Return to 10-Q
CHURCHILL DOWNS
INCORPORATED
STOCK OPTION
AGREEMENT
130,000
OPTIONS
THIS STOCK OPTION AGREEMENT
(“Agreement”) is made as of the 18th day of July, 2006,
between Churchill Downs Incorporated, a Kentucky corporation, with
its principal place of business at 700 Central Avenue, Louisville,
Kentucky 40208 (“Company”), and Robert L. Evans
(“Executive”).
WHEREAS, Company has identified Executive as the
successor to the current President and Chief Executive Officer who
will be stepping down from such office effective August 14,
2006;
WHEREAS, Company has entered into an employment
agreement between the Company and Executive pursuant to which
Executive will become the President and Chief Executive Officer of
Company effective August 14, 2006 (the “Employment
Agreement”);
WHEREAS, under the terms of the Employment
Agreement, and as a material inducement to enter into the
Employment Agreement, Executive is to receive certain grants of
equity compensation as a consequence of his employment by
Company;
WHEREAS, the Compensation Committee (the
“Committee”) of the Board of Directors of the Company
at its meeting on July 12, 2006 authorized and directed Company to
make an award of options to Executive under the terms and
conditions set forth in this Agreement; and
WHEREAS, the parties desire to enter into this
Agreement to set forth the terms and conditions of such
award.
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a.
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“
Board ” means Company’s Board of
Directors.
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b.
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“
Change in Control ” shall have the meaning ascribed to
such term in the Employment Agreement.
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c.
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“
Code ” means the Internal Revenue Code of 1986, as
amended.
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d.
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“
Common Stock ” means Company’s common stock, no
par value, or the common stock or securities of a Successor that
have been substituted therefore pursuant to Section 10.
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e.
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“
Company ” means Churchill Downs Incorporated, a
Kentucky corporation, with its principal place of business at 700
Central Avenue, Louisville, Kentucky 40208.
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f.
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“
Disability ” has the meaning ascribed to such term in
the Employment Agreement.
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g.
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“
Employment Agreement ” has the meaning set forth in
the recitals above.
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h.
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“ Fair
Market Value ” has the meaning given such term in the
Employment Agreement.
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i.
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“
Option Price ” means the price to be paid for Common
Stock upon the exercise of an option, in accordance with Section
3.
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j.
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“
Executive’s Representative ” means the personal
representative of Executive’s estate, and after final
settlement of Executive’s estate, the successor or successors
entitled thereto by law.
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k.
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“
Subsidiary ” means any corporation or other entity
that at the time an option is granted under the Plan qualifies as a
subsidiary of Company as defined by Code Section 424(f).
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l.
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“
Successor ” means the entity surviving a merger or
consolidation with Company, or the entity that acquires all or a
substantial portion of Company’s assets or outstanding
capital stock (whether by merger, purchase or
otherwise).
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2.
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GRANT OF
NON-QUALIFIED STOCK OPTION . Company hereby grants to the Executive the
right and option to purchase from Company an aggregate of 130,000
shares of Common Stock (the “Options”), which Options
are not intended to constitute an incentive stock option under Code
§422.
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3.
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OPTION
PRICE . The price to be
paid for the Common Stock upon exercise of the Options is the Fair
Market Value of Company’s Common Stock as of July 18,
2006.
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4.
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OPTION
EXPIRATION . The Options
shall expire, and cease to be exercisable, at the earliest of the
following times:
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b.
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the date of
Executive’s Termination of Employment for Cause (as defined
in the Employment Agreement);
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c.
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the date of the
Executive’s voluntary Termination of Employment without Good
Reason (as defined in the Employment Agreement);
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d.
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one (1) year
after the Executive’s Termination of Employment as a result
of death or Disability (as defined in the Employment Agreement);
or
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e.
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if the
Executive’s employment terminates other than a termination
under (b), (c) or (d) of this Section 4, the later of: (i) the last
day of the calendar quarter in which the Executive’s
Termination of Employment occurs or (ii) the day thirty (30) days
after such Termination of Employment.
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a.
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Vesting
Period . No part of the
Options may be exercised unless and until such Options or part
thereof shall have become vested based upon the continuous
employment of Executive after August 14, 2006. The Options shall
vest and become exercisable as follows:
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Vesting Date
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Number of Options to
Vest
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September 30, 2006
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5,417
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December 31, 2006
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10,833
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March 31, 2007
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10,833
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June 30, 2007
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10,833
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September 30, 2007
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10,833
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December 31, 2007
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10,833
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March 31, 2008
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10,833
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June 30, 2008
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10,833
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September 30, 2008
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10,833
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December 31, 2008
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10,834
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March 31, 2009
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10,834
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June 30, 2009
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10,834
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August 14, 2009
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5,417
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In the event:
(i) the Executive’s employment is terminated by the Company
other than for Cause, death or Disability or (ii) the Executive
resigns for Good Reason, for purposes of determining the vesting of
Options under this Section 5, the Executive’s employment
shall be considered to have continued through the last day of the
calendar quarter in which his Termination of Employment
occurs.
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b.
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Partial
Accelerated Vesting upon Change in Control . In the event of a Change in Control during the
Employment Term (as defined in the Employment Agreement), Executive
shall receive accelerated vesting of fifty percent (50%) of the
then-unvested Options. The Options that are subject to accelerated
vesting pursuant to this Section 5.b. shall be taken pro-rata from
each then-unvested tranche of the Option award, and the remaining
portion of each tranche shall vest according to Section 5.a. above,
subject to potential accelerated vesting pursuant to Section 5.c.
below.
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c.
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Accelerated
Vesting upon Termination after Change in Control
. If, during the 2-year period
following a Change in Control during the Employment Term:
(i) Executive is terminated by the Company other than for
Cause (as defined in the Employment Agreement), death or
Disability, or (ii) Executive voluntarily resigns for Good Reason
(as defined in the Employment Agreement), all Options shall become
fully vested as of the date of such termination.
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6.
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EXERCISE OF
OPTIONS . To exercise an
Option, Executive or Executive’s Representative shall deliver
to Company, or to a broker-dealer in the Common Stock with the
original copy to Company, the following: [i] seven (7) day prior
written notice (which notice may be sent prior to the vesting date
of the options to be exercised with exercise contingent on such
vesting) specifying the number of shares as to which the Option is
being exercised and, if determined by counsel for Company to be
necessary, representing that such shares are being acquired for
investment purposes only and not for purpose of resale or
distribution; and [ii] payment by Executive or Executive’s
Representative, or the broker-dealer, of the Option Price for such
shares in cash, or if the Committee in its discretion agrees to so
accept, by delivery to Company of other Common Stock owned by
Executive, or in some combination of cash and Common Stock
acceptable to the Committee. At the expiration of the seven (7) day
notice period, and provided that all conditions precedent contained
in th
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