<PAGE>

                                                                    EXHIBIT 10.4




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                               Dated: May 1, 1996


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                              EMPLOYMENT AGREEMENT

                               - by and between -

                          HOLLYWOOD CASINO CORPORATION

                                    - and -

                              EDWARD T. PRATT III


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<PAGE>

                               TABLE OF CONTENTS


                                                          Page
                                                          ----

RECITALS                                                   1

 1.         DEFINITIONS                                    2

 2.         PRIOR EMPLOYMENT                               4

 3.         BASIC EMPLOYMENT AGREEMENT                     4

 4.         DUTIES OF EMPLOYEE                             4

 5.         ACCEPTANCE OF EMPLOYMENT                       5

 6.         TERM                                           5

 7.         SPECIAL TERMINATION PROVISIONS                 5

 8.         COMPENSATION TO EMPLOYEE                       7
  (a)       Base Salary                                    7
  (b)       Base Salary Adjustment                         7
  (c)       Incentive Bonus                                8
  (d)       Employee Benefit Plans                         8
  (e)       Expense Reimbursement                          9
  (f)       Licensing Expenses                             9
  (g)       Vacations and Holidays                         9

 9.         LICENSING REQUIREMENTS                        10

 10.        CONFIDENTIALITY                               11

 11.        RESTRICTIVE COVENANT                          12

 12.        BEST EVIDENCE                                 13

 13.        SUCCESSION                                    13

 14.        ASSIGNMENT                                    13

 15.        AMENDMENT OR MODIFICATION                     14

 16.        GOVERNING LAW                                 14

 17.        NOTICES                                       14

 18.        INTERPRETATION                                15

                                       i
<PAGE>

 19.        SEVERABILITY                                  15

 20.        DISPUTE RESOLUTION                            15

 21.        WAIVER                                        15

 22.        PAROL                                         16

 EXECUTION PAGE                                           17



                                      ii
<PAGE>

                      -----------------------------------

                              EMPLOYMENT AGREEMENT

                      -----------------------------------


     THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
  the 1st day of May, 1996, by and between HOLLYWOOD CASINO CORPORATION, a
  Delaware corporation ("Employer"), and EDWARD T. PRATT III ("Employee").

                              W I T N E S S E T H:
                              -------------------


     WHEREAS, Employer is a corporation, duly organized and existing under the
  laws of the State of Delaware, which develops and/or operates land-based,
  riverboat and dockside casinos and related support facilities in emerging and
  established gaming jurisdictions and which has a need for qualified,
  experienced personnel;

     WHEREAS, Employee is an adult individual currently residing at 17423 Woods
  Edge Drive, Dallas, Texas 75287;

     WHEREAS, Employee has represented and warranted to Employer that Employee
  possesses sufficient qualifications and expertise in order to fulfill the
  terms of the employment stated in this Agreement; and

     WHEREAS, Employer is willing to employ Employee, and Employee is desirous
  of accepting employment from Employer, under the terms and pursuant to the
  conditions set forth herein.

     NOW, THEREFORE, for and in consideration of the foregoing recitals, and in
  consideration of the mutual covenants, agreements, understandings,
  undertakings, representations,

                                       1
<PAGE>

  warranties and promises hereinafter set forth, and intending to be legally
  bound thereby, Employer and Employee do hereby covenant and agree as follows:

     1.   DEFINITIONS.  As used in this Agreement, the words and terms
  hereinafter defined have the respective meanings ascribed to them herein,
  unless a different meaning clearly appears from the context:

            (a) "Cause" - means (i) the conviction of Employee of
            a felony by a court of competent jurisdiction; (ii) the indictment
            of Employee by a state or federal grand jury of competent
            jurisdiction for embezzlement or misappropriation of Employer's
            funds or for any act of dishonesty or lack of fidelity towards
            Employer; (iii) a decree of a court of competent jurisdiction that
            Employee is not mentally competent or is unable to handle his own
            affairs; (iv) the written confession by Employee of any act of
            dishonesty towards Employer or any embezzlement or misappropriation
            of Employer's funds; (v) the payment (or, by the operation solely of
            the effect of a deductible, the failure of payment) by a surety or
            insurer of a claim under a fidelity bond issued to the benefit of
            Employer reimbursing Employer for a loss due to the wrongful act or
            wrongful omission to act of Employee (the occurrence of which shall
            cause Employee to be indebted to Employer for the greater of either
            (A) the loss incurred by Employer or (B) the sums paid by Employer
            to Employee pursuant to this Agreement); (vi) Employee's breach of
            the restrictive covenant set forth in Paragraph 11 of this
            Agreement, or (vii) Employee's failure to maintain in force and in
            good standing any and all licenses, permits and/or approvals
            required of Employee by the relevant governmental authorities for
            the discharge of the obligations of Employee under this Agreement,
            provided that should Employee's required licenses, permits and/or
            approvals be suspended pending a final license, permit or approval
            revocation determination, this Agreement shall not terminate but any
            compensation which would otherwise be paid by Employer to Employee
            under Paragraph 8 of this Agreement shall be suspended and accrued
            pending the final resolution of such final license, permit and/or
            approval revocation determination, and, in the event such final
            resolution of such final license, permit and/or approval revocation
            determination does not revoke Employee's licenses, permits and/or
            approvals, any compensation which has been so suspended and accrued
            shall be paid by Employer to Employee, provided, however, that
            Employee's disability due to illness or accident or any other mental
            or physical incapacity shall not constitute "Cause" as defined
            herein.

                                       2
<PAGE>

            (b) "Complete Disability" - means the inability of Employee, due to
            illness or accident or other mental or physical incapacity, to
            perform his obligations under this Agreement for a period of three
            hundred sixty (360) calendar days in the aggregate over a period of
            five hundred (500) consecutive calendar days, such "Complete
            Disability" to become effective upon the expiration of such three
            hundred sixtieth (360th) day.

            (c) "Confidential Information" - means any information in any form,
            regardless of the medium or media by which such information is
            recorded or communicated, that is in the possession of Employer
            being neither in the public domain nor routinely available to third
            parties, and if directly or indirectly disclosed to Employer's
            competitors (i) would assist such competitors in competing against
            Employer, (ii) would diminish or eliminate any competitive advantage
            now enjoyed by Employer,(iii) would cause financial injury or loss
            to Employer, or (iv) would reveal proprietary information or trade
            secrets of Employer.

            (d) "Effective Date" - means May 1, 1996.

            (e) "Employee" - means Edward T. Pratt III.

            (f) "Employer" - means Hollywood Casino Corporation, a Delaware
            corporation.

                                       3
<PAGE>

            (g) "Employer's Affiliates" - means any parent, subsidiary,
            affiliate or other legal entity of Employer.

            (h) "Prior Employment" - means any prior employment Employee has had
            with either Employer or Employer's Affiliates.

       2.   PRIOR EMPLOYMENT.  This Agreement supersedes and replaces any and
  all prior employment agreements, whether written or oral, by and between
  Employee, on the one side, and Employer or Employer's Affiliates, on the other
  side.  From and after the Effective Date, Employee shall be the employee of
  Employer under the terms and pursuant to the conditions set forth in this
  Agreement.

       3.   BASIC EMPLOYMENT AGREEMENT.  Subject to the terms and pursuant to
  the conditions hereinafter set forth, Employer hereby employs Employee during
  the Term hereinafter specified to serve in a managerial or executive capacity,
  under a title and with such duties not inconsistent with those set forth in
  Paragraph 4 of this Agreement, as the same may be modified and/or assigned to
  Employee by Employer from time to time.  Notwithstanding the foregoing,
  Employer and Employee hereby covenant and agree that, in the absence of mutual
  consent of both Employer and Employee, Employee shall not be assigned duties
  by Employer which would require that Employee maintain his principal place of
  residence or primary place of employment outside of the greater metropolitan
  area of Dallas, Texas.

       4.   DUTIES OF EMPLOYEE.   Employee shall perform such duties assigned to
  Employee by Employer as are generally associated with the duties of President
  and Chief Operating Officer of Employer, or

                                       4
<PAGE>

  such similar duties as may be assigned to Employee by the Chairman of the
  Board of Directors of Employer, including but not limited to (i) the efficient
  and continuous operation of Employer and Employer's Affiliates; (ii) the
  preparation of relevant budgets and allocation of relevant funds; (iii) the
  selection and delegation of duties and responsibilities of subordinates; (iv)
  the direction, review and oversight of all operations and programs under
  Employee's supervision; and (v) such other and further duties specifically
  related to such duties as assigned by Employer to Employee.  In the
  performance of his duties hereunder, Employee shall report directly to the
  Chairman of the Board/Chief Executive Officer and the Board of Directors of
  Employer.  Notwithstanding the foregoing, Employee shall devote such time to
  Employer's Affiliates as required by Employer, provided such duties are not
  inconsistent with Employee's primary duties to Employer hereunder.

       5.   ACCEPTANCE OF EMPLOYMENT.  Employee hereby unconditionally accepts
  the employment set forth hereunder, under the terms and pursuant to the
  conditions set forth in this Agreement.  Employee hereby covenants and agrees
  that, during the Term of this Agreement, Employee will devote the whole of his
  normal and customary working time and best efforts solely to the performance
  of Employee's duties under this Agreement.

       6.   TERM.  The term of this Agreement shall commence on May 1, 1996 and
  expire on 12:00 p.m. on April 30, 2000 (the "Term"), unless sooner terminated
  as provided herein.

       7.   SPECIAL TERMINATION PROVISIONS.  Notwithstanding the provisions of
  Paragraph 6 above, this Agreement and all parties'

                                       5
<PAGE>

  rights and obligations hereunder shall terminate upon the occurrence of any of
  the following events:

            (a) the death of Employee; provided, however, that any and all
            employee benefits due and owing to Employee shall be paid to the
            spouse of Employee in the event of such death;

            (b) the giving of written notice from Employer to Employee of the
            termination of this Agreement upon the Complete Disability of
            Employee; provided, however, that a termination pursuant to this
            Paragraph 7(b) shall not affect Employee's vesting or continued
            rights in any stock option plan set forth in Paragraph 8(c) of this
            Agreement;

            (c) the giving of written notice by Employer to Employee of the
            termination of this Agreement upon the discharge of Employee for
            Cause;

            (d) the giving of written notice by Employer to Employee of the
            termination of this Agreement without Cause; provided, however,
            that, if Employer gives Employee written notice of termination of
            this Agreement without Cause, such notice must be accompanied by
            Employer's written tender to Employee of Employer's commitment to
            continue to pay to Employee the compensation set forth in Paragraph
            8(a) of this Agreement; and/or

            (e) a Change of Control (as defined in that certain Indenture dated
            as of October 17, 1995, among Employer, HWCC-Tunica, Inc. and
            Shawmut Bank, National Association (now Fleet National Bank) as
            Trustee); provided, however, that, in the event of such Change of
            Control, Employer shall be obligated to pay to Employee an amount
            (the "Severance Amount") equal to the aggregate compensation which
            would have been paid by Employer to Employee under Paragraph 8(a) of
            this Agreement during the period (the "Severance Period") from the
            date of termination to the later to occur of the expiration date of
            this Agreement or thirty-six (36) months from the date of
            termination assuming that such termination had not occurred.
            Employee shall have the right, exercisable by written notice to
            Employer, to elect to have the Severance Amount paid by

                                       6
<PAGE>

            Employer to Employee in (i) a lump sum payment not later than the
            date of occurrence of the Change of Control or (ii) equal monthly
            installments during the Severance Period.

       8.   COMPENSATION TO EMPLOYEE.  For and in complete consideration for
  Employee's full and faithful performance of his duties under this Agreement,
  Employer hereby covenants and agrees to pay to Employee, and Employee hereby
  covenants and agrees to accept from Employer, the following items of
  compensation:

            (a) Base Salary.  Employer hereby covenants and agrees to pay to
  Employee, and Employee hereby covenants and agrees to accept from Employer, an
  annual base salary of Four Hundred Twenty-Five Thousand and No/100 Dollars
  ($425,000.00), effective January 1, 1996, payable in such equal regular
  installments as is Employer's custom and usage.  Such base salary shall be
  exclusive of and in addition to any other benefits which Employer, in its sole
  discretion, may make available to Employee, including, but not limited to, any
  pension plans, bonus plans, retirement plans, company life insurance plan,
  medical and/or hospitalization plans, or any and all other benefit plans which
  may from time to time be in available to executive officers of Employer
  generally during the Term of this Agreement.

            (b) Base Salary Adjustment.  The base salary prescribed in Paragraph
  8(a) above may be adjusted at such time and in such manner as the Compensation
  Committee of the Board of Directors of Employer may determine in accordance
  with the executive

                                       7
<PAGE>

  compensation policy of Employer then in effect; provided, however, that such
  base salary shall never be less than $425,000 per annum.

            (c) Incentive Bonus.  Employee shall be eligible to receive one or
  more incentive compensation bonuses based upon such performance and other
  criteria as Employer shall determine in its sole discretion.  After the
  Effective Date of this Agreement, Employer will implement an incentive bonus
  program in which Employee will participate and which will be used to determine
  Employee's incentive bonus.  The incentive bonus shall be payable by Employer
  to Employee no later than the first day of March of the year following the
  calendar year for which the incentive bonus is accrued (or in accordance with
  the terms of any applicable incentive bonus program), and, where applicable,
  shall be prorated based upon the number of days Employee was employed by
  Employer during such calendar year.  Any incentive bonus shall be in addition
  to Employee's participation in any and all profit sharing plans, bonus
  participation plans, stock options or other incentive compensation to which
  Employee is entitled to participate or receive.

            (d)   Employee Benefit Plans.  Employer hereby covenants and agrees
  that it shall include Employee, if otherwise eligible, in any pension plans,
  retirement plans, company life insurance plans, medical and/or hospitalization
  plans, and/or any and all other benefit plans which may be placed in effect by
  Employer during the Term of this Agreement.

            (e) Expense Reimbursement. During the Term of this Agreement,
  Employer shall either pay directly or reimburse Employee

                                       8
<PAGE>

  for Employee's reasonable expenses incurred for the benefit of Employer in
  accordance with Employer's general policy regarding reimbursement, as the same
  may be amended, modified or changed from time to time.  Such reimbursable
  expenses shall include, but are not limited to, reasonable entertainment and
  promotional expenses, gift and travel expenses, dues and expenses of
  membership in clubs, professional societies and fraternal organizations, and
  the like.  Prior to reimbursement, Employee shall provide Employer with
  sufficient detailed invoices of such expenses in accordance with the then
  applicable guidelines of the Internal Revenue Service so as to permit Employer
  to claim a deduction of such expenses.

            (f) Licensing Expenses.  Employer hereby covenants and agrees that
  Employer shall pay all licensing fees and expenses incurred by Employee in
  securing and maintaining such licenses and permits required of Employee in
  order to perform his duties under this Agreement.

            (g) Vacations and Holidays.  Commencing as of the Effective Date of
  this Agreement, Employee shall be entitled to (i) annual paid vacation leave
  in accordance with Employer's standard policy therefor, to be taken at such
  times as selected by Employee and approved by Employer, and (ii) the following
  paid holidays (or, at Employer's option, an equivalent number of paid days
  off):  New Year's Day, Dr. Martin Luther King, Jr.'s Birthday, Memorial Day,
  Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

            9.    LICENSING REQUIREMENTS.  (a)  Employer and Employee hereby
  covenant and agree that this Agreement may be subject to the approval of (i)
  the New Jersey Casino Control

                                       9
<PAGE>

  Commission (the "CCC") pursuant to the provisions of the New Jersey Casino
  Control Act, as amended (the "New Jersey Gaming Act"), and the regulations
  promulgated thereunder, (ii) the Illinois Gaming Board (the "IGB") pursuant to
  the provisions of the Illinois Riverboat Gambling Act, as amended (the
  "Illinois Gaming Act"), and the regulations promulgated thereunder and/or
  (iii) the Mississippi Gaming Commission (the "MGC") pursuant to the provisions
  of the Mississippi Gaming Control Act, as amended (the "Mississippi Gaming
  Act"), and the regulations promulgated thereunder.  If this Agreement is
  required by the New Jersey Gaming Act, the Illinois Gaming Act and/or the
  Mississippi Gaming Act and the regulations promulgated thereunder to be
  approved by the CCC, the IGB and/or the MGC, as applicable, but is not so
  approved by any such gaming regulatory authority, this Agreement shall
  immediately terminate and shall be null and void and of no further force or
  effect; provided, however, should this Agreement be required to be approved
  but is not so approved by the CCC, the IGB and/or the MGC, Employer and
  Employee hereby covenant and agree that, with the exception of the provisions
  of Paragraph 8 of this Agreement, this Agreement shall be modified and amended
  so as to receive the appropriate approval from the CCC, the IGB and/or the
  MGC.

       (b) Employer and Employee hereby covenant and agree that, in order for
  Employee to discharge the duties required under this Agreement, Employee shall
  hold any necessary and appropriate casino key employee license (the "License")
  in gaming jurisdictions in which Employer or Employer's Affiliates may now or
  hereafter maintain casino operations.  In the event that any applicable

                                       10
<PAGE>

  gaming regulatory authority (the "Authority") objects to the renewal of
  Employee's License or refuses to renew Employee's License, Employer, at
  Employer's sole cost and expense, shall promptly defend such action and shall
  take such reasonable steps as may be required to either remove the Authority's
  objections or secure the Authority's approval.  Notwithstanding the foregoing,
  if the source of the Authority's objections or the Authority's refusal to
  renew Employee's License arise as a result of any of the events described in
  Paragraph 1(a) of this Agreement, Employer's obligations under this Paragraph
  9 shall not be operative and Employee shall promptly reimburse Employer upon
  demand for any expenses incurred by Employer pursuant to this Paragraph 9.

       10.  CONFIDENTIALITY.  Employee hereby warrants, covenants and agrees
  that, without the prior express written approval of Employer, Employee shall
  hold in the strictest confidence and shall not disclose to any person, firm,
  corporation or other entity, any and all of Employer's Confidential
  Information, including, but not limited to, (i) information, letters,
  photographs, graphs, samples, or computer software of a confidential nature;
  (ii) information or other documents concerning Employer's business, customers
  or suppliers; (iii) Employer's marketing methods, files and credit and
  collection techniques and files; or (iv) Employer's trade secrets, technical
  information, design, process, procedure, improvement and other "know-how" or
  information not of a public nature, regardless of how such information came
  into the custody of Employee.  The warranty, covenant and agreement set forth
  in this

                                       11
<PAGE>

  Paragraph 10 shall not expire, shall survive this Agreement and shall be
  binding upon Employee without regard to the passage of time or other events.

       11.  RESTRICTIVE COVENANT.  Employee hereby covenants and agrees that,
  during the Term of this Agreement or until April 30, 2000, if Employer
  terminates Employee pursuant to Paragraph 7(d) above and is continuing to make
  payments to Employee as provided therein, Employee shall not directly or
  indirectly, either as a principal, agent, employee, employer, consultant,
  partner, shareholder of a closely held corporation or shareholder in excess of
  five percent (5%) of a publicly traded corporation, corporate officer or
  director, or in any other individual or representative capacity, engage or
  otherwise participate in any manner or fashion in any business that is in
  competition in any manner whatsoever with the principal business activity of
  Employer or Employer's Affiliates, in or about any state in which Employer or
  Employer's Affiliates are licensed to conduct casino operations (the
  "Operating States"), including without limitation any waterways which are
  wholly within the Operating States, which are partly within the Operating
  States and partly without the Operating States, or which form a boundary
  between the Operating States and any other state or body public.  Employee
  hereby further acknowledges and agrees that the restrictive covenant contained
  in this Paragraph 11 is reasonable as to duration, terms and geographical area
  and that the same protects the legitimate interests of Employer and Employer's
  Affiliates, imposes no undue hardship on Employee and is not injurious to the
  public.  Notwithstanding anything express or implied herein to the contrary,

                                       12
<PAGE>

  the restrictive covenant contained in this Paragraph 11 shall not apply in the
  event of the termination of this Agreement due to a Change of Control.

       12.  BEST EVIDENCE.  This Agreement shall be executed in original and
  "Xerox" or photostatic copies and each copy bearing original signatures in ink
  shall be deemed an original.

       13.  SUCCESSION.  This Agreement shall be binding upon and inure to the
  benefit of Employer and Employee and their respective successors and assigns.

       14.  ASSIGNMENT.  Employee shall not assign this Agreement or delegate
  his duties hereunder without the express written prior consent of Employer
  thereto.  Any purported assignment by Employee in violation of this Paragraph
  14 shall be null and void and of no force or effect.  Employer shall have the
  right to assign this Agreement freely; provided, however, that in the event of
  such an assignment by Employer and the assignee subsequently defaults under
  the terms of this Agreement, Employer shall remain liable for compliance with
  the terms of Paragraph 8 of this Agreement.

       15.  AMENDMENT OR MODIFICATION.  This Agreement may not be amended,
  modified, changed or altered except by a writing signed by both Employer and
  Employee.

       16.  GOVERNING LAW.  This Agreement shall be governed by and construed in
  accordance with the laws of the State of Texas in effect on the Effective Date
  of this Agreement.

                                       13
<PAGE>

       17.  NOTICES.  Any and all notices required under this Agreement shall be
  in writing and shall either hand-delivered; mailed by certified mail, return
  receipt requested; or sent via telecopier addressed to:

       TO EMPLOYER:         Chairman of the Board
                            Hollywood Casino Corporation
                            Two Galleria Tower, Suite 2200
                            13455 Noel Road, LB 48
                            Dallas, Texas 75240

       WITH COPY TO:        General Counsel
                            Hollywood Casino Corporation
                            Two Galleria Tower, Suite 2200
                            13455 Noel Road, LB 48
                            Dallas, Texas 75240

       TO EMPLOYEE:         Edward T. Pratt III
                            17423 Woods Edge Drive
                            Dallas, Texas 75287

  All notices hand-delivered shall be deemed delivered as of the date actually
  delivered.  All notices mailed shall be deemed delivered as of three (3)
  business days after the date postmarked.  All notices sent via telecopier
  shall be deemed delivered as of the next business day following the date of
  the confirmation of delivery.  Any changes in any of the addresses listed
  herein shall be made by notice as provided in this Paragraph 17.

       18.  INTERPRETATION.  The preamble recitals to this Agreement are
  incorporated into and made a part of this Agreement.  Titles of paragraphs are
  for convenience only and are not to be considered a part of this Agreement.

       19.  SEVERABILITY.  In the event any one or more provisions of this
  Agreement is declared judicially void or otherwise unenforceable, the
  remainder of this Agreement shall survive and such provision(s) shall be
  deemed modified or amended so as to fulfill the intent of the parties hereto.

                                       14
<PAGE>

       20.  DISPUTE RESOLUTION.  Except for equitable actions seeking to enforce
  the provisions of Paragraphs 10 and 11 of this Agreement, jurisdiction and
  venue for which is hereby granted to Dallas County, Texas, any and all claims,
  disputes or controversies arising between the parties hereto regarding any of
  the terms of this Agreement or the breach thereof, on the written demand of
  either of the parties hereto, shall be submitted to and be determined by final
  and binding arbitration held in Dallas, Texas, in accordance with the
  Employment Dispute Resolution Rules of the American Arbitration Association.
  This Agreement to arbitrate shall be specifically enforceable in any court of
  competent jurisdiction.

       21.  WAIVER.  None of the terms of this Agreement, including this
  Paragraph 21, or any term, right or remedy hereunder shall be deemed waived
  unless such waiver is in writing and signed by the party to be charged
  therewith and in no event by reason of any failure to assert or delay in
  asserting any such term, right or remedy or similar term, right or remedy
  hereunder.

       22.  PAROL.  This Agreement constitutes the entire agreement between
  Employer and Employee with respect to the subject matter hereto and this
  Agreement supersedes any prior understandings, agreements or undertakings by
  and between Employer and Employee with respect to the subject matter hereof.

                                       15
<PAGE>

  IN WITNESS WHERE AND INTENDING TO BE LEGALLY BOUND THEREBY, the parties hereto
  have executed and delivered this Agreement as of the year and date first above
  written.
                                 EMPLOYER:



  ATTEST:                        HOLLYWOOD CASINO CORPORATION, a
                                 Delaware corporation



  /s/  William D. Pratt          By:/s/    Jack E. Pratt
  -----------------------           ------------------------------
  Name: William D. Pratt            Name: Jack E. Pratt
  Title: Secretary                  Title: Chairman of the Board
                                     & Chief Executive Officer

                                 EMPLOYEE:

                                 /s/ Edward T. Pratt III
                                 ---------------------------------
                                 EDWARD T. PRATT III

                                       16