CHURCHILL DOWNS INCORPORATED RESTRICTED STOCK AGREEMENT 90,000 SHARES
Return to
10-Q
XXXXXXXXX
XXXXX INCORPORATED
90,000
SHARES
THIS
RESTRICTED STOCK AGREEMENT (the “Agreement”) is made as of the 18th day of July,
2006 by and between Xxxxxx X. Xxxxx (the “Executive”), and Xxxxxxxxx Xxxxx
Incorporated (the “Company”), a Kentucky corporation with its principal place of
business at 000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
WITNESSETH:
WHEREAS,
the Company has identified the Executive as the successor to the current
President and Chief Executive Officer who is stepping down from such office
effective August 14, 2006;
WHEREAS,
the Company has entered into an employment agreement between the Company and
the
Executive pursuant to which the Executive will become the President and Chief
Executive Officer of the Company effective August 14, 2006 (the “Employment
Agreement”);
WHEREAS,
under the terms of the Employment Agreement, and as a material inducement to
enter into the Employment Agreement, the Executive is to receive certain grants
of equity compensation as a consequence of his employment by the Company;
WHEREAS,
the Compensation Committee (the “Committee”) of the Board of Directors of the
Company at its meeting on July 12, 2006 authorized and directed the Company
to
make an award of stock to the Executive under the terms and conditions set
forth
in this Agreement; and
WHEREAS,
the parties desire to enter into this Agreement to set forth the terms and
conditions of such award.
NOW,
THEREFORE, in consideration of the foregoing and the mutual undertakings herein
contained, and for other good and valuable consideration, the mutuality, receipt
and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Grant
of Stock.
Subject
to the further terms, conditions and restrictions contained in this Agreement,
the Company hereby grants to the Executive 90,000 shares (the “Shares”) of the
Company’s common stock, no par value per share (the “Common Stock”), in
consideration for services to be performed by the Executive as an employee
of
the Company and its subsidiaries. As long as the Shares are subject to the
Restrictions set forth in Section 4 of this Agreement, such shares shall be
deemed to be, and are referred to in this Agreement as, the “Restricted
Shares”.
2. Certificates
for Shares.
Certificates evidencing Restricted Shares shall be deposited with the Company
to
be held in escrow until such Shares are released to the Executive or forfeited
in accordance with this Agreement. The Executive shall, simultaneously with
the
execution and delivery of this Agreement, execute and deliver to the Company
a
stock power in blank with respect to the Restricted Shares. If any Restricted
Shares are forfeited, the Company shall direct the transfer agent of the Common
Stock to make the appropriate entries in its records showing the cancellation
of
the certificate or certificates for such Restricted Shares.
3. Adjustments
in Restricted Shares.
| (a) |
In
the event of any change in the outstanding Common Stock by reason
of a
stock dividend or distribution (or distribution on Common Stock of
any
security convertible into securities of the Company), recapitalization,
merger, consolidation, split-up, combination, subdivision,
reclassification, exchange of shares or the like, the Committee shall
make
equitable adjustments in the Restricted Shares so that the shares
represent the same percentage of the Company’s equity as was the case
immediately prior to such change. Any new, additional or different
securities to which the Executive shall be entitled in respect of
Restricted Shares by reason of such adjustment shall be deemed to
be
Restricted Shares and shall be subject to the same terms, conditions
and
restrictions as the Restricted Shares so
adjusted.
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| (b) |
In
the event Company merges, consolidates or effects a share exchange
with
another entity, or all or a substantial portion of Company’s assets or
outstanding capital stock are acquired (whether by merger, purchase
or
otherwise) by another entity (any such entity being hereafter referred
to
as the “Successor”) each of the Restricted Shares shall automatically be
converted into and replaced by shares of common stock, or such other
class
of securities having rights and preferences no less favorable than
the
Restricted Shares, of the Successor, and the number of Restricted
Shares
shall be correspondingly adjusted, so that Executive shall have the
right
to that number of shares of common stock of the Successor that have
a
value equal, as of the date of the merger, conversion or acquisition,
to
the value, as of the date of the merger, conversion or acquisition,
of the
Restricted Shares.
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4. Restrictions.
During
applicable periods of restriction determined in accordance with Section 6 of
this Agreement, Restricted Shares, and all rights with respect to such Shares,
may not be sold, assigned, transferred, exchanged, pledged, hypothecated or
otherwise encumbered or disposed of and shall be subject to the risk of
forfeiture contained in Section 5 of this Agreement (such limitations on
transferability and risk of forfeiture being herein referred to as the
“Restrictions”), but the Executive shall have all other rights of a stockholder;
provided,
however, that, until such time as the Restrictions lapse, the Executive shall
not have the right to vote the Restricted Shares; receive dividends thereon;
or
purchase any securities pursuant to that certain Rights Agreement dated as
of
March 19, 1998, between the Company and The Fifth Third Bank (as successor
Rights Agent to Bank of Louisville), as amended, and as the same may be amended,
modified or supplemented from time to time.
5. Forfeiture
of Restricted Shares.
Subject
to Section 6 below, in the event that the Executive’s employment with the
Company and its subsidiaries terminates for any reason, such event shall
constitute an “Event of Forfeiture” and all Shares which at that time are
Restricted Shares shall thereupon be forfeited by the Executive to the Company
without payment of any consideration by the Company, and neither the Executive
nor any heir, personal representative, successor or assign of the Executive
shall have any right, title or interest in or to such Restricted Shares or
the
certificates evidencing the same.
6. Lapse
of Restrictions.
| (a) |
In
the event that the Fair Market Value (as defined in the Employment
Agreement) of the Company’s Common Stock on and after August 14, 2006
reaches the following prices each for ***
consecutive trading days, the Restrictions on the respective Restricted
Shares shall lapse as follows:
|
|
#
of Shares for which
Restrictions
lapse and
which
become non-forfeitable
|
**
consecutive day
Fair
Market Value
|
|
22,500
|
At
or above $**.**
|
|
22,500
|
At
or above $**.**
|
|
22,500
|
At
or above $**.**
|
|
22,500
|
At
or above $**.**
|
provided,
however, that the **-consecutive trading day period occurs prior to a
Termination of Employment (as defined in the Employment Agreement), subject
to
Section 6(c) below.
| (b) |
Upon
the lapse of the Restrictions in accordance with this Section, the
Company
shall, as soon as practicable thereafter, deliver to the Executive
a
certificate (without any restrictive endorsement referring to such
Restrictions) for the Shares that are no longer subject to such
Restrictions.
|
| (c) |
In
the event the Executive’s employment is terminated other than for Cause
(as defined in the Employment Agreement) or if the Executive resigns
for
Good Reason (as defined in the Employment Agreement) for purposes
of
determining any lapse of the Restrictions in (a) above and the forfeiture
of Shares, if any, under Section 5 and Section 6, the Executive’s
employment shall be considered to have continued through the last
day of
the calendar quarter in which his Termination of Employment occurs.
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| (d) |
In
the event of a Change in Control during the Employment Term, the
Restrictions shall immediately lapse on fifty percent (50%) of the
Shares
then-subject to Restrictions. The Shares that are subject to the
lapse of
Restrictions pursuant to this Section 6(d) shall be taken pro-rata
from
each tranche of the then-Restricted Shares, and the remaining portion
of
each tranche shall be subject to the lapse of Restrictions according
to
Section 6(a) above, subject to potential accelerated lapsing of
Restrictions pursuant to Section 6(e) below.
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_______________________
*Confidential
information omitted and filed separately with the Securities and Exchange
Commission under a Confidential Treatment Request.
| (e) |
If,
during the 2-year period following a Change in Control during the
Employment Term: (i) the Executive is terminated by the Company other
than
for Cause, death or Disability, or (ii) the Executive voluntarily
resigns
for Good Reason, the Restrictions on all then-Restricted Shares shall
fully lapse, as of the Termination of Employment.
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7. Withholding
Requirements.
Whenever Restrictions lapse with respect to Restricted Shares, the Company
shall
have the right to (i) withhold from sums due to the Executive; (ii) require
the
Executive to remit to the Company; or (iii) retain Shares otherwise deliverable
to the Executive; in an amount sufficient to satisfy any Federal, state or
local
withholding tax requirements prior to making such payments or delivering any
such Shares to the Executive.
8. Effect
Upon Employment.
Nothing
contained in this Agreement shall confer upon the Executive the right to
continue in the employment of the Company or its subsidiaries or affect any
right that the Company or its subsidiaries may have to terminate the employment
of the Executive.
9. Amendment.
This
Agreement may not be amended, modified or supplemented except with the consent
of the Committee and by a written instrument duly executed by the Executive
and
the Company.
10. Binding
Effect.
This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their heirs, personal representatives, successors and assigns.
Executive accepts the award of Shares hereunder subject to all of the terms
and
conditions of this Agreement. Executive hereby agrees to accept as binding,
conclusive and final all reasonable decisions and interpretations of the
Committee upon any questions arising under this Agreement, including without
limitation, the interpretation of the Restrictions imposed upon the
Shares.
11. Notices.
Notices
shall be deemed delivered if delivered personally or if sent by registered
or
certified mail to the Company at its principal place of business, as set forth
above, and to Executive at the address as shall most currently appear on the
records of the Company, or at such other address as either party may hereafter
designate in writing to the other.
12. Investment
Representation.
If the
Shares awarded to the Executive under this Agreement are not registered under
the Securities Act of 1933, as amended, pursuant to an effective registration
statements, the Executive, if the Committee shall reasonably deem it advisable,
may be required to represent and agree in writing (i) that any Shares acquired
by the Executive under this Agreement will not be sold except pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
or pursuant to an exemption from registration under such Act, and (ii) that
the
Executive has acquired such Shares for his own account and not with a view
to
the distribution thereof.
13. Compliance
with Section 16(b).
This
Agreement and the grant of Shares hereunder is intended to comply with all
applicable conditions of Rule 16(b)-3 of the General Rules and Regulations
under
the Securities Exchange Act of 1934, as amended. All transactions involving
the
Company’s executive officers are subject to such conditions, regardless of
whether the conditions are expressly set forth in this Agreement. Any provision
of this Agreement that is contrary to a condition of Rule 16b-3 shall not
apply.
14. Effective
Date and Approval.
It is
the intent of the parties that the compensation payable to the Executive with
respect to the Shares constitute qualified performance based compensation under
Internal Revenue Code §162(m) and regulations issued thereunder. The effective
date of the award of the Shares is July 18, 2006, and is subject to approval
by
stockholders of the Company holding not less than a majority of the shares
present and voting at the Company’s 2007 Annual Meeting. In the event this award
of Shares is not approved by stockholders of the Company, this Agreement shall
be of no effect and the award of Shares hereunder shall be null and void. The
Company agrees to use its reasonable best efforts to procure shareholder
approval of the award of the Shares, including, without limitation, placing
such
matter on the agenda for the Company’s 2007 annual meeting, including
appropriate disclosures in the proxy statement for such meeting, recommending
to
Company shareholders the approval of such Shares award and soliciting proxies
for the approval of such Shares award.
15. Code
Section 409A.
It is
intended that any amounts payable under this Agreement and the Company’s and
Executive’s exercise of authority or discretion hereunder shall comply with Code
Section 409A (including the Treasury regulations and other published guidance
relating thereto) so as not to subject Executive to the payment of any interest
or additional tax imposed under Code Section 409A. To the extent any amount
payable under this Agreement would trigger the additional tax imposed by Code
Section 409A, the Agreement shall be modified to avoid such additional
tax.
16. Registration
of Shares.
The Company shall use its reasonable best efforts to file, within 90 days
following the execution of this Agreement, a registration statement with the
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Act of 1933, as amended (the "Act"), covering the Shares, and thereafter to
cause such registration statement to become effective in accordance with the
Act
and the rules and regulations adopted by the Commission thereunder
17. Compliance
With Other Laws And Regulations.
The
rights of the Executive and the obligations of Company under this Agreement
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.
Company shall not be required to issue or deliver certificates for shares of
Common Stock before [i] the listing of such shares on any stock exchange or
over-the-counter market, such as NASDAQ, on which the Common Stock may then
be
listed or traded, and [ii] the completion of any registration or qualification
of any governmental body which Company shall, in it sole discretion, determines
to be necessary or advisable. The Company agrees to use its best efforts to
procure any such listing, registration or qualification.
18. Severability.
The
invalidity or unenforceability of any provision of the Agreement shall not
affect the validity or enforceability of the remaining provisions of the
Agreement, and such invalid or unenforceable provision shall be stricken to
the
extent necessary to preserve the validity and enforceability of the Agreement
with the parties agreeing in such event to make all reasonable efforts to
replace such invalid or unenforceable provision with a valid provision that
will
place the parties in approximately the same economic position as contemplated
hereunder.
19. Governing
Law; Jurisdiction.
This
Agreement shall be governed by the laws of the Commonwealth of Kentucky. The
Executive consents to the exclusive jurisdiction of the courts of the
Commonwealth of Kentucky and of any federal court located in Jefferson County,
Kentucky in connection with any action or proceeding arising out of or relating
to this Agreement, any document or instrument delivered pursuant to or in
connection with this Agreement, or any breach of this Agreement or any such
document or instrument.
20. Entire
Agreement.
This
Agreement contains the entire agreement between the parties hereto with respect
to the subject matter hereof.
21. Capitalized
Terms.
Capitalized terms not otherwise defined in this Agreement shall have the meaning
given them in the Employment Agreement.
22. Counterparts
and Signatures.
This
Agreement may be signed in counterparts, each of which shall be an original,
with the effect as if the signatures thereto and hereto were upon the same
instrument. Signatures conveyed by facsimile or PDF file shall constitute
original signatures.
(Signature
page follows.)
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IN
WITNESS WHEREOF, the Company and the Executive have executed and delivered
this
Agreement as of the date first above written.
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XXXXXX
X. XXXXX
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/s/
Xxxxxx X. Xxxxx
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XXXXXXXXX
XXXXX INCORPORATED
By:
/s/
Xxxxxx X. Xxxxx
Xxxxxx
X. Xxxxx,
Authorized
Representative
of
the Board of Directors
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