Document:

Exhibit 10.4

 

FARMER
BROS. CO.

 

CHANGE IN
CONTROL SEVERANCE AGREEMENT

 

EXECUTIVE
OFFICERS

 

THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this “Agreement”),
effective as of March 3, 2008 (the “Effective Date”), is made by and
between FARMER BROS. CO., a Delaware corporation (the “Company”), and Drew H.
Webb (the “Executive”).

 

WHEREAS, the Company considers it
essential to foster the continued employment of well qualified, senior
executive management personnel; and

 

WHEREAS, the Company has determined
that appropriate steps should be taken to foster such continued employment by
setting forth the benefits and compensation to be awarded to such personnel in
the event of a voluntary or involuntary termination within the meaning of this
Agreement; and

 

WHEREAS, the Company further
recognizes that the possibility of a Change in Control of the Company exists
and that such possibility, and the uncertainty and questions that it may raise
among executive management, may result in the departure or distraction of
executive personnel to the detriment of the Company; and

 

WHEREAS, the Company has further
determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Company’s executive
management, including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from
the possibility of a Change in Control;

 

NOW, THEREFORE, in consideration of the
premises and the mutual covenants herein contained, the Company and the
Executive hereby agree as follows:

 

1.             Term
of Agreement. The term of this Agreement shall commence as of the
date hereof and expire on the close of business on December 31, 2008;
provided, however, that (i) commencing on January 1, 2009 and each January 1
thereafter, the term of this Agreement will automatically be extended for an
additional year unless, not later than September 30 of the immediately
preceding year, the Company (provided no Change in Control has occurred and no
Threatened Change in Control is pending) or the Executive shall have given
notice that it or the Executive, as the case may be, does not wish to have the
Term extended; (ii) if, prior to a Change in Control, the Executive ceases
for any reason to be an employee of the Company, thereupon without further
action the Term shall be deemed to have expired and this Agreement will
immediately terminate and be of no further effect.

 

2.             Definitions.

 

(a) Base Salary
shall mean the Executive’s salary, which excludes Bonuses, at the rate in
effect when an event triggering benefits under Section 3 of this Agreement
occurs.

 

(b) Beneficial Owner or
Beneficial Ownership shall have the meaning ascribed to such
term in Rule 13d-3 of the Exchange Act.

 

(c) Board or Board of Directors
shall mean the Board of Directors of Farmer Bros. Co., or its successor.

 

1

 

(d) Bonus(es)
shall mean current cash compensation over and above Base Salary whether awarded
under the Company’s Incentive Compensation Plan or otherwise awarded.

 

(e) Cause shall mean:

 

(i) the
Executive’s material fraud, malfeasance, or gross negligence, willful and
material neglect of Executive’s employment duties or Executive’s willful and
material misconduct with respect to business affairs of the Company or any
subsidiary of the Company or

 

(ii) Executive’s
conviction of or failure to contest prosecution for a felony or a crime
involving moral turpitude.

 

A termination of Executive for “Cause” based on clause (i) of the
preceding sentence can be made only by delivery to Executive of a resolution
duly adopted by the affirmative vote of not less than three quarters of the
Board then in office at a meeting of the Board called and held for such
purpose, after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive’s counsel (if the Executive chooses to
have counsel present at such meeting), to be heard before the Board, finding
that, in the good faith opinion of the Board, the Executive had committed an
act constituting “Cause” as herein defined and specifying the particulars
thereof in detail.  Nothing herein will
limit the right of the Executive or his beneficiaries to contest the validity
or propriety of any such determination.  
A termination for Cause based on clause (ii) above shall take
effect immediately upon giving of the termination notice. No act or omission
shall be deemed “willful” if it was due primarily to an error in judgment or
ordinary negligence.

 

(f) Change in Control
shall mean:

 

(1) An
acquisition by any Person (as such term is defined in Section 3(a)(9) of
the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a “group” as defined in Section 13(d) thereof) of
Beneficial Ownership of the Shares then outstanding (the “Company Shares
Outstanding”) or the voting securities of the Company then outstanding entitled
to vote generally in the election of directors (the “Company Voting Securities
Outstanding”), if such acquisition of Beneficial Ownership results in the
Person beneficially owning (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) fifty percent (50%) or more of the Company Shares
Outstanding or fifty percent (50%) or more of the combined voting power of the
Company Voting Securities Outstanding; excluding, however, any such acquisition
by a trustee or other fiduciary holding such Shares under one or more employee
benefit plans maintained by the Company or any of its subsidiaries; or

 

(2) The
approval of the stockholders of the Company of a reorganization, merger,
consolidation, complete liquidation, or dissolution of the Company, the sale or
disposition of all or substantially all of the assets of the Company or any
similar corporate transaction (in each case referred to in this Section 3(e) as
a “Corporate Transaction”), other than a Corporate Transaction that would
result in the outstanding common stock of the Company immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into common stock of the surviving entity or a parent or affiliate thereof) at
least fifty percent (50%) of the outstanding common stock of the Company or
such surviving entity or parent or affiliate thereof immediately after such
Corporate Transaction; provided, however, if the consummation of such Corporate
Transaction is subject, at the time of such approval by stockholders, to the
consent of any government or governmental agency, the Change in Control shall
not occur until the obtaining of such consent (either explicitly or
implicitly); or

 

2

 

(3) A
change in the composition of the Board such that the individuals who, as of the
Effective Date, constitute the Board (such Board shall be hereinafter referred
to as the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, for purposes of this Section 3(e) that
any individual who becomes a member of the Board subsequent to the Effective
Date whose election, or nomination for election by the Company’s stockholders,
was approved by a vote of at least a majority of those individuals who are
members of the Board and who were also members of the Incumbent Board (or
deemed to be such pursuant to this proviso) shall be considered as though such
individual were a member of the Incumbent Board; but, provided, further, that
any such individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act, including any successor
to such Rule), or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board, shall not be so
considered as a member of the Incumbent Board.

 

(g) Code
shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

(h) Disability
shall mean the Executive’s inability as a result of physical or mental
incapacity to substantially perform his duties for the Company on a full-time
basis for a period of six (6) months.

 

(i) Exchange Act
shall mean the Securities Exchange Act of 1934, as amended from time to time,
or any successor act thereto.

 

(j) Involuntary Termination
shall mean termination of employment that is involuntary on the part of the
Executive and that occurs for reasons other than for Cause, Disability or
death.

 

(k) Threatened Change in
Control shall mean any bona fide pending tender offer for any
class of the Company’s outstanding Shares, or any pending bona fide offer to
acquire the Company by merger or consolidation, or any other pending action or
plan to effect, or which would lead to, a Change in Control of the Company as
determined by the Incumbent Board. A Threatened Change in Control Period shall
commence on the first day the actions described in the preceding sentence
become manifest and shall end when such actions are abandoned or the Change in
Control occurs.

 

(l) Shares
shall mean the shares of common stock of the Company.

 

(m)  Resignation for Good
Reason shall mean termination of employment that is voluntary on
the part of the Executive but is due to:

 

(i) a
significant reduction of the Executive’s responsibilities, title or status
resulting from a formal change in such title or status, or from the assignment
to the Executive of any duties inconsistent with his title, duties, or
responsibilities;

 

(ii) a
reduction in the Executive’s Base Salary or benefits;

 

(iii) the
failure to award Executive a Bonus for any fiscal year which is at least fifty
percent (50%) of the average Bonus awarded to Executive for the three (3) fiscal
years prior to the occurrence of the Change in Control, provided that such
reduction in Bonuses shall not constitute grounds for Resignation for Good
Reason if the Bonus, or lack of Bonus, is determined in accordance with a
written plan adopted by the Company prior to the occurrence of a Change in
Control; or

 

3

 

(iv) a
Company-required involuntary relocation of Executive’s place of residence or a
significant increase in the Executive’s travel requirements.

 

3.             Events
That Trigger Benefits Under This Agreement. The Executive shall be
eligible for the compensation and benefits described in Section 4 of this
Agreement as follows:

 

(a) A Change in Control occurs and Executive’s employment is
Involuntarily Terminated or terminated by Resignation for Good Reason within
twenty-four (24) months following the occurrence of the Change in Control; or

 

(b) A Threatened Change in Control occurs and the Executive’s
employment is Involuntarily Terminated during a Threatened Change in Control
Period or Executive demonstrates to the Incumbent Board, excluding Executive
and any other Company executives who are parties to Change in Control Agreements
for Executive Officers, that grounds for a Resignation for Good Reason likely
will occur if a Change in Control occurs. 
The determination of the Incumbent Board in that regard shall be
conclusive.

 

4.             Benefits
Upon Termination.  If the
Executive becomes eligible for benefits under Section 3 above, the Company
shall pay or provide to the Executive the following compensation and benefits:

 

(a) Salary.
The Executive will continue to receive his Base Salary for the twenty-four (24)
month period following the Executive’s date of termination payable
semi-monthly.  The Executive shall also
receive two (2) consecutive annual payments of fifty percent (50%) of
Executive’s average Bonus as reported in the Company’s proxy statement for the
last three (3) completed fiscal years or for the number of completed of
fiscal years that Executive has been in the employ of the Company if fewer than
three, prior to the occurrence of the event triggering benefits under this
Agreement.  If a triggering event occurs
before a bonus for fiscal 2008 is awarded to Executive under the Company’s 2005
Incentive Compensation Plan, the Bonus amount shall be $100,000, payable in two
annual installments of $50,000.  The
Bonus amount is payable annually within thirty (30) days after the end of the
Company’s fiscal year commencing with the first fiscal year-end after Executive’s
date of termination.

 

(b) Qualified and
Non-Qualified Plan Coverage. Subject to the eligibility
provisions of the plans, the Executive shall continue to participate in the
tax-qualified and non-qualified retirement, savings and employee stock
ownership plans of the Company during the twenty four (24) month period
following the Executive’s date of termination unless the Executive commences
Employment prior to the end of the twenty four (24) month period, in which
case, such participation shall end on the date of his new employment. The
Executive shall inform the Company promptly upon commencing new employment.

 

(c) Health, Dental, and Life
Insurance Coverage. The health, dental, and life insurance
benefits coverage provided to the Executive at his date of termination shall be
continued by the Company during the twenty-four (24) month period following the
Executive’s date of termination unless the Executive commences employment prior
to the end of the twenty four (24) month period and qualifies for substantially
equivalent insurance benefits with the Executive’s new employer , in which
case, such insurance coverages shall end on the date of qualification.  The Executive shall inform the Company
promptly of his qualification for any of such insurance coverages.  . The Company shall provide for such
insurance coverages at its expense at the same level and in the same manner as
if the Executive’s employment had not terminated (subject to the customary
changes in such coverages if the Executive retires under a Company retirement
plan, reaches age 65, or similar events and subject to Executive’s right to
make any changes in such coverages that an active employee is permitted to make).
Any additional coverages the Executive had at termination, including dependent
coverage, will also be continued for such period on the same terms, to the
extent permitted by the applicable policies or contracts. Any costs the
Executive was paying for such coverages at the time of termination shall be
paid

 

4

 

by
the Executive by separate check payable to the Company each month in advance.
If the terms of any benefit plan referred to in this Section do not permit
continued participation by the Executive, the Company will arrange for other
coverage at its expense providing substantially similar benefits. If the
Executive is covered by a split-dollar or similar life insurance program at the
date of termination, he shall have the option in his sole discretion to have
such policy transferred to him upon termination, provided that the Company is
paid for its interest m the policy upon such transfer.

 

(d) Outplacement Services.
The Company shall provide the Executive with outplacement services by a firm
selected by the Executive, at the expense of the Company, in an amount up to
$25,000.

 

(e) No Mitigation Obligation.  The Company hereby acknowledges that it will
be difficult and may be impossible for the Executive to find reasonably
comparable employment following termination of Executive’s employment by the
Company and that the non-solicitation covenant contained in Section 6 may
further limit the employment opportunities for the Executive.  Accordingly, the payment of the compensation
and benefits by the Company to the Executive in accordance with the terms of
this Agreement is hereby acknowledged by the Company to be reasonable, and the
Executive will not be required to mitigate the amount of any payment provided for
this Agreement by seeking other employment or otherwise, nor will any profits,
income, earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise, except as expressly provided in the first
sentence of Section 4(c).

 

5.             Parachute
Payments.

 

                Notwithstanding anything
contained in this Agreement to the contrary, in the event that the compensation
and benefits provided for in this Agreement to Executive together with all
other payments and the value of any benefit received or to be received by
Executive:

 

(a) constitute “parachute payments” within the meaning of Section 280G
of the Code, and

 

(b) but for this Section, would be subject to the excise tax
imposed by Section 4999 of the Code, the Executive’s compensation and
benefits pursuant to the terms of this Agreement shall be payable either:

 

(i) in full, or

 

(ii) in such lesser
amount which would result in no portion of such compensation and benefits being
subject to excise tax under Section 4999 of the Code, whichever of the
foregoing amounts, taking into account the applicable federal, state and local
income taxes and the excise tax imposed by Section 4999, results in the
receipt by Executive on an after-tax basis, of the greatest amount of
compensation and benefits under this Agreement, notwithstanding that all or
some portion of such compensation and benefits may be subject to the excise tax
imposed under Section 4999 of the Code. 
Unless the Company and Executive otherwise agree in writing, any
determination required under this Section 5 shall be made in writing by
the Company’s independent public accountants serving immediately before the
Change in Control (the “Accountants”), whose determination shall be conclusive
and binding upon Executive and the Company for all purposes.  For purposes of making the calculations
required by this Section 5, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable good faith interpretations concerning the applications of Section 280G
and 4999 of the Code.  The Company shall
cause the Accountants to provide detailed supporting calculations of its
determination to Executive and the Company. 
Executive and the Company shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section. The Company shall bear all

 

5

 

costs the Accountants may
reasonably incur in connection with any calculations contemplated by this Section 5.

 

6.             Obligation
Not to Solicit.

 

(a) Executive hereby agrees that while Executive is receiving
compensation and benefits under this Agreement, Executive shall not in any
manner attempt to induce or assist others to attempt to induce any officer,
employee, customer or client of the Company to terminate its association with
the Company, nor do anything directly or indirectly to interfere with the relationship
between the Company and any such persons or concerns.

 

(b) In the event that the Executive engages in any activity in
violation of Section 6(a), all compensation and benefits described in Section 4
shall immediately cease.

 

7.             Confidentiality. The terms of
this Agreement are to be of the highest confidentiality. In order to insure and
maintain such confidentiality, it is agreed that neither party, including all
persons and entities under a party’s control, shall, directly or indirectly,
publicize or disclose to third persons the terms of this Agreement or the
substance of negotiations with respect to it; provided, however, that nothing
herein shall be construed to prevent disclosures which are reasonably necessary
to enforce the terms of this Agreement or which are otherwise required by law
to be made to governmental agencies or others; moreover, nothing herein shall
be construed to prevent the parties hereto, or their attorneys, from making
such disclosures for legitimate business purposes to their respective insurers,
financial institutions, accountants and attorneys or, in the case of a
corporation, limited liability company or partnership, to its respective
officers, directors, employees, managers, members and agents or any of its
respective subsidiaries, group or divisions, provided that each such recipient
of such disclosures agrees to be bound by the requirements concerning
disclosure of confidential information as set forth in this Paragraph 7.

 

8.             Settlement
of Disputes; Arbitration. (a) All disputes
arising under or in connection with this Agreement, shall be submitted to
binding arbitration in Los Angeles County before an arbitrator selected by
mutual agreement of the parties.  If the
parties are unable to agree mutually on an arbitrator within thirty (30) days
after a written demand for arbitration is made, the matter shall be submitted
to JAMS/ENDISPUTE (“JAMS”) or successor organization for binding arbitration in
Los Angeles County by a single arbitrator who shall be a former California Superior
Court judge.  The arbitrator shall be
selected by JAMS in an impartial manner determined by it.  Except as may be otherwise provided herein,
the arbitration shall be conducted under the California Arbitration Act, Code
of Civil Procedure §1280 et  seq. 
The parties shall have the discovery rights provided in Code of Civil
Procedure §§1283.05 and 1283.1.  The
arbitration hearing shall be commenced within ninety (90) days of the
appointment of the arbitrator, and a decision shall be rendered by the arbitrator
within thirty (30) days of the conclusion of the hearing.  The arbitrator shall have complete authority
to render any and all relief, legal and equitable, appropriate under California
law, including the award of punitive damages where legally available and
warranted.  The arbitrator shall award
costs of the proceeding, including reasonable attorneys’ fees, to the party or
parties determined to have substantially prevailed, but such award for
attorneys’ fees shall not exceed One Hundred Thousand Dollars ($100,000).  Judgment on the award can be entered in a
court of competent jurisdiction.

 

(b)           The foregoing
notwithstanding, if the amount in controversy exceeds $200,000, exclusive of
attorneys’ fees and costs, the matter shall be litigated in the Los Angeles
County Superior Court as a regular civil action except that a former California
Superior Court Judge selected by JAMS in an impartial manner shall be appointed
as referee to determine, sitting without a jury (a jury being waived by all
parties hereto), all issues pursuant to California Code of Civil Procedure
§638(1).  Judgment entered on the
decision of the referee shall be appealable as a judgment of the Superior
Court.  The prevailing party

 

6

 

shall
be entitled to receive its reasonable attorneys’ fees and costs from the other
party, but such award for attorneys’ fees shall not exceed One Hundred Thousand
Dollars ($100,000).

 

9.             Miscellaneous.

 

(a) Notices.
Any notice or other communication required or permitted under this Agreement
shall be effective only if it is in writing and shall be deemed to have been
duly given when delivered personally or seven days after mailing if mailed
first class by registered or certified mail, postage prepaid, addressed as
follows:

 

	
  If to the Company:

  	
   

  	
  Farmer Bros. Co

  
	
   

  	
   

  	
  20333
  South Normandie Avenue

  
	
   

  	
   

  	
  Torrance,
  CA 90502

  
	
   

  	
   

  	
  Attn:
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  with
  a copy to:

  	
   

  	
  John
  M. Anglin, Esq.

  
	
   

  	
   

  	
  Anglin,
  Flewelling, Rasmussen, Campbell & Trytten LLP

  
	
   

  	
   

  	
  199
  South Los Robles Avenue, Suite 600

  
	
   

  	
   

  	
  Pasadena,
  CA 91101-2459

  
	
   

  	
   

  	
   

  
	
  If
  to the Executive:

  	
   

  	
  Drew
  H. Webb

  
	
   

  	
   

  	
  10310
  E. Sierra Pinta Drive

  
	
   

  	
   

  	
  Scottsdale,
  AZ 85255

  

 

or
to such other address as any party may designate by notice to the others.

 

(b) Assignment.
This Agreement shall inure to the benefit of and shall be binding upon the
parties hereto and their respective executors, administrators, heirs, personal
representatives, and successors, but, except as hereinafter provided, neither
this Agreement nor any right hereunder may be assigned or transferred by either
party thereto, or by any beneficiary or any other person, nor be subject to
alienation, anticipation, sale, pledge, encumbrance, execution, levy, or other
legal process of any kind against the Executive, his beneficiary or any other
person. Notwithstanding the foregoing, any person or business entity succeeding
to substantially all of the business of the Company by purchase, merger,
consolidation, sale of assets, or otherwise, shall be bound by and shall adopt
and assume this Agreement and the Company shall cause the assumption of this
Agreement by such successor. If Executive shall die while any amount would
still be payable to Executive hereunder (other than amounts that, by their
terms, terminate upon the death of Executive) if Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the executors, personal
representatives or administrators of Executive’s estate.

 

(c) No Obligation to Fund.
The agreement of the Company (or its successor) to make payments to the
Executive hereunder shall represent solely the unsecured obligation of the
Company (and its successor), except to the extent the Company (or its
successors) in its sole discretion elects in whole or in part to fund its
obligations under this Agreement pursuant to a trust arrangement or otherwise.

 

(d) Applicable Law.
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of California.

 

7

 

(e) Amendment.
This Agreement may only be amended by a written instrument signed by the
parties hereto, which makes specific reference to this Agreement.

 

(f) Severability.
If any provision of this Agreement shall be held invalid or unenforceable by
any court of competent jurisdiction, such holding shall not invalidate or
render unenforceable any other provisions hereof.

 

(g) Withholding.
The Company shall have the right to withhold any and all local, state and
federal taxes which may be withheld in accordance with applicable law.

 

(h) Other Benefits.
Nothing in this Agreement shall limit or replace the compensation or benefits
payable to Executive, or otherwise adversely affect Executive’s rights, under
any other benefit plan, program, or agreement to which Executive is a party.

 

(i) Employment Rights. Nothing
expressed or implied in this Agreement will create any right or duty on the
part of the Company or the Executive to have the Executive remain in the
employment of the Company or any Subsidiary prior to or following any Change in
Control.  The Company and Executive are
parties to an Employment Agreement executed concurrently herewith.  Except as provided in Section 11 of the
Employment Agreement, the provisions of the Employment Agreement and this
Agreement are cumulative.

 

 

 

[Signatures
Follow]

 

 

8

 

IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed on its behalf by its duly authorized officers and the
Executive has hereunder set his hand, as of the date first above written.

 

	
   

  	
  “COMPANY”

  
	
   

  	
   

  
	
   

  	
  Farmer Bros. Co., a
  Delaware corporation.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/
  ROGER M. LAVERTY III

  
	
   

  	
  Name:

  	
  ROGER
  M. LAVERTY III

  
	
   

  	
  Title:

  	
  PRESIDENT
  AND CHIEF EXECUTIVE OFFICER

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /S/
  JOHN E. SIMMONS

  
	
   

  	
  Name:

  	
  JOHN
  E. SIMMONS

  
	
   

  	
  Title:

  	
  TREASURER
  AND CHIEF FINANCIAL OFFICER

  
	
   

  	
   

  
	
   

  	
  “EXECUTIVE”

  
	
   

  	
   

  
	
   

  	
   

  	
  /S/
  DREW. H. WEBB

  
	
   

  	
   

  	
  DREW
  H. WEBB

  

9Exhibit 10.5

 

AGREEMENT

 

This Agreement is made and entered into this 1st day of May, 2007,
superseding the agreement entered into on the 22nd day of October, 2003 by and
between Dover Downs, Inc., a Corporation of the State of Delaware
(hereinafter called Dover Downs), and Delaware Standardbred Owners Association, Inc.,
a Delaware Corporation (hereinafter called D.S.O.A.) and is executed in
duplicate original copies.

 

WITNESSETH:

 

WHEREAS, Dover Downs is licensed to conduct and is engaged in the
business of conducting harness racing meetings at a harness racing track known
as Dover Downs, located in Dover, Delaware; and

 

WHEREAS, D.S.O.A.’s membership consists of owners, trainers, and
drivers of harness horses participating in harness race meetings at Dover Downs
and elsewhere in the United States and Canada, and D.S.O.A. has been organized
and exists for the purpose of promoting the sport of harness racing; improving
the lot of owners, drivers, and trainers of harness racing horses participating
in race meetings; establishing health, welfare and insurance programs for
owners, drivers, and trainers of harness racing horses; negotiating with
harness racing tracks on behalf of owners, trainers, drivers, and grooms of
harness racing horses; and generally rendering assistance to them whenever and
wherever possible; and

 

WHEREAS, the parties hereto desire to cooperate in promoting the
popularity of the sport of harness racing, and in insuring the continuity of
harness racing at Dover Downs for the best interests of the parties hereto and
the public; and

 

 

 

 

IN CONSIDERATION OF the promises, the covenants set forth herein, and
other considerations, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

 

1.  Term of Agreement

 

The provisions of this Agreement shall apply to and govern every
harness racing meeting conducted by or at Dover Downs effective May 1,
2007, and continuing through July 31, 2010. The parties agree that this
Agreement shall automatically renew for two successive one year periods unless
either party notifies the other party by May 1st of its
intention to not renew this Agreement in which event the agreement shall
terminate at the end of the then current term (i.e., on July 31, 2010 in
the event there is no renewal or July 31, 2011 in the event that the
Agreement is renewed only once or July 31, 2012 in the event that the
Agreement is renewed for both option years.

 

During the term of this agreement Dover Downs will schedule
not less than 133 days of live racing each year, where a live day of racing
shall consist of a minimum of 13 programmed races per day, and the minimum
number of races each year shall be 1995 unless otherwise mutually agreed by the
parties provided however, that any days or races lost to weather, acts of God,
technical problems, or human error, shall not be required to be rescheduled.
These days and races are subject to the availability of horses and may be
reduced if the races are not adequately filled by available horses. If such a
reduction is necessary, Dover Downs will consult with the D.S.O.A. to determine
the best manner in which to conduct the reduced number of races.

 

 

 

2

 

 

2.  Basic Purse Distribution

 

A.  Dover Downs will distribute
as racing purses at all meetings conducted at Dover Downs during the term of
this agreement 10% of the live handle wagered at Dover Downs.  Except, however, when Dover Downs races more
than 13 races per day, Dover Downs will retain all monies received from the
live handle wagered on the last race each day.

 

In the event of any legislation which changes Dover Downs’ share of the
pari-mutuel commission, the amount calculated above shall be adjusted so that
50% of any increase shall be added to purses and 50% of any decrease shall be
subtracted from the purses.

 

B. Dover Downs agrees to distribute to D.S.O.A. via the purse pool and
subject to the provisions of paragraph 5, twenty five percent (25%) of any
monies received from Dover Downs’ export signal of the live race meets
conducted during the term of this agreement. Except, however, when Dover Downs
races more than 13 races per day, Dover Downs will retain all monies received
from Dover Downs’ export signal on the last live race each day.

 

C. 
Over and above the purses payable under paragraphs 2 A) and 2 (B), Dover Downs shall pay additional purses in an
amount calculated pursuant to 29 Del.C.4815 (b)(3)b et seq.

 

D.  In consideration of Dover Downs racing more
than 1560 races per race meet and agreeing to many provisions relating to race
conditions, qualifying standards, qualifying races, physical improvements, and
other accommodations for the horsemen, 
the 

 

 

3

 

share of pari-mutuel
commissions for purses has been negotiated to the amounts specified in
Paragraphs 2 (A) and 2 (B) above.

 

E.  An average of 6 races per
program shall be written and if possible filled for Delaware owned or bred
horses.  The race secretary shall make
every effort to write Delaware owned horses in all classes permitted to race at
Dover Downs.  The purses for these races
shall be twenty (20%) percent greater than purses for the same class not
restricted to Delaware owned or bred horses rounded to the nearest $100. Should
these races not fill with all Delaware owned or bred horses the racing
secretary may open the class to non-Delaware owned or bred horse, with the
Delaware owned or bred horses having first preference in accordance with
D.H.R.C. rules.

 

F.  During the term of this
Agreement, Dover Downs, on a weekly basis during any race meeting conducted by
Dover Downs, shall pay directly to the drivers and trainers of the horses whose
owners are entitled to receive a portion of the purse money, an amount equal to
five (5%) percent of the owners’ purse money, which amount shall be credited
against the purses required to be paid to the owners of such horses.  In no event shall the aggregate payment made
by Dover Downs on account of purses and other items specified in Paragraph 5 be
increased beyond the applicable amount for purses.

 

                3.  Projection of Purses and Carry-Over of
Purse Money

 

A.   The
specifications of the applicable purses for the race meet, in accordance with
Paragraph 2, shall be projected on the basis of the total estimated purse funds
to be accrued during the live race meeting, with consideration given to
seasonal fluctuation of purse accruals, so as to maintain a reasonably uniform
purse distribution schedule throughout the Dover Downs meetings each year.

 

 

4

 

 

B. (i) If any purse money due under Paragraph 2 has not been fully
distributed at any meeting covered by this Agreement, the amount due shall be
carried over and distributed in purses at the next meeting covered by this Agreement.
Any underpayment of purse money under the preceding Agreements between Dover
Downs and D.S.O.A. shall likewise be added to the purse money payable under
Paragraph 2.

 

   (ii) If the purses
actually paid at any meeting covered by this Agreement exceed the amount due
under Paragraph 2, the amount of the excess payment shall be deducted from the
purses otherwise payable at the next meeting covered by this Agreement.  Any overpayment of purses during the last meeting
conducted under the previous agreement between Dover Downs and D.S.O.A. shall
likewise be deducted from the purse money payable under Paragraph 2 of this
Agreement.

 

                                                4.  Minimum and Maximum Purses

 

At all meetings conducted at Dover Downs, the minimum and maximum purse
payable by Dover Downs for any pari-mutuel betting race shall be agreed upon by
D.S.O.A. representatives and Dover Downs prior to the beginning of each race
meet. In the event the parties are unable to reach an agreement, the minimum
and maximum purse payable will be the same as the start of the previous race
meet conducted at Dover Downs.

 

5.  Arrangements with D.S.O.A.

 

A.  Dover Downs will pay to
D.S.O.A., in diminution of and as a credit against the percentages specified in
Paragraph 2, requested funds to compensate D.S.O.A. for its expenses provided
that D.S.O.A.’s representation of the horsemen racing at meetings conducted by
Dover Downs has been demonstrated by the horsemen’s adherence

 

 

5

 

to and recognition of this Agreement. 
Such sums, other than health insurance premiums payable under paragraph
5(E), shall not exceed 110% of the amount requested the prior year and shall be
paid in monthly installments no later than seven (7) days after the
conclusion of each month of each racing meeting covered by this Agreement
unless mutually agreed by the parties.

 

B.  When this Agreement and any
succeeding Agreement between D.S.O.A. and Dover Downs has expired and there is
no agreement in effect between them providing otherwise, any underpayment of
purses due under this Agreement shall be payable to horsemen who participated
in the last Dover Downs’ meet covered by this Agreement and both parties shall
take whatever action is required to accomplish such payment.

 

In order to minimize any underpayment  or  overpayment of purses at the conclusion of the live race
meet  under this Agreement, D.S.O.A. and
Dover Downs will meet regularly to make adjustments to the purse account if
necessary.  These adjustments to the
purses will be in  a fair and reasonable manner and  will include lowering the minimum purse if such action is
warranted.  The base purse for any
claiming race will not exceed 80% of the claiming price.

 

C.  Dover Downs shall provide an
office for the use of a D.S.O.A. representative on its racing grounds.

 

D.  Representatives of Dover
Downs will be available at reasonable times to consult with D.S.O.A.
representatives upon request of either party concerning any matters pertaining
to the provisions of this Agreement and/or the conduct of races, maintenance of
the receiving stable area, the race track, paddock and training areas.

 

 

6

 

 

E.  Dover Downs shall pay to
D.S.O.A. as part of its expenses in paragraph 5(A.), the incurred premiums of
insurance administered by D.S.O.A. for grooms, second trainers, trainers, and
drivers.  Insurance premiums shall be
paid monthly  upon presentation of a bill
from D.S.O.A..  The premiums shall be in
diminution of and as a credit against purse money payable under this Agreement
as specified in Paragraph 2.

 

F.  Dover Downs agrees to
cooperate with D.S.O.A. in its effort to provide education, promotional
material and public relations regarding harness racing, pari-mutuel betting,
and horse ownership.

 

G.  D.S.O.A. acknowledges that
from time to time  certain legislative effort will
be required in Delaware pertaining to pari-mutuel wagering, horse racing, the
video lottery as well as other matters that will effect Dover Downs.  D.S.O.A. will fully support and help lobby for all
reasonable legislation  and oppose all
harmful legislation insofar as it  does not
adversely impact horsemen’s issues.

 

H.  During the term of this
contract the minimum claiming price for Delaware Owned and Bred races shall be
($7,500) seventy five hundred dollars. The minimum open claiming price shall be
($12,500) twelve thousand five hundred dollars unless changed by mutual
agreement.

 

I.  Unless
changed by mutual agreement, the qualifying times during the term of this
agreement shall be 2:00 for pacers and 2:02 for trotters, plus applicable
allowances for weather, and track conditions. Two year olds will receive a two
second allowance. Three year olds will receive a two second allowance from January 1
through April 30 and a one second allowance after April 30.

 

 

7

 

J.   During this Agreement,
horses permitted at Dover Downs will have the opportunity to qualify two times
per calendar month. Horses that are two year olds and three year olds, and are
nominated to the Delaware Breeders program, will have unlimited opportunity to
qualify during each of the three (3) months leading up to the first event
of the program to which it is nominated.

 

K.  There shall not be any
general age restrictions in condition races that are written as NW of $6,000 or
higher in last (x) starts. This does not apply to NW of (x) races
lifetime, NW of ($x) lifetime, or any other type of condition race written
according to the available horse population in an effort to enhance the quality
and competitiveness of the racing at Dover Downs.  All races written for NW of (x) races
lifetime shall exclude as a win only, any win in which the first place money
was less than or equal to $500.

 

L.  During the term of this
agreement, if Dover Downs has races with nine horse fields, a bonus will be
added to the base purse as follows:

 

	
  Base purse is:

  	
   

  	
  Bonus is:

  
	
   

  	
   

  	
   

  
	
  Less than $20,000

  	
   

  	
  $500

  
	
  $20,000 or more

  	
   

  	
  $1000

  

 

M.  Dover Downs, upon request,
shall furnish to D.S.O.A. a summary of the handle.

 

N.   During the term of this
agreement, Dover Downs will provide an outrider, if one can be obtained at a
comparable cost to that paid by area racetracks, that is acceptable to the
D.S.O.A..

 

O.   Dover Downs will provide
drainage in each stall of the paddock in order to permit bathing of horses in
the race stalls in the paddock.

 

 

8

 

 

6.  Simulcast Wagering

 

A.  As consideration for the
distribution to the purse pool in accordance with paragraph 2(B.)  D.S.O.A. agrees, as is standard in the industry, to share  the daily cost incurred by Dover Downs for the daily export
of the live signal throughout each season. 
These incremental costs incurred by Dover Downs for the exporting of
live races will be calculated and shared 25% by D.S.O.A. and 75% by  Dover Downs.  These
daily costs will be detailed on the purse reconciliation report submitted to
D.S.O.A. at the end of each month.

 

B. As consideration for the covenants set forth herein, and other
considerations, D.S.O.A. agrees that it will not share in any of the revenues
or expenses from intrastate and interstate simulcasting of standardbred and
thoroughbred races from such tracks as approved per paragraph 6(c).

 

C.  All simulcasting agreements
need the approval of D.S.O.A. prior to Dover Downs accepting wagering on those
races. D.S.O.A. agrees not to unreasonably withhold their approval.

 

    Should either D.S.O.A. or Dover Downs deny an
approval or elect to terminate an agreement, they must provide the other party
written notice at least 15 days prior to termination or disapproval with
reasonable explanation for their action.

 

7.  Stake and Early Closing
Events

 

Not more than 8% of the total purse money payable to the horsemen
during each race meet shall be paid for Stake and Early Closing events. Purse
money payable to the Delaware Breeders Program, or any other Delaware
owned/bred Stakes or early closing events, shall not be part of the 8%
limitation.

 

 

9

 

8.  On-Track Driver Insurance

 

Dover Downs shall provide On-track driver accident and disability
insurance with minimums of $50,000 death benefit, $100,000 medical expenses and
$500 a week disability income extending for 26 weeks then $350 a week
disability income for an additional 78 weeks subject to no more than a
seven-day waiting period.  This coverage
shall have no deductible to the horsemen and will be provided on race days,
non-race days during the race meet when the track is available for training and
for three (3) days prior to each race meeting covered under this
Agreement.

 

9.  Stall Assignments and
Racing Privileges

 

Nothing in this Agreement shall be deemed to limit or restrict in any
manner the absolute discretion of Dover Downs to assign stalls and/or grant
racing privileges to owners and trainers whether or not members of D.S.O.A.,
except that stall space and/or racing privileges shall not be denied by reason
of membership in, or activity on behalf of, D.S.O.A. or a duly constituted
horsemen’s committee.  Notwithstanding
this paragraph, it is understood that Dover Downs does not contemplate opening
its barn area and providing stabling facilities during the term of this
Agreement.  Dover Downs does, however,
agree to make reasonable attempts to restrict the horse population to a
manageable level with preference being given to Delaware owned horses.

 

10.  Indemnity and Cooperation

 

D.S.O.A. shall indemnify and hold Dover Downs harmless against any
claims, losses, expenses, judgments, penalties or extra distributions imposed
upon or suffered by Dover Downs arising out of, or in connection with, the
payment provided in Paragraph 5 above. 
In the event any other organization shall claim to represent the

 

 

10

 

 

horsemen participating in any Dover Downs meeting during the term of
this Agreement, Dover Downs shall promptly notify D.S.O.A.

 

Dover Downs agrees and acknowledges that the D.S.O.A. during the term
of this agreement is and shall be the sole and exclusive representatives and
bargaining agent for harness horse people in respect to all matters related to
harness racing and ancillary and appurtenant activities carried on by Dover
Downs, as long as D.S.O.A. represents a majority of the horsemen racing at
Dover Downs.

 

11.  Controlling Law and
Regulation

 

The interpretation of the provisions of this Agreement shall be
governed by the law of Delaware.  If and
to the extent that any provision(s) of this Agreement is and/or becomes
inconsistent with any Delaware Statute, law or any regulation of the Delaware
State Harness Racing Commission not in effect or hereinafter enacted, such
provision or provisions shall be deemed to be superseded by such law or
regulation as the case may be.  The
validity of the remaining provisions of the contract shall be construed and
enforced as if the contract did not contain the particular provision held to be
invalid.

 

12.  Miscellaneous

 

This agreement acknowledges and incorporates by reference the letter
from Charles Lockhart, Vice President of Horse Racing, under date of April 20,
2007 attached hereto, addressing some issues that the parties have agreed to.

 

 

11

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed on their behalf by their respective Officers as of the date first above
written.

 

	
  Witness:

  	
   

  	
  DOVER DOWNS, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ Denis McGlynn

  	
   

  	
  By 

  	
   

  	
  /s/ Charles B. Lockhart

  
	
   

  	
   

  	
   

  	
   

  	
       Charles B. Lockhart

  
	
   

  	
   

  	
   

  	
   

  	
       Vice President—Horse
  Racing

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Witness:

  	
   

  	
  DELAWARE STANDARDBRED
  OWNERS

  ASSOCIATION, INC. 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ Salvatore DiMario

  	
   

  	
  By

  	
   

  	
  /s/ James T. Case

  
	
   

  	
   

  	
   

  	
   

  	
       James T. Case

  
	
   

  	
   

  	
   

  	
   

  	
       President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
						

 

 

12

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