Document:

Exhibit 10.3

 

INVESTMENT MANAGEMENT
AGREEMENT

 

KVO Capital Management, LLC, a Delaware limited liability company
(the “Adviser”), having an address at 44 South Main Street, Box 17,
Hanover, NH 03755, United States of America and MONTPELIER REINSURANCE LTD., a
Bermuda corporation (the “Client”), having an address at 94 Pitts Bay
Road, Pembroke HM 08, Bermuda, hereby enter into this Investment Management
Agreement, dated as of April 1, 2008 (this “Agreement”), and hereby
agree that the Adviser shall act as discretionary adviser with respect to
certain assets of the Client  (the “Investment
Account”) on the following terms and conditions:

 

1.     Investment Account  The Investment Account shall consist of cash
and securities in an aggregate amount equal to at least $100,000,000 (the “Minimum
Account Amount”), or such greater amount as may be agreed to by the
Adviser, initially furnished by the Client for investment pursuant to this
Agreement, as well as all other assets which become part of the Investment
Account as a result of trading therein or additions thereto, except for amounts
withdrawn there from and paid to the Client. 
The Minimum Account Amount shall include Net Profits (defined in
Schedule B) earned in the Investment Account during the Initial Term.  The Client may make additions to the
Investment Account in amounts exceeding $1,000,000, or in such other amount as
may be agreed to by the Adviser and the Client. 
The Client may make withdrawals from the Investment Account only in cash
and in such amounts as it shall determine upon not less than fifteen (15) days
prior written notice thereof to the Adviser and provided that (i) the
withdrawal shall not cause the assets in the Investment Account to fall below
the Minimum Account Amount prior to the end of the Initial Term (as defined in Section 16
below), unless otherwise agreed to by Adviser; and (ii) the Client may not
withdraw any Designated Investments (as defined in Section 8(c) below).   For the avoidance of doubt, the Client is
not required to make additions to the Investment Account if it falls below the
Minimum Account Amount due to net investment losses prior to the expiration of
the Initial Term, and the Client will not be required to maintain any minimum
amount in the Investment Account after the Initial Term.

 

2.     Services of Adviser  By execution of this Agreement the Adviser
accepts appointment as adviser for the Investment Account with full discretion
and agrees to supervise and direct the investments of the Investment Account in
accordance with the investment objectives, policies and restrictions described
in the investment guidelines attached hereto as Schedule A (the “Investment
Guidelines”).  Schedule A may be
amended upon agreement of both parties in writing.  The Adviser agrees that Kernan V. Oberting
shall be primarily responsible for directing the investments of the Investment
Account in accordance with the Investment Guidelines.  In the performance of its services, the
Adviser will not be liable for any error in judgment or any acts or omissions
to act except those resulting from (i) a breach of the representations set
forth in Sections 6(b) and/or (ii) the Adviser’s gross negligence,
willful misconduct or malfeasance. 
Nothing herein shall in any way constitute a waiver or limitation of any
right of any person under the federal securities laws.

 

3.     Discretionary Authority  Subject to the Investment Guidelines, the
Adviser shall have full discretion and authority, without obtaining any prior
approval, as the Client’s agent and attorney-in-fact: (a) to make all
investment decisions in respect of the Investment Account on the Client’s
behalf and at the sole risk of the Client; (b) to buy, sell, exchange,
convert, liquidate or otherwise trade in any stock, bond and other securities
or financial instruments in respect of the Investment Account; (c) to
place orders with respect to, and to arrange for, any of the foregoing; and (d) in
furtherance of the foregoing, to do anything which the Adviser shall deem
requisite, appropriate or advisable in connection therewith, including, without
limitation, the selection of such brokers, dealers, and others as the Adviser
shall determine in its absolute discretion. 
The Adviser shall have responsibility to vote all proxies on securities
held from time to time in the Investment Account.

 

4.     Custody  The assets of the Investment Account shall be
held in one or more separately identified accounts in the custody of one or
more banks, trust companies, brokerage firms or other entities designated by
the Client and acceptable to the Adviser. 
The Adviser will communicate its investment purchase, sale and delivery
instructions directly with the custodians identified by the Client or 

 

 

other qualified
depositories.  The Client shall be
responsible for all custodial arrangements and the payment of all custodial
charges and fees, and the Adviser shall have no responsibility or liability
with respect to custody arrangements or the acts, omissions or other conduct of
the custodians, except that the Adviser will be responsible for any losses or
expenses incurred by the Investment Account or the Client to the extent caused
by (i) a breach of the representations set forth in Sections 6(b) below,
and/or (ii) the Adviser’s gross negligence, willful misconduct or
malfeasance.

 

5.     Brokerage  When placing orders for the execution of
transactions for the Investment Account, the Adviser may allocate transactions
to such brokers or dealers, for execution in any markets, at such prices and
commission rates, as are selected by the Adviser in its sole discretion. The
Adviser acknowledges that it has a fiduciary duty to the Client to seek best
execution of any transaction effected or executed for the Investment
Account.  Subject to the obligation to
achieve best execution, the Adviser is not obligated to negotiate “execution
only” commission rates, and, in negotiating commission rates, the Adviser may
take into account the financial stability and reputation of brokerage firms and
brokerage and research services provided by such brokers.  The Adviser
will limit the use of “soft dollars” to obtain services that constitute
eligible research and brokerage services within the meaning of Section 28(e) of
the Securities Exchange Act of 1934, as amended.  The Investment Account may be deemed to be
paying for research or brokerage services provided or paid for by the broker
which is included in the commission rate although the Investment Account may
not, in any particular instance, be the direct or indirect beneficiary of the
research or brokerage services provided. 
Research furnished by brokers may include, but is not limited to,
written information and analyses concerning specific securities, companies or
sectors; market, finance and economic studies and forecasts; financial
publications; statistics and pricing services; discussions with research
personnel; and software and data bases utilized in the investment management
process.  Brokerage services furnished by
brokers may include, but is not limited to, services related to the execution,
clearing and settlement of securities transactions and functions incidental
thereto; trading software to route orders; software that provides trade
analytics and trading strategies; software used to transmit orders; clearance
and settlement in connection with a trade; electronic communication of
allocation instructions; routing settlement instructions; and post trade
matching of trade information.  The
Client acknowledges that since commission rates are generally negotiable, selecting
brokers on the basis of considerations which are not limited to applicable
commission rates may at times result in higher transaction costs than would
otherwise be obtainable.  The Adviser is
hereby authorized to, and the Client acknowledges that the Adviser may,
aggregate orders on behalf of the Investment Account with orders on behalf of
other clients of the Adviser, itself and its affiliates.  In such event, allocation of the securities
purchased or sold, as well as expenses incurred in the transaction, shall be
made in a manner which the Adviser considers to be the most fair and equitable
to all of its clients, including the Client.

 

6.                    Representations, Warranties and
Agreements

(a)          The Client represents, warrants and agrees that:

 

(i)                                     it has full legal power and authority to
enter into this Agreement; and

 

(ii)                                  the appointment of the Adviser hereunder is
permitted by the Client’s governing documents and has been duly authorized by
all necessary corporate or other action;

 

(b)         The Adviser represents, warrants and agrees that:

 

(i)                                     it has full legal power and authority to
enter into this Agreement;

 

(ii)                                  entering into this Agreement has been
duly authorized by all necessary action;

 

(iii)                               at such time as funds are first contributed to the
Investment Account and for 

 

2

 

the duration of
the Agreement thereafter (the “Management Period”), it will hold and maintain
all licenses, registrations, franchises, approvals, authorizations or permits
necessary or required to transact its business in the places and in the manner
in which such business (including performance of its duties and obligations
hereunder) is conducted (collectively, “Licenses”).  The Adviser will at all times during the
Management Period be duly registered with the Securities and Exchange
Commission pursuant to the Investment Advisers Act of 1940 as amended, or
exempt from registration as an investment adviser thereunder;

 

(iv)                              to the best of its knowledge is, and will
in good faith continue to conduct its activities during the term of this
Agreement, in compliance with all applicable federal, state, local or foreign
laws, rules and regulations; and

 

(v)                                 if at any time during the term of this
Agreement the Adviser becomes aware that: (1) any of the foregoing
representations and warranties have ceased to be true and correct in all
respects, or (2) that any of the events described in Section 16(b) below
with respect to the Adviser have occurred, the Adviser shall immediately
provide written notice to the Client.

 

7.     Reports  The Adviser shall provide the Client reports
containing the status of the Investment Account at least monthly, and will
provide written advisory report letters on a quarterly basis.  All records maintained pursuant to this Agreement
shall be subject to examination by the Client and by persons authorized by it,
or by appropriate governmental authorities, at all times upon reasonable
notice.  The Adviser shall provide copies
of trade tickets, custodial reports, proxy votes and other records the Client
reasonably requires for regulatory, accounting or tax purposes.

 

8.                    Investment Management Fees and Expenses.

(a)   The Adviser will be paid a
monthly management fee (the “Management Fee”) for its investment
advisory services provided hereunder, determined in accordance with Schedule B
to this Agreement.  The Management Fee
shall be payable in arrears within ten (10) days after the last day of
each  month based upon the net asset
value of the Investment Account as of the last day of the immediately preceding
month.  The Management Fee shall be
pro-rated for any partial month.  In the
event that the Management Fee is to be paid by the custodian out of the
Investment Account, the Client shall provide written authorization to the
custodian to pay the Management Fee directly from the Investment Account.

 

(b)   The Adviser will be paid an
annual incentive fee (the “Incentive Fee”) for its investment advisory
services provided hereunder, determined in accordance with Schedule B to this
Agreement.  The Incentive Fee shall be
payable within ten (10) days after the last day of each calendar year and,
with respect to any withdrawals from the Investment Account on a date other
than December 31, the Incentive Fee shall be payable within ten (10) days
of the withdrawal; provided, however, that the first Incentive Fee shall be
payable within ten (10) days of December 31, 2009 for the performance
period beginning as of the date hereof and ending December 31, 2009.  Notwithstanding the foregoing, no Incentive
Fee shall be payable for any calendar year unless there have been sufficient
Net Profits (as defined in Schedule B) to recoup the Loss Carryforward (as
defined in Schedule B).  In the event
that the Incentive Fee is to be paid by the custodian out of the Investment
Account, the Client shall provide written authorization to the custodian to pay
the Incentive Fee directly from the Investment Account.

 

(c)   The Adviser, in its
reasonable discretion, shall deem a restricted or illiquid security or other
financial instrument purchased by the Investment Account that is difficult to
value accurately as a “Designated Investment”. 
In the event this Agreement is terminated and the Investment Account
holds any Designated Investments, (i) the Agreement will remain in force
with respect to the Designated Investments; provided that, (y) when a
Designated Investment is sold or liquidated, or when the Adviser, in its
reasonable discretion, determines that a Designated Investment should no longer
be 

 

3

considered a
Designated Investment (a “Deemed Liquidation”), then this Agreement
shall terminate immediately with respect to such Designated Investment, and (z) in
the event the Agreement is terminated pursuant to Section 16(b), the
Client may opt to take control of all Designated Investments, in which case the
Agreement will terminate in its entirety; (ii) the Management Fee shall be
paid directly by the Client and not from the Investment Account; and (iii) in
lieu of the Incentive Fee in Section 8(b) above, a performance fee in
an amount equal to 15% of the Net Profits (including realized and unrealized
gains as applicable) attributable to each Designated Investment shall be
payable within ten (10) days after the sale, liquidation, or Deemed
Liquidation of each Designated Investment, subject to the Loss
Carryforward.  In the event that the
performance fee is to be paid by the custodian out of the Investment Account,
the Client shall provide written authorization to the custodian to pay the
performance fee directly from the Investment Account.

 

(d)   The Investment Account shall
be responsible for all expenses incurred directly in connection with
transactions effected on behalf of the Investment Account pursuant to this
Agreement and shall include:  the
Management Fee and the Incentive Fee; custodial fees; borrowing expenses;
investment expenses such as commissions; and other expenses reasonably related
to the purchase, sale or transmittal of Investment Account assets.

 

9.     Confidential Relationship  All information and advice furnished by
either party to the other party pursuant to this Agreement shall be treated by
the receiving party as confidential and shall not be disclosed to third parties
except with the consent of the other party or as required by law.  The Client consents to the disclosure by the
Adviser that Client is a client of the Adviser and to the inclusion of Client
on a list of representative clients of the Adviser or in other marketing
materials.  The Client acknowledges that
the Adviser shall own and be permitted to use the investment track record with
respect to the Investment Account, and shall be permitted to retain copies of
all documentation necessary to support the investment track record.

 

10.   Non-Assignability   Neither party may assign this Agreement
without the prior written consent of the other party; provided, however, that
an assignment by the Client to an affiliate or due to the reconstruction,
amalgamation, or merger by the Client shall not require the prior written
consent of the Adviser.

 

11.   Directions to the Adviser  All directions by or on behalf of the Client
to the Adviser shall be in writing signed by or on behalf of the Client.  The Adviser shall be fully protected in
relying upon any such writing which the Adviser believes to be genuine and
signed or presented by the proper person or persons, shall be under no duty to
make any investigation or inquiry as to any statement contained therein and may
accept the same as conclusive evidence of the truth and accuracy of the
statements therein contained.

12.   Services to Other Clients  It is understood that the Adviser acts as
investment adviser to other clients and may give advice and take action with
respect to such clients that differs from the advice given or the action taken
with respect to the Investment Account, provided that (i) such advice or
action for such other clients does not materially interfere with Adviser’s
performance of its obligations to Client pursuant to this Agreement and (ii) the
allocation of investment opportunities shall be made on a fair and equitable
basis by the Adviser taking into account all factors, including, but not
limited to, the investment guidelines, tax profile and risk tolerance of all of
its clients, including the Client. 
Notwithstanding the foregoing, nothing in this Agreement shall restrict
the right of the Adviser, its members, managers, officers, employees or
affiliates to perform investment management or advisory services for any other
person or entity, and the performance of such service for others shall not be
deemed to violate or give rise to any duty or obligation to the Client.

 

13.   Investment by the Adviser for Its Own
Account  Nothing in this Agreement
shall limit or restrict the Adviser or any of its members, managers, officers,
employees or affiliates from buying, selling or trading any securities for its
or their own account or accounts.  The
Client acknowledges that the Adviser and its members, managers, officers,
employees, affiliates and other clients may at any time have, acquire,
increase, decrease or dispose of securities which are at or about the same time
acquired 

 

4

 

or disposed of for
the Investment Account.  The Adviser
shall have no obligation to purchase or sell for the Investment Account or to
recommend for purchase or sale by the Investment Account any security that the
Adviser or its members, managers, officers, employees or affiliates may
purchase or sell for itself or themselves or for any other client.

 

14.   Notices  All notices and instructions with respect to
securities transactions or any other matters contemplated by this Agreement
shall be deemed duly given when delivered in writing personally or by reputable
overnight courier service to the following addresses: (a) if to the Adviser,
at its address set forth above, Attention: Kernan V. Oberting, or (b) if
to the Client, at its address set forth above, Attention: Treasurer.  The Adviser or the Client may change its
address or specify a different manner of addressing itself by giving notice of
such change in writing to the other party.

 

15.   Entire Agreement; Amendment  This Agreement sets forth the entire
agreement of the parties with respect to management of the Investment Account
and shall not be amended except by an instrument in writing signed by the
parties hereto.

 

16.   Term; Termination  Subject to Section 8(c) above,

 

(a)           Subject
to Section 16(b) below, this Agreement shall continue in force for
the period beginning on the later of May 1, 2008 or the effective date on
which the Adviser receives its Licenses and ending on December 31, 2010
(such period, the “Initial Term”), and subject to automatic renewal for
additional successive one-year periods. 
Either party may, upon at least ninety (90) days prior written notice,
terminate this Agreement as of December 31, 2010  and annually thereafter, provided that the
Client shall honor any trades executed but not settled before the date of any
such termination.

 

(b) Either party may terminate this Agreement
immediately in the event (i) of a winding-up of, or the appointment of an
administrator, examiner or receiver to either party or upon the happening of a
like event at the direction of an appropriate regulatory agency or court of
competent jurisdiction (except a voluntary liquidation for the purposes of a
reconstruction, amalgamation or merger); (ii) that the Adviser ceases to
be permitted to act as an investment adviser under any law, rule or
regulation or the Adviser breaches any of the representations set forth in
Sections 6(b)(iii) or (iv); (iii) of a conviction of, or plea of
guilty or no contest to, a felony under federal, state or foreign securities
laws by Kernan V. Oberting; (iv) of a formal investigation of or a formal
proceeding involving the Adviser or Kernan V. Oberting initiated by a state,
federal or foreign governmental agency in connection with the provision of
investment advisory services; or (v) either party is in material breach of
the Agreement, and has not cured such breach within thirty (30) days of
receiving notice of such breach by the other party.

 

(c) The Management Fee for the month during which
any termination of this Agreement shall occur shall be paid as of the date of
termination and prorated if the termination date does not coincide with the end
of a month.

 

17.   Governing Law  To the extent that the interpretation or
effect of this Agreement shall depend on state law, this Agreement shall be
governed by and construed in accordance with the laws of New York.

 

18.   Effective Date  This Agreement shall become effective on the
date first written above.

 

5

 

19.   Binding Agreement  This Agreement shall be binding upon, and
inure to the benefit of, both parties and their respective successor and
assigns, including any corporation with which, or into which, the Client may be
merged or which may succeed to its assets or business.  For the avoidance of doubt, this Agreement
shall continue in effect with its terms notwithstanding the dissolution or
merger of the Client.

 

20.   Counterparts  This Agreement may be executed in two
counterparts, each one of which shall be deemed to be an original.

6

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective duly authorized
representatives as of the date first written above.

 

	
  ADVISER:

  	
   

  	
  CLIENT:

  
	
   

  	
   

  	
   

  
	
  KVO CAPITAL MANAGEMENT, LLC

  	
   

  	
  MONTPELIER REINSURANCE LTD.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   /s/
  Kernan V. Oberting

  	
   

  	
  By:

  	
   /s/
  Anthony Taylor

  
	
  Name:

  	
  Kernan V. Oberting 

  	
   

  	
  Name:

  	
  Anthony Taylor

  
	
  Title:

  	
  Managing Member

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
							

 

7Exhibit 4.1

 

AMENDED AND RESTATED CANTERBURY
PARK HOLDING CORPORATION

1995 EMPLOYEE STOCK PURCHASE PLAN

As Amended through June 1,
2006

 

CANTERBURY PARK HOLDING CORPORATION

EMPLOYEE
STOCK PURCHASE PLAN

 

Establishment
of Plan.  Canterbury Park Holding Corporation
(hereinafter referred to as the “Company”) proposes to grant to certain
employees of the Company the opportunity to purchase common stock of the
Company.  Such common stock shall be
purchased pursuant to the plan herein set forth which shall be known as the “Canterbury
Park Holding Corporation Employee Stock Purchase Plan” (hereinafter referred to
as the “Plan”).  The Company intends that
the Plan shall qualify as an “Employee Stock Purchase Plan” under Section 423
of the Internal Revenue Code of 1954, as amended, and shall be construed in a
manner consistent with the requirements of said Section 423 and the
regulations thereunder.

 

Purpose. 
The Plan is intended to encourage stock ownership by all employees of
the Company and to provide them with further incentive to continue their
employment, improve operations, increase profits, and contribute more
significantly to the Company’s success.

 

Administration. 
The Plan shall be administered by a committee (hereinafter referred to
as the “Committee”) consisting of not less than three directors or employees of
the Company (which shall be the Compensation Committee if any is established by
the Board of Directors), as designated by the Board of Directors of the Company
(hereinafter referred to as the “Board of Directors”).  The Board of Directors shall fill all
vacancies in the Committee and may remove any member of the Committee at any
time, with or without cause.  The
Committee shall select its own chairman and hold its meetings at such times and
places as it may determine.  All
determinations of the Committee shall be made by a majority of its
members.  Any decision which is made in
writing and signed by a majority of the members of the Committee shall be
effective as fully as though made by a majority vote at a meeting duly called
and held.  The determinations of the
Committee shall be made in accordance with its judgment as to the best
interests of the Company, its employees and its shareholders and in accordance
with the purposes of the Plan; provided, however, that the
provisions of the Plan shall at all times be construed in a manner consistent
with the requirements of Section 423 of the Internal Revenue Code, as
amended.  Such determinations shall be
binding upon the Company and the participants in the Plan unless otherwise
determined by the Board of Directors. 
The Company shall pay all expenses of administering the Plan.  No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it.

 

Duration
and Phases of the Plan.  ii. The Plan will commence on April 15,
1995 and will terminate when all shares authorized for issuance under Paragraph
10 of this Plan, as it may be amended from time to time, are issued or at such
earlier date as shall be determined by the Company’s Board of Directors, except
that any phase commenced prior to such termination shall, if necessary, be
allowed to continue beyond such termination until completion.  Notwithstanding the foregoing, this Plan
shall be considered of no force or effect and any options granted shall be
considered null and void unless the holders of a majority of all of the issued
and outstanding shares of the common stock of’ the Company approve the Plan within
twelve (12) months before or after the date of its adoption by the Board of
Directors; and, further, any amendment of this Plan to increase the number of
shares authorized for issuance under Paragraph 10 of this Plan shall be
considered of no force or effect and any options granted thereafter shall be
considered null and void unless the holders of a majority of all the issued and
outstanding shares of the common stock of the Company approve such amendment of
the Plan within 

 

 

twelve (12) months
after the date Paragraph 10 is amended by the Board of Directors to increase
the number of shares authorized for issuance.

 

The Plan shall be carried out in one or more phases,
each phase being for a period of one year or such other period of time as may
be determined by the Board or Committee. 
No phase shall run concurrently, but a phase may commence immediately
after the termination of the preceding phase. 
The existence and date of commencement of a phase (the “Commencement
Date”) shall be determined by the Committee, provided that the commencement of
the first phase shall be within twelve (12) months before or after the date of
approval of the Plan by the shareholders of the Company.  In the event all of the stock reserved for
grant of options hereunder is issued pursuant to the terms hereof prior to the
commencement of one or more phases scheduled by the Committee or the number of
shares remaining is so small, in the opinion of the Committee, as to render
administration of any succeeding phase impracticable, such phase or phases
shall be cancelled.  Phases shall be
numbered successively Phase 1, Phase 2, Phase 3, etc.

 

The Board of Directors may elect to accelerate the
termination date of any phase effective on the date specified by the Board of
Directors in the event of (i) any consolidation or merger of the Company
in which the Company is not the continuing or surviving corporation or pursuant
to which shares would be converted into cash, securities or other property,
other than a merger of the Company in which shareholders immediately prior to
the merger have the same proportionate ownership of stock in the surviving
corporation immediately after the merger; (ii) any sale, lease, exchange
or other transfer (in one transaction or a series of related transactions) of
all or substantially all of the assets of the Company; or (iii) any plan
of liquidation or dissolution of the Company.

 

Eligibility.  All
Employees, as defined in Paragraph 19 hereof, who are employed by the Company
at least one day prior to the Commencement Date of a phase shall be eligible to
participate in such phase.

 

Participation.  Participation
in the Plan is voluntary.  An eligible
Employee may elect to participate in any phase of the Plan, and thereby become
a “Participant” in the Plan, by completing the Plan payroll deduction form
provided by the Company and delivering it to the Company or its designated
representative prior to the Commencement Date of that phase.  Payroll deductions for a Participant shall
commence on the first payday after the Commencement Date of the phase and shall
terminate on the last payday immediately prior to or coinciding with the
termination date of that phase unless sooner terminated by the Participant as
provided in Paragraph 9 hereof.

 

Payroll Deductions.  iii. Upon
enrollment, a Participant shall elect to make contributions to the Plan by
payroll deductions (in full dollar amounts and in amounts calculated to be as
uniform as practicable throughout the period of the phase), in the aggregate
amount not in excess of 10% of such Participant’s Base Pay for the term of the
phase, as determined according to Paragraph 19 hereof.

 

The minimum authorized
payroll deduction must aggregate to not less than $10 per month.

 

In the event that the Participant’s compensation for
any pay period is terminated or reduced from the compensation rate for such a
period as of the Commencement Date of the phase for any reason so that the
amount actually withheld on behalf of the Participant as of the termination
date of the phase is less than the amount anticipated to be withheld over the
phase year as determined on the Commencement Date of the phase, then the extent
to which the Participant may exercise his option shall be based on the amount
actually withheld on his behalf.  In the
event of a change in the pay period of any Participant, such as from bi-weekly
to monthly, an appropriate adjustment shall be made to the deduction in each
new pay period so as to ensure the deduction of the proper amount authorized by
the Participant.

 

All payroll deductions made for Participants shall be
credited to their accounts under the Plan. 
The Participant may not make any separate cash payments into such
account.

 

 

Except for his right to discontinue participation in
the Plan as provided in Paragraph 9, no Participant shall be entitled to
increase or decrease the amount to be deducted in a given phase after the
Commencement Date.

 

Options.

 

Grant of Option.

 

A Participant who
is employed by the Company as of the Commencement Date of a phase shall, subject
to the limitations of Paragraph 10 hereof, be granted an option as of such date
to purchase that number of full shares of Company common stock to be determined
by dividing the total amount to be credited to that Participant’s account under
Paragraph 7 hereof by (1) the option price set forth in Paragraph 8(a)(ii)(A) hereof
with respect to phases ending on or prior to October 1, 2005, or (2) ninety-five
percent (95%) of the per share fair market value of such common stock on the
Termination Date of the phase with respect to phases beginning on or after October 1,
2005; provided that with respect to this clause (2) in no event
shall a Participant be permitted to purchase during a phase more than that
number of shares which is equal to 30% of the amount determined by dividing the
total amount credited to the Participant’s account under Paragraph 7 hereof by
95% of the fair market value per share of such common stock on the Commencement
Date of such phase and rounding down to the nearest whole number.

 

Unless otherwise
determined by the Board or Committee prior to the commencement of a Phase, the
option price for such shares of common stock shall be the lower of:

 

Eighty-five
percent (85%) of the fair market value of such shares of common stock on the
Commencement Date of the phase for phases ending on or prior to October 1,
2005 and ninety-five percent (95%) of the fair market of such common stock on
the termination date for phases beginning on or after October 1, 2005; or

 

Eighty-five
percent (85%) of the fair market value of such shares of common stock on the
termination date of the phase for phases ending prior to October 1, 2005
and ninety-five (95%) of the fair market value if such shares of common stock
on the termination date for phases beginning on or after October 1, 2005.

 

The fair market
value of shares of common stock of the Company shall be determined by the
Committee for each valuation date in a manner acceptable under Section 423,
Internal Revenue Code of 1954.

 

Anything herein to
the contrary notwithstanding, no Employee shall be granted an option hereunder:

 

Which permits his
rights to purchase stock under all employee stock purchase plans of the
Company, its subsidiaries or its parent, if any, to accrue at a rate which
exceeds Twenty-Five Thousand Dollars ($25,000) of the fair market value of such
stock (determined at the time such option is granted) for each calendar year in
which such option is outstanding at any time;

 

If immediately
after the grant such Employee would own and/or hold outstanding options to
purchase stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the 

 

 

Company, its parent, if
any, or of any subsidiary of the Company. 
For purposes of determining stock ownership under this Paragraph, the rules of
Section 425(d) of the Internal Revenue Code, as amended, shall apply;
or

 

Which can be
exercised after the expiration of 27 months from the date the option is
granted.

 

Exercise of Option.

 

Unless a
Participant gives written notice to the Company pursuant to Paragraph 8(b) (ii) or
Paragraph 9 prior to the termination date of a phase, his option for the
purchase of shares will be exercised automatically for him as of such
termination date for the purchase of the number of full shares of Company
common stock which the accumulated payroll deductions in his account at that
time will purchase at the applicable option price, subject to the limitations
set forth in Paragraph 10 hereof.

 

A Participant may,
by written notice to the Company at any time during the thirty (30) day period
immediately preceding the termination date of a phase, elect, effective as of
the termination date of that phase, to exercise his option for a specified
number of full shares less than the maximum number which may be purchased under
his option.

 

As promptly as
practicable after the termination date of any phase, the Company will deliver
to each Participant herein the common stock purchased upon the exercise of his
option, together with a cash payment equal to the balance, if any, of his
account which was not used for the purchase of common stock with interest
accrued thereon.

 

Withdrawal or Termination of Participation. 
iv. A Participant may, at any time prior to the termination date of a
phase, withdraw all payroll deductions then credited to his account by giving
written notice to the Company.  Promptly
upon receipt of such notice of withdrawal, all payroll deductions credited to
the Participant’s account will be paid to him with interest accrued thereon and
no further payroll deductions will be made during that phase.  In such event, the option granted the
Participant under that phase of the Plan shall lapse immediately.  Partial withdrawals of payroll deductions
hereunder may not be made.

 

In the event of the death of a Participant, the person
or persons specified in Paragraph 14 may give notice to the Company within
sixty (60) days of the death of the Participant electing to purchase the number
of full shares which the accumulated payroll deductions in the account of such
deceased Participant will purchase at the option price specified in Paragraph 8(a) (ii) and
have the balance in the account distributed in cash with interest accrued
thereon.  If no such notice is received
by the Company within said sixty (60) days, the accumulated payroll deductions
will be distributed in full in cash with interest accrued thereon.

 

Upon termination of Participant’s employment for any
reason other than death of the Participant, the payroll deductions credited to his
account, plus interest, shall be returned to him.

 

Stock Reserved for Options. 
v. Three Hundred Fifty Thousand (350,000) shares(1) of the Company’s
$.01 par value common stock are reserved for issuance upon the exercise of
options to be granted under the Plan. 
Shares subject to the unexercised portion of any lapsed or expired
option may again be subject to option under the Plan.

 

(1) Increased from 100,000 shares to 250,000
shares approved by shareholders June 2001. Increase from to 250,000 shares
to 350,000 shares approved by Board April 2006 and by the shareholders on June 1,
2006.

 

 

If the total number of shares of Company common stock
for which options are to be granted for a given phase as specified in Paragraph
8 exceeds the number of shares then remaining available under the Plan (after
deduction of all shares for which options have been exercised or are then
outstanding) and if the Committee does not elect to cancel such phase pursuant
to Paragraph 4, the Committee shall make a pro rata allocation of the shares
remaining available in as uniform and equitable a manner as it shall consider
practicable.  In such event, the options
to be granted and the payroll deductions to be made pursuant to the Plan which
would otherwise be effected may, in the discretion of the Committee, be reduced
accordingly.  The Committee shall give
written notice of such reduction to each Participant affected.

 

The Participant (or a joint tenant named pursuant to
Paragraph 10(d) hereof) shall have no rights as a shareholder with respect
to any shares subject to the Participant’s option until the date of the
issuance of a stock certificate evidencing such shares.  No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the date
such stock certificate is actually issued, except as otherwise provided in
Paragraph 12 hereof.

 

The shares of Company common stock to be delivered to
a Participant pursuant to the exercise of an option under the Plan will be
registered in the name of the Participant or, if the Participant so directs by
written notice to the Committee prior to the termination date of that phase of
the Plan, in the names of the Participant and one other person the Participant
may designate as his joint tenant with rights of survivorship, to the extent
permitted by law.

 

Accounting and Use of Funds. 
Payroll deductions for each Participant shall be credited to an account
established for him under the Plan.  A
Participant may not make any separate cash payments into such account.  Such account shall be solely for bookkeeping
purposes and no separate fund or trust shall be established hereunder and the
Company shall not be obligated to segregate such funds.  All funds from payroll deductions received or
held by the Company under the Plan may be used, without limitation, for any
corporate purpose by the Company.

 

Adjustment Provision.  vi. Subject
to any required action by the shareholders of the Company, the number of shares
which are authorized in Section 10 to be issued pursuant to this Plan and
the number of shares covered by each outstanding option and the price per share
thereof in each such option, shall be proportionately adjusted for any increase
or decrease in the number of issued shares of the Company common stock
resulting from a subdivision or consolidation of shares or the payment of a
share dividend (but only on the shares) or any other increase or decrease in
the number of such shares effected without receipt of consideration by the
Company.

 

In the event of a change in the shares of the Company
as presently constituted, which is limited to a change of all its authorized
shares with par value into the same number of shares with a different par value
or without par value, the shares resulting from any such change shall be deemed
to be the shares within the meaning of this Plan.

 

Non-Transferability of Options. 
vii. Options granted under any phase of the Plan shall not be
transferable except under the laws of descent and distribution and shall be
exercisable only by the Participant during his lifetime and after his death
only by his beneficiary of the representative of his estate as provided in
Paragraph 9(b) hereof.

 

Neither payroll deductions credited to a Participant’s
account, nor any rights with regard to the exercise of an option or to receive
common stock under any phase of the Plan may be assigned, transferred, pledged
or otherwise disposed of in any way by the Participant.  Any such attempted assignment, transfer,
pledge or other disposition shall be null and void and without effect, except
that the Company may, at its option, treat such act as an election to withdraw
funds in accordance with Paragraph 9.

 

 

Designation of Beneficiary. 
A Participant may file a written designation of a beneficiary who is to
receive any cash to the Participant’s credit plus interest thereon under any
phase of the Plan in the event of such Participant’s death prior to exercise of
his option pursuant to Paragraph 9(b) hereof, or to exercise his option
and become entitled to any stock and/or cash upon such exercise in the event of
the Participant’s death prior to exercise of the option pursuant to Paragraph 9(b) hereof.  The beneficiary designation may be changed by
the Participant at any time by written notice to the Company.

 

Upon the death of a
Participant and upon receipt by the Company of proof deemed adequate by it of
the identity and existence at the Participant’s death of a beneficiary validly
designated under the Plan, the Company shall in the event of the Participant’s
death under the circumstances described in Paragraph 9(b) hereof, allow
such beneficiary to exercise the Participant’s option pursuant to Paragraph 9(b) if
such beneficiary is living on the termination date of the phase and deliver to
such beneficiary the appropriate stock and/or cash after exercise of the
option.  In the event there is no validly
designated beneficiary under the Plan who is living at the time of the
Participant’s death under the circumstances described in Paragraph 9(b) or
in the event the option lapses, the Company shall deliver the cash credited to
the account of the Participant with interest to the executor or administrator
of the estate of the Participant, or if no such executor or administrator has
been appointed to the knowledge of the Company, it may, in its discretion,
deliver such cash to the spouse or to any one or more dependents or relatives
of the Participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.  The Company will not be responsible for or be
required to give effect to the disposition of any cash or stock or the exercise
of any option in accordance with any will or other testamentary disposition
made by such Participant or in accordance with the provision of any law
concerning intestacy, or otherwise.  No
designated beneficiary shall, prior to the death of a Participant by whom he has
been designated, acquire any interest in any stock or in any option or in the
cash credited to the Participant under any phase of the Plan.

 

Amendment and Termination. 
The Plan may be terminated at any time by the Board of Directors
provided that, except as permitted in Paragraph 4(c) with respect to an
acceleration of the termination date of any phase, no such termination will
take effect with respect to any options then outstanding.  Also, the Board may, from time to time, amend
the Plan as it may deem proper and in the best interests of the Company or as
may be necessary to comply with Section 423 of the Internal Revenue Code
of 1986, as amended, or other applicable laws or regulations; provided,
however, that no such amendment shall, without prior approval of the
shareholders of the Company (1) increase the total number of shares for
which options may be granted under the Plan (except as provided in Paragraph 12
herein), (2) permit aggregate payroll deductions in excess of ten percent
(10%) of a Participant’s compensation as of the Commencement Date of a phase,
or (3) impair any outstanding option.

 

Interest.  In any
situation where the Plan provides for the payment of interest on a Participant’s
payroll deductions, such interest shall be determined by averaging the
month-end balances in the Participant’s account for the period of his
participation and computing interest thereon at the rate of five percent (5%)
per annum.

 

Notices.  All notices
or other communications in connection with the Plan or any phase thereof shall
be in the form specified by the Committee and shall be deemed to have been duly
given when received by the Participant or his designated personal
representative or beneficiary or by the Company or its designated
representative, as the case may be.

 

Participation of Subsidiaries. 
The Board of Directors may, by written resolution, authorize the
employees of any of its subsidiaries to participate hereunder.  Effective as of the date of coverage of any
such subsidiary, any references herein to the “Company” shall be interpreted as
referring to such subsidiary as well as to Canterbury Park Holding Corporation.

 

In the event that any
subsidiary which is covered under the Plan ceases to be a subsidiary of
Canterbury Park Holding Corporation, the employees of such subsidiary shall be
considered to have 

 

 

terminated their
employment for purposes of Paragraph 9 hereof as of the date such subsidiary
ceases to be such a subsidiary.

 

Definitions.  viii. “Subsidiary”
shall include any corporation which shall be deemed a subsidiary of the Company
under Section 425(f) of the Internal Revenue Code of 1954, as
amended.

 

“Employee” shall mean any employee, including an
officer, of the Company who as of the first day of the month immediately
preceding the Commencement Date of a phase is customarily employed by the
Company for more than fifteen (15) hours per week.

 

“Base Pay” is the regular pay for employment for each
employee as annualized for a twelve (12) month period, exclusive of overtime,
commissions, bonuses, disability payments, shift differentials, incentives and
other similar payments, determined as of the Commencement Date of each phase.

 

Adopted by Board of
Directors:  April 3, 1995

 

Amended in early 2001 by
Board to increase authorized shares to 250,000, with shareholder approval of such
amendment occurring in June 2001.

 

Amended August 2005
to conform to FAS 123R.

 

Amended in April 2006
by the Board to increase authorized shares to 350,000, with shareholder
approval of such amendment occurring June 1, 2006.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}]]