SCHEDULE 14A
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 1
4a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
CHURCHILL DOWNS INCORPORATED
..............................................................................
(Name of Registrant as Specified In Its Charter)
Alexander M. Waldrop, General Counsel
..............................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
........................................................................
2) Aggregate number of securities to which transaction applies:
........................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
........................................................................
4) Proposed maximum aggregate value of transaction:
........................................................................
5) Total fee paid:
........................................................................
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
........................................................................
2) Form, Schedule or Registration Statement No.:
........................................................................
3) Filing Party:
........................................................................
4) Date Filed:
........................................................................
<PAGE>
CHURCHILL DOWNS INCORPORATED
700 Central Avenue
Louisville, Kentucky 40208
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 13, 1996
To the Shareholders of Churchill Downs Incorporated:
Notice is hereby given that the Annual Meeting of Shareholders
of Churchill Downs Incorporated (the "Company"), a Kentucky corporation, will be
held at Churchill Downs Sports Spectrum, 4520 Poplar Level Road, Louisville,
Kentucky, on Thursday, June 13, 1996, at 10:00 a.m., E.D.T. for the following
purposes:
I. To elect four (4) Class III Directors for a term of three (3) years
(Proposal No. 1);
II. To approve the proposed Churchill Downs Incorporated 1995 Employee
Stock Purchase Plan (Proposal No. 2);
III. To approve or disapprove the minutes of the 1995 Annual Meeting of
Shareholders, approval of which does not amount to ratification of actions taken
at such meeting (Proposal No. 3); and
IV. To transact such other business as may properly come before the meeting
or any adjournment thereof, including matters incident to its conduct.
The close of business on April 18, 1996, has been fixed as the
record date for the determination of the shareholders entitled to notice of and
to vote at the meeting, and only shareholders of record at that time will be
entitled to notice of and to vote at the meeting and at any adjournments
thereof.
Shareholders who do not expect to attend the meeting in person
are urged to sign, date and promptly return the Proxy that is enclosed herewith.
By Order of the Board of Directors.
ALEXANDER M. WALDROP
Senior Vice President,
Secretary and
General Counsel
May 10, 1996
<PAGE>
CHURCHILL DOWNS INCORPORATED
700 Central Avenue
Louisville, Kentucky 40208
PROXY STATEMENT
---------------
Annual Meeting of Shareholders
To Be Held on June 13, 1996
The enclosed Proxy is being solicited by the Board of
Directors of Churchill Downs Incorporated (the "Company") to be voted at the
1996 Annual Meeting of Shareholders to be held on Thursday, June 13, 1996, at
10:00 a.m., E.D.T. (the "Annual Meeting"), at the Churchill Downs Sports
Spectrum, 4520 Poplar Level Road, Louisville, Kentucky and any adjournments
thereof. This solicitation is being made primarily by mail and at the expense of
the Company. Certain officers and directors of the Company and persons acting
under their instruction may also solicit Proxies on behalf of the Board of
Directors by means of telephone calls, personal interviews and mail at no
additional expense to the Company. The Proxy and this Proxy Statement are being
sent to shareholders on or about May 9, 1996.
VOTING RIGHTS
- -------------
Only holders of record of the Company's Common Stock, No Par
Value ("Common Stock"), on April 18, 1996, are entitled to notice of and to vote
at the Annual Meeting. On that date, 3,784,605 shares of Common Stock were
outstanding and entitled to vote. Each shareholder has one vote per share on all
matters coming before the Annual Meeting, other than the election of directors.
In the election of directors, a shareholder is entitled by Kentucky law to
exercise "cumulative" voting rights; that is, the shareholder is entitled to
cast as many votes as equals the number of shares owned by the shareholder
multiplied by the number of directors to be elected and may cast all such votes
for a single nominee or distribute them among the nominees in any manner that
the shareholder desires. Shares
1
<PAGE>
represented by proxies received may be voted cumulatively (see "Election of
Directors"). Under the Company's Articles of Incorporation and Bylaws and the
Kentucky statutes, abstentions and broker non-votes on any matter are not
counted in determining the number of votes required for the election of a
director or passage of any matter submitted to the shareholders. Abstentions and
broker non-votes are counted for purposes of determining whether a quorum
exists.
If the enclosed Proxy is properly executed and returned prior to the
Annual Meeting, the shares represented thereby will be voted as specified
therein. IF A SHAREHOLDER DOES NOT SPECIFY OTHERWISE, THE SHARES REPRESENTED BY
THE SHAREHOLDER'S PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED
BELOW UNDER "ELECTION OF DIRECTORS," FOR APPROVAL OF THE CHURCHILL DOWNS
INCORPORATED 1995 EMPLOYEE STOCK PURCHASE PLAN, FOR APPROVAL OF THE MINUTES OF
THE 1995 ANNUAL MEETING OF SHAREHOLDERS AND ON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF.
REVOCATION OF PROXY
- -------------------
A proxy may be revoked at any time before the shares it
represents are voted by giving written notice of revocation to the Secretary of
the Company and such revocation shall be effective for all votes after receipt.
COMMON STOCK OWNED BY CERTAIN PERSONS
-------------------------------------
The following table sets forth information concerning the
beneficial ownership of the Common Stock as of March 1, 1996, by [i] the only
persons known by the Board of Directors to own beneficially more than five
percent (5%) of the Common Stock and [ii] the Company's directors and executive
officers as a group. Except as otherwise indicated, the persons named in the
table have sole
2
<PAGE>
voting and investment power with respect to all of the shares of Common Stock
shown as beneficially owned by them.
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS BENEFICIALLY
OF BENEFICIAL OWNER OWNED % OF CLASS
-------------------- ------------ ----------
<S> <C> <C>
28 parties to a Third Supplemental
Stockholder Agreement
c/o Thomas H. Meeker, Stockholder
Representative
700 Central Avenue
Louisville, Kentucky 40208 1,235,526 (1)(4)(5) 32.4%
Darrell R. Wells
4350 Brownsboro Road
Suite 310
Louisville, Kentucky 40207 232,930 (2)(3)(4) 6.2%
Charles W. Bidwill, Jr.
911 Sunset Road
Winnetka, Illinois 60093 223,259 (2)(3)(4) 5.9%
21 Directors and Executive
Officers as a Group 1,133,382 (2)(3)(4)(6) 29.5%
- ---------------
<FN>
(1) Pursuant to certain federal securities laws, the parties to the Third
Supplemental Stockholder Agreement (the "Stockholder Agreement") may
collectively be considered a "group" and therefore may be deemed a "person"
known by management of the Company to own beneficially more than 5% of the
shares of Common Stock of the Company. The names and addresses of the
parties to the Stockholder Agreement are set forth in the Schedule 13D
filed by such parties with the Securities and Exchange Commission ("SEC")
on April 25, 1995, as amended on May 31, 1995, which filing is incorporated
herein by reference. Each shareholder who is a party to the Stockholder
Agreement has agreed that until April 15, 1997, such shareholder will not
sell, transfer, assign or otherwise dispose of shares of Common Stock
beneficially owned or acquired by such shareholder without first offering
to sell such Common Stock to the Company and to all other signatories to
the Stockholder Agreement on the same terms and conditions as in an offer
received from a third party by such shareholder. The Stockholder Agreement
provides for proration of the shares offered by the selling shareholder in
the event that more than one of the signatories to the Stockholder
Agreement desires to purchase the shares offered by such selling
shareholder. The Stockholder Agreement provides that Common Stock may be
transferred by the parties to the Agreement, without offering such Common
Stock to the Company and to all other signatories, [i] pursuant to an offer
to purchase not less than all of the outstanding shares of the Common Stock
that the Board of Directors has recommended and that an independent
financial advisor retained by the Company has determined is fair to the
Company's shareholders from a financial point of view; [ii] by gift, will
or pursuant to the laws of descent and distribution; [iii] by pledge to a
financial institution; [iv] if the transfer is by operation of law; or [v]
in a small transaction which is defined to be a transfer in any single
calendar month of 3,000 shares or less of the Common Stock. The Stockholder
Agreement does not restrict the rights of any shareholder who is a party
thereto to vote the Common Stock, to receive cash or stock dividends, to
receive shares of Common Stock in a stock split, or to sell or dispose
3
<PAGE>
of shares of Common Stock except as specifically set forth in such
Stockholder Agreement. The Company has approved and become a third party
beneficiary of the Stockholder Agreement.
(2) Of the total shares listed above, Mr. Wells disclaims beneficial ownership
of 22,400 shares held by The Wells Foundation, Inc., of which he is a
trustee and of 135,791.90 shares held by The Wells Family Partnership, of
which he is the Managing General Partner. Mr. Wells shares voting and
investment power with respect to all shares attributed to him in the above
table. Mr. Bidwill shares voting and investment power with respect to 2,919
shares beneficially owned by him.
(3) See "Executive Officers of the Company," "Election of Directors," and
"Continuing Directors," below.
(4) The 232,930 shares beneficially owned by Mr. Wells and 223,259 shares
beneficially owned by Mr. Bidwill are subject to the Stockholder Agreement.
An additional 633,827 shares owned by certain other directors, nominees for
election as directors and executive officers of the Company are subject to
the Stockholder Agreement.
(5) Includes 33,800 shares issuable under currently exercisable options.
(6) Includes 56,800 shares issuable under currently exercisable options.
</FN>
</TABLE>
Section 16(a) of the Securities Exchange Act of 1934 requires that
the Company's directors, executive officers and persons who beneficially own
more than ten percent (10%) of the Company's Common Stock file certain reports
with the Securities and Exchange Commission ("SEC") with regard to their
beneficial ownership of the Common Stock. Pursuant to applicable SEC
regulations, the signatories to the Stockholder Agreement are also required to
file such reports with the SEC solely because they are signatories to the
Stockholder Agreement. See Footnote (1) above for a discussion of the terms of
the Stockholder Agreement. The Company is required to disclose in this Proxy
Statement any failure to file or late filings of such reports. During the
Company's prior fiscal year, the Company determined that Edna Veeneman Lewis, a
signatory to the Stockholder Agreement, made a late filing of one (1) report,
covering one (1) transaction. In addition, W. Bruce Lunsford made a late filing
of one (1) report relating to Mr. Lunsford becoming a signatory to the
Stockholder Agreement but prior to being elected a director of the Company. The
required reports were subsequently filed for each person. Based solely on its
review of the forms filed with the SEC, the Company believes that all other
filing requirements applicable to its directors, executive officers and ten
percent (10%) beneficial owners were satisfied.
4
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
---------------------------------
The Company's executive officers, as listed below, are elected
annually to their executive offices and serve at the pleasure of the Board of
Directors.
<TABLE>
<CAPTION>
COMMON STOCK OF
THE COMPANY
BENEFICIALLY OWNED
AS OF MARCH 1, 1996(1)(2)
-------------------------
POSITION(S) WITH COMPANY % OF
NAME AND AGE AND TERM OF OFFICE AMOUNT CLASS
------------ ------------------------ ------ -----
<S> <C> <C> <C>
William S. Farish (3) Director since 1985; 43,280(4) 1.1%
57 Chairman of the Board
since 1992
Thomas H. Meeker President and Chief Executive 46,337(4)(5) 1.2%
52 Officer since 1984; Director since 1995
Vicki L. Baumgardner Vice President, Finance and 3,153(6) .1%
44 Treasurer since February 1993;
Controller from 1989 to February
1993
David E. Carrico Senior Vice President, Administration 4,310(7) .1%
45 since June 1994; Vice President of
Marketing from 1990 to June 1994
Dan L. Parkerson Senior Vice President, 4,450(8) .1%
53 since February 1991 and General
Manager since June 1991; Vice
President of Operations from 1990
to February, 1991
Jeffrey M. Smith Senior Vice President, Planning 6,349(9) .2%
43 and Development since February 1993;
Senior Vice President of Finance from 1991 to
February 1993; Treasurer from 1986 to February
1993; Vice President of Finance from 1990 to
1991
Alexander M. Waldrop Senior Vice President since June 1994; 6,104(10) .2%
39 General Counsel and Secretary since
August 1992
5
<PAGE>
- ------------------
<FN>
(1) See the Tables on Option Grants in Last Fiscal Year and Aggregate
Year-End Option Values under "Executive Compensation" below for
a discussion of stock options granted by the Board of Directors to
executive officers during 1995.
(2) No executive officer shares voting or investment power with respect to
his or her beneficially owned shares.
(3) Mr. Farish does not serve full-time as an executive officer of the
Company and is not compensated as an officer of the Company.
(4) All shares owned by Mr. Farish and Mr. Meeker are subject to the
Stockholder Agreement. See "Common Stock Owned by Certain Persons."
(5) Includes 33,800 shares issuable under currently exercisable options.
(6) Includes 3,000 shares issuable under currently exercisable options.
(7) Includes 4,000 shares issuable under currently exercisable options.
(8) Includes 4,000 shares issuable under currently exercisable options.
(9) Includes 6,000 shares issuable under currently exercisable options.
(10) Includes 6,000 shares issuable under currently exercisable options.
</FN>
</TABLE>
Mr. Waldrop was employed as an attorney with the Louisville law firm
of Wyatt, Tarrant & Combs, which firm serves as primary outside counsel to the
Company, from August 1985 until his employment by the Company.
ELECTION OF DIRECTORS
---------------------
(PROPOSAL NO. 1)
----------------
At the Annual Meeting, shareholders will vote to elect four (4)
persons to serve in Class III of the Board of Directors to hold office for a
term of three (3) years expiring at the 1999 Annual Meeting of Shareholders and
thereafter until their respective successors shall be duly elected and
qualified.
The Articles of Incorporation of the Company provide that the Board of
Directors shall be composed of not less than nine (9) nor more than twenty-five
(25) members, the exact number to be
6
<PAGE>
established by the Board of Directors, and further provide for the division of
the Board of Directors into three (3) approximately equal classes, of which one
(1) class is elected annually. The Board of Directors previously established the
Board at thirteen members: four (4) directors in Class I, five (5) directors
in Class II, and four (4) directors in Class III. During 1995, Daniel M.
Galbreath, a director in Class I, passed away. At this time, the Board of
Directors has determined to leave this seat vacant.
At the Annual Meeting, the four (4) persons named in the following
table will be nominated on behalf of the Board of Directors for election as
directors in Class III. All of the nominees currently serve as Class III
directors of the Company and all of the nominees have agreed to serve if
reelected. If there are more nominees at the Annual Meeting than there are
directorships, the nominees receiving the highest number of votes will be
elected to the available directorships.
<TABLE>
NOMINEES FOR ELECTIONS AS DIRECTORS
- -----------------------------------
<CAPTION>
COMMON STOCK OF
THE COMPANY BENEFICIALLY
OWNED AS OF
MARCH 1, 1996(3)
------------------------
NAME, AGE AND PRINCIPAL OCCUPATION (1) AND
POSITIONS WITH COMPANY CERTAIN DIRECTORSHIPS (2) AMOUNT % OF CLASS
---------------------- ---------------------------------- ------ ----------
CLASS III - TERMS EXPIRING IN 1999
----------------------------------
<S> <C> <C> <C>
Charles W. Bidwill, Jr. Chairman of the Board, National Jockey Club 223,259(4) 5.9%
67 (Operator of Sportsman's Park Racetrack);
Director since 1982 Former President and General Manager,
National Jockey Club (until December 31,
1995); Director, Orange Park Kennel Club,
Associated Outdoor Clubs (Tampa Greyhound
Track), Bayard Raceways and Caterers of
North Florida, Jacksonville Kennel Club, Big
Shoulders Fund, Archdiocese of Chicago, Link
Unlimited
7
<PAGE>
Thomas H. Meeker President and Chief Executive Officer of the 46,337(4)(5) 1.2%
52 Company; Director, Anderson Park, Inc.
Director since 1995; (Chairman), Thoroughbred Racing Association
President and Chief of North America, Inc. (Executive Committee),
Executive Officer since Equibase Company, PNC Bank, Kentucky, Inc.
1984 (Chairman, Audit and Loan Committees), Bell
South Telecommunications, Inc. (Vice
Chairman, Executive Committee) and Alliant
Health System, Inc. (Executive Committee)
Carl F. Pollard Owner, Hermitage Farm since 1995 73,040(4) 1.9%
57 (Thoroughbred breeding); Director and
Director since 1985 Chairman of the Executive Committee,
Columbia/HCA Healthcare Corporation;
Former Chairman of the Board, Columbia
Healthcare Corporation; President and Chief
Operating Officer (1991-March 1993),
Humana Inc.; Director, National City Bank,
Kentucky and Nexstar Pharmaceuticals, Inc.;
President and Director, Kentucky Derby
Museum Corporation
Darrell R. Wells General Partner, Security Management 232,930(4) 6.2%
52 Company (Investments); Director, First
Director since 1985 Security Trust Company, Shelby County Trust
Bank, Commonwealth Bancshares, Citizens
Financial Corporation, Commonwealth Bank &
Trust Company and Jundt Growth Fund
- ---------------
<FN>
(1) Except as otherwise indicated, there has been no change in principal
occupation or employment during the past five years.
(2) Directorships in companies with a class of securities registered
pursuant to the Securities Exchange Act of 1934 or companies
registered under the Investment Company Act of 1940 and, in the case
of certain nominees, other directorships considered significant by
them.
(3) No nominee shares voting or investment power of his beneficially owned
shares, except that Mr. Bidwill and Mr. Wells share with others the
voting and investment power with respect to 2,919 and 232,930 shares,
respectively. Of the total shares listed above, Mr. Wells disclaims
beneficial ownership of 22,400 shares held by The Wells Foundation,
Inc., of which he is a trustee and of 135,791.90 shares held by The
Wells Family Partnership, of which he is the Managing General Partner.
(4) Messrs. Bidwill, Meeker, Pollard and Wells are signatories to the
Stockholder Agreement with respect to 223,259, 46,337, 73,040 and
232,930 shares, respectively. See "Common Stock Owned by Certain
Persons."
(5) Includes 33,800 shares issuable under currently exercisable options.
</FN>
</TABLE>
8
<PAGE>
The Board of Directors has no reason to believe that any of the nominees
will be unavailable to serve as a director. If any nominee should become
unavailable before the Annual Meeting, the persons named in the enclosed Proxy,
or their substitutes, reserve the right to vote for substitute nominees selected
by the Board of Directors. In addition, if any shareholder(s) shall vote shares
cumulatively or otherwise for the election of a director or directors other than
the nominees named above, or substitute nominees, or for less than all of them,
the persons named in the enclosed Proxy or their substitutes, or a majority of
them, reserve the right to vote cumulatively for some number less than all of
the nominees named above or any substitute nominees, and for such of the persons
nominated as they may choose.
CONTINUING DIRECTORS
- --------------------
The following table sets forth information relating to the Class I and Class II
directors of the Company who will continue to serve as directors until the
expiration of their respective terms of office, and the Directors Emeriti, and
the beneficial ownership of Common Stock by such directors.
<TABLE>
<CAPTION>
COMMON STOCK OF THE COMPANY
BENEFICIALLY OWNED AS OF
MARCH 1, 1996 (3)
----------------------------
NAME, AGE AND PRINCIPAL OCCUPATION (1) AND
POSITIONS WITH COMPANY CERTAIN DIRECTORSHIPS (2) AMOUNT % OF CLASS
---------------------- ---------------------------- ------ ----------
CLASS I - TERMS EXPIRING IN 1997 (4)
------------------------------------
<S> <C> <C> <C>
William S. Farish President, W. S. Farish & Company 43,280(5) 1.1%
57 (Trust management company) and
Director since 1985; Chairman Owner, Lane's End Farm; Director,
since 1992 Breeders' Cup Limited and Keeneland
Association, Incorporated; Vice
Chairman and Steward, Jockey Club;
Advisory Director, Galveston-Houston
Company, Inc. and Post Oak Bank
9
<PAGE>
G. Watts Humphrey, Jr. President, G.W.H. Holdings, Inc. 18,000 .5%
51 (Private investment company); Chief
Director since 1995 Executive Officer, The Conair Group,
Inc., Metaltech L.P., Nextech, L.P.,
Galvtech, L.P. and Smith-Steelite;
Deputy Chairman - Fourth District,
Federal Reserve Bank of Cleveland;
Chairman, The Society of Plastics
Industry, Inc. and The Blood-Horse,
Inc.; Director, Keeneland Association,
Incorporated; Treasurer, Breeders' Cup
Limited; Steward, Jockey Club
Arthur B. Modell Owner and President, National Football 1,000 *
70 League Baltimore Franchise
Director since 1985 (Professional football team); Board of
Trustees and President, Cleveland
Clinic Foundation; Director, Lake Erie
Radio Co.
CLASS II - TERMS EXPIRING IN 1998
---------------------------------
Catesby W. Clay Chairman, Kentucky River Coal 46,630(5) 1.2%
72 Corporation (Coal land lessor);
Director since 1953 President, Runnymede Farm, Inc.
(Thoroughbred breeding); Director,
National Council of Coal Lessors
(Executive Committee), Kentucky Coal
Association, University of Kentucky
Mining Engineering Foundation;
Director and President, Foundation for
Drug-Free Youth
J. David Grissom Chairman, Mayfair Capital, Inc. 10,050(5) .3%
57 (Private investment firm); Director,
Director since 1979 Providian Corporation, Columbia/HCA
Healthcare Corporation, LG&E Energy
Corporation and Regal Cinemas, Inc.;
Chairman, Centre College Board of
Trustees
Seth W. Hancock Partner and Manager, Claiborne Farm, 142,825(5) 3.8%
46 and President, Hancock Farms, Inc.
Director since 1973 (Thoroughbred breeding and farming);
Vice President and Director, Clay Ward
Agency, Inc. (Equine insurance);
Director, Hopewell Company and
Keeneland Association, Incorporated
and Breeders' Cup Limited (Executive
Committee)
10
<PAGE>
Frank B. Hower, Jr. Retired; Former Chairman, Liberty 1,040(5) *
67 National Bancorp, Inc. and Liberty
Director since 1979 National Bank & Trust Company of
Louisville; Director, Banc One Kentucky
Corporation, Bank One, Kentucky, NA,
American Life and Accident Insurance
Company, The Associated Group, Regional
Airport Authority of Louisville and
Jefferson County, Kentucky Historical
Society and Actors Theatre of Louisville;
Member, Board of Trustees, Centre College,
J. Graham Brown Foundation and University
of Louisville
W. Bruce Lunsford Chairman, President and Chief 100,030(5) 2.6%
48 Executive Officer, Vencor, Inc.;
Director since 1995 Director, ResCare, Inc., National City
Bank, Kentucky (Executive
Committee), National City Corporation,
Kentucky Economic Development
Corporation and Kentucky Country Day
School; Member, Board of Trustees,
Bellarmine College and Centre College
DIRECTORS EMERITI (6)(7)
------------------------
John W. Barr, III Retired; Former Chairman, National 2,000(5) .1%
75 City Bank, Kentucky, Inc.; Director,
Director from 1979 to 1993; Kitchen Kompact Company; Director,
Director Emeritus since 1993 Speed Museum, Cave Hill Cemetery,
Boy Scouts of America and American
Printing House for the Blind
Louis J. Herrmann, Jr. Owner, Louis Herrmann Auto 50,265(5) 1.3%
76 Consultant Incorporated (Automobile
Director from 1968 to 1994; sales); Director, Southeastern Financial
Secretary-Treasurer from Services, Inc.
1985 to 1986;
Director Emeritus since 1994
Stanley F. Hugenberg, Jr. President, Jackantom Sales Company 3,670(5) .1%
78 (Manufacturers' representative);
Director from 1982 to 1992; Member, Board of Trustees, J. Graham
Director Emeritus since 1992 Brown Foundation
William T. Young Chairman, W.T. Young, Inc. 114,660(5) 3.0%
78 (Warehousing); Owner, Overbrook
Director from 1985 to 1992; Farm (Thoroughbred breeding);
Director Emeritus since 1992 Director, Columbia/HCA Healthcare
Corporation; Chairman, Board of
Trustees, Transylvania University
11
<PAGE>
- ---------------
<FN>
*Less than 0.1%
(1) Except as otherwise indicated, there has been no change in principal
occupation or employment during the past five years.
(2) Directorships in companies with a class of securities registered pursuant
to the Securities Exchange Act of 1934 or companies registered under the
Investment Company Act of 1940 and, in the case of certain directors, other
directorships considered significant by them.
(3) No director shares voting or investment power of his beneficially owned
shares, except that Messrs. Clay, Hancock and Herrmann share with others
the voting and investment power with respect to 43,630 shares, 106,325
shares and 10,200 shares, respectively, and Mr. Lunsford shares investment
power with respect to 10,000 shares. Of the total shares listed, Mr. Clay
specifically disclaims beneficial ownership of 10,950 shares owned by the
Agnes Clay Pringle Trust of which he is a trustee, and Mr. Hancock
specifically disclaims beneficial ownership of 79,200 shares owned by the
A.B. Hancock Jr. Marital Trust of which he is the trustee, of 9,030 shares
owned by the Waddell Walker Hancock II Trust of which he is a trustee, of
9,030 shares owned by the Nancy Clay Hancock Trust of which he is a trustee
and of 6,043.33 shares held by the ABC Partnership of which he is a general
partner.
(4) Daniel M. Galbreath served as a Class I director until his death in
September of 1995. The Board of Directors has determined to leave the
position formerly held by Mr. Galbreath vacant at this time.
(5) Messrs. Farish, Clay, Grissom, Hancock, Hower, Lunsford, Barr, Herrmann,
Hugenberg and Young are signatories to the Stockholder Agreement with
respect to 43,280, 46,630, 10,050, 142,825, 1,040, 100,030, 2,000, 50,265,
3,670 and 114,660 shares, respectively. See "Common Stock Owned by Certain
Persons."
(6) Directors Emeriti are entitled to attend meetings of the Board of Directors
but do not have a vote on matters presented to the Board. The Bylaws
provide that once a director is 72 years of age, he may not stand for
re-election but shall assume Director Emeriti status as of the annual
meeting following his current term of service as a director. The Chairman
of the Board may continue to serve as a director notwithstanding this
provision.
(7) Y. Peyton Wells, Jr. served as a director emeritus until his death in March
of 1996.
</FN>
</TABLE>
COMPENSATION AND COMMITTEES OF THE BOARD OF DIRECTORS
- -----------------------------------------------------
Four (4) meetings of the Board of Directors were held during the
last fiscal year. Directors other than Directors Emeriti are paid $750 for each
meeting of the Board that they attend, and directors who do not reside in
Louisville are reimbursed for their travel expenses. In addition, all directors,
other than Directors Emeriti, receive an annual retainer of $3,000 per year and
directors who serve as committee chairmen receive an additional $1,000 for a
total retainer of $4,000 per year. The Chairman
12
<PAGE>
of the Board receives an additional $1,000 for a total retainer of $5,000.
Directors Emeriti are not paid any compensation for attending meetings. They are
entitled to have their expenses reimbursed.
The Company has four (4) standing Committees: the Executive,
Audit, Compensation and Racing Committees. No Director Emeritus serves on any
Board committee. The Executive Committee is authorized, subject to certain
limitations set forth in the Company's Bylaws, to exercise the authority of the
Board of Directors between Board meetings. Thirteen (13) meetings of the
Executive Committee (of which Messrs. Bidwill, Farish, Grissom and Pollard are
members) were held during the last fiscal year. The Audit Committee is
responsible for annually examining the financial affairs of the Company,
including consulting with the Company's auditors. One (1) meeting of the Audit
Committee (of which Messrs. Farish, Humphrey, Pollard and Wells are members) was
held during the last fiscal year. The Compensation Committee administers the
Company's Supplemental Benefit Plan, any incentive compensation plan, the 1993
Stock Option Plan, and, if approved by the shareholders, the Churchill Downs
Incorporated 1995 Employee Stock Purchase Plan (as more fully described under
Proposal No. 2) and reviews and recommends actions regarding executive
compensation. Two (2) meetings of the Compensation Committee (of which Messrs.
Farish, Hower, Lunsford, Modell and Wells are members) were held during the last
fiscal year. The Racing Committee is responsible for the Company's contracts and
relations with horsemen, jockeys and others providing horse racing related
services. The Racing Committee (of which Messrs. Clay, Farish, Hancock and
Pollard are members) held one meeting during the last fiscal year. Directors are
paid $500 for each committee meeting they attend other than meetings held by
telephone. The Company does not have a standing nominating committee. All
directors serving as Class I, II or III directors, except Mr. Modell, attended
at least seventy-five percent (75%) of the meetings of the Board of Directors
and the meetings of the committees on which they served.
13
<PAGE>
PROPOSED 1995 EMPLOYEE STOCK PURCHASE PLAN
------------------------------------------
(PROPOSAL NO. 2)
----------------
On June 15, 1995, the Board of Directors adopted the Churchill
Downs Incorporated 1995 Employee Stock Purchase Plan (the "Stock Purchase Plan")
and directed that it be submitted to the shareholders at the Annual Meeting for
approval. Subject to such approval, the Stock Purchase Plan became effective
August 1, 1995. The Stock Purchase Plan provides employees of the Company with
the opportunity to acquire a proprietary interest in the Company through the
purchase of Common Stock on a payroll or other compensation deduction basis. The
Board of Directors believes that the Stock Purchase Plan will provide the
Company's employees with a strong incentive to work for its continued success,
by providing them with a convenient means for regular and systematic purchases
of Common Stock. It is intended that the Stock Purchase Plan be an "employee
stock purchase plan" as defined in Section 423 of the Internal Revenue Code of
1986, as amended (the "Code") and the regulations promulgated thereunder. The
Stock Purchase Plan must be approved by the affirmative vote of a majority of
the shares of Common Stock present in person or represented by proxy at the
Annual Meeting. Unless otherwise instructed, it is the intention of the persons
named in the Proxy to vote the shares represented thereby in favor of the Stock
Purchase Plan.
The following constitutes a brief description of the material
features of the Stock Purchase Plan and is qualified in its entirety by
reference to the copy of the Stock Purchase Plan which is attached as EXHIBIT A
to this Proxy Statement.
All employees of the Company will be eligible to participate in
the Stock Purchase Plan upon satisfying certain eligibility requirements set
forth in the Stock Purchase Plan, including being employed by the Company for at
least one (1) year. The Company employed approximately 260 persons as of March
1, 1996 who would be eligible to participate in the Plan.
14
<PAGE>
On each annual purchase date under the Stock Purchase Plan, each
participant will be deemed to have purchased, without any further action, the
number of whole shares of Common Stock determined by dividing the funds in the
participant's stock purchase account by the applicable purchase price. The
purchase price for shares of Common Stock on any purchase date will be equal to
85% of the lower of the fair market value per share of the Common Stock on the
first or last business day of the applicable purchase period. In order to
participate in the Stock Purchase Plan, a participant must voluntarily file with
the Company a form authorizing regular payroll deductions to be held in the
participant's stock purchase account. A participant may withdraw at any time
from the Stock Purchase Plan in accordance with applicable procedures and
thereafter no further payroll deductions will be made. A participant who
withdraws from the Stock Purchase Plan may elect to participate in a subsequent
purchase period, if then eligible, in accordance with applicable procedures.
No employee may purchase more than 250 shares or $25,000 in fair
market value of the stock in any year under the Stock Purchase Plan and all
other stock purchase plans of the Company. No employee may purchase Common Stock
under the Stock Purchase Plan if such employee, immediately after a right to
purchase is granted to such employee, would own, directly or indirectly, within
the meaning of Section 423(b)(3) of the Code, five percent (5%) or more of the
total combined voting power or value of all classes of capital stock of the
Company.
The Common Stock to be issued and sold under the Stock Purchase
Plan may be authorized but previously unissued shares or shares purchased by the
Company. The aggregate number of shares of Common Stock to be sold under the
Stock Purchase Plan will not exceed 50,000 shares, subject to adjustment in the
event of stock dividends, stock splits or other changes in the Company's
capitalization.
The Stock Purchase Plan will be administered by the Compensation
Committee of the Board of Directors. The Compensation Committee has the
authority to adopt such rules and regulations for carrying out the Stock
Purchase Plan as it may deem proper and in the best interests of the Company.
15
<PAGE>
The Compensation Committee may amend the Stock Purchase Plan from time to time,
except no amendment may be made without shareholder approval if its effect would
be to cause the Stock Purchase Plan to [i] increase the number of shares
reserved for issuance under the Stock Purchase Plan or [ii] alter the
eligibility criteria for participation in the Stock Purchase Plan. The Stock
Purchase Plan shall automatically terminate at the earlier of [i] the date on
which the maximum number of shares of Common Stock have been sold or [ii] July
31, 2000.
The Stock Purchase Plan, and the right of employees to make
purchases thereunder, is intended to qualify under the provisions of Section 423
of the Code. Under those provisions, no income will be taxable to any employee
at the time of his or her election to participate in the Stock Purchase Plan or
when shares are purchased. However, the difference between the fair market value
of the shares on the date of purchase and the purchase price paid by the
participant is considered taxable wages subject to federal employment taxes.
Upon disposition of the shares, the employee will be subject to tax and the
amount of tax will depend upon the holding period of the shares. If shares are
disposed of by the employee more than two (2) years after the date on which the
option to purchase the shares was granted (the first day of the applicable
purchase period) and one (1) year after the date on which the shares were
purchased, or the employee dies while owning the shares, the lesser of (a) the
excess of the fair market value of the shares at the time the option to purchase
the shares was granted over the employee's purchase price or (b) the excess of
the fair market value of the shares at the time of such shares disposition or
death over the employee's purchase price, will be treated as ordinary income,
and any further gain will be treated as long-term capital gain. If the shares
are disposed of before the expiration of this holding period, the excess of the
fair market value of the shares measured as of the purchase date over the
employee's purchase price will be treated as ordinary income, and any further
gain will be treated as a capital gain. The amount taxable as ordinary income to
the employee is subject to federal income tax withholding. The Company is not
entitled to deductions for amounts taxed as ordinary income to
16
<PAGE>
the employees except to the extent of ordinary income reported by employees upon
disposition of shares within two (2) years from the date the option to purchase
the shares was granted and one (1) year from the date of purchase.
The foregoing is only a summary of the effects of the federal
income taxation upon the employee and the Company with respect to the shares
purchased under the Stock Purchase Plan and does not purport to be complete. The
foregoing does not discuss income tax laws of any municipality, state, or
foreign country in which an employee may reside.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE PROPOSAL TO
ADOPT THE CHURCHILL DOWNS INCORPORATED 1995 EMPLOYEE STOCK PURCHASE PLAN.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
-------------------------------------------------------
Under rules established by the SEC, the Compensation Committee of
the Board of Directors (the "Committee") is required to disclose: (1) the
Committee's compensation policies applicable to the Company's executive
officers; (2) the relationship of executive compensation to Company performance;
and (3) the Committee's bases for determining the compensation of the Company's
Chief Executive Officer ("CEO"), Thomas H. Meeker, for the most recently
completed fiscal year. Pursuant to these requirements, the Committee has
prepared this report for inclusion in the Proxy Statement.
The Committee consists of five (5) independent Directors, none of
whom has ever been employed by the Company. The Committee annually reviews
executive officer compensation and makes recommendations to the Board of
Directors on all matters related to executive compensation. The Committee's
authority and oversight extend to total compensation, including base salary,
annual incentive compensation and stock options for the Company's executive
officers as well as the Company's Profit Sharing Plan and Stock Option Plan. The
Committee also administers the employment contract and Supplemental Benefit Plan
of the Company's CEO, Thomas H. Meeker. The Committee makes its
17
<PAGE>
compensation recommendations to the Board of Directors after considering the
recommendations of the CEO (on all but CEO compensation) and other qualified
compensation consultants. The Committee also reviews compensation data from
comparable companies including those found in the peer group performance graph
(the "Peer Graph") which follows this report.
The fundamental philosophy of the Committee is to assure that the
Company's compensation program for executive officers links pay to business
strategy and performance in a manner which is effective in attracting,
motivating and retaining key executives while also providing performance
incentives which will inure to the benefit of executive officers and
shareholders alike. The objective is to provide total compensation commensurate
with Company performance by combining salaries that are competitive in the
marketplace with incentive pay opportunities established by the Committee which
are competitive with median levels of competitors' incentive compensation. The
Committee has determined that as an executive's level of responsibility
increases, a greater portion of his or her compensation should be based upon the
Company's performance.
The Committee has structured executive compensation based upon
this philosophy. There have been three (3) basic elements of the Company's
executive compensation program, each determined by individual and corporate
performance: (1) base salary compensation, (2) annual variable performance
incentive compensation earned under the Company's Incentive Compensation Plan
("ICP") which expired as of December 31, 1995 and (3) stock option grants made
under the Company's 1993 Stock Option Plan (the "Option Plan").
Base salaries are targeted to be competitive with similar
positions in comparable companies. In determining base salaries, the Committee
also takes into account individual experience and performance and specific
issues particular to the Company.
The ICP was designed to provide a direct financial incentive in
the form of annual cash and/or stock bonuses. The ICP provided for the award of
a bonus based upon the Company's
18
<PAGE>
achievement of earnings per share ("EPS") goals and goals based upon the 5-year
total return to shareholders in the form of dividends and increases in the
Company's stock price, compared to the Wilshire 5000 stock index. For the
Company's year ended December 31, 1995, the Committee set the ICP minimum
performance goal at EPS equal to the Company's budget and total return to
shareholders goal equal to the Wilshire 5000. The Company did not meet the EPS
goal or the total return to shareholders goal. As a result, no bonuses were
awarded under the ICP for the Company's year ended December 31, 1995.
The ICP expired as of December 31, 1995. During the three-year
term of the ICP, the Company met the goals and bonuses were awarded under the
ICP on one occasion, despite the Company's strong overall performance. As a
result, the Committee has determined that the ICP is not fulfilling the
Committee's objectives and the Committee is evaluating alternative forms of
incentive compensation. The Committee believes that a new incentive compensation
plan will be established during 1996. The Committee anticipates that incentive
compensation will continue to be tied to Company performance.
The third component of executive compensation is the Option Plan.
The Committee believes that the granting of options to officers of the Company,
including Mr. Meeker, will further the Company's goals of attracting, motivating
and retaining employees while also providing compensation which links pay to the
Company's long-term performance. During 1995, awards under the Option Plan were
as follows: (1) Mr. Meeker was granted 1,826 nonqualified stock options and
3,174 incentive stock options ("ISOs") and (2) all other officers were granted a
total of 5,600 ISOs. The options are exercisable on December 30, 1998. The
Option Plan provides for cashless exercises through broker's transactions.
The Committee believes that the Option Plan is integral to a
performance based compensation package. The Option Plan allows the Company to
further tie compensation to
19
<PAGE>
performance of the Company with a possibility of increasing the total
compensation package of its executives without an equivalent cash outlay by the
Company.
Mr. Meeker was employed as President and Chief Executive Officer
of the Company in October 1984 under an annually renewing three-year contract.
Each year, Mr. Meeker's base salary is set by the Committee after considering
the Company's overall financial performance in light of the Company's strategic
development initiatives. For 1995, Mr. Meeker's annual base salary continued to
be $245,000. This stability in base salary reflects the Committee's efforts to
shift a greater portion of Mr. Meeker's overall compensation to performance
based sources such as the Option Plan and other forms of incentive compensation.
COMPENSATION COMMITTEE
----------------------
Frank B. Hower, Jr.
William S. Farish
W. Bruce Lunsford
Arthur B. Modell
Darrell R. Wells
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
-----------------------------------------------------------
The Company is unaware of any relationships among its officers
and directors which would require disclosure under this caption.
PERFORMANCE GRAPH
-----------------
Set forth below is a line graph comparing the yearly percentage
change in the cumulative total shareholder return on the Company's Common Stock
against the cumulative total return of each of a peer group index and the
Wilshire 5000 index for the period of approximately five (5) fiscal years
commencing January 31, 1991 and ending December 31, 1995. The period ending
December 31, 1993 represents an eleven (11) month period due to the change in
the Company's fiscal year. The companies used in the peer group index consist of
Bay Meadows Operating Co., Fair Grounds Corp., Hollywood Park Operating Co.,
International Thoroughbred Breeders, Inc. and Santa Anita Operating Co., which
20
<PAGE>
are all of the publicly traded companies known to the Company to be engaged
primarily in thoroughbred racing in the continental United States. The Wilshire
5000 equity index measures the performance of all United States headquartered
equity securities with readily available price data. The graph depicts the
result of an investment of $100 in the Company, the Wilshire 5000 index and the
peer group companies. Since the Company has historically paid dividends on an
annual basis, the performance graph assumes that dividends were reinvested
annually.
<TABLE>
<CAPTION>
1/31/91 1/31/92 1/31/93 12/31/93 12/31/94 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Churchill Downs $100 $156 $196 $235 $192 $155
Wilshire 5000 $100 $128 $141 $155 $155 $212
Peer Group $100 $85 $ 86 $134 $76 $74
</TABLE>
EXECUTIVE COMPENSATION
----------------------
The following table sets forth the remuneration paid during the
last three (3) fiscal years by the Company to [i] Mr. Meeker, the President and
CEO of the Company, and [ii] each of the Company's
21
<PAGE>
four (4) most highly compensated executive officers in fiscal year 1995
(collectively the "named executive officers").
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION LONG TERM
COMPENSATION
OTHER SECURITIES ALL
NAME & PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) ANNUAL UNDERLYING OTHER
COMPEN- OPTIONS/SARS COMPENSATION(4)
SATION (#)
<S> <C> <C> <C> <C> <C> <C>
Thomas H. Meeker, 1995 $245,000 -0- $57,136 5,000 $12,830
President, CEO and 1994 245,000 $73,868 49,463 10,000 12,711
Director 1993 217,250 101,673 43,645 50,700 20,088
David E. Carrico, Senior 1995 92,000 -0- -0- 1,000 7,922
Vice President, 1994 86,607 21,574 -0- 1,750 7,867
Administration 1993 68,000 18,471 -0- 6,000 6,304
Dan L. Parkerson, 1995 96,000 -0- -0- 1,000 9,303
Senior Vice President, 1994 94,108 22,512 -0- 1,750 9,188
and General Manager 1993 78,883 28,695 -0- 6,000 7,061
Jeffrey M. Smith, 1995 95,000 -0- -0- 1,000 9,039
Senior Vice President, 1994 93,581 22,278 -0- 2,000 9,171
Planning and Development 1993 76,083 27,694 -0- 9,000 8,133
Alexander M. Waldrop, 1995 92,000 -0- -0- 1,000 8,162
Senior Vice President, 1994 88,821 21,574 -0- 2,000 8,113
General Counsel and 1993 75,167 19,543 -0- 9,000 132
Secretary
- ------------------
<FN>
(1) On November 18, 1993, the Company amended its Articles of Incorporation to
change its fiscal year from January 31 to December 31. Annual compensation
for 1993 is based upon actual compensation paid by the Company to the named
executive officers for the eleven months ended December 31, 1993. Annual
compensation figures for 1994 and 1995 include a twelve month period.
(2) In 1994, bonus awards were paid in cash and/or stock pursuant to the
Company's Incentive Compensation Plan. In 1993, bonuses were paid in cash
outside of the Company's Incentive Compensation Plan in recognition of the
Company's strong overall performance and the non-recurring nature of
certain development expenses. Bonuses attributable to 1995 may be paid
during 1996 under a new incentive compensation plan. See "Compensation
Committee Report on Executive Compensation."
(3) Includes the expense of a Supplemental Benefit Plan of which Mr. Meeker is
currently the only participant. See the discussion regarding the
Supplemental Benefit Plan below.
(4) Consists of life insurance premiums paid by the Company with respect to
certain term life insurance payable on the officer's death to beneficiaries
designated by him and, further, includes amounts contributed by the Company
to the officer's account under the Company's Profit Sharing Plan. Amounts
attributable to such term life insurance are as follows:
</FN>
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
MR. MEEKER MR. CARRICO MR. PARKERSON MR. SMITH MR. WALDROP
<S> <C> <C> <C> <C> <C>
1995 $2,875 $466 $818 $286 $177
1994 2,864 247 791 278 167
1993 2,909 247 812 288 132
</TABLE>
Pursuant to the Company's Profit Sharing Plan, the Company matches
employees' contributions (which are limited to 10% of annual compensation
up to $9,240 for calendar year 1995) up to 2% of quarterly contributions
and also makes discretionary contributions. Amounts contributed by the
Company on behalf of the named executive officers are as follows:
<TABLE>
<CAPTION>
MR. MEEKER MR. CARRICO MR. PARKERSON MR. SMITH MR. WALDROP
<S> <C> <C> <C> <C> <C>
1995 $9,955 $7,456 $8,485 $8,752 $7,985
1994 9,847 7,620 8,397 8,893 7,946
1993 17,179 6,057 6,249 7,845 0
</TABLE>
The following table provides information with respect to the named
executive officers concerning options granted during 1995:
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS GRANT
DATE VALUE(3)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES OR BASE PRESENT
GRANTED IN FISCAL PRICE EXPIRATION VALUE
NAME (1) YEAR ($/SH)(2) DATE ($)
<S> <C> <C> <C> <C> <C>
Thomas H. Meeker 5,000 47% $31.50 12/29/2005 $79,650
David E. Carrico 1,000 9% $31.50 12/29/2005 $15,930
Dan L. Parkerson 1,000 9% $31.50 12/29/2005 $15,930
Jeffrey M. Smith 1,000 9% $31.50 12/29/2005 $15,930
Alexander M. Waldrop 1,000 9% $31.50 12/29/2005 $15,930
- ---------------------------
<FN>
(1) The 9,000 options are exercisable beginning 12/30/1998.
(2) All options were granted on December 29, 1995. 3,174 options granted to Mr.
Meeker are intended to qualify as incentive stock options under the
Internal Revenue Code of 1986, as amended, and 1,826 options granted to Mr.
Meeker are non-qualified stock
23
<PAGE>
options. The 1,000 options granted to each of Messrs. Carrico, Parkerson,
Smith and Waldrop are also intended to qualify as incentive stock options
under the Internal Revenue Code of 1986, as amended. The exercise price of
these options, whether incentive stock options or non-qualified stock
options, is the fair market value of the shares as of the date of their
grant. The 9,000 options were granted at an exercise price equal to the
closing high bid price of the Company's Common Stock as of December 28,
1995.
(3) The options are valued using the Cox-Ross-Rubinstein Binomial option
pricing model, which is a variation of the Black-Scholes option pricing
model. This calculation is based on the following assumptions: (i) an
expected option term of eight years, (ii) an interest rate of 5.58% based
on the quoted yield of U.S. Treasury Bonds on the date of grant maturing in
eight years, (iii) a dividend yield of 1.27% per share, and (iv) a stock
price standard deviation of 43.9% based upon the average closing price of
the 250-day period preceding the grant date. Based on these assumptions,
the value of the nonqualifying options and the incentive stock options was
determined to be $15.93 per share.
</FN>
</TABLE>
The following table provides information with respect to the named
executive officers concerning unexercised options held as of December 31,
1995:
<TABLE>
AGGREGATE YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT YEAR END YEAR END (1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C>
Thomas H. Meeker 33,800/31,900 $0/17,500
David E. Carrico 4,000/4,750 $0/3,500
Dan L. Parkerson 4,000/4,750 $0/3,500
Jeffrey M. Smith 6,000/6,000 $0/3,500
Alexander M. Waldrop 6,000/6,000 $0/3,500
- -------------------
<FN>
(1) Closing high bid as of the last trading day of 1995 (December 29, 1995)
minus the exercise price.
</FN>
</TABLE>
The Company maintains a Supplemental Benefit Plan (the "Plan") in
which Mr. Meeker is currently the only participant. The Plan provides that if a
participant remains in the employ of the Company until age 55 or becomes totally
and permanently disabled, the participant will be paid a monthly benefit equal
to 45% of the "highest average monthly earnings," as defined in the Plan, prior
to the time of disability or age 55, reduced by certain other benefits as set
forth in the Plan, commencing on retirement (or attainment of age 55 if
disability occurs prior to said age) and continuing for life. The benefit
payable under the Plan is increased by 1% for each
24
<PAGE>
year the participant remains employed by the Company after age 55, to a maximum
of 55% of the highest average monthly earnings at age 65. The Plan further
provides that the monthly benefit will be reduced by [i] 100% of the primary
insurance amount under social security payable to a participant determined as of
the later of the participant's retirement date or attainment of age 62; [ii]
100% of the participant's monthly benefit calculated in the form of a life
annuity under the Company's terminated Pension Plan; [iii] 100% of the monthly
income option calculated as a life annuity from the cash surrender value of all
life insurance policies listed on a schedule attached to the participant's plan
agreement; and [iv] 100% of the employer contributions and any employee
contributions up to a maximum of $2,000 per year allocated to the participant's
accounts under the Company's Profit Sharing Plan, calculated in the form of a
life annuity payable on his retirement date. Due to these reductions, the
estimated annual benefit payable upon retirement at age 65 to Mr. Meeker under
the Plan is $47,251. This estimate is based upon the following assumptions: [i]
8% annual earnings under the Company's Profit Sharing Plan; [ii] Mr. Meeker's
salary remains constant; and [iii] a 4% annual cost of living increase.
EMPLOYMENT AGREEMENT AND CHANGE IN CONTROL AGREEMENT
- ----------------------------------------------------
Mr. Meeker was employed as President and Chief Executive Officer
of the Company in October 1984 under an annually renewing three-year contract.
Mr. Meeker's compensation for 1996 includes a base salary of $260,000 per year,
reimbursement for travel and entertainment expenses (including his wife's travel
expenses on Company business), provision of an automobile, payment of dues for
one (1) country club and any other professional or business associations, and a
$250,000 life insurance policy. Mr. Meeker's employment may be terminated by the
Company prior to the expiration of his employment agreement only if he willfully
fails to perform his duties under his employment agreement or otherwise engages
in misconduct that injures the Company. Pursuant to Mr. Meeker's employment
agreement, in the event of both a "change in control" of the Company and, within
one (1) year of such "change in control," either termination of Mr. Meeker's
employment by the Company without "just cause" or his resignation, the Company
will pay to Mr. Meeker an amount equal to three (3) times his average annual
base salary over the prior five (5) years. A "change in control" is defined
25
<PAGE>
generally to include the sale by the Company of all or substantially all of its
assets, a consolidation or merger involving the Company, the acquisition of over
30% of the Common Stock in a tender offer or any other change in control of the
type which would be required to be reported under the Federal securities laws;
however, a "change in control" will not be deemed to have occurred in the case
of a tender offer or change reportable under the Federal securities laws, unless
it is coupled with or followed by the election of at least one-half of the
directors of the Company to be elected at any one (1) election and the election
of such directors has not been previously approved by at least two-thirds of the
directors in office prior to such change in control.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
During the past fiscal year, the Company did not engage in any
transactions in which any director or officer of the Company had any material
interest, except as described below.
Directors of the Company may from time to time own or have
interests in horses racing at the Company's tracks. All such races are
conducted, as applicable, under the regulations of the Kentucky Racing
Commission or the Indiana Horse Racing Commission, and no director receives any
extra or special benefit with regard to having his horses selected to run in
races or in connection with the actual running of races.
Directors of the Company may own or have interests in horses
bought and/or sold at the Company's annual Thoroughbred horse sale. The Company
has no ownership interest in the horses being bought or sold. The Company acts
as the auctioneer for the sale and receives a commission as a percentage of the
sales price of each horse. No director receives any extra or special benefit
with regard to buying or selling Thoroughbred horses in the sale.
One or more directors of the Company have an interest in business
entities which contract with the Company for the purpose of simulcasting the
Kentucky Derby and other races and the acceptance of interstate wagers on such
races. In such case, no extra or special benefit not shared by all others so
contracting with the Company is received by any director or entity owned or
controlled by a director.
26
<PAGE>
Mr. Charles W. Bidwill, Jr., a director and five percent (5%)
owner of the Company, is the Chairman and part owner of National Jockey Club. In
1995, National Jockey Club and the Company were parties to a simulcasting
contract whereby National Jockey Club was granted the right to simulcast certain
of the Company's races, including the Kentucky Oaks - Grade I race and the
Kentucky Derby - Grade I race. In consideration for these rights, National
Jockey Club paid to the Company 5.6% of its gross handle on the Kentucky Oaks -
Grade I race and the Kentucky Derby - Grade I race and 4.4% of its gross handle
on the other simulcast races. For purposes of this and other simulcast
contracts, gross handle is defined as the total amount wagered by patrons on the
races at the National Jockey Club facility less any money returned to the
patrons by cancels and refunds. This simulcast contract is uniform throughout
the industry and the rates charged were substantially the same as rates charged
to other parties who contracted to simulcast the same races. In 1995, the
Company simulcasted the Kentucky Derby to 844 locations in the United States and
selected international sites. National Jockey Club received no extra or special
benefit as a result of the Company's relationship with Mr.
Bidwill.
Thomas H. Meeker, President and Chief Executive Officer of the
Company, is currently indebted to the Company in the principal amount of
$65,000, represented by his demand note bearing interest at 8% per annum
(payable quarterly) and payable in full upon termination of Mr. Meeker's
employment with the Company for any reason. This indebtedness arose in
connection with Mr. Meeker's initial employment, pursuant to the terms of which
he was granted a loan by the Company for the purpose of purchasing the Company's
Common Stock.
INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------
At its meeting held on March 21, 1996, the Board of Directors
adopted the recommendation of the Audit Committee and selected Coopers &
Lybrand, LLP to serve as the Company's independent public accountants and
auditors for the fiscal year ending December 31, 1996. Coopers & Lybrand, LLP
has served as the Company's independent public accountants and auditors since
the Company's 1990 fiscal year.
27
<PAGE>
Representatives of Coopers & Lybrand, LLP are expected to be
present at the Annual Meeting and will be available to respond to appropriate
questions and will have the opportunity to make a statement if they desire to do
so.
APPROVAL OF MINUTES OF 1995 SHAREHOLDERS' MEETING AND OTHER MATTERS
-------------------------------------------------------------------
(PROPOSAL NO. 3)
----------------
The Board of Directors of the Company does not know of any matters
to be presented to the Annual Meeting other than those specified above, except
matters incident to the conduct of the Annual Meeting and the approval by a
majority of the shares represented at the Annual Meeting of minutes of the 1995
Annual Meeting which approval does not amount to ratification of actions taken
thereat. If, however, any other matters should come before the Annual Meeting,
it is intended that the persons named in the enclosed Proxy, or their
substitutes, will vote such Proxy in accordance with their best judgment on such
matters.
PROPOSALS BY SHAREHOLDERS
-------------------------
Any shareholder proposal that may be included in the Board of
Directors' Proxy Statement and Proxy for presentation at the Annual Meeting of
Shareholders to be held in 1997 must be received by the Company at 700 Central
Avenue, Louisville, Kentucky 40208, Attention of the Secretary, no later than
January 9, 1997.
INCORPORATION OF DOCUMENT BY REFERENCE
--------------------------------------
Information concerning the signatories to the Stockholder
Agreement is contained in the filing on Schedule 13D made by such signatories
with the SEC on April 25, 1995, as amended on May 31, 1995, which Schedule 13D
filing (including all exhibits) is incorporated herein by reference. The Company
will provide a copy of such Schedule 13D, without charge, to a shareholder
requesting such a copy, by written or oral request. Requests for copies of the
Schedule 13D should be directed to Alexander M. Waldrop, Senior Vice President,
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Secretary and General Counsel, Churchill Downs Incorporated, 700 Central Avenue,
Louisville, Kentucky 40208, telephone number (502) 636-4400.
By Order of the Board of Directors.
Thomas H. Meeker, President
and Chief Executive Officer
Alexander M. Waldrop
Senior Vice President,
Secretary and
General Counsel
Louisville, Kentucky
May 10, 1996
PLEASE SIGN AND RETURN THE ENCLOSED PROXY
IF YOU CANNOT BE PRESENT IN PERSON
28
EXHIBIT A
CHURCHILL DOWNS INCORPORATED
1995 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of the Plan is to provide eligible employees of
the Company, and of any Parent or Subsidiary corporation which the Company's
Board of Directors has designated as a Participating Employer in the Plan, an
opportunity to acquire a proprietary interest in the Company through the
purchase of the Company's common stock on a payroll or other compensation
deduction basis. It is believed that participation in the ownership of the
Company will be to the mutual benefit of the eligible employees and the Company.
The Company intends for the Plan to qualify as an "employee stock purchase plan"
under Code Section 423, and the Plan shall be so construed. Any term not
expressly defined in the Plan but defined in the Code for purposes of Code
Section 423 shall have the same definition herein.
2. DEFINITIONS.
A. ACCOUNT. The term "Account" means the funds accumulated
with respect to an individual Participant as a result of deductions from the
Participant's pay for the purpose of purchasing Stock under the Plan. The funds
allocated to a Participant's Account shall remain the Participant's property at
all times.
B. BASE PAY. The term "Base Pay" means regular straight time
earnings, excluding payments for overtime, bonuses, incentive compensation and
other special payments.
C. BOARD. The term "Board" means the Company's Board of
Directors.
D. CODE. The term "Code" means the Internal Revenue Code of
1986, as amended.
E. COMMITTEE. The term "Committee" means the committee
appointed by the Board to administer the Plan in accordance with Section 3.
F. COMPANY. The term "Company" means Churchill Downs
Incorporated, a Kentucky corporation, 700 Central Avenue, Louisville, Kentucky
40208.
G. ELIGIBLE EMPLOYEE. The term "Eligible Employee" means
any person, including any officer or director, who satisfies the following three
requirements: [i] who has been employed by a Participating Employer for at least
one (1) year; [ii] whose customary weekly employment with the Participating
Employer is at least twenty-one (21) hours; and [iii] whose customary calendar
year employment exceeds five (5) months.
H. EXCHANGE ACT. The term "Exchange Act" means the
Securities Exchange Act of 1934.
I. FAIR MARKET VALUE. The term "Fair Market Value" means the
value of Stock under the Plan, determined in accordance with Section 8.
J. PARENT. The term "Parent" means, as defined in Code
Section 424(e), any corporation, other than the Company, in an unbroken chain of
corporations ending with the Company, if at the time of the granting of an
option under the Plan, each of the corporations other than the Company own stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
K. PARTICIPANT. The term "Participant" means an Eligible
Employee who elects to participate in the Plan.
L. PARTICIPATING EMPLOYER. The term "Participating Employer"
means the Company and any Parent or Subsidiary which the Board has authorized to
participate in the Plan as to its Eligible Employees.
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M. PLAN. The term "Plan" means the Churchill Downs
Incorporated 1995 Employee Stock Purchase Plan, as set forth herein and as
amended from time to time.
N. PLAN YEAR. The term "Plan Year" means the twelve (12)
consecutive month period beginning each August 1.
O. STOCK. The term "Stock" means the Company's no par value
common stock.
P. SUBSIDIARY. The term "Subsidiary" means, as defined in
Code Section 424(f), any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if, at the time of the granting
of an option under the Plan, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock of one of the other corporations
in such chain.
3. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee of the Company's Board of Directors consisting of not less than three
(3) members appointed by the Board and serving at the Board's pleasure. Each
member of the Committee shall be both a member of the Board who has not at any
time within one (1) year before becoming a member of the Committee been eligible
to receive stock or options under any plan of the Company or its affiliates and
who is a "disinterested person" within the meaning of Rule 16b-3 under the
Exchange Act, or any successor rule or regulation. Any vacancy occurring in the
membership of the Committee shall be filled by appointment by the Board. The
Committee shall have full power and authority to construe, interpret, and
administer the Plan and may from time to time adopt such rules and regulations
for carrying out the Plan as it may deem proper and in the best interests of the
Company.
4. EFFECTIVE DATE AND DURATION OF THE PLAN. The effective date of the Plan
is August 1, 1995, subject to ratification of the Plan by the holders of a
majority of all the shares of Stock which are voted in person or by proxy at a
duly held stockholders' meeting. The Plan shall terminate upon the earlier of:
[i] issuance of all shares authorized to be issued under the Plan; or [ii] July
31, 2000.
5. ELIGIBILITY AND PARTICIPATION. All Eligible Employees of a Participating
Employer may participate in the Plan, subject to the limitations set forth in
Section 7. Participation is voluntary. To become a Participant, an Eligible
Employee must complete an authorization form for a payroll deduction available
from the Committee and deliver it to the Committee on or before the last
business day of July of each year. Payroll deductions shall commence on the
Participant's first pay day of August following delivery of the completed
payroll deduction authorization form to the Committee, and shall continue each
Plan Year until altered or terminated as provided in Sections 6, 9 and 10.
6. PAYROLL DEDUCTIONS.
A. PERCENTAGE OF COMPENSATION. Each Eligible Employee electing
to participate in the Plan shall indicate on the payroll deduction form the
percentage of the Eligible Employee's Base Pay to be withheld. Such percentage
shall not be greater than five percent (5%) nor less than one-half percent
(.5%).
B. ACCOUNTS. Payroll deductions from a Participant shall be
credited to the Participant's Account. Amounts shall remain in a Participant's
Account until used to purchase shares pursuant to Section 9 hereof or paid out
pursuant to Sections 9 or 10. A Participant may not make separate cash payments
into the Account. No interest or earnings on the Account will be credited to any
Participant. Compensation deductions received or held by the Committee under the
Plan shall be used only for the purposes specified in the Plan.
C. CHANGES TO PAYROLL DEDUCTION AUTHORIZATION. Participants may
change their payroll deduction authorization as of the beginning of each
Plan Year and may also make one (1) mid-Plan Year change to the percentage of
payroll deductions authorized by delivery of a new payroll deduction
authorization form to the Committee. The change shall become effective as soon
as administratively practicable and shall continue each Plan Year until again
altered pursuant to this section or terminated pursuant to Sections 6, 9 or 10.
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7. GRANT OF OPTIONS.
A. NUMBER OF SHARES OPTIONED. On the first business day in each
Plan Year, each individual who is a Participant on such day shall be granted an
option to purchase as many full shares of Stock as the Participant can purchase
with the compensation deductions credited to the Participant's Account during
the Plan Year up to a maximum of two hundred fifty (250) shares.
B. LIMITATION ON AMOUNT OF GRANT. Notwithstanding the foregoing,
no Participant shall be granted an option to the extent that the option would
permit the Participant's rights to purchase stock under the Plan and all
employee stock purchase plans of the Company and its Parent and Subsidiaries (if
any) to accrue at a rate which exceeds $25,000 of the fair market value of such
stock (determined at the time the option is granted) for each calendar year in
which the option is outstanding at any time. This section shall be applied by
use of all rules and definitions of terms which are applicable for purposes of
Code Section 423(b)(8), it being the intent that this section shall cause the
Plan to comply with the requirements of such section of the Code.
C. 5% SHAREHOLDERS. Anything herein to the contrary
notwithstanding, no Participant shall be granted an option if the Participant
would own, immediately after the grant of the option, stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or of any Parent or Subsidiary. The rules of Code
Section 424(d) shall apply in determining stock ownership and stock which the
Participant may purchase under outstanding options shall be treated as stock
owned by the Participant.
D. OPTION PRICE. The option price per share shall be 85% of
the lower of the Fair Market Value per share of the Stock on the first or last
business day in the Plan Year (rounded up to the next whole dime). "Business
day" means the day on which any national securities exchange is open if the
Stock is then listed on such exchange, or, if not listed, the day when the
over-the-counter market is open.
8. FAIR MARKET VALUE OF STOCK. The Fair Market Value per share of Stock
as of any day shall be computed as follows:
A. If the Stock is traded on the over-the-counter market, the
closing high bid quotation for the Stock in the over-the-counter market, as
reported by the National Association of Securities Dealers Automated Quotation
System, on the business day immediately preceding the date of grant.
B. If the Stock is listed on a national securities exchange, the
average of the closing prices of the Stock on the Composite Tape for the ten
(10) consecutive trading days immediately preceding such given date.
C. If the Stock is neither traded on the over-the-counter market
nor listed on a national securities exchange, such value as the Plan Committee,
in good faith, shall determine.
9. EXERCISE OF OPTIONS.
A. DATE OF EXERCISE. Unless a Participant gives written notice
to the Committee as provided in Section 9.B, the Participant's option for the
Plan Year is deemed exercised automatically at the close of the last business
day of the Plan Year for as many full shares of Stock as can be purchased with
funds in the Participant's Account on that date.
B. PARTICIPANT NOTICE TO CHANGE AMOUNT OF EXERCISE. By deliver-
ing a written notice to the Committee at least two (2) business days before the
end of the Plan Year, a Participant may decide not to exercise the Participant's
option for the Plan Year or to exercise the option for some lesser number of
shares. If more than one written notice is delivered by a Participant, the last
notice shall control.
C. DISPOSITION OF ACCOUNT. Funds in a Participant's Account will
be used to pay the option price upon exercise of the Participant's option, and
the Company shall deliver to each Participant certificates representing any
Stock purchased as soon as administratively practicable after the end of the
Plan Year. Any amount in a Participant's
31
<PAGE>
Account at the end of the Plan Year will be paid to Participant (without
interest) as soon as administratively practicable after the end of the Plan
Year.
D. LAPSE OF OPTIONS. All unexercised options shall lapse on the
earlier of: [i] the end of the Plan Year; [ii] termination of participation; or
[iii] termination of the Plan.
10. TERMINATION OF PARTICIPATION.
A. TERMINATION BY PARTICIPANT. A Participant may at any time
terminate participation by giving written notice of such termination to the
Committee and electing to either:
[1] leave any funds in the Participant's Account in which
event the Participant's option will be deemed exercised at the end of the
Plan Year pursuant to Section 9.A and any amounts remaining after such
exercise will be paid to the Participant (without interest); or
[2] receive any funds in the Participant's Account.
Participants who change their payroll deduction authorization to
zero pursuant to Section 6.C shall be deemed to have terminated participation in
the Plan and will be deemed to have elected a disposition of the Participant's
Account in accordance with Section 10.A[1] unless the Participant notifies the
Committee in writing at least two (2) business days before the end of the Plan
Year that the Participant elects to receive the funds in the Participant's
Account.
Upon termination of participation, all further payroll deductions
from such Participant shall cease and all amounts in the Participant's Account
which are not used to purchase Stock shall be paid to the Participant (without
interest) as soon as administratively practicable.
B. CHANGE IN EMPLOYEE STATUS. If, on or before the last business
day of the Plan Year, a Participant ceases to be an Eligible Employee for any
reason, including death, disability, resignation, retirement or dismissal, the
Participant's participation in the Plan shall cease and any outstanding options
shall lapse in full on the day the Participant's status as an Eligible Employee
ceases. Upon lapse, all further payroll deductions shall cease, and all amounts
credited to the Participant's Account and not used to purchase Stock shall be
paid to the Participant (without interest) as soon as administratively
practicable following such lapse.
C. LEAVES OF ABSENCE. The employment relationship of a
Participant with a Participating Employer will be treated as continuing intact
while the Participant is on military, sick leave or other bona fide leave of
absence for a period not to exceed ninety (90) days, or for a longer period,
provided that the Participant's right to reemployment with the Participating
Employer is guaranteed either by statute or by contract. Where the period of
leave exceeds ninety (90) days and where the Participant's right to reemployment
is not guaranteed either by statute or contract, the employment relationship
will be deemed to have terminated on the 91st day of such leave.
D. LIMITATION ON WITHDRAWALS FROM ACCOUNT. A Participant may not
withdraw any amount in the Participant's Account except pursuant to Sections
9.C, 10.A or 10.B.
E. REINSTATEMENT OF PARTICIPATION. A Participant whose
participation in the Plan terminates may not elect to participate in the Plan
again until the next Plan Year. In addition, no Participant who is an officer or
director of the Company or a Participating Employer (as contemplated by Rule
16b-3 of the Exchange Act, or any successor rule or regulation) may participate
in the Plan again for at least six (6) months after termination of
participation.
11. STOCK RESERVED FOR PLAN.
A. NUMBER AND TYPE OF SHARES. A total of fifty thousand (50,000)
shares of Stock, which may consist of authorized but unissued shares or treasury
shares or both, are reserved for issuance under the Plan, subject to adjustment
upon changes in capitalization of the Company as provided in Section 11.C. If
any option shall lapse or terminate for any reason as to any shares, such shares
of Stock shall again become available under the Plan.
32
<PAGE>
B. PRORATION OF AVAILABLE SHARES. Notwithstanding anything herein
to the contrary, if the total number of shares which would otherwise have been
acquired under the Plan on any date exceeds the number of shares of Stock then
available under the Plan, then the Committee may make such pro rata allocation
of the shares remaining available in such practicable manner as it shall
determine to be fair and equitable. The payroll deductions to be made pursuant
to the Participant authorizations shall be reduced accordingly and the Committee
shall give written notice of such reduction to each affected Participant. Any
payroll deductions in a Participant's Account not used to purchase Stock shall
be paid (without interest) to such Participant.
C. ADJUSTMENT PROVISION. If there is any change in the number of
outstanding shares of Stock by reason of any stock dividend, stock split-up or
similar transaction, the number of shares of Stock then remaining available for
issuance and the number of shares subject to any outstanding options shall be
correspondingly changed, without change in the aggregate option price.
Additionally, equitable adjustments shall be made in options to reflect any
other changes in the Stock, including changes resulting from a combination of
outstanding shares or other recapitalization, reorganization, sale, merger,
consolidation or similar transaction. The establishment of the Plan shall not
affect the Company's right to make adjustments, reclassifications,
reorganizations or changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate, sell or otherwise transfer all or any part of
its business or assets.
D. DELIVERY OF SHARES. A Participant shall have no interest in,
or rights of a shareholder to, any shares of Stock covered by an option until
shares have been issued to the Participant. Stock to be delivered to a
Participant pursuant to the exercise of an option shall be issued in the name of
the Participant, or, if the Participant so directs by written notice delivered
to the Committee, in the names of the Participant and one other person
designated in the notice, as joint tenants with rights of survivorship, to the
extent permitted by applicable law.
E. RESTRICTIVE LEGENDS.
[1] FAILURE TO SATISFY HOLDING PERIOD REQUIREMENTS.
Certificates representing shares of Stock issued pursuant to the Plan shall
bear a restrictive legend stating that the shares represented thereby may
not be transferred before the expiration of two (2) years from the date of
grant of the option and one (1) year from the date of transfer of the Stock
to the Participant, unless the Participant notifies the Company of the
Participant's intention to dispose of the Stock. Upon receipt of such
notice by the Committee, the Participant is free to dispose of the Stock.
[2] INSIDERS. Certificates representing shares of Stock
issued pursuant to the Plan to any director or executive officer of the
Company or a Participating Employer within the meaning of Section 16 of the
Exchange Act shall bear a restrictive legend stating that the shares
represented thereby may not be transferred before the expiration of six (6)
months from the date of the issuance of shares of Stock to the Participant.
[3] OTHER LEGENDS. The Company shall be entitled to place
any other legends on certificates for shares of Stock issued hereunder
which it deems appropriate to effectuate the terms of the Plan or to comply
with any applicable law.
12. TRANSFERABILITY. Neither compensation deductions credited to a
Participant's Account nor any rights with regard to participation in the Plan,
exercise of any option or the right to receive shares of Stock under the Plan
may be assigned, transferred, pledged, or otherwise disposed of in any way by a
Participant other than by will or the laws of descent and distribution. Any such
attempted assignment, transfer, pledge, or other disposition shall be without
effect. An option granted under the Plan is exercisable during the Participant's
lifetime only by the Participant.
13. DESIGNATION OF BENEFICIARIES. A Participant may deliver to the
Committee a written designation (on a prescribed form) of a beneficiary or
beneficiaries who are to receive any Stock and cash payable to the Participant
but not delivered to the Participant because of the Participant's death before
such delivery. Such designation may be changed or revoked by delivery of written
notice to the Committee. Upon the death of a Participant and upon receipt by the
Committee of proof deemed adequate by it of the identity and existence of a
beneficiary or beneficiaries validly designated by such Participant, the Company
shall issue and deliver such Stock and pay such cash to such beneficiary or
beneficiaries. In the absence of the Company's receipt of such proof, or if the
Participant fails to designate any beneficiary who is living at the
33
<PAGE>
time of the Participant's death, the Company shall issue and deliver such Stock
and pay such cash to the executor or administrator of the estate of such
Participant, or if no such executor or administrator has been appointed (to the
knowledge of the Committee), the Company, if and as the Committee may direct in
its discretion, shall issue and deliver such Stock and pay such cash to the
spouse and/or any one or more dependents or relatives of such Participant, or if
no such spouse, dependent or relative is known to the Committee, then to such
other person or persons as the Committee may designate in its discretion.
14. AMENDMENT AND TERMINATION. The Plan may be amended or terminated by
the Compensation Committee of the Board at any time. Any amendment of the Plan
requires approval by the Company's stockholders within twelve (12) months after
such amendment's adoption by the Compensation Committee if it increases the
total number of shares of Stock available for issuance under the Plan, or
changes the class of corporations eligible to become Participating Employers or
the class of persons eligible to receive options under the Plan, or if the
Committee otherwise deems such approval necessary or advisable for purposes of
complying with Rule 16b-3 of the Exchange Act, or any successor rule or
regulation. Such stockholder approval shall mean approval by holders of a
majority of all the shares of the Stock which are voted in person or by proxy at
a duly held stockholders' meeting. No such amendment may be adopted which would
adversely affect any rights acquired by any person hereunder before the
effective date of such amendment, unless such amendment is necessary for the
Company to obtain a ruling it may request from the Internal Revenue Service with
respect to the Plan, or necessary for the plan to conform to the requirements of
Code Section 423 or any other applicable law.
15. NOTICES. Any notice or other communication by any person to the
Committee shall be deemed to have been duly given when actually received by a
member of the Committee, or when actually received by the Company addressed as
follows:
Churchill Downs Incorporated
700 Central Avenue
Louisville, Kentucky 40208
Attention: Board of Directors, Compensation Committee
Any notice or other communication or any delivery of Stock or cash to any person
(other than the Committee) under or in connection with the Plan shall be deemed
to have been duly given or made when deposited in the United States mails,
postage prepaid, addressed to such person at the address last shown for such
person in the records of the Committee or any Participating Employer.
16. TAX WITHHOLDING. The Participating Employer shall have the right to
withhold from each Participant's compensation an amount equal to all federal,
state and local taxes which the Participating Employer is required by law to
withhold as a result of the Participant's participation in the Plan or
disposition of shares of Stock issued under the Plan.
17. NONGUARANTEE OF EMPLOYMENT. No provision of the Plan shall be
construed as giving any person any right he would not otherwise have to become
or remain an employee of a Participating Employer, or any other right not
expressly created by such provision.
18. GOVERNING LAW. The Plan shall be governed by the laws of the
Commonwealth of Kentucky and any applicable federal laws.
Dated this 18th day of July, 1995.
CHURCHILL DOWNS INCORPORATED
By: /s/ Thomas H. Meeker
-------------------------------------
Title: President and Chief Executive Officer
34
PROXY
CHURCHILL DOWNS INCORPORATED
700 Central Avenue
Louisville, Kentucky 40208
ANNUAL MEETING OF SHAREHOLDERS - JUNE 13, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Frank B. Hower, Jr. and
W. Bruce Lunsford as Proxies with full power to appoint a substitute and hereby
authorizes them to represent and to vote, as designated below, all shares of the
undersigned at the Annual Meeting of Shareholders to be held on Thursday, June
13, 1996 or any adjournment thereof, hereby revoking any Proxy heretofore given.
The Board of Directors unanimously recommends a vote FOR the
following proposals:
1. Election of Class III Directors (Proposal No. 1):
____ FOR all nominees listed ____ WITHHOLD AUTHORITY to
below (Except as marked to vote for all nominees listed
the contrary below) below
Class III Directors: Charles W. Bidwill, Jr., Thomas H.
Meeker, Carl F. Pollard and Darrell R.
Wells
(INSTRUCTION: To withhold authority to vote for any individual
nominee write that nominee's name on the space provided below).
- ----------------------------------------------------------------
1
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2. ____ FOR ____ AGAINST ____ ABSTAIN
Proposal to approve the Churchill Downs Incorporated 1995 Employee
Stock Purchase Plan (Proposal No. 2);
3. ____ FOR ____ AGAINST ____ ABSTAIN
Proposal to approve minutes of the 1995 Annual Meeting of Share-
holders, approval of which does not amount to ratification of
action taken thereat (Proposal No. 3);
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting including matters incident to
its conduct.
UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSAL NO. 2 AND FOR
PROPOSAL NO. 3, AND FOR THE ELECTION OF ALL
CLASS III DIRECTORS DESIGNATED UNDER PROPOSAL
NO. 1. Please sign, date and return this
Proxy promptly in the enclosed envelope.
Dated ________________________________, 1996
________________________________________________________
_____________________ (Please sign this proxy exactly as
name(s) appears. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee,
guardian or other fiduciary, please give full title.)
2
