June 6, 2005

Dear Members of the AHA Board of Directors,

In this letter, I want to share with you the results of the legal review of the Sweepstakes Trust Agreement. You are the first to receive this information. I must inform you, though, that the attachment from our legal counsel is confidential and should not be disseminated to others. As you know, in BOD Motion #20-5/14/05, we asked the AHA Legal Review Committee to perform a legal review of the proposed modifications to the Breeders Sweepstakes program. The primary issues requested in the legal review focused on the potential for liability if the proposed rule changes are made and who has ultimate authority over the Sweepstakes program. We have received the legal opinion from Holland & Hart, which I am forwarding to you along with a copy of the Sweepstakes Trust Agreement, amended as of 8-24-91.

A significant issue, which we sought guidance on, was who had the final authority over the Breeders Sweepstakes program. It is the law firm's opinion, based on a review of the Sweepstakes Trust Agreement and resolutions, that the AHA Board of Directors has the ultimate authority over the Sweepstakes program. The 1984 Board resolution creating the Sweepstakes program dictates in one section that the Sweepstakes Commission "make recommendations to the Board for the promotion, regulation, operation and management of the Sweepstakes." Per the Sweepstakes Trust Agreement, the rules and regulations "may be changed, altered, amended or modified from time to time by the Board of Directors."

Two dates have been mentioned when discussing the subject of Sweepstakes: 1984, when the Trust was created, and 1991 when IAHA amended the Trust Agreement to reflect the reincorporation in Colorado. Our legal review states that it "does not appear that the substantive terms in the Trust Agreement have been amended or modified since its creation in 1984." The legal opinion adds, "In fact, in 1991 the IAHA, upon reincorporation in Colorado, adopted and agreed to fulfill the rights and obligations of the 1984 Trust Agreement which included the requirement that the Board of Directors must approve any changes to the Sweepstakes rules and regulations."

However, the most significant issue for both the Board of Directors and the Sweepstakes Commission was the potential liability for making the proposed changes. The law firm concluded that the risk of liability is not sufficient to reject rule changes deemed reasonable and necessary for the continued success of the Sweepstakes program.

With the legal review completed, I sincerely hope that we can move on in a positive manner. It is important to point out that we must be careful that the issue of authority does not override our primary objective: To improve the Sweepstakes program and be more responsive to our general membership which includes breeders and exhibitors.

I sensed at the March meeting that the Board embraces changes within the Sweepstakes program. I was tremendously impressed with the sincerity and openness displayed by the Sweepstakes Commission about changes and amendments to their Sweepstakes proposal. Within days after you receive this communication, I am sending a letter to the Sweepstakes Commission outlining what I am informing you about in this letter. I will let them know that all of us - myself, the Executive Committee and the Board of Directors, are solidly behind their efforts. Our Association has "awakened" to the fact that if we are to survive as a breed and as an Association, we must make changes. The process we are going through now is a painful one. Change is never easy, particularly when there have been few changes in a number of years. We must remember our fiduciary responsibility to AHA by viewing our Association as "a business" and embracing "best practices" in all that we do. It is imperative that we do not go down the path of letting debate and controversy become our focus while we lose track of the important task of rebuilding our Association and our breed. We simply cannot afford to be sidetracked!

We will receive updated information from the Sweepstakes Commission prior to July 25, in plenty of time for review before our August meeting. It is important for us as a governing body to remember that our role here is not one of doing the Commission's work but to function as an oversight body to do what is fiscally best for the Association. The Commission members are charged with making recommendations for amending and changing program rules as needed. While our approval is needed, I do not want to see us get bogged down in doing the Commission's work.

I applaud the leadership and actions displayed by the Sweepstakes Commission. I ask that you view the initiatives, even if you disagree with some of them, as proactive measures for our breed and Association. It is imperative that we remain focused on programs and initiatives that will help turn our Arabian horse industry around. We are making progress: In our minds, in our hearts and in our actions. Let's keep it up.

As always, I am available to talk with any of you if you need additional information or clarity.



Sincerely,