Churchill Downs Inc – ‘PRE 14A’ for 12/31/98

As of:  Monday, 3/15/99   ·   For:  12/31/98   ·   Accession #:  20212-99-1   ·   File #:  0-01469

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Preliminary Proxy Solicitation Material   —   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PRE 14A     Preliminary Proxy                                     31    134K 

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          CHURCHILL DOWNS INCORPORATED
700 CENTRAL AVENUE
LOUISVILLE, KENTUCKY 40208

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
 TO BE HELD ON JUNE 17, 1999
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 17, 1999, at 10:00 a.m.,  E.D.T. for the following
purposes:                                                                       

       I.     To elect five (5) Class  III  Directors  for a term of three (3)
years(Proposal No.1);                                                           

        II. To approve  amending  the  Company's  Articles of  Incorporation  to
increase  the number of  authorized  shares of the  Company's  Common Stock from
20,000,000 to 50,000,000 shares (Proposal No. 2);                               

        III. To approve or disapprove  the minutes of the 1998 Annual Meeting of
Shareholders, approval of which does not amount to ratification of actions taken
at such meeting (Proposal No.3); and                                            

        IV. To  transact  such other  business as may  properly  come before the
meeting or any adjournment thereof, including matters incident to its conduct.  

        The close of  business on April 20,  1999,  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
April 28, 1999                                                                  

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CHURCHILL DOWNS INCORPORATED
700 CENTRAL AVENUE
LOUISVILLE, KENTUCKY 40208

 PROXY STATEMENT

Annual Meeting of Shareholders To Be Held on June 17, 1999

        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 1999 Annual Meeting of  Shareholders  to be held on Thursday,  June
17, 1999, 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 April 28, 1999.                          

Voting Rights                                                                   
        Only  holders  of record of the  Company's  Common  Stock,  No Par Value
("Common  Stock"),  on April 20, 1999,  are entitled to notice of and to vote at
the  Annual  Meeting.  On that  date,  7,525,041  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 SHAREHOLDERDOES  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                                        

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APPROVAL OF THE PROPOSED  AMENDMENT TO THE COMPANY'S  ARTICLES OF INCORPORATION,
FOR APPROVAL OF THE MINUTES OF THE 1998 ANNUAL  MEETING OF  SHAREHOLDERS  AND ON
SUCH OTHER  BUSINESS  AS MAY  PROPERLY  COME  BEFORE  THE ANNUAL  MEETING OR ANY
ADJOURNMENTS THEREOF.                                                           

Revocation of Proxy                                                             

        A proxy may be revoked at any time before the shares it  represents  are
voted by giving written notice of revocation to the Secretary of the Company and
such revocation shall be effective for all votes after receipt.                 

 Common Stock Owned by Certain Persons

        The following  table sets forth  information  concerning  the beneficial
ownership  of the Common  Stock as of April 15,  1999,  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

Darrell R. Wells                                                                
4350 Brownsboro Road                                                            
Suite 310                                                                       
Louisville, Kentucky  40207            479,310(1)(2)                        6.4%

Charles W. Bidwill, Jr.                                                         
911 Sunset Road                                                                 
Winnetka, Illinois  60093               440,680(2)                          5.9%

27 Directors and Executive                                                      
Officers as a Group                   2,586,640(2)(3)                      34.4%

--------------                                                                  
(1) Of the total shares listed above, Mr. Wells 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. Wells shares voting and investment
power with respect to all shares attributed to him in the above table.  

(2) See  "Executive  Officers of the  Company,"  "Election  of  Directors,"  and
"Continuing Directors," below.                                          

(3) Includes 273,400 shares issuable under currently exercisable options.       

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 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. For the Company's
prior fiscal  year,  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.      

 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.    

                                                        [Enlarge/Download Table]


                                                                     Common Stock of the    
                                                                  Company Beneficially Owned
                                                                  as of April 15, 1999(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           86,560           1.2%
60                     Board since 1992                                                     

Thomas H. Meeker       President  and  Chief  Executive Officer       172,313          42.3%
55                     since 1984; Director since 1995                                      

Vicki L. Baumgardner   Vice  President,  Finance  and  Treasurer       15,306(5)         .2%
47                     since  February  1993; Controller from                               
                       1989 to February 1993                                                

David E. Carrico       Senior Vice President, Sales since              22,120(6)         .3%
48                     December  1996;  Senior Vice President,                              
                       Administration  from June 1994 to                                    
                       December 1996; Vice President of                                     
                       Marketing from 1990 to June 1994                                     

Robert L. Decker       Executive  Vice  President and  Chief            2,000            *  
51                     Financial  Officer  since January 1999;                              
                       Senior  Vice  President, Finance  and                                
                       Development, and Chief Financial Officer                             
                       from March 1997 to December 1998                                     

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                                                                    Common Stock of the    
                                                                 Company Beneficially Owned
                                                                 as of April 15, 1999(1)(2)

                              Position(s) With Company                                     
   Name and Age                 and Term of Office                  Amount       % of Class
                                                                                           
Dan L. Parkerson      Senior Vice President, Property Management      22,400(7)         .3%
56                    since January 1999; Senior Vice President,                           
                      Live  Racing  from   December  1996  to                              
                      December  1998;  General Manager from June                           
                      1991 to December 1998                                                
Rebecca C. Reed       Senior Vice President, General Counsel and         485            *  
41                    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 since January      2,742(8)         *  
53                    1999; Vice President, Racing from September                          
                      1994 to December 1998; Stakes Coordinator                            
                      from August 1990 to August 1994                                      
Jeffrey M. Smith      President,  Churchill Downs  Management         28,576(9)         .4%
46                    Company    since  January   1993;    Senior                          
                      Vice  President,   Planning  and   Development                       
                      from February   1993  to   December   1996;                          
                      Senior  Vice President,   Finance  from  1991                        
                      to  February   1993;                                                 
                      Treasurer from 1986 to February 1993                                 
Karl F. Schmitt, Jr.  Senior  Vice  President, Communications         15,426(10)        .2%
46                    since March 1998; Vice President, Corporate                          
                      Communications since 1990                                            
Alexander M. Waldrop  Senior Vice President and General Manager       28,382(11)        .4%
42                    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 1998.                                 

(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 144,400 shares issuable under currently exercisable options.   

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(5)     Includes 15,000 shares issuable under currently exercisable options.    

(6)     Includes 21,500 shares issuable under currently exercisable options.    

(7)     Includes 21,500 shares issuable under currently exercisable options.    

(8)     Includes 2,600 shares issuable under currently exercisable options.     

(9)     Includes 28,000 shares issuable under currently exercisable options.    

(10)    Includes 15,000 shares issuable under currently exercisable options.    

(11)    Includes 28,000 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.                                           

 Election of Directors
(Proposal No. 1)
        At the Annual Meeting,  shareholders will vote to elect five (5) persons
to serve in Class III of the Board of  Directors  to hold  office  for a term of
three  (3)  years  expiring  at the 2002  Annual  Meeting  of  Shareholders  and
thereafter  until  their  respective   successors  shall  be  duly  elected  and
qualified.                                                                      

        The Articles of  Incorporation  of the Company provide that the Board of
Directors shall be composed of not less than nine (9) nor more than  twenty-five
(25) members, the exact number to be 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.  At its
meeting on June 18, 1998, the Board of Directors amended the Company's Bylaws to
establish the number of directors at thirteen  (13),  with four (4) directors in
each of Class I and Class II and with five (5) directors in 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                                

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Stock and subject to the fiduciary  obligations  of the directors of the Company
in nominating such person for election as a director.                           

        At the Annual Meeting, the five (5) persons named in the following table
will be nominated on behalf of the Board of Directors  for election as directors
in Class III. All of the nominees  currently serve as Class III directors of the
Company  and all of the  nominees  have  agreed  to  serve if  reelected.  Under
cumulative  voting,  the five (5) nominees receiving the highest number of votes
will be elected.                                                                

Nominees for Election as Directors                                              

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                                                                          Common Stock of the   
                                                                      Company Beneficially Owned
                                                                         as of April 15, 1999(3)

   Name, Age and                                                                                
   Positions with        Principal Occupation (1) and                                           
      Company              Certain Directorships (2)                     Amount       % of Class

                       Class III - Terms Expiring in 2002                                       
                                                                                                
Charles W. Bidwill, Jr.    Chairman of the Board, National Jockey Club    440,680           5.9%
70                         (Operator of Sportsman's Park Racetrack); For                        
Director since 1982        mer President and General Manager, National                          
                           Jockey  Club (until  December  31,  1995);                           
                           Director,Orange Park Kennel  Club,  Associated                       
                           Outdoor  Clubs (Tampa  Greyhound   Track),                           
                           Bayard Race ways and Caterers of North Florida,                      
                           Jacksonville Kennel Club, Big Shoulders Fund                         
                           Archdiocese  of  Chicago,  Cristo  Rey Jesuit                        
                           High School                                                          
Daniel P. Harrington       President and Chief Executive Officer, HTV     200,000           2.7%
43                         Industries, Inc.(private holding company with                        
Director since 1998        diversified   business  interests);  Former                          
                           Chairman  and  President, Ellis Park  Race                           
                           Course, Inc. (1993 to 1998); Trustee, V & V                          
                           Foundation                                                           
Thomas H. Meeker           President and Chief Executive Officer of the   172,313(4)        2.3%
55                         Company; Director, Anderson Park, Inc. (Chair                        
Director since 1995;       man), Thoroughbred Racing Association of North                       
President and Chief        America, Inc., Equibase Company, PNC Bank,                           
Executive Officer          Kentucky, Inc., National Thoroughbred Racing                         
since 1984                 Association,  Norton  Healthcare,  Inc.                              
                           (Executive Committee);  Member, Board of                             
                           Trustees, Centre College                                             


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                                                                    Common Stock of the   
                                                                Company Beneficially Owned
                                                                   as of April 15, 1999(3)

   Name, Age and                                                                          
   Positions with    Principal Occupation (1) and                                         
      Company          Certain Directorships (2)                     Amount     % of Class
                                                                                          

Carl F. Pollard      Owner, Hermitage Farm since 1995 (Thorough     143,080           1.9%
60                   bred breeding); Former Chairman of the Board,                        
Director since 1985  Columbia  Healthcare  Corporation;  President                        
                     and Chief Operating Officer (1991-March 1993),                       
                     Humana Inc.; Director, National City Bank,                           
                     Kentucky (Executive Committee), Breeders' Cup                        
                     Limited, Kentucky Derby Museum Corporation,                          
                     Nexstar  Pharmaceuticals,  Inc.  (formerly                           
                     Vestar); Trustee,  Thoroughbred  Owners  and                         
                     Breeders Association                                                 
Darrell R. Wells     General Partner, Security Management Company   479,310           6.4%
56                   (Investments); Director, First Security Trust                        
Director since 1985  Company, Commonwealth Bancshares, Citizens                           
                     Financial Corporation, Commonwealth Bank &                           
                     Trust Company and Jundt Growth Fund                                  
--------------                                                                            
* 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 considered significant by them.   

(3)     No nominee shares voting or investment power of his  beneficially  owned
        shares,  except  that Mr.  Meeker  shares  with  others  the  voting and
     investment  power with  respect to 26,908  shares; Mr.  Wells  shares
        voting  and  investment  power  with  respect to 479,310 shares; and Mr.
       Harrington  shares  voting and investment power with respect to 200,000
        shares.  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 200,000 shares held by TVI Corp.        

(4)     Includes 144,400 shares issuable under currently exercisable options.   

        The Board of Directors has no reason to believe that any of the nominees
will be  unavailable  to serve  as a  director.  If any  nominee  should  become
unavailable before the Annual Meeting,  the persons named in the enclosed Proxy,
or their substitutes, reserve the right to vote for substitute nominees selected
by the Board of Directors.  In addition, if any shareholder(s) shall vote shares
cumulatively or otherwise for the election of a director or directors other than
the nominees named above, or substitute nominees,  or for less than all of them,
the persons named in the enclosed Proxy or their  substitutes,  or a majority of
them,  reserve the right to vote  cumulatively  for some number less than all of
the nominees named above or any substitute nominees, and for such of the persons
nominated as they may choose.                                                   

Continuing Directors                                                            

        The following table sets forth  information  relating to the Class I and
Class II directors of the Company who will continue to serve as directors  until
the expiration of their respective terms                                        

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of office, and  the  Directors  Emeriti, and the beneficial ownership of Common 
Stock by such Directors.                                                        

                                                        [Enlarge/Download Table]


                                                                         Common Stock of the   
                                                                     Company Beneficially Owned
                                                                        as of April 15, 1999(3)
  Name, Age and                                                                                
  Positions with          Principal Occupation (1) and                                         
    Company                 Certain Directorships (2)                   Amount       % of Class

                            Class I - Terms Expiring in 2000                                   
                                                                                               
William S. Farish         President, W. S. Farish & Company (Trust man    86,560           1.2%
60                        agement company) and Owner and Chief Execu                           
Director since 1985;      tive Officer, Lane's End Farm (Thoroughbred                          
Chairman since 1992       breeding and racing); Director, Add-Vision,                          
                          Breeders' Cup Limited and Keeneland Associa                          
                          tion, Incorporated; Vice Chairman and Steward,                       
                          Jockey Club; Chairman, American Horse Council                        
G. Watts Humphrey, Jr.    President, G. W. H. Holdings, Inc. (Private     36,000            .5%
54                        investment company); Chief Executive Officer,                        
Director since 1995       The Conair Group, Inc. (Plastics  machinery                          
                          equipment company),  MetalTech L.P.,  NexTech,                       
                          L.P.,  GalvTech,  L.P.  (Metals manufacturing                        
                          and  distribution  companies)  and  Centria                          
                          (Manufacturing and erector of metal building                         
                          systems); Chairman - Fourth District, Federal                        
                          Reserve  Bank of Cleve land;  Director,  The                         
                          Blood Horse, Inc.(Chairman) and   Keeneland                          
                          Association,  Incorporated;  Director and                            
                          Treasurer, Breeders' Cup Limited                                     
Arthur B. Modell          Owner and President, Baltimore Ravens Football   2,000            *  
73                        Company, Inc. (Professional football team)                           
Director since 1985                                                                            
Dennis D. Swanson         President and General Manager, WNBC-TV              0             *  
61                        (Television station); Co-Chairman, NBC Olym                          
Director since 1996       pics; Former President, ABC Sports, Inc. (from                       
                          January 1986 to May 1996); Chairman, Founda                          
                          tion for Minority Interests in Media, Inc. and                       
                          Resource Development Board, College of Com                           
                          munications, University of Illinois at Champaign-                    
                          Urbana                                                               

                       Class II - Terms Expiring in 2001                                       

J. David Grissom          Chairman,  Mayfair  Capital, Inc.  (Private     20,100            .3%
60                        investment  firm) ;  Director,  Providian                            
Director since 1979       Financial  Corporation,  and  L G & E Energy                         
                          Corporation; Chairman, Centre  College Board                         
                          of Trustees                                                          


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                                                                        Common Stock of the   
                                                                    Company Beneficially Owned
                                                                       as of April 15, 1999(3)
  Name, Age and                                                                               
  Positions with         Principal Occupation (1) and                                         
    Company                Certain Directorships (2)                   Amount       % of Class

                                                                                              
Seth W. Hancock          Partner  and  Manager,  Claiborne  Farm, and  285,650           3.8% 
49                       President, Hancock Farms, Inc. (Thoroughbred                         
Director since 1973      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 Executive     2,080            *  
70                       Officer, Liberty  National  Bancorp,  Inc.,                          
Director since 1979      Liberty  National  Bank  &  Trust  Company o                         
                         Louisville;  Director,  Banc  One  Kentucky                          
                         Corporation, Bank One, Kentucky, NA, American                        
                         Life  and  Accident  Insurance  Company, and                         
                         Anthem, Inc.; Member, Board of Trustees, J.                          
                         Graham  Brown  Foundation  and  University of                        
                         Louisville (Chairman)                                                
W. Bruce Lunsford        Chairman,  Ventas,  Inc. (Real  estate         200,060           2.7%
51                       investment trust); Former Chairman, President                        
Director since 1995      and  Chief  Executive  Officer,  Vencor, Inc.                        
                         (Intensive care hospitals and nursing homes);                        
                         Director,   ResCare, Inc., National City Bank,                       
                         Kentucky (Executive Committee), National City                        
                         Corporation (Executive Committee), Kentucky                          
                         Economic Development Corporation (Chairman)                          

                            Directors Emeriti (4)                                             

Catesby W. Clay          Chairman, Kentucky River Coal Corporation       60,580            .8%
75                       (Coal land lessor); President, Runnymede Farm,                       
Director from 1953 to    Inc. (Thoroughbred breeding); Director, Kent-                        
1998; Director Emeritus  Mar Corp. (President), KRCC Oil & Gas Co.,                           
since 1998               Inc., University of Kentucky Mining Engineering                      
                         Foundation; Director and President, Foundation                       
                         for Drug-Free Youth                                                  
John W. Barr, III        Retired; Former Chairman, National City Bank,    4,000            .1%
78                       Kentucky, Inc.; Director, Kitchen Kompact                            
Director from 1979 to    Company; Director, Speed Museum, Cave Hill                           
1993; Director Emeritus  Cemetery, and Boy Scouts of America                                  
since 1993                                                                                    


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                                                                          Common Stock of the   
                                                                      Company Beneficially Owned
                                                                        as of April 15, 1999(3) 
  Name, Age and                                                                                 
  Positions with           Principal Occupation (1) and                                         
    Company                  Certain Directorships (2)                   Amount       % of Class

                                                                                                
Louis J. Herrmann, Jr.     Owner, Louis  Herrmann  Auto  Consultant        80,130           1.1%
79                         Incorporated (Automobile sales); Director,                           
Director from 1968 to      Southeastern Financial Services, Inc                                 
1994; Secretary-Treasurer                                                                       
from                                                                                            
1985 to 1986;                                                                                   
Director Emeritus since                                                                         
1994                                                                                            

Stanley F. Hugenberg, Jr.  President, Jackantom Sales Company (Manufac-     7,340            .1%
81                         turers' representative); Member, Board of                            
Director from 1982 to      Trustees, J. Graham Brown Foundation                                 
1992; Director Emeritus                                                                         
since 1992                                                                                      

William T. Young           Chairman, W.T. Young, Inc. (Warehousing),      229,320           3.1%
81                         Owner, Overbrook Farm (Thoroughbred racing                           
Director  from  1985       and  breeding);  Chairman,  Transylvania                             
to 1992; Director          University;  and Chairman,  Shakertown at                            
Emeritus since 1992        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 considered significant by them.                           

(3) No director  shares voting or  investment  power of his  beneficially  owned
    shares, except that Messrs. Clay, Hancock and Lunsford share with others the
    voting and investment  power with respect to 54,580  shares,  212,650 shares
    and 20,000  shares,  respectively.  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,  Mr. Hancock specifically
    disclaims  beneficial ownership of 158,400 shares owned by the A.B. Hancock,
    Jr. Marital Trust of which he is the trustee,  of 18,060 shares owned by the
    Waddell Walker  Hancock II Trust of which he is a trustee,  of 18,060 shares
    owned by the  Nancy  Clay  Hancock  Trust of  which he is a  trustee  and of
    12,086.66  shares  held by the ABC  Partnership  of  which  he is a  general
partner.                                                                

(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. The Bylaws provide
    that once a director  is 72 years of age,  he may not stand for  re-election
    but shall assume Director Emeriti status as of the annual meeting  following
    his  current  term of service as a director.  The  Chairman of the Board may
continue to serve as a director notwithstanding this provision.         

Compensation and Committees of the Board of Directors                           

           Five (5) meetings of the Board of Directors were held during the last
fiscal year. During 1998,  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 1998 and  Directors  who served as
committee chairmen received                                                     

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an additional  $2,000 for a total  retainer of $8,000 for 1998.  The Chairman of
the Board of Directors  received an  additional  $5,000 for a total  retainer of
$11,000 for 1998. 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
1998 were as follows:                                                           

            J. David Grissom, Chairman
   William S. Farish
         Charles W. Bidwill, Jr.
 Carl F. Pollard

Thirteen  (13)  meetings of the  Executive  Committee  were held during the last
fiscal year.                                                                    
 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 for 1998 were as follows:          

January 1998 - May 1998                       June 1998 - December 1998       
-----------------------                       -------------------------       

Darrell R. Wells, Chairman                     Darrell R. Wells, Chairman       
G. Watts Humphrey, Jr.                         Daniel P. Harrington             
W. Bruce Lunsford                              G. Watts Humphrey, Jr.           
Carl F. Pollard                                W. Bruce Lunsford                
 Carl F. Pollard

One (1) meeting of the Audit Committee was 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  recommends  to the Board of
Directors actions on the compensation of the Company's Chief Executive  Officer.
The Compensation Committee consists of not fewer than two (2) directors who     

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are not officers or  employees of the  Company or any of its  subsidiaries.  The
members of the Compensation Committee for 1998 were as follows:                 

January 1998 - December 1998

   Frank B. Hower, Jr., Chairman
W. Bruce Lunsford         
Dennis D. Swanson         
Darrell R. Wells          

Two (2) meetings of the Compensation  Committee were held during the last fiscal
year.                                                                           
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 1998 are as follows:          

 January 1998 - May 1998               June 1998 - December 1998

 Seth W. Hancock, Chairman             Seth W. Hancock, Chairman
Catesby W. Clay                       G. Watts Humphrey, Jr.  
G. Watts Humphrey, Jr.                Carl F. Pollard         
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,  except Mr. Modell,  attended
at least  seventy-five  percent  (75%) of the meetings of the Board of Directors
and the meetings of the committees on which they served.                        

 Proposed Amendment to the Company's Articles of Incorporation
to Increase the Authorized Common Stock from
 20,000,000 to 50,000,000 Shares
(Proposal No. 2)

           The Company's  Board of Directors has adopted and  recommended to the
shareholders  a proposal to amend the  Company's  Articles of  Incorporation  to
increase  the  number of  authorized  shares of Common  Stock no par value  from
20,000,000 to 50,000,000  shares. On April 15, 1999, there were 7,525,041 shares
of Common  Stock  outstanding.  If the  amendment  is  adopted,  approxi  mately
42,500,000 shares of Common Stock would be authorized and unissued.  At December
31,  1998,  there were  700,000  shares of Common  Stock  reserved  for issuance
pursuant to the existing stock option plans of the Company. In addition, 100,000
shares are reserved for issuance pursuant to the employee stock purchase plan of
the Company. There are no preemptive rights relating to                         

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the Common  Stock.  Except to the extent that the  Company  may issue  shares of
Common Stock reserved  therefor  pursuant to its stock purchase and stock option
plans,  the Company has not entered into any agreements or  understandings,  and
has no present plans, for the issuance of additional shares of common stock, but
desires  to have such  shares  available  for future  issuances  as the need may
arise. No further  shareholder  approval would be required prior to the issuance
of the additional shares authorized by this amendment subject,  however,  to the
rules of the Nasdaq Stock Market which require  shareholder  approval of certain
share issuances.                                                                

           The Board of  Directors'  purpose in  proposing  the  increase in the
number of  authorized  shares of Common  Stock is to have shares  available  for
future issuances and splits from time to time as and when the Board of Directors
determines  that such  issuances  and splits may be  desirable.  The  additional
shares of Common  Stock could be used to dilute the stock  ownership of a person
seeking to obtain  control  of the  Company or could be  privately  placed  with
purchasers  who would  support  the Board of  Directors  in  opposing  a hostile
takeover attempt.  This proposal to amend the Articles of Incorporation is not a
response to any effort of which the Company is aware to accumulate  Common Stock
or obtain  control of the  Company,  nor is it part of a plan by  management  to
recommend  a  series  of  similar  amendments  to the  Board  of  Directors  and
shareholders. The Board of Directors does not presently contemplate recommending
the  adoption of any other  amendments  to the Articles of  Incorporation  which
could be construed to affect the ability of third parties to take over or change
control of the Company.                                                         

           The  current  Articles  of  Incorporation  and Bylaws of the  Company
contain  other  provisions  which  could be  viewed as  discouraging  takeovers,
including a staggered  Board of  Directors,  authorized  but unissued  preferred
stock  with  respect  to which  the  Board of  Directors  retains  the  power to
determine voting rights,  limitations on the ability to call special meetings of
shareholders  of the Company,  and procedures to be complied with in order for a
matter to be properly  before a meeting of  shareholders.  Under  Kentucky  law,
shareholders  of the Company have  cumulative  voting  rights in the election of
directors.   The  adoption  of  this  proposed  amendment  to  the  Articles  of
Incorporation  of the Company may render more  difficult or  discourage  certain
transactions  such as a merger,  tender offer or proxy  contest or assumption of
control  by a holder  of a  larger  block of the  Company's  securities  and the
removal  of  incumbent  management,  but the Board of  Directors  believes  that
encouraging  potential  acquirors to negotiate  with the Board of Directors on a
potential acquisition is in the best interest of the Company.                   

           In  addition  to  Common  Stock,   under  the  current   Articles  of
Incorporation  of the Company the Company is authorized to issue 250,000  shares
of preferred  stock,  no par value per share,  in series.  As of April 15, 1999,
there were no such shares of  preferred  stock  outstanding,  but  pursuant to a
shareholder  rights plan  adopted by the Company on March 19, 1998 (the  "Rights
Plan"),  rights  have been  issued to the  holders  of the  Common  Stock of the
Company  pursuant to such plan entitling  such holders,  subject to the terms of
such plan, to acquire shares of preferred stock of the Company.                 

           Pursuant  to the  Rights  Plan,  on  March  19,  1998,  the  Board of
Directors  declared a dividend  distribution  of one right (a "Right")  for each
outstanding share of Common Stock to                                            

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shareholders  of record at the close of business on March 30, 1998 (the  "Record
Date").  The  description  and  terms of the  Rights  are set  forth in a Rights
Agreement  dated as of March  19,  1998 (the  "Rights  Agreement")  between  the
Company and Fifth Third Bank, as Rights Agent.                                  

           Prior to the  Distribution  Date  (hereinafter  defined),  the Rights
shall be represented by the  certificates  for shares of Common Stock.  Separate
right  certificates  shall be distributed to shareholders as soon as practicable
after the Distribution  Date. The Rights will expire on the tenth anniversary of
the  effective  date of the Rights  Agreement  (the  "Expiration  Date")  unless
earlier  redeemed or canceled by the Company as provided below.  Initially,  the
Rights will not be  exercisable.  The Rights will  become  exercisable  upon the
earlier of (a) the tenth  business day (or such later date as may be  determined
by the  Board)  after  such time as the  Company  learns  that a person or group
(including any affiliate or associate of such person or group) has acquired,  or
obtained  the  right  to  acquire,  beneficial  ownership  of 15% or more of the
outstanding  Common  Stock  (such  person or group  being  called an  "Acquiring
Person")  unless  provisions  intended to prevent  accidental  triggering of the
Rights  apply,  and (b) such date,  if any, as may be designated by the Board of
Directors  of the  Company  following  the  commencement  of,  or  first  public
disclosure  of an  intention  to  commence,  a  tender  or  exchange  offer  for
outstanding Common Stock which could result in such person or group becoming the
beneficial owner of 15% or more of the outstanding  Common Stock (the earlier of
such  dates  being  called  the  "Distribution   Date").  Each  Right  shall  be
exercisable  for  1/1,000  of a  share  of  Series  1998  Preferred  Stock  (the
"Preferred  Stock")  (as  described  below) at a purchase  price (the  "Purchase
Price") of $80.00,  subject to adjustment.  Prior to the Distribution  Date, the
Rights shall be  transferable  only with the related  shares of Common Stock and
shall  automatically  be transferred  with such shares.  After the  Distribution
Date, the Rights shall be separately  transferable  and the Company will provide
Right Certificates to all holders of Common Stock.                              

           The terms of the Preferred Stock provide that each 1/1,000 of a share
of  Preferred   Stock  is  entitled  to   participate  in  dividends  and  other
distributions,  and to vote, on an equivalent  basis with one whole share of the
presently  constituted Common Stock of the Company.  In addition,  the Preferred
Stock has  certain  minimum  dividend  and  liquidation  rights.  The  amount of
Preferred Stock issuable upon exercise of the Rights is subject to adjustment by
the Board of  Directors  of the Company in the event of any change in the Common
Stock or Preferred Stock,  whether by reason of share  dividends,  share splits,
recapitalizations,   mergers,  consolidations,   combinations  or  exchanges  of
securities,  split-ups,  split-offs,  spin-offs,   liquidations,  other  similar
changes in capitalization,  any distribution or issuance of assets, evidences of
indebtedness  or subscription  rights,  options or warrants to holders of Common
Stock or Preferred Stock or otherwise.                                          

           Subject to provisions of the Rights Plan, at such time as there is an
Acquiring  Person,  proper  provision  shall be made so that the  holder of each
Right will thereafter have the right to receive,  upon exercise thereof, for the
Purchase  Price,  that number of thousandths of a share of Preferred Stock equal
to the number of shares of Common  Stock  which at the time of such  transaction
would  have a market  value of twice the  Purchase  Price (the  "flip-in").  Any
Rights that are or were  beneficially  owned by an Acquiring  Person on or after
the  Distribution  Date shall become null and void.  In the event the Company is
acquired in a merger or other business                                          

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combination by an Acquiring Person that is a publicly traded  corporation or 50%
or  more of the  Company's  assets  or  assets  representing  50% or more of the
Company's earning power are sold, leased, exchanged or otherwise transferred (in
one or more  transactions)  to an  Acquiring  Person  that is a publicly  traded
corporation,  each Right will entitle its holder to  purchase,  for the Purchase
Price, that number of common shares of such corporation which at the time of the
transaction  would  have a  market  value  of  twice  the  Purchase  Price  (the
"flip-over"). In the event the Company is acquired in a merger or other business
combination by an Acquiring  Person that is not a publicly  traded entity or 50%
or  more of the  Company's  assets  or  assets  representing  50% or more of the
earning  power  of  the  Company  are  sold,  leased,   exchanged  or  otherwise
transferred (in one or more  transactions)  to an Acquiring Person that is not a
publicly traded entity, each Right will entitle its holder to purchase,  for the
Purchase Price, at such holder's option,                                        

           A.  that  number  of  shares  of  the  surviving  corporation  in the
    transaction with such entity (or, at such holder's option,  of the surviving
    corporation  in such  acquisition,  which could be the Company) which at the
    time of the  transaction  would  have an  aggregate  book value of twice the
Purchase Price or                                                       

           B. that  number of  shares  of such  entity  which at the time of the
transaction would have a book value of twice the Purchase Price or      

           C. if such entity has  affiliates  which have publicly  traded common
    shares,  that number of common  shares of the  affiliate  with the  greatest
    aggregate  market value on the  transaction  date,  which at the time of the
transaction would have a market value of twice the Purchase Price.      

           Any Rights that are or were beneficially owned by an Acquiring Person
on or after the  Distribution  Date shall become null and void. The  "flip-over"
provision  only  applies to a merger or  similar  business  combination  with an
Acquiring Person, and it does not apply to a merger or business combination with
any party which has not triggered the "flip-in" provision.                      

           The Rights are  redeemable  by the Board of Directors at a redemption
price of $.01 per Right (the  "Redemption  Price") any time prior to the earlier
of (a) the tenth  business day (or such later date as may be  determined  by the
Board)  after  such  time as  there  becomes  an  Acquiring  Person  and (b) the
Expiration Date. Immediately upon the action of the Board electing to redeem the
Rights,  and  without any  further  action and without any notice,  the right to
exercise the Rights will  terminate  and the only right of the holders of Rights
will be to receive the Redemption Price.                                        

           Rights  agreements  generally  provide  a  significant  deterrent  to
attempts to acquire  control of a corporation  without the approval of the board
of directors.  The Rights would cause substantial  dilution to a person or group
that attempts to acquire control without Board  approval.  The Rights,  however,
should  not  affect  any  prospective  offeror  willing to make an offer for all
outstanding shares of the Common Stock at a fair price and otherwise in the best
interest of the  Company  and its  shareholders  as  determined  by the Board of
Directors or affect any prospective  offeror willing to negotiate with the Board
of Directors.                                                                   

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           The  adoption  of  this   proposed   amendment  to  the  Articles  of
Incorporation  of the Company requires that the number of votes cast in favor of
the proposal exceed the number of votes cast in opposition to the proposal.  The
complete text of the proposed  amendment to the Articles of Incorporation is set
forth on  Appendix A hereto;  however,  such text is subject to change as may be
required by the Kentucky Secretary of State.                                    

           THE BOARD OF DIRECTORS  RECOMMENDS THAT THE SHAREHOLDERS APPROVE THIS
PROPOSED AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION.                  

 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  four  (4)  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,  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.                                                       

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           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 performance.  During 1998, all officers were granted a total
of 17,457  nonqualified  stock options and 34,309  incentive stock options.  All
these  options are  exercisable  on November 18, 2001 and all were granted under
the 1997 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 Committee after considering the
Company's  overall   financial  performance  in light of the Company's strategic
development  initiatives.  For 1998, Mr. Meeker's annual base  salary was set at
$300,000.  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                                                                      

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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.
                                                               W. Bruce Lunsford
                                                               Dennis D. Swanson
                                                                Darrell R. Wells

 Compensation Committee Interlocks and Insider Participation

           The Company is unaware of any  relationships  among its  officers and
directors which would require disclosure under this caption.                    

 Performance Graph

           Set forth  below is a line  graph  comparing  the  yearly  percentage
change in the cumulative total shareholder  return on the Company's Common Stock
against  the  cumulative  total  return  of each of a peer  group  index and the
Wilshire  5000  index for the  period of  approximately  five (5)  fiscal  years
commencing  January 1, 1994 and ending  December 31, 1998. The companies used in
the peer group index consist of Hollywood Park Operating  Co.,  Canterbury  Park
Holding Corp., Dover Downs Entertainment and Penn National Gaming, which are all
of the publicly traded companies known to the Company to be engaged primarily in
thoroughbred  racing in the continental  United States and to be publicly traded
for at least five (5) years. Fair Grounds Corp. and  International  Thoroughbred
Breeders,  Inc.,  previously  a part of the  peer  group  index,  are no  longer
included  in the peer  group  because  each is no longer  publicly  traded.  The
Meditrust  Companies  (previously  known as Santa  Anita  Operating  Co.),  also
previously  a part of the peer group  index,  is no longer  included in the peer
group  because  of  the  sale  of  Santa  Anita  Racetrack  in  1998,  its  only
thoroughbred   racing  asset.  The  Wilshire  5000  equity  index  measures  the
performance of all United States  headquartered  equity  securities with readily
available  price data.  The graph depicts the result of an investment of $100 in
the Company,  the Wilshire  5000 index and the peer group  companies.  Since the
Company has  historically  paid  dividends on an annual basis,  the  performance
graph assumes that dividends were reinvested annually.                          

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                                                                [Download Table]

                                                               
                 Dec-93  Dec-94  Dec-95  Dec-96  Dec-97  Dec-98
Churchill Downs   $100     82      66      69      86      131 
Peer Group        $100     37      38      72      87       57 
Wilshire 5000     $100     97     130     155     200      243 


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 1998  (collectively  the  "named  executive
officers").                                                                     

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SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]


                                                                     LONG  TERM                    
                              ANNUAL COMPENSATION                   COMPENSATION                   

                                                                      Securities                   
                                                      Other           Underlying                   
    Name and                                          Annual         Options/SARS     All Other    
Principal Position   Year  Salary        Bonus(1)  Compensation (2)    (#)(3)      Compensation (4)
                                                                                                   
Thomas H. Meeker,    1998  $300,000      $202,500  $55,200            18,078       $14,671         
President, Chief     1997   285,000       192,370   51,406            30,000        15,125         
Executive Officer    1996   260,000       175,500   51,406           127,400        15,522         
and Director                                                                                       
Robert L. Decker,    1998   176,800        92,820    -0-               5,408        12,628         
Executive Vice       1997   134,038(5)     89,250    -0-              28,000        99,157(5)      
President and Chief  1996     -0-           -0-      -0-               -0-           -0-           
Financial Officer                                                                                  

Dan L. Parkerson,    1998   110,240        54,982    -0-               1,686        13,039         
Senior Vice          1997   105,763        54,259    -0-               3,768        13,087         
President, Property  1996    99,840        52,416    -0-              20,000         9,465         
Management                                                                                         
Jeffrey M. Smith,    1998   109,200        50,737    -0-               2,868        12,040         
President -          1997   104,762        52,369    -0-               3,734        12,108         
Churchill Downs      1996    98,800        51,870    -0-              26,000         8,818         
Management                                                                                         
Company                                                                                            
Alexander M.         1998   125,000        62,125    -0-               3,199        11,887         
Waldrop, Senior      1997   105,603        55,650    -0-               3,768        11,822         
Vice President and   1996    95,680        50,232    -0-              26,000         8,538         
General Manager                                                                                    


------------------                                                              

(1) In 1996, 1997 and 1998, 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) On June 3, 1996,  155,400 existing options to the named executive  officers,
    except Mr. Decker,  were canceled and an equal number of options were issued
to the named executive officers.                                        

(4) Consists of life  insurance  premiums  paid by the Company  with  respect to
    certain term life insurance  payable on the officer's death to beneficiaries
    designated by him and, further,  includes amounts contributed by the Company
    to the officer's  account under the Company's  Profit Sharing Plan.  Amounts
attributable to such term life insurance are as follows:                

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      Mr. Meeker  Mr. Decker  Mr. Parkerson  Mr. Smith  Mr. Waldrop
1998  $3,168      $1,749      $1,534         $586       $408       
1997   2,980       1,392       1,458          557        330       
1996   2,592        -0-          864          302        290       


    Pursuant  to  the  Company's   Profit  Sharing  Plan,  the  Company  matches
    employees' contributions (which are limited to 12% of annual compensation up
    to $10,000 for calendar year 1998) up to 2% 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:                                                

                                                                [Download Table]

                                                                   
      Mr. Meeker  Mr. Decker  Mr. Parkerson  Mr. Smith  Mr. Waldrop
1998  $11,503     $10,879     $11,505        $11,454    $11,479    
1997   12,145       -0-        11,629         11,551     11,492    
1996   12,930       -0-        8,601           8,516      8,248    
                                                                               
(5) Mr. Decker was employed by the Company in March 1997,  and his  compensation
    for 1997 reflects less than twelve months of service. All other compensation
    for Mr. Decker during 1997 includes  $97,765 of the Company's  reimbursement
of relocation expenses.                                                 

    The following table provides information with respect to the named executive
officers concerning options granted during 1998:                                

                         OPTION GRANTS IN LAST FISCAL YEAR

                                                        [Enlarge/Download Table]


                                    % of Total Options                                              
                          Options         Granted to                                    Grant Date  
                          Granted         Employees         Exercise or    Expiration  Present Value
        Name              (#)(1)   Fiscal Year '98 (%)(6)  Base Price ($)     Date        ($)(7)    
        ----              -------  ----------------------  --------------  ----------  -------------
                                                                                                    
Thomas H. Meeker (2)      18,078          34.92%             $32.50        11/17/2008   $188,287    
Robert L. Decker (3)       5,408          10.45%             $32.50        11/17/2008     56,329    
Dan L. Parkerson (4)       1,686           3.26%             $32.50        11/17/2008     17,561    
Jeffrey M. Smith (4)       2,868           5.54%             $32.50        11/17/2008     29,873    
Alexander M. Waldrop (5)   3,199           6.18%             $32.50        11/17/2008     33,320    

------------------                                                              
(1) The 31,239  options  granted  in 1998 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 18,078  options  granted to Mr.  Meeker,  3,076 are  incentive  stock
    options and 15,002 are non-qualified stock options, all of which vest on the
    third  anniversary  of the date of grant  (November  18,  2001).  All  these
options were granted under the 1997 Plan.                               
(3) Of the total of 5,408 options  granted to Mr. Decker in 1998,  (i) 3,076 are
    incentive stock options and (ii) 2,332 are non-qualified stock options,  all
    of which vest on the third  anniversary  of the date of grant  (November 18,
2001) and all of which were granted under the 1997 Plan.                
(4) The 1,686 options granted to Mr.  Parkerson and 2,868 options granted to Mr.
    Smith , which  represent all of the options granted to these named executive
    officers  in 1998,  are  incentive  stock  options  which  vest on the third
    anniversary  of the date of grant  (November 18,  2001).  All of the options
   granted to Mr. Parkerson and to Mr. Smith were granted under the 1997 Plan.
(5) Of the 3,199  options  granted to Mr.  Waldrop,  3,076 are  incentive  stock
    options and 123 are non-qualified  stock options.  All these options vest on
    the third anniversary of the date of grant (November 18, 2001), and all were
granted under the 1997 Plan.                                            
(6) Although a stock option grant was made during 1998 to Richard Schnaars,  who
    is now  no  longer  employed  by  the  Company,  that  grant  (1,912  shares
    underlying  the option) was canceled upon his cessation of  employment,  and
those shares are not included in this calculation.                      

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(7) The fair market 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 1998,  respectively:  dividend
    yield  of  1.5385 % in  1998;  risk-free  interest  rate of  5.75%;  and the
    expected lives of options are 6.5 years,  and a volatility of 24.85% for all
grants.                                                                 

           The following  table provides  information  with respect to the named
executive officers concerning unexercised options held as of December 31, 1998: 

AGGREGATE YEAR-END OPTION VALUES

                                                        [Enlarge/Download Table]


                                                              Number of Securities  Value of Unexercised
                                                                 Underlying            In-the-Money     
                                                              Unexercised Options   Options at year end 
                      Shares Acquired on                        at year end (#)           ($)(1)        
                          Exercise                               Exercisable/         Exercisable/      
     Name                    (#)          (Value Realized ($)   Unexercisable        Unexercisable      

                                                                                                        
Thomas H. Meeker              0                  $0              144,400/61,078     $1,693,812/583,906  
Robert L. Decker              0                   0                 0/33,408              0/380,517     
Dan L. Parkerson              0                   0               21,500/9,454         259,290/103,238  
Jeffrey M. Smith              0                   0               28,000/10,602        327,320/109,731  
Alexander M. Waldrop          0                   0               28,000/10,967        327,320/112,412  


-----------------------------                                                   
(1) Closing bid as of the last trading day of 1998 (December 31, 1998) minus the
exercise price. The closing bid was $32.875.                            

    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 $137,397.  This
estimate is based upon the following assumptions: (a) 8% annual                 

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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 1999  includes a base salary of  $312,000  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 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 1999 includes  a  base 
salary  of  $183,872,  reimbursement for  reasonable  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 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 
to  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                                               

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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  or the
Indiana Horse Racing  Commission,  and no director receives any extra or special
benefit  with  regard  to  having  his  horses  selected  to run in  races or in
connection with the actual running of races.                                    

           One or more  directors  of the  Company  have an interest in business
entities which contract with the Company or Hoosier Park, L.P. ("Hoosier Park"),
the Company's affiliate,  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 and five percent (5%) owner
of the Company,  is the Chairman and a 14.2% owner of National  Jockey Club.  In
1998,  National  Jockey  Club and the  Company  were  parties to a  simulcasting
contract  whereby  National  Jockey Club was granted the right to simulcast  the
Company's  races,  including  the Kentucky  Oaks - Grade I race and the Kentucky
Derby - Grade I race. In  consideration  for these rights,  National Jockey Club
paid to the Company 5% of its gross handle on the  Kentucky  Oaks - Grade I race
and the  Kentucky  Derby Grade I race and 3.25% of its gross handle on the other
simulcast races. In 1998,  National Jockey Club and Hoosier Park were parties to
a simulcasting  contract  whereby  National Jockey Club was granted the right to
simulcast Hoosier Park's  thoroughbred races. In consideration for these rights,
National  Jockey Club paid to Hoosier  Park 2% to 2 1/2% of its gross  handle on
the simulcast races.  National Jockey Club and Hoosier Park were also parties to
a simulcasting  contract whereby Hoosier Park was granted the right to simulcast
National Jockey Club's  thoroughbred  races. In consideration  for these rights,
Hoosier  Park paid to  National  Jockey  Club 3.0 % of its  gross  handle on the
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 1998,  the Company and Hoosier Park
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.             

           Thomas H.  Meeker,  President  and  Chief  Executive  Officer  of the
Company,  is  currently  indebted  to the  Company  in the  principal  amount of
$65,000,  represented  by his  demand  note  bearing  interest  at 8% per  annum
(payable  quarterly)  and  payable  in full  upon  termination  of Mr.  Meeker's
employment  with  the  Company  for  any  reason.  This  indebtedness  arose  in
connection                                                                      

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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 16, 1999, the Board of Directors adopted
the  recommendation of the Audit Committee and selected  PriceWaterhouseCoopers,
formerly  known  as  Coopers  &  Lybrand,  L.L.P.  ("Coopers"),  to serve as the
Company's independent public accountants and auditors for the fiscal year ending
December  31,  1999.  Coopers  has served as the  Company's  independent  public
accountants and auditors since the Company's 1990 fiscal year.                  

           Representatives  of Coopers are  expected to be present at the Annual
Meeting and will be available to respond to appropriate  questions and will have
the opportunity to make a statement if they desire to do so.                    

 Approval of Minutes of 1998 Shareholders' Meeting
and Other Matters (Proposal No. 3)

           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 1998 Annual Meeting
which approval does not amount to  ratification  of actions taken  thereat.  If,
however, any other matters should come before the Annual Meeting, it is intended
that the persons named in the enclosed  Proxy, or their  substitutes,  will vote
such Proxy in accordance with their best judgment on such matters.              

 Proposals by Shareholders

           Any  shareholder  proposal  that  may be  included  in the  Board  of
Directors'  Proxy Statement and Proxy for  presentation at the Annual Meeting of
Shareholders  to be held in 2000 must be  received by the Company at 700 Central
Avenue,  Louisville,  Kentucky 40208, Attention of the Secretary,  no later than
December 30, 1999.  Pursuant to the Company's bylaws,  proposals of shareholders
intended to be presented at the Company's  2000 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 2000 annual  meeting of
shareholders  of the  Company  must be received in writing by the Company at its
principal  executive  offices  not later than March 19,  2000,  nor sooner  than
February 18, 2000. Any  proposal submitted  before  or after those dates will be
considered  untimely,  and  management  proxies  will be allowed to use their   
discretionary voting authority if the proposal is raised at the annual meeting. 

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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                                                            
April 28, 1999                                                                  

 PLEASE SIGN AND RETURN THE ENCLOSED PROXY
IF YOU CANNOT BE PRESENT IN PERSON

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APPENDIX A

 ARTICLE VII

 CAPITAL STOCK

           The  corporation  shall be authorized to issue  50,000,000  shares of
common  stock of no par  value  (the  "Common  Stock"),  and  250,000  shares of
preferred stock of no par value in such series and with such rights, preferences
and  limitations,  including  voting  rights,  as the  Board  of  Directors  may
determine (the "Preferred Stock").                                              

    A. The Common  Stock.  Shares of the Common Stock may be issued from time to
time as the Board of Directors  shall  determine  and on such terms and for such
consideration as shall be fixed by the Board of Directors.                      

B.     The Preferred Stock.                                             

           1. Shares of the  Preferred  Stock may be issued from time to time in
one or more  series  as may  from  time to time be  determined  by the  Board of
Directors of the corporation.  Each series shall be distinctly  designated.  All
shares  of any one  series  of the  Preferred  Stock  shall  be  alike  in every
particular,  except that there may be different  dates from which  dividends (if
any) thereon shall be cumulative, if made cumulative.  The relative preferences,
participating,  optional  and other  special  rights of each  such  series,  and
limitations  thereof,  if any, may differ from those of any and all other series
at any time  outstanding.  The Board of Directors of the corporation  is hereby 
expressly granted authority to fix by resolution or resolutions adopted prior to
the issuance of any shares of each particular series of the Preferred Stock, the
designation,  relative  preferences,  participating,  optional and other special
rights and limitations  thereof,  if any, of such series,  including but without
limiting the generality of the foregoing, the following:                        

           [a] The  distinctive  designation of, and the number of shares of the
Preferred Stock which shall constitute the series, which number may be increased
(except as otherwise  fixed by the Board of  Directors)  or  decreased  (but not
below the number of shares thereof then outstanding) from time to time by action
of the Board of Directors;                                                      

           [b] The rate and times at which,  and the terms and  conditions  upon
which  dividends,  if any,  on shares of the series  may be paid,  the extent of
preference or relation, if any, of such dividend to the dividends payable on any
other  class or  classes  of stock of the  corporation,  or on any series of the
Preferred Stock or of any other class of stock of the  corporation,  and whether
such dividends shall be cumulative or non-cumulative;                           

           [c] The  right,  if any,  of the  holders  of shares of the series to
convert the same into,  or exchange  the same for,  shares of any other class or
classes of stock of the corporation, or of any series of the Preferred Stock and
the terms and conditions of such conversion or exchange;                        

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           [d] Whether  shares of the series shall be subject to redemption  and
the redemption price or prices and the time or times at which, and the terms and
conditions upon which shares of the series may be redeemed;                     

           [e] The  rights,  if any, of the holders of shares of the series upon
voluntary or involuntary  liquidation,  merger,  consolidation,  distribution or
sale of assets, dissolution or winding up of the corporation;                   

           [f] The terms of the sinking fund or redemption or purchase  account,
if any, to be provided for shares of the series; and                            

           [g] The voting powers, if any, of the holders of shares of the series
which may, without limiting the generality of the foregoing,  include the right,
voting as a series by itself or  together  with  other  series of the  Preferred
Stock as a class,  to vote  more or less  than one vote per  share on any or all
matters voted upon by the stockholders and to elect one or more directors of the
corporation  in the event  there  shall  have been a default  in the  payment of
dividends on any one or more series of the  Preferred  Stock or under such other
circumstances and upon such conditions as the Board of Directors may fix.       

C.     Other Provisions.                                                

           1. The relative preferences, rights and limitations of each Series of
Preferred Stock in relation to the  preferences,  rights and limitations of each
other series of Preferred  Stock shall,  in each case,  be as fixed from time to
time by the Board of Directors in the resolution or resolutions adopted pursuant
to  authority  granted in this  Article  VII, and the consent by class or series
vote or otherwise,  of the holders of the Preferred  Stock of such of the series
of the  Preferred  Stock  as are  from  time to time  outstanding  shall  not be
required  for the  issuance  by the Board of  Directors  of any other  series of
Preferred Stock whether the preferences and rights of such other series shall be
fixed by the  Board  of  Directors  as  senior  to,  or on a  parity  with,  the
preferences and rights of such  outstanding  series,  or any of them;  provided,
however,  that  the  Board  of  Directors  may  provide  in such  resolution  or
resolutions  adopted  with  respect  to any series of  Preferred  Stock that the
consent of the holders of a majority  (or such  greater  proportion  as shall be
therein fixed) of the outstanding  shares of such series voting thereon shall be
required for the issuance of any or all other Series of Preferred Stock.        

           2. Subject to the  provisions of  Subparagraph 1 of this Paragraph C,
shares of any series of  Preferred  Stock may be issued from time to time as the
Board of Directors shall determine and on such terms and for such  consideration
as shall be fixed by the Board of Directors.                                    

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 PROXY

CHURCHILL DOWNS INCORPORATED

700 Central Avenue
Louisville, Kentucky 40208

ANNUAL MEETING OF SHAREHOLDERS - JUNE 17, 1999

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Frank L. Hower, Jr. and   
G. Watts Humphrey, Jr., 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 17, 1999 or any adjournment thereof, hereby revoking any
Proxy hereto fore given.                                                        
           The  Board  of  Directors  unanimously  recommends  a  vote  FOR  the
following proposals:                                                            
1.            Election of Class III Directors (Proposal No. 1):         

____ FOR all nominees listed                       ____ WITHHOLD AUTHORITY to   
below (Except as marked to                         vote for all nominees listed 
the contrary below)                                below                        

Class III Directors:             Charles W. Bidwill, Jr., Daniel P.             
Harrington, Thomas H. Meeker, Carl F. Pollard, Darrell R. Wells                 

(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.     _____ FOR             ____ AGAINST                 ____ ABSTAIN  
Proposal to approve amending the Company's Articles of                  
Incorporation  to  increase  the number of  authorized  shares of the  Company's
Common Stock from 20,000,000 to 50,000,000 shares                               
(Proposal No. 2);                                                               
3.     ____ FOR              ____ AGAINST                 ____ ABSTAIN  
Proposal to approve minutes of the 1998 Annual Meeting of               
Shareholders, approval of which does not amount to ratification of              
action taken thereat (Proposal No. 3); and                                      
    4. In their  discretion,  the Proxies are authorized to vote upon such other
business as may properly come before the meeting  including  matters incident to
its conduct.                                                                    

                  UNLESS CONTRARY DIRECTION IS GIVEN, THIS PROXY
            WILL BE VOTED FOR PROPOSAL NO. 2 AND FOR
               PROPOSAL NO. 3, AND FOR THE ELECTION OF ALL
                 CLASS III DIRECTORS DESIGNATED UNDER PROPOSAL
             NO. 1.  Please sign, date and return this
            Proxy promptly in the enclosed envelope.
                Dated ________________________________, 1999

                 ---------------------------------------------

                 ---------------------------------------------
                          (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.)

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Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘PRE 14A’ Filing		Date		First		Last			Other Filings
		11/18/01		18		22
		3/19/00		26
		2/18/00		26
		12/31/99		26					10-K,  8-K
		12/30/99		26
		6/17/99		1		30
		4/28/99		1		27
		4/20/99		1		2
		4/15/99		3		14
		3/16/99		26
Filed on:		3/15/99
For Period End:		12/31/98		13		23			10-K,  10-K/A,  DEF 14A
		6/18/98		6
		4/21/98		6					8-K,  8-K/A
		3/30/98		15
		3/28/98		6
		3/19/98		14		15			8-K
		6/3/96		21
		12/31/95		7					10-K,  10-K/A,  DEF 14A
		1/1/94		19
									List all Filings