<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 26, 1999
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 26th day of May 1999,
at 10:30 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 ratify the appointment of Deloitte & Touche LLP as the independent
public accountants of the Company for fiscal year 1999.
3. To approve an amendment to the Hollywood Casino Corporation 1996 Long-
Term Incentive Plan.
4. To transact any and all other business that may properly come before the
meeting.
The Board of Directors has fixed the close of business on April 16, 1999 as
the Record Date to determine which stockholders are entitled to notice of and to
vote at the Annual Meeting or any postponement or adjournment. Only
stockholders of record at the close of business on the Record Date are entitled
to notice of, and to vote at, the Annual 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 the 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. THE COMPANY WILL RETURN YOUR PROXY
TO YOU IF YOU ATTEND THE ANNUAL MEETING AND REQUEST THAT IT BE RETURNED OR IF
YOU REQUEST THAT IT BE RETURNED AS DESCRIBED ON THE NEXT PAGE. YOUR PROMPT
RESPONSE WILL REDUCE THE TIME AND EXPENSE OF PROXY SOLICITATION.
BY ORDER OF THE BOARD OF DIRECTORS,
William D. Pratt, Secretary
Dallas, Texas
April 28, 1999
1
<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 26, 1999
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
28, 1999, 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 26, 1999 (the "Annual Meeting"), at the time and
place and for the purposes set forth in the accompanying Notice of Annual
Meeting.
The accompanying Proxy form is designed to permit you, as a holder of the
Company's voting common stock ("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 your
executed and dated proxy card specifies a choice with respect to a voting
matter, your shares will be voted accordingly. If you do not specify a choice,
the 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 Proposals 2 and 3.
The Company encourages you to attend its annual meeting. Mailing your Proxy
does not prevent you from voting in person if you so desire. Any stockholder of
the Company completing a Proxy has the right to revoke his or her Proxy at any
time prior to the voting. Revocation of your proxy may be done 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. No revocation
will be effective, however, unless it is 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 or other electronic means. 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 enclosed Proxy form and any additional
material as well as the cost of forwarding solicitation material to the
beneficial owners of stock and other solicitation costs will be paid for 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 three (3) directors to hold office until their respective
successors have been duly elected and qualified.
2. Ratification of the appointment of Deloitte & Touche as the independent
public accountants of the Company for fiscal year 1999.
3. Approval of an amendment to the Hollywood Casino Corporation 1996 Long-
Term Incentive Plan.
4. Any other matters as may properly come before the meeting.
VOTING RIGHTS AND PRINCIPAL STOCKHOLDERS
General
The Board of Directors of the Company has fixed the close of business on
April 16, 1999 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 postponment or adjournment. On the Record Date
there were 24,949,976 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 record of the Company's
Common Stock 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 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 approve any proposal. The
inspectors of election will treat any shares held by brokers or nominees for
which they have no discretionary power to vote on a particular matter and for
which they have received no instructions from the beneficial owners or persons
entitled to vote ("broker non-votes") 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 directors, the proposal to ratify the
appointment of the accountants or the proposal to approve the amendment to the
incentive plan.
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, Mississippi Gaming
Commission and Louisiana Gaming Control Board 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
3
<PAGE>
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 prevent persons who are
not citizens of the United States, as defined therein, from holding a total of
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 as defined in the Company's Certificate of
Incorporation.
Security Ownership of Certain Beneficial Owners
Based on filings with the Securities and Exchange Commission, no one other
than certain directors of the Company is known who beneficially owned more than
5% of the outstanding Common Stock as of the Record Date.
Security Ownership of Management
The following table presents the number of shares of Common Stock
beneficially owned by each director and executive officer named under the
caption "Remuneration of Directors and Executive Officers" and by all current
directors and named 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.................. 8,219,377 (b) 32.4%
Edward T. Pratt, Jr............ 1,091,544 4.4%
William D. Pratt............... 1,354,447 (c) 5.4%
Edward T. Pratt III............ 2,822,525 (d) 11.1%
Paul C. Yates.................. 160,000 (e) *
Theodore H. Strauss............ 20,500 (f) *
James A. Colquitt.............. 17,500 (f) *
Oliver B. Revell III........... 15,000 (f) *
All directors and officers as
a group (9 individuals)...... 13,727,893 (g) 52.9%
</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 1,642,001 shares (6.6%) of the outstanding stock of
the Company, (ii) the MEP Family Partnership and the CLP Family Partnership,
both Texas general partnerships for which Mr. Pratt is the Managing General
Partner, own 14,000 and 7,000 shares, respectively, less than 1% of the
outstanding stock of the Company, (iii) 1,079,632 shares (4.3%) of the
outstanding stock of the Company owned of record by adult children of Mr.
Pratt and subject to a proxy giving him the right to vote such shares and
prohibiting the transfer of such shares without his approval and (iv)
975,134 shares (3.9%) of the outstanding
4
<PAGE>
common stock of the Company held by Mr. Pratt as custodian for his minor
children. Also includes options to purchase 450,000 shares of common stock
of the Company exercisable within 60 days under the Hollywood Casino
Corporation 1996 Long-Term Incentive Plan (the "1996 Plan").
(c) Beneficial ownership is attributable to the following: (i) 381,088 shares
(1.5%) of the outstanding stock of the Company owned of record by adult
children of Mr. Pratt and subject to a proxy giving him the right to vote
such shares and prohibiting the transfer of such shares without his approval
and (ii) WDP Jr. Family Trust, for which Mr. Pratt is the Managing Trustee,
owns 200,294 shares, less than 1% of the outstanding stock of the Company.
(d) Beneficial ownership is attributable to 1,438,812 shares (5.8%) of the
outstanding stock of the Company owned of record by siblings of Mr. Pratt
and subject to a proxy giving him the right to vote such shares and
prohibiting the transfer of such shares without his approval. Also includes
options to purchase 450,000 shares of Common Stock of the Company
exercisable within 60 days under the 1996 Plan.
(e) Includes options to purchase 50,000 shares of Common Stock of the Company
exercisable within 60 days under the 1996 Plan.
(f) Includes 17,500 shares of Common Stock of the Company each for Mr. Strauss
and Mr. Colquitt and 15,000 shares of Common Stock of the Company for Mr.
Revell 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").
(g) Includes 1,005,000 shares of Common Stock of the Company subject to options
exercisable within 60 days.
ELECTION OF DIRECTORS
The Amended and Restated Articles of Incorporation of the Company provide
that the Board of Directors shall consist of at least three (3) members and that
the number of directors may 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 1999 consists of Jack
E. Pratt, Edward T. Pratt III and Theodore H. Strauss; 2000 consists of James A.
Colquitt and Oliver B. Revell III; and 2001 consists of Edward T. Pratt, Jr. and
William D. Pratt.
Unless otherwise directed, the persons appointed by your Proxy will vote
your shares for the election of the nominees listed in the table below as
directors of the Company:
<TABLE>
<CAPTION>
Year First
Became a
Name and Age Director Present Offices Held in the Company
- -------------------------- ---------- -----------------------------------
<S> <C> <C>
Jack E. Pratt (72) 1990 Chief Executive Officer and
Chairman of the Board
Edward T. Pratt III (43) 1992 President, Chief Operating Officer
sand Director
Theodore H. Strauss (74) 1993 Director
</TABLE>
5
<PAGE>
The Board of Directors does not believe that any of the nominees for director
will refuse or be unable to accept election or be unable to serve as a director
of the Company. Should any nominee become unavailable for nomination or
election or refuse to be nominated or to accept election as a director of the
Company, then the persons appointed by your Proxy will vote your shares for the
election of other individual(s) 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 successor has been
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:
Jack E. Pratt has been Chief Executive Officer and Chairman of the Board of
the Company since 1993. From 1990 to May 1995, he also served as President of
the Company. Mr. Pratt also served for more than five years prior to his
resignation from such positions on January 2, 1998 as Chairman of the Board of
Directors and Chief Executive Officer of Greate Bay Casino Corporation ("GBCC"),
which until December 31, 1996, was an approximately 80% owned subsidiary of the
Company. Mr. Pratt served as Chairman of the Board of Directors and Chief
Executive Officer of GB Holdings, Inc. and Greate Bay Hotel and Casino, Inc.
("GBHC") and as Chairman of the Board of Directors, President and Chief
Executive Officer of GB Property Funding Corp. until his resignation from such
positions on January 2, 1998. On January 5, 1998, these three subsidiaries of
GBCC filed petitions for relief under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the District of New Jersey.
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 five years until November 1995 when he was
elected President and Chief Operating Officer of GBCC. He also served until his
resignation from such positions on January 2, 1998 as President, Chief Operating
Officer and a director of GB Holdings, Inc. and as Executive Vice President and
a director of GB Property Funding Corp. On January 5, 1998, these GBCC
subsidiaries filed petitions for relief under Chapter 11 of the United States
Bankruptcy Code.
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, Inc. and
Sizeler Property Investors, Inc. It is anticipated that Bear, Stearns & Co.
Inc. will perform services on behalf of the Company in the current year.
Required Vote
Assuming the presence of a quorum, the holders of at least of a plurality of
the issued and outstanding shares of Common Stock present, either in person or
by proxy, at the Annual Meeting must vote in favor in order to elect a director.
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 52.3% of the outstanding Common Stock, election of the
nominees is assured.
6
<PAGE>
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
Non-employee directors of the Company receive an annual fee of $50,000 for
service on the Board of Directors. They also receive stock option grants
described under the caption "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
five special meetings during the year ended December 31, 1998. All directors
attended at least 75% of meetings of the Board of Directors and its committees
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 accountants,
including the amount they will 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) report to the Board of Directors and take
action on such matters as the Board of Directors may direct it to take. The
Audit Committee is comprised of James A. Colquitt, Oliver B. Revell III and
Edward T. Pratt, Jr. The Audit Committee met five times during 1998.
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 William D. Pratt, James A. Colquitt
and Theodore H. Strauss. The Compensation Committee met three times during
1998. 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 Theodore
H. Strauss and James A. Colquitt. The Stock Option Committee met twice during
1998.
7
<PAGE>
Family Relationships.
Jack E. Pratt, Edward T. Pratt, Jr. and William D. Pratt are brothers (the
"Pratt Brothers"). Edward T. Pratt III, President and Chief Operating Officer
of the Company, is the son of 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)....................... 72 Chief Executive Officer and Chairman of the Board
of Directors of the Company
Edward T. Pratt, Jr. (2)................ 75 Vice President, Treasurer and Vice Chairman of
the Board of Directors of the Company
William D. Pratt (3).................... 70 Executive Vice President, Secretary, General
Counsel and Director of the Company
Edward T. Pratt III (1)................. 43 President, Chief Operating Officer and Director of
the Company
James A. Colquitt (4)................... 80 Director of the Company
Theodore H. Strauss (1)................. 74 Director of the Company
Oliver B. Revell III (5)................ 60 Director of the Company
Paul C. Yates (6)....................... 37 Executive Vice President and Chief Financial
Officer of the Company
Charles F. LaFrano III (7).............. 44 Vice President of Finance of the Company
</TABLE>
- ----------------------------
(1) See "Election of Directors - Business Experience for Past Five Years" for
certain information with respect to Jack E. Pratt, Edward T. Pratt III and
Theodore H. Strauss.
(2) Edward T. Pratt, Jr. has held his positions with the Company since 1990 and
has served for more than five years as Treasurer and Vice Chairman of the
Board of Directors of GBCC. Mr. Pratt also served until his resignation
from such positions on January 2, 1998 as Vice Chairman of the Board of
Directors of GB Holdings, Inc. and of GB Property Funding Corp. and as a
Director of GBHC.
8
<PAGE>
On January 5, 1998, these three GBCC subsidiaries filed petitions for relief
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the District of New Jersey.
(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 until his
resignation from such positions on January 2, 1998 as Executive Vice
President, General Counsel and Secretary of GB Holdings, Inc. and of GB
Property Funding Corp. and as a director of GBHC. On January 5, 1998, these
three GBCC subsidiaries filed petitions for relief under Chapter 11 of the
United States Bankruptcy Code.
(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 GBCC.
(5) Oliver B. Revell III was elected to fill an existing vacancy on the Board of
Directors on September 12, 1997. Mr. Revell has been President of Revell
Group International, a security consulting business, since September 1994.
From May 1991 until September 1994, Mr. Revell was a Special Agent in Charge
for the Federal Bureau of Investigation.
(6) Paul C. Yates has served as Executive Vice President and Chief Financial
Officer of the Company since May 1998. Prior to August 1997, Mr. Yates
served as managing director with Bear, Stearns & Co. Inc. for a period of
more than five years. It is anticipated that Bear, Stearns & Co. Inc. will
perform services on behalf of the Company in the current year.
(7) 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. Mr. LaFrano also served until his resignation from such
positions on January 2, 1998 as Vice President and Assistant Secretary of
GB Holdings, Inc. and GB Property Funding Corp. On January 5, 1998, these
GBCC subsidiaries filed petitions for relief under Chapter 11 of the United
States Bankruptcy Code.
Section 16(a) of the Securities and 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 on reviews of these filings furnished
to the Company during the year ended December 31 1998 and through March 31,
1999, the Company has determined that Edward T. Pratt III and William D. Pratt
were each late once in filing a statement of change in beneficial ownership in
each case involving a total of one 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 the Company's Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company determined as of the end of
the last fiscal year (hereafter referred to as the named executive officers) for
the fiscal years ended December 31, 1998, 1997 and 1996.
<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) 1998 $643,729 $170,208 $ - 150,000 $ 19,270
Chief Executive 1997 643,235 228,476 - 150,000 33,920
Officer and Chairman of the 1996 646,770 - 14,000 150,000 279,984
Board of the Company
Edward T. Pratt III (3) 1998 423,860 170,208 - 150,000 4,000
President and Chief Operating 1997 423,840 228,476 - 150,000 3,500
Officer of the Company 1996 426,167 - - 150,000 1,980
Edward T. Pratt, Jr. (3) 1998 323,425 73,012 - - 4,000
Vice President, Treasurer and 1997 324,312 101,545 - - 3,500
Vice Chairman of the Board of 1996 325,891 - 18,500 - 171,150
the Company
William D. Pratt (3) 1998 293,373 73,012 - - 11,240
Executive Vice President, 1997 294,195 101,545 - - 11,547
Secretary and General Counsel 1996 295,811 - 14,000 - 215,208
of the Company
Paul C. Yates (4) 1998 164,113 75,000 - 150,000 -
Executive Vice President and 1997 - - - - -
Chief Financial Officer of the 1996 - - - - -
Company
</TABLE>
__________________________
(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 Jack E. Pratt, Edward T. Pratt, Jr. and William
D. Pratt also include pension benefit accruals on their behalf. See also
"Employment Contracts" below.
10
<PAGE>
(3) Jack E. Pratt held and Edward T. Pratt, Jr., William D. Pratt and Edward T.
Pratt III concurrently hold the positions as officers of GBCC described
under the captions "Election of Directors" and "Management." Through
September 1998, GBCC reimbursed the Company in accordance with overhead
allocation agreements for that portion of salary, bonus and other
compensation which related to services provided to GBCC. Effective October
1, 1998, GBCC pays HCC a monthly services fee which approximates its portion
of shared overhead costs.
(4) Mr. Yates began his employment in May 1998 and, therefore, the amounts
reflected above represent only the period from the commencement of his
employment through the end of the year.
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")
were made to the named executive officers during the fiscal year ended December
31, 1998.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
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 31.9 $ 1.75 $ 1.75 6/19/03 $ 72,524 $ 160,259
Edward T. Pratt III 150,000 31.9 1.75 1.75 6/19/03 72,524 160,259
Edward T. Pratt, Jr. - - - - - - -
William D. Pratt - - - - - - -
Paul C. Yates 150,000 31.9 1.91 1.91 5/11/08 179,825 455,711
</TABLE>
_____________________
(a) Options were granted "at market" on the date of grant and first become
exercisable six months from the date of grant for Jack E. Pratt and Edward
T. Pratt III. The options granted to Mr. Yates were awarded on May 11, 1998
and become exercisable as follows: 50,000 shares on the first anniversary of
the date of grant, 34,000 shares two years after such date, an additional
33,000 shares three years after such date and the remaining 33,000 shares
four years after such date.
11
<PAGE>
Option Exercises and Holdings
The following table provides information, with respect to the named executive
officers, concerning options outstanding 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 ($1.03)
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......... - $ - 450,000 - $ - $ -
Edward T. Pratt III... 40,008 64,989 450,000 - - -
Edward T. Pratt, Jr... - - - - - -
William D. Pratt...... - - - - - -
Paul C. Yates......... - - - 150,000 - -
</TABLE>
On June 19, 1998, the Board of Directors of the Company approved the
repricing of all options granted to non-employee directors of the Company prior
to January 1, 1998. The exercise price on such options was reset at $1.75 per
share, the market value of the Company's stock at the date of the repricing.
All of the options repriced remained fully vested. The following table presents
certain information concerning the repricing of options to all executive
officers and directors of the Company since its inception.
TEN YEAR OPTION REPRICING TABLE
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Price Exercise Option Term
Date Underlying of Stock Price at New Remaining
of Options at Time Time of Exercise at Date of
Name Repricing Required of Repricing Repricing Price Repricing
- ---------------------- ------------ -------- ------------ --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
James A. Colquitt 6/19/98 10,000 $1.75 $6.25 $1.75 8 yr.
James A. Colquitt 6/19/98 2,500 1.75 3.88 1.75 8 yrs., 7 mo.
Theodore H. Strauss 6/19/98 10,000 1.75 6.25 1.75 8 yr.
Theodore H. Strauss 6/19/98 2,500 1.75 3.88 1.75 8 yr., 7 mo.
Oliver B. Revell III 6/19/98 10,000 1.75 2.81 1.75 9 yr., 3 mo.
</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, Executive Vice President,
Secretary and General Counsel of the Company, are under employment contracts
with the Company and have provided services to GBCC under intercompany service
12
<PAGE>
and allocation agreements ratified by the non-interested directors of the
respective Boards of Directors. Their employment contracts were executed during
October 1989 and originally expired on September 30, 1992, but have subsequently
been extended by amendment through December 31, 2001 with respect to Jack E.
Pratt and to December 31, 2000 with respect to Edward T. Pratt, Jr. and William
D. Pratt. Services to GBCC continue to be provided pursuant to intercompany
service 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 each Pratt Brother's highest annual
salary during his employment term by 50%; 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 $484,000, $244,000 and $221,000, 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. In the
event of a change in control of the Company, the agreement provides that if Mr.
Pratt's employment were to be terminated, he would receive the greater of the
remaining compensation under his employment contract or three times his then
annual base salary, payable in a lump sum or in equal monthly installments over
the applicable period.
Paul C. Yates, Executive Vice President and Chief Financial Officer of the
Company, serves in such positions under an employment contract dated as of May
11, 1998 and continuing, unless sooner terminated, until May 10, 2000. The
expiration date of the contract is then subject to an automatic one-year renewal
unless either party provides 90-days notice not to renew. The terms of Mr.
Yates agreement provide for a minimum annual base compensation of $250,000. In
addition, Mr. Yates participates in Company incentive bonus plans; however, the
employment agreement provides for a minimum annual bonus of $75,000. In the
event of a change in control of the Company, the agreement provides that if Mr.
Yates' employment were to be terminated, he would receive the remaining
compensation and minimum bonus under his employment agreement payable in a lump
sum or in equal monthly installments over the applicable period.
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.
13
<PAGE>
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 as
a result of 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 currently receive awards during any
fiscal year covering an aggregate of more than 150,000 shares of Common Stock.
Shareholders are being asked in this proxy to approve an amendment to the 1996
Plan increasing the maximum number of shares that may be awarded to a
participant during any fiscal year to 500,000 (see "Proposal to Approve an
Amendment to the Hollywood Casino Corporation 1996 Long-Term Incentive Plan").
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, by the laws of descent and distribution, or as otherwise allowed by the
1996 Plan. 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 months after such
retirement. Options granted under the Directors' Plan are not transferable or
assignable other than by will, by the laws of descent and distribution, or as
otherwise allowed by the Directors' Plan.
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
14
<PAGE>
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.
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
$778,000 for the year ended December 31, 1998.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors of the Company is
comprised of William D. Pratt, James A. Colquitt and Theodore H. Strauss. Mr.
Pratt also serves as an executive officer of the Company and as an executive
officer and director of GBCC. Mr. Strauss is senior managing director of Bear,
Stearns & Co. Inc.; it is anticipated that Bear, Stearns & Co. Inc. will perform
services on behalf of the Company in the current year.
15
<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 polices. The Compensation Committee
also reviews and approves all salary arrangements and other recommendations for
executives, evaluates executives' 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 1998 executive incentive compensation plan of the Company (the "1998
Incentive Compensation Plan"), which was approved by the independent members of
the Compensation Committee effective as of March 5, 1998, 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. The 1998 Incentive Compensation Plan provides
that a bonus will be awarded to certain key executives of the Company and its
subsidiaries designated by management if certain specific pre-determined company
or business unit financial goals set by management at the beginning of the
fiscal year 1998 are achieved by such executives during the fiscal year 1998.
Notwithstanding the foregoing, (i) except as provided in item (ii) below, no
bonus payouts will be made under the 1998 Incentive Compensation Plan if any
minimum threshold performance goal set by management is not achieved, (ii) the
Compensation Committee may award a bonus to a participant in the 1998 Incentive
Compensation Plan in amounts not to exceed 25% of annual base salary if the
performance goal is not met due to circumstances beyond the reasonable control
of such participant and the Compensation Committee determines that such a bonus
is merited, (iii) the President and Chief Operating Officer of the Company may
recommend to the Compensation Committee, and the Compensation Committee may
award, certain discretionary bonuses to certain participants based upon such
participants' contributions on significant special projects and (iv) maximum
bonus payouts will be 200% of targeted
16
<PAGE>
payouts for superior performance relative to target forecast numbers. The
targets established in the 1998 Incentive Compensation Plan 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 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.
Mr. Jack E. Pratt is Chairman of the Board and Chief Executive Officer of
the Company and also previously served as Chairman of the Board and Chief
Executive Officer of Greate Bay Casino Corporation ("GBCC") which, prior to
December 31, 1996, was a direct approximately 80% owned subsidiary of the
Company, until his resignation from his positions with GBCC on January 2, 1998.
Mr. Pratt holds his positions with the Company and held his positions with GBCC
pursuant to an employment agreement with GBCC dated as of September 21, 1989, as
amended (the "Pratt Employment Agreement"), which the Company assumed effective
as of January 1, 1996 and which is described in the Company's Form 10-K for the
fiscal year ended December 31, 1998. The expiration date of the Pratt
Employment Agreement is December 31, 2001. Through September 1998, in
accordance with certain services agreements between the Company and subsidiaries
of GBCC (the "Services Agreements"), GBCC reimbursed the Company for that
portion of bonus, salary and other compensation which related to services
provided to GBCC and its subsidiaries. Effective October 1, 1998, GBCC pays the
Company a monthly services fee which approximates GBCC's portion of shared
overhead costs in accordance with that certain Management and Administrative
Services Agreement dated as of October 1, 1998, between the Company and GBCC.
In light of previous decisions of the Board of Directors of the Company 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 and
there have been no adjustments to such annual base salary since January 1, 1996.
In accordance with the terms of the Services Agreements, the Company's portion
of such annual base salary during 1998 was $541,046. Based on the computation
of the 1998 operating results of the Company and the application of the
methodology of the 1998 Incentive Compensation Plan to such 1998 operating
results, the independent members of the Compensation Committee awarded a bonus
to Mr. Jack E. Pratt in the amount of $170,208 on February 22, 1999. In
addition, in order to encourage long-term performance, the Plan Committee
awarded to Mr. Pratt under the 1996 Long-Term Incentive Plan (i) 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 June 19, 1998
(i.e., $1.75 per share) and (ii) the grant of a non-qualified stock option to
purchase 450,000 shares of the Class A Common Stock of the Company at the fair
market value of such stock on April 6, 1999 (i.e., $1.25 per share), subject to
the
17
<PAGE>
ratification by the stockholders of the Company of an amendment to the 1996
Long-Term Incentive Plan increasing the maximum number of shares that may be
awarded to a participant during any fiscal year from 150,000 to 500,000 shares.
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.
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
Theodore H. Strauss, Chairman
James A. Colquitt
William D. Pratt
18
<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 previous five years. 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
(January 1, 1994 = 100)
<TABLE>
<CAPTION>
Hollywood
Equity Casino Casino
Date Index Index Corporation
- -------------------- ------ ------ -----------
<S> <C> <C> <C>
January 1, 1994 100.0 100.0 100.0
March 31, 1994 96.2 86.7 88.2
June 30, 1994 96.4 66.3 52.9
September 30, 1994 101.1 74.4 52.9
December 30, 1994 100.7 76.8 45.1
March 31, 1995 110.5 99.3 44.1
June 30, 1995 121.3 111.1 69.6
September 29, 1995 131.2 107.0 54.9
December 29, 1995 138.7 101.8 33.3
March 29, 1996 146.5 124.2 27.0
June 28, 1996 152.8 144.6 53.9
September 30, 1996 157.9 120.2 38.2
December 31, 1996 170.6 111.1 29.4
March 31, 1997 174.6 95.5 27.5
June 30, 1997 204.3 104.9 23.5
September 30, 1997 221.4 122.1 22.5
December 31, 1997 228.6 97.7 14.5
March 31, 1998 259.6 106.4 14.7
June 30, 1998 267.7 95.0 14.7
September 30, 1998 240.8 63.8 11.3
December 31, 1998 294.1 66.9 8.1
</TABLE>
19
<PAGE>
TRANSACTIONS WITH MANAGEMENT
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 36% 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, 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.
It was anticipated that one of the Company's primary methods 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. At December 31, 1998, the
Company evaluated the collectability of the PPI Funding Notes. Such evaluation
was based, in part, on the Company's determination of the potential for
repayment of the PPI Funding Notes by means of the available cash and noncash
assets of PPI Funding Corp. and its affiliates. Particular consideration was
given to the filing for protection under Chapter 11 of the United States
Bankruptcy Code by GBCC's most significant subsidiary on January 5, 1998. The
Company concluded that a valuation allowance in the amount of $22.7 million was
necessary to reduce the carrying amount of the PPI Funding Notes to their
estimated realizable value of $12.3 million. Management anticipates that this
balance will be realized through a combination of asset acquisitions and
repayments from GBCC.
Prior to distributing its approximate 80% interest in GBCC to its
shareholders in 1996, the Company loaned funds to GBCC for various purposes. As
of December 31, 1998, the outstanding balance on such borrowings was $6.8
million. Of the amounts borrowed, $250,000 was due on April 1, 1998 for which
payment has not been received. Such borrowing from the Company continues to
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
$1.8 million at December 31, 1998. Payment of interest on borrowings from the
Company is subject to the approval of New Jersey gaming authorities.
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. As of April 1, 1997, a subsidiary of the Company
acquired 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 receives 99% of the first $84,000 of net income
earned by the partnership each month and 1% of any income earned above such
amount. Distributions made to the GBCC subsidiary which retained the limited
partnership interest amounted to $5.6 million during 1998. In exchange for the
general partnership interest, the Company issued to the GBCC subsidiary a five-
year note in the original amount of $3.8 million, assigned $7.6 million
principal amount of PPI Funding Notes (see above) and assigned certain accrued
interest receivable. The $3.8 million note is payable in monthly installments
of $83,000, including interest at the rate of 14% per annum, commencing on May
1, 1997, with additional quarterly variable principal payments commencing on
July 1, 1997 in an amount equal to the Company's share of quarterly cash
distributions, as defined, from the limited partnership. The outstanding
principal balance of the note
20
<PAGE>
was $2.8 million at December 31, 1998. The Company incurred interest expense on
the note amounting to $439,000 during the year ended December 31, 1998.
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 and its subsidiaries share certain general and administrative
costs with GBCC pursuant to a services agreement. Net allocated costs and fees
charged to GBCC amounted to $1 million during the year ended December 31, 1998.
A receivable in the amount of $179,000 in connection with such allocated costs
and fees was due to the Company at December 31, 1998.
A subsidiary of GBCC provides computer-related, marketing and other
administrative services to the Company's casino facilities. The GBCC subsidiary
has an agreement with the Tunica Casino through December 31, 1999. This
agreement provides for the sale of computer hardware and information systems
equipment and the licensing of software necessary to operate the facility. The
Tunica 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 $33,600 per month. 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 the Aurora Casino
which it charges for direct costs and expenses. Total billings to the Company,
including the two casinos, for such products and services amounted to $1.1
million during the year ended December 31, 1998. Payables to the GBCC
subsidiary at December 31, 1998 totalled $109,000.
As a result of revising the tax treatment for the spin-off of GBCC's stock
to the Company's shareholders at December 31 1996, shareholders of the Company
on the distribution date would also have been required to revise their method of
reporting the distribution received on their separate federal income tax
returns. The Company committed to assume the obligation for additional federal
income taxes owed by its shareholders arising from the revised tax treatment.
Consequently, the Company reached an agreement with the Internal Revenue Service
to settle such obligations on behalf of its shareholders, exclusive of the Pratt
Family, for $100,000 and to issue new tax reporting forms to the Pratt Family.
Such forms will require the Pratt Family members to amend their federal income
tax returns for 1996 resulting in substantial additional taxes and interest. The
Company has agreed to reimburse the Pratt Family for these additional tax
obligations which total approximately $790,000.
In March 1999, the Company entered into an agreement in principle with GBCC
and certain of its wholly owned subsidiaries, including PRT Funding Corp. ("PRT
Funding") and Pratt Casino Corporation ("PCC"), and the holders of $85 million
of senior notes currently in default which were issued by PRT Funding. Under
the terms of the agreement, the Company would purchase the stock of PCC from
GBCC for nominal consideration as part of a debt restructuring (the
"Restructuring") of PRT Funding, PCC and other subsidiaries of PCC. Upon
completion of the Restructuring, PCC's assets will consist of its limited
partnership interest in a management contract for the Aurora Casino and a
consulting agreement for the Tunica Casino. These assets will serve as
collateral for $39.3 million of new notes to be issued by PCC to the holders of
the senior notes as part of the Restructuring. The acquisition of PCC will also
result in a charge to expense by the Company of approximately $39.3 million
during 1999 as no asset value will be attributed to the management contract and
consulting agreement when acquired.
After the acquisition of PCC, the Company will have incurred additional
debt and associated interest, but will no longer report a minority interest in
the limited partnership which holds the Aurora management contract nor pay the
Tunica consulting fee to a GBCC subsidiary. The minority interest and consulting
fee expense totaled $7.7 million for the year ended December 31, 1998.
21
<PAGE>
The successful completion of the Restructuring is subject to the execution
of definitive documents and will require that PCC and PRT Funding file for
protection under Chapter 11 of the United States Bankruptcy Code with the above
transactions included as part of a pre-negotiated plan of reorganization. Such
plan will require approval of the bankruptcy court as well as by the various
gaming regulatory organizations having jurisdiction over PCC and PRT Funding.
PROPOSAL TO APPROVE AN AMENDMENT TO THE
HOLLYWOOD CASINO CORPORATION 1996 LONG-TERM INCENTIVE PLAN
The Board of Directors adopted and the Company's stockholders approved the
1996 Plan during 1996. The Board of Directors voted to amend the 1996 Plan on
March 9, 1999, subject to stockholder approval, to increase the maximum number
of shares that may be granted to an individual under the 1996 Plan from 150,000
shares to 500,000 shares. This amendment to the 1996 Plan is being submitted to
stockholders for approval because such approval is necessary under Section
162(m) of the Internal Revenue Code of 1986, as amended, 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 Plan to be excluded in calculating the $1,000,000 limit. The
full text of the proposed amendment to the 1996 Plan is attached to this Proxy
Statement as Exhibit A.
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 proposed amendment to the 1996 Plan.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
AMENDMENT TO THE HOLLYWOOD CASINO CORPORATION 1996 LONG-TERM INCENTIVE 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
Deloitte & Touche LLP ("Deloitte & Touche") to serve as the independent public
accountants of the Company for its fiscal year ending December 31, 1999.
Deloitte & Touche was engaged by the Audit Committee of the Board of Directors
during October 1998 to serve as independent public accountants for the Company
for fiscal year 1998. Representatives of Deloitte & Touche are expected to be
present at the Annual Meeting to make a statement or to respond to questions. If
the appointment of Deloitte & Touche 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
result in the ratification of the appointment of Deloitte & Touche.
22
<PAGE>
The Company filed a complaint on October 8, 1998 against Arthur Andersen
LLP ("Andersen"), its former certifying accountants, and selected partners
alleging negligent advice and breach of contract with respect to the tax
consequences resulting from the spin off of the stock of GBCC to the Company's
shareholders on December 31, 1996.
In view of such litigation, the Audit Committee of the Company's Board of
Directors voted on October 16, 1998 to terminate Andersen as its independent
accountants. There were no disagreements with Andersen of the type which would
require diclosure under Item 304 of Regulation S-K. Andersen's report on the
consolidated financial statements of the Company for the past two years was
unqualified.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR
FISCAL YEAR 1999.
OTHER BUSINESS
The Board of Directors is not aware of any other business that may properly
be, or is likely to be, brought before the Annual Meeting. If, however, any
other business should properly be presented to the Annual Meeting, the persons
appointed by your Proxy will vote your shares as they deem proper.
STOCKHOLDER PROPOSALS
Under 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 included for the
2000 Annual Meeting, stockholder proposals must be received by the Company by
January 14, 2000, and must otherwise comply with the requirements of Rule 14a-8.
23
<PAGE>
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, 1998, including audited financial statements, is enclosed with this Notice
of Annual Meeting. 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 Form 10-K and the Company will furnish to
you, for a minimal charge, any exhibit 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 28, 1999
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
<PAGE>
Exhibit A
THIRD AMENDMENT TO HOLLYWOOD CASINO CORPORATION
1996 LONG-TERM INCENTIVE PLAN
-----------------------------
WHEREAS, Hollywood Casino Corporation (the "Company") established the
Hollywood Casino Corporation 1996 Long-Term Incentive Plan effective June 12,
1996 and amended such Plan effective March 18, 1997 and effective June 19, 1998
(as so amended, the "Plan"); and
WHEREAS, Article 11 of the Plan authorizes the Board of Directors of the
Company to amend the Plan without the approval of the stockholders of the
Company unless stockholder approval is necessary to comply with Section 162(m)
of the Internal Revenue Code of 1986 or Rule 16b-3 (the "Rule") promulgated
under Section 16(b) of the Securities Exchange Act of 1934; and
WHEREAS, subject to the approval of the stockholders of the Company, the
Board of Directors (the "Board") authorized the amendment of the Plan on March
9, 1999 to increase the maximum annual individual grants under the Plan from
150,000 shares to 500,000 shares of the Company's Class A Common Stock during
any fiscal year; and
WHEREAS, all capitalized terms used but not defined herein shall have the
respective meanings assigned to them in the Plan;
WHEREAS, the stockholders of the Company ratified such amendment to the Plan
on ________, 1999; and
NOW, THEREFORE, effective as of March 9, 1999, the Corporation hereby amends
the Plan as follows:
I.
Section 6.3 of the Plan is amended to read in its entirety as follows:
"6.3 Maximum Individual Grants. No Participant may receive during any
fiscal year of the Company Awards covering an aggregate of more than five
hundred thousand (500,000) shares of Common Stock."
* * * * *
IN WITNESS WHEREOF, the Company has executed this Amendment this _____ day of
___________, 1999.
HOLLYWOOD CASINO CORPORATION
By:
-----------------------------------------
Name: Jack E. Pratt
Title: Chairman of the Board and
Chief Executive Officer
Attest:
- -------------------------------
William D. Pratt, Secretary
1
<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 Edward T. Pratt, Jr. and William D. Pratt as
proxies, with the power to appoint their substitutes, 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 16, 1999, at the Annual Meeting of Stockholders to be held
on May 26, 1999, or any postponment or adjournment.
1. PROPOSAL TO ELECT AS CLASS III DIRECTORS OF THE COMPANY THE FOLLOWING PERSONS
TO HOLD OFFICE UNTIL THE 2002 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 in the space provided below.)
_______________________________________________________
2. PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS FOR FISCAL YEAR 1999.
______ FOR ______ AGAINST ______ ABSTAIN
-------------------------------------------------------------------------------
(please sign on the other side)
3. PROPOSAL TO APPROVE THE AMENDMENT TO THE HOLLYWOOD CASINO CORPORATION 1996
LONG-TERM INCENTIVE PLAN.
______ FOR ______ AGAINST ______ ABSTAIN
4. 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 PROPOSALS 2 AND 3.
Dated:____________________________, 1999
-----------------------------------------
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.
