Exhibit 10.1
MEC
- ------------------------------- MEC GRUNDSTUCKSENTWICKLUNGS GMBH
MAGNA ENTERTAINMENT CORPORATION
Magna-Strasse 1
2522 Oberwaltersdorf, Austria
Tel.: +43/2253/600-0
Fax: +43/2253/600-595
www.magnaentertainment.com
Rechtsform der Gesellschaft:
Gesellschaft mit beschrankter Haftung
Sitz der Gesellschaft:
Oberwaltersdorf
Firmenbuchnummer:
FN 135317x
Firmenbuchgericht:
Landesgericht Wiener Neustadt
UID-Mr.: ATU 44530806
Osterreichische Lotterien
Gesellschaft m.b.H.
zH der Geschaftsfuhrer
Herrn Dr. Emil Mezgolits
Herrn DI Friedrich Stickler
Rennweg 44
A-1030 Wien
Oberwaltersdorf, January 24, 2003/sb
RE: OFFER FOR TAKING A LOAN
Dear Gentlemen:
We herewith submit the offer (hereinafter referred to as the "Offer") by
MEC Grundstucksentwicklungs GmbH (hereinafter referred to as "MGE" or a
"Party") to take a loan (hereinafter referred to as the "Loan") from
Osterreichische Lotterien Gesellschaft m.b.H. (hereinafter referred to as
"OLG" or a "Party") under the following terms and conditions:
1. PRINCIPAL AMOUNT
1.1 The principal amount (hereinafter referred to as the "Principal Amount")
which shall be advanced and/or paid by OLG to MGE's bank account No. 100 486
803 with Raiffeisen Zentralbank Osterreich AG, Am Stadtpark 9, 1030 Vienna,
Austria, identification No. BLZ 31.000, Swift-Code:
RZBAATWW, (hereinafter referred to as the "Loan
Bankverbindung: RZB, Kto. 100486808. BLZ 31000
VERTRAG.3200/MAGNA MANAGEMENT AG
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Account") pursuant to the terms and conditions described hereunder shall be:
EUR 15'000'000.--
(Euro fifteen million)
1.2 The Principal Amount shall bear interest payable in EUR of (fixed) 4
(four) % per annum from (and including) the date the Principal Amount was
advanced and/or paid by OLG to MGE. Interest is to be computed on an
actual/360 day basis and paid without any further notice etc. (i.e.
"Mahnung") by MGE to OLG at the last working-day of each calendar-year
quarter to the bank account as specified by OLG.
2. PLEDGE AND GUARANTEE
2.1 MGE is the current registered owner of the real estate as described in
ANNEX 2.1 (hereinafter referred to as the "Real Estate").
2.2 In order to secure all debts arising from the Loan, MGE offers to pledge
to OLG the Real Estate pursuant to the conditions set out hereunder
(hereinafter referred to as the "Pledge"). MGE shall upon request of OLG
draw up a mortgage-deed in the German language which is suitable for the
registration of such mortgage with the Austrian land register (ANNEX 2.2),
provided, however, that OLG shall not make such request unless MGE is in
default pursuant to article 2.4 below.
2.3 The Pledge shall secure the repayment of the Loan including, without
limitation, the payment of interest and other amounts which accrue and
become due in respect of the Loan.
2.4 If MGE fails to fulfill its obligations under the Loan upon being due and
also fails to do so within 30 days after written notice by OLG, OLG shall
have the right to realize the Pledge.
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2.5 In the event of the Loan having been fully repaid and all conditions of
the Loan having been met, the Pledge shall terminate.
2.6 Further to the Pledge, the Loan shall be secured by a Guarantee issued
by Magna Entertainment Corp. in accordance with ANNEX 2.6.
3. CONVERSION OF THE LOAN ("WANDLUNGSRECHT")
3.1 Magna Entertainment Corp. intends to establish a company for sports
betting and entertainment in the grand stand building of the race track in
Ebreichsdorf (hereinafter referred to as the "Betting Company").
In view and/or consideration of OLG's right pursuant to article 3.2 et
seq. below, MEC will conduct its business with and in the Betting Company
in accordance with the so-called "arm's length principle".
3.2 During the term of the Loan according to article 5 below , OLG shall
have the option, but not the obligation, to convert the Principle Amount
plus interest accrued and not yet paid as described above in article 1 above
into an equity participation in the Betting Company on the basis of a
valuation taking into account (only) the net book value (i.e. total assets
minus total liabilities) of the Betting Company.
3.3 If MGE and OLG cannot reach an agreement on the number of shares to be
issued, an international auditing firm which is independent from the
Parties shall determine the number of shares to be issued as an arbitrator.
If MGE and OLG can not agree on the appointment of an arbitrator,
the arbitrator shall be appointed by the president of the Austrian Chamber
of Auditors.
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4. TERMINATION
4.1 OLG shall have the right to terminate the Loan immediately if:
- MGE does not pay interest on the Principal Amount as described in
article 1 above: or
- the Heads of Agreement (i.e. "Punktation") to be concluded by Magna
Entertainment Corp. and OLG for the establishment and operation of
Video-Lottery-Terminals ("VLTs") in the grand stand building of the race
track in Ebreichsdorf shall not become legally effective and/or the VLTs
not go into operation on or before July 31, 2005 because of reasons not
caused by OLG, or the Heads of Agreement shall (after having become
legally effective) be terminated.
4.2 MGE shall have the right to terminate the Loan at the end of each
calendar-month upon prior notice to be given to OLG at least ten
working-days in advance, without incurring any prepayment penalties.
4.3 Upon termination of the Loan as described above in article 4.1 and
article 4.2, MGE shall pay back immediately to OLG the Principle Amount in
cash plus interest accrued and not yet paid as described in article 1 above.
5. ENTERING INTO FORCE, PERIOD OF ACCEPTANCE AND TERM
5.1 The Loan shall enter into force and become valid and enforceable upon
acceptance by OLG of the Offer.
During the Acceptance-Period as described hereunder, OLG shall be able to
accept the Offer any time by transferring the Principal Amount to the Loan
Account.
5.2 MGE expects OLG to accept the Offer considerably prior to 31 March 2003.
The Offer
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shall, however, remain valid until 31 March 2003, end of banking
day, Vienna time (i.e. the "Acceptance-Period"). Upon acceptance of the
Offer, there shall be no condition precedent to be fulfilled, in particular
all corporate approvals shall be obtained by OLG prior to the acceptance
of the Offer.
5.3 The Loan shall automatically terminate 48 months after the date of
acceptance of the Offer. Upon termination, the provision of above article
4.3 shall apply mutatis mutandis. OLG's and MGE's right to terminate the
Loan pursuant to above article 4.1 respectively article 4.2 are reserved.
6. MISCELLANEOUS
6.1 The Loan shall be governed by and construed in accordance with the laws
of Austria.
6.2. a) Any controversy between the Parties arising out of or relating to the
Loan shall be exclusively and finally settled by arbitration in Vienna,
Austria, in accordance with the "Rules of Arbitration and Conciliation
of the International Arbitral Center of the Federal Economic Chamber,
Vienna", hereinafter referred to as the "Vienna Rules".
6.2. b) Each party shall be entitled to appoint one arbitrator and the two
arbitrators so appointed shall appoint a third arbitrator (hereinafter
referred to as "the Arbitration Board"). This third arbitrator shall be
the Chairman of the Arbitration Board (hereinafter referred to as "the
Chairman"). The Chairman shall have:
(i) the qualification of an Austrian attorney at law;
(ii) professional experience in commercial matters; and
(iii)good knowledge of the English language.
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The Parties mutually agree that any decision by the Arbitration Board
shall not be contestable (i.e., "anfechtbar") based (solely) on the
reason and/or reasons that one or more arbitrator lacks the
qualification of above article 6.2.(b).(ii) and (iii).
6.2. c) The proceedings of the arbitration shall be conducted and any award
shall be rendered in the German language.
6.2. d) The procedure to establish the Arbitration Board shall be initiated
by the Party seeking a judgment. Said Party shall notify the other Party
of its claims together with a brief statement of the facts alleged and
the name and address of the arbitrator to be appointed. The other Party
shall appoint his arbitrator within 30 days after the receipt of the
aforementioned notice. If the other Party fails to appoint his
arbitrator (I.E., the "second arbitrator") or if the two arbitrators
fail to appoint the third arbitrator (I.E., the "Chairman"), the second
arbitrator respectively the Chairman shall be appinted by the presidium
("Prasidium") in accordance with the Vienna Rules.
6.3 a) PUBLIC ANNOUNCEMENTS
Except as required by mandatory law including the applicable stock
exchange rules, no public announcements or press releases concerning the
Offer and the Loan shall be made without the prior written consent of the
other Party.
6.3 b) COOPERATION
The Parties agree to cooperate with each other to facilitate the
consummation and implementation of the transactions contemplated by the
Offer and the Loan in the most expeditious manner and to execute such
further and other documents, certificates, deeds or other instruments
as may be reasonably required or requested, if any.
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6.3. c) ASSIGNMENT AND DELEGATION
Neither Party shall assign its rights or part of its rights under
the Loan to an "outside" third party. Either Party, however, shall be
free to assign its rights or part of its rights under the Loan to one or
more of its affiliated companies within the meaning of section 228
(3) HGB.
Neither Party shall appoint an "outside" third party to perform its
duties or part of its duties under the Loan. Either Party, however,
shall be free to appoint one or more of its affiliated companies within
the meaning of section 228 (3) HGB to perform all or part of its duties
under the Loan.
6.3. d) EXPENSES
Each Party shall pay its own expenses incident to the negotiation,
preparation and execution of the Loan and the consummation of the
transactions contemplated by the Loan, including all fees and
disbursements of their respective counsel.
6.3. e) ALLOCATION OF TAXES
Stamp duties (i.e. "Rechtsgeschaftsgebuhren"), if any, and other fees,
if any, payable in connection with the Offer and the Loan including the
Pledge and the drawing up of a mortgage-deed shall be paid by MGE,
unless such stamp duties are only payable because of reasons only caused
by OLG.
6.3. f) VALIDITY
Provisions which are or become deemed invalid shall be replaced with
valid provisions which, in their commercial and legal effect,
approximate so closely to those for which they will be substituted that
it may reasonably be assumed that the Parties hereto would have entered
into the Loan with such substituted provisions. In the event, that such
approximations cannot be found and the invalid provisions
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cannot be replaced, the invalidity of any such provisions shall not
affect the validity of the Loan as a whole, unless the invalid and
irreplaceable provisions are of such central and essential importance
to the Loan that it can reasonably be assumed that the Parties hereto
would not have entered into the Loan without such invalid provisions.
6.3. g) NOTICES
All notices and other communications to be given under or by reason of
the Offer and the Loan shall be addressed as follows:
(a) if to OLG: Osterreichische Lotterien
Gesellschaft m.b.H.
attn.: Management Board
Rennweg 44
1038 Vienna, Autria
(b) if to MGE: MEC Grundstucksentwicklungs GmbH
attn.: Management Board
Magna Strasse 1
2522 Oberwaltersdorf, Austria
We are looking forward to your acceptance of the Offer as described above in
article 3.
Place and Date: Place and Date:
/s/ Peter Koob /s/ Wolfgang Breitfuss
___________________________________ __________________________________
Dkfm Peter Koob Ing Wolfgang Breitfuss
Managing Director of Managing Director of
MEC Grundstucksentwicklungs GmbH MEC Grundstucksentwicklungs GmbH
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