<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] No fee required.
[ ] 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 MAY 29, 1997
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 29th day of May 1997,
at 10:00 a.m. (local time) for the following purposes:
1. To elect one (1) director to hold office until his respective successor
has been duly elected and qualified.
2. To ratify the appointment of Arthur Andersen LLP as the independent public
accountants of the Company for fiscal year 1997.
3. 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 April 18, 1997, 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
April 30, 1997
<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 MAY 29, 1997
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
April 30, 1997, 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 May 29, 1997 (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 the nominee for election as a director 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 nominee specified under the caption
"Election of Directors" in Proposal 1 and FOR the action specified in Proposal
2.
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 and
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.
2
<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 one (1) director to hold office until his respective
successor has been duly elected and qualified.
2. To ratify the appointment of Arthur Andersen LLP as the
independent public accountants of the Company for fiscal year 1997.
3. 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 April 18, 1997, 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 24,859,968 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. The inspectors of election will treat shares referred
to as "broker non-votes" (i.e., shares held by brokers or nominees as to which
they have no discretionary power to vote on a particular matter and have
received no instructions from the beneficial owners or persons entitled to vote
thereon), if any, as shares that are present for purposes of determining the
presence of a quorum. However, for purposes of determining the outcome of any
matter as to which the broker has indicated on the Proxy that it does not have
discretionary authority to vote, those shares will be treated as not entitled to
vote with respect to that matter (even though those shares may be entitled to
vote on other matters). Broker non-votes will have no effect on determining the
outcome of the election of the director or the proposal to ratify the
appointment of the accountants.
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. 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 persons who are not
3
<PAGE>
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, no persons,
other than certain directors of the Company, are known who beneficially owned
more than 5% of the outstanding Common Stock as of the Record Date.
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 "Remuneration 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) 16.6%
Edward T. Pratt, Jr............ 956,748 (c) 3.8%
William D. Pratt............... 4,899,447 (d) 19.7%
Edward T. Pratt III............ 2,532,621 (e) 10.2%
Richard D. Knight.............. 80,999 *
Leonard M. DeAngelo (f)........ 65,004 *
Theodore H. Strauss............ 13,000 (g) *
James A. Colquitt.............. 10,000 (g) *
All directors and officers as
a group (9 individuals)...... 12,625,191 (h) 50.6%
</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
(7.2%) 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%) 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.
4
<PAGE>
(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 (18.5%) 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 90,008 shares of Common Stock of the Company exercisable within 60
days under the Hollywood Casino Corporation 1992 Stock Option Plan (the
"1992 Plan").
(f) Mr. De Angelo served as an executive officer of Greate Bay Hotel and
Casino, Inc. ("GBHC") which, until December 31, 1996, was an approximately
80% owned, indirect subsidiary of the Company.
(g) Includes 10,000 shares of Common Stock of the Company for each of Messrs.
Strauss and Colquitt subject to options exercisable within 60 days of the
date hereof under the Hollywood Casino Corporation 1996 Non-Employee
Director Stock Plan (the "Directors' Plan").
(h) Includes 110,008 shares of Common Stock of the Company subject to options
exercisable within 60 days of the date hereof.
ELECTION OF DIRECTOR
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). 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 1997 consists of Mr.
James A. Colquitt and an existing vacancy on the Board of Directors (the Company
has not yet found a qualified person to fill the vacancy; consequently, proxies
cannot be voted for more than one person to serve as a Director); 1998 consists
of Messrs. Edward T. Pratt, Jr. and William D. Pratt; and 1999 consists of
Messrs. Jack E. Pratt, Edward T. Pratt III and Theodore H. Strauss.
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 nominee listed in the table
below for the office of director of the Company to hold office until his
respective successor has been duly elected and qualified:
Year First
Became a
Name and Age Director Present Offices Held in the Company
------------ ---------- -----------------------------------
James A. Colquitt (78) 1995 Director
The Board of Directors does not contemplate that the above-named
nominee 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 he
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
5
<PAGE>
represented by such Proxy for the election of such other person or persons as
may be nominated or designated by the Board of Directors. The 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, the 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 the nominee to be a director of the Company:
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 Greate Bay Casino Corporation
("GBCC", formerly known as Pratt Hotel Corporation) which, until December 31,
1996, was an approximately 80% owned subsidiary of the Company.
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 nominee, and,
because the Directors own or beneficially own 50.4% of the outstanding Common
Stock, election of the nominee is assured.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE INDIVIDUAL NOMINATED FOR ELECTION AS A DIRECTOR.
Board Meetings and Committees
Non-employee directors of the Company receive an annual fee of $50,000 for
service on the Board of Directors. Beginning in 1996, non-employee directors of
the Company also receive grants of stock options as more fully described at
"Remuneration of Directors and Executive Officers - Stock Option Plans - The
Hollywood Casino Corporation 1996 Non-Employee Director Stock Plan" below. The
Board of Directors of the Company held four regular and three special meetings
during the year ended December 31, 1996. 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, Compensation and Stock
Option Committees, but does not have a standing nominating committee. The Board
of Directors does not have a nominating committee because the Board of Directors
as a whole functions in this capacity. The Board of Directors will consider
nominees recommended by a stockholder. The Company's Certificate of
Incorporation provides that a stockholder may nominate a director at the Annual
Meeting if written notice is delivered to the Company by the tenth day following
the date the Notice of the Annual Meeting was mailed. No additional compensation
or fees are paid to directors for attending Audit, Compensation and Stock Option
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
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<PAGE>
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. The
Audit Committee met four times during 1996.
Compensation Committee. The Compensation Committee of the Board of
Directors has the duty to review the compensation of the Company's executive
officers. The Compensation Committee is comprised of Messrs. Jack E. Pratt,
William D. Pratt, James A. Colquitt and Theodore H. Strauss. The Compensation
Committee met once during 1996. The report of the Compensation Committee appears
in this Proxy Statement under the heading "Remuneration of Directors and
Executive Officers."
Stock Option Committee. The Stock Option Committee of the Board of
Directors has the duty to review the granting of stock options to key officers
and employees of the Company. The Stock Option Committee is comprised of Messrs.
Theodore H. Strauss and Mr. James A. Colquitt. The Stock Option Committee met
three times during 1996.
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)....................... 70 Chief Executive Officer and Chairman of the Board
of Directors of the Company
Edward T. Pratt, Jr. (2)................ 73 Vice President, Treasurer and Vice Chairman of
the Board of Directors of the Company
William D. Pratt (3).................... 68 Executive Vice President, Secretary, General
Counsel and Director of the Company
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C>
Edward T. Pratt III (4)................. 41 President, Chief Operating Officer and Director of
the Company
James A. Colquitt (5)................... 78 Director of the Company
Theodore H. Strauss (6)................. 72 Director of the Company
Charles F. LaFrano III (7).............. 42 Vice President of Finance of the Company
Richard D. Knight (8)................... 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
John C. Hull (9)........................ 58 Corporate Controller and
Principal Accounting Officer of
the Company
</TABLE>
____________________________
(1) 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 GBCC for more than five years. From 1990 to May
1995, he also served as President of the Company.
(2) Mr. Edward T. Pratt, Jr. has held his positions with the Company since 1990
and has served as Treasurer and Vice Chairman of the Board of Directors of
GBCC for more than five years.
(3) William D. Pratt has held his positions with the Company since 1990 and has
served as Executive Vice President, Secretary, General Counsel and Director
of GBCC for more than five years. Mr. Pratt also served as Vice President
and Secretary of Southmark San Juan, Inc. ("SSJ"), 46.3% of the stock of
which was owned by GBCC, 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) 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 GBCC for more than 5 years
until November 1995 when he was elected President and Chief Operating
Officer of GBCC. He also served as co-chairman and co-chief executive
officer of SSJ at the time of the filing of its 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) See "Election of Directors - Business Experience for Past Five Years" for
certain information with respect to Mr. James A. Colquitt.
(6) 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
8
<PAGE>
& Co. Inc. served as an underwriter with respect to the October 1995
offering of Senior Secured Notes by the Company.
(7) Mr. Charles F. LaFrano III has served as Vice President of Finance of the
Company since 1994 and has served as Vice President of GBCC for more than
five years.
(8) 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.
(9) Mr. John C. Hull has held his positions with the Company and has served as
Corporate Controller of GBCC since November 1994. Mr. Hull joined the
Company in April 1994 and served as a financial consultant to the Company
from 1990 until April 1994 and as a financial consultant to GBCC from 1988
until April 1994. Mr. Hull served as Vice President and Chief Financial
Officer of SSJ at the time of its filing of its 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.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, officers and certain stockholders to file with the
Securities and Exchange 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, 1996 and
through March 31, 1997 and of Forms 5 and amendments thereto furnished with
respect to the year ended December 31, 1996, the Company has determined that
Leonard M. DeAngelo and John C. Hull were each late in filing an initial
statement of beneficial ownership and William D. Pratt, Theodore H. Strauss and
James A. Colquitt were each late once in filing a statement of change in
beneficial ownership, in each case relating to a single transaction.
9
<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, 1996,
1995 and 1994.
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------
Long-Term
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) 1996 $646,770 $ - $14,000 150,000 $279,984
Chief Executive 1995 565,998 205,000 14,000 - 211,772
Officer and Chairman of the 1994 530,197 150,000 13,000 - 105,552
Board of the Company
Edward T. Pratt III (3) 1996 426,167 - - 150,000 1,980
President and Chief Operating 1995 325,897 118,000 - - 1,980
Officer of the Company 1994 305,076 135,000 - - 2,250
Edward T. Pratt, Jr. (3) 1996 325,891 - 18,500 - 171,150
Vice President, Treasurer and 1995 284,001 62,000 18,500 - 43,396
Vice Chairman of the Board of 1994 277,452 60,000 18,000 - 40,485
the Company
William D. Pratt 1996 295,811 - 14,000 - 215,208
Executive Vice President, 1995 242,499 53,000 13,000 - 66,508
Secretary and General Counsel 1994 237,015 45,000 14,000 - 78,529
of the Company
Richard D. Knight
Executive Vice President - 1996 459,114 50,000 - - 1,980
Operations of the Company, 1995 378,888 80,000 - - 1,980
Executive Vice President and 1994 349,867 50,000 - - 2,250
Chief Operating Officer of HCA
and HCT
Leonard M. DeAngelo (4) 1996 482,258 - - - 1,980
President of GBHC 1995 284,772 75,000 - - 1,980
1994 223,920 - - - 2,100
- --------------------------
</TABLE>
10
<PAGE>
(1) Represents directors' fees for service as a director to a subsidiary of
GBCC.
(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, Edward T. Pratt, Jr. and
William D. Pratt also include pension benefit accruals on their behalf.
See also "Employment Contracts" below.
(3) Messrs. Jack Pratt, Edward Pratt, Jr., William D. Pratt and Edward T. Pratt
III concurrently hold the positions as officers of GBCC described under the
caption "Management." GBCC reimburses the Company for that portion of
salary, bonus and other compensation which relates to services provided to
GBCC. 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
1996 $386,823 $ - $139,992
1995 454,930 133,250 105,886
1994 442,263 25,385 53,528
Edward T. Pratt, Jr.
1996 $191,417 $ - $ 85,575
1995 202,941 31,000 21,698
1994 207,677 10,154 20,802
William D. Pratt
1996 $172,188 $ - $107,604
1995 201,792 26,500 33,254
1994 180,085 7,615 39,924
Edward T. Pratt III
1996 $284,579 $ - $ 990
1995 274,031 100,300 990
1994 233,299 60,230 1,721
</TABLE>
(4) All amounts included in the totals reported above relate to services
provided to GBCC and paid by GBCC.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options under the Hollywood Casino Corporation 1996 Long-Term Incentive Plan
(the "1996 Plan") to the named executive officers. No grants of stock options
under the Hollywood Casino Corporation 1992 Stock Option Plan (the "1992 Plan")
or the Pratt Hotel Corporation 1990 Incentive Stock Option Plan (the "GBCC
Plan") were made to the named executive officers during the fiscal year ended
December 31, 1996.
11
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS MARKET PRICE APPRECIATION
OPTIONS/ GRANTED TO EXERCISE PRICE ON FOR OPTION TERM
SAR'S EMPLOYEES OR BASE DATE OF EXPIRATION ---------------------
NAME GRANTED (a) IN FISCAL YEAR PRICE GRANT DATE 5% 10%
---- ----------- -------------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack E. Pratt 150,000 46.9 $3.13 $3.13 12/30/01 $129,507 $286,177
Edward T. Pratt III 150,000 46.9 3.13 3.13 12/30/01 129,507 286,177
Edward T. Pratt, Jr. - - - - - - -
William D. Pratt - - - - - - -
Richard D. Knight - - - - - - -
Leonard M. DeAngelo - - - - - - -
</TABLE>
- ----------
(a) Options granted "at market" on the date of grant and first become
exercisable six months from the date of grant.
OPTION EXERCISES AND HOLDINGS
The following table provides information, with respect to the named
executive officers, concerning options granted under the 1992 Plan and the 1996
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
1992 PLAN AND 1996 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 ($3.75)
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.............. - - - 150,000 - $93,750
Edward T. Pratt III........ 40,000 $164,976 90,008 150,000 $337,476 93,750
Edward T. Pratt, Jr........ - - - - - -
William D. Pratt........... - - - - - -
Richard D. Knight.......... - - - - - -
Leonard M. DeAngelo........ - - - - - -
</TABLE>
No options were exercised by the named executive officers under the GBCC
Plan during the last fiscal year and no unexercised options were held by the
named executive officers at the end of the fiscal year.
12
<PAGE>
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, Executive Vice President,
Secretary and General Counsel of the Company, are under employment contracts
with the Company and have provided services to GBCC pursuant to intercompany
allocation agreements ratified by the respective Boards of Directors of the
Company and GBCC. Their employment contracts were executed during October 1989
and originally expired on December 31, 1994, but have subsequently been extended
by amendment through December 31, 2000 with respect to Jack E. Pratt and to
December 31, 1999 with respect to Edward T. Pratt, Jr. and William D. Pratt.
Services to GBCC 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 $464,000, $234,000 and $208,000, 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, served 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 provided for a minimum annual base
salary of $450,000, subject to annual increases of five percent.
13
<PAGE>
Stock Option Plans
The Hollywood Casino Corporation 1996 Long-Term Incentive Plan. During
1996, the stockholders of the Company approved the adoption of the Hollywood
Casino Corporation 1996 Long-Term Incentive Plan (the "1996 Plan"). The Company
has reserved 3,000,000 shares of its Class A Common Stock for grants of
nonqualified stock options, stock options qualified for special tax treatment
under the Internal Revenue Code and restricted stock awards (collectively,
"awards") to employees of the Company and its subsidiaries.
Awards under the 1996 Plan, together with the exercise price, vesting
schedule and restrictions and conditions, if any, are determined by a Committee
of the Board of Directors of the Company. However, any common stock acquired
pursuant to an award to a director, executive officer or 10% or greater
stockholder of the Company must be held by that participant for at least six
months from the date of the award, unless the Committee determines that a
disposition would not violate the federal securities laws. The exercise price
must be at least 100% (or at least 110% in the case of incentive stock options
granted to certain employees who own greater than 10% of the outstanding Common
Stock of the Company) of the fair market value of the Common Stock on the date
of grant and may be paid in cash or in shares of the Company's Common Stock
valued at fair market value on the date of exercise.
No participant in the 1996 Plan may receive awards during any fiscal year
covering an aggregate of more than 150,000 shares of Common Stock. The grant of
incentive stock options is also subject to a $100,000 calendar year limit. Upon
termination of a participant's employment for any reason, the participant will
forfeit the nonvested portions of all awards he or she holds. Awards which have
not yet vested are not transferable or assignable other than by will or by the
laws of descent and distribution. The 1996 Plan also provides that in the event
of a "Change in Control", as such term is defined in the 1996 Plan, all
unmatured installments of awards will become fully accelerated and exercisable
in full.
The Hollywood Casino Corporation 1996 Non-Employee Director Stock Plan.
During 1996, the stockholders of the Company approved the adoption of the
Hollywood Casino Corporation 1996 Non-Employee Director Stock Plan (the
"Directors' Plan"). The Company has reserved 150,000 shares of its Class A
Common Stock for grants of nonqualified stock options to directors who are not
employees of the Company ("outside directors") in order to attract and retain
such individuals and encourage their performance.
Under the Directors' Plan, an option to purchase 10,000 shares of Common
Stock was granted to each outside director upon adoption of the Directors' Plan
in 1996. Each person becoming an outside director subsequent to adoption of the
Directors' Plan will automatically receive an option to purchase 10,000 shares
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 15 of each year. The exercise price for all options under the
Directors' Plan is 100% of the fair market value of the Common Stock on the date
of grant and may be paid in cash or in shares of the Company's Common Stock
valued at fair market value on the date of exercise. An outside director may
also elect to receive all or part of his or her retainer fee in the form of
Common Stock of the Company based on the market value of the Common Stock as of
the end of the period for which such fee applies. Common Stock received in lieu
of a retainer fee is fully vested upon receipt.
Options granted under the Directors' Plan extend for ten years from and may
be exercised any time after six months from the date of grant. Upon termination
of a participant's service as a director due to death or total disability,
outstanding options may be exercised for a period of 12 months after such
termination unless the original expiration date of the option is sooner. Upon
termination of a participant's service as a director for reason of retirement,
outstanding options may be exercised for a period of three
14
<PAGE>
months after such retirement. Options granted under the Directors' Plan are not
transferable or assignable other than by will or by the laws of descent and
distribution.
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 "1992
Plan") for its key executives. After the consummation of the Company's initial
public offering in June 1993 all stock options outstanding under the 1992 Plan
became exercisable for Class A Common Stock and any options granted under the
1992 Plan after that date are to purchase Class A Common Stock.
Options granted under the 1992 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 1992 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 1992 Plan), the options held by that
participant shall automatically terminate. Options granted under the 1992 Plan
are not assignable except by will, the laws of descent and distribution or
pursuant to qualified domestic relations order. The 1992 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 1992 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, GBCC adopted the Pratt Hotel Corporation 1990 Incentive Stock Option Plan
(the "GBCC Plan"). The GBCC Plan provided for the granting of incentive stock
options intended to qualify for special tax treatment under the Internal Revenue
Code (the "Code"). The shares offered under the GBCC Plan consisted of shares
(whether authorized and unissued or issued and reacquired) of the Common Stock
of GBCC. Options for no more than 102,092 shares of the Common Stock could be
granted under the GBCC Plan.
On December 31, 1996, the Company distributed its ownership of GBCC to the
Company's stockholders. Accordingly, GBCC ceased to be a subsidiary of the
Company at that time. As of December 31, 1996, no named executive officer of
the Company had any options outstanding under the GBCC Plan.
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
$586,000 for the year ended December 31, 1996.
15
<PAGE>
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 also serve as executive
officers of the Company and serve as executive officers and directors of GBCC.
Jack E. Pratt also serves on the Compensation Committee of GBCC. Mr. Strauss is
senior managing director of Bear, Stearns & Co. Inc., which served as
underwriters with respect to the October 1995 offering of $210 million of Senior
Secured Notes by the Company.
16
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee believes that the Company's continued growth in
the casino industry 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 and 1996 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 policies. 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.
Adjustments 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 of the Company 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 1996 the Board of Directors of the Company adopted, and
the stockholders of the Company ratified, the Hollywood Casino Corporation 1996
Long-Term Incentive Plan (the "1996 Long-Term Incentive Plan"). The 1996 Long-
Term Incentive Plan is administered by a committee (the "Plan Committee")
consisting of Messrs. James A. Colquitt and Theodore H. Strauss who are also
members of the Compensation Committee. The purpose of the 1996 Long-Term
Incentive Plan is to attract and retain key executives by
17
<PAGE>
the grant of awards to such executives (such as stock options and restricted
stock) which provide them with proprietary interest in the Company which will
only appreciate in value if the price of the stock of the Company increases.
The Plan 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 in establishing
bonus award guidelines. Practices of comparable companies have been adapted for
use at the Company with the actual percent granted varying by position within
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 stockholders 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.
Prior to 1996, Mr. Jack E. Pratt, Chairman of the Board and Chief Executive
Officer of the Company, was an employee of GBCC and served under an employment
agreement with GBCC 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, 1996. In addition, 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 GBCC.
Effective as of January 1, 1996, the Company assumed the obligations of
GBCC under the Employment Agreement and Mr. Pratt continued to provide services
to the Company and GBCC which allocated the cost of such services pursuant to
the Overhead Allocation Arrangement.
Effective as of January 1, 1997, and in light of the spin-off by the
Company of GBCC and its subsidiaries on December 31, 1996, the Company intends
to enter into services agreements with subsidiaries of GBCC. Pursuant to the
Employment Agreement and the services agreements, Mr. Pratt will continue to
provide services to the Company and GBCC which will allocate the cost of such
services pursuant to the services agreements. Furthermore, effective as of
January 1, 1997, the Company extended the term of the Employment Agreement with
Mr. Pratt to December 31, 2000.
In light of previous decisions of the Board of Directors of HCC and its
Compensation Committee, the minimum annual base salary of Mr. Pratt under the
Employment Agreement was set at $645,000 effective as of January 1, 1996. Due
to the recent performance of the Company, there were no adjustments to the
annual base salary of Mr. Pratt in the fiscal year 1996 and there have been no
adjustments to the annual base salary of or bonuses paid to Mr. Pratt thus far
in the fiscal year 1997. However, in order to encourage long-term performance,
the Plan Committee awarded to Mr. Pratt under the 1996 Long-Term Incentive Plan
the grant of a non-qualified stock option to purchase 150,000 shares of the
Class A Common Stock of the Company at the fair market value of such stock on
December 30, 1996 (i.e., $3.125 per share).
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 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.
18
<PAGE>
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
19
<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 146.5 120.1 26.6
March 29, 1996 154.6 146.4 21.5
June 28, 1996 162.2 170.5 43.0
September 30, 1996 167.6 141.7 30.5
December 31, 1996 181.1 131.0 23.4
</TABLE>
20
<PAGE>
TRANSACTIONS WITH MANAGEMENT
Greate Bay Casino Corporation. As a result of the distribution by the
Company of the stock it owned in GBCC to the Company's stockholders on December
31, 1996, GBCC is no longer a consolidated subsidiary. GBCC, however, remains
approximately 38% owned by the Pratt Family and GBCC and the Company have a
number of common officers and directors.
During 1990, the Company acquired approximately $38.8 million of
unsecured notes (the "PCPI Notes") issued by PCPI Funding Corp., a subsidiary of
GBCC. As part of a refinancing in February 1994 of virtually all of GBCC's
casino-related outstanding debt, a newly formed subsidiary of GBCC issued
approximately $40.5 million discounted principal amount of new deferred interest
notes (the "PPI Funding Notes") in exchange for the $38.8 million principal
amount of PCPI Notes held by the Company. The increased principal amount of the
new notes included a call premium on the exchange ($1.7 million) equal to 4 1/2%
of the principal amount of PCPI Notes exchanged; such premium was paid to all
third parties holding PCPI Notes. Interest income accreted with respect to the
PPI Funding Notes for the year ended December 31, 1996 amounted to $7.3
million.
It was anticipated that the Company's primary method of collection
with respect to the PPI Funding Notes would be through the utilization of tax
net operating losses generated in prior years by GBCC. As GBCC is no longer a
consolidated subsidiary for federal income tax purposes, this means of
collection is no longer available to the Company. Accordingly, at December 31,
1996, the Company established a valuation allowance in the amount of $18.7
million to reduce the outstanding principle balance on the PPI Funding Notes to
an estimated realizable value. Management anticipates that the remaining
balance of $35.6 million will be realized through a combination of asset
acquisitions and repayments from GBCC.
Since May 1992, GBCC has borrowed funds from the Company for various
purposes. As of December 31, 1996, the outstanding balance on such borrowings
was $7.8 million and, under certain conditions, GBCC may obtain additional loans
from the Company. Of the amounts borrowed, $1 million, which is not due until
April 1, 1998, is classified as noncurrent and $250,000 is due on demand, or if
no demand is made, on April 1, 1998. Such borrowings from the Company bear
interest at the rate of 14% per annum, payable semiannually. The remaining $6.5
million was borrowed from the Company during 1996 on a demand basis with
interest at the rate of 13 3/4% per annum payable quarterly commencing October
1, 1996. Interest receivable in connection with such borrowings amounted to
$94,000 at December 31, 1996. Payment of interest on borrowings from the
Company is subject to the approval of New Jersey gaming authorities.
In connection with the February 1994 refinancing of virtually all of
GBCC's casino-related indebtedness, a newly formed subsidiary of GBCC borrowed
$15 million from the Company to be used in connection with an expansion of the
Sands Hotel and Casino. The debt accrued interest at the rate of 14 5/8% per
annum and was scheduled for repayment in February 2005. As of December 31,
1996, the entire $15 million principal amount of such notes together with all
accrued interest has been assigned or otherwise contributed by the Company to
GBCC.
Hollywood Casino - Aurora, Inc. ("HCA"), a wholly owned subsidiary of
the Company, was organized for the purpose of developing and owning a riverboat
gaming facility in Aurora, Illinois, (the "Aurora Casino") which commenced
operations on June 17, 1993. GBCC receives, pursuant to a services agreement, a
base services fee equal to 5% of operating revenues (as defined in the
agreement) subject to a maximum of $5.5 million annually, and an incentive fee
equal to 10% of gross operating profit (as defined in the agreement to generally
include all revenues, less expenses other than depreciation, interest,
21
<PAGE>
amortization and taxes). Unpaid base services and incentive fees of $2.1
million were owed to GBCC at December 31, 1996.
Subject to regulatory approval and effective as of April 1, 1997, a
subsidiary of the Company will acquire the general partnership interest in the
limited partnership which holds the management contract on the Aurora Casino
from a subsidiary of GBCC. As general partner, the Company will receive 99% of
the first $84,000 of net income earned by the partnership each month and 1% of
any income earned above such amount. The Company will issue to the GBCC
subsidiary a five-year note in the original amount of $3.8 million, assign $7.6
million principal amount of PPI Funding Notes (see above) and assign certain
accrued interest receivable in exchange for the general partnership interest.
HWCC - Tunica, Inc. ("HCT"), a wholly owned subsidiary of the Company,
completed construction of a dockside gaming facility in Tunica County,
Mississippi (the "Tunica Casino") which commenced operations in August 1994.
Pursuant to a ten-year consulting agreement with HCT, GBCC receives monthly
consulting fees of $100,000.
The Company was obligated during 1996 under the terms of an
administrative services agreement to pay GBCC $50,000 per month in connection
with certain shared administrative costs. In addition, the Company and its
subsidiaries share certain general and administrative costs with GBCC. A
receivable in the amount of $203,000 in connection with such allocated costs and
fees was due to the Company at December 31, 1996.
Various subsidiaries of GBCC provide certain marketing and other
administrative services to casino facilities owned by the Company. The casino
facilities are billed for such services at either the direct or allocated cost
of providing the services. A subsidiary of GBCC also provides computer-related
services to the casino facilities. The subsidiary has an agreement with one
casino facility which expired on December 31, 1996 and has been renewed through
December 31, 1999; such agreement provides for the sale of computer hardware and
information systems equipment and the licensing of software necessary to operate
the facility. The casino pays prices and fees in amounts and on terms and
conditions that the subsidiary provides to unrelated third parties as well as a
fixed license and consulting fee of $30,000 per month ($33,600 effective January
1, 1997). The subsidiary is also reimbursed for its direct costs and expenses
incurred under this agreement. The GBCC subsidiary also provides similar
services and hardware to another casino facility which it charges for direct
costs and expenses.
On October 16, 1995, the Company assumed the employment contracts of
each of the Pratt Brothers, including the outstanding obligations of GBCC for
the pension and death benefit payments to be made to the Pratt Brothers. As
consideration for the assumption, the Company obtained a non-interest bearing
receivable from GBCC in the amount of approximately $4.3 million, representing
the net present value of the outstanding obligations as of such date. On
December 31, 1996, such receivable was eliminated by means of a capital
contribution to GBCC by the Company.
DFW North. Prior to sale of the property in September 1996, GBCC
operated the Holiday Inn located at the north entrance of the Dallas/Fort Worth
International Airport ("DFW North") which was owned by Metroplex Hotel Limited
("Metroplex"), a limited partnership owned 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 the Estate of Crystal A. Pratt, the former wife of Jack
E. Pratt, as a 30% limited partner. During the year ended December 31, 1996,
GBCC made capital expenditures under the hotel operating agreement totaling
approximately $1.8 million toward property improvements. GBCC was also
obligated by the operating agreement to make minimum payments equal to principal
and interest payments on the indebtedness incurred by Metroplex to purchase DFW
North. During February 1994, GBCC 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
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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 $398,000 during the year ended December 31, 1996. Payments from
Metroplex included interest at the rate of 9 1/2% per annum. Upon the sale of
the hotel by Metroplex, GBCC received proceeds sufficient to repay the third
party indebtedness, repay the Company for all outstanding principal and
interest, recover $2.6 million of its total investment in property improvements
and receive additional cash of approximately $770,000.
Other. 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 1996 totaled $499,000. The
aircraft was sold during March 1997 with the Company realizing a gain of the
sale of approximately $460,000. A commission of approximately $83,000 was paid
to the maintenance company with respect to the sale.
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, 1997.
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 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 1997.
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 9, 1998, and must otherwise comply with the requirements of Rule 14a-8.
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COPIES OF THE ANNUAL REPORT ON FORM 10-K
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
The Annual Report on Form 10-K covering the Company's year ended
December 31, 1996, including audited financial statements, is enclosed herewith.
The Form 10-K does not form any part of the materials for the solicitation of
Proxies. The enclosed Form 10-K does not include all exhibits required to be
filed with the Securities and Exchange Commission. However, these exhibits are
listed in Part III of the enclosed Form 10-K, and the Company will furnish, for
a minimal charge, any such exhibit to each stockholder upon written request.
Written requests for exhibits 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
April 30, 1997
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.
24
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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 April 18, 1997, at the Annual Meeting of Stockholders to
be held on May 29, 1997, or any adjournment(s) thereof.
1. PROPOSAL TO ELECT AS CLASS I DIRECTOR OF THE COMPANY THE FOLLOWING PERSON TO
HOLD OFFICE UNTIL THE 2000 ANNUAL MEETING OF STOCKHOLDERS OR UNTIL HIS
SUCCESSOR HAS BEEN DULY ELECTED AND QUALIFIED.
FOR nominee listed below WITHHOLD AUTHORITY
to vote for nominee below.
---- ----
James A. Colquitt
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS FOR FISCAL YEAR 1997.
FOR AGAINST ABSTAIN
------ ------ ------
- --------------------------------------------------------------------------------
(please sign on the other side)
3. 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 NOMINEE UNDER PROPOSAL 1 AND FOR THE ACTION UNDER
PROPOSAL 2.
Dated: , 1997
-------------------
-------------------------------
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.
