EXHIBIT 2.1

LEASE AGREEMENT

between

CITY OF LOUISVILLE, KENTUCKY
Lessor

and

CHURCHILL DOWNS INCORPORATED
Lessee

Dated as of January 1, 2002

This Instrument Prepared by:

/s/ JOHN S. EGAN
John S. Egan
FROST BROWN TODD LLC
400 W. Market Street, 32nd Flr.
Louisville, Kentucky 40202
(502) 589-5400

1.  DEFINED TERMS..........................................................3

2.  GRANT AND TERM OF LEASE................................................3

3.  RENT...................................................................4

4.  OPTION TO PURCHASE.....................................................5

5.  TITLE, USE AND QUIET ENJOYMENT.........................................8

6.  COVENANT FOR OPERATION AND MAINTENANCE.................................8

7.  INSURANCE..............................................................9

8.  TAXES AND OTHER GOVERNMENT CHARGES....................................10

9.  CONDEMNATIONS; CASUALTY...............................................11

10. ALTERATIONS AND ADDITIONS.............................................13

11. NON-PROJECT PROPERTY; REMOVAL OF PROPERTY FROM THE PROJECT............13

12. DEFAULT...............................................................14

13. WAIVER OF REQUIREMENTS................................................15

14. NOTICES...............................................................15

15. CONSTRUCTION OF LEASE.................................................17

16. CAPTIONS..............................................................17

17. ASSIGNMENT/BINDING ON SUCCESSORS......................................17

18. SHORT FORM LEASE......................................................18

19. ESTOPPEL CERTIFICATES.................................................18

20. CONSENT TO ADDITIONAL MORTGAGES.......................................19

21. SEVERABILITY..........................................................20

22. FURTHER ASSURANCES....................................................20

23. GOVERNING LAW.........................................................20

24. ENTIRE AGREEMENT......................................................20

                                     - i -

25. COUNTERPARTS..........................................................20

26. MISCELLANEOUS.........................................................20

27. NO PERSONAL LIABILITY.................................................21

28. PREPAYMENT............................................................21

29. OTHER LESSOR EXPENSES.................................................21

30. LIMITATION OF LIABILITY OF LESSOR.....................................21

31. NO PERSONAL RECOURSE..................................................21

LEASE AGREEMENT

THIS LEASE AGREEMENT (the "Lease"), dated as of January 1, 2002, between

the CITY OF LOUISVILLE, KENTUCKY, a municipality and political subdivision of

the Commonwealth of Kentucky, having an address at 601 West Jefferson Street,

Louisville, Kentucky 40202 ("Lessor") and CHURCHILL DOWNS INCORPORATED, a

Kentucky corporation, having an address at 700 Central Avenue, Louisville,

Kentucky 40208-1200 ("Lessee"):

WHEREAS, Lessee is in the process of expanding and renovating the

historic racetrack facility known as "Churchill Downs Racetrack" (the

"Facility") located at 700 Central Avenue, Louisville, Kentucky (the "Site");

WHEREAS, the Project (as defined in the Loan Agreement, defined below)

as proposed by Lessee will be utilized to make horseracing, entertainment,

dining, pari-mutuel wagering and other recreational activities available to the

public, and the racetrack facility, as improved by the Project, will be a

"recreation park" within the meaning of Chapter 103 of the Kentucky Revised

Statutes (the "Act");

WHEREAS, Lessor has determined that the Project will enhance Churchill

Downs Racetrack as a unique asset of Lessor, will create and preserve jobs for

the community (both during construction and thereafter during operation of the

Project) and will increase tax revenues for Lessor;

WHEREAS, Lessee has requested that Lessor issue industrial building

revenue bonds under the Act in order to provide financing for the Project;

WHEREAS, Lessor has determined that the issuance of industrial

building revenue bonds in connection with the Project will promote the economic

development of Lessor

and the Commonwealth of Kentucky (the "Commonwealth"), will help relieve

conditions of unemployment through the creation of construction and other jobs

and will further improve the status of Churchill Downs Racetrack as a "world

class" recreational destination, thereby helping to make Lessor and the

Commonwealth more attractive to industry and helping to encourage the increase

of industry in the Commonwealth;

WHEREAS, Lessor is therefore issuing its City of Louisville, Kentucky

Taxable Industrial Building Revenue Bond, Series 2002 (Churchill Downs

Incorporated Project), in an amount of $153,000,000, issued as a single

draw-down Bond (the "Bond") pursuant to the Act; and

WHEREAS, pursuant to that certain Loan Agreement (the "Loan

Agreement") of even date herewith by and among Lessor, Lessee, and Churchill

Downs Investment Company, a Kentucky corporation (the "Lender"), Lender has

agreed to purchase the Bond of Lessor and make the Loan(s) (as defined in the

Loan Agreement) to Lessor in accordance with the provisions of the Loan

Agreement; and

WHEREAS, the proceeds of such Bond are and will be advanced directly

to Lessee pursuant to the Loan Agreement and used to assist Lessee with the

financing of certain costs of the Project; and

WHEREAS, in order to permit the issuance of the Bond under the Act for

the purposes of financing the costs of the Project, Lessee is simultaneously

conveying to Lessor, subject to the Existing Mortgage and the Existing Security

Agreement, the Site on which the existing facilities are being renovated and

expanded, together with improvements, fixtures, machinery and equipment and

other tangible personal property now or hereafter located thereon, and Lessor

and Lessee wish to simultaneously enter into this Lease pursuant to which Lessee

will lease back

such land, improvements, fixtures, machinery and equipment and other tangible

personal property from Lessor in return for rental payments sufficient to pay

debt service on the Bond;

WHEREAS, Lessee has agreed to make lease payments to Lessor under this

Lease in amounts equal to the amounts due from Lessor to the Lender under the

Bond and, pursuant to the Lease, Lessor has directed that Lessee make payments

otherwise payable by it hereunder to Lessor directly to the Lender; and

WHEREAS, in connection with the transactions contemplated by the Loan

Agreement the parties hereto desire to enter into this Lease;

NOW, THEREFORE, in consideration of the mutual covenants hereinafter

set forth and of the premises, the parties hereto enter into this Lease as

follows:

1 DEFINED TERMS. All capitalized terms used and not otherwise

defined herein shall have the respective meanings assigned thereto in the Loan

Agreement.

2. GRANT AND TERM OF LEASE. Upon the term and conditions

hereinafter set forth and subject to the Existing Mortgage and the Existing

Security Agreement, Lessor hereby leases to Lessee, and Lessee leases from

Lessor, all of the following (collectively, the "Leased Premises"): the land and

all buildings, structures, other improvements and fixtures now standing or at

any time hereafter constructed or placed upon the Site, including, without

limitation, all of the foregoing which are included in or constitute a part of

the Facility (said buildings, structures, other improvements and fixtures being

herein collectively called the "Improvements") and all equipment, machinery,

furniture, furnishings and removable fixtures of every kind and nature (the

"Tangible Personal Property" as more particularly described in the Bill of Sale)

whatsoever which are now or at any time hereafter located in or upon, or affixed

to, the Site (the description of which site is attached hereto and made a part

hereof as EXHIBIT A hereto) and/or any

Improvements which now or hereafter are used or useful in connection with, or

constitute a part of, the Facility. The Leased Premises do not include any

inventory, accounts receivable or intangible personal property. The term (the

"Term") of this Lease shall be from January 1, 2002 to December 31, 2032.

Notwithstanding the foregoing, Lessee shall have the option at any time during

the Term to terminate this Lease by exercising its Option to Purchase pursuant

to Section 4 hereof; provided, however, that the indemnification obligations

from Lessee in favor of Lessor shall survive termination of the Lease, pursuant

to Article VI of the Loan Agreement.

3. RENT. Until the Rent Termination Event (hereinafter defined),

rent hereunder (the "Rent") shall be equal to the amounts payable to the Lender

pursuant to the Bond and shall be payable in the amounts and at the times

interest or principal is payable to Lender under the Bond. The Bond is a

"draw-down" bond, with principal to be advanced from the Lender to Lessee,

pursuant to the terms of the Bond. A schedule of disbursements of principal is

to be attached to the Bond. Lessor hereby irrevocably and unconditionally

directs Lessee to pay, as Rent, all amounts due under the Bond directly to the

Lender, at the times and in the manner prescribed in Bond and the Loan

Agreement. As used herein, the term "Rent Termination Event" shall mean the

earlier of (i) the payment and performance in full of all obligations of Lessee

under this Lease and the Loan Agreement and the other Bond Documents or (ii) the

termination of this Lease pursuant to the proper exercise of the Option to

Purchase, as hereinafter noted.

The obligations of Lessee to pay Rent pursuant to this Lease and to

perform and observe the other agreements and covenants on its part contained

herein shall be absolute and unconditional. Until such time as the principal of,

premium, if any, and interest on the Bond and any other amounts payable to

Lessor under any other Bond Documents shall have been fully paid or other

provision for the payment thereof shall have been made in accordance with the

Loan

Agreement, Lessee (i) shall not suspend or discontinue any Rent pursuant to this

Lease (unless consented to by the Lender), (ii) shall perform and observe all

its other agreements contained in this Lease, and (iii) except as provided in

Section 4 hereof, shall not terminate this Lease for any cause including,

without limiting the generality of the foregoing, failure to complete the

Project, failure of title of the Project or any part thereof, any acts or

circumstances that may constitute failure of consideration, destruction of or

damage to the Project, commercial frustration of purpose, any change in the tax

or other laws of the United States of America or of the Commonwealth of Kentucky

or any political subdivision thereof or any failure of Lessor to perform and

observe any agreement, whether express or implied, or any duty, liability or

obligation arising out of or connected with this Lease. Nothing contained in

this Section shall be construed to release Lessor from the performance of any of

the agreements on its part herein contained; and in the event Lessor should fail

to perform any such agreement on its part, Lessee may institute such action

against Lessor as Lessee may deem necessary to compel performance so long as

such action shall be in accordance with the agreements on the part of Lessee

contained in the preceding sentence. Lessee may, however, at its own expense and

in its own name or in the name of Lessor, prosecute or defend any action or

proceeding or take any other action involving third persons which Lessee deems

reasonably necessary in order to insure completion of the acquisition,

construction, installation and equipping of the Project or to secure or protect

Lessor's and its respective rights of ownership, possession, occupancy and use

of the Project, and in such event Lessor hereby agrees to cooperate fully with

Lessee.

4. OPTION TO PURCHASE. At (i) the scheduled expiration of the

Term of this Lease or (ii) on the first day of each month during the Term of

this Lease Agreement, Lessee shall have the option to purchase all or any

portion of the Leased Premises from Lessor for One Dollar

($1.00), subject to satisfaction of the conditions set forth in this Section 4.

The rights granted to Lessee in this Section 4 shall be deemed the "Option to

Purchase."

Lessee's right to exercise its Option to Purchase hereunder is

conditioned upon satisfaction of all of the following conditions:

(i) the absence of any default under the Insurance

Agreement (provided that any default which has been

waived by the non-defaulting party may be disregarded

for purposes of this sentence);

(ii) the payment of, or provision to Lessor of

adequate security ("adequate security" to be determined

by Lessor in its reasonable discretion) for, any fees,

expenses, claims, other amounts or payments then due to

Lessor and for other obligations incurred and to be

incurred by the Lessor in connection with the Project

or under the Loan Agreement, the Lease, the Insurance

Agreement or the other Bond Documents (provided, that,

to the extent that Lessor has any fees, expenses or

claims against Lessee for indemnification arising under

either Section 6.5 or Section 7.11 of the Loan

Agreement, Lessee will be deemed to have provided

adequate security to Lessor for such fees, expenses or

claims by providing Lessor with evidence that it is in

compliance with the requirements of Section 7 of this

Lease and the Insurance Agreement) or the other Bond

Documents;

(iii) the payment of any ad valorem taxes then due

and payable to the City, the School District, the

Commonwealth of Kentucky and other local taxing

authorities with respect to the Project;

(iv) Lessee's delivery to Lessor of a statement in

writing from Lender acknowledging that the amounts due

under the Loan Agreement (including the Bond) have been

paid in full or forgiven; and

(v) Lessee's delivery to Lessor of at least

fifteen (15) days prior written notice stating (a) that

Lessee wishes to exercise the Option to Purchase, (b)

that the conditions for exercise of the Option to

Purchase under Section 4 of the Lease are satisfied

(acknowledging, however, that Lessor, in its reasonable

discretion, shall be entitled to determine whether in

fact such conditions have been satisfied insofar as

they affect Lessor's rights), and (c) the time, date

and place at which closing of the transfer of the title

to the Leased Premises shall occur.

If Lessee properly exercises the Option to Purchase granted under this Section

4, and all of the foregoing conditions have been met, Lessor shall, on the date

and at the time and place specified in Lessee's notice of exercise, convey to

Lessee, by quitclaim deed and bill of sale with no warranties, all of Lessor's

right, title and interest to the Leased Premises. Lessee shall bear all cost and

expenses in connection with the preparation of the documents of conveyance and

the delivery thereof and all fees, assessments, taxes and charges in connection

with the conveyance of title to the Project. Notwithstanding any of the

foregoing to the contrary, if (i) Lessee properly gives notice of its Option to

Purchase hereunder to Lessor, (ii) all of the foregoing conditions have been met

and (iii) Lessor fails to execute and deliver a quitclaim deed and bill of sale

to Lessee, legal and equitable title to the Leased Premises shall automatically

be transferred from Lessor to Lessee notwithstanding the fact that no quitclaim

deed and no bill of sale has been executed by Lessor. It is the intention of the

parties that at the conclusion of the Term of the Lease or at the conclusion of

the Term of the Lease pursuant to the Option to Purchase, title to

the Leased Premises shall automatically be vested in Lessee, subject to any of

the foregoing limitations to the extent applicable. Upon conveyance of title and

payment therefor as aforesaid, this Agreement shall cease and terminate and all

obligations of Lessee and Lessor hereunder, except obligations pertaining to

indemnification, shall be terminated and extinguished.

5. TITLE, USE AND QUIET ENJOYMENT. Lessor covenants, warrants and

represents that at all times prior to the expiration or other termination of

this Lease when Lessee is not in default hereunder or under other Bond Documents

beyond applicable grace periods, if any, the peaceable and quiet enjoyment of

the Leased Premises by Lessee shall not be disturbed by Lessor; provided,

however, that Lessor (in its capacity as a municipal body and not as landlord

hereunder) shall not be prevented from enforcing, as against Lessee or the

Leased Premises, any laws of general application heretofore or hereafter enacted

by Lessor (in its capacity as a municipal body).

6. COVENANT FOR OPERATION AND MAINTENANCE. Lessor shall have no

responsibility for the maintenance, operation or repair of the Leased Premises

or any expenses associated therewith. So long as any Bond is outstanding, Lessee

will maintain, preserve and keep the Project, or cause the Project to be

maintained, preserved and kept, in good repair, working order and condition and

will from time to time make or cause to be made all proper repairs, replacements

and renewals necessary to continue to constitute the Project as an industrial

building project under KRS Chapter 103; provided, however, that Lessee will have

no obligation to maintain, preserve, keep, repair, replace or renew any element

or portion of the Project (i) the maintenance, preservation, keeping, repairing,

replacement or renewal of which becomes uneconomical to Lessee because of damage

or destruction by a cause not within the control of Lessee, or condemnation of

all or substantially all of the Project or obsolescence (including

economic obsolescence) or change in government standards and regulations, and

(ii) with respect to which Lessee has furnished to Lessor and the Lender a

certificate executed by Lessee certifying that the maintenance, preservation,

keeping, repair, replacement or renewal of such element or unit of the Project

or the Project itself is being discontinued for one of the foregoing reasons,

which shall be stated therein.

7. INSURANCE. During the Term of this Lease, and in addition to

the requirements of the Existing Mortgage, the Existing Security Agreement, any

Leasehold Mortgage and the Insurance Agreement, Lessee covenants to maintain

insurance (at Lessee's own expense) as follows:

(a) Lessee shall continuously at all times during the Lease Term

maintain insurance against such risks as are customarily insured against by

businesses of like size and character, paying as the same become due all

premiums in respect thereto, including, without limitation, public liability

insurance.

(b) All insurance shall be taken out and maintained with

generally recognized responsible insurance companies qualified to do business in

the Commonwealth of Kentucky and may be written with deductible amounts

comparable to those on similar policies by other businesses of like size and

character. Each public liability insurance policy with respect to the Leased

Premises shall name Lessor as an additional insured. Lessee shall not permit any

condition to exist with respect to the Leased Premises which would wholly or

partially invalidate the insurance thereon. Unless a policy with such an

undertaking is unavailable or is available only at a cost which Lessee

reasonably determines to be unreasonable, each policy shall contain an

undertaking by the insurer that such policy shall not be modified adversely to

the interest of Lessor or cancelled without at least thirty (30) days' prior

notice to Lessor.

(c) Notwithstanding any provision hereof to the contrary, Lessee

shall also maintain liability insurance in at least the minimum amount required

by the Insurance Agreement. Lessee shall cause its policy or policies for

liability insurance to name Lessor an as additional insured and additional loss

payee.

(d) Notwithstanding any provision hereof to the contrary, but

subject to the Insurance Agreement, Lessee may self-insure any insurance

required hereunder.

8. TAXES AND OTHER GOVERNMENT CHARGES. It is understood, acknowledged

and agreed by the parties that pursuant to KRS 103.285, the Project and the

Leased Premises are intended to be exempt from taxation by Lessor and other

political subdivisions in Kentucky to the same extent as other public property

used for public purposes, as long as the same are owned by Lessor. Except for

such taxes exempted by virtue of KRS 103.285, Lessee covenants and agrees to pay

during the term of this Lease, as the same respectively become due, as

additional lease rentals, all other taxes, payments in lieu of taxes,

assessments and other governmental charges of any kind whatsoever, if any, that

may at any time be lawfully assessed, levied or charged against or with respect

to the Project or any payments made or to be made pursuant to this Lease;

provided, that with respect to special assessments or other governmental charges

that may lawfully be paid in installments over a period of years, Lessee shall

be obligated to pay only such installments as may have become due. Additionally,

Lessee agrees to pay to the Jefferson County School District payments in lieu of

taxes equal to the amounts which would have been due and payable by Lessee

absent the application of KRS 103.285.

Lessee may, at its expense and in its own name, in good faith contest

any such asserted taxes, assessments and other governmental charges and, in the

event of any such contest, may permit the taxes, assessments or other

governmental charges so contested to remain unpaid

during the period of such contest and any appeal therefrom unless Lessor shall

notify Lessee that, in the opinion of its counsel, by nonpayment of any such

items the security provided pursuant to the provisions of this Lease will be

materially endangered, in which event such taxes, charges for payments in lieu

of taxes, assessments or charges shall be paid forthwith or such other

arrangements to protect the interests of the Lessor as are acceptable to Lessor

shall be made. Lessor will cooperate fully with Lessee in any such contest. In

the event Lessee shall fail to pay any of the foregoing items required by this

Section to be paid by Lessee, Lessor or the Lender may (but shall be under no

obligation to) pay the same and any amounts so advanced therefor by Lessor or

the Lender shall become an additional obligation of Lessee to the one making the

advancement, which amounts, together with interest thereon, Lessee agrees to

pay. Lessee may, at its expense and in its own name and behalf, apply for any

tax exemption or exemption from payments in lieu of taxes allowed by the

Commonwealth of Kentucky, or any political or taxing subdivision thereof under

any existing or future provisions of law which grants or may grant any such tax

exemption or exemptions from payments in lieu of taxes.

9. CONDEMNATIONS; CASUALTY.

(a) In the event of any taking of the Leased Premises or any

portion thereof under the power of eminent domain, or otherwise by any public or

quasi-public authority (or any conveyance of the Leased Premises or any portion

thereof in lieu of or in anticipation of any such taking), subject to the

Existing Mortgage, the Existing Security Agreement and any Leasehold Mortgage,

(i) this Lease shall, upon the vesting of title pursuant to such taking or

conveyance, terminate as to the portion of the Leased Premises so taken; (ii)

if, in the judgment of Lessee the restoration or continued operation of the

Improvements after such taking or conveyance is not economically feasible, and

no default hereunder then exists which remains

unwaived by the Lender or Lessor, Lessee may, upon fifteen (15) days prior

written notice to Lessor and with the prior written consent of the Lender (and

in addition to any other rights of cancellation to which Lessee may be entitled

hereunder), terminate this Lease as to the remainder of the Leased Premises by

exercising the Option to Purchase pursuant to Section 4 hereof. Subject to the

Existing Mortgage, the Existing Security Agreement, any Leasehold Mortgage, the

Insurance Agreement and the rights of Lessor to indemnification under any Bond

Documents, all such proceeds shall first be applied to the restoration of the

Improvements (if Lessee shall elect to restore the same) or the removal thereof,

and any balance thereof remaining after such application shall be paid only to

Lessee.

(b) In the event of any damage or destruction to the Leased

Premises by fire or other casualty, subject to the Existing Mortgage, the

Existing Security Agreement, any Leasehold Mortgage, the Insurance Agreement and

the rights of Lessor to indemnification under any Bond Documents, all proceeds

shall first be applied to the restoration of the Improvements (if Lessee shall

elect to restore the same) or the removal thereof, and any balance thereof

remaining after such application shall be paid only to Lessee. If, in the

judgment of Lessee, the restoration of the Improvements and their continued

operation thereafter is not economically feasible, Lessee may, if not in default

hereunder, subject to the Existing Mortgage, the Existing Security Agreement,

any Leasehold Mortgage, the Insurance Agreement and the rights of Lessor to

indemnification under any Bond Documents, upon fifteen (15) days' prior written

notice to Lessor and with the prior written consent of the Lender (and in

addition to any other rights of cancellation to which Lessee may be entitled

hereunder), terminate this Lease by exercising the Option to Purchase pursuant

to Section 4 hereof. Notwithstanding whether Lessee exercises the Option to

Purchase, subject to the Existing Mortgage, the Existing Security Agreement, any

Leasehold Mortgage, the Insurance Agreement and the rights of Lessor to

indemnification under any Bond Documents, Lessee shall be entitled to settle all

insurance claims and to receive all insurance proceeds.

10. ALTERATIONS AND ADDITIONS. Lessee shall have the privilege of

requesting additional assistance in completing the Project, by issuance of

additional issues of bonds (subject to acceptance of such request by Lessor, if

Lessor is asked to issue such bonds) or through financing from other sources,

and for the making of alterations, additions and improvements upon, in and to

the Project, as it in its discretion may from time to time determine to be

desirable for its use and purposes and as do not adversely affect the use,

operating unity or value of the Project or the structural integrity of any

building or other structure forming a part thereof. Any or all of said

alterations, additions, or improvements shall be located wholly within the

boundary lines of the Site and comply with all applicable federal, state and

local laws and regulations thereunder. All such alterations, additions and

improvements, except structures which are independent of the Project and not

connected thereto by party walls and with respect to which release of a portion

of the Site has been made, shall become part of the Project.

11. NON-PROJECT PROPERTY; REMOVAL OF PROPERTY FROM THE PROJECT. It

is recognized and acknowledged that Lessee may install in and about the Project

at its own expense machinery, equipment and other general property to which it

may choose to retain title. All such machinery, equipment and property shall

remain the sole property of Lessee and shall not be conveyed to Lessor.

Nothing contained in this Lease shall prohibit or prevent Lessee from

leasing machinery, equipment or other property or from purchasing such property

for use in or about the Project under a conditional sales contract, lease sale

contract or subject to vendor's lien or security

interest as security for the unpaid portion of the purchase price thereof,

provided no such lien or security interest shall otherwise attach to the

Project. Lessor and the Lender, if requested by the Borrower, shall consent to

the installation of any such machinery, equipment or other property and waive

and relinquish to the seller or lessor thereof, as the case may be, all right of

levy for rent and all claims and demands of every kind against any such property

installed or to be installed under any such lease or contract.

Lessee shall have the right, in its reasonable discretion, to replace

any tangible real or personal property constituting a portion of the Property

with other tangible real or personal property of equal or greater value or to

sell any tangible real or personal property constituting a portion of the

Property so long as the aggregate value of all such real or personal property

sold without replacement is less than five percent (5%) of the value of the

Project.

12. DEFAULT. If (i) Lessee fails to pay the Rent specified in Section 3

hereof to the Lender at the times and in the manner provided herein and such

failure continues for sixty (60) days after notice from Lender to Lessee and

Lessor, or (ii) Lessee defaults under the Insurance Agreement or otherwise

materially fails to comply with the terms of Section 7 hereof and such default

or failure continues for fifteen (15) days after notice from Lessor to Lessee,

or (iii) Lessee defaults in compliance with any other material obligation or

covenant owing from Lessee to Lessor hereunder and fails to cure such default

within sixty (60) days after notice to cure such default (provided, however,

that if at the end of the 60-day period referred to in clause (iii) Lessee is

attempting to cure a default of the nature referred to in such clause with due

diligence, such sixty (60) day period shall be extended for so long as Lessee

continues to attempt to cure such default), then Lessor may, at Lessor's option

and in addition to any and all other rights and remedies that Lessor may have at

law or in equity, terminate this Lease, without prejudice to any

rights of indemnification Lessor may have hereunder or under the Loan Agreement

or under the Insurance Agreement (which rights shall survive any such

termination). In addition, upon the occurrence of a default referred to in (ii)

above and the continuation of such default or failure for fifteen (15) days

after notice from Lessor to Lessee, Lessor may, if it determines to do so in its

sole discretion, immediately cause the Leased Premises to be transferred back to

Lessee. The occurrence of any default under this Lease shall not derogate from

the right of Lessee to exercise its Option to Purchase under Section 4 hereof,

which right shall remain in effect upon termination of this Lease following a

default, and which right may be exercised upon Lessee's satisfaction of the

conditions set forth in Section 4 hereof.

13. WAIVER OF REQUIREMENTS. No requirement whatsoever of this Lease

shall be deemed waived or varied except in writing, nor shall Lessor's or

Lender's acceptance of any payment with knowledge of any default constitute a

waiver of Lessor's or Lender's rights thereby nor of any subsequent or continued

breach of any requirements of this Lease. All remedies herein provided for shall

be in addition to, and not in substitution for, any remedies otherwise available

to Lessor or Lessee.

14. NOTICES. All notices, requests, consents and other communications

("Notices") required or contemplated by the provisions hereof shall be in

writing and personally delivered, or sent by facsimile, telecopy, telex,

telegram, cable, mail (by certified or registered mail, return receipt

requested, fully prepaid) or by reputable overnight courier, fully prepaid, as

to each party hereto, at its address set forth below or at such other address as

shall be designated by such party in a notice to the other party hereto given

pursuant to this Section. All notices shall be effective (i) if personally

delivered on a Business Day during normal business hours in the time zone in

which delivered, when so delivered, (ii) if sent by telecopy, telex, telegram or

cable during

normal business hours in the time zone in which delivered, when so received, or

the next Business Day if sent after normal business hours in the time zone sent

to, (iii) if so mailed, upon receipt thereof and (iv) if by such courier, on the

next Business Day, except that if such courier shall be delivering to a foreign

country, three Business Days after being given to such courier. For the purposes

of this Section, the term Business Day shall mean a day that is a business day

in the city to which such notice is transmitted. A copy of all notices sent by

either party hereto shall be sent by such party to the Lender at the address set

forth below concurrently with such notice being sent to the other party

       Lessor:           City of Louisville, Kentucky
                         601 West Jefferson Street
                         Louisville, Kentucky 40202
                         Attention: Mayor
                         Facsimile:  (502) 574-4201
                         Telephone: (502) 574-3061

With copy to:            David Morris
                         City of Louisville, Kentucky
                         601 West Jefferson Street
                         Louisville, Kentucky 40202
                         Facsimile:  (502) 574-4215
                         Telephone: (502) 574-3348


       Lessee:           Churchill Downs Incorporated
                         700 Central Avenue
                         Louisville, Kentucky  40208-1200
                         Attention:  Michael Miller
                         Senior Vice President Finance
                         Facsimile:  (502) 638-3908
                         Telephone:  (502) 636-3842

With a copy to:            Rebecca C . Reed
                           Senior Vice President and General Counsel
                           Churchill Downs Incorporated
                           700 Central Avenue
                           Louisville, Kentucky  40208-1200
                           Facsimile:  (502) 636-4439
                           Telephone:  (502) 636-4429

         Lender:           Churchill Downs Investment Company
                           700 Central Avenue
                           Louisville, Kentucky  40208-1200
                           Attention: Robert L. Decker, President
                           Facsimile: (502) 636-4348
                           Telephone:  (502) 636-4588

15. CONSTRUCTION OF LEASE. Words of any gender used in this Lease shall

be held to include any other gender, and words in the singular number shall be

held to include the plural, when the same requires. Wherever used herein, the

words "Lessor" and "Lessee" shall be deemed to include the permitted successors,

sublessees and assigns of the parties, unless the context excludes such

construction.

16. CAPTIONS. The captions as to contents of particular sections or

paragraphs herein are inserted only for convenience, and are in no way to be

construed as part of this Lease or as a limitation on the scope of the

particular sections or paragraphs to which they refer.

17. ASSIGNMENT/BINDING ON SUCCESSORS. This Lease may not be assigned by

Lessor, unless such assignment or other action is required by law or is

necessary to preserve Lessor's indemnification and other rights, except that

this Lease may be assigned by Lessor to the Lender. Unless such assignment or

other action is required by law or is necessary to preserve Lessor's

indemnification and other rights, Lessor may not assign, encumber, sell,

transfer or convey all or any part of its interest in the Leased Premises or any

portion thereof, including, without limitation, placing any liens on its

interest in the Leased Premises or any portion thereof.

If there is no default under the Loan Agreement, this Lease or

Insurance Agreement, this Lease may be assigned, and/or the Leased Premises

sublet in whole or in part, by Lessee without Lessor's consent to any reputable

Person who agrees to assume and accept the duties of Lessee hereunder and under

the Loan Agreement and Insurance Agreement. The term "reputable Person" shall

include, without limitation, any present or future holders of or any

participants in any Leasehold Mortgage on the leasehold interest hereunder or on

the fee interest under the Existing Mortgage or any interest in the Tangible

Personal Property under the Existing Security Agreement, and/or the designee(s)

of any such holders and/or participants and/or any purchasers of such leasehold

interest or such fee interest upon the foreclosure of, or by assignment in lieu

of the foreclosure of, any such mortgage. All the provisions herein contained

shall bind and inure to the benefit of the parties hereto, their successors and

legal representatives and their permitted assigns.

Lessor and Lessee agree that any interest of Lessor under this Lease

held by Lessor as of January 1, 2003 shall on such date and thereafter be deemed

to be held by Louisville Jefferson County Metro Government, as statutory

successor to Lessor.

Nothing in this Section 17 shall limit Lessee's right to lease suites,

corporate boxes and other facilities constituting a portion of the Leased

Premises in the normal course of Lessee's operation of the Leased Premises.

18. SHORT FORM LEASE. Either party shall, upon request of the other,

execute in recordable form a short form lease for the purpose of recordation.

19. ESTOPPEL CERTIFICATES. Lessor will execute, acknowledge and deliver

promptly upon request by Lessee, a certificate certifying (i) that this Lease is

unmodified and in full force and effect (or, if there have been modifications,

that this Lease is in full force and effect as

modified, stating the date of each instrument so modifying the Lease and having

attached thereto a copy thereof), and (ii), without independent investigation,

whether any default of Lessee known to it exists hereunder and, if any such

default exists, specifying the nature and period of existence thereof and what

action it is taking or proposes to take with respect thereto, and whether notice

thereof has been given to Lessee. Lessor shall be entitled to rely upon

certificates from Lender and Lessee exclusively in providing such

certificate(s). Any such certificate may be relied upon by any prospective

purchaser, pledgee, mortgagee or other transferee of Lessee's interest under

this Lease, but shall be completely without prejudice as to rights of Lessor as

to the existence of actual defaults.

20. CONSENT TO ADDITIONAL MORTGAGES. Provided that Lessee is not in

default under this Lease, the Loan Agreement or the Insurance Agreement, to the

extent Lessee advises Lessor that it is replacing the Existing Credit Agreement

with another principal credit facility or credit facilities, or supplementing

the Existing Credit Agreement with another principal credit facility or credit

facilities, or replacing or supplementing any of the foregoing (collectively,

the "Additional Credit Facilities") in favor of PNC Bank, National Association

("PNC") or other lenders (collectively, the "Additional Lenders"), Lessor agrees

that it will (i) consent to Lessee's entry into additional leasehold mortgages

with any Additional Lenders and agree to give such Additional Lenders reasonable

notice of, and opportunity to cure, defaults of the Lessee hereunder or under

the Loan Agreement and (ii) if required by such Additional Lenders, enter into

(a) a non-recourse mortgage of the Lessor's interest in the Site and the Leased

Premises to additionally secure Lessee's obligations to the Additional Lenders

and (b) a non-recourse security agreement concerning Lessor's interest in the

Tangible Personal Property to secure the

obligations of Lessee and any guarantors party to the Additional Credit

Facilities to the Additional Lenders.

21. SEVERABILITY. If any provision of this Lease is invalid or

unenforceable as to either of the parties, the remainder of this Lease shall not

be affected thereby.

22. FURTHER ASSURANCES. Each party shall execute, acknowledge and

deliver such documents and other instruments and perform such acts as may be

reasonably required by the other party or the Lender, in order to give full

effect to this Lease or to facilitate the recording of the short form of lease

referred to in Section 18 above.

23. GOVERNING LAW. This Lease shall be governed by, and construed in

accordance with, the laws of the Commonwealth of Kentucky applicable to

agreements made in and to be performed wholly within such Commonwealth.

24. ENTIRE AGREEMENT. This Lease contains all of the agreements and

conditions made between the parties hereto regarding the subject matter of this

Lease and may not be modified orally or in any other manner than by an agreement

in writing signed by all of the parties hereto or their respective successors in

interest.

25. COUNTERPARTS. This Lease may be executed in counterparts, any one

or series of which, when executed by all parties, shall be deemed one

instrument.

26. MISCELLANEOUS. Notwithstanding anything to the contrary contained

herein, Lessee shall have the right, without the consent of Lessor, to dispose

of or make alterations and changes to the Leased Premises including furniture,

fixtures and equipment thereon, so long as (i) such alterations or changes do

not materially adversely affect the value of the Project as whole and (ii) such

alterations or changes do not affect the status of the Project as an "industrial

building" within the meaning of the Act.

27. NO PERSONAL LIABILITY. No officer, official, director, employee,

agent or representative of, and no shareholder (in such capacity) or

incorporator (in such capacity) of, any party hereto (or any partner in any such

party which is a partnership) shall have any liability whatsoever under this

Lease in connection with the transactions contemplated hereby, whether or not

the transactions contemplated hereby are consummated in accordance with the

terms hereof, provided, however, that nothing in this Section 27 shall diminish

or impair the obligations of any party to this Lease, the Loan Agreement, the

Insurance Agreement or any other Bond Document to which it is a party.

28. PREPAYMENT. Lessee shall have the right to cause Lessor to prepay

the Bond in whole or in part, upon the written direction of Lessee, but solely

with monies furnished to Lessor by Lessee.

29. OTHER LESSOR EXPENSES. Anything to the contrary herein

notwithstanding, Lessee shall pay any reasonable expenses (including but not

limited to reasonable attorney's fees and other charges of the Lessor) not

specifically mentioned herein which are reasonably incurred by Lessor, after

notice to Lessee, in connection with the Project, this Lease, the Loan

Agreement, the Insurance Agreement, the Bond or the other Bond Documents.

30. LIMITATION OF LIABILITY OF LESSOR. In the event of any default by

the Lessor hereunder and notwithstanding the provisions of Section 31 below, the

liability of the Lessor to the Lessee shall be enforceable only out of Lessor's

interest in the Project and under this Agreement and there shall be no other

recourse for damages by the Lessee against the Lessor, its officers, members,

agents and employees, or any of the property now or hereafter owned by it or

them.

31. NO PERSONAL RECOURSE. No recourse shall be had for any claim based

on (i) the

Lease, (ii) the Loan Agreement, (iii) the Bond, (iv) the Consent Waiver and

Estoppel between the Lessor and PNC, or (v) the Leasehold Mortgage and Security

Agreement between Lessee and PNC with a Joinder by the Lessor, against the

Lessor or any member, officer or employee past, present or future, of the Lessor

or of any successor body as such, either directly or through the Lessor or any

such successor body, under any constitutional provision, statute or rule of law

or by the enforcement of any assessment or penalty or otherwise.

[Remainder of this Page Left Blank Intentionally]

IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease on the

date set forth below.

LESSOR:

THE CITY OF LOUISVILLE, KENTUCKY

By:/s/ DAVID L. ARMSTRONG
       Name: David L. Armstrong
       Title: Mayor
Date: DECEMBER 23, 2002

ATTESTED:

/s/ KATHLEEN J. HERRON
Clerk of the Board of Aldermen

LESSEE:

CHURCHILL DOWNS INCORPORATED

By:/s/ MICHAEL E. MILLER
Name:  MICHAEL E. MILLER
Title: SENIOR VICE PRESIDENT, FINANCE
Date:  DECEMBER 20, 2002

COMMONWEALTH OF KENTUCKY            )
                                    :     ss.:
COUNTY OF JEFFERSON                 )

The foregoing instrument was acknowledged before me on December 23, 2002 by David L. Armstrong and Kathy Herron, as the Mayor and Clerk of the Board of Aldermen, respectively, of the City of Louisville, Kentucky, a municipality and political subdivision of the Commonwealth of Kentucky, on behalf of said City.

My commission expires:SEPTEMBER 25, 2004.

(SEAL)

/s/ BRENDA K. LIVESAY
Notary Public

COMMONWEALTH OF KENTUCKY            )
                                    :     ss.:
COUNTY OF JEFFERSON                 )

The foregoing instrument was acknowledged before me on December 20, 2002 by Michael E. Miller, as the Senior Vice President, Finance of Churchill Downs Incorporated, a Kentucky corporation.

My commission expires:SEPTEMBER 6, 2006.

(SEAL)

/s/ SUE CARWILE
Notary Public

EXHIBIT A omitted consisting of a legal description of the property. The registrant will supplementally provide a copy of such exhibit to the Commission upon request.