SCHEDULE 14A INFORMATION
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 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
CHURCHILL DOWNS INCORPORATED
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / 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:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(4) Date Filed:
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CHURCHILL DOWNS INCORPORATED
700 CENTRAL AVENUE
LOUISVILLE, KENTUCKY 40208
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 21, 2001
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 21, 2001, at 10:00 a.m., E.D.T. for the following purposes:
I. To elect five (5) Class II Directors for a term of three (3) years,
one (1) Class I Director for a term of two (2) years and one (1) Class III
Director for a term of one (1) year (Proposal No. 1);
II. To approve or disapprove the minutes of the 2000 Annual Meeting of
Shareholders, approval of which does not amount to ratification of actions taken
at such meeting (Proposal No. 2); and
III. 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 23, 2001, 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.
REBECCA C. REED
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
May 7, 2001
CHURCHILL DOWNS INCORPORATED
700 CENTRAL AVENUE
LOUISVILLE, KENTUCKY 40208
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 21, 2001
The enclosed Proxy is being solicited by the Board of Directors (the "Board
of Directors") of Churchill Downs Incorporated (the "Company") to be voted at
the 2001 Annual Meeting of Shareholders to be held on Thursday, June 21, 2001,
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 7, 2001.
VOTING RIGHTS
Only holders of record of the Company's Common Stock, No Par Value ("Common
Stock"), on April 23, 2001, are entitled to notice of and to vote at the Annual
Meeting. On that date, 13,084,451 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 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 MINUTES OF THE 2000 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.
1
COMMON STOCK OWNED BY CERTAIN PERSONS
The following table sets forth information concerning the beneficial
ownership of the Common Stock as of April 23, 2001, 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
voting and investment power with respect to all of the shares of Common Stock
shown as beneficially owned by them.
SHARES
NAME AND ADDRESS BENEFICIALLY
OF BENEFICIAL OWNER OWNED % OF CLASS
------------------- ------------ ----------
Duchossois Industries, Inc. 3,150,000(1) 24.0%
845 Larch Avenue
Elmhurst, Illinois 60126
Brad M. Kelley 1,093,800 8.3%
2200 Lapsley Lane
Bowling Green, Kentucky 42103
32 Directors and Executive Officers as a Group 7,198,185(2)(3) 55.0%
- ----------
(1) By the terms of a certain Merger Agreement between the Company and
Duchossois Industries, Inc., which is described in more detail below,
Duchossois Industries, Inc., may be issued up to an additional 1,250,000
shares of the common stock of the Company in the future, subject to the
occurrence of certain events as specified in the Merger Agreement.
(2) See "Executive Officers of the Company," "Election of Directors," and
"Continuing Directors," below.
(3) Includes 294,660 shares issuable under currently exercisable options.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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. The Company is required to disclose in this Proxy
Statement any failure to file or late filings of such reports. Based solely on
its review of the forms filed with the SEC, the Company believes that all filing
requirements applicable to its directors, executive officers and ten
percent (10%) beneficial owners were satisfied.
2
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.
COMMON STOCK OF THE
COMPANY BENEFICIALLY
OWNED AS OF
APRIL 23, 2001(1)(2)
POSITION(S) WITH COMPANY --------------------
NAME AND AGE AND TERM OF OFFICE AMOUNT % OF CLASS
------------ ------------------------ ------ ----------
William S. Farish (3) Director since 1985; Chairman of the Board 199,560 1.5%
62 since 1992
Thomas H. Meeker President and Chief Executive Officer since 219,313(4) 1.6%
57 1984; Director since 1995
Frederick M. Baedeker, Jr. President, Churchill Downs California 0 *
51 Company since November 1999
Vicki L. Baumgardner Vice President, Finance and Treasurer since 21,055(5) .1%
49 February 1993
Robert L. Decker Executive Vice President and Chief 32,876(6) .2%
53 Financial Officer since January 1999;
Senior Vice President, Finance and
Development, and Chief Financial Officer
from March 1997 to December 1998
C. Kenneth Dunn President, Calder Race Course, Inc. since 0 *
54 April 1999; President, Tropical
Park, Inc., since April 1999
John R. Long President, Churchill Downs Management Com- 1,000 *
53 pany since November 1999; Executive Vice
President and Chief Operating Officer since
July 1999
Michael E. Miller Senior Vice President, Finance since 450 *
49 January 2000
Scott A. Mordell President, Arlington International Race- 0 *
38 course, Inc., since September 2000
Rebecca C. Reed Senior Vice President, General Counsel and 865 *
43 Secretary since January 1999; Associate
General Counsel and Assistant Secretary
from January 1998 to December 1998;
Corporate Counsel from January 1994 to
December 1997
Donald R. Richardson Senior Vice President, Racing, Churchill 7,306(7) *
55 Downs Management Company since
November 1999; Senior Vice President,
Racing, from January 1999 to
November 1999; Vice President, Racing from
September 1994 to December 1998
Karl F. Schmitt, Jr. Senior Vice President, Communications since 16,746(8) .1%
48 March 1998; Vice President, Corporate
Communications from 1990 to March 1998
3
COMMON STOCK OF THE
COMPANY BENEFICIALLY
OWNED AS OF
APRIL 23, 2001(1)(2)
POSITION(S) WITH COMPANY --------------------
NAME AND AGE AND TERM OF OFFICE AMOUNT % OF CLASS
------------ ------------------------ ------ ----------
Andrew G. Skehan Senior Vice President, Corporate Sales and 0 *
40 Marketing since September 1999; Senior Vice
President, Corporate Marketing from
April 1999 to September 1999
Alexander M. Waldrop President, Ellis Park Race Course, Inc., 36,224(9) .2%
44 since September 2000; President and General
Manager, Churchill Downs Racetrack since
September 1999; Senior Vice President and
General Manager since January 1999; Senior
Vice President, Administration from
December 1996 to December 1998; Senior Vice
President from June 1994 to December 1996;
General Counsel and Secretary from
August 1992 to December 1998
- ----------
* Less than 0.1%
(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 2000.
(2) No executive officer shares voting or investment power with respect to his
or her beneficially owned shares, except that Mr. Meeker shares investment
and voting power with respect to 26,908 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) Includes 187,400 shares issuable under currently exercisable options.
(5) Includes 20,466 shares issuable under currently exercisable options.
(6) Includes 28,000 shares issuable under currently exercisable options.
(7) Includes 6,706 shares issuable under currently exercisable options.
(8) Includes 16,320 shares issuable under currently exercisable options.
(9) Includes 35,768 shares issuable under currently exercisable options.
From January, 1993, until joining the Company, Mr. Decker was employed as
the Vice President of Finance of The Americas Hilton International Company, a
subsidiary of Ladbroke Group PLC, a full service hotel and gaming enterprise.
From September, 1987 to January, 1993, Mr. Decker was the Vice President of
Finance and Chief Financial Officer of Ladbroke Racing Corporation, an owner and
operator of thoroughbred, harness and greyhound racetracks, and off-track
betting systems in the United States.
From 1990 to 1998, Mr. Skehan was employed by PepsiCo, Inc., holding various
positions, including that of general manager for PepsiCo Restaurants
International. From February 1998, until joining the Company, Mr. Skehan served
as a vice president/regional director of marketing and new markets (Europe,
Middle East and Africa) for Nabisco Corporation.
From March 1999 to October 1999, Mr. Baedeker was employed by ODS
Technologies, LLC, as Vice President, Communications. Mr. Baedeker was employed
from 1998 to February 1999 by the National Thoroughbred Racing Association as
Senior Vice President, Marketing. From 1992 to 1998, Mr. Baedeker was employed
by Hollywood Park, Inc., as Vice President, Marketing and Public Relations.
4
From 1990 until joining the Company, Mr. Dunn was employed as President of
Calder Race Course, Inc., and Tropical Park, Inc., under successive former
owners, including Kawasaki Acquisition Corp.
From 1993 until March 1999, Mr. Long was employed as President and Chief
Executive Officer of Ladbroke/USA, where he oversaw racing and gaming operations
in North America for Ladbroke Group, PLC.
From 1996 to 1999, Mr. Miller was employed as Senior Vice President and
Chief Financial Officer of Fender Musical Instruments Corporation. During 1995,
he served as a Director of Entrepreneurial Tax Services with Ernst & Young LLP.
From 1995 until joining the Company, Mr. Mordell was employed as President
of Arlington International Racecourse, Inc., under the former owner, Duchossois
Industries, Inc.
5
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
At the Annual Meeting, shareholders will vote to elect (i) five (5) persons
to serve in Class II of the Board of Directors to hold office for a term of
three (3) years expiring at the 2004 Annual Meeting of Shareholders and
thereafter until their respective successors shall be duly elected and
qualified, (ii) one (1) person to serve in Class I of the Board of Directors to
hold office for a term of two (2) years expiring at the 2003 Meeting of
Shareholders and thereafter until his successor shall be duly elected and
qualified, and (iii) one (1) person to serve in Class III of the Board of
Directors to hold office for a term of one (1) year expiring at the 2002 Annual
Meeting of Shareholders and thereafter until his successor 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 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. In
2000, the Board of Directors amended the Company's Bylaws to establish the
number of directors at fifteen (15), with five (5) directors in each of
Class I, Class II and Class III.
The Company is a party to a Stock Purchase Agreement dated as of March 28,
1998 (the "Stock Purchase Agreement"), between the Company and TVI Corp., under
which the Company acquired all of the shares of the stock of Racing Corporation
of America from TVI Corp. as of April 21, 1998. The Stock Purchase Agreement
provides that, at the regular meeting of the Board of Directors in June of 1998,
Daniel Harrington, President of TVI Corp., would be nominated to serve as a
director of the Company in the class of directors deemed appropriate by the
Company, subject to reelection of Mr. Harrington (or a substitute nominee
reasonably acceptable to the Company) by the shareholders of the Company at the
next annual meeting of the shareholders of the Company if TVI Corp. continues to
then hold 200,000 shares of the Company's Common Stock and subject to the
fiduciary obligations of the directors of the Company in nominating such person
for election as a director. At the June 1999 Annual Meeting of shareholders of
the Company, Mr. Harrington was reelected as a Class III director.
The Company is a party to a Merger Agreement dated as of June 23, 2000, as
amended (the "Merger Agreement"), between the Company and Duchossois Industries,
Inc., under which certain subsidiaries of the Company were merged into certain
wholly-owned subsidiaries of Duchossois Industries, Inc. ("Merger"). The Merger
was approved by vote of the Company's shareholders at a Special Meeting of the
shareholders on September 8, 2000. Pursuant to a Stockholder's Agreement between
the Company and Duchossois Industries, Inc., as part of the Merger, Duchossois
Industries, Inc., designated three (3) individuals for appointment and election
to the Board of Directors. The Stockholder's Agreement provides that those
individuals, Mr. Richard L. Duchossois, Mr. Craig Duchossois, and Mr. Robert L.
Fealy (or substitute designees reasonably acceptable to the Company), would be
nominated to serve as directors of the Company, being allocated as equally as
possible among the three classes of directors, for vote of the shareholders of
the Company at the annual meeting of shareholders at which each respective class
is then submitted for vote by the shareholders. In 2000, the Board of Directors
of the Company appointed Mr. Craig Duchossois to serve as a member of Class I,
Mr. Richard L. Duchossois to serve as a member of Class II and Mr. Robert L.
Fealy to serve as a member of Class III.
At the Annual Meeting, the seven (7) persons named in the following table
will be nominated on behalf of the Board of Directors for election as directors
in Class II, Class I and Class III, as indicated. All of the nominees currently
serve as members of Class I, Class II and Class III, as indicated, and have
agreed to serve if reelected. Under cumulative voting, the seven (7) nominees
receiving the highest number of votes will be elected.
6
NOMINEES FOR ELECTION AS DIRECTORS
COMMON STOCK OF THE
COMPANY BENEFICIALLY
OWNED AS OF
NAME, AGE AND APRIL 23, 2001 (3)
POSITIONS WITH PRINCIPAL OCCUPATION (1) AND -------------------------
COMPANY CERTAIN DIRECTORSHIPS (2) AMOUNT % OF CLASS
-------------- ---------------------------- ------ ----------
CLASS II--TERMS EXPIRING IN 2004
Richard L. Duchossois Chairman, Duchossois Industries, Inc. 3,165,000 24.2%
79 (private holding company with diversified
Director since 2000(4) business interests); Vice Chairman,
Thrall Car Manufacturing Company
(railroad car manufacturing company);
Director, Emirates World Series of
Racing; Director, Thoroughbred Racing
Association; Director, Arlington
International Racecourse, Inc.
J. David Grissom Chairman, Mayfair Capital, Inc. (private 228,400 1.7%
62 investment firm); Chairman, The Glenview
Director since1979 Trust Company (trust and investment
management company); Director, Providian
Financial Corporation and LG&E Energy
Corporation; Chairman, Board of Trustees,
Centre College
Seth W. Hancock Partner and Manager, Claiborne Farm, and 290,650 2.2%
51 Presi-dent, 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
Frank B. Hower, Jr. Retired; Former Chairman and Chief 2,200 *
72 Executive Officer, Liberty National
Director since 1979 Bancorp, Inc., Liberty National Bank &
Trust Company of Louisville; Director,
American Life and Accident Insurance
Company and Hardscuffle, Inc.; Member,
Board of Trustees, J. Graham Brown
Foundation
Thomas H. Meeker President and Chief Executive Officer of 219,313(5) 1.6%
57 the Company; Director, Anderson
Director since 1995; Park, Inc. (Chairman), Thoroughbred
President and Chief Racing Association of North
Executive Officer America, Inc., Equibase Company, PNC
Since 1984 Bank, Kentucky, Inc., National Thorough-
bred Racing Association; Member, Board of
Trustees, Centre College
7
COMMON STOCK OF THE
COMPANY BENEFICIALLY
OWNED AS OF
NAME, AGE AND APRIL 23, 2001 (3)
POSITIONS WITH PRINCIPAL OCCUPATION (1) AND -------------------------
COMPANY CERTAIN DIRECTORSHIPS (2) AMOUNT % OF CLASS
-------------- ---------------------------- ------ ----------
CLASS I -- TERM EXPIRING 2003
Craig J. Duchossois Chief Executive Officer, Duchossois 3,150,000 24.1%
56 Industries, Inc. (private holding company
Director since 2000(4) with diversified business interests);
Chairman and Chief Executive Officer,
Thrall Car Manufacturing Company
(railroad car manufacturing company);
Chairman, The Chamberlain Group, Inc.
(garage door opener manufacturer);
Director, Blue Rhino Corporation,
Bissell, Inc., and LaSalle National Bank
CLASS III TERM EXPIRING 2002
Robert L. Fealy Chief Financial Officer, Duchossois 0 *
49 Industries, Inc. (private holding company
Director since 2000 with diversified business interests);
Vice President, Chief Financial Officer
and Director, The Chamberlain
Group, Inc. (garage door opener manufac-
turer); Vice President and Chief
Financial Officer, Thrall Car
Manufacturing Company (railroad car
manufacturing company); Director, New
Asia Bancorp; Director, Continental
Community Holdings, Inc.; Director, Brivo
Systems, Inc.; Director, Sloan Ventures,
LLC; Director, Illinois Venture Capital
Association
- ----------
* 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 nominees, other
directorships or positions considered significant by them.
(3) No nominee shares voting or investment power of his beneficially owned
shares, except Messrs. Hancock and Meeker share with others the voting and
investment power with respect to 212,650 and 26,908 shares, respectively,
and Messrs. Richard L. Duchossois and Craig J. Duchossois share voting or
investment power with respect to 3,150,000 shares owned by Duchossois
Industries, Inc. Messrs. Richard L. Duchossois and Craig J. Duchossois
specifically disclaim 3,150,000 shares owned by Duchossois Industries, Inc.
and disclaim the additional amount of up to 1,250,000 shares which may be
issued to Duchossois Industries, Inc, in the future, subject to the
occurrence of certain events as specified in the Merger Agreement.
(4) Mr. Richard L. Duchossois is the father of Mr. Craig J. Duchossois, who is
also a director of the Company. Of the shares beneficially owned by
Mr. Richard L. Duchossois, the 3,150,000 shares owned by Duchossois
Industries, Inc., are the same shares beneficially owned by Mr. Craig J.
Duchossois.
(5) Includes 187,400 shares issuable under currently exercisable options.
8
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 III 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.
COMMON STOCK OF THE
COMPANY BENEFICIALLY
OWNED AS OF
NAME, AGE AND APRIL 23, 2001 (3)
POSITIONS WITH PRINCIPAL OCCUPATION (1) AND -------------------------
COMPANY CERTAIN DIRECTORSHIPS (2) AMOUNT % OF CLASS
-------------- ---------------------------- ------ ----------
CLASS I--TERMS EXPIRING IN 2003
William S. Farish President, W.S. Farish & Company (trust 199,560 1.5%
62 management company) and Owner and Chief
Director since 1985; Executive Officer, Lane's End Farm
Chairman since 1992 (Thoroughbred breeding and racing);
Director, Add-Vision, Breeders' Cup
Limited and Keeneland Association,
Incorporated; Vice Chairman and
Steward, Jockey Club; Director,
American Horse Council; President,
Ephraim McDowell Cancer Research Foun-
dation
G. Watts Humphrey, Jr. President, G.W.H. Holdings, Inc. 51,000 .3%
56 (private investment company); Chief
Director since 1995 Executive Officer, The Conair Group,
Inc. (plastics machinery equipment
company), MetalTech L.P., NexTech,
L.P., GalvTech, L.P. d/b/a The Techs
(metals manufacturing and distribu-
tion companies) and Centria
(manufacturer and erector of metal
building systems); Vice President and
Treasurer, Breeders' Cup Limited;
Chairman, The Blood Horse, Inc.;
Director, Keeneland Association,
Incorporated, Shakertown at Pleasant
Hill, Kentucky, Inc., and Mississippi
Valley Bancshares, Inc.
9
COMMON STOCK OF THE
COMPANY BENEFICIALLY
OWNED AS OF
NAME, AGE AND APRIL 23, 2001 (3)
POSITIONS WITH PRINCIPAL OCCUPATION (1) AND -------------------------
COMPANY CERTAIN DIRECTORSHIPS (2) AMOUNT % OF CLASS
-------------- ---------------------------- ------ ----------
Brad M. Kelley Chief Executive Officer and Chairman, 1,093,800 8.3%
44 Commonwealth Brands, Inc. (cigarette
Director since 2000 manufacturer); Director, Commonwealth
Brands, Inc. (Chairman); Director,
Bison Capital, LLC (Chairman); Member,
Kentucky Downs, LLC (Thoroughbred
racing associa-tion and pari-mutuel
off-track betting facility)
Dennis D. Swanson President and General Manager, WNBC-TV 1,000 *
63 (television station); Co-Chairman, NBC
Director since 1996 Olympics; Former President, ABC
Sports, Inc. (from January 1986 to
May 1996); Chairman, Foundation for
Minority Interests in Media, Inc. and
Resource Development Board, College of
Com-munications, University of Illinois
at Champaign-Urbana
CLASS III -- TERMS EXPIRING IN 2002
Charles W. Bidwill, Jr. Chairman of the Board, National Jockey 451,680 3.4%
72 Club (operator of Sportsman's Park
Director since 1982 Racetrack); Director, Orange Park
Kennel Club, Associated Outdoor Clubs
(Tampa Greyhound Track), Bayard
Raceways, Jacksonville Kennel Club, Big
Shoulders Fund, Archdiocese of Chicago,
Link Unlimited, and Cristo Rey Jesuit
High School
Daniel P. Harrington President and Chief Executive Officer, 233,300 1.7%
45 HTV Industries, Inc. (private holding
Director since 1998 company with diversified business
interests); Former Chairman and
President, Ellis Park Race
Course, Inc. (1993 to April 1998);
Trustee, The Veale Foundation;
Director, Biopure Corporation (Audit
Committee), Portec Rail
Products, Inc., First Guaranty Bank,
TVI Corp., HTV Industries, Inc., First
State Financial Corp., and Southern
Belle Dairy
Carl F. Pollard Owner, Hermitage Farm since 1995 (Thor- 173,080 1.3%
62 oughbred breeding); Director, National
Director since 1985 City Bank, Kentucky (Executive
Committee), Breeders' Cup Limited,
Kentucky Derby Museum Corporation;
Trustee, Thoroughbred Owners and
Breeders Association
10
COMMON STOCK OF THE
COMPANY BENEFICIALLY
OWNED AS OF
NAME, AGE AND APRIL 23, 2001 (3)
POSITIONS WITH PRINCIPAL OCCUPATION (1) AND -------------------------
COMPANY CERTAIN DIRECTORSHIPS (2) AMOUNT % OF CLASS
-------------- ---------------------------- ------ ----------
Darrell R. Wells General Partner, Security Management 477,310 3.6%
58 Company (investments); Director, First
Director since 1985 Security Trust Company, Commonwealth
Bancshares, Citizens Financial
Corporation, Commonwealth Bank & Trust
Company, Jundt Growth Fund, and First
Security Bank
DIRECTORS EMERITI (4)
Catesby W. Clay Chairman Emeritus, Kentucky River Coal 66,580 .5%
77 Corporation (Coal land lessor);
Director from 1953 to President, Runnymede Farm, Inc.
1998; Director Emeritus (Thoroughbred breeding); Director,
since 1998 Kent-Mar Corp., KRCC Oil & Gas
Co., Inc., University of Kentucky
Mining Engineering Foundation; Director
and President, Foundation for Drug-Free
Youth
Louis J. Herrmann, Jr. Owner, Louis Herrmann Auto Consultant 80,130 .6%
81 Incorporated (automobile sales);
Director from 1968 to 1994; Director, Southeastern Financial
Secretary-Treasurer from 1985 Services, Inc
to 1986; Director Emeritus
since 1994
Stanley F. Hugenberg, Jr. President, Jackantom Sales Company 7,340 *
83 (manufacturers' representative);
Director from 1982 to 1992; Member, Board of Trustees, J. Graham
Director Emeritus since 1992 Brown Foundation
Arthur B. Modell Owner and Chief Executive Officer, 12,000 *
75 Director from 1985 to 2000; Baltimore Ravens Football
Director Emeritus since 2000 Company, Inc. (professional football
team); President, Baltimore Ravens
Football Company, Inc. (until 1999)
William T. Young Chairman, W.T. Young, LLC 329,320 2.5%
83 (warehousing); Owner, Overbrook Farm
Director from 1985 to 1992; (Thoroughbred racing and breeding);
Director Emeritus since Former Chairman, W.T. Young, Inc.;
1992 Chairman, Transylvania University; and
Chairman, Shakertown at Pleasant Hill
Kentucky, Inc.
- ----------
* 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 or positions considered significant by them.
(3) No director shares voting or investment power of his beneficially owned
shares, except that Messrs. Clay and Young share with others the voting and
investment power with respect to 54,580 shares and 100,000 shares,
respectively; Mr. Wells shares voting
11
and investment power with respect to 479,310 shares; Mr. Harrington shares
voting and investment power with respect to 233,300 shares; and Mr. Pollard
shares voting and investment power with respect to 49,000 shares owned by
The Carl F. Pollard Foundation, Inc. Of the total shares listed, Mr. Clay
specifically disclaims beneficial ownership of 21,900 shares owned by the
Agnes Clay Pringle Trust of which he is a trustee; and Mr. Young
specifically disclaims beneficial ownership of 99,317 shares owned by
Overbrook Farm of which a corporation and a limited liability company each
controlled by Mr. Young are general partners. Mr. Wells specifically
disclaims beneficial ownership of 44,800 shares held by the Wells
Foundation, Inc., of which he is a trustee, and of 284,880 shares held by
The Wells Family Partnership, of which he is the Managing General Partner.
Mr. Harrington specifically disclaims beneficial ownership of 233,300 shares
held by TVI Corp.
(4) Directors Emeriti are entitled to attend meetings of the Board of Directors
but do not have a vote on matters presented to the Board. Prior to September
2000, the Bylaws provided that once a director is 72 years of age, he could
not stand for re-election but assumed Director Emeritus status as of the
annual meeting following his current term of service as a director. The
Chairman of the Board could continue to serve as a director notwithstanding
this provision. The Board of Directors amended the Bylaws in 2000 to
eliminate the age limitation on election as a director.
COMPENSATION AND COMMITTEES OF THE BOARD OF DIRECTORS
Four (4) meetings of the Board of Directors were held during the last fiscal
year. During 2000, directors, other than Directors Emeriti, were paid $750 for
each meeting of the Board of Directors that they attended. Directors were paid
$750 for each committee meeting they attended and each teleconference meeting in
which they participated. Directors who did not reside in Louisville were
reimbursed for their travel expenses. Directors, other than Directors Emeriti,
received a retainer of $6,000 for 2000 and Directors who served as committee
chairmen received an additional $2,000 for a total retainer of $8,000 for 2000.
The Chairman of the Board of Directors received an additional $5,000 for a total
retainer of $11,000 for 2000. Directors Emeriti were not paid any compensation
for attending meetings. They were 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.
EXECUTIVE 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. The members of the Executive Committee for
2000 were as follows:
J. David Grissom, Chairman
Charles W. Bidwill, Jr.
Richard L. Duchossois*
William S. Farish
Carl F. Pollard
Fifteen (15) meetings of the Executive Committee were held during the last
fiscal year.
*Mr. Duchossois became a member of the Executive Committee in September 2000.
12
AUDIT COMMITTEE
The Audit Committee is responsible for annually examining the financial
affairs of the Company, including consultation with the Company's auditors. The
members of the Audit Committee meet the requirements of the Audit Committee
Policy of the NASD. The members of the Audit Committee for 2000 were as
follows::
First Quarter 2000 Second Quarter through Year End 2000
------------------ ------------------------------------
Darrell R. Wells, Chairman Darrell R. Wells, Chairman
Daniel P. Harrington Daniel P. Harrington
G. Watts Humphrey, Jr. G. Watts Humphrey, Jr.
W. Bruce Lunsford Carl F. Pollard
Carl F. Pollard
Five (5) meetings of the Audit Committee were held during the last fiscal year.
COMPENSATION COMMITTEE
The Compensation Committee administers the Company's executive compensation
plans, including its Supplemental Benefit Plan, any incentive compensation plan,
any deferred compensation plan, any stock option plan and any employee stock
purchase plan, and reviews and approves the compensation of the Company's Chief
Executive Officer. The Compensation Committee consists of not fewer than two
(2) directors who are not officers or employees of the Company or any of its
subsidiaries. The members of the Compensation Committee for 2000 were as
follows:
Frank B. Hower, Jr., Chairman
Craig J. Duchossois*
G. Watts Humphrey
Dennis D. Swanson
Darrell R. Wells
Three (3) meetings of the Compensation Committee were held during the last
fiscal year.
*Mr. Duchossois became a member of the Compensation Committee in
September 2000.
RACING COMMITTEE
The Racing Committee is responsible for the Company's contracts and
relations with horsemen, jockeys and others providing horse racing related
services. The members of the Racing Committee for 2000 were as follows:
Seth W. Hancock, Chairman
G. Watts Humphrey, Jr.
Carl F. Pollard
No meeting of the Racing Committee was held during the last fiscal year.
The Company does not have a standing nominating committee. All directors
serving as Class I, II or III directors 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
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under rules established by the SEC, the Compensation Committee is required
to disclose: (1) the Compensation Committee's compensation policies applicable
to the Company's executive officers; (2) the relationship of executive
compensation to Company performance; and (3) the Compensation 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 Compensation Committee has prepared this report for
inclusion in the Proxy Statement.
The Compensation Committee consists of five (5) independent Directors, none
of whom has ever been employed by the Company. The Compensation Committee
annually reviews executive officer compensation and makes recommendations to the
Board of Directors on all matters related to the structure of the Company's
executive compensation programs. The Compensation Committee's authority and
oversight extend to total executive compensation, including base salaries,
incentive and other compensation programs, supplemental benefit plans, deferred
compensation plans, stock option plans and stock purchase plans, for the Company
as well as the administration of the employment contracts of the Company's chief
executive officer and chief financial officer. The Compensation Committee also
reviews compensation data from comparable companies.
The fundamental philosophy of the Compensation 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 and benefits that are competitive
in the marketplace with incentive opportunities established by the Compensation
Committee which are competitive with median levels of competitors' incentive
compensation. The Compensation 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 Compensation Committee also
believes that the Company's compensation program should include an individual
performance component to reward employees whose job performance does not
directly affect revenues.
The Compensation Committee has structured executive compensation based upon
this philosophy. There are 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 1997 Incentive Compensation Plan (the
"ICP") and (3) stock option grants made under the Company's 1993 Stock Option
Plan (the "1993 Option Plan"), and stock option grants and stock appreciation
rights under the Company's 1997 Stock Option Plan (the "1997 Option Plan") (the
1993 Option Plan and the 1997 Option Plan are, collectively, the "Option
Plans").
Base salaries are targeted to be competitive with similar positions in
comparable companies. In determining base salaries, the Compensation Committee
also takes into account individual experience and performance and issues
specific to the Company.
The ICP is designed to reward employees' short term performance by providing
for the award of a cash bonus if annual goals based upon the Company's pre-tax
earnings, as well as the performance of the employee and the center in which the
employee works, are achieved. The award of bonuses is based initially on the
Company's achievement of certain target pre-tax earnings goals established by
the Compensation Committee. The amount of each bonus is then determined by the
Company's performance [measured by earnings (computed before taxes but after
recognition of awards made under the ICP)], the center in which that employee
works and that employee's performance.
The third component of executive compensation is the 1993 Option Plan and
the 1997 Option Plan. The Compensation Committee believes that the granting of
options and stock appreciation rights 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
14
performance. During 2000, all officers were granted a total of 85,597
nonqualified stock options and 92,618 incentive stock options. All of these
options are exercisable in 2003 and all were granted under the 1997 Option Plan.
The Option Plans provide for cashless exercises through broker's transactions.
The Compensation Committee believes that the Option Plans are integral to a
performance based compensation package because of their reward based upon the
Company's long-term performance. The Option Plans allow the Company to further
tie compensation to 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 Compensation Committee after
considering the Company's overall financial performance in light of the
Company's strategic development initiatives. For 2000, Mr. Meeker's annual base
salary was set at $321,360. Mr. Meeker's base salary is adjusted periodically to
incorporate cost of living increases and to keep his salary competitive with
similar positions in comparable companies. This approach reflects the
Committee's philosophy to shift a great portion of Mr. Meeker's overall
compensation to sources based upon the Company's overall performance.
COMPENSATION COMMITTEE
Frank B. Hower, Jr.
Craig J. Duchossois
G. Watts Humphrey, Jr.
Dennis D. Swanson
Darrell R. Wells
15
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 two peer group indices and the NASDAQ
Market Index for the period of approximately five (5) fiscal years commencing
January 1, 1996 and ending December 31, 2000. The companies used by the Company
in the peer group index in 2000 consisted of Canterbury Park Holding Corp.,
Hollywood Park, Inc. and Penn National Gaming, which were all of the publicly
traded companies known to the Company at that time to be engaged primarily in
thoroughbred racing in the continental United States and to be publicly traded
for at least five (5) years. In September 1999, the Company purchased the assets
of Hollywood Park Inc.'s thoroughbred racing operation at Hollywood Park
Racetrack.
With the elimination of Hollywood Park, Inc. (now doing business as Pinnacle
Entertainment, Inc.) from the existing peer group because it is no longer
engaged in thoroughbred racing, the Company concluded that the existing peer
group no longer provides the most meaningful comparison. The Company, therefore,
has decided to use the Media General Leisure Industry Group index, which is a
published industry peer index of companies engaged in the leisure industry. For
purposes of comparison, the Company includes here information on both peer
groups, with the former peer group referenced as Peer Group I and the new peer
group referenced as Peer Group II.
As its broad equity market index, the Company has, in recent years, used the
Wilshire 5000, which measures the performance of all United States headquartered
equity securities with readily available price data. The Company has changed
from the Wilshire 5000 to the NASDAQ Market Index, which is a comparable market
index representing the exchange on which the Company's securities are listed.
The NASDAQ Market Index measures the performance of stocks listed on the NASDAQ
National Market and the NASDAQ Small Cap Market. The graph depicts the result of
an investment of $100 in the Company, the NASDAQ Market Index, the Wilshire 5000
index and the peer group companies. Because the Company has historically paid
dividends on an annual basis, the performance graph assumes that dividends were
reinvested annually.
16
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CHURCHILL DOWNS PEER GROUP I PEER GROUP II NASDAQ WILSHIRE 5000
Dec-95 $100 $100 $100 $100 $100
Dec-96 $104.72 $323 $112.29 $124.27 $121
Dec-97 $129.11 $226 $131.35 $152 $159
Dec-98 $196.56 $173 $152.75 $214.39 $196
Dec-99 $137.72 $222 $153.99 $378.12 $243
Dec-00 $185.12 $256 $139.53 $237.66 $216
DEC-95 DEC-96 DEC-97 DEC-98 DEC-99 DEC-00
Churchill Downs $100 $104.72 $129.11 $196.56 $137.72 $185.12
Peer Group I $100 $323 $226 $173 $222 $256
Peer Group II $100 $112.29 $131.35 $152.75 $153.99 $139.53
NASDAQ $100 $124.27 $152 $214.39 $378.12 $237.66
Wilshire 5000 $100 $121 $159 $196 $243 $216
17
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 four (4) most highly compensated
executive officers in fiscal year 2000 who were serving as executive officers at
the end of 2000 (collectively the "named executive officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION SECURITIES UNDER- ALL OTHER
NAME AND BONUS OTHER ANNUAL LYING OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY (1) COMPENSATION (2) SARS(#) (3)
------------------ ---- ------ ----- ---------------- ----------------- ------------
Thomas H. Meeker, 2000 $321,360 $159,073 $87,100 31,130 $11,968
President, Chief Executive 1999 312,000 210,600 55,000 40,000 15,320
Officer and Director 1998 300,000 202,500 55,200 18,078 14,671
Frederick M. Baedeker, Jr. 2000 250,000 107,188 -0- 9,800 2,856
President, Churchill Downs 1999 15,833 15,996 -0- 10,500 -0-
California Company (4) 1998 -0- -0- -0- -0- -0-
Robert L. Decker 2000 237,900(5) 103,457(5) -0- 14,988 14,427
Executive Vice President and 1999 187,893(5) 96,533(5) -0- 15,000 11,342
Chief Financial Officer 1998 176,800 92,820 -0- 5,408 12,628
C. Kenneth Dunn 2000 200,000 85,619 -0- 8,071 9,799
President--Calder Race 1999 138,461 70,000 -0- 7,500 7,516
Course, Inc. and Tropical 1998 -0- -0- -0- -0- -0-
Park, Inc. (6)
John R. Long 2000 247,200 93,874 -0- 14,988 128,199
Executive Vice President and 1999 113,538 60,900 -0- 20,000 494
Chief Operating Officer; 1998 -0- -0- -0- -0- -0-
President, Churchill Downs
Management Company (7)
- ----------
(1) In 1998, 1999 and 2000, bonuses were paid in cash pursuant to the Company's
Incentive Compensation Plans then in effect. See "Compensation Committee
Report on Executive Compensation."
(2) Includes the expense of a Supplemental Benefit Plan of which Mr. Meeker is
currently the only participant. See the Compensation Committee Report on
Executive Compensation above and discussion regarding the Supplemental
Benefit Plan below.
(3) 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:
MR. MEEKER MR. BAEDEKER MR. DECKER MR. DUNN MR. LONG
2000 $3,468 $2,856 $1,175 $ 69 $1,226
1999 4,463 -0- 1,353 55 494
1998 3,168 -0- 1,749 -0- -0-
Pursuant to the Company's Profit Sharing Plan, the Company matches
employees' contributions (which are limited to 12% of annual compensation up to
$10,500 for calendar year 2000) up to 4% of quarterly contributions and also
makes discretionary contributions. Amounts contributed by the Company, including
discretionary contributions, on behalf of the named executive officers are as
follows:
MR. MEEKER MR. BAEDEKER MR. DECKER MR. DUNN MR. LONG
2000 $ 8,500 $ -0- $ 13,252 $9,730 $ -0-
1999 10,857 -0- 9,989 7,461 -0-
1998 11,503 -0- 10,879 -0- -0-
18
(4) Mr. Baedeker was employed by the Company in September 1999 after the Company
acquired Hollywood Park Racetrack, and his compensation for 1999 reflects
less than 12 months of service.
(5) Includes certain amounts deferred under the Company's Deferred Compensation
Plan.
(6) Mr. Dunn was employed by the Company in April 1999 when the Company acquired
Calder Race Course, and his compensation for 1999 reflects less than twelve
months of service.
(7) Mr. Long was employed by the Company in June 1999, and his compensation for
1999 reflects less than twelve months of service. All Other Compensation for
Mr. Long includes $124,557 of the Company's reimbursement of relocation
expenses.
The following table provides information with respect to the named executive
officers concerning options granted during 2000:
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF % OF TOTAL OPTIONS
SECURITIES UNDERLYING GRANTED TO GRANT DATE
OPTIONS GRANTED EMPLOYEES EXERCISE OR EXPIRATION PRESENT VALUE
NAME (#) (1) FISCAL YEAR 2000 (%) BASE PRICE ($) DATE ($) (7)
---- --------------------- -------------------- -------------- ---------- -------------
Thomas H. Meeker (2) 31,130 17.46% $27.75 11/14/2010 $479,791
Frederick M. Baedeker,
Jr. (3) 9,800 5.49% $27.75 11/14/2010 151,042
Robert L. Decker (4) 14,988 8.41% $27.75 11/14/2010 231,002
C. Kenneth Dunn (5) 8,071 4.52% $27.75 11/14/2010 124,394
John R. Long (6) 14,988 8.41% $27.75 11/14/2010 231,002
- ----------
(1) The 78,977 options granted in 2000 to the named executive officers are
composed of incentive stock options, as defined under the Internal Revenue
Code of 1986, as amended, and non-qualified stock options. The exercise
price of these options, whether incentive stock options or non-qualified
stock options, is the fair market value of the shares on the date of their
grant.
(2) Of the 31,130 options granted to Mr. Meeker, 3,603 are incentive stock
options and 27,527 are non-qualified stock options, all of which vest on the
third anniversary of the date of grant (November 15, 2003) and were granted
under the 1997 Option Plan.
(3) Of the 9,800 options granted to Mr. Baedeker 3,603 are incentive stock
options and 6,197 are non-qualified stock options, all of which vest on the
third anniversary of the date of grant (November 15, 2003) and were granted
under the 1997 Option Plan.
(4) Of the 14,988 options granted to Mr. Decker, 3,603 are incentive stock
options and 11,385 are non-qualified stock options, all of which vest on the
third anniversary of the date of grant (November 15, 2003) and were granted
under the 1997 Option Plan.
(5) Of the 8,071 options granted to Mr. Dunn, 3,603 are incentive stock options
and 4,468 are non-qualified stock options, all of which vest on the third
anniversary of the date of grant (November 15, 2003), and were granted under
the 1997 Option Plan.
(6) Of the 14,988 options granted to Mr. Long, 3,603 are incentive stock options
and 11,385 are non-qualified stock options, all of which vest on the third
anniversary of the date of grant (November 15, 2003), and were granted under
the 1997 Option Plan.
(7) The fair value of each stock option granted is estimated on the date of
grant using the Black - Scholes option pricing model with the following
weighted-average assumptions for grants in 2000, respectively: dividend
yield of 1.83% in 2000; risk-free interest rate of 5.05%; and the expected
lives of options are 9.3 years, and a volatility of 55.2342% for all grants.
19
The following table provides information with respect to the named executive
officers concerning unexercised options held as of December 31, 2000:
AGGREGATE YEAR-END OPTIONS
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT YEAR END (#) AT YEAR END ($) (1)
SHARES ACQUIRED EXERCISABLE / EXERCISABLE /
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------------ -------------------- --------------------
Thomas H. Meeker 0 0 187,400/89,208 1,922,256/351,741
Frederick M. Baedeker, Jr. 0 0 0/20,300 0/92,503
Robert L. Decker 0 0 28,000/35,396 292,764/138,740
C. Kenneth Dunn 0 0 0/15,571 0/70,560
John R. Long 0 0 0/34,988 0/102,800
- ----------
(1) Closing bid as of the last trading day of 2000 (December 29, 2000) minus the
exercise price. The closing bid was $29.813.
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. Benefits commence at retirement on or after attainment of age
55, and continue as a 50% joint and survivor annuity. The benefit payable under
the Plan is increased by 1% for each year Mr. Meeker remains in the employment
of the Company after age 55, to a maximum benefit of 55% of the highest average
monthly earnings at age 65. The Plan further provides that the monthly benefit
will be reduced by [a] 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; [b] 100% of the
participant's monthly benefit calculated in the form of a 50% joint and survivor
annuity under the Company's terminated Pension Plan; [c] 100% of the monthly
income option calculated as a 50% joint and survivor annuity from the cash
surrender value of all life insurance policies listed on a schedule attached to
the participant's plan agreement; and [d] 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 50% joint and survivor annuity payable on his retirement date. If
Mr. Meeker retires at age 59 or later (a) the reduction for Social Security is
50% of the primary insurance amount rather than 100% of that amount; (b) the
reduction for the life annuity from the life insurance cash surrender value is
eliminated; and (c) the reduction for the life annuity from employee
contributions to the Company's Profit Sharing Plan is eliminated. The estimated
annual benefit payable at age 65 to Mr. Meeker under the Plan is $184,794. This
estimate is based upon the following assumptions: (a) 8% annual earnings under
the Company's Profit Sharing Plan; (b) Mr. Meeker's salary remains constant, and
(c) the maximum wage base for determining the Social Security offset remains
constant.
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 2001 includes a base salary of $450,000 per year,
reimbursement for travel and entertainment expenses (including his wife's travel
expenses on the Company's 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
20
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 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.
In March of 1997, the Company and Mr. Decker entered into an employment
agreement whereby Mr. Decker was employed as the Company's Senior Vice
President, Finance and Development, and Chief Financial Officer. As of January
1999, Mr. Decker became the Company's Executive Vice President and Chief
Financial Officer. Mr. Decker's compensation for 2001 includes a base salary of
$260,000, reimbursement for reasonable travel and entertainment expenses
(including his wife's travel expenses on the Company's business), provision of
an automobile and payment of dues for one (1) country club and a mutually
acceptable number of professional or business clubs and associations. The
Company may terminate Mr. Decker and Mr. Decker may resign at any time. If the
Company terminates Mr. Decker without just cause, then the Company must pay
Mr. Decker one (1) year's base salary. "Just cause" means the willful and
continued failure by Mr. Decker to substantially perform his duties, the willful
engaging by Mr. Decker in misconduct which is materially injurious to the
Company, monetarily or otherwise, or the willful violation by Mr. Decker of the
terms of his employment agreement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the past fiscal year, the Company did not engage in any transactions
in which any director, officer or 5% shareholder 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, the
Illinois Racing Board, the Indiana Horse Racing Commission, the California Horse
Racing Board or the Florida Department of Business and Professional Regulation
Division of Pari-Mutuel Wagering, 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.
One or more directors of the Company have an interest in business entities
which contract with the Company (including its wholly-owned subsidiaries),
Hoosier Park, L.P. ("Hoosier Park"), Churchill Downs California Company and
Churchill Downs California Fall Operating Company (collectively, "Hollywood
Park"), Calder Race Course, Inc., and Tropical Park, Inc. (collectively,
"Calder"), Arlington International Racecourse, Inc. ("Arlington Park") and Ellis
Park, Inc. ("Ellis Park") (collectively, "Affiliates"), for the purpose of
simulcasting the Kentucky Derby and other races and the acceptance of intrastate
or 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 in which such director has an interest.
Mr. Charles W. Bidwill, Jr., a director of the Company, is the Chairman and
a 14.42% owner of National Jockey Club. In 2000, National Jockey Club and the
Company and its Affiliates were parties to simulcasting contracts whereby
National Jockey Club was granted the right to simulcast the Affiliates'
respective races and 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 7.80% of its gross handle on the
Kentucky Oaks--Grade I race and the Kentucky Derby--Grade I race, 3.50% of gross
handle on other races simulcast from Churchill Downs and 3.30% of gross handle
on simulcast races
21
from Hollywood Park Racetrack. In 2000, National Jockey Club and the Company and
its Affiliates were also parties to simulcasting contracts whereby the Company
and its Affiliates were granted certain rights to simulcast National Jockey
Club's thoroughbred races. In consideration for these rights, the Company and
its Affiliates paid to National Jockey Club 3.0% of each track's respective
gross handle on the National Jockey Club's simulcast races. For purposes of
these and other simulcast contracts, gross handle is defined as the total amount
wagered by patrons on the races at the receiving facility less any money
returned to the patrons by cancels and refunds. These simulcast contracts are
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 2000, the Company and its Affiliates simulcasted their races to over
1,000 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.
Mr. Brad M. Kelley, a director and 8.3% owner of the Company, is a member
and the majority owner (52%) of Kentucky Downs, LLC ("Kentucky Downs"). The
Company has a 24% ownership interest in Kentucky Downs, a thoroughbred racing
association which also serves as a pari-mutuel off-track betting facility
receiving simulcast transmissions of races conducted at the Company's
racetracks. In 2000, Kentucky Downs and the Company and its Affiliates were
parties to simulcasting contracts whereby Kentucky Downs was granted the right
to simulcast the Company's and its Affiliates' respective races. In
consideration for these rights with regard to the Company and Ellis Park,
Kentucky Downs paid to the Company and to Ellis Park, respectively, the
percentages of moneys wagered which are required by KRS 230.377, ET SEQ. In
consideration for these rights, with respect to the other Affiliates, Kentucky
Downs paid 3.35% of its gross handle on races simulcast from Hollywood Park,
3.25% of its gross handle on races simulcast from Tropical Meet at Calder, and
3.0% on the other races simulcast from Affiliates. In 2000, Kentucky Downs and
the Company and its Affiliates, except Hollywood Park, were also parties to
simulcasting contracts whereby the Company and its Affiliates were granted the
right to simulcast Kentucky Downs' thoroughbred races. In consideration for
these rights with regard to the Company and Ellis Park, the Company and Ellis
Park, respectively, paid to Kentucky Downs the percentages of moneys wagered
which are required by KRS 230.377, ET SEQ. In consideration for these rights,
Hoosier Park and Calder, respectively, paid to Kentucky Downs 3.0% of each
track's gross handle on races simulcast from Kentucky Downs. For purposes of
these and other simulcast contracts, gross handle is defined as the total amount
wagered by patrons on the races at the receiving facility less any money
returned to the patrons by cancels and refunds. These simulcast contracts are
uniform within Kentucky and 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 2000, the Company and its Affiliates simulcasted
their races to over 1,000 locations in the United States and selected
international sites. Kentucky Downs received no extra or special benefit as a
result of the Company's relationship with Mr. Kelley.
Contemporaneously with the execution of the Merger Agreement, Churchill
Downs Management Company ("CDMC"), a wholly-owned subsidiary of the Company, and
Arlington International Racecourse, Inc. ("Arlington"), then a wholly-owned
subsidiary of Duchossois Industries, Inc. (a 24.1% owner of the Company) entered
into a management agreement ("Management Agreement") by which CDMC rendered
management services for the Arlington racetrack and off-track betting facilities
operation until September 8, 2000, in exchange for the payment of a fee based
upon a percentage of earnings. In 2000, CDMC earned a total of $5,806,804 in
management fees pursuant to the Management Agreement.
On September 8, 2000, Arlington, then a wholly-owned subsidiary of the
Company, entered into a lease and option to purchase agreement ("Lease") by
which Arlington leases from Duchossois Industries, Inc. approximately 68 acres
of real estate adjacent to the racetrack in Arlington Heights, Illinois, for use
in Arlington's backside operations. For 2000, Arlington paid $83,194 to
Duchossois Industries, Inc., pursuant to the Lease.
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%
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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 15, 2001, the Board of Directors adopted the
recommendation of the Audit Committee and selected PricewaterhouseCoopers,
formerly known as Coopers & Lybrand, L.L.P. ("PWC"), to serve as the Company's
independent public accountants and auditors for the fiscal year ending December
31, 2001. PWC has served as the Company's independent public accountants and
auditors since the Company's 1990 fiscal year.
Representatives of PWC 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.
AUDIT FEES
The aggregate fees incurred by the Company for services provided by PWC for
the annual audit and for the quarterly reviews of the Company's financial
statements for the year ended December 31, 2000, was approximately $302,000, of
which an aggregate amount of $105,517 was billed to the Company through
December 31, 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During 2000, there were no fees billed to the Company by PWC for services
concerning the design or implementation of systems that (i) gather the data
underlying the financial statements or (ii) generate data significant to the
financial statements taken as a whole.
ALL OTHER FEES
For services other than those described in the two preceding sections
("Other Services"), PWC billed the Company aggregate fees in the amount of
$335,508 during 2000. Other Services include income tax consultation, tax return
preparation, financial system selection assistance, Arlington Park acquisition
assistance, audits of employee benefit plans and other accounting consultation.
The Audit Committee has considered whether the provision of non-audit services
to the Company is compatible with maintaining PWC's independence.
23
AUDIT COMMITTEE REPORT
The following is the report of the Company's Audit Committee relating to
actions taken with respect to the Company's financial statements for the year
2000 and the related interim periods. All Committee actions are determined by
the Committee Charter, previously approved by the Board, and incorporated herein
by reference. The Committee's job is one of oversight and it recognizes that the
Company's management is responsible for preparing the Company's financial
statements.
Specifically, we:
- Reviewed and discussed with management and the auditors the Company's
interim and annual financial statements for 2000.
- Discussed with the auditors all matters required to be discussed under
Statement on Auditing Standards No. 61, as amended, which sets forth
required communication between external auditors and audit committees.
- Received the written disclosures and letters from the auditors required by
Independence Standards No. 1 regarding their independence, and discussed
the auditors' independence with them.
- Discussed with management and the auditors the quality and adequacy of the
Company's internal controls.
Based on the above, we recommend to the Board of Directors that the audited
financials be included in the Company's annual report of Form 10K, and that
PricewaterhouseCoopers be re-appointed as auditors for 2001.
MEMBERS OF THE AUDIT COMMITTEE
Darrell R. Wells, Chairman
Daniel P. Harrington
G. Watts Humphrey, Jr.
Carl F. Pollard
APPROVAL OF MINUTES OF 2000 SHAREHOLDERS' MEETING
AND OTHER MATTERS (PROPOSAL NO. 2)
The Board of Directors 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 2000 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.
24
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 2002 must be received by the Company at 700 Central Avenue,
Louisville, Kentucky 40208, Attention of the Secretary, no later than
January 7, 2002. Pursuant to the Company's Bylaws, proposals of shareholders
intended to be presented at the Company's 2002 annual meeting of shareholders
must be received by the Company at the principal executive offices of the
Company not less than 90 nor more than 120 days prior to the anniversary date of
the immediately preceding annual meeting of shareholders. Accordingly, any
shareholder proposals intended to be presented at the 2002 annual meeting of
shareholders of the Company must be received in writing by the Company at its
principal executive offices not later than March 23, 2002, nor sooner than
February 21, 2002. Any proposal submitted before or after those dates will be
considered untimely, and the Chairman shall declare that the business is not
properly brought before the meeting and such business shall not be transacted at
the annual meeting.
BY ORDER OF THE BOARD OF DIRECTORS.
THOMAS H. MEEKER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
REBECCA C. REED
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
Louisville, Kentucky
May 7, 2001
PLEASE SIGN AND RETURN THE ENCLOSED PROXY
IF YOU CANNOT BE PRESENT IN PERSON
25
APPENDIX A
CHURCHILL DOWNS INCORPORATED
AUDIT COMMITTEE CHARTER
PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to assist the
Board of Directors (the "Board") in fulfilling its responsibility to oversee
management's conduct of the Company's financial reporting process, including by
overviewing the financial reports and other financial information provided by
the Company to any governmental or regulatory body, the public or other users
thereof, the Company's systems of internal accounting and financial controls,
the annual independent audit of the Company's financial statements, and its
compliance with the Board approved Code of Conduct and Compliance Policy.
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, record,
facilities and personnel of the Company and the power to retain outside counsel,
auditors or other experts for this purpose. The Board and the Committee are in
place to represent the Company's shareholders; accordingly, the outside auditor
is ultimately accountable to the Board and the Committee.
The Committee shall review the adequacy of this Charter on an annual basis.
MEMBERSHIP
The Committee shall be comprised of not less than three members of the Board,
and the Committee's composition will meet the requirements of the Audit
Committee Policy of the NASD, as determined by the Board.
Accordingly, all of the members will be directors:
- - Who have no relationship to the Company that may interfere with the exercise
of their independence from management and the Company; and
- - Who are financially literate or who become financially literate within a
reasonable period of time after appointment to the Committee. In addition, at
least one member of the Committee will have accounting or related financial
management expertise.
KEY RESPONSIBILITIES
The Committee's job is one of oversight and it recognizes that the Company's
management is responsible for preparing the Company's financial statements and
that the outside auditors are responsible for auditing those financial
statements. Additionally, the Committee recognizes that financial management, as
well as the outside auditors, have more time, knowledge and more detailed
information on the Company than do Committee members; consequently , in carrying
out its oversight responsibilities, the Committee is not providing any expert or
special assurance as to the Company's financial statements or any professional
certification as to the outside auditor's work.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances. The Committee shall report to the Board
no less than annually on its activities.
- - The Committee shall review with management and the outside auditors the
audited financial statements to be included in the Company's Annual Report on
Form 10-K (or the Annual Report to Shareholders if distributed prior to the
filing of Form 10-K) and review with the outside auditors the matters required
to be discussed to by Statement of Auditing Standards ("SAS") No. 61.
- - The Committee shall review with the outside auditors the Company's interim
financial results to be included in the Company's quarterly reports to be
filed with Securities and Exchange Commission and
the matters required to be discussed by SAS No. 61; this review will occur
prior to the Company's filing of the Form 10-Q.
- - The Committee shall at least annually discuss with management and the outside
auditors the quality and adequacy of the Company's internal controls, as well
as its compliance with the requirements of the Blue Ribbon Committee
established by the SEC and the NASD.
- - The Committee shall:
- request from the outside auditors annually, a formal written statement
delineating all relationships between the auditor and the Company
consistent with Independence Standards Board Standard Number 1;
- discuss with the outside auditors at least annually any such disclosed
relationships and their impact on the outside auditor's independence; and
recommend that the Board take appropriate action;
- The Committee, subject to any action that may be taken by the full Board,
shall have the ultimate authority and responsibility to select, evaluate
and, where appropriate, replace the outside auditor.
PROXY
CHURCHILL DOWNS INCORPORATED
700 Central Avenue
Louisville, Kentucky 40208
ANNUAL MEETING OF SHAREHOLDERS - JUNE 21, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints G. Watts Humphrey, Jr. and Darrell R.
Wells, and any of them, 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 21, 2001, 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 II, Class I and 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 II Directors: Richard L. Duchossois; J. David Grissom; Seth W. Hancock;
Frank B. Hower, Jr.; Thomas H. Meeker
Class I Director: Craig J. Duchossois
Class III Director: Robert L. Fealy
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
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2. Proposal to approve minutes of the 2000 Annual Meeting of
Shareholders, approval of which does not amount to ratification of action taken
thereat (Proposal No. 2); and
____ FOR ____ AGAINST ____ ABSTAIN
3. 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 THE ELECTION OF
ALL CLASS II, CLASS I AND CLASS III DIRECTORS
DESIGNATED UNDER PROPOSAL NO. 1. Please sign, date
and return this Proxy promptly in the enclosed
envelope.
Dated ________________________________, 2001
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(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