CHANGE IN CONTROL SEVERANCE PLAN
This Severance Plan (the "Plan") of Casino Magic Corp. has been
established effective January 23, 1998, to encourage the continued employment
of certain employees up to and beyond the effective date of any Change in
Control, and to alleviate their concerns about a possible loss of employment
following a Change in Control, on the terms and subject to the conditions set
forth herein. This Plan may be referred to as the "Senior Management Change
in Control Severance Plan. " Initially capitalized words and phrases are
defined herein.
1. ELIGIBLE EMPLOYEES.Each Full-time employee of Casino Magic Corp.
or any of its subsidiaries (collectively hereafter, the "Company") on the
Effective Date who (i) is an "officer" as that term is defined under Rule
16a-1 of the Securities Exchange Act of 1934, or (ii) holds the position of
general manager of one of the Company's operating casinos is eligible to
participate in and receive benefits under this Plan, unless such employee
elects to be covered under a contract with the Company that provides for
benefits upon termination of employment (eligible employees are hereafter
referred to as "Participants").
2. TRIGGERING EVENTS.No benefits are provided under this Plan for
Participants who leave the employ of the Company for any reason prior to the
Effective Date. After the Effective Date, no benefits are provided under the
Plan to any Participant unless one of the following events ("Triggering
Events") have occurred with respect to such Participant:
a. The termination of the Participant's employment by the Company
without cause at any time within two years immediately following the Effective
Date, or
b. The Participant's voluntary termination of employment, if Cause does
not then exist for the termination of the Participant's employment by the
Company, for Good Reason at any time within two years immediately following
the Effective Date.
3. OBLIGATIONS OF COMPANY UPON OCCURRENCE OF TRIGGERING EVENt. A
Participant whose employment with the Company is terminated under
circumstances constituting a Triggering Event shall be entitled to the
following:
a. Payment in cash, payable within 30 days of Participant's termination,
of the sum
of (i) accrued Annual Base Salary through the date of termination, (ii) a pro
rata portion of the Annual Bonus, (iii) any compensation previously deferred
by him or cash compensation awarded but payment of which was deferred by the
Company until a subsequent event, including the passage of time, (iv) any
accrued vacation pay, and (v) a multiple, to be established from time-to-time
by the Compensation Committee of the Board of Directors, of Participant's
Annual Base Salary and the Annual Bonus; provided that the amount payable
under this phrase (v) shall not equal or exceed an amount which would be
defined as in "excess parachute payment" under Section 28OG of the Internal
Revenue Code of 1986. If no Compensation Committee has been established, then
the multiple will be established by the Board of Directors. In the event a
Participant holds more than one office with the Company, the Participant will
be entitled to the highest multiple applicable.
b. For twenty-four months from the date of termination as the result of a
Triggering
Event, or such longer period as may be provided by the terms of the
appropriate program, the Company shall continue so-called "fringe benefits" to
the Participant and/or the family of the Participant at least equal to those
which would have been provided in accordance with the programs in effect on
the date of termination if employment of the Participant had not been
terminated or, if more favorable to Participant, as in effect generally at the
time thereafter with respect to other peer employees of the Company and their
families; provided, however, that if the Participant obtains other employment
and is eligible to receive medical or other fringe benefits under another
employer-provided plan, the medical and other fringe benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility; and provided further that if the application
of this sentence would result in material adverse tax consequences to the
Company, the Company may, in lieu thereof, make cash payments to the
Participant sufficient to allow Participant to obtain equivalent coverage for
Participant and the family of Participant (including to the extent necessary
the election of COBRA coverage and the maintenance of duplicate coverage
during any pre-existing condition exclusion), and pay any additional cash
payments necessary so that Participant will receive the full pre-tax benefit
of the cash payments in lieu of coverage. For purposes of determining
eligibility (but not the time of commencement of benefits) of the Participant
for retiree benefits pursuant to such programs, a Participant shall be
considered to have remained employed for two years after the date of
termination and to have retired on the last day of such period.
c. For a period ending on the earlier of six months from the date of
termination or Participant's obtaining other full-time permanent employment,
the Company shall, at its sole expense as incurred, provide the Participant
with outplacement services that are reasonable in scope and cost in relation
to Participant's position.
d. The Company will reimburse Participant for reasonable moving expenses,
not to exceed $25,000, if Participant moves his or her principal residence
with 24 months of termination as the result of a Triggering Event, and
Participant either (i) moves to another state, or (ii) has obtained permanent
full-time employment at a location which requires that Participant travel at
least 15 miles from Participant's principal residence to Participant's new
place of employment, more than the distance traveled from Participant's
principal residence to Participant's work location with the Company
immediately prior to termination.
e. To the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Participant any other amounts or benefits
required to be paid or provided or which he or she is eligible to receive
under any other program.
4. MISCELLANEOUS.
a. Exclusion of Payments for Benefit Determination. Except for payments
made pursuant to subsection 3a, phrases (i) through (iv) of this Plan, no
payment or other benefits provided shall be deemed to be compensation for
purposes of calculating benefits of the Participant under any of the Company's
pension or retirement plans, nor shall such payment or the value of any other
benefit hereunder that is provided solely by virtue of this Plan be included
in calculating such benefits.
b. No Transferability of Benefits. The right to receive benefits under
this Plan shall not be transferred, assigned, pledged or otherwise disposed
of, except by will or under the laws of descent or distribution.
c. Taxes. The Company may withhold from any payment due under this Plan
any taxes required to be withheld under applicable federal, state or local tax
laws or regulations, and the Participant, prior to payment, shall execute and
deliver all applicable withholding election forms required by the Company.
d. Only One Benefit. Participants are not eligible to receive any
additional benefits under any other severance plans applicable to any other
groups of employees. To the extent that any other plans require payment of
benefits, the amount or fair value of such benefits shall reduce any benefits
payable hereunder.
e. Disqualification for Benefits. A Participant will receive no benefits
under this Plan (except as provided under subsection 3a phrases (i), (ii) and
(iv)) under the following circumstances:
(1) The Participant resigns voluntarily without Good
Reason;
(2) The Participant is terminated for Cause;
(3) The Participant is terminated for a condition that would
entitle the Participant to receive benefits under any long-term disability
insurance policy or program of the Company,
f. Death. A Participant will receive no benefits under subsection 3a
phrase (v) of this Plan if termination of Participant's employment with the
Company is the result of his or her death.
5. AMENDMENT, TERMINATION AND LIMITATION.Although the Company
presently intends to continue this Plan unchanged, it reserves the right to
amend or terminate the Plan, and the Compensation Committee may limit or
restrict the benefits provided to any Participant under the Plan, upon six
months notice without the consent of any Participant. However, the Company
may not terminate or reduce the benefits provided for under this Plan after
the Effective Date, or after a definitive agreement is entered into that, if
consummated, would result in a Change in Control, until such time as such
agreement is terminated or abandoned. The power to amend or terminate the
Plan as provided in this Section is reserved to the Board of Directors of
Casino Magic Corp.
6. DEFINITIONS.The definitions provided in this Section shall apply for
purposes of this entire Plan. Other terms are defined elsewhere in this Plan.
"Annual Base Salary" means a salary at least equal to the greater of (i) the
base salary paid in the calendar year immediately preceding the Effective
Date, or (ii) the annualized rate of the base salary which was being paid from
the beginning of the current calendar year through the month immediately
preceding the month in which the Effective Date occurs, or (iii) any greater
annual base salary awarded after the Effective Date.
"Cause" with respect to the termination of a Participant, means:
a. willful and continued failure to perform substantially the duties
assigned to the Participant (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to Participant by the Board of Directors
or the Chief Executive Officer of the Company which specifically identifies
the manner in which it is believed that the Participant has not substantially
performed Participant's duties, or
b. commission by the Participant of fraud, misappropriation, embezzlement
or other acts of dishonesty, alcoholism, drug addiction or dependency, or
conviction for any crime punishable as a felony or as a gross misdemeanor
involving moral turpitude, which actions or occurrences the Board of Directors
determines have a material adverse effect upon the Participant's ability to
perform the duties which have been assumed by or assigned to Participant, or
determines are materially adverse to the interests of the Company, or
c. Participant is found not to be suitable, or a similar finding is
made, by any state gaming commission or similar agency which regulates gaming.
No act or failure to act, on the Participant's part shall be considered
"willful" unless it is done, or omitted to be done, by him in bad faith or
without reasonable belief that his action or omission was in the Company's
best interests. Any act, or failure to act, based upon authority given
pursuant to a resolution of the Board of Directors or instructions of the
Chief Executive Officer or the advice of counsel for the Company shall be
conclusively presumed to be in good faith and in the Company's best interests.
"Change in Control" means
a. the acquisition by any individual, entity or group within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "34 Act") (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 under the 34 Act) of 25 % or more of either (i) the
Casino Magic Corp.'s then outstanding common stock ("Outstanding Stock") or
(ii) the combined voting power of Casino Magic Corp.'s then outstanding voting
securities entitled to vote generally in the election of directors
("Outstanding Voting Securities") other than any acquisition (i) by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any entity controlled by it or (ii) by any entity pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection (c)
of this definition; or
b. Individuals who as of the date hereof constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof; provided, however, that any individual becoming a director subsequent
to the date hereof whose election or nomination was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as a member of the Incumbent Board unless his initial assumption of
office occurs as a result of an actual or threatened contest with respect to
the election or removal of directors or other actual or threatened
solicitation of proxies by or on behalf of a Person other than the Board; or
c. Consummation of a reorganization, merger of consolidation, share
exchange or sale or other disposition of all or substantially all of the
Company's assets (a ."Combination") unless immediately thereafter (i) all or
substantially all of the beneficial owners of the Outstanding Stock and
Outstanding Voting Securities immediately prior to such Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors, as the case may be, of the entity resulting from such
Combination (including, without limitation, any entity which as a result of
such transaction owns the Company or all or substantially all of its assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership immediately prior to such Combination of the
Outstanding Stock and Outstanding Voting Securities, as the case may be, (ii)
no Person (excluding any entity resulting from such Combination or any
employee benefit plan (or related trust) of the Company or such resulting
entity) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the resulting
entity or the combined voting power of the then outstanding voting securities
of such entity except to the extent that such ownership existed prior to the
Combination and (iii) at least a majority of the members of the board of
directors of the resulting entity were members of the Incumbent Board at the
time of the execution of the initial agreement or of the action of the Board
providing for such Combination; or
d. Approval by the shareholders of the Company's complete
liquidation or dissolution.
"Effective Date" means the date of any Change in Control, or, if a
Participant was terminated at the request of a third person in connection with
an anticipated Change in Control, the date immediately prior to such
termination.
"Employment Period Benefits" means (i) a base salary equal to Annual Base
Salary, (ii) an annual bonus at least equal to the average of the bonuses
actually paid to Participant during the last three full years prior to the
Effective Date (annualized if the Participant was not employed by the Company
for the whole of any such fiscal year), (iii) participation in all programs
applicable generally to peer employees, (iv) prompt reimbursement of expenses,
(v) fringe benefits equivalent to those provided peer employees, and (vi) paid
vacation comparable to that provided to peer employees.
"Full-time" means not less than 30 hours per week. For purposes of
eligibility to participate in this Plan, an employee will be considered a
Full-time employee if, during the three months preceding the Effective Date,
the employee worked, on average, at least 30 hours per week.
"Good Reason" means
a. assignments of the Participant to any duties or responsibilities that
in any material respect are inconsistent with or result in a diminution of
Participant's Role with the Company immediately prior to the Effective Date,
excluding an isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Participant;
b. any failure by the Company to provide the Employment Period Benefits,
other than an isolated, insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Participant;
c. a requirement imposed by the Company (i) that Participant's principal
functions be performed at any office or location outside the corporate limits
of the county or province within which said Participant's principal function
was performed immediately prior to the Effective Date, or (ii) that
Participant travel on Company business to a substantially greater extent that
reasonably required for the performance of his or her duties: or
d. any purported termination by the Company of his employment
otherwise than as expressly permitted by this Plan.
"Role" means a position with the Company in an executive capacity and
substantially comparable to the position, authority and responsibilities held,
exercised and assumed by Participant with the Company immediately prior to the
Effective Date.
"Annual Bonus" means, with respect to any Participant, the higher of (i)
the annual bonus provided in clause (ii) of the definition of "Employment
Period Benefits" in this Plan, (ii) the Annual Base Salary of the Participant
multiplied by the percentage of salary set for determination of the
Participant's target bonus as most recently set by the Compensation Committee
of the Company prior to the Effective Date, pursuant to the Company's cash
bonus plan in effect prior to the Effective Date, reduced by the amount of
bonus not payable because Participant failed to achieve the goals required for
the payment of such bonus during Participant's employment, or (iii) the annual
bonus paid or payable to the Participant for the most recently completed
fiscal year prior to the date of termination, if any.
7. ADDITIONAL PROVISIONS.
a. No Right to Continued Employment. This Plan does not create any
contract of employment or restrict in any way the right of the Company to
terminate the employment of any Participant at any time, with or without
Cause, subject to the rights of the Participant, if any, to receive benefits
under this Plan.
b. Construction, Governing Laws. Whenever the context may require,
pronouns used in this Plan shall include the corresponding masculine, feminine
or neuter forms, and the singular form of nouns, pronouns and verbs shall
include the plural and vice versa. This Plan shall be governed by the laws of
the state of Minnesota, except those dealing with choice of law.
c. Severability. The invalidity of any provision or portion of this
Plan shall not affect the remainder of the Plan, which shall remain in full
force and effect.
d. Successors. This Plan shall be binding and inure to the benefit of the
Company, its successors and assigns, and the Participants and their respective
heirs and successors.
e. Legal Fees. The Company agrees TO reimburse the Participant for
all legal fees incurred in enforcing the Plan where the courts find favor of
the Participant.
The Company has caused this Plan to be adopted and execute by its duly
authorized officer effective as of the date first set forth above.
CASINO MAGIC CORP.
___________________________________
Marlin F. Torguson, Chairman of the Board