Document:

Exhibit 10.1

	
  

  	
  Magna Entertainment Corp.

  337 Magna Drive

  Aurora, Ontario,

  Canada  L4G 7K1

  Tel: 
  905-726-2462

  Fax:  905-726-2585

  

 

February 27, 2007

PRIVATE & CONFIDENTIAL

Mr. Michael A. Neuman

160 Valley Road

Toronto, Ontario

M2L 1G4

Dear Michael:

Re:  Employment with Magna Entertainment Corp.

This letter shall
confirm that the following are the terms and conditions of your employment with
Magna Entertainment Corp. (the “Corporation”):

1.                                       Position:  Subject to the approval of the Board
of Directors (the “Board”) of the Corporation, you are hereby appointed, effective February 27, 2007, as the Chief Executive
Officer of the Corporation. You shall report to the Chairman of the Board and
shall be the most senior officer of the Corporation (after the Chairman) with
responsibility for the leadership of the execution of the Corporation’s
approved business plan, including, without limitation, the leadership of all of
the Corporation’s employees and consultants deployed in that execution.  You shall carry out your day-to-day duties
from the Corporation’s head office, which is currently located in Aurora,
Ontario.  You acknowledge that, due to
the nature of your position and job responsibilities, you shall be expected to
engage in extensive business travel.  You
shall devote substantially all of your business time, energy and skill to the
performance of your duties for the Corporation.

2.                                       Base Salary: 
During your employment by the Corporation, your Base Salary shall be
US$500,000 per annum for fiscal 2007 and subsequent fiscal years (less
statutorily required deductions), payable in arrears in accordance with the
Corporation’s standard payroll practices. 
Your Base Salary shall be pro-rated during any partial year of
employment.

3.                                       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 statutorily required deductions) each fiscal year in an amount
not less

than
US$500,000, payable quarterly in arrears. 
Your Annual Bonus shall be pro-rated during any partial year of
employment.

Your
Annual Bonus shall be paid in cash, but you agree to purchase from the treasury
of the Corporation an amount of the Corporation’s Class A Subordinate Voting
Stock (“Class A Stock”) equal to 50% of your Annual Bonus, at a price per share
that is equal to 100% of the last sale price of Class A Stock on the Toronto
Stock Exchange (the “TSX”) on the trading day prior to the date on which you purchase
the Class A Stock.  You agree to purchase
the required amount of Class A Stock each quarter as soon as practicable
following your receipt of the portion of your Annual Bonus paid in such
quarter; provided, however, that you may acquire Class A Stock from the
Corporation in advance at your discretion, at such prices as may then prevail,
and such shares may be used to satisfy this requirement. You acknowledge and
agree that the timing and pricing of your purchase of Class A Stock from the
Corporation shall be subject to all applicable securities law
restrictions.  Your obligation to
purchase Class A Stock pursuant to this provision shall immediately cease upon
the termination of your employment with the Corporation.

You
and the Corporation acknowledge your mutual intent to replace for fiscal 2008
and subsequent fiscal years your fixed amount of Annual Bonus with a
profit-sharing amount to be based on a percentage of the net pre-tax profits of
the Corporation, such percentage to be mutually agreed upon on or before
December 31, 2007; provided that no mutual agreement shall be required in the
event the Corporation proposes a percentage of net pre-tax profits of the
Corporation, which, based on the then current business plan for fiscal 2008, as approved by the Board of Directors of the
Corporation, is expected to result in an Annual Bonus equivalent to or
greater than US$500,000; and, provided, further that in no event shall your
Annual Bonus be less than US$500,000.

4.                                       Benefits: 
During your employment by the Corporation, you shall be entitled to:

(a)                                  participate in all group insurance and
benefit programs generally applicable to salaried employees of the Corporation
from time to time, including an annual comprehensive medical exam with a
company mutually agreeable to you and the Corporation;

(b)                                 four (4) weeks vacation in respect of each
completed twelve (12) month period of employment during the term of this
agreement, to be taken at such time or times as are mutually convenient to you
and the Corporation, but not payment in lieu thereof;

(c)                                 use
for business purposes the golf course, clubhouse, meeting rooms and dining
facilities of the Magna Golf Club in accordance with the access agreement
between the Corporation and Magna International Inc; and

(d)                                 reimbursement for all reasonable and
documented business expenses incurred on behalf of the Corporation in carrying
out your duties, in accordance

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with the Corporation’s policies from time to time, but excluding
automobile operating costs other than the standard mileage charge approved by
the Corporation from time to time.

5.                                       Stock Options: Subject to the approval of all regulatory
bodies having jurisdiction (including the consent of the TSX and 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’s Long-Term Incentive Plan, the Corporation shall grant you options
to purchase 1,000,000 shares of Class A Stock at an exercise price per share of
Class A Stock that is equal to 100% of the last sale price of Class A Stock on
the TSX on the trading day prior to the date of Board approval of the stock
option grant; provided, however, that you acknowledge and agree that the timing
and pricing of the grant of your options shall be subject to all applicable
securities law restrictions.  Such
options shall vest 20% on the grant date and 20% on each of the four succeeding
anniversaries of the grant date, and shall be exercisable by you only in accordance
with the terms and conditions set forth in the Stock Option Agreement referred
to above.

You and the Corporation acknowledge and agree
that your aggregate compensation is comprised of cash and options.  In recognition of the fact that the
Corporation is unable to grant you options on your Start Date because of
securities law restrictions, the Corporation hereby agrees to pay to you the
Top-Up Amount (as defined below).

The Top-Up Base Amount shall be the amount
determined by multiplying (i) 200,000 by (ii) the amount, if any, by which the
closing trading price of Class A Stock on the TSX on the day prior to the date
on which your options are granted to you exceeds the closing trading price of
Class A Stock on the TSX on the day prior to your Start Date.

Recognizing that you would have paid income
tax at capital gains rates on any such appreciation in the trading price of
Class A Stock if the options had been granted to you on your Start Date, the
Top-Up Base Amount shall be multiplied by 75% to determine the Top-Up
Amount.  For greater certainty, the
Top-Up Amount cannot be less than zero. 
The Top-Up Amount shall be paid to you by the Corporation in cash.

6.                                       Conditions for Continued
Employment: It is
acknowledged by you that as a condition of your continued employment you shall
comply in every respect with the Corporation’s Capital Expenditure Guidelines,
Health, Safety and Environmental Policy, Code of Business Conduct, Corporate
Disclosure Policy and Insider Reporting and Trading Policy, as amended from
time to time, together with such other policies as the Corporation may
establish and be in effect from time to time (collectively, the “Policies”).  Copies of such Policies in effect as of your
Start Date are attached hereto as Exhibit A.

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7.                                       Termination:

(a)                                  Your employment and this agreement, including
all benefits provided for under this agreement, shall terminate on:  (i) the acceptance by the Corporation of your
voluntary resignation in accordance with paragraph 7(b); (ii) 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; (iii) your death; (iv) your dismissal for cause
or by reason of your breach of a material term of this agreement; or (v) your
termination of this agreement for Good Reason (as defined below).

(b)                                 You may, at any time or for any reason,
terminate your employment and this agreement by providing the Corporation with
not less than three (3) months prior written notice of intention to terminate.

(c)                                  The Corporation may, at any time and for any
reason (other than those set out in subparagraph 7(a)), terminate your
employment and this agreement without cause by providing you a retiring
allowance equivalent to the greater of $1,000,000 or your Base Salary and
Annual Bonus for the full fiscal (calendar) year ending immediately prior to
the day of termination (less statutorily required deductions), payable in cash
and, at the Corporation’s option, either in a lump sum within thirty (30) days
of the day of termination or monthly in arrears in twelve (12) equal
instalments commencing thirty (30) days after the day of termination.  If your employment
is terminated pursuant to this sub-paragraph 7(c) other than by reason of your
voluntary resignation, the Corporation shall maintain on your behalf the
benefits referred to in paragraph 4(a) for a period not less than twelve (12)
months.

(d)                                 Provided that the Corporation has not
notified you in writing that circumstances exist that would permit the
Corporation to terminate this agreement for cause or by reason of your breach
of a material term of this agreement, you shall be entitled to terminate this
agreement in the event that the Corporation takes any material decision without
first having consulted with you about that material decision (a “Good Reason”);
provided, however, that you agree to first (i) inform the Board in reasonable
detail of material decision that you are concerned about, (ii) meet with the
Chairman and/or other members of the Board to attempt in good faith to rectify
or cure the situation and (iii) provide the Corporation with a reasonable time
period to rectify or cure the situation (provided that the situation is capable
of rectification or cure).  If within
thirty (30) days of your informing the Board of your intention to terminate
this agreement for Good Reason the situation has not been rectified or cured to
your satisfaction, acting reasonably, then you may terminate this agreement for
Good Reason within the next ten (10) days, after which time you shall be deemed
to have waived your right to terminate this agreement for Good Reason relating
to the material decision that you initially complained about.  In the event that you terminate this agreement
for Good Reason, the Corporation shall pay to you a

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retiring
allowance equivalent to your Base Salary and Annual Bonus for the full fiscal
(calendar) year ending immediately prior to the day of termination (less
statutorily required deductions), payable, in cash, monthly in arrears in
twelve (12) equal instalments commencing thirty (30) days after the day of
termination.

(e)                                  On termination of this agreement, other than
your dismissal for cause or for breach of a material term of this agreement under
sub-paragraph 7(a)(iv), the Corporation shall also pay, in cash, your Annual
Bonus on a prorated basis to the date of termination.

(f)                                    In the event that the Corporation terminates
your employment for cause or for breach of a material term of this agreement
under paragraph 7(a)(iv), or if you breach the provisions of paragraph 8, the
payment of any further amounts under this agreement shall immediately cease.

(g)                                 The termination provisions set forth above
are inclusive of any and all statutory, common law and/or contractual
entitlement to severance pay, 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 and the termination of your employment and this
agreement.  All payments set forth above
in this Section 7 are conditional upon you executing a full and final release
in the Corporation’s standard form, waiving any and all claims against the
Corporation, its subsidiaries and their respective directors and officers.  If you fail to execute the full and final
release, the Corporation’s only obligation to you shall be notice, pay in lieu
of notice and severance as required by the applicable employment standards
legislation.

8.                                       Other Conditions: 
Without limiting your fiduciary obligations or your obligations pursuant
to the Corporation’s Policies, you hereby acknowledge as reasonable, in terms
of both scope and duration, and agree that you shall abide by the following
terms and conditions:

i)                                         Intellectual Property:  Any
and all patents, trade marks, copyrighted works, inventions, know-how,
practices, processes, research materials, software, systems, technology, trade
secrets, work methods, computer programs, concepts, data, designs, devices,
discoveries, drawings, formulae, ideas, and improvements and advances therefor
(collectively, “Intellectual Property”) that are either provided to you or that
you obtain access to in the course of your employment are and shall remain the
exclusive property of the Corporation.

You
agree that any Intellectual Property (whether registrable or not) produced,
made, written, or designed by you, either alone or jointly with others, in the
course of your employment or in any way relating to the business of the
Corporation and its subsidiaries and affiliates, including Magna International
Inc. and its subsidiaries (collectively the “MEC Group”), shall vest in and be
the

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exclusive
property of the Corporation and the MEC Group. 
You further agree that both during your employment and subsequent to
your termination of employment, you shall promptly and fully disclose to the
Corporation, complete details of any Intellectual Property arising through or
in the course of your employment, with the intention that the Corporation and
the MEC Group shall have full knowledge of and obtain full ownership of such
Intellectual Property.  At the
Corporation’s expense, you agree to cooperate in executing all necessary assignments
and other documents and shall cooperate in all other such acts and things as
the Corporation may reasonably require in order to vest such Intellectual
Property rights exclusively in the name of the Corporation and the MEC Group.  In addition, if requested at any time, you
shall immediately execute a separate form of employee intellectual property
agreement in the Corporation’s standard form as a condition of your continued
employment.

ii)                                      Confidentiality:  You
shall keep confidential at all times during and after your employment, all
information (including proprietary or confidential information) about the
business and affairs of, or belonging to, the Corporation or any member of the
MEC 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. 
In addition, if requested at any time, you shall immediately execute a
separate form of employee confidentiality agreement in the Corporation’s
standard form as a condition of your continued employment.

iii)                                   Conflict of Interest:  You
shall not engage in any business activities, either through yourself or through
immediate family member(s), which may place you in an actual or apparent
conflict of interest with your duty to act, at all times, in the best interests
of the Corporation and the MEC Group.

iv)                                  Non-Competition: 
During the term of your employment with the Corporation and for a period
of twelve (12) months after the termination of your employment, you shall not,
directly or indirectly, in any capacity in Canada or the United States compete
with the business of the Corporation or any member of the MEC Group in respect
of which you have had access to proprietary or confidential information.

v)                                     Non-Solicitation: 
During the term of your employment with the Corporation and for a period
of twelve (12) months after the termination of your employment, you shall not,
directly or indirectly (A) solicit, attempt to solicit or call upon any firm, person or company who is or was a
customer, client, or supplier of the Corporation or any member of
the MEC Group to cease doing business with the MEC Group or to do business with
any entity, or (B) solicit, attempt to solicit, or communicate in any way with
employees of the Corporation or any member of the MEC
Group for the purpose of having such employees employed or in any way engaged
by another person, firm, corporation, or other entity that competes with the
business of any member of the MEC Group.

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9.                                       General:

i)                                         Severability: You acknowledge and agree that should any
provision in this agreement be held to be invalid, void or unenforceable, it
shall be declared separate and distinct from the remaining provisions herein,
and such remaining provisions shall continue in full force and effect.

ii)                                      Notional Severance.  In
the event that any covenant, provision or restriction contained in this
agreement is found to be void or unenforceable (in whole or in part) by a court
of competent jurisdiction because of the duration, the scope or geographic
area, such court shall have the power to reduce the duration, scope or area of
such covenant, provision or restriction to what the court considers reasonable
and, in its reduced terms, such covenant, provision or restrictions shall then
be enforceable as if originally part of this Agreement.

iii)                                   Assignability: This agreement may be assigned by the
Corporation with your consent (such consent not to be unreasonably withheld) to
any other member of the MEC Group.  Upon
completion of such assignment, the Corporation shall be automatically released
from any obligation, liability or responsibility under this agreement.

iv)                                  Governing Law: This agreement and the legal relations
hereby created between you and the Corporation shall be governed by and
construed under and in accordance with the laws of and applicable within the
Province of Ontario without regard to conflicts of laws principles.

10.                                 D&O Insurance: Concurrent with the execution of this
agreement, you and the Corporation shall enter into the form of indemnity
agreement attached hereto as Exhibit B.

11.                                 Effective Date: Your employment under the terms of this
agreement shall be effective as of February 27, 2007.  Upon cessation of your employment or other termination
of this agreement, paragraph 8 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  (3) copies in the places indicated and return
two (2) fully signed copies to the attention of Frank Stronach by 5:00pm on
February 27, 2007,  after which, if not
so signed and returned, this agreement shall be withdrawn.

[signature page follows]

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Upon execution by you, this agreement (i) replaces
any prior written or oral employment agreement or other agreement concerning
remuneration between you and the Corporation or any member of the MEC Group and
(ii) shall continue to apply to your employment in a similar or other capacity
with the Corporation or any member of the MEC Group.

	
  Yours very truly,

  
	
   

  
	
  /s/Frank Stronach

  	
   

  
	
   

  
	
  Frank Stronach

  
	
  Chairman

  

 

- - - - - - -

I hereby accept the terms and conditions set out
above and acknowledge that this agreement contains all the terms and conditions
of my employment with Magna Entertainment Corp. and that no other terms,
conditions or representations other than those within this letter form part of
this agreement.  I hereby confirm that I
am not subject to any restrictions (contractual or otherwise) arising from my
former employment that would prevent or impair me in carrying out my duties and
functions with the Corporation and that I am not aware of any circumstance that
would prevent my being licensed as an officer of the Corporation under the
applicable pari-mutuel or gaming laws and regulations.  Furthermore, I confirm that during the course
of my employment I shall not offer to the Corporation any confidential or
proprietary information that I have knowledge of with respect to my former
employers, nor shall 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 has come into the public domain.

I understand that in order to manage the employment
relationship, it shall be necessary for the Corporation to collect and use
certain personal information about me, as well as my beneficiaries and
dependents.  I hereby grant my consent to
the collection and use of this information, as well as to the disclosure of
relevant personal information to employees, agents and affiliates of the
Corporation where necessary for legitimate business reasons, including
performance and attendance management and administration of the Corporation’s
compensation and employee benefit programs.

	
  February 27, 2007

  	
   

  
	
   

  	
   

  	
  /s/    Michael
  A. Neuman

  
	
  Date

  	
  Michael A. Neuman

  
			

 

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Exhibit
A

Corporate Policies

[see attached]

 9
 

MAGNA
ENTERTAINMENT CORP.

INSIDER TRADING POLICY

The directors and
officers of Magna Entertainment Corp. (“MEC”), and such other employees of MEC
or such other directors, officers or employees of any MEC Affiliate (as defined
in MEC’s Corporate Constitution) as may be designated from time to time by the
Chief Executive Officer, President, Chief Financial Officer or Secretary of MEC
(collectively, the “Restricted Persons”), shall not, directly or
indirectly, purchase, sell or otherwise trade in any security of MEC
(including, without limitation, the Class A Subordinate Voting Stock, options
to acquire Class A Subordinate Voting Stock, or Class B Stock of MEC):

1.                                       for
the period commencing at 11:59 p.m. on the last day of each fiscal quarter of
MEC until 12:01 a.m. on the third (3rd)
business day after the public announcement of MEC’s financial results for such
fiscal quarter (or fiscal year, as the case may be); or

2.                                       at
any time when any of the Restricted Persons has/have knowledge of any “material
information” regarding MEC (i.e. information about MEC, whether positive or
negative, which, if publicly disclosed, would result in, or would reasonably be
expected to result in, a significant change in the market price or value of any
security of MEC or would affect an investor’s decision to buy or sell MEC
securities) which has not been made available to the public until 12:01 a.m. on
the third (3rd) business
day after the public announcement of such information; or

3.                                       at
any time and for such duration as a “trading blackout” or other similar notice
prohibiting trading in any MEC security if issued by the Chief Executive
Officer, President, Chief Financial Officer, General Counsel or Secretary of
MEC; and

4.                                       at
all times in respect of any “call” or “put” option(s) for, or in relation to,
any MEC security.

Restricted Persons
also shall not directly or indirectly disclose material information relating to
MEC to any family member, relative or any other person, whether to trade in MEC
securities or otherwise.

The above
restrictions also apply to purchases, sales or other trading in any securities
of other public companies when any of the Restricted Persons acquire(s),
through his/her/their position or relationship with MEC or any MEC Affiliate,
any material non-public information regarding such public company.

This Policy is not
intended to reduce or otherwise affect the personal obligations imposed on the
directors, officers and other insiders of MEC under applicable securities
legislation in the United States or Canada (whether upon the initial
acquisition of ownership of, or rights to exercise control or direction over,
any securities of MEC, or in connection with any subsequent sale or trade in
respect thereof).

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Breach of this
Policy may be considered as the basis for the termination of employment for
cause or otherwise, for any Restricted Person.

Any questions regarding this Policy or any related
matters should be directed to either the Chief Financial Officer or Secretary
of MEC.  To avoid inadvertent violation
of this Policy, it is recommended that Restricted Persons contact the Chief
Financial Officer or Secretary of MEC before buying or selling MEC securities.

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MI
DEVELOPMENTS INC.

INSIDER
REPORTING AND TRADING POLICY

5.                                                                                       Introduction

Each Insider (as described below) of MI Developments
Inc. (“MID”) must comply with the insider
trading requirements in respect of MID’s shares and other securities (“MID
Securities”) under the securities laws of Ontario and the other Canadian
provinces and, to the extent applicable, the United States.  This Policy is intended to establish a
standard with respect to the purchase and sale of MID Securities which all
officers, directors and employees of MID and its subsidiaries are expected to
comply with as Insiders; however,  this Policy in no way reduces the personal obligations imposed by these
laws directly on each Insider.

6.                                                                                       MID Securities

The term “MID Securities” includes Class A Subordinate
Voting Shares (including options to acquire such shares) and Class B Shares of
MID.  This Policy also will apply to any
Preference Shares or other MID Securities issued in the future.

7.                                                                                       Who is legally an “Insider” of MID?

a                                                                                          Category
1:                                   The
broader category of Insiders are those persons in a “special relationship” with
MID, including:

i                                                                                             all
directors, officers and employees of MID or its subsidiaries as well as their
respective spouses, children, relatives who share the same residence and certain
entities (i.e. certain trusts, partnerships and
corporations) which are associated with such individuals;

ii                                                                                          persons
who directly or indirectly own or exercise control or direction over 10% or
more of MID’s voting securities (i.e.  the Stronach Trust);

iii                                                                                       persons
outside MID who engage or propose to engage in any business or professional
activity with MID; and

iv                                                                                      anyone
who learns of “material information” (as described below) regarding MID from
someone who he knows, or should know, is a person in a special relationship
with MID.

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b                                                                                         Category
2:                                   The
narrower category of Insiders are those who must
file Insider Reports with the Ontario Securities Commission and other
provincial securities commissions when they first become owners of, or first
commence exercising control or direction over, MID Securities and thereafter in
connection with any trade by them in MID Securities, including:

i                                                                                             directors
of MID or any “major subsidiary” of MID (including Magna Entertainment Corp. (“MEC”));

ii                                                                                          officers
of MID or any “major subsidiary” of MID (including MEC) with the following
titles: Chairman, Deputy Chairman, Vice-Chairman, President, Executive
Vice-President, Vice-President, Secretary, Treasurer, Controller, Managing
Director or anyone else who does the work normally done by a person with any of
the titles listed above;

iii                                                                                       each
of the five highest-paid employees of MID or its subsidiaries; and

iv                                                                                      anyone
who, directly or indirectly, beneficially owns or controls 10% of the voting
rights attached to all voting securities of MID (i.e.
the Stronach Trust).

Under
Canadian securities regulations (National Instrument 55-101), only officers and
directors of “major subsidiaries” are subject
to Canadian insider reporting requirements. 
We will determine annually which subsidiaries are “major subsidiaries”
and will advise any individuals affected by this determination of their
obligations.

4.                                       Legal Restrictions on Insider Trading for Category 1 Persons

·                                          A
Category 1 Insider, or person in a “special relationship” with MID, is prohibited from buying or selling MID Securities with knowledge of “material
information” with respect to MID which has not been generally disclosed to the
public.

·                                          Category 1 Insiders also may not disclose to any other person any
material information with respect to MID other than in the ordinary course of
business.  Persons who receive
such material information in the ordinary course of business would themselves
become Category 1 Insiders on receipt. 
This prohibition also applies to enquiries about MID by, or discussions
with, the financial press, investment analysts or others in the financial
community.  Under our informal disclosure
policy, only Frank Stronach, Werner Czernohorsky, William Biggar, Andrew Blair,
John Simonetti or Edward Hannah may speak publicly for MID.  We expect to adopt a formal MID Corporate
Disclosure Policy in late 2003 or 2004. 
Category 1 Insiders should not discuss material information

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relating to MID
affairs in public or quasi-public areas where their conversations may be
overheard (e.g., restaurants, washrooms, elevators, etc.).

Information about MID is “material” if disclosure
results in, or would reasonably be expected to result in, a significant change
in the market price or value of any MID Securities.  In practical terms this usually means that
information is material if it would affect investors’ valuation of MID
Securities and therefore their decisions to buy, sell or hold them.  Examples include the following:

·                  A significant acquisition, disposition or merger involving MID
or one of its subsidiaries (including MEC).

·                  A new issue of
equity, debt or convertible securities or a significant
change in capital structure.

·                  A significant change in dividends.

·                  A significant change expected in earnings and/or in the balance
sheet.

·                  Borrowing of a significant amount of funds.

·                  Significant developments affecting MID’s properties or
markets.

·                  Entering into or
loss of significant contracts.

·                  Significant changes in capital investment plans or corporate
objectives.

·                  Significant changes in management.

·                  Significant litigation.

·                  Significant labour disputes or disputes with major
contractors or suppliers.

·                  Any
other undisclosed material
fact/change that a reasonable investor would consider important in deciding
whether to buy, sell or hold.

It is the
responsibility of each individual Category 1 Insider to determine whether he or
she has knowledge of any material information concerning the affairs of
MID.  However, any
Category 1 Insider who has knowledge of information that would have a 5% impact
on the sales, net income or assets of MID on a consolidated basis is presumed
to have knowledge of material information and must speak to the General Counsel
of MID prior to buying or selling MID Securities.  The 5% threshold is only a guideline and is
not intended to replace the materiality test described above.

Any individual
Insider who is contemplating buying or selling MID Securities and is unsure as
to whether they have knowledge of information which is of such significance as to
be material or whether such information has been publicly disclosed should
speak to the General Counsel of MID before taking any action.

5.                                       MID Policy on Insider Trading

Insiders may trade
MID Securities, except as follows:

(a)                      A Category 1
Insider shall not trade in MID Securities when they have
knowledge of undisclosed  material information of
the type described in paragraph 4 above.  Trading will remain restricted until 12:01
a.m. on the third business day following public disclosure of such material information.

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(b)                     At certain
times, information which may be material regarding MID may be known only by a
few members of management.  In these
situations, all directors and officers of MID and any other officer, director
or employee of MID or its subsidiaries designated from time to time by the
Chairman, the Deputy Chairman, a Vice Chairman, the Chief Executive Officer,
the Chief Operating Officer, the President, the Chief Financial Officer or the
General Counsel of MID, will be prohibited from trading in MID Securities
during the period this information remains undisclosed.  The Chief Financial
Officer or General Counsel of MID will provide notification when this situation
exists.

In addition, MID
has established the following “Trading Black-out” guideline which prohibits
trading during the black-out period and which will help ensure that MID and its
Insiders are not only acting in accordance with applicable law at all times but
are seen to be doing so:

(i)                                     The
directors and senior officers of MID;

(ii)                                  the
directors of MEC and such other subsidiaries of MID designated from time to
time by the Chairman, the Deputy Chairman, a Vice-Chairman, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial
Officer or the General Counsel of MID;

(iii)                               the
officers of the subsidiaries described in (i) above with the following
titles:  Chairman, President, Executive
Vice-President, Vice-President, Secretary, Controller and Treasurer; and (iii)

(iv)                              any
other officer, director or employee of MID or its subsidiaries designated from
time to time by the Chairman, the Deputy Chairman, a Vice-Chairman, the Chief
Executive Officer, the President, the Chief Financial Officer, the Chief
Operating Officer or the General Counsel of MID shall not trade in MID
Securities during the period commencing at 11:59 p.m. of the last day of each
fiscal quarter and ending at 12:01 a.m. on the third business day after the
public announcement of MID’s quarterly or annual financial results.  The Chief Financial Officer or General
Counsel of MID will provide notification of the date on which quarterly and
annual financial results are expected to be released.

This
Trading Black-out is in addition to the absolute
prohibition on trading when an Insider has knowledge of undisclosed material
information of the type described in paragraph 4 above.

 15
 

6.                                       Magna Entertainment Corp.

Insiders of MEC
are subject to the same insider trading requirements in respect of MID
Securities as MID Insiders.  Since MEC
has established its own Insider Trading Policy, officers and directors of MID
as well as all Insiders of MEC are subject to the rules and restrictions
contained in the MEC Insider Trading Policy with regard to securities of
MEC.  Reference should be made to MEC’s
Insider Trading Policy for further details as such policy differs from this
Policy in certain respects.

MEC insiders are
required to file U.S. insider reports (Forms 3 or 4) in the U.S. and Canadian
insider reports in Canada.  Please see
the MEC Insider Trading Policy.

7.                                       Other Restricted Companies

In addition to
restrictions on trading in MID Securities, the same legal restrictions will
apply when an officer, director or employee acquires, through his position at
MID or otherwise, material non-public information about another public
company.  For example, from time to time
MID or its subsidiaries will enter into discussions with other public companies
in connection with long-term leases, financings, joint ventures, acquisitions
or other strategic arrangements.  During
the course of any such confidential discussions or negotiations, all directors
and officers of MID, any other director, officer or employee of MID or its
subsidiaries who becomes aware of such confidential discussions or negotiations
in the course of their employment or otherwise and any other director, officer
or employee of MID or its subsidiaries designated from time to time by the
Chairman, the Deputy Chairman, a Vice-Chairman, the Chief Executive Officer,
the President, the Chief Operating Officer, the Chief Financial Officer or the
General Counsel of MID, will be prohibited from trading in the securities of
such public company during the period this information remains
undisclosed.  The Chief Financial Officer
or General Counsel of MID  will provide
notification when this situation exists.

8.                                       Insider Liability

An Insider who
fails to comply with insider trading laws is exposed to civil liabilities
and/or criminal, fines and/or imprisonment, in addition to the general
embarrassment and damage to his or her reputation.  Furthermore, the reputation of MID, and
investor confidence in MID, may be damaged and MID may also be exposed to
liability.  Both the Ontario Securities
Commission and the U.S. Securities and Exchange Commission actively prosecute
insider trading violations.

Each Insider’s
employment contract specifically requires the employee to comply with policies
prescribed by MID from time to time, which includes this Policy.  Breach of this Policy may be considered as
the basis for immediate termination for cause and may require MID to refer the
matter to the appropriate regulatory authority.

 16
 

9.                                       Additional Information

Any technical
questions regarding insider trading and related activities should be directed
to the General Counsel of MID.

 17
 

 

	
  

  	
  Magna Entertainment

  Corp.

  
	
   

  	
   

  
	
   

  	
  337 Magna Drive

  
	
   

  	
  Aurora, Ontario L4G 7K1

  
	
   

  	
  Tel (905) 726-2462

  
	
   

  	
  Legal Dept. Fax (905) 726-7172

  

 

Memorandum

To:                                                                              Board
of Directors and Management of MEC

From:                                                               Jim
McAlpine

Gary Cohn

Date:                                                                   July
25, 2001

Re:                                                                             Notification
Policy for Transactions in MEC Shares

As a young company
with a relatively small public float, MEC’s stock price is fairly
volatile.  In particular, the trading
price of our stock is susceptible to significant fluctuations based on rumors
or perceptions in the market.  As we move
into a phase in our development during which we will be pursuing various
financing alternatives, it is important for our senior management to have as
much warning as possible of events which may influence the perception of the
Company’s fortunes and hence the trading price of our stock.

One event which
can have a significant effect on how we are perceived by the market in general,
and potential investors in particular, is the purchase or sale of our stock by
directors or members of management.  We
are viewed as “insiders” who have insight into the Company’s fortunes which
goes beyond our public disclosures. 
Although we certainly do not wish to restrict or inhibit investment in
MEC by members of our Board and management team, we do wish to monitor such
transactions so that we can address any concerns which they may raise with
potential investors or the market in general.

As a result, we
are requesting that any director or member of management who has formed an
intention to either buy or sell shares of MEC, notify the Secretary of the
Corporation of such intention at the first available opportunity.  This policy does not replace or supersede our
Insider Trading Policy, with which you are all familiar.  The MEC Insider Trading Policy establishes

 18
 

certain “black-out”
periods during which any trading in MEC shares or other MEC securities is
prohibited.  This new policy supplements
the existing policy by addressing the situation where someone proposes to trade
in MEC stock outside of a black-out period.

This policy will
continue in effect until further notice. 
Should you have any questions, please contact Jim McAlpine or Gary Cohn.

GMC/mm

c:                                     Don
Amos

Frank
DeMarco, Jr.

Andrew
Gaughan

Ed
Hannah

Jack
Liebau

Graham
Orr

Doug
Tatters

 19
 

MAGNA ENTERTAINMENT CORP.

Code of
Business Conduct

GENERAL

This Code of Business
Conduct (this “Code”) is a statement of guiding principles for the conduct of
all of our employees with respect to our business.  This Code applies to employees of Magna
Entertainment Corp. and its consolidated subsidiaries, collectively referred to
in this Code as “our company” or “MEC”.

All of our employees are
required to use sound judgment and to act ethically in the performance of their
employment responsibilities.  Specifically,
each of our employees is expected to be familiar with the principles outlined
in this Code and to adhere to such principles and to all applicable laws
governing our company and its business.

All employees are
expected to report appropriately any indications of illegal or improper conduct
of any person or entity involving our company or its business.

This Code is only
intended to be a statement of guiding principles.  It is not a contract and is not intended as a
detailed guide for all situations you may face.

WAIVERS OF THIS CODE

This Code applies to our
officers and our employees equally.  Our
directors are also required to abide by the principles of this Code, within the
scope of their duties as directors of our company, as if they were employees of
our company.  Any waiver of this Code for
any officer or director of our company must be approved in advance by the
Corporate Governance, Human Resources and Compensation Committee of our Board
of Directors.  Any such waivers will be
publicly disclosed by appropriate means and as required by applicable law.

QUESTIONS, REPORTING YOUR
CONCERNS AND ENFORCEMENT

·                                          Questions About this Code of Conduct.  If you have questions regarding this Code or
the matters addressed by this Code, please speak with your Manager or immediate
Supervisor (“Supervising Manager”).  If
you do not wish to communicate with that person or you are uncomfortable with
the guidance provided, please feel free to contact either the Corporate
Secretary or the Chief Executive Officer at 905-726-2462.  If you wish to remain anonymous, you may
contact the MEC FYI Line with any questions by calling 1-866-9 MEC FYI
(1-866-963-2394) or 905-726-7442.

·                                          How to Report Your Concerns.  If you wish to report or discuss any breaches
of this Code or any illegal or unethical conduct relating to our business,
please promptly inform your Supervising Manager.  Your Supervising Manager will be responsible
for resolving

 20
 

the issue and, if necessary, reporting the matter to
senior management and our Legal Department.

If your report involves wrongdoing by your Supervising Manager or you
are uncomfortable reporting to your Supervising Manager, please promptly
contact your Human Resources Department, the General Manager of your facility
or MEC’s Chief Executive Officer at 905-726-2462.  If necessary, the person receiving the report
will then contact senior management to investigate the matter or delegate its
investigation to the appropriate person or committee.  Generally, non-material technical violations
of this Code or isolated incidents that do not have a material effect on our
company should be reported to your Supervising Manager.  If you are unsure who to report your concerns
to, please call the MEC FYI Line at 1-866-9 MEC FYI (1-866-963-2394) or
905-726-7442.

If you wish to communicate anonymously, you are free to do so, and we
will maintain the confidentiality of your communication to the extent possible
under applicable laws.  Communications
intended to be confidential can be made in one of two ways.  You may communicate in writing without
indicating your name or address by writing to: 
Magna Entertainment Corp., 337 Magna Drive, Aurora, Ontario, L4G 7K1,
Attention:  Chief Executive Officer.  Please write “CONFIDENTIAL” conspicuously on
the front of the envelope.   Alternatively,
you can call the MEC FYI Line anonymously at 1-866-9 MEC FYI (1-866-963-2394)
or 905-726-7442 to report any violations of this Code or to seek guidance on
matters involving this Code.

If you have concerns about accounting, internal accounting controls, or
auditing matters relating to our company or your report involves senior
management of our company, in addition to making a report as described above,
you may also contact the Audit Committee of our Board of Directors directly.  Inquiries or communications intended to be
anonymous should be mailed in writing without indicating your name or address
to Magna Entertainment Corp., 337 Magna Drive, Aurora, Ontario, L4G 7K1,
Attention:  Chairman, Audit Committee.
Please write “CONFIDENTIAL” conspicuously on the front of the envelope.

·                                          No Retaliation for Reports.  We encourage our employees to report any
concerns about breaches of this Code or any illegal or unethical conduct
relating to our business.  We do not
retaliate or discriminate against employees who honestly report their concerns
to us.

·                                          Do Not Make False Claims.  It is a violation of this Code for any
employee knowingly to make false reports of illegal or unethical conduct.

·                                          Enforcement.  We are committed to enforcing this Code
consistently with respect to all of our employees, regardless of title or
position.  Our officers and other
supervising employees are expected to be leaders in demonstrating this personal
commitment to the standards outlined in this Code and recognizing indications of
illegal or unethical conduct.  We will
not tolerate violation or circumvention of any laws applicable to our business
by any employee during the course of his/her employment or by any agent or
representative acting on behalf of our company. 
We will not tolerate the disregard or

 21
 

circumvention of this Code, any other policies of our company or the
engagement in unethical dealings in connection with our company’s
business.  Employees who fail to comply
with this Code or to cooperate with any investigation will be subject to
disciplinary action, the nature and severity of which will depend upon the
violation.  Disciplinary action may
include termination, referral for criminal prosecution and actions to seek
reimbursement of our company or others for any losses or damages resulting from
the violation.  In addition, consultants,
agents, independent contractors and representatives will be required to meet
the same standards as our employees and will face the same types of
consequences, including termination of any consulting contract, agency or
representative relationship with our company.

Any person making a report of a breach of this Code has the right, if
they so choose, to be informed of the resolution of their report.

WE HAVE A DUTY TO ACT IN THE BEST
INTERESTS OF OUR STOCKHOLDERS

Our employees share a
duty to protect our assets and manage our business in the best interests of our
stockholders.

·                                          Records and reporting: All business
information, financial or otherwise, pertaining to our company must be accurately
and honestly recorded, whether in internal records or in information we release
to the public or file with government agencies, and no one shall enter any
false or artificial information in our records or reporting systems.  Employees are expected to follow any records
retention and destruction policies that we may implement and communicate from
time to time.  It is our company’s policy
not to destroy or alter our records or documents (in any form) in response to
or in anticipation of any legal proceeding or government inquiry or
investigation.  Criminal liability may be
incurred by any person who knowingly falsifies, alters, destroys, mutilates or
conceals a record, document or other object with the intent to impede or
obstruct an investigation or impair its availability for use in an official
proceeding.

·                                          Disclosure Controls and Procedures.  We are required by applicable securities
laws, rules and regulations to maintain effective disclosure controls and
procedures so that financial and non-financial information we are required to
report in our securities filings is timely and accurately reported both to our
senior management and in the filings we

 22

make.  All employees are
expected, within the scope of their employment duties, to support the
effectiveness of our disclosure controls and procedures and to provide
information which promotes full, fair, accurate, timely and understandable
disclosure in reports and documents that our company files with, or submits to
government agencies and in our company’s other public communications.

·                                          Stock Trading; Use of Confidential Information.  Any employee who is aware of material
nonpublic information concerning our company, or concerning third parties with
whom our company does business, is prohibited from buying or selling securities
of our company or of those third parties until after the material information
has been fully disclosed to the public. 
Employees must not disclose any of this material nonpublic information
to family, friends or others outside the company.  Generally, all information concerning the
affairs of our company is to be kept confidential and disclosed only to
authorized persons for legitimate business purposes, unless and until such
information has been publicly disclosed by authorized employees in accordance
with our disclosure policies.  For more
information about this prohibition, please refer to the MEC Insider Trading
Policy, a copy of which can be obtained from the Corporate Secretary at
905-726-2462.

Selective Disclosure Prohibited.  Applicable securities laws, rules and
regulations generally prohibit selective disclosure of material nonpublic
information to persons outside our company. 
All employees are expected to keep all material nonpublic information
about our company strictly confidential unless and until we have made full
public disclosure regarding the information by way of a press release or
appropriate filing with securities regulatory authorities.

Providing Information to the Public.  Our policy is to disseminate material
information about our business in a timely manner and only through our
employees authorized for this purpose. 
Employees are not under any circumstance to discuss our company’s
financial, business or other information with the press (except for those
employees expressly authorized for this purpose), at any public venue or on any
website, chat room or similar forum. 
Requests from the media, analysts or stockholders about our company must
be forwarded promptly in accordance with our Corporate Disclosure Policy.

For more information concerning the foregoing disclosure practices,
please refer to the MEC Corporate Disclosure Policy, a copy of which can be
obtained from the Corporate Secretary at 905-726-2462.

·                                          Communications. Communications by
our employees on behalf of our company must be for a legitimate business
purpose, be appropriate and avoid inappropriate or derogatory comments about
other individuals or companies, unprofessional language and unauthorized
statements.

·                                          Use of Company Assets.  Our company’s assets are to be used only for
our lawful, corporate purposes.  All
employees should help our company protect its assets from misuse, theft, damage
or other loss.  Improper or unauthorized
personal use of company

 23
 

assets is prohibited.  Employees
have a duty to protect our trade secrets and other nonpublic information and
keep them confidential.  Access to our
intellectual property and other confidential information is to be limited to
those authorized to use them in their duties for the company.  If customers or suppliers provide nonpublic
information to us in their dealings with us, our employees are expected to protect
that information in the same manner as our company’s non-public information.

·                                          Suppliers.  Our contracts with suppliers of products and
services to us are to be based exclusively on the best interests of our company
and its business, reflect a fair price for the deliverables provided to us and
be documented in accordance with appropriate approval, contracting and internal
control procedures.

WE ARE COMMITTED TO OUR CUSTOMERS

We are committed to
excellence in service and performance and building strong customer
relationships.

·                                          Customer Relationships.  Our goal is to develop customer loyalty by
delivering high quality racing, entertainment, pari-mutuel wagering and
hospitality services.  We will comply
strictly with all applicable horse racing, gaming and other industry laws and
standards.  Our advertising will be
truthful, non-deceptive and fair and we will not make false or deceptive
statements about our competitors.

·                                          Protecting Our Customers’ Private Information.  We are committed to treating the confidential
information of our customers with a standard of care that meets or exceeds the
care we use to protect our own proprietary and confidential information.  We are also subject to various privacy laws
restricting the manner in which we handle customer and employee
information.  Our employees are expected
to limit access to confidential information about our customers and employees
to those individuals in our company who need to know this information to carry
out their jobs, and at all times in compliance with applicable privacy laws.

WE RESPECT OUR EMPLOYEES AND OUR
EMPLOYEES ARE EXPECTED TO RESPECT EACH OTHER

Each MEC employee has a
duty to promote a positive working environment for all of our employees, our
horsemen and their employees who work at our racetracks.

·                                          Health and Safety.  We are committed to maintaining a healthy and
safe working environment.  We require all
employees to report promptly any unsafe or hazardous conditions, injuries, or
accidents connected with our business to their Supervising Manager.  If you have any doubts about whether to raise
safety-related concerns with your Supervising Manager, always err on the side
of disclosure.

·                                          Duties to Our Fellow Employees.  Harassment or abuse by one employee towards
another is prohibited.  We will not
tolerate any harassment in the workplace on the basis

 24
 

of sex, race, color, religion, national origin, age, disability or any
other characteristic protected by law. 
All of our employees must be allowed to work in an environment free from
abuse and harassment.  For more
information, please refer to our company’s Harassment Policy in your employee
handbook.  If you require a copy of the
Harassment Policy, please contact your Human Resources Department or the
General Manager of your facility.  If you
wish to make a report of harassment, please contact your Supervising Manager or
Human Resources Department.  If you do
not feel comfortable reporting an incident of harassment to anyone at your
facility, please call the MEC Employee Hotline at 1-800-263-1691.  Any good faith reports of harassment or abuse
can be made without fear of retaliation although, for legal and practical
reasons, they cannot be made anonymously.

·                                          Compliance with Fair Labor Standards.  Our employment decisions will be based on
business-related factors, such as job performance, individual skills and
talents, and other business-related factors. 
We do not discriminate in any aspect of employment based on race, color,
religion, sex, marital status, national origin, disability or age, within the
meaning of applicable laws.

·                                          Working Within Our Communities.  We respect our employees’ participation
in their community and in charitable, religious and political activities,
provided that these activities do not unreasonably interfere with their job
responsibilities to us.  Our employees
may not represent that their personal views or activities represent those of
our company.  Our employees must not
engage in any unwanted solicitations or pressure toward other employees
relating to charitable, religious or political causes, unrelated to our
business.

WE COMPLY WITH ALL APPLICABLE
LAWS

We expect our employees
to comply with all applicable laws and regulations affecting our company and
its business, whether or not referred to explicitly in this Code.   The following is a non-exhaustive summary of
certain laws and regulations applicable to our company and its business.

·                                          Prohibited Corrupt Practices.  Our company must comply with anti-corruption
laws that apply to our company’s business.  
Our employees and agents must not directly or indirectly offer or make a
corrupt payment to any domestic or foreign government officials, or employees
of enterprises owned or controlled by a government agency.  Our employees must not engage in any form of
fraud, including but not limited to embezzlement, theft, hiding or misuse of
company assets, or falsification of records.

·                                          Prohibited Political Contributions.

U.S. Political Contributions.  There are various complex laws governing
political contributions in the U.S.  As a
result, we have adopted a policy in respect of U.S. political contributions and
gifts to U.S. public officials.  All U.S.
political contributions and gifts to U.S. public officials (whether in the form
of cash, property or services) must be made

 25
 

in compliance with this policy which essentially requires that any U.S.
political contributions made by or on behalf of our company be made only after
approval is obtained from the applicable political contributions officer.  For more details on our policy on U.S.
political contributions, please consult the MEC U.S. Political Contributions
Policy, a copy of which can be obtained by contacting the Corporate Secretary
at 905-726-2462.

Political Contributions Outside the U.S.  None of our employees
shall contribute in our company’s name or on our company’s behalf, any cash,
property or services of any kind for or in support of any political candidate,
committee, initiative, or activity outside the U.S. unless it is first approved
by an executive officer of our company. 
No lobbying efforts shall be undertaken in our company’s name or on our
company’s behalf without prior authorization from our Legal Department.

·                                          Prohibited Loans to Executive Officers and
Directors.  Under U.S.
law, our company may not, directly or indirectly, extend or maintain credit,
arrange for the extension of credit, or renew an extension of credit, in the
form of a personal loan to or for any director or executive officer of our
company.

·                                          Environmental Laws.  Our employees are required to adhere in all
material respects to applicable environmental laws and ensure that all
hazardous materials and substances they handle are being handled and disposed
of properly.  For further information
concerning our environmental policies and procedures, please consult our Health
& Safety and Environmental Policy, a copy of which can be obtained from the
General Manager of your facility.

·                                          Intellectual Property Laws.  Our employees must take reasonable steps to
avoid any violations of copyright, trademark, service mark, patent, trade
secret or other intellectual property rights held by third parties when
conducting business on behalf of our company or using our business systems and
facilities.

·                                          Pari-Mutuel and Other Horse Racing Industry
Specific Regulation.  Our
employees must adhere in all material respects to all rules and regulations
applicable to them as employees working within the horse racing industry,
including, without limitation, pari-mutuel wagering laws concerning wagers
placed by pari-mutuel staff, if applicable.

OUR EMPLOYEES ARE EXPECTED TO ACT
IN THE BEST INTERESTS OF OUR COMPANY AND AVOID CONFLICTS OF INTEREST

All of our employees must
be wary of any investment, business interest or other personal interest that
interferes, or even appears to interfere, with their objective ability to act
in the best interests of our company.   A
conflict of interest arises in any situation where an employee’s private
interests or personal considerations, including potential benefits to the
employee’s family, may detrimentally affect the independent judgment of the
employee to act in the best interests of our company.  A conflict of interest also arises where an
employee uses his position, confidential information or corporate time or
facilities for private gain.

 26
 

All employees who, by virtue of their employment duties and
responsibilities are in a position to retain or influence the retention of
persons or companies to provide goods and services to our company, are required
to complete a questionnaire disclosing the direct or indirect business interests
of themselves and their immediate family members.  For more information on this area, please
refer to the MEC Conflict of Interest Policy, a copy of which can be obtained
from the Human Resources Department by calling 905-726-2462.

WE
COMPETE FAIRLY AND ETHICALLY

We are committed to
providing high quality racing, entertainment, pari-mutuel wagering and
hospitality services to our customers on a lawful and ethical basis.  Our company and its employees must comply
with the antitrust and unfair competition laws of the countries in which our
company engages in business.  Antitrust
is the general term for laws that protect the free enterprise system by
promoting fair competition and restricting restraints on trade.  Generally, these laws prohibit or regulate:  attempts to monopolize or otherwise restrain
trade, price fixing or other agreements with competitors that would divide or
allocate customers or otherwise harm customers, selling products and services
below cost, “tied selling”, and certain other overly restrictive
agreements.  Employees responsible for
any dealings with competitors are expected to know the laws that apply to their
business activities, and should speak to the Legal Department as questions
arise.

EFFECTIVE DATE

This
Code was implemented and became effective on May 4, 2004.

 27
 

MAGNA ENTERTAINMENT CORP.

HEALTH & SAFETY AND

ENVIRONMENTAL POLICY

Magna Entertainment Corp. (“MEC”) is committed to an
operating philosophy which is based on fairness and concern for the well-being
of its customers, its employees, others who are employed at its facilities, and
the communities in which it operates.

To this end, it is MEC’s objective to be an industry
leader in health and safety and environmental compliance with the goals of
providing safe and healthful working conditions and reducing the impact of its
operations on the environment.

The following principles are fundamental to achieving
this objective:

(a)                                  Striving to comply with, and exceed where practical, all applicable
health and safety and environmental laws, regulations and standards in all its
operations;

(b)         Regularly evaluating and monitoring its business activities which impact
upon health and safety and the environment.

(c)          Ensuring that a systematic review program is implemented and monitored
at all times for each of its operations, with a goal of continual improvement
in health and safety and environmental matters; and

(d)         Ensuring that adequate reports on health and safety and environmental
matters are presented to MEC’s senior management team on a regular and periodic
basis.

Each of MEC’s facilities shall develop and implement
policies and action plans for its operations which are consistent with the
foregoing principles.

Each full-time employee of MEC shall be made aware of
this policy and shall be expected to abide by these principles in carrying out
his or her responsibilities.

MEC’s management is committed to providing the
necessary support to ensure that the foregoing objective and goals are
achieved.

 

	
  Dated:

  	
  March 7, 2002

  	
   

  

 

 28
 

MEC
HARASSMENT POLICY

In accordance with our commitment to fair treatment of
all employees, we wish to advise all staff that MEC will not tolerate any
harassment in the workplace on the basis of sex, race, color, religion,
national origin, age, disability or any other characteristic protected by
law.  This policy applies to employees, customers, and others who attend
our facilities.

Harassment is a serious problem that is commonly defined as “engaging
in a course of comment or conduct that is known or ought reasonably to be known
to be unwelcome.”

Harassment may involve such matters as name-calling; identifying jokes;
stereotyping; or other demeaning and insulting behavior because a person is a
member of an identifiable group.

Sexual harassment may involve such matters as crude sexual jokes or
sexual names; the display of obscene or pornographic material, sexual advances;
grabbing; touching; or other demeaning or insulting behavior.

If you feel you are being
harassed, first promptly ask the person to stop.  The person may not
realize that he or she is being offensive.  If you continue to be harassed
or feel that you are a victim of harassment you should immediately report the
matter to a member of management.  The Company will promptly investigate such
allegations and take appropriate corrective action if warranted.  All
complaints will be kept confidential to the extent possible.

Any employee who does not feel comfortable reporting an incident of harassment to anyone at
their facility, should call the Employee Hotline at:  1-800-263-1691.

Please be advised that anonymous claims cannot, for legal and practical
reasons, be investigated.

Any employee (associate, supervisor, manager) who is
found to be engaging in harassment will be subject to discipline up to, and
including dismissal, depending on the severity of the offence.

 29
 

MAGNA
ENTERTAINMENT CORP.  CONFLICT OF INTEREST POLICY

This policy applies to all employees of MEC who by virtue of their
employment duties and responsibilities are in a position to retain or influence
the retention of persons or companies to provide goods and services for MEC and
its subsidiaries.  This would include Department Managers, purchasing
personnel and other members of senior management of the Business Unit.

A conflict of interest refers to a situation where an employee’s
private interests or personal considerations may detrimentally affect the
independent judgment of the employee to act in the best interests of MEC.

A potential conflict is not limited to the employee alone.  It
also occurs when such an interest  benefits members of the employee’s
family, or a business enterprise with which the employee’s family is
associated.

A conflict of interest also occurs where an employee uses his position,
confidential information or corporate time and facilities for private gain.

An employee shall not place themselves in a position where they are
under an obligation to any persons or companies who might benefit from special
considerations or special treatment of favors by or from MEC, or who could be
considered to be in competition with the business of MEC or any of its
affiliates.

Employee shall not have any financial interests that can conflict in
any manner with the discharge of their duties.

Employee shall not place themselves in a position where they or their
families can derive any direct or indirect interest from any transactions which
can be influenced by their decision.

Questions regarding the appropriateness of certain conduct can usually
be readily resolved by making the situation known to management and seeking
approval to proceed.

In an effort to avoid any appearance of potential
conflicts of interest, all employees to which this policy applies shall be
required to disclose on the attached questionnaire any direct or indirect
interests they have in any business or enterprise with which the employee or
his/her family members are associated on an annual basis to be submitted by
January 31, of each year.  It is the responsibility of all department
heads to ensure that the employees to which this policy applies and who report
to them comply with this requirement.  All employees subject to this
policy will have a continuing obligation to report any new business interests
which they and their families have a direct or indirect interest.

 30
 

One copy of the completed form is to
be forwarded to the Corporate Secretary at MEC Head Office and one copy is to
be retained by the employee’s General Manager.

MAGNA
ENTERTAINMENT CORP. CORPORATE

DISCLOSURE POLICY

Statement of Policy Regarding the Disclosure of Company Information

As a public company, we have an obligation to ensure
that all communications that we make regarding Magna Entertainment Corp. (“MEC”
or the “Company”) are consistent, accurate and in compliance with the
requirements of the Securities and Exchange Commission (the “SEC”), the various
provincial securities commissions in Canada, the Nasdaq Stock Market
(“NASDAQ”), the Toronto Stock Exchange (the “TSX”) and the securities laws in
both the U.S. and Canada.  Failure to achieve this goal could result in
significant civil or criminal liability for the Company and, in some instances,
certain employees.  It is therefore crucial that we implement carefully
defined procedures and policies to govern the disclosure of Company information
to the public.  This Corporate Disclosure Policy (“this Policy”) sets
forth those procedures and policies.

Confidentiality

1.                                       Consistent with our Insider Trading Policy,
employees should not discuss internal Company matters or developments relating
to the Company with anyone outside of the Company (including family members,
relatives and friends), except as required in the performance of their duties
for the Company.  In addition, employees should not discuss Company
affairs in any public or quasi-public areas where conversations may be
overheard.

Communications with Analysts and Stockholders

2.                                       The SEC imposes special requirements
regarding the disclosure of Company information to securities industry
professionals (i.e., securities analysts, investment bankers and mutual fund
representatives) and MEC stockholders.  In order to ensure that we fulfill
these requirements, only the following MEC officers are authorized to discuss
Company matters with such persons:  Frank Stronach, Tom Hodgson, Don Amos,
Blake Tohana, Corporate Secretary and their designees.  If a securities
industry professional or MEC stockholder contacts any other employee seeking
information regarding the Company, that employee must notify the party making
the inquiry that all queries of this sort are to be directed to Blake Tohana.

3.                                       Unless legal counsel advises otherwise, “road
show” materials and other materials to be distributed to or discussed with
analysts must be disseminated by one of the means mentioned in clauses (i),
(ii) or (iii) of paragraph 8 prior to the time of their use.

Communications with Government and Media

 31
 

4.                                       Requests for Company information from
government officials or media representatives are also subject to this
Policy.  Requests from government officials should be directed to the
Corporate Secretary or his designee.  Any inquiries from media
representatives should be directed to Lynn Cooke.  From time to time,
specific guidance will be provided on the proper handling or re-direction of
media inquiries relating to certain topics.

5.                                       All press releases (which generally receive
wide distribution) and “media releases” (which are typically distributed only
to select media), unless they relate strictly to non-material news affecting an
individual racetrack, must be forwarded at least 24 hours prior to issuance to
the Corporate Secretary, for his review.  He will be responsible for
ensuring that all releases are distributed in accordance with NASDAQ and TSX
requirements.

Earnings Disclosure

6.                                       MEC’s quarterly earnings information is to be
disclosed in the following manner:  First, a press release containing a
discussion of earnings results for the previous quarter should be submitted to
Dow Jones, Bloomberg, Business Wire, PR Newswire, Reuters or some similar
service prior to the earnings conference call.  Second, information
regarding when the earnings conference call will be held and how it can be
accessed by the public should, in addition to being included in the earnings
release, (i) be included in a separate press release issued at least 24 hours
prior to the earnings release, and (ii) posted on our website at least 24 hours
prior to the earnings release.  Third, the call should be broadcast live
on a medium that will allow the public, without charge, to listen in on the call. 
Assuming that these three steps have been followed, the information contained
in the earnings press release may be discussed freely on the scheduled call.

7.                                       No employee should ever discuss earnings
(including giving formal or informal “guidance” of any sort on an analyst’s
earnings estimates) with anyone outside of the Company, except in accordance
with the procedure set forth in paragraph 6, or if the information being
provided has previously been disclosed in accordance with the procedure set forth
in paragraph 6.

Disclosure of other Material Nonpublic Information

8.                                       All other “material nonpublic” information
should initially be disclosed either (i) using the procedure to be followed for
disclosure of earnings information, (ii) in a filing with the SEC, (iii) by
another method reasonably expected to effect a broad and non-exclusionary
distribution of information to the public or (iv) pursuant to an express
confidentiality agreement with the recipient of the information.  For
guidance on what Company information is “material,” see paragraph 10 or contact
the Corporate Secretary.  For guidance on what Company information is
“nonpublic,” see paragraph 11 or contact Blake Tohana.

9.                                       No employee, including those who are
authorized to interact with securities professionals and MEC stockholders, may
ever discuss or otherwise disclose “material nonpublic” information with any
person outside the Company, except in accordance with the procedures set forth
in this Policy.

 32
 

10.                                 It is impossible to state with certainty what
Company information is “material.”  Under the federal securities laws,
information is “material” if a reasonable investor would consider it important
in making an investment decision regarding the Company’s securities. 
Unless, after consultation with legal counsel, it is concluded otherwise,
employees should assume that information regarding the following topics is
always “material”: (i) earnings or revenue figures,  (ii) significant
mergers, acquisitions, dispositions, tender offers, joint ventures or changes
in assets, (iii) real estate acquisitions, dispositions or development
projects, (iv) changes in control, (v) significant new products, technologies
or contracts, (vi) significant developments regarding customers, suppliers,
litigation or regulation, (vii) changes in senior personnel, (viii)
bankruptcies or receiverships, (ix) changes in auditors or auditor notification
that the Company may no longer rely on an auditor’s audit report, and (x)
events regarding the Company’s securities (such as defaults on senior
securities, calls of securities for redemption, repurchase plans, stock splits
or changes in dividends, changes in the rights of stockholders, or public or
private sales of additional securities).  If you are uncertain as to whether
a particular item of Company information should be considered “material,”
contact the Corporate Secretary.

11.                                 Information is “nonpublic” if it has not been
disseminated in a manner making it available to investors generally. 
Employees should assume that all information that has not been disclosed for at
least 24 hours pursuant to one of the procedures set forth in clauses (i), (ii)
or (iii) of paragraph 8 is still “nonpublic.”  If you are uncertain as to
whether a particular item of Company information should be considered
“nonpublic,” contact Blake Tohana.

12.                                 If a director, executive officer or investor
relations official (“senior official”) becomes aware that there has been an
inadvertent or improper disclosure of material nonpublic information, the parties
involved should take the following steps immediately:  (i) contact Blake
Tohana and the Corporate Secretary, (ii) develop a plan to make public
disclosure of the information (such as by including the information in a
widely-distributed press release or an SEC filing on Form 8-K), and (iii)
execute the plan by the later of (A) 24 hours or (B) the opening of the next
trading day on NASDAQ, in each case after the senior official learns of the
inadvertent or improper disclosure.

13.                                 Persons listed in paragraph 2 should, prior
to any scheduled interaction with securities industry professionals or MEC
stockholders, take an inventory of what Company information, in addition to
information regarding the topics listed in paragraph 10, might be considered
“material nonpublic.”  Prior to the scheduled interaction, those persons
should decide whether (i) to keep the information off-limits for the
interaction with the outsider or (ii) to disclose the information publicly, by
one of the means mentioned in clauses (i), (ii) or (iii) of paragraph 8.

Coordination with MI Developments

14.                                 Given the relationship between MEC and our parent company, MI
Developments Inc. (“MID”), particular care must be taken with announcements
which may be material to MID.  Please consult with the Corporate Secretary
regarding any such matters before making any public disclosure.

* * *

 33
 

As noted, it is crucial that all employees adhere
strictly to this Policy.  Failure to do so may be grounds for termination,
in addition to any civil or criminal penalties that may be applicable.  If you have any questions regarding how these
procedures should be followed in a particular case, please call the Corporate
Secretary.   Do not try to resolve uncertainties on your own.

Revision Date:
January 2006

 34
 

POLICY ON U.S. POLITICAL CONTRIBUTIONS (Updated July
2005)

As
indicated in the June 2005 memo from Tom Hodgson, Executive Vice President Paul
Cellucci will have oversight of MEC’s political contribution policy throughout
the U.S.  Paul will work closely with tracks on decisions involving
political strategy and the contributions required to support these strategies.

A.  Political Contributions

The
following procedures for political contributions will apply to MEC and all of
its subsidiaries:

1.             As previously directed, each track or
business unit must budget for annual political contributions.  MEC
Corporate should not be provided with any details about the proposed recipients
of political contributions.  Those details may only be provided to Paul
Cellucci, Greg Scoggins, and other executives who are U.S. citizens.

2.             The Track or Business Unit GM/President
(provided he or she is a U.S. citizen) is responsible for approving every
political contribution.  Foreign
nationals, including MEC officers, directors and executives who are not
American citizens or Green Card holders, must not participate in political
contribution decisions – including soliciting, approving or rejecting
contributions, signing check authorizations or signing or delivering actual
checks.

3.             Before a track or business unit can make a
political contribution, the Track or Business Unit GM/President must do the
following:

a.                                       Confirm that sufficient funds are available
in the track or business unit budget;

b.                                      Obtain confirmation from Gregg Scoggins that
proposed contribution is legal and within statutory limits.  Gregg can be
contacted by phone (804-752-2014), e-mail (Gregg.Scoggins@magnaent.com) or fax
(804-752-0027).

4.             After following the steps in section 3 and
then making the political contribution, the political contributions officer
must complete the attached Report of Political Contribution Form and fax it to
Jim Pietras (phone:  978-567-5933, e-mail:  jim.pietras
@magnaent.com, fax:  978-567-5943.)

B.  Gifts to Public Officials

Another issue is the use of MEC facilities to hold political
fundraisers or the donation of property or services of MEC, MID, Magna
International or any other MEC affiliate to a government organization or
official.  There are onerous public ethics laws in each state in which we
operate governing whether, and under what circumstances, “gifts” may be made to
public officials.  Participation in the political process is a fundamental
constitutional right, which we support wholeheartedly, but MEC must
nevertheless be

 35
 

very cautious in its dealings with politicians and public officials to
ensure that we do not violate any laws.

You must first receive legal approval from Gregg Scoggins before
agreeing to any of the following:

·                                          hosting a political fundraiser;

·                                          contributing property to a government
department; organization, employee or official;

·                                          providing goods or services to a government
department, organization, employee or official (e.g. use of a Magna plane, air
fare, golf sponsorships, sporting event tickets, etc.); or

·                                          making any other kind of gift to a public
official.

A breach of this policy will be considered a serious matter.  If
you have any questions or comments about this policy, please call Gregg
Scoggins at (804-752-2014).

 36
 

MAGNA ENTERTAINMENT CORP. REPORT OF CAMPAIGN
CONTRIBUTION

	
  Date of Contribution

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Track/Business
  Unit

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Recipient (Full
  legal name)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Contribution
  Amount

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Recipient Office
  (Senate, Governor, etc.)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Contribution
  Type (Candidate, Non-Party Initiative, Campaign Committee or Soft Money

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Campaign Type
  (Primary, General Election)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Party
  Affiliation (Democrat, Republican, Independent)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Donor (Full
  legal name)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Donor Type
  (Corporate or PAC)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Approval from
  Gregg Scoggins

  	
   

  	
  Yes ٱ

  	
  No ٱ

  	
   

  
	
   

  	
   

  	
   

  
	
  Funds in Budget

  	
   

  	
  Yes ٱ

  	
  No ٱ

  	
   

  
	
   

  	
   

  	
   

  
	
  Complied with
  MEC Political Contributions Policy

  	
   

  	
  Yes ٱ

  	
  No ٱ

  	
   

  

 

(Track or Business Unit GM/President)

Date

 37
 

MEC
RESPONSIBLE GAMING POLICY

MEC is in the horse racing, gaming and entertainment business and is committed
to encouraging responsible gambling by its patrons.  MEC is not in
business to capitalize on compulsive behavior by its patrons or underage
gambling.  MEC recognizes the existence of problem gambling and underage
gambling and is committed to taking all necessary steps to direct its customers
to recognized assistance centers.

Problem Gaming

MEC follows a policy intended to sensitize our employees to problem
gaming issues in an effort to promote responsible gambling.  MEC track
staff is trained to recognize gamblers exhibiting traits associated with
compulsive gambling.  No wagers are accepted from any individual who track
staff reasonably believes has a compulsive gambling problem.

Underage Gambling

MEC follows a policy intended to prevent underage gambling.  MEC
track staff is trained not to accept wagers from minors and MEC maintains a
policy at all of its properties of carding youth to establish that they are of
legal betting age in the relevant jurisdiction.  While MEC encourages
youth to enjoy the sport of horse racing and to attend horse racing with their
families and friends, our employees are trained to identify unattended youth in
the wagering area and to contact legal authorities where necessary.

If you or someone you know has a gambling problem,
please contact your local Gambler’s Anonymous at its 1-800 [number] or visit www.gamblersanonymous.org
or the National Center for Problem Gambling at www.ncpgambling.org.

 38
 

MAGNA ENTERTAINMENT CORP.

FIXED ASSET DISPOSAL FORM

 

	
  Company:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Local
  Ref. #           

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Property
  / Department:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Submitted
  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Proceeds
  of Disposal:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Currency:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Asset Tag #

  	
   

  	
  Disposal

  	
   

  	
  Proceeds

  	
   

  	
  Net Book Value

  
	
  Item

  	
   

  	
  Description of Fixed Assets to be Disposed

  	
   

  	
  Asset Serial #

  	
   

  	
  Date

  	
   

  	
  on Disposal

  	
   

  	
  on Disposal Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Approvals:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MEC EVP & C.O.O.

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MEC EVP & C.F.O.

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  General Manager

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Controller

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Departmental Manager

  	
   

  	
  Date

  	
   

  
							

 

Footnotes:

 

1. MAXIMUM APPROVAL LEVELS REQUIRED PRIOR TO
DISPOSAL (ASSET VALUE APPROVAL LEVEL REQUIRED IS THE GREATER OF FAIR MARKET
VALUE OR NET BOOK VALUE):

 

	
  $0 - $19,999 : General
  Manager, Controller and Department Manager

  	
   

  	
  $20,000 - $199,999 : MEC EVP & COO, General
  Manager, Controller and Department Manager

  	
   

  	
  $200,000 AND OVER : MEC EVP & COO, MEC EVP &
  CFO General Manager, Controller and Dept. Manager

  
	
   

  	
   

  

 

 39
 

MAGNA ENTERTAINMENT CORP.

FIXED ASSET DISPOSAL FORM

	
  1. Reason for Disposal:

  	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  

 

 40
 

MAGNA ENTERTAINMENT CORP.

CAPITAL EXPENDITURE APPROVAL FORM

 

 

	
  Company:

  	
   

  	
   

  	
   

  	
  Local Ref. # 

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Property / Department:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Submitted By:

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Expenditure:

  	
   

  	
   

  	
   

  	
  Currency:

  	
   

  	
   

  
								

 

	
  Item

  	
   

  	
  Description of Expenditures:

  	
   

  	
  Amount

  	
   

  	
  Start Date

  	
   

  	
  Completion Date

  	
   

  
	
   

  	
   

  	
  (Ensure attached analysis page is completed for each capital
  expenditure requested)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Approvals:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MEC Chairman

  	
   

  	
  Date

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MEC C.E.O.

  	
   

  	
  Date

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MEC EVP & C.O.O.

  	
   

  	
  Date

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MEC EVP & C.F.O.

  	
   

  	
  Date

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  General Manager

  	
   

  	
  Date

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Controller

  	
   

  	
  Date

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Departmental Manager

  	
   

  	
  Date

  	
   

  	
   

  

 

Footnotes:

1.
Capital budget approvals are required for all purchases or leases of capital
items, the disposition of any capital items, and the purchase, sale or lease of
land and buildings.

2.
Funds allocated to items approved on this form are not to be substituted with
other items.  All substitutions must have
prior written approval on a separate form.

3.
MAXIMUM APPROVAL LEVELS REQUIRED PRIOR TO EXPENDITURE COMMITMENTS:

 

	
   

  	
   

  	
  $0 - $19,999 : General Manager, Controller and Department
  Manager

  	
   

  	
  $20,000 - $199,999 : MEC EVP & COO,

  MEC EVP & CFO, General Manager and Controller

  	
   

  	
  $200,000 AND OVER : MEC Chairman or MEC C.E.O., MEC
  EVP & COO, MEC EVP & CFO and General Manager

  

 

4.
Request must be supported by at least three supplier quotes. If the lowest
quote is not being accepted and/or three quotes were not obtained, then an
explanation must be provided.

 41
 

MAGNA ENTERTAINMENT CORP.

CAPITAL
EXPENDITURE APPROVAL FORM

	
  Expenditure Requested:

  	
   

  
	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1. Business Purpose:

  	
   

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  
	
  2. Funding Methodology:

  	
   

  
								

 

3.Impact on Current Year’s Capital
Budget:

	
  Total Remaining Capital
  Budget to be Approved

  	
  0.00

  	
   

  
	
  Less: Requested
  Capital Expenditure

  	
  $            —

  	
   

  
	
  Remaining
  Capital Budget

  	
  0.00

  	
   

  

 

	
  4. Estimated Life of Asset:

  	
   

  	
    years

  	
   

  

 

	
  5. Disposition of Replaced Asset:

  	
   

  	
   

  
	
  What will be
  replaced?

  	
   

  
	
   

  	
   

  
	
  When was the
  replaced asset acquired?

  	
   

  	
   

  
	
  What is the book
  value of the replaced asset?

  	
  $0

  
						

 

	
  6. New Asset’s Ongoing Associated Costs:

  	
   

  
	
   

  
	
   

  

 

7. 
Return on Asset:

	
  Estimated annual income from
  asset

  plus: Annual cost savings

  less: Annual ongoing costs (from #6 above)

  	
   

  	
   

  
	
          Estimated annual return

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Capital Expenditure
  Request

  divide by: Estimated annual return

  	
   

  	
   

  
	
          Years for Return on Asset

  	
   

  	
  years

  

 

	
  8. Other Comments:

  	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  

 

 42
 

Exhibit
B

Form of Indemnity Agreement

[see attached]

 43
 

INDEMNITY
AGREEMENT

This Indemnity
Agreement (“Agreement”) is made as of [date] by and between Magna Entertainment
Corp., a Delaware corporation (the “Company”), and [name] (the “Indemnitee”),
an officer or director of the Company or a subsidiary of the Company.

RECITALS

WHEREAS,
the Indemnitee is serving as an officer or director of the Company or a
subsidiary of the Company and in such capacity has rendered valuable services
to the Company; and

WHEREAS,
the Company has investigated the availability and sufficiency of liability
insurance and Delaware statutory indemnification provisions to provide its
directors and officers of the Company or its subsidiaries with adequate
protection and has concluded that such insurance and statutory provisions may
provide inadequate and unacceptable protection to certain individuals requested
to serve as its directors and officers; and

WHEREAS,
in order to induce and encourage highly experienced and capable persons such as
the Indemnitee to continue to serve as officers or director of the Company or a
subsidiary of the Company, the Board of Directors has determined, after due
consideration and investigation of the terms and provisions of this Agreement
and the various other options available to the Company and the Indemnitee in
lieu hereof, that this Agreement is not only reasonable and prudent but also
necessary to promote and ensure the best interests of the Company and its
stockholders; and

WHEREAS,
in recognition of the services of the Indemnitee, and in order to provide the
Indemnitee with specific contractual assurances that indemnification protection
will be available to the Indemnitee, the Company wishes to provide in this
Agreement for indemnification of and advancing of expenses to the Indemnitee as
set forth in this Agreement.

AGREEMENT

NOW,
THEREFORE, in consideration of the mutual covenants
contained herein and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Indemnitee do
hereby agree as follows:

1.                                      Definitions.
Whenever used in this Agreement the following words, unless the context clearly
indicates otherwise, shall have the following meanings:

(a) “Proceeding” includes any threatened,
pending or completed claim, action, suit, proceeding, formal or informal, or
alternative dispute resolution mechanism, or any hearing, inquiry or investigation
that the Indemnitee believes might lead to the institution of any claim,
action, suit, proceeding or alternative dispute resolution mechanism, whether
brought before or after the date of this Agreement, whether brought in the
right of the Company or otherwise and whether of a civil, criminal,
administrative, investigative or other nature.

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(b) “Expenses” include, without limitation,
attorneys’ fees, disbursements and retainers, accounting and witness fees,
travel and deposition costs, expenses of investigations, judicial or
administrative Proceedings and appeals, amounts paid in settlement by or on
behalf of the Indemnitee, and any expenses of establishing the existence of
and/or enforcing a right to indemnification, pursuant to this Agreement or otherwise,
including reasonable compensation for time spent by the Indemnitee in
connection with the investigation, defense or appeal of a Proceeding or action
for indemnification for which he or she is not otherwise compensated by the
Company, a subsidiary of the Company, or any third party.  The term “Expenses” does not include
Liabilities.

(c) “Independent Legal Counsel” shall refer to
an attorney or firm of attorneys with recognized expertise in matters of
Delaware corporations law and who shall not have otherwise performed services
for the Company or the Indemnitee within the five years immediately preceding
such counsel’s selection pursuant to Section 5 of this Agreement.

(d) “Liabilities” include, without limitation,
judgments, fines, penalties, excise taxes and other liabilities levied or
assessed against the Indemnitee in connection with any Proceeding.  The term “Liabilities” does not include
Expenses.

(e) “D&O Insurance” means directors’ and
officers’ liability insurance.

2.                                      Agreement
to Serve.

The Indemnitee
agrees to continue to serve as an officer or director of the Company or a
subsidiary of the Company at the will of the Company for so long as the
Indemnitee is duly elected or appointed or until such time as the Indemnitee
tenders his or her resignation in writing. 
The indemnification provisions provided under this Agreement shall
continue for Indemnitee even though Indemnitee may have ceased to serve in such
capacity at the time of any Proceeding.

3.
                                   Indemnification
in Third Party Actions.

The Company
shall indemnify the Indemnitee (including the Indemnitee’s spouse, heirs,
estate, executor or personal or legal representatives), and each person who
controls the Indemnitee or who may be liable within the meaning of Section 15
of the Securities Act of 1933, as amended (the “Securities
Act”), or Section 20 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), if the Indemnitee is a party to or
threatened to be made a party to or is otherwise involved in any Proceeding
(other than a Proceeding by or in the right of the Company), by reason of (or
arising in part out of) any event or occurrence related to the fact that the
Indemnitee is or was a director, officer, employee, controlling person, agent
or fiduciary of the Company or any subsidiary of the Company, or is or was
serving at the request of the Company as a director, officer, employee,
controlling person, agent or fiduciary of another corporation, limited
liability company, partnership, joint venture, trust, or other enterprise, or
by reason of any actions alleged to have been taken or omitted in such
capacity, against all Expenses and Liabilities actually and reasonably incurred
by the Indemnitee in connection with the defense, settlement, or other
disposition of such a Proceeding, to the fullest extent permitted by Delaware
law; provided that any settlement of a Proceeding be approved in writing by the

 45
 

Company. 
For purposes of this Agreement, if the Indemnitee serves as a director,
officer, employee, controlling person, agent or fiduciary of any corporation,
limited liability company, partnership, joint venture, trust or other
enterprise that is owned or controlled, wholly or in part, directly or
indirectly, by the Company, the Indemnitee shall be conclusively presumed to serve
in that capacity at the request of the Company.

4.                                      Indemnification
in Proceedings by or in the Right of the Company.

The Company
shall indemnify the Indemnitee (including the Indemnitee’s spouse, heirs,
estate, executor or personal or legal representatives), and each person who
controls the Indemnitee or who may be liable within the meaning of Section 15
of the Securities Act, or Section 20 of the Exchange Act, if the Indemnitee is
a party to or threatened to be made a party to or is otherwise involved in any
Proceeding by or in the right of the Company by reason of (or arising in part
out of) any event or occurrence related to the fact that the Indemnitee is or
was a director, officer, employee, controlling person, agent or fiduciary of
the Company or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee, controlling person,
agent or fiduciary of another corporation, limited liability company,
partnership, joint venture, trust or other enterprise, or by reason of any
actions alleged to have been taken or omitted in such capacity, against all
Expenses and Liabilities actually and reasonably incurred by the Indemnitee in
connection with the defense, settlement or other disposition of such a Proceeding,
to the fullest extent permitted by Delaware law.

5.                                      Conclusive
Presumption regarding Standards of Conduct.

(a) The
Indemnitee shall be conclusively presumed to have met the relevant standards of
conduct, if any, as defined by Delaware law, for indemnification pursuant to
this Agreement, unless a final determination is made by a court of competent
jurisdiction that the Indemnitee has not met such standards.  For purposes of this Agreement, the
termination of any claim, action, suit, or proceeding, by judgment, order,
settlement (whether with or without court approval), or conviction, or upon a
plea of nolo contendere, or its equivalent, shall not, of itself, create a
presumption that the Indemnitee did not meet any particular standard of conduct
or that a court has determined that indemnification is not permitted by
applicable law.

(b)
Notwithstanding the foregoing provisions of Section 5(a) of this Agreement, in
the event of any Proceeding (other than a Proceeding by or in the right of the
Company) in which the claimant alleges or has alleged specific material acts by
the Indemnitee of actual fraud, personal dishonesty, misappropriation, or
breach of the duty of loyalty, in each case for the direct or indirect personal
benefit of the Indemnitee, then the Company may rebut the presumption that the
Indemnitee has met the relevant standards of conduct for indemnification under
this Agreement by obtaining, at its expense, a written opinion of Independent
Legal Counsel, to the effect that, assuming the truth of the facts alleged by
the claimant, the Indemnitee, and all other former or current officers and
directors who are similarly situated in the context of the Proceeding and who
have had a similar involvement in the alleged acts have not met such standards.
 Receipt by the Company of such an
opinion shall, accordingly and notwithstanding the absence of a final
determination by a court of competent jurisdiction as contemplated by Section
5(a) of this Agreement, permit

 46
 

the Company to make a determination that the
Indemnitee has not met the relevant standards of conduct, provided that any
such determination is also made with respect to all other persons who, the
opinion states, did not meet such standards. 
Neither the receipt of a written opinion from Independent Legal Counsel
nor the making by the Company of a determination pursuant to this Section 5(b)
shall create a presumption that the Indemnitee did not meet any particular
standards of conduct or that the Indemnitee is not entitled to indemnification
under this Agreement or otherwise. 
Nothing herein, however, shall prevent the Company from presenting such
opinion as evidence or the Independent Legal Counsel as a witness in any court
case.

6.                                      Indemnification
of Expenses of Successful Party. 
Notwithstanding any other provision of this Agreement (except for, and
subject to, Section 10(c)), to the extent that the Indemnitee has been
successful in defense of any Proceeding or in defense of any claim, issue or
matter therein, on the merits or otherwise, including the dismissal of a
Proceeding without prejudice or the settlement of a Proceeding (with the
consent of the Company, which consent shall not be unreasonably withheld)
without an admission of liability, the Indemnitee shall be indemnified against
Expenses actually and reasonably incurred in connection therewith.

7.                                      Indemnification
for Expenses of a Witness. 
Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of the fact that Indemnitee was a director,
officer, employee, controlling person, agent or fiduciary of the Company or any
subsidiary of the Company, or was serving at the request of the Company as a
director, officer, employee, controlling person, agent or fiduciary of another
corporation, limited liability company, partnership, joint venture, trust or
other enterprise, a witness in any Proceeding, the Indemnitee shall be
indemnified against Expenses actually and reasonably incurred in connection
therewith.

8.                                      Advances
of Expenses.  If requested by
Indemnitee, the Company shall, in accordance with this Agreement and within
five (5) business days of a written request by Indemnitee, advance to
Indemnitee the Expenses that are reasonably anticipated to be incurred by
Indemnitee and reimburse Indemnitee for the Expenses that are actually incurred
by Indemnitee in connection with any Proceeding; provided that the Indemnitee
shall undertake in writing to repay any advances if it is conclusively
determined by a court of competent jurisdiction that the Indemnitee is not
entitled to indemnification under this Agreement or otherwise.  The Indemnitee’s obligation to reimburse the
Company for advanced Expenses shall be unsecured and no interest shall be
charged thereon.

9.                                      Partial
Indemnification.  If the
Indemnitee is entitled under any provision of this Agreement to indemnification
by the Company for a portion of the Expenses or Liabilities actually and
reasonably incurred by the Indemnitee in the investigation, defense, appeal, or
settlement of any Proceeding but not, however, for the total amount of the
Indemnitee’s Expenses or Liabilities, the Company shall nevertheless indemnify
the Indemnitee for the portion of Expenses and Liabilities to which the
Indemnitee is entitled.

 47

10.          Indemnification Procedure;
Determination of Right to Indemnification.

(a) Promptly
after receipt by the Indemnitee of notice of the commencement of any
Proceeding, the Indemnitee shall, if a claim in respect thereof is to be made
against the Company under this Agreement, notify the Company of the
commencement thereof in writing.  The
omission to so notify the Company will not relieve it from any liability which
it may have to the Indemnitee under this Agreement except to the extent such
failure materially prejudices the Company.

(b) If a claim
for indemnification or advances under this Agreement is not paid by the Company
within 30 days of receipt of written notice, the rights provided by this
Agreement shall be enforceable by the Indemnitee in any court of competent
jurisdiction.  The burden of proving by
clear and convincing evidence that indemnification or advances are not
appropriate shall be on the Company. 
Neither the failure of the Independent Legal Counsel to have made a
determination prior to the commencement of such action that indemnification or
advances are proper in the circumstances because the Indemnitee has met the
applicable standard of conduct, nor an actual determination by the Independent
Legal Counsel that the Indemnitee has not met the applicable standard of
conduct, shall be a defense to the action or create a presumption that the
Indemnitee has not met the applicable standard of conduct.

(c) The
Indemnitee’s Expenses incurred in connection with any proceeding concerning his
or her right to indemnification or advances in whole or in part pursuant to
this Agreement or otherwise shall also be indemnified by the Company regardless
of the outcome of such a proceeding, unless a court of competent jurisdiction
determines that each of the material assertions made by the Indemnitee in the
proceeding was not made in good faith or was frivolous.

(d) With
respect to any Proceeding for which indemnification is requested, the Company
will be entitled to participate therein at its own expense and, except as
otherwise provided below, to the extent that it may wish, the Company may
assume the defense thereof, with counsel reasonably satisfactory to the
Indemnitee.  After notice from the
Company to the Indemnitee of its election to assume the defense of a
Proceeding, the Company will not be liable to the Indemnitee under this
Agreement for any Expenses subsequently incurred by the Indemnitee in
connection with the defense thereof, other than as provided below.  The Company shall not settle any Proceeding
in any manner that would impose any penalty or limitation on the Indemnitee
without the Indemnitee’s written consent, which consent shall not be
unreasonably withheld.  The Indemnitee
shall have the right to employ his or her own counsel in any Proceeding, but
the fees and expenses of such counsel incurred after notice from the Company of
its assumption of the defense of the Proceeding shall be at the expense of the
Indemnitee, unless (i) the employment of counsel by the Indemnitee has been
authorized by the Company in writing, (ii) the Indemnitee shall have reasonably
requested separate counsel in the conduct of the defense of a Proceeding, or
(iii) the Company shall not in fact have employed counsel to assume the defense
of a Proceeding, in each of which cases the fees and expenses of the Indemnitee’s
counsel shall be advanced by the Company. 
The Company shall not be entitled to assume the defense of any
Proceeding brought by or on behalf of the Company or as to which the Indemnitee
has

 48
 

concluded that there may be a conflict of
interest between the Company on the one hand and the Indemnitee on the other
hand.

11.          Limitations on Indemnification.  No payments pursuant to this Agreement shall
be made by the Company:

(a) To
indemnify or advance funds to the Indemnitee for Expenses with respect to
Proceedings initiated or brought voluntarily by the Indemnitee and not by way
of defense, except (i) with respect to Proceedings brought to establish or
enforce a right to indemnification under this Agreement or any other statute or
law or otherwise as required under applicable law, (ii) with respect to
Proceedings (or parts thereof) authorized by the Board, or (iii) as otherwise
required under applicable law, regardless of whether the Indemnitee ultimately
is determined to be entitled to such indemnification or advancement of
Expenses;

(b) To
indemnify the Indemnitee for any Expenses or Liabilities sustained in any
Proceeding for which payment is actually made to the Indemnitee under a valid
and collectible insurance policy, except in respect of any excess beyond the
amount of payment under such insurance;

(c) If a court
of competent jurisdiction finally determines that any indemnification or
advances under this Agreement is not permitted by applicable law;

(d) To indemnify
the Indemnitee for any Expenses or Liabilities sustained in any Proceeding for
an accounting of profits made from the purchase and sale by the Indemnitee of
securities of the Company pursuant to Section 16(b) of the Securities Exchange
Act of 1934 and amendments thereto or similar provisions of any state statutory
law or common law; or

(e) To
indemnify the Indemnitee for any Expenses or Liabilities resulting from the
Indemnitee’s conduct which is finally adjudged to have been willful misconduct,
knowingly fraudulent or deliberately dishonest.

12.          Liability Insurance.

(a) The
Company hereby covenants and agrees that, as long as the Indemnitee shall
continue to serve as an officer or director of the Company or a subsidiary of
the Company and thereafter as long as the Indemnitee may be subject to any
possible Proceeding, the Company, subject to subsection (c) below, shall
promptly obtain and maintain in full force and effect D&O Insurance in
reasonable amounts from established and reputable insurers.

(b) In all
D&O Insurance policies, the Indemnitee shall be named as an insured in such
a manner as to provide the Indemnitee the same rights and benefits as are
accorded to the most favorably insured of the Company’s officers or directors.

(c)
Notwithstanding the foregoing, the Company shall have no obligation to obtain
or maintain D&O Insurance if the Company determines in good faith that such
insurance is not reasonably available, the premium costs for such insurance are
disproportionate to the

 49
 

amount of coverage provided, the coverage
provided by such insurance is so limited by exclusions that it provides an
insufficient benefit, or the Indemnitee is covered by similar insurance
maintained by a subsidiary of the Company.

13.
         Indemnification Hereunder Not
Exclusive. 
The indemnification provided by this Agreement shall not be deemed
exclusive of any other rights to which the Indemnitee may be entitled under the
certificate of incorporation, bylaws, any agreement, vote of shareholders or
disinterested directors, provision of applicable law, or otherwise, both as to
action in the Indemnitee’s official capacity and as to action in another
capacity on behalf of the Company or any subsidiary of the Company while
holding such office.

14.
         Contribution.  Subject to Section 9, if the indemnification
provided for hereunder for any reason is held by a court of competent
jurisdiction to be unavailable to the Indemnitee in respect of any Expenses or
Liabilities referred to therein, then the Company, in lieu of indemnifying the
Indemnitee thereunder, shall contribute to the amount paid or payable by the
Indemnitee as a result of such Expenses or Liabilities (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company and
the Indemnitee, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company and the Indemnitee in connection with the action
or inaction that resulted in such Expenses or Liabilities, as well as any other
relevant equitable considerations.

15.          Successors and Assigns.  This Agreement shall be binding upon, and
shall inure to the benefit of the Indemnitee and his or her heirs, executors,
administrators, and assigns, and the Company and its successors and
assigns.  The Company shall require and
cause any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all, substantially all, or a substantial part,
of the Company’s business or assets or both, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place.

16.
         Severability.  Each and every paragraph, sentence, term and
provision of this Agreement is separate and distinct so that if any paragraph,
sentence, term, or provision hereof shall be held to be invalid or
unenforceable for any reason, such invalidity or unenforceability shall not
affect the validity or enforceability of any other paragraph, sentence, term or
provision hereof.  To the extent
required, any paragraph, sentence, term, or provision of this Agreement may be
modified by a court of competent jurisdiction to preserve its validity and to
provide the Indemnitee with the broadest possible indemnification permitted
under Delaware law.

17.          Scope.  The Company intends to indemnify the
Indemnitee hereunder to the fullest extent permitted by Delaware law.  In the event of any change after the date of
this Agreement in any applicable law, statute or rule that expands the right of
the Company to indemnify a director, officer, employee, controlling person,
agent or fiduciary, it is the intent of the parties hereto that the Indemnitee
shall enjoy by this Agreement the greater benefits afforded by such
change.  Upon any change in any
applicable law, statute or rule that narrows the right of the Company to
indemnify a director, officer, employee, controlling person, agent or
fiduciary, such change, to the extent not otherwise required by such law,
statute or rule to be applied to this

 50
 

Agreement, shall have no effect on this
Agreement or the parties’ rights and obligations hereunder except as set forth
in Section 11(a) hereof.

18.
         Savings Clause.  If this Agreement or any paragraph, sentence,
term, or provision hereof is invalidated on any ground by any court of
competent jurisdiction, the Company shall nevertheless indemnify the Indemnitee
as to any Expenses, judgments, fines, penalties, or excise taxes incurred with
respect to any Proceeding to the full extent permitted by any applicable
paragraph, sentence, term, or provision of this Agreement that has not been
invalidated or by any other applicable provision of Delaware law.

19.          Governing Law.  This Agreement shall be construed as a whole
and in accordance with its fair meaning. 
Headings are for convenience only and shall not be used in construing
meaning.  This Agreement shall be
governed and interpreted in accordance with the laws of the State of Delaware,
without regard to conflicts of laws principles.

20.
         Amendments.  No amendment, waiver, modification,
termination, or cancellation of this Agreement shall be effective unless in
writing signed by the party against whom enforcement is sought.  The indemnification rights afforded to the
Indemnitee hereby are contract rights and may not be diminished, eliminated, or
otherwise affected by amendments to the certificate of incorporation, bylaws or
by other agreements, including D&O Insurance policies.

21.
         Counterparts.  This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
party and delivered to the other.

22.
         Notices.  Any notice required to be given under this
Agreement to the Company shall be directed to the Company at its principal
executive offices, 337 Magna Drive, Aurora, Ontario, Canada L4G 7K1, Attention:
General Counsel, and to the Indemnitee at the address indicated below or to
such other address as either shall designate in writing.

 51

IN
WITNESS WHEREOF, the parties have executed this
Indemnity Agreement as of the date first written above.

	
  

  	
  INDEMNITEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  [name]

  
	
   

  	
  Address:

  	
  [address]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MAGNA ENTERTAINMENT CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Blake S. Tohana

  
	
   

  	
  Title:

  	
  Executive Vice-President and

  
	
   

  	
   

  	
    Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  William G. Ford

  
	
   

  	
  Title:

  	
  SecretaryExhibit 10.1

SETTLEMENT AGREEMENT

This SETTLEMENT AGREEMENT (“Agreement”) is made
and entered into this 27th day of February, 2007 (the “Effective Date”), by and
between CellStar International Corporation\Asia, a Delaware corporation (“CICA”), CellStar Corporation, a Delaware corporation and
parent company of CICA  (“CellStar”), CellStar, Ltd., a Texas limited partnership (“CellStar Ltd.”), Fine Day Holdings Limited, a corporation
organized and existing under the laws of the British Virgin Islands (“Fine Day”), CellStar (Asia) Corporation Limited, a Hong Kong
corporation (“CellStar Asia”), and Mr. Horng
An-Hsien, the Chairman and sole shareholder of Fine Day (“Mr. Horng”).

WITNESSETH:

WHEREAS, Fine Day
is the Obligor under that one certain Subordinated Promissory Note dated
September 2, 2005, in the principal amount of US$6,000,000.00 (the “Note”); and

WHEREAS, the
principal balance of the Note is payable in full on or before September 1, 2008
(the “Maturity Date”), with interest paid
quarterly in advance, commencing March 1, 2006; and

WHEREAS, the Note
was issued by Fine Day as partial payment of the purchase price for the
outstanding shares of CellStar Asia pursuant to the terms of an Amended and
Restated Stock Purchase Agreement between CICA and Fine Day dated as of August
24, 2005 (the “Stock Purchase Agreement”); and

WHEREAS, further in
connection with the execution of the Stock Purchase Agreement, CellStar, Ltd.
granted a license to CellStar Asia to use certain trademarks, logos, service
marks and other intellectual property (the “Marks”)
pursuant to a Trademark License Agreement dated as of September 2, 2005 (the “License Agreement”); and

WHEREAS, Fine Day
has informed CICA that it intends to cause CellStar Asia and its wholly-owned
subsidiary Shanghai CellStar International Trading Co., Ltd. (“Shanghai CellStar”), to cease operations and, as a result,
Fine Day will not be able to pay quarterly interest payments or the principal
of the Note at the Maturity Date; and

WHEREAS, Fine Day
and Mr. Horng have requested that CICA agree to accept a compromise settlement
of the obligation under the Note;

NOW, THEREFORE, in
consideration of the premises, representations, mutual covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, intending to be
legally bound hereby, the Parties agree as follows:

1.             Mutual Release of All Claims.  Upon the terms and subject to the
conditions  contained in this Agreement,
CICA hereby waives, releases
and forever discharges Fine
Day, and Fine Day hereby waives, releases and forever discharges CICA, from any
and all claims, causes of action, losses, obligations, liabilities, damages,
judgments, costs or expenses (including attorneys’ fees), of any kind
whatsoever, except for the rights and obligations of this Agreement and Mutual
Release as outlined below.  CICA and Fine
Day agree, to the fullest extent permitted by law, not to in any manner — and whether directly or indirectly — institute,
prosecute or pursue any complaints, claims, charges, demands, suits, actions or
causes of action, whether in law or in equity, which they assert or could
assert against the other, at common law or under any statute, rule, regulation,
order or law, whether federal, state or local or on any grounds whatsoever.

2.             Consideration for this
Settlement.  As consideration for the
promises contained in this Agreement, and the mutual releases granted pursuant
hereto, Fine Day, CellStar Asia, Mr. Horng and CICA make the following
representations and agreements:

(a)           On
or before the Closing Date, Fine Day shall pay to CICA the amount of
US$650,000.00, payable to CICA by wire transfer to an account nominated in writing by CICA.

(b)           On or before the Closing Date, Mr. Horng
shall transfer to CellStar, free and clear of all liens, pledges and security
interests of any kind, all of his ownership interest in all shares of common
stock of CellStar owned by him (the “CellStar Shares”).  Mr. Horng hereby represents and warrants to
CICA and CellStar that, as of the date of this Agreement, he owns at least
474,000 shares of CellStar common stock but if he shall subsequently become aware of any further shares owned
by him in CellStar, these shares shall also be included within the definition
of “CellStar Shares”.  Mr. Horng
shall execute and deliver to CellStar at Closing a stock power in substantially
the form attached hereto as Exhibit A,
along with any other documents reasonably requested by CellStar in order to
consummate the transfer of the CellStar Shares to CellStar.

(c)           Within
twenty (20) days following the date of this Agreement, Mr. Horng shall deliver
to CellStar a legal proxy obtained from his broker with respect to the CellStar
Shares, duly executed by Mr. Horng.  Mr.
Horng further agrees to execute and deliver to CellStar within twenty (20) days
following the date of this Agreement, an irrevocable proxy with respect to the
CellStar Shares in substantially the form set forth as Exhibit B
attached hereto, entitling the attorneys in fact named therein to vote the
CellStar Shares.

(d)           CellStar Ltd and Cellstar Asia hereby agree
to terminate the License Agreement without
any further claim by either party against the other effective as of the
Closing Date but subject to the following
terms upon Closing:

·                                    CellStar
Asia shall, and shall cause each of its subsidiaries to immediately cease (i)
using the Marks, and (ii) any Internet domain names that include the name “CellStar”
or any similar name, 

 2
 

                                          including
any translation or transliteration of such name (“Internet
Domain Names”).

·                                    CellStar
Asia will assign, transfer and convey
to CellStar, Ltd. upon Closing any
and all right, title and interest in and to the Marks, together with any
goodwill, and the Internet Domain Names, which CellStar Asia may have obtained
and agrees to execute any instrument reasonably requested by CellStar, Ltd. to
accomplish, register, record or confirm such transfer upon Closing.

·                                    Immediately following the Closing,
CellStar Asia shall, and shall cause each of its subsidiaries and affiliates,
including Shanghai CellStar, to change their respective corporate name to
delete the name “CellStar” or any similar name, including any translation or
transliteration of such name, from its corporate name.

·                                    Notwithstanding the foregoing, CellStar
Limited will grant a non-exclusive licence to CellStar Asia and Shanghai
CellStar and their subsidiaries and affiliates to continue to use the name “CellStar”
and its Chinese transliteration for the following purposes only:

(i)                                           for the purposes of winding down their
respective businesses;

(ii)                                        for the purposes of continuing their
existing litigation in China and Hong Kong subject to them providing to
CellStar Ltd. at least annually and on demand a 
report from the attorneys of Cellstar Asia or Shanghai Cellstar (as the
case may be) as to  whether or not such
litigation is subsisiting; and

(iii)                               for the purposes of policing the vendors of
CellStar products in China (including those known as the “Small Bs”).

·                                          The
limited non-exclusive license set forth above shall automatically terminate
upon the earlier to occur of (i) the final wind down of the business of
CellStar Asia and Shanghai CellStar and the completion of all outstanding
litigation, or (ii) the expiration of  48
months from the date of this Agreement.

(e)           Save only for compliance by the respective parties with the terms of
this Agreement (i) Mr. Horng hereby releases CellStar, its subsidiaries
and their respective employees, officers, agents, directors, stockholders and
affiliates, from any and all claims, causes of action, losses, obligations,
liabilities, damages, judgments, costs, or expenses (including attorneys fees),
of any kind whatsoever, including, but not limited to, any claims for
indemnification and/or expense reimbursement arising out of his employment
and/or service as a director or officer of CellStar and its subsidiaries and (ii) Cellstar, Cellstar Ltd and CICA
and their respective subsidiaries and affiliates hereby release Mr Horng, Fine
Day and Cellstar Asia and their subsidiaries and their respective
employees, officers, agents, directors, stockholders and affiliates from any
and all claims, causes of action, losses, obligations, liabilities, damages,
judgments, costs, or expenses (including attorneys fees), of any kind
whatsoever including but not limited
to claims under the Licence Agreement, the Stock Purchase Agreement and the
Note.

 3
 

(f) CICA confirms that with
effect from the date hereof no further sums shall be due and/or payable by Mr.
Horng (by way of principal, interest or otherwise) pursuant to the Note.

3.             Closing.  The closing of the transactions contemplated
in this Agreement (the “Closing”) shall
occur on April 13, 2007 (the “Closing Date”),
unless mutually extended by mutual agreement of the parties. Upon Closing the Note shall be cancelled
with CICA confirming that there are no further amounts (whether principal,
interest or otherwise) due thereunder. In the event at Closing, either
party shall fail to take any action required to be taken or deliver any
document required to be provided herein, this Agreement shall be null and void
for all purposes and Cellstar shall
return to Mr. Horng the irrevocable proxy provided pursuant to Section 2(c)
duly cancelled.

4.             Confidentiality. Each party
agrees  not to directly or indirectly
make any press announcement whatsoever relating to the terms hereof, and
specifically not to make any press announcement in relation the winding down of
Cellstar Asia and Shanghai Cellstar and/or the release of the Note, save only
if such announcement has been approved by all other parties in writing;
provided, however, that CellStar may make such disclosure of this Agreement as
may be required by applicable law, rule or regulation.

5.             Breach.  Subject to the provision of Section 10 of
this Agreement, in the event either party breaches any term or provision of
this Agreement, the non-breaching party may bring suit in a court of competent
jurisdiction to enforce any term or provision of this Agreement, and in the
event said court determines that a party has breached or failed to perform any
material term or provision of this Agreement, damages and injunctive relief may
be issued against such party.

6.             Assignability.  Following the Closing, this Agreement and all
rights and duties hereunder may be assigned by CellStar, CICA and CellStar,
Ltd. to 2601 Metropolis Corp., an Indiana corporation and wholly-owned
subsidiary of Brightpoint, Inc.

7.             Recovery Of Attorneys Fees. 
If either party seeks and obtains judicial or equitable relief for any
violation of this Agreement by the breaching party, the non-breaching party
shall be entitled to recover from the breaching party its costs and reasonable
attorneys’ fees expended in such effort.

8.             Notices. 
All notices and other communications hereunder will be in writing.  Any notice or other communication hereunder
shall be deemed duly given if it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth:

If to CellStar, CICA or
CellStar Ltd.:

CellStar  Corporation

601 S. Royal Lane

Coppell, Texas 75019 U.S.A.

Fax:  972-462-3566

Attn:  General Counsel

 4
 

If to Fine Day,
CellStar Asia or Mr. Horng:

Fine Day Holdings Limited

___________________________

___________________________

___________________________

With copy to:

c/o Stephan,
Oringher, Richman & Theodora
  2029 Century Park East, Sixth Floor
  Los Angeles, California 90067
  Attention: Martha Shen-Urquidez
  Fax: (310) 551-0283

Any party may send any notice or other communication hereunder to the
intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger services, telecopy,
telex, ordinary mail or electronic mail), but no such notice or other communication
shall be deemed to have been duly given unless and until it is actually
received by the intended recipient.  Any
party may change the address to which notices and other communications
hereunder are to be delivered by giving the other party notice in the manner
set forth herein.

9.             Joint Preparation.  The Parties acknowledge that this Agreement
has been drafted, prepared, negotiated and agreed to jointly, with advice of
each Party’s respective legal counsel, and to the extent that any ambiguity
should appear, now, or at any time in the future, latent or apparent, such
ambiguity shall not be resolved or construed against either Party.

10.           Review By Counsel.  The Parties acknowledge that they have
thoroughly discussed all aspects of this Agreement and the effect of same with
their respective legal counsel, that they have had a reasonable time to review
the Agreement, that they fully understand all the provisions of the Agreement
and are voluntarily entering into this Agreement.  The parties
further represent  that
they have not transferred or assigned to any person or entity any claim
involving the other party or any portion thereof or interest therein.

11.           Execution In Multiple Counterparts.  This Agreement may be
executed in multiple counterparts, whether or not all signatories appear on
these counterparts, and each counterpart shall be deemed an original for all
purposes.

12.           Choice
of Law; Venue.   This Agreement shall
be deemed to have been entered into
and performed in Hong Kong and shall thereby be governed by and interpreted in
accordance with the laws of Hong Kong (being also the governing law of the Note
and the Stock Purchase Agreement).  Any
disputes between the parties hereto relating to or arising under this Agreement
that cannot be resolved by good faith negotiation within sixty (60) days or
notice thereof shall be brought, heard and determined in the appropriate court
in Hong Kong.

[The remainder of this page has been
intentionally left blank.]

 5

IN
WITNESS WHEREOF, each of the Parties has caused this
Agreement to be executed as of the day and year first above written.

	
  

  	
  Fine Day Holdings Limited

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
  /s/ An-Hsien Hong

  	
   

  
	
   

  	
  Name: 

  	
   

  	
  An-Hsien Hong

  	
   

  
	
   

  	
  Title:

  	
   

  	
   CEO/Chairman

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  /s/ An-Hsien Hong

  	
   

  	
   

  
	
   

  	
  Horng An-Hsien

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CellStar (Asia) Corporation Limited

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
  /s/ Elaine Flud Rodriguez

  	
   

  
	
   

  	
  Name: 

  	
   

  	
  Elaine Flud Rodriguez

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CellStar Corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
  /s/ Elaine Flud Rodriguez

  	
   

  
	
   

  	
  Name: 

  	
   

  	
  Elaine Flud Rodriguez

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CellStar International Corporation/Asia

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
  /s/ Elaine Flud Rodriguez

  	
   

  
	
   

  	
  Name: 

  	
   

  	
  Elaine Flud Rodriguez

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
  CellStar Ltd.

  
	
   

  	
  By: National
  Auto Center, Inc., 

     General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
  /s/ Elaine Flud Rodriguez

  	
   

  
	
   

  	
  Name: 

  	
   

  	
  Elaine Flud Rodriguez

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  	
   

  

 

 6

Exhibit A

Irrevocable
Stock Power

 

Name: _________________________

For value received, the
undersigned does (do) hereby sell, assign and transfer to

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

_____________ shares of
the _________ stock of
_______________________________

represented by
Certificate(s) No.(s) ___________________________________ inclusive,

standing in the name of
the undersigned on the books of said Company.

The undersigned does (do) hereby irrevocably
constitute and appoint ____________________________________________ attorney to
transfer the said stock on the books of said Company, with full power of
substitution in the premises.

	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dated 02-28-2007

  	
   

  	
  Sign Here:

  	
   

  	
  /s/ An-Hsien Hong

  	
   

  

 

Exhibit B

IRREVOCABLE
PROXY

The undersigned stockholder of CellStar Corporation, a
Delaware corporation (the “Company”),
hereby irrevocably (to the fullest extent permitted by law) appoints Elaine Flud Rodriguez 
“ as the sole and exclusive attorney-in-fact and proxy of the
undersigned, with full power of substitution and resubstitution, to vote and
exercise all voting rights (to the fullest extent that the undersigned is
entitled to do so) with respect to 474,000 outstanding shares of common stock
of the Company that are held beneficially by the undersigned as of the date of
this Proxy (collectively, the “Shares”),
including, without limitation, all voting rights relating to the Company’s
Special Meeting of Stockholders scheduled to be held on March 28, 2007.  Upon the execution of this Proxy, any and all
prior proxies given by the undersigned with respect to any of the Shares are
hereby revoked and the undersigned agrees not to grant any subsequent proxies
with respect to the voting rights granted by this Proxy until after the
Expiration Time (as defined below).

This Proxy is irrevocable (to the fullest extent
permitted by law) and is coupled with an interest.  As used herein, the term “Expiration Time” shall mean the tenth anniversary of the
date of this Proxy.

The attorney-in-fact and proxy named above is hereby
authorized and empowered by the undersigned, at any time prior to the
Expiration Time, to act as the undersigned’s attorney-in-fact and proxy to vote
the Shares, and to exercise all voting, consent and similar rights of the
undersigned with respect to the Shares (including, without limitation, the
power to execute and deliver written consents), at every annual, special or
adjourned meeting of stockholders of the Company and in every written consent in
lieu of such meeting.

Any obligation of the undersigned hereunder shall be
binding upon the successors, heirs and legal or personal representatives of the
undersigned, and shall survive the death or incapacity of the undersigned.

This Proxy shall terminate, and be of no further force
and effect, automatically at the Expiration Time.

Dated: 2-28-2007

	
  WITNESS:

  	
   

  	
  BENEFICIAL HOLDER:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/ An Hsien Hong

  	
   

  
	
   Signature

  	
   

  	
   

  	
  Signature

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  An Hsien Hong

  	
   

  
	
  Print name here

  	
   

  	
   

  	
  Print name here

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