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.
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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
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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
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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 by the Compensation Committee of the Board of
Directors, of Participant's Annual Base Salary and the Annual Bonus; provided
that the amount payable
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under this phrase (v) shall not equal or exceed an amount which would be
defined as in "excess parachute payment" under Section 280G 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.
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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.
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a. Exclusion of Payments for Benefit Determination. Except for
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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
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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
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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
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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
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benefits under this Plan (except as provided under subsection 3a phrases (i),
(ii) and (iv)) under the following circumstances:
(i) The Participant resigns voluntarily without Good Reason;
(ii) The Participant is terminated for Cause; or
(iii) 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
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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
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presently intends to continue this Plan unchanged, it reserves the right to
amend or terminate the Plan, and
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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
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for purposes of this entire Plan. Other terms are defined elsewhere in this
Plan.
"Annual Base Salary," with respect to any Participant, means a salary at
least equal to either (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 annual base salary awarded (on an annualized basis)
for any calendar year after the Effective Date, as selected by the
Participant.
"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.
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"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.
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"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) either, as selected by Participant:
(A). a base salary equal to Annual Base Salary, plus an annual bonus at
least equal to the average of the bonuses payable to Participant with respect
to the last three calendar years prior to the termination of Participant's
employment (including the year of termination and annualized if the
Participant was not employed by the Company for the whole of any such calendar
year); or
(B). an annual base salary equal to that payable in 1998, and the right to
participate in a bonus program substantially similar to that established for
Participant in 1998, with reasonably attainable goals established to earn such
bonus;
(ii) participation in all programs applicable generally to peer
employees;
(iii) prompt reimbursement of expenses;
(iv) fringe benefits equivalent to those provided peer employees; and
(v) 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;
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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 bonus payable
with respect to the calendar year selected by Participant as the Annual Base
Salary year (annualized if the Participant was not employed by the Company for
the whole of any calendar year.
7. ADDITIONAL PROVISIONS.
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a. No Right to Continued Employment. This Plan does not create any
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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,
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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
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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
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of the Company, its successors and assigns, and the Participants and their
respective heirs and successors.
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e. Legal Fees. The Company agrees to reimburse the Participant for
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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.
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Marlin F. Torguson, Chairman of theBoard
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