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<SEC-DOCUMENT>0000940397-04-000198.txt : 20041025
<SEC-HEADER>0000940397-04-000198.hdr.sgml : 20041025
<ACCEPTANCE-DATETIME>20041025142938
ACCESSION NUMBER:		0000940397-04-000198
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20041019
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
ITEM INFORMATION:		Unregistered Sales of Equity Securities
ITEM INFORMATION:		Regulation FD Disclosure
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20041025
DATE AS OF CHANGE:		20041025

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CHURCHILL DOWNS INC
		CENTRAL INDEX KEY:			0000020212
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-RACING, INCLUDING TRACK OPERATION [7948]
		IRS NUMBER:				610156015
		STATE OF INCORPORATION:			KY
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-01469
		FILM NUMBER:		041093725

	BUSINESS ADDRESS:	
		STREET 1:		700 CENTRAL AVE
		CITY:			LOUISVILLE
		STATE:			KY
		ZIP:			40208
		BUSINESS PHONE:		5026364400

	MAIL ADDRESS:	
		STREET 1:		700 CENTRAL AVENUE
		STREET 2:		700 CENTRAL AVENUE
		CITY:			LOUIVILLE
		STATE:			KY
		ZIP:			40208
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>cdkydowns8k102204.htm
<TEXT>
<HTML>
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<TITLE></TITLE>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>Washington, D.C. 20549</b></font></p>

<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><b>FORM 8-K</b></FONT></p>

<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>CURRENT REPORT<BR>
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934</b></font></p>

<br>

<p><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Date of Report (Date of earliest
event reported) <u>&nbsp;&nbsp;&nbsp;&nbsp;<b>October 19, 2004</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</u></font></p>

<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH></TR>
<TR VALIGN="TOP">
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><b>CHURCHILL DOWNS INCORPORATED</b></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><b><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></b><BR></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Exact name of registrant as specified in its charter)</FONT></TD></TR>
</table>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH="34%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="33%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="33%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>KENTUCKY</B></FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>0-1469</B></FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>61-0156015</B></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD colspan=3><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></TD>
     </TR>
<TR VALIGN="TOP">
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(State or other jurisdiction<br>of incorporation)</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Commission<br>File Number)</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(IRS Employer<br>Identification No.)</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD></TR>
</TABLE>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH></TR>
<TR VALIGN="TOP">
     <TD ALIGN=left WIDTH="75%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>700 Central Avenue<BR>Louisville, Kentucky</b></FONT></TD>
     <TD ALIGN=left WIDTH="25%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><b><br>40208</b></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</u></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Address of principal executive offices)</FONT></TD>
     <TD ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Zip Code)</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD></TR>
</TABLE>

<br>
<p><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Registrant's telephone number, including area code <u>
&nbsp;&nbsp;&nbsp;&nbsp;<b>(502) 636-4400</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></font></p>


<TABLE WIDTH="100%" BORDER="0" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH></TR>
<TR VALIGN="TOP">
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>N/A</b></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD WIDTH="100%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</u></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Former name or former address, if changed since last report)</FONT></TD></TR>
</TABLE>

<p align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see
General Instruction A.2. below):</font></p>

<p ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE="2">[&nbsp;&nbsp;] Written communications pursuant to Rule 425 under the securities Act (17 CFR
230.425)</font></p>

<p ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE="2">[&nbsp;&nbsp;] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)</font></p>

<p ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE="2">[&nbsp;&nbsp;] Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))</font></p>

<p ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE="2">[&nbsp;&nbsp;] Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c))</font></p>

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<A NAME=A001></A>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 1.01  Entry into a Material Definitive Agreement.</B></font></p>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
October 19, 2004, Churchill Downs Incorporated (the &#147;Company&#148;) acquired a total
of 539,489 shares of its common stock from Brad M. Kelley, pursuant to a Stock Redemption
Agreement between the Company and Mr. Kelley (the &#147;Redemption Agreement&#148;) and a
Purchase Agreement between Kelley Farms Racing, LLC and the Company (the &#147;Kentucky
Downs Purchase Agreement&#148;), each dated October 19, 2004. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the Kentucky Downs Purchase Agreement, the Company sold a 19% interest in Kentucky
Downs, LLC, the operator of Kentucky Downs racetrack, to Kelley Farms Racing, LLC,
controlled by Mr. Kelley, along with debt owed to the Company by Kentucky Downs, LLC in
the approximate amount of $2.7 million and the Company&#146;s rights under a racetrack
management agreement, in exchange for 86,886 shares of the Company&#146;s common stock
valued at approximately $3.2 million. Under the Kentucky Downs Purchase Agreement, if
certain alternative gaming legislation is enacted or such gaming becomes legal within five
years, Kelley Farms Racing, LLC will be required to pay the Company $2 million as
additional consideration for its acquisition of the Company&#146;s interest in Kentucky
Downs, LLC, and if alternative gaming has commenced at Kentucky Downs racetrack within
five years, Kelley Farms Racing, LLC will be required to pay the Company up to an
additional $12 million as additional consideration. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Redemption Agreement, the Company redeemed 452,603 shares of its common stock from Mr.
Kelley at a price of $36.83 per share, which, after giving effect to the transactions under the Kentucky Downs Purchase
Agreement, reduced Mr. Kelley&#146;s ownership of the Company&#146;s common stock to 4.9%.
The shares redeemed under the Redemption Agreement were acquired by the Company in
exchange for its subordinated unsecured convertible promissory note in the principal
amount of $16,669,379.87 (the &#147;Note&#148;). The Note matures on October 18, 2014, and
may not be prepaid without Mr. Kelly&#146;s consent. The Note bears interest on an
annualized basis based upon the dividends which Mr. Kelley would have received on the
Company shares redeemed under the Redemption Agreement had such redemption not occurred.
Upon maturity, the Company must pay the principal balance and unpaid accrued interest in
any combination of cash and shares of the Company&#146;s common stock, based upon a price
per share of $36.83 (the &#147;Conversion Price&#148;, subject to adjustments for stock
splits and the like). </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
the holder of the note, Mr. Kelley may declare the outstanding principal and unpaid
interest on the Note immediately due and payable upon an event of default under the Note
and so long as such condition exists, including default in the payment of the principal
and unpaid accrued interest of the Note within fifteen days of when due and payable, the
institution of certain bankruptcy or insolvency proceedings against the Company, the
continuance for sixty days after the commencement of an action against the Company seeking
any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar relief,
and the failure of the Company to convert the Note in accordance with the procedures set
forth in the Note (in which case the Note shall accrue interest at the maximum allowable
rate until the date of conversion). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.
          Kelley may convert the Note, in whole or in part and upon not less than
          seventy-five days notice to the Company, into the number of shares of the
          Company&#146;s common stock equal to the principal amount of the Note plus accrued and unpaid interest being converted divided by the Conversion Price.
          Under the terms of the Note, Mr. Kelley may exercise his conversion right if </FONT></P>


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<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>his total beneficial ownership of the
Company&#146;s common stock immediately after conversion would be less than 4.9% of the
total number of issued and outstanding shares of common stock. If Mr. Kelley&#146;s
post-conversion beneficial ownership of the Company&#146;s common stock would be 5.0% or
greater, he may exercise the conversion right only if he has fully disclosed any and all
information, has executed any documents, and has taken all steps required by any
applicable gaming agency or regulatory authority for holders of 5.0% of the Company&#146;s
common stock (the &#147;Disclosure Requirements&#148;). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Note may be immediately converted without prior notice, subject to Mr. Kelley&#146;s
compliance with the Disclosure Requirements, in the event the Company establishes a record
date for holders to receive certain Company distributions (other than a distribution
payable only in cash), or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive any other
right, or in the event of certain reorganizations, reclassifications, recapitalizations,
transfers, consolidations or mergers or any voluntary or involuntary dissolution,
liquidation or winding-up of the Company. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company agreed in the Redemption Agreement to register the shares of common stock issuable
upon conversion of the Note on a Form S-3 Registration Statement with the Securities and
Exchange Commission, subject to trading halts or blackout periods necessary to comply with
applicable securities laws. In the event that Mr. Kelley has complied with the conversion
procedures required by the Note, and due to applicable securities laws, he is unable to
transfer the shares acquired upon conversion on his proposed transfer date, the Company
may, at its option, redeem such shares based upon the closing price on the Nasdaq stock
market on the date of conversion. If the Company does not redeem such shares, either the
Company must hold harmless Mr. Kelley from any drop in the closing price of the
Company&#146;s common stock between the conversion date and the proposed transfer date
(the &#147;Price Drop Obligation&#148;), or Mr. Kelley must pay the Company the amount of
any increase in the closing price of the common stock between the conversion date and the
proposed transfer date. Due to the nature of the Price Drop Obligation, the Company is
unable to determine the maximum potential amount of this future payment that the Company
may be required to make. However, assuming the Note is converted in full for all 452,603
shares, each $1.00 drop in share price between the conversion date and the proposed
transfer date would increase the Price Drop Obligation by $452,603. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.
          Kelley agreed in the Redemption Agreement that neither he nor any of his
          affiliates will purchase the Company&#146;s common stock unless his total
          beneficial ownership of the Company&#146;s common stock immediately after such
          purchase would be less than 4.9% or prior to such purchase, he has complied with
          the Disclosure Requirements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Kentucky Downs Purchase Agreement, the Redemption Agreement and the Note are filed as
Exhibits 10.1, 10.2 and 10.3 to this Current Report on Form 8-K, respectively, and are
incorporated by reference herein. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 2.03 Creation of a Direct
Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a
Registrant.</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information provided in Item 1.01 of this Current Report on Form 8-K is incorporated by
reference. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 </FONT></P>


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<A NAME=A002></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 3.02 Unregistered
Sales of Equity Securities.</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" FSL="Default" -->
<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information provided in Item 1.01 of this Current Report on Form 8-K is incorporated by
reference. </FONT></P>

<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Note
was issued in a private placement and was not registered under the Securities Act of 1933 (the "Act").  The
Note contains a legend stating that it may not be offered or sold in the absence of an effective registration
statement under the Act, or an opinion of counsel satisfactory to the Company that such registration is not required
under the Act, and that the Note is subject to transfer restrictions set forth in the Note.  The Note was
issued by the Company in reliance upon an exemption from registration set forth in Section 4(2) of the Act
and Rule 506 promulgated under the Act.  Mr. Kelley represented to the Company in the Redemption
Agreement that, among other items, he was acquiring the Note for investment for his own account and not
with a view to the resale or distribution thereof, and that he is an "accredited investor" within the meaning
of Rule 501 promulgated under the Act.</font></p>

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<A NAME=A003></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 7.01 Regulation FD
Disclosure.</B> </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October
19, 2004, the Company issued a press release announcing the acquisition of 539,489 shares
of its common stock from Mr. Kelley and related transactions. A copy of this press release
is attached hereto as Exhibit 99 .1. </FONT></P>

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<A NAME=A004></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Item 9.01 Financial
Statements and Exhibits.</B> </FONT></P>


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     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
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     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(c)</FONT></TD>
     <TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH=93% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Exhibits</FONT></TD></TR>
</TABLE>
<BR>
<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH=100%>
<TR VALIGN="TOP">
     <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">10.1</FONT></TD>
     <TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Purchase Agreement dated as of
October 19, 2004 by and between Kelley Farms Racing, LLC and Churchill Downs Incorporated.</FONT></TD></TR>
</TABLE>
<BR>
<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH=100%>
<TR VALIGN="TOP">
     <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">10.2</FONT></TD>
     <TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Stock Redemption Agreement dated as of October 19, 2004 between Churchill Downs Incorporated and Brad M. Kelley.<BR></FONT></TD></TR>
</TABLE>
<BR>
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<TR VALIGN="TOP">
     <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">10.3</FONT></TD>
     <TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Convertible  Promissory  Note of Churchill  Downs
 Incorporated in the principal  amount of  $16,669.379.87  dated October 19, 2004.</FONT></TD></TR>
</TABLE>
<BR>
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<TR VALIGN="TOP">
     <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">99.1</FONT></TD>
     <TD WIDTH=2%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH=93%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Press release dated October 19,
2004 issued by Churchill Downs Incorporated, furnished pursuant to Item 7.01.</FONT></TD></TR>
</TABLE>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 </FONT></P>





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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SIGNATURES </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly authorized. </FONT></P>


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     <TD width=40%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD width=60%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CHURCHILL DOWNS INCORPORATED<BR><BR></b></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">October 25, 2004</FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><u>&nbsp;/s/ Michael E. Miller&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u><br>
Michael E. Miller<br>Executive Vice President and Chief Financial<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Officer<br>
(Principal Financial and Accounting Officer)</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD></TR>
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<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>cdkydowns8kpurchagt.htm
<DESCRIPTION>PURCHASE AGREEMENT
<TEXT>
<HTML>
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<p align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>EXHIBIT 10.1</B></FONT></P>
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<A NAME=A001></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PURCHASE AGREEMENT </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS
PURCHASE AGREEMENT (this &#147;Agreement&#148;) is made and entered into as of the 19th day
of October, 2004, by and between Kelley Farms Racing, LLC, a Florida limited liability
company (&#147;KFR LLC&#148;) and Churchill Downs Incorporated, a Kentucky corporation
(&#147;CDI&#148;). </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
CDI is (i) the owner of twenty four (24) units of the membership interests of Kentucky
Downs, LLC, a Kentucky limited liability company formerly known as BC Racing Group, LLC
(&#147;KD LLC&#148;) which currently operates a racetrack at a facility located at
Interstate 65, Exit #2, Franklin, Kentucky (the &#147;Facility&#148;), (ii) a party to
that certain Management Agreement dated July 15, 1997 by and among CDI, Turfway Park
Racing Association, Inc. and BC Racing Group, LLC (the &#147;Management Agreement&#148;)
pursuant to which CDI has a right to receive the &#147;Racetrack Management Fee&#148; and,
if alternative forms of gaming are commenced at the Facility, the &#147;Alternative Gaming
Management Fee&#148; (both such terms are defined in Section 9 of the Management
Agreement), and (iii) the holder of that certain promissory note of BC Racing Group, LLC
dated July 11, 1997 in principal face amount of $1,822,916.67 plus several other notes
(and all interest accrued thereon) as are described on Exhibit A attached hereto (the
&#147;KD Notes&#148;); </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
KFR LLC desires to acquire nineteen (19) of CDI&#146;s twenty four (24) units of KD LLC, a
proportionate amount of the KD Notes, and CDI&#146;s rights and interest in the Management
Agreement (collectively the &#147;CDI Member Interest&#148;); </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
KFR LLC and CDI agree that the CDI Member Interest has a value of $3,200,000; </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Brad
Kelley, an individual (&#147;Kelley&#148;), is the sole member of Bison Capital, LLC and
Bison Capital, LLC is the sole member of KFR LLC; </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
CDI desires to acquire a number of shares of CDI common stock held by Kelley necessary to
reduce Kelley&#146;s percentage ownership of CDI&#146;s total issued and outstanding
shares from 8.77% to 4.9%; and </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
KFR LLC shall deliver 86,886 of Kelley&#146;s shares of CDI common stock (the
&#147;Kelley Shares&#148;) to CDI at Closing (a number of shares equal to $3,200,000
divided by the average per share closing price on the Nasdaq national market of one share
of CDI&#146;s common stock for the ten (10) trading days immediately prior to the
Closing). </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW
THEREFORE, in consideration of the premises and the mutual covenants contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as follows: </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Sale of Shares</B>. Subject to the terms and conditions of this Agreement, at the
          Closing (as defined below): (i) CDI will sell, transfer and convey the assets
          comprising the CDI Member Interest to KFR LLC and (ii) KFR LLC, on behalf of
          Kelley, will sell, transfer and convey the Kelley Shares to CDI and will assume
          all of CDI&#146;s obligations under the Management Agreement. </FONT></P>


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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Additional Consideration</B>. As additional consideration for the CDI Member
          Interest, if (i) Alternative Gaming Legislation (as defined below) is enacted by
          the Kentucky General Assembly and signed into law by the Governor of Kentucky or
          becomes law without the Governor&#146;s signature (or, if Alternative Gaming is
          legalized via litigation, as of the date of a favorable, non-appealable judicial
          decision allowing Alternative Gaming) and, in any case, not earlier than the
          date the Facility has the immediate right to be issued a gaming license under
          such legislation or court order, without any legal impediment beyond the control
          of the Facility to initiate operations (the &#147;Effective Date&#148;) on or
          prior to the date which is five (5) years from the date of the Closing and (ii)
          other than the business then operated at the Facility, there is not another
          business eligible to host Alternative Gaming (as defined below) anywhere within
          an eighty (80) mile radius of the Facility, then, within ten (10) business days
          of the Effective Date, KFR LLC shall pay TWO MILLION DOLLARS ($2,000,000) in
          immediately available funds to CDI (the &#147;Effective Date Payment&#148;). </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Further,
as additional consideration for the CDI Member Interest, if, within five (5) years of the
date of the Closing, any Alternative Gaming has commenced at the Facility (such
commencement to be the date on which the first patron wages money on an Alternative Gaming
activity, i.e., the first coin drop), then, within ten (10) business days after such date,
KFR LLC shall pay TWELVE MILLION DOLLARS ($12,000,000) to CDI in immediately available
funds (the &#147;Commencement Date Payment&#148;), provided, however, if: the Alternative
Gaming Legislation authorizes less than 750 electronic devices at the Facility, the
Commencement Date Payment will be equal to the number of authorized electronic devices
multiplied by $16,000. </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Alternative
Gaming&#148; means any gaming activity other than bingo or pari-mutuel wagering on live
(or replays of live) or simulcast horse racing. </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Alternative
Gaming Legislation&#148; means any legislation which authorizes Alternative Gaming at the
Facility. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Closing</B>. The closing of the transactions contemplated by this Agreement (the
          &#147;Closing&#148;) shall take place at the offices of Wyatt, Tarrant &amp;
          Combs, LLP, in Louisville, Kentucky commencing at 10:00 a.m. local time no later
          than five (5) days following the satisfaction or waiver of all conditions to the
          obligations of the parties to consummate the transactions contemplated hereby or
          such other date as the parties may mutually determine (the &#147;Closing
          Date&#148;); <U>provided</U>, <U>however</U>, that the Closing Date shall be no later than
          October 18, 2004. At the Closing, (i) KFR LLC shall deliver to CDI a certificate
          signed by Kelley, certifying that Kelley is the sole record and beneficial owner
          of the Kelley Shares and he has good, valid and marketable title to the Kelley
          Shares and that they are upon transfer to CDI free and clear of all claims,
          liens, pledges, restrictions and encumbrances whatsoever, in substantially the
          form attached hereto as <U>Exhibit B</U>; (ii) KFR LLC will execute and deliver to CDI
          a certificate certifying that the representations of KFR LLC set forth in
          Section 4 below are true, accurate and complete on and as of the Closing; (iii)
          CDI will execute and deliver to KFR, LLC a certificate certifying that the
          representations of CDI set forth in Section 5 below are true, accurate and
          complete on and as of the Closing; (iv) KFR LLC will deliver the Kelley Shares
          to CDI, including any certificate evidencing the shares, and also including the
          stock power attached hereto as <U>Exhibit C</U> executed by Kelley in favor of CDI; (v)
          CDI will deliver nineteen (19) units of the membership interests of KD LLC to
          KFR LLC, including any certificate evidencing such </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</font></p>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>membership  interests  and  the
transfer  of  membership  interests instrument attached hereto as <U>Exhibit
D</U> executed by CDI in favor of KFR LLC; (vi) CDI will deliver to KFR LLC resolutions of the
members and management committee of KD LLC amending the KD Operating Agreement and
approving the transaction contemplated by this Agreement substantially in the form as
attached hereto as <U>Exhibit E</U>; (vii) CDI will deliver to KFR LLC a new promissory note
issued by KD LLC and payable to KFR LLC in substantially the form attached hereto as
<U>Exhibit F</U>; (viii) KFR LLC will deliver to CDI a new promissory note issued by KD LLC and
payable to CDI in substantially the form attached hereto as <U>Exhibit G</U>; (ix) CDI will
deliver a fully executed amendment to the Management Agreement, in substantially the form
attached hereto as Exhibit H; and (x) KFR LLC will execute and deliver the Pledge
Agreement substantially in the form attached hereto as Exhibit I (the &#147;Pledge
Agreement&#148;). </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
         <B>Representations and Warranties of KFR LLC</B>. KFR LLC represents and warrants to
          CDI that the statements contained in this Section 4 are true and correct as of
          the date hereof. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Authority.</U> Upon the execution and delivery hereof by KFR LLC, this Agreement
          will constitute the legal, valid, and binding obligation of KFR LLC, enforceable
          against KFR LLC in accordance with its terms. KFR LLC has the absolute and
          unrestricted right, power, authority, and capacity to execute and deliver this
          Agreement and to perform its obligations under this Agreement. Other than the
          consents (or waivers) of the other members of KD LLC which are required pursuant
          to the Operating Agreement of KD LLC prior to the transfer of the KD Units (the
          &#147;KD Consents&#148;), KFR LLC is not or will not be required to give any
          notice to or obtain any consent from any person in connection with the execution
          and delivery of this Agreement or the consummation or performance of any of the
          transactions contemplated by this Agreement. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>No Conflict</U>. Neither the execution and delivery of this Agreement nor the
          consummation or performance of any of the transactions contemplated hereby will
          violate or conflict with or constitute a default under any mortgage, indenture,
          contract, agreement, license, permit, instrument, or trust or any order or
          ruling of any governmental authority to which KFR LLC is a party or by which KFR
          LLC is bound. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Investment Experience</U>. KFR LLC is organized in the State of Florida. Kelley is
          the sole member of Bison Capital, LLC and Bison Capital, LLC is the sole member
          of KFR LLC. KFR LLC acknowledges that it can bear the economic risk of this
          investment, and has such knowledge and experience in evaluating and investing in
          private placement transactions of securities and in financial or business
          matters that it is capable of evaluating the merits and risks of the investment
          in the Securities. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Accredited Investor</U>. KFR LLC is an &#147;accredited investor&#148; within the
          meaning of SEC Rule 501 of Regulation D, as presently in effect. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Receipt of Information</U>. KFR LLC believes it has received all the information it
          considers necessary or appropriate for deciding whether to purchase the CDI
          Member Interest. KFR LLC further represents that it has had an opportunity to
          ask questions and receive answers from the Company regarding the terms and
          conditions of the offering of the CDI Member Interest and the business,
          properties, and financial condition of KD LLC and the Company and to </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</font></p>


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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>obtain additional information (to the
extent the Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify the accuracy of any information furnished to KFR
LLC or to which KFR LLC had access. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Representations and Warranties of CDI</B>. CDI represents and warrants to KFR LLC
          that the statements contained in this Section 5 are true and correct as of the
          date hereof. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Corporate Standing</U>. CDI is a corporation duly organized, validly existing, and
          in good standing under the laws of the Commonwealth of Kentucky. CDI has all
          requisite power and authority to own, lease and operate its properties and to
          carry on its business as now being conducted and as presently proposed to be
          conducted, to execute, deliver and perform this Agreement. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Authority</U>. Upon the execution and delivery hereof by CDI, this Agreement will
          constitute the legal, valid, and binding obligations of CDI, enforceable against
          CDI in accordance with its terms. CDI has the absolute and unrestricted right,
          power, and authority to execute and deliver this Agreement and to perform its
          obligations hereunder. Except for the approval of its Board of Directors, the
          consent of its primary lender, the KD Consents and any listing requirement of
          the Nasdaq national market, CDI is not and will not be required to obtain any
          consent from any person in connection with the execution and delivery of this
          Agreement or the consummation or performance of any of the transactions
          contemplated by this Agreement. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>No Conflict</U>. Neither the execution and delivery of this Agreement by CDI nor the
          consummation or performance of any of the transactions by CDI contemplated by
          this Agreement will give any person the right to prevent, delay, or otherwise
          interfere with any of the transactions pursuant to: (i) any provision of
          CDI&#146;s Articles of Incorporation or Bylaws; (ii) any resolution adopted by
          the board of directors or the stockholders of CDI; (iii) any legal requirement
          or order of any court or other governmental body to which CDI may be subject; or
          (iv) any contract to which CDI is a party or by which CDI may be bound. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Good Title</U>. CDI is the sole record owner of the CDI Member Interest and has good
          and valid title to the assets comprising the CDI Member Interest. The CDI Member
          Interest is, and upon transfer to KFR LLC pursuant to this Agreement will be,
          free and clear of all claims, liens, pledges, restrictions and encumbrances
          whatsoever, other than any transfer restrictions under the Operating Agreement
          of KD LLC or under applicable securities laws. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Pre-Closing Covenants</B>. The parties agree as follows with respect to the period
          between the date hereof and the Closing: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          Each of the parties will use its reasonable best efforts to take all action and
          to do all things necessary in order to consummate and make effective the
          transactions contemplated by this Agreement (including satisfaction of the
          closing conditions set forth in Section 7 below). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent"  -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          Each of the parties will give any notices to, make any filings with, and use its
          reasonable best efforts to obtain any authorizations, consents, and approvals
          referred to in Section 4.A and Section 5.B above. </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</font></p>


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<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          Subject to the terms and conditions of this Agreement, each of the parties
          hereto shall use commercially reasonable efforts to take, or cause to be taken,
          all action, and to do, or cause to be done, all things reasonably necessary,
          proper or advisable under applicable laws and regulations to consummate and make
          effective the transaction contemplated by this Agreement, including using
          commercially reasonable efforts to ensure timely satisfaction of the conditions
          precedent to each party&#146;s obligations hereunder. Neither party shall,
          without the prior written consent of the other party, take any action which
          would reasonably be expected to prevent or materially impede, interfere with or
          delay the transactions contemplated by this Agreement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Conditions to Obligation to Close.</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Conditions to Obligation of CDI</U>. The obligation of CDI to consummate the
          transactions to be performed by it in connection with the Closing is subject to
          satisfaction of the following conditions: </FONT></P>


 <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=6%></TD>
               <TD WIDTH=94%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[1]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
                    CDI&#146;s Board of Directors shall have approved this Agreement and the
                       transactions contemplated hereby;</FONT></P></TD>
               </TR>
               </TABLE>
               <BR>
<!-- MARKER FORMAT-SHEET="Para (List) Indent Level 2" FSL="Default" -->
          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=6%></TD>
               <TD WIDTH=94%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[2]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               CDI shall have received the consents and/or approvals described in Section 5.B; </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=6%></TD>
               <TD WIDTH=94%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[3]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               the qualification or exemption of the sale and redemption of the Kelley Shares,
               and the sale, transfer and assignment of the CDI Member Interest, under any
               applicable securities laws and regulations; </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Level 2" FSL="Default" -->
          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=6%></TD>
               <TD WIDTH=94%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[4]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               no injunction, judgment, order, decree or ruling in effect preventing
               consummation of any of the transactions contemplated by this Agreement shall be
               in existence; </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=6%></TD>
               <TD WIDTH=94%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[5]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               the representations and warranties of KFR LLC set forth in Section 4 shall be
               true, accurate and complete as of the Closing Date; and </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=6%></TD>
               <TD WIDTH=94%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[6]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               the transaction contemplated by that certain Stock Redemption Agreement dated as
               of the date hereof by and between CDI and Kelly shall close simultaneously with
               the Closing hereof. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CDI may waive any condition specified
in this Section 7.A if it executes a writing so stating at or prior to the Closing. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Conditions to Obligation of KFR LLC</U>. The obligation of KFR LLC to consummate the
          transactions to be performed by it in connection with the Closing is subject to
          satisfaction of the following conditions: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Level 2"  -->
          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=6%></TD>
               <TD WIDTH=94%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[1]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               no injunction, judgment, order, decree or ruling in effect preventing
               consummation of any of the transactions contemplated by this Agreement shall be
               in existence; </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</font></p>


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<!-- MARKER FORMAT-SHEET="Para (List) Indent Level 2" FSL="Default" -->
          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=6%></TD>
               <TD WIDTH=94%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[2]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               the representations and warranties of CDI shall be true, accurate and complete
               as of the Closing Date; and </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="Para (List) Indent Level 2" FSL="Default" -->
          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=6%></TD>
               <TD WIDTH=94%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[3]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               the KD Amendment shall have been adopted so as to be effective as of the date of
               the Closing. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>KFR LLC may waive any condition
specified in this Section 7.B if KFR LLC executes a writing so stating at or prior to the
Closing. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Post-Closing Covenants.</B> With respect to the period from and after the Closing,
          the parties agree as follows: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          KFR LLC shall use its influence to cause KD LLC to actively pursue passage of
          Alternative Gaming Legislation. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          KFR LLC agrees to not purposefully delay the commencement of Alternative Gaming
          to a date beyond the five (5) year anniversary of the date of the Closing in
          order to avoid paying the amounts described above to CDI, and KFR LLC agrees not
          to take any action to cause KD LLC or the business then operating on the grounds
          of the Facility, to purposefully delay the commencement of Alternative Gaming in
          order to avoid such payments. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
         <B> Default.</B> In the event that KFR LLC defaults in the prompt payment and
          performance of all liabilities, obligations, covenants and duties owing by KFR
          LLC to CDI under and pursuant to this Agreement (the &#147;Obligations&#148;),
          including without limitation, all costs and expenses (including, without
          limitation, reasonable attorneys&#146; fees and expenses) of CDI incurred in the
          enforcement or collection of the Obligations, then CDI&#146;s exclusive remedy
          shall be as set forth in the Pledge Agreement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Indemnification</B>. Each of CDI and KFR LLC shall indemnify, defend and hold
          harmless the other and such other party&#146;s respective directors, officers,
          employees, agents, successors and assigns from and against all losses,
          liabilities, damages, deficiencies, demands, claims, suits, actions, causes of
          action, judgments, settlements, assessments, costs of investigation and other
          expenses (including but not limited to fees, disbursements and other reasonable
          charges of attorneys, accountants, consultants, experts and other professional
          advisers, interest and penalties) based upon, arising out of or otherwise in
          respect of any breach or failure or nonfulfillment of any representation,
          warranty, covenant, undertaking or agreement of such party contained in this
          Agreement. Without limiting the generality of the foregoing, KFR LLC shall
          indemnify and hold CDI harmless from any and all liability related to or arising
          from the Management Agreement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent"  -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Public Announcements.</B> Any public announcement or similar publicity with respect
          to this Agreement or the transaction contemplated hereby will be issued, if at
          all, at such time and in such manner as CDI and KFR LLC jointly determine,
          provided that CDI may make such disclosure, after consulting with KFR LLC, if
          such disclosure is required by applicable law or regulation, including the rules
          of the Nasdaq national market. </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</font></p>


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<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Notices.</B> All notices, consents, waivers, and other communications under this
          Agreement must be in writing and will be deemed to have been duly given when (a)
          delivered by hand or registered United States mail (with written confirmation of
          receipt), (b) sent by facsimile (with written confirmation of receipt), or (c)
          when received by the addressee, if sent by a nationally recognized overnight
          delivery service (receipt requested), in each case to the appropriate addresses
          and facsimile numbers set forth below (or to such other addresses and facsimile
          numbers as a party may designate by notice to the other parties): </FONT></P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH=100%>
<TR VALIGN="BOTTOM">
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH=15% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH=85% ALIGN=LEFT ><FONT FACE="Times New Roman, Times, Serif" SIZE="2">if to &#147;CDI&#148;
<BR><BR>Churchill Downs Incorporated<BR>700 Central Avenue<BR>
Louisville, Kentucky 40208<BR>Attention: President<BR>
Facsimile No.: (502) 634-4456<BR><BR></FONT></TD></TR>

<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">with a copy to:
<BR><BR>Churchill Downs Incorporated<BR>700 Central Avenue<BR>
Louisville, Kentucky 40208<BR>Attention: General Counsel<BR>Facsimile No.: (502) 636-4439<BR><BR></FONT></TD></TR>

<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">if to &#147;KFR LLC&#148;
<BR><BR>Kelley Farms Racing, LLC<BR>c/o Greg Betterton<BR>981 Ridgewood Avenue, #101
<BR>Venice, FL 34285<BR>Facsimile No.:  (941) 483-4992</FONT></TD></TR>

</TABLE>


<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Confidentiality.</B> Each party will maintain in confidence, and will cause the
          directors, officers, employees, agents, and advisors of such party to maintain
          in confidence, any written, oral, or other information obtained in confidence
          from another party in connection with this Agreement, unless (a) such
          information is already known to such party or to others not bound by a duty of
          confidentiality or such information becomes publicly available through no fault
          of such party, (b) the use of such information is necessary or appropriate in
          making any filing or obtaining any consent or approval required for the
          consummation of the transactions contemplated by this Agreement, or (c) the
          furnishing or use of such information is required by legal proceedings or law. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent"  -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Expenses.</B> Except as otherwise expressly provided in this Agreement, each party
          to this Agreement will bear its respective expenses incurred in connection with
          the preparation, execution, and performance of this Agreement and the
          transactions contemplated by this Agreement, including all fees and expenses of
          agents, representatives, counsel, and accountants. </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</font></p>


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<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Further Assurances.</B> The parties agree (a) to furnish upon request to each other
          such further information, (b) to execute and deliver to each other such other
          documents, and (c) to do such other acts and things, all as the other party may
          reasonably request for the purpose of carrying out the intent of this Agreement
          and the documents referred to in this Agreement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Entire Agreement and Modification.</B> This Agreement supersedes all prior
          agreements between the parties with respect to its subject matter and
          constitutes a complete and exclusive statement of the terms of the agreement
          between the parties with respect to its subject matter. This Agreement may not
          be amended except by a written agreement executed by CDI and KFR, LLC. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Time of Essence.</B> With regard to all dates and time periods set forth or referred
          to in this Agreement, time is of the essence. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Governing Law.</B> This Agreement will be governed by the laws of the Commonwealth
          of Kentucky without regard to conflicts of laws principles. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent"  -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Counterparts.</B> This Agreement may be executed in one or more counterparts, each
          of which will be deemed to be an original copy of this Agreement and all of
          which, when taken together, will be deemed to constitute one and the same
          agreement. </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8</font></p>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date
first written above. </FONT></P>

<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH=100%>
<TR VALIGN="BOTTOM">
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH=65% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#147;CSI&#148;<BR><BR>
        CHURCHILL DOWNS INCORPORATED<BR><BR><BR><BR></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">By:<u>/s/ Rebecca C. Reed&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
<br><br>Its:<u> Secretary&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD></TR>
</TABLE><BR><BR>


<TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH=100%><TR VALIGN="BOTTOM">
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH=65% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#147;KFR LLC&#148;<BR><BR>
        KELLEY FARMS RACING, LLC<BR><BR><BR><BR></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">By:<u>/s/ Greg Betterton&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
<br><br>Its:<u> Manager&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD></TR>
</TABLE>




<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9</font></p>


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<A NAME=A003></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibit A </FONT></P>

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<A NAME=A004></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Schedule of KD Notes </FONT></P>

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<A NAME=A005></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of September 30, 2004 </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=6 BORDER=0 WIDTH=70%>
<TR VALIGN=Bottom>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Top>
     <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Note</U></FONT></TD>
     <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Date</U></FONT></TD>
     <TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Principal</U></FONT></TD>
     <TD WIDTH=17% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Accrued Interest (not<br>yet added to principal)</U></FONT></TD>
     <TD WIDTH=15% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Top>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Note #1</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>09/2002</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$148,066.19</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$1,458.35</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Top>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Note #2</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>09/2003</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$103,252.23</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$1,016.96</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Top>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Note #3</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>09/2000</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$95,849.83</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$944.06</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Top>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Note #4</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>09/2001</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$81,103.68</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$798.82</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Top>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Note #5</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>initial</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$2,876,124.42</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$28,327.86</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Top>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Note #6</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>09/2004</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$48,000.00</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$92.05</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Top>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Totals</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$3,352,396.35</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$32,638.10</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
</TABLE>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
amount of principal owed to CDI as of September 30, 2004 = $3,352,396.35 </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total accrued
interest as of September 30, 2004 = $32,638.10 </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
principal and interest owed to CDI as of September 30, 2004 = $3,385,034.45 </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Daily interest
at 4.75% on $3,352,396.35 = $436.27 </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total amount of new Note payable to
KFR LLC is 19/24 of $3,385,034.45 which is $2,679,818.94 (add $345.38 for each day between
9/30/04 and the Closing, so if the Closing is October 18, 2004, the total would be
$2,679,818.94 plus (18 x $345.38) or $2,686,035.78). </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total amount of new Note payable to
CDI is 5/24 of $3,385,034.45 which is $705,215.51 (add $90.89 for each day between 9/30/04
and the Closing, so if the Closing is October 18, 2004, the total would be $705,215.51
plus (18 x $90.89) or $706,851.53. </FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</font></p>





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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibits to the Purchase
Agreement have been intentionally omitted because they are not material.  The registrant agrees to
furnish such omitted exhibits supplementally to the Commission upon request.</font></p>

<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11</font></p>

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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>cdkydowns8kstkredagt.htm
<DESCRIPTION>STOCK REDEMPTION AGREEMENT
<TEXT>
<HTML>
<HEAD>
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>EXHIBIT 10.2</B></FONT></P>
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<A NAME=A001></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>STOCK REDEMPTION
AGREEMENT</B> </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS
STOCK REDEMPTION AGREEMENT (this &#147;Agreement&#148;) is made and entered into as of the
19th day of October, 2004, by and between Brad M. Kelley, an individual
(&#147;Stockholder&#148;) and Churchill Downs Incorporated, a Kentucky corporation
(&#147;CDI&#148;). </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Stockholder is the record and beneficial owner of 1,165,870 shares of the issued and
outstanding common stock of CDI, which constitutes approximately 8.77% of CDI&#146;s total
issued and outstanding shares of common stock; </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Stockholder is the sole member of Bison Capital, LLC, which is the sole member of Kelley
Farms Racing LLC (&#147;KFR LLC&#148;); </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
CDI desires to acquire that number of shares of CDI common stock held by Stockholder
necessary to reduce Stockholder&#146;s percentage ownership of CDI&#146;s total issued and
outstanding shares from 8.77% to 4.9% (after taking into account the shares received by
CDI in connection with that certain Purchase Agreement dated as of the date hereof by and
between KFR LLC and CDI (the &#147;Purchase Agreement); and </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Stockholder shall permit the redemption of the number of shares necessary to reduce
Stockholder&#146;s percentage ownership of CDI&#146;s issued and outstanding common stock
to 4.9% (after taking into account the shares received by CDI in connection with the
Purchase Agreement) in exchange for a convertible promissory note of CDI in substantially
the form attached hereto as Exhibit A (the &#147;Note&#148;). </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW
THEREFORE, in consideration of the premises and the mutual covenants contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as follows: </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Redemption of Shares.</B> Subject to the terms and conditions of this Agreement, at
          the Closing (as defined below) CDI shall redeem that number of shares of common
          stock of CDI held by Stockholder (the &#147;Shares&#148;) necessary to reduce
          Stockholder&#146;s percentage ownership of CDI&#146;s issued and outstanding
          common stock to 4.9% (after taking into account the shares received by CDI in
          connection with the Purchase Agreement) in exchange for the Note. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Principal Amount of the Note; Conversion Price of Note.</B> The Note delivered by
          CDI to Stockholder at the Closing shall be the Note attached hereto as Exhibit
          A, provided that (i) such Note will be dated as of the date of the Closing, (ii)
          the Conversion Price (as defined below) will be designated in the body of the
          Note, and (iii) the principal amount of the Note will be designated on the face
          of the Note after being calculated pursuant to the following equation: (A x B)
          &#151; C = D, where: &#147;A&#148; is 539,489, &#147;B&#148; is the average per
          share closing price on the Nasdaq national market of one share of the
          Company&#146;s common stock for the ten (10) trading days immediately prior to
          the date of Closing, &#147;C&#148; is $3,200,000.00 and &#147;D&#148; is the
          principal amount of the Note. The &#147;Conversion Price&#148; is equal to
          &#147;B&#148;. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Closing.</B> The closing of the transactions contemplated by this Agreement (the
          &#147;Closing&#148;) shall take place at the offices of Wyatt, Tarrant &amp;
          Combs, LLP, in Louisville, </FONT></P>


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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Kentucky  commencing at 10:00 a.m.
local time no later than five (5) days following
the satisfaction or waiver of all conditions to the obligations of the parties to
consummate the transactions contemplated hereby or such other date as the parties may
mutually determine (the &#147;Closing Date&#148;); provided, however, that the Closing
Date shall be no later than October 18, 2004. At the Closing, (i) Stockholder will execute
and deliver to CDI a certificate certifying that the representations of Stockholder set
forth in Section 4 below are true, accurate and complete on and as of the Closing; (ii)
CDI will execute and deliver to Stockholder a certificate certifying that the
representations of CDI set forth in Section 5 below are true, accurate and complete on and
as of the Closing; (iii) Stockholder will deliver the Shares to CDI, including any
certificate evidencing the shares and the execution and delivery to CDI of the stock power
attached hereto as Exhibit B; and (iv) CDI will execute and deliver the Note to
Stockholder. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Representations and Warranties of Stockholder.</B> Stockholder represents and
          warrants to CDI that the statements contained in this Section 4 are true and
          correct as of the date hereof. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Authority.</U> This Agreement constitutes the legal, valid, and binding obligation
          of Stockholder, enforceable against Stockholder in accordance with its terms.
          Upon the execution and delivery hereof by Stockholder this Agreement will
          constitute the legal, valid, and binding obligation of Stockholder, enforceable
          against Stockholder in accordance with its terms. Stockholder has the absolute
          and unrestricted right, power, authority, and capacity to execute and deliver
          this Agreement and to perform his obligations under this Agreement. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>No Conflict.</U> Neither the execution and delivery of this Agreement nor the
          consummation or performance of any of the transactions contemplated hereby will
          violate or conflict with or constitute a default under any mortgage, indenture,
          contract, agreement, license, permit, instrument, or trust or any order or
          ruling of any governmental authority to which Stockholder is a party or by which
          Stockholder is bound. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Good Title.</U> Stockholder is the sole record and beneficial owner of the Shares
          and has good, valid and marketable title to the Shares. The Shares are, and upon
          transfer to CDI pursuant to this Agreement will be, free and clear of all
          claims, liens, pledges, restrictions and encumbrances whatsoever. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Purchase Entirely for Own Account.</U> Stockholder understands that the Note, at the
          time of issuance may not be registered under the Securities Act on the grounds
          that the redemption provided for in this Agreement and the issuance of the Note
          hereunder is exempt from registration under the Securities Act and that the
          Company&#146;s reliance on such exemption is predicated on the
          Stockholders&#146; representations set forth herein. This Agreement is made with
          Stockholder in reliance upon Stockholder&#146;s representations to Company,
          which by Stockholder&#146;s execution of this Agreement, Stockholder hereby
          confirms, that the Note will be acquired for investment for Stockholder&#146;s
          own account, not as a nominee or agent, and not with a view to the resale or
          distribution of any part thereof, and that Stockholder has no present intention
          of selling, granting any participation in, or otherwise distributing the same. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Investment Experience</U>. Stockholder is domiciled in the State of Florida and
          acknowledges that he is able to fend for himself, can bear the economic risk of
          his investment, </FONT></P>

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<A NAME=A002></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 </FONT></P>


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<A NAME=A003></A>
<P ALIGN=JUSTIFY><FONT FACE="Times New Roman, Times, Serif" SIZE=2>and has such knowledge and experience
in evaluating and investing
in private placement transactions of securities and in financial or business matters that he is
capable of evaluating the merits and risks of the investment in the Note. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
         <U> Accredited Investor.</U> Stockholder is an &#147;accredited investor&#148; within
          the meaning of SEC Rule 501 of Regulation D, as presently in effect. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Receipt of Information.</U> Stockholder believes he has received all the information
          he considers necessary or appropriate for deciding whether to accept the Note. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
       <B>   Representations and Warranties of CDI.</B> CDI represents and warrants to
          Stockholder that the statements contained in this Section 5 are true and correct
          as of the date hereof. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Corporate Standing.</U> CDI is a corporation duly organized, validly existing, and
          in good standing under the laws of the Commonwealth of Kentucky. CDI has all
          requisite power and authority to own, lease and operate its properties and to
          carry on its business as now being conducted and as presently proposed to be
          conducted, to execute, deliver and perform this Agreement. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Authority.</U> This Agreement constitutes the legal, valid, and binding obligation
          of CDI, enforceable against CDI in accordance with its terms. Upon the execution
          and delivery hereof by CDI, this Agreement will constitute the legal, valid, and
          binding obligations of CDI, enforceable against CDI in accordance with its
          terms. CDI has the absolute and unrestricted right, power, and authority to
          execute and deliver this Agreement and to perform its obligations hereunder.
          Except for the approval of its Board of Directors, the consent of its primary
          lender, the KD Consents and any listing requirement of the Nasdaq national
          market, CDI is not and will not be required to obtain any consent from any
          person in connection with the execution and delivery of this Agreement or the
          consummation or performance of any of the transactions contemplated by this
          Agreement. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>No Conflict.</U> Neither the execution and delivery of this Agreement by CDI nor the
          consummation or performance of any of the transactions by CDI contemplated by
          this Agreement will give any person the right to prevent, delay, or otherwise
          interfere with any of the transactions pursuant to: (i) any provision of
          CDI&#146;s Articles of Incorporation or Bylaws; (ii) any resolution adopted by
          the board of directors or the stockholders of CDI; (iii) any legal requirement
          or order of any court or other governmental body to which CDI may be subject; or
          (iv) any contract to which CDI is a party or by which CDI may be bound. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Pre-Closing Covenants.</B> The parties agree as follows with respect to the period
          between the date hereof and the Closing: </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          Each of the parties will use its reasonable best efforts to take all action and
          to do all things necessary in order to consummate and make effective the
          transactions contemplated by this Agreement (including satisfaction of the
          closing conditions set forth in Section 7 below). </FONT></P>

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<A NAME=A004></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3 </FONT></P>


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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          Neither Stockholder nor any affiliate of Stockholder shall purchase any
          additional shares of CDI&#146;s common stock without first receiving the express
          written consent of CDI. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          Each of the parties will give any notices to, make any filings with, and use its
          reasonable best efforts to obtain any authorizations, consents, and approvals
          required by this Agreement. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          Subject to the terms and conditions of this Agreement, each of the parties
          hereto shall use commercially reasonable efforts to take, or cause to be taken,
          all action, and to do, or cause to be done, all things reasonably necessary,
          proper or advisable under applicable laws and regulations to consummate and make
          effective the transaction contemplated by this Agreement, including using
          commercially reasonable efforts to ensure timely satisfaction of the conditions
          precedent to each party&#146;s obligations hereunder. Neither party shall,
          without the prior written consent of the other party, take any action which
          would reasonably be expected to prevent or materially impede, interfere with or
          delay the transactions contemplated by this Agreement. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
         <B> Conditions to Obligation to Close.</B> </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Conditions to Obligation of CDI.</U> The obligation of CDI to consummate the
          transactions to be performed by it in connection with the Closing is subject to
          satisfaction of the following conditions: </FONT></P>

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   <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=9%></TD>
               <TD WIDTH=91%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[1]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
                CDI&#146;s Board of Directors shall have approved this Agreement and the
          transactions contemplated hereby;</FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=9%></TD>
               <TD WIDTH=91%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[2]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               CDI shall have received the consents and/or approvals described in Section 5.B; </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=9%></TD>
               <TD WIDTH=91%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[3]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               the qualification or exemption of the sale and redemption of the Shares, and the
               issuance of the Note, under any applicable securities laws and regulations; </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=9%></TD>
               <TD WIDTH=91%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[4]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               no injunction, judgment, order, decree or ruling in effect preventing
               consummation of any of the transactions contemplated by this Agreement shall be
               in existence; </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=9%></TD>
               <TD WIDTH=91%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[5]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               the representations and warranties of Stockholder set forth in Section 4 shall
               be true, accurate and complete as of the Closing Date; and </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=9%></TD>
               <TD WIDTH=91%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[6]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               the transactions contemplated by the Purchase Agreement shall have been
               consummated simultaneously with the Closing. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CDI may waive any condition specified
in this Section 7.A if it executes a writing so stating at or prior to the Closing. </FONT></P>

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<A NAME=A005></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4 </FONT></P>


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<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <U>Conditions to Obligation of Stockholder.</U> The obligation of Stockholder to
          consummate the transactions to be performed by him in connection with the
          Closing is subject to satisfaction of the following conditions: </FONT></P>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=9%></TD>
               <TD WIDTH=91%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[1]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; no
               injunction, judgment, order, decree or ruling in effect preventing consummation
               of any of the transactions contemplated by this Agreement shall be in existence; </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=9%></TD>
               <TD WIDTH=91%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[2]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               the representations, warranties of CDI shall be true, accurate and complete as
               of the Closing Date; and </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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          <TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
               <TR VALIGN=TOP>
               <TD ALIGN=RIGHT WIDTH=9%></TD>
               <TD WIDTH=91%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;[3]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
               the transactions contemplated by the Purchase Agreement shall have been
               consummated simultaneously with the Closing. </FONT></P></TD>
               </TR>
               </TABLE>
               <BR>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stockholder may waive any condition
specified in this Section 7.B if Stockholder executes a writing so stating at or prior to
the Closing. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Post-Closing Covenants.</B> With respect to the period from and after the Closing,
          the parties agree as follows: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          Neither Stockholder nor any affiliate of Stockholder shall purchase any
          additional shares of CDI&#146;s common stock unless (i) Stockholder&#146;s total
          beneficial ownership of the Company&#146;s common stock immediately after such
          purchase would be less than 4.9% of the Company&#146;s then total number of
          issued and outstanding shares of common stock, or (ii) prior to such purchase,
          Holder has fully disclosed any and all information, has executed any documents,
          and has taken all other steps, required by any applicable gaming agency or
          regulatory authority for holders of 5.0% or more of the Company&#146;s common
          stock, and agrees to make all such information available in the future and to
          comply with any request of the Company or any applicable gaming agency or
          regulatory authority or otherwise fully complies with (on a timely basis) the
          requirements of such applicable gaming agency or regulatory authority. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          Stockholder shall use his influence to cause KFR LLC to actively pursue passage
          of Alternative Gaming Legislation (as such term is defined in the Purchase
          Agreement). </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          Stockholder agrees to not purposefully delay the commencement of Alternative
          Gaming (as such term is defined in the Purchase Agreement) to a date beyond the
          five (5) year anniversary of the date of the Closing in order to avoid paying
          the Effective Date Payment and/or the Commencement Date Payment (each as defined
          in the Purchase Agreement) to CDI, and Stockholder agrees not to take any action
          to cause Kentucky Downs LLC or the business then operating on the grounds of the
          Facility (as defined in the Purchase Agreement), to purposefully delay the
          commencement of Alternative Gaming. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          Within sixty (60) days of the date hereof, CDI agrees to cause the Shares into
          which the Note is convertible to be registered for secondary offering purposes
          with the Securities and Exchange Commission (&#147;SEC&#148;) on a Form S-3
          Registration Statement. Stockholder acknowledges that Stockholder&#146;s ability
          to sell the Shares under such registration statement may thereafter be subject
          to trading halts or blackout periods imposed by CDI which CDI or its </FONT></P>

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<A NAME=A006></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5 </FONT></P>


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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>counsel
may deem necessary or appropriate to comply with applicable securities laws. CDI
acknowledges and agrees that CDI&#146;s commitment to deliver Shares upon conversion of
the Note which are immediately transferable (subject only to compliance with all
applicable securities laws and regulations) is a material condition of Stockholder
entering into this Agreement. CDI further acknowledges that its failure to deliver
immediately transferable Shares will trigger the Redemption Option (as defined in the
Note). If CDI fails to exercise the Redemption Option, Stockholder could suffer a
substantial financial loss or gain during the Interim Period (as defined in the Note). As
set forth in the Note, in such an event, CDI will hold Stockholder harmless from a loss
and Stockholder will pay CDI the amount of any gain. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Indemnification.</B> Each of CDI and Stockholder shall indemnify, defend and hold
          harmless the other and such other party&#146;s respective directors, officers,
          employees, agents, successors and assigns from and against all losses,
          liabilities, damages, deficiencies, demands, claims, suits, actions, causes of
          action, judgments, settlements, assessments, costs of investigation and other
          expenses (including but not limited to fees, disbursements and other reasonable
          charges of attorneys, accountants, consultants, experts and other professional
          advisers, interest and penalties) based upon, arising out of or otherwise in
          respect of any breach or failure or nonfulfillment of any representation,
          warranty, covenant, undertaking or agreement of such party contained in this
          Agreement. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Public Announcements.</B> Any public announcement or similar publicity with respect
          to this Agreement or the transaction contemplated hereby will be issued, if at
          all, at such time and in such manner as CDI and Stockholder jointly determine,
          provided that CDI may make such disclosure, after consulting with Stockholder,
          if such disclosure is required by applicable law or regulation, including the
          rules of the Nasdaq national market. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Notices.</B> All notices, consents, waivers, and other communications under this
          Agreement must be in writing and will be deemed to have been duly given when (a)
          delivered by hand or registered United States mail (with written confirmation of
          receipt), (b) sent by facsimile (with written confirmation of receipt), or (c)
          when received by the addressee, if sent by a nationally recognized overnight
          delivery service (receipt requested), in each case to the appropriate addresses
          and facsimile numbers set forth below (or to such other addresses and facsimile
          numbers as a party may designate by notice to the other parties): </FONT></P>

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<TR VALIGN="BOTTOM">
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH=15% ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH=85% ALIGN=LEFT ><FONT FACE="Times New Roman, Times, Serif" SIZE="2">if to &#147;CDI&#148;
<BR><BR>Churchill Downs Incorporated<BR>700 Central Avenue<BR>
Louisville, Kentucky 40208<BR>Attention: President<BR>
Facsimile No.: (502) 634-4456<BR><BR></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">with a copy to:
<BR><BR>Churchill Downs Incorporated<BR>700 Central Avenue<BR>
Louisville, Kentucky 40208</FONT></TD></TR>
</TABLE>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6</FONT></p>


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<TR VALIGN="BOTTOM">
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH=15% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH=85% ALIGN=LEFT ><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Attention: General Counsel<BR>
Facsimile No.: (502) 636-4439</FONT></TD></TR>
</TABLE>

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<TR VALIGN="BOTTOM">
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH></TR>
<TR VALIGN="TOP">
     <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">if to &#147;Stockholder&#148;
<BR><BR>Brad Kelley<BR>c/o Greg Betterton, Esq.<BR>981 Ridgewood Avenue, #101
<BR>Venice, FL 34285<BR>Facsimile No.:  (941) 483-4992</FONT></TD></TR>
</table>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Confidentiality.</B> Each party will maintain in confidence, and will cause the
          directors, officers, employees, agents, and advisors of such party to maintain
          in confidence, any written, oral, or other information obtained in confidence
          from another party in connection with this Agreement, unless (a) such
          information is already known to such party or to others not bound by a duty of
          confidentiality or such information becomes publicly available through no fault
          of such party, (b) the use of such information is necessary or appropriate in
          making any filing or obtaining any consent or approval required for the
          consummation of the transactions contemplated by this Agreement, or (c) the
          furnishing or use of such information is required by legal proceedings or law. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Indent" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Expenses.</B> Except as otherwise expressly provided in this Agreement, each party
          to this Agreement will bear its respective expenses incurred in connection with
          the preparation, execution, and performance of this Agreement and the
          transactions contemplated by this Agreement, including all fees and expenses of
          agents, representatives, counsel, and accountants. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Further Assurances.</B> The parties agree (a) to furnish upon request to each other
          such further information, (b) to execute and deliver to each other such other
          documents, and (c) to do such other acts and things, all as the other party may
          reasonably request for the purpose of carrying out the intent of this Agreement
          and the documents referred to in this Agreement. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Entire Agreement and Modification.</B> This Agreement supersedes all prior
          agreements between the parties with respect to its subject matter and
          constitutes a complete and exclusive statement of the terms of the agreement
          between the parties with respect to its subject matter. This Agreement may not
          be amended except by a written agreement executed by CDI and Stockholder. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Time of Essence.</B> With regard to all dates and time periods set forth or referred
          to in this Agreement, time is of the essence. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
         <B> Governing Law.</B> This Agreement will be governed by the laws of the Commonwealth
          of Kentucky without regard to conflicts of laws principles. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
          <B>Counterparts. </B>This Agreement may be executed in one or more counterparts, each
          of which will be deemed to be an original copy of this Agreement and all of
          which, when taken together, will be deemed to constitute one and the same
          agreement. </FONT></P>

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<A NAME=A007></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7 </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date
first written above. </FONT></P>


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     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH></TR>
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     <TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH=65% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#147;CDI&#148;<BR><BR>
        CHURCHILL DOWNS INCORPORATED<BR><BR><BR><BR></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">By:<u> Rebecca C. Reed&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
<br><br>Its:<u> Secretary&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD></TR>
</TABLE>

<BR><BR>
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     <TH><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
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     <TD width=35%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD width=65% align=left><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#147;STOCKHOLDER&#148;<BR><BR><BR><BR></FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
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     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><u>/s/ Brad M. Kelley&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
<br>Brad M. Kelley</FONT></TD></TR>
</TABLE>


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<P ALIGN=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibits to the Stock
Redemption Agreement have been intentionally omitted because they are not material.  The
registrant agrees to furnish such omitted exhibits supplementally to the Commission upon request.</FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9 </FONT></P>


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<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>cdkydowns8knote.htm
<DESCRIPTION>CONVERTIBLE PROMISSORY NOTE
<TEXT>
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>EXHIBIT 10.3</B></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>THIS NOTE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE &#147;ACT&#148;). THIS NOTE MAY NOT BE
SOLD, OFFERED FOR SALE, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT. THIS NOTE IS SUBJECT TO
CERTAIN TRANSFER RESTRICTIONS SET FORTH IN SECTION 12 OF THIS NOTE. </FONT></P>

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<A NAME=A001></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CHURCHILL DOWNS INCORPORATED<BR>
CONVERTIBLE PROMISSORY NOTE</FONT></P>

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     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$16,669,379.87</FONT></TD>
     <TD WIDTH=50% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Louisville, Kentucky
<BR>October 19, 2004</FONT></TD></TR>
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     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD></TR>
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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Churchill
Downs Incorporated, a Kentucky corporation (the &#147;Company&#148;), the principal office
of which is located at 700 Central Avenue, Louisville, Kentucky 40208, for value received,
hereby promises to pay to the order of Brad M. Kelley, an individual, whose principal
residence is located at 100 Gulf Blvd., Boca Grande, Florida 33921 (&#147;Holder&#148;),
the sum of Sixteen Million Six Hundred Sixty-Nine Thousand Three Hundred Seventy-Nine
Dollars and 87/100 ($16,669,379.87), or such lesser amount as shall then equal the
outstanding principal balance hereof and any unpaid accrued interest hereon, as set forth
below, on the date which is ten (10) years from the date hereof (the &#147;Maturity
Date&#148;). The Company shall have no right to prepay or transfer this note prior to the
Maturity Date without the consent of the Holder. The Company shall, on the Maturity Date,
pay the principal balance hereof and any unpaid accrued interest hereon in any combination
of cash and shares of the Company&#146;s common stock (with shares of the Company&#146;s
common stock to be valued for such purposes at the Conversion Price). </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment
for all amounts due hereunder shall be made by mail to the Holder c/o Holder&#146;s
attorney, Greg Betterton, Esq., 981 Ridgewood Avenue, #101, Venice, Florida 34285. This
Note is issued pursuant to that certain Stock Redemption Agreement dated as of the date
hereof by and among the Company and the Holder, as the same may from time to time be
amended, modified or supplemented (the &#147;Redemption Agreement&#148;). </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a statement of the rights of the Holder and the conditions to which this Note
is subject, and to which the Holder, by the acceptance of this Note, agrees: </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Definitions</I>. Unless specifically defined herein, capitalized terms shall have
          the meaning given them in the Redemption Agreement. As used herein, the
          following terms, unless the context otherwise requires, have the following
          meanings: </FONT></P>


<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></P>


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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;
          The &#147;Company&#148; includes any entity which shall succeed to or assume the
          obligations of the Company under this Note. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;
          &#147;Holder,&#148; when the context refers to a holder of this Note, shall mean
          any person who shall at the time be the registered holder of this Note. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;
          &#147;Conversion Price&#148; means $36.83. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Interest.</I> The Company shall pay interest on the principal amount of the Note on
          an annual basis if, and only if, the Company declares and pays a cash dividend
          on its common stock for such year. Within ten (10) business days of paying any
          cash dividend on its common stock, the Company will pay to the Holder as
          interest an amount equal to what Holder would have received as a dividend on the
          shares of the Company&#146;s common stock redeemed pursuant to the Redemption
          Agreement. All payments made on this Note shall be applied, at the option of the
          Holder, first to collection costs, if any, then to accrued interest and then to
          principal. After maturity or in the event of default, interest shall continue to
          accrue on the Note at the rate set forth above. Notwithstanding anything in this
          Note to the contrary, the interest rate charged hereon shall not exceed the
          maximum rate allowable by applicable law. If any stated interest rate herein
          exceeds the maximum allowable rate, then the interest rate shall be reduced to
          the maximum allowable rate, and any excess payment of interest made by the
          Company at any time shall be applied to the unpaid balance of any outstanding
          principal of this Note. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Events of Default</I>. If any of the events specified in this Section 3 shall occur
          (herein individually referred to as an &#147;Event of Default&#148;), the Holder
          of the Note may, so long as such condition exists, declare the entire
          outstanding principal of this Note and unpaid accrued interest thereon
          immediately due and payable, by notice in writing to the Company: </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;
          Default in the payment of the principal and unpaid accrued interest of this Note
          within fifteen (15) days of when due and payable; or </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;
          The institution by the Company of proceedings to be adjudicated as bankrupt or
          insolvent, or the consent by it to institution of bankruptcy or insolvency
          proceedings against it, or the filing by it of a petition or answer to consent
          seeking reorganization or release under the federal Bankruptcy Act, or any other
          applicable federal or state law, or the consent by it to the filing of any such
          petition or the appointment of a receiver, liquidator, assignee, trustee or
          other similar official of the Company, or of any substantial part of its
          property, or the making by it of an assignment for the benefit of creditors, or
          the taking of corporate action by the Company in furtherance of any such action;
          or </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;
          If, within sixty (60) days after the commencement of an action against the
          Company (and service of process in connection therewith on the Company) seeking
          any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
          relief under any present or future statute, law or regulation, such action shall
          not have been resolved in favor of the Company or all </FONT></p>


<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</FONT></P>


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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> orders or proceedings
          thereunder affecting the operations or the business of the Company stayed, or if
          the stay of any such order or proceeding shall thereafter be set aside, or if,
          within sixty (60) days after the appointment without the consent or acquiescence
          of the Company of any trustee, receiver or liquidator of the Company or of all
          or any substantial part of the properties of the Company, such appointment shall
          not have been vacated. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;&nbsp;&nbsp;
          Failure of Company to convert in accordance with the procedure set forth herein,
          in which case this Note shall accrue interest at the maximum allowable rate
          until the date of conversion. </FONT></P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Conversion.</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para (List) Flush" FSL="Default" -->
     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Optional Conversion.</I> Upon delivery of the Conversion Notice attached hereto to
          the Company, the Holder has the right, at the Holder&#146;s option, at any time
          prior to payment in full of the principal balance of and accrued interest on
          this Note, to convert this Note, in accordance with the provisions of this
          Section 4, in whole or in part (if in part, in principal amounts of no less than
          $100,000, and in $100,000 increments), into shares of the Company&#146;s common
          stock, which are fully paid, nonassessable, fully registered and immediately
          transferable, subject only to compliance with all applicable securities laws and
          regulations. This Note, or any portion thereof, will be convertible into that
          number of fully paid and nonassessable shares of the Company&#146;s common stock
          equal to (i) the principal amount of the Note being converted, together with all
          accrued but unpaid interest thereon, divided by (ii) the Conversion Price.
          Provided, however, Holder will only be able to convert the Note, or any portion
          thereof, into shares of the Company&#146;s common stock if Holder&#146;s total
          beneficial ownership of the Company&#146;s common stock immediately after such
          conversion would be less than 4.9% of the Company&#146;s then total number of
          issued and outstanding shares of common stock (nothing herein shall prevent
          Holder from entering into an agreement to sell all or a portion of the shares
          into which this Note would convert as long as the closing on any such sale
          occurs simultaneously with the conversion of the Note so that Holder&#146;s
          percentage ownership of Company&#146;s common stock never surpasses 4.9%).
          Notwithstanding the immediately preceding sentence, if Holder&#146;s
          post-conversion beneficial ownership of the Company&#146;s common stock would be
          five percent (5.0%) or greater, Holder may convert the Note, or any portion
          thereof, if (and only if) Holder has fully disclosed any and all information,
          has executed any documents, and has taken all other steps, required by any
          applicable gaming agency or regulatory authority for holders of 5.0% or more of
          the Company&#146;s common stock (the &#147;Disclosure Requirements&#148;), and
          agrees to make all such information available in the future and to comply with
          any request of the Company or any applicable gaming agency or regulatory
          authority or otherwise fully complies with (on a timely basis) the requirements
          of such applicable gaming agency or regulatory authority. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Conversion Procedure</I>. Before the Holder shall be entitled to convert this Note
          into shares of the Company&#146;s common stock, Holder shall deliver the
          Conversion Notice attached hereto to Company not less than seventy-five (75)
          days prior to the date Holder desires to convert this Note. Such Conversion
          Notice shall be delivered by mail, postage prepaid, to the Company at its
          principal corporate office, and shall contain a statement of the election of
          Holder to </FONT></P>



<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></P>


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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>convert the Note, or a portion of the Note as well as the date the
          Holder desires such conversion to be effective. Such conversion shall be deemed
          to have been made immediately prior to the close of business on the later of (a)
          the date specified in such notice (which date shall be not less than seventy
          five (75) days from the date Company receives such notice) or (b) the date of
          surrender of this Note or (c) the date Holder has demonstrated compliance with
          the Disclosure Requirements, and the person or persons entitled to receive the
          shares issuable upon such conversion shall be treated for all purposes as the
          record holder or holders of such shares as of such date. </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
promptly as practicable after the conversion of this Note, the Company at its expense will
issue and deliver to the Holder of this Note a certificate or certificates for the number
of full shares of the Company&#146;s registered common stock issuable upon such
conversion. </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Holder has complied with the provisions of this Note as it relates to conversion of this
Note and, despite such compliance by Holder, it is apparent to Company that Holder will be
unable to convert this Note into fully registered and immediately transferable shares of
the Company&#146;s common stock on the date Holder has specified in the Transfer Notice
(&#147;Holder&#146;s Desired Transfer Date&#148;) because of Company&#146;s actions,
inactions or efforts to comply with applicable securities laws, then Company shall have
the option of allowing Holder to convert this Note (or a portion hereof) so that Company
can immediately purchase and redeem the shares issued by Company to Holder upon conversion
of this Note (or a portion hereof) at a per share price equal to the per share closing
price on the Nasdaq national market (&#147;Closing Price&#148;) on the day of conversion
(the &#147;Redemption Option&#148;). Upon exercising the Redemption Option, the principal
amount of the Note will be reduced accordingly. If Company does not elect to exercise the
Redemption Option, Company will hold Holder harmless from any drop in the Closing Price
between the Holder&#146;s Desired Transfer Date and the date Holder is able to convert
this Note into fully registered and immediately transferable shares of the Company&#146;s
common stock (the &#147;Interim Period&#148;). Similarly, if during the Interim Period,
the Closing Price increases, Holder will pay the amount of the increase to Company. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Mechanics and Effect of Conversion.</I> No fractional shares shall be issued upon
          conversion of this Note. In lieu of the Company issuing any fractional shares to
          the Holder upon the conversion of this Note, the Company shall pay to the Holder
          the amount of outstanding principal and interest that is not so converted. Upon
          conversion of the entire outstanding principal amount of and all accrued
          interest on this Note, the Company shall be forever released from all its
          obligations and liabilities under this Note. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Conversion Price Adjustments</I>. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Adjustments for Splits and Subdivisions.</I> In the event the Company should at any
          time or from time to time after the date of issuance hereof fix a record date
          for the effectuation of a split or subdivision of the outstanding capital stock
          of the Company or the determination of holders of capital stock entitled to
          receive a dividend or other distribution payable in additional shares of capital
          stock or other securities or rights convertible into, or entitling the holder
          thereof to receive directly or indirectly, additional shares of capital stock
          (hereinafter referred to as &#147;Share</FONT></P>



<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></p>


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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> Equivalents&#148;) without payment of
          any consideration by such holder for the additional capital stock or the Share
          Equivalents (including the additional shares of capital stock issuable upon
          conversion or exercise thereof), then, as of such record date (or the date of
          such dividend distributions, split or subdivision if no record date is fixed),
          the Conversion Price of this Note shall be appropriately decreased so that the
          number of shares issuable upon conversion of this Note shall be increased in
          proportion to such increase of outstanding shares of capital stock. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Adjustments for Reverse Splits.</I> If the number of shares of Company&#146;s
          capital stock outstanding at any time after the date hereof is decreased by a
          combination of the outstanding shares of Company&#146;s capital stock, then,
          following the record date of such combination, the Conversion Price for this
          Note shall be appropriately increased so that the number of shares issuable on
          conversion hereof shall be decreased in proportion to such decrease in
          outstanding shares. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Notices of Record Date, etc.</I> In the event of: </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;
          Any taking by the Company of a record of the holders of any class of securities
          of the Company for the purpose of determining the holders thereof who are
          entitled to receive any distribution (other than a distribution payable only in
          cash) or other distribution, or any right to subscribe for, purchase or
          otherwise acquire any shares of stock of any class or any other securities or
          property, or to receive any other right; or </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;
          Any capital reorganization of the Company, any reclassification or
          recapitalization of the capital stock of the Company or any transfer outside of
          the regular course of business of all or substantially all of the assets of the
          Company to any other person (other than a subsidiary of the Company) or any
          consolidation or merger involving the Company (other than a merger with a
          subsidiary of the Company) ; or </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;
          Any voluntary or involuntary dissolution, liquidation or winding-up of the
          Company, </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the Company will mail to the holder
of this Note at least ten (10) days prior to the earliest date specified therein, a notice
specifying: (a) the date on which any such record is to be taken for the purpose of such
distribution or right, and the amount and character of such distribution or right; and (b)
the date on which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding-up is expected to become effective and the
record date (if any) for determining shareholders entitled to vote thereon. In the event
Company delivers the notice described in this Section 6, Holder may demand immediate
conversion of this Note without regard to the notice provisions and time periods set forth
in Section 4 (ii); provided that Holder must still comply with the Disclosure Requirements
if Holder&#146;s post-conversion beneficial ownership of the Company&#146;s common stock
will equal or exceed 5.0%. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Reservation of Shares Issuable Upon Conversion.</I> The Company covenants that it
          shall reserve from its authorized and unissued shares of common stock, a
          sufficient number of shares </FONT></p>



<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT></P>


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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>to effect the conversion of the
entire outstanding
          principal amount of this Note. The Company further covenants that all shares
          that may be issued upon the exercise of rights represented by this Note will,
          when issued in accordance with the terms hereof, be fully paid, nonassessable,
          fully registered and immediately transferable (subject only to compliance with
          all applicable securities laws and regulations), free of preemptive rights and
          free from all taxes, liens and charges in respect of the issue thereof (other
          than taxes in respect of any transfer occurring contemporaneously or otherwise
          specified herein). The Company agrees that its issuance of this Note shall
          constitute full authority to its officers who are charged with the duty of
          executing stock certificates to execute and issue the necessary certificates for
          shares upon the conversion of this Note. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Prepayment</I>. The Company shall have no right to prepay this Note without the
          consent of Holder, who may grant or deny such consent in its sole discretion. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Note is Subordinate to Company&#146;s Credit Facilities and other Senior Long
          Term Debt</I>. Holder acknowledges that Company has existing credit facilities with
          commercial lenders and other senior long term debt with institutional investors
          and that, prior to the Maturity Date, Company may enter into amendments thereto
          or into new credit facilities with commercial lenders or into new other senior
          long term debt with institutional investors (collectively, the &#147;Credit
          Facilities and Other Senior Long Term Debt&#148;). Notwithstanding any contrary
          statement contained in this Note, any and all payments arising on account of any
          obligation arising from or in connection with this Note (whether of principal,
          interest or otherwise) shall be, at all times, subordinate to the payment of
          amounts of any kind or nature, present or future, which are owed by Company
          pursuant to or arising from the Credit Facilities and Other Senior Long Term
          Debt. By signing below, Holder hereby irrevocably subordinates and postpones the
          payment and the time of payment of all payments arising on account of any
          obligation arising from or in connection with this Note and all claims and
          demands arising therefrom to the Credit Facilities and Other Senior Long Term
          Debt and directs that the Credit Facilities and Other Senior Long Term Debt be
          paid in full before any amounts be paid pursuant to this Note, provided such
          subordination shall not restrict Holder&#146;s right to convert. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Assignment</I>. Subject to the restrictions on transfer described in Section 12
          below, the rights and obligations of the Company and the Holder of this Note
          shall be binding upon and benefit the successors, assigns, heirs, administrators
          and transferees of the parties. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Waiver and Amendment</I>. Any provision of this Note may be amended, waived or
          modified only upon the written consent of both the Company and the Holder. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Transfer of this Note; Compliance with Securities Laws.</I> The Holder of this Note,
          by acceptance hereof, acknowledges that this Note and the shares to be issued
          upon conversion hereof are being acquired solely for the Holder&#146;s own
          account and not as a nominee for any other party, and for investment. This Note
          is not transferable without the express written consent of Company. Further, if
          Company consents to any transfer proposed by Holder, such transfer must be in
          compliance with all applicable securities laws and regulations as determined in
          the sole discretion of Company&#146;s legal counsel. </FONT></P>




<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></P>


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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Notices.</I> Any notice, request or other communication required or permitted
          hereunder shall be in writing and shall be deemed to have been duly given when
          (i) delivered by hand (with written confirmation of receipt), or (ii) when
          received by the addressee, if sent by a nationally recognized overnight delivery
          service (receipt requested), in each case to the appropriate addresses set forth
          herein. Any party hereto may by notice so given change its address for future
          notice hereunder. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>No Shareholder Rights</I>. Nothing contained in this Note shall be construed as
          conferring upon the Holder or any other person the right to vote or to consent
          to or receive notice as a shareholder in respect of meetings of shareholders for
          the election of directors of the Company or any other matters or any rights
          whatsoever as a shareholder of the Company. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Waivers.</I> The Company hereby waives presentment, demand, protest and notice of
          dishonor and protest, and also waives all other exemptions; and agrees that
          extension or extensions of the time of payment of this Note or any installment
          or part thereof may be made before, at or after maturity by agreement by the
          Holder. Upon default hereunder the Holder shall have the right to convert this
          Note without regard to the notice provisions and time periods set forth in
          Section 4 (ii); provided that Holder must still comply with the Disclosure
          Requirements if Holder&#146;s post-conversion ownership of the Company&#146;s
          common stock will equal or exceed 5.0%. The Company shall pay to the Holder,
          upon demand, all costs and expenses, including, without limitation,
          attorneys&#146; fees and legal expenses, that may be incurred by the Holder in
          connection with the enforcement of this Note, including expenses, if any,
          incurred by Holder related to the registration of shares on conversion. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Governing Law.</I> This Agreement shall be governed by and construed in accordance
          with the laws of the Commonwealth of Kentucky, excluding that body of law
          relating to conflict of laws. </FONT></P>

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     <P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.&nbsp;&nbsp;&nbsp;&nbsp;
          <I>Heading; References.</I> All headings used herein are used for convenience only and
          shall not be sued to construe or interpret this Note. Except where otherwise
          indicated, all references herein to Sections refer to Sections hereof. </FONT></P>

<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, the Company has caused this Convertible Promissory Note to be issued as
of this the 19th day of October, 2004. </FONT></P>


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     <TD WIDTH=35%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH=65% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#147;Company&#148;<BR><BR>
        CHURCHILL DOWNS INCORPORATED<BR><BR><BR><BR></FONT></TD></TR>
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     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">By:<u> /S/ Michael W. Anderson&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
<br><br>Its:<u> VP Finance &amp; Treasurer&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></TD></TR>
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<BR><BR>
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     <TD width=65% align=left><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#147;Holder&#148;<BR><BR><BR><BR></FONT></TD></TR>
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     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
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     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><u> /s/ Brad M. Kelley&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
<br>Brad M. Kelley</FONT></TD></TR>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NOTICE OF CONVERSION </FONT></P>

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<A NAME=A004></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(To Be Signed Only Upon
Conversion of Note) </FONT></P>

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<A NAME=A005></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TO CHURCHILL DOWNS
INCORPORATED </FONT></P>

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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><p align=justify><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The
Note attached to this Notice of Conversion is in the principal amount of $__________ and
is dated September _____, 2004. The undersigned, the Holder of the attached Note, hereby
surrenders such Note for conversion into shares of the common stock of Churchill Downs
Incorporated, to the extent of $_________ unpaid principal amount and accrued interest of
such Note, and requests that the certificates for such shares be issued in the name of,
and delivered to, Brad M. Kelley, whose address is ___________________________. The
undersigned requests that the conversion be effective as of _________ ____, 20__ (which
date must be no less than the date which is sixty (60) days after the date this Notice of
Conversion is delivered to Churchill Downs Incorporated, except as provided in Section 6
of the Note) and further acknowledges that such effective date is subject to the terms of
the Note. </FONT></p></TD>
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</TABLE>
<BR>

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     <TD width=10%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD width=90%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Dated:<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></TD></TR>
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<BR><BR>

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     <TD width=35%><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD width=65% align=left><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
<BR>(Signature must conform in all respect to name<BR>of Holder as specified on the face of the Note)</FONT></TD></TR>
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     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD></TR>
<TR VALIGN="TOP">
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>
<BR>Address</FONT></TD></TR>
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<TYPE>EX-99.1
<SEQUENCE>5
<FILENAME>cdkydowns8kpr.htm
<DESCRIPTION>PRESS RELEASE
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>EXHIBIT 99.1</B></FONT></P>

<p align=left><IMG SRC="cdlogo.jpg"></p>

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     <TD WIDTH=45% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">FOR IMMEDIATE RELEASE </FONT></TD>
     <TD WIDTH=55% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Contact: Mike Ogburn<br>
Churchill Downs Incorporated<br>(502) 636-4415(office)<br>(502)262-0224(mobile)<BR><u>mogburn@kyderby.com</U></FONT></TD></TR>
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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>CHURCHILL DOWNS INCORPORATED SELLS 19-PERCENT STAKE IN KENTUCKY DOWNS,<BR>
REDEEMS SHARES OF STOCK</B></font></p>
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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>LOUISVILLE, Ky. (Oct. 19, 2004)</B>
&#151; Churchill Downs Incorporated (Nasdaq: CHDN) (&#147;CDI&#148; or the
&#147;Company&#148;) today announced that it sold a 19-percent stake in Kentucky Downs,
including debt owed to CDI, to Kelley Farms Racing. As part of the terms of the
transaction, former CDI board member Brad M. Kelley exchanged shares of CDI stock valued
at $3.2 million for the stake. The sale reduces CDI&#146;s ownership of Kentucky Downs to
a total of 5 percent. </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Thomas
H. Meeker, CDI&#146;s president and chief executive officer, said the Company&#146;s
divesture was in the best interests of both parties. </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;CDI
sold a portion of its Kentucky Downs ownership for fair value which includes a contingency
payout should the facility be approved for alternative gaming legislation,&#148; said
Meeker. &#147;The sale also afforded us the opportunity to monetize a currently
non-productive asset. For Brad Kelley, the transaction increased his stake in a racetrack
that he has sought additional ownership in for some time. He is a gifted businessman from
the Franklin, Ky. area who is well-suited to advance the strategic interests of Kentucky
Downs,&#148; said Meeker. </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, as part of the transaction, the Company redeemed an additional amount of CDI
stock from Kelley in exchange for a convertible promissory note. In total, CDI redeemed
539,489 shares of Company stock valued at $19.9 million, reducing Kelley&#146;s ownership
of CDI stock to 4.9 percent. </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Churchill
Downs Incorporated, headquartered in Louisville, Ky., owns and operates world-renowned
horseracing venues throughout the United States. The Company&#146;s seven racetracks in
California, Florida, Illinois, Indiana, Kentucky and Louisiana host 123 graded-stakes
events and many of North America&#146;s most prestigious races, including the Kentucky
Derby and Kentucky Oaks, Hollywood Gold Cup and Arlington Million. CDI racetracks have
hosted nine Breeders&#146; Cup World Thoroughbred Championships &#150; more than any other
North American racing company. CDI also owns off-track betting facilities and has
interests in various television production, telecommunications and racing services
companies that support CDI&#146;s network of simulcasting and racing operations. CDI
trades on the Nasdaq National Market under the symbol CHDN and can be found on the
Internet at <U>www.churchilldownsincorporated.com</U>. </FONT></P>

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<P ALIGN="JUSTIFY"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kentucky
Downs, formerly known as Dueling Grounds Race Course, offers a short annual race meet and
year-round simulcast wagering. The track is located on the Kentucky and Tennessee border,
about 40 miles from Nashville. A distinctive feature of the facility is that all of its
racing is conducted on a European-style 1 5/16-mile turf course. CDI has held a minority
interest in Kentucky Downs since 1997. </FONT></P>

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<A NAME=A003></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151; MORE &#151; </FONT></P>

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<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>700 CENTRAL AVENUE o LOUISVILLE, KY 40208 o P: (502) 636-4400 o churchilldownsincorporated.com </FONT></P>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Churchill Downs
Incorporated Sells 19-Percent Stake in Kentucky Downs<BR>Page 2<BR> Oct. 19, 2004 </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>This
news release contains forward-looking statements made pursuant to the &#147;safe
harbor&#148; provisions of the Private Securities Litigation Reform Act of 1995. The
reader is cautioned that such forward-looking statements are based on information
available at the time and/or management&#146;s good faith belief with respect to future
events, and are subject to risks and uncertainties that could cause actual performance or
results to differ materially from those expressed in the statements. Forward-looking
statements speak only as of the date the statement was made. We assume no obligation to
update forward-looking information to reflect actual results, changes in assumptions or
changes in other factors affecting forward-looking information. Forward-looking statements
are typically identified by the use of terms such as &#147;anticipate,&#148;
&#147;believe,&#148; &#147;could,&#148; &#147;estimate,&#148; &#147;expect,&#148;
&#147;intend,&#148; &#147;may,&#148; &#147;might,&#148; &#147;plan,&#148;
&#147;predict,&#148; &#147;project,&#148; &#147;should,&#148; &#147;will,&#148; and
similar words, although some forward-looking statements are expressed differently.
Although we believe that the expectations reflected in such forward-looking statements are
reasonable, we can give no assurance that such expectations will prove to be correct.
Important factors that could cause actual results to differ materially from our
expectations include: the effect of global economic conditions; the effect (including
possible increases in the cost of doing business) resulting from future war and terrorist
activities or political uncertainties; the economic environment; the impact of increasing
insurance costs; the impact of interest rate fluctuations; the financial performance of
our racing operations; the impact of gaming competition (including lotteries and
riverboat, cruise ship and land-based casinos) and other sports and entertainment options
in those markets in which we operate; costs associated with our efforts in support of
alternative gaming initiatives; costs associated with our Customer Relationship Management
initiative; a substantial change in law or regulations affecting our pari-mutuel and
gaming activities; a substantial change in allocation of live racing days; litigation
surrounding the Rosemont, Illinois, riverboat casino; changes in Illinois law that impact
revenues of racing operations in Illinois; a decrease in riverboat admissions subsidy
revenue from our Indiana operations; the impact of an additional Indiana racetrack and its
wagering facilities near our operations; our continued ability to effectively compete for
the country&#146;s top horses and trainers necessary to field high-quality horse racing;
our continued ability to grow our share of the interstate simulcast market; our ability to
execute our acquisition strategy and to complete or successfully operate planned expansion
projects; our ability to adequately integrate acquired businesses; market reaction to our
expansion projects; any business disruption associated with our facility renovations; the
loss of our totalisator companies or their inability to keep their technology current; our
accountability for environmental contamination; the loss of key personnel and the
volatility of our stock price.</I> </FONT></P>

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