<PAGE>
As filed with the Securities and Exchange Commission on February 11, 2000
Registration No. 333-94791
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
MAGNA ENTERTAINMENT CORP.
(formerly MI Entertainment Corp.)
(Exact name of Registrant as specified in its charter)
---------------
Delaware 7999 98-0208374
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
---------------
285 West Huntington Drive
Arcadia, California 91007
(626) 574-7233
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
DAVID A. MITCHELL
285 West Huntington Drive
Arcadia, California 91007
(626) 574-7233
(Address, including zip code, and telephone number, including area code, of
agent for service)
---------------
Copies to:
SCOTT M. FREEMAN
Sidley & Austin
875 Third Avenue
New York, NY 10022
(212) 906-2000
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
EXPLANATORY NOTE
The Registration Statement covers three distributions of the registrant's
Class A Subordinate Voting Stock:
. the distribution of these shares by Magna International Inc. to holders
of its Class A Subordinate Voting Shares and Class B Shares by way of
special dividend (the "Spin-Off Distribution");
. the distribution on a delayed or continuous basis of these shares upon
the redemption or exchange of exchangeable shares of a Canadian
subsidiary of the registrant to be distributed by Magna to some of its
Canadian shareholders as part of the special dividend referred to above
(the "Redemption Distribution"); and
. the distribution on a delayed or continuous basis of these shares by
some of the registrant's shareholders (the "Selling Shareholders
Distribution").
The Registration Statement contains two forms of prospectus: one to be used
in connection with the Spin-Off Distribution and Selling Shareholders
Distribution in the United States (the "U.S. Distribution") and one to be used
concurrently in connection with the Spin-Off Distribution and the Redemption
Distribution in Canada (the "Canadian Distribution"). The U.S. Prospectus and
Canadian Prospectus are identical except for the front cover page and certain
other pages, and except that the Canadian Propectus includes a "Certificate of
the Company and Promoter" and "Certificate of MEC Holdings (Canada) Inc.". The
form of the U.S. Prospectus is included herein and is followed by the front
cover page and other pages and certificates to be used in the Canadian
Prospectus. Each of the alternate pages for the Canadian Prospectus included
herein is labeled "Alternate Page for Canadian Prospectus".
2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth all expenses, other than the underwriting
discount, payable by the registrant in connection with the securities being
registered. All amounts shown are estimates except for the SEC registration fee
and the NASD filing fee.
<TABLE>
<CAPTION>
Amount to be Paid
-----------------
<S> <C>
SEC registration fee.................................... $
NASD filing fee.........................................
Blue Sky fees and expenses..............................
Printing and engraving expenses.........................
Accounting fees and expenses............................
Legal fees and expenses.................................
Miscellaneous...........................................
----
Total................................................... $
====
</TABLE>
Item 14. Indemnification of Directors and Officers
As permitted by Section 145 of the Delaware General Corporation Law, our by-
laws require us to indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding by reason of the fact that that person is or was or has agreed to
become one of our directors, officers, employees or agents, or has agreed to
serve at our request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. Our
indemnification obligation extends to costs, charges, expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by any such person or on his or her behalf in connection
with such an action, suit or proceeding and any appeal therefrom, if that
person acted in good faith in a manner he or she reasonably believed to be in
or not opposed to our best interests and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. Our certificate of incorporation also provides that, to the extent
permitted by law, our directors will have no liability to us or our
stockholders for monetary damages for breach of fiduciary duty as a director.
We are covered under Magna's liability insurance which provides for coverage
for our officers and directors and officers and directors of our subsidiaries,
subject to a deductible for executive indemnification. The policy does not
provide coverage for losses arising from violation of, or the enforcement of,
environmental laws and regulations.
Item 15. Recent Sales of Unregistered Securities
On November 12, 1999, we issued 650,695 shares of our Class A Subordinate
Voting Stock, par value $0.01, to Edward J. DeBartolo Corporation and Oklahoma
Racing LLC as partial consideration for the purchase of all the issued and
outstanding stock of Thistledown, Inc. The transaction involved the purchase of
all issued and outstanding stock of Thistledown, Inc. and Remington Park, Inc.
for an aggregate amount of $24.0 million of which $19.5 million was paid in
cash and $4.5 million was paid through the issuance of the Class A Subordinate
Voting Stock. This issuance was made in reliance on the exemption from
registration provided in Section 4(2) of the United States Securities Act of
1933 for transactions by an issuer not involving any public offering.
On December 10, 1999, we issued 1,012,195 shares of our Class A Subordinate
Voting Stock, par value $0.01 to Ladbroke Racing Corporation as partial
consideration for the purchase of all the issued and outstanding stock of
Ladbroke Land Holdings, Inc. and Pacific Racing Association Inc. The aggregate
amount of consideration for the transaction was $87.0 million of which $60.0
million was paid in cash $7.0 million was
II-1
<PAGE>
paid through the issuance of the Class A Subordinate Voting Stock and $20.0
million was paid by way of an interest-free promissory note. This issuance was
made in reliance on the exemption from registration provided in Section 4(2) of
the United States Securities Act of 1933 for transactions by an issuer not
involving any public offering.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
2.1 Share Purchase Agreement dated October 29, 1999 between MI Venture
Inc.
(now Magna Entertainment Corp.) and 1305272 Ontario Inc.+
2.2 Share Purchase Agreement dated October 29, 1999 between MI Venture
Inc.
(now Magna Entertainment Corp.) and Magna International Inc.+
2.3 Share Purchase Agreement dated October 29, 1999 between MI Venture
Inc.
(now Magna Entertainment Corp.) and 1346457 Ontario Inc.+
3.1 Certificate of Incorporation of Magna Entertainment Corp.,
including amendments thereto+
3.2 By-Laws of Magna Entertainment Corp.+
4.1 Form of Stock Certificate for Class A Subordinate Voting Stock
5.1 Opinion of Sidley & Austin*
10.1 Asset Purchase Agreement dated as of November 13, 1998 between MI
Developments (America) Inc., Meditrust Corporation, Meditrust
Operating Company, The Santa Anita Companies, Inc. and Santa Anita
Enterprises, Inc. together with assignment of interest from MI
Developments (America) Inc. to The Santa Anita Companies, Inc.+
10.2 Stock Purchase Agreement dated as of June 30, 1999 between MI
Venture Inc. (now Magna Entertainment Corp.) and Gulfstream
Holdings Inc. of Illinois and Gulfstream Park Racing Association
Inc.+
10.3 Stock Purchase Agreement dated as of October 21, 1999 between MI
Venture Inc. (now Magna Entertainment Corp.), The Edward J.
DeBartolo Corporation and Oklahoma Racing LLC+
10.4 Stock Purchase Agreement dated as of November 5, 1999 between MI
Venture Inc. (now Magna Entertainment Corp.) and Ladbroke Racing
Corporation+
10.5 Exchangeable Share Support Agreement dated as of December 30, 1999
between Magna Entertainment Corp. and MEC Holdings (Canada) Inc.
10.6 Voting and Exchange Agreement dated as of December 30, 1999 among
Magna International Inc., Magna Entertainment Corp. and MEC
Holdings (Canada) Inc.
10.7 Term Loan Credit Agreement dated as of November 15, 1999, as
amended from time to time, between The Santa Anita Companies, Inc
and Wells Fargo National Association+
10.8 Revolving Credit Agreement dated as of November 15, 1999 between
Los Angeles Turf Club, Incorporated and Wells Fargo National Bank+
10.9 Forebearance Agreement dated as of February 8, 2000 between Magna
International Inc. and Magna Entertainment Corp.+
10.10 Access Agreement dated as of March 1, 1999 between Magna
International Inc. and Magna Vierte Beteiligungs AG
10.11 Magna Entertainment Corp. Long-Term Incentive Plan
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.12 Employment Agreement with David A. Mitchell dated November 26,
1999 and accepted December 20, 1999
21.1 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP in respect of the Audited
Consolidated Financial Statements of Magna Entertainment Corp.+
23.2 Consent of Ernst & Young LLP in respect of the Audited Financial
Statements of Los Angeles Turf Club, Inc.+
23.3 Consent of PricewaterhouseCoopers LLP in respect of the Audited
Consolidated Financial Statements of Gulfstream Park Racing
Association, Inc. and Subsidiary+
23.4 Consent of Hill, Barth & King LLC in respect of the Audited
Financial Statements of Remington Park, Inc.+
23.5 Consent of Hill, Barth & King LLC in respect of the Audited
Financial Statement of Thistledown, Inc.+
23.6 Consent of Ernst & Young LLP in respect of the Audited Combined
Financial Statements of Golden Gate Fields+
23.7 Consent of Jerry D. Campbell to act as director+
23.8 Consent of William G. Davis to act as director+
23.9 Consent of Peter M. George to act as director+
23.10 Consent of Joseph W. Harper to act as director+
23.11 Consent of J. Terrence Lanni to act as director+
23.12 Consent of Edward C. Lunley to act as director+
23.13 Consent of Earl I. Mack to act as director+
23.14 Consent of Gino Roncelli to act as director+
23.15 Consent of Andrew Stronach to act as director+
23.16 Consent of Ronald J. Volkman to act as director+
23.17 Consent of John C. York II to act as director+
23.18 Consent of Sidley & Austin (included in Exhibit 5.1)
27.1 Financial Data Schedules+
99.1 Provisions attaching to the Exchangeable Shares of MEC Holdings
(Canada) Inc.+
</TABLE>
- --------
*To be filed by amendment
+Previously filed
(b) Financial Statement Schedules
Schedule III--Real Estate and Accumulated Depreciation
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<PAGE>
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b), if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to that information in the
registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of our securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of our securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission this indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against these liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether the
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of that
issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-1 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Toronto, in Canada, on January 14, 2000.
MAGNA ENTERTAINMENT CORP.
(Registrant)
By: /s/ James Nicol
---------------------------------
Name: James Nicol
Title: Vice Chairman and President
By: /s/ J. Brian Colburn
---------------------------------
Name: J. Brian Colburn
Title: Executive Vice-President and Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints J. Brian Colburn, Vincent Galifi, James Nicol,
and Graham Orr, and each of them (with full power to each of them to act
alone), his or her true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments pursuant to Rule 462(b) or otherwise) to
this registration statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the U.S. Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Frank Stronach
- ------------------
Frank Stronach Chairman, Chief Executive Officer and Director January 14, 2000
/s/ Graham Orr
- ------------------
Graham Orr Executive Vice-President and Chief Financial Officer January 14, 2000
/s/ James Nicol
- ------------------
James Nicol Vice Chairman, President and Director January 14, 2000
/s/ James Bromby
- ------------------
James Bromby Corporate Controller January 14, 2000
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Vincent Galifi
- ----------------------
Vincent Galifi Executive Vice President, Finance and Director January 14, 2000
/s/ J. Brian Colburn
- ----------------------
J. Brian Colburn Executive Vice President and Secretary and Director January 14, 2000
/s/ Lonny Powell
- ----------------------
Lonny Powell Executive Vice President, Racing Operations January 14, 2000
/s/ Frank DeMarco, Jr.
- ----------------------
Frank DeMarco, Jr Vice-President, Regulatory Affairs January 14, 2000
</TABLE>
II-6
<PAGE>
II. INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
2.1 Share Purchase Agreement dated October 29, 1999 between MI Venture
Inc.
(now Magna Entertainment Corp.) and 1305272 Ontario Inc.+
2.2 Share Purchase Agreement dated October 29, 1999 between MI Venture
Inc.
(now Magna Entertainment Corp.) and Magna International Inc.+
2.3 Share Purchase Agreement dated October 29, 1999 between MI Venture
Inc.
(now Magna Entertainment Corp.) and 1346457 Ontario Inc.+
3.1 Certificate of Incorporation of Magna Entertainment Corp.,
including amendments thereto+
3.2 By-Laws of Magna Entertainment Corp.+
4.1 Form of Stock Certificate for Class A Subordinate Voting Stock
5.1 Opinion of Sidley & Austin*
10.1 Asset Purchase Agreement dated as of November 13, 1998 between MI
Developments (America) Inc., Meditrust Corporation, Meditrust
Operating Company, The Santa Anita Companies, Inc. and Santa Anita
Enterprises, Inc. together with assignment of interest from MI
Developments (America) Inc. to The Santa Anita Companies, Inc.+
10.2 Stock Purchase Agreement dated as of June 30, 1999 between MI
Venture Inc. (now Magna Entertainment Corp.) and Gulfstream
Holdings Inc. of Illinois and Gulfstream Park Racing Association
Inc.+
10.3 Stock Purchase Agreement dated as of October 21, 1999 between MI
Venture Inc. (now Magna Entertainment Corp.), The Edward J.
DeBartolo Corporation and Oklahoma Racing LLC+
10.4 Stock Purchase Agreement dated as of November 5, 1999 between MI
Venture Inc. (now Magna Entertainment Corp.) and Ladbroke Racing
Corporation+
10.5 Exchangeable Share Support Agreement dated as of December 30, 1999
between Magna Entertainment Corp. and MEC Holdings (Canada) Inc.
10.6 Voting and Exchange Agreement dated as of December 30, 1999 among
Magna International Inc., Magna Entertainment Corp. and MEC
Holdings (Canada) Inc.
10.7 Term Loan Credit Agreement dated as of November 15, 1999, as
amended from time to time, between The Santa Anita Companies, Inc
and Wells Fargo National Association+
10.8 Revolving Credit Agreement dated as of November 15, 1999 between
Los Angeles Turf Club, Incorporated and Wells Fargo National Bank+
10.9 Forebearance Agreement dated as of February 8, 2000 between Magna
International Inc. and Magna Entertainment Corp.+
10.10 Access Agreement dated as of March 1, 1999 between Magna
International Inc. and Magna Vierte Beteiligungs AG
10.11 Magna Entertainment Corp. Long-Term Incentive Plan
10.12 Employment Agreement with David A. Mitchell dated November 26,
1999 and accepted December 20, 1999
21.1 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP in respect of the Audited
Consolidated Financial Statements of Magna Entertainment Corp.+
23.2 Consent of Ernst & Young LLP in respect of the Audited Financial
Statements of Los Angeles Turf Club, Inc.+
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
23.3 Consent of PricewaterhouseCoopers LLP in respect of the Audited
Consolidated Financial Statements of Gulfstream Park Racing
Association, Inc. and Subsidiary+
23.4 Consent of Hill, Barth & King LLC in respect of the Audited
Financial Statements of Remington Park, Inc.+
23.5 Consent of Hill, Barth & King LLC in respect of the Audited
Financial Statement of Thistledown, Inc.+
23.6 Consent of Ernst & Young LLP in respect of the Audited Combined
Financial Statements of Golden Gate Fields+
23.7 Consent of Jerry D. Campbell to act as director+
23.8 Consent of William G. Davis to act as director+
23.9 Consent of Peter M. George to act as director+
23.10 Consent of Joseph W. Harper to act as director+
23.11 Consent of J. Terrence Lanni to act as director+
23.12 Consent of Edward C. Lunley to act as director+
23.13 Consent of Earl I. Mack to act as director+
23.14 Consent of Gino Roncelli to act as director+
23.15 Consent of Andrew Stronach to act as director+
23.16 Consent of Ronald J. Volkman to act as director+
23.17 Consent of John C. York II to act as director+
23.18 Consent of Sidley & Austin (included in Exhibit 5.1)
27.1 Financial Data Schedules+
99.1 Provisions attaching to the Exchangeable Shares of MEC Holdings
(Canada) Inc.+
</TABLE>
- --------
*To be filed by amendment
+Previously filed
<PAGE>
EXHIBIT 4.1
Form of Stock Certificate for Class A Subordinate Voting Stock
NUMBER SHARES
Magna Entertainment Corp.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CLASS A SUBORDINATE VOTING STOCK
SEE REVERSE FOR CERTAIN DEFINITIONS
This certifies that is the registered holder of
FULLY PAID AND NON-ASSESSABLE class a subordinate voting stock in the capital of
MAGNA ENTERTAINMENT CORP.
A transfer of shares represented by this certificate will not be registered in a
register of transfers of the Corporation, except upon surrender of this
certificate duly endorsed by the appropriate person. This certificate is not
valid until countersigned and registered by the Transfer Agent and Registrar of
the Corporation.
In Witness Whereof the Corporation has caused this certificate to be signed by
its duly authorized officers.
Dated
COUNTERSIGNED AND REGISTERED
AMERICAN SECURITIES TRANSFER AND TRUST, INCORPORATED DENVER
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED OFFICER
OR
COUNTERSIGNED AND REGISTERED
MONTREAL TRUST COMPANY OF CANADA TORONTO
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED OFFICER
/s/ Frank Stronach
<PAGE>
Chairman of the Board
/s/ Jerry D. Campbell
President And Chief Executive Officer
The shares represented by this certificate are transferable in Denver, Colorado
at the principal office of American Securities Transfer and Trust,
Incorporated and in Toronto, Canada at the principal office of Montreal
Trust Company of Canada.
CLASS A SUBORDINATE VOTING STOCK
MAGNA ENTERTAINMENT CORP.
SHARES OF THE CLASS A SUBORDINATE VOTING STOCK HAVE RIGHTS, PRIVILEGES,
RESTRICTIONS AND CONDITIONS ATTACHING TO THEM. THE CORPORATION WILL FURNISH TO A
STOCKHOLDER ON DEMAND AND WITHOUT CHARGE, A FULL COPY OF THE TEXT OF THE RIGHTS,
PRIVILEGES, RESTRICTIONS AND CONDITIONS ATTACHING TO THE CLASS A SUBORDINATE
VOTING STOCK AND TO EACH CLASS AND SERIES, WHICH THE CORPORATION IS AUTHORIZED
TO ISSUE INSOFAR AS SAME HAS BEEN FIXED BY THE DIRECTORS, AS WELL AS THE
AUTHORITY OF THE BOARD OF DIRECTORS TO FIX THE RIGHTS, PRIVILEGES, RESTRICTIONS
AND CONDITIONS OF SUBSEQUENT SERIES.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT - Custodian
(Cust) (Minor)
under Uniform Gifts to Minors Act
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sells, assigns and transfers unto
<PAGE>
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
Attorney,
to transfer the said stock on the books of the within named Corporation, with
full power of substitution in the premises.
Dated:
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE>
EXCHANGEABLE SHARE SUPPORT AGREEMENT
------------------------------------
THIS AGREEMENT is made as of the 31st day of December, 1999.
BETWEEN:
MAGNA ENTERTAINMENT CORP.
a corporation existing under the laws of the State of
Delaware ("MEC")
- and -
MEC HOLDINGS (CANADA) INC.
a corporation existing under the laws of the Province
of Ontario ("Exchangeco")
WHEREAS by Articles of Amendment dated December 30, 1999 Exchangeco is
authorized to issue Exchangeable Shares shares in its capital, each such share
exchangeable for one share of Class A Subordinate Voting Stole of MEC ("Class A
Share") in accordance with the rights, privileges, restrictions and conditions
attaching to the Exchangeable Shares (the "Share Provisions");
AND WHEREAS MEC is the holder of all of the issued and outstanding common
shares of Exchangeco;
AND WHEREAS this Agreement evidences certain obligations of MEC to
Exchangeco to ensure that Exchangeco will at all times be able to satisfy its
obligations to the holders of Exchangeable Shares under the Share Provisions;
NOW THEREFORE for good and valuable consideration, the receipt and adequacy
of which is hereby mutually acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions.
As used herein, the following terms shall have the following meanings:
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by, or under common control of, that Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as applied to any
Person, means the possession by another Person, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
first mentioned Person, whether through the ownership of voting securities, by
contract or otherwise.
"Share Provisions" has the meaning set forth in the first recital to this
Agreement.
<PAGE>
-2-
Other capitalized terms which are not defined in this Agreement have the meaning
ascribed to such terms in the Share Provisions.
1.2 Interpretation Not Affected by Headings.
The division of this Agreement into Articles, sections and other portions and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement. Unless otherwise
indicated, all references to an "Article" or "section" followed by a number
and/or a letter refer to the specified Article or section of this Agreement.
The terms "this Agreement", "hereof", "herein" and "hereunder" and similar
expressions refer to this agreement and not to any particular Article, section
or other portion hereof and include any agreement or instrument supplementary or
ancillary hereto.
1.3 Number, Gender.
Words importing the singular number only shall include the plural and vice
versa. Words importing any gender shall include all genders.
1.4 Date for any Action.
If any date on which any action is required to be taken under this Agreement is
not a Business Day, such action shall be required to be taken on the next
succeeding Business Day.
ARTICLE 2
COVENANTS OF MEC AND EXCHANGECO
2.1 Covenants Regarding Exchangeable Shares.
So long as any Exchangeable Shares not owned by MEC or a subsidiary of MEC are
outstanding, MEC will:
(a) not declare or pay any dividend on the MEC Class A Shares unless (i)
Exchangeco shall (w) simultaneously declare or pay, as the case may be, an
equivalent dividend (as provided for in the Share Provisions) on the
Exchangeable Shares (an "Equivalent Dividend"), and (x) have sufficient
money or other assets or authorized but unissued securities available to
enable the due declaration and the due and punctual payment, in accordance
with applicable law, of any Equivalent Dividend, or (ii) in the case of a
stock dividend by MEC, Exchangeco shall (y) subdivide the Exchangeable
Shares in lieu of a stock dividend thereon (as provided for in the Share
Provisions) (an "Equivalent Stock Subdivision"), and (z) have sufficient
authorized but unissued securities available to enable the Equivalent Stock
Subdivision;
(b) advise Exchangeco sufficiently in advance of the declaration by MEC of
any dividend on MEC Class A Shares and take all such other actions as are
reasonably necessary, in co-operation with Exchangeco, to ensure that (i)
the respective declaration date, record date and payment date for an
Equivalent Dividend shall be the same as the declaration date, record date
and payment date for the corresponding dividend on the MEC Class A Shares
or, (ii) the record date and effective date for an Equivalent Stock
<PAGE>
-3-
Subdivision shall be the same as the record date and payment date for the
corresponding stock dividend on the MEC Class A Shares;
(c) ensure that the record date for any dividend declared on MEC Class A
Shares is not less than 10 Business Days after the declaration date of such
dividend;
(d) take all such actions and do all such things as are reasonably
necessary or desirable to enable and permit Exchangeco, in accordance with
applicable law, to pay and otherwise perform its obligations with respect
to the satisfaction of the Liquidation Amount, the Retraction Price or the
Redemption Price in respect of each issued and outstanding Exchangeable
Share upon the liquidation, dissolution or winding-up of Exchangeco, the
delivery of a Retraction Request by a holder of Exchangeable Shares or a
redemption of Exchangeable Shares by Exchangeco, as the case may be,
including without limitation all such actions and all such things as are
necessary or desirable to enable and permit Exchangeco to cause to be
delivered MEC Class A Shares to the holders of Exchangeable Shares in
accordance with the provisions of Article 5, 6 or 7, as the case may be, of
the Share Provisions;
(e) take all such actions and do all such things as are reasonably
necessary or desirable to enable and permit MEC, in accordance with
applicable law, to perform its obligations arising upon the exercise by it
of the Liquidation Call Right, the Retraction Call Right or the Redemption
Call Right, including without limitation all such actions and all such
things as are necessary or desirable to enable and permit MEC to deliver
MEC Class A Shares to the holders of Exchangeable Shares in accordance with
the provisions of the Liquidation Call Right, the Retraction Call Right or
the Redemption Call Right, as the case may be; and
(f) if MEC becomes a "specified financial institution" (as such term is
defined in the Income Tax Act (Canada)) or does not deal at arm's length
with such a person, take all such actions and do all such things as are
reasonably necessary or desirable to exercise the Retraction Call Right if
requested to do so by a holder of Exchangeable Shares making a Retraction
Request.
2.2 Segregation of Funds.
MEC will cause Exchangeco to deposit a sufficient amount of funds in a separate
account of Exchangeco and segregate a sufficient amount of such other assets and
property as is necessary to enable Exchangeco to pay dividends when due and to
pay or otherwise satisfy its respective obligations under Article 5, 6 or 7 of
the Share Provisions, as applicable.
2.3 Reservation of MEC Class A Shares.
MEC hereby represents, warrants and covenants in favour of Exchangeco that MEC
will, at all times while any Exchangeable Shares (other than Exchangeable Shares
held by MEC or its subsidiaries) are outstanding, keep available, free from pre-
emptive and other rights, out of its authorized and unissued capital stock such
number of MEC Class A Shares (or other shares or securities into which MEC Class
A Shares may be reclassified or changed as contemplated by
<PAGE>
-4-
section 2.7 hereof) (a) as is equal to the sum of (i) the number of Exchangeable
Shares issued and outstanding from time to time and (ii) the number of
Exchangeable Shares issuable upon the exercise of all rights to acquire
Exchangeable Shares outstanding from time to time and (b) as are now and may
hereafter be required to enable and permit MEC to meet its obligations under the
Voting and Exchange Agreement and under any other security or commitment
pursuant to which MEC may now or hereafter be required to issue MEC Class A
Shares, to enable and permit MEC to meet its obligations under each of the
Liquidation Call Right, the Retraction Call Right and the Redemption Call Right
and to enable and permit Exchangeco to meet its obligations hereunder and under
the Share Provisions.
2.4 Notification of Certain Events.
In order to assist MEC to comply with its obligations hereunder and to permit
MEC to exercise the Liquidation Call Right, the Retraction Call Right and the
Redemption Call Right, Exchangeco will notify MEC of each of the following
events at the time set forth below:
(a) in the event of any determination by the Board of Directors of
Exchangeco to institute voluntary liquidation, dissolution or winding-up
proceedings with respect to Exchangeco or to effect any other distribution
of the assets of Exchangeco among its shareholders for the purpose of
winding up its affairs, at least 60 days prior to the proposed effective
date of such liquidation, dissolution, winding-up or other distribution;
(b) promptly, upon the earlier of receipt by Exchangeco of notice of and
Exchangeco otherwise becoming aware of any threatened or instituted claim,
suit, petition or other proceedings with respect to the involuntary
liquidation, dissolution or winding-up of Exchangeco or to effect any other
distribution of the assets of Exchangeco among its shareholders for the
purpose of winding up its affairs;
(c) immediately, upon receipt by Exchangeco of a Retraction Request;
(d) on the same date on which notice of redemption is given to holders of
Exchangeable Shares, upon the determination of a Redemption Date in
accordance with the Share Provisions; and
(e) as soon as practicable upon the issuance by Exchangeco of any
Exchangeable Shares or rights to acquire Exchangeable Shares.
2.5 Delivery of MEC Class A Shares to Exchangeco.
In furtherance of its obligations under sections 2.1(d) and (e) hereof, upon
notice from Exchangeco of any event that requires Exchangeco to cause to be
delivered MEC Class A Shares to any holder of Exchangeable Shares, MEC shall
forthwith issue and deliver or cause to be delivered to Exchangeco the requisite
number of MEC Class A Shares to be received by, and issued to or to the order
of, the former holder of the surrendered Exchangeable Shares, as Exchangeco
shall direct. All such MEC Class A Shares shall be duly authorized and validly
issued as fully paid and non-assessable and shall be free and clear of any
security interest, lien, claim or encumbrance. In consideration of the issuance
and delivery of each such MEC Class A Share,
<PAGE>
-5-
Exchangeco shall issue to MEC, or as MEC shall direct, common shares of
Exchangeco having equivalent value.
2.6 Qualification of MEC Class A Shares.
If any MEC Class A Shares (or other shares or securities into which MEC Class A
Shares may be reclassified or changed as contemplated by section 2.7 hereof) to
be issued and delivered hereunder require registration or qualification with or
approval of or the filing of any document, including any prospectus or similar
document or the taking of any proceeding with or the obtaining of any order,
ruling or consent from any governmental or regulatory authority under any
Canadian or United States federal, provincial or state securities or other law
or regulation or pursuant to the rules and regulations of any securities or
other regulatory authority or the fulfilment of any other United States or
Canadian legal requirement before such shares (or such other shares or
securities) may be issued by MEC and delivered by MEC at the direction of
Exchangeco, if applicable, to the holder of surrendered Exchangeable Shares or
in order that such shares (or such other shares or securities) may be freely
traded thereafter (other than any restrictions of general application on
transfer by reason of a holder being a "control person" of MEC for purposes of
Canadian provincial securities law or an "affiliate" of MEC for purposes of
United States federal or state securities law), MEC will in good faith
expeditiously take all such actions and do all such things as are necessary or
desirable to cause such MEC Class A Shares (or such other shares or securities)
to be and remain duly registered, qualified or approved under United States
and/or Canadian law, as the case may be. MEC will in good faith expeditiously
take all such actions and do all such things as are reasonably necessary or
desirable to cause all MEC Class A Shares (or such other shares or securities)
to be delivered hereunder to be listed, quoted or posted for trading on all
stock exchanges and quotation systems on which outstanding MEC Class A Shares
(or such other shares or securities) have been listed by MEC and remain listed
and are quoted or posted for trading at such time.
2.7 Economic Equivalence.
(a) MEC will not without prior approval of Exchangeco and the prior approval of
the holders of the Exchangeable Shares given in accordance with section 10.2 of
the Share Provisions:
(i) issue or distribute MEC Class A Shares (or securities exchangeable for
or convertible into or carrying rights to acquire MEC Class A Shares) to
the holders of all or substantially all of the then outstanding MEC Class A
Shares by way of stock dividend or other distribution, other than an issue
of MEC Class A Shares (or securities exchangeable for or convertible into
or carrying rights to acquire MEC Class A Shares) to holders of MEC Class A
Shares who exercise an option to receive dividends in MEC Class A Shares
(or securities exchangeable for or convertible into or carrying rights to
acquire MEC Class A Shares) in lieu of receiving cash dividends; or
(ii) issue or distribute rights, options or warrants to the holders of all
or substantially all of the then outstanding MEC Class A Shares entitling
them to subscribe for or to purchase MEC Class A Shares (or securities
exchangeable for or convertible into or carrying rights to acquire MEC
Class A Shares); or
<PAGE>
-6-
(iii) issue or distribute to the holders of all or substantially all of
the then outstanding MEC Class A Shares: (A) shares or securities of MEC of
any class other than MEC Class A Shares (other than shares convertible into
or exchangeable for or carrying rights to acquire MEC Class A Shares), (B)
rights, options or warrants other than those referred to in section
2.7(a)(ii) above, (C) evidences of indebtedness of MEC or (D) assets of
MEC,
unless the economic equivalent on a per share basis of such rights, options,
securities, shares, evidences of indebtedness or other assets is issued or
distributed simultaneously to holders of the Exchangeable Shares, in which case,
for greater certainty, no approval of the holders of Exchangeable Shares is
required; provided that, for greater certainty, the above restrictions shall not
apply to any securities issued or distributed by MEC pursuant to the Share
Provisions, the provisions of this Agreement or the provisions of the Voting and
Exchange Agreement.
(b) MEC will not without the prior approval of Exchangeco and the prior
approval of the holders of the Exchangeable Shares given in accordance with
section 10.2 of the Share Provisions:
(i) subdivide, redivide or change the then outstanding MEC Class A Shares
into a greater number of MEC Class A Shares; or
(ii) reduce, combine, consolidate or change the then outstanding MEC Class
A Shares into a lesser number of MEC Class A Shares; or
(iii) reclassify or otherwise change MEC Class A Shares or effect an
amalgamation, merger, reorganization or other transaction affecting MEC
Class A Shares,
unless the same or an economically equivalent change shall simultaneously be
made to, or in the rights of the holders of, the Exchangeable Shares, in which
case, for greater certainty, no approval of the holders of Exchangeable Shares
is required.
(c) MEC will ensure that the record date for any event referred to in section
2.7(a) or 2.7(b) above, or (if no record date is applicable for such event) the
effective date for any such event, is not less than ten Business Days after the
date on which such event is declared or announced by MEC (with contemporaneous
notification thereof by MEC to Exchangeco).
(d) The Board of Directors of Exchangeco shall determine, in good faith and in
its sole discretion, economic equivalence for the purposes of any event referred
to in section 2.7(a) or 2.7(b) above and each such determination shall be
conclusive and binding on MEC. In making each such determination, the following
factors shall, without excluding other factors determined by the Board of
Directors of Exchangeco to be relevant, be considered by the Board of Directors
of Exchangeco:
(i) in the case of any stock dividend or other distribution payable in MEC
Class A Shares, the number of such shares issued in proportion to the
number of MEC Class A Shares previously outstanding;
(ii) in the case of the issuance or distribution of any rights, options or
warrants to subscribe for or purchase MEC Class A Shares (or securities
exchangeable for or
<PAGE>
-7-
convertible into or carrying rights to acquire MEC Class A Shares), the
relationship between the exercise price of each such right, option or
warrant and the current market value (as determined by the Board of
Directors of Exchangeco in the manner above contemplated) of an MEC Class A
Share;
(iii) in the case of the issuance or distribution of any other form of
property (including without limitation any shares or securities of MEC of
any class other than MEC Class A Shares, any rights, options or warrants
other than those referred to in section 2.7(d)(ii) above, any evidences of
indebtedness of MEC or any assets of MEC), the relationship between the
fair market value (as determined by the Board of Directors of Exchangeco in
the manner above contemplated) of such property to be issued or distributed
with respect to each outstanding MEC Class A Share and the current market
value (as determined by the Board of Directors of Exchangeco in the manner
above contemplated) of an MEC Class A Share;
(iv) in the case of any subdivision, redivision or change of the then
outstanding MEC Class A Shares into a greater number of MEC Class A Shares
or the reduction, combination, consolidation or change of the then
outstanding MEC Class A Shares into a lesser number of MEC Class A Shares
or any amalgamation, merger, reorganization or other transaction affecting
MEC Class A Shares, the effect thereof upon the then outstanding MEC Class
A Shares; and
(iv) in all such cases, the general taxation consequences of the relevant
event to holders of Exchangeable Shares to the extent that such
consequences may differ from the taxation consequences to holders of MEC
Class A Shares as a result of differences between taxation laws of Canada
and the United States (except for any differing consequences arising as a
result of differing marginal taxation rates and without regard to the
individual circumstances of holders of Exchangeable Shares).
For purposes of the foregoing determinations, the current market value of any
security listed and traded or quoted on a securities exchange shall be the
average of the closing bid and ask prices of such security during a period of
not less than 20 consecutive trading days ending not more than three trading
days before the date of determination on the principal securities exchange on
which such securities are listed and traded or quoted; provided, however, that
if in the opinion of the Board of Directors of Exchangeco the public
distribution or trading activity of such securities during such period does not
create a market which reflects the fair market value of such securities, then
the current market value thereof shall be determined by the Board of Directors
of Exchangeco, in good faith and in its sole discretion, and provided further
that any such determination by the Board of Directors of Exchangeco shall be
conclusive and binding on MEC.
(e) Exchangeco agrees that, to the extent required, upon due notice from MEC,
Exchangeco will use its best efforts to take or cause to be taken such steps as
may be necessary for the purposes of ensuring that appropriate dividends are
paid or other distributions are made by Exchangeco, or subdivisions, redivisions
or changes are made to the Exchangeable Shares, in order to implement the
required economic equivalence with respect to the MEC Class A Shares and
Exchangeable Shares as provided for in this section 2.7.
<PAGE>
-8-
2.8 Tender Offers.
In the event that a tender offer, share exchange offer, issuer bid, take-over
bid or similar transaction with respect to MEC Class A Shares (an "Offer") is
proposed by MEC or is proposed to MEC or its shareholders and is recommended by
the Board of Directors of MEC, or is otherwise effected or to be effected with
the consent or approval of the Board of Directors of MEC, and the Exchangeable
Shares are not redeemed by Exchangeco or purchased by MEC pursuant to the
Redemption Call Right, MEC will use its reasonable efforts expeditiously and in
good faith to take all such actions and do all such things as are necessary or
desirable to enable and permit holders of Exchangeable Shares to participate in
such Offer to the same extent and on an economically equivalent basis as the
holders of MEC Class A Shares, without discrimination. Without limiting the
generality of the foregoing, MEC will use its reasonable efforts expeditiously
and in good faith to ensure that holders of Exchangeable Shares may participate
in all such Offers without being required to retract Exchangeable Shares as
against Exchangeco (or, if so required, to ensure that any such retraction shall
be effective only upon, and shall be conditional upon, the closing of the Offer
and only to the extent necessary to tender or deposit to the Offer). Nothing
herein shall affect the rights of Exchangeco to redeem (or MEC to purchase
pursuant to the Redemption Call Right) Exchangeable Shares, as applicable, in
the event of an MEC Control Transaction.
2.9 Ownership of Outstanding Shares.
Without the prior approval of Exchangeco and the prior approval of the holders
of the Exchangeable Shares given in accordance with section 10.2 of the Share
Provisions, MEC covenants and agrees in favour of Exchangeco that, as long as
any outstanding Exchangeable Shares are owned by any person or entity other than
MEC or any of its subsidiaries, MEC will be and remain the direct or indirect
beneficial owner of all issued and outstanding voting shares in the capital of
Exchangeco.
2.10 MEC and Subsidiaries Not to Vote Exchangeable Shares.
MEC covenants and agrees that it will appoint and cause to be appointed
proxyholders with respect to all Exchangeable Shares held by it and its
subsidiaries for the sole purpose of attending each meeting of holders of
Exchangeable Shares in order to be counted as part of the quorum for each such
meeting. MEC further covenants and agrees that it will not, and will cause its
subsidiaries not to, exercise any voting rights which may be exercisable by
holders of Exchangeable Shares from time to time pursuant to the Share
Provisions or pursuant to the provisions of the OBCA (or any successor or other
corporate statute by which Exchangeco may in the future be governed) with
respect to any Exchangeable Shares held by it or by its subsidiaries in respect
of any matter considered at any meeting of holders of Exchangeable Shares.
2.11 Rule 10b-18 Purchases.
For greater certainty, nothing contained in this Agreement, including without
limitation the obligations of MEC contained in section 2.8 hereof, shall limit
the ability of MEC or Exchangeco
<PAGE>
-9-
to make a "Rule l0b-18 Purchase" of MEC Class A Shares pursuant to Rule 10b-18
of the U.S. Securities Exchange Act of 1934, as amended, or any successor
provisions thereof.
2.12 Stock Exchange Listing.
MEC covenants and agrees in favour of Exchangeco that, as long as any
outstanding Exchangeable Shares are owned by any person or entity other than MEC
or any of its subsidiaries, MEC will use its reasonable best efforts to maintain
a listing for such Exchangeable Shares on a Canadian stock exchange.
ARTICLE 3
MEC SUCCESSORS
3.1 Certain Requirements in Respect of Combination, etc.
MEC shall not consummate any transaction (whether by way of reconstruction,
reorganization, consolidation, merger, transfer, sale, lease or otherwise)
whereby all or substantially all of its undertaking, property and assets would
become the property of any other person or, in the case of a merger, of the
continuing corporation resulting therefrom unless, but may do so if:
(a) such other person or continuing corporation (the "MEC Successor") by
operation of law, becomes, without more, bound by the terms and provisions
of this Agreement or, if not so bound, executes, prior to or
contemporaneously with the consummation of such transaction, an Agreement
supplemental hereto and such other instruments (if any) as are reasonably
necessary or advisable to evidence the assumption by the MEC Successor of
liability for all moneys payable and property deliverable hereunder and
the covenant of such MEC Successor to pay and deliver or cause to be
delivered the same and its Agreement to observe and perform all the
covenants and obligations of MEC under this Agreement; and
(b) such transaction shall be upon such terms and conditions as
substantially to preserve and not to impair in any material respect any of
the rights, duties, powers and authorities of the other parties hereunder
or the holders of Exchangeable Shares.
3.2 Vesting of Powers in Successor.
Whenever the conditions of section 3.1 have been duly observed and performed,
the parties, if required by section 3.1, shall execute and deliver a
supplemental agreement hereto and thereupon MEC Successor shall possess and from
time to time may exercise each and every right and power of MEC under this
Agreement in the name of MEC or otherwise and any act or proceeding by any
provision of this Agreement required to be done or performed by the Board of
Directors of MEC or any officers of MEC may be done and performed with like
force and effect by the directors or officers of such MEC Successor.
3.3 Wholly-Owned Subsidiaries.
Nothing herein shall be construed as preventing the amalgamation or merger of
any wholly-owned direct or indirect subsidiary of MEC with or into MEC or the
winding-up,
<PAGE>
-10-
liquidation or dissolution of any wholly-owned subsidiary of MEC provided that
all of the assets of such subsidiary are transferred to MEC or another
wholly-owned direct or indirect subsidiary of MEC and any such transactions are
expressly permitted by this Article 3.
ARTICLE 4
GENERAL
4.1 Term.
This Agreement shall come into force and be effective as of the date hereof and
shall terminate and be of no further force and effect at such time as no
Exchangeable Shares (or securities or rights convertible into or exchangeable
for or carrying rights to acquire Exchangeable Shares) are held by any person or
entity other than MEC and any of its subsidiaries.
4.2 Changes in Capital of MEC and Exchangeco.
At all times after the occurrence of any event contemplated pursuant to sections
2.7 and 2.8 hereof or otherwise, as a result of which either MEC Class A Shares
or the Exchangeable Shares or both are in any way changed, this Agreement shall
forthwith be amended and modified as necessary in order that it shall apply with
full force and effect, mutatis mutandis, to all new securities into which MEC
Class A Shares or the Exchangeable Shares or both are so changed and the parties
hereto shall execute and deliver an Agreement in writing giving effect to and
evidencing such necessary amendments and modifications.
4.3 Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule or law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.
4.4 Amendments, Modifications.
This Agreement may not be amended or modified except by an Agreement in writing
executed by Exchangeco, MEC and MEC and approved by the holders of the
Exchangeable Shares in accordance with section 10.2 of the Share Provisions.
4.5 Ministerial Amendments.
Notwithstanding the provisions of section 4.4, the parties to this Agreement may
in writing at any time and from time to time, without the approval of the
holders of the Exchangeable Shares, amend or modify this Agreement for the
purposes of:
<PAGE>
-11-
(a) adding to the covenants of any or all parties provided that the Board
of Directors of each of Exchangeco and MEC shall be of the good faith
opinion that such additions will not be prejudicial to the rights or
interests of the holders of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent with this
Agreement as may be necessary or desirable with respect to matters or
questions which, in the good faith opinion of the Board of Directors of
each of Exchangeco and MEC, it may be expedient to make, provided that each
such Board of Directors shall be of the good faith opinion that such
amendments or modifications will not be prejudicial to the rights or
interests of the holders of the Exchangeable Shares; or
(c) making such changes or corrections which, on the advice of counsel to
Exchangeco and MEC, are required for the purpose of curing or correcting
any ambiguity or defect or inconsistent provision or clerical omission or
mistake or manifest error, provided that the Boards of Directors of each of
Exchangeco and MEC shall be of the good faith opinion that such changes or
corrections will not be prejudicial to the rights or interests of the
holders of the Exchangeable Shares.
4.6 Meeting to Consider Amendments.
Exchangeco, at the request of MEC, shall call a meeting or meetings of the
holders of the Exchangeable Shares for the purpose of considering any proposed
amendment or modification requiring approval pursuant to section 4.4 hereof.
Any such meeting or meetings shall be called and held in accordance with the
bylaws of Exchangeco, the Share Provisions and all applicable laws.
4.7 Amendments Only in Writing.
No amendment to or modification or waiver of any of the provisions of this
Agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by all of the parties hereto.
4.8 Enurement.
This Agreement shall be binding upon and enure to the benefit of the parties
hereto and their respective successors and assigns. All holders of
Exchangeable Shares, whether acquired prior or subsequent to the date hereof,
shall be intended third-party beneficiaries of this Agreement.
4.9 Notices to Parties
All notices and other communications between the parties to this Agreement shall
be in writing and shall be deemed to have been given if delivered personally or
by confirmed telecopy to the parties at the following addresses (or at such
other address for any such party as shall be specified in like notice):
(a) if to Exchangeco:
<PAGE>
337 Magna Drive
Aurora, Ontario
L4G 7K1
Attention: President
Telecopier No.: (905) 726-2603
(b) if to MEC:
285 West Huntington Drive
Arcadia, California
90017
Attention: President
Telecopier No.: (626) 574-6306
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof
unless such day is not a Business Day in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
4.10 Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed an
original, and all of which taken together shall constitute one and the same
instrument.
4.11 Jurisdiction.
This Agreement shall be governed by and construed in accordance with the laws of
the Province of Ontario and the laws of Canada applicable therein.
4.12 Attornment.
MEC agrees that any action or proceeding arising out of or relating to this
Agreement may be instituted in the courts of Ontario, waives any objection which
it may have now or hereafter to the venue of any such action or proceeding,
irrevocably submits to the jurisdiction of the said courts in any such action or
proceeding, agrees to be bound by any judgment of the said courts and not to
seek, and hereby waives, any review of the merits of any such judgment by the
courts of any other jurisdiction and hereby appoints Exchangeco at its
registered office in the Province of Ontario as attorney for service of process.
<PAGE>
IN WITNESS OF WHICH, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
MAGNA ENTERTAINMENT CORP.
By: /s/ J. Brian Colburn
----------------------------------------
J. Brian Colburn
Executive Vice-President and Secretary
By: /s/ Vincent J. Galifi
----------------------------------------
Vincent J. Galifi
Executive Vice-President, Finance
MEC HOLDINGS (CANADA) INC.
By: /s/ J. Brian Colburn
----------------------------------------
J. Brian Colburn
Executive Vice-President and Secretary
By: /s/ Vincent J. Galifi
----------------------------------------
Vincent J. Galifi
Executive Vice-President, Finance
<PAGE>
EXHIBIT 10.6
VOTING AND EXCHANGE AGREEMENT
-----------------------------
THIS AGREEMENT is made as of the 31st day of December, 1999.
A M O N G:
MAGNA INTERNATIONAL INC.
a corporation existing under the laws of the Province
of Ontario ("Magna")
- and -
MAGNA ENTERTAINMENT CORP.
a corporation existing under the laws of the State of
Delaware ("MEC")
- and -
MEC HOLDINGS (CANADA) INC.
a corporation existing under the laws of the Province
of Ontario ("Exchangeco")
WHEREAS by Articles of Amendment dated December 30, 1999 Exchangeco is
authorized to issue Exchangeable Shares in its capital, each such share
exchangeable for one share of MEC in accordance with the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares (the "Share
Provisions");
AND WHEREAS MEC is the holder of all of the issued and outstanding common
shares of Exchangeco;
AND WHEREAS Magna is the holder of approximately 97.5% of the equity of
MEC, and all of the Exchangeable Shares;
AND WHEREAS Magna has determined to distribute approximately 20% of the
equity of MEC held by it to the holders of Magna's Class A Subordinate Voting
Shares and Class B Shares by way of a dividend-in-kind, and to satisfy the
payment of such dividend to certain Canadian residents by the transfer to them
of Exchangeable Shares unless such residents elect otherwise;
AND WHEREAS this Agreement evidences certain obligations of MEC to
Exchangeco to ensure that Exchangeco will at all times be able to satisfy its
obligations to the holders of Exchangeable Shares under the Share Provisions;
AND WHEREAS this Agreement evidences certain obligations of Magna to the
holders from time to time of the Exchangeable Shares in respect of the voting of
certain shares of Class B stock of MEC held by Magna;
NOW THEREFORE for good and valuable consideration, the receipt and adequacy
of which is hereby mutually acknowledged, the parties hereto covenant and agree
as follows:
<PAGE>
-2-
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions.
In this Agreement, the following terms shall have the following meanings:
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by, or under control with, that Person. For the purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as applied to any Person,
means the possession by another Person, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that first
mentioned Person, whether through the ownership of voting securities, by
contract or otherwise.
"Automatic Exchange Right" means the benefit of the obligation of MEC to effect
the automatic exchange of MEC Class A Shares for Exchangeable Shares pursuant to
section 3.11(c).
"Exchange Right" has the meaning ascribed thereto in section 3.1.
"Holder" means a Person who is the registered holder of an Exchangeable Share,
but does not include Magna, MEC or any subsidiary of MEC.
"Exchangeco Insolvency Event" means the institution by Exchangeco of any
proceeding to be adjudicated a bankrupt or insolvent or to be wound up, or the
consent of Exchangeco to the institution of bankruptcy, insolvency or winding-up
proceedings against it, or the filing of a petition, answer or consent seeking
dissolution or winding-up under any bankruptcy, insolvency or analogous laws,
including without limitation the Companies Creditors' Arrangement Act (Canada)
and the Bankruptcy and Insolvency Act (Canada), and the failure by Exchangeco to
contest in good faith any such proceedings commenced in respect of Exchangeco
within 30 days of becoming aware thereof, or the consent by Exchangeco to the
filing of any such petition or to the appointment of a receiver, or the making
by Exchangeco of a general assignment for the benefit of creditors, or the
admission in writing by Exchangeco of its inability to pay its debts generally
as they become due, or Exchangeco not being permitted, pursuant to solvency
requirements of applicable law, to redeem any Retracted Shares pursuant to
section 6.6 of the Share Provisions.
"Liquidation Event" has the meaning ascribed thereto in section 3.11(a).
"Liquidation Event Effective Date" has the meaning ascribed thereto in section
3.11(c).
"List" has the meaning ascribed thereto in section 2.9.
"MEC Class A Shares" means the shares of Class A Subordinate Voting Stock of
MEC.
"MEC Class B Shares" means the shares of Class B Stock of MEC.
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"MEC Class Vote" means a matter to be considered by holders of shares of MEC
Class A Shares as a separate class, whether at an MEC Meeting or in connection
with an MEC Consent.
"MEC Consent" means a written consent sought by MEC from its shareholders
including the holders of MEC Class A Shares.
"MEC Meeting" means a meeting of shareholders of MEC at which holders of MEC
Class A Shares are entitled to vote.
"MEC Shares" means the MEC Class A Shares and the MEC Class B Shares,
collectively.
"MEC Successor" has the meaning ascribed thereto in section 5.1(a).
"MEC Votes" means the voting rights attaching to the MEC Shares held by Magna,
either as exercised by Magna in accordance with Voting Instructions or as
exercised by or on behalf of a Holder in person or by proxy.
"Record Date" means the record date established by MEC or by applicable law for
purposes of determining shareholders entitled to vote at an MEC Meeting or to
provide consent for the purposes of an MEC Consent.
"Retracted Shares" has the meaning ascribed thereto in section 3.6.
"Share Provisions" has the meaning set forth in the first recital to this
Agreement.
"Voting Instructions" means the instructions provided by a Holder to Magna with
respect to the exercise of the Voting Rights.
"Voting Rights" has the meaning ascribed thereto in section 2.1.
Other capitalized terms which are not defined in this Agreement have the meaning
ascribed to such terms in the Share Provisions.
1.2 Interpretation Not Affected by Headings, etc.
The division of this Agreement into Articles, sections and other portions and
the insertion of headings are for convenience of reference only and should not
affect the construction or interpretation of this agreement. Unless otherwise
indicated, all references to an "Article" or "section" refer to the specified
Article or section of this Agreement. The terms "this Agreement", "hereof",
"herein" and "hereunder" and similar expressions refer to this Agreement and not
to any particular Article, section or other portion hereof and include any
agreement or instrument supplementary or ancillary hereto.
1.3 Number, Gender, etc.
Words importing the singular number only shall include the plural and vice
versa. Words importing any gender shall include all genders.
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1.4 Date for any Action.
If any date on which any action is required to be taken under this Agreement is
not a Business Day, such action shall be required to be taken on the next
succeeding Business Day.
ARTICLE 2
VOTING RIGHTS OF HOLDERS IN SHARES OF MEC
2.1 Grant of Voting Rights.
Magna hereby grants each Holder of Exchangeable Shares the right (the "Voting
Rights") to cast and exercise, in person or by proxy, one vote attaching to MEC
Share held by Magna in respect of each Exchangeable Share held by the Holder on
the Record Date, on any matters, questions, proposals or propositions whatsoever
that may properly come before the shareholders of MEC at MEC Meeting or in
connection with MEC Consent. Magna may satisfy this obligation by exercising
voting rights attaching to MEC Class A Shares or MEC Class B Shares held by and
registered in the name of Magna, except in the case of a Class Vote in which
case Magna shall satisfy this obligation by exercising votes attaching to MEC
Class A Shares held by and registered in the name of Magna.
2.2 Magna to Hold Sufficient Shares.
Until the termination of this Agreement, Magna covenants and agrees that it
shall retain ownership of, and hold registered in its name, a sufficient number
of MEC Shares to comply with its obligations pursuant to section 2.1 hereof. In
the event of a Class Vote, Magna shall convert MEC Class B Shares held by it
into MEC Class A Shares, if and to the extent necessary to enable Magna to cast
one vote attaching to an MEC Class A Share for each Exchangeable Share in
respect of which it has received Voting Instructions, or to deliver a proxy in
respect of an MEC Class A Share to each Holder who has validly requested one.
2.3 Magna Not to Exercise Voting Rights Independently.
In respect of each MEC Meeting or MEC Consent, Magna will determine the number
of Exchangeable Shares outstanding on the Record Date in respect of which no
Voting Instructions were validly and timely provided to Magna and in respect of
which no proxies were delivered to Holders (the "Unvoted Exchangeable Shares").
Magna will forebear from casting that number of votes attaching to the MEC
Shares held by it as is equal to the number of Unvoted Exchangeable Shares. For
greater certainty, other than the MEC Shares voted in accordance with Voting
Instructions received from holders of Exchangeable Shares, and other than the
MEC Shares which Magna forebears from voting in respect of Unvoted Exchangeable
Shares, Magna shall have the right to cast all other voting rights attaching to
the MEC Shares owned by it, or under its direction and control, at its sole
discretion.
2.4 Minority Approval Requirements.
Magna will use its best efforts to secure any regulatory approvals necessary or
desirable from any securities regulatory authority, stock exchange or other
regulatory body having jurisdiction so that all votes cast by Magna at an MEC
Meeting, and all MEC Consents given by Magna
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pursuant to Voting Instructions received from holders of Exchangeable Shares,
may be treated as votes cast by the Holder of such Exchangeable Shares, and not
as votes cast by Magna, for the purposes of determining the satisfaction of any
applicable minority shareholder approval requirements.
2.5 Legended Share Certificates.
Exchangeco will cause each certificate representing Exchangeable Shares to bear
an appropriate legend notifying the holder of its right to instruct Magna with
respect to the exercise of voting rights attaching to MEC Shares.
2.6 Mailings to Shareholders.
With respect to each MEC Meeting and MEC Consent, MEC shall use its reasonable
efforts to mail or cause to be mailed (or otherwise communicate in the same
manner as MEC utilizes in communications to holders of MEC Class A Shares) to
each of the Holders, such mailing or communication to commence on the same day
as the mailing or notice (or other communication) with respect thereto is
commenced by MEC to its shareholders:
(a) a copy of such notice, together with any related materials to be
provided to shareholders of MEC;
(b) a statement that such Holder is entitled to instruct Magna as to the
exercise of the MEC Votes with respect to such MEC Meeting or MEC Consent
or to attend such MEC Meeting and to exercise personally the MEC Votes
thereat;
(c) a statement as to the manner in which such instructions may be given to
Magna, including an express indication that instructions may be given to
Magna to give:
(i) a proxy to such Holder or his designee to exercise personally the
MEC Votes; or
(ii) a proxy to a designated agent or other representative of the
management of MEC to exercise such MEC Votes;
(d) a statement that if no such instructions are received from the Holder,
the MEC Votes to which such Holder is entitled will not be exercised by
Magna;
(e) a form of direction whereby the Holder may so direct and instruct Magna
as contemplated herein; and
(f) a statement of the time and date by which such instructions must be
received by Magna in order to be binding upon it, which in the case of an
MEC Meeting shall not be earlier than the close of business on the second
Business Day prior to such meeting, and of the method for revoking or
amending such instructions.
For the purpose of determining MEC Votes to which a Holder is entitled in
respect of any MEC Meeting or MEC Consent, the number of Exchangeable Shares
owned of record by the Holder
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shall be determined at the close of business on the Record Date. MEC will notify
Magna of any decision of the Board of Directors of MEC with respect to the
calling of any MEC Meeting and shall provide all necessary information and
materials to Magna in each case promptly and in any event in sufficient time to
enable Magna to perform its obligations contemplated by this Agreement.
2.7 Copies of Shareholder Information.
MEC will send to Holders all proxy materials (including notices of MEC Meetings,
but excluding proxies to vote MEC Class A Shares), information statements,
reports (including without limitation, all interim and annual financial
statements) and other written communications that, in each case, are to be
distributed from time to time to holders of MEC Class A Shares at the same time
as such materials are first sent to holders of MEC Class A Shares.
2.8 Other Materials.
As soon as reasonably practicable after receipt by MEC or shareholders of MEC
(if such receipt is known by MEC) of any material sent or given by or on behalf
of a third party to holders of MEC Class A Shares generally, including without
limitation, dissident proxy and information circulars (and related information
and material) and tender and exchange offer circulars (and related information
and material), MEC shall use its reasonable efforts to obtain and deliver to
each Holder such material as soon as possible thereafter (unless the same has
been provided directly to Holders by such third party).
2.9 List of Persons Entitled to Vote.
Exchangeco shall: (a) prior to each annual, general and special MEC Meeting or
the seeking of any MEC Consent; and (b) forthwith upon each request made at any
time by MEC or Magna in writing, prepare or cause to be prepared a list (a
"List") of the names and addresses of the Holders arranged in alphabetical order
and showing the number of Exchangeable Shares held of record by each such
Holder, in each case at the close of business on the date specified by Magna or
MEC in such request or, in the case of a List prepared in connection with an MEC
Meeting or an MEC Consent, at the close of business on the Record Date. Each
such List shall be delivered to Magna promptly after receipt by Exchangeco of
such request or the record date for such meeting or seeking of consent, as the
case may be. MEC agrees to give Exchangeco and Magna written notice of the
calling of any MEC Meeting or the seeking of any MEC Consent, together with the
record dates therefor, sufficiently prior to the date of the calling of such
meeting or seeking of such consent so as to enable Exchangeco to perform its
obligations under this section 2.9.
2.10 Entitlement to Direct Votes.
Any Holder named in a List prepared in connection with any MEC Meeting or MEC
Consent will be entitled: (a) to instruct Magna in the manner described in
section 2.6 with respect to the exercise of the MEC Votes to which such Holder
is entitled; or (b) to attend such meeting and
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personally exercise thereat, as the proxy of Magna, the MEC Votes to which such
Holder is entitled.
2.11 Voting by Magna, and Attendance of Magna Representative at Meeting.
(a) In connection with each MEC Meeting and MEC Consent, Magna shall exercise,
either in person or by proxy, in accordance with the instructions received from
a Holder pursuant to section 2.6, the MEC Votes as to which such Holder is
entitled to direct the vote (or any lesser number thereof as may be set forth in
the instructions); provided, however, that such written instructions are
received by Magna from the Holder prior to the time and date fixed by Magna for
receipt of such instructions in the notice given by Magna to the Holder pursuant
to section 2.6.
(b) Magna shall cause a representative who is empowered by it to sign and
deliver, on behalf of Magna, proxies for Voting Rights to attend each MEC
Meeting. Upon submission by a Holder (or its designee) of identification
satisfactory to Magna's representative, and at the Holder's request, such
representative shall sign and deliver to such Holder (or its designee) a proxy
to exercise personally the MEC Votes as to which such Holder is otherwise
entitled hereunder to direct the vote, if such Holder either: (i) has not
previously given Magna instructions pursuant to section 2.6 in respect of such
meeting; or (ii) submits to such representative written revocation of any such
previous instructions. At such meeting, the Holder exercising such MEC Votes
shall have the same rights as Magna to speak at the meeting in favour of any
matter, question, proposal or proposition, to vote by way of ballot at the
meeting in respect of any matter, question, proposal or proposition, and to vote
at such meeting by way of a show of hands in respect of any matter, question or
proposition.
2.12 Distribution of Written Materials.
Any written materials distributed by MEC pursuant to this Agreement shall be
sent by mail (or otherwise communicated in the same manner as MEC utilizes in
communications to holders of MEC Class A Shares) to each Holder at its address
as shown on the books of Exchangeco. Exchangeco shall provide or cause to be
provided to MEC for this purpose, on a timely basis, a current List and, upon
the request of MEC, mailing labels.
2.13 Termination of Voting Rights.
All of the rights of a Holder with respect to the MEC Votes exercisable in
respect of the Exchangeable Shares held by such Holder, including the right to
instruct Magna as to the voting of or to vote personally such MEC Votes, shall
be deemed to be surrendered by the Holder, and such MEC Votes and the Voting
Rights represented thereby shall cease immediately upon the delivery by such
holder to Exchangeco or MEC of the certificates representing such Exchangeable
Shares in connection with the exercise by the Holder of the Exchange Right or
the automatic exchange of Exchangeable Shares for MEC Class A Shares (unless, in
either case, MEC shall not have delivered the requisite MEC Class A Shares
issuable in exchange therefor to the Holders), or upon the redemption of
Exchangeable Shares pursuant to Article 6 or 7 of the Share Provisions, or upon
the effective date of the liquidation, dissolution or winding-up of Exchangeco
pursuant to Article 5 of the Share Provisions, or upon the purchase of
Exchangeable
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Shares from the holder thereof by MEC pursuant to the exercise by MEC of the
Retraction Call Right, the Redemption Call Right or the Liquidation Call Right.
ARTICLE 3
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
3.1 Grant and Ownership of the Exchange Right.
MEC hereby grants to the Holders the right (the "Exchange Right"), upon the
occurrence and during the continuance of an Exchangeco Insolvency Event, to
require MEC to purchase from each or any Holder all or any part of the
Exchangeable Shares held by the Holder and the Automatic Exchange Rights, all in
accordance with the provisions of this Agreement. MEC hereby acknowledges
receipt of good and valuable consideration (and the adequacy thereof) for the
grant of the Exchange Right and the Automatic Exchange Rights by MEC to the
Holders.
3.2 Legended Share Certificates.
Exchangeco will cause each certificate representing Exchangeable Shares to bear
an appropriate legend notifying the Holders of the Exchange Rights and the
Automatic Exchange Rights.
3.3 Purchase Price.
The total purchase price payable by MEC for each Exchangeable Share to be
purchased by MEC under the Exchange Right shall be an amount per share equal to:
(a) the Current Market Price of an MEC Class A Share on the last Business Day
prior to the day of closing of the purchase and sale of such Exchangeable Share
under the Exchange Right, which shall be satisfied in full by MEC causing to be
sent to such holder one MEC Class A Share; plus (b) to the extent not paid by
Exchangeco, an additional amount equivalent to the full amount of all declared
and unpaid dividends on each such Exchangeable Share held by such holder on any
dividend record date which occurred prior to the closing of the purchase and
sale. The total purchase price for each such Exchangeable Share so purchased may
be satisfied only by MEC issuing and delivering or causing to be delivered, to
the relevant Holder, one MEC Class A Share and on the applicable payment date a
cheque for the balance, if any, of the purchase price without interest (but less
any amounts withheld pursuant to section 3.12).
3.4 Exercise Instructions.
Subject to the terms and conditions herein set forth, a Holder shall be
entitled, upon the occurrence and during the continuance of an Exchangeco
Insolvency Event, to exercise the Exchange Right with respect to all or any part
of the Exchangeable Shares registered in the name of such Holder on the books of
Exchangeco. To exercise the Exchange Right, the Holder shall deliver to MEC, in
person or by mail, [at its principal office in Toronto, Ontario] or at such
other place or places in Canada or the United States as MEC may from time to
time designate by written notice to the Holders, the certificates representing
the Exchangeable Shares which such Holder desires MEC to purchase, duly endorsed
in blank for transfer, and accompanied by such other documents and instruments
as may be required to effect a transfer of Exchangeable Shares under the OBCA
and the by-laws of Exchangeco and such additional documents and instruments as
MEC or Exchangeco may reasonably require together with: (a) a duly completed
form of
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notice of exercise of the Exchange Right, contained on the reverse of or
attached to the Exchangeable Share certificates, stating: (i) that the Holder
thereby exercises the Exchange Right so as to require MEC to purchase from the
Holder the number of Exchangeable Shares specified therein; (ii) that such
Holder has good title to and owns all such Exchangeable Shares to be acquired by
MEC free and clear of all liens, claims, security interests, adverse claims and
encumbrances; (iii) the names in which the certificates representing MEC Class A
Shares issuable in connection with the exercise of the Exchange Right are to be
issued; and (iv) the names and addresses of the persons to whom such new
certificates should be delivered; and (b) payment (or evidence satisfactory to
Exchangeco and MEC of payment) of the taxes (if any) payable as contemplated by
section 3.7 of this Agreement. If only a part of the Exchangeable Shares
represented by any certificate or certificates delivered to Magna are to be
purchased by MEC under the Exchange Right, a new certificate for the balance of
such Exchangeable Shares shall be issued to the holder at the expense of
Exchangeco.
3.5 Delivery of MEC Class A Shares; Effect of Exercise.
Promptly after receipt of the certificates representing the Exchangeable Shares
which the Holder desires MEC to purchase under the Exchange Right, together with
such documents and instruments of transfer and a duly completed form of notice
of exercise of the Exchange Right (and payment of taxes, if any, payable as
contemplated by section 3.7 or evidence thereof), duly endorsed for transfer to
MEC, MEC shall promptly thereafter deliver or cause to be delivered to the
Holder of such Exchangeable Shares (or to such other persons, if any, properly
designated by such Holder) the number of MEC Class A Shares issuable in
connection with the exercise of the Exchange Right, and on the applicable
payment date cheques for the balance, if any, of the total purchase price
therefor without interest (but less any amounts withheld pursuant to section
3.12); provided, however, that no such delivery shall be made unless and until
the Holder requesting the same shall have paid (or provided evidence
satisfactory to Exchangeco and MEC of the payment of) the taxes (if any) payable
as contemplated by section 3.7 of this Agreement. Immediately upon the issuance
by MEC of the MEC Class A Shares that are issuable upon the exercise of the
Exchange Right as provided in this section 3.5, the closing of the transaction
of purchase and sale contemplated by the Exchange Right shall be deemed to have
occurred and the holder of such Exchangeable Shares shall be deemed to have
transferred to MEC all of such holder's right, title and interest in and to such
Exchangeable Shares and shall cease to be a holder of such Exchangeable Shares
and shall not be entitled to exercise any of the rights of a holder in respect
thereof, other than the right to receive his proportionate part of the total
purchase price therefor (together with a cheque for the balance, if any, of the
total purchase price therefor without interest), unless the requisite number of
MEC Class A Shares is not allotted, issued and delivered by MEC to Magna within
five Business Days of the date of the giving of such notice by Magna, in which
case the rights of the Holder shall remain unaffected until such MEC Class A
Shares are so allotted, issued and delivered by MEC and any such cheque is
delivered and paid. Concurrently with a Holder ceasing to be a holder of
Exchangeable Shares, the Holder shall be considered and deemed for all purposes
to be the holder of the MEC Class A Shares delivered to it pursuant to the
Exchange Right.
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3.6 Exercise of Exchange Right Subsequent to Retraction.
In the event that a Holder has exercised its right under Article 6 of the Share
Provisions to require Exchangeco to redeem any or all of the Exchangeable Shares
held by the Holder (the "Retracted Shares") and is notified by Exchangeco
pursuant to section 6.6 of the Share Provisions that Exchangeco will not be
permitted as a result of solvency requirements of applicable law to redeem all
such Retracted Shares, and provided that MEC shall not have exercised the
Retraction Call Right with respect to the Retracted Shares and that the Holder
has not revoked the retraction request delivered by the Holder to Exchangeco
pursuant to section 6.1 of the Share Provisions, the retraction request will
constitute and will be deemed to constitute notice from the Holder exercising
the Exchange Right with respect to those Retracted Shares that Exchangeco is
unable to redeem. In any such event, Exchangeco hereby agrees with MEC and in
favour of the Holder to immediately notify MEC of such prohibition against
Exchangeco redeeming all of the Retracted Shares and promptly to forward or
cause to be forwarded to MEC all relevant materials delivered by the Holder to
Exchangeco or to the transfer agent of the Exchangeable Shares (including
without limitation, a copy of the retraction request delivered pursuant to
section 6.1 of the Share Provisions) in connection with such proposed redemption
of the Retracted Shares and MEC will thereupon purchase, pursuant to the
Exchange Right in accordance with the provisions of this Article 5, the
Retracted Shares that Exchangeco is not permitted to redeem.
3.7 Stamp or Other Transfer Taxes.
Upon any sale of Exchangeable Shares to MEC pursuant to the Exchange Right or
the Automatic Exchange Rights, the share certificate or certificates
representing MEC Class A Shares to be delivered in connection with the payment
of the total purchase price therefor shall be issued in the name of the Holder
of the Exchangeable Shares so sold or in such names as such Holder may otherwise
direct in writing without charge to the holder of the Exchangeable Shares so
sold; provided, however, that such Holder: (a) shall pay (and none of MEC,
Exchangeco or Magna shall be required to pay) any documentary, stamp, transfer
or other taxes that may be payable in respect of any transfer involved in the
issuance or delivery of such shares to a Person other than such Holder; or (b)
shall have evidenced to the satisfaction of MEC and Exchangeco that such taxes,
if any, have been paid.
3.8 Notice of Insolvency Event.
As soon as practicable following the occurrence of an Exchangeco Insolvency
Event, or any event that with the giving of notice or the passage of time or
both would be an Exchangeco Insolvency Event, Exchangeco shall give written
notice thereof to Magna and MEC. As soon as practicable following the
occurrence of an Exchangeco Insolvency Event, MEC will mail to each Holder, at
the expense of MEC, a notice of such Exchangeco Insolvency Event, which notice
shall contain a brief statement of the rights of the Holders with respect to the
Exchange Right.
3.9 Qualification of MEC Class A Shares.
MEC covenants that if any MEC Class A Shares to be issued and delivered pursuant
to the Exchange Right or the Automatic Exchange Right require registration or
qualification with or
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approval of or the filing of any document, including any prospectus or similar
document, or the taking of any proceeding with or the obtaining of any order,
ruling or consent from any governmental or regulatory authority under any
Canadian or United States federal, provincial or state law or regulation or
pursuant to the rules and regulations of any regulatory authority or the
fulfilment of any other Canadian or United States federal, provincial or state
legal requirement before such shares may be issued and delivered by MEC to the
initial holder thereof or in order that such shares may be freely traded
thereafter (other than any restrictions of general application on transfer by
reason of a holder being a "control person" of MEC for purposes of Canadian
provincial securities law or an "affiliate" of MEC for purposes of United States
federal or state securities law), MEC will in good faith expeditiously take all
such actions and do all such things as are necessary or desirable to cause such
MEC Class A Shares to be and remain duly registered, qualified or approved. MEC
will in good faith expeditiously take all such actions and do all such things as
are reasonably necessary or desirable to cause all MEC Class A Shares to be
delivered pursuant to the Exchange Right or the Automatic Exchange Rights to be
listed, quoted or posted for trading on all stock exchanges and quotation
systems on which outstanding MEC Class A Shares have been listed by MEC and
remain listed and are quoted or posted for trading at such time.
3.10 MEC Class A Shares.
MEC hereby represents, warrants and covenants that the MEC Class A Shares
issuable as described herein will be duly authorized and validly issued as fully
paid and non-assessable and shall be free and clear of any lien, claim or
encumbrance.
3.11 Automatic Exchange on Liquidation of MEC.
(a) MEC will give Holders written notice of each of the following events
(each, a "Liquidation Event") at the time set forth below:
(i) in the event of any determination by the Board of Directors of MEC
to institute voluntary liquidation, dissolution or winding-up proceedings
with respect to MEC or to effect any other distribution of assets of MEC
among its shareholders for the purpose of winding up its affairs, at least
60 days prior to the proposed effective date of such liquidation,
dissolution, winding-up or other distribution; and
(ii) as soon as practicable following the earlier of (A) receipt by
MEC of notice of, and (B) MEC otherwise becoming aware of, any threatened
or instituted claim, suit, petition or other proceedings with respect to
the involuntary liquidation, dissolution or winding-up of MEC or to effect
any other distribution of assets of MEC among its shareholders for the
purpose of winding up its affairs, in each case where MEC has failed to
contest in good faith any such proceeding commenced in respect of MEC
within 30 days of becoming aware thereof.
(b) The notice to Holders delivered upon the occurrence of a Liquidation
Event shall include a brief description of the automatic exchange of
Exchangeable Shares for MEC Class A Shares provided for in section 3.11(c).
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(c) In order that the Holders will be able to participate on a pro rata
basis with the holders of MEC Class A Shares in the distribution of assets of
MEC in connection with a Liquidation Event, on the fifth Business Day prior to
the effective date (the "Liquidation Event Effective Date") of a Liquidation
Event all of the then outstanding Exchangeable Shares shall be automatically
exchanged for MEC Class A Shares. To effect such automatic exchange, MEC shall
purchase on the fifth Business Day prior to the Liquidation Event Effective Date
each Exchangeable Share then outstanding and held by Holders, and each Holder
shall sell the Exchangeable Shares held by it at such time, for a total purchase
price per share equal to: (a) the Current Market Price of an MEC Class A Share
on the fifth Business Day prior to the Liquidation Event Effective Date, which
shall be satisfied in full by MEC issuing to the Holder one MEC Class A Share,
and (b) to the extent not paid by Exchangeco, an additional amount equivalent to
the full amount of all declared and unpaid dividends on each such Exchangeable
Share held by such holder on any dividend record date which occurred prior to
the date of the exchange.
(d) On the fifth Business Day prior to the Liquidation Event Effective
Date, the closing of the transaction of purchase and sale contemplated by the
automatic exchange of Exchangeable Shares for MEC Class A Shares shall be deemed
to have occurred, and each Holder shall be deemed to have transferred to MEC all
of the Holder's right, title and interest in and to such Holder's Exchangeable
Shares and shall cease to be a holder of such Exchangeable Shares, and MEC shall
issue to the Holder the MEC Class A Shares issuable upon the automatic exchange
of Exchangeable Shares for MEC Class A Shares and on the applicable payment date
shall deliver to the Holder a cheque for the balance, if any, of the total
purchase price for such Exchangeable Shares without interest but less any
amounts withheld pursuant to section 5.13. Concurrently with such Holder ceasing
to be a holder of Exchangeable Shares, the Holder shall be considered and deemed
for all purposes to be the holder of the MEC Class A Shares issued pursuant to
the automatic exchange of Exchangeable Shares for MEC Class A Shares and the
certificates held by the Holder previously representing the Exchangeable Shares
exchanged by the Holder with MEC pursuant to such automatic exchange shall
thereafter be deemed to represent MEC Class A Shares issued to the Holder by MEC
pursuant to such automatic exchange. Upon the request of a Holder and the
surrender by the Holder of Exchangeable Share certificates deemed to represent
MEC Class A Shares, MEC shall deliver or cause to be delivered to the Holder
certificates representing MEC Class A Shares of which the Holder is the holder.
3.12 Withholding Rights.
MEC shall be entitled to deduct and withhold from any consideration otherwise
payable under this Agreement to any Holder such amounts as MEC is required or
permitted to deduct and withhold with respect to such payment under the Income
Tax Act (Canada), the United States Internal Revenue Code of 1986 or any
provision of provincial, state, local or foreign tax law, in each case as
amended or succeeded. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes as having been paid to the holder of
the shares in respect of which such deduction and withholding was made, provided
that such withheld amounts are actually remitted to the appropriate taxing
authority. To the extent that the amounts so required or permitted to be
deducted or withheld from any payment to a holder exceeds the cash portion of
the consideration otherwise payable to the holder, MEC is hereby authorized to
sell or otherwise dispose of such portion of the consideration as is necessary
to provide sufficient funds
<PAGE>
-13-
to MEC to enable it to comply with such deduction or withholding requirements
and MEC shall notify the holder thereof and remit to such holder any unapplied
balance of the net proceeds of such sale. MEC represents and warrants that,
based upon facts currently known to it, it has no current intention, as at the
date of this Agreement, to deduct or withhold from any dividend paid to holders
of Exchangeable Shares any amounts under the United States Internal Revenue Code
of 1986.
ARTICLE 4
GENERAL
4.1 Action of Holders.
No Holder shall have the right to institute any action, suit or proceeding or to
exercise any other remedy authorized by this Agreement for the purpose of
enforcing any of its rights hereunder against MEC or Exchangeco unless the
Holder has requested MEC, in the case of the enforcement of a right against
Exchangeco, or Exchangeco, in the case of enforcement of a right against MEC, to
take or institute such action, suit or proceeding and such other party shall
have failed to act within a reasonable time thereafter. In such case, but not
otherwise, the Holder shall be entitled to take proceedings in any court of
competent jurisdiction such as such other party might have taken; it being
understood and intended that no one or more Holders shall have any right in any
manner whatsoever to affect, disturb or prejudice the rights hereby created by
any such action, or to enforce any right hereunder or the Voting Rights, the
Exchange Rights or the Automatic Exchange Rights, except subject to the
conditions and in the manner herein provided.
4.2 Conflicting Claims.
If conflicting claims or demands are made or asserted with respect to any
interest of any Holder in any Exchangeable Shares, including any disagreement
between the heirs, representatives, successors or assigns succeeding to all or
any part of the interest of any Holder in any Exchangeable Shares, resulting in
conflicting claims or demands being made in connection with such interest, then
MEC, Magna and Exchangeco shall each be entitled, at its sole discretion, to
refuse to recognize or to comply with any such claims or demands. In so
refusing, MEC, Magna or Exchangeco may elect not to exercise any MEC Votes,
Exchange Rights or Automatic Exchange Rights subject to such conflicting claims
or demands and, in so doing, it shall not be or become liable to any Person on
account of such election or its failure or refusal to comply with any such
conflicting claims or demands. MEC, Magna and Exchangeco shall be entitled to
continue to refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the MEC Votes,
Exchange Rights or Automatic Exchange Rights subject to such conflicting claims
or demands have been adjudicated by a final judgment of a court of competent
jurisdiction and all rights of appeal have expired; or
(b) all differences with respect to the MEC Votes, Exchange Rights or
Automatic Exchange Rights subject to such conflicting claims or demands have
been conclusively settled by a valid written agreement binding on all such
adverse claimants, and Magna shall have been furnished with an executed copy of
such agreement certified to be in full force and effect.
<PAGE>
-14-
If MEC, Magna or Exchangeco elects to recognize any claim or comply with any
demand made by any such adverse claimant, it may in its discretion require such
claimant to furnish such surety bond or other security satisfactory to it as it
shall deem appropriate to fully indemnify it as between all conflicting claims
or demands.
ARTICLE 5
MEC SUCCESSORS
5.1 Certain Requirements in Respect of Combination, etc.
MEC shall not consummate any transaction (whether by way of reconstruction,
reorganization, consolidation, merger, transfer, sale, lease or otherwise)
whereby all or substantially all of its undertaking, property and assets would
become the property of any other Person or, in the case of a merger, of the
continuing corporation resulting therefrom unless, but may do so if:
(a) such other Person or continuing corporation (herein called the "MEC
Successor"), by operation of law, becomes, without more, bound by the terms and
provisions of this Agreement or, if not so bound, executes, prior to or
contemporaneously with the consummation of such transaction, an Agreement
supplemental hereto and such other instruments (if any) as are reasonably
necessary or advisable to evidence the assumption by the MEC Successor of
liability for all moneys payable and property deliverable hereunder and the
covenant of such MEC Successor to pay and deliver or cause to be delivered the
same and its agreement to observe and perform all the covenants and obligations
of MEC under this Agreement; and
(b) such transaction shall preserve and not impair in any material respect
any of the rights, duties, powers and authorities of the Holders hereunder.
5.2 Wholly-Owned Subsidiaries.
Nothing herein shall be construed as preventing the amalgamation or merger of
any wholly-owned direct or indirect subsidiary of MEC with or into MEC or the
winding-up, liquidation or dissolution of any wholly-owned subsidiary of MEC
provided that all of the assets of such subsidiary are transferred to MEC or
another wholly-owned direct or indirect subsidiary of MEC, and any such
transactions are expressly permitted by this Article 5.
ARTICLE 6
AMENDMENTS
6.1 Amendments, Modifications, etc.
This Agreement may not be amended or modified except by an agreement in writing
executed by MEC, Exchangeco and Magna and approved by the Holders in accordance
with section 10.2 of the Share Provisions.
<PAGE>
-15-
6.2 Ministerial Amendments.
Notwithstanding the provisions of section 6.1, the parties to this Agreement may
in writing, at any time and from time to time, without the approval of the
Holders, amend or modify this Agreement for the purposes of:
(a) adding to the covenants of any or all parties hereto for the protection
of the Holders hereunder provided that the Board of Directors of each of
Exchangeco and MEC shall be of the good faith opinion that such additions will
not be prejudicial to the rights or interests of the Holders;
(b) making such amendments or modifications not inconsistent with this
Agreement as may be necessary or desirable with respect to matters or questions
which, in the good faith opinion of the Board of Directors of each of MEC and
Exchangeco and in the opinion of counsel to Magna, having in mind the best
interests of the Holders, it may be expedient to make, provided that such Boards
of Directors shall be of the opinion that such amendments and modifications will
not be prejudicial to the interests of the Holders; or
(c) making such changes or corrections which, on the advice of counsel to
MEC, Exchangeco and Magna, are required for the purpose of curing or correcting
any ambiguity or defect or inconsistent provision or clerical omission or
mistake or manifest error, provided that the Board of Directors of each of MEC
and Exchangeco shall be of the opinion that such changes or corrections will not
be prejudicial to the rights and interests of the Holders.
6.3 Meeting to Consider Amendments.
Exchangeco, at the request of MEC, shall call a meeting or meetings of the
Holders for the purpose of considering any proposed amendment or modification
requiring approval pursuant hereto. Any such meeting or meetings shall be called
and held in accordance with the by-laws of Exchangeco, the Share Provisions and
all applicable laws.
6.4 Changes in Capital of MEC and Exchangeco.
At all times after the occurrence of any event contemplated pursuant to section
2.7 or 2.8 of the Exchangeable Share Support Agreement or otherwise, as a result
of which either MEC Class A Shares or the Exchangeable Shares or both are in any
way changed, this Agreement shall forthwith be amended and modified as necessary
in order that it shall apply with full force and effect, mutatis mutandis, to
all new securities into which MEC Class A Shares or the Exchangeable Shares or
both are so changed and the parties hereto shall execute and deliver a
supplemental Agreement giving effect to and evidencing such necessary amendments
and modifications.
6.5 Execution of Amendments.
No amendment to or modification or waiver of any of the provisions of this
Agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by each of Magna, MEC and Exchangeco. From time to time
Exchangeco, MEC and Magna may, subject to the provisions of these presents, and
they shall, when so directed by these presents, execute and
<PAGE>
-16-
deliver by their proper officers, Agreements or other instruments supplemental
hereto, which thereafter shall form part hereof, for any one or more of the
following purposes:
(a) evidencing the succession of MEC Successors and the covenants of and
obligations assumed by each such MEC Successor;
(b) making any additions to, deletions from or alterations of the
provisions of this Agreement or the Voting Rights, the Exchange Right or the
Automatic Exchange Rights which, in the opinion of Magna relying on the advice
of counsel, will not be prejudicial to the interests of the Holders or are, in
the opinion of counsel to Magna, necessary or advisable in order to incorporate,
reflect or comply with any legislation the provisions of which apply to MEC,
Exchangeco, Magna or this Agreement; and
(c) for any other purposes not inconsistent with the provisions of this
Agreement, including without limitation, to make or evidence any amendment or
modification to this Agreement as contemplated hereby, provided that, in the
opinion of MEC and Exchangeco, relying on the advice of counsel, the rights of
Holders will not be prejudiced thereby.
ARTICLE 7
TERMINATION
7.1 Term.
This Agreement shall continue to be in force and effect until the earliest to
occur of the following events, but not thereafter:
(a) at any time following the distribution of Exchangeable Shares to
Holders, no outstanding Exchangeable Shares continue to be held by any Holder;
(b) each of MEC and Exchangeco elects in writing to terminate this
Agreement and such termination is approved by the Holders in accordance with
section 10.2 of the Share Provisions; and
(c) 21 years from the date of this Agreement.
7.2 Survival of Agreement.
This Agreement shall continue until there are no Exchangeable Shares outstanding
held by a Holder.
ARTICLE 8
GENERAL
8.1 Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule or law, or public policy, all other
conditions and provisions of this Agreement shall
<PAGE>
-17-
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the fullest
extent possible.
8.2 Enurement.
This Agreement shall be binding upon and enure to the benefit of the parties
hereto and their respective successors and permitted assigns and to the benefit
of the Holders. The Holders shall be intended third-party beneficiaries of this
Agreement.
8.3 Notices to Parties.
All notices and other communications between the parties hereunder shall be in
writing and shall be deemed to have been given if delivered Personally or by
confirmed telecopy to the parties at the following addresses (or at such other
address for such party as shall be specified in like notice):
(a) if to Exchangeco:
337 Magna Drive
Aurora, Ontario
L4G 7K1
Attention: President
Telecopier No.: (905) 726-7126
(b) if to MEC:
285 West Huntington Drive
Arcadia, California
90017
Attention: President
Telecopier No.: (626) 574-6306
(c) if to Magna:
337 Magna Drive
Aurora, Ontario
L4G 7K1
Attention: Executive Vice-President, Special Projects and Secretary
Telecopier No.: (905) 726-2603
<PAGE>
-18-
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of receipt thereof unless
such day is not a Business Day in which case it shall be deemed to have been
given and received upon the immediately following Business Day.
8.4 Notice to Holders.
Any and all notices to be given and any documents to be sent to any Holders may
be given or sent to the address of such Holder shown on the register of holders
of Exchangeable Shares in any manner permitted by the by-laws of Exchangeco from
time to time in force in respect of notices to shareholders and shall be deemed
to be received (if given or sent in such manner) at the time specified in such
by-laws, the provisions of which by-laws shall apply mutatis mutandis to notices
or documents as aforesaid sent to such Holders.
8.5 Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
8.6 Jurisdiction.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York without regard to the conflict of laws principles thereof.
8.7 Attornment.
Each of MEC, Exchangeco and Magna agree that any action or proceeding arising
out of or relating to this Agreement may be instituted in the courts of the
State of New York, waives any objection which it may have now or hereafter to
the venue of any such action or proceeding, irrevocably submits to the
jurisdiction of the said courts in any such action or proceeding, agrees to be
bound by any judgment of the said courts and agrees not to seek, and hereby
waives, any review of the merits of any such judgment by the court of any other
jurisdiction and hereby appoints CT Corporation at its registered office in New
York, New York as its attorney for service of process.
<PAGE>
-19-
IN WITNESS OF WHICH, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
MAGNA INTERNATIONAL INC.
By: /s/ J. Brian Colburn
--------------------------------------------
J. Brian Colburn
Executive Vice-President, Special
Projects and Secretary
By: /s/ Vincent J. Galifi
--------------------------------------------
Vincent J. Galifi
Executive Vice-President, Finance and
Chief Financial Officer
MAGNA ENTERTAINMENT CORP.
By: /s/ J. Brian Colburn
----------------------------------------
J. Brian Colburn
Executive Vice-President and Secretary
By: /s/ Vincent J. Galifi
----------------------------------------
Vincent J. Galifi
Executive Vice-President, Finance
MEC HOLDINGS (CANADA) INC.
By: /s/ J. Brian Colburn
----------------------------------------
J. Brian Colburn
Executive Vice-President and Secretary
By: /s/ Vincent J. Galifi
----------------------------------------
Vincent J. Galifi
Executive Vice-President, Finance
<PAGE>
Exhibit 10.10
Magna Vierte Beteiligungs AG
Oberwaltersdorf, Austria
Dear Sirs:
Re: Fontana Sports - Access Agreement
This letter will confirm the general terms on which Magna International
Inc. ("Magna") shall pay, or cause Magna Europa AG ("Europa") to pay to Magna
Vierte Beteiligungs ("MVB") an annual access fee in consideration for the grant
by MVB to Europa of priority access to the Fontana Sports golf course, tennis
and fitness facility in Oberwaltersdorf, Austria. Magna shall cause Europa to
enter into an agreement (the "Access Agreement") with MVB, on mutually
acceptable terms, setting forth the complete terms of the agreement, including
those terms set forth below. The Access Agreement shall be subject to, and in a
form enforceable under, Austrian law.
Europa's right of priority shall be subject to the following terms and
conditions:
1. Europa shall have a priority right of access to use, from time to time,
the clubhouse, golf course, tennis courts, fitness areas, common areas and all
other areas comprising part of Fontana Sports (collectively, the "Fontana
Premises") for Europa-sponsored corporate and charitable events and for business
development or other related purposes. Provided there is no unreasonable
interference with the members of Fontana Sports, Europa's right of access shall
be in priority to all other users of the Fontana Premises.
2. Europa may exercise the right of access by notifying MVB in writing in
advance of the intended dates, times and facilities required as well as
reasonable details as to the function or event intended to be held. MVB shall
immediately advise Europa in writing whether or not the required facilities will
be available when requested.
3. In consideration for the grant of the right of access, Europa shall pay
MVB an annual access fee of Euros 2.5 million (the equivalent of U.S.$2.7
million), payable quarterly in advance during the term of the arrangement.
Europa shall also pay MVB an amount determined by MVB for conducting each Europa
function, calculated on the basis of MVB's lowest applicable rates at the time
the Fontana Premises are reserved for a Europa function, or as otherwise agreed
between Europa and MVB. Europa shall also pay all taxes, licences, rates,
duties, assessments and fees payable by MVB pursuant to any applicable law. All
amounts due from Europa to MVB other than the access fee shall be paid within 30
days of the date of any invoice delivered by MVB to Europa in respect of a
particular function. Restaurant services shall be billed monthly by MVB to
Europa.
<PAGE>
Page 2
4. In connection with any function held by Europa on the Fontana Premises,
MVB shall furnish to Europa the services customarily provided by operators of
comparable facilities. Europa and MVB shall mutually agree upon the maximum
rounds of golf, maximum number of hours of tennis and maximum number of persons
using the fitness facility in respect of each year during the term of this
agreement.
5. Europa will not use or permit the use of the Fontana Premises in a
manner which violates any applicable rule or regulation of MVB relating to the
use of Fontana Sports or any applicable law or is detrimental to the image or
reputation of Fontana Sports or MVB.
6. Europa will indemnify MVB, its directors, officers, employees and agents
and any other person for whom MVB is legally responsible from and against all
claims, actions, damages, losses and liabilities arising from the use by Europa
of the Fontana Premises.
7. MVB also hereby grants Europa a right of first refusal to purchase
Fontana Sports. Europa shall have ten business days from receipt of a written
notice from MVB describing any proposed sale by MVB to an arm's length third
party of Fontana Sports. Europa shall indicate its intention to purchase Fontana
Sports within 10 business days of receipt of such notice upon the same terms and
conditions as the third party offer, failing which MVB shall be entitled to sell
Fontana Sports to a third party. If such sale is not consummated within 120
days, MVB shall be required to comply again with the terms and conditions of
this section.
8. The arrangements reflected in this letter shall commence on March 1,
1999 and end at 12:01 a.m. on March 1, 2004, subject to a mutually agreeable
extension.
If you are in agreement with the terms hereof, please sign the duplicate
copy of this letter and return it to Magna at the address above.
MAGNA INTERNATIONAL INC.
By:
-------------------------------
Agreed to and acknowledged as of March 1, 1999.
MAGNA VIERTE BETEILIGUNGS AG
By:
-------------------------------
<PAGE>
Exhibit 10.11
MAGNA ENTERTAINMENT CORP. LONG-TERM INCENTIVE PLAN
I. INTRODUCTION
1.1 Purposes. The purposes of the Long-Term Incentive Plan (the "Plan") of
-------- ----
Magna Entertainment Corp. (the "Company") are (i) to align the interests of the
-------
Company's stockholders and the recipients of awards under this Plan by
increasing the proprietary interest of such recipients in the Company's growth
and success, (ii) to advance the interests of the Company by attracting and
retaining outside directors, officers, employees, consultants, independent
contractors and agents and (iii) to motivate such persons to act in the
long-term best interests of the Company and its stockholders.
1.2 Certain Definitions.
-------------------
"Agreement" shall mean the written Stock Option Agreement evidencing an
---------
award hereunder between the Company and the recipient of such award.
"Board" shall mean the Board of Directors of the Company.
-----
"Bonus Stock" shall mean shares of Common Stock which are not subject
-----------
to a Restriction Period or Performance Measures.
"Bonus Stock Award" shall mean an award of Bonus Stock under this Plan.
-----------------
"Cause" shall mean the willful and continued failure substantially to
-----
perform the duties assigned by the Company (other than a failure resulting from
the optionee's Disability), the willful engaging in conduct which is
demonstrably injurious to the Company or any Subsidiary, monetarily or
otherwise, including conduct that, in the reasonable judgment of the Company, no
longer conforms to the standard of the Company's executives or employees, any
act of dishonesty, commission of a felony, or a significant violation of any
statutory or common law duty of loyalty to the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Committee" shall mean the Corporate Governance, Human Resources and
---------
Compensation Committee of the Board.
"Common Stock" shall mean the Class A Subordinate Voting Stock of the
------------
Company.
"Company" has the meaning specified in Section 1.1.
-------
"Disability" shall mean the inability of the holder of an award to
----------
perform substantially such holder's duties and responsibilities for a continuous
period of at least six months, as determined solely by the Committee.
"Eligible Participants" shall mean the persons specified in Section
---------------------
1.4(a).
<PAGE>
"Eligible Director" shall mean those Outside Directors specified in
-----------------
Section 1.4(b).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
-----
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Fair Market Value" shall mean the closing transaction price of a share
-----------------
of Common Stock as reported on The Nasdaq Stock Market on the trading day
immediately prior to the date as of which such value is being determined;
provided, however, that Fair Market Value may be determined by the Committee by
whatever means or method as the Committee, in the good faith exercise of its
discretion, shall at such time deem appropriate.
"Free-Standing SAR" shall mean a SAR which is not issued in tandem
-----------------
with, or by reference to, an option, which entitles the holder thereof to
receive, upon exercise, shares of Common Stock (which may be Restricted Stock),
cash or a combination thereof with an aggregate value equal to the excess of the
Fair Market Value of one share of Common Stock on the date of exercise over the
base price of such SAR, multiplied by the number of such SARs which are
exercised.
"Incentive Stock Option" shall mean an option to purchase shares of
----------------------
Common Stock that meets the requirements of Section 422 of the Code, or any
successor provision, which is intended by the Committee to constitute an
Incentive Stock Option.
"Insider" means (i) an insider as defined in the Securities Act
-------
(Ontario), other than a person who falls within that definition solely by virtue
of being a director or senior officer of a Subsidiary; and (ii) an associate of
any person who is an insider by virtue of (i).
"Mature Shares" shall mean previously-acquired shares of Common Stock
-------------
for which the holder thereof has good title, free and clear of all liens and
encumbrances and which such holder either (i) has held for at least six months
or (ii) has purchased on the open market.
"Non-Statutory Stock Option" shall mean an option to purchase shares of
--------------------------
Common Stock which is not an Incentive Stock Option.
"Outstanding Issue" means the total number of shares of Common Stock,
-----------------
Class B stock of the Company and Common Stock reserved for issuance by the
Company upon the exchange, retraction or redemption, of the Exchangeable Shares
of MEC (Holdings) Inc. issued and outstanding at the date of calculation
(excluding any such shares issued pursuant to share compensation arrangements
during the 12-month period prior to the date of calculation).
"Outside Director" shall mean directors of the Company who are not
----------------
officers or employees of the Company or any affiliate.
"Performance Measures" shall mean the criteria and objectives,
--------------------
established by the Committee, which shall be satisfied or met (i) as a condition
to the exercisability of all or a portion of a Stock Option or SAR, (ii) as a
condition to the grant of a Stock Award or (iii) during the applicable
Restriction Period or Performance Period as a condition to the holder's receipt,
in
2
<PAGE>
the case of a Restricted Stock Award, of the shares of Common Stock subject to
such award, or, in the case of a Performance Share Award, of the shares of
Common Stock subject to such award and/or of payment with respect to such award.
In the sole discretion of the Committee, the Committee may amend or adjust the
Performance Measures or other terms and conditions of an outstanding award in
recognition of unusual or nonrecurring events affecting the Company or its
financial statements or changes in law or accounting principles. Such criteria
and objectives may include one or more of the following: the attainment by a
share of Common Stock of a specified Fair Market Value for a specified period of
time, earnings per share, return to stockholders (including dividends), return
on equity, earnings of the Company, revenues, market share, cash flow or cost
reduction goals, or any combination of the foregoing. If the Committee desires
that compensation payable pursuant to any award subject to Performance Measures
be "qualified performance-based compensation" within the meaning of Section
162(m) of the Code, the Performance Measures (i) shall be established by the
Committee no later than the end of the first quarter of the Performance Period
or Restriction Period, as applicable (or such other time designated by the
Internal Revenue Service) and (ii) shall satisfy all other applicable
requirements imposed under Treasury Regulations promulgated under Section 162(m)
of the Code, including the requirement that such Performance Measures be stated
in terms of an objective formula or standard.
"Performance Period" shall mean any period designated by the Committee
------------------
during which the Performance Measures applicable to a Performance Share Award
shall be measured.
"Performance Share" shall mean a right, contingent upon the attainment
-----------------
of specified Performance Measures within a specified Performance Period, to
receive one share of Common Stock, which may be Restricted Stock, or in lieu of
all or a portion thereof, the Fair Market Value of such Performance Share in
cash.
"Performance Share Award" shall mean an award of Performance Shares
-----------------------
under this Plan.
"Post-Termination Exercise Period" shall mean the period specified in
--------------------------------
or pursuant to Section 2.3(a), Section 2.3(b), Section 2.3(d) or Section 2.3(e)
following termination of employment with or the service to the Company during
which a Stock Option or SAR may be exercised.
"Restricted Stock" shall mean shares of Common Stock which are subject
----------------
to a Restriction Period.
"Restricted Stock Award" shall mean an award of Restricted Stock under
----------------------
this Plan.
"Restriction Period" shall mean any period designated by the Committee
------------------
during which the Common Stock subject to a Restricted Stock Award may not be
sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or
disposed of, except as provided in this Plan or the Agreement relating to such
award.
"Retirement" shall mean termination of employment with or service to
----------
the Company by reason of retirement on or after age 60 with the consent of the
Company.
3
<PAGE>
"SAR" shall mean a stock appreciation right which may be a
---
Free-Standing SAR or a Tandem SAR.
"Stock Award" shall mean a Restricted Stock Award or a Bonus Stock
-----------
Award.
"Stock Option" shall mean an Incentive Stock Option or a Non-Statutory
------------
Stock Option.
"Subsidiary" and "Subsidiaries" shall have the meanings set forth in
---------- ------------
Section 1.4.
"Tandem SAR" shall mean an SAR which is granted in tandem with, or by
----------
reference to, a Stock Option (including a Non-Statutory Stock Option granted
prior to the date of grant of the SAR), which entitles the holder thereof to
receive, upon exercise of such SAR and surrender for cancellation of all or a
portion of such Stock Option, shares of Common Stock (which may be Restricted
Stock), cash or a combination thereof with an aggregate value equal to the
excess of the Fair Market Value of one share of Common Stock on the date of
exercise over the base price of such SAR, multiplied by the number of shares of
Common Stock subject to such Stock Option, or portion thereof, which is
surrendered.
"Tax Date" shall have the meaning set forth in Section 5.5.
--------
"Ten Percent Holder" shall have the meaning set forth in Section
------------------
2.1(a).
1.3 Administration. This Plan shall be administered by the Committee. Any
--------------
one or a combination of the following awards may be made under this Plan to
eligible persons: (i) Stock Options in the form of Incentive Stock Options or
Non-Statutory Stock Options, (ii) SARs in the form of Tandem SARs or
Free-Standing SARs, (iii) Stock Awards in the form of Restricted Stock or Bonus
Stock and (iv) Performance Shares. The Committee shall, subject to the terms of
this Plan, select eligible persons for participation in this Plan and determine
the form, amount and timing of each award to such persons and, if applicable,
the number of shares of Common Stock, the number of SARs and the number of
Performance Shares subject to such an award, the exercise price or base price
associated with the award, the time and conditions of exercise or settlement of
the award and all other terms and conditions of the award, including, without
limitation, the form of the Agreement evidencing the award. The Committee may,
in its sole discretion and for any reason at any time, take action such that (i)
any or all outstanding Stock Options and SARs shall become exercisable in part
or in full, (ii) all or a portion of the Restriction Period applicable to any
outstanding Restricted Stock Award shall lapse, (iii) all or a portion of the
Performance Period applicable to any outstanding Performance Share Award shall
lapse and (iv) the Performance Measures applicable to any outstanding award (if
any) shall be deemed to be satisfied at the maximum or any other level. Any such
action by the Committee shall be subject to the requirements of Section 162(m)
of the Code and regulations thereunder in the case of an award intended to be
qualified performance-based compensation, except if the action is determined in
good faith by the Committee to be necessary in order to facilitate a transaction
involving a Change of Control of the Company. The Committee shall, subject to
the terms of this Plan, interpret this Plan and the application thereof,
establish rules and regulations it deems necessary or desirable for the
administration of this Plan and may impose, incidental to the grant of an award,
conditions with respect to the award, such as limiting competitive
4
<PAGE>
employment or other activities. All such interpretations, rules, regulations and
conditions shall be final, binding and conclusive.
The Committee may delegate some or all of its power and authority
hereunder to the Board, the Chairman of the Board, the President and Chief
Executive Officer or other executive officer of the Company as the Committee
deems appropriate; provided, however, that (i) the Committee may not delegate
its power and authority to the Board, the Chairman of the Board, or the
President and Chief Executive Officer or other executive officer of the Company
with regard to the grant of an award to any person who is a "covered employee"
within the meaning of Section 162(m) of the Code or who, in the Committee's
judgment, is likely to be a covered employee at any time during the period an
award hereunder to such employee would be outstanding and (ii) the Committee may
not delegate its power and authority to the Chairman of the Board, President and
Chief Executive Officer or other executive officer of the Company with regard to
the selection for participation in this Plan of an officer or other person
subject to Section 16 of the Exchange Act or decisions concerning the timing,
pricing or amount of an award to such an officer or other person.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by all of the members of the Committee without a meeting.
1.4 Eligibility. (a) Participants in this Plan shall consist of such
-----------
officers and other employees, consultants, independent contractors and agents of
the Company, its subsidiaries from time to time and any other entity designated
by the Board or the Committee (individually a "Subsidiary" and collectively the
----------
"Subsidiaries") as the Committee in its sole discretion may select from time to
------------
time. For purposes of this Plan, references to employment shall also mean an
agency or independent contractor relationship and references to employment by
the Company shall also mean employment by a Subsidiary. The Committee's
selection of a person to participate in this Plan at any time shall not require
the Committee to select such person to participate in this Plan at any other
time; and (b) Outside Directors shall also be participants in the Plan.
1.5 Shares Available. Subject to adjustment as provided in Section 5.7,
----------------
8,000,000 shares of Common Stock shall be available for awards under this Plan.
To the extent that shares of Common Stock subject to an outstanding Stock Option
(except to the extent shares of Common Stock are issued or delivered by the
Company in connection with the exercise of a Tandem SAR), Free-Standing SAR,
Stock Award or Performance Share are not issued or delivered by reason of the
expiration, termination, cancellation or forfeiture of such award or by reason
of the delivery or withholding of shares of Common Stock to pay all or a portion
of the exercise price of an award, if any, or to satisfy all or a portion of the
tax withholding obligations relating to an award, then such shares of Common
Stock shall again be available under this Plan.
Shares of Common Stock shall be made available from authorized and
unissued shares of Common Stock, or authorized and issued shares of Common Stock
reacquired and held as treasury shares or otherwise or a combination thereof.
5
<PAGE>
To the extent necessary for an award to be qualified performance-based
compensation under Section 162(m) of the Code and the regulations thereunder,
the maximum number of shares of Common Stock with respect to which Stock Options
or SARs or a combination thereof may be granted during any calendar year to any
person shall be 4,000,000, subject to adjustment as provided in Section 5.7.
Notwithstanding anything else in the Plan, at no time shall:
(a) the aggregate number of shares of Common Stock reserved for
awards under the Plan (subject to adjustment as provided in Section 5.7),
together with the number of shares of Common Stock of the Company reserved for
issuance under any other share compensation arrangements of the Company, result
in the number of shares of Common Stock of the Company reserved for issuance
pursuant to share compensation arrangements exceeding 10% of the Outstanding
Issue;
(b) the number of shares of Common Stock reserved for awards under
the Plan to any one person (subject to adjustment as provided in Section 5.7),
exceed 5% of the Outstanding Issue;
(c) the aggregate number of shares of Common Stock issued within a
one-year period pursuant to awards under the Plan, together with the number of
shares of Common Stock of the Company issued within such period under any other
share compensation arrangements of the Company, exceed 10% of the Outstanding
Issue;
(d) the aggregate number of shares of Common Stock reserved for
awards under the Plan to Insiders of the Company, together with the number of
shares of Common Stock of the Company reserved for issuance to such persons
under any other share compensation arrangements of the Company, exceed 10% of
the Outstanding Issue;
(e) the aggregate number of shares of Common Stock issued within a
one-year period to Insiders of the Company pursuant to awards under the Plan,
together with the number of shares of Common Stock of the Company issued within
such period to such persons under any other share compensation arrangements of
the Company, exceed 10% of the Outstanding Issue; or
(f) the aggregate number of shares of Common Stock issued within a
one-year period to any one Insider of the Company and that Insider's associates
(as defined in the Securities Act (Ontario)) pursuant to awards under the Plan,
together with the number of shares of Common Stock of the Company issued within
such period to such persons under any other share compensation arrangements of
the Company, exceed 5% of the Outstanding Issue.
For the purposes of paragraphs (d), (e) and (f) above, shares of Common
Stock of the Company issued and awards granted to a person prior to such person
becoming an Insider may be excluded in determining the number of shares of
Common Stock of the Company issuable to Insiders.
II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6
<PAGE>
2.1 Stock Options. The Committee may, in its discretion, grant Stock
-------------
Options to purchase shares of Common Stock to such Eligible Participants as may
be selected by the Committee. Each Stock Option, or portion thereof, that is not
an Incentive Stock Option, shall be a Non-Statutory Stock Option. An Incentive
Stock Option may not be granted to any person who is not an employee of the
Company or any parent or subsidiary (as defined in Section 424 of the Code).
Each Incentive Stock Option shall be granted within ten years of the date this
Plan is adopted by the Board. To the extent that the aggregate Fair Market Value
(determined as of the date of grant) of shares of Common Stock with respect to
which Stock Options designated as Incentive Stock Options are exercisable for
the first time by a participant during any calendar year (under this Plan or any
other plan of the Company, or any parent or subsidiary as defined in Section 424
of the Code) exceeds the amount (currently $100,000) established by the Code,
such Stock Options shall constitute Non-Statutory Stock Options.
The Committee shall grant Stock Options to purchase 10,000 shares of
Common Stock to each Eligible Director in each of the following circumstances:
(i) immediately following each such Eligible Director's election
to the Board; and
(ii) immediately following the completion of each five (5) years
of continuous service as a director of the Corporation.
Stock Options granted to Eligible Directors shall vest as to 20% of the
shares of Common Stock included in each such grant to Eligible Directors on the
date of such grant, with an additional 20% of the shares vesting on each of the
second, third, fourth and fifth anniversary dates of each such grant.
Stock Options shall be subject to the following terms and conditions
and shall contain such additional terms and conditions, not inconsistent with
the terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of
-----------------------------------
Common Stock subject to a Stock Option, other than those granted to Eligible
Directors and the purchase price per share of Common Stock purchasable upon
exercise of the Stock Option shall be determined by the Committee; provided,
however, that the purchase price per share of Common Stock purchasable upon
exercise of a Stock Option shall not be less than 100% of the greater of (i) the
Fair Market Value of a share of Common Stock on the date of grant of such Stock
Option and (ii) the price of the last board lot of shares of Common Stock sold
on The Toronto Stock Exchange on the last business day prior to the date of
grant of such Stock Option on which a board lot of shares of Common Stock traded
on The Toronto Stock Exchange (the "TSE Permitted Price"); provided further,
that if an Incentive Stock Option shall be granted to any person who, at the
time such Stock Option is granted, owns capital stock possessing more than ten
percent of the total combined voting power of all classes of capital stock of
the Company (or of any parent or subsidiary as defined in Section 424 of the
Code) (a "Ten Percent Holder"), the purchase price per share of Common Stock
------------------
shall be the greater of (i) the price (currently 110% of Fair Market Value)
required by the Code in order to constitute an Incentive Stock Option and (ii)
the TSE Permitted Price.
7
<PAGE>
(b) Option Period and Exercisability. The period during which a Stock
--------------------------------
Option may be exercised shall be determined by the Committee; provided, however,
that no Stock Option shall be exercisable later than ten years after its date of
grant and shall expire at the end of such period; provided further, that if an
Incentive Stock Option shall be granted to a Ten Percent Holder, such Stock
Option shall not be exercised later than five years after its date of grant. The
Committee may, in its discretion, establish Performance Measures which shall be
satisfied or met as a condition to the grant of a Stock Option or to the
exercisability of all or a portion of a Stock Option other than those granted to
Eligible Directors. The Committee shall determine whether a Stock Option shall
become exercisable in cumulative or non-cumulative installments and in part or
in full at any time. An exercisable Stock Option, or portion thereof, may be
exercised only with respect to whole shares of Common Stock.
(c) Method of Exercise. A Stock Option may be exercised (i) by giving
------------------
written notice to the Company specifying the number of whole shares of Common
Stock to be purchased and accompanied by payment therefor in full (or
arrangement made for such payment to the Company's satisfaction) either (A) in
cash, (B) by delivery (either actual delivery or by attestation procedures
established by the Company) of Mature Shares having an aggregate Fair Market
Value, determined as of the date of exercise, equal to the aggregate purchase
price payable by reason of such exercise, (C) in cash by a broker-dealer
acceptable to the Company to whom the optionee has submitted an irrevocable
notice of exercise or (D) a combination of (A) and (B), in each case to the
extent set forth in the Agreement relating to the Stock Option, (ii) if
applicable, by surrendering to the Company any Tandem SARs which are canceled by
reason of the exercise of the Stock Option and (iii) by executing such documents
as the Company may reasonably request. The Company shall have sole discretion to
disapprove of an election pursuant to any of clauses (B)-(D). Any fraction of a
share of Common Stock which would be required to pay such purchase price shall
be disregarded and the remaining amount due shall be paid in cash by the
optionee. No certificate representing Common Stock shall be delivered until the
full purchase price therefor has been paid (or arrangement made for such payment
to the Company's satisfaction).
2.2 Stock Appreciation Rights. The Committee may, in its discretion,
-------------------------
grant SARs to Eligible Participants. The Agreement relating to a SAR shall
specify whether the SAR is a Tandem SAR or a Free-Standing SAR.
SARs shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem advisable:
(a) Number of SARs and Base Price. The number of SARs subject to an
-----------------------------
award shall be determined by the Committee. Any Tandem SAR related to an
Incentive Stock Option shall be granted at the same time that such Incentive
Stock Option is granted. The base price of a Tandem SAR shall be the purchase
price per share of Common Stock of the related Stock Option. The base price of a
Free-Standing SAR shall be determined by the Committee; provided, however, that
such base price shall not be less than 100% of the greater of (i) the Fair
Market Value of a share of Common Stock on the date of grant of such SAR or (ii)
the price of the last board lot of shares of Common Stock sold on The Toronto
Stock Exchange on the last
8
<PAGE>
business day prior to the date of grant of such SAR on which a board lot of
shares of Common Stock traded on The Toronto Stock Exchange.
(b) Exercise Period and Exercisability. The Agreement relating to an
----------------------------------
award of SARs shall specify whether such award may be settled in shares of
Common Stock (including shares of Restricted Stock) or cash or a combination
thereof. The period for the exercise of an SAR shall be determined by the
Committee; provided, however, that no Tandem SAR shall be exercised later than
the expiration, cancellation, forfeiture or other termination of the related
Stock Option; provided further, that no SAR shall be exercisable later than ten
years after its date of grant and shall expire at the end of such period. The
Committee may, in its discretion, establish Performance Measures which shall be
satisfied or met as a condition to the grant of an SAR or to the exercisability
of all or a portion of an SAR. The Committee shall determine whether an SAR may
be exercised in cumulative or non-cumulative installments and in part or in full
at any time. An exercisable SAR, or portion thereof, may be exercised, in the
case of a Tandem SAR, only with respect to whole shares of Common Stock and, in
the case of a Free-Standing SAR, only with respect to a whole number of SARs. If
an SAR is exercised for shares of Restricted Stock, a certificate or
certificates representing such Restricted Stock shall be issued in accordance
with Section 3.2(c) and the holder of such Restricted Stock shall have such
rights of a stockholder of the Company as determined pursuant to Section 3.2(d).
Prior to the exercise of an SAR for shares of Common Stock, including Restricted
Stock, the holder of such SAR shall have no rights as a stockholder of the
Company with respect to the shares of Common Stock subject to such SAR and shall
have rights as a stockholder of the Company in accordance with Section 5.9.
(c) Method of Exercise. A Tandem SAR may be exercised (i) by giving
------------------
written notice to the Company specifying the number of whole SARs which are
being exercised, (ii) by surrendering to the Company any Stock Options which are
canceled by reason of the exercise of the Tandem SAR and (iii) by executing such
documents as the Company may reasonably request. A Free-Standing SAR may be
exercised (i) by giving written notice to the Company specifying the whole
number of SARs which are being exercised and (ii) by executing such documents as
the Company may reasonably request.
2.3 Termination of Employment or Service.
------------------------------------
(a) Disability. Unless otherwise specified in the Agreement relating
----------
to a Stock Option or SAR, as the case may be, if the employment with or service
to the Company of the holder of a Stock Option or SAR terminates by reason of
Disability, each Stock Option and SAR held by such holder shall be fully
exercisable and may thereafter be exercised by such holder (or such holder's
legal representative or similar person) until and including the earliest to
occur of (i) the date which is three (3) years (or such other period as set
forth in the Agreement relating to such Stock Option or SAR) after the effective
date of such holder's termination of employment or service and (ii) the
expiration date of the term of such Stock Option or SAR.
(b) Retirement. Unless otherwise specified in the Agreement relating
----------
to a Stock Option or SAR, as the case may be, if the employment with or service
to the Company of the holder of a Stock Option or SAR terminates by reason of
Retirement, each Stock Option and SAR held by such holder shall be fully
exercisable and may thereafter be exercised by such holder (or such holder's
legal representative or similar person) until and including the earliest to
9
<PAGE>
occur of (i) the date which is three (3) years (or such other period as set
forth in the Agreement relating to such Stock Option or SAR) after the effective
date of such holder's termination of employment or service and (ii) the
expiration date of the term of such Stock Option or SAR.
(c) Death. Unless otherwise specified in the Agreement relating to a
-----
Stock Option or SAR, as the case may be, if the employment with or service to
the Company of the holder of a Stock Option or SAR terminates by reason of
death, each Stock Option and SAR held by such holder shall be fully exercisable
by such holder's executors, administrators, legal representatives,
beneficiaries, or similar person until and including the earliest to occur of
(i) the date which is 1 year (or such other period as set forth in the Agreement
relating to such Stock Option or SAR) after the date of death and (ii) the
expiration date of the term of such Stock Option or SAR.
(d) Other Termination. Unless otherwise specified in the Agreement
-----------------
relating to a Stock Option or SAR, as the case may be, if the employment with
the Company of the holder of a Stock Option or SAR terminates for any reason
other than Disability, Retirement, death, or for Cause, each Stock Option and
SAR held by such holder shall be exercisable only to the extent that such Stock
Option or SAR is exercisable on the effective date of such holder's termination
of employment or service and may thereafter be exercised by such holder (or such
holder's legal representative or similar person) until and including the
earliest to occur of (i) the date which is three (3) months (or such other
period as set forth in the Agreement relating to such Stock Option or SAR) after
the effective date of such holder's termination of employment and (ii) the
expiration date of the term of such Stock Option or SAR.
(e) Cause. Notwithstanding anything to the contrary in this Plan or
-----
in any Agreement relating to a Stock Option or SAR, as the case may be, if the
employment with or service to the Company of the holder of a Stock Option or SAR
is terminated by the Company for Cause, each Stock Option and SAR held by such
holder shall be automatically canceled by the Company on the effective date of
such holder's termination of employment or service.
10
<PAGE>
III. STOCK AWARDS
3.1 Stock Awards. The Committee may, in its discretion, grant Stock Awards
-------------
to Eligible Participants. The Agreement relating to a Stock Award shall specify
whether the Stock Award is a Restricted Stock Award or Bonus Stock Award.
3.2 Terms of Stock Awards. Stock Awards shall be subject to the following
---------------------
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a) Number of Shares and Other Terms. The number of shares of Common
--------------------------------
Stock subject to a Restricted Stock Award or Bonus Stock Award and the
Performance Measures (if any) and Restriction Period applicable to a Restricted
Stock Award shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted
----------------------
Stock Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of the
shares of Common Stock subject to such award (i) if specified Performance
Measures are satisfied or met during the specified Restriction Period or (ii) if
the holder of such award remains continuously in the employment of or service to
the Company during the specified Restriction Period and for the forfeiture of
all or a portion of the shares of Common Stock subject to such award (x) if
specified Performance Measures are not satisfied or met during the specified
Restriction Period or (y) if the holder of such award does not remain
continuously in the employment of or service to the Company during the specified
Restriction Period.
Bonus Stock Awards shall not be subject to any Performance Measures or
Restriction Periods.
(c) Share Certificates. During the Restriction Period, a certificate
------------------
or certificates representing a Restricted Stock Award may be registered in the
holder's name or a nominee name at the discretion of the Company and may bear a
legend, in addition to any legend which may be required pursuant to Section 5.6,
indicating that the ownership of the shares of Common Stock represented by such
certificate is subject to the restrictions, terms and conditions of this Plan
and the Agreement relating to the Restricted Stock Award. As determined by the
Committee, all certificates registered in the holder's name shall be deposited
with the Company, together with stock powers or other instruments of assignment
(including a power of attorney), each endorsed in blank with a guarantee of
signature if deemed necessary or appropriate by the Company, which would permit
transfer to the Company of all or a portion of the shares of Common Stock
subject to the Restricted Stock Award in the event such award is forfeited in
whole or in part. Upon termination of any applicable Restriction Period (and the
satisfaction or attainment of applicable Performance Measures), or upon the
grant of a Bonus Stock Award, in each case subject to the Company's right to
require payment of any taxes in accordance with Section 5.5, a certificate or
certificates evidencing ownership of the requisite number of shares of Common
Stock shall be delivered to the holder of such award.
11
<PAGE>
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise
----------------------------------------------
set forth in the Agreement relating to a Restricted Stock Award, and subject to
the terms and conditions of a Restricted Stock Award, the holder of such award
shall have all rights as a stockholder of the Company, including, but not
limited to, voting rights, the right to receive dividends and the right to
participate in any capital adjustment applicable to all holders of Common Stock;
provided, however, that a distribution with respect to shares of Common Stock,
other than a regular cash dividend, shall be deposited with the Company and
shall be subject to the same restrictions as the shares of Common Stock with
respect to which such distribution was made.
(e) Awards to Certain Executive Officers. Notwithstanding any other
------------------------------------
provision of this Article III, and only to the extent necessary to ensure the
deductibility to the Company of an award, the number of shares of Common Stock
subject to a Stock Award granted to a "covered employee" within the meaning of
Section 162(m) of the Code in any calendar year shall not exceed 400,000,000.
3.3 Termination of Employment or Service.
------------------------------------
(a) Disability, Retirement and Death. Unless otherwise set forth in
--------------------------------
the Agreement relating to a Restricted Stock Award, if the employment with or
service to the Company of the holder of such award terminates by reason of
Disability, Retirement or death, the Restriction Period shall terminate as of
the effective date of such holder's termination of employment or service and all
Performance Measures, if any, applicable to such award shall be deemed to have
been satisfied at the minimum target level.
(b) Other Termination. Unless otherwise set forth in the Agreement
-----------------
relating to a Restricted Stock Award, if the employment with or service to the
Company of the holder of a Restricted Stock Award terminates for any reason
other than Disability, Retirement or death, the portion of such award which is
subject to a Restriction Period on the effective date of such holder's
termination of employment or service shall be forfeited by such holder and such
portion shall be automatically canceled by the Company.
IV. PERFORMANCE SHARE AWARDS
4.1 Performance Share Awards. The Committee may, in its discretion, grant
------------------------
Performance Share Awards to Eligible Participants.
4.2 Terms of Performance Share Awards. Performance Share Awards shall be
---------------------------------
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of this Plan, as the
Committee shall deem advisable.
(a) Number of Performance Shares and Performance Measures. The number
-----------------------------------------------------
of Performance Shares subject to any award and the Performance Measures and
Performance Period applicable to such award shall be determined by the
Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Performance
----------------------
Share Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of such
award, if specified Performance Measures are
12
<PAGE>
satisfied or met during the specified Performance Period, and for the forfeiture
of all or a portion of such award, if specified Performance Measures are not
satisfied or met during the specified Performance Period.
(c) Settlement of Vested Performance Share Awards. The Agreement
---------------------------------------------
relating to a Performance Share Award (i) shall specify whether such award may
be settled in shares of Common Stock (including shares of Restricted Stock) or
cash or a combination thereof and (ii) may specify whether the holder thereof
shall be entitled to receive, on a current or deferred basis, dividend
equivalents, and, if determined by the Committee, interest on or the deemed
reinvestment of any deferred dividend equivalents, with respect to the number of
shares of Common Stock subject to such award. If a Performance Share Award is
settled in shares of Restricted Stock, a certificate or certificates
representing such Restricted Stock shall be issued in accordance with Section
3.2(c) and the holder of such Restricted Stock shall have such rights of a
stockholder of the Company as determined pursuant to Section 3.2(d). Prior to
the settlement of a Performance Share Award in shares of Common Stock, including
Restricted Stock, the holder of such award shall have no rights as a stockholder
of the Company with respect to the shares of Common Stock subject to such award
and shall have rights as a stockholder of the Company in accordance with Section
5.9.
4.3 Termination of Employment.
-------------------------
(a) Disability, Retirement and Death. Unless otherwise set forth in
--------------------------------
the Agreement relating to a Performance Share Award, if the employment with or
service to the Company of the holder of such award terminates by reason of
Disability, Retirement or death, all Performance Measures applicable to such
award shall be deemed to have been satisfied at the minimum target level and the
Performance Period applicable to such award shall thereupon terminate.
(b) Other Termination. Unless otherwise set forth in the Agreement
-----------------
relating to a Performance Share Award, if the employment with or service to the
Company of the holder of a Performance Share Award terminates for any reason
other than Disability, Retirement or death, the portion of such award which is
subject to a Performance Period on the effective date of such holder's
termination of employment shall be forfeited and such portion shall be
automatically canceled by the Company.
V. GENERAL
5.1 Effective Date and Term of Plan. This Plan was approved by the
-------------------------------
directors of the Company on February __, 2000 and was approved by the unanimous
written resolution of all of the shareholders of the Company on February __,
2000, which date is the effective date of this Plan. This Plan shall terminate
when shares of Common Stock are no longer available for the grant, exercise or
settlement of awards, unless terminated earlier by the Board. Termination of
this Plan shall not affect the terms or conditions of any award granted prior to
termination.
5.2 Amendments. The Board may amend this Plan as it shall deem advisable,
----------
subject to any requirement of stockholder approval required by applicable law,
rule or regulation, including Section 162(m) and Section 422 of the Code;
provided, however, that no amendment shall be made without stockholder approval
if such amendment would (a) increase the maximum number
13
<PAGE>
of shares of Common Stock available under this Plan (subject to Section 5.7) or
(b) effect any change applicable to Incentive Stock Options that is inconsistent
with Section 422 of the Code, unless the Board has determined in good faith that
such change is inconsistent with Section 422 of the Code and is necessary in
order to facilitate a transaction involving a Change of Control of the Company.
No amendment may impair the rights of a holder of an outstanding award without
the consent of such holder.
5.3 Agreement. No award shall be valid until an Agreement is executed by
---------
the Company and the recipient of such award and, upon execution by each party
and delivery of the Agreement to the Company, such award shall be effective as
of the effective date set forth in the Agreement.
5.4 Non-Transferability of Awards. No award shall be transferable other
-----------------------------
than by will or by the laws of descent and distribution. Each award may be
exercised or settled during the holder's lifetime only by the holder. Except to
the extent permitted by the second preceding sentence or the Agreement relating
to an award, no award may be sold, transferred, assigned, pledged, hypothecated,
encumbered or otherwise disposed of (whether by operation of law or otherwise)
or be subject to execution, attachment or similar process. Upon any attempt to
so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of
any such award, such award and all rights thereunder shall immediately become
null and void.
5.5 Tax Withholding. The Company shall have the right to require, prior to
---------------
the issuance or delivery of any shares of Common Stock or the payment of any
cash pursuant to an award made hereunder, payment by the holder of such award of
any Federal, state, local or other taxes which may be required to be withheld or
paid in connection with such award. An Agreement may provide that (i) the
Company shall withhold whole shares of Common Stock which would otherwise be
delivered to a holder, having an aggregate Fair Market Value determined as of
the date the obligation to withhold or pay taxes arises in connection with an
award (the "Tax Date"), or withhold an amount of cash which would otherwise be
--------
payable to a holder, in the amount necessary to satisfy any such obligation or
(ii) the holder may satisfy any such obligation by any of the following means:
(A) a cash payment to the Company, (B) delivery (either actual delivery or by
attestation procedures established by the Company) to the Company of Mature
Shares having an aggregate Fair Market Value, determined as of the Tax Date,
equal to the amount necessary to satisfy any such obligation, (C) authorizing
the Company to withhold whole shares of Common Stock which would otherwise be
delivered having an aggregate Fair Market Value, determined as of the Tax Date,
or withhold an amount of cash which would otherwise be payable to a holder,
equal to the amount necessary to satisfy any such obligation, (D) in the case of
the exercise of a Stock Option, a cash payment by a broker-dealer acceptable to
the Company to whom the optionee has submitted an irrevocable notice of exercise
or (E) any combination of (A), (B) and (C), in each case to the extent set forth
in the Agreement relating to the award; provided, however, that the Company
shall have sole discretion to disapprove of an election pursuant to any of
clauses (B)-(E). Shares of Common Stock to be delivered or withheld may not have
an aggregate Fair Market Value in excess of the amount determined by applying
the minimum statutory withholding rate. Any fraction of a share of Common Stock
which would be required to satisfy such an obligation shall be disregarded and
the remaining amount due shall be paid in cash by the holder.
14
<PAGE>
5.6 Restrictions on Shares. Each award made hereunder shall be subject to
----------------------
the requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
award upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the exercise or settlement
of such award or the delivery of shares thereunder, such award shall not be
exercised or settled and such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any award made hereunder bear a legend indicating that the
sale, transfer or other disposition thereof by the holder is prohibited except
in compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
5.7 Adjustment. Notwithstanding anything to the contrary contained in this
----------
Plan, in the event of any stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares,
liquidation, spin-off, sale of substantially all assets or other similar change
in capitalization or event, or any distribution to holders of Common Stock other
than a regular cash dividend, the number and class of securities available under
this Plan, the number and class of securities subject to each outstanding Stock
Option and the purchase price per security, the per person limits imposed by
Sections 1.5 and 3.2 on grants of Stock of SAR's and Stock Awards in a Calendar
Year, the terms of each outstanding SAR, the number and class of securities
subject to each outstanding Stock Award, and the terms of each outstanding
Performance Share shall be adjusted by the Committee, such adjustments to be
made in the case of outstanding Stock Options and SARs without an increase in
the aggregate purchase price or base price. The decision of the Committee
regarding any such adjustment shall be final, binding and conclusive. If any
such adjustment would result in a fractional security being (a) available under
this Plan, such fractional security shall be disregarded, or (b) subject to an
award under this Plan, the Company shall pay the holder of such award, in
connection with the first vesting, exercise or settlement of such award in whole
or in part occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the Fair Market Value on the vesting,
exercise or settlement date over (B) the exercise or base price, if any, of such
award.
5.8 No Right of Participation or Employment. No person shall have any right
---------------------------------------
to participate in this Plan other than Eligible Directors. Neither this Plan nor
any award made hereunder shall confer upon any person any right to continued
employment by the Company, any Subsidiary or any affiliate of the Company or
affect in any manner the right of the Company, any Subsidiary or any affiliate
of the Company to terminate the employment of any person at any time without
liability hereunder.
5.9 Rights as Stockholder. No person shall have any right as a stockholder
---------------------
of the Company with respect to any shares of Common Stock or other equity
security of the Company which is subject to an award hereunder unless and until
such person becomes a stockholder of record with respect to such shares of
Common Stock or equity security.
5.10 Designation of Beneficiary. If permitted by the Company, a holder of an
--------------------------
award may file with the Committee a written designation of one or more persons
as such holder's beneficiary or
15
<PAGE>
beneficiaries (both primary and contingent) in the event of the holder's death.
To the extent an outstanding Stock Option or SAR granted hereunder is
exercisable, such beneficiary or beneficiaries shall be entitled to exercise
such Stock Option or SAR.
Each beneficiary designation shall become effective only when filed in
writing with the Committee during the holder's lifetime on a form prescribed by
the Committee. The spouse of a married holder domiciled in a community property
jurisdiction shall join in any designation of a beneficiary other than such
spouse. The filing with the Committee of a new beneficiary designation shall
cancel all previously filed beneficiary designations.
If a holder fails to designate a beneficiary, or if all designated
beneficiaries of a holder predecease the holder, then each outstanding Stock
Option and SAR hereunder held by such holder, to the extent exercisable, may be
exercised by such holder's executor, administrator, legal representative or
similar person.
5.11 Governing Law. This Plan, each award hereunder and the related
-------------
Agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of laws.
5.12 Foreign Employees. Without amending this Plan, the Committee may grant
-----------------
awards to Eligible Participants or Eligible Directors who are foreign nationals
on such terms and conditions different from those specified in this Plan as may
in the judgment of the Committee be necessary or desirable to foster and promote
achievement of the purposes of this Plan and, in furtherance of such purposes
the Committee may make such modifications, amendments, procedures, subplans and
the like as may be necessary or advisable to comply with provisions of laws in
other countries or jurisdictions in which the Company or its Subsidiaries
operates or has employees in or in which an Eligible Director resides.
16
<PAGE>
EXHIBIT 10.12
PRIVATE & CONFIDENTIAL
November 26, 1999
Mr. David Mitchell
8817 Bonta Court
Las Vegas, Nevada
89134
Dear David:
Re: Employment with MI Entertainment Corp.
- ---------------------------------------------
In accordance with our recent discussions, this letter confirms that the terms
and conditions of your employment with MI Entertainment Corp. (the
"Corporation"), shall be as follows:
1. Position: You are appointed Executive Vice-President and CFO of the
Corporation reporting to the Chairman and carrying out your day-to-day
duties from the Corporation's head office at Santa Anita Race Track.
2. Remuneration: Your Base Salary shall be US $300,000 per annum (less
statutorily required deductions), payable monthly in arrears and otherwise
in accordance with the Corporation's standard payroll practices.
Annual Bonus: In addition to your Base Salary, you shall receive an
Annual Bonus (inclusive of all entitlement to vacation pay, whether
vacation is taken or not in any period and less the required withholding
taxes and other statutory deductions) in an amount equal to the greater of
US $150,000 or one-half of one percent (0.5%) of the net profits before
income tax of the Corporation for each such full fiscal year completed
during your employment.
"Net profits before income tax of the Corporation" for the purposes of this
Agreement shall be determined and paid in accordance with the stated
policies prescribed by the Corporation from time to time, in its sole
discretion.
3. Signing Bonus: In addition, you shall receive a one-time lump-sum signing
bonus of US $100,000 (less statutorily required deductions and inclusive of
all entitlement to vacation pay) after completion of your eighth week of
employment.
<PAGE>
-2-
4. Benefits: During your employment by the Corporation, you will be entitled
to:
(a) participate in all group insurance and benefit programs generally
applicable to salaried employees of the Corporation from time to time,
with the exception of the Magna Employee Equity Participation and
Profit Sharing Plan or any equivalent or related plans in effect from
time to time;
(b) three (3) weeks vacation in respect of each completed twelve (12)
month period, to be taken at such time or times as are mutually
convenient to you and the Corporation, but not payment in lieu
thereof;
(c) receive an automobile allowance of US $875 per month for the purchase
or lease of a domestic vehicle, provided that you shall be responsible
for all automobile operating costs including, without limitation,
fuel, repairs, maintenance, insurance premiums and insurance
deductibles;
(d) reimbursement for all reasonable and documented business expenses
incurred on behalf of the Corporation in carrying out your duties, in
accordance with the Corporation's policies from time to time, but
excluding automobile operating costs; and
(e) reimbursement of your reasonable travel expenses to and from Las Vegas
until the earlier of your family's relocation to California and
December 31, 2000.
5. Stock Options: Subject to the express approval of the Board of Directors of
the Corporation and any regulatory bodies having jurisdiction (including
the consent of NASDAQ to the listing of the underlying shares), and subject
to you entering into a Stock Option Agreement with the Corporation in the
standard form contemplated by the Corporation Incentive Stock Option Plan,
the Corporation shall grant you options to purchase 25,000 Class A
Subordinate Voting shares of the Corporation at an exercise price per share
which is equal to 100% of the last sale price of such shares on NASDAQ on
the trading day prior to the date of the Corporation's Board approval. Such
options shall be exercisable by you only in accordance with the terms and
conditions set forth in the Stock Option Agreement referred to above. Upon
receipt of an executed copy of this Agreement, we will place this matter
before the Board of Directors of the Corporation at the earliest
opportunity.
6. Termination: Your employment and this Agreement, including all benefits
provided for under this agreement, will terminate without notice or payment
in lieu thereof, on: (a) the acceptance by the Corporation of your
voluntary resignation, (b) at the Corporation's option, your disability for
an aggregate of six (6) months or more in any twenty-four (24) month
period, subject to any statutory requirement to accommodate such
disability, (c) your death; or (d) your dismissal for just cause or by
reason of your breach of the terms of this Agreement.
Otherwise, you or the Corporation may, at any time, terminate your
employment and this Agreement by providing the other party with twelve (12)
months' prior written notice of intention to terminate. In addition the
Corporation may elect to terminate your employment immediately by paying
you a retiring allowance of US $300,000 (less statutorily required
deductions) either in a lump sum within
<PAGE>
-3-
thirty (30) days of the date of termination or monthly in arrears in six
(6) equal installments commencing thirty (30) days after the date of
termination. If your employment is terminated pursuant to this paragraph,
the Corporation shall maintain on your behalf the benefits referred to in
paragraph 4(a) (except for Short Term and Long Term disability benefits)
for a period of not less than the period required by applicable statute.
Your Short Term and Long Term disability benefits shall be maintained for
the period required by applicable statute.
In the event that you breach the provisions of paragraph 7, the payment of
any further installments of such retiring allowance will immediately cease.
Further, the amount paid in each installment will be offset by any income
earned, during the period you are entitled to receive installments, from
alternate or self-employment.
Upon termination of this Agreement, other than upon your resignation under
paragraph 6(a) or for dismissal for cause or for breach under sub-paragraph
(d), any stock options referenced in paragraph 5 which have vested, will
continue to be exercisable in accordance with the said Stock Option
Agreement.
The termination provisions set forth above represent all severance pay
entitlement, notice of termination or pay in lieu thereof, salary, bonuses,
automobile allowances, vacation and/or vacation pay and other remuneration
and benefits payable or otherwise provided to you in relation to your
employment by the Corporation or any affiliates of Magna International Inc.
(the "Magna Group").
7. Other Conditions: You hereby acknowledge as reasonable and agree that you
shall abide by the following terms and conditions:
i) Technology, Know-How, Inventions, Patents: That all designs, devices,
improvements, inventions and ideas made or conceived by you resulting
from your access to the business of the Corporation shall be exclusive
property of the Corporation and you and your estate agree to take all
necessary steps to ensure that such property rights are protected.
ii) Confidentiality: You shall keep confidential at all times during or
after your employment, any information (including proprietary or
confidential information) about the business and affairs of, or
belonging to, the Corporation, or any member of the Magna Group or
their respective customers or suppliers, including information which,
though technically not trade secrets, the dissemination or knowledge
whereof might prove prejudicial to any of them.
iii) Non-Competition: During the term of your employment with the
Corporation and for a period of six (6) months after the cessation of
your employment, you shall not, directly or indirectly, in any
capacity compete with the business of the Corporation or any other
member of the Magna Group in respect of which you have had, access to
proprietary or confidential information or solicit the employees
thereof.
8. Term: Subject to earlier termination in accordance with the terms of this
Agreement, your employment with the Corporation shall commence on January 1,
2000, or such earlier or later date as may be mutually agreed upon, (the
"Start Date") and shall expire on December 31, 2004. This Agreement may be
renewed for a subsequent term on such terms and conditions as may be
mutually
<PAGE>
-4-
agreed upon in writing. Upon termination of this Agreement, paragraph 7
shall continue in full force and effect. This Agreement shall be null and
void and of no effect if you do not commence employment by January 1, 2000.
9. Assignability: The Corporation may, in its sole discretion, assign this
Agreement to an affiliated or other organization at any time. Upon any such
assignment, the terms and conditions of this Agreement shall continue in
full force and effect.
If the terms of employment as set out in this Agreement are acceptable to you,
please sign and date three copies of this Agreement in the places indicated and
return two fully signed copies to the attention of Keith Stein by December 21,
1999, after which, if not so signed and returned, this Agreement shall become
null and void and of no effect. Upon execution by you, this Agreement: (i)
replaces any prior written or oral employment contract or other Agreement
concerning remuneration between you and the Corporation, or any member of the
Magna Group; (ii) will continue to apply to your employment in a similar or
other capacity with the Corporation, or any member of the Magna Group and, (iii)
will continue to be applicable in the event that your employment with the
Corporation continues beyond the expiry date of the term specified above without
this Agreement being formally extended or replaced.
Yours very truly,
MI ENTERTAINMENT CORP.
Per:
---------------------
Frank Stronach
**********
I hereby accept the terms and conditions set out above and acknowledge that this
Agreement contains all of the terms and conditions of my employment with the
Corporation and that no other terms, conditions or representations other than
those within this letter form part of this Agreement. I confirm that I am not
subject to any restrictions (contractual or otherwise) arising from my former
employment which would prevent or impair me in carrying out my duties and
functions with the Corporation. Furthermore, I confirm that during the term of
my employment I will not offer to the Corporation any confidential or
proprietary information that I have knowledge of with respect to my former
employers, nor will I provide such information to the Corporation should I be
requested to do so, until such time as such information is no longer
confidential, proprietary or comes into the public domain.
- ------------------ ------------------------------
Date David Mitchell
<PAGE>
Exhibit 21.1
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
% Included
----------
<S> <C>
United States
Magna Entertainment Corp....................................... 100
The Santa Anita Companies, Inc................................ 100
Los Angeles Turf Club, Inc.................................. 100
SLRD Thoroughbred Training Center, Inc........................ 100
Gulfstream Park Racing Association, Inc....................... 100
Pacific Racing Association.................................... 100
MEC Land Holdings (California) Inc............................ 100
Remington Park, Inc........................................... 100
Thistledown, Inc.............................................. 100
MI Racing, Inc. .............................................. 100
MEC Land Holdings (USA) Inc................................... 100
DLR, Inc...................................................... 100
OTL, Inc...................................................... 100
Vista Hospitality, Inc........................................ 100
Canada
MEC Holdings (Canada) Inc...................................... 100
1207032 Ontario Inc........................................... 100
1180482 Ontario Inc............................................ 100
Europe
MI Entertainment Holding GmbH.................................. 100
Magna Ventures Management GmbH................................ 100
SDP Landholding GmbH......................................... 100
Steyr-Barter Handels GmbH................................... 100
Steyr-Industrie-Commerz und Handels GmbH................... 100
Gemeinnutzige Wohnungs-Gesellschaft,
"Steyr-Daimler-Puch" GmbH & Co. KG.......................... 100
MI Air Flugbetriebs GmbH..................................... 100
Magna Vierte Beteiligungs AG................................... 100
Magna Projektentwicklungs AG................................... 100
Magna Grundstucksentwicklungs GmbH............................ 100
</TABLE>
