COLONIAL DOWNS HOLDINGS, INC. Announces Agreements
NEW KENT, Va.--(BUSINESS WIRE)-- January 19,1999--Colonial Downs Holdings, Inc. (NASDAQ: NMS: CDWN) which through its subsidiaries holds the only licenses to own and operate a pari-mutuel horseracing course and satellite racing centers in Virginia, announced today that it has reached new agreements with the Maryland Jockey Club and Delmarva Properties.
The agreement with the Maryland Jockey Club (MJC) calls for MJC to manage all of Colonial Downs' assets including the Colonial Downs race track during live race meets and all four of the company's racing centers. Colonial Downs will pay MJC a management fee that equals 1 percent of the first $75 million in handle and two percent of handle for any amount above $75 million. The management fee is inclusive of personnel costs during live meets. The parties also reached a settlement on all outstanding amounts which were subject to arbitration. The settlement amount is $1.45 million payable over 7 years. The agreement also provides for an incentive performance fee equal to 40% of earnings before interest, taxes, depreciation and amortization above targeted goals.
Jeffrey P. Jacobs, Colonial Downs Board Chairman said, "We are pleased to have reached this agreement with the Maryland Jockey Club. The agreement reduces the fixed cost component of our Maryland Jockey Club fee, which combined with Colonial Downs cost reductions result in $1.5 to 2.0 million of annual savings. It aligns Virginia and Maryland interests in terms of expanding Virginia horse racing into the 21st century. It enables us to take advantage of the national prominence, reputation, and expertise of the Maryland Jockey Club. It also provides incentives for MJC to assist us in our efforts to expand our racing center network into Northern Virginia. The benefits of our alliance with the Maryland Jockey Club are already evident. Our thoroughbred races in 1998 averaged almost nine horses per race; we hosted the first annual Virginia Derby that showcased the finest horses in the country; the horsemen love our turf course; and the horse industry in Virginia is beginning to reflect the impact of Colonial Downs."
Additionally, Jacobs stated, "Colonial Downs has entered into an agreement with Delmarva Properties. Under the new agreement, Delmarva Properties has agreed not to exercise its reconveyance rights under its deed dated March 19, 1997. Under the 1997 agreement, Delmarva conveyed the property that the racetrack is on to Colonial Downs with the condition that the property be only used for horse racing for the first five years of operation. In the event that the property was used for purposes other than primarily horse racing activities, then Delmarva could reacquire the property. Under the new agreement, Delmarva waived the right of reconveyance of the property. Additionally, the agreement allows Colonial Downs to redevelop the property as an athletic facility, a fine arts center, or a hotel/conference center. This new agreement protects Colonial Downs shareholders in the unlikely event that Colonial Downs would decide to change the current use of the property. Possible reasons for Colonial Downs to alter the use of the property are if the Virginia Racing Commission or the Virginia legislature mandates that Colonial Downs host a live racing schedule that would require it to operate in a negative cashflow position. Because these two agreements are now in place, Colonial Downs is a much stronger, more viable company today than it was a week ago."
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