A lawsuit filed by a lender against a thoroughbred racehorse owner for an alleged default on a $23 million loan doesn’t, by itself, seem all that intriguing.
But it sure is when the owner is Ahmed Zayat, the horse is American Pharoah, and one of the public documents in the case is the purchase agreement that Orpendale, the buyer of American Pharoah’s breeding rights, entered into in 2015. The revelation of the agreement being part the lawsuit record was first reported earlier this year by Ray Paulick, whose Paulick Report is one of the horse racing industry’s leading sources for news in the sport.
The specific timing of the signing of this document is key: Jan. 15, 2015. That’s only a couple of days before the annual Eclipse Awards, and the contract, we now know, added a $1 million bonus for Zayat when Pharoah captured the award as 2-year-old champion.
Zayat’s horse then kicked off his epic run, netting his owner another $1.5 million for winning the Grade 1 race Arkansas Derby.
Next came the Triple Crown wins, providing a $3 million bonus to Zayat for the Kentucky Derby, $2 million for the Preakness, and $2 million for the Belmont Stakes.
But Pharoah wasn’t done. The Haskell Invitational at Monmouth Park, another Grade 1 race, brought Zayat another $2 million. Finally, Pharoah’s career concluded with a win at the Breeders’ Cup Classic, adding another $2 million for Zayat’s wallet.
Then, in what was a mere formality, American Pharoah reprised his Eclipse Award achievement by adding “best 3-year-old champion” to his resume.
Zayat picked up another $2 million when American Pharoah was named champion 3-year-old male, sending the horse off to stud with $15.5 million in incentives on top of the initial $8 million sale price.
More American Pharoah sale details
The agreement also mandated that American Pharoah would stick to training with legendary trainer Bob Baffert for the rest of his career — not exactly a big sacrifice on Zayat’s part.
What if the horse had been injured or underperforming? The agreement stipulated that a panel of Zayat, Baffert, and Orpendorf representative Paul Shanahan would meet to discuss the horse’s future.
“Each person shall be entitled to one vote,” the agreement indicates.
Not that anyone would be too surprised, but this deal mandated that American Pharoah would retire at the end of the 2015 racing season. The location for the horse to stand at stud was Ashford Stud in Woodford County, Kentucky.
Zayat was allowed to continue to race under “his colors,” while the deal clarified that Zayat was entitled to “all racing income, awards, and trophies” while also being responsible for all expenses.
Breeding rights lead to a legal battle
The contract details 11 “annual fully-transferable lifetime Northern Hemisphere breeding rights.”
Four went to Justin Zayat, the owner’s son, and five more went to other family members. The last two went to Baffert.
Each “breeding right” allowed the holder to breed American Pharoah with one thoroughbred mare in each breeding season.
Each of the rights could be sold or transferred, but if any such sale was contemplated, Orpendorf officials would have to be notified and given up to three days to match the offer as a “right of first refusal.”
Those nine breeding rights are the subject of the lawsuit mentioned at the start of this article. The lender alleges that Zayat’s family sold the rights for $3.3 million — rights that the lender says were collateral for a $23 million loan and whose proceeds should have been used to partly repay the debt.
Last week, Zayat’s attorneys filed a “motion to dismiss” the lawsuit based on the claim that the lender “did not understand the [horse racing] industry.”
The agreement is detailed enough that it stipulated that American Pharoah would not run in the 1½-mile Belmont Stakes unless the horse won the first two legs of the Triple Crown.
“Neither party shall be authorized to make any press release relating to the sale of the Horse until the Horse is retired from racing,” the agreement stipulates.
It seems a bit incongruous for a fabled used-car phrase to be part of a purchase agreement for such a magnificent animal, but the buyer acknowledges that its veterinarian had thoroughly inspected the horse — and that the buyer agrees to the purchase “as is” and “with all faults.”
Photo by Barbara Kalbfleisch / Shutterstock.com
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