<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S)240.14a-12
Hollywood Casino Corporation
----------------------------
(Name of Registrant as Specified in its Charter)
Hollywood Casino Corporation
----------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i) (1) or 14a-6(i) (2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6 (i) (3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a) (2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:......................................
2) Form, Schedule or Registration Statement No.:................
3) Filing Party:................................................
4) Date Filed:..................................................
<PAGE>
HOLLYWOOD CASINO CORPORATION
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75240
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 30, 1996
To the Stockholders of
Hollywood Casino Corporation
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Hollywood
Casino Corporation (the "Company") will be held at the Westin Hotel, 13340
Dallas Parkway, in the City of Dallas, Texas 75240 on the 30th day of July 1996,
at 10:00 a.m. (local time) for the following purposes:
1. To elect three (3) directors to hold office until their respective
successors have been duly elected and qualified.
2. To approve the Hollywood Casino Corporation 1996 Long-Term Incentive Plan.
3. To approve the Hollywood Casino Corporation 1996 Non-Employee Director
Stock Plan.
4. To ratify the appointment of Arthur Andersen LLP as the independent public
accountants of the Company for fiscal year 1996.
5. To transact any and all other business that may properly come before the
meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on June 21, 1996, as
the Record Date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting or any adjournments(s) thereof. Only stockholders
of record at the close of business on the Record Date are entitled to notice of,
and to vote at, such meeting. The stock transfer books will not be closed. A
list of stockholders entitled to vote at the Annual Meeting will be available
for examination at the offices of the Company for 10 days prior to such meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. HOWEVER, WHETHER OR
NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED TO PROMPTLY
MARK, SIGN, DATE AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE ENCLOSED,
SELF-ADDRESSED, STAMPED ENVELOPE SO THAT YOUR SHARES OF STOCK MAY BE REPRESENTED
AND VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT THE PRESENCE OF A
QUORUM MAY BE ASSURED AT THE ANNUAL MEETING. YOUR PROXY WILL BE RETURNED TO YOU
IF YOU SHOULD BE PRESENT AT THE ANNUAL MEETING AND SHOULD REQUEST SUCH RETURN OR
IF YOU SHOULD REQUEST SUCH RETURN IN THE MANNER PROVIDED FOR REVOCATION OF
PROXIES ON THE INITIAL PAGE OF THE ENCLOSED PROXY STATEMENT. PROMPT RESPONSE BY
OUR STOCKHOLDERS WILL REDUCE THE TIME AND EXPENSE OF PROXY SOLICITATION.
BY ORDER OF THE BOARD OF DIRECTORS,
William D. Pratt, Secretary
Dallas, Texas
July 3, 1996
<PAGE>
HOLLYWOOD CASINO CORPORATION
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75240
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 30, 1996
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement and the accompanying Proxy are being mailed to
the stockholders of Hollywood Casino Corporation (the "Company") on or about
July 3, 1996, in connection with the solicitation of Proxies by the Board of
Directors of the Company to be voted at the Annual Meeting of Stockholders of
the Company to be held on July 30, 1996 (the "Annual Meeting"), at the time and
place and for the purposes set forth in the accompanying Notice of Annual
Meeting, and at any adjournment(s) thereof.
The accompanying form of Proxy is designed to permit each holder of
the Company's common stock, par value $.0001 per share ("Common Stock"), to vote
for or withhold voting for any or all of the nominees for election as directors
of the Company listed under Proposal 1 and to authorize the proxies to vote in
their discretion with respect to any other proposal brought before the Annual
Meeting. When a stockholder's executed and dated proxy card specifies a choice
with respect to a voting matter, the shares will be voted accordingly. If no
such specifications are made, such Proxy will be voted by those persons named in
the Proxy at the Annual Meeting: FOR the election of the nominees specified
under the caption "Election of Directors" in Proposal 1 and FOR the actions
specified in Proposal 2, Proposal 3 and Proposal 4.
The Company encourages the personal attendance of stockholders at its
annual meetings, and giving of a Proxy does not preclude the right to vote in
person should any stockholder giving the Proxy so desire. Any stockholder of
the Company giving a Proxy has the right to revoke his or her Proxy at any time
prior to the voting thereof either in person at the Annual Meeting or by giving
written notice to the Company addressed to Mr. William D. Pratt, Secretary,
Hollywood Casino Corporation, Two Galleria Tower, Suite 2200, 13455 Noel Road,
LB 48, Dallas, Texas 75240; however, no such revocation shall be effective
until such notice of revocation has been received by the Company at or prior to
the Annual Meeting.
In addition to the solicitation of Proxies by use of the mail,
officers and regular employees of the Company may solicit the return of Proxies
by personal interview, telephone and telegraph. Such officers and employees
will not be additionally compensated, but will be reimbursed for out-of-pocket
expenses. Brokerage houses and other custodians, nominees and fiduciaries will
be requested to forward solicitation materials to the beneficial owners of
stock. The cost of preparing, printing, assembling, and mailing the Notice of
Annual Meeting, this Proxy Statement, the form of Proxy enclosed herewith, any
additional material, the cost of forwarding solicitation material to the
beneficial owners of stock, and other costs of solicitation are to be borne by
the Company.
1
<PAGE>
PURPOSES OF THE MEETING
At the Annual Meeting, the stockholders of the Company
will consider and vote on the following matters:
1. The election of three (3) directors to hold office until their
respective successors have been duly elected and qualified.
2. To approve the Hollywood Casino Corporation 1996
Long-Term Incentive Plan.
3. To approve the Hollywood Casino Corporation 1996
Non-Employee Director Stock Plan
4. To ratify the appointment of Arthur Andersen LLP as the
independent public accountants of the Company for fiscal year
1996.
5. Such other and further business as may properly come before the
meeting or any adjournment(s) thereof.
VOTING RIGHTS AND PRINCIPAL STOCKHOLDERS
General
The Board of Directors of the Company has fixed the close of business
on June 21, 1996, as the record date (the "Record Date") for the Annual Meeting.
Only holders of record on the Record Date are entitled to notice of, and to vote
at, the Annual Meeting or any adjournment(s) thereof. On the Record Date there
were 24,719,968 shares of Common Stock issued and outstanding, all of which are
entitled to vote. The Common Stock is the only class of stock entitled to vote
at the Annual Meeting. Holders of the Company's Common Stock of record as of
the Record Date will be entitled to one (1) vote per share on all matters to be
acted upon at the Annual Meeting. The presence, in person or by proxy, of the
holders of a majority of the issued and outstanding shares of Common Stock
entitled to vote at the Annual Meeting or any adjournment(s) thereof is
necessary to constitute a quorum to transact business. In accordance with
Delaware law, a stockholder entitled to vote for the election of directors can
withhold authority to vote for certain nominees for director. Abstentions are
counted for purposes of determining a quorum to conduct business, but are
ignored in vote tabulation, thereby increasing the number of votes necessary to
effectuate any proposal. Broker "non-votes" (i.e., shares held in nominee name
of brokers on behalf of customers, which shares are not represented by proxy)
are not counted for purposes of the meeting.
All shares of Common Stock will vote as a single class. Neither the
Company's Certificate of Incorporation nor its Bylaws provide for cumulative
voting rights.
Regulation
Holders of Class A Common Stock may be subject to certain regulatory
restrictions on ownership. Holders are subject to the qualification provisions
of the New Jersey Casino Control Act (the "Casino Act") relating to financial
sources and may, in the sole discretion of the New Jersey Casino Control
Commission with the concurrence of the Division of Gaming Enforcement, be
required to make filings, submit to regulatory proceedings and qualify under the
Casino Act. The Illinois Gaming Board and Mississippi Gaming Commission may
require persons holding Class A Common Stock to be investigated and licensed or
found suitable to hold such stock. The gaming laws and regulations of other
jurisdictions in which the Company may seek or obtain licenses may also contain
restrictions on the ability of a person or group to acquire or hold Class A
Common Stock or may require regulatory approval. Finally, the federal Merchant
Marine Act of 1936 and the federal Shipping Act of 1916 and applicable
regulations thereunder contain provisions designed to present
2
<PAGE>
persons who are not citizens of the United States, as defined therein, from
holding in the aggregate more than 25% of the outstanding shares of Class A
Common Stock. A holder of Class A Common Stock who cannot legally hold such
shares, or who exposes the Company to a risk of loss of a license or other
regulatory risks, may be required to sell his or her shares of Class A Common
Stock to a qualified buyer or to the Company at the price prescribed by law or,
if no price is prescribed, at the fair market value (defined in the Company's
Certificate of Incorporation).
Security Ownership of Certain Beneficial Owners
Based on filings with the Securities and Exchange Commission, the only
person known to the Company, other than certain directors of the Company, which
beneficially owned more than 5% of the outstanding Common Stock as of the Record
Date is described below:
<TABLE>
<CAPTION>
Shares of Percentage of
Common Stock Outstanding
Name and Address of Beneficially Common
Beneficial Owner Owned Stock
- ---------------------------------- -------------- -------
<S> <C> <C>
Keystone Custodian Funds, Inc.
200 Berkeley Street
Boston, MA 02116-5034 2,417,591 (a) 9.8%
</TABLE>
___________________________
(a) According to a Schedule 13G filed on February 15, 1996, Keystone Custodian
Funds, Inc. has sole power to vote or to direct the vote with respect to
2,417,591 shares and sole power to dispose or to direct the disposition of
2,417,591 shares.
Security Ownership of Management
The following information pertains to the Common Stock beneficially owned by
each director, each executive officer and former executive officer named under
"Renumeration of Directors and Executive Officers" and by all current directors
and officers of the Company as a group as of the Record Date:
<TABLE>
<CAPTION>
Shares of Percentage of
Common Stock Outstanding
Beneficially Common
Beneficial Owner Owned (a) Stock
- ------------------------ -------------- ------
<S> <C> <C>
Jack E. Pratt........... 4,120,377 (b) 16.7%
Edward T. Pratt, Jr..... 956,748 (c) 3.9%
William D. Pratt........ 4,909,897 (d) 19.9%
Edward T. Pratt III..... 2,532,621 (e) 10.2%
Richard D. Knight....... 80,999 *
Leonard M. DeAngelo..... 65,004 *
Theodore H. Strauss..... 3,000 *
William P. Weidner (f).. 286,981 1.2%
Bradley H. Stone (f).... 181,990 *
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Shares of Percentage of
Common Stock Outstanding
Beneficially Common
Beneficial Owner Owned (a) Stock
- ------------------------ -------------- ------
<S> <C> <C>
All directors and
officers as a group 12,776,649 (g) 51.4%
</TABLE>
____________________________
* Less than 1%
(a) Except as otherwise described, each individual has the sole power to vote
and dispose of the Common Stock beneficially owned by him.
(b) Beneficial ownership is attributable to the following: (i) C. A. Pratt
Partners, Ltd., a Texas limited partnership of which Jack E. Pratt is the
General Partner, owns 1,282,123 shares (5.2%) of the outstanding stock of
the Company, (ii) J.E. Pratt Co. No. 1, a Texas general partnership of
which Mr. Pratt is the Managing General Partner, owns 1,799,387 shares
(7.3%) of the outstanding stock of the Company, and (iii) the W.D. Pratt
Family Trust, for which Mr. Pratt is the Managing Trustee, owns 1,003,867
shares (4.1%) of the outstanding stock of the Company.
(c) Beneficial ownership is attributable to E.T. Pratt Co. No. 1, a Texas
general partnership of which Edward T. Pratt, Jr. is the Managing General
Partner, which owns 926,748 shares (3.7%) of the outstanding stock of the
Company.
(d) Beneficial ownership is attributable to the following: (i) W.D. Pratt Co.
No. 1, a Texas general partnership of which William D. Pratt is the
Managing General Partner, owns 290,830 shares (1.2%) of the outstanding
stock of the Company, (ii) the J.E. Pratt Family Trust, for which Mr. Pratt
is the Managing Trustee, owns 4,588,867 shares (18.6%) of the outstanding
stock of the Company, and (iii) WDP Jr. Family Trust, for which Mr. Pratt
is the Managing Trustee, owns 9,750 shares, less than 1% of the outstanding
stock of the Company.
(e) Beneficial ownership is attributable to the E. Pratt Family Trust, of which
Edward T. Pratt III is the Managing Trustee, which owns 2,076,013 shares
(8.4%) of the outstanding stock of the Company. Also includes options to
purchase 130,008 shares of Common Stock of the Company exercisable within
60 days under the Hollywood Casino Corporation 1992 Stock Option Plan (the
"HCC Plan").
(f) Former officer or director of the Company. Resigned effective November
1995.
(g) Includes 130,008 shares of Common Stock of the Company subject to options
exercisable within 60 days of the date hereof.
ELECTION OF DIRECTORS
The Amended and Restated Articles of Incorporation of the Company provide that
the Board of Directors shall consist of not fewer than three (3) members and
that the number of directors shall be determined by resolution of the Board of
Directors at any meeting. By action of the Board of Directors, the number of
directors comprising the Board of Directors has been set at seven (7). During
November 1995, Messrs. Daniel B. Greenwood and William P. Weidner resigned their
positions on the Board of Directors for personal reasons. The remaining members
of the Board of Directors elected James A. Colquitt to fill the unexpired term
of Mr. Greenwood. The Board of Directors has not filled the position vacated by
Mr.
4
<PAGE>
Weidner. The Board of Directors is divided into three classes of approximately
equal size, and directors are elected for staggered three-year terms. The class
standing for reelection at the Company's annual stockholders meeting in 1996
consists of Messrs. Jack E. Pratt, Edward T. Pratt III and Theodore H. Strauss;
1997 consists of Mr. James A. Colquitt and an existing vacancy on the Board of
Directors; and 1998 consists of Messrs. Edward T. Pratt, Jr. and William D.
Pratt.
Unless otherwise directed on any duly executed and dated Proxy, it is the
intention of the persons named in such Proxy to nominate and to vote the shares
represented by such Proxy for the election of the nominees listed in the table
below for the office of director of the Company to hold office until their
respective successors have been duly elected and qualified:
<TABLE>
<CAPTION>
Year First
Became a
Name and Age Director Present Offices Held in the Company
------------- -------- -----------------------------------
<S> <C> <C>
Jack E. Pratt (69) 1990 Chairman of the Board and Chief
Executive Officer and Director
Edward T. Pratt III (40) 1992 President, Chief Operating Officer
and Director
Theodore H. Strauss (71) 1993 Director
</TABLE>
The Board of Directors does not contemplate that any of the above-
named nominees for director will refuse or be unable to accept election as a
director of the Company, or be unable to serve as a director of the Company.
Should any of them become unavailable for nomination or election or refuse to be
nominated or to accept election as a director of the Company, then the person or
persons voting the Proxy will vote the shares represented by such Proxy for the
election of such other person or persons as may be nominated or designated by
the Board of Directors. Each nominee, so far as the Board can determine, is
willing to serve and intends to serve the entire term if elected. If elected as
a director of the Company, each director will hold office until his respective
successor has been duly elected and qualified.
Business Experience for Past Five Years
The following information summarizes the business experience during at
least the past five years of each person nominated to be a director of the
Company:
Mr. Jack E. Pratt has been Chief Executive Officer and Chairman of the
Board of the Company since 1993 and Chairman of the Board of Directors and Chief
Executive Officer of Pratt Hotel Corporation ("PHC"), an approximately 80%-owned
subsidiary of the Company, for more than five years. From 1990 to May 1995, he
also served as President of the Company.
Mr. Edward T. Pratt III has served on the Board of Directors of the
Company since 1992. From 1992 to July 1993, he served as Vice President of the
Company; from July 1993 to May 1995, he served as Executive Vice President of
the Company; and in May 1995, Mr. Pratt was elected President and Chief
Operating Officer of the Company. Mr. Pratt served as Executive Vice President-
Development and Corporate Affairs of PHC for more than 5 years until November
1995 when he was elected President and Chief Operating Officer of PHC. He also
served as co-chairman and co-chief executive officer of Southmark San Juan, Inc.
("SSJ"), 49% of the stock of which was owned by PHC at the time of the filing by
SSJ of a voluntary petition for reorganization under Chapter 11 of the Federal
Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Texas,
Dallas Division. In November 1992, the reorganization plan was confirmed by the
Bankruptcy Court.
5
<PAGE>
Mr. Theodore H. Strauss has served on the Board of Directors of the
Company since 1993. Mr. Strauss has been a Senior Managing Director of Bear,
Stearns & Co. Inc., a leading national investment banking firm, for more than
five years. He also serves on the Board of Directors of Clear Channel
Communications, Sport Supply Group and Sizeler Property Investors. Bear,
Stearns & Co. Inc. served as an underwriter with respect to the October 1995
offering of Senior Secured Notes by the Company. See "Transactions with
Management."
Required Vote
Assuming the presence of a quorum, the affirmative vote of the holders
of at least of a plurality of the issued and outstanding shares of Common Stock
present, in person or by proxy, at the Annual Meeting is necessary for the
election of directors. The Directors have informed the Company that they intend
to vote all of their shares of Common Stock in favor of the nominees, and,
because the Directors own or beneficially own 50.4% of the outstanding Common
Stock, election of the nominees is assured.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
ELECTION OF EACH OF THE INDIVIDUALS NOMINATED FOR ELECTION AS A DIRECTOR.
Board Meetings and Committees
Nonemployee directors of the Company received an annual fee of $50,000
for service on the Board of Directors. The Board of Directors of the Company
held four regular and two special meetings during the year ended December 31,
1995. All directors attended at least 75% of all meetings of the Board of
Directors and committees thereof for which they were eligible to serve.
The Board of Directors of the Company has Audit and Compensation
Committees, but does not have a standing nominating committee. No additional
compensation or fees are paid to directors for attending Audit and Compensation
Committee meetings.
Audit Committee. The Audit Committee has the duty to (i) recommend
annually to the Board of Directors the independent public accountants to be
engaged to audit the books, records and accounts of the Company for the ensuing
year; (ii) arrange the details for the engagement of the independent public
accountants, including the remuneration to be paid; (iii) review with the
Company's independent public accountants, as well as the Company's controller
and other appropriate personnel, the Company's general policies and procedures
with respect to audits and accounting and financial controls and the general
accounting and reporting principles that should be applied in preparing the
Company's financial statements; (iv) meet with the independent public
accountants as required and review with them the Company's interim and year-end
financial statements, any certification, report or opinion that the independent
public accountants propose to render in connection with such statements, and any
other appropriate matter; and (v) make such reports and recommendations to the
Board of Directors in connection with the foregoing as it shall deem appropriate
or as the Board of Directors may request, and take such action thereon as the
Board of Directors may direct it to take. The Audit Committee is comprised of
Messrs. James A. Colquitt, Theodore H. Strauss and Edward T. Pratt, Jr. Messrs.
Colquitt and Strauss were appointed to replace Messrs. Daniel B. Greenwood and
Edward T. Pratt III in December 1995. The Audit Committee met twice during
1995.
Compensation Committee. The Compensation Committee of the Board of
Directors has the duty to review the compensation of the Company's executive
officers and to review the granting of stock options to key officers and
employees of the Company. The Compensation Committee is comprised of Messrs.
Jack E. Pratt, William D. Pratt, James A. Colquitt and Theodore H. Strauss. Mr.
Colquitt was appointed to replace Mr. Daniel B. Greenwood in December 1995. The
Compensation Committee met twice during 1995. The
6
<PAGE>
report of the Compensation Committee appears in this Proxy Statement under the
heading "Renumeration of Directors and Executive Officers."
Family Relationships
Messrs. Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt are
brothers (the "Pratt Brothers"). Mr. Edward T. Pratt III, President and Chief
Operating Officer of the Company, is the son of Mr. Edward T. Pratt, Jr. There
is no other family relationship between any of the directors and any executive
officers of the Company or its subsidiaries or affiliates.
Certain Relationships
See "Transactions with Management" for certain transactions between
directors and the Company or its subsidiaries or affiliates.
MANAGEMENT
Certain information is set forth below concerning the directors,
executive officers and certain key employees of the Company. For a discussion
of other activities of certain of the directors and officers and certain
entities with which they are affiliated, see "Transactions with Management."
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Jack E. Pratt (1) (2)................................ 69 Chief Executive Officer and Chairman of the Board
of Directors of the Company; Chairman of the
Board, Chief Executive Officer and Director of PHC
Edward T. Pratt, Jr. (1)............................. 72 Vice President, Treasurer and Vice Chairman of the
Board of Directors of the Company; Vice Chairman
of the Board, Treasurer and Director of PHC
William D. Pratt (1) (3)............................. 67 Executive Vice President, Secretary, Acting General
Counsel and Director of the Company; Executive
Vice President, Secretary, Acting General Counsel
and Director of PHC
Edward T. Pratt III (2).............................. 40 President, Chief Operating Officer and Director of
the Company; President and Chief Operating Officer
of PHC
James A. Colquitt (4)................................ 77 Director of the Company
Theodore H. Strauss (2).............................. 71 Director of the Company
Albert J. Cohen (1).................................. 56 Executive Vice President and Principal Financial
Officer of the Company; Executive Vice President
and Principal Financial Officer of PHC
Charles F. LaFrano III (1)........................... 41 Vice President of Finance of the Company; Vice
President of PHC
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C>
Richard D. Knight (5)................................ 49 Executive Vice President - Operations of the
Company; Executive Vice President and Chief
Operating Officer of Hollywood Casino - Aurora, Inc.
("HCA") and HWCC - Tunica, Inc. ("HCT"), both wholly
owned subsidiaries of the Company
Leonard M. DeAngelo (6).............................. 44 President of Greate Bay Hotel and Casino, Inc.
("GBHC"), a wholly owned subsidiary of PHC
</TABLE>
____________________________
(1) Except as noted below, all of such persons have served in the positions
described for PHC for more than five years. Messrs. Edward T. Pratt, Jr.
and William D. Pratt have held their positions with the Company since 1990;
Mr. Albert J. Cohen since 1993; and Mr. Charles F. LaFrano III since 1994.
(2) See "Election of Directors - Business Experience for Past Five Years" for
certain information with respect to Messrs. Jack E. Pratt, Edward T. Pratt
III and Theodore H. Strauss.
(3) William D. Pratt previously served as General Counsel of both the Company
and PHC for more than five years prior to May 1995. Mr. Pratt also served
as Vice President and Secretary of SSJ, at the time of its filing on August
20, 1992 of a voluntary petition for reorganization under Chapter 11 of the
Federal Bankruptcy Code in the U.S. Bankruptcy Court for the Northern
District of Texas, Dallas Division. In November 1992, the reorganization
plan was confirmed by the Bankruptcy Court.
(4) James A. Colquitt is self-employed as an insurance consultant and was
elected to the Board of Directors of the Company in December 1995. Until
1983, Mr. Colquitt was Chairman of the Board of Colquitt, Owens & Stephens,
a general insurance agency based in Marietta, Georgia. From 1986 until
November 1995, Mr. Colquitt served on the Board of Directors of PHC.
(5) Richard D. Knight was elected Executive Vice President of Operations of the
Company in May 1995. He has also served as Executive Vice President and
Chief Operating Officer of HCA since 1992 and of HCT since 1994. Mr.
Knight has over 20 years of casino operating experience and was previously
employed as a senior operating officer within the Bally organization,
serving most recently as Senior Vice President of Bally's Park Place, Inc.
from 1991 to 1992 and as Senior Vice President and Chief Operating Officer
of Bally's Grand Hotel and Casino, Inc. in Atlantic City, New Jersey from
1989 to 1991.
(6) Leonard M. DeAngelo was named President of GBHC in November 1995. He
previously served as Senior Vice President of GBHC from March 1995 to
November 1995 and Vice President of Casino Operations of GBHC from February
1988 to March 1995.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, officers and certain
stockholders to file with the Securities and Exchange Commission (the
"Commission") an initial statement of beneficial ownership and certain
statements of changes in beneficial ownership of equity securities of the
Company. Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during the year ended December 31, 1995, Forms 5 and
amendments thereto furnished with respect to the year ended December 31, 1995,
the Company has determined that each of Bradley H. Stone, Albert J. Cohen and
Charles F. LaFrano III were late once in filing a statement of change in
beneficial ownership, in each case relating to a single transaction.
8
<PAGE>
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary of Cash and Certain Other Compensation
The following table provides certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries, to or on
behalf of (i) the Company's Chief Executive Officer; (ii) each of the four other
most highly compensated executive officers of the Company determined as of the
end of the last fiscal year; and (iii) additional individuals who would have
qualified as among the four other most highly compensated executive officers of
the Company but for the fact that the individual was not serving as an executive
officer of the Company at the end of the last fiscal year (hereafter referred to
as the named executive officers) for the fiscal years ended December 31, 1995,
1994 and 1993.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------- Other Annual Awards/ All Other
Name and Principal Position Year Salary Bonus Compensation (1) Options Compensation (2)
--------------------------- ---- ------- ------- ----------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Jack E. Pratt (3) 1995 $565,998 $205,000 $14,000 - $ 211,772
Chief Executive 1994 530,197 150,000 13,000 _ 105,552
Officer and Chairman of the 1993 444,248 - 16,500 _ 42,295
Board of the Company
Edward T. Pratt III (4) 1995 325,897 118,000 - _ 1,980
President and Chief Operating 1994 305,076 135,000 - _ 2,250
Officer of the Company 1993 234,239 - - _ 3,000
Edward T. Pratt, Jr. (3) 1995 284,001 62,000 18,500 _ 43,396
Vice President, Treasurer and 1994 277,452 60,000 18,000 _ 40,485
Vice Chairman of the Board of 1993 243,648 - 20,625 _ 3,000
the Company
Richard D. Knight
Executive Vice President - 1995 378,888 80,000 - _ 1,980
Operations of the Company, 1994 349,867 50,000 - _ 2,250
Executive Vice President and 1993 330,667 50,000 - _ 3,000
Chief Operating Officer of HCA
and HCT
Leonard M. DeAngelo (5) 1995 284,772 75,000 - _ 1,980
President of GBHC 1994 223,920 - - _ 2,100
1993 207,853 - - _ 2,956
William P. Weidner (5) 1995 814,180 - - _ 1,980
Formerly President and 1994 727,698 - - _ 2,250
Chief Operating Officer of PHC 1993 690,075 - - _ 3,000
Bradley H. Stone (5) 1995 506,313 - - _ 1,980
Formerly Executive Vice 1994 479,231 - - _ 2,250
President of PHC 1993 457,983 - - _ 3,000
</TABLE>
__________________________
9
<PAGE>
(1) Represents directors' fees for service as a director to a subsidiary of
PHC.
(2) Includes matching contributions by the Company to The Hollywood Casino
Corporation and Subsidiaries Retirement Savings Plan on behalf of the named
executive officer. See also "Employee Retirement Savings Plan" below.
Amounts set forth above for Messrs. Jack E. Pratt and Edward T. Pratt, Jr.
also include pension benefit accruals on their behalf. See also
"Employment Contracts" below.
(3) Messrs. Jack Pratt and Edward Pratt, Jr. concurrently hold the positions as
officers of PHC described under the caption "Management" pursuant to those
certain employment agreements described under the caption "Employment
Contracts". The Company reimburses PHC for those portions of the
respective salaries and pension accruals which relate to services provided
to the Company and PHC reimburses the Company for the portion of bonuses
which relate to services provided to PHC. Of the salary, bonus and all
other compensation amounts reported above, the following tabulation
presents amounts which relate to services which the Messrs. Pratt provided
to the Company:
<TABLE>
<CAPTION>
All Other
Salary Bonus Compensation
--------- -------- ------------
<S> <C> <C> <C>
Jack E. Pratt
1995 $454,930 $133,250 $105,886
1994 442,263 25,385 53,528
1993 294,173 - 28,007
Edward T. Pratt, Jr.
1995 $202,941 $ 31,000 $ 21,698
1994 207,677 10,154 20,802
1993 131,906 - -
</TABLE>
(4) Mr. Edward Pratt III concurrently serves as President and Chief Operating
Officer of PHC. Prior to November 1995, he served as Executive Vice
President of Development and Corporate Affairs of PHC. PHC reimburses the
Company for that portion of salary, bonus and other compensation which
relates to services provided to PHC. Of the salary, bonus and other
compensation amounts reported above, the following represents amounts which
relate to services which Mr. Pratt provided to the Company: 1995 - salary
$274,031, bonus $100,300, all other compensation $990; 1994 - salary
$233,299, bonus $60,230, all other compensation $1,721; and 1993 - salary
$143,921, all other compensation $1,843. All other amounts included in the
totals reported above relate to services provided to PHC and paid by PHC.
(5) All amounts included in the totals reported above relate to services
provided to PHC and paid by PHC.
OPTION GRANTS IN LAST FISCAL YEAR
No grants of stock options under the Hollywood Casino Corporation 1992
Stock Option Plan (the "HCC Plan") or the Pratt Hotel Corporation 1990 Incentive
Stock Option Plan (the "PHC Plan") were made to the named executive officers
during the fiscal year ended December 31, 1995.
10
<PAGE>
Option Exercises and Holdings
The following table provides information, with respect to the named
executive officers, concerning options granted under the HCC Plan during the
last fiscal year and unexercised options held as of the end of the fiscal year:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
HCC PLAN
--------
<TABLE>
<CAPTION>
Value of Unexercised
In-the-Money Options at
FY-End (Market Price of
Value Realized Number of Unexercised Shares at FY-End ($4.25)
Shares (Market Price at Options at FY End Less Exercise Price)
Acquired Exercise Less ---------------------------------- ------------------------------
Name on Exercise Exercise Price) Exercisable Unexercisable Exercisable Unexercisable
---- ------------- --------------- --------------- ----------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack E. Pratt.............. - - - - - -
Edward T. Pratt III........ - - 130,008 - $552,456 -
Edward T. Pratt, Jr........ - - - - - -
Richard D. Knight.......... 26,666 $223,312 - - - -
Leonard M. DeAngelo........ 21,668 184,165 - - - -
William P. Weidner......... 113,327 991,543 - - - -
Bradley H. Stone........... 63,330 538,267 - - - -
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
PHC PLAN
--------
<TABLE>
<CAPTION>
Value of Unexercised
In-the-Money Options at
FY-End (Market Price of
Value Realized Number of Unexercised Shares at FY-End ($2.25)
Shares (Market Price at Options at FY End Less Exercise Price)
Acquired Exercise Less ---------------------------------- ------------------------------
Name on Exercise Exercise Price) Exercisable Unexercisable Exercisable Unexercisable
---- ------------- --------------- --------------- ----------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack E. Pratt.............. - - - - - -
Edward T. Pratt III........ - - - - - -
Edward T. Pratt, Jr........ - - - - - -
Richard D. Knight.......... - - - - - -
Leonard M. DeAngelo........ - - - - - -
William P. Weidner......... - - - - - -
Bradley H. Stone........... - - - - - -
</TABLE>
Employment Contracts
Jack E. Pratt, Chairman of the Board and Chief Executive Officer of the
Company, Edward T. Pratt, Jr., Vice Chairman of the Board, Vice President and
Treasurer of the Company, and William D. Pratt,
11
<PAGE>
Executive Vice President, Secretary and Acting General Counsel of the Company,
have been under employment contracts with PHC and have provided services to the
Company pursuant to intercompany allocation agreements ratified by the
respective Boards of Directors of the Company and PHC. Their employment
contracts were executed during October 1989 and originally expired on December
31, 1994, but were extended by amendment through December 31, 1996. Effective
as of January 1, 1996, the Company has assumed the obligations and extended the
terms of the contracts to December 31, 1998 with respect to Jack E. Pratt and to
December 31, 1997 with respect to Edward T. Pratt, Jr. and William D. Pratt.
Services to PHC will continue to be provided pursuant to intercompany allocation
agreements. The terms of the contracts may be extended again by mutual
agreement of the parties and the extended term, or any further extension
thereof, will be followed immediately by a four-year period as consultants to
the Company. Upon expiration of the consulting term, each of the Pratt Brothers
will be entitled to receive a lifetime pension benefit and his designated
beneficiary is entitled to receive a death benefit, throughout the term of the
employment, consulting and pension benefit periods.
The terms of the employment contracts provide for an annual base salary in the
first year for Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt of
$350,000, $223,000 and $191,000, respectively, subject to annual review and
increase by the Compensation Committee of the Board of Directors of the Company.
Compensation under the consulting and pension benefit provisions of the
employment contracts of each of the Pratt Brothers will be 75% of the average of
his three highest annual salaries during the employment term of the contract.
The death benefit is derived by multiplying a Pratt Brother's highest annual
salary during his employment term by 50% and such benefit will be paid annually
to his designated beneficiary for a period of ten years after his death. The
estimated annual pension benefit payable to Jack E. Pratt, Edward T. Pratt, Jr.
and William D. Pratt is currently $425,000, $220,000 and $192,000, respectively.
Edward T. Pratt III, President and Chief Operating Officer of the Company, is
under an employment contract dated as of May 1, 1996 in such capacities
continuing through April 30, 2000 unless sooner terminated by either party. The
terms of Mr. Pratt's agreement provide for a minimum annual base salary
effective January 1, 1996 of $425,000, subject to annual review and increase by
the Compensation Committee of the Board of Directors of the Company.
Richard D. Knight, Executive Vice President of Operations of the Company and
Executive Vice President and Chief Operating Officer of HCA and HCT, is under an
employment contract, as amended by letter agreement dated May 9, 1995, in such
capacities continuing through December 31, 1997 unless sooner terminated by
either party. The terms of Mr. Knight's agreement provide for an annual base
salary of $450,000, subject to annual increases based on changes in the Consumer
Price Index, as defined, and an annual bonus of not less than $56,500.
Leonard M. DeAngelo, President of GBHC, serves under an employment contract,
as amended on November 17, 1995, in such capacity continuing through November
16, 1998, unless sooner terminated by one of the respective parties. The terms
of Mr. DeAngelo's amended contract provide for a minimum annual base salary of
$450,000, subject to annual increases of five percent.
William P. Weidner, formerly President and Chief Operating Officer of PHC, and
Bradley H. Stone, formerly Executive Vice President of PHC and President of
GBHC, were under employment contracts in such respective capacities continuing
through December 31, 1995; both contracts were terminated in November 1995. The
terms of Mr. Weidner's and Mr. Stone's contracts provided for minimum annual
base salaries of $677,000 and $422,000, respectively, subject to annual
increases based on changes in the Consumer Price Index, as defined in the
employment contracts.
12
<PAGE>
Stock Option Plans
The 1992 Hollywood Casino Corporation Stock Option Plan. During 1992, the
-------------------------------------------------------
Company reserved 1,197,000 shares of Class B Common Stock for the purpose of
establishing the Hollywood Casino Corporation 1992 Stock Option Plan (the "HCC
Plan") for its key executives. After the consummation of the Company's initial
public offering in June 1993 all stock options outstanding under the HCC Plan
became exercisable for Class A Common Stock and any options granted under the
HCC Plan after that date are to purchase Class A Common Stock.
Options granted under the HCC Plan vest in equal annual installments over a
period of three years. In the event of the death, disability or retirement of a
participant in the HCC Plan, the participant's options will accelerate and be
exercisable in full. If the participant's employment with the Company is
terminated for cause (as defined in the HCC Plan), the options held by that
participant shall automatically terminate. Options granted under the HCC Plan
are not assignable except by will, the laws of descent and distribution or
pursuant to qualified domestic relations order. The HCC Plan provides that if
any person or group (other than certain members of the Pratt family) becomes the
beneficial owner of 51% or more of the total voting power of each class of the
Company's capital stock (subject to certain exceptions), the vesting of all
outstanding options will accelerate and be exercisable in full. The exercise of
incentive stock options granted under the HCC Plan is subject to a $100,000
calendar-year limit for each option holder based on the fair market value of the
Company's Common Stock at the time the option was granted.
The exercise price of options granted under the Company Plan may be paid in
cash or in shares of Class A Common Stock valued at fair market value on the
date of exercise.
The 1990 Pratt Hotel Corporation Incentive Stock Option Plan. On March 22,
------------------------------------------------------------
1990, PHC adopted the Pratt Hotel Corporation 1990 Incentive Stock Option Plan
(the "PHC Plan"). The PHC Plan provides for the granting of incentive stock
options that are intended to qualify for special tax treatment under the
Internal Revenue Code (the "Code"). The shares to be offered under the Plan
consist of shares (whether authorized and unissued or issued and reacquired) of
the Common Stock. Options for no more than 102,092 shares of the Common Stock
may be granted under the PHC Plan.
The PHC Plan is administered by the Compensation Committee of the Board of
Directors (the "Board") of PHC. Subject to the terms of the PHC Plan, the
Compensation Committee may from time to time determine those key employees who
shall be granted stock options under the PHC Plan, the number of shares to be
subject to such options and interpret and establish and amend rules and
regulations relating to the PHC Plan. Only key employees of PHC or any of its
subsidiaries are eligible to participate in the PHC Plan. Incentive stock
options granted under the PHC Plan are exercisable for a term ending five years
from the date of grant.
The exercise of options is subject to a $100,000 calendar-year limit for each
option holder based on the fair market value of the Common Stock at the time the
option was granted. Options not exercised in earlier periods shall be
accumulated and available for exercise in later periods. Options may be
exercised only as to full shares of Common Stock. Upon termination of an
optionee's employment with PHC for any reason, including death or disability,
his or her options will immediately expire.
The Compensation Committee may provide for the exercise of options immediately
or in installments, and upon such other terms, conditions and restrictions as it
may determine, including granting PHC the right to repurchase shares issued upon
the exercise of options. The PHC Plan provides that if any person or group
(other than Pratt Brothers) becomes the beneficial owner of more than 51% of the
Common Stock (other than by merger, consolidation or purchase from PHC), PHC's
right to repurchase a former employee's shares shall terminate.
13
<PAGE>
Employee Retirement Savings Plan
During 1993, the Company adopted The Hollywood Casino Corporation and
Subsidiaries Retirement Savings Plan (the "Savings Plan"), a qualified defined
contribution plan for the benefit of all of the Company's employees who satisfy
certain eligibility requirements. The Savings Plan is qualified under the
requirements of section 401(k) of the Code allowing participating employees to
benefit from the tax deferral opportunities provided therein. All employees of
the Company who have completed one year of service, as defined, and who have
attained the age of 21, are eligible to participate in the Savings Plan.
The Savings Plan provides for a matching contribution by the Company based
upon certain criteria, including levels of participation by the Company's
employees. The Company accrued matching contributions totaling approximately
$820,000 for the year ended December 31, 1995.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors of the Company is
comprised of Messrs. Jack E. Pratt, William D. Pratt, James A. Colquitt and
Theodore H. Strauss. Jack E. Pratt and William D. Pratt serve as executive
officers and directors of the Company and PHC. They also serve on the
Compensation Committee of PHC. Mr. Colquitt, prior to his appointment to the
Board of Directors and Compensation Committee of the Company, held similar
positions with PHC. Mr. Strauss is senior managing director of Bear, Stearns &
Co. Inc., which served as underwriters with respect to certain securities
offerings during 1995. See"Transactions with Management."
14
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee believes that the Company's dramatic
emergence as one of the industry's leading casino entertainment developers and
operators since going public in 1993 is directly attributable to the caliber and
commitment of its officers, senior management and key operational managers.
Attracting and retaining executives capable of sustaining and managing the
Company's growth over the long term are fundamental to building stockholder
value and are among the Company's highest priorities. As a reflection of such
high priority, the Company retained the Performance and Compensation Management
Consulting Practice of KPMG Peat Marwick (the "Consultant") in 1995 to conduct a
review and analysis of the Company's executive compensation policy and provide
the Company with recommendations for such policy (the "Consultant's Report").
It is the Compensation Committee's overall goal to develop executive
compensation policies that are consistent with, and linked to, strategic
business objectives and Company values. The Compensation Committee approves the
design of, assesses the effectiveness of, and administers executive compensation
programs in support of Company compensation polices. The Compensation Committee
also reviews and approves all salary arrangements and other recommendations for
executives, evaluates executive's performance, and considers other matters.
The Consultant's recommendations contained in the Consultant's Report
affirmed the Company's existing executive compensation policy that executive
compensation should consist of three components: a base salary commensurate with
each executive's respective scope of responsibilities and level of personal
performance and competitive with the base salary offered to executives of
similar caliber and responsibilities in comparable gaming companies and other
relevant industries; an annual incentive compensation program rewarding
exceptional financial and operational performance as measured against
predetermined criteria and taking into account prevailing operational,
financial, competitive, regulatory and other constraints; and a stock option
program tying executive compensation to long-term share price appreciation. The
Compensation Committee approved base salaries for executives for the fiscal year
1996 and awarded bonuses to executives for the fiscal year 1995 in accordance
with the foregoing policies and the recommendations contained in the
Consultant's Report.
Increases to base salaries are driven primarily by individual
performance. Individual performance is evaluated based on sustained levels of
individual contribution to the Company. When evaluating individual performance,
the Compensation Committee considers the executive's efforts in promoting
Company values; continuing management training and development; improving
quality developing relationships with customers, suppliers and employees;
demonstrating leadership abilities among coworkers; and other goals.
The annual incentive plan promotes the Company's pay-for-performance
philosophy by providing executives with direct financial incentives in the form
of annual cash bonuses to achieve Company, business unit and individual
performance goals. Annual bonus opportunities afford the Company with the
opportunity to communicate specific goals that are of primary importance during
the coming year and motivate executives to achieve these goals. Eligible
executives are assigned threshold, target and maximum bonus levels based on a
percentage of base salary. The percentages have been established on bonus
practices and opportunities within companies comparable to the Company's size
and/or industry. Executives earn bonuses to the extent to which preestablished
goals are achieved. Targets are considered by the Compensation Committee to be
achievable, but to require stretch performance from each executive.
Long-term incentives are provided to executives pursuant to the
Company's stock option plans. In keeping with the Company's commitment to
provide a total compensation package which favors at risk components of pay,
long-term incentives comprise a substantial portion of an executive's total
compensation package. The Compensation Committee's objective is to provide
executives with long-term incentive award opportunities that are on par with
grants made within the Company's industry and are reflective of performance.
Long-term incentive award guidelines have been developed based on the same
method used at establishing bonus award
15
<PAGE>
guidelines. Practices of comparable companies have been adapted for use at the
Company with the actual percent granted varying by position within the Company.
Stock options are granted at an option price not less than fair market
value of the Company's common stock on the date of grant. Accordingly, stock
options have value only if the stock price appreciates from the date that the
options are granted. This design focuses executives on the creation of
stockholder value over the long-term and encourages equity ownership in the
Company.
The Compensation Committee believes that the compensation program for
the executives of the Company is comparable with the compensation program
provided by comparable companies and serves the best interests of the
shareholders of the Company. The Compensation Committee also believes that
performance pay is appropriately linked to individual performance, annual
financial performance of the Company and stockholder value.
In 1995 Mr. Jack E. Pratt, Chairman of the Board and Chief Executive
Officer of the Company, was an employee of PHC and served under an employment
agreement with PHC dated as of September 21, 1989, as amended (the "Employment
Agreement"), described in the Company's Form 10-K for the fiscal year ended
December 31, 1995. Mr. Pratt provided services to the Company through an
intercompany overhead allocation arrangement (the "Overhead Allocation
Arrangement") previously approved by the Boards of Directors of the Company and
PHC. In light of previous decisions of the Board of Directors of PHC and its
Compensation Committee, the minimum annual base salary of Mr. Pratt under the
Employment Agreement has been set at $566,000 effective as of July 1, 1994.
There were no adjustments to the annual base salary of Mr. Pratt in the fiscal
year 1995.
Effective as of January 1, 1996, the Company assumed the obligations
of PHC under the Employment Agreement and extended the term of such Employment
Agreement to December 31, 1998. Mr. Pratt continues to provide services to the
Company and PHC which allocate the cost of such services pursuant to the
Overhead Allocation Arrangement. In January 1996, the Compensation Committee
(exclusive of Messrs. Jack E. Pratt and William D. Pratt who did not consider or
vote on such matters) unanimously approved (i) an increase in the annual base
salary of Mr. Jack E. Pratt from $566,000 to $645,000 effective as of January 1,
1996 and (ii) the award of a bonus to Mr. Jack E. Pratt in the amount of
$205,000 for fiscal year 1995, in recognition of profitable operations at a
riverboat gaming facility owned by a subsidiary of the Company, profitable
operations at a dockside gaming facility owned by a subsidiary of the Company
and the successful refinancing of substantially all of the Company's gaming
related debt obligations at more favorable terms.
Mr. Leonard M. DeAngelo is an employee of a subsidiary of PHC and
serves under an employment agreement with such subsidiary through November 16,
1998, unless sooner terminated as provided therein. As an employee of a
subsidiary of PHC, the compensation of Mr. De Angelo is established by PHC's
Compensation Committee and is based principally on his rights under his
employment agreement. See "Remuneration of Directors and Executive Officers -
Employment Contracts".
Mr. Richard D. Knight serves under an employment agreement through
December 31, 1997, unless sooner terminated as provided therein. The terms of
Mr. Knight's employment agreement currently provide for an annual base salary of
$450,000, subject to annual increases based on changes in the consumer price
index and an annual bonus of not less than $50,000 through December 31, 1995 and
$56,500 thereafter. In addition, in September 1995, the Compensation Committee
unanimously approved the award of an additional bonus to Mr. Knight in the
amount of $30,000 based on his efforts and performance in connection with the
successful opening of the Hollywood Casino in Tunica County, Mississippi.
Federal income tax legislation has limited the deductibility of
certain compensation paid to the Chief Executive Officer and covered employees
to the extent the compensation exceeds $1,000,000. Performance-based
compensation and certain other compensation, as defined, are not subject to the
deduction limitation. It
16
<PAGE>
is not currently anticipated that any covered employee could earn annual
compensation in excess of the one million dollar definition under existing or
proposed compensation plans. The Company continually reviews its compensation
plans to minimize or avoid potential adverse effects of this legislation. The
Compensation Committee will consider recommending such steps as may be required
to qualify either annual or long-term incentive compensation for deductibility
if that appears appropriate at some time in the future.
This report and the accompanying stock price performance graph are
provided for general informational purposes only pursuant to regulations under
the Securities Exchange Act of 1934. No information contained in this report or
the accompanying graph shall be deemed to be filed in whole or in part for
purposes under the Securities Act or the Securities Exchange Act of 1934, or
incorporated by reference into any filing made thereunder.
Compensation Committee
Jack E. Pratt
William D. Pratt
James A. Colquitt
Theodore H. Strauss
17
<PAGE>
STOCK PRICE PERFORMANCE
The graph set forth below compares the stock price performance of the
Company with those of the Dow Jones Equity Market Index and the Dow Jones Index
for the Casino Industry for the period since the Company's Common Stock became
publicly traded (May 28, 1993). The Company has not paid dividends over such
period of time; however, the comparative equity market and industry data assumes
reinvestment of dividends. The stock price performance shown below may not be
indicative of future stock price performance. (Table substituted for graph).
Hollywood Casino Corporation
Stock Price Performance
(May 28, 1993 = 100)
<TABLE>
<CAPTION>
Hollywood
Equity Casino Casino
Date Index Index Corporation
- -------------------- ------ ------ -----------
<S> <C> <C> <C>
May 28, 1993 100.0 100.0 100.0
June 30, 1993 100.4 99.9 135.9
September 30, 1993 103.2 129.8 92.2
December 31, 1993 105.2 117.9 79.7
March 31, 1994 101.2 102.2 70.3
June 30, 1994 101.4 78.2 42.2
September 30, 1994 106.2 87.8 42.2
December 30, 1994 106.0 90.5 35.9
March 31, 1995 116.3 117.1 35.2
June 30, 1995 127.6 131.0 55.5
September 29, 1995 138.3 126.2 43.8
December 29, 1995 146.7 120.1 26.6
</TABLE>
18
<PAGE>
TRANSACTIONS WITH MANAGEMENT
PHC operates the Holiday Inn located at the north entrance of the
Dallas/Fort Worth International Airport ("DFW North") which is owned by
Metroplex Hotel Limited ("Metroplex"), a limited partnership owned at December
31, 1995 by Jack E. Pratt and Edward T. Pratt, Jr., each as 30% general and
limited partners, William D. Pratt as a 10% general and limited partner and
Crystal A. Pratt, the former wife of Jack E. Pratt, as a 30% limited partner.
During the year ended December 31, 1995, PHC made capital expenditures under the
hotel operating agreement totaling approximately $750,000 toward property
improvements. PHC is also obligated by the operating agreement, which expires
in 2002, to make minimum payments equal to principal and interest payments on
the indebtedness incurred by Metroplex to purchase DFW North. During February
1994, PHC purchased such underlying indebtedness with a principal balance of
approximately $13.8 million from third parties at a cost of $6.8 million ($1
million of which was paid during 1993), with funds borrowed from the Company,
and subject to third party indebtedness amounting to $2.7 million. Payments
under the hotel operating agreement, net of debt service receipts, amounted to
$530,000 during the year ended December 31, 1995. Payments from Metroplex,
including interest at the rate of 9 1/2% per annum, are due monthly with the
remaining principal balance of $13.4 million due May 31, 1997.
In September 1994, a subsidiary of the Company entered into an
agreement with an entity owned by a relation to the Pratt Brothers to manage the
operation and maintenance of a company-owned aircraft and to make such aircraft
available for charters by third parties. Expenses and commissions charged by
the management company under the agreement during 1995 totaled $462,000.
Theodore H. Strauss, a director of the Company, also serves as Senior
Managing Director of Bear, Stearns & Co. Inc., which served as an underwriter
with respect to the October 1995 offering of $210 million of Senior Secured
Notes issued by the Company.
PROPOSAL TO APPROVE THE HOLLYWOOD CASINO CORPORATION
1996 LONG-TERM INCENTIVE PLAN
General
The Board of Directors adopted the Hollywood Casino Corporation 1996
Long-Term Incentive Plan on June 12, 1996, subject to stockholder approval. The
1996 Plan is being submitted for stockholder approval for three reasons. First,
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), stockholder approval is necessary in order for performance payments
under the 1996 Plan to certain executive officers to be deductible by the
Company for federal income tax purposes. Section 162(m) imposes a $1,000,000
limit on the deductibility of compensation paid to certain executive officers.
Stockholder approval of the 1996 Plan will enable awards made under the 1996
Plan to be excluded in calculating the $1,000,000 limit. Second, stockholder
approval is required under Section 422 of the Code for the inclusion of
incentive stock options in the 1996 Plan. Third, stockholder approval of the
1996 Plan is being sought to permit certain transactions under the 1996 Plan to
be exempt from the Securities and Exchange Commission regulations on short-swing
trading.
During 1992, the Company's Board of Directors adopted the Hollywood
1992 Stock Option Plan. For a description of this plan, see "Stock Option
Plans" discussed previously. The provisions of the 1996 Plan are summarized
below. All such statements are qualified in their entirety by reference to the
full text of the 1996 Plan, which is attached hereto as Exhibit A.
The 1996 Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA"). The 1996 Plan is not a
"qualified plan" within the meaning of Section 401 of the Code. The 1996 Plan
will terminate on June 12, 2006, and thereafter no incentive stock options, non-
qualified stock options or restricted stock awards (collectively, "awards") may
be granted thereunder. The Board of Directors may
19
<PAGE>
amend or discontinue the 1996 Plan without the approval of the stockholders,
subject to certain limitations. See "Amendment of the 1996 Plan" below.
Nothing in the 1996 Plan or in any award granted pursuant to the 1996
Plan confers upon any employee any right to continue in the employ of the
Company or to interfere in any way with the right of the Company to terminate
the employment of any person at any time.
The proceeds from the sale of Common Stock pursuant to the exercise of
or payment for awards under the 1996 Plan will be added to the general funds of
the Company and used for general corporate purposes. The holder of an award
granted pursuant to the 1996 Plan other than restricted stock does not have any
of the rights or privileges of a stockholder, except with respect to shares that
have been actually issued. Holders of restricted stock have all the rights of a
stockholder of the Company, except for the right to transfer the restricted
stock. Holders of restricted stock will also forfeit the restricted stock upon
the occurrence of certain events. See "-- Termination and Forfeiture" below.
1996 Plan Benefits
As discussed herein, stock option awards under the 1996 Plan will be
determined by the Plan Committee in accordance with the terms of the 1996 Plan.
Presently, no stock options have been awarded under the 1996 Plan to any
participants. Accordingly, awards of stock options to be granted in the future
to participants, including current or future named executive officers, cannot be
determined at this time since the actual awards will be made at the discretion
of the Plan Committee. No stock options were awarded in fiscal 1995 under the
Company's 1992 Stock Option Plan. Therefore, if the 1996 Plan had been in
effect in fiscal 1995, no stock options would have been awarded under such plan
to the Company's chief executive officer, the named executive officers, the
Company's executive officers as a group and all non-executive employees as a
group.
Purpose and Eligibility
The purposes of the 1996 Plan are to attract key employees and to
encourage performance by providing such persons with a proprietary interest in
the Company through the granting of awards. The 1996 Plan is designed to help
achieve those purposes through the use of compensation strategies that will
attract and retain those employees who are important to the long-term success of
the Company.
Any employee of the Company or its subsidiary corporations or
partnerships (including officers or directors who are employees) is eligible to
receive awards under the 1996 Plan at the discretion of the Plan Committee. See
"Administration of the 1996 Plan" below. Non-employee directors are not
eligible to participate in the 1996 Plan.
The Company had approximately 6,200 employees at May 31, 1996,
all of whom are eligible to participate in the 1996 Plan.
Administration of the 1996 Plan
The 1996 Plan is administered by the Plan Committee appointed by the
Company's Board of Directors. The current members of the Plan Committee are
James A. Colquitt and Theodore H. Strauss. Members of the Plan Committee serve
at the will of the Board and may be removed, with or without cause, from the
Plan Committee at any time at the Board's discretion.
The Plan Committee has full discretion to grant awards under the 1996
Plan, to interpret the 1996 Plan, to make such rules as it deems advisable in
the administration of the 1996 Plan and to take all other actions advisable to
administer the 1996 Plan. The Plan Committee shall determine the eligible
persons to whom
20
<PAGE>
awards will be granted and will set forth the terms of the awards in award
agreements, so long as those terms are not inconsistent with the 1996 Plan.
Awards
The Plan Committee may grant or award incentive stock options, non-
qualified stock options and restricted stock. Stock options which are intended
to qualify for special tax treatment under particular provisions of the Code,
are considered "incentive stock options," and options which are not intended to
so qualify are considered "non-qualified stock options." See "Certain Federal
Income Tax Aspects" below.
Restricted stock may be awarded by the Plan Committee and will be
subject to such terms, conditions and restrictions as the Plan Committee deems
appropriate. Restrictions may include limitations on the right to transfer or
pledge the restricted stock until the expiration of a specified period of time
and forfeiture of the restricted stock upon the occurrence of certain events
such as termination of employment prior to the expiration of a specified period
of time. See "Restrictions" below.
The maximum number of shares of Common Stock presently authorized for
issuance under the 1996 Plan is 3,000,000, subject to adjustment for stock
splits and similar events. Shares to be issued may be made available from
either authorized but unissued Common Stock or Common Stock held by the Company
in its treasury. Shares of Common Stock previously subject to awards that are
expired, terminated, forfeited, settled in cash in lieu of Common Stock or
exchanged for awards that do not involve Common Stock are available for further
grants of awards under the 1996 Plan.
Award Agreements
Each award granted under the 1996 Plan is required to be evidenced by
an award agreement, which designates the type of award (or combination of
awards) being granted and sets forth the number of shares or the total cash
amount subject to each award (if applicable), the award or exercise price (if
applicable), the maximum term of the award, any rules related to forfeiture, the
vesting or restriction schedule or criteria (if applicable), the date of grant,
and any other terms, provisions, limitations and performance requirements of the
award. The Plan Committee may require that each participant irrevocably grant
to the Company a power of attorney to transfer to the Company any shares
forfeited under the award and that the stock certificates evidencing shares of
restricted stock be held in custody by the Company until the restrictions have
lapsed.
The exercise period for an award may not extend longer than ten years
from the date the award is granted and, in the case of incentive stock options,
is limited to five years from the date of grant for certain employees owning
more than 10% of the outstanding shares of Common Stock.
If the Plan Committee establishes a purchase price for an award, the
participant must accept the award of stock within a period of 30 days (or such
shorter period as the Plan Committee may specify) after the date of grant by
executing an award agreement and paying the purchase price.
Exercise of Awards
The exercise price for a stock option will be determined by the Plan
Committee and will be at least 100% (or at least 110% in the case of incentive
stock options granted to certain employees owning more than 10% of the
outstanding shares of Common Stock) of the fair market value of the Common Stock
on the date of grant.
On the date that the participant desires to exercise a stock option
(the "Exercise Date"), the participant must pay the total exercise price of the
shares to be purchased by delivering to the Company cash, a certified check,
bank draft, or money order in the amount of the exercise price, or Common Stock
(including restricted
21
<PAGE>
stock) having a fair market value equal to the exercise price or any other form
of payment which is acceptable to the Plan Committee. In the event that shares
of restricted stock are tendered to exercise a stock option, that number of
shares of Common Stock issued upon the exercise of the option equal to the
number of shares of restricted stock used as consideration to exercise the
option will be subject to the same restrictions as the restricted stock so
tendered. If the participant fails to pay the exercise price on the Exercise
Date or fails to accept delivery of the Common Stock to be issued upon exercise,
the participant's option may be terminated by the Company.
Restrictions
Under the 1996 Plan, the Plan Committee determines the vesting
schedule, restrictions or conditions, if any, applicable to any award granted.
Once vested, awards may be exercised at any time during the award period.
Restricted stock may be subject to certain restrictions and conditions which may
include length of continuous service, achievement of specific business
objectives, increases in specified indices, attainment of specified growth rates
or other comparable measurements of Company performance. The Plan Committee
may, in its discretion and in accordance with the terms of the 1996 Plan,
accelerate any vesting schedule or otherwise remove any restrictions or
conditions applicable to an award. Any restricted stock award or performance
award made in the form of Common Stock to a participant who is a director,
executive officer or 10% or greater stockholder of the Company as determined
under Section 16 of the Exchange Act (an "insider") must be held by that
participant for at least six months from the date of the award.
No participant may receive during any fiscal year awards covering an
aggregate of more than 150,000 shares of Common Stock under the 1996 Plan.
The grant of incentive stock options to each participant is subject to
a $100,000 calendar year limit. This limitation prohibits the grant of an
incentive stock option that would entitle the recipient to purchase, thereunder
and together with other incentive options, securities worth more than $100,000
(based upon the aggregate fair market value of the securities underlying such
options on the date of grant) in the year in which such options first become
exercisable. See "Certain Federal Income Tax Aspects" for additional
limitations on incentive stock options.
A participant who is an insider cannot exercise a stock option until
at least six months have expired from the date of grant of the award. Stock
options and restricted stock that have not yet vested or are subject to
forfeiture are not transferable or assignable other than by will or by the laws
of descent and distribution or, in the case of nonqualified stock options and
restricted stock, pursuant to the terms of a qualified domestic relations order
as defined in the Code.
The Company is not required to sell or issue shares of Common Stock
under any award if the issuance of Common Stock would violate any provisions of
any law or regulation of any governmental authority or any national securities
exchange or other forum on which shares of Common Stock are traded (including
Section 16 of the Exchange Act). As a condition of any sale or issuance of
shares of Common Stock under an award, the Plan Committee may require such
agreements or undertakings, if any, as it may deem necessary or advisable to
ensure compliance with any such law or regulation.
Termination and Forfeiture
Upon termination of the participant's employment with the Company and
its subsidiaries, a participant's stock options will be exercisable as specified
in the award agreement, provided the award is exercised prior to the date of its
stated expiration. Upon termination of a participant's employment for any
reason, the participant will forfeit the nonvested portions of all stock options
and restricted stock awards the participant then holds. If a participant
forfeits nonvested shares of restricted stock and has paid consideration to the
22
<PAGE>
Company for such forfeited restricted stock, the Company is required to repay
such consideration to the participant.
Adjustments
The 1996 Plan provides that the maximum number of shares issuable
under the 1996 Plan as a whole and to each participant individually, the number
of shares issuable upon exercise of outstanding stock options, and the exercise
prices of such awards are subject to such adjustments as are appropriate to
reflect any stock dividend, stock split, share combination, exchange of shares,
recapitalization or increase or decrease in shares of Common Stock without
receipt of consideration of or by the Company.
If the Company merges or consolidates, transfers all or substantially
all of its assets to another entity or dissolves or liquidates, then under
certain circumstances a holder of an award will be entitled to purchase the
equivalent number of shares of stock, other securities, cash or property that
the award holder would have been entitled to receive had he or she exercised his
or her award immediately prior to such event. Notwithstanding these adjustment
provisions, all awards granted under the 1996 Plan may be canceled by the
Company upon a merger or consolidation of the Company in which the Company is
not the surviving or resulting corporation, or the reorganization, dissolution
or liquidation of the Company, subject to each participant's right to exercise
his or her award as to the shares of Common Stock covered by that award for a
period of 30 days immediately preceding the effective date of such event.
The 1996 Plan provides that in the event of a "Change of Control" of
the Company, all unmatured installments of awards will become fully accelerated
and exercisable in full. "Change of Control" is defined as the occurrence of
the following events: (i) a consolidation, merger or share exchange in which the
Company does not survive or in which shares of Common Stock would be converted
into cash, securities or other property, unless the Company's stockholders
retain the same proportionate common stock ownership in the surviving company
after the merger or Jack E. Pratt, Edward T. Pratt, Jr., William D. Pratt or
certain affiliates or associates of such persons (each of such persons being a
"Pratt Family Member") own a majority of the voting power of the capital stock
of the surviving or resulting entity, (ii) a sale, lease, exchange or other
transfer of all or substantially all of the Company's assets, other than a sale,
lease, exchange or other transfer to a Pratt Family Member, (iii) the approval
by the Company's stockholders of a plan to dissolve or liquidate the Company,
unless such plan is approved by all of the Pratt Family Members who then own
capital stock of the Company, (iv) the termination of control of the Company by
directors in office as of effective date of the 1996 Plan and their successors
approved in accordance with the terms of the 1996 Plan, by virtue of their
ceasing to constitute a majority of the entire Board of Directors, (v) the
acquisition of beneficial ownership of 20% of the voting power of the Company's
outstanding voting securities by any person or group who beneficially owned less
than 10% of such voting power on the date the 1996 Plan was approved by the
Board of Directors or the acquisition of beneficial ownership of an additional
5% of the voting power of the Company's outstanding voting securities by any
person or group who beneficially owned at least 10% of such voting power as of
such date, in each case subject to certain exceptions, including acquisitions by
a Pratt Family Member or (vi) the appointment of a trustee in a bankruptcy
proceeding involving the Company.
If the Company makes a partial distribution of its assets in the
nature of a partial liquidation (except for certain cash dividends) then the
prices then in effect with respect to each outstanding award will be reduced in
proportion to the percentage reduction in the tangible book value of the shares
of the Company's Common Stock as a result of such distribution.
Stock options and restricted stock may also be granted under the 1996
Plan in substitution for stock options and restricted stock held by employees of
a corporation who become management employees of the Company or a subsidiary as
a result of a merger, consolidation or stock acquisition.
23
<PAGE>
Amendment of the 1996 Plan
The 1996 Plan provides that the Board of Directors may from time to
time discontinue or amend the 1996 Plan without the consent of the stockholders
unless stockholder approval is required by applicable law, rule or regulation.
The 1996 Plan also provides the Board of Directors with the power and authority,
subject to certain conditions, to amend the 1996 Plan in any manner advisable in
order for stock options to qualify for the exemption granted under Section 16b
(and any changes or amendments thereto) of the Exchange Act. In addition,
subject to certain conditions, if an amendment would adversely affect an
outstanding award, the consent of the participant holding that award must be
obtained.
Certain Federal Income Tax Aspects
Withholding. Withholding of Federal taxes at applicable rates will be
-----------
required in connection with any ordinary income realized by a participant by
reason of the exercise of awards granted pursuant to the 1996 Plan. A
participant must pay such taxes to the Company in cash or Common Stock prior to
the receipt of any Common Stock certificate.
Nonqualified Stock Options. The granting of a nonqualified stock
--------------------------
option will not result in Federal income tax consequences to either the Company
or the optionee. Upon exercise of a nonqualified stock option, the optionee
will recognize ordinary income in an amount equal to the difference between the
fair market value of the shares on the date of exercise and the exercise price,
and the Company will be entitled to a corresponding deduction.
For purposes of determining gain or loss realized upon a subsequent
sale or exchange of such shares, the optionee's tax basis will be the sum of the
exercise price paid and the amount of ordinary income, if any, recognized by the
optionee upon exercise of the option. Any gain or loss realized by an optionee
on disposition of such shares generally will be a long-term capital gain or loss
(if the shares are held as a capital asset for at least one year) and will not
result in any tax deduction to the Company. Long-term capital gains are
currently taxed at a maximum rate of 28% and short-term capital gains are
currently taxed as ordinary income. Ordinary income is currently taxed at five
rates, depending upon a taxpayer's income level: 15%, 28%, 31%, 36% and 39.6%.
Incentive Stock Options. In general, no income will be recognized by
-----------------------
an optionee and no deduction will be allowed to the Company at the time of the
grant or exercise of an incentive stock option granted under the 1996 Plan.
When the stock received on exercise of the option is sold, provided that the
stock is held for more than two years from the date of grant of the option and
more than one year from the date of exercise, the optionee will recognize long-
term capital gain or loss equal to the difference between the amount realized
and the exercise price of the option related to such stock. Long-term capital
gains are currently taxed at a maximum rate of 28% and short-term capital gains
are currently taxed as ordinary income. If these holding period requirements
under the Code are not satisfied, the sale of stock received upon exercise of an
incentive stock option is treated as a "disqualifying disposition", and the
optionee must notify the Company in writing of the date and terms of the
disqualifying disposition.
In general, the optionee will recognize at the time of a disqualifying
disposition ordinary income in an amount equal to the amount by which the lesser
of (i) the fair market value of the Common Stock on the date the incentive stock
option is exercised or (ii) the amount realized on such disqualifying
disposition, exceeds the exercise price. The optionee will also recognize
capital gain to the extent of any excess of the amount realized on such
disqualifying disposition over the fair market value of the Common Stock on the
date the incentive stock option is exercised (or capital loss to the extent of
any excess of the exercise price over the amount realized on disposition). Any
capital gain or loss recognized by the optionee will be long-term or short-term
depending upon the holding period for the stock sold. Long-term capital gains
are currently taxed at a maximum rate of 28% and short-term capital gains are
currently taxed as ordinary income. Ordinary
24
<PAGE>
income is currently taxed at five rates, depending upon a taxpayer's income
level: 15%, 28%, 31%, 36% and 39.6%. The Company may claim a deduction at the
time of the disqualifying disposition equal to the amount of the ordinary income
the optionee recognizes.
Although an optionee will not realize ordinary income upon the
exercise of an incentive stock option, the excess of the fair market value of
the shares acquired at the time of exercise over the option price is included in
"alternative minimum taxable income" for purposes of calculating the optionee's
alternative minimum tax, if any, pursuant to Section 55 of the Code.
Restricted Stock. A participant who receives a grant of restricted
----------------
stock will not recognize any taxable income for Federal income tax purposes in
the year of the award, provided the shares are subject to restrictions (that is,
they are nontransferable and subject to a substantial risk of forfeiture). If a
participant is subject to Section 16(b) of the Exchange Act on the date of the
award, the shares generally will be deemed to be subject to restrictions (in
addition to the restrictions imposed by the award) for at least six months
following the date of the award. However, the participant may elect under
Section 83(b) of the Code to recognize compensation income in the year of the
award in an amount equal to the fair market value of the shares on the date of
the award, determined without regard to the restrictions. If the participant
does not make a Section 83(b) election, the fair market value of the shares on
the date the restrictions lapse, less any amount paid by the participant for
such shares, will be treated as compensation income to the participant and will
be taxable in the year the restrictions lapse. The Company or one of its
subsidiaries generally will be entitled to a compensation deduction for the
amount of compensation income the participant recognizes.
Other Tax Matters. If unmatured installments of awards are
-----------------
accelerated as a result of a Change of Control (see "Adjustments" above), any
amounts received from the exercise by a participant of a stock option, the lapse
of restrictions on restricted stock or the deemed satisfaction of conditions of
performance awards may be included in determining whether or not a participant
has received an "excess parachute payment" under Section 280G of the Code, which
could result in (i) the imposition of a 20% Federal excise tax (in addition to
Federal income tax) payable by the participant on certain payments of Common
Stock or cash resulting from such exercise or deemed satisfaction of conditions
of performance awards or, in the case of restricted stock, on all or a portion
of the fair market value of the shares on the date the restrictions lapse and
(ii) the loss by the Company of a compensation deduction.
Vote Required
The affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
is required to adopt the 1996 Plan.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE
THE HOLLYWOOD CASINO CORPORATION 1996 LONG-TERM INCENTIVE PLAN.
PROPOSAL TO APPROVE THE HOLLYWOOD CASINO CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK PLAN
General
The Board of Directors of the Company adopted the Hollywood Casino
Corporation 1996 Non-Employee Director Stock Plan (the "Directors' Plan"),
effective as of June 12, 1996. The Directors' Plan is being submitted for
stockholder approval at this annual meeting, because under Rule 16b-3 of the
Exchange Act, stockholder approval is required to permit future stock option
grants to non-employee directors under the
25
<PAGE>
Directors' Plan to be exempt from the Securities and Exchange Commission
regulations on short-swing trading. These regulations provide that all profits
realized from a purchase and sale or a sale and purchase of a company's
securities within any six month period by a director, an officer or the owner of
more than 10% of any registered class of a company's capital stock must be
returned to the company. The receipt of an option grant is deemed to be a
purchase for the purposes of such regulations unless the option grant is exempt
under Rule 16b-3. An option grant that is not exempt must therefore be matched
with any sale of Common Stock to determine whether a short-swing profit was
earned. The lack of an exemption from the short-swing trading regulations for
an option grant could cause a new outside director inadvertently to violate the
short-swing trading rules by receiving an automatic grant under the Directors'
Plan, if such director had sold any shares of common stock of the Company during
the period beginning six months prior to, and ending six months after, the date
of the option grant. Even an inadvertent violation would cause a new non-
employee director to be required to return any short-swing profits to the
Company. The lack of an exemption thus could make it more difficult to attract
outside directors to the Company.
The Directors' Plan provides that each director who is not an employee
of the Company or any subsidiary of the Company (an "outside director") will
receive a nonqualified option to purchase 10,000 shares of Class A Common Stock
of the Company ("Common Stock") on the effective date of the Directors' Plan and
that each outside director who joins the Company's Board of Directors in the
future will receive a nonqualified option to purchase 10,000 shares of Common
Stock. Additionally, outside directors will receive a nonqualified option to
purchase 2,500 shares of Common Stock on January 15th of each year. On June 12,
1996, the Company granted options to purchase 10,000 shares of Common Stock to
the two outside directors of the Company, James A. Colquitt and Theodore H.
Strauss. Such options have an exercise price of $6.25 per share, which
represented the market value per share of the Common Stock on the date of grant.
These options are subject to stockholder approval of the Directors' Plan, vest
six months after the date of grant and will expire no later than ten years after
the date of grant. The last reported sale price as reported by Nasdaq on June
21, 1996 of the Common Stock was $6.50 per share. For a discussion of the
federal income tax consequences of the issuance of these options, please see
"Certain Federal Income Tax Aspects" below.
Additionally, an outside director may elect under the Directors' Plan
to take all or part of his or her retainer fee in the form of Common Stock based
on the market value of the Common Stock at the end of the applicable period for
which the retainer fee is being paid.
The provisions of the Directors' Plan are summarized below. All such
statements are qualified in their entirety by reference to the full text of the
Directors' Plan, which is attached hereto as Exhibit B.
The Directors' Plan is not subject to the provisions of ERISA. The
Directors' Plan is not a "qualified plan" within the meaning of Section 401 of
the Code. The Directors' Plan will terminate on June 12, 2006, and thereafter
no options may be granted thereunder. The Board of Directors may amend or
discontinue the Directors' Plan without the approval of the stockholders,
subject to certain limitations. See "Amendment of the Directors' Plan" below.
The holder of an option granted pursuant to the Directors' Plan does
not have any of the rights or privileges of a stockholder except with respect to
shares that have been actually issued. Nothing in the Directors' Plan or in any
option granted pursuant to the Directors' Plan may be construed as to create an
employer-employee relationship between the Company and the participant. The
proceeds from the sale of Common Stock pursuant to the exercise of options
granted under the Directors' Plan will be added to the general funds of the
Company and used for general corporate purposes.
26
<PAGE>
Purpose and Eligibility
Only outside directors of the Company are eligible to receive options
under the Directors' Plan. At the present time, this group of outside directors
consists of two members: James A. Colquitt and Theodore H. Strauss.
The purposes of the Directors' Plan are to attract outside directors
and to encourage performance by providing such persons with a proprietary
interest in the Company through the granting of stock options. The Directors'
Plan is designed to help achieve those purposes through the use of stock-based
compensation strategies that will attract and retain outside directors who can
contribute to the long-term success of the Company.
Administration of the Directors' Plan
The Directors' Plan shall be administered by the Plan Committee
appointed by the Company's Board of Directors. The current members of the Plan
Committee are James A. Colquitt and Theodore H. Strauss. Members of the Plan
Committee serve at the will of the Board and may be removed, with or without
cause, from the Plan Committee at any time at the Board's discretion.
The Plan Committee will make such rules and regulations as it deems
appropriate. Any interpretation, determination or other actions made or taken
by the Plan Committee will be final, binding and conclusive on all parties.
Stock Options
The maximum number of shares of Common Stock presently authorized for
issuance under the Directors' Plan is 150,000, subject to adjustment for stock
splits and similar events. Shares to be optioned and sold may be made available
from either authorized but unissued Common Stock or Common Stock held by the
Company in its treasury. If an option granted under the Directors' Plan
terminates or expires without having been exercised in full, the unexercised
shares subject to that option will be available for further grants of options
under the Directors' Plan.
All stock options granted under the Directors' Plan are designated as
stock options that are not intended to qualify for special tax treatment under
Section 422 of the Code ("nonqualified stock options"). See "Certain Federal
Income Tax Aspects" below. Each nonqualified stock option granted under the
Directors' Plan is required to be evidenced by a stock option agreement, which
sets forth the material terms and provisions of the stock option.
Under the Directors' Plan, an option to purchase 10,000 shares of
Common Stock was granted to each outside director of the Company as of June 12,
1996. Each person who becomes an outside director of the Company after that
date will automatically receive an option to purchase 10,000 shares of Common
Stock on the date that person becomes a director. Additionally, outside
directors will receive a nonqualified option to purchase 2,500 shares of Common
Stock on January 15th of each year. The exercise price for all stock options
granted under the Directors' Plan is 100% of the fair market value of the Common
Stock on the date of grant. The option period extends for ten years from the
date the option is granted, subject to earlier forfeiture in the event a
director ceases to serve as such. See "Restrictions" below.
On the date that the participant desires to exercise stock options,
the participant is required to deliver to the Company the total exercise price
of the shares to be purchased, in cash, or by means of a certified check, a bank
draft, a money order, or in Common Stock owned by the participant having a
market value equal to the exercise price, or by any other form of payment which
is acceptable to the Plan Committee. If
27
<PAGE>
the participant fails to pay for any of the option shares or fails to accept
delivery of those shares, the participant's right to purchase such shares may be
terminated by the Company.
Stock in Lieu of Retainer Fees
An outside director may elect under the Directors' Plan to take all or
part of his or her retainer fee in the form of Common Stock based on the market
value of the Common Stock at the end of the applicable period for which the
retainer fee is being paid. Generally, an election to receive stock in lieu of
a retainer fee must be made at least six months in advance and will be
irrevocable for six months after it is made.
Restrictions
The options granted and to be granted under the Directors' Plan are
not transferable or assignable other than by will or by the laws of descent and
distribution or pursuant to the terms of a qualified domestic relations order as
defined in the Code.
Stock options may be exercised at any time during the option period
after the expiration of six months from the date of grant. Upon termination of
the participant's service as a director with the Company and its subsidiaries
due to death or total and permanent disability, his or her option may be
exercised for a period of 12 months after such termination of service, unless
the expiration of the original option period is sooner. Total and permanent
disability is defined as the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or that has lasted or can be expected to
last for a continuous period for not less than 12 months. Upon the termination
of the participant's service as a director with the Company and its subsidiaries
by reason of retirement after attaining the Company's normal retirement age, he
or she may exercise such option for a period of three months after such
retirement.
In the event of a termination of a participant's service as a director
other than as a result of death, retirement after attaining the Company's normal
retirement age or total and permanent disability, the participant will forfeit
all previously vested and unexercised stock options on the 30th day after the
date of termination. In the event of termination of employment prior to the
date of such stockholder approval, however, this 30-day period will commence on
the date of such stockholder approval.
Common Stock received in lieu of a retainer fee is fully vested
upon receipt.
The Company is not required to sell or issue shares of Common Stock
under any stock option if the issuance of Common Stock would violate any
provisions of any law or regulation of any governmental authority or any
national securities exchange or other forum in which shares of Common Stock are
traded (including Section 16 of the Exchange Act). As a condition of any sale
or issuance of shares of Common Stock under a stock option, the Plan Committee
may require such agreements or undertakings, if any, as the Plan Committee may
deem necessary or advisable to assure compliance with any such law or
regulation.
Adjustments
The Directors' Plan provides that the number of shares issuable under
the Directors' Plan and upon exercise of outstanding options and the exercise
prices of such options are subject to such adjustments as are appropriate to
reflect any stock dividend, stock split, share combination, exchange of shares,
recapitalization or increase or decrease in shares of Common Stock without
receipt of consideration of or by the Company.
If the Company merges or consolidates, transfers all or substantially
all of its assets to another entity or dissolves or liquidates, then under
certain circumstances a holder of an option will be entitled to purchase the
equivalent number of shares of stock, other securities, cash or property that
the option holder would have
28
<PAGE>
been entitled to receive had he or she exercised his or her option immediately
prior to such event. Notwithstanding these adjustment provisions, all stock
options granted under the Directors' Plan may be canceled by the Company upon a
merger or consolidation of the Company in which the Company is not the surviving
or resulting corporation, or the reorganization, dissolution or liquidation of
the Company, subject to each optionee's right to exercise his or her option as
to the shares of Common Stock covered by that option for a period of 30 days
immediately preceding the effective date of such event.
Upon the occurrence of an event requiring adjustment of the exercise
price or shares issuable upon exercise, the Company is required to mail a copy
of its computation of the adjustment to all optionees, which will be binding on
each optionee.
If the Company makes a partial distribution of its assets in the
nature of a partial liquidation (except for certain cash dividends) then the
exercise prices then in effect with respect to each outstanding stock option
will be reduced in proportion to the percentage reduction in the tangible book
value of the shares of the Company's Common Stock as a result of such
distribution.
Amendment of the Directors' Plan
The Directors' Plan provides that the Board of Directors may from time
to time discontinue or amend the Directors' Plan without the consent of the
stockholders unless such discontinuance or amendment is required by applicable
law, rule or regulation. The Directors' Plan also provides the Board of
Directors with the power and authority, subject to certain conditions, to amend
the Directors' Plan in any manner advisable in order for stock options to
qualify for the exemption granted under Section 16b (and any changes or
amendments thereto) of the Exchange Act. In addition, subject to certain
conditions, if an amendment would adversely affect the holder of an outstanding
stock option or shares received under the Directors' Plan, the consent of the
participant holding that option must be obtained. The provisions of the
Directors' Plan governing the eligibility of participants and the amount, timing
and exercise price of options to be granted under the Directors' Plan cannot be
amended more than once every six months other than to comport with changes in
the Code, ERISA or rules thereunder.
Certain Federal Income Tax Aspects
The granting of a non-qualified stock option plan will not result in
federal income tax consequences to either the Company or the optionee. Upon
exercise of a non-qualified stock option, the optionee will recognize ordinary
income in an amount equal to the difference between the fair market value of the
shares on the date of exercise and the exercise price, and the Company will be
entitled to a corresponding deduction.
For purposes of determining gain or loss realized upon a subsequent
sale or exchange of such shares, the optionee's tax basis will be the sum of the
exercise price paid and the amount of ordinary income, if any, recognized by the
optionee upon exercise of the option. Any gain or loss realized by an optionee
on disposition of such shares generally will be a long-term capital gain or loss
(if the shares are held as a capital asset for at least one year) and will not
result in any tax deduction to the Company. Long-term capital gains are
currently taxed at a maximum rate of 28% and short-term capital gains are
currently taxed as ordinary income. Ordinary income is currently taxed at five
rates, depending upon a taxpayer's income level: 15%, 28%, 31%, 36% and 39.6%.
Withholding of federal taxes at applicable rates will be required in
connection with any ordinary income realized by an optionee by reason of the
exercise of stock options granted pursuant to the Directors' Plan. A
participant must pay such taxes to the Company in cash prior to the receipt of
any Common Stock certificate.
29
<PAGE>
Vote Required
The affirmative vote of the majority of shares present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
is required to adopt the Directors' Plan.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE
THE HOLLYWOOD CASINO CORPORATION 1996 NON-EMPLOYEE DIRECTOR STOCK PLAN.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee and subject to
ratification by the stockholders at the Annual Meeting, the Board of Directors
has appointed Arthur Andersen LLP ("Andersen") to serve as the independent
public accountants of the Company for its fiscal year ending December 31, 1996.
Andersen, which has served as the independent public accountants of the Company
since 1990, follows a policy of rotating the engagement partner every seven
years. Other partners and non-partner personnel are rotated on a periodic
basis. Representatives of Andersen are not expected to be present at the Annual
Meeting to make a statement or to respond to questions. If the appointment of
Andersen is not ratified by the stockholders, the Board of Directors will
appoint other independent public accountants based upon the recommendation of
the Audit Committee.
The affirmative vote of a majority of the votes cast on this proposal
shall constitute ratification of the appointment of Andersen.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL
YEAR 1996.
OTHER BUSINESS
The Board of Directors knows of no other business that may properly
be, or that is likely to be, brought before the Annual Meeting. If, however,
any other business should properly be presented to the Annual Meeting, the
persons named in the accompanying Proxy will vote the Proxy as in their
discretion they may deem desirable.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, stockholders may present proposals for inclusion in the Company's proxy
statement for consideration at its Annual Meeting of Stockholders by submitting
proposals to the Company in a timely manner. In order to be so included for the
1997 Annual Meeting, stockholder proposals must be received by the Company by
January 3, 1997, and must otherwise comply with the requirements of Rule 14a-8.
30
<PAGE>
COPIES OF THE ANNUAL REPORT ON FORM 10-K
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
The Annual Report covering the Company's year ended December 31, 1995,
including audited financial statements, is enclosed herewith. The Annual Report
does not form any part of the materials for the solicitation of Proxies. A copy
of the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission without exhibits will be sent without change to any
shareholder upon written request. Such exhibits are listed in Part III of Form
10-K, and the Company will furnish, for a minimal charge, any such exhibit to
each stockholder upon written request. Written requests for the Form 10-K or
exhibits thereto should be directed to Investor Relations, Hollywood Casino
Corporation, Two Galleria Tower, Suite 2200, 13455 Noel Road, LB 48, Dallas,
Texas 75240.
BY ORDER OF THE BOARD OF DIRECTORS
William D. Pratt, Secretary
July 3, 1996
Dallas, Texas
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO
DO NOT EXPECT TO ATTEND THE ANNUAL MEETING AND WISH THEIR STOCK TO BE VOTED ARE
URGED TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-
ADDRESSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
31
<PAGE>
Exhibit A
HOLLYWOOD CASINO CORPORATION
1996 LONG-TERM INCENTIVE PLAN
-----------------------------
The Hollywood Casino Corporation 1996 Long-Term Incentive Plan
(hereinafter called the "Plan") was adopted by the Board of Directors of
----
Hollywood Casino Corporation, a Delaware corporation (hereinafter called the
"Company"), effective as of June 12, 1996, and was approved by the Company's
- --------
stockholders on ______________, 1996.
ARTICLE 1
PURPOSE
-------
The purpose of the Plan is to attract and retain key management
employees of the Company and its Subsidiaries and to provide such persons with a
proprietary interest in the Company through the granting of incentive stock
options, non-qualified stock options or restricted stock, whether granted singly
or in combination, that will
(a) increase the interest of such persons in
the Company's welfare;
(b) furnish an incentive to such persons to continue their
services for the Company; and
(c) provide a means through which the Company may attract able
persons as employees.
ARTICLE 2
DEFINITIONS
-----------
For the purpose of the Plan, unless the context requires otherwise,
the following terms shall have the meanings indicated:
2.1 "Act" means the Illinois Act, the Mississippi Act, the New Jersey
Act, and any other gaming laws to which the Company is or may be subject.
2.2 "Award" means the grant of any Incentive Stock Option, Non-
qualified Stock Option or Restricted Stock, whether granted singly or in
combination (each individually referred to herein as an "Incentive").
2.3 "Award Agreement" means a written agreement between a Participant
and the Company which sets out the terms of the grant of an Award.
2.4 "Award Period" means the period during
which one or more Incentives granted under an Award may be exercised.
2.5 "Board" means the board of directors of the Company.
2.6 "Change of Control" means any of the following: (i) any
consolidation, merger or share exchange of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which shares of the
Company's Common Stock would be converted into cash, securities or other
property, other than a consolidation, merger or share exchange of the Company in
which the holders of the Company's Common Stock immediately prior to such
transaction have the same proportionate ownership of Common
1
<PAGE>
Stock of the surviving corporation immediately after such transaction or in
which a Pratt Family Member owns a majority of the combined total voting power
of each class of capital stock of the surviving or resulting corporation; (ii)
any sale, lease, exchange or other transfer (excluding transfer by way of pledge
or hypothecation) in one transaction or a series of related transactions, of all
or substantially all of the assets of the Company other than a sale, lease,
exchange or transfer to a Pratt Family Member; (iii) the stockholders of the
Company approve any plan or proposal for the liquidation or dissolution of the
Company unless such liquidation or dissolution is approved by all of the Pratt
Family Members who then own or hold beneficially or of record any shares of
capital stock of the Company; (iv) the cessation of control (by virtue of their
not constituting a majority of directors) of the Board by the individuals (the
"Continuing Directors") who (x) at the date of this Plan were directors or (y)
become directors after the date of this Plan and whose election or nomination
for election by the Company's stockholders, was approved by a vote of at least
two-thirds of the directors then in office who were directors at the date of
this Plan or whose election or nomination for election was previously so
approved; (v) the acquisition of beneficial ownership (within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "1934
Act")) of an aggregate of 20% of the voting power of the Company's outstanding
voting securities by any person or group (as such term is used in Rule 13d-5
under the 1934 Act) [who beneficially owned less than 10% of the voting power of
the Company's outstanding voting securities on the date of this Plan, or the
acquisition of beneficial ownership of an additional 5% of the voting power of
the Company's outstanding voting securities by any person or group who
beneficially owned at least 10% of the voting power of the Company's outstanding
voting securities on the date of this Plan], provided, however, that
-------- -------
notwithstanding the foregoing, an acquisition shall not constitute a Change of
Control hereunder if the acquiror is (w) a Pratt Family Member, (x) a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
and acting in such capacity, (y) a Subsidiary of the Company or a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of voting securities of
the Company or (z) any other person whose acquisition of shares of voting
securities is approved in advance by a majority of the Continuing Directors; or
(vi) in a Title 11 bankruptcy proceeding, the appointment of a trustee or the
conversion of a case involving the Company to a case under Chapter 7.
2.7 "Code" means the Internal Revenue Code of 1986, as amended.
2.8 "Commission" means the Illinois Commission, the Mississippi
Commission, the New Jersey Commission, and any other similar gaming entity to
which the Company is or may be, subject in the future.
2.9 "Committee" means the committee appointed or designated by the
Board to administer the Plan in accordance with Article 3 of this Plan.
2.10 "Common Stock" means the Class A Common Stock which the Company
is currently authorized to issue or may in the future be authorized to issue.
2.11 "Company" means Hollywood Casino Corporation, a Delaware
corporation, and any successor entity.
2.12 "Date of Grant" means the effective date on which an Award is
made to a Participant as set forth in the applicable Award Agreement; provided,
however, that solely for purposes of Section 16 of the 1934 Act and the rules
and regulations promulgated thereunder, the Date of Grant of an Award shall be
the date of stockholder approval of the Plan if such date is later than the
effective date of such Award as set forth in the Award Agreement.
2.13 "Employee" means common law employee (as defined in accordance
with the Regulations and Revenue Rulings then applicable under Section 3401(c)
of the Code) of the Company or any Subsidiary of the Company.
2
<PAGE>
2.14 "Fair Market Value" of a share of Common Stock means (i) the
closing price per share on any stock exchange on which the Common Stock is
traded, (ii) the mean between the closing or average (as the case may be) bid
and asked prices per share of Common Stock on the over-the-counter market or
(iii) as determined by the Committee if the Common Stock is not traded on an
exchange or quoted on an over-the-counter market, whichever is applicable.
2.15 "Illinois Act" means the Illinois Riverboat Gambling Act, Ill.
Rev. Stat. ch. 120, Paragraph 2401 et seq., as amended, and the regulations
-- ---
promulgated and rulings issued thereunder, and any other Illinois statute
regulating gaming activity.
2.16 "Illinois Commission" means the Illinois Gaming Board
established pursuant to Section 5 of the Illinois Act.
2.17 "Incentive Stock Option" or "ISO" means an incentive stock
option within the meaning of Section 422 of the Code, granted pursuant to this
Plan.
2.18 "Mississippi Act" means the Mississippi Gaming Control Act, as
amended and the regulations promulgated and rulings issued thereunder, and any
other Mississippi statute regulating gaming activity.
2.19 "Mississippi Commission" means the Mississippi Gaming Commission
established pursuant to the Mississippi Act.
2.20 "New Jersey Act" means the New Jersey Casino Control Act, N.J.
Stat. Ann. 5:12 1, et seq., as amended, and the regulations promulgated and
-- ---
rulings issued thereunder, and any other New Jersey statute regulating gaming
activity.
2.21 "New Jersey Commission" means the New Jersey Casino Control
Commission.
2.22 "Non-qualified Stock Option" or "NQSO" means a non-qualified
stock option, granted pursuant to this Plan.
2.23 "Option Price" means the price which must be paid by a
Participant upon exercise of a Stock Option to purchase a share of Common Stock.
2.24 "Participant" shall mean an Employee of the Company or a
Subsidiary to whom an Award is granted under this Plan.
2.25 "Plan" means this Hollywood Casino Corporation 1996 Long-Term
Incentive Plan, as amended from time to time.
2.26 "Pratt Family Member" means Jack E. Pratt, Edward T. Pratt, Jr.,
William D. Pratt, or any affiliate or associate (as such terms are defined in
Rule 12b-2 promulgated under the 1934 Act) of any of those persons.
2.27 "Restricted Stock" means shares of Common Stock issued or
transferred to a Participant pursuant to this Plan which are subject to
restrictions or limitations set forth in this Plan and in the related Award
Agreement.
2.28 "Retirement" means any Termination of Service pursuant to the
terms of any pension plan or policy of the Company which is applicable to such
Participant at the time of his or her Termination of Service, or if no such plan
or policy exists, the attainment of either (i) age 65, or (ii) age 55 and the
completion of 10 full years of service with the Company.
3
<PAGE>
2.29 "Stock Option" means a Non-qualified Stock Option or an
Incentive Stock Option.
2.30 "Subsidiary" means (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing a majority of
the total combined voting power of all classes of stock in one of the other
corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general
partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and
(iii) any partnership, if the partners thereof are composed only of the Company,
any corporation listed in item (i) above or any limited partnership listed in
item (ii) above. "Subsidiaries" means more than one of any such corporations,
limited partnerships or partnerships.
2.31 "Termination of Service" occurs when a Participant who is an
Employee of the Company or any Subsidiary shall cease to serve as an Employee of
the Company and its Subsidiaries, for any reason.
2.32 "Total and Permanent Disability" means a Participant is
qualified for long-term disability benefits under the Company's disability plan
or insurance policy; or, if no such plan or policy is then in existence, that
the Participant, because of ill health, physical or mental disability or any
other reason beyond his or her control, is unable to perform his or her duties
of employment for a period of six (6) continuous months, as determined in good
faith by the Committee.
ARTICLE 3
ADMINISTRATION
--------------
The Plan shall be administered by a committee appointed by the Board
(the "Committee"). The Committee shall consist of not fewer than two persons.
Any member of the Committee may be removed at any time, with or without cause,
by resolution of the Board. Any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board.
Membership on the Committee shall be limited to those members of the
Board who are disinterested persons under Rule 16b-3(c) promulgated pursuant to
the 1934 Act. The Committee shall select one of its members to act as its
Chairman. A majority of the Committee shall constitute a quorum, and the act of
a majority of the members of the Committee present at a meeting at which a
quorum is present shall be the act of the Committee.
The Committee shall determine and designate from time to time the
eligible persons to whom Awards will be granted and shall set forth in each
related Award Agreement the Award Period, the Date of Grant, and such other
terms, provisions, limitations, and performance requirements, as are approved by
the Committee, but not inconsistent with the Plan. The Committee shall
determine whether an Award shall include one type of Incentive or two or more
Incentives granted in combination.
The Committee, in its discretion, shall (i) interpret the Plan, (ii)
prescribe, amend, and rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and (iii) make such other determinations and
take such other action as it deems necessary or advisable in the administration
of the Plan. Any interpretation, determination, or other action made or taken by
the Committee shall be final, binding, and conclusive on all interested parties.
ARTICLE 4
ELIGIBILITY
-----------
Any Employee (including an Employee who is also a director or an
officer) whose judgment, initiative, and efforts contributed or may be expected
to contribute to the successful performance of the
4
<PAGE>
Company is eligible to participate in the Plan. Non-employee directors shall
not be eligible to participate in the Plan. The Committee, upon its own action,
may grant, but shall not be required to grant, an Award to any Employee of the
Company or any Subsidiary. Awards may be granted by the Committee at any time
and from time to time to new Participants, or to then Participants, or to a
greater or lesser number of Participants, and may include or exclude previous
Participants, as the Committee shall determine. Except as required by this
Plan, Awards granted at different times need not contain similar provisions.
The Committee's determinations under the Plan (including without limitation
determinations of which Employees, if any, are to receive Awards, the form,
amount and timing of such Awards, the terms and provisions of such Awards and
the agreements evidencing same) need not be uniform and may be made by it
selectively among Employees who receive, or are eligible to receive, Awards
under the Plan.
ARTICLE 5
SHARES SUBJECT TO PLAN
----------------------
The maximum number of shares of Common Stock that may be issued
pursuant to Awards granted under the Plan is three million (3,000,000) (as may
be adjusted in accordance with Articles 13 and 14 hereof). Shares to be issued
may be made available from either authorized but unissued Common Stock or Common
Stock held by the Company in its treasury. Shares of Common Stock previously
subject to Awards which are forfeited, terminated, settled in cash in lieu of
Common Stock, or exchanged for Awards that do not involve Common Stock, or
expired unexercised, shall immediately become available for Awards under the
Plan.
During the term of this Plan, the Company will at all times reserve
and keep available the number of shares of Common Stock that shall be sufficient
to satisfy the requirements of this Plan.
ARTICLE 6
GRANT OF AWARDS
---------------
6.1 In General. The grant of an Award shall be authorized by the
Committee and shall be evidenced by an Award Agreement setting forth the
Incentive or Incentives being granted, the total number of shares of Common
Stock subject to the Incentive(s), the Option Price (if applicable), the Award
Period, the Date of Grant, and such other terms, provisions, limitations, and
performance objectives, as are approved by the Committee, but not inconsistent
with the Plan. The Company shall execute an Award Agreement with a Participant
after the Committee approves the issuance of an Award. Any Award granted
pursuant to this Plan must be granted within ten (10) years of the date of
adoption of this Plan. The Plan shall be submitted to the Company's stockholders
for approval; however, the Committee may grant Awards under the Plan prior to
the time of stockholder approval. Any such options granted prior to such
stockholder approval shall be made subject to such stockholder approval. The
grant of an Award to a Participant shall not be deemed either to entitle the
Participant to, or to disqualify the Participant from, receipt of any other
Award under the Plan.
If the Committee establishes a purchase price for an Award, the
Participant must accept such Award within a period of 30 days (or such shorter
period as the Committee may specify) after the Date of Grant by executing the
applicable Award Agreement and paying such purchase price.
6.2 Maximum ISO Grants. The Committee may not grant Incentive Stock
Options under the Plan to any Employee which would permit the aggregate Fair
Market Value (determined on the Date of Grant) of the Common Stock with respect
to which Incentive Stock Options (under this and any other plan of the Company
and its Subsidiaries) are exercisable for the first time by such Employee during
any calendar year to exceed $100,000. To the extent any Stock Option granted
under this Plan which is designated as an Incentive Stock Option exceeds this
limit, such Stock Option shall be a Non-qualified Stock Option.
5
<PAGE>
6.3 Maximum Individual Grants. No Participant may receive during any
fiscal year of the Company Awards covering an aggregate of more than one hundred
fifty thousand (150,000) shares of Common Stock.
6.4 Restricted Stock. If Restricted Stock is granted to a
Participant under an Award, the Committee shall set forth in the related Award
Agreement: (i) the number of shares of Common Stock awarded, (ii) the price, if
any, to be paid by the Participant for such Restricted Stock, (iii) the time or
times within which such Award may be subject to forfeiture, (iv) specified
performance goals, or other criteria, which the Committee determines must be met
in order to remove any restrictions (including vesting) on such Award, and (v)
all other terms, limitations, restrictions, and conditions of the Restricted
Stock, which shall be consistent with this Plan. The provisions of Restricted
Stock need not be the same with respect to each Participant.
(a) Legend on Shares. Each Participant who is awarded Restricted
Stock shall be issued a stock certificate or certificates in respect of such
shares of Common Stock. Such certificate(s) shall be registered in the name of
the Participant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Restricted Stock, substantially
as provided in Section 17.10 of the Plan. The Committee may require that the
stock certificates evidencing shares of Restricted Stock be held in custody by
the Company until the restrictions thereon shall have lapsed, and that the
Participant deliver to the Committee a stock power or stock powers, endorsed in
blank, relating to the shares of Restricted Stock.
(b) Restrictions and Conditions. Shares of Restricted Stock shall be
subject to the following restrictions and conditions:
(i) Subject to the other provisions of this Plan and the terms of
the particular Award Agreements, during such period as may be
determined by the Committee commencing on the Date of Grant (the
"Restriction Period"), the Participant shall not be permitted to sell,
transfer, pledge or assign shares of Restricted Stock. Except for
these limitations, the Committee may in its sole discretion, remove
any or all of the restrictions on such Restricted Stock whenever it
may determine that, by reason of changes in applicable laws or other
changes in circumstances arising after the date of the Award, such
action is appropriate. If the Restricted Stock is held by an insider
(as defined in Section 8.2 of the Plan), the Restriction Period shall
be at least six months from the Date of Grant.
(ii) Except as provided in sub-paragraph (i) above, the
Participant shall have, with respect to his or her Restricted Stock,
all of the rights of a stockholder of the Company, including the right
to vote the shares, and the right to receive any dividends thereon.
Certificates for shares of Common Stock free of restriction under this
Plan shall be delivered to the Participant promptly after, and only
after, the Restriction Period shall expire without forfeiture in
respect of such shares of Common Stock. Certificates for the shares of
Common Stock forfeited under the provisions of the Plan and the
applicable Award Agreement shall be promptly returned to the Company
by the forfeiting Participant. Each Award Agreement shall require that
(x) each Participant, by his or her acceptance of Restricted Stock,
shall irrevocably grant to the Company a power of attorney to transfer
any shares so forfeited to the Company and agrees to execute any
documents requested by the Company in connection with such forfeiture
and transfer, and (y) such provisions regarding returns and transfers
of stock certificates with respect to forfeited shares of Common Stock
shall be specifically performable by the Company in a court of equity
or law.
(iii) The Restriction Period of Restricted Stock shall commence
on the Date of Grant and, subject to paragraph (d) of Article 14 of
the Plan, unless otherwise established by the Committee in the Award
Agreement setting forth the terms of the Restricted Stock, shall
expire upon satisfaction of the conditions set forth in the Award
Agreement; such conditions may provide for vesting based on (i) length
of continuous service, (ii) achievement of specific business
objectives, (iii) increases in
6
<PAGE>
specified indices, (iv) attainment of specified growth rates, or (v)
other comparable measurements of Company performance, as may be
determined by the Committee in its sole discretion.
(iv) Subject to the provisions of the particular Award Agreement,
upon Termination of Service for any reason during the Restriction
Period, the nonvested shares of Restricted Stock shall be forfeited by
the Participant. In the event a Participant has paid any consideration
to the Company for such forfeited Restricted Stock, the Company shall,
as soon as practicable after the event causing forfeiture (but in any
event within 5 business days), pay to the Participant, in cash, an
amount equal to the total consideration paid by the Participant for
such forfeited shares. Upon any forfeiture, all rights of a
Participant with respect to the forfeited shares of the Restricted
Stock shall cease and terminate, without any further obligation on the
part of the Company.
ARTICLE 7
OPTION PRICE
------------
The Option Price for any share of Common Stock which may be purchased
under a Stock Option shall be at least One Hundred Percent (100%) of the Fair
Market Value of the share on the Date of Grant. If an Incentive Stock Option is
granted to an Employee who owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company (or any parent or
Subsidiary), the Option Price shall be at least 110% of the Fair Market Value of
the Common Stock on the Date of Grant.
ARTICLE 8
AWARD PERIOD; VESTING
---------------------
8.1 Award Period. Subject to the other provisions of this Plan, the
Committee may, in its discretion, provide that an Incentive may not be exercised
in whole or in part for any period or periods of time or beyond any date
specified in the Award Agreement. Except as provided in the Award Agreement, an
Incentive may be exercised in whole or in part at any time during its term. The
Award Period for an Incentive shall be reduced or terminated upon Termination of
Service in accordance with this Article 8 and Article 9. No Incentive granted
under the Plan may be exercised at any time after the end of its Award Period.
No portion of any Incentive may be exercised after the expiration of ten (10)
years from its Date of Grant. However, if an Employee owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more than 10%
of the combined voting power of all classes of stock of the Company (or any
parent or Subsidiary) and an Incentive Stock Option is granted to such Employee,
the term of such Incentive Stock Option (to the extent required by the Code at
the time of grant) shall be no more than five (5) years from the Date of Grant.
8.2 Vesting. The Committee, in its sole discretion, may determine
that an Incentive will be immediately exercisable, in whole or in part, or that
all or any portion may not be exercised until a date, or dates, subsequent to
its Date of Grant, or until the occurrence of one or more specified events,
subject in any case to the terms of the Plan. If the Committee imposes
conditions upon exercise, then subsequent to the Date of Grant, the Committee
may, in its sole discretion, accelerate the date on which all or any portion of
the Incentive may be exercised. Notwithstanding anything in the Plan to the
contrary, a participant who is a director, executive officer or 10% or greater
stockholder of the Company under Section 16 of the 1934 Act and the rules
promulgated thereunder (an "insider") cannot exercise a Stock Option until at
least six months have expired from the Date of Grant.
7
<PAGE>
ARTICLE 9
TERMINATION OF SERVICE
----------------------
In the event of Termination of Service of a Participant, a Stock
Option may only be exercised as determined by the Committee and provided in the
Award Agreement.
ARTICLE 10
EXERCISE OF INCENTIVE
---------------------
10.1 In General. A vested Incentive may be exercised during its
Award Period, subject to limitations and restrictions set forth therein and in
Article 9. A vested Incentive may be exercised at such times and in such
amounts as provided in this Plan and the applicable Award Agreement, subject to
the terms, conditions, and restrictions of the Plan.
In no event may an Incentive be exercised or shares of Common Stock be
issued pursuant to an Award if a necessary listing of the shares of Common Stock
on a stock exchange or any registration under state or federal securities laws
required under the circumstances has not been accomplished. No Incentive may be
exercised for a fractional share of Common Stock. The granting of an Incentive
shall impose no obligation upon the Participant to exercise that Incentive.
Subject to such administrative regulations as the Committee may from
time to time adopt, a Stock Option may be exercised by the delivery of written
notice to the Committee setting forth the number of shares of Common Stock with
respect to which the Stock Option is to be exercised and the date of exercise
thereof (the "Exercise Date") which shall be at least three (3) days after
giving such notice unless an earlier time shall have been mutually agreed upon.
On the Exercise Date, the Participant shall deliver to the Company consideration
with a value equal to the total Option Price of the shares to be purchased,
payable as follows: (a) cash, certified check, bank draft, or money order
payable to the order of the Company, (b) Common Stock (including Restricted
Stock), valued at its Fair Market Value on the Exercise Date, and/or (c) any
other form of payment which is acceptable to the Committee. In the event that
shares of Restricted Stock are tendered as consideration for the exercise of a
Stock Option, a number of shares of Common Stock issued upon the exercise of the
Stock Option equal to the number of shares of Restricted Stock used as
consideration therefor, shall be subject to the same restrictions as the
Restricted Stock so submitted. Common Stock which is acquired by the
Participant pursuant to the exercise of a Stock Option may not be used to
exercise a subsequent Stock Option until and unless such shares have been held
for a period of six months.
Upon payment of all amounts due from the Participant, the Company
shall cause certificates for the Common Stock then being purchased to be
delivered to the Participant (or the person exercising the Participant's Stock
Option in the event of his death) at its principal business office promptly
after the Exercise Date; provided that the Participant has exercised an
Incentive Stock Option, the Company may at its option retain physical possession
of the certificate evidencing the shares acquired upon exercise until the
expiration of the holding periods described in Section 422(a)(1) of the Code.
The obligation of the Company to deliver shares of Common Stock shall, however,
be subject to the condition that if at any time the Committee shall determine in
its discretion that the listing, registration, or qualification of the Stock
Option or the Common Stock upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the Stock
Option or the issuance or purchase of shares of Common Stock thereunder, the
Stock Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent, or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
If the Participant fails to pay for any of the Common Stock specified
in such notice or fails to accept delivery thereof, the Participant's right to
purchase such Common Stock may be terminated by the Company.
8
<PAGE>
10.2 Disqualifying Disposition of ISO. If shares of Common Stock
acquired upon exercise of an Incentive Stock Option are disposed of by a
Participant prior to the expiration of either two (2) years from the Date of
Grant of such Stock Option or one (1) year from the transfer of shares of Common
Stock to the Participant pursuant to the exercise of such Stock Option, or in
any other disqualifying disposition within the meaning of Section 422 of the
Code, such Participant shall notify the Company in writing of the date and terms
of such disposition. A disqualifying disposition by a Participant shall not
affect the status of any other Stock Option granted under the Plan as an
Incentive Stock Option within the meaning of Section 422 of the Code.
ARTICLE 11
AMENDMENT OR DISCONTINUANCE
---------------------------
Subject to the limitations set forth in this Article 11, the Board may
at any time and from time to time, without the consent of the Participants,
alter, amend, revise, suspend, or discontinue the Plan in whole or in part;
provided, however, that no amendment which requires stockholder approval in
order for the Plan to continue to comply with Rule 16b-3 under the 1934 Act and
Section 162(m) of the Code, including any successors to such Rule and Section,
shall be effective unless such amendment shall be approved by the requisite vote
of the stockholders of the Company entitled to vote thereon.
Subject to the forgoing, the Board shall have the power and authority
to amend the Plan in any manner advisable in order for Stock Options granted
under the Plan to qualify for the exemption provided by Rule 16b-3 (or any
successor rule relating to exemption from Section 16(b) of the 1934 Act) or to
qualify as "performance-based" compensation under Section 162(m) of the Code
(including amendments as a result of changes to Rule 16b-3 or Section 162(m) or
the regulations thereunder to permit greater flexibility with respect to Stock
Options granted under the Plan), and any such amendment shall, to the extent
deemed necessary or advisable by the Committee, be applicable to any outstanding
Stock Options theretofore granted under the Plan, notwithstanding any contrary
provisions contained in any stock option agreement. In the event of any such
amendment to the Plan, the holder of any Stock Option outstanding under the Plan
shall, upon request of the Committee and as a condition to the exercisability
thereof, execute a conforming amendment in the form prescribed by the Committee
to any stock option agreement relating thereto within such reasonable time as
the Committee shall specify in such request. Notwithstanding anything contained
in this Plan to the contrary, unless required by law, no action contemplated or
permitted by this Article 11 shall adversely affect any rights of Participants
or obligations of the Company to Participants with respect to any Stock Options
theretofore granted under the Plan without the consent of the affected
Participant.
ARTICLE 12
TERM
----
The Plan shall be effective from the date that this Plan is approved
by the Board. Unless sooner terminated by action of the Board, the Plan will
terminate on June 12, 2006, but Incentives granted before that date will
continue to be effective in accordance with their terms and conditions.
ARTICLE 13
CAPITAL ADJUSTMENTS
-------------------
If at any time while the Plan is in effect, or unexercised Stock
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding shares of Common Stock resulting from (1) the
declaration or payment of a stock dividend, (2) any recapitalization resulting
in a stock split-up, combination, or exchange of shares of Common Stock, or (3)
other increase or decrease in such shares of Common Stock effected without
receipt of consideration by the Company, then and in such event:
(i) An appropriate adjustment shall be made in the maximum number
of shares of Common Stock then subject to being awarded under the Plan
and in the maximum number of shares
9
<PAGE>
of Common Stock then subject to being awarded to a Participant, to the
end that the same proportion of the Company's issued and outstanding
shares of Common Stock shall continue to be subject to being so
awarded; and
(ii) Appropriate adjustments shall be made in the number of
shares of Common Stock and the Option Price thereof then subject to
purchase pursuant to each such Stock Option previously granted and
unexercised, to the end that the same proportion of the Company's
issued and outstanding shares of Common Stock in each such instance
shall remain subject to purchase at the same aggregate Option Price.
Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of or Option Price of shares of Common Stock
then subject to outstanding Stock Options granted under the Plan.
Upon the occurrence of each event requiring an adjustment with respect
to any Stock Option, the Company shall mail to each affected Participant its
computation of such adjustment which shall be conclusive and shall be binding
upon each such Participant.
ARTICLE 14
RECAPITALIZATION, MERGER AND
CONSOLIDATION; CHANGE IN CONTROL
--------------------------------
(a) The existence of this Plan and Incentives granted hereunder shall
not affect in any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations, reorganizations, or
other changes in the Company's capital structure and its business, or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred or
preference stocks ranking prior to or otherwise affecting the Common Stock or
the rights thereof (or any rights, options, or warrants to purchase same), or
the dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
(b) Subject to any required action by the stockholders, if the Company
shall be the surviving or resulting corporation in any merger, consolidation or
share exchange, any Incentive granted hereunder shall pertain to and apply to
the securities or rights (including cash, property, or assets) to which a holder
of the number of shares of Common Stock subject to the Incentive would have been
entitled.
(c) In the event of any merger, consolidation or share exchange
pursuant to which the Company is not the surviving or resulting corporation,
there shall be substituted for each share of Common Stock subject to the
unexercised portions of such outstanding Incentives, that number of shares of
each class of stock or other securities or that amount of cash, property, or
assets of the surviving, resulting or consolidated company which were
distributed or distributable to the stockholders of the Company in respect to
each share of Common Stock held by them, such outstanding Incentives to be
thereafter exercisable for such stock, securities, cash, or property in
accordance with their terms. Notwithstanding the foregoing, however, all such
Incentives may be cancelled by the Company as of the effective date of any such
reorganization, merger, consolidation, share exchange or any dissolution or
liquidation of the Company by giving notice to each holder thereof or his
personal representative of its intention to do so and by permitting the purchase
during the thirty (30) day period next preceding such effective date of all of
the shares of Common Stock subject to such outstanding Incentives.
10
<PAGE>
(d) In the event of a Change of Control, then, notwithstanding any
other provision in this Plan to the contrary, all unmatured installments of
Incentives outstanding shall thereupon automatically be accelerated and
exercisable in full and all Restriction Periods applicable to Awards of
Restricted Stock shall automatically expire. The determination of the Committee
that any of the foregoing conditions has been met shall be binding and
conclusive on all parties.
ARTICLE 15
LIQUIDATION OR DISSOLUTION
--------------------------
In case the Company shall, at any time while any Incentive under this
Plan shall be in force and remain unexpired, (i) sell all or substantially all
of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each
Participant may thereafter receive upon exercise of a Stock Option (in lieu of
each share of Common Stock of the Company which such Participant would have been
entitled to receive) the same kind and amount of any securities or assets as may
be issuable, distributable, or payable upon any such sale, dissolution,
liquidation, or winding up with respect to each share of Common Stock of the
Company. If the Company shall, at any time prior to the expiration of any Stock
Option, make any partial distribution of its assets, in the nature of a partial
liquidation, whether payable in cash or in kind (but excluding the distribution
of a cash dividend payable out of earned surplus and designated as such) then in
such event the Option Prices then in effect with respect to each Stock Option
shall be reduced, on the payment date of such distribution, in proportion to the
percentage reduction in the tangible book value of the shares of the Company's
Common Stock (determined in accordance with generally accepted accounting
principles) resulting by reason of such distribution.
ARTICLE 16
INCENTIVES IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER CORPORATIONS
----------------------------------------
Incentives may be granted under the Plan from time to time in
substitution for similar instruments held by employees of a corporation who
become or are about to become management Employees of the Company or any
Subsidiary as a result of a merger or consolidation of the employing corporation
with the Company or the acquisition by the Company of stock of the employing
corporation. The terms and conditions of the substitute Incentives so granted
may vary from the terms and conditions set forth in this Plan to such extent as
the Board at the time of grant may deem appropriate to conform, in whole or in
part, to the provisions of the Incentives stock appreciation right in
substitution for which they are granted.
ARTICLE 17
MISCELLANEOUS PROVISIONS
------------------------
17.1 Investment Intent. The Company may require that there be
presented to and filed with it by any Participant under the Plan, such evidence
as it may deem necessary to establish that the Incentives granted or the shares
of Common Stock to be purchased or transferred are being acquired for investment
and not with a view to their distribution.
17.2 No Right to Continued Employment. Neither the Plan nor any
Incentive granted under the Plan shall confer upon any Participant any right
with respect to continuance of employment by the Company or any Subsidiary.
17.3 Indemnification of Board and Committee. No member of the Board
or the Committee, nor any officer or Employee of the Company acting on behalf of
the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each and any officer or
employee of the
11
<PAGE>
Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination, or interpretation.
17.4 Effect of the Plan. Neither the adoption of this Plan nor any
action of the Board or the Committee shall be deemed to give any person any
right to be granted an Award or any other rights except as may be evidenced by
an Award Agreement, or any amendment thereto, duly authorized by the Committee
and executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.
17.5 Compliance With Other Laws and Regulations. Notwithstanding
anything contained herein to the contrary, the Company shall not be required to
sell or issue shares of Common Stock under any Incentive if the issuance thereof
would constitute a violation by the Participant or the Company of any provisions
of any law or regulation of any governmental authority or any national
securities exchange or other forum in which shares of Common Stock are traded
(including without limitation any gaming laws or Section 16 of the 1934 Act);
and, as a condition of any sale or issuance of shares of Common Stock under an
Incentive, the Committee may require such agreements or undertakings, if any, as
the Committee may deem necessary or advisable to assure compliance with any such
law or regulation. The Plan, the grant and exercise of Incentives hereunder,
and the obligation of the Company to sell and deliver shares of Common Stock,
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.
17.6 Tax Requirements. The Company shall have the right to deduct
from all amounts hereunder paid in cash or other form, any Federal, state, or
local taxes required by law to be withheld with respect to such payments. The
Participant receiving shares of Common Stock issued under the Plan shall be
required to pay the Company the amount of any taxes which the Company is
required to withhold with respect to such shares of Common Stock. Such payments
shall be required to be made prior to the delivery of any certificate
representing such shares of Common Stock. Such payment may be made in cash, by
check, or through the delivery of shares of Common Stock owned by the
Participant (which may be effected by the actual delivery of shares of Common
Stock by the Participant or, if the Participant is not an insider (as defined in
Section 8.2 of the Plan), by the Company's withholding a number of shares to be
issued upon the exercise of a Stock Option, if applicable), which shares have an
aggregate Fair Market Value equal to the required minimum withholding payment,
or any combination thereof.
17.7 Non-Assignability. An Incentive granted to a Participant may
not be transferred or assigned other than by will or by the laws of descent and
distribution, and in the case of a Non-qualified Stock Option, may also be
assigned pursuant to a qualified domestic relations order as defined in the Code
or Title I of the Employee Retirement Income Security Act of 1974, as amended.
If the Participant attempts to alienate, assign, pledge, hypothecate, or
otherwise dispose of his Incentive or any right thereunder, except as provided
for in this Plan or the Award Agreement, or in the event of any levy,
attachment, execution, or similar process upon the right or interest conferred
by this Plan or the Award Agreement, the Committee may terminate the
Participant's Incentive by notice to him, and it shall thereupon become null and
void. In the case of a Restricted Stock Award or a cash Award, such Award, or
any portion thereof, shall no longer be deemed to be an Incentive under this
Section when such Award or portion of such Award becomes vested and all
restrictions and conditions applicable to such Award or portion thereof have
lapsed or been satisfied, as the case may be.
17.8 Use of Proceeds. Proceeds from the sale of shares of Common
Stock pursuant to Incentives granted under this Plan shall constitute general
funds of the Company.
17.9 Legend. Each certificate representing shares of Restricted
Stock issued to a Participant shall bear the following legend, or a similar
legend deemed by the Company to constitute an appropriate notice of
12
<PAGE>
the provisions hereof (any such certificate not having such legend shall be
surrendered upon demand by the Company and so endorsed):
On the face of the certificate:
"Transfer of this stock is restricted in accordance with conditions
printed on the reverse of this certificate."
On the reverse:
"The shares of stock evidenced by this certificate are subject to and
transferrable only in accordance with that certain Hollywood Casino
Corporation 1996 Long-Term Incentive Plan, a copy of which is on file
at the principal office of the Company in Dallas, Texas. No transfer
or pledge of the shares evidenced hereby may be made except in
accordance with and subject to the provisions of said Plan. By
acceptance of this certificate, any holder, transferee or pledgee
hereof agrees to be bound by all of the provisions of said Plan."
The following legend shall be inserted on a certificate evidencing Common
Stock issued under the Plan if the shares were not issued in a transaction
registered under the applicable federal and state securities laws:
"Shares of stock represented by this certificate have been acquired by
the holder for investment and not for resale, transfer or
distribution, have been issued pursuant to exemptions from the
registration requirements of applicable state and federal securities
laws, and may not be offered for sale, sold or transferred other than
pursuant to effective registration under such laws, or in transactions
otherwise in compliance with such laws, and upon evidence satisfactory
to the Company of compliance with such laws, as to which the Company
may rely upon an opinion of counsel satisfactory to the Company."
A copy of this Plan shall be kept on file in the principal office of the
Company in Dallas, Texas.
17.10 Commission. To the extent required by law, stock ownership under
the Plan will be subject to review by each Commission pursuant to the provisions
of the applicable Act. If, after exercise of any Stock Options or issuance of
any Restricted Stock under the Plan, a Participant is found to be disqualified
by a Commission, such person shall dispose of his shares of Common Stock and the
Company shall have the absolute right to repurchase such shares at the then Fair
Market Value, the Option Price or the purchase price (if applicable), whichever
is the least.
13
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
as of _________________________, 1996, by its President and Secretary pursuant
to prior action taken by the Board.
Hollywood Casino Corporation
By:_________________________
President
Attest:
_____________________________________________
Secretary
14
<PAGE>
Exhibit B
HOLLYWOOD CASINO CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK PLAN
-------------------------------------
The Hollywood Casino Corporation 1996 Non-Employee Director Stock Plan
(hereinafter called the "Plan") was adopted by the Board of Directors of
----
Hollywood Casino Corporation, a Delaware corporation (hereinafter called the
"Company"), effective as of June 12, 1996, and was approved by the Company's
- --------
stockholders on __________, 1996.
ARTICLE 1
PURPOSE
-------
The purpose of the Plan is to attract and retain key Outside Directors of
Hollywood Casino Corporation and to provide such persons with a proprietary
interest in the Company through the issuance of Common Stock that will
(a) increase the interest of such persons in the Company's welfare;
(b) furnish an incentive to such persons to continue their services for the
Company; and
(c) provide a means through which the Company may attract able persons as
directors.
ARTICLE 2
DEFINITIONS
-----------
For the purpose of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:
2.1 "Act" means the Illinois Act, the Mississippi Act, the New Jersey Act,
and any other gaming laws to which the Company is or may be subject.
2.2 "Board" means the board of directors of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Commission" means the Illinois Commission, the Mississippi
Commission, the New Jersey Commission, and any other similar gaming entity to
which the Company is or may be, subject in the future.
2.5 "Committee" means the committee appointed or designated by the Board
to administer the Plan in accordance with Article 3 of this Plan.
2.6 "Common Stock" means the Common Stock which the Company is currently
authorized to issue or may in the future be authorized to issue.
2.7 "Company" means Hollywood Casino Corporation, a Delaware corporation,
and any successor entity.
1
<PAGE>
2.8 "Date of Grant" means the effective date on which a Stock Option is
awarded to an Outside Director (as defined in Article 4 of this Plan) as set
forth in the applicable Stock Option Agreement.
2.9 "Employee" means common law employee (as defined in accordance with
the Regulations and Revenue Rulings then applicable under Section 3401(c) of the
Code) of the Company or any Subsidiary of the Company.
2.10 "Fair Market Value" of a share of Common Stock means (i) the closing
price per share on any stock exchange on which the Common Stock is traded, (ii)
the mean between the closing or average (as the case may be) bid and asked
prices per share of Common Stock on the over-the-counter market, whichever is
applicable or (iii) as determined by the Committee if the Common Stock is not
traded on an exchange or quoted on an over-the-counter market, whichever is
applicable.
2.11 "Illinois Act" means the Illinois Riverboat Gambling Act, Ill. Rev.
Stat. ch. 120, Paragraph 2401 et seq., as amended, and the regulations
-- ---
promulgated and rulings issued thereunder, and any other Illinois statute
regulating gaming activity.
2.12 "Illinois Commission" means the Illinois Gaming Board established
pursuant to Section 5 of the Illinois Act.
2.13 "Mississippi Act" means the Mississippi Gaming Control Act, as
amended, and the regulations promulgated and rulings issued thereunder, and any
other Mississippi statute regulating gaming activity.
2.14 "Mississippi Commission" means the Mississippi Gaming Commission
established pursuant to the Mississippi Act.
2.15 "New Jersey Act" means the New Jersey Casino Control Act, N.J. Stat.
Ann. 5:12 1, et seq., as amended, and the regulations promulgated and rulings
-- ---
issued thereunder, and any other New Jersey statute regulating gaming activity.
2.16 "New Jersey Commission" means the New Jersey Casino Control
Commission.
2.17 "Option Period" means the period during which a Stock Option may be
exercised.
2.18 "Option Price" means the price which must be paid by a Participant
upon exercise of a Stock Option to purchase a share of Common Stock.
2.19 "Outside Director" means a director of the Company who is not an
Employee.
2.20 "Participant" shall mean an Outside Director of the Company who is
entitled to participate in the Plan.
2.21 "Plan" means this Hollywood Casino Corporation 1996 Non-Employee
Director Stock Plan, as amended from time to time.
2.22 "Retirement" means Termination of Service at or after attaining age
65.
2.23 "Stock Option" means a non-qualified option to purchase Common Stock
of the Company granted under this Plan.
2
<PAGE>
2.24 "Stock Option Agreement" means a written agreement between a
Participant and the Company which sets out the terms of the grant of a Stock
Option.
2.25 "Subsidiary" means (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing a majority of
the total combined voting power of all classes of stock in one of the other
corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general
partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and
(iii) any partnership, if the partners thereof are composed only of the Company,
any corporation listed in item (i) above or any limited partnership listed in
item (ii) above. "Subsidiaries" means more than one of any such corporations,
limited partnerships or partnerships.
2.26 "Termination of Service as a Director" occurs when a Participant who
is an Outside Director of the Company shall cease to serve as a director of the
Company for any reason.
2.27 "Total and Permanent Disability" means total and permanent disability
as defined in Section 22(e) of the Code.
ARTICLE 3
ADMINISTRATION
--------------
The Plan shall be administered by a committee appointed by the Board (the
"Committee"). The Committee shall consist of not fewer than two persons. Any
member of the Committee may be removed at any time, with or without cause, by
resolution of the Board. Any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board.
The Committee shall select one of its members to act as its Chairman and
shall make such rules and regulations for its operation as it deems appropriate.
A majority of the Committee shall constitute a quorum, and the act of a majority
of the members of the Committee present at a meeting at which a quorum is
present shall be the act of the Committee. The Committee, in its discretion,
shall (i) interpret the Plan, (ii) prescribe, amend, and rescind any rules and
regulations necessary or appropriate for the administration of the Plan, and
(iii) make such other determinations and take such other action as it deems
necessary or advisable in the administration of the Plan. Any interpretation,
determination, or other action made or taken by the Committee shall be final,
binding, and conclusive on all interested parties.
ARTICLE 4
ELIGIBILITY; GRANT OF OPTIONS
-----------------------------
The Committee shall grant Stock Options as follows: (i) each Outside
Director serving as such on the effective date of the Plan shall receive a Stock
Option for 10,000 shares of Common Stock; (ii) each person who shall
subsequently be elected or appointed after the effective date of the Plan to
serve as an Outside Director and who shall not have previously served as an
Outside Director of the Company shall receive a Stock Option for 10,000 shares
of Common Stock; and (iii) each person serving as an Outside Director on
January 15th of each calendar year shall receive a Stock Option for 2,500 shares
of Common Stock. The Committee shall not grant Stock Options under any other
circumstances.
The grant of a Stock Option shall be evidenced by a Stock Option
Agreement setting forth the total number of shares of Common Stock subject to
the Stock Option, the Option Price, the maximum term of the Stock Option, the
Date of Grant, and such other terms and provisions as are approved by the
Committee, but not inconsistent with the Plan. The Company shall execute a
Stock Option Agreement with a Participant after the issuance of a Stock Option.
Any Stock Option granted pursuant to this Plan must be granted within ten
3
<PAGE>
(10) years of the date of adoption of this Plan. The Plan shall be submitted to
the Company's stockholders for approval; however, the Committee may grant Stock
Options under the Plan prior to the time of stockholder approval. Any such
options granted prior to such stockholder approval shall be subject to such
stockholder approval.
ARTICLE 5
SHARES SUBJECT TO PLAN
----------------------
The maximum number of shares of Common Stock that may be issued under
the Plan is one hundred and fifty thousand (150,000) (as may be adjusted in
accordance with Articles 12 and 13 hereof). All Stock Options granted under the
Plan shall be designated as non-qualified stock options. Shares of Common Stock
to be issued under the Plan may be made available from either authorized but
unissued Common Stock or Common Stock held by the Company in its treasury.
Shares of Common Stock previously subject to Stock Options which are forfeited,
terminated, or settled in cash in lieu of Common Stock, or expired unexercised,
shall immediately become available for grants of Stock Options under the Plan.
During the term of this Plan, the Company will at all times reserve
and keep available the number of shares of Common Stock that shall be sufficient
to satisfy the requirements of this Plan.
ARTICLE 6
OPTION PRICE
------------
The Option Price for any share of Common Stock which may be purchased
under a Stock Option shall be One Hundred Percent (100%) of the Fair Market
Value of the share on the Date of Grant.
ARTICLE 7
OPTION PERIOD; FORFEITURE
-------------------------
A Stock Option may be exercised in whole or in part at any time during
its Option Period after the expiration of six (6) months from its Date of Grant.
No Stock Option granted under the Plan may be exercised at any time after the
end of its Option Period.
The Option Period for each Stock Option will terminate at the first
of the following to occur:
(a) 5 p.m. on the tenth anniversary of the Date of Grant;
(b) 5 p.m. on the date which is twelve (12) months following the
Participant's Termination of Service as a Director due to death or
Total and Permanent Disability;
(c) 5 p.m. on the date which is three (3) months following the
Participant's Termination of Service as a Director due to Retirement;
or
(d) 5 p.m. on the 30th day after the day of any other
Termination of Service as a Director; provided, however, that if such
termination occurs after the date this Plan is adopted but before this
Plan is approved by the stockholders of the Company, such 30-day
period shall begin to run on the effective date of such stockholder
approval rather than on the date of termination.
4
<PAGE>
ARTICLE 8
EXERCISE OF OPTION
------------------
Stock Options may be exercised during the Option Period. Options may
be exercised at such times and in such amounts as provided in this Plan and the
applicable Stock Option Agreements, subject to the terms, conditions, and
restrictions of the Plan.
In no event may a Stock Option be exercised or shares of Common Stock
be issued pursuant to a Stock Option if a necessary listing of the shares on a
stock exchange or any registration under state or federal securities laws
required under the circumstances has not been accomplished. No Stock Option may
be exercised for a fractional share of Stock. The granting of a Stock Option
shall impose no obligation upon the Participant to exercise that Stock Option.
Subject to such administrative regulations as the Committee may from
time to time adopt, a Stock Option may be exercised by the delivery of written
notice to the Committee setting forth the number of shares of Common Stock with
respect to which the Stock Option is to be exercised and the date of exercise
thereof (the "Exercise Date") which shall be at least three (3) days after
giving such notice unless an earlier time shall have been mutually agreed upon.
On the Exercise Date, the Participant shall deliver to the Company consideration
with a value equal to the total Option Price of the shares of Common Stock to be
purchased, payable as follows: (a) cash, certified check, bank draft, or money
order payable to the order of the Company, (b) Common Stock, valued at its Fair
Market Value on the Exercise Date, and/or (c) any other form of payment which is
acceptable to the Committee. Common Stock which is acquired by the Participant
pursuant to the exercise of a Stock Option may not be used to exercise a
subsequent Stock Option until and unless such shares have been held for a period
of six months.
Upon payment of all amounts due from the Participant, the Company
shall cause certificates for the Common Stock then being purchased to be
delivered to the Participant (or the person exercising the Participant's Stock
Option in the event of his death) at its principal business office promptly
after the Exercise Date. The obligation of the Company to deliver shares of
Common Stock shall, however, be subject to the condition that if at any time the
Committee shall determine in its discretion that the listing, registration, or
qualification of the Stock Option or the Common Stock upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the Stock Option or the issuance or purchase of shares of
Common Stock thereunder, the Stock Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent, or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
If the Participant fails to pay for any of the Common Stock specified
in such notice or fails to accept delivery thereof, the Participant's right to
purchase such Common Stock may be terminated by the Company.
5
<PAGE>
ARTICLE 9
AMENDMENT OR DISCONTINUANCE
---------------------------
Subject to the limitations set forth in this Article 9, the Board may at
any time and from time to time, without the consent of the Participants, alter,
amend, revise, suspend, or discontinue the Plan in whole or in part; provided,
however, that no amendment which requires stockholder approval in order for the
Plan to continue to comply with Rule 16b-3 under the Securities Exchange Act of
1934 Act, as in effect from time to time (the "1934 Act"), including any
successor to such Rule, shall be effective unless such amendment shall be
approved by the requisite vote of the stockholders of the Company entitled to
vote thereon.
Subject to the forgoing, the Board shall have the power and authority to
amend the Plan in any manner advisable in order for Stock Options granted under
the Plan to qualify for the exemption provided by Rule 16b-3 (or any successor
rule relating to exemption from Section 16(b) of the 1934 Act) (including
amendments as a result of changes to Rule 16b-3 or the regulations thereunder to
permit greater flexibility with respect to Stock Options granted under the
Plan), and any such amendment shall, to the extent deemed necessary or advisable
by the Committee, be applicable to any outstanding Stock Options theretofore
granted under the Plan, notwithstanding any contrary provisions contained in any
stock option agreement. To the extent required by the rules and regulations
promulgated under Section 16 of the 1934 Act, Articles 4, 6 and 7 of the Plan
shall not be amended more than once every six months, except that the foregoing
shall not preclude any amendment to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974 or the rules thereunder in
effect from time to time. In the event of any such amendments to the Plan, the
holder of any Stock Option outstanding under the Plan shall, upon request of the
Committee and as a condition to the exercisability thereof, execute a conforming
amendment in the form prescribed by the Committee to any stock option agreement
relating thereto within such reasonable time as the Committee shall specify in
such request. Notwithstanding anything contained in this Plan to the contrary,
unless required by law, no action contemplated or permitted by this Article 9
shall adversely affect any rights of Participants or obligations of the Company
to Participants with respect to any Stock Options theretofore granted under the
Plan without the consent of the affected Participant.
ARTICLE 10
ELECTION TO RECEIVE COMMON STOCK
---------------------------------
IN LIEU OF RETAINER
-------------------
A Participant may elect to reduce all or part of the cash compensation
otherwise payable for services to be rendered by him or her as a director
(including the annual retainer fee and any fees payable for services on the
Board or any committee thereon) and to receive in lieu thereof shares of Common
Stock. Any such election (a) shall be in writing, (b) shall specify an amount
of such compensation to be received in the form of Common Stock (expressed as a
percentage of the compensation otherwise payable in cash, as an amount in
dollars of compensation otherwise payable in cash or as a type of fee (e.g.,
retainer fee) otherwise payable in cash), (c) shall be made at least six months
prior to the end of the first calendar quarter with respect to which such
election is to apply and (d) may not be revoked or changed thereafter except as
to compensation for services rendered at least six months after any such
election to revoke or change is made in writing. Any such election shall
continue in effect until six months after an election to revoke or change such
election is made in writing.
If a Participant elects pursuant to this Article 10 to receive Common
Stock, there shall be issued to such Participant promptly after the end of each
calendar quarter with respect to which such election applies a number of shares
of Common Stock equal to the amount of such compensation divided by the Fair
Market Value of a share of Common Stock on the last business day of the calendar
quarter for which the compensation would have been paid in cash in the absence
of such election. To the extent that the application of the
6
<PAGE>
foregoing formula would result in fractional shares of Common Stock being
issuable, cash will be paid to the Participant in lieu of such fractional shares
based upon the value established pursuant to such formula.
ARTICLE 11
TERM
----
The Plan shall be effective from the date that this Plan is approved by the
Board. Unless sooner terminated by action of the Board, the Plan will terminate
on June 12, 2006, but Stock Options granted before the date will continue to be
effective in accordance with their terms and conditions.
ARTICLE 12
CAPITAL ADJUSTMENTS
-------------------
If at any time while the Plan is in effect or unexercised Stock Options are
outstanding there shall be any increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from (1) the declaration or payment
of a stock dividend, (2) any recapitalization resulting in a stock split-up,
combination, or exchange of shares of Common Stock, or (3) other increase or
decrease in such shares of Common Stock effected without receipt of
consideration by the Company, then and in such event:
(i) An appropriate adjustment shall be made in the maximum number of
shares of Common Stock then subject to being issued under the Plan, to the
end that the same proportion of the Company's issued and outstanding shares
of Common Stock shall continue to be subject to being so issued;
(ii) Appropriate adjustments shall be made in the number of shares
to be granted under Article 4 of the Plan, to the end that the same
proportion of the Company's issued and outstanding shares of Common Stock
shall be granted under Article 4.
(iii) Appropriate adjustments shall be made in the number of shares
of Common Stock and the Option Price thereof then subject to purchase
pursuant to each such Stock Option previously granted and unexercised, to
the end that the same proportion of the Company's issued and outstanding
shares of Common Stock in each such instance shall remain subject to
purchase at the same aggregate Option Price.
Except as otherwise expressly provided herein, the issuance by the Company
of shares of its capital stock of any class, or securities convertible into
shares of capital stock of any class, either in connection with direct sale or
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of or Option Price of shares of Common Stock
then subject to outstanding Stock Options granted under the Plan.
Upon the occurrence of each event requiring an adjustment with respect to
any Stock Option, the Company shall mail to each Participant its computation of
such adjustment which shall be conclusive and shall be binding upon each such
Participant.
7
<PAGE>
ARTICLE 13
RECAPITALIZATION, MERGER AND CONSOLIDATION
------------------------------------------
(a) The existence of this Plan and Stock Options granted hereunder
shall not affect in any way the right or power of the Company or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations, or other changes in the Company's capital structure and its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or preference stocks ranking prior to or otherwise
affecting the Common stock or the rights thereof (or any rights, options, or
warrants to purchase same), or the dissolution or liquidation of the Company, or
any sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
(b) Subject to any required action by the stockholders, if the Company
shall be the surviving or resulting corporation in any merger or consolidation,
any Stock Option granted hereunder shall pertain to and apply to the securities
or rights (including cash, property, or assets) to which a holder of the number
of shares of Common Stock subject to the Stock Option would have been entitled.
(c) In the event of any merger or consolidation pursuant to which the
Company is not the surviving or resulting corporation, there shall be
substituted for each share of Common Stock subject to the unexercised portions
of such outstanding Stock Options, that number of shares of each class of stock
or other securities or that amount of cash, property, or assets of the surviving
or consolidated company which were distributed or distributable to the
stockholders of the Company in respect to each share of Common Stock held by
them, such outstanding Stock Options to be thereafter exercisable for such
stock, securities, cash, or property in accordance with their terms.
Notwithstanding the foregoing, however, all such Stock Options may be cancelled
by the Company as of the effective date of any such reorganization, merger,
consolidation, or any dissolution or liquidation of the Company by giving notice
to each holder thereof or his personal representative of its intention to do so
and by permitting the purchase during the thirty (30) day period next preceding
such effective date of all of the shares of Common Stock subject to such
outstanding Stock Options.
(d) Upon the occurrence of each event requiring an adjustment of the
Option Price or the number of shares of Common Stock purchasable pursuant to
Stock Options granted pursuant to the terms of this Plan, the Company shall mail
to each Participant its computation of such adjustment which shall be conclusive
and shall be binding upon each such Participant.
ARTICLE 14
LIQUIDATION OR DISSOLUTION
--------------------------
In case the Company shall, at any time while any Stock Option under
this Plan shall be in force and remain unexpired, (i) sell all or substantially
all of its property, or (ii) dissolve, liquidate, or wind up its affairs, then
each Participant may thereafter receive upon exercise hereof (in lieu of each
share of Common Stock of the Company which such Participant would have been
entitled to receive) the same kind and amount of any securities or assets as may
be issuable, distributable, or payable upon any such sale, dissolution,
liquidation, or winding up with respect to each share of Common Stock of the
Company. If the Company shall, at any time prior to the expiration of any Stock
Option, make any partial distribution of its assets, in the nature of a partial
liquidation, whether payable in cash or in kind (but excluding the distribution
of a cash dividend payable out of earned surplus and designated as such) then in
such event the prices then in effect with respect to each Stock Option shall be
reduced, on the payment date of such distribution, in proportion to the
percentage reduction in the tangible book value of the shares of the Company's
Common Stock (determined in accordance with generally accepted accounting
principles) resulting by reason of such distribution.
8
<PAGE>
ARTICLE 15
OPTIONS IN SUBSTITUTION FOR
---------------------------
STOCK OPTIONS GRANTED BY OTHER CORPORATIONS
-------------------------------------------
Stock Options may be granted under the Plan from time to time in
substitution for such options held by directors of a corporation who become or
are about to become Outside Directors in connection with a merger or
consolidation of the employing corporation with the Company or the acquisition
by the Company of stock of the employing corporation. The terms and conditions
of the substitute options so granted may vary from the terms and conditions set
forth in this Plan to such extent as the Committee at the time of grant may deem
appropriate to conform, in whole or in part, to the provisions of the options in
substitution for which they are granted.
ARTICLE 16
MISCELLANEOUS PROVISIONS
------------------------
16.1 Investment Intent. The Company may require that there be
presented to and filed with it by any Participant under the Plan, such evidence
as it may deem necessary to establish that the options granted or the shares of
Common Stock to be purchased or transferred are being acquired for investment
and not with a view to their distribution.
16.2 No Employment Relationship. The Participant is not an Employee
of the Company or any Subsidiary. Nothing herein shall be construed to create
an employer-employee relationship between the Company and the Participant.
16.3 Indemnification of Board and Committee. No member of the Board
or the Committee, nor any officer or employee of the Company acting on behalf of
the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in respect of any such
action, determination, or interpretation.
16.4 Effect of the Plan. Neither the adoption of this Plan nor any
action of the Board or the Committee shall be deemed to give any person any
right to be granted a Stock Option to purchase Common Stock of the Company or
any other rights except as may be evidenced by a Stock Option Agreement, or any
amendment thereto, duly authorized by the Committee and executed on behalf of
the Company, and then only to the extent and upon the terms and conditions
expressly set forth therein.
16.5 Compliance With Other Laws and Regulations. Notwithstanding
anything contained herein to the contrary, the Company shall not be required to
sell or issue shares of Common Stock under any Stock Option if the issuance
thereof would constitute a violation by the Participant or the Company of any
provisions of any law or regulation of any governmental authority or any
national securities exchange or other forum in which shares of Common Stock are
traded (including without limitation any gaming laws or Section 16 of the
Securities Exchange Act of 1934); and, as a condition of any sale or issuance of
shares of Common Stock under a Stock Option, the Committee may require such
agreements or undertakings, if any, as the Committee may deem necessary or
advisable to assure compliance with any such law or regulation. The Plan, the
grant and exercise of Stock Options hereunder, and the obligation of the Company
to sell and deliver shares of Common Stock, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
government or regulatory agency as may be required.
16.6 Tax Requirements. The Company shall have the right to deduct
from all amounts hereunder paid in cash or other form, any Federal, state, or
local taxes required by law to be withheld with respect to such payments. The
Participant receiving shares of Common Stock issued under the Plan shall be
required
9
<PAGE>
to pay the Company the amount of any taxes which the Company is required to
withhold with respect to such shares of Common Stock. Such payments shall be
required to be made prior to the delivery of any certificate representing such
shares of Common Stock. Such payment may be made in cash or by check.
16.7 Non-Assignability. A Stock Option granted to a Participant may
not be transferred or assigned other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended. If the Participant attempts to alienate, assign, pledge, hypothecate,
or otherwise dispose of his Stock Option or any right thereunder, except as
provided for in this Plan or the Stock Option Agreement, or in the event of any
levy, attachment, execution, or similar process upon the right or interest
conferred by this Plan or the Stock Option Agreement, the Committee may
terminate the Participant's Stock Option by notice to him, and it shall
thereupon become null and void.
16.8 Use of Proceeds. Proceeds from the sale of shares of Common
Stock pursuant to Stock Options granted under this Plan shall constitute general
funds of the Company.
16.9 Legend. If shares of Common Stock are issued upon exercise of
a Stock Option, and such transaction is not registered under the applicable
federal and state securities laws, the certificate(s) representing such shares
shall bear the following legend, or a similar legend deemed by the Company to
constitute an appropriate notice of the provisions of the applicable securities
laws (any such certificate not having such legend shall be surrendered upon
demand by the Company and so endorsed):
"Shares of stock represented by this certificate have been acquired by
the holder for investment and not for resale, transfer or
distribution, have been issued pursuant to exemptions from the
registration requirements of applicable state and federal securities
laws, and may not be offered for sale, sold or transferred other than
pursuant to effective registration under such laws, or in transactions
otherwise in compliance with such laws, and upon evidence satisfactory
to the Company of compliance with such laws, as to which the Company
may rely upon an opinion of counsel satisfactory to the Company."
16.10 Commission. To the extent required by law, stock ownership
under the Plan will be subject to review by each Commission pursuant to the
provisions of the applicable Act. If, after the exercise of any Stock Options
or the issuance of any Common Stock under the Plan, a Participant is found to be
disqualified by a Commission, such person shall dispose of his shares of Common
Stock and the Company shall have the absolute right to repurchase such shares at
the then market price, the Option Price or the Fair Market Value, if any,
whichever is the least.
10
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed as of ________________, 1996, by its President and Secretary pursuant
to prior action taken by the Board.
Hollywood Casino Corporation
By:________________________________
President
Attest:
_______________________
Secretary
11
<PAGE>
HOLLYWOOD CASINO CORPORATION
Two Galleria Tower, Suite 2200
13455 Noel Road, LB 48
Dallas, Texas 75240
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William D. Pratt and Edward T. Pratt,
Jr. as proxies, with the power to appoint their substitute, and hereby
authorizes them to represent and vote as designated below, all of the shares of
the Common Stock of Hollywood Casino Corporation (the "Company") held of record
by the undersigned on June 21, 1996, at the Annual Meeting of Stockholders to be
held on July 30, 1996, or any adjournment(s) thereof.
1. PROPOSAL TO ELECT AS CLASS III DIRECTORS OF THE COMPANY THE FOLLOWING
PERSONS TO HOLD OFFICE UNTIL THE 1999 ANNUAL MEETING OF STOCKHOLDERS OR
UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED.
FOR ALL nominees listed below WITHHOLD AUTHORITY
___(except as marked to the contrary below) ___to vote for all nominees
below.
Jack E. Pratt Edward T. Pratt III Theodore H. Strauss
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
________________________________________________________________________________
2. PROPOSAL TO APPROVE THE HOLLYWOOD CASINO CORPORATION 1996 LONG-TERM
INCENTIVE PLAN
__ FOR __ AGAINST __ ABSTAIN
3. PROPOSAL TO APPROVE THE HOLLYWOOD CASINO CORPORATION 1996 NON-EMPLOYEE
DIRECTOR STOCK PLAN
__ FOR __ AGAINST __ ABSTAIN
4. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS FOR FISCAL YEAR 1996.
__ FOR __ AGAINST __ ABSTAIN
________________________________________________________________________________
(please sign on the other side)
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder(s). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES UNDER PROPOSAL 1 AND FOR THE ACTIONS
UNDER PROPOSAL 2, PROPOSAL 3, AND PROPOSAL 4.
Dated:____________________, 1996
________________________________
Signature
________________________________
Signature if Held Jointly
Please execute this Proxy as your name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full name by the president or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
