EXHIBIT 10.14


 


STOCK PURCHASE AGREEMENT


 


THIS STOCK PURCHASE AGREEMENT (the “Agreement”) is made as of the 18th
day of August 2005, by and among PIMLICO RACING ASSOCIATION, INC., a
Maryland corporation, LAUREL RACING ASSOCIATION LIMITED PARTNERSHIP, a Maryland
limited partnership, and THE MARYLAND JOCKEY CLUB OF BALTIMORE CITY, INC., a
Maryland corporation (each, individually a “Seller”, and collectively, “Sellers”),
MARYLAND-VIRGINIA RACING CIRCUIT, INC., a Virginia corporation (the “Company”),
and COLONIAL DOWNS, L.P., a Virginia limited partnership (“Colonial Downs” or “Purchaser”).


 


RECITALS


 


A.                                   The
Company is organized under the laws of the Commonwealth of Virginia and is
engaged in the business of managing the Colonial Downs horse Racetrack and
related off-track betting facilities (the “OTB Facilities” and, collectively,
the “Business”).


 


B.                                     Sellers
are the record and beneficial owners of all of the issued and outstanding
shares of capital stock of the Company (the “Shares”).


 


C.                                     Sellers
desire to sell, and Purchaser desires to purchase, all of the Shares, upon the
terms and conditions set forth herein.


 


D.                                    The
Company and Purchaser are party to an Amended and Restated Management and
Consulting Agreement, dated as of January 15, 1999, as amended by four addenda
thereto (as so amended, the “Management and Consulting Agreement”).  Capitalized terms not otherwise defined
herein are used as defined in the Management and Consulting Agreement.  All amounts cited in this Agreement are cited
and payable in US dollars.


 


AGREEMENT


 


NOW, THEREFORE, for and in consideration of the foregoing Recitals,
which are incorporated herein, the mutual covenants and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:


 


ARTICLE I — STOCK PURCHASE


 


1.1                               Purchase
of Shares.  For the consideration
set forth in Section 1.2, Sellers hereby agree to sell, transfer, assign
and convey the Shares to Purchaser, and Purchaser hereby agrees to purchase the
Shares from Sellers.  At Closing (as
defined in Section 2.1), Sellers shall deliver to Purchaser certificates
evidencing the Shares, duly endorsed in blank. 
At the time of such deliveries, all of the Shares shall be free and clear
of all liens, claims, encumbrances, pledges, security interests, charges,
options and restrictions of any kind or nature.


 


1.2                               Purchase
Price.  Subject to the terms and
conditions of this Agreement, the purchase price payable for the Shares to be
sold pursuant to Section 1.1 (the “Purchase Price”)


 





















 


shall be Ten
Million and 00/100 Dollars ($10,000,000.00), which shall be paid to Sellers as
follows:  Seven Million and 00/100
Dollars ($7,000,000.00) by wire transfer of immediately available funds to an
account designated by Sellers at Closing, and the remainder of the Purchase
Price shall be paid pursuant to a demand promissory note (the “Note”) executed
and delivered by Purchaser at Closing. 
The Note shall be substantially in the form attached hereto as Exhibit A,
mature one (1) year from the Closing Date (as defined in Section 2.1),
and bear interest at the “Prime Rate” as published in The Wall Street
Journal (Eastern Edition), from time to time, plus 1%.  The Note shall be guaranteed by Jacobs
Entertainment, Inc. pursuant to a guaranty substantially in form of Exhibit B
(the “Guaranty”).


 


1.3                               Proration
of Property Taxes.  The parties’
responsibilities for property, sales or use taxes incurred and owing by the
Company shall be payable by both Purchaser and Sellers on a prorated
basis.  Sellers shall pay all such taxes
prorated through the Closing Date, and Purchaser shall pay all such taxes
prorated from the Closing Date until the end of the period for which such tax
is due and payable.


 


1.4                               Proration
of Management Fee and Tax Liability. 
By January 31, 2006, the parties shall calculate (i) all
amounts that would be owing to Sellers under the Management and Consulting
Agreement in respect of calendar year 2005 as if that Management and Consulting
Agreement had remained in effect for the full 2005 calendar year and consistent
in manner of calculation with past practice (the “2005 Management Fee”); (ii) the
amount of all property, sales, use and income taxes payable by Seller pursuant
to the terms hereof (the “Tax Liability”). 
Purchaser shall pay to Sellers, by February 15, 2006, after
deducting any amounts already paid to Sellers in respect of the 2005 Management
Fee (which amounts, for greater certainty, do not include the Purchase Price),
an amount equal to (a) the 2005 Management Fee multiplied by the number of
days during the 2005 calendar year prior to (and inclusive of) the Closing Date
and divided by 365 less (b) the Tax Liability.  If the Tax Liability exceeds the amount
calculated pursuant to clause (a) of the preceding sentence, Sellers shall
pay to Purchaser such excess by February 15, 2006.


 


1.5                               Payment
of Management Fee Promissory Note.  As
of or prior to the Closing Date, Purchaser shall pay to Sellers all amounts
outstanding under the promissory note from Purchaser to Company (the “Management
Fee Note”), in the amount of One Hundred Forty Five Thousand and 00/100 Dollars
($145,000), plus any accrued and unpaid interest as of the date such payment is
made, which note was made pursuant to Section 4.6 of the Management and
Consulting Agreement.


 


ARTICLE II — CLOSING


 


2.1.                            Time
and Place.  This Agreement shall
be executed on or before 5:00 p.m. on August 17, 2005, and closing of
the transactions contemplated by this Agreement (the “Closing”) shall take
place on September 15, 2005 at 10:00 a.m. in Richmond, Virginia, at
the offices of Hirschler Fleischer or at such other place and time as shall be
mutually agreed by the parties and shall be effective as of the date of this
Agreement (the “Closing Date”).


 


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2.2                               Deliveries
by Sellers.  At (or prior to) the
Closing, Sellers shall deliver the following to Purchaser:


 


(a)                                  certificates
representing the Shares as required by Section 1.1, each accompanied by a transfer
power duly endorsed in blank by the record owner of such certificate;


 


(b)                                 copies
of the Company’s Articles of Incorporation, certified by the Clerk of the State
Corporation Commission of the Commonwealth of Virginia, and Bylaws, all as
certified by the Company’s Secretary;


 


(c)                                  a
Certificate of Good Standing for the Company from the Clerk of the State
Corporation Commission of the Commonwealth of Virginia dated within ten (10) days
prior to the Closing Date;


 


(d)                                 all
minute books, stock ledgers, and all other corporate records relating thereto
of the Company;


 


(e)                                  the
written resignation of each officer and director of the Company; and


 


(f)                                    such
other documents as may be reasonably requested by Purchaser.


 


2.3                               Deliveries
by Purchaser.  At the Closing,
Purchaser shall deliver the following to Sellers:


 


(a)                                  Seven
Million and No/100 Dollars ($7,000,000) in immediately available funds;


 


(b)                                 all
payments due under the Management Fee Note as required by Section 1.5;


 


(c)                                  the
fully executed Note required by Section 1.2;


 


(d)                                 the
Guaranty required in connection with the Note; and


 


(e)                                  such
additional documents as Sellers may reasonably request.


 


ARTICLE III — REPRESENTATIONS AND
WARRANTIES OF SELLERS


 


Sellers, jointly and severally, represent and warrant each of the
following to Purchaser and the Company:


 


3.1                               Organization
and Good Standing.  The Company
is a corporation duly organized and validly existing under the laws of the
Commonwealth of Virginia with the requisite corporate power and authority to
own, lease and operate its properties and assets and to carry on the Business
as presently conducted.  The Company has
never had any subsidiaries or any direct or indirect equity interest in any
other firm, corporation, limited liability company, partnership or other
business entity, whether or not incorporated.


 


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3.2                               Authority.  Sellers have the complete and
unrestricted right, power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated herein, and upon
execution of this Agreement by all parties thereto, this Agreement will
constitute a legal, valid and binding obligation of Sellers enforceable in
accordance with its terms.


 


3.3                               Assets of Business.  Schedule 3.3 sets forth a complete
listing, by item, of all furniture, fixtures, equipment, machinery, and other
tangible personal property (other than inventory and supplies) of the Company
used in the Business.  The Company will
have a zero cash balance at the time of Closing.


 


3.4                               Title
to Shares.  Sellers have good,
absolute and marketable title to the Shares, free and clear of all liens,
claims, encumbrances, pledges, security interests, charges, options and
restrictions of any kind or nature.  The
delivery of the Shares to Purchaser, as herein contemplated, will vest in
Purchaser good, absolute and marketable title to all of the Shares, free and
clear of all liens, claims, encumbrances, pledges, security interests, charges,
options and restrictions of any kind or nature.


 


3.5                               Capitalization.  The authorized capital stock of the Company
consists of ten thousand (10,000) shares of Class A common stock and ten
thousand (10,000) shares of Class B common stock, of which five thousand
one hundred (5,100) shares of Class A common stock are issued and
outstanding and no shares of Class B common stock are issued and
outstanding.  The Shares constitute all
of the issued and outstanding shares of capital stock of the Company, and are
owned by Sellers as set forth on Schedule 3.5.  The Shares are validly issued, fully paid and
non-assessable.  There are no outstanding
warrants, preferences, rights, options, calls, subscriptions or like
instruments providing for the purchase or acquisition from any of Sellers or
the Company of any shares of capital stock of the Company or other security or
equity interest in the Company convertible into shares of capital stock of the
Company.


 


3.6                               Ownership
of and Title to Assets.  The
Company has good and marketable title to all of the assets it purports to own,
free and clear of any liens, security interests, pledges, conditional sales
agreements, leases, charges and encumbrances of any kind or nature.


 


3.7                               Consents
and Approvals.  Except as set
forth on Schedule 3.7, there is, to Seller’s knowledge, no requirement
applicable to the Company or any Seller to make any filing with, or to obtain
any permit, authorization, consent or approval of any public body as a
condition to the lawful consummation of the transactions contemplated by this
Agreement.  Except as set forth on Schedule 3.7,
there is, to Seller’s knowledge, no requirement that any party to any Contract
(defined in Section 3.14 below), or License (defined in Section 3.9
below) to which the Company is a party or by which it or any of its assets or
the Shares are bound, consent to the execution of this Agreement by the Company
or the consummation of the transactions contemplated by this Agreement.  Any required consents as set forth in Schedule 3.7
have been obtained or will be obtained prior to Closing.


 


3.8                               Non-Contravention.  The execution, delivery and performance by
Sellers of this Agreement will not, and the consummation of the transactions
contemplated hereby will not, to Seller’s knowledge, constitute or result in,
whether at present or with the giving of notice or the passage of time, a
material violation, breach or default under: 
(i) any agreement, contract,


 


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covenant,
lease, mortgage, or other instrument to which the Company or any Seller is a
party or by which it is, or the Shares are, bound; (ii) any constitution,
statute or regulation to which the Company or any Seller is, or the Shares are,
subject; (iii) any judgment, order, decree or other requirement of law by
which the Company or any Seller is, or the Shares are, bound; or (iv) the
Company’s Articles of Incorporation, Bylaws or any resolution adopted by the
Board of Directors or the shareholders. 
If, to Seller’s knowledge, the execution, delivery or performance by
Sellers of this Agreement would otherwise cause a material violation, breach or
default under parts (i)-(iv) of this Section 3.8, the required
consent shall be obtained prior to Closing to permit these actions by
Sellers.  Any required consents under
this Section shall be set forth in Schedule 3.8.  Additionally, to Seller’s knowledge, neither
the execution and delivery of this Agreement nor the consummation or
performance of the transactions will (a) contravene, conflict with, or
result in a violation of any of the terms or requirements of, or give any
governmental body the right to revoke, withdraw, suspend, cancel, terminate, or
modify any authorization from such governmental body that is held by the
Company or otherwise relates to the Business, or any of the assets owned or
used by the Company or (b) cause any of the assets owned by the Company to
be reassessed or revalued by any taxing authority or governmental body.


 


3.9                               Permits and Licenses.  Set forth on Schedule 3.9 is a list of
all permits and licenses (the “Licenses”) owned by Sellers or the Company in
connection with the operation of the Business. 
All of the Licenses are in current force and effect and the Company and
Sellers are not in receipt of any notice that the Company is not in compliance
with, or that threatens the revocation of, any Licenses.  The Business has been conducted in compliance
in all material respects with the Licenses.


 


3.10                        Financial
Statements.  Sellers have
delivered to Purchaser financial statements of the Company for the years ended December 31,
2004 and 2003 (the “Financial Statements”), and such Financial Statements have
been certified by the Company’s Chief Financial Officer as to their
accuracy.  Further, the Financial
Statements have been prepared in accordance with generally accepted accounting
principles (“GAAP”), consistently applied throughout the periods involved, and
present fairly the financial position and results of operations and cash flows
of the Company as of the dates, and for the periods, indicated therein, and are
in all material respects accurate, complete and correct.


 


3.11                        Absence
of Undisclosed Liabilities.  To
Sellers’ knowledge, the Company has no liabilities or obligations (whether
absolute, accrued or contingent) of any nature except (i) as set forth in its
Financial Statements or that were incurred in the ordinary course of business
since the respective date of the Financial Statements, and (ii) the
contractual obligations set forth in Schedule 3.14.


 


3.12                        Tax
Returns and Audits.  All federal
and state income taxes of the Company attributable to taxable years ending on
or before the Closing Date have been fully paid or properly accrued.  The Company has prepared, executed and duly
filed all other federal, state, local, foreign and other tax returns required
to be filed by applicable laws and regulations whose due dates fall on or
before the Closing Date and such tax returns are true, complete and correct in
all material respects.  True and complete
copies of the federal income tax returns filed by the Company for the taxable
years ending December 31, 2002, December 31, 2003 and December 31,
2004 have been delivered to Purchaser. 
The Company has paid when due or properly accrued all federal and state
income taxes, sales taxes, use taxes, personal property


 


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taxes,
franchise taxes, gross receipts taxes and all other taxes (including all
penalties, interest and installments thereof) attributable to all taxable years
ending on or before the Closing Date, and for its year-to-date operations
through the Closing Date.  All
liabilities of the Company for federal and state income taxes, sales taxes, use
taxes, personal property taxes, franchise taxes, gross receipts taxes and all
other taxes (including all penalties, interest and installments thereof)
through the Closing Date which are not yet due and payable have been accrued as
liabilities and are reflected on the Financial Statements (to the extent
applicable to the periods covered by the Financial Statements).  The Company has not been delinquent in the
payment of any tax, assessment or governmental charge. There are no liens for
taxes upon the assets of the Company, except for statutory liens for current
taxes not yet due.  The Company has not
had any tax deficiencies proposed or assessed against it.  The tax returns of the Company have not been
audited by the Internal Revenue Service. 
The Company has received no notice of any investigation or audit by any
taxing or tax collecting agency.


 


3.13                        Litigation.  There is no suit, action, claim, dispute,
investigation or other proceeding (whether legal, administrative or
arbitrative), currently pending or, to the knowledge of Sellers, threatened
against the Company, and Sellers do not know of any basis or grounds for any such
suit, action, claim, dispute, investigation or other proceeding.


 


3.14                        Contracts.  For purposes hereof, “Contract” means any
contract, agreement, deed, mortgage, lease, permit, license, commitment,
undertaking, arrangement or understanding, written or oral, or other document
or instrument to which or by which the Company is a party or otherwise subject
or bound or to which or by which any property or right of the Company is
subject or bound.  Schedule 3.14
sets forth a true and complete list of all Contracts.  Sellers have made available to Purchaser a
correct and complete copy of each written Contract listed in Schedule 3.14.  Except as disclosed in Schedule 3.14,
with respect to each such Contract:  (i) the
Contract is enforceable and in full force and effect; (ii) subject to
obtaining any necessary consents disclosed in Schedules 3.7 or 3.8, the
Contract will continue to be enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (iii) to the knowledge of Sellers, no party is in breach or
default, and no event has occurred which with notice or lapse of time or both
would constitute a breach or default, or permit termination, modification, or
acceleration, under the Contract; and (iv) to the knowledge of Sellers, no
party has repudiated any provision of the Contract.  With respect to the Management and Consulting
Agreement, the parties shall enter into an agreement substantially in the form
attached hereto as Exhibit C at Closing releasing Sellers from any
obligations or liabilities thereunder.


 


3.15                        Employees;
Employee Benefit Plans.  The
employment of all employees of the Company is terminable at will.  The Company does not now maintain and has not
maintained in the immediately preceding three (3) years (i) an “employee
pension benefit plan” or “pension plan”, as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (ii) an
“employee welfare benefit plan” as defined in Section 3(1) of ERISA;
or (iii) any other benefit, welfare, pension, retirement, profit-sharing,
bonus, stock option or similar employee benefit plan or obligation (including
unfunded liability under any previously terminated plan).


 


3.16                        Compliance
with Laws.  To Seller’s
knowledge, the Company is in material compliance with all laws, regulations,
policies, guidelines, orders, judgments or decrees of any


 


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federal,
state, local or foreign court or governmental authority applicable to it,
including but not limited to those related to civil rights; public health and
safety; worker health and safety; and labor and nondiscrimination.  Neither Sellers nor the Company has received
any notice alleging non-compliance with any of the aforementioned laws,
regulations, policies, guidelines, orders, judgments or decrees, or engaged in
any such illegal practices.


 


3.17                        Insurance.  Schedule 3.17 sets forth a true and
complete list, showing the insurance company, insured and other parties, type
and amount of coverage and deductibles, of all insurance policies covering the
Company or its employees.  Such policies
are in full force and effect, all premiums due thereon have been paid, and the
Company is not in default in any material respect under any provision of any
such policy nor has it failed to give notice or present any material claim
thereunder in a timely manner.  Schedule 3.17
sets forth all claims made by or against the Company under any policy of
insurance since January 1, 2002.  No
material claim by the Company on or in respect of any insurance policy has been
declined or refused by the insurer.


 


3.18                        Books and Records.  The
Company has made and kept books and records and accounts which, in reasonable
detail, accurately and fairly reflect the activities of the Company in all
material respects.  The minute book of
the Company is true, correct and complete in all material respects and contains
copies of the minutes and records of, and accurately and adequately reflects in
all material respects, all meetings and actions taken by written consent of the
board of directors, committees of the boards of directors and shareholders of
the Company, as the case may be.  The
copies of the stock record book and the stock certificate book of the Company
are true, correct and complete and accurately and adequately reflect all
transactions in connection with the Company’ capital stock through and
including the date hereof.  Copies of the
minute book and stock books of the Company provided to Purchaser by Sellers are
the complete set of such books maintained by the Company.


 


3.19                        Full
Disclosure.  All Schedules to
this Agreement are accurate and complete. 
None of the representations and warranties of Sellers in this Article III
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.  As used in this Agreement, the term “knowledge”
with respect to Sellers means the knowledge of Joe De Francis, Doug Illig,
John Mooney, Tom Hodgson, or Brian Budden of any fact or matter which such
person actually knows or would reasonably be expected to be advised of or have
personal knowledge of in the course of performing his or her ordinary and
customary duties, as historically performed.


 


ARTICLE IV — REPRESENTATIONS AND
WARRANTIES OF PURCHASER


 


Purchaser represents and warrants each of the following to Sellers:


 


4.1                               Authority.
Purchaser has the complete and unrestricted right, power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated herein, and upon execution of this Agreement by all parties
thereto, this Agreement will constitute valid and binding obligations of Purchaser
enforceable in accordance with its respective terms.


 


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4.2                               Ability
to Carry Out Agreement. 
Purchaser is not a party to, subject to, or bound by any agreement or
any judgment, order, writ, injunction, or decree of any court or governmental
body that could prevent or materially impair the carrying out of this Agreement
or the performance by Purchaser of any of Purchaser’s obligations hereunder,
other than the consent required by law of the Virginia Racing Commission (the “Commission”)
to this Agreement and the transactions contemplated herein or as otherwise
disclosed herein.


 


4.3                               Full
Disclosure.  None of the
representations and warranties of Purchaser in this Article IV contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.


 


ARTICLE V — ADDITIONAL COVENANTS AND
AGREEMENTS


 


5.1                               Covenants
of Purchaser and Sellers.


 


(a)                                  Cooperation.  Purchaser and Sellers shall use commercially
reasonable efforts to cause the sale contemplated by this Agreement to be
consummated and shall make all filings with and give all notices to third
parties which may be necessary or required in order to effect the transaction
contemplated hereby, including, but not limited to, seeking the approval of the
Commission to this Agreement and the transactions contemplated herein.


 


(b)                                 Additional
Actions.  Upon request from time to
time, Sellers shall execute and deliver all documents, make all truthful oaths,
testify in any proceedings and do all other acts that may be reasonably
necessary or desirable, in the opinion of Purchaser, to perfect the title of
Purchaser to the Shares, all without further consideration, but at the expense
of Purchaser unless arising out of default of any Seller.


 


ARTICLE VI — POST-CLOSING COVENANTS AND
AGREEMENTS


 


If the Closing occurs, the parties agree to the following:


 


6.1                               Instant
Racing.  For purposes of this
Agreement, “Instant Racing” means any form of simulcast broadcast of historic
races on which pari-mutuel wagers are placed, such as but not limited to, the
Instant Racing that is marketed by RaceTech, LLC.  In the event of implementation of Instant
Racing in Virginia by Purchaser, or any affiliate of Purchaser, or any person
in which Purchaser has a direct or indirect interest, within twenty (20) years
of the date hereof, Purchaser will pay to Sellers (or a designated affiliate or
assignee), on a monthly basis for a period of ten (10) years from
commencement of such entity’s Instant Racing operations in Virginia the greater
of (a) one-third (1/3) of earnings before interest, income taxes,
depreciation and amortization, (“EBITDA”) generated by Instant Racing after recovery
by Purchaser of a non-interest bearing loan in the amount of required Instant
Racing Capital Costs (as defined herein), and (b) 2% of Instant Racing win
(handle less payouts) after recovery by Purchaser of a non-interest bearing
loan in the amount of required Instant Racing Capital Costs.  Instant Racing Capital Costs include all
funds reasonably expended by Purchaser to (x) purchase, lease or otherwise
acquire the devices necessary to conduct the Instant Racing to which this Section 6.1
applies, (y) install such devices, including necessary cable and
electrical improvements, and


 


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(z) make
necessary alterations to the Racetrack and OTB Facilities for the installation
and operation of such devices.


 


6.2                               Northern
Virginia SWF.  In the event of
introduction of new OTB Facilities (i.e., other than those operated by Colonial
Downs during the 2004 calendar year) in the Virginia counties of Loudoun,
Fairfax, Prince William, and Arlington and the Virginia cities of Manassas,
Manassas Park, Fairfax City, Falls Church and Alexandria (collectively “Northern
Virginia”), within twenty years of the date hereof, Purchaser will pay to
Sellers (or a designated affiliate or assignee), on a monthly basis for a
period of ten years from commencement of such OTB operation, the amounts set
forth in Sections 4.1.2 and 4.1.3 of the Management and Consulting
Agreement.  Such amounts shall be reduced
as set forth in Section 4.1.4 of the Management and Consulting Agreement.


 


6.3                               Agreement
with XpressBet, Inc. 
Purchaser shall enter into a long-term agreement with XpressBet, Inc.
based on the Advanced Account Wagering Services Agreement, dated as of April 27,
2005, between XpressBet, Inc. and Purchaser (the “ADW Agreement”).  Sellers acknowledge that the Virginia
Horsemen’s Benevolent and Protective Association, Inc. (“VHBPA”) and the
Virginia Harness Horse Association (“VHHA”) must consent to the ADW Agreement,
and that the Commission must approve the ADW Agreement.


 


6.4                               Signal
Sales Agreement.  Purchaser shall
enter into a long-term agreement for provision to Magna Entertainment Corp. (“MEC”)
of domestic and international signal rights (simulcast and HRTV) with respect
to Colonial Downs’ export simulcast signal and the export simulcast signal of
any other horse racetrack owned and managed by Purchaser, Jacobs Entertainment, Inc.
or any of their respective affiliates on standard MEC terms as set forth in the
Agreements between (i) Colonial Downs (host) and MEC Sport and
Entertainment (guest) at a 2% host fee, and (ii) Colonial Downs (host) and
the Meadows (guest), both of which agreements are attached on Schedule 6.4.  Sellers and Purchaser agree to continue to
exchange simulcast racing programs in accordance with Sections 3.4.1, 3.4.2 and
3.4.3, as amended, of the Management and Consulting Agreement, for the
remainder of the 2005 calendar year.


 


6.5                               Race
Days.


 


(a)                                  Coordination of
Thoroughbred Meets.  Sellers and
Purchaser shall continue to discuss annually the coordination of race dates
between Laurel Race Course (“Laurel”) and Pimlico Race Course (“Pimlico”) on
the one hand and Colonial Downs on the other. 
For a period of ten (10) years after Closing, which period shall be
automatically renewed in 5-year periods unless one party notifies the other by November 1
of the preceding year, Colonial Downs shall not hold race dates at the
Racetrack or at any other horse racetracks in Virginia owned in whole or in
part, directly or indirectly, by Colonial Downs in advance of the later of June 17
and the Monday following running of the Belmont Stakes Race (the “Cut Date”) of
any calendar year, and Sellers shall not hold race dates at Pimlico or Laurel
or at any other horse racetracks in Maryland owned in whole or in part,
directly or indirectly, by Sellers from the Cut Date to July 31 of any
calendar year unless expressly agreed in writing otherwise by the parties.  The period from the Cut Date to July 31
shall be defined as a “Meet.”  There are
ten (10) Meets during this ten (10) year period.


 


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(b)                                 Changes in Law
Affecting Race Days.  If
non-pari-mutuel gaming activities are authorized by new legislation and
conducted in Maryland at Laurel or Pimlico or at any other horse racetracks in
Maryland owned in whole or in part, directly or indirectly, by Sellers and the
legislation authorizing such activities expressly requires that Sellers or any
other horse racetracks in Maryland owned in whole or in part, directly or
indirectly, by Sellers conduct live thoroughbred racing during any period from
the Cut Date to July 31 (the “Legislative Overlap Requirement”), then the
Sellers shall be relieved from their obligation pursuant to Section 6.5(a) to
the extent of such overlapping days and it shall not be a breach of this
Agreement provided that (i) Sellers shall not, directly or indirectly, and
Sellers shall cause any person or entity under common control with or
affiliated with Sellers not to, directly or indirectly, seek any such
Legislative Overlap Requirement in Maryland law, including without limitation
lobbying any member of the Maryland General Assembly for such requirement; and (ii) Sellers
shall pay to Purchaser the product of One Million and No/100 Dollars
($1,000,000.00) multiplied by the number of Meets remaining in the initial ten (10) year
period specified in Section 6.5(a) during
which Sellers will conduct live thoroughbred racing during any period from the
Cut Date to July 31 pursuant to the Legislative Overlap Requirement,
such sum to be paid One Million and No/100 Dollars ($1,000,000.00) per year on
or before June 17 of the year the overlap in race days commences and each
year thereafter plus accrued but unpaid interest.  The unpaid balance of the foregoing fee shall
bear interest from the first payment date until paid in full at the “Prime Rate”
as published in The Wall Street Journal (Eastern Edition), from time to
time, plus 1%.  Payment of the foregoing
fee shall be a joint and several obligation of the Sellers.  Sellers shall be relieved of the
payment obligation in (ii) hereof, but the remainder of this
paragraph (b) shall remain in full effect, in the event that Purchaser,
directly or indirectly, has sought, or has caused any person or
entity under common control with or affiliated with Purchaser to seek any such
Legislative Overlap Requirement in Maryland law, including without limitation
lobbying any member of the Maryland General Assembly for such requirement.


 


6.6                               Personnel.  For so long as the parties coordinate race
dates in June and July as provided in Section 6.5, Sellers shall
not object to Purchaser attempting to hire at its option and full expense, the
personnel set forth on Schedule I to the Management and Consulting
Agreement during a period in which Sellers are not conducting live racing at
Laurel, Pimlico, or any other horse racetracks in Maryland owned in whole or in
part, directly or indirectly, by Sellers. 
In addition, Sellers shall not unreasonably seek to deter the personnel
set forth on Schedule I to the Management and Consulting Agreement from
being employed by Purchaser during a period in which Sellers are not conducting
live racing at Laurel, Pimlico, or any other horse racetracks in Maryland owned
in whole or in part, directly or indirectly, by Sellers.


 


6.7                               “All
Along” Stakes Race.  To the
extent permissible by law, Sellers agree to allow Purchasers to continue to
conduct, and hereby forfeit any interest to, the “All Along” stakes race
currently run at Colonial Downs.


 


6.8                               Confidentiality.  During the term of the Management and
Consulting Agreement and in the course of entering into this Agreement, the
parties have shared confidential information regarding their respective
operations.  The parties agree to
maintain the confidentiality of such information for a period of ten (10) years
after the Closing Date.   The parties
shall not disclose any confidential information to any person or entity unless
and until such confidential information has become public knowledge without
fault by the disclosing party


 


10





















 


or unless
compelled to disclose the confidential information by judicial or governmental
authority.  Each party shall use the
other party’s confidential information only as needed to perform its
obligations hereunder and in no event for purposes competitive with the other
party.  Each party further agrees to
treat all confidential information of the other party in the same manner as it
treats its own confidential information.


 


ARTICLE VII — CONDITIONS TO CLOSING


 


7.1                               Obligations
of Sellers.  The obligations of
Sellers to consummate the transactions contemplated by this Agreement shall be
subject, to the extent not waived, to the following conditions:


 


(a)                                  The
representation and warranties of Purchaser set forth in Article IV hereof
shall be true and correct as of the Closing Date.


 


(b)                                 Purchaser
shall have performed all obligations and complied with all covenants required
hereunder to be performed or complied with by Purchaser on or before the
Closing Date, including without limitation payment of $7,000,000 in cash, the
delivery of the Note and Guaranty, and payment in full of all obligations under
the Management Fee Note.  All documents
delivered by Sellers and Purchaser hereunder shall be in form and substance
reasonably satisfactory to Sellers.


 


(c)                                  All
action required to be taken by Purchaser and Sellers (including receiving any
required approval of the shareholders or directors of Purchaser and Sellers) in
connection with the transactions contemplated by this Agreement shall have been
taken, all documents incident thereto shall be reasonably satisfactory in
substance and form to Sellers, and Sellers shall have received such originals
or copies of such documents as Sellers may reasonably request.


 


7.2                               Obligations
of Purchaser.  The obligations of
Purchaser to consummate the transactions contemplated by this Agreement shall
be subject, to the extent not waived, to the following conditions:


 


(a)                                  The
representations and warranties of Sellers set forth in Article III hereof
shall be true and correct as of the Closing Date.


 


(b)                                 Sellers
shall have performed all obligations and complied with all covenants required
hereunder to be performed or complied with by Sellers on or before the Closing
Date.  All documents delivered by Sellers
and Purchaser hereunder shall be in form and substance reasonably satisfactory
to Purchaser.


 


(c)                                  All
action required to be taken by Sellers or the Company (including receiving any
required approval of the shareholders or directors of the Company) in connection
with the transactions contemplated by this Agreement shall have been taken, all
documents incident thereto shall be reasonably satisfactory in substance and
form to Purchaser, and Purchaser shall have received such originals or copies
of such documents as Purchaser may reasonably request.


 


11





















 


(d)                                 The
Company shall not have operated otherwise than in the ordinary course of
business or in accordance with this Agreement between the time of execution of
this Agreement and Closing, including, but not limited to, without first
consulting with Purchaser, any hiring or firing of executive personnel set
forth in Section 2.4.5 of the Management and Consulting Agreement.


 


(e)                                  Sellers
shall have delivered to Purchaser the written resignation of each officer and
director of the Company.


 


7.3                               Joint
Obligations of Sellers and Purchaser. 
The obligations of Sellers and Purchaser to consummate the transactions
contemplated by this Agreement shall be subject to the parties securing the
Commission’s approval of this Agreement and the transactions contemplated
hereby, provided however that the obligations in Section 5.1 shall be
continuing and binding in any event.


 


ARTICLE VIII — INDEMNIFICATION AND
RELEASE


 


8.1                               Covered
Liabilities.  For purposes of
this Agreement, “Covered Liabilities” means any and all losses, liabilities,
fines, damages, obligations, payments (including but not limited to those
arising out of any demand, assessment, settlement, judgment, or compromise relating
to any Legal Action (as defined in Section 8.4) for which the Indemnifying
Party (as defined in Section 8.4) is responsible, costs and expenses
(including but not limited to interest and penalties due and payable with
respect thereto) and reasonable attorneys’ fees and any other reasonable
out-of-pocket expenses actually incurred in investigating, preparing,
defending, avoiding, or settling any Legal Action or in investigating,
preserving, or enforcing another party’s obligations hereunder.


 


8.2                               Indemnity
by Sellers.  Sellers, jointly and
severally shall, on demand, indemnify and hold harmless Purchaser, the Company,
and their present and future partners, officers, directors, employees, agents
and representatives and their respective successors and assigns (each, a “Purchaser
Indemnified Person”) from and against any and all Covered Liabilities that are
incurred by or asserted against Purchaser Indemnified Persons, or individual
one of them, and in connection with, related to, or arising directly or indirectly
from any of the following, provided that Sellers may establish as an
affirmative defense to such claim for indemnification that Purchaser had
knowledge on or before Closing, where Purchaser’s knowledge is the knowledge of
Jeff Jacobs, Ian Stewart, Jerry Monahan, Duke Dale, Iain Woolnough, or Tom
Hamilton of any fact or matter which such person actually knows or would
reasonably be expected to be advised of or have personal knowledge of in the
course of performing his or her ordinary and customary duties, as historically
performed, of the specific facts and circumstances giving rise to such breach:


 


(a)                                  any
breach, default, or violation by any Seller of a covenant, agreement,
representation or warranty set forth in this Agreement;


 


(b)                                 any
misrepresentation or omission of fact by any Seller in this Agreement;


 


(c)                                  any
undisclosed or contingent liabilities that arise subsequent to Closing to the
extent relating to the operation of the Business at or prior to Closing; or


 


12





















 


(d)                                 any
federal and state income taxes, sales taxes, use taxes, personal property
taxes, franchise taxes, gross receipts taxes and all other taxes (including any
future assessments and all penalties, interest and installments thereof) attributable
to the Company’s taxable years (or other taxable periods) ending on or before
or including the Closing Date, or attributable to the Company’ year-to-date
operations through the Closing Date, except for personal property taxes for
which Purchaser has agreed to be responsible pursuant to Section 1.3
hereof.


 


8.3                               Indemnity
by Purchaser.  Purchaser shall
indemnify, defend and hold harmless Sellers, and their present and future
employees, agents and representatives and their respective successors and
assigns (each, a “Seller Indemnified Person”) from and against any and all
Covered Liabilities that are incurred by or asserted against the Seller
Indemnified Persons, or individual one of them, and in connection with, related
to, or arising directly or indirectly from any of the following, provided that
Purchaser may establish as an affirmative defense to such claim for
indemnification that Sellers had knowledge on or before Closing of the specific
facts and circumstances giving rise to such breach:


 


(a)                                  any
breach, default or violation by Purchaser of a covenant, agreement,
representation or warranty set forth in this Agreement;


 


(b)                                 any
misrepresentation or omission of fact by Purchaser in this Agreement; or


 


(c)                                  Purchaser’s
ownership and operation of the Business after the Closing Date except for any
Covered Liabilities for which Sellers are obligated to indemnify any Purchaser
Indemnified Person pursuant to Section 8.2.


 


8.4                               Notice
and Defense of Claims.


 


(a)                                  Promptly
after receipt by a party seeking indemnification hereunder (an “Indemnified
Party”) of notice of any claim or the commencement of any action, or upon
discovery of any facts which an Indemnified Party believes may give rise to a
claim for indemnification hereunder (a “Claim”), such Indemnified Party shall,
if a Claim is to be made against a party from whom indemnification is sought
hereunder (an “Indemnifying Party”) give written notice to the Indemnifying
Party of the Claim and the facts, in reasonable detail, constituting the basis
for such Claim.  Failure of an
Indemnified Party to give such written notice of any Claim shall release an
Indemnifying Party from its indemnification obligations hereunder only to the
extent that such failure actually prejudiced the Indemnifying Party’s ability to
defend the Claim.


 


(b)                                 The
obligations and liabilities of an Indemnifying Party to an Indemnified Party
with respect to Claims resulting from the assertion of liability by those not
parties to this Agreement (including governmental claims for penalties, fines
and assessments) shall be subject to the following conditions:


 


13





















 


(i)                                     If
any action, complaint, claim, prosecution, indictment, suit, arbitration,
investigation, audit, inquiry or proceeding is brought by a third party (a “Legal
Action”) against an Indemnified Party, the Legal Action may be defended by the
Indemnifying Party with legal counsel of its choice reasonably satisfactory to
the Indemnified Party so long as (a) the Indemnifying Party notifies the
Indemnified Party in writing within fifteen (15) business days after the
Indemnified Party has given notice of the Legal Action that the Indemnifying
Party acknowledges its indemnity obligation pursuant to the terms of this Article VIII
and assumes the defense of the Legal Action; (b) the Indemnifying Party
provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend against the Legal Action and fulfill its indemnification obligations
hereunder; (c) if any of Sellers is an Indemnifying Party, the Legal
Action does not seek an injunction or other equitable relief against the
Company or Purchaser; (d) settlement of, or an adverse judgment with
respect to, the Legal Action will not, in the reasonable and good faith
judgment of the Indemnified Party, establish a precedential custom or practice
adverse to the continuing business interests of the Indemnified Party; and (e) the
Indemnifying Party conducts the defense of the Legal Action with reasonable
diligence.


 


(ii)                                  So
long as the Indemnifying Party is conducting the defense of a Legal Action in
accordance with Section 8.4(b)(i):  (A) without
the prior written approval of the Indemnified Party, the Indemnifying Party
will not consent to the entry of any judgment or enter into any settlement with
respect to such Legal Action unless written agreement is obtained releasing the
Indemnified Party from all liability thereunder; (B) the Indemnified Party
shall have the right to be represented by advisory counsel and accountants at
its own expense; (C) the Indemnifying Party shall keep the Indemnified
Party fully informed as to the status of such Legal Action at all stages
thereof, whether or not the Indemnified Party is represented by its own
counsel; and (D) the parties shall render to each other such assistance as
may be reasonably required in order to ensure the proper and adequate defense
of such Legal Action.


 


(iii)                               In
the event any of the conditions in Section 8.4(b)(i) is or becomes
unsatisfied, the Indemnified Party may upon written notice to the Indemnifying
Party assume the defense of the Legal Action, and the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the costs of defending
against the Legal Action (including reasonable attorneys’ fees and expenses)
incurred from the date the Indemnified Party assumed defense of the Legal
Action, and (b) the Indemnifying Party will remain responsible for any
Covered Liabilities the Indemnified Party may suffer.  In the event the Indemnified Party assumes
defense of the Legal Action, such Indemnified Party shall conduct the defense
in good faith and with all reasonable diligence.


 


(c)                                  Interest.  Upon a final determination that an indemnification
obligation is due and the failure of the Indemnifying Party to pay such
obligation within forty-five (45) days of written demand for payment from the
Indemnified Party, interest shall accrue on the unpaid amount of the
indemnification obligation from the date of the final determination until the
indemnification obligation is paid in full at the “Prime Rate” as published in The
Wall Street Journal (Eastern Edition), as of the date the final
determination is made.  Interest shall be
calculated based on the actual number of days elapsed from the date that there
is a final determination that such indemnification obligation becomes due and
owing until paid in full and based on a 365-day year.


 


14





















 


8.5                               Survival.  The obligations of indemnification set forth
in Sections 8.2 and 8.3 hereof shall survive the Closing Date for a period
of eighteen (18) months; provided, however, the representations and
warranties in Sections 3.2, 3.4, 3.6 and 4.1 and related indemnification
obligations shall survive indefinitely and the representations and warranties
in Section 3.12 and the obligations of indemnification for any breach
thereof and the obligations of indemnification under Section 8.2(d) shall
survive until expiration of the last of the limitation periods contained in the
Internal Revenue Code or other applicable tax law during which a claim,
assessment or reassessment can be made against the Company.  Notwithstanding the provisions of the
preceding sentence, if written notice of a claim or demand giving rise to an
indemnification obligation is provided to the Indemnifying Party within ninety
(90) days after the Indemnified Party receives notice of any Legal Action, and
such notice is within the scope of indemnification provided for in Sections 8.2
or 8.3, as the case may be, the obligation of indemnification with respect to
such claim or demand shall survive until such claim or demand is finally
resolved, regardless of the expiration of any survival period.


 


8.6                               Offset.  In addition to any other remedies available
to Purchaser hereunder or otherwise, to the extent that any of Purchaser
Indemnified Persons are entitled to be indemnified by Sellers pursuant to Section 8.2
above for any Covered Liabilities, or if any Purchaser Indemnified Person has a
monetary Claim against Seller, Purchaser Indemnified Person shall have the
right, at its option, after proper determination that such amount is in fact to
be indemnified pursuant to this Agreement, to offset such Covered Liability or
monetary Claim against the Note.  In
addition to any other remedies available to Sellers hereunder or otherwise, to
the extent that Purchaser has not rendered proper payment to Sellers in respect
of 2005 Management Fees in accordance with Section 1.4 above, Sellers
shall have the right, at their option, to offset this amount from any amounts
owing by Seller to Purchaser or to increase the amount of the Note by the
amount of Purchaser’s deficiency in payment.


 


8.7.                            (a)                                  Limitations
of Sellers.  Except for claims
based on fraud or knowing misrepresentation, the Company’s and Selling
Stockholders’ liability pursuant to Section 8.2 will be subject to the
following limitations:


 


(i)                                     Sellers
will not be liable for any Covered Liabilities unless and until the aggregate
amount of any such Covered Liabilities exceeds $100,000 (the “Threshold Amount”), in which event
Sellers will be liable for all such Covered Liabilities.


 


(ii)                                  Sellers
will not be liable for any Covered Liabilities to the extent that the aggregate
amount of all Covered Liabilities exceeds 20% of the Purchase Price (the “Cap Amount”).


 


(b)                                  Limitations of
Purchaser.  Except for claims based
on fraud or knowing misrepresentation, Purchaser’s liability pursuant to Section 8.3
will be subject to the following limitations:


 


(i)                                     Purchaser
will not be liable for any Covered Liabilities unless and until the aggregate
amount of any such Covered Liabilities exceeds the Threshold Amount, in which
event Purchaser will be liable for all such Covered Liabilities.


 


15





















 


(ii)                                  Purchaser
will not be liable for any Covered Liabilities to the extent that the aggregate
amount of all Covered Liabilities exceeds the Cap Amount.


 


ARTICLE IX — GENERAL PROVISIONS


 


9.1                               Termination.  This Agreement and the transactions
contemplated by this Agreement may be terminated (i) by action of either
Purchaser or Sellers if a material breach of any provision of this Agreement
has been committed by the other party and such breach has not been waived, (ii) by
action of Sellers in the event of a failure of a condition set forth in Section 7.1,
(iii) by action of Purchaser in the event of a failure of a condition set
forth in Section 7.2, (iv) by mutual consent of Purchaser and Sellers
in the event of the failure of the condition set forth in Section 7.3, and
(v) by either Purchaser or Sellers if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before October 31,
2005, or such later date as the parties may mutually agree.


 


9.2                               Commissions
and Broker Fees.  Sellers and
Purchaser hereby represent and warrant that they have not dealt with any agent,
broker or finder with respect to the Agreement or the transactions contemplated
hereby, and agree to indemnify and hold the other harmless from any agent’s,
broker’s or finder’s fee claimed against that party with respect to the sale of
stock and the transactions contemplated herein.


 


9.3                               Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given upon
personal delivery, receipt of a facsimile confirmation if sent via facsimile,
or if mailed, three days after mailing, first-class, postage prepaid, addressed
to the party for whom they are intended at the following addresses or facsimile
numbers:


 


	
  If to
  Sellers:

  	
  The Maryland
  Jockey Club

  
	
   

  	
  Route 198
  and Racetrack Road

  
	
   

  	
  P.O. Box
  130

  
	
   

  	
  Laurel, MD
  20725

  
	
   

  	
  Facsimile:
  410-792-4877

  
	
   

  	
  Telephone:
  301-725-0400

  
	
   

  	
   

  
	
  with copies
  to:

  	
  Attention:
  General Counsel

  
	
   

  	
  Magna
  Entertainment Corp.

  
	
   

  	
  337
  Magna Drive

  
	
   

  	
  Aurora,
  Ontario

  
	
   

  	
  CANADA L4G
  7K1

  
	
   

  	
  Facsimile:
  905-726-7295

  
	
   

  	
   

  
	
   

  	
  H. Lane
  Kneedler, Esq.

  
	
   

  	
  Reed Smith
  LLP

  
	
   

  	
  Riverfront
  Plaza - West Tower

  
	
   

  	
  901 East
  Byrd Street, Suite 1700

  
	
   

  	
  Richmond VA
  23219-4068

  
	
   

  	
  Facsimile: 804-344-3410

  



 


16





















 


	
  If to
  Purchaser:

  	
  Mr. Jeffrey
  P. Jacobs

  
	
   

  	
  Colonial
  Downs, L.P.

  
	
   

  	
  10515
  Colonial Downs Parkway

  
	
   

  	
  New Kent, VA
  23124

  
	
   

  	
  Facsimile:
  804-966-1567

  
	
   

  	
   

  
	
   

  	
  Mr. Ian
  M. Stewart, President

  
	
   

  	
  Colonial
  Downs, L.P.

  
	
   

  	
  10515
  Colonial Downs Parkway

  
	
   

  	
  New Kent, VA
  23124

  
	
   

  	
  Facsimile:
  804-966-1567

  
	
   

  	
   

  
	
  with a copy
  to:

  	
  James L.
  Weinberg, Esq.

  
	
   

  	
  Hirschler
  Fleischer, A Professional Corporation

  
	
   

  	
  P.O. Box
  500

  
	
   

  	
  Richmond, VA
  23218-0500

  
	
   

  	
  Facsimile:
  (804) 644-0957

  



 


Such names and
addresses may be changed by written notice to the other parties as provided
hereunder.


 


9.4                               Entire
Agreement.  This Agreement,
including all Recitals and Schedules, which are hereby incorporated as a part
hereof, contains the entire understanding of the parties with respect to the
subject matter contained herein.  This
Agreement supersedes all prior oral and written agreements and representations
among the parties hereto.  There are no
restrictions, promises, warranties, covenants, or understandings among the
parties hereto other than those expressly set forth herein.  The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.


 


9.5                               Successors
and Assigns.  This Agreement
shall inure to the benefit of and be binding upon Sellers, Purchaser, and their
respective successors and assigns. 
Neither party may assign its rights and obligations hereunder without
the prior written consent of the other.


 


9.6                               Remedies
and Waivers.  Because an award of
money damages would be inadequate for any breach of portions of this Agreement
by a party, the parties agree that, in the event of any breach or threatened
breach of this Agreement, each party will be entitled, without the requirement
of posting a bond or other security, to equitable relief, including injunctive
relief and specific performance.  Such
remedies will not be the exclusive remedies for any breach of this Agreement
but will be in addition to all other remedies available at law or equity.  All rights and remedies available at law, in
equity or under the terms of this Agreement or any other agreement or
instrument executed in connection herewith shall be cumulative, and no waiver
thereof shall be (a) implied from the prior acts or omissions, or based
solely upon the oral representations, of a party hereto; or (b) effective
or binding unless, and then only to the extent that, such waiver is set forth
in this Agreement, or a party hereto signs an express written waiver of rights
or remedies and causes such written waiver to be delivered to the party for
whose benefit it was made.


 


17





















 


9.7                               Applicable
Law; Venue.  This Agreement shall
be construed and enforced in accordance with the laws of the Commonwealth of
Virginia, exclusive of its rules regarding choice of law. In all court
proceedings brought in connection with this Agreement, the parties hereto
irrevocably consent to non-exclusive personal jurisdiction by, and venue in,
the Circuit Court of the City of Richmond, Virginia and the United States
District Court for the Eastern District of Virginia, Richmond Division.


 


9.8                               Modification.  This Agreement shall not be modified unless,
and then only to the extent that, a written modification is executed by all of
the parties hereto or their respective successors or assigns.


 


9.9                               Severability.  All provisions in this Agreement are severable
and each valid and enforceable provision shall remain in full force and effect,
notwithstanding any determination binding upon the parties hereto that certain
provisions of this Agreement are invalid or unenforceable.


 


9.10                        Counterparts/Facsimile.  This Agreement may be executed in one or more
counterparts, all of which shall constitute one original and a facsimile
delivery by a party of an executed copy of this Agreement shall be binding on
the party upon such delivery.


 


9.11                        Further
Assurances.  After the Closing,
each party to the Agreement shall, at the request of another party, furnish,
execute, and deliver such documents, instruments, certificates, notices of
other further assurances as the requesting party shall reasonably request as
necessary or desirable to effect complete consummation of this Agreement and
the transactions contemplated hereby.


 


18





















 


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


 


	
  SELLERS:

  	
  PURCHASER:

  
	
   

  	
   

  	
   

  	
   

  
	
  PIMLICO RACING ASSOCIATION, INC.

  	
  COLONIAL DOWNS, L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Stansley
  Racing Corp., its

  
	
  By:

  	
  /s/ Joseph A. DeFrancis

  	
   

  	
   

  	
  general
  partner

  
	
   

  	
  Joseph A. De Francis, President

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Ian M.
  Stewart

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  Ian M. Stewart, President

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  LAUREL RACING ASSOCIATION

  LIMITED PARTNERSHIP

  	
  COMPANY:

  
	
   

  	
   

  	
  MARYLAND-VIRGINIA RACING

  
	
  By:

  	
  The Maryland Jockey Club of

  	
  CIRCUIT, INC.

  
	
   

  	
  Baltimore City, Inc., its

  	
   

  	
   

  
	
   

  	
  general partner

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  	
  Name

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE
  MARYLAND JOCKEY CLUB OF

  	
   

  	
   

  
	
  BALTIMORE
  CITY, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
								



 


19





















 


LIST OF REQUIRED SCHEDULES


 




	
  Exhibit A

  	
   

  	
  Promissory
  Note

  
	
  Exhibit B

  	
   

  	
  Guaranty

  
	
  Exhibit C

  	
   

  	
  Release

  
	
  Schedule 3.3

  	
   

  	
  Assets of
  the Business

  
	
  Schedule 3.5

  	
   

  	
  Share
  Ownership

  
	
  Schedule 3.7

  	
   

  	
  Consents and
  Approvals

  
	
  Schedule 3.8

  	
   

  	
  Non-Contravention
  Consents

  
	
  Schedule 3.9

  	
   

  	
  Permits and
  Licenses

  
	
  Schedule 3.14

  	
   

  	
  Contracts

  
	
  Schedule 3.17

  	
   

  	
  Insurance

  
	
  Schedule 6.4

  	
   

  	
  Signal Sales
  Agreements

  






 





















 


Exhibit A


 


PROMISSORY
NOTE


 


	
  $3,000,000.00

  	
  New Kent County, Virginia

  
	
   

  	
  September    , 2005

  



 


FOR VALUE RECEIVED, COLONIAL DOWNS, L.P., a
Virginia limited partnership (“Maker”), promises to pay to the order of PIMLICO
RACING ASSOCIATION, INC. and LAUREL RACING ASSOCIATION LIMITED PARTNERSHIP
(collectively, “Noteholders”), at Route 198 and Racetrack Road, P. O. Box 130,
Laurel, Maryland 20725, or at such other place as Noteholders may designate to
Maker in writing from time to time, the principal sum of THREE MILLION AND
NO/100 DOLLARS ($3,000,000.00) with interest thereon as herein provided in
lawful money of the United States of America, as follows:


 


1.                                       Interest Rate.  Interest shall accrue from the date hereof on
the unpaid principal balance outstanding hereunder at an annual rate equal to
the “Prime Rate” as published in The Wall Street Journal (Eastern
Edition) from time to time, plus one percent (1%) compounded annually and accruing
daily.


 


2.                                       Payments.  The Maker shall make a single payment in the
amount of Three Million and No/100 Dollars ($3,000,000.00), together with all
accrued interest thereon, on the first anniversary of the date first written
above.


 


3.                                       Offset.  Payment of this Note by Maker is subject to
Maker’s and Noteholders’ respective specific offset rights and rights to
withhold payments or increase amounts owing under this Note pursuant to Section 8.6
of that certain Stock Purchase Agreement among Noteholders and Maker of even
date herewith (the “Stock Purchase Agreement”). 
The offset provisions of Section 8.6 of the Stock Purchase
Agreement are incorporated herein.


 


4.                                       Prepayment.                              Maker
shall have the right and privilege to prepay any outstanding balance of the
Note, both unpaid principal and accrued interest, either in whole or in part,
without premium or penalty at any time.


 


5.                                       Waiver.  Maker, and any other person or entity who is
or may become liable hereon or who has assumed, served as a surety or guaranteed
the payment hereof hereby waives, to the extent permitted by law, each of the
following: (a) the benefit of, and right to assert, any statute of
limitations defenses affecting Maker’s rights, duties or obligations under this
Note; (b) presentation, demand, protest, notices of dishonor and protest
and the benefits of homestead exemptions; and (c) all defenses and pleas
with respect to any extensions of the time for payment under this Note.  Noteholders shall not by any act or omission
be deemed to waive any of their rights or remedies hereunder at law or in
equity, or as provided by statute, unless such waiver be in writing, signed by
Noteholders, and then only to the extent specifically set forth therein.  A waiver of one event shall not be construed
as a continuing waiver or as a bar to, or waiver of, such right or remedy upon
a subsequent event.


 





















 


6.                                       Events
of Default.  The outstanding
indebtedness evidenced by this Note shall, at the option of Noteholders upon
written notice to the Maker, become immediately due and payable in full upon
the occurrence of any of the following events which shall be deemed an event of
default (“Event of Default”) under this Note: 
(a) Maker’s failure to pay any amount when due under this Note,
which payment default is not cured in full within five (5) days of
delivery of written notice of such payment default to Maker; (b) the
filing of a petition under any provision of the Bankruptcy Code by or against
Maker that is not dismissed within sixty (60) days thereafter; (c) any judicial
assignment by Maker for the benefit of creditors; (d) the appointment of a
receiver or trustee on behalf of Maker; or (e) default by Maker under the
Stock Purchase Agreement.


 


7                                          Remedies.  Notwithstanding any other provision of this
Note, upon the occurrence of an Event of Default, interest shall accrue on the
unpaid principal amount due under this Note at a rate equivalent to the greater
of (a) the “Prime Rate” as published in The Wall Street Journal
(Eastern Edition) on the date of occurrence of the Event of Default, or (b) seven
percent (7%) per annum, from the date of occurrence of the Event of Default
until such Default is cured or this Note is paid in full.  Maker agrees to pay any collection expenses,
court costs, and reasonable attorneys’ fees and costs that may be sustained by
Noteholders in the collection or enforcement of this Note or any part hereof
after the occurrence of an Event of Default. 
The remedies provided for in this Note shall be cumulative and
concurrent and may be pursued singularly, successively, or together against
Maker at the sole discretion of Noteholders.


 


8.                                       Governing
Law; Severability; Expenses.  This
Note shall be governed and controlled as to its validity, enforcement,
interpretation, construction, and in all other respects, by the laws of the
Commonwealth of Virginia, without regard to any conflict of law provisions to
the contrary.  Each provision of this
Note is severable and each valid and enforceable provision of this Note shall
remain in full force and effect, regardless of any judicial or administrative
determination that renders certain provisions of this Note invalid or
unenforceable.  In the event a legal
action is brought for collection of the indebtedness hereunder, the prevailing
party shall be entitled to recover its costs and expenses, including reasonable
attorneys’ fees, in connection with such action.


 


All directions, notices, and other
communications by or from Noteholders of this Note to or upon Maker shall be in
writing and shall be deemed to have been duly made and delivered when
personally delivered or when sent by certified mail, postage prepaid, addressed
to Maker at the address set forth in the Stock Purchase Agreement, or to such
other address of which Maker has notified Noteholders in writing.


 


2





















 


IN WITNESS WHEREOF, the undersigned has
executed and delivered this Note as of the date first above written.


 


	
   

  	
  COLONIAL DOWNS, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Stansley Racing Corp., its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Jeffrey P. Jacobs, Chairman

  



 


3





















 


Exhibit B


 


GUARANTY


 


THIS GUARANTY (“Guaranty”) is given this        
day of September 2005 by JACOBS
ENTERTAINMENT, INC., a Delaware corporation (“Guarantor”) to PIMLICO RACING ASSOCIATION, INC., a Maryland corporation,
and LAUREL RACING ASSOCIATION LIMITED PARTNERSHIP,
a Maryland limited partnership (each, individually a “Noteholder”, and
collectively, “Noteholders”), and their successors and assigns.


 


WITNESSETH


 


WHEREAS, pursuant to a Stock Purchase
Agreement, dated as of August     , 2005 (the “Stock
Purchase Agreement”), Colonial Downs, L.P., a Virginia limited partnership (“Maker”),
is acquiring from Noteholders as of the date hereof all of the issued and
outstanding stock of Maryland-Virginia Racing Circuit, Inc., a Virginia
corporation (“Company”) (capitalized terms not defined herein are used as
defined in the Stock Purchase Agreement);


 


WHEREAS, in connection with such acquisition,
Maker is issuing a Promissory Note, dated as of the date hereof (the “Note”),
in the original principal amount of Three Million and no/100 Dollars
($3,000,000) payable in full on or before September     ,
2006;


 


WHEREAS, it is a condition to closing under
the Stock Purchase Agreement that the Guarantor execute and deliver this
Guaranty in favor of Noteholders in order to secure the prompt and complete
payment, including without limitation any interest, fees and other charges with
respect to the Note;  and


 


WHEREAS, Guarantor is indirect holder of all
of the ownership interests in Maker, and Guarantor has determined that its
execution, delivery and performance of this Guaranty directly or indirectly
benefits, and is within the corporate or other purposes, and is in the best
interest of, Guarantor;


 


NOW, THEREFORE, in consideration of the
recitals made above, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantor agrees as follows:


 


1.                                       Guarantor
unconditionally and absolutely guarantees to Noteholders, its successors, and
assigns the prompt and punctual payment by Maker of all amounts due under the
Note, including without limitation, reasonable attorneys’ fees, expenses and
court costs, which may be incurred in enforcing the payment of the Note and any
other sum owed pursuant to the Note or the obligations of the Maker thereunder.


 


2.                                       The obligations
of Guarantor shall be direct and immediate and not contingent.  Guarantor agrees that the obligations of
Guarantor hereunder are independent of the obligations of Maker, and a separate
action or actions may be brought and prosecuted against Guarantor


 





















 


regardless of whether action is brought against Maker or whether Maker
is joined in such action or actions and regardless of whether any action is
taken to realize upon the Note or otherwise satisfactory of any other
obligations guaranteed hereby.


 


3.                                       Noteholders may
also, without notice to Guarantor and without affecting Guarantor’s liability
under this Guaranty or Noteholders’ remedies hereunder (a) enter into
renewals, modifications, extensions and/or amendments to the Note as
Noteholders may desire, (b) release any security given at any time for the
payment of the Note or satisfaction of other obligations guaranteed hereby, (c) release
any one or more of the parties liable or who may become liable on the Note or
similar guarantees, (d) grant any indulgence or forbearance whatsoever
regarding the Note, and (e) fail to act with diligence and delay in the
collection or enforcement hereof or of the Note.  Specifically, Guarantor represents and
warrants that this Guaranty is being given independent of any other guaranty
that may now or hereafter be given with respect to the Note and that Guarantor
has not relied on the existence of any other guaranty nor the continued
liability of any guarantor in executing and delivering this instrument.


 


4.                                       Neither
Guarantor’s obligations to make payment in accordance with the terms of this
Guaranty nor any remedy for the enforcement hereof shall be impaired, changed
or released in any manner whatsoever by any release, impairment or limitation
of the liability of Maker or its estate in bankruptcy or other creditor’s
proceeding under any statute or from the decision of any court.


 


5.                                       Guarantor waives
any right to require Noteholders to (a) proceed against Maker, (b) proceed
against or exhaust any security held from Maker, or (c) pursue any other
remedy in Noteholders’ power whatsoever. 
In confirmation of the foregoing, Guarantor specifically waives any and
all rights under or pursuant to Sections 49-25 and 49-26 of the Code of
Virginia.  Guarantor waives any defense
arising by reason of any disability or other defense whatsoever of the
liability of Maker.


 


6.                                       Until all
obligations to Noteholders under the Note shall have been paid in full,
Guarantor shall (a) have no right of subrogation, (b) waive any right
to enforce any remedies which Guarantor now has or may hereafter have against
Maker, and (c) waive any benefit of, and any right to participate in, any
security now or hereafter held by Noteholders. 
Guarantor waives notice of acceptance of this Guaranty, all
presentments, demands for performance, notices of nonperformance, protest,
notices of protest, and notices of dishonor; provided, however, Noteholders shall
notify Guarantor of any default under the Note by Maker, such notification
being deemed to occur upon Noteholders’ provision of notice to Maker in
accordance with the terms of the Stock Purchase Agreement.


 


7.                                       At Noteholders’
option and with or without demand or notice, all or any part of Guarantor’s
obligations hereunder shall become due and payable immediately upon the
occurrence of any default by Maker under the Note and the failure of such
default to be remedied prior to the lapse of any applicable cure period
thereunder.


 


2





















 


8.                                       The obligations
of Guarantor hereunder shall be binding upon its successors and assigns and
shall inure to the benefit of Noteholders’ successors and assigns.


 


9.                                       Guarantor
acknowledges and agrees that this Guaranty and Guarantor’s obligations
hereunder shall apply to and continue with respect to any amount paid to
Noteholders under the Note and hereunder which is subsequently recovered from
Noteholders for any reason whatsoever (including, without limitation, as a
result of any bankruptcy, insolvency or fraudulent conveyance proceeding),
notwithstanding the fact that the Note may have expired or been terminated or
this Guaranty returned or both.


 


10.                                 Guarantor absolutely,
unconditionally, and irrevocably waives any and all right to assert any
defense, setoff, counterclaim, or cross-claim of any nature whatsoever (other
than absence of an event of default or payment in full in cash) with respect to
this Guaranty or the obligations of Guarantor under this Guaranty or the
obligations of any other person or party (including, without limitation, Maker)
relating to this Guaranty in any action or proceeding brought by Noteholders to
collect amounts due under the Note or any portion thereof, or to enforce the
obligations of Guarantor under this Guaranty.


 


11.                                 All notices required,
contemplated or made hereunder shall be in writing, and shall be deemed to have
been properly given on the second business day after deposit in the United States
mail, postage prepaid, certified or registered, return receipt requested,
addressed as follows:


 


	
  If to Noteholders:

  	
  The Maryland Jockey Club

  
	
   

  	
  Route 198 and Racetrack Road

  
	
   

  	
  P.O. Box 130

  
	
   

  	
  Laurel, MD 20725

  
	
   

  	
  Facsimile: 410-792-4877

  
	
   

  	
  Telephone: 301-725-0400

  
	
   

  	
   

  
	
  with copies to:

  	
  Attention: General Counsel

  
	
   

  	
  Magna Entertainment Corp.

  
	
   

  	
  337 Magna Drive

  
	
   

  	
  Aurora, Ontario

  
	
   

  	
  CANADA L4G 7K1

  
	
   

  	
  Facsimile: 905-726-7295

  
	
   

  	
   

  
	
   

  	
  H. Lane Kneedler, Esq.

  
	
   

  	
  Reed Smith LLP

  
	
   

  	
  Riverfront Plaza - West Tower

  
	
   

  	
  901 East Byrd Street, Suite 1700

  
	
   

  	
  Richmond VA 23219-4068

  
	
   

  	
  Facsimile: 804-344-3410

  



 


3





















 


	
  If to Guarantor:

  	
  Jacobs Entertainment, Inc.

  
	
   

  	
  c/o The Lodge Casino

  
	
   

  	
  240 Main Street

  
	
   

  	
  P. O. Box 21

  
	
   

  	
  Black Hawk, CO 80422-0021

  
	
   

  	
   

  
	
  With a copy to:

  	
  James L. Weinberg, Esq.

  
	
   

  	
  Hirschler Fleischer

  
	
   

  	
  701 E. Byrd St., 15th Floor
  (23219)

  
	
   

  	
  P. O. Box 500

  
	
   

  	
  Richmond, VA 23218-0500

  
	
   

  	
  Facsimile: 804-644-0957

  



 


or to such other address as may be specified by any party pursuant to
written notification thereof, given by such party as required above at least
ten days prior to the effective date of the change.


 


12.                                 If any provision of
this Guaranty shall be held to be invalid or unenforceable either generally or
as to any particular set of circumstances, all other provisions hereof shall
nevertheless remain valid and enforceable in accordance with their terms.


 


13.                                 This Guaranty shall be
governed by and construed in accordance with the laws of the Commonwealth of
Virginia.


 


14.                                 Guarantor represents
and warrants that:  (a) the
execution and delivery and the observance and performance of this Guaranty by
the Guarantor does not and will not conflict with or result in a breach of, or
cause, a default under the terms or provisions of, any existing rule, regulation
or order of any court or governmental body or of any indenture, agreement or
instrument to which Guarantor is a pertinent party or by which Guarantor is
bound or to which Guarantor is subject; (b) this Guaranty has been duly
executed and delivered by Guarantor and constitutes a valid and binding
Guaranty enforceable in accordance with its terms; (c) Guarantor’s assets
are sufficient to satisfy Guarantor’s obligations under this Guaranty; (d) Guarantor
shall not engage in any sale, transfer, or assignment of its assets that is
intended to adversely affect Guarantor’s ability to meet its obligations
hereunder; (e) Guarantor shall continue to maintain shareholder equity of
not less than the outstanding balance of the Note; and (f) Guarantor is a
corporation duly organized and in good standing under the laws of Delaware, and
has duly authorized the execution and delivery of this Guaranty, either by
corporate resolution or by a grant of authority to the undersigned corporate
officer.


 


15.                                 This Guaranty is intended
by Noteholders and Guarantor as a final expression of their agreement and is
intended as a complete and exclusive statement of the terms of that
agreement.  No course of dealing, course
of performance or customs and practices, and no parol evidence of any nature,
shall be used to supplement or modify any terms of this Guaranty.


 


16.                                 Guarantor agrees that
any suit, action or proceeding arising out of or relating to this Guaranty may
be instituted in the Circuit Court of the City of Richmond, Virginia or the


 


4





















 


U. S. District Court for the Eastern District of Virginia (either
the Richmond or Norfolk Divisions), and the Guarantor hereby waives any
objection which Guarantor may have to such venue and irrevocably submits to the
jurisdiction of such court in any such suit, action or proceeding.  Guarantor hereby consents to suit and service
of process on the Commonwealth of Virginia, and hereby appoints the Secretary
of the Commonwealth as its agent for receipt of service of process.


 


WITNESS the following signature and seal:


 


	
  GUARANTOR:

  	
  JACOBS ENTERTAINMENT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Jeffrey P. Jacobs, Chief Executive Officer

  



 


5





















 


Exhibit C


 


RELEASE


 


THIS RELEASE is made as of September    ,
2005 by and among (1) PIMLICO RACING
ASSOCIATION, INC., a Maryland corporation, LAUREL RACING ASSOCIATION LIMITED
PARTNERSHIP, a Maryland limited partnership, and THE MARYLAND JOCKEY CLUB OF
BALTIMORE CITY, INC., a Maryland corporation (each, individually, a “Released
Party” and, collectively, the “Released Parties”), (2) MARYLAND-VIRGINIA
RACING CIRCUIT, INC. (the “Circuit”), a Virginia corporation that is a
subsidiary of the Released Parties, and (3) COLONIAL DOWNS,
L.P., a Virginia limited partnership, STANSLEY RACING CORP., a Virginia
corporation that is the sole general partner of Colonial Downs, L.P., COLONIAL
HOLDINGS, INC. (formerly Colonial Downs Holdings, Inc.), a Virginia
corporation that is the limited partner of Colonial Downs, L.P. and the
successor in interest to STANSLEY MANAGEMENT CORP., a Virginia corporation that
was the former sole general partner of Colonial Downs, L.P. (collectively, “Colonial
Downs”).


 


WITNESSETH:


 


WHEREAS, the Released Parties and
Colonial Downs, L.P. are party to a Stock Purchase
Agreement, dated as of even date herewith (the “Stock Purchase Agreement”),
pursuant to which Colonial Downs, L.P. shall acquire all of
the outstanding stock of the Circuit;


 


WHEREAS, the Circuit and Colonial Downs are party
to an Amended and Restated Management and Consulting Agreement, dated as of January 15,
1999, as amended by four addenda thereto (as so amended, the “Management and
Consulting Agreement”);


 


WHEREAS, pursuant to the Management and
Consulting Agreement, the Circuit agrees to cause the Released Parties to
undertake certain actions and the Released Parties are subject to
certain other obligations and potential liabilities; and


 


WHEREAS, Colonial Downs and the
Circuit, in connection with the closing under the Stock
Purchase Agreement, have agreed to release the Released
Parties from all obligations and liabilities under the Management and
Consulting Agreement.


 


NOW, THEREFORE, for and in consideration of
the foregoing Recitals which are incorporated herein and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:


 


1.                                       Release.  Colonial Downs and the
Circuit hereby release and forever discharge
all of the Released Parties’ obligations and liabilities under the Management
and Consulting Agreement.  This Release
shall have no effect upon the Released Parties’ obligations and liabilities
under the Stock Purchase Agreement, including, but not limited to, the matters
set forth in Article VI thereof.


 


2.                                       Miscellaneous.  This Release shall be binding upon and inure
to the benefit of each party hereto, its legal representatives and assigns and
may not be assigned without the


 





















 


consent of each party hereto. 
Except as otherwise specified in the Stock Purchase Agreement, this
Release constitutes the entire release between the parties hereto with respect
to the subject matter hereof and supersedes all prior oral and written
discussions and understandings.  Any
modification or amendment to this Release or waiver by either party of any
rights or remedies available to it shall not be effective unless, and only to
the extent that, such modification, amendment or waiver is set forth in a
writing delivered to the other party at the address specified above each party’s
signature hereto.  This Release shall be
construed and enforced in accordance with and governed by the law of the
Commonwealth of Virginia, exclusive of its rules regarding choice of law.
In all court proceedings brought in connection with this Release, the parties
hereto irrevocably consent to non-exclusive personal jurisdiction by, and venue
in, the Circuit Court of the City of Richmond, Virginia and the United States
District Court for the Eastern District of Virginia, Richmond Division.  Any headings preceding the text of the
several Sections and subparagraphs hereof are inserted solely for convenience
of reference and shall not constitute a part of this Release, nor shall they
affect its meaning, construction or effect. 
All provisions in this Release are severable and each valid and
enforceable provision shall remain in effect and shall be binding upon the
undersigned, notwithstanding that other provisions may be held by legislative
or judicial process to be invalid or unenforceable.  All notices hereunder shall be in writing and
shall be given as specified in the Stock Purchase Agreement.  This Release 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 release.


 


	
  PIMLICO RACING ASSOCIATION, INC.

  	
  COLONIAL DOWNS, L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Stansley
  Racing Corp., its

  
	
  By:

  	
   

  	
   

  	
   

  	
  general
  partner

  
	
   

  	
  Joseph A. De Francis, President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  Jeffrey P. Jacobs, Chairman

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  LAUREL RACING ASSOCIATION

  LIMITED PARTNERSHIP

  	
  STANSLEY
  RACING CORP.

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  The Maryland Jockey Club of

  	
  By:

  	
   

  	
   

  
	
   

  	
  Baltimore City, Inc., its

  	
   

  	
  Jeffrey P.
  Jacobs

  
	
   

  	
  general partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  	
  COLONIAL HOLDINGS, INC.

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Jeffrey P.
  Jacobs, Chairman

  
								



 


2





















 


	
  MARYLAND-VIRGINIA
  RACING

  	
   

  	
  THE MARYLAND
  JOCKEY CLUB OF

  
	
  CIRCUIT,
  INC.

  	
   

  	
  BALTIMORE
  CITY, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Name:

  



 


3