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                                                                   EXHIBIT 10.29

                 ____________________________________________

                             EMPLOYMENT AGREEMENT
                 ____________________________________________


   THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of this
11/th/ day of May, 1998, by and between HOLLYWOOD CASINO CORPORATION
("Employer") and PAUL C. YATES ("Employee").

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

   WHEREAS, Employer is a corporation, duly organized and existing under the
laws of the State of Delaware, which owns and operates various casino properties
throughout the United States and which has a need for qualified, experienced
personnel;

   WHEREAS, Employee is an adult individual currently residing at 809 Malcolm
Avenue, Los Angeles, California.

   NOW, THEREFORE, for and in consideration of the foregoing recitals, and in
consideration of the mutual covenants, agreements, understandings, undertakings,
representations, 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
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defined have the respective meanings ascribed to them herein, unless a different
meaning clearly appears from the context:

     (a)  "Just Cause"  means any of the following: (i) the Employee's willful
           ----------                                                         
     refusal to perform, or his substantial neglect of, the duties assigned to
     the Employee pursuant to Paragraph 4 hereof (for any reason other than as
     the result of a Complete Disability), and the failure by the Employee to
     promptly cure the breach or failure of performance upon written notice
     thereof from the Employer; (ii) Employee's willful engagement in any
     personal misconduct involving dishonesty, illegality, or moral turpitude
     which is materially detrimental or materially injurious
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     to the business interests, reputation or goodwill of Employer or Employer's
     Affiliates; (iii) Employee's willful engagement in any material act of
     dishonesty, disloyalty, or infidelity against Employer or Employer's
     Affiliates; (iv) the material breach by the Employee of his covenants under
     this Agreement, and the failure by the Employee to promptly cure the breach
     or failure of performance upon written notice thereof from the Employer;
     (v) Employee's willful violation of any material policy established by
     Employer with respect to the operation of Employer's business and affairs,
     or the conduct of Employer's employees; (vi) Employee's insubordination
     with respect to, or willful failure, in any material respect, to carry out
     all reasonable and lawful instructions issued by, the President or Chief
     Executive Officer of Employer and the failure by the Employee to promptly
     cure such failure to perform upon written notice thereof from the Employer;
     and (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 and such failure is not the result of any
     negligence or omission by the Employer. All determinations of the existence
     of "Just Cause," including without limitation any determination with
     respect to performance, reasonableness, effectiveness, materiality and
     injury, shall be made in good faith by the Employer's Board of Directors
     and shall be conclusive as to all parties.

     (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 one hundred eighty (180)
     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 one hundred eightieth (180th) day.

     (c)  "Effective Date" means the date first above written.
           --------------                                     

     (d)  "Employee" means Employee as earlier defined in this Agreement.
           --------                                                      

     (e)  "Employer" means Employer as earlier defined in this Agreement.
           --------                                                      

     (f)  "Employer's Affiliates" means any parent, subsidiary or affiliated
           ---------------------                                            
     corporation or other legal entity of Employer.

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

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   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 pursuant to the terms of this Agreement.

   4.  DUTIES OF EMPLOYEE. Employee shall perform such duties assigned to
       ------------------                                                
Employee by Employer as are generally associated with the duties of Executive
Vice President and Chief Financial Officer, 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. The foregoing
notwithstanding, 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.

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<PAGE>
 
   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 (the "Term") shall commence on the
       ----                                                               
Effective Date and, unless sooner terminated as provided herein, expire on May
10, 2000 (the "Original Expiration Date"), with an automatic renewal of the Term
for one year through May 10, 2001, unless either Employer or Employee shall have
provided written notice to the other on or prior to February 10, 2000 of its/his
intention for the Term to expire on the Original Expiration Date.

   7.  TERMINATION BY THE EMPLOYER. Notwithstanding the provisions of Paragraph
       ---------------------------                                             
6 above, this Agreement and each party's rights and obligations hereunder shall
terminate upon the occurrence of any of the following events:

     (a) the death of Employee;
 
     (b) the giving of written notice from Employer to Employee of the
     termination of this Agreement upon the Complete Disability of Employee;

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

     (d) the giving of written notice by Employer to Employee of the
     termination of this Agreement without Just Cause; provided, however, that
     such notice must be accompanied by Employer's written tender to Employee of
     Employer's unconditional commitment to continue to pay to Employee the Base
     Salary and Minimum Bonus as set forth in Paragraphs 8(a) and 8(b) of this
     Agreement for the remainder of the Term of this Agreement.

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<PAGE>
 
   8.  COMPENSATION TO EMPLOYEE. For and in complete consideration of
       ------------------------                                      
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 Two Hundred Fifty Thousand and No/100 Dollars ($250,000) (the "Base
Salary"), effective on the Effective Date, 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)  Incentive Compensation Plan.  In addition to receiving the Base
        ---------------------------                                    
Salary, Employee shall also be entitled to participate in the incentive
compensation plan of the Corporation as and when implemented.  Employee will
participate on the same terms as senior executive officers of Employer
generally.  The incentive compensation will be payable by Employer to Employee
in accordance with the terms of such incentive compensation plan, and, where
applicable, shall be prorated based upon the number of weeks Employee was
employed by Employer during such calendar year.  Any incentive compensation
shall be in addition to Employee's participation in any and all profit sharing
plans, bonus participation plans, stock option plans or other incentive
compensation and profit sharing plans which are from time to time made generally
available by Employer to Employer's Affiliates to senior 

                                       5
<PAGE>
 
executive officers. Notwithstanding anything to the contrary set forth in this
Agreement, Employee's additional compensation under this Paragraph 8(b) will in
no event be less than $75,000 during any year of the Term (the "Minimum Bonus").

   (c)  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.  In the event that the Employer terminates
the Employee without Just Cause pursuant to Paragraph 7(d) of this Agreement,
the Employer shall continue to include the Employee in the employee benefits
plans described in this Paragraph 8(c) for the remainder of the Term of this
Agreement.

   (d)  Expense Reimbursement.  During the Term of this Agreement, Employer 
        ---------------------                                     
shall either pay directly or reimburse Employee 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 travel expenses, dues and expenses of
membership in professional societies 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.

   (e)  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.

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<PAGE>
 
   (f)  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, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day and up to three (3) additional floating holidays which vary from
year to year.

   (g)  Relocation Expenses.  Promptly upon presentation of receipts therefor, 
        -------------------                                         
Employer shall reimburse Employee for the actual out-of-pocket expenses incurred
by Employee in moving from Employee's residence in California to Dallas, Texas,
other than any such costs relating to the purchase or sale of any house. In the
event that any of the Employee's relocation expenses which are paid for or
reimbursed by the Employer constitute taxable income to the Employee, the
Employer shall reimburse the Employee for the payment of such tax liability.

   9.  LICENSING REQUIREMENTS.
       ---------------------- 

   (a) Employer and Employee hereby covenant and agree that this Agreement may
be subject to the approval of the Illinois Gaming Board and the Mississippi
Gaming Commission and any other jurisdiction in which Employer or Employer's
Affiliates conducts business (collectively, the "Gaming Authorities") pursuant
to the provisions of the Illinois Riverboat Gambling Act, the Mississippi Gaming
Control Act and any other applicable law and the regulations promulgated
thereunder (collectively, the "Gaming Acts").  In the event this Agreement is
required to be approved by the Gaming Authorities and is not so approved by the
Gaming Authorities, then both the Employer and the Employee covenant that they
will attempt in good faith to enter into a modified agreement that would be
approved by the Gaming Authorities provided, however, that, in no event will any
modified 

                                       7
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agreement reduce the Base Salary and Minimum Bonus provisions of Paragraphs 8(a)
and 8(b) of this Agreement. In the event that the Employer and Employee cannot
in good faith enter into a modified agreement or if a modified agreement is not
approved by the Gaming Authorities, then this Agreement shall immediately
terminate and shall be null and void and of no further force or effect.

   (b) Employer and Employee hereby covenant and agree that, in order for
Employee to discharge the duties required under this Agreement, Employee may be
required to continue to hold casino key employee licenses (the "Licenses") as
issued by one or more Gaming Authorities pursuant to the terms of the Gaming
Acts and as otherwise required by this Agreement. In the event that any of the
Gaming Authorities objects to the renewal of Employee's License, or any of the
Gaming Authorities refuses to renew Employee's applicable 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 attempt to secure such Gaming
Authority's approval.  The foregoing notwithstanding, if such Gaming Authority's
refusal to renew Employee's License arises 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.  TERMINATION BY EMPLOYEE.  The Employee shall have the option to 
        -----------------------                                           
terminate this Agreement, effective upon the effective date set forth in written
notice of such termination to the Employer, for "Good Reason".  For purposes of
this Agreement, Good Reason shall mean the occurrence of any one or more of the
following events: (i) any material breach of this Agreement by the Employer that
is not promptly remedied by the Employer after receipt of written notice thereof
from the Employee; and (ii) for any reason within one year following the
occurrence of a Change in Control 

                                       8
<PAGE>
 
(as defined in that certain Indenture dated as of October 17, 1995, among
Employer, HWCC-Tunica, Inc. and Shawmut Bank, National Association, predecessor-
in-interest to State Street Bank and Trust Company, as Trustee) (a "Change in
Control"). A termination of this Agreement by the Employee for Good Reason shall
be effectuated by giving Employer written notice of the termination, setting
forth in reasonable detail the specific conduct of the Employer that constitutes
Good Reason and the specific provision(s) of this Agreement on which the
Employee relies, and shall be given within sixty (60) days of the event giving
rise to the Good Reason. Upon termination of this Agreement by the Employee for
Good Reason, the Employee shall be entitled to the unpaid portion of the Base
Salary and Minimum Bonus as set forth in Paragraphs 8(a) and 8(b) for the
remainder of the Term of this Agreement.

   11.  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 data, including, but not
limited to (i) information or other documents concerning Employer's business,
customers or suppliers; (ii) Employer's marketing methods, files and credit and
collection techniques and files; or (iii) Employer's trade secrets 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 Paragraph 11 shall not expire, shall survive this
Agreement and shall be binding upon Employee without regard to the passage of
time or other events.

   12.  RESTRICTIVE COVENANT.  Employee hereby covenants and agrees that,
        --------------------                                             
during the Term of this Agreement, 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 

                                       9
<PAGE>
 
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 any navigable 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 12 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.

   13.  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.

   14.  SUCCESSION.
        ---------- 

   (a)  This Agreement shall be binding upon and inure to the benefit of
Employer and Employee and their respective successors and assigns; provided,
however, in the event of a Change of Control, Employer shall have the option, in
its sole discretion, to either (a) retain Employee for the services set forth in
Paragraph 4 and otherwise abide by the terms and conditions of this Agreement or
(b) terminate Employee's employment and pay to Employee an amount (the
"Severance Amount") equal to the aggregate Base Salary under Paragraph 8(a) and
the Minimum Bonus set forth under the last sentence of Paragraph 8(b) which
would have been paid by Employer to Employee during the period (the "Severance
Period") from the date of termination of the Agreement to the expiration of this
Agreement had it not been so terminated.  Employer shall have the right,
exercisable by written notice to 

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<PAGE>
 
Employee, to elect to pay the Severance Amount 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.

   (b)  Except as otherwise set forth in the immediately preceding sentence, the
Employer will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Employer, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Employer would be
required to perform it if no such succession had taken place.  Failure of the
Employer to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Employee to compensation from the Employer in the same amount and on the same
terms as he would be entitled to hereunder if he terminated this Agreement  for
Good Reason.

   15.  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 15 shall be
null and void and of no force or effect.

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

   17.  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.

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

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

     TO EMPLOYEE:                   Paul C. Yates
                                      c/o Hollywood Casino Corporation
                                      Two Galleria Tower, Suite 2200
                                      13455 Noel road, LB 48
                                      Dallas, Texas 75240

   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 18.

   19.  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.

   20.  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 provisions shall be deemed modified or amended
so as to fulfill the intent of the parties hereto.

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<PAGE>
 
   21.  DISPUTE RESOLUTION. Except for equitable actions seeking to enforce the
        ------------------                                                     
provisions of Paragraphs 11 and 12 of this Agreement, jurisdiction and venue for
which is hereby granted to the District Court of 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.

   22.  WAIVER. None of the terms of this Agreement, including this Paragraph
        ------                                                               
22, 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.

   23.  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.

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<PAGE>
 
   IN WITNESS WHEREOF 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.

                                      HOLLYWOOD CASINO CORPORATION



                                      By   /s/ Edward T. Pratt III
                                           ------------------------------------
                                           Name: Edward T. Pratt III
                                           Title: President and Chief
                                              Operating Officer



 



                                      /s/ Paul C. Yates
                                      -----------------------------------------
                                      Paul C. Yates

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