Robert Evans Restricted Stock Agreement


    CHURCHILL
      DOWNS INCORPORATED

    RESTRICTED
      STOCK AGREEMENt

     

    65,000
      SHARES

     

    THIS
      RESTRICTED STOCK AGREEMENT (the “Agreement”) is made as of the 18th day of July,
      2006 by and between Robert L. Evans (the “Executive”), and Churchill Downs
      Incorporated (the “Company”), a Kentucky corporation with its principal place of
      business at 700 Central Avenue, Louisville, Kentucky 40208. 

     

    WITNESSETH:

     

    WHEREAS,
      the Company has identified the Executive as the successor to the current
      President and Chief Executive Officer who is stepping down from such office
      effective August 14, 2006;

     

    WHEREAS,
      the Company has entered into an employment agreement (the “Employment
      Agreement”) between the Company and the Executive pursuant to which the
      Executive will become the President and Chief Executive Officer of the Company
      effective August 14, 2006 (the “Start Date”);

     

    WHEREAS,
      under the terms of the Employment Agreement, and as a material inducement to
      enter into the Employment Agreement, the Executive is to receive certain grants
      of equity compensation as a consequence of his employment by the Company;


     

    WHEREAS,
      the Compensation Committee (the “Committee”) of the Board of Directors of the
      Company at its meeting on July 12, 2006 authorized and directed the Company
      to
      make an award of stock to the Executive under the terms and conditions set
      forth
      in this Agreement; and

     

    WHEREAS,
      the parties desire to enter into this Agreement to set forth the terms and
      conditions of such award.

     

    NOW,
      THEREFORE, in consideration of the foregoing and the mutual undertakings herein
      contained, and for other good and valuable consideration, the mutuality, receipt
      and sufficiency of which are hereby acknowledged, the parties agree as
      follows:

     

    1. Grant
      of Stock.
      Subject
      to the further terms, conditions and restrictions contained in this Agreement,
      the Company hereby grants to the Executive 65,000 shares (the “Shares”) of the
      Company’s common stock, no par value per share (the “Common Stock”), in
      consideration for services to be performed by the Executive as an employee
      of
      the Company and its subsidiaries. As long as the Shares are subject to the
      Restrictions set forth in Section 4 of this Agreement, such shares shall be
      deemed to be, and are referred to in this Agreement as, the “Restricted
      Shares”.

     

    2. Certificates
      for Shares.
      Certificates evidencing Restricted Shares shall be deposited with the Company
      to
      be held in escrow until such Shares are released to the Executive or forfeited
      in accordance with this Agreement. The Executive shall, simultaneously with
      the
      execution and delivery of this Agreement, execute and deliver to the Company
      a
      stock power in blank with respect to the Restricted Shares. If any Restricted
      Shares are forfeited, the Company shall direct the transfer agent of the Common
      Stock to make the appropriate entries in its records showing the cancellation
      of
      the certificate or certificates for such Restricted Shares.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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      3. Adjustments
        in Restricted Shares.
        

    

    
      	 	
              (a)

            	
              In
                the event of any change in the outstanding Common Stock by reason
                of a
                stock dividend or distribution (or distribution on Common Stock of
                any
                security convertible into securities of the Company), recapitalization,
                merger, consolidation, split-up, combination, subdivision,
                reclassification, exchange of shares or the like, the Committee shall
                make
                equitable adjustments in the Restricted Shares so that the shares
                represent the same percentage of the Company’s equity as was the case
                immediately prior to such change. Any new, additional or different
                securities to which the Executive shall be entitled in respect of
                Restricted Shares by reason of such adjustment shall be deemed to
                be
                Restricted Shares and shall be subject to the same terms, conditions
                and
                restrictions as the Restricted Shares so
                adjusted.

            


    

     

    
      	 	
              (b)

            	
              In
                the event Company merges, consolidates or effects a share exchange
                with
                another entity, or all or a substantial portion of Company’s assets or
                outstanding capital stock are acquired (whether by merger, purchase
                or
                otherwise) by another entity (any such entity being hereafter referred
                to
                as the “Successor”) each of the Restricted Shares shall automatically be
                converted into and replaced by shares of common stock, or such other
                class
                of securities having rights and preferences no less favorable than
                the
                Restricted Shares, of the Successor, and the number of Restricted
                Shares
                shall be correspondingly adjusted, so that Executive shall have the
                right
                to that number of shares of common stock of the Successor that have
                a
                value equal, as of the date of the merger, conversion or acquisition,
                to
                the value, as of the date of the merger, conversion or acquisition,
                of the
                Restricted Shares.

            


    

     

    4. Restrictions.
      During
      applicable periods of restriction determined in accordance with Section 6 of
      this Agreement, Restricted Shares, and all rights with respect to such Shares,
      may not be sold, assigned, transferred, exchanged, pledged, hypothecated or
      otherwise encumbered or disposed of and shall be subject to the risk of
      forfeiture contained in Section 5 of this Agreement (such limitations on
      transferability and risk of forfeiture being herein referred to as the
“Restrictions”), but the Executive shall have all other rights of a stockholder;
provided,
      however, that, until such time as the Restrictions lapse, the Executive shall
      not have the right to vote the Restricted Shares; receive dividends thereon;
      or
      purchase any securities pursuant to that certain Rights Agreement dated as
      of
      March 19, 1998, between the Company and The Fifth Third Bank (as successor
      Rights Agent to Bank of Louisville), as amended, and as the same may be amended,
      modified or supplemented from time to time.

     

    5. Forfeiture
      of Restricted Shares.
      Subject
      to Section 6 below, in the event that the Executive’s employment with the
      Company and its subsidiaries terminates for any reason, such event shall
      constitute an “Event of Forfeiture” and all Shares which at that time are
      Restricted Shares shall thereupon be forfeited by the Executive to the Company
      without payment of any consideration by the Company, and neither the Executive
      nor any heir, personal representative, successor or assign of the Executive
      shall have any right, title or interest in or to such Restricted Shares or
      the
      certificates evidencing the same. 

    
       

      
        
          
          

        

        
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    6. Lapse
      of Restrictions.
      

     

    (a)  The
      Restrictions on the respective Restricted Shares shall lapse upon the
      satisfaction of the requirements described in Subsections (i) and (ii)
      below:

     

    (i) for
      ***
      (**)
      consecutive trading days after the Start Date, the Fair Market Value of a share
      of the Common Stock being equal to or greater than *-*, * percent (***%) of
      the
      Fair Market Value of a share of Common Stock as of July 18, 2006 (the “Share
      Price Requirement”); and

     

    (ii) for
      the
      applicable number of Restricted Shares per the schedule immediately below,
      the
      later of: (A) the corresponding date as listed on the schedule below, or (B)
      the
      satisfaction of the Share Price Requirement; provided, however, that such
      corresponding date or Share Price Requirement occurs prior to a Termination
      of
      Employment, but subject to Section 6(c) below: 

     

    


    
      	
              Date

            	
              #
                of Shares for which Restrictions lapse and
                

              which
                become non-forfeitable

               

            
	
              September
                30, 2006

            	
              1,625

            
	
              December
                31,2006

            	
              3,250

            
	
              March
                31, 2007

            	
              3,250

            
	
              June
                30, 2007

            	
              3,250

            
	
              September
                30, 2007

            	
              3,250

            
	
              December
                31, 2007

            	
              3,250

            
	
              March
                31, 2008

            	
              3,250

            
	
              June
                30, 2008

            	
              3,250

            
	
              September
                30, 2008

            	
              3,250

            
	
              December
                31, 2008

            	
              3,250

            
	
              March
                31, 2009

            	
              3,250

            
	
              June
                30, 2009

            	
              3,250

            
	
              September
                30, 2009

            	
              3,250

            
	
              December
                31, 2009

            	
              3,250

            
	
              March
                31, 2010

            	
              3,250

            
	
              June
                30, 2010

            	
              3,250

            
	
              September
                30, 2010

            	
              3,250

            
	
              December
                31, 2010

            	
              3,250

            
	
              March
                31, 2011

            	
              3,250

            
	
              June
                30, 2011

            	
              3,250

            
	
              August
                14, 2011

            	
              1,625

            


    

    _______________________

    *
      Confidential information omitted and filed separately with the Securities and
      Exchange Commission under a Confidential Treatment Request.

     

    
       

      
        
          
          

        

        
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    (b)  Upon
      the
      lapse of the Restrictions in accordance with this Section, the Company shall,
      as
      soon as practicable thereafter, deliver to the Executive a certificate (without
      any restrictive endorsement referring to such Restrictions) for the Shares
      that
      are no longer subject to such Restrictions.

     

    (c)  In
      the
      event the Executive’s employment is terminated other than for Cause (as defined
      in the Employment Agreement) or if the Executive resigns for Good Reason (as
      defined in the Employment Agreement) for purposes of determining any lapse
      of
      the Restrictions in (a) above and the forfeiture of Shares, if any, under
      Section 5 and Section 6, the Executive’s employment shall be considered to have
      continued through the last day of the calendar quarter in which his Termination
      of Employment occurs. 

     

    (d)  In
      the
      event of a Change in Control during the Employment Term, the Restrictions shall
      immediately lapse on fifty percent (50%) of the Shares then-subject to
      Restrictions. The Shares that are subject to the lapse of Restrictions pursuant
      to this Section 6(d) shall be taken pro-rata from each tranche of the
      then-Restricted Shares, and the remaining portion of each tranche shall be
      subject to the lapse of Restrictions according to Section 6(a) above, subject
      to
      potential accelerated lapsing of Restrictions pursuant to Section 6(e) below.
      

     

    (e)  If,
      during the 2-year period following a Change in Control during the Employment
      Term: (i) the Executive is terminated by the Company other than for Cause,
      death
      or Disability, or (ii) the Executive voluntarily resigns for Good Reason, the
      Restrictions on all then-Restricted Shares shall fully lapse, as of the
      Termination of Employment. 

     

    7. Withholding
      Requirements.
      Whenever Restrictions lapse with respect to Restricted Shares, the Company
      shall
      have the right to (i) withhold from sums due to the Executive; (ii) require
      the
      Executive to remit to the Company; or (iii) retain Shares otherwise deliverable
      to the Executive; in an amount sufficient to satisfy any Federal, state or
      local
      withholding tax requirements prior to making such payments or delivering any
      such Shares to the Executive.

     

    8. Effect
      Upon Employment.
      Nothing
      contained in this Agreement shall confer upon the Executive the right to
      continue in the employment of the Company or its subsidiaries or affect any
      right that the Company or its subsidiaries may have to terminate the employment
      of the Executive.

     

    9. Amendment.
      This
      Agreement may not be amended, modified or supplemented except with the consent
      of the Committee and by a written instrument duly executed by the Executive
      and
      the Company.

     

    10. Binding
      Effect.
      This
      Agreement shall be binding upon and shall inure to the benefit of the parties
      hereto and their heirs, personal representatives, successors and assigns.
      Executive accepts the award of Shares hereunder subject to all of the terms
      and
      conditions of this Agreement. Executive hereby agrees to accept as binding,
      conclusive and final all reasonable decisions and interpretations of the
      Committee upon any questions arising under this Agreement, including without
      limitation, the interpretation of the Restrictions imposed upon the
      Shares.

    
       

      
        
          
          

        

        
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    11. Notices.
      Notices
      shall be deemed delivered if delivered personally or if sent by registered
      or
      certified mail to the Company at its principal place of business, as set forth
      above, and to Executive at the address as shall most currently appear on the
      records of the Company, or at such other address as either party may hereafter
      designate in writing to the other.

     

    12. Investment
      Representation.
      If the
      Shares awarded to the Executive under this Agreement are not registered under
      the Securities Act of 1933, as amended, pursuant to an effective registration
      statements, the Executive, if the Committee shall reasonably deem it advisable,
      may be required to represent and agree in writing (i) that any Shares acquired
      by the Executive under this Agreement will not be sold except pursuant to an
      effective registration statement under the Securities Act of 1933, as amended,
      or pursuant to an exemption from registration under such Act, and (ii) that
      the
      Executive has acquired such Shares for his own account and not with a view
      to
      the distribution thereof.

     

    13. Compliance
      with Section 16(b).
      This
      Agreement and the grant of Shares hereunder is intended to comply with all
      applicable conditions of Rule 16(b)-3 of the General Rules and Regulations
      under
      the Securities Exchange Act of 1934, as amended. All transactions involving
      the
      Company’s executive officers are subject to such conditions, regardless of
      whether the conditions are expressly set forth in this Agreement. Any provision
      of this Agreement that is contrary to a condition of Rule 16b-3 shall not
      apply.

     

    14. Effective
      Date and Approval.
      It is
      the intent of the parties that the compensation payable to the Executive with
      respect to the Shares constitute qualified performance based compensation under
      Internal Revenue Code §162(m) and regulations issued thereunder. The effective
      date of the award of the Shares is July 18, 2006, and is subject to approval
      by
      stockholders of the Company holding not less than a majority of the shares
      present and voting at the Company’s 2007 Annual Meeting. In the event this award
      of Shares is not approved by stockholders of the Company, this Agreement shall
      be of no effect and the award of Shares hereunder shall be null and void. The
      Company agrees to use its reasonable best efforts to procure shareholder
      approval of the award of the Shares, including, without limitation, placing
      such
      matter on the agenda for the Company’s 2007 annual meeting, including
      appropriate disclosures in the proxy statement for such meeting, recommending
      to
      Company shareholders the approval of such Shares award and soliciting proxies
      for the approval of such Shares award.

     

     

    
       

      
        
          
          

        

        
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    15. Code
      Section 409A.
      It is
      intended that any amounts payable under this Agreement and the Company’s and
      Executive’s exercise of authority or discretion hereunder shall comply with Code
      Section 409A (including the Treasury regulations and other published guidance
      relating thereto) so as not to subject Executive to the payment of any interest
      or additional tax imposed under Code Section 409A. To the extent any amount
      payable under this Agreement would trigger the additional tax imposed by Code
      Section 409A, the Agreement shall be modified to avoid such additional
      tax. 

     

     

    16.  Registration
      of Shares. 
      The Company shall use its reasonable best efforts to file, within 90 days
      following the execution of this Agreement, a registration statement with the
      Securities and Exchange Commission (the "Commission") pursuant to the Securities
      Act of 1933, as amended (the "Act"), covering the Shares, and thereafter to
      cause such registration statement to become effective in accordance with the
      Act
      and the rules and regulations adopted by the Commission thereunder

     

    17. Compliance
      With Other Laws And Regulations.
      The
      rights of the Executive and the obligations of Company under this Agreement
      shall be subject to all applicable federal and state laws, rules and regulations
      and to such approvals by any government or regulatory agency as may be required.
      Company shall not be required to issue or deliver certificates for shares of
      Common Stock before [i] the listing of such shares on any stock exchange or
      over-the-counter market, such as NASDAQ, on which the Common Stock may then
      be
      listed or traded, and [ii] the completion of any registration or qualification
      of any governmental body which Company shall, in it sole discretion, determines
      to be necessary or advisable. The Company agrees to use its best efforts to
      procure any such listing, registration or qualification.

     

    18. Severability.
      The
      invalidity or unenforceability of any provision of the Agreement shall not
      affect the validity or enforceability of the remaining provisions of the
      Agreement, and such invalid or unenforceable provision shall be stricken to
      the
      extent necessary to preserve the validity and enforceability of the Agreement
      with the parties agreeing in such event to make all reasonable efforts to
      replace such invalid or unenforceable provision with a valid provision that
      will
      place the parties in approximately the same economic position as contemplated
      hereunder.

     

    19. Governing
      Law; Jurisdiction.
      This
      Agreement shall be governed by the laws of the Commonwealth of Kentucky. The
      Executive consents to the exclusive jurisdiction of the courts of the
      Commonwealth of Kentucky and of any federal court located in Jefferson County,
      Kentucky in connection with any action or proceeding arising out of or relating
      to this Agreement, any document or instrument delivered pursuant to or in
      connection with this Agreement, or any breach of this Agreement or any such
      document or instrument.

     

    20. Entire
      Agreement.
      This
      Agreement contains the entire agreement between the parties hereto with respect
      to the subject matter hereof.

     

    21. Capitalized
      Terms.
      Capitalized terms not otherwise defined in this Agreement shall have the meaning
      given them in the Employment Agreement.

     

    22. Counterparts
      and Signatures.
      This
      Agreement may be signed in counterparts, each of which shall be an original,
      with the effect as if the signatures thereto and hereto were upon the same
      instrument. Signatures conveyed by facsimile or PDF file shall constitute
      original signatures.

     

    


    (Signature
      page follows.)

    
       

      
         

        
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    IN
      WITNESS WHEREOF, the Company and the Executive have executed and delivered
      this
      Agreement as of the date first above written.

     

    


    
      	 	
              ROBERT
                L. EVANS

               

            
	 	
              /s/
                Robert L. Evans   

               

            
	 	 
	 	
              CHURCHILL
                DOWNS INCORPORATED

               

              By:
                 /s/
                Robert L. Fealy   

              Robert
                L. Fealy,

              Authorized
                Representative

              of
                the Board of Directors

            


    

     

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