 


30

















 


Eastern District of
Virginia (Richmond Division), including any Local Rules (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.


 


(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.


 


(7)                                  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


 


31

















 


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
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).


 


32

















 


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 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 attorney’s fees.


 


33

















 


20.                                 Contribution
Adjustments.


 


A.                                   Changes
in Applicable Law.  The parties have
negotiated the relevant transfers from the Thoroughbred Partners’ Account to
the Horsemen’s Account (the “Purse Amounts”) from expected handle at the
Richmond (Hull Street) SWF, the
Vinton SWF, the existing
Chesapeake SWF, the Second Chesapeake SWF, and future SWFs located in Henry and
Scott Counties, 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 VHBPA (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 20, 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 Thoroughbred Partners’ Account or transfers to the
Horsemen’s Account, or otherwise inures to the benefit or detriment of the
VHBPA 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 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 thoroughbred 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


 


34

















 


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.                                     Changes
in MVRC Management Fee.  The parties
have also negotiated the relevant transfers from the Thoroughbred Partners’
Account to the Horsemen’s Account from expected handle at the Richmond (Hull Street) SWF, the Vinton SWF, the existing Chesapeake
SWF, the Second Chesapeake SWF, and future SWFs located in Henry and Scott Counties, and
Northern Virginia based upon an amendment to the Management and Consulting
Agreement reducing MVRC’s management fee to 1.5% of handle wagered at Richmond (Hull Street), Vinton, and SWFs
located in Henry and Scott Counties.  If
that management fee is further reduced pursuant to Section 4.1.4 of the
Management and Consulting Agreement, then one-half of the amount of that
reduction attributable to handle at Richmond (Hull Street), Vinton, and SWFs located in the Henry and Scott Counties
(collectively, the “New Handle) shall be contributed by Colonial Downs to the
Thoroughbred Partners’ Account (such that the effective rate of contribution
attributable to the New Handle is increased by .375%) and such amount shall be
added to the annual transfer of funds from the Thoroughbred Partners’ Account
to the Horsemen’s Account regarding Richmond (Hull Street), Vinton, and all SWFs located in Henry and Scott Counties, as set
forth in Exhibit B hereto.  Such
payments shall commence upon the effective date of the management fee reduction
and shall terminate upon the termination of such reduction in the management
fee pursuant to Section 4.1.4 of the Management and Consulting
Agreement.  Similarly, if the management
fee in the Management and Consulting Agreement currently applicable to handle
at SWFs, other than those identified above, is reduced at any time, then
Colonial Downs shall annually provide $100,000 for capital improvements to the


 


35

















 


Racetrack’s backstretch
pursuant to Section 16
hereof effective in the first full calendar year after the reduction in the
management fee goes into effect.  Such obligation
shall be reduced to $50,000 per year if the management fee reduction is
terminated pursuant to Section 4.1.4 of the Management and Consulting
Agreement.


 


C.                                     Termination
of Management Fee.  If the
above-referenced management fees are reduced to zero or otherwise eliminated
completely then the annual transfer of funds from the Thoroughbred Partners’
Account to the Horsemen’s Account for all SWFs, wherever located within
Virginia, shall be subject to good faith negotiations between the parties, or
their successors or assigns, as to the appropriate sharing between them of the
benefits of that reduction or elimination.


 


D.                                    Duration.  The terms and provisions of this Section 20 shall remain in full force and
effect for as long as the licenses for the Richmond (Hull Street) SWF, the Vinton
SWF, the existing Chesapeake SWF, the Second Chesapeake SWF, or the SWFs
located in Henry and Scott Counties
remain in effect.


 


21.                                 Consents,
Approvals, Agreements or Assurances. 
Wherever this Agreement requires the consent, approval, agreement, or
assurance of Colonial Downs and/or the VHBPA, (i) 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.


 


22.                                 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.


 


36

















 


23.                                 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

  
	
   

  	
   

  
	
  Copy to:

  	
  James L.
  Weinberg, Esq.

  
	
   

  	
  Hirschler
  Fleischer

  
	
   

  	
  The Federal
  Reserve Bank Building

  
	
   

  	
  P.O. Box
  500

  
	
   

  	
  701 E. Byrd
  Street, 15th floor

  
	
   

  	
  Richmond, VA
  23219

  
	
   

  	
   

  
	
   

  	
  Mr. John E.
  Mooney, President

  
	
   

  	
  Maryland-Virginia
  Racing Circuit, Inc.

  
	
   

  	
  10515 Colonial
  Downs Parkway

  
	
   

  	
  New Kent, VA
  23124

  
	
   

  	
   

  
	
   

  	
  H. Lane Kneedler, Esq.

  
	
   

  	
  Reed Smith LLP

  
	
   

  	
  901 East Byrd
  Street, Suite 1700

  
	
   

  	
  Richmond, VA
  23219-4069

  



 


37

















 


	
  VHBPA:

  	
  Ms. Althea
  D. Richards, President

  
	
   

  	
  Virginia
  Horsemen’s Benevolent and

  
	
   

  	
  Protective
  Association, Inc.

  
	
   

  	
  P.O. Box
  273

  
	
   

  	
  Millwood, VA
  22646

  
	
   

  	
   

  
	
  Copy to:

  	
  Frank Petramalo, Jr., Esq.

  
	
   

  	
  VHBPA

  
	
   

  	
  38-C Garrett Street

  
	
   

  	
  Warrenton, VA 20186

  



 


24.                                 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 23 above.  No waiver of any breach shall be deemed to be
a waiver of any other or any subsequent breach.


 


25.                                 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.


 


26.                                 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.


 


27.                                 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.


 


38

















 


28.                                 Entire
Agreement; Modification.  This
Agreement contains the entire Agreement between the parties and supersedes all
prior agreements (including the
Existing Agreement) and understandings, both written and oral, between
the parties with respect to the subject matter of this Agreement; provided,
however, this Agreement shall not alter the allocation of funds to the Horsemen’s
Account from the New Richmond SWF and SWFs in Central-Southside Virginia Region
pursuant to the Existing 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 VHBPA
that is the recognized majority thoroughbred 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.


 


29.                                 Conditions
Precedent to Effectiveness of this Agreement.  The parties acknowledge that this Agreement
and the expenditures from the Racing Benevolence Fund detailed in Section 16 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.


 


39

















 


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


 


 


	
  VIRGINIA
  HORSEMEN’S

  	
  COLONIAL DOWNS,
  L.P.

  	
   

  
	
  BENEVOLENT AND
  PROTECTIVE

  	
   

  	
   

  
	
  ASSOCIATION,
  INC.

  	
  By:

  	
  Stansley Racing
  Corp., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Althea D.
  Richards

  	
   

  	
   

  	
  By:

  	
  /s/ Ian M.
  Stewart

  	
   

  
	
   

  	
  Althea D.
  Richards, President

  	
   

  	
   

  	
  Ian M. Stewart,
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  STANSLEY RACING
  CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ian M.
  Stewart

  	
   

  
	
   

  	
   

  	
  Ian M. Stewart,
  President

  	
   

  
										



 


40

















 


EXHIBIT A


 


FORM OF


TRUST AGREEMENT


 


THIS
TRUST AGREEMENT is entered into this           
day of                   ,
200      , by and between COLONIAL
DOWNS, L.P., a Virginia limited partnership (the “Trustee”), and the
VIRGINIA HORSEMEN’S BENEVOLENT AND PROTECTIVE
ASSOCIATION, INC., a not-for-profit corporation (the “VHBPA”), on
behalf of the thoroughbred horsemen engaging in thoroughbred racing at Colonial
Downs’ racetrack (the “Track”) (collectively, the “Beneficiaries”).


 


W I T N E S S E T H:


 


WHEREAS,
pursuant to prior agreements that have expired and an Agreement, dated as of November       ,
2002 (the “Horsemen’s Agreement”), relating to live thoroughbred racing at
Colonial Downs, among other matters, the Trustee has and will make deposits
into an account currently maintained at BB&T Bank, N.A., Middleburg branch
(the “Thoroughbred Partners’ Account”) a portion of which will be used to fund
purses and related payments to the Beneficiaries participating in racing at the
Track during the 2003 thoroughbred racing season and other years governed by
the Horsemen’s Agreement;


 


NOW,
THEREFORE, in consideration of the mutual promises and
covenants set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:


 


1.                                       The
Account.  The Trustee shall maintain
the Thoroughbred Partners’ Account at a financial institution mutually
acceptable to the parties and that is insured by an agency of the United States
government.


 


2.                                       Deposits.  The Trustee shall deposit all funds required
by the Horsemen’s Agreement into the Thoroughbred Partners’ Account.  The funds so deposited into the Thoroughbred
Partners’ Account, exclusive of interest earned thereon and amounts payable to
Colonial Downs therefrom, are hereinafter referred to as the “Trust Account
Funds.”  Except as provided in Section 5.B.
of the Horsemen’s Agreement, no other funds shall be deposited into the
Thoroughbred Partners’ Account, and the Trustee shall not commingle any other
funds with the Trust Account Funds.


 


3.                                       Withdrawals.  The VHBPA, on behalf of the Beneficiaries,
grants the Trustee the authority to withdraw funds from the Thoroughbred
Partners’ Account to make payments required to be made pursuant to the terms
and provisions of the Horsemen’s Agreement, including, without limitation, to
provide for the payment of purses and related awards to the Beneficiaries.


 


A-1

















 


4.                                       Title
to Funds in the Account.  The Trustee
shall hold only legal title to the Trust Account Funds and shall not have any
equitable or beneficial interest in such Funds. 
Accordingly, the Trust Account Funds are excluded from the Trustee’s
estate for purposes of 11 U.S.C. § 541(d), as amended.


 


5.                                       Interest.  The Trustee understands and accepts that
interest, if any, earned on the Funds will be reported under its employer
identification number, that such reporting is done as a matter of convenience
for the administration of the Thoroughbred Partners’ Account and that the
receipt of such interest does not affect the beneficial and equitable title
that the parties have to such interest and is not in derogation of the rights
and entitlements of the parties as set forth herein and in the Horsemen’s
Agreement.


 


6.                                       Trustee’s
Duties.  The duties of the Trustee
under this Agreement shall be limited to the safekeeping and disbursement of
the Trust Account Funds and documents under the terms and conditions of this
Agreement.  The Trustee shall be entitled
to rely on and may assume the genuineness and authenticity of any signatures
purported to be made by the parties hereto, their lawful representatives, and
successors or assigns.  Upon election of
either party hereto, an independent third party may be appointed trustee of the
Thoroughbred Partners’ Account and the Trustee hereunder may be relieved of its
duties as trustee but shall be bound by the other provisions of this Agreement.


 


7.                                       Limitation
on Liability.  The Trustee shall not
be liable for any claims, damages, liabilities, losses, costs, or expenses
arising from the Trustee’s acts or omissions with respect to the Trust Account
Funds or its performance hereunder, unless such actions or omissions result
from the Trustee’s negligence or willful misconduct.


 


8.                                       Reimbursement
of Expenses.  The Trustee shall be
reimbursed in the form of one-half of the interest accruing on the Trust
Account Funds for all costs and expenses reasonably incurred by it in
connection with the administration of the Account, including payment of any
trustee fees to a third-party trustee.


 


9.                                       Termination.  This Agreement shall terminate on the date on
which all payments under the Horsemen’s Agreement have been made and the
Horsemen’s Agreement is no longer in effect.


 


10.                                 Notices.  All notices, approvals, and other
communications authorized or required to be given between the parties hereto
shall be validly given or made if in writing and sent in accordance with the
terms and conditions of the Horsemen’s Agreement.


 


11.                                 Governing
Law.  This Agreement shall be
governed, construed, and enforced in accordance with the laws of the
Commonwealth of Virginia, without regard to any conflicts of law, rules or
provisions thereof.


 


12.                                 Miscellaneous.  Any action, suit, or proceeding in respect of
or arising out of this Agreement may be prosecuted as to any party hereto in
Richmond, Virginia.  Each party hereto
consents to the exercise of jurisdiction over its person by any court situated
in Richmond,


 


A-2

















 


Virginia and having
jurisdiction over the subject matter of any such action, suit, or
proceeding.  The invalidity or
unenforceability of any provision of this Agreement in any particular respect
shall not affect the validity and enforceability of any other provision of this
Agreement or of the same provision in any other respect.  This Agreement and the Horsemen’s Agreement
set forth the entire understanding of the parties to this Agreement with
respect to the operation of the trust for the Thoroughbred Partners’ Account
and may not be amended except by a written instrument executed by all parties
hereto.  Other than the Horsemen’s
Agreement, any previous agreements or understandings among the parties hereto
regarding the subject matter hereof are merged into and superseded by this
Agreement.  All of the covenants,
stipulations, terms, and conditions of this Agreement shall extend to and be
binding upon the respective successors and assigns of the parties hereto, but
this Agreement shall not be assigned by the Trustee without the prior written
consent of the Beneficiaries.


 


This
Agreement or any amendment hereto may be executed in two or more counterparts,
each of which shall constitute an original, and all of which together shall
constitute one and the same Agreement.


 


	
  VIRGINIA
  HORSEMEN’S

  	
  COLONIAL DOWNS,
  L.P.

  	
   

  
	
  BENEVOLENT AND
  PROTECTIVE

  	
   

  	
   

  
	
  ASSOCIATION,
  INC.

  	
  By:

  	
  Stansley Racing
  Corp., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Althea D.
  Richards, President

  	
   

  	
   

  	
  Ian M. Stewart,
  President

  
								



 


A-3

















 


EXHIBIT B


 


Annual Transfers of Funds from
Thoroughbred


Partners’ Account to Horsemen’s
Account


 


	
  All SWFs located
  in the Central-Southside Virginia Region (including, but not limited to, the town of Vinton and Scott and
  Henry Counties)

  	
   

  	
  4.5% of all
  thoroughbred handle in a calendar year at each such facility for ten years
  from the opening date of each such facility.

  

  After ten years from opening date, for each calendar year:

  

  5% of the first $75,000,000 of thoroughbred handle at each such facility;
  plus 6% of thoroughbred handle in excess of $75,000,000 up to $150,000,000 at
  each such facility; and plus 7% of thoroughbred handle in excess of
  $150,000,000 at each such facility.

  
	
   

  	
   

  	
   

  
	
  The Richmond (Hull St.) SWF

  	
   

  	
  4% of the first
  $15,000,000 of thoroughbred handle in a calendar year at such facility;

  

  plus 5% of thoroughbred handle in excess of $15,000,000 up to $20,000,000 in
  a calendar year at such facility;

  

  plus 6% of thoroughbred handle in excess of $20,000,000 up to $25,000,000 in
  a calendar year at such facility; and

  

  plus 7% of thoroughbred handle in excess of $25,000,000 in a calendar year at
  such facility.

  
	
   

  	
   

  	
   

  
	
  The existing
  Chesapeake SWF and the Second Chesapeake SWF

  	
   

  	
  4.5% of all
  thoroughbred handle in a calendar year in excess of the aggregate sum of
  $22,375,000 of the combined thoroughbred handle from the two facilities.

  
	
   

  	
   

  	
   

  
	
  Northern
  Virginia SWF

  	
   

  	
  0% of all
  thoroughbred handle wagered at each such facility for the first 12 months of
  operation and thereafter as provided for “All Other SWFs” described below.

  
	
   

  	
   

  	
   

  
	
  All Other SWFs
  (including the aggregate thoroughbred handle of the two Chesapeake SWFs up to
  $22,375,000)

  	
   

  	
  5% of the first
  $75,000,000 of aggregate thoroughbred handle from such facilities; plus
  6% of aggregate thoroughbred handle in excess of $75,000,000 up to
  $150,000,000 from such facilities; plus 7% of thoroughbred handle in
  excess of $150,000,000 from such facilities less the amounts the VHBPA
  is authorized to deduct from the Thoroughbred Partners’ Account pursuant to
  the Agreement (including but not limited to NTRA dues, an administrative fee,
  and repayment of advances (including interest) made by Colonial Downs to the
  Thoroughbred Partners’ Account).

  



 


B-1

















 


EXHIBIT C


 


Anticipated Development Schedule


 


	
  Action Item

  	
   

  	
  Time Period

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Identify and
  bring under contract potential SWF site.

  	
   

  	
  4 to 6 weeks
  from approval of Agreement.

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Meeting with
  local government officials and neighbors; confirmation of zoning compliance.

  	
   

  	
  3 to 6 weeks
  from having site under contract.

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Application to
  the Virginia Racing Commission.

  	
   

  	
  1 to 2 weeks
  from satisfaction of Item 2.

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Action by the
  Virginia Racing Commission on application after filing.

  	
   

  	
  6 to 12 weeks.

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Application for
  permits to commence construction or renovation after grant of licenses.

  	
   

  	
  Within 1 week
  after grant of licenses.

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Construction or
  renovation period.

  	
   

  	
  3 to 6 months.

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Total time from
  identifying a site to opening.

  	
   

  	
  7 to 13 months.

  



 


C-1

















 


EXHIBIT D


 


Central-Southside Virginia Region


 


Counties


 


1.                           Albemarle


2.                           Allegheny


3.                           Amherst


4.                           Augusta


5.                           Bath


6.                           Bedford
County


7.                           Bland


8.                           Botetourt


9.                           Buchanan


10.                     Campbell


11.                     Carroll


12.                     Craig


13.                     Dickenson


14.                     Floyd


15.                     Franklin
County


16.                     Giles


17.                     Grayson


18.                     Greene


19.                     Halifax


20.                     Henry


21.                     Highland


22.                     Lee


23.                     Montgomery


24.                     Nelson


25.                     Patrick


26.                     Pittsylvania


27.                     Pulaski


28.                     Roanoke
County


29.                     Rockbridge


30.                     Russell


31.                     Scott


32.                     Smyth


33.                     Tazewell


34.                     Washington


35.                     Wise


36.                     Wythe


 


Cities


 


1.                           Bedford
City


2.                           Bristol


3.                           Buena
Vista


4.                           Charlottesville


5.                           Covington


6.                           Danville


7.                           Franklin
City


8.                           Galax


9.                           Lexington


10.                     Lynchburg


11.                     Martinsville


12.                     Norton


13.                     Radford


14.                     Roanoke
City


15.                     Salem


16.                     South
Boston


17.                     Staunton


18.                     Waynesboro


 


Towns (Population Greater Than 5,000)


 


1.                          Vinton


2.                          Abingdon


3.                          Blacksburg


4.                          Big Stone Gap


5.                          Farmville


6.                          Marion


7.                          Pulaski


8.                          South Boston


9.                          Wytheville


 


D-1