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Churchill Downs and Arlington International Racecourse Announce Merger Plans

As wholly owned subsidiaries of DII, Arlington International Racecourse Inc., Arlington Management Services Inc. and Turf Club of Illinois Inc. hold and operate the Chicago-area racetrack and five off-track betting and pari-mutuel operations in Illinois.

Under the terms of the agreement, CDI will issue 3.15 million shares of its common stock upon closing to DII. The agreement also specifies the issuance of up to an additional 1.25 million shares of CDI stock to DII depending on certain developments and conditions over a future period.

CDI currently has approximately 9.9 million shares outstanding, which had a closing price of $22.69 yesterday. DII has entered into a stockholder agreement that will provide for restrictions on the voting and transfer of the shares of CDI common stock received in the merger.

The transaction remains subject to customary closing conditions, including the approval of the Illinois Racing Board and approval of CDI shareholders at a special meeting that is expected to be held during the third quarter. Assuming those conditions are met, closing of the transaction is expected promptly following the shareholders' special meeting. The transaction will be accounted for as a purchase.

Richard L. Duchossois, chairman of DII, will serve as a CDI director, as a member of the board's executive committee and as chairman of Arlington's operating board. DII will be entitled initially to designate three members of the CDI board of directors, which will be expanded from 12 to 15 members. Scott Mordell will continue as the track's president and chief executive officer.

``The horse racing industry is consolidating in response to a changing market and new distribution systems,'' said Thomas H. Meeker, CDI's president and chief executive officer.

``Our merger with Arlington is the beginning of a strategic relationship that will enable us to combine resources with a world- class operation that is committed to quality live racing, positioning both companies for future growth in this changing industry.

``Arlington and Illinois racing are important to the national racing industry. As CDI continues to pursue opportunities to aggregate more racing content under our brand, Arlington will boost the annual number of CDI racing programs by 18 percent.

Additionally, this agreement will particularly enhance our position in the sizeable Chicago market and expand the Churchill Downs Simulcast Network by adding a signal that is well known throughout the United States and in major international markets. We are truly excited about having Dick Duchossois join CDI as a member of our board. He has shown a true passion for our industry and effective leadership in showcasing racing at Arlington.

``Our successful integration of Ellis Park, Calder Race Course and Hollywood Park into our existing operations over the last two years reinforces our optimism about this transaction. With the resulting four racetracks in Illinois, Indiana and Kentucky, we believe our merger with Arlington will create exciting opportunities to strengthen the Midwest racing circuit.

Additionally, the demonstrated capability of Arlington's management will help us embrace the racetrack under our brand and ensure that Arlington continues to offer the premier racing experience to its guests and maintain its important role in the community.''

Duchossois, commenting on the merger, stated, ``We believe this merger will allow us to complement the Arlington brand of excellence with that of Churchill Downs, the best-known brand in horse racing.

``We believe CDI's business strategy and commitment to excellence are aligned with our own operating philosophy. We have a shared vision of dedication to customer service, commitment to the live racing experience and growth of simulcast sales.

This business combination will enable us to coordinate quality racing schedules throughout the Midwest and will greatly benefit Illinois racing. I look forward to joining with a dynamic company like CDI and continuing my involvement with Arlington.''

Meeker added, ``Our decision to use stock to facilitate this transaction will have a positive impact on CDI's overall financial position. We will strengthen our balance sheet by decreasing our leverage, and combining resources with a well-managed organization like Arlington should increase our access to capital, positioning the Company for continued growth.''

The contingent shares involved in this transaction relate principally to the timing of the planned opening of a relocated riverboat casino in Rosemont, Ill. Under full implementation of legislation recently passed by the state of Illinois, Arlington will receive certain payments from the Illinois Horse Racing Equity Fund, whose funds are derived from the riverboat casino's revenues. The final determination of any additional number of shares to be issued will be based on the financial benefit derived through the Fund in the casino's first year of operation.

Arlington International Racecourse is one of the world's premier Thoroughbred racetracks. The racetrack's 2000 meet runs from May 14 through Sept. 30 and features the $2 million Arlington Million, one of the world's richest races, on Aug. 19. Located outside of Chicago in Arlington Heights, Ill., Arlington originally opened in 1927 and was rebuilt after a 1985 fire. The racetrack operates pari-mutuel facilities in Chicago, Arlington Heights, Rockford, Waukegan, and East Moline, Ill. Arlington can be found on the Internet at www.arlingtonpark.com .

Churchill Downs Incorporated, headquartered in Louisville, Ky., is one of the world's leading horse racing companies. Its flagship operation, Churchill Downs, is home of the Kentucky Derby and hosted its 126th running on May 6, 2000. The Company owns additional racetracks in Kentucky, California and Florida and has interests in an Indiana pari-mutuel operation as well as various racing services companies. Churchill Downs Incorporated can be found on the Internet at www.kentuckyderby.com .

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