(Special Note) [Translation] This English translation is provided for reference purposes only. In the event of any discrepancy between the Japanese original version and this English translation, the Japanese original version shall prevail. Japan Racing Horse Association Horse Market Business Regulations Chapter 1. General Provisions Article 1 Compliance with Regulations Any party involved in any transaction(s) at the horse market including all sellers and buyers of horses and other participants shall comply with the Horse Market Business Regulations ("these Regulations") herein provided for the fair and smooth operation of the market. Article 2. Location of the Horse Market 1. The Japan Racing Horse Association (hereinafter the "Auction Holder" or the "Association" as the case may be) shall hold the horse market (hereinafter the "Market") at Northern Horse Park, 114-7 Misawa, Tomakomai-shi, Hokkaido. 2. The Auction Holder's offices shall be at the following addresses, and its office shall be established at the Market premises during the duration of the Market. Tokyo Office: Azabudai Building, 2-2-1 Azabudai, Minato-ku, Tokyo Hokkaido Office: c/o Thoroughbred Breeders Club Co., Ltd., 3-3-1 Tomikawa-higashi, Hidaka-cho, Saru-gun, Hokkaido Article 3. Types of Horses to be Handled The horses to be handled at the Market shall be thoroughbred foals and yearlings. Article 4. Horses on the Market 1. With regard to any horse handled in the Market, except in cases where the defects (kashi) stipulated in Article 17, Paragraph 6 were not announced in accordance therewith, the horses will be sold "as is" without any kind of warranty by the Auction Holder or the seller. 2. A buyer may make reference to extremity x-rays and/or records of upper respiratory tract endoscopy at a designated facility located within the Market premises, in accordance with the procedures separately stipulated by the Auction Holder, restricted only to yearlings that such a buyer intends to buy. Article 5. Date of the Market The date on which the Market will be held shall be the date determined by the Board of Directors of the Association, notified to the Governor of Hokkaido, and made public. Article 6. Time of the Market The time during which the Market will be held shall be from 8:00AM through 6:00PM. Provided, however, that if transactions regarding the horses are not completed within such time, such time may be extended. Article 7. Tying Up of Horses, etc. 1. No horse shall be allowed to enter the Market premises nor be put up for auction unless it has been diagnosed by a veterinarian stationed at the veterinary clinic within the Market premises as being free from domestic animal epidemics stipulated in Article 2 of the Domestic Animal Epidemics Prevention Law. 2. The horses shall be tied up at the location designated by the Auction Holder, in accordance with the instructions of the Auction Holder. 3. With regard to any horse which, due to any illness other than the domestic animal epidemics stipulated in Article 2 of the Domestic Animal Epidemics Prevention Law, or any bad habit, is judged likely to pose danger to other horses, in the event that the Auction Holder refuses the entry of such horse to the Market or requests that it be isolated or its movements be restricted, the person responsible for such horse must abide by such refusal or request. Article 8. Procedures in case of Examination by Veterinarian 1. Any party in a transaction regarding a horse may request a veterinarian stationed at the Market premises on the day of the Market an examination of such horse to determine whether it has any illness. 2. In the event that a party in a transaction regarding a horse wishes to request the examination stipulated in the foregoing paragraph, such party shall make a request to that effect to the Auction Holder in advance. Article 9. Liability for Accidents within the Market Premises The Auction Holder shall not be held liable or responsible for any damages which may arise from any accident related to any horse within the Market premises or any other premises related thereto at any time during the entire period during which the Market is held or any other periods during which any such horses are kept in the relevant stable in connection with participation in the Market. Chapter 2. Methods and Procedures for Horse Transactions Article 10. Methods of Transactions Transactions regarding horses at the Market shall be through purchase and sale, and the method of purchase and sale shall be through auction. Article 11. Methods of Auction 1. The horses shall be led to the auction area one at a time in the order specified by the Auction Holder. 2. In principle, the method of auction shall be "bidding-up", however, depending on the circumstances, there may be cases in which "bidding-down" (i.e., Dutch auction) is taken. The unit for bidding-up shall be ten thousand yen (10,000yen). Article 12. Re-Auction 1. If there is no successful bidder for a horse, the seller may put such horse up for re-auction. 2. Any seller who wishes to put a horse up for re-auction pursuant to the foregoing paragraph shall immediately make a request to that effect to the Auction Holder. 3. Re-auctions shall be performed in such order that the Auction Holder designates. Article 13. Applying for Sale 1. Any party who wishes to apply to sell a horse shall apply by filling out an Application for Sale, in the form separately specified by the Auction Holder, with its name (or company name), address, horse's breed, sex, color, date of birth, pedigree, illnesses or bad habits, and shall provide the Auction Holder with such Application, attaching thereto a document certifying the horse's pedigree. The Sale Application Registration Fee stipulated in Article 28 (1) shall be paid immediately after the horse has been selected to be put up for auction. 2. The document certifying the horse's pedigree shall be the Certificate of Pedigree Registration issued by the Japan Race Horse Registry. Provided, however, that with regard to foals and yearlings, the following procedures shall apply: (1) Foal market (a) When there is no document certifying a foal's pedigree, a late submission will be accepted and the certification of pedigree shall be based on the declaration of the seller. Even in such a case, however, the seller must provide the Auction Holder with the Certificate of Pedigree Registration promptly upon issuance thereof. (b) A copy of the foal's Stallion Service Certificate shall be attached to the Application for Sale. (2) Yearling market The seller must provide the Auction Holder with a yearling's Certificate of Pedigree Registration at the time of applying for sale at the Market. Provided, however, that a late submission may be accepted if a seller who has not yet received a Certificate of Pedigree Registration from the Japan Race Horse Registry proves that the application for registration of the yearling's pedigree has been filed to the said Registry no later than the deadline for submission of the application for sale at the Market separately specified by the Auction Holder. In such a case, the certification of pedigree shall be performed based on the declaration of the seller. The seller must provide the Auction Holder with the Certificate of Pedigree Registration upon issuance thereof. 3. With regard to Items (1) and (2) of the foregoing paragraph, if, after completion of the transaction, it is discovered that there is a discrepancy regarding the horse's pedigree in the contents of the seller's declaration, or if a paternal or maternal relationship is disproved by either a blood-type test or DNA-type test, the seller shall settle the matter entirely on its own responsibility. 4. The Auction Holder shall be entitled to refuse the entry of a yearling for auction in the event that it is discovered before it is led to the auction area that there is a discrepancy in the contents of the seller's declaration, if the Certificate of Pedigree Registration for the yearling is not submitted to the Auction Holder by the day before the first day of the Market and it is judged necessary to do so by the Auction Holder. In such a case, the Auction Holder shall not refund to the seller the Sales Application Registration Fee. 5. In the event that the Auction Holder has received the Certificate of Pedigree Registration from the seller, the Auction Holder shall deliver the Certificate of Pedigree Registration to the buyer after the completion of settlement of the purchase price in full, and with regard to any horse retained by the seller as RNA (Reserve Not Attained), the Auction Holder shall return the Certificate of Pedigree Registration to the seller promptly after the auction of such horse. Provided, however, that in the cases stipulated in Paragraph 2, (1)(a) and (2) above, in which the Auction Holder has permitted late submission of the Certificate of Pedigree Registration, the Auction Holder shall deliver the Certificate of Pedigree Registration to the buyer after receiving the same from the seller. 6. Prior to the commencement of auction of a horse, the seller thereof shall submit to the Auction Holder documents showing the reserve price (the proposed minimum sales price previously determined by the seller, provided that such price excludes applicable consumption tax) and any illnesses or bad habits of such horse. The Auction Holder shall be responsible for keeping the reserve price in its possession throughout the auction of such horse. 7. After the procedures stipulated in the foregoing paragraph, the seller shall receive a horse hip number tag, attach the same to the horse, and follow the instructions of the Market attendants. Article 14. Selection of Horses The Auction Holder, with respect to horses in which an Application for Sale has been submitted, shall select the horses to be put up for auction at the Market in accordance with the selection standards set out in the Appendix. Article 15 Withdrawal from the Market 1. In the event that a horse that has been selected to be put up for auction must be absent due to an unavoidable reason such as illness or accident, the seller shall promptly notify the Auction Holder to that effect in writing, attaching a veterinarian's medical certificate, etc. The seller who neglects such procedure shall pay the Market Holder the penalty for absence stipulated in Article 28. 2. In the event that the Auction Holder receives a written notification pursuant to the foregoing paragraph, the Auction Holder shall, on the day of the Market, announce the horse's withdrawal by posting in the Market premises the horse number thereof recorded in the auction catalogue. Article 16. Applying for Purchase 1. Any person who wishes to purchase at the Market shall apply and register by providing its name (or company name) and address to the Auction Holder no later than five (5) days prior to the opening of the Market. 2. In the case stipulated in the foregoing paragraph, such a person who wishes to authorize an agent to act on his behalf shall provide the Auction Holder with a Purchase Agent Authorization in the form specified separately. 3. If such a person cannot complete the procedures provided in Paragraphs 1 and 2 above by the due date stipulated in Paragraph 1 due to unavoidable reasons, there may be cases in which the Auction Holder will accept such a person's registration in the event that such a person completes the procedures set forth in Paragraphs 1 and 2 above and provides a guarantor acceptable to the Auction Holder both at least 30 minutes prior to the opening of the Market. With the Auction Holder's specific approval, such provision of a guarantor may be exempted. 4. The Auction Holder will investigate the matters specified in the foregoing Paragraphs 1 through 3, and as a result thereof, there may be cases in which the Auction Holder will not accept such a person's application for purchase. Article 17. Announcements prior to the Commencement of Auction 1. In addition to those matters recorded in the auction catalogue, matters specified in Paragraph 6 below shall be announced orally based upon the written notification of the seller, prior to the auction of a horse. 2. In the event of any matters to be added, or if the seller becomes aware of any matters left out or errors in the matters recorded in the auction catalogue, the seller shall, prior to the commencement of the auction, request in writing to the Auction Holder for such addition or correction. 3. If the Auction Holder receives a request pursuant to the foregoing paragraph, the Auction Holder shall make announcements concerning such addition or correction from the auction rostrum. 4. In the event of any discrepancy in the matters announced, the seller shall settle the matter entirely on its own responsibility. 5. If a Certificate of Pedigree Registration has not yet been issued for a foal or yearling, such fact shall be announced prior to auctioning of such foal or yearling. 6. Matters referred to in Paragraph 1 above as the matters specified in Paragraph 6 shall be the following: (1) bad habits (cribbing, circling or weaving) (2) eye diseases (cataract, amaurosis or glaucoma), periodic ophthalmia (moonblindness) (3) history of laparotomy (4) history of surgery caused by bone fracture (5) gelding Article 18. Determination of Successful Bidder and Agreement of Purchase and Sale 1. If the auctioneer calls out the highest bid at least three (3) times, and no bidder makes a bid exceeding the amount thereof, after the fall of the auctioneer's hammer, the bidder making such highest bid shall be determined to be the successful bidder. Provided, however, that if the highest bid is less than the reserve price, there are cases in which the auctioneer declares that the horse will be retained by the Seller as RNA (Reserve Not Attained). 2. An Agreement of Purchase and Sale shall take effect at the time of determination of the successful bidder, and the auctioneer shall immediately announce the buyer's registration number and the amount of the successful bid. 3. No person shall be entitled to raise any objections after the auctioneer has determined the successful bidder. 4. Upon determination of the successful bidder, the successful bidder shall immediately execute the prescribed form of the Confirmation of Sale. The successful bidder and the seller must later execute an Agreement of Purchase and Sale in the specified form for the purpose of re-confirmation of the agreement for sale and purchase. Article 19. Settlement of Dispute in Determination of Successful Bidder 1. In the event of any disputes that may arise in the determination of the successful bidder, the persons involved shall be bound by the decision of the auctioneer. 2. In the event that the auctioneer makes a decision to re-commence the auction of the horse in dispute, only the direct parties involved in such dispute may participate in such re-commenced auction, provided however that if the auction price falls below the price as of when the dispute arose, any party may participate in the auction, and the auctioneer shall so announce. Article 20. Settlement of Purchase Price 1. The buyer shall pay, within ten (10) days immediately following the last day of the sale at the Market, the amount of the successful bid plus the applicable consumption tax thereon (hereinafter collectively referred to as the "Transaction Price") by wire-transfer to a bank account designated by the Auction Holder. Provided, however, that with regard to foals only, a settlement arrangement may be used, in which fifty percent (50%) of the Transaction Price is paid within ten (10) days immediately following the last day of the sale at the Market, and the remaining fifty percent (50%) is paid no later than March 31 of the following year. Settlement of the Transaction Price shall be made in Japanese Yen currency. 2. The Auction Handling Fee stipulated in Article 28 (2) shall be payable by the seller to the Auction Holder, and the Auction Holder shall collect such Auction Handling Fee from the Transaction Price received from the buyer and pay the remainder to the seller. 3. If the buyer fails to pay the Transaction Price by the due date, the buyer shall pay delay damages in the amount of twenty percent (20%) annual interest on the unpaid portion thereof to be calculated for the period from the day following such due date through the date of completion of the payment in full. The payment of delay damages shall be made by wire-transfer to the bank account designated by the Auction Holder. Article 21. Delivery of Horses 1. Delivery of the horse to the buyer shall be made at the date, time and place determined by the seller and the buyer through mutual consultation, after payment of the Transaction Price in full. 2. Until delivery of the horse, the seller shall maintain such horse with the same degree of care as if the horse were the property of the seller. 3. As to foals only, the seller shall complete the implantation of a micro-chip with such standards stipulated by the International Organization for Standardization (ISO) under its own expenses for the purpose of identifying each horse, no later than the time of delivery to the buyer. If, following the delivery of the horse, it turns out that the seller failed to complete such implantation, the seller shall be fully responsible for the settlement of any problem that may arise therefrom. Article 22. Rescission of Agreement 1. If the buyer or the seller breaches any of these Regulations or any specific provisions of the Agreement of Purchase and Sale, the other party shall be entitled to rescind the Agreement of Purchase and Sale pursuant to relevant laws or the provisions of the Agreement of Purchase and Sale. 2. If, within ten (10) days after the day following the date of sale at the Market, the buyer discovers any matter specified in Article 17 Paragraph 6 which was not announced pursuant to Article 17, and notifies the Auction Holder in writing of such effect with a medical certificate, etc. by a veterinarian, the buyer shall be entitled to rescind the Agreement of Purchase and Sale regarding such horse. 3. In the event of any defects (kashi) other than the matters stipulated in Article 17, or if the written notification of any defect is given after the period stipulated in the foregoing paragraph, the buyer shall not be entitled to rescind the agreement or otherwise raise any objections in connection therewith. Article 23. Announcements after Completion of Transactions Announcements to be made after completion of transactions shall be made by posting the following matters on the Market premises no later than the following day: (1) The number of horses auctioned, categorized by breed, sex, and age; (2) The number of horses on which transactions were concluded, categorized by breed, sex, and age; and (3) The highest, lowest, and average transaction price for horses in each of the categories specified in the foregoing item. Chapter 3. Attendants for Management of Market Business; Persons concerned with Transactions Article 24. Members for Management of Market Business The Auction Holder shall manage the business of the Market. The auctioneers, veterinarians and Market attendants shall be either employees of the Auction Holder or those persons designated or commissioned by the Auction Holder. Article 25. Prohibited Acts of Auctioneer No auctioneer shall perform any of the following acts: (1) Obstructing legitimate transactions in collusion with any seller or buyer, or allowing any seller or buyer to engage in bid rigging or any other wrongful act; (2) Receiving money or any other benefit from any seller or buyer in connection with the auctioneer's professional duties; (3) Becoming a party to a purchase or sale; (4) Intentionally preventing the establishment of a successful bid; (5) Calling out bids in argot or in any other manner not understandable to all; and (6) Disclosing to any other person a reserve price recorded in a reserve price document. Article 26. Prohibition of Brokerage Business No brokerage business shall be permitted in the Market. Chapter 4. Prepayment Deposit and Fees to be Collected Article 27. Deposits No deposit of a prepayment by a buyer is required. Article 28.Fees to be Collected The types and amounts of fees to be collected shall be as follows: (1) Sale Application Registration Fee: Members of Japan Racing Horse Association: Fifty two thousand five hundred yen (52,500yen) including applicable consumption tax per horse. Those other than members of Japan Racing Horse Association: One hundred five thousand yen (105,000yen) including applicable consumption tax per horse. The Sale Application Registration Fee under this sub-paragraph (1) will not be refunded under any circumstances. (2) Auction Handling Fee: For foals, four one-hundredths (4/100) of the Transaction Price, payable by the seller. For yearlings, five one-hundredth (5/100) of Transaction Price, payable by the seller. (3) Auction Handling Fee in the case of RNA: For foals, one and a half-hundredth (1.5/100) of the Reserve Price, payable by the seller of a horse of RNA (i.e., a horse in respect to which the highest bid did not reach the reserve price and therefore no Agreement of Purchase and Sale was entered into). For yearlings, two and one half-hundredth (2.5/100) of the Reserve Price, payable by the seller of a horse of RNA. (4) Premium for Market General Insurance Applied to foals only, the Premium for Market General Insurance shall be collected through deduction from the Purchase Price, payable by the seller. (5) Penalty for Absence Five hundred thousand yen (500,000yen) per horse, provided that this penalty shall not apply if such absence occurred due to any good cause for unavoidable reasons such as sicknesses or accidents of the horse and such effect was promptly notified to the Auction Holder together with a relevant veterinarian certificate. Chapter 5. Miscellaneous Provisions Article 29. Measures in case of Breach of Agreement 1. If an Agreement of Purchase and Sale concerning a horse is rescinded or terminated due to a breach of the Agreement by the buyer, such buyer shall pay to the Auction Holder as a penalty an amount equivalent to fifty one-hundredths (50/100) of the Transaction Price. Provided, however, that with regard to foals, if the Auction Holder has already received fifty percent (50%) of the Transaction Price, such amount may be applied to such penalty. 2. The penalty collected by the Auction Holder shall be paid to the seller of the horse in question. Article 30.Insurance on Foals With regard to any foal sold at the Market, the Auction Holder shall, at the expense of the seller thereof, take out Market General Insurance on the foal, and the coverage shall be the entirety of the Transaction Price. Article 31. Matters regarding Maintenance of Order on Market Premises There may be cases in which the Auction Holder refuses entry into or orders to leave the Market premises to any person to whom any of the following apply: (1) A person who violates these Regulations; (2) A person who spreads false rumors regarding any horse at the Market; (3) A person who obstructs the business of the Market or disturbs order, or who is likely to do so; (4) A person who intentionally damages Market facilities or makes harm to any horse, or who is likely to do so; and (5) A person who does not follow the instructions of Market attendants. Article 32. Jurisdiction In the event that any dispute arises in connection with the transactions regarding horses at the Market, the parties shall submit exclusively to the jurisdiction of the Sapporo District Court. Article33. Effective Date These Regulations shall become effective as from April 1, 1998. Supplementary Provision The amendments to these Regulations shall take effect as from April 1, 2009 Appendix Selection Standards for Horses for Auction at the Market The Auction Holder shall select horses (foals or yearlings of thoroughbred) to be put up for auction at the Market in accordance with the following: 1.The Horse Selection Committee (1) (1) The members of the Horse Selection Committee (the "Committee") shall be appointed by the Chairman of the Japan Racing Horse Association (the "Association") based upon the approval of the Board of Directors of the Association. (2) (2) The number of the members of the Committee shall be nine (9), two (2) of whom shall be appointed by the Chairman of the Association from among those who have profound learning and experience with thoroughbred horses. (3) The quorum of the Committee shall be the attendance by the majority of the members. 2.Method of Selection The Committee will select such horses with respect to their pedigree based upon the priority of the races attached hereto ("Selection Standards") in accordance with the following procedures, and with due consideration to the sire of the horse, the horses ranked high shall be selected within the number of horses available for auction at the Market: (1) With respect to the racing performance of the broodmare and its close family members, the Committee will, in accordance with the Selection Standards, put the horse with more winners of important races among its broodmare and family members into a higher rank. (2) With respect to the evaluation of sires, the Committee will determine the ranks of sires in accordance with the racing results of the progeny of sires based upon the then current sire ranking (as published by Japan Racing Association) and the Selection Standards. With respect to freshman sires, the Committee will separately determine the ranks with due consideration to their pedigree, racing results and prospect as a stallion. (3) In conducting the selection activities, the Committee may use a Black-type prepared based upon the Selection Standards in order to facilitate the evaluation of pedigree. (Note) A "Black-type" is a written description of pedigree adopted in the catalogue for horses put up for auction at the Market, in which horses of their family who won or placed in major races in and outside Japan are described in accordance with the Selection Standards, together with the description of broodmare pedigree. 3.Miscellaneous (1) In the event that the Committee believes that the public nature of the Market is impaired due to, for example, an unreasonably significant number of horses owned by a specific owner being put up for auction at the Market as a result of horse-ranking determined in the course of selection activities, the Committee may exclude certain horse(s) owned by such specified owner with the consent of such owner. (2) For those horses not selected, the Committee or the Association will notify the owner of such a horse the reason for not selecting the horse for auction at the Market. Attachment Selection Standards (Priority of the Races) A priority shall be given to the races in the following order: I. 1st Priority (1) JRA: Winners of races rated by G1, G2, G3, JPN1, JPN2 or JPN3 (hereinafter "JRA Principal Race") (2) NAR: Winners of any Dirt Graded Race (DGR), any graded race in the Minami-kanto Region held prior to the commencement of DGR, any of the 3 major races in the Tokai Region (Tokai Derby, Tokai Kikkasho and Tokai Ohkasho) or major races in any other regions in which the prize money for the winner is 30,000,000yen or more (3) Foreign: Winners of any International GI, GII or GIII race II. 2nd Priority (1) JRA: Winners of any Open Tokubetsu Races held in or after 1984, excluding steeplechase races, or 2nd or 3rd in any JRA Principal Race (2) NAR: 2nd or 3rd in any DGR, or winners of any major race other than those listed in the 1st Priority in which the prize money for the winner is10,000,000yen (3) Foreign: 2nd, 3rd or 4th in any International GI, GII or GIII race, or winners of any listed race in the UK, Ireland, France, Germany, Italy, Australia or New Zealand or of any general stakes race in North America or any major races in PART I nations other than those specified above (namely, Argentina, Brazil, Chile, South Africa, UAE and Peru). III. 3rd Priority (1) JRA: Winners of any Tokubetsu race, 2nd or 3rd in any Open Tokubetsu race, 4th or 5th in any JRA Principal Race, any horse which won 4 or more races excluding steeplechase races or any horse which won 3 or more steeplechase races (2) NAR: 4th or 5th in any DGR, or 2nd or 3rd in any graded race in the Minami-kanto region held prior to the commencement of DGR, any of the 3 major races in the Tokai Region or any major race in any other regions in which the prize money for the winner is 30,000,000yen or more, or winners of any general graded race other than those NAR races listed in I and II above (3) Foreign: 2nd or 3rd in any listed race in the UK, Ireland, France, Germany, Italy, Australia or New Zealand, or in any general stakes race in North America, or any major race in PART I nations other than those specified above (namely, Argentina, Brazil, Chile, South Africa, UAE and Peru), or winners of any major races in any other nations IV. 4th Priority Any horse other than those under the foregoing categories specified in I through III.