Exhibit 10.1
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT
AGREEMENT is made and entered into as of September 27, 2007
(“Employment Agreement”), between CHURCHILL DOWNS
INCORPORATED, a Kentucky corporation (“Company”) and
William E. Mudd (“Mudd”).
1.
Employment . Pursuant to this Employment
Agreement, the Company shall employ Mudd, and Mudd shall accept
employment, in the capacity of Executive Vice President and Chief
Financial Officer of the Company, reporting to the President and
Chief Executive Officer of the Company, except, where applicable,
reporting to the Board of Directors or a committee thereof. Mudd
and the Company hereby agree that October 15, 2007 is the date on
which Mudd’s employment shall begin (the “Effective
Date”). Mudd shall exert his best efforts and devote his full
time and attention to the business and affairs of the Company. Mudd
shall have all powers and responsibilities attendant to the
position of Chief Financial Officer assigned to him or delegated to
him by the Company’s President and CEO (the
“CEO”). The duties and responsibilities of said
position may be described in a position description mutually
acceptable to him and the CEO; provided that said position shall,
in any case, include (i) those normal and customary duties
associated with a position of Chief Financial Officer (managing the
day to day activities of the finance department to include SEC
filings, regulatory reporting, external audit, financial
compliance, risk management, capital structure management,
strategic planning, business planning, business forecasting and
budgeting, management reporting, treasury management, shareholder
value management, investor relations, tax management, capital
investment analysis and advising the Board of Directors on
governance issues) and (ii) serving on the Executive Leadership
team.
2.
Compensation and Perquisites .
A.
Salary . As compensation for the services
rendered by Mudd hereunder, the Company shall pay to Mudd a base
salary (“base salary”) of $290,000 a year, payable in
accordance with the Company’s standard payroll procedures.
The base salary shall be prorated in 2007 based upon the proportion
of the year remaining as of the Effective Date. Salary adjustments,
if any, shall be made, in the discretion of the Compensation
Committee of the Board of Directors, at any time but will normally
occur in April of each year in accordance with standard Company
policy and in no event may Mudd’s base salary be reduced
below the annualized base salary paid in the preceding year, unless
such reductions are made for other senior executive officers and
the chief executive officer of the Company.
B.
Expenses . The Company will reimburse Mudd for
all reasonable and necessary travel and other out-of-pocket
expenses incurred by him in the performance of his duties. The
Company will pay Mudd’s reasonable travel and entertainment
expenses and other reasonable expenses incurred on behalf of the
Company’s business. Mudd shall present to the Company on a
timely basis from time to time an itemized account of such expenses
in such form as may be required by the Company. The reimbursement
of such expenses shall be subject to the customary policies of the
Company.
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C.
Automobile . The Company will provide Mudd with
an automobile allowance of $900 per month so long as similar
benefits are provided to other members of the Executive Leadership
team. The Company may terminate such benefits at its
discretion.
D.
Dues . The Company will pay for Mudd’s
dues (excluding any initiation fee) for any one country club so
long as similar benefits are provided to other members of the
Executive Leadership team. The Company may terminate such benefits
at its discretion.
E.
Moving Expenses . The Company will pay to Mudd
his reasonable moving expenses actually incurred (the
“Relocation Expenses”) which include but are not
limited to, transportation costs, cost of relocating household
goods, temporary housing, sales expenses relating to home
(including any commissions due to any real estate agent in
connection with the sale or purchase of a house), living allowances
and the gross up of such expenses to cover tax liability incurred
by him in connection with his relocation to Louisville, Kentucky.
Mudd shall present to the Company an itemized account of such
expenses. The Company and Mudd each agrees to use all reasonable
efforts to keep such Relocation Expenses at or below $150,000;
provided that the Company remains responsible for all Relocation
Expenses in excess of $150,000 in accordance with the first
sentence of this Paragraph. Mudd represents to the Company that he
intends to place his Pennsylvania home for sale as soon as
reasonably practicable and to relocate himself and his family in a
newly purchased home in the Louisville area as soon as reasonably
practicable. The Company represents that it intends to use the
Buyer Value Option “BVO” Program to assist in
Mudd’s relocation. Relocation Today will manage Mudd’s
total relocation in conjunction with the Company’s Human
Resources Department. Mudd will be required to sign a relocation
payback agreement (attached hereto as Exhibit A
).
F.
Cash Signing Bonus : Mudd shall receive a cash
signing bonus of $100,000, within thirty (30) days of the Effective
Date. Mudd agrees that that if he terminates employment within
twelve (12) months of the Effective Date he will repay the cash
signing bonus on a daily calendar pro-rated basis [(365
minus number of days since the Effective Date) divided
by 365 multiplied by $100,000)].
G.
Equity Signing Grant : Mudd shall receive, under
the Company’s 2007 Omnibus Stock Incentive Plan, an initial
stock grant of 2,500 shares of restricted stock, which will vest in
three (3) years (measured from the Effective Date) and 4,500 stock
options, which will vest ratably over three (3) years (measured
from the Effective Date). These grants shall be subject to and on a
basis consistent with the terms and conditions and overall
administration of such plan. The Company and Mudd shall execute the
standard restricted stock grant agreement and stock option
agreement in effect at the time of the grant.
All payments and
other compensation to Mudd shall be subject to applicable
withholding.
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3.
Employee Benefits .
A.
Employee Stock Purchase Plan . Mudd shall be
entitled to participate in the Churchill Downs Incorporated 2000
Employee Stock Purchase Plan, subject to and on a basis consistent
with the terms, conditions and overall administration of such
plan.
B.
Long Term Incentive Plan. Mudd shall be
entitled to participate in the Company’s 2007 Long Term
Incentive Plan (“LTI”) subject to and on a basis
consistent with the terms and conditions and overall administration
of such plan. Mudd’s award shall be based on achievement of
certain performance goals and vesting criteria as approved by the
Compensation Committee of the Board of Directors. Mudd’s LTI
target award will be $3.0 million with terms similar to those at
his level. LTI payments may be in the form of cash or Company stock
and may require Compensation Committee and Board of Director
approval.
C.
Medical, Dental, Vision and Life Insurance .
Mudd will be eligible to participate in the Company’s
medical, dental, vision, disability and life insurance plans on the
same basis as generally offered to other executives of the Company
from time to time. Mudd acknowledges receipt of a summary of those
benefits.
D.
Incentive Compensation Plan . Mudd shall be
entitled to participate in the Company’s (1997) Incentive
Compensation Plan, as amended and restated effective March 1, 2005
(the “ICP”), subject to and on a basis consistent with
the terms, conditions and overall administration of such plan. For
purposes of participation in the ICP, Mudd’s Target Award (as
defined therein) for calendar year 2008 shall be set at sixty
percent (60%) of base salary. The bonus award for calendar year
2008 performance will be paid in March 2009. Mudd shall not
participate in, or be eligible for an award under, the ICP for
calendar year 2007. The ICP may be modified, adjusted and changed
from time to time at the discretion of the Company.
E.
Section 401(k) Retirement Plan . Mudd shall be
entitled to participate in the Company’s Section 401(k)
Retirement Plan, subject to and on a basis consistent with the
terms, conditions and overall administration of such
plan.
F.
Other Plans and Programs . Mudd will be eligible
to participate in all other plans and programs offered to
executives of the Company, subject to and on a basis consistent
with the terms, conditions and overall administrative requirements
of such plans, including, without limitation, the Deferred
Compensation Plan, the 125 Flex Plan, Executive Supplemental Long
Term Disability Insurance; provided that, in some instances, Mudd
will not be able to participate in such plans until he has
completed the required term of employment as required under the
terms of such plans.
4.
Vacation . Mudd shall be awarded paid time off
(PTO) consistent with the Company’s established policy as
amended from time to time.
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5.
Termination of Employment . The Company may
terminate Mudd’s employment at any time, for any
reason.
A.
By Company (except for termination for Cause), or Mudd for Good
Reason . In the event Mudd is terminated by the
Company, without Cause or in the event of Mudd’s termination
of employment for Good Reason, the Company shall pay or otherwise
provide to Mudd the following amounts and benefits (the
“Termination Benefits”):
(i)
the Company shall pay Mudd a severance benefit in accordance with
the Company’s Executive Severance Policy as it may exist from
time to time and at the time he incurs an employment termination
eligible for payment under such plan; provided that if such
termination occurs within eighteen (18) months of the Effective
Date, the severance benefit shall equal twenty-four (24) months of
base salary at the base salary then in effect (unless a reduction
in base salary is the basis for Mudd’s termination of
employment for Good Reason, in which case the base salary in effect
immediately prior to such reduction),
(ii)
the Company shall pay Mudd a pro rated annual bonus for the year in
which Mudd’s termination occurs based, at a minimum, on the
Target Award (as defined in the ICP), subject to the
Company’s accomplishment of the Threshold Company Goal under
the ICP for such year. Such amount shall be payable at the time and
in the manner stipulated in the said ICP,
(iii)
the Company shall pay Mudd the balance of any annual or long-term
incentive awards, if any, earned (but not yet paid) as of the date
of employment termination, subject to the terms of the applicable
plan or program,
(iv)
any equity based award shall be governed by the applicable plan or
program (except as set forth in item (v) below),
(v)
the Compensation Committee of the Board of Directors shall
terminate any restrictions applicable to the restricted stock and
stock options granted to Mudd pursuant to Paragraph 2G above, to
the effect that there shall be no “Restriction Period”
applicable to such shares as of the date of employment
termination.
(vi)
the Company shall permit Mudd to continue to participate in all
other employee benefits programs in which Mudd participated at the
time of employment termination, in each case from the date of
employment termination until the six (6) month anniversary thereof,
with the exception of the Company’s Section 401(k) Retirement
Plan, the 2005 Churchill Downs Incorporated Deferred Compensation
Plan, the Churchill Downs Incorporated 2000 Employee Stock Purchase
Plan, the Company’s 125 Flex Plan and the Company’s
Life and Disability Insurance programs; provided however, that the
Company’s obligations under this subparagraph (v
