<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 23, 2000
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 23rd day of May 2000,
at 10:30 a.m. (local time) for the following purposes:
1. To elect two (2) 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 2000.
3. 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 17, 2000 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 24, 2000
<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 23, 2000
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
24, 2000, 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 23, 2000 (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 action specified in Proposal 2.
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.
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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 two (2) 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 2000.
3. 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 17, 2000 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 24,953,476 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 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, 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 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
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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:
Shares of Percentage of
Common Stock Outstanding
Beneficially Common
Beneficial Owner Owned (a) Stock
- ------------------------------- -------------- ------------
Jack E. Pratt.................. 8,669,377 (b) 33.5%
Edward T. Pratt, Jr............ 1,096,544 4.4%
William D. Pratt............... 1,385,747 (c) 5.6%
Edward T. Pratt III............ 3,272,525 (d) 12.7%
Paul C. Yates.................. 234,000 (e) *
Theodore H. Strauss............ 66,000 (f) *
James A. Colquitt.............. 30,000 (f) *
Oliver B. Revell III........... 17,500 (f) *
All directors and officers as
a group (9 individuals)....... 14,807,693 (g) 55.0%
____________________________
* 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) 1,109,632 shares (4.4%) of the
outstanding stock of the Company owned of record either by adult children of
Mr. Pratt or by family trusts 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) 975,136 shares (3.9%) of the outstanding common stock of
the Company held by Mr. Pratt as custodian for his minor children. Also
includes options to purchase 900,000 shares of common stock of the Company
exercisable within 60 days under the Hollywood Casino Corporation 1996 Long-
Term Incentive Plan (the "1996 Plan").
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(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 900,000 shares of Common Stock of the Company
exercisable within 60 days under the 1996 Plan.
(e) Includes options to purchase 94,000 shares of Common Stock of the Company
exercisable within 60 days under the 1996 Plan.
(f) Includes 20,000 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 1,963,000 shares of Common Stock of the Company subject to options
exercisable within 60 days.
ELECTION OF DIRECTORS
The Amended and Restated Articles of Certificate 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 2000 consists of
James A. Colquitt and Oliver B. Revell III; 2001 consists of Edward T. Pratt,
Jr. and William D. Pratt; and 2002 consists of Jack E. Pratt, Edward T. Pratt
III and Theodore H. Strauss.
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:
Year First
Became a
Name and Age Director Present Offices Held in the Company
- --------------------------- ---------- -----------------------------------
James A. Colquitt (81) 1995 Director
Oliver B. Revell III (61) 1997 Director
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.
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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:
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"), which at that time was known as Pratt Hotel Corporation. GBCC was,
until December 31, 1996, an approximately 80% owned subsidiary of the Company.
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, Inc., 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.
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 54.2% of the outstanding Common Stock, election of the
nominees is assured.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
EACH OF THE INDIVIDUALS NOMINATED FOR ELECTION AS A DIRECTOR.
Board Meetings and Committees
Non-employee directors of the Company receive an annual fee of $50,000 for
service on the Board of Directors and, effective May 1, 2000, will receive a fee
of $1,000 for each committee meeting they attend. 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 six special meetings during the year ended December 31, 1999.
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.
The Board of Directors also establishes special committees on an as needed
basis. During 1999, two special committees were convened: (1) a committee of the
independent directors consisting of James A. Colquitt, Theodore H. Strauss and
Oliver B. Revell III to consider and approve the acquisition of Pratt Casino
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Corporation from GBCC and (2) a Pricing Committee consisting of Jack E. Pratt,
Edward T. Pratt III and Paul C. Yates (Chief Financial Officer of the Company)
to consider and approve the pricing of the Senior Secured Notes issued by the
Company in May 1999. In addition, the Board of Directors established a Year 2000
Committee consisting of Edward T. Pratt, Jr. and various officers and employees
of the Company to monitor and advise the Board of Directors with respect to
issues surrounding year 2000 readiness. The Year 2000 Committee, or its
subcommittees, met ten times during 1999.
Audit Committee. The Audit Committee is responsible, among other things, to
(1) 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; (2) 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;
(3) monitor the integrity of the Company's financial reporting process and
systems and internal controls; (4) 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; and (5) report to the Board of
Directors and take action on such matters as the Board of Directors may direct
it to take. During 1999 and for the period up to March 17, 2000, the Audit
Committee was comprised of James A. Colquitt, Oliver B. Revell III and Edward T.
Pratt, Jr. The Audit Committee met four times during 1999. Effective March 17,
2000, Theodore H. Strauss replaced Edward T. Pratt, Jr. on the Audit Committee.
Accordingly, the Audit Committee is now comprised entirely of independent
directors of the Company. The Board of Directors adopted a Charter for the Audit
Committee on March 17, 2000 which is included as Appendix A to this proxy
statement.
Compensation Committee. The Compensation Committee of the Board of Directors
has the duty to review the compensation of the Company's executive officers.
During 1999 and for the period up to March 17, 2000, the Compensation Committee
was comprised of William D. Pratt, James A. Colquitt and Theodore H. Strauss.
The Compensation Committee met four times during 1999. Effective March 17, 2000,
William D. Pratt resigned from the Compensation Committee. 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. Until June 16, 1999, the Stock Option Committee was
comprised of Theodore H. Strauss and James A. Colquitt. Effective June 16, 1999,
Oliver B. Revell III replaced Theodore H. Strauss on the Stock Option Committee.
The Stock Option Committee met twice during 1999.
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.
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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)..................... 73 Chief Executive Officer and Chairman of the Board
of Directors of the Company
Edward T. Pratt, Jr. (2).............. 76 Vice President, Treasurer and Vice Chairman of the
Board of Directors of the Company
William D. Pratt (3).................. 71 Executive Vice President, Secretary, General
Counsel and Director of the Company
Edward T. Pratt III (4)............... 44 President, Chief Operating Officer and Director of
the Company
James A. Colquitt (5)................. 81 Director of the Company
Theodore H. Strauss (6)............... 75 Director of the Company
Oliver B. Revell III (5).............. 61 Director of the Company
Paul C. Yates (7)..................... 38 Executive Vice President and Chief Financial
Officer of the Company
Charles F. LaFrano III (8)............ 45 Vice President of Finance of the Company
</TABLE>
- ----------------------------
(1) 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 GBCC. 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. Mr.
Pratt served until his resignation from such positions in January 1998 as
Chairman of the Board of Directors and Chief Executive Officer of Pratt
Casino Corporation ("PCC"), Chairman of the Board of Directors, President
and Chief Executive Officer of PRT Funding Corp. and Chairman of the Board
of Directors and President of New Jersey Management, Inc. ("NJMI"). On May
25, 1999, 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 Delaware.
(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. On
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January 5, 1998, these three GBCC subsidiaries filed petitions for relief
under Chapter 11 of the United States Bankruptcy Code. Mr. Pratt has been
Chief Financial Officer, Principal Accounting Officer and a director of PCC,
PRT Funding and NJMI since January 2, 1998 and also served as Vice Chairman
of the Board of Directors of PCC and PRT Funding from September 1993 to
January 1, 1998 and as Executive Vice President, Treasurer and a director of
NJMI for more than five years prior to January 1, 1998. On May 25, 1999,
these three subsidiaries of GBCC filed petitions for relief under Chapter 11
of the United States Bankruptcy Code.
(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. Mr. Pratt also served until his resignation
from such positions in January 1998 as Executive Vice President, Secretary,
General Counsel and a director of PCC and PRT Funding and as Vice President,
Secretary and a director of NJMI. On May 25, 1999, these three subsidiaries
filed petitions for relief under Chapter 11 of the United States Bankruptcy
Code.
(4) 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. Mr. Pratt
has been Executive Vice President and Secretary of PCC, PRT Funding and NJMI
since January 2, 1998 and also served as President, Chief Operating Officer
and a director of PCC and as Executive Vice President and a director of PRT
Funding from September 1993 to January 1, 1998. On May 25, 1999, these three
subsidiaries of GBCC filed petitions for relief under Chapter 11 of the
United States Bankruptcy Code.
(5) See "Election of Directors - Business Experience for Past Five Years" for
certain information with respect to James A. Colquitt and Oliver B. Revell
III.
(6) 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. Bear, Stearns & Co. served as an underwriter with respect to the
Company's October 1995 offering of its 12 3/4% Senior Secured Notes and the
Company's May 1999 offering of its 11 1/4% Senior Secured Notes due 2007 and
Floating Rate Senior Secured Notes due 2006 and was an initial purchaser of
13% First Mortgage Notes, with contingent interest, issued during August
1999 by Hollywood Casino Shreveport (the "Shreveport Partnership"), an
effectively 100%-owned partnership formed to develop, construct and own a
dockside casino and hotel complex in Shreveport, Louisiana (the "Shreveport
Resort"). He also serves on the Board of Directors and is Chairman of the
Executive Committee of Texas Capital Bankshares and serves on the Boards of
Directors of Clear Channel Communications, Inc. and Sizeler Property
Investors, Inc.
(7) 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. Bear Stearns & Co. served as an underwriter with
respect
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to the Company's October 1995 offering of its 12 3/4% Senior Secured Notes
and the Company's May 1999 offering of its 11 1/4% Senior Secured Notes due
2007 and Floating Rate Senior Secured Notes due 2006 and was an initial
purchaser of 13% First Mortgage Notes, with contingent interest, issued
during August 1999 by the Shreveport Partnership.
(8) 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. Mr. LaFrano served until his resignation from such
positions in January 1998 as Vice president and Assistant Secretary of PCC
and PRT Funding. On May 25, 1999, PCC and PRT Funding 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 1999 and through March 31, 2000,
the Company has determined that Theodore H. Strauss was late four times in
filing a statement of change in beneficial ownership involving a total of six
transactions, James A. Colquitt was late once in filing a statement of change in
beneficial ownership involving a total of three transactions and Jack E. Pratt
was late once in filing a statement of change in beneficial ownership involving
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, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Annual Compensation Long-Term
----------------------------------- Compensation
Other Annual Awards/ All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation (1)
- --------------------------- ---- ------ ----- ------------ ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Jack E. Pratt (2) 1999 $645,000 $284,749 $ - 450,000 $29,610
Chief Executive 1998 643,729 170,208 - 150,000 19,270
Officer and Chairman of the 1997 643,235 228,476 - 150,000 33,920
Board of the Company
Edward T. Pratt III (2) 1999 425,000 284,749 - 450,000 4,000
President and Chief Operating 1998 423,860 170,208 - 150,000 4,000
Officer of the Company 1997 423,840 228,476 - 150,000 3,500
Edward T. Pratt, Jr. (2) 1999 325,000 122,145 - - 4,000
Vice President, Treasurer and 1998 323,425 73,012 - - 4,000
Vice Chairman of the Board of 1997 324,312 101,545 - - 3,500
the Company
William D. Pratt (2) 1999 295,000 122,145 - - 16,815
Executive Vice President, 1998 293,373 73,012 - - 11,240
Secretary and General Counsel 1997 294,195 101,545 - - 11,547
of the Company
Paul C. Yates (3) 1999 250,000 114,510 - 50,000 1,442
Executive Vice President and 1998 164,113 75,000 - 150,000 -
Chief Financial Officer of the 1997 - - - - -
Company
</TABLE>
__________________________
(1) 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.
(2) 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 caption "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.
10
<PAGE>
Effective October 1, 1998, GBCC pays HCC a monthly services fee which
approximates its portion of shared overhead costs (see "Transactions with
Management").
(3) Mr. Yates began his employment in May 1998 and, therefore, the amounts
reflected above with respect to 1998 represent only the period from the
commencement of his employment through the end of that 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, 1999.
<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 450,000 35.0 $1.25 1.25 4/5/04 $155,408 $343,412
Edward T. Pratt III 450,000 35.0 1.25 1.25 4/5/04 155,408 343,412
Edward T. Pratt, Jr. - - - - - - -
William D. Pratt - - - - - - -
Paul C. Yates 50,000 3.9 1.25 1.25 4/5/09 25,444 59,295
</TABLE>
_____________________
(a) Options were granted "at market" on the date of grant and first became
exercisable six months after the date of grant for Jack E. Pratt and Edward
T. Pratt III. The options granted to Mr. Yates were awarded on April 6, 1999
and become exercisable as follows: 10,000 shares on or after December 1,
1999 and 10,000 shares on or after each December 1 of 2000, 2001, 2002 and
2003.
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 ($4.31)
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......... - $ - 900,000 - $2,165,625 $ -
Edward T. Pratt III... - - 900,000 - 2,165,625 -
Edward T. Pratt, Jr... - - - - - -
William D. Pratt...... - - - - - -
Paul C. Yates......... - - 60,000 140,000 150,938 363,125
</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
and allocation
12
<PAGE>
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, 2003 with respect to Jack E. Pratt and to
December 31, 2002 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 employment 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.
In addition, each of the Pratt Brothers participates in Company incentive bonus
plans. 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 $500,000, $250,000 and $227,000, respectively.
Edward T. Pratt III, President and Chief Operating Officer of the Company,
is under an employment contract dated as of January 1, 2000 in such capacities
continuing through December 31, 2003 unless sooner terminated by either party.
The terms of Mr. Pratt's agreement provide for a minimum annual base salary
effective January 1, 2000 of $468,000, subject to annual review and increase by
the Compensation Committee of the Board of Directors of the Company. In
addition, Mr. Pratt participates in Company incentive bonus plans. 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
January 1, 2000 and continuing, unless sooner terminated, until December 31,
2002. The terms of Mr. Yates' agreement provide for a minimum annual base
compensation of $275,000 during 2000 and increasing to an annual base
compensation of $300,000 effective January 1, 2001 for the remainder of the term
of the contract. 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 receive awards during any fiscal year
covering an aggregate of more than 500,000 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, 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 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.
14
<PAGE>
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
$652,000 for the year ended December 31, 1999.
Compensation Committee Interlocks and Insider Participation
During 1999, the Compensation Committee of the Board of Directors of the
Company was comprised of William D. Pratt, James A. Colquitt and Theodore H.
Strauss. Mr. Pratt, who also serves as an executive officer of the Company and
as an executive officer and director of GBCC, resigned from the Compensation
Committee effective March 17, 2000. Mr. Strauss is senior managing director of
Bear, Stearns & Co. Inc. Bear, Stearns & Co. served as an underwriter with
respect to the Company's October 1995 offering of its 12 3/4% Senior Secured
Notes and the Company's May 1999 offering its 11 1/4% Senior Secured Notes due
2007 and Floating Rate Senior Secured Notes due 2006 and was an initial
purchaser of 13% First Mortgage Notes, with contingent interest, issued during
August 1999 by the Shreveport Partnership.
15
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
Compensation Committee of the Board
The Compensation Committee is currently composed of Messrs. James A.
Colquitt and Theodore H. Strauss who are nonemployee, independent members of the
Board of Directors. Although Mr. William D. Pratt, Executive Vice President,
General Counsel, Secretary and Director of the Company, was formerly a member of
the Compensation Committee until his resignation on March 17, 2000, he
disqualified himself and did not consider or vote on the adoption of stock
option plans or executive incentive compensation plans or the making of
compensation decisions affecting Messrs. Jack E. Pratt, Edward T. Pratt, Jr. or
Edward T. Pratt III or himself while he was a member of the Compensation
Committee.
The overall goal of the Compensation Committee is 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 the performance of executives and considers other matters.
Compensation Policy and Objectives of Hollywood Casino Corporation
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 ("KPMG") 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 "KPMG Report"). The recommendations of KPMG contained in the KPMG Report
affirmed the Company's policy that executive compensation should consist of
three components: (1) 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;
(2) 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 (3) a stock option program tying executive compensation
to long-term share price appreciation.
Compensation Programs of Hollywood Casino Corporation
Base salaries and adjustments to base salaries of executives of the Company
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 1999 executive incentive compensation plan of the Company (the "1999
Incentive Compensation Plan"), which was previously approved by the independent
members of the Compensation Committee, promotes the Company's pay-for-
performance philosophy by providing executives with direct financial
16
<PAGE>
incentives in the form of annual cash bonuses to achieve Company, business unit
and individual performance goals. The 1999 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 1999 are achieved by such executives during the fiscal year 1999.
Notwithstanding the foregoing, (i) except as provided in items (ii) and (iii)
below, no bonus payouts will be made under the 1999 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 1999
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, a discretionary bonus to a participant in the Plan based
upon such participant's contributions on significant special projects and (iv)
the bonuses of certain employees of the Company and its subsidiaries within the
construction department have been established based on the performance and
contribution of such individuals relative to the successful and timely
completion of specific major construction projects vital to the strategic
business plan of the Company. The targets established in the 1999 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 (as amended, 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 Oliver B. Revell III
(who replaced Mr. Theodore H. Strauss as a member of the Plan Committee on June
16, 1999). Each member of the Plan Committee is a nonemployee, independent
member of the Company's Board of Directors. 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.
Recent Decisions on Compensation
Employment Agreement of Chief Executive Officer
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 "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
17
<PAGE>
year ended December 31, 1999. The expiration date of the Employment Agreement is
December 31, 2003. Through September 1998, in accordance with certain services
agreements between the Company and subsidiaries of GBCC, 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, as amended (the
"Services Agreement"), between the Company and GBCC.
Recent Compensation Actions
At the direction of the Compensation Committee, the Company retained HVS
Executive Search ("HVS") in November 1999 to undertake a review of the
compensation levels of executives of the Company in comparison to the
compensation levels of other gaming companies similar to the Company in size,
revenues and market competitiveness. HVS is widely recognized as a leader in
providing human resource consulting to the gaming industry and has access to
data on compensation paid to management of numerous companies in the gaming
industry. HVS rendered a report (the "1999 HVS Report") to the Compensation
Committee on the annual base salary and bonuses paid and proposed to be paid to
executives of the Company relative to the annual base salary and bonuses paid to
executives in similar positions with peer group companies.
In light of previous decisions of the Board of Directors of the Company and
its Compensation Committee, the annual base salary of Mr. Pratt under the
Employment Agreement was set at $645,000 effective as of January 1, 1996 and
remained at that level through December 31, 1999. The independent members of the
Compensation Committee approved an increase in the annual base salary of Mr.
Pratt from $645,000 to $710,000 effective as of January 1, 2000, based on a
review of the duties and responsibilities of Mr. Pratt and his contributions to
the Company, taking into account cost of living changes and based on the
information provided by HVS in the 1999 HVS Report that the annual base salary
of Mr. Pratt, as so adjusted, was in line with the market.
Based on the computation of the 1999 operating results of the Company and
the application of the methodology of the 1999 Incentive Compensation Plan to
such 1999 operating results, the independent members of the Compensation
Committee awarded a bonus to Mr. Jack E. Pratt in the amount of $284,749 on
March 16, 2000. HVS stated in the 1999 HVS Report that such bonus payout was
consistent with peer group norms.
In addition, in order to encourage long-term performance, and as disclosed
in the Report of the Compensation Committee in April 1999, the Plan Committee
awarded to Mr. Pratt under the 1996 Long-Term Incentive Plan 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 ratification by the stockholders of the Company of an
amendment to the 1996 Long-Term Incentive Plan increasing the maximum number of
shares that could be awarded to a participant during any fiscal year from
150,000 to 500,000 shares (which ratification occurred on May 26, 1999).
Tax Deductibility Considerations
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
18
<PAGE>
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
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 these 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 2, 1995 = 100)
Hollywood
Equity Casino Casino
Date Index Index Corporation
- -------------------- ------ ------ -----------
January 2, 1995 100.0 100.0 100.0
March 31, 1995 109.7 129.4 112.5
June 30, 1995 120.4 144.7 177.5
September 29, 1995 130.2 139.4 140.0
December 29, 1995 137.7 132.6 85.0
March 29, 1996 145.5 161.7 68.8
June 28, 1996 151.7 188.3 137.5
September 30, 1996 156.7 156.5 97.5
December 31, 1996 169.4 144.7 75.0
March 31, 1997 173.3 124.4 70.0
June 30, 1997 202.8 136.6 60.0
September 30, 1997 219.7 159.0 57.5
December 31, 1997 226.9 127.3 36.9
March 31, 1998 257.7 138.6 37.5
June 30, 1998 265.7 123.8 37.5
September 30, 1998 239.0 83.1 28.8
December 31, 1998 291.9 87.1 20.6
March 31, 1999 305.5 116.5 20.6
June 30, 1999 325.9 126.2 30.0
September 30, 1999 304.3 131.2 50.0
December 31, 1999 351.4 131.6 86.3
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TRANSACTIONS WITH MANAGEMENT
GBCC -
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 an estimated
realizable value of $12.3 million. The remaining estimated net realizable
balance of $12.3 million was fully reserved in 1999 as a result of the October
1999 termination of management and consulting contracts with GBCC (see below)
with respect to the Company's casino facilities in Aurora, Illinois and Tunica
County, Mississippi. These agreements provided a source of funds to GBCC which
is now no longer available. In addition, GBCC's only remaining operating
subsidiary experienced a loss from operations in 1999, further reducing cash
flows available for repayment of the PPI Funding Notes.
Prior to distributing its approximate 80% interest in GBCC to its
stockholders in 1996, the Company loaned funds to GBCC for various purposes. As
of December 31, 1999, 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
$781,000 at December 31, 1999, net of valuation allowance of $1.9 million.
Interest income was not recognized by the Company on such loans and an
additional $1 million of interest receivable was reserved during 1999.
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, the Company acquired the
general partnership interest in Pratt Management, L.P. ("PML"), a limited
partnership which held the management contract on the Aurora Casino, from a
subsidiary of GBCC. As general partner, the Company received 99% of the first
$84,000 of net income earned by PML each month and 1% of any income earned above
such amount with the remainder distributed to the GBCC subsidiary which retained
the limited partnership interest in PML. As part of the Restructuring (as
defined below), the Company acquired the GBCC subsidiary which had retained the
limited partnership interest and terminated the management
21
<PAGE>
agreement during October 1999. Distributions made to the GBCC subsidiary during
1999 prior to the October transaction amounted to $7.9 million.
In exchange for the general partnership interest in PML acquired from the
GBCC subsidiary in 1997, the Company issued 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 was 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
PML. The note was amended as of October 12, 1999 to provide for monthly
installments of $83,000 including interest and additional quarterly principal
payments of $21,000 commencing January 1, 2000. The outstanding principal
balance of the note was $2 million at December 31, 1999. The Company incurred
interest expense on the note amounting to $348,000 during the year ended
December 31, 1999.
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") and commenced operations in August 1994.
Pursuant to a ten-year consulting agreement with HCT which was terminated on
October 12, 1999 in connection with the Restructuring (as defined below), GBCC
received a monthly consulting fee of $100,000. Total fees during 1999 amounted
to $939,000.
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 $610,000 during the year ended December 31, 1999. A
receivable in the amount of $20,000 in connection with such allocated costs and
fees was due to the Company at December 31, 1999.
A subsidiary of GBCC provides computer-related, marketing and other
administrative services to the Company's casino facilities. The GBCC subsidiary
also had an agreement with the Tunica Casino through December 31, 1999. This
agreement provided for the sale of computer hardware and information systems
equipment and the licensing of software necessary to operate the facility. The
Tunica Casino paid prices and fees in amounts and on terms and conditions that
the subsidiary provided to unrelated third parties as well as a fixed license
and consulting fee of $33,600 per month. The subsidiary was also reimbursed for
its direct costs and expenses incurred under this agreement. The GBCC subsidiary
also provided similar services and hardware to the Aurora Casino through HCA's
management contract with PML. The computer services agreements with PML and HCT
terminated in October and December 1999, respectively. The GBCC subsidiary
continues to provide services to HCT and HCA on an as needed basis at third
party consulting rates while negotiations for new service agreements continue.
Total billings to the Company, including the two casinos, for such products and
services amounted to $1.3 million during the year ended December 31, 1999.
Payables to the GBCC subsidiary at December 31, 1999 totalled $106,000.
As a result of revising the tax treatment for the spin-off of GBCC's stock to
the Company's stockholders at December 31 1996, stockholders 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 stockholders 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 stockholders, exclusive of the Pratt
Family, for $100,000 and to issue new tax reporting forms to the Pratt Family.
Such forms required the Pratt Family members to amend their federal income tax
returns for 1996 resulting in substantial additional taxes and interest. The
Company reimbursed the Pratt Family during 1999 with respect to these additional
tax obligations which total approximately $770,000.
On April 28, 1999, the Company entered into a voting agreement with GBCC and
certain of its wholly owned subsidiaries, including PRT Funding Corp. and PCC,
and the holders of substantially all of the $85
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<PAGE>
million of unsecured senior notes issued by PRT Funding which were in default.
The unsecured notes were guaranteed by PCC. Under the terms of the voting
agreement, the Company agreed to 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. When acquired by the Company, PCC's
assets were to consist of its limited partnership interest in a management
contract for the Aurora Casino and its consulting agreement for the Tunica
Casino and its liabilities were to consist of a new $40.3 million obligation
payable in satisfaction of the unsecured notes.
In order to complete the restructuring, PCC and PRT Funding filed for
protection under Chapter 11 of the United States Bankruptcy Code on May 25, 1999
with the above transactions as part of a pre-negotiated plan of reorganization.
Such plan was confirmed by the United States Bankruptcy Court for the District
of Delaware in October 1999. At such time, the Company completed its acquisition
of PCC and settled PCC's obligations. The acquisition and subsequent termination
of the management contract and consulting agreement resulted in a fourth quarter
charge to expense by the Company in the amount of $40.4 million (including net
termination costs) since, for financial reporting purposes, no asset value was
attributed to the contracts when acquired.
Shreveport Partnership -
HWCC-Louisiana, Inc. ("HCL"), a wholly owned subsidiary of the Company,
effectively owns 100% of the Shreveport Partnership which owns and will operate
the Shreveport Resort. Construction of the Shreveport Resort is on schedule for
its targeted opening date in early November 2000. HCL has a joint venture
partner in the Shreveport Partnership which holds a residual interest in the
event the project is ever sold amounting to 10% plus any capital contributions
made by the joint venture partner to the Shreveport Partnership.
In accordance with the amended and restated partnership agreement, upon
securing financing for the Shreveport Resort, HCL loaned $1 million to its joint
venture partner which the partner used to make a $1 million capital contribution
to the Shreveport Partnership. The loan accrues interest at the rate of prime
commencing with the opening of the Shreveport Resort and will be payable
monthly. Principal on the loan is payable on the tenth anniversary of the
opening of the Shreveport Resort.
The joint venture partner was also given credit for an additional $1 million
capital contribution when the financing was secured and payment of a certain $5
million obligation to a third party was made. The credit was in recognition of
guarantees provided by an affiliate of the joint venture partner which were
necessary for the Shreveport Partnership to obtain regulatory approval for its
development plans.
HCL's joint venture partner will receive for so long as it remains a joint
venture partner, among other things, an amount equal to 1% of "complex net
revenues" of the Shreveport Resort, as defined, which approximates net revenues.
Such payment is in exchange for the assignment by the partner of its interest in
the Shreveport Partnership to HCL.
The Shreveport Partnership has also entered into an agreement with HCL's
joint venture partner to provide certain marine services for so long as it
remains a joint venture partner. The Marine Services Agreement became effective
on September 22, 1998 and, in addition to the reimbursement of the partner for
its direct expenses incurred, the Shreveport Resort will pay a monthly fee of
$30,000 effective with its opening. No payments have been made under the
agreement as of December 31, 1999.
23
<PAGE>
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 of the Company
has appointed Deloitte & Touche LLP ("Deloitte & Touche") to serve as the
independent public accountants of the Company for its fiscal year ending
December 31, 2000. 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. 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.
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 stockholders
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 disclosure under Item 304 of Regulation S-K. Andersen's report on the
consolidated financial statements of the Company for the years ended December
31, 1997 and 1996 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 2000.
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
2001 Annual Meeting, stockholder proposals must be received by the Company by
January 12, 2001, and must otherwise comply with the requirements of Rule 14a-8.
24
<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,
1999, 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 24, 2000
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.
25
<PAGE>
Appendix A
CHARTER
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF HOLLYWOOD CASINO CORPORATION
-------------------------------
I. PURPOSE
The Audit Committee (the "Committee") is appointed by the Board of
Directors (the "Board") of Hollywood Casino Corporation, a Delaware
corporation (the "Corporation"), to assist the Board in fulfilling its
oversight responsibilities. Consistent with this oversight function, the
Committee's primary duties and responsibilities are to:
. Monitor the integrity of the Corporation's financial reporting
process (including the overview of any financial reports or other
financial information provided by the Corporation to any
governmental or regulatory body, the public or other users thereof)
and systems of internal controls regarding finance, accounting,
legal and regulatory compliance;
. Monitor the independence and performance of the Corporation's
independent auditors and their audit of the Corporation's financial
statements and internal auditing department; and
. Provide an avenue of communication among the independent auditors,
the management, the internal auditing department and the Board of
Directors of the Corporation.
The Committee has the authority to conduct any investigation appropriate to
fulfilling its responsibilities and it has direct access to the independent
auditors as well as anyone in the organization and full access to all
books, records, facilities and personnel of the Corporation. The Committee
has the ability to retain, at the Corporation's expense, special legal,
accounting or other consultants or experts it deems necessary in the
performance of its duties.
II. COMPOSITION
The Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors and
free from any relationship that, in the opinion of the Board, would
interfere with the exercise of his or her independent judgment as a member
of the Committee. Accordingly, all members of the Committee must be
independent within the meaning of such term as it is specified in the rules
established by the American Stock Exchange.
All members of the Committee shall have a basic understanding of
finance and accounting (including the ability to read and understand
fundamental financial statements, including the Corporation's balance
sheet, income statement and cash flow statement), and at least one member
of the Committee shall have accounting or related financial management
expertise. Committee members may enhance their familiarity with finance and
accounting by participating in educational programs conducted by the
Corporation or an outside consultant.
The members of the Committee shall be elected by the Board at each
annual meeting of the Board to serve until their successors shall be duly
elected and qualified or until their earlier death, resignation or removal.
Unless a Chairman is elected by the full Board, the members of the
Committee may designate a Chairman by majority vote of the full Committee
membership.
III. MEETINGS
The Committee shall meet at least four times annually, or more
frequently as circumstances dictate, and shall prepare and distribute an
agenda for each meeting in advance of each meeting. As part of its job to
foster open communication, the Committee should meet privately at least
annually with management, the director of the internal auditing department
and the independent auditors of the Corporation to discuss any matters that
the Committee or each of these groups believe should be discussed. In
addition, the Committee or at least its Chairman should meet with the
independent
26
<PAGE>
auditors and management of the Corporation quarterly to review the
Corporation's financial statements and significant findings based upon the
auditors' limited review procedures.
IV. RESPONSIBILITIES AND DUTIES
The Committee's job is one of oversight and it recognizes that the
Corporation's management is responsible for preparing the Corporation's
financial statements and that the outside auditors are responsible for
auditing those financial statements. Additionally, the Committee recognizes
that financial management (including the internal audit staff), as well as
the outside auditors, have more time, knowledge and more detailed
information on the Corporation than do Committee members; consequently, in
carrying out its oversight responsibilities, the Committee is not providing
any expert or special assurance as to the Corporation's financial
statements or any professional certification as to the outside auditor's
work.
To fulfill its responsibilities and duties the Committee shall do the
following in carrying out its oversight function:
A. Documents/Reports Review
------------------------
1. Review and reassess the adequacy of this Charter at least
annually, submit the Charter to the Board of Directors for
approval and have the document published at least every three
years in accordance with SEC regulations;
2. Review the annual audited financial statements of the Corporation
and/or its subsidiaries prior to filing or distribution (which
review should include discussion with management and independent
auditors of significant issues regarding accounting principles,
practices and judgments) and review and discuss the management
representation letter to the independent auditors;
3. In consultation with the Corporation's management, independent
auditors and internal auditors, consider the quality, adequacy and
integrity of the Corporation's financial reporting processes and
controls. Discuss significant financial risk exposures and the
steps management has taken to monitor, control and report such
exposures. Review significant findings prepared by the independent
auditors and the internal auditing department together with
management's response;
4. Review with financial management and the independent auditors the
quarterly financial results of the Corporation and/or its
subsidiaries prior to the release of earnings and/or the quarterly
financial statements of the Corporation and/or its subsidiaries
prior to filing or distribution. Discuss any significant changes
to the accounting principles of the Corporation and/or its
subsidiaries and any items required to be communicated by the
independent auditors in accordance with AICPA SAS 61 (see item 9).
The Chairman of the Committee may represent the entire Committee
for purposes of this review;
B. Independent Auditors
--------------------
5. The Board and the Committee are in place to represent the
stockholders of the Corporation. The independent auditors are
ultimately accountable to the Committee and the Board of Directors
of the Corporation. The Committee shall review the independence
and performance of the auditors and annually recommend to the
Board of Directors appropriate action to oversee the independence
of the outside auditors of the Corporation, including the
appointment of such independent auditors or the dismissal or
discharge of such auditors when circumstances warrant. The
Committee, subject to any action that may be taken by the full
Board, shall have the ultimate authority and responsibility to
select (or nominate for stockholder approval), evaluate and, where
appropriate, replace the outside auditor;
6. Approve the fees and other significant compensation to be paid to
the independent auditors;
27
<PAGE>
7. On an annual basis, (a) request from the outside independent auditors
a formal written statement delineating all relationships between the
auditor and the Corporation consistent with Independent Standards
Board Standard Number 1; and (b) review and discuss with the
independent auditors all such disclosed relationships and their
impact on the auditors' independence;
8. Review and approve the audit plan of the independent auditors as
described in the engagement letter of such auditors - discuss scope,
staffing, locations, reliance upon management and internal audit and
general audit approach;
9. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss certain matters required
to be communicated to the Committee in accordance with AICPA SAS 61;
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied
in its financial reporting;
C. Internal Audit Department and Legal Compliance
----------------------------------------------
11. Review and approve the budget, plan, changes in plan, activities,
organizational structure and qualifications of the internal audit
department of the Corporation and/or its subsidiaries, as needed;
12. Review the appointment, performance and replacement of the senior
internal audit executive of the Corporation and/or its subsidiaries;
13. Review significant reports prepared by the internal audit department
together with management's response and follow-up to these reports;
14. On at least an annual basis, review with the Corporation's counsel
any legal matters that could have a significant impact on the
organization's financial statements, the compliance by the
Corporation and/or its subsidiaries with applicable laws and
regulations and inquiries received from regulators or governmental
agencies;
D. Other Audit Committee Responsibilities
--------------------------------------
15. Annually prepare a report to stockholders as required by the
Securities and Exchange Commission (which report should be included
in the Corporation's annual proxy statement);
16. Perform any other activities consistent with this Charter, the
Corporation's by-laws and governing law, as the Committee or the
Board deems necessary or appropriate; and
17. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
28
<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 17, 2000, at the Annual Meeting of Stockholders to be held
on May 23, 2000, or any postponment or adjournment.
1. PROPOSAL TO ELECT AS CLASS I DIRECTORS OF THE COMPANY THE FOLLOWING PERSONS
TO HOLD OFFICE UNTIL THE 2003 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.
James A. Colquitt Oliver B. Revell III
(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 2000.
___ 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 NOMINEES UNDER PROPOSAL 1 AND FOR THE ACTION UNDER
PROPOSAL 2.
Dated:____________________________, 2000
________________________________________
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.
