CASINO MAGIC CORP.
1998 EXECUTIVE OFFICER BONUS PLAN
This Bonus Plan (the "Plan") of Casino Magic Corp. (the "Company") has
been established effective as of January 1, 1998, to provide an incentive for
the executive officers of the Company to achieve, and to cause the Company to
achieve, certain goals established by the Board of Directors of the Company
and the Company's chief executive officer, including specific financial goals
of the Company.
1. Administration. The Compensation Committee shall administer the
--------------
Plan, and shall be the final arbitrator as to whether a Bonus is or is not
payable in accordance with the Plan and any resolution adopted under the Plan.
2. Participants. Each executive officer of the Company as designated
------------
by the Compensation Committee and who enters into an agreement with the
Company in such form and content as shall be determined by the Compensation
Committee (hereunder referred to as a "Participant").
3. Definitions. The following words and phrases when used herein
-----------
shall have the meanings set forth below:
a. "Bonus" shall mean all cash amounts paid or payable to a person in
addition to any duly authorized salary paid or payable to such person.
b. "Net Income" shall mean the net income of the Company, before
provision for income taxes (including the effect of the payment of Bonuses),
for any designated period as determined in accordance with generally accepted
accounting principals, consistently applied, and as presented in the Company's
Forms 10-Q and 10-K filed with the Securities and Exchange Commission, less
the amount (if any) by which extraordinary gains (including income tax
benefits with respect to prior years) for the period exceed extraordinary
losses or write-offs, and prior to the deduction of expenses (if any) related
to the negotiation and consummation of a transaction in which there is a
Change in Control or contemplated Change in Control of the Company.
c. "Target Net Income" for each calendar quarter shall mean the
following:
(i) Net Income of $0 in the first quarter of 1998;
(ii) Net Income of $370,623 in the second quarter of 1998;
(iii) Net Income of $5,344,738 in the third quarter of 1998; and
(iv) Net Income of $919,250 in the fourth quarter of 1998.
d. "Target Net Income for 1998" shall mean Net Income of $6,634,611
calendar year 1998.
e. "Maximum Bonus" shall mean the maximum Bonus payable under the
Plan, and shall equal four times the Quarterly Maximum Bonus established for
each Participant by the Compensation Committee.
f. "Quarterly Maximum Bonus" shall mean the maximum Bonus payable
with respect to and following the end of each calendar quarter as established
for each Participant by the Compensation Committee.
g. "Cause" with respect to the termination of a Participant, means:
(i) 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
(ii) 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
(iii) 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.
h. "Change in Control" means:
(i) 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 (A) the
Company's then outstanding common stock ("Outstanding Stock") or (B) the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors
2
("Outstanding Voting Securities") other than any acquisition (A) by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any entity controlled by it or (B) by any entity pursuant to a
transaction which complies with clauses (A), (B) and (C) of subsection (iii)
of this definition; or
(ii) 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
(iii) 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 (A) 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, (B)
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 (C) 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
(iv) Approval by the shareholders of the Company's complete
liquidation or dissolution.
i. "Good Reason" means:
(i) 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;
3
(ii) any failure by the Company to provide the salary and benefits
specified at the adoption of this Plan for each Participant, other than as
agreed to by the Participant, and 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;
(iii) a requirement imposed by the Company (A) 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
(B) that Participant travel on Company business to a substantially greater
extent that reasonably required for the performance of his or her duties; or
(iv) any purported termination by the Company of his employment
otherwise than as expressly permitted by this Plan.
4. Miscellaneous.
-------------
a. 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.
b. 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.
c. Disqualification for Bonus. A Participant will receive no payment
--------------------------
under this Plan after and under the following circumstances:
(i) The Participant resigns voluntarily without Good Reason; or
(ii) The Participant is terminated for Cause.
d. Change in Control. In the event of a Change in Control during any
-----------------
calendar quarter, the Quarterly Maximum Bonus for that quarter will be deemed
to be fully earned by Participant for that calendar quarter, and shall be
payable upon the effectiveness of the Change in Control.
e. Payment Times. Any Bonuses earned under this Plan will be due and
-------------
payable within 45 days following the end of each calendar quarter for which
said Bonus is earned; provided that any Bonus earned with respect to the
fourth quarter or the full calendar year of 1998 will be payable within 90
days following the end of such calendar year.
4
f. Compensation Committee Discretion. Nothing under this Plan is
---------------------------------
intended to limit the amount of Bonus or other compensation which the
Compensation Committee may authorize to be paid to any Participant.
Specifically, but not in limitation of the foregoing, the Compensation
Committee may authorize a Bonus with respect to any calendar quarter of 1998,
wherein the Compensation Committee determines that the Target Net Income was
favorably exceeded by 10% or more, or may apply lesser percentages to the
Quarterly Maximum Bonus when the Target Net Income was not achieved.
5. 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.
The Company has caused this Plan to be adopted and executed by each
member of the Compensation Committee.
CASINO MAGIC CORP.
COMPENSATION COMMITTEE
_______________________________________
E. Thomas Welch
_______________________________________
Roger H. Frommelt
5