Document:

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                       AMENDMENT NO. 3 TO RIGHTS AGREEMENT

                  Amendment  No. 3 to Rights  Agreements,  dated as of September
8, 2000, by and between CHURCHILL DOWNS INCORPORATED,  a Kentucky  corporation
(the "Company"), and FIFTH THIRD BANK, as Rights Agent (the "Rights Agent").

                  WHEREAS,  the Company has entered into an Amended and Restated
Agreement and Plan of Merger dated of as of June 23, 2000, as amended as of July
14,  2000,  by  and  among  the  Company,  A.  Acquisition  Corp.,  an  Illinois
corporation and a direct or indirect wholly owned  subsidiary of the Company ("A
Sub"), A. Management  Acquisition Corp., an Illinois corporation and a direct or
indirect  wholly owned  subsidiary of the Company ("A Management  Sub"), T. Club
Acquisition Corp., an Illinois corporation and a direct or indirect wholly owned
subsidiary of the Company ("T Club Sub"),  Arlington  International  Racecourse,
Inc.., an Illinois corporation ("A Corp."), Arlington Management Services, Inc.,
an Illinois corporation ("A Management Corp."), Turf Club of Illinois,  Inc., an
Illinois  corporation ("T Club"), and Duchossois  Industries,  Inc., an Illinois
corporation ("D Corp."), and in connection therewith the Board has determined in
good faith that certain amendments set forth below to the Rights Agreement dated
as of March 19, 1998 between the Company and Bank of  Louisville  as the initial
Rights Agent, as heretofore amended (the "Rights Agreement"), are desirable and,
pursuant  to  Section  26 of the  Rights  Agreement  has  duly  authorized  such
amendments to the Rights Agreement. A duly authorized officer of the Company has
executed  and  delivered  this   Amendment  No.  3  to  Rights   Agreement  (the
"Amendment").

                  WHEREAS, Fifth Third Bank has succeeded the Bank of Louisville
as Rights Agent.

                  NOW  THEREFORE,  for  good  and  valuable  consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereby
agree as follows:

                  1.  CERTAIN DEFINITIONS.  For purposes of this Amendment,
terms which are  capitalized but not defined herein and which are defined in the
Rights  Agreement  shall  have  the  meanings  ascribed  to them  in the  Rights
Agreement.

                  2.  AMENDMENT TO SECTION 1 OF THE RIGHTS AGREEMENT.

                  A. Section 1 of the Rights Agreement is hereby amended to add
the following definition:

                  "Stockholder's   Agreement"   shall  mean  the   Stockholder's
Agreement  dated  as of  September  8,  2000  among  the  Company,  D Corp.  and
subsequent signatories thereto, as the same may be amended from time to time.

                  B.  Section 1 of the Rights Agreement is hereby amended to
delete the definition of "Voting Agreement".

                  3.  RESTATEMENT OF THE DEFINITION OF "ACQUIRING PERSON".  The
definition of "Acquiring  Person" set forth in Section 1 of the Rights Agreement
is hereby deleted in its entirety and replaced with the following definition:

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                  "ACQUIRING  PERSON" shall mean a Person who or which, alone or
together  with  all  Affiliates  and  Associates  of such  Person,  shall be the
Beneficial  Owner of 15% or more of the Common Shares then outstanding but shall
not include (a) the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any of its Subsidiaries,  or any Person holding Common
Shares for or pursuant to the terms of such  employee  benefit  plan, or (b) any
such Person who has become and is such a Beneficial  Owner solely because (i) of
any change in the aggregate number of Common Shares  outstanding  since the last
date on which such Person acquired Beneficial  Ownership of any Common Shares or
(ii) it acquired  such  Beneficial  Ownership in the good faith belief that such
acquisition would not (A) cause such Beneficial Ownership to equal or exceed 15%
of the Common  Shares then  outstanding  and such Person relied in good faith in
computing the percentage of its  Beneficial  Ownership on publicly filed reports
or documents of the Company which are inaccurate or out of date or (B) otherwise
cause a  Distribution  Date or the  adjustment  provided for in Section 11(a) to
occur.  Notwithstanding clause (b)(ii) of the prior sentence, if any Person that
is not an  Acquiring  Person  due to such  clause  (b)(ii)  does not  reduce its
percentage  of  Beneficial  Ownership  of Common  Shares to less than 15% by the
Close of Business on the fifth  Business  Day after notice from the Company (the
date of notice being the first day) that such Person's  Beneficial  Ownership of
Common Shares so equals or exceeds 15%,  such Person  shall,  at the end of such
five Business Day period,  become an Acquiring  Person (and such clause  (b)(ii)
shall no longer  apply to such  Person).  For purposes of this  definition,  the
determination  whether any Person acted in "good  faith"  shall be  conclusively
determined  by the  Board  of  Directors  of the  Company.  Notwithstanding  the
foregoing, D Corp. or a D Corp. Shareholder,  or any Affiliate or Associate of D
Corp. or a D Corp.  Shareholder,  or any Stockholder (as such term is defined in
the Stockholder's Agreement) shall not be an Acquiring Person when such Person's
Beneficial Ownership of Common Shares is subject to, does not violate, and is in
compliance with, the Stockholder's Agreement (the foregoing sentence referred to
herein as the "D Corp. Exclusion").

                  4.  EFFECTIVENESS.  The Amendment shall be effective as of
September  8,  2000 as if  executed  by both  parties  on such  date.  Except as
expressly  amended by this Amendment,  the Rights Agreement shall remain in full
force and effect.

                  5.  GOVERNING  LAW.  This  Amendment  shall be  deemed to be a
contract  under the laws of the  Commonwealth  of Kentucky  and for all purposes
shall be governed by, construed and enforced in accordance with the laws of such
State  applicable  to contracts to be made and  performed  entirely  within such
State.

                  6.  COUNTERPARTS.  This Amendment may be executed in any
number of counterparts and each of such  counterparts  shall for all purposes be
deemed to be an original,  and all such counterparts  shall together  constitute
but one and the same instrument.

                  7.  SEVERABILITY.   If  any  term,   provision,   covenant  or
restriction  of this Amendment is held by a court of competent  jurisdiction  or
other  authority  to be invalid,  void or  unenforceable,  the  remainder of the
terms, provisions,  covenants and restrictions of this Amendment shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.

                                        2

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                  8.  DESCRIPTIVE HEADINGS.  Descriptive headings of the several
Sections of this  Amendment  are  inserted  for  convenience  only and shall not
control or affect the meaning or  construction  of any of the provisions of this
Amendment.

                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Amendment to be duly executed as of the day and year first above written.

                                           CHURCHILL DOWNS INCORPORATED

                                           By:   /S/ THOMAS H. MEEKER
                                           Title:  Thomas H. Meeker, President

FIFTH THIRD BANK, as Rights Agent

By:   /S/ GEOFFREY D. ANDERSON
Title:  ASSISTANT VICE PRESIDENT

                                        3SIXTH AMENDMENT TO FINANCING AGREEMENT

         This SIXTH AMENDMENT TO FINANCING AGREEMENT (this  "Amendment"),  dated
as of July 18,2000,  is entered into by and among SHARPER IMAGE  CORPORATION,  a
Delaware corporation (the "Borrower") and THE CIT GROUP/BUSINESS CREDIT, INC., a
New York corporation  ("CITBC"),  and amends that certain  Financing  Agreement,
dated  September  21,  1994 (as the same is in effect  immediately  prior to the
effectiveness of this Amendment,  the "Existing Financing  Agreement" and as the
same may be amended,  supplemented  or modified and in effect from time to time,
the "Financing Agreement"),  by and between the Borrower and CITBC.  Capitalized
terms  used and not  otherwise  defined  in this  Amendment  shall have the same
meanings in this Amendment as set forth in the Financing Agreement.

                                    RECITAL

         The Borrower has requested  that CITBC amend various  provisions of the
Existing  Financing  Agreement,  and CITBC is  willing  to agree to so amend the
Existing  Financing  Agreement  on the terms and subject to the  conditions  set
forth below.

                                   AGREEMENT

         NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and  agreements set forth below and other good and valuable  consideration,  the
receipt and  adequacy  of which are hereby  acknowledged,  the parties  agree as
follows:

         SECTION 1.  Amendments.  On the terms of this  Amendment and subject to
the satisfaction of the conditions precedent set forth below in Section 2, CITBC
and the Borrower hereby agree as follows:

                  (a) Clause (c) of the definition of "Line of Credit" set forth
in Section 1 of the  Financing  Agreement is hereby  amended and restated in its
entirety to read as follows:

                           "(c) July 18 -  December 31, 2000     $31,000,000"

                  (b)  For  the  period   commencing  July 18, 2000  and  ending
September  30,  2000,  the limit on the  aggregate  amount of  Eligible  Ordered
Inventory  computed pursuant to clauses (a) and (b) of Section 3, Paragraph 1 of
the Financing  Agreement set forth in the proviso to such paragraph shall hereby
be temporarily increased from "$6,500,000" to "$14,500,000".

                  (c)  For  the  period   commencing  July 18, 2000  and  ending
September  30,  2000,  the limit on  documentary  Letters of Credit set forth in
clause (i) of the first  sentence  of Section 4,  Paragraph  1 of the  Financing
Agreement  shall  hereby  be  temporarily   increased  from   "$15,000,000"   to
"$26,000,000".

Sixth Amendment to Financing Agreement v2

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         SECTION 2.  Conditions to  Effectiveness.  The  amendments set forth in
Section 1 of this Amendment shall become effective only upon the satisfaction of
all of the following  conditions precedent (the date of satisfaction of all such
conditions being referred to as the "Amendment Effective Date"):

                  (a) On or before the  Amendment  Effective  Date,  CITBC shall
have received this Amendment, duly executed and delivered by the Borrower.

                  (b) On or before the Amendment  Effective  Date, all corporate
and other  proceedings  taken or to be taken in connection with the transactions
contemplated by this Amendment,  and all documents incidental thereto,  shall be
reasonably  satisfactory  in form and  substance to CITBC and its  counsel,  and
CITBC and such counsel  shall have  received all such  counterpart  originals or
certified copies of such documents as they may reasonably request.

                  (c) On or before the  Amendment  Effective  Date,  CITBC shall
have  received a legal  documentation  fee of  $1,500,  which fee shall be fully
earned as of the date hereof.

                  (d) Each of the  representations  and  warranties set forth in
this Amendment shall be true and correct as of the Amendment Effective Date.

         SECTION 3. Representations and Warranties.  In order to induce CITBC to
enter into this Amendment and to amend the Existing  Financing  Agreement in the
manner provided in this Amendment, the Borrower represents and warrants to CITBC
as of the Amendment Effective Date as follows:

                  (a)  Power  and  Authority.  The  Borrower  has all  requisite
corporate  power and authority to enter into this Amendment and to carry out the
transactions  contemplated  by, and perform its obligations  under, the Existing
Financing  Agreement as amended by this Amendment  (hereafter referred to as the
"Amended Financing Agreement").

                  (b) Authorization of Agreements. The execution and delivery of
this  Amendment  by the Borrower and the  performance  of the Amended  Financing
Agreement by the Borrower have been duly authorized by all necessary action, and
this Amendment has been duly executed and delivered by the Borrower.

                  (c)   Enforceability.    The   Amended   Financing   Agreement
constitutes the legal, valid and binding obligation of the Borrower  enforceable
against the Borrower in accordance  with its terms,  except as may be limited by
bankruptcy,  insolvency  or other  similar laws  affecting  the  enforcement  of
creditors'  rights in general.  The  enforceability  of the  obligations  of the
Borrower  hereunder is subject to general  principles of equity  (regardless  of
whether such enforceability is considered in a proceeding in equity or at law).

Sixth Amendment to Financing Agreement v2       2

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                  (d) No Conflict. The execution and delivery by the Borrower of
this  Amendment  and the  performance  by the Borrower of the Amended  Financing
Agreement  do not and will not (i)  contravene,  in any  material  respect,  any
provision  of any law,  regulation,  decree,  ruling,  judgment or order that is
applicable to the Borrower or its  properties or other assets,  (ii) result in a
breach  of  or  constitute  a  default  under  the  charter,   bylaws  or  other
organizational documents of the Borrower, or any material agreement,  indenture,
lease or instrument  binding upon the Borrower or its properties or other assets
or (iii) result in the  creation or  imposition  of any liens on its  properties
other than as permitted under the Financing Agreement.

                  (e)  Governmental  Consents.  No  authorization or approval or
other action by, and no notice to or filing with, any governmental  authority or
regulatory  body is required for the due execution,  delivery and performance by
the Borrower of this Amendment.

                  (f) Representations and Warranties in the Financing Agreement.
The  Borrower   confirms   that  as  of  the   Amendment   Effective   Date  the
representations and warranties contained in Section 6 of the Financing Agreement
are (before and after giving effect to this  Amendment)  true and correct in all
material respects (except to the extent any such  representation and warranty is
expressly stated to have been made as of a specific date, in which case it shall
be true and  correct as of such  specific  date) and that no Default or Event of
Default has occurred and is continuing.

         SECTION 4. Miscellaneous.

                  (a)  Reference  to  and  Effect  on  the  Existing   Financing
Agreement.

                           (i) Except as specifically  amended by this Amendment
and the documents  executed and delivered in connection  herewith,  the Existing
Financing Agreement shall remain in full force and effect and is hereby ratified
and confirmed.

                           (ii) The execution and delivery of this Amendment and
performance of the Amended  Financing  Agreement  shall not, except as expressly
provided herein, constitute a waiver of any provision of, or operate as a waiver
of any right, power or remedy of CITBC under, the Existing  Financing  Agreement
or any agreement or document executed in connection therewith.

                           (iii) Upon the conditions  precedent set forth herein
being  satisfied,  this  Amendment  shall be  construed as one with the Existing
Financing  Agreement,  and the Existing  Financing  Agreement  shall,  where the
context  requires,  be read and construed  throughout so as to incorporate  this
Amendment.

                  (b) Fees and  Expenses.  The  Borrower  acknowledges  that all
costs, fees and expenses incurred in connection with this Amendment will be paid
in accordance with Section 7, Paragraph 4 of the Existing  Financing  Agreement.

Sixth Amendment to Financing Agreement v2     3

<PAGE>

                  (c)  Headings.   Section  and  subsection   headings  in  this
Amendment  are  included  for  convenience  of  reference  only  and  shall  not
constitute  a part of this  Amendment  for any  other  purpose  or be given  any
substantive effect.

                  (d)  Counterparts.  This  Amendment  may be executed in one or
more  counterparts,  each of which shall be deemed an original  but all of which
together shall constitute one and the same instrument.

                  (e)  Governing  Law. This  Amendment  shall be governed by and
construed according to the laws of the State of California.

         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Amendment as of the date first above written.

                                         SHARPER IMAGE CORPORATION, a Delaware
                                         corporation

                                         By: /s/ Jeffrey P. Forgan
                                             -----------------------------------
                                         Name: Jeffrey P. Forgan
                                               ---------------------------------
                                         Title: SVP, CFO
                                               ---------------------------------

                                         By: /s/ Tracy Y. Wan
                                             -----------------------------------
                                         Name: Tracy Y. Wan
                                               ---------------------------------
                                         Title: President, COO
                                                --------------------------------

                                         THE CIT GROUP/BUSINESS CREDIT, INC., a
                                         New York Corporation

                                         By: /s/ Adrian Avalos
                                            ------------------------------------
                                         Name: Adrian Avalos
                                               ---------------------------------
                                         Title: VP
                                               ---------------------------------

Sixth Amendment to Financing Agreement v2       4

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