Document:

Robert Evans Stock Option Agreement

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    10-Q

    CHURCHILL
      DOWNS INCORPORATED

     

    STOCK
      OPTION AGREEMENT

     

    130,000
      OPTIONS

     

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

    

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

     

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

     

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

     

    
      	1.  	
              DEFINITIONS.
                

            

    

     

    
      	a.  	
              “Board”
                means Company’s Board of Directors.

            

    

     

    
      	b.  	
              “Change
                in Control”
                shall have the meaning ascribed to such term in the Employment
                Agreement.

            

    

     

    
      	c.  	
              “Code”
                means the Internal Revenue Code of 1986, as
                amended.

            

    

     

    
      	d.  	
              “Common
                Stock”
                means Company’s common stock, no par value, or the common stock or
                securities of a Successor that have been substituted therefore pursuant
                to
                Section 10.

            

    

     

    
      	e.  	
              “Company”
                means Churchill Downs Incorporated, a Kentucky corporation, with
                its
                principal place of business at 700 Central Avenue, Louisville, Kentucky
                40208.

            

    

     

    
      	f.  	
              “Disability”
                has the meaning ascribed to such term in the Employment
                Agreement.

            

    

     

    
      
      

      
        

      

    

     

    
    

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      	g.  	
              “Employment
                Agreement”
                has the meaning set forth in the recitals
                above.

            

    

     

    
      	h.  	
              “Fair
                Market Value”
                has the meaning given such term in the Employment
                Agreement.

            

    

     

    
      	i.  	
              “Option
                Price”
                means the price to be paid for Common Stock upon the exercise of
                an
                option, in accordance with Section
                3.

            

    

     

    
      	j.  	
              “Executive’s
                Representative”
                means the personal representative of Executive’s estate, and after final
                settlement of Executive’s estate, the successor or successors entitled
                thereto by law.

            

    

     

    
      	k.  	
              “Subsidiary”
                means any corporation or other entity that at the time an option
                is
                granted under the Plan qualifies as a subsidiary of Company as defined
                by
                Code Section 424(f).

            

    

     

    
      	l.  	
              “Successor”
                means the entity surviving a merger or consolidation with Company,
                or the
                entity that acquires all or a substantial portion of Company’s assets or
                outstanding capital stock (whether by merger, purchase or
                otherwise).

            

    

     

    
      	2.  	
              GRANT
                OF NON-QUALIFIED STOCK OPTION.
                Company hereby grants to the Executive the right and option to purchase
                from Company an aggregate of 130,000 shares of Common Stock (the
                “Options”), which Options are not intended to constitute an incentive
                stock option under Code §422.

            

    

     

    
      	3.  	
              OPTION
                PRICE.
                The price to be paid for the Common Stock upon exercise of the Options
                is
                the Fair Market Value of Company’s Common Stock as of July 18,
                2006.

            

    

     

    
      	4.  	
              OPTION
                EXPIRATION.
                The Options shall expire, and cease to be exercisable, at the earliest
                of
                the following times:

            

    

     

    
      	a.  	
              August
                14, 2012; 

            

    

     

    
      	b.  	
              the
                date of Executive’s Termination of Employment for Cause (as defined in the
                Employment Agreement);

            

    

     

    
      	c.  	
              the
                date of the Executive’s voluntary Termination of Employment without Good
                Reason (as defined in the Employment
                Agreement);

            

    

     

    
      	d.  	
              one
                (1) year after the Executive’s Termination of Employment as a result of
                death or Disability (as defined in the Employment Agreement);
                or

            

    

     

    
      	e.  	
              if
                the Executive’s employment terminates other than a termination under (b),
                (c) or (d) of this Section 4, the later of: (i) the last day of the
                calendar quarter in which the Executive’s Termination of Employment occurs
                or (ii) the day thirty (30) days after such Termination of Employment.
                

            

    

     

    
      
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      	5.  	
              VESTING
                OF OPTIONS.

            

    

     

    
      	a.  	
              Vesting
                Period.
                No part of the Options may be exercised unless and until such Options
                or
                part thereof shall have become vested based upon the continuous employment
                of Executive after August 14, 2006. The Options shall vest and become
                exercisable as follows:

            

    

     

    
      	
              Vesting
                Date

               

            	
              Number
                of Options to Vest

               

            
	
              September
                30, 2006

            	
              5,417

            
	
              December
                31, 2006

            	
              10,833

            
	
              March
                31, 2007

            	
              10,833

            
	
              June
                30, 2007

            	
              10,833

            
	
              September
                30, 2007

            	
              10,833

            
	
              December
                31, 2007

            	
              10,833

            
	
              March
                31, 2008

            	
              10,833

            
	
              June
                30, 2008

            	
              10,833

            
	
              September
                30, 2008

            	
              10,833

            
	
              December
                31, 2008

            	
              10,834

            
	
              March
                31, 2009

            	
              10,834

            
	
              June
                30, 2009

            	
              10,834

            
	
              August
                14, 2009

            	
              5,417

            

    

    

    
      	 	
              In
                the event: (i) the Executive’s employment is terminated by the Company
                other than for Cause, death or Disability or (ii) the Executive resigns
                for Good Reason, for purposes of determining the vesting of Options
                under
                this Section 5, 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. 

            

    

     

    
      	b.  	
              Partial
                Accelerated Vesting upon Change in Control.
                In the event of a Change in Control during the Employment Term (as
                defined
                in the Employment Agreement), Executive shall receive accelerated
                vesting
                of fifty percent (50%) of the then-unvested Options. The Options
                that are
                subject to accelerated vesting pursuant to this Section 5.b. shall
                be
                taken pro-rata from each then-unvested tranche of the Option award,
                and
                the remaining portion of each tranche shall vest according to Section
                5.a.
                above, subject to potential accelerated vesting pursuant to Section
                5.c.
                below. 

            

    

     

    
      	c.  	
              Accelerated
                Vesting upon Termination after Change in Control.
                If, during the 2-year period following a Change in Control during
                the
                Employment Term: (i) Executive is terminated by the Company other
                than for Cause (as defined in the Employment Agreement), death or
                Disability, or (ii) Executive voluntarily resigns for Good Reason
                (as
                defined in the Employment Agreement), all Options shall become fully
                vested as of the date of such
                termination.

            

    

     

    
      
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      	6.  	
              EXERCISE
                OF OPTIONS.
                To exercise an Option, Executive or Executive’s Representative shall
                deliver to Company, or to a broker-dealer in the Common Stock with
                the
                original copy to Company, the following: [i] seven (7) day prior
                written
                notice (which notice may be sent prior to the vesting date of the
                options
                to be exercised with exercise contingent on such vesting) specifying
                the
                number of shares as to which the Option is being exercised and, if
                determined by counsel for Company to be necessary, representing that
                such
                shares are being acquired for investment purposes only and not for
                purpose
                of resale or distribution; and [ii] payment by Executive or Executive’s
                Representative, or the broker-dealer, of the Option Price for such
                shares
                in cash, or if the Committee in its discretion agrees to so accept,
                by
                delivery to Company of other Common Stock owned by Executive, or
                in some
                combination of cash and Common Stock acceptable to the Committee.
                At the
                expiration of the seven (7) day notice period, and provided that
                all
                conditions precedent contained in this Agreement are satisfied, Company
                shall, without transfer or issuance tax or other incidental expenses
                to
                Executive, deliver to Executive, at the offices of Company, a certificate
                or certificates for the Common Stock. If Executive fails to accept
                delivery of the Common Stock, Executive’s right to exercise the applicable
                portion of the Options shall terminate. The Options may be exercised
                in
                whole or in part at any time before their expiration. If payment
                of the
                Option Price is made in Common Stock, the value of the Common Stock
                used
                for payment of the Option Price shall be the Fair Market Value of
                the
                Common Stock on the business day preceding the day written notice
                of
                exercise is delivered to Company. The Option Price shall be subject
                to
                adjustments in accordance with the provisions of Section
                10.

            

    

     

    
      	7.  	
              NONTRANSFERABILITY.
                The Options are not transferable other than by will or by the laws
                of
                descent and distribution. During Executive’s lifetime, the Options are
                exercisable only by Executive, and after Executive’s death, to the extent
                exercisable by Executive on the date of Executive’s death, by Executive’s
                Representative at any time before expiration of said Options. Any
                attempted assignment, transfer, pledge, hypothecation or other disposition
                of an Option or levy or attachment or similar process not specifically
                permitted herein, shall be null and void and without
                effect.

            

    

     

    
      	8.  	
              INVESTMENT
                REPRESENTATION.
                Upon reasonable demand by the Committee for such a representation,
                Executive or Executive’s Representative shall deliver to the Committee at
                the time of exercise a written representation that the shares to
                be
                acquired upon exercise of the Options are to be acquired for investment
                and not for resale or distribution. Upon such demand, delivery of
                such
                representation before delivery of Common Stock shall be a condition
                precedent to the right of Executive or Executive’s Representative to
                purchase Common Stock.

            

    

     

    
      	9.  	
              COMPLIANCE
                WITH OTHER LAWS AND REGULATIONS.
                The grant and exercise of Options and the obligation of Company to
                sell
                and deliver shares under the Options 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, determine to be necessary or advisable. The Company agrees
                to
                use its best efforts to procure any such listing, registration or
                qualification.

            

    

     

    
      
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      	10.  	
              CAPITAL
                ADJUSTMENTS AND MERGERS AND CONSOLIDATIONS.

            

    

     

    
      	a.  	
              Capital
                Adjustments.
                In the event of a Company stock dividend or distribution (or distribution
                on Common Stock of any security convertible into securities of the
                Company), stock split, reorganization, merger, consolidation, subdivision,
                reclassification, combination or exchange of shares or the like,
                the
                number of shares of Common Stock subject to the Options shall be
                automatically adjusted to take into account such capital adjustment.
                The
                price of any share under the Options shall be adjusted so that there
                will
                be no change in the aggregate purchase price payable upon exercise
                of the
                Options. 

            

    

     

    
      	b.  	
              Mergers
                and Consolidations.
                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 a Successor, the kind of shares of Common Stock that
                shall
                be subject to the Options 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 Company’s Common
                Stock, of the Successor, and the number of shares subject to the
                Options
                and the purchase price per share upon exercise of the Options shall
                be
                correspondingly adjusted, so that Executive shall have the right
                to
                purchase [a] 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 shares of Common Stock of Company theretofore
                subject
                to Executive’s Options, [b] for a purchase price per share that, when
                multiplied by the number of shares of common stock of the Successor
                subject to the Options, shall equal the aggregate exercise price
                at which
                Executive could have acquired all of the shares of Common Stock of
                Company
                theretofore optioned by Executive.

            

    

     

    
      	c.  	
              No
                Effect on Company’s Rights.
                The granting of the Options shall not affect in any way the right
                and
                power of Company to make adjustments, reorganizations, reclassifications,
                or changes of its capital or business structure or to merge, consolidate,
                dissolve, liquidate, sell or transfer all or any part of its business
                or
                assets.

            

    

     

    
      	11.  	
              TAX
                WITHHOLDING.
                Company shall have the right to: [i] withhold from any payment due
                to
                Executive or Executive’s Representative; or [ii] require Executive or the
                Executive’s Representative to remit to Company; or [iii] retain cash or
                Common Stock otherwise deliverable to Executive or Executive’s
                Representative, in an amount sufficient to satisfy applicable tax
                withholding requirements resulting from the grant or exercise of
                the
                Options pursuant to this Agreement.

            

    

     

    
      
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      	12.  	
              NO
                RIGHTS AS SHAREHOLDER.
                Executive or Executive’s Representative shall have no rights as a
                shareholder with respect to Common Stock subject to the Options before
                the
                date of transfer to Executive of a certificate for such shares.
                

            

    

     

    
      	13.  	
              NO
                RIGHTS TO CONTINUED EMPLOYMENT.
                Nothing contained in this Agreement nor any award herewith shall
                confer
                upon Executive any right with respect to continuance of employment
                by
                Company or Subsidiary nor interfere with the right of Company or
                Subsidiary to terminate Executive’s
                employment.

            

    

     

    
      	14.  	
              EFFECTIVE
                DATE AND APPROVAL.
                It is the intent of the parties that the compensation payable to
                the
                Executive with respect to the Options constitute qualified performance
                based compensation under Internal Revenue Code §162(m) and regulations
                issued thereunder. The effective date of the Options is July 18,
                2006,
                subject to approval by stockholders of the Company holding not less
                than a
                majority of the shares present and voting at Company’s 2007 Annual
                Meeting. In the event the grant of the Options is not approved by
                stockholders of the Company, this Option Agreement shall be of no
                effect
                and the Options shall be null and void. The Company agrees to use
                its
                reasonable best efforts to procure shareholder approval of the award
                of
                the Options, 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 Options and soliciting
                proxies
                for the approval of such Options.

            

    

     

    
      	15.  	
              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.

            

    

     

    
      	16.  	
              REGISTRATION
                OF SHARES SUBJECT TO OPTIONS.
                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
                subject to the Options, 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.  	
              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.

            

    

     

    
      
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      	18.  	
              SEVERABILITY.
                The invalidity or unenforceability of any provision of the Agreement
                shall
                not affect the validity and 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.  	
              BINDING
                EFFECT.
                This Agreement shall be binding upon and inure to the benefit of
                the
                parties and their respective legal representatives, successors and
                assigns. 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 terms, conditions and restrictions applicable
                to
                the Options granted hereunder and the terms and conditions of this
                Agreement.

            

    

     

    
      	20.  	
              GOVERNING
                LAW; JURISDICTION: SERVICE OF PROCESS.
                This Agreement shall be governed by the laws of the Commonwealth
                of
                Kentucky. 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.

            

    

     

    
      	21.  	
              ENTIRE
                AGREEMENT.
                This Agreement contains the entire agreement between the parties
                hereto
                with respect to the subject matter hereof and may not be amended,
                modified
                or supplemented except in a writing signed by Company and
                Executive.

            

    

     

    
      	22.  	
              CAPITALIZED
                TERMS.
                Capitalized terms not otherwise defined in this Agreement shall have
                the
                meaning given them in the Employment
                Agreement.

            

    

     

    
      	23.  	
              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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      to 10-Q

    
 

    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

            

    

     

    8Vernon Niven's Offer Letter accepted

Return to
    10-Q

     

    

    September
      8, 2006

    

    Mr.
      Vernon Niven III

    1310
      Quiet Cove Lane

    Gulf
      Breeze, FL 32563

     

    Dear
      Vernon:

     

    I
      am
      pleased to offer you the position of Executive Vice President technology
      initiatives, as a Churchill Downs Incorporated (CDI) employee, reporting
      directly to our CEO, Bob Evans. Your responsibilities will be similar to those
      of other CDI business unit leaders. Your start date will be Monday, September
      11, 2006.

     

    Your
      base
      salary will be $11,538.46 bi-weekly. You will be eligible to participate in
      a
      cash bonus plan beginning for calendar year 2007, which is payable in March
      2008
      and is based on objectives mutually agreed upon between you and our CEO, and
      approved by the Compensation Committee of the Board of Directors. The target
      bonus for this position is 60% of base pay. In calendar year 2007 (paid out
      in
      March 2008) your target bonus award is up to $180,000.

    

    In
      this
      role, you may also be eligible for Long Term Incentives based on achievement
      of
      certain performance goals and vesting criteria as described in Exhibit A
      (attached). The Long Term Incentive payments are intended to be in the form
      of
      Company stock but require Board of Director and shareholder approval. Should
      Company stock not be available at the time of payment (based on the performance
      and vesting criteria in Exhibit A), the Long Term Incentives will be paid in
      cash. Should there be a change in control, defined as an acquisition by any
      individual, entity or group, with at least 51% of the voting control of CDI
      or
      CDI’s technology initiative, the remaining unforfeited Long Term Incentives as
      outlined in Exhibit A will vest at 50% of the scheduled value, paid in the
      year
      that the incentive otherwise would have been paid by Churchill Downs
      Incorporated.

        

    You
      will
      be provided relocation assistance similar to that offered to other senior CDI
      executives of comparable level, once your relocation destination has been
      mutually agreed upon. Relocation Today, Inc. will administer and manage your
      relocation.

    

    We
      will
      forward to you separately a summary of the customary fringe benefits you will
      be
      entitled to, including health insurance, life insurance, 401(k), Employee Stock
      Purchase Plan, Deferred Compensation Plan, and our executive severance policy.
      Please refer to the benefits summary for a description of the benefit,
      corresponding employee contribution and eligibility dates.

    

    Your
      employment with Churchill Downs Incorporated is "at will" and it can be
      terminated with or without cause, and with or without notice, at any time,
      at
      the option of either Churchill Downs Incorporated or yourself. 

     

    
      
      

      
        

      

    

     

    Return to 10-Q

     

    Vernon
      Niven III

    September
      8, 2006

    Page
      2

    

    

    Should
      your employment be terminated by the Company without “just cause” as defined
      below, the Company will convey the following:

    

    

    
      	a.  	
              pay
                through the month in which the severance occurs and severance pay
                and
                benefits per the Executive Severance
                Policy,

            

    

    
      	b.  	
              pay
                a pro rata annual bonus for the year in which your termination occurs
                based on the bonus target,

            

    

    
      	c.  	
              pay
                the balance of any long term incentive awards, if any, earned through
                your
                termination date but not yet paid,

            

    

    
      	d.  	
              pay
                20% of the then remaining unforfeited Long Term Incentives ( payable
                only
                if executive has completed one year of continuous service)
                

            

    

    

    “Just
      cause” shall mean [i] failure to perform substantially your duties after written
      demand for substantial performance improvement, or [ii] engaging in illegal
      conduct or gross misconduct which, in the sole direction of the Company, is
      injurious to the business or reputation of the Company.

    

    You
      agree
      that for a period of two years from the date you cease to be an employee of
      CDI
      or any subsidiary of CDI, regardless of the reason for no longer being an
      employee, you will not directly or indirectly:

    

    
      	-  	
              solicit
                any customers or prospective customers of CDI for the purpose of
                selling
                them products or services that compete with those of
                CDI;

            

    

    
      	-  	
              solicit
                or recruit in any form, as employees, contractors, sub-contractors,
                consultants or other capacity in which such individuals provide services
                of material business value, any employees or ex-employees of CDI,
                unless
                such ex-employees’ employment with CDI has been terminated for at least
                two years; 

            

    

    
      	-  	
              disclose
                to any third parties or use to your own benefit, directly or indirectly,
                any confidential or proprietary information or knowledge of CDI;
                and

            

    

    
      	-  	
              work
                with or for a competitor of CDI or yourself which would potentially
                subject CDI trade secrets or confidential information to
                misuse.

            

    

    

    Furthermore,
      you agree that any intellectual property developed while an employee of CDI
      is
      the sole exclusive property of CDI, including but not limited to any business
      processes, product or service designs, software code, and other such knowledge
      regardless of its form of expression, including such knowledge developed by
      contractors employed by you on CDI’s behalf.

    

    While
      you
      are employed by CDI, you agree to devote 100% of your business efforts to CDI
      and not to accept employment or otherwise engage with any third-parties whereby
      your obligations to such third-parties inhibit in any way your performance
      in
      discharging your CDI responsibilities.

    
       

      
        
        

        
          

        

      

       

      Return to 10-Q

       

    

    Vernon
      Niven III

    September
      8, 2006

    Page
      3

    

    Our
      employment offer is contingent upon a successful background check and submission
      of satisfactory proof of your identity and legal authorization to work in the
      United States. If you fail to submit this proof, federal law prohibits us from
      hiring you. As an Officer of Churchill Downs Incorporated, this employment
      agreement is also subject to the approval of the Board of
      Directors.

    

    Vernon,
      we are excited about the prospect of you joining us during this most exciting
      period for our Company. Please call me at 502-636-4836 as soon as you have
      had
      the opportunity to review the contents of this letter so I may promptly address
      any concerns you may have.

    

    If
      you
      agree with and accept the terms of this offer of employment, please sign the
      letter and return it to me. We are confident your employment with Churchill
      Downs Incorporated will prove mutually beneficial, and we look forward to having
      you join the team.

    

    Sincerely,

    

    /s/
      Chuck
      Kenyon

    Chuck
      Kenyon

    Vice
      President Human Resources

    Churchill
      Downs Incorporated

    

     

    Accepted
      by: 

     

     

    /s/
      Vernon Niven      Sept.
      12, 2006

     

     

    Vernon
      Niven III      Date

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Return
      to
      10-Q

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