Exhibit 10.1

 

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THE INTERIM MANAGEMENT PRACTICE

 

FTI Palladium Partners
3 Times Square
11th Floor
New York, NY 10036
212.247.1010 telephone
212.841.9350 facsimile
www.ftipalladiumpartners.com

 

PRIVATE & CONFIDENTIAL

 

April 7, 2009

 

Via E-mail Delivery

 

Mr. William Menear

Lead Director

Magna Entertainment Corporation

337 Magna Drive

Aurora, Ontario L467K1

 

Re: Engagement Letter between FTI Consulting, Inc. and Magna Entertainment
Corporation

 

Dear Mr. Menear :

 

1.             Introduction

 

This letter confirms that we, FTI Consulting, Inc. (“FTI”), have been retained
by you, Magna Entertainment Corporation. (the “Company”), to provide certain
financial advisory and consulting services (the “Services”) set out below.  This
letter of engagement (the “Engagement”) and the related Standard Terms and
Conditions constitute the engagement contract (the “Engagement Contract”)
pursuant to which the Services will be provided.

 

2.             Scope of Services

 

The Services, to be performed at your direction, are expected to include the
following:

 

·      Provide the services of Greg Rayburn to serve as the interim Chief
Executive Officer (the “CEO”) reporting directly to the Board of Directors. In
the capacity of CEO, Greg will enjoy the same full and free access to the Board
of Directors and its Committees as other members of the senior management of the
Company as specified in the Corporate Governance Guidelines of the Board of
Directors and will be granted the right to attend and participate (but not vote)
in the meetings of the Company’s Board of Directors, or its Committees, as an
observer (it being understood that the Board of Directors of the Company may
from time to time meet in “executive session” or otherwise ask that certain or
all non-directors not attend such meeting or a portion thereof) (such role
referred to as “Board Observer”).

 

·      To the extent determined by mutual agreement of you and Greg Rayburn,
provide the services of other employees of FTI (the “Temporary Employees”) to
support

 

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Greg Rayburn in his role and in the accomplishment of the following specific
aspects of the Services in coordination with the Company’s senior management and
assigned permanent employees:

 

1.             Discharge the customary duties and responsibilities of the CEO;

 

2.             Lead the Company’s chapter 11 sale/restructuring process; and

 

3.             Provide such other services as may be requested by the Company’s
Board of Directors in connection with this Engagement.

 

We currently anticipate that Greg Rayburn will be supported by one Temporary
Employee.  We will keep you informed as to our staffing and will not add
additional Temporary Employees to the assignment without first obtaining your
consent that such additional resources are required and do not duplicate the
activities of other employees or professionals.  Moreover, we will attempt to
utilize Company personnel to fulfill such roles and will take such steps as may
be necessary to avoid duplications with the Company’s other professionals. 
Furthermore, we will obtain your consent as to the areas of responsibility being
filled by all Temporary Employees and will adjust the staffing levels upwards or
downwards.

 

In addition to these specific services, we understand that, at your request and
to the extent appropriate, such Temporary Employees may be asked to participate
in meetings and discussions with the Company, its lenders, other constituencies
and their respective professionals.

 

The Services of the Temporary Employees may be performed by FTI or by any
subsidiary of FTI, as FTI shall determine.  FTI may also provide Services
through its or its subsidiaries’ agents or independent contractors.  References
herein to FTI and its employees shall be deemed to apply also, unless the
context shall otherwise indicate, to employees of each such subsidiary and to
any such agents or independent contractors and their employees.

 

The Services, as outlined above, are subject to change as mutually agreed
between us.

 

The Company is operating under the protection of the Bankruptcy Code and our
retention will be required to be approved by the Bankruptcy Court.  Our role
will include serving as CEO and principal bankruptcy advisors to the debtor and
debtors in possession in those cases under a general retainer, subject to court
approval.  Our role will also encompass planning and negotiations attendant to
these tasks.

 

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The services we will provide in connection with the Engagement will encompass
all services normally and reasonably associated with this type of engagement
that we are requested and are able to provide and that are consistent with our
ethical obligations.  With respect to all matters of our Engagement, we will
coordinate closely with the Company as to the nature of the services that we
will render and the scope of our engagement.

 

As usual, our Engagement is to represent the Company and not its individual
directors, officers, employees or shareholders.  However, we anticipate that in
the course of that Engagement, we may provide information or advice to
directors, officers or employees in their corporate capacities.

 

3.             Fees and Cash on Accounts

 

For services rendered in connection with this assignment, the Company agrees to
pay FTI a monthly, non-refundable advisory fee of $165,000 for the services of
Greg Rayburn and one additional Temporary Employee.  Payment of such fees is due
and payable on the first business day of each month.

 

In addition to the fixed rate fees, we will earn and be due a completion fee
payable on the confirmation of any plan consummated by the company in its
bankruptcy proceedings. If FTI services are finalized after 6 months, the
completion fee will be $600,000, if the services are finalized after 5 months
the completion fee will be $500,000, if the services are finalized  after 4
months the completion fee will be $400,000. In the event the engagement is not
concluded within 6 months the completion fee will increase from $600,000 by
$100,000 per month but will under no circumstances exceed $1,000,000.

 

In addition to the fees outlined above, FTI will bill for reasonable allocated
and direct expenses which are likely to be incurred on your behalf during this
Engagement.  Allocated expenses include the cost of items which are not billed
directly to the engagement, including administrative support and other overhead
expenses that are not billed through as direct reimbursable expenses, and are
calculated at 3.0% of FTI’s advisory fees.  Direct expenses include reasonable
and customary out-of-pocket expenses which are billed directly to the engagement
such as certain telephone, overnight mail, messenger, travel, meals,
accommodations and other expenses specifically related to the engagement. 
Further, if FTI and/or any of its employees are required to testify or provide
evidence at or in connection with any judicial or administrative proceeding
relating to this matter, FTI will be compensated by you at its regular hourly
rates and reimbursed for reasonable allocated and direct

 

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expenses (including counsel fees) with respect thereto; provided that during the
term of this Engagement Greg Rayburn will testify or provide evidence as
required without further charge beyond the fixed monthly fee.

 

Cash on Account

 

Initially, the Company will forward to us the amount of $165,000, which funds
will be held “on account” to be applied to our professional fees, charges and
disbursements for the Engagement (the “Initial Cash on Account”).  To the extent
that this amount exceeds our fees, charges and disbursements upon the completion
of the Engagement, we will refund any unused portion.  The Company agrees to
increase or supplement the Initial Cash on Account from time to time during the
course of the Engagement in such amounts as the Company and we mutually shall
agree are reasonably necessary to increase the Initial Cash on Account to a
level that will be sufficient to fund Engagement fees, charges, and
disbursements to be incurred.

 

We will send the Company periodic invoices (generally weekly but not less
frequently than monthly) for services rendered and charges and disbursements
incurred on the basis discussed above, and in certain circumstances, an invoice
may be for estimated fees, charges and disbursements through a date certain. 
Each invoice constitutes a request for an interim payment against the fee to be
determined at the conclusion of our Services.  Upon transmittal of the invoice,
we may immediately draw upon the Initial Cash on Account (as replenished from
time to time) in the amount of the invoice.  The Company agrees upon submission
of each such invoice to promptly wire the invoice amount to us as replenishment
of the Initial Cash on Account (together with any supplemental amount to which
we and the Company mutually agree), without prejudice to the Company’s right to
advise us of any differences it may have with respect to such invoice.  We have
the right to apply to any outstanding invoice (including amounts billed prior to
the date hereof), up to the remaining balance, if any, of the Initial Cash on
Account (as may be supplemented from time to time) at any time subject to (and
without prejudice to) the Company’s opportunity to review our statements.

 

The Company agrees to promptly notify FTI if the Company or any of its
subsidiaries or affiliates extends (or solicits the possible interest in
receiving) an offer of employment to a principal or employee of FTI involved in
this Engagement and agrees that FTI has earned and is entitled to a cash fee,
upon hiring, equal to 150% of the aggregate first year’s annualized
compensation, including any guaranteed or target bonus and equity award, to be
paid to FTI’s former principal or employee that the Company or any of it
subsidiaries or affiliates hires at any time up to one year

 

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subsequent to the date of the final invoice rendered by FTI with respect to this
Engagement.

 

In a case under the Bankruptcy Code, fees and expenses may not be paid without
the express prior approval of the bankruptcy court.  The bankruptcy court has
established a procedure for the payment of interim fees during the Company’s
case that permits payment of interim fees.  We will submit invoices on account
against our final fee in accordance with such order.  These interim invoices
will be based on the percentage allowed by the bankruptcy court of our internal
time charges and costs and expenses for the work performed during the relevant
period and will constitute a request for an interim payment against the
reasonable fee to be determined at the conclusion of our representation.

 

Post-petition fees, charges and disbursements will be due and payable
immediately upon entry of an order containing such court approval or at such
time thereafter as instructed by the court.  The Company understands that, while
the arrangement in this paragraph may be altered in whole or in part by the
bankruptcy court, the Company shall nevertheless remain liable for payment of
court approved post-petition fees and expenses.  Such items are afforded
administrative priority under 11 U.S.C. § 503(b)(l).  The Bankruptcy Code
provides in pertinent part, at 11 U.S.C. § 1l29(a)(9)(A), that a plan cannot be
confirmed unless these priority claims are paid in full in cash on the effective
date of any plan (unless the holders of such claims agree to different
treatment).  It is agreed and understood that the unused portion, if any, of the
Initial Cash on Account (as may be supplemented from time to time) and the
Additional Cash on Account shall be held by us and applied against the final fee
application filed and approved by the court.

 

4.             Terms and Conditions

 

The attached Standard Terms and Conditions set forth the duties of each party
with respect to the Services. Further, this letter and the Standard Terms and
Conditions attached comprise the entire Engagement Contract for the provision of
the Services to the exclusion of any other express or implied terms, whether
expressed orally or in writing, including any conditions, warranties and
representations, and shall supersede all previous proposals, letters of
engagement, undertakings, agreements, understandings, correspondence and other
communications, whether written or oral, regarding the Services.

 

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5.             Conflicts of Interest

 

Based on the list of interested parties (the “Potentially Interested Parties”),
provided by you, we have undertaken a limited review of our records to determine
FTI’s professional relationships with the Company, the administrative agent and
other related parties.  As you may be aware, FTI is regularly retained by the
administrative agent and/or other members of your lending group (or law firms
retained by the administrative agent or lending group members).  However, such
representations are in matters unrelated to this engagement.

 

We were not made aware of any conflicts of interest or additional relationships
that we believe would preclude us from performing the Services.  However, as you
know, we are a large consulting firm with numerous offices throughout the United
States.  We are regularly engaged by new clients, which may include one or more
of the Potentially Interested Parties.  We will not knowingly accept an
engagement that directly conflicts with this Engagement without your prior
written consent.

 

6.             Acknowledgement and Acceptance

 

Please acknowledge your acceptance of the terms of this Engagement Contract by
signing both the confirmation below and the attached Standard Terms and
Conditions and returning a copy of each to us at the above address.

 

If you have any questions regarding this letter or the attached Standard Terms
and Conditions, please do not hesitate to contact Greg Rayburn at (336)
407-4857.

 

Very truly yours,

 

FTI CONSULTING, INC.

 

 

By:

/s/ Greg Rayburn

 

 

Greg Rayburn

 

 

Senior Managing Director

 

 

Attachment — As stated

 

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CONFIRMATION OF TERMS OF ENGAGEMENT

 

We agree to engage FTI Consulting, Inc. upon the terms set forth herein and in
the attached Standard Terms and Conditions.

 

Magna Entertainment Corporation

 

By:

/s/ William Menear

 

 

William Menear

 

 

Lead Director

 

 

 

 

 

 

 

Date:

April 14, 2009

 

 

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FTI CONSULTING, INC.

 

STANDARD TERMS AND CONDITIONS

 

The following are the Standard Terms and Conditions on which we will provide the
Services to you set forth within the attached letter of engagement with Accuride
Corporation dated April 4, 2009.   The Engagement letter and the Standard Terms
and Conditions  (collectively the “Engagement Contract”) form the entire
agreement between us relating to the Services and replace and supersede any
previous proposals, letters of engagement, undertakings, agreements,
understandings, correspondence and other communications, whether written or
oral, regarding the Services.  The headings and titles in the Engagement
Contract are included to make it easier to read but do not form part of the
Engagement Contract.

 

1.             Reports and Advice

 

1.1           Use and purpose of advice and reports — Any advice given or report
issued by us is provided solely for your use and benefit and only in connection
with the purpose in respect of which the Services are provided. Unless required
by law, you shall not provide any advice given or report issued by us to any
third party, or refer to us or the Services, without our prior written consent.
In no event, regardless of whether consent has been provided, shall we assume
any responsibility to any third party to which any advice or report is disclosed
or otherwise made available.

 

2.             Information and Assistance

 

2.1           Provision of information and assistance — Our performance of the
Services is dependent upon your providing us with such information and
assistance as we may reasonably require from time to time.

 

2.2           Punctual and accurate information — You shall use reasonable
skill, care and attention to ensure that all information we may reasonably
require is provided on a timely basis and is accurate and complete and relevant
for the purpose for which it is required.  You shall also notify us if you
subsequently learn that the information provided is incorrect or inaccurate or
otherwise should not be relied upon.

 

2.3           No assurance on financial data — While our work may include an
analysis of financial and accounting data, the Services will not include an
audit, compilation or review of any kind of any financial statements or
components thereof.  Company management will be responsible for any and all
financial information they provide to us during the course of this Engagement,
and we will not examine or compile or verify

 

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any such financial information.  Moreover, the circumstances of the Engagement
may cause our advice to be limited in certain respects based upon, among other
matters, the extent of sufficient and available data and the opportunity for
supporting investigations in the time period.  Accordingly, as part of this
Engagement, we will not express any opinion or other form of assurance on
financial statements of the Company.

 

2.4           Prospective financial information - In the event the Services
involve prospective financial information, our work will not constitute an
examination or compilation, or apply agreed-upon procedures, in accordance with
standards established by the American Institute of Certified Public Accountants
or otherwise, and we will express no assurance of any kind on such information. 
There will usually be differences between estimated and actual results, because
events and circumstances frequently do not occur as expected, and those
differences may be material.  We will take no responsibility for the
achievability of results or events projected or anticipated by the management of
the Company.

 

3.             Additional Services

 

3.1           Responsibility for other parties — You shall be solely responsible
for the work and fees of any other party engaged by you to provide services in
connection with the Engagement regardless of whether such party was introduced
to you by us.  Except as provided in this Engagement Contract, we shall not be
responsible for providing or reviewing the advice or services of any such third
party, including advice as to legal, regulatory, accounting or taxation
matters.  Further, we acknowledge that we are not authorized under our
Engagement Contract to engage any third party to provide services or advice to
you, other than our agents or independent contractors engaged to provide
Services, without your written authorization.

 

4.             Confidentiality

 

4.1           Restrictions on confidential information — Both parties agree that
any confidential information received from the other party shall only be used
for the purposes of providing or receiving Services under this or any other
contract between us. Except as provided below, neither party will disclose the
other party’s confidential information to any third party without the other
party’s consent. Confidential information shall not include information that:

 

4.1.1        is or becomes generally available to the public other than as a
result of a breach of an obligation under this Clause 4.1;

 

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4.1.2        is acquired from a third party who, to the recipient party’s
knowledge, owes no obligation of confidence in respect of the information; or

 

4.1.3        is or has been independently developed by the recipient.

 

4.2           Disclosing confidential information — Notwithstanding Clause 1.1
or 4.1 above, either party will be entitled to disclose confidential information
of the other to a third party to the extent that this is required by valid legal
process, provided that (and without breaching any legal or regulatory
requirement) where reasonably practicable not less than 2 business days’ notice
in writing is first given to the other party.

 

4.3           Citation of engagement — Without prejudice to Clause 4.1 and
Clause 4.2 above, to the extent our engagement is or becomes known to the
public, we may cite the performance of the Services to our clients and
prospective clients as an indication of our experience, unless we and you
specifically agree otherwise in writing.

 

4.4           Internal quality reviews — Notwithstanding the above, we may
disclose any information referred to in this Clause 4 to any other FTI entity or
use it for internal quality reviews.

 

4.5           Maintenance of workpapers — Notwithstanding the above, we may keep
one archival set of our working papers from the Engagement, including working
papers containing or reflecting confidential information, in accordance with our
internal policies.

 

5.             Termination

 

5.1           Termination of Engagement with notice — Either party may terminate
the Engagement Contract for whatever reason upon written notice to the other
party. Upon receipt of such notice, we will stop all work immediately. You will
be responsible for all fees and expenses incurred by us through the date
termination notice is received.

 

5.2           Continuation of terms — The terms of the Engagement that by their
context are intended to be performed after termination or expiration of this
Engagement Contract, including but not limited to, Clauses 3 and 4 of the
Engagement letter, and Clauses 1.1, 4, 6 and 7 of the Standard Terms and
Conditions, are intended to survive such termination or expiration and shall
continue to bind all parties.

 

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6.             Indemnification and Liability Limitation; Waiver of Jury Trial

 

6.1           Indemnification - You agree to indemnify and hold harmless FTI and
any of its subsidiaries and affiliates, officers, directors, principals,
shareholders, agents, independent contactors and employees (collectively
“Indemnified Persons”) from and against any and all claims, liabilities,
damages, obligations, costs and expenses (including reasonable attorneys’ fees
and expenses and costs of investigation) arising out of or relating to your
retention of FTI, the execution and delivery of this Engagement Contract, the
provision of Services or other matters relating to or arising from this
Engagement Contract, except to the extent that any such claim, liability,
obligation, damage, cost or expense shall have been determined by final
non-appealable order of a court of competent jurisdiction to have resulted from
the gross negligence or willful misconduct of the Indemnified Person or Persons
in respect of whom such liability is asserted.

 

6.2           Limitation of liability - You agree that no Indemnified Person
shall have any liability as a result of your retention of FTI, the execution and
delivery of this Engagement Contract, the provision of Services or other matters
relating to or arising from this Engagement Contract, other than liabilities
that shall have been determined by final non-appealable order of a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the Indemnified Person or Persons in respect of whom such
liability is asserted.  Without limiting the generality of the foregoing, in no
event shall any Indemnified Person be liable for consequential, indirect or
punitive damages, damages for lost profits or opportunities or other like
damages or claims of any kind.

 

6.3           In addition to the above indemnification, FTI personnel serving as
employees of the Company will be entitled to the benefit of the most favorable
indemnities provided by the Company to its officers and directors, whether under
the Company’s by-laws, certificate of incorporation, by contract or otherwise. 
The Company agrees that it will use its commercially reasonable efforts to
obtain Directors and Officers insurance and that should such insurance be
obtained, it specifically will include and cover Rayburn (and any other employee
of FTI who, at the request of the Board of Directors of the Company, FTI agrees
will serve as an officer of the Company) under the Company’s policies for
directors’ and officers’ insurance. The Company agrees to also maintain
insurance coverage for Rayburn for a period of not less than two (2) years
following the date of termination of such FTI employee’s services hereunder. The
provisions of this section 7 are in the nature of contractual obligations and no
change in applicable law or the Company’s charter, by-laws or other
organizational documents or policies shall affect any of Rayburn’s rights
hereunder. The obligations of the parties as

 

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reflected herein shall survive the termination of the Engagement.  The parties
intend that an independent contractor relationship will be created by this
letter agreement.  As an independent contractor, FTI will have complete and
exclusive charge of the management and operation of its business, including
hiring and paying the wages and other compensation of all its employees and
agents, and paying all bills, expenses and other charges incurred or payable
with respect to the operation of its business.  None of FTI’s employees serving
as a Temporary Employee, including Rayburn as CEO of the Company, will be
entitled to receive from the Company any salary, bonus, compensation, vacation
pay, sick leave, retirement, pension or social security benefits, workers
compensation, disability, unemployment insurance benefits or any other Company
employee benefits.  FTI will be responsible for all employment, withholding,
income and other taxes incurred in connection with the operation and conduct of
its business (including those related to the Temporary Employees).

 

6.4           WAIVER OF JURY TRIAL —TO FACILITATE JUDICIAL RESOLUTION AND SAVE
TIME AND EXPENSE, YOU AND FTI IRREVOCABLY AND UNCONDITIONALLY AGREE NOT TO
DEMAND A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THE SERVICES OR ANY SUCH OTHER MATTER.

 

7.             Governing Law and Jurisdiction-The Engagement Contract shall be
governed by and interpreted in accordance with the laws of the State of New
York, without giving effect to the choice of law provisions thereof.  The United
States District Court for the Southern District of New York and the appropriate
Courts of the State of New York sitting in the Borough of Manhattan, City of New
York shall have exclusive jurisdiction in relation to any claim, dispute or
difference concerning the Engagement Contract and any matter arising from it.
The parties submit to the jurisdiction of such Courts and irrevocably waive any
right they may have to object to any action being brought in these Courts, to
claim that the action has been brought in an inconvenient forum or to claim that
those Courts do not have jurisdiction.

 

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FTI CONSULTING, INC

 

CONFIRMATION OF STANDARD TERMS AND CONDITIONS

 

We agree to engage FTI Consulting, Inc. upon the terms set forth in these
Standard Terms and Conditions as outlined above.

 

Magna Entertainment Corporation

 

By:

/s/ William Menear

 

 

William Menear

 

 

Lead Director

 

 

 

 

Date:

April 14, 2009

 

 

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