Document:

QuickLinks
 -- Click here to rapidly navigate through this document
  

        Exhibit 10.2

 
 

DEMAND DEBENTURE    
    

	PRINCIPAL SUM: $51,694,000.00	 	DATE: October 18, 2002

	1.
	Promise
to Pay: FLAMBORO DOWNS HOLDINGS LIMITED, a corporation incorporated under the laws of the Province of Ontario (hereinafter referred to as the "Debtor"), for value received,
hereby covenants and promises to pay to CHARLES JURAVINSKI AND MARGARET JURAVINSKI, on joint account, with right of survivorship (collectively the "Lenders"), at their offices at 626 Harvest Road,
Dundas, Ontario, L9H 5K7, or at such other place as the Lenders may designate by notice in writing to the Debtor, on demand, all amounts now or hereafter owing by the Debtor to the Lenders, up
to the maximum principal amount of FIFTY ONE MILLION SIX HUNDRED NINETY FOUR THOUSAND DOLLARS ($51,694,000.00) in lawful money of Canada, plus interest thereon in accordance with the terms of a
guarantee dated October 18, 2002 executed by the Debtor and delivered to the Lenders (the "Guarantee").

	2.
	Security:
As security for the Guarantee and the payment and performance of the Guaranteed Obligations (as defined in the Guarantee), the Debtor hereby:

	(a)
	grants,
conveys, mortgages, charges, pledges and assigns as and by way of a fixed and specific mortgage, charge, pledge and assignment to and in favour of the Lenders, their
successors and assigns, all of its right, title, estate and interest, present and future, in and to:

	(i)
	the
lands and premises described in Schedule "A" hereto, together with all buildings, erections, structures and improvements now or hereafter constructed or
placed in, under or upon said lands and premises, and all leasehold interests in such property (the "Lands");

	(ii)
	all
machinery, plant, equipment, apparatus and fittings and other fixtures and all furniture, goods and other items of personal property presently situate upon the
Lands or which at any time may hereafter be constructed or brought or placed thereon, or used in connection therewith; and

	(iii)
	all
rights-of-way, easements, licences and privileges, appurtenant or appertaining to the above;

	(b)
	unconditionally
and irrevocably assigns, transfers and sets over unto and in favour of the Lenders, their successors and assigns, as and by way of a general assignment all of its
right, title, estate and interest, present and future, in and to:

	(i)
	any
existing or future lease, agreement to lease or other occupancy or tenancy agreement or legally binding letter of interest or offer to lease relating to the whole or
any part or parts of the Lands and any existing or future license or concession whereby any person is given the right (other than an easement or a right in the nature of an easement) to use or occupy
the whole or any part or parts of the Lands, and includes all modifications, extensions, amendments, renewals or replacements thereof which may hereafter be effected or entered into (collectively, the
"Leases"), and all benefits, powers and advantages of the Debtor to be derived therefrom and all covenants, obligations and agreements of the tenants thereunder;

	(ii)
	all
rents and other moneys now due and payable or hereafter to become due and payable under the Leases, and each guarantee of or indemnity in respect of the obligations
of the tenants thereunder with full power to demand, sue for recovery, receive and give receipts for all such rents and other moneys and otherwise to enforce the rights of the Debtor thereto in the
name of the Debtor;

	(iii)
	any
and all existing or future agreements, contracts, licenses, permits, plans and specifications, bonds, letters of credit, letters of guarantee or other documents or
instruments affecting or relating to the Lands or any part or parts thereof and all extensions, amendments, renewals or substitutions thereof or therefore which may hereafter be effected or entered
into and all benefit, power and advantage of the Debtor to be derived therefrom; 

29

 

	(iv)
	any
and all existing or future agreements of purchase and sale, options to purchase and mortgage, loan or other financing commitments affecting the Lands or any part or
parts thereof and all proceeds and other moneys now due and payable or hereafter to become due and payable thereunder and all benefit, power and advantage of the Debtor to be derived therefrom;

	(v)
	any
and all existing or future insurance policies pertaining to the Lands and the proceeds therefrom and all proceeds of expropriation or similar taking of the Lands or
any part or parts thereof and all benefit, power and advantage of the Debtor to be derived therefrom;

	(vi)
	all
of the Debtor's present and future accounts, accounts receivable, money, intangibles, claims, contract rights, demands, chattel papers, instruments, documents,
notes and choses in action relating to the Lands, together with any and all security therefore, including, without limiting the generality of the foregoing, all of its present and future mortgages,
debentures, bonds, promissory notes, bills of exchange, insurance claims, judgments and book debts, now due or hereafter to become due to or owned by the Debtor, together with all securities,
documents, computer disks, tapes, software or records now or hereafter owned by the Debtor and representing or evidencing the said debts, accounts, accounts receivable, claims, contract rights,
demands and choses in action and all other rights and benefits in respect thereto;

	(vii)
	all
of the Debtor's present and future computer hardware, software and programs relating to the Lands, and all rights, agreements, licences, permits and consents in
respect of or in any way relating to such computer hardware, software and programs including, without limitation, all paper cards, magnetic tapes, discs, diskettes, drums or magnetic bubbles and
whether permanently installed in hardware or crystallized in firmware;

	(viii)
	all
goodwill, patents, tradenames, trademarks, copyrights and other industrial and intellectual property and all other intangibles now or hereafter owned by the
Debtor; and

	(ix)
	with
respect to the personal property described in clauses (vi) and (vii) above, all substitutions and replacements thereof, increases, additions and
accessions thereto and any interest of the Debtor therein; and

	(c)
	grants,
conveys, mortgages, charges, pledges and assigns as and by way of a floating charge to and in favour of the Lenders, the undertaking, property, assets, rights, benefits and
privileges of the Debtor for the time being, both real and personal, moveable and immoveable, tangible and intangible, legal and equitable of whatsoever nature and kind, now owned or hereafter
acquired including, without limiting the generality of the foregoing, its goodwill and its interest in all equipment, inventory, lands, buildings, leases, chattels and accounts (except such property
and assets as are validly and effectively subject to any fixed and specific mortgage and charge or assignment or transfer created hereby) in each case as and to the extent the foregoing relate to or
are part of the Lands; 

provided
that the said mortgages and charges shall not extend or apply to any personal property which is "consumer goods", as such term is defined in the Personal Property
Security Act (Ontario) nor to the last day of the term of any lease now held or hereafter acquired by the Debtor, but should such mortgages and charges become enforceable, the
Debtor shall thereafter stand possessed of such last day and shall hold it in trust for the Lenders for the purpose of this Debenture and to assign and dispose thereof as the Lenders shall, for such
purpose, direct. Upon any sale or sales of such leasehold interest or any part thereof, the Lenders, for the purpose of vesting the aforesaid one day residue of such term or renewal thereof in any
purchaser or purchasers thereof, shall be entitled by deed or writing to appoint such purchaser or purchasers or any other person or persons a new trustee or trustees of the aforesaid residue of any
such term or renewal thereof in the place of the Debtor and to vest the same accordingly in the new trustee or trustees so appointed free and discharged from any obligation respecting the same. 

        All
the undertaking, property and assets granted, assigned, transferred, mortgaged and charged pursuant to subparagraphs 2(a) and 2(c) hereof being hereinafter collectively
referred to as the "mortgaged property"; all the undertaking, property and assets assigned, transferred and set over pursuant to subparagraph 2(b) hereof being hereinafter collectively referred
to as the "assigned property"; and the mortgaged property and assigned property being hereinafter collectively referred to as the "secured property". 

30

 

        If
any of the secured property may not be mortgaged, charged or assigned, or if a security interest may not be created therein by the Debtor in favour of the Lenders (because the consent
or approval of a third party or parties is required and such consent or approval has not been obtained or the requirement therefore waived as of the date hereof and if the failure to obtain such
consent or approval renders the mortgage, charge, assignment or security interest hereunder invalid and/or unenforceable or because rights appurtenant to the secured property would not, as a matter of
law, pass to the Lenders as an incidence of the mortgages, charges, assignments or security interests made pursuant to this Debenture) the Debtor shall hold such secured property and all benefits
derived thereunder in trust for the Lenders. The Debtor shall, at the request and under the direction of the Lenders, in the name of the Debtor, take or cause to be taken all such reasonable action
and do or cause to be done all such reasonable things as are necessary or desirable to preserve such secured property and all benefits to be derived thereunder for the benefit and account of the
Lenders, and the Debtor agrees to pay promptly to the Lenders all monies collected by or paid to the Debtor in respect of such secured property. 

        TO
HAVE AND TO HOLD the secured property and all rights hereby conferred unto the Lenders, their successors and assigns, forever, for the uses and purposes and with the powers and
authorities and subject to the terms and conditions herein set forth. 

	3.
	No
Liability: Except for gross negligence or wilful misconduct, nothing herein contained shall render the Lenders liable to any person for the fulfilment or non-fulfilment
of the covenants, obligations, agreements and undertakings of the Debtor under the assigned property and the Debtor agrees to indemnify and save harmless the Lenders from and against any and all
claims or demands whatsoever of any person arising from or out of the assigned property.

	4.
	Registration:
The Lenders shall have the right at any time and without notice to cause this Debenture or notice thereof to be registered or filed in any place or office where the
Lenders or their counsel deem advisable or necessary, acting reasonably.

	5.
	Agreements:
The Debtor agrees with the Lenders that it will sign any document and take any further action at the Lenders' expense as the Lenders may think necessary, acting reasonably,
in order to carry out the intention of this Debenture.

	6.
	Maintenance
of Records: The Debtor agrees to maintain proper records and books of account with respect to the revenue of and expenditures arising from or out of the secured property in
accordance with industry practices and will permit the Lenders or any person appointed by the Lenders for that purpose to examine such books at all reasonable times and to make copies of extracts
therefrom and will give the Lenders all information with regard to the incomings and outgoings of the secured property which the Lenders may reasonably request in writing.

	7.
	Enforceability:
The security hereby constituted shall become enforceable upon the occurrence of a default in payment by the Borrower under the Promissory Note (herein an "Event of
Default") and for so long as such Event of Default shall continue.

	8.
	Attorney
of the Debtor: Upon and during an Event of Default the Lenders as attorney or agent of the Debtor and in its name, may, at any time and from time to time after the security
constituted hereby becomes enforceable, exercise, acting reasonably, any of the rights, powers, authority and discretions which under the terms of any of the assigned property could be exercised by
the Debtor with respect to such assigned property.

	9.
	Performance
Until Default: Until the occurrence of an Event of Default, the Debtor shall be entitled to deal with the secured property and enforce all of the benefits, advantages and
powers thereunder as if this Debenture had not been made. Upon the occurrence of an Event of Default, the Lenders may, but shall not be obligated to, exercise all rights, powers, authority and
discretions of the Debtor in respect of the secured property in its place and stead.

	10.
	Further
Encumbrances: The Debtor covenants that:

	(a)
	it
shall not sell, transfer, assign, convey or otherwise dispose of the Lands (except that leasing all or any part of the Lands is specifically permitted hereunder) or any part
thereof, where such part exceeds 5% of the total acreage of the Lands, without the prior written consent of the Lenders; which consent may 

31

 

be
unreasonably and arbitrarily withheld (other than a sale, transfer or other disposition to Magna Entertainment Corp. ("MEC"), an affiliate of MEC or an affiliate of Ontario Racing Inc.,
which sale, transfer or other disposition shall not require the consent of the Lenders); and 

	(b)
	it
shall not create, issue, incur, assume, permit or have outstanding (except to the Lenders) any mortgage, charge, lien or other encumbrance on any part of the secured property which
ranks ahead of or pari passu with this Debenture, other than permitted encumbrances set out in Schedule "B" hereto.

	11.
	Waiver
of Default: The Lenders may by written notice to the Debtor waive any default of the Debtor on such terms and conditions as the Lenders may determine, but no such waiver shall
be taken to affect any subsequent default or the rights resulting therefrom.

	12.
	Remedies:
Upon the occurrence of any Event of Default and so long as any Event of Default subsists, the Lenders may realize upon the security constituted hereby and enforce their
rights in the following manner:

	(a)
	immediately
take possession of all of the secured property or any part or parts thereof with power, among other things, to exclude the Debtor, to preserve and maintain the secured
property, complete the construction of any buildings or other improvements on the Lands which are in the course of construction, make additions and replacements to the secured property, to receive
rents, income and profits of all kinds and pay therefrom all reasonable expenses of maintaining, preserving and protecting and operating the secured property and all charges, payment of which may be
necessary or desirable, acting reasonably, to preserve or protect the secured property, and enjoy and exercise all powers necessary, acting reasonably, to the performance of all functions made
necessary or advisable by possession;

	(b)
	take
proceedings in any court of competent jurisdiction for the appointment of a receiver (which term as used in this Debenture includes a manager and a receiver and manager) of all
or any part of the secured property;

	(c)
	take
proceedings in any court of competent jurisdiction for sale or foreclosure of all or any part of the secured property;

	(d)
	file
proofs of claim and other documents to establish its claims in any proceedings relative to the Debtor;

	(e)
	with
or without taking possession, take any action or proceedings to enforce the performance of any covenant in favour of the Debtor contained in any of the assigned property;

	(f)
	whether
or not the Lenders have taken possession of the secured property or any of it, sell, lease or otherwise dispose thereof in accordance with applicable laws, either as a whole
or in separate parcels, at public auction, by public tender or by private sale, with or without notice, advertising or other formality, all of which is hereby waived by the Debtor, either for cash or
upon credit, and upon such terms and conditions as the Lenders may reasonably determine; and the Lenders may also buy at an auction and rescind or vary any contract of sale, lease, grant, conveyance
or other disposition that may be entered into and resell, release or redispose of the secured property with or under any of the powers conferred hereunder and may stop, suspend or adjourn any sale,
lease or other disposition from time to time and hold the same as adjourned without further notice; and the Lenders may execute and deliver to any purchaser of the secured property or any part
thereof, good and sufficient deeds and documents for the same, the Lenders being irrevocably constituted the attorney of the Debtor for the purpose of making any such sale, lease or other disposition
and executing such deeds and documents;

	(g)
	by
instrument in writing appoint any person to be a receiver (which term shall include a manager and a receiver and manager) of the secured property or of any part thereof and may
remove any receiver so appointed and appoint another in his stead; and any such receiver so appointed shall be at all times the agent of the Debtor and not the agent of the Lenders and the Debtor
shall be responsible for the 

32

 

receiver's
acts or defaults and for its remuneration; any such receiver shall have power, acting reasonably: 

	(i)
	to
take possession of and collect and get in all or any part of the secured property or any part thereof and, for that purpose only, to take proceedings in the name of
the Debtor or otherwise and to make any arrangement or compromise;

	(ii)
	to
improve, maintain, manage, operate, repair, renew, amend, complete, replace and restore the secured property;

	(iii)
	to
carry out negotiations for leases and grant options to lease, agree to lease and lease the whole or any part of the secured property until the same is fully sold or
leased, with only such notice as is required by law and in such manner as may seem advisable to the receiver, acting reasonably, and to affect any such negotiation, option to lease, agreement to lease
or lease in the name and on behalf of the Debtor or otherwise;

	(iv)
	to
surrender or accept the surrender of any Lease;

	(v)
	to
amend, negotiate, terminate or modify any agreement (including, without limitation, the Leases) relating to the secured property;

	(vi)
	to
rescind or vary any contract or agreement of sale or lease;

	(vii)
	to
make any stipulation as to title or conveyance or commencement of title;

	(viii)
	to
execute and prosecute all suits, proceedings and actions in the name of the Debtor or otherwise, defend all suits, proceedings and actions against the Debtor or
the receiver, appear in and conduct the prosecution and defence of any suit, proceeding or action which the receiver considers necessary, acting reasonably, for the reasonable and proper protection of
the secured property;

	(ix)
	to
carry on or concur in carrying on all or any part of the business of the Debtor relating to the secured property;

	(x)
	to
borrow or raise money on the security of the secured property or any part thereof in priority to this Debenture or otherwise, for the purpose of the maintenance,
preservation or protection of the secured property or any part thereof or for carrying on all or any part of the business of the Debtor relating to the secured property, in either case which is
reasonably necessary, and in so doing the receiver may issue certificates called "Receiver's Certificates". Receiver's Certificates may be payable either to order or to bearer and may be payable at
such time or times as the receiver may think expedient and shall bear interest at reasonable rates as shall be stated therein and the amounts from time to time payable by virtue of Receiver's
Certificates shall form a charge upon the secured property in priority to the charge of this Debenture;

	(xi)
	whether
or not the receiver has taken possession of the secured property or any of it, to sell, lease or otherwise dispose or concur in a disposition of the whole or
any part of the secured property in accordance with applicable laws, at public auction, by public tender or by private sale, with only such notice as may be required by law, either for cash or upon
credit, at such time and upon such terms and conditions as the receiver may determine, acting reasonably;

	(xii)
	to
exercise any of the rights and remedies which may be exercised by the Lenders against the Debtor or the secured property; and

	(xiii)
	to
make any arrangement or compromise with respect to the secured property which the receiver shall, acting reasonably, think expedient in the interest of the
Lenders;

	(h)
	act
as attorney for the Debtor (and the Debtor grants to the Lenders its irrevocable power of attorney, which power shall be binding upon the Debtor and all third parties) to execute
and deliver on behalf of the Debtor all documents and instruments as may be necessary to effect the transfers and procedures contemplated in this Section 12;

	(i)
	amend,
negotiate, terminate or modify any Lease or other agreement relating to the Lands; and 

33

 

	(j)
	exercise
or pursue any other remedy or proceeding authorized or permitted hereby or by law or equity. 

        Such
remedies may be exercised from time to time separately or in combination. Nothing in this Debenture shall curtail or limit the remedies of the Lenders as permitted by any law or
statute to a mortgagee or creditor, all such remedies being cumulative and in addition to and not in substitution for any other rights or remedies of the Lenders however created. 

	13.
	Limitation
of Liability: The Lenders shall not, nor shall any receiver appointed by them, be responsible or liable for any debts contracted by it or for salaries during any period
wherein the Lenders or such receiver shall manage the secured property upon or after entry, as herein provided, nor shall the Lenders nor the receiver be liable to account as mortgagee in possession
or for anything except actual receipts or be liable for any loss on realization or for any default or omission for which a mortgagee in possession might be liable, except in the case of gross
negligence or wilful misconduct.

	14.
	Lenders
Not Obliged to Realize Security: The Lenders shall not be liable or accountable for any failure to collect, enforce or realize any intangible and shall not be bound to
institute proceedings for the purpose of collecting, enforcing or realizing the same for the purpose of preserving any right of the Lenders, the Debtor or any other person, firm or corporation in
respect of the same, and shall have no obligation to take any steps to preserve rights against prior parties to any secured property and whether or not in the Lender's possession and shall not be
liable or accountable for any delay in or failure to do so, except in the case of gross negligence or wilful misconduct.

	15.
	Attorney
on Sale: In case of any sale hereunder, whether by the Lenders, or by a receiver, or under judicial proceedings, the Debtor agrees that it will, forthwith upon request,
execute and deliver to the purchaser such deeds, assurances, conveyances and receipts as may be necessary to transfer good title to the secured property sold, and if in case of any such sale the
Debtor shall fail to do so forthwith after request, the Lenders or such receiver may execute and deliver to the purchaser of the secured property, or any part thereof, such deeds, assurances,
conveyances and receipts as may be necessary to transfer good and sufficient title to the same, the Lenders or, if appointed, the receiver being hereby irrevocably constituted the attorney of the
Debtor for the purpose of making such sale and executing all deeds, assurances, conveyances, receipts and documents appertaining thereto and any such sale shall be a perpetual bar both at law and in
equity against the Debtor and all persons claiming an interest in the secured property sold or any part thereof by, from, through or under the Debtor.

	16.
	Protection
of Third Parties: No person dealing with the Lenders or its agents shall be concerned to inquire whether the powers which the Lenders is purporting to exercise have become
exercisable, or whether any money remains due upon the security of this Debenture, or as to the necessity or expediency of the stipulations and conditions subject to which any sale shall be made, or
otherwise as to the propriety or regularity of any sale or any other dealing by the Lenders with the secured property or any part thereof or to see to the application of any money paid to the Lenders;
and, in the absence of fraud on the part of such person, such dealings shall be deemed, insofar as regards the safety and protection of such person, to be within the powers hereby conferred and to be
valid and effectual accordingly.

	17.
	Judgment:
Subject to the provisions of Sections 36 and 38 hereof, neither the taking of any judgment nor the exercise of any power of seizure or sale shall operate to
extinguish the liabilities of the Debtor to make payment of the principal hereby secured or interest thereon or other moneys owing hereunder nor shall such operate as a merger of any covenant or
affect the right of the Lenders to interest at the rate provided for herein, and any judgment shall bear interest at such rate.

	18.
	Charge
Valid Irrespective of Advances: The charges hereby created shall be and be deemed to be effective and shall have effect whether or not the moneys hereby secured or any part
thereof shall be advanced before or after or at the same time as the issue of this Debenture or before or after or upon the date of the execution of this Debenture.

	19.
	After
Acquired Property: The Debtor covenants and agrees that if and to the extent that any of its right, title, estate and interest in any of the secured property is not acquired
until after delivery of this Debenture, this Debenture shall nonetheless apply thereto and the security interest of the Lenders hereby created shall attach to such secured property at the same time as
the Debtor acquires rights therein, without the necessity 

34

 

of
any further mortgage, charge, pledge, assignment or assurance and thereafter the security interests created hereby in respect of such secured property shall be absolute, fixed and specific. 

	20.
	Attachment:
The Debtor hereby acknowledges and agrees that there is no agreement between the parties hereto, express or implied, to postpone the attachment of the security interests
created hereby.

	21.
	Severability:
If any term, covenant, obligation or agreement contained in this Debenture, or the application thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Debenture or the application of such term, covenant, obligation or agreement to persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term, covenant, obligation or agreement herein contained shall be separately valid and enforceable to the fullest extent permitted by law.

	22.
	Further
Assurances: The Debtor hereby covenants and agrees that it will at all times, at the Lenders sole cost and expense, do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered all and singular such further acts, deeds, mortgages, charges, assignments and assurances in law, in each case consistent with the terms of this Debenture, as the
Lenders may require, acting reasonably, for the better mortgaging, charging, pledging and assigning unto the Lenders the property and assets hereby mortgaged, charged, pledged or assigned or intended
so to be or which the Debtor may hereafter become bound to mortgage, charge, pledge or assign in favour of the Lenders and for the better accomplishing, effectuating and perfecting of this Debenture,
including but not limiting the generality of the foregoing, such as may be required in order to register or file this Debenture or perfect the registration of this Debenture wherever the Lenders,
acting reasonably, consider that the same or notice of the same ought to be registered or filed.

	23.
	Notice:
Any notice or other communication which may be or is required to be given or made pursuant to this Debenture shall be deemed to have been sufficiently and effectively given if
signed by or on behalf of the party giving notice and personally delivered, mailed by prepaid registered mail or sent by facsimile machine to the party for which it is intended at its address as
follows: 

	 
	 	 
	 	 

	(a)	 	if to the Debtor at:	 	 
	

 	
 	

337 Magna Dr.

Aurora, Ont.

L4G 7K2	
 	

 
	

 	
 	

Attention:    Chief Executive Officer

Facsimile No.: 905-726-7167	
 	

 
	

 	
 	

And	
 	

 
	

 	
 	

Attention:    General Counsel

Facsimile No: 905-726-2585	
 	

 
	

(b)	
 	

if to the Lenders, at:

626 Harvest Road

Dundas, Ontario

L9H 5K7	
 	

 
	

 	
 	

Attention:    Charles Juravinski and Margaret Juravinski	
 	

 
	

 	
 	

With a copy to:

Ross & McBride LLP

1 King St. West

P.O. Box 907

Hamilton, Ontario

L8N 3P6	
 	

 
	

 	
 	

Attention:

Facsimile #:	
 	

Paul D. Paradis

905-526-0732

35

 

        Any
notice or communication which may or is required to be given or made shall be made or given as herein provided or to such other address or facsimile number or in care of such other
person as a party may from time to time advise to the other party hereto by notice in writing as aforesaid and any such notice shall not be deemed to be received until actual receipt thereof by the
party to whom such notice is personally delivered or, if sent by facsimile machine shall be deemed to be received on the business day next following the date of transmission or, if sent by mail as
aforesaid, shall be deemed to be received on the fifth business day following the date of such mailing. 

        If
at the date of any such mailing or on or before the fifth business day after such mailing there is a general interruption in the operation of the postal service in Canada which does
or is likely to delay the delivery by mail of such notice or communication, such notice or communication shall, to the extent possible, be delivered personally or sent by facsimile. 

	24.
	Continuing
and Additional Security: This Debenture shall not be considered as satisfied or discharged by an intermediate payment of any part or parts of the Guaranteed Obligations but
shall constitute and be a continuing security to the Lenders that will remain in force and effect until discharged by the Lenders and shall be in addition to and not in substitution for any other
security now or hereafter held by the Lenders.

	25.
	Transferable:
This Debenture shall not be transferable by the Lenders.

	26.
	Governing
Law: This Debenture shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and shall be treated
in all respects as an Ontario contract.

	27.
	Modifications:
No amendment, supplement, modification, consent or waiver shall be effective unless executed in writing and signed by the party or parties to be bound thereby.

	28.
	Currency
of Payment: The principal, interest and other moneys payable hereunder shall be paid in lawful money of Canada.

	29.
	Successors:
This Debenture and all its provisions shall enure to the benefit of the Lenders, and shall be binding upon the Debtor and its successors and assigns.

	30.
	Waiver:
No consent or waiver by the Lenders to or of any breach or default by the Debtor in the performance of its obligations hereunder shall be deemed or construed to be a consent
or waiver to or of any other breach or default in the performance by the Debtor hereunder. Failure on the part of the Lenders to complain of any act or failure to act of the Debtor or to declare the
Debtor in default, irrespective of how long such failure continues shall not constitute a waiver by the Lenders of its rights hereunder.

	31.
	Rights
to Cure: If the Debtor fails to do anything hereby required to be done by it, the Lenders, may, but shall not be obliged to, do such thing and all sums thereby reasonably
expended by the Lenders shall be payable forthwith by the Debtor, together with interest at the rate as provided for herein from the date of incurring such expense, shall be secured hereby and shall
have the benefit of the lien hereby created, but no such performance by the Lenders shall be deemed to relieve the Debtor from any default hereunder.

	32.
	Interpretation
Not Affected by Headings, Etc.: Grammatical variations of any terms defined herein have similar meanings; words importing the singular number shall include the plural
and vice versa; words importing the masculine gender shall include the feminine and neuter genders. The division of this Debenture into separate paragraphs and subparagraphs, and the insertion of
headings and marginal notes and references are for convenience of reference only and shall not affect the construction or interpretation of this Debenture.

	33.
	Time
of Essence: Time shall be of the essence of this Debenture.

	34.
	Copy:
The Debtor acknowledges receipt of a copy hereof.

	35.
	Delay,
Releases, Partial Discharges, Waivers and Amendments: The Lenders may release others from any liability to pay all or any part of the Obligations Secured without releasing the
Debtor or the Borrower. The Lenders may release its interest under this Debenture in all or any part of the secured property (or any other collateral) whether or not the Lenders receive any value and
shall be accountable to the Debtor and 

36

 

the
Borrower only for monies which the Lenders actually receive. If the Lenders release their interest in part of the secured property, the remainder of the secured property shall continue to secure
the Obligations Secured and the Debtor's obligations under this Debenture will continue unchanged. The Lenders may grant extensions of time or other indulgences, take and give up securities, accept
compositions and proposals, grant releases and discharges and otherwise deal with the Debtor and/or the Borrower and other persons (including, without limitation, any person to whom all or any part of
the secured property is transferred) and with any securities as the Lenders may see fit without affecting any of the Lenders' rights or remedies (herein or otherwise) or the Debtor's liability under
this Debenture (including, without limitation, the Debtor's liability to pay the Obligations Secured). The Lenders may delay enforcing any of its rights and may waive any breach of the Debtor's
obligations under this Debenture or any such document without affecting the Lenders' rights in respect of any other existing breach or any subsequent breach of the same or a different nature. No such
waiver shall be effective unless made in writing and signed by one (or both) of the Lenders 

	36.
	Debenture
Not a Substitute for Other Security: This Debenture is in addition to and not in substitution for any security now or later held by the Lenders for all or any part of the
Guaranteed Obligations. The Debtor agrees that this Debenture shall not create any merger or discharge of any part of the Guaranteed Obligations or any other debt owing to the Lenders or of any lien,
bond, promissory note, bill of exchange or other security now or later held by the Lenders (whether from the Debtor or any other person). The Debtor further agrees that this Debenture shall not in any
way affect any other security now or later held by the Lenders for all or any part of the Guaranteed Obligations or the liability of any endorser or any other person, or any of the Lenders' remedies,
in respect of any such lien, bond, bill of exchange, promissory note or other security, or any renewal thereof, held by the Lenders for or on account of all or any part of the Guaranteed Obligations.

	37.
	Paramountcy
of Promissory Note: This Debenture is entered into pursuant to the terms of the Promissory Note and is subject to the terms thereof. Notwithstanding anything herein, in
the event of any inconsistency between, and/or conflict with, the terms of this Debenture and the terms of the Promissory Note, the provisions of the Promissory Note shall prevail and the rights and
obligations hereunder shall be construed in accordance with the provisions of the Promissory Note.

	38.
	Termination:
The Lenders covenant and agree with the Debtor that, upon payment in full of the Obligations Secured and cancellation of the Promissory Note, this Debenture shall be and
become fully ended and terminated and all right, title, estate, interest and benefit of the Debtor in, to, under or in respect of the secured property shall revert to the Debtor and all covenants and
agreements of the Debtor hereunder shall be at an end and the Lenders shall, at the Debtor's expense, promptly execute such discharges, re-assignments and other instruments and give such
notifications or assurances as may be necessary to fully release, cancel and discharge this Debenture in the circumstances. 

37

 

        IN
WITNESS WHEREOF the Debtor has duly executed this Debenture as of the date first above written. 

	 	 	FLAMBORO DOWNS HOLDINGS LIMITED
	

 	
 	

Per:	

 Name: Andrew Gaughan

Title: President
 
	

 	
 	

I have authority to bind the Corporation.

	 
	 	 

	
 Witness:

Name:	 	
CHARLES JURAVINSKI
	
 Witness:

Name:	 	
MARGARET JURAVINSKI

38

 
 
 

SCHEDULE A
  Legal Description of the Lands    
    

        Firstly: 

        PIN
17549-0023 (LT) being Part of Lot 3, Concession 3, West Flamborough, as in VM194726; S/T WF17909, Flamborough, City of Hamilton 

        Secondly: 

        PIN
17549-0025 (LT) being Part of Lots 3 and 4, Concession 3, West Flamborough, as in AB345248, Part of Lot 3, Concession 3, West Flamborough, as in CD199166 &
CD338882; and Part of Lot 4, Concession 3, West Flamborough, designated as Part 1 on 62R-2480; S/T WF17909, WF17912, Flamborough, City of Hamilton 

39

 
 
 

SCHEDULE B
  PERMITTED ENCUMBRANCES    
    

	1.
	Charge/Mortgage
registered as Instrument No. CD176204 on February 16, 1994 in favour of Margaret Juravinski (as assigned by Instrument No. WE4337 registered on
September 19, 2000, Instrument No. WE19885 registered on January 5, 2001, Instrument No. WE30418 registered on April 3, 2001) and filed under the Personal
Property Security Act of Ontario (the "PPSA") as File No. 076508811 (Registration Numbers 19940216 1315 0017 0552 and 19981127 1210 0017 6225).

	2.
	Charge/Mortgage
registered as Instrument No. CD176205 on February 16, 1994 in favour of Charles Juravinski (as assigned by Instrument No. WE4338 registered on
September 19, 2000, Instrument No. WE19884 registered on January 5, 2001, Instrument No. WE30417 registered on April 3, 2001) and filed under the PPSA as File No. 076508802
(Registration Numbers 19940216 1315 0017 0553 and 19981127 1210 0017 6224).

	3.
	Debenture
in favour of Margaret Juravinski and Charles Juravinski securing the principal amount of $51,694,000 made as of even date hereof.

	4.
	PPSA
File No. 852537582 (Registration No. 19990629 1404 1715 3395) in favour of Xerox Canada Ltd. against "Equipment" and "Other" in relation to personal property
lease dated June 18, 1999.

	5.
	Instrument
No. WE13181 registered November 17, 2000 being a Claim for Lien by Spadas Decorating & Painting Ltd. claiming the amount of $12,211.84; Certificate of
Action registered as No. WE18726 on December 20, 2000.

	6.
	Instrument
No. WE13332 registered November 17, 2000 being a Claim for Lien by Zinc Construction Corporation claiming the amount of $1,270,496.45; Certificate of Action
registered as No. WE19639 on January 3, 2001.

	7.
	Instrument
No. WE13470 registered November 20, 2000 being a Claim for Lien by Zet Master Limited claiming the amount of $103,913.24; Certificate of Action registered as No.
WE20986 on January 16, 2001.

	8.
	Instrument
No. WE13614 registered November 20, 2000 being a Claim for Lien by Mayfair Electric Ltd. claiming the amount of $476,027.97; Certificate of Action registered
as No. WE18891 on December 21, 2000.

	9.
	Instrument
No. WE13837 registered November 22, 2000 being a Claim for Lien by Grainger Glass Inc. claiming the amount of $33,267.83.

	10.
	Instrument
No. WE13893 registered November 22, 2000 being a Claim for Lien by General Sprinklers Inc. claiming the amount of $21,310.28.

	11.
	Instrument
No. WE14521 registered November 27, 2000 being a Claim for Lien by Branair Ltd. claiming the amount of $312,511.35; Certificate of Action registered as No.
WE18852 on December 21, 2000.

	12.
	Instrument
No. WE32327 registered April 20, 2001 being a Claim for Lien by Paul Steelman, Ltd. claiming the amount of $516,376.65; Certificate of Action registered as
No. WE39013 on June 4, 2001.

	13.
	Site
Plan Agreement registered on June 20, 1973 as Instrument No. AB297350 between Flamboro Downs Holdings Limited, Ray Connell and Charles Juravinski and The Corporation of
the Township of West Flamborough.

	14.
	Agreement
registered on July 10, 1973 as Instrument No. AB300610 between Her Majesty the Queen and Flamboro Downs Holdings Limited.

	15.
	Site
Plan Agreement registered on September 10, 1999 as Instrument No. LT569691 between The Corporation of The Town of Flamborough and Flamboro Downs Holdings Limited which
amends Instrument No. AB297350. 

40

 
	16.
	Right-of-Way
set out in the Agreement registered on December 18, 1951 as Instrument No. WF17909 in favour of Imperial Oil Limited for which a Notice of
Claim was registered on October 28, 1985 as Instrument No. CD331366.

	17.
	Right-of-Way
set out in the Agreement registered on December 18, 1951 as Instrument No. WF17912 in favour of Imperial Oil Limited for which a Notice of
Claim was registered on October 28, 1985 as Instrument No. CD331367.

	18.
	Restrictive
Covenant set out in the Deed of Land registered on April 4, 1956 as Instrument No. WF20588Z pertaining to the maintenance of a line fence.

	19.
	By-law
No. 2214 registered on August 30, 1961 as Instrument No. HL173791 designating the Property as an area of subdivision control.

	20.
	Unexecuted
Agreement between James Taylor and Flamboro Downs Holdings Limited and a copy of a letter dated September 15, 2000 from Flamboro Downs Holdings Limited to James
Taylor.

	21.
	Residential
month-to-month tenancies set out in list of Flamboro Downs Rental Properties and a copy of a letter dated October 20, 1997 of Flamboro Downs
Holdings Limited to Mr. and Mrs. Mike Saftic with respect to Rivest Residence.

	22.
	Unexecuted
Agreement dated May 15, 1985, between Wilson's Tack & Veterinarian Supplies Limited and Flamboro Downs Holdings Ltd.

	23.
	Agreement
dated January 1, 1999 between The Ontario Harness Horse Association and Flamboro Downs Holdings Limited.

	24.
	The
reservations, limitations, provisos and conditions expressed in the grant from the Crown, as varied by statute.

	25.
	The
rights of any person who would, but for the Land Titles Act, be entitled to the Property or any part of them through length or
adverse possession, prescription, misdescription or boundaries settled by convention.

	26.
	Any
unregistered leases to which Subsection 70(2) of the Registry Act, R.S.O. 1990 applies (where there is actual possession
under a lease which has a term not exceeding seven years).

	27.
	Any
matters which might be revealed by (a) an up-to-date survey of the Property; or (b) any errors in the existing Plan of Survey dated
November 23, 2000 prepared by A.T. McLaren Limited, Ontario Land Surveyors; or (c) an inspection and/or site investigation of the Property. 

The
encroachments revealed by the Plan of Survey dated November 23, 2000 prepared by A. T. McLaren Limited, Ontario Land Surveyors. In this regard, there are a few fence encroachments and, in
particular, the said Plan of Survey reveals a twelve (12) foot discrepancy between the legal description of the adjoining property along the easterly boundary of the Property as set out in PIN
17549-0026 and the legal description of the portion of the Property set out in the Deeds of Land to Flamboro Downs Holdings
Limited registered as Instrument Nos.199166 and 345248. There is a possibility that the lands to the east may have a claim to the twelve (12) foot strip, however, it may also be argued that the
discrepancy occurred only on paper and that no possession of the twelve (12) foot strip has attached. 

	28.
	Any
lien arising with respect to deficiencies in holdbacks, if any, required to be retained by the owner of the Property pursuant to Part IV of the  Construction Lien Act (Ontario).

	29.
	Any
charges or levies under the Assessment Act (Ontario) which are not yet due and payable.

	30.
	Any
unregistered interest in the Property (including without limitation, leases, claims, agreements of purchase and sale, options and other encumbrances) of which the Lenders have
actual notice.

	31.
	Any
claim or interest, by possession, continuous use or improvements, which a third party may have acquired in respect of the Property.

	32.
	Any
unregistered easements regarding the provision of utilities to the Property.

	33.
	Prescribed
Lottery Scheme Site Holder Facilities Agreement between the Ontario Lottery Corporation (now OLGC) and Flamboro Downs Holdings Limited dated May 3, 1999. 

41

QuickLinks

DEMAND DEBENTURE

SCHEDULE A Legal Description of the Lands

SCHEDULE B PERMITTED ENCUMBRANCESQuickLinks
 -- Click here to rapidly navigate through this document

        Exhibit 10.3

 
 

GUARANTEE    
    

GUARANTEE
AGREEMENT made the 18th day of October, 2002 by FLAMBORO DOWNS HOLDINGS LIMITED, a corporation incorporated under the laws of
the Province of Ontario (the "Guarantor") to and in favour of CHARLES JURAVINSKI and MARGARET JURAVINSKI, on joint account, with right of survivorship,
of the City of Hamilton, in the Province of Ontario (collectively, the "Creditor"). 

RECITALS:

	A.
	Pursuant
to a share purchase agreement made as of February 5, 2002 among the Creditor, the Guarantor, Flamboro Downs Limited and 1180554 Ontario Limited ("1180554") (the
"Original Share Purchase Agreement"), the Creditor agreed to sell, assign and transfer to 1180554 and 1180554 agreed to purchase the Purchased Shares
and the Business of the Acquired Companies and the property and assets owned or leased by the Acquired Companies, all as more particularly defined and set forth in the Original Share Purchase
Agreement;

	B.
	The
Original Share Purchase Agreement was amended by an amending agreement among the parties dated March 15, 2002 (the "First Amending
Agreement"), an amending agreement among the parties dated March 28, 2002 (the "Second Amending Agreement"), and a
waiver, acknowledgment and amending agreement among the parties made as of May 3, 2002 (the "Third Amending Agreement");

	C.
	The
Original Share Purchase Agreement was further amended by an acknowledgement and amending agreement made as of June 4, 2002 among the parties to the Original Share Purchase
Agreement and Ontario Racing Inc. (the "Purchaser") and Magna Entertainment Corp. (the "Fourth Amending Agreement"), and a letter amending
agreement dated October 9, 2002 (the "Fifth Amending Agreement"), (the Original Share Purchase Agreement, as so amended by the First Amending
Agreement, the Second Amending Agreement, the Third Amending Agreement, the Fourth Amending Agreement, and the Fifth Amending Agreement is hereinafter referred to as the "Share
Purchase Agreement");

	D.
	Capitalized
terms used but not defined herein shall have the respective meanings ascribed to them in the Share Purchase Agreement.

	E.
	Pursuant
to the Share Purchase Agreement, a portion of the Purchase Price for the Purchased Shares was satisfied on Closing by delivery by the Purchaser to the Creditor of a promissory
note dated the 18th day of October, 2002 (the "Promissory Note"); 

 

	F.
	Pursuant
to the Share Purchase Agreement and the Promissory Note, the Guarantor is required to unconditionally guarantee the due and punctual payment and performance of all debts and
liabilities, present or future, direct or indirect, absolute or contingent, matured or not, at any time owing by the Purchaser to the Creditor arising out of or relating to the Promissory Note;

	G.
	Accordingly,
the Guarantor enters into this Guarantee Agreement for the purpose of unconditionally guaranteeing the due and punctual payment and performance of the obligations of the
Purchaser to and in favour of the Creditor; 

NOW
THEREFORE IN CONSIDERATION of the sum of TEN DOLLARS ($10.00) and other good and valuable consideration as set out in the Share Purchase Agreement, the receipt and sufficiency of which are
acknowledged, the Guarantor agrees with the Creditor as follows: 

1.     Guaranteed Obligations  

The
Guarantor irrevocably and unconditionally guarantees the due and punctual payment and performance of all debts and liabilities, present or future, direct or indirect, absolute or contingent,
matured or not, at any time owing by the Purchaser to the Creditor arising out of or relating to the Promissory Note, as amended, modified, supplemented, restated or replaced from time to time,
including all reasonable legal and other costs, charges and expenses payable thereunder (collectively, the "Guaranteed Obligations"); and if the Purchaser shall at any time fail to fully and
faithfully perform and discharge the Guaranteed Obligations, the Guarantor shall itself perform and discharge the Guaranteed Obligations. The foregoing covenant and obligation of the Guarantor is
absolute, present and continuing and is in no way conditional or contingent on any event, circumstance, action or omission which might in any way discharge a guarantor or surety. 

2.     Right to Immediate Payment  

The
Creditor shall not be bound to seek or exhaust its recourse against the Purchaser or any other persons or to realize on any security it may hold in respect of the Guaranteed Obligations before
being entitled to payment from the Guarantor under this Agreement and the Guarantor renounces all benefits of discussion and division. 

3.     Payment on Demand  

The
liability of the Guarantor shall be payable immediately upon written demand showing evidence that the Purchaser is in default under the Promissory Note and such demand shall be conclusively deemed
to have been effectually made and given when an envelope containing such demand, addressed to the Guarantor at the address of the Guarantor set out below, or at such other address as the Guarantor may
from time to time designate to the Creditor in writing, is posted by registered mail, postage prepaid, or delivered to the Guarantor. 

2

 

        Address
of Guarantor: 

        337
Magna Drive

        Aurora,
Ont.

        L4G 7K2 

        Attention:
General Counsel and Chief Executive Officer 

4.     Statement of Accounts  

Any
account settled or stated by or between the Creditor and the Purchaser, or if any such account has not been so stated or settled prior to any demand for payment, any account stated by the Creditor
shall, in the absence of manifest error, be accepted by the Guarantor as conclusive evidence that the amount of the Guaranteed Obligations so settled or stated is due and payable by the Purchaser to
the Creditor. 

5.     Liability Absolute  

The
liability of the Guarantor shall be absolute and unconditional irrespective of: 

	(a)
	the
invalidity, unenforceability or illegality, in whole or in part, of any agreements, instruments or other documents held by the Creditor to create, represent or evidence any
Guaranteed Obligations;

	(b)
	any
defence, counterclaim or right of set-off available to the Purchaser, save and except for such right or rights of set-off available to the Purchaser as
specifically provided for in the Promissory Note;

	(c)
	any
change in the name, objects, capital, constating documents or by-laws of the Purchaser;

	(d)
	any
amalgamation, merger or re-organization of the Purchaser or, if a partnership, of the partnership, including, without limitation, by reason of the death, retirement or
admission for membership of any partners (in which case this Agreement shall apply to the corporation or partnership, as the case may be, resulting or continuing therefrom); or

	(e)
	any
other circumstance which might otherwise constitute, in whole or in part, a defence available to, or a discharge of, the Guarantor, the Purchaser or any other persons, firms or
corporations in respect of the Guaranteed Obligations or the liability of the Guarantor. 

3

 

6.     Continuing Nature and Reinstatement  

This
Agreement is a continuing guarantee and shall apply to and secure payment of all Guaranteed Obligations and any ultimate unpaid balance thereof. This Agreement shall be reinstated if at any time
any payment of any Guaranteed Obligation is rescinded or must otherwise be returned by the Creditor upon the insolvency, bankruptcy or reorganization of the Purchaser or for any other reason
whatsoever, all as though such payment had not been made. 

7.     Liquidation, Bankruptcy, etc.  

In
the event of any liquidation, winding up or bankruptcy of the Purchaser (whether voluntary or compulsory) or in the event that the Purchaser shall make a bulk sale of any of its assets within the
bulk transfer provisions of any applicable legislation or any composition with creditors or scheme of arrangement, the Creditor shall have the right to rank in priority to the Guarantor for its claim
in respect of the Guaranteed Obligations and to receive all dividends or other payments in respect thereof until its claim has been paid in full, all without prejudice to its claim against the
Guarantor who shall continue to be liable for any remaining unpaid balance of the Guaranteed Obligations. In the event of any valuation or retention by the Creditor of any securities, such valuation
or retention shall not, as between the Creditor and the Guarantor, be considered payment, satisfaction or reduction of any Guaranteed Obligations. 

8.     Waiver of Subrogation Rights  

In
the event that the Creditor receives any payments on account of the liability of the Guarantor, the Guarantor shall not have, and waives to the extent required, all rights to claim repayment from
or against the Purchaser and any other guarantors and all rights to be subrogated to any rights of the Creditor, until the Guaranteed Obligations have been paid in full. 

9.     Entire Agreement  

There
are no representations, conditions, agreements or understandings with respect to this Agreement or affecting the liability of the Guarantor other than as set out or referred to in this
Agreement, the Share Purchase Agreement, the Promissory Note and the collateral documents contained or described within the Promissory Note. 

10.   Additional Security  

This
Agreement is in addition and without prejudice to any security of any kind (including, without limitation, any guarantees, whether or not in the same form as this Agreement) held by the Creditor. 

4

 

11.   Further Assurances  

The
Guarantor shall from time to time upon the reasonable request of the Creditor, execute and deliver, under seal or otherwise, all such further agreements, instruments and documents and do all such
further acts and things as the Creditor may reasonably require and as may be reasonably necessary to give effect to the transaction contemplated by this Agreement. 

12.   Successors, Assigns and Governing Law  

This
Agreement shall enure to the benefit of and be binding upon the respective heirs, legal representatives, successors and assigns of the Guarantor and the Creditor and shall be governed by and
construed in accordance with the laws of the Province of Ontario. The Guarantor irrevocably submits to the jurisdiction of the courts of Ontario in any action or proceeding arising out of or relating
to this Agreement but nothing shall prevent the Creditor from enforcing this Agreement or any related judgment against the Guarantor in any other jurisdiction. 

        SIGNED,
SEALED AND DELIVERED at Toronto, Ontario, this 18th day of October, 2002. 

	 	 	FLAMBORO DOWNS HOLDINGS LIMITED
	

 	
 	

Per:	
 	

 Name: Andrew Gaughan

Title: President
	 	 	 	 	I have authority to bind the Corporation.

5

QuickLinks

GUARANTEE

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}]]