EXHIBIT 10.1
THIS NOTE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”). THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT. THIS NOTE IS SUBJECT TO CERTAIN TRANSFER
RESTRICTIONS SET FORTH IN SECTION 12 OF THIS NOTE.
CHURCHILL DOWNS INCORPORATED
AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE
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$16,669,379.87
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Louisville,
Kentucky
March 7, 2005
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WHEREAS,
Churchill Downs Incorporated previously issued its Convertible
Promissory Note dated October 19, 2004 in the principal amount of
$16,669,379.87 (the "Original Note") to Brad M. Kelley;
WHEREAS,
Churchill Downs Incorporated and Brad M. Kelley desire to amend and
restate the Original Note as set forth herein;
NOW,
THEREFORE, the Original Note is amended and restated to read in its
entirety as follows:
Churchill
Downs Incorporated, a Kentucky corporation (the
“Company”), the principal office of which is located at
700 Central Avenue, Louisville, Kentucky 40208, for value received,
hereby promises to pay to the order of Brad M. Kelley, an
individual, whose principal residence is located at 100 Gulf Blvd.,
Boca Grande, Florida 33921 (“Holder”), the sum of
Sixteen Million Six Hundred Sixty-Nine Thousand Three Hundred
Seventy-Nine Dollars and 87/100 ($16,669,379.87), or such lesser
amount as shall then equal the outstanding principal balance hereof
and any unpaid accrued interest hereon, as set forth below, on the
date which is ten (10) years from October 19, 2004 (the
“Maturity Date”). The Company shall have no right to
prepay or transfer this note prior to the Maturity Date without the
consent of the Holder. The Company shall, on the Maturity Date, pay
the principal balance hereof and any unpaid accrued interest hereon
in cash.
Payment
for all amounts due hereunder shall be made by mail to the Holder
c/o Holder’s attorney, Greg Betterton, Esq., 981 Ridgewood
Avenue, #101, Venice, Florida 34285. This Note is issued pursuant
to that certain Stock Redemption Agreement dated as of October 19,
2004 by and among the Company and the Holder, as the same may from
time to time be amended, modified or supplemented (the
“Redemption Agreement”).
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The
following is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder,
by the acceptance of this Note, agrees:
1.
Definitions. Unless specifically defined herein, capitalized
terms shall have the meaning given them in the Redemption
Agreement. As used herein, the following terms, unless the context
otherwise requires, have the following meanings:
(i)
The “Company” includes
any entity which shall succeed to or assume the obligations of the
Company under this Note.
(ii)
“Holder,” when the
context refers to a holder of this Note, shall mean any person who
shall at the time be the registered holder of this Note.
(iii)
“Conversion Price” means
$36.83.
2.
Interest. The Company shall pay interest on the principal
amount of the Note on an annual basis if, and only if, the Company
declares and pays a cash dividend on its common stock for such
year. Within ten (10) business days of paying any cash dividend on
its common stock, the Company will pay to the Holder as interest an
amount equal to what Holder would have received as a dividend on
the shares of the Company’s common stock redeemed pursuant to
the Redemption Agreement. All payments made on this Note shall be
applied, at the option of the Holder, first to collection costs, if
any, then to accrued interest and then to principal. After maturity
or in the event of default, interest shall continue to accrue on
the Note at the rate set forth above. Notwithstanding anything in
this Note to the contrary, the interest rate charged hereon shall
not exceed the maximum rate allowable by applicable law. If any
stated interest rate herein exceeds the maximum allowable rate,
then the interest rate shall be reduced to the maximum allowable
rate, and any excess payment of interest made by the Company at any
time shall be applied to the unpaid balance of any outstanding
principal of this Note.
3.
Events of Default. If any of the events specified in this
Section 3 shall occur (herein individually referred to as an
“Event of Default”), the Holder of the Note may, so
long as such condition exists, declare the entire outstanding
principal of this Note and unpaid accrued interest thereon
immediately due and payable, by notice in writing to the
Company:
(i)
Default in the payment of the
principal and unpaid accrued interest of this Note within fifteen
(15) days of when due and payable; or
(ii)
The institution by the Company of
proceedings to be adjudicated as bankrupt or insolvent, or the
consent by it to institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer
to consent seeking reorganization or release under the federal
Bankruptcy Act, or any other applicable federal or state law, or
the consent by it to the filing of any such petition or the
appointment of a receiver, liquidator, assignee, trustee or other
similar official of the Company, or of any substantial part of its
property, or the making by it of an assignment for the
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benefit of creditors, or the
taking of corporate action by the Company in furtherance of any
such action; or
(iii)
If, within sixty (60) days after the
commencement of an action against the Company (and service of
process in connection therewith on the Company) seeking any
bankruptcy, insolvency, reorganization, liquidation, dissolution or
similar relief under any present or future statute, law or
regulation, such action shall not have been resolved in favor of
the Company or all orders or proceedings thereunder affecting the
operations or the business of the Company stayed, or if the stay of
any such order or proceeding shall thereafter be set aside, or if,
within sixty (60) days after the appointment without the consent or
acquiescence of the Company of any trustee, receiver or liquidator
of the Company or of all or any substantial part of the properties
of the Company, such appointment shall not have been
vacated.
(iv)
Failure of Company to convert in
accordance with the procedure set forth herein, in which case this
Note shall accrue interest at the maximum allowable rate until the
date of conversion.
4.
Conversion.
(i)
Optional Conversion. Upon
delivery of the Conversion Notice attached hereto to the Company,
the Holder has the right, at the Holder’s option, at any time
prior to payment in full of the principal balance of and accrued
interest on this Note, to convert this Note, in accordance with the
provisions of this Section 4, in whole or in part (if in part, in
principal amounts of no less than $100,000, and in $100,000
increments), into shares of the Company’s common stock, which
are fully paid, nonassessable, fully registered and immediately
transferable, subject only to compliance with all applicable
securities laws and regulations. This Note, or any portion thereof,
will be convertible into that number of fully paid and
nonassessable shares of the Company’s common stock equal to
(i) the principal amount of the Note being converted divided by
(ii) the Conversion Price. Provided, however, Holder will only be
able to convert the Note, or any portion thereof, into shares of
the Company’s common stock if Holder’s total beneficial
ownership of the Company’s common stock immediately after
such conversion would be less than 4.9% of the Company’s then
total number of issued and outstanding shares of common stock
(nothing herein shall prevent Holder from entering into an
agreement to sell all or a portion of the shares into which this
Note would convert as long as the closing on any such sale occurs
simultaneously with the conversion of the Note so that
Holder’s percentage ownership of Company’s common stock
never surpasses 4.9%). Notwithstanding the immediately preceding
sentence, if Holder’s post-conversion beneficial ownership of
the Company’s common stock would be five percent (5.0%) or
greater, Holder may convert the Note, or any portion thereof, if
(and only if) Holder has fully disclosed any and all information,
has executed any documents, and has taken all other steps, required
by any applicable gaming agency or regulatory authority for holders
of 5.0% or more of the Company’s common stock (the
“Disclosure Requirements”), and agrees to make all such
information available in the future and to comply with any request
of the Company or any applicable gaming agency or regulatory
authority or otherwise
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fully complies with (on a timely
basis) the requirements of such applicable gaming agency or
regulatory authority.
(ii)
Conversion Procedure. Before
the Holder shall be entitled to convert this Note into shares of
the Company’s common stock, Holder shall deliver the
Conversion Notice attached hereto to Company not less than
seventy-five (75) days prior to the date Holder desires to convert
this Note. Such Conversion Notice shall be delivered by mail,
postage prepaid, to the Company at its princip
