DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.        )

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Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

PENN NATIONAL GAMING, INC.

 

(Name of Registrant as Specified In Its Charter)

N/A

 

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LOGO

2021 Notice of Annual Meeting and Proxy Statement


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LOGO

825 Berkshire Boulevard, Suite 200

Wyomissing, Pennsylvania 19610

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To be held on June 9, 2021

NOTICE IS HEREBY GIVEN that the 2021 Annual Meeting of Shareholders (the “Annual Meeting”) of Penn National Gaming, Inc. (the “Company”), a Pennsylvania corporation, will be held on Wednesday, June 9, 2021, at 10:00 a.m. Eastern time. This year, due to the continuing public health impact of the coronavirus (COVID-19) pandemic, the Annual Meeting will be online and a completely virtual meeting of shareholders. You may attend, vote and submit questions during the Annual Meeting via the live audio webcast on the Internet at www.virtualshareholdermeeting.com/PENN2021. You will not be able to attend the Annual Meeting in person nor will there be any physical location.

Only shareholders of record at the close of business on April 7, 2021 are entitled to notice of, and to vote at, the Annual Meeting and any postponement or adjournment thereof. We are committed to ensuring our shareholders have the same rights and opportunities to participate in the Annual Meeting as if it had been held in a physical location. As further described in the proxy materials for the Annual Meeting, you are entitled to attend the Annual Meeting via the live audio webcast on the Internet at www.virtualshareholdermeeting.com/PENN2021. While we encourage you to vote in advance of the Annual Meeting, you may also vote and submit questions relating to meeting matters during the Annual Meeting (subject to time restrictions). You may vote by telephone, Internet or mail prior to the Annual Meeting.

To be admitted to the Annual Meeting at www.virtualshareholdermeeting.com/PENN2021, you must enter the 16-digit control number found in the control number box included on your Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on June 9, 2021 (the “Notice”) or proxy card (if you receive a printed copy of the proxy materials).

The Annual Meeting will be held for the following purposes:

 

  1.

To elect two Class I directors to serve until the 2024 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified;

 

  2.

To approve the Company’s Second Amended and Restated Articles of Incorporation to increase the number of authorized shares of common stock from 200,000,000 to 400,000,000;

 

  3.

To approve the Company’s Amended and Restated 2018 Long Term Incentive Compensation Plan;

 

  4.

To ratify the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the 2021 fiscal year;

 

  5.

To approve, on an advisory basis, the compensation paid to the Company’s named executive officers; and

 

  6.

To consider and transact such other business as may properly come before the Annual Meeting.

On or about April 23, 2021, we began mailing to certain shareholders the Notice Regarding the Availability of Proxy Materials for the 2021 Annual Meeting of Shareholders to be held on June 9, 2021 (the “Notice of Annual Meeting”) containing instructions on how to access this Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “Annual Report”) and how to vote online. The Notice of Annual Meeting, Proxy Statement and Annual Report are available at www.proxyvote.com.

 

Wyomissing, Pennsylvania

   By order of the Board of Directors,
April 23, 2021   

 

LOGO

Harper Ko

Executive Vice President, Chief Legal Officer and Secretary

 

 

Your vote is very important. You may vote at the virtual meeting or by proxy. Whether or not you plan to virtually attend the Annual Meeting, we encourage you to read this proxy statement and submit your proxy or voting instructions as soon as possible. You may vote by proxy by telephone or Internet (instructions are on your proxy card, voter instruction form or the Notice, as applicable) or, if you received your materials by mail, by completing, signing and mailing the enclosed proxy card in the enclosed envelope.

 

 


 

     2     PENN NATIONAL GAMING, INC.


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TABLE OF CONTENTS

 

    Page  

Forward-looking Statements

    4  
Letter from the President
and CEO to our Shareholders
    5  

2021 Proxy Statement Summary

    7  

2021 Annual Meeting of Shareholders

    7  

Voting Matters and Board Recommendations

    7  

Overview of Penn National Gaming

    7  

2020 and 2021 Achievements

    8  

Governance of the Company

    9  

Corporate Governance Highlights

    9  

Board of Directors

    10  

Committees of the Board

    14  

Director Selection Process

    16  

Compensation of Directors

    17  
Environmental, Human Capital
Management and Social Responsibility
    18  
Proposal No. 1 Election of Class I Directors     34  

Information about Nominees and Other Directors

    34  
Proposal No. 2 Approval of the Company’s Second Amended and Restated Articles of Incorporation to increase the number of authorized shares of common stock from 200,000,000 to 400,000,000     40  
Proposal No. 3 Approval of the Company’s Amended and Restated 2018 Long Term Incentive Compensation Plan     41  

Summary of Material Terms of the 2018 Plan and Changes made by the Amendment and Restatement

    42  

Grants Under the 2018 Plan

    45  

U.S. Federal Income Tax Consequences

    46  

Summary of the Proposal

    47  
Proposal No. 4 Ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the 2021 fiscal year     48  
Audit Committee Report     49  
Proposal No. 5 Approval, on an advisory basis, of the compensation paid to the Company’s named executive officers     50  
Compensation Discussion and Analysis     51  

Executive Compensation Highlights

    51  

Executive Summary

    52  

Key Compensation Practices

    53  

Consideration of “Say on Pay Vote”

    53  

Shareholder Outreach

    53  

Executive Compensation Benchmarking Peer Group

    54  

Overview of Compensation Program

    55  

Analysis of 2020 Compensation

    60  

Other Compensation Policies

    65  

Reconciliations and Non-GAAP Financial Measures

    66  

Compensation Committee Report

    66  
Compensation Tables     67  

Summary Compensation

    67  

2020 Grants of Plan Based Awards

    68  

Outstanding Equity Awards at Fiscal Year End

    69  

2020 Option Exercises and Stock Vested

    70  
Equity Compensation Plan Information     70  

2020 Nonqualified Deferred Compensation

    71  

Employment, Retirement and Separation Agreements

    73  

CEO Pay Ratio

    76  

 


Security Ownership of Principal Shareholders,
Management and Directors
    77  
Transactions with Related Persons, Director Nomination by Shareholders and Shareholder Access     79  

Review and Approval of Transactions with Related Persons

    79  

Director Nominations by Shareholders

    79  

Shareholder Access Policy

    80  

Compensation Committee Interlocks and Insider Participation

    80  
Questions and Answers About the Annual Meeting And Voting     81  

Who is entitled to vote at the Annual Meeting?

    81  

How many votes do I have?

    81  

Do shareholders have cumulative voting rights with respect to the election of directors?

    81  

What constitutes a quorum?

    81  

What am I voting on and what votes are required?

    81  

Will any other matter be voted on?

    81  

What is the difference between holding shares of record and as a beneficial owner?

    81  

How do I vote?

    82  

What is the effect of giving a proxy?

    82  

What are broker non-votes?

    82  

May I change my vote?

    82  

May I attend the meeting?

    83  

Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of printed proxy materials?

    83  

Who will bear the costs of this solicitation and how will proxies be solicited?

    83  

Where can I find the voting results of the Annual Meeting?

    83  
Other Matters     84  

Advance Notice Provision

    84  

Shareholder Proposals

    84  

Householding of Proxy Materials

    84  
 

 


 

2021 PROXY STATEMENT     3     


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FORWARD-LOOKING STATEMENTS

 

This Proxy Statement includes forward-looking statements. These statements are not historical facts, but instead represent beliefs of Penn National Gaming, Inc. (the “Company”) regarding future events, many of which, by their nature are inherently uncertain and outside the Company’s control. These statements can be identified by the use of forward-looking terminology such as “expects,” “believes,” “estimates,” “projects,” “intends,” “plans,” “seeks,” “may,” “will,” “should,” or “anticipates” or the negative or other variations of these or similar words, or by discussions of future events, strategies or risks and uncertainties. Specifically, forward-looking statements include, but are not limited to, statements regarding: COVID-19; continued demand for our gaming properties and the possibility that our gaming properties may be required to close again in the future due to COVID-19; the impact of COVID-19 on general economic conditions, capital markets, unemployment, and the Company’s liquidity, operations, supply chain and personnel; future stock price performance; future margin improvements; stock-based compensation expense; the potential benefits and expected timing of the Perryville transaction with Gaming and Leisure Properties, Inc. (“GLPI”); the Company’s future results of operations, liquidity and revenue, including from our online sports betting and online casino games (“iGaming”) business in Pennsylvania, Michigan and Illinois and in additional states in the future; the expected benefits and potential challenges of the investment in Barstool Sports, including the anticipated benefits for the Company’s online and retail sports betting, iGaming and social casino products; the expected financial returns from the transaction with Barstool Sports; expected future launches of the Barstool-branded mobile sports betting product in additional states; the future revenue and profit contributions of the Barstool-branded mobile sports betting product; our expectations of future results of operations and financial condition, including margins; the purchase of the remaining equity in Barstool Sports; our expectations for our properties; our development projects; our expectations with regard to the impact of competition; the anticipated opening dates of our retail sportsbooks in future states and our proposed Pennsylvania Category 4 casinos in York and Berks Counties; our expectations with regard to acquisitions, potential divestitures and development opportunities, as well as the integration of and synergies related to any companies we have acquired or may acquire; the actions of regulatory, legislative, executive or judicial decisions at the federal, state or local level with regard to our business and the impact of any such actions; our ability to maintain regulatory approvals for our existing businesses and to receive regulatory approvals for our new business partners; the performance of our partners in online sports betting, iGaming and retail/mobile sportsbooks, including the risks associated with any new business, the actions of regulatory, legislative, executive or judicial decisions at the federal, state or local level with regard to online sports betting, iGaming and retail/mobile sportsbooks and the impact of any such actions; and our expectations regarding economic and consumer conditions. Accordingly, the Company cautions that the forward-looking statements contained herein are qualified by important factors that could cause actual results to differ materially from those reflected by such statements. Such factors include, but are not limited to: (a) COVID-19 and its effect on capital markets, general economic conditions, unemployment, consumer spending and the Company’s liquidity, financial condition, operations and personnel; (b) industry, market, economic, political, regulatory and health conditions; (c) disruptions in operations from data protection breaches, cyberattacks, extreme weather conditions, medical epidemics or pandemics, such as COVID-19, and other natural or manmade disasters or catastrophic events; (d) the reopening of the Company’s gaming properties are subject to various conditions, including numerous regulatory approvals and may be delayed, including for reasons beyond our control; (e) the consummation of the Perryville transaction with GLPI is subject to various conditions, including regulatory approvals, and accordingly may be delayed or may not occur at all, including for reasons beyond our control; (f) potential adverse reactions or changes to business or regulatory relationships resulting from the announcement or completion of the transactions with GLPI; (g) the outcome of any legal proceedings that may be instituted against the Company or its directors, officers or employees; (h) the impact of new or changes in current laws, regulations, rules or other industry standards; and (i) other risks, including those as may be detailed from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”). For more information on the potential factors that could affect the Company’s financial results and business, review the Company’s filings with the SEC, including, but not limited to, our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K. We do not intend to update publicly any forward-looking statements except as required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Proxy Statement may not occur.

 


 

     4     PENN NATIONAL GAMING, INC.


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LOGO

 

    

 

 

 

LETTER FROM THE PRESIDENT AND CEO TO OUR SHAREHOLDERS

 

LOGO   

April 23, 2021

    

Dear Fellow Shareholder:

 

2020 was undoubtedly one of the most challenging times in any of our lives from a personal and professional standpoint. At Penn National Gaming, we endured unprecedented changes to our business, created and implemented comprehensive new COVID-19 health and safety protocols to help keep our team members and guests safe, and withstood a series of natural disasters that damaged several of our southern properties and left many of our team members displaced in the midst of the ongoing pandemic.

Yet, despite all the challenges we faced, it was a year of transformational growth for our Company. When the pandemic caused the temporary closure of our entire portfolio, we took decisive steps  to  preserve  the  long-term  future  of   the  Company,  including  the  sale of Tropicana Las Vegas and the successful completion of two capital raises. Meanwhile, we completely reimagined our

   

operational norms and product offerings to create a more modern and efficient operating model at our properties. As a result, we finished the year with an improved balance sheet to help support our evolution into the nation’s best-in-class omni-channel provider of retail and online gaming and sports betting entertainment – all while creating significant shareholder value.

                    I am immensely proud of the way our team members at all levels of our organization came together to weather the storm last year. Our impressive results in 2020 speak to the relentless focus and nimbleness of our corporate and property management teams and they reflect the power of our incredible partnership with our friends at Barstool Sports.

What I am equally proud of in looking back on 2020 is how our Company rose to the occasion to support our team members and our communities in these times of great need and heightened social justice awareness.

Our 41 properties in 19 states throughout the country donated more than 45 tons of food and PPE directly to area food banks and emergency relief organizations at the height of the pandemic. Many of our properties served as COVID-19 test sites and housed emergency personnel, in addition to organizing food drives and blood donations.

While some companies temporarily suspended their charitable giving, we continued to support our charitable partners, contributing $6 million last year from our Penn National Gaming Foundation and our properties to worthwhile charities and civic organizations in our host communities. In addition, we generated more than $14 million in economic development funds for our host communities in Kansas, Indiana and Iowa.

During the time our properties were temporarily closed, we extended health benefits to all furloughed team members and also provided $13 million in one-time holiday cash bonuses in December to our non-executive team members companywide to help with the financial impact to their families in 2020. Meanwhile, our executives took significant pay cuts early in 2020 when COVID-19 initially forced property closures and sacrificed end-of-year performance bonuses as well.

Through our Penn National Gaming Foundation, we created a COVID-19 Emergency Relief Fund for our team members and raised over $4 million from our Board of Directors, senior management team and our Foundation.

In addition, we created the Hurricane Laura Relief Fund and have contributed more than $6.5 million to assist L’Auberge Lake Charles and the community, which includes covering full wages and benefits for our team members while the property was closed.

Most recently, we joined Barstool Sports Founder Dave Portnoy’s personal mission to help save and sustain small businesses who have been impacted by COVID-19, contributing more than $4.6 million and counting to the non-profit “Barstool Fund.” To date, the Fund has raised over $36 million and is actively supporting 288 small businesses around the country.

 

2021 PROXY STATEMENT     5     


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LOGO

 

    

 

Finally, on the social justice front, we formed a new Diversity Committee and launched a $1 million annual Penn Diversity Scholarship Program for the Children of Team Members. We also implemented a series of new inclusion-related initiatives to educate our team members across the organization, while continuing to foster a respectful and inclusive workplace.

Like most, we were eager to turn the page to 2021. As of March 5 of this year, all of our casino properties were operational for the first time since the pandemic struck. With the continued easing of capacity restraints and the rollout of COVID-19 vaccinations across the country, we have reason to feel a renewed sense of optimism here in 2021.

Our core business continues to experience stronger visitation, spend per visit and volumes. We are also seeing encouraging growth in the younger demographic tiers of our database as a steadier flow of guests in all age segments of our database have begun to return to our land-based facilities.

We are looking forward to introducing our guests to our new cashless, cardless and contactless technology (which we refer to as the “3 Cs”) later this year pending final regulatory approvals, which will improve efficiency and provide a guest experience in line with other industries frequented by younger demographics.

On the interactive front, 2020 was highlighted by the successful launch of the Barstool Sportsbook app in Pennsylvania last September. This was a meaningful milestone for our Company and I would like to thank our team at Penn Interactive and our partners at Barstool Sports for their tireless efforts and dedication in bringing this highly regarded product to market.

In January of this year, we introduced our Barstool Sportsbook mobile app and fully integrated iCasino in Michigan, and in March we launched our sports betting app in Illinois. By the end of 2021, we anticipate being live with our digital products in at least 10 states.

Despite limited external marketing spend, the Barstool Sportsbook app has consistently ranked in the top three or four in market share in the highly competitive Pennsylvania and Michigan sports betting markets and, while early, has delivered strong initial results in Illinois as well.

We believe our success in these markets demonstrates the benefits of our structural advantages in the space. Most significantly, our investment in Barstool Sports provides highly efficient customer acquisition and enhanced retention through a fully integrated and rapidly growing media partnership. In addition, our industry leading footprint provides us with a highly valuable casino database, as well as frictionless access to key states and sizable recurring revenue and equity value from our third-party skin partners. We believe these advantages will allow us to win sizable share in each of our markets while delivering best in class profitability.

We are also looking forward to continuing to introduce our Barstool-branded retail sportsbooks across our portfolio, including our two new properties opening in Pennsylvania later this year. We’re continuing to see very strong results from our retail sportsbooks, with our Indiana properties seeing meaningful increases in both gaming and non-gaming revenues following their rebranding as Barstool Sportsbooks.

Finally, we have continued to enhance our industry leading mychoice rewards program, which now connects all of our properties and digital products and is a key component of our omni-channel strategy. Our experience has shown that customers who play across multiple channels are more valuable, and our mychoice program offers its more than 20 million members a wide-range of compelling incentives to consolidate play across our various platforms.

Despite its challenges, 2020 was an exceptional year of growth and momentum for our Company and we believe the successful groundwork we laid over the year has positioned us for an exciting 2021 and beyond. As always, I’d like to thank all of our valued shareholders for your ongoing support and confidence.

Sincerely,

 

LOGO

Jay A. Snowden

President, Chief Executive Officer and Director

 


 

 

     6     PENN NATIONAL GAMING, INC.


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LOGO

2021 PROXY STATEMENT SUMMARY

This summary contains highlights about our Company and the upcoming 2021 Annual Meeting of Shareholders. This summary does not contain all of the information that you may wish to consider in advance of the meeting, and we encourage you to read the entire proxy statement before voting.

2021 Annual Meeting of Shareholders

 

 

Date and Time:

  

 

Wednesday, June 9, 2021 at 10:00 a.m., Eastern time

 

Location:

  

 

Live audio webcast on the Internet at www.virtualshareholdermeeting.com/PENN2021*

 

Record Date:

  

 

April 7, 2021

*This year’s Annual Meeting will be conducted via audio webcast online and a completely virtual meeting of shareholders due to the ongoing public health impact of the COVID-19 pandemic. You may attend, ask questions relating to meeting matters and vote during the Annual Meeting via the live audio webcast on the Internet at the link above. You will not be able to attend the Annual Meeting in person. There will be no physical location for shareholders to attend.

Voting Matters and Board Recommendations

 

     
   Proposal   Matter   Board
Recommendation
     

1

  Election of Class I Directors (David A. Handler and John M. Jacquemin)      FOR each Nominee
     

2

  Approval of the Company’s Second Amended and Restated Articles of Incorporation to increase the number of authorized shares of common stock from 200,000,000 to 400,000,000     FOR
     

3

  Approval of the Company’s Amended and Restated 2018 Long Term Incentive Compensation Plan     FOR
     

4

  Ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the 2021 fiscal year     FOR
     

5

  Approval, on an advisory basis, of the compensation paid to the Company’s named executive officers     FOR

Overview of Penn National Gaming

 

 

Nation’s Leading Omni-Channel Gaming and Sports Betting Operator– Penn National Gaming, Inc. is the largest and most diversified regional operator of gaming and racing properties in the United States with 41 properties in 19 states. The Company continues to evolve into a highly innovative omni-channel provider of retail and online gaming and sports betting entertainment. The Company has consistently generated attractive returns for its shareholders.

 

 

Disciplined Operating Focus – In 2020, the Company continued to deploy disciplined operating strategies by managing existing properties with a focus on maximizing profitability and free cash flow, while delivering outstanding gaming and entertainment experiences for customers and supporting the local communities in which it operates.

 


 

2021 PROXY STATEMENT     7     


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2020 and 2021 Achievements

 

           

Decisive Actions in Response to COVID-19

 

In 2020, we were faced with the novel coronavirus (known as “COVID-19”) pandemic, which had a devastating impact on the gaming industry. To help combat the spread of COVID-19, we were required to temporarily suspend operations at all of our properties for single or multiple time periods during the year. Once re-opened, our properties operated with reduced gaming and hotel capacity and limited food and beverage offerings in order to accommodate social distancing and health and safety protocols.

 

In light of COVID-19, we took the following actions to strengthen our balance sheet and improve our liquidity:

 

•  We entered into an agreement with our principal landlord, Gaming and Leisure Properties, Inc. (“GLPI”) and closed on the sale of the Tropicana Las Vegas real estate assets and a new ground lease for our planned Category 4 casino in Morgantown, Pennsylvania, in exchange for $337.5 million in rent credits and the ability to participate in additional upside from the eventual sale of Tropicana Las Vegas by GLPI;

 

•  In April 2020, we entered into an amendment to our credit agreement to obtain relief from our financial covenants for a period up to one year.

 

•  In May 2020, we completed a public offering of $330.5 million aggregate principal amount of 2.75% unsecured convertible notes due May 15, 2026;

 

•  In May 2020, we completed a $345.0 million public offering of 19,166,667 shares of common stock; and

 

•  In September 2020, we completed a $982.1 million public offering of 16,100,000 shares of common stock.

 

As a result of these actions, as of December 31, 2020, we had $1,853.8 million in cash on our balance sheet and no outstanding balance under our $700 million revolving credit facility.

 

          

Evolution as an Omni-Channel Provider of Retail and Online Gaming and Sports Betting Entertainment

 

In 2020 and early 2021, we undertook meaningful actions in our evolution from an owner and manager of gaming and racing properties into an omni-channel provider of retail and online gaming and sports betting entertainment.

 

Investment in Barstool Sports - In February 2020, we acquired 36% of the common stock of Barstool Sports, a leading digital sports, entertainment and media platform. In connection with the Barstool Sports investment, we became Barstool Sports’ exclusive gaming partner for up to 40 years and have the right to utilize the Barstool Sports brand for all of our online and retail sports betting and iCasino apps.

 

Interactive – In 2020, we launched our Barstool Sportsbook app in Pennsylvania with over 72,000 registered customers. On January 22, 2021, we launched the Barstool Sportsbook app in Michigan with over 48,000 registered customers. Further, on March 10, 2021, we successfully launched the Barstool Sportsbook app in Illinois. We expect to have our Barstool Sportsbook app live in at least 10 states by the end of 2021.

 

We currently operate online casino games in Pennsylvania through our HollywoodCasino.com gaming platform. We also launched our online casino games in Michigan in 2021. We currently operate a number of our retail sports books in Colorado, Illinois, Indiana, Iowa, Michigan, Mississippi, Pennsylvania and West Virginia. In addition, we continued to enter into long-term market access agreements with leading sports betting operators (BetMGM, Unibet and Rush Street), which we expect to fund our own online sports betting and iCasino business.

 

Further, we have entered into long-term market access agreements with third parties (Rush Street and Resorts) to gain access to new states, including sports betting in New York (Rush Street) and iCasino in New Jersey (Resorts).

 

           

Team Member Assistance

 

In response to COVID-19, we created a COVID-19 Emergency Relief Fund for our team members and raised over $4 million in contributions from our Board of Directors, senior management team and from our Penn National Gaming Foundation. We also extended health benefits to all furloughed team members and provided $13 million in one-time holiday cash bonuses to our non-executive team members companywide to help with the financial impact to their families. Further, in response to Hurricane Laura, we contributed more than $6.5 million to L’Auberge Lake Charles and the surrounding community, including payment of full wages and benefits for our team members.

 

     

Diversity

 

In 2020, we formed a new Diversity Committee and established a $1 million annual diversity scholarship program to support the children of our team members. We also implemented a series of new inclusion-related initiatives to educate our team members across the organization, while continuing to foster a respectful and inclusive workplace. We continue to strive to find the best and most talented executives and Board members. Currently, we are well represented from a gender diversity perspective; 50% of our executive officers and 38% of our Board of Directors are women.

 

        

  

 

Growth by Acquisitions and Development

 

We entered into an agreement with GLPI to acquire the operations of Hollywood Casino Perryville for $31.1 million, which is expected to close in the second or third quarter of 2021, subject to regulatory approval. Upon completion of this transaction, we will be in our 20th state. We expect to open our Category 4 Casinos in Morgantown and York, Pennsylvania in 2021, subject to regulatory approval.

  

 


 

     8     PENN NATIONAL GAMING, INC.


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LOGO

825 Berkshire Boulevard, Suite 200

Wyomissing, Pennsylvania 19610

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS

June 9, 2021

This Proxy Statement is being furnished to the shareholders of Penn National Gaming, Inc. (the “Company,” “Penn National” or “PENN”) in connection with the solicitation of proxies for the Company’s 2021 Annual Meeting of Shareholders (the “Annual Meeting”) to be held on June 9, 2021 at 10:00 a.m., Eastern time, or at any adjournment or postponement thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting. The Annual Meeting will be held via live audio webcast on the Internet at www.virtualshareholdermeeting.com/PENN2021. This solicitation is being made by the Company. This Proxy Statement, the accompanying Proxy Card, and the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “Annual Report”) are first being made available to our shareholders on or about April 23, 2021.

GOVERNANCE OF THE COMPANY

Corporate Governance Highlights

 

 

Independence

 

 

Board Leadership

 

 

Gender Diversity

 

 

Board Tenure

 

 

Overboarding

 

 

Director Skills and Experience

7 of 8 independent directors

 

Fully independent Compensation, Audit, Nominating and Corporate Governance Committees

 

Separate Chairman and CEO (for over seven years)

 

Independent Chairman

 

Lead Independent Director

  3 of 8 board members, or 38%, are female (two of whom hold board leadership positions)   4 directors have tenure of less than 7 years   No overboarded directors   Extensive experience in gaming, hospitality, capital markets, accounting, tax, technology, risk management, marketing, media and governmental affairs
   

We have one class of common stock and no supermajority voting requirements.

 

   

We conduct regular self-assessments of the Board and its committees.

 

   

The Board has adopted a Code of Business Conduct for directors, officers and employees and the Company conducts company-wide sexual harassment training.

 

   

We have significant stock ownership requirements for our directors and named executive officers.

 

   

We hold an annual advisory vote on executive compensation.

 

   

We conduct comprehensive succession and talent development planning.

   

We have an active cyber security committee and diversity committee.

 

   

We conduct extensive shareholder engagement throughout the year.

 

   

The Board has significant involvement in our long-term growth and capital deployment strategy.

 

   

Reflecting the highly regulated industry in which our Company operates, we have a Compliance Committee with broad authority, comprised of Board members and non-director compliance professionals.

 

   

The Nominating and Corporate Governance Committee regularly reviews and assesses our Company’s corporate governance structure and practices in light of industry trends and best practices.

 

 


 

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Board of Directors

Commitment to Shareholder Value

We have continued to pursue innovative transactions to create value for our shareholders and to undertake new avenues of growth over the last several years:

 

   

On November 1, 2013, we created the gaming industry’s first real estate investment trust, Gaming and Leisure Properties, Inc. (“GLPI”), through a tax free spin-off (the “Spin-Off”). The Company was an industry pioneer in this regard, as several of its peers have since completed similar transactions.

 

   

On October 15, 2018, we acquired Pinnacle Entertainment, Inc. in a stock/cash transaction that significantly expanded the Company’s position as the nation’s leading regional gaming operator.

 

   

In 2019, we pursued online opportunities through Penn Interactive, including the launch of Hollywoodcasino.com, an online real money gaming operation, in Pennsylvania.

 

   

We completed a significant investment in the first quarter of 2020 in Barstool Sports, Inc., a leading digital sports, entertainment and media platform and have the right to utilize the Barstool Sports brand for all of our online and retail sports betting and iCasino apps.

 

   

In 2020, we launched the Barstool Sportsbook app in Pennsylvania. In 2021, we launched our Barstool Sportsbook app in Michigan and Illinois. We continue to evolve into an omni-channel provider of retail and interactive gaming, sports betting and entertainment. We expect to have our Barstool Sportsbook app live in ten states by the end of 2021.

 

   

On March 22, 2021, the Company was added to the S&P 500 Index and we have created value for our shareholders with Total Shareholder Returns (TSR) of 237.9% on a one year basis, 439% on a five year basis, and 987% on a ten year basis.

The Board was highly instrumental in providing leadership to the Company during the evolution of these notable developments.

 

Board Overview

 

The Company operates in a highly specialized and rigorously regulated industry. This environment demands a high level of integrity and accountability in all key aspects of its operations, its management team and its Board of Directors. The Board believes that its structure and composition have been important elements of the Company’s development activity, growth and success in the gaming industry over the years. The Board is comprised of individuals who bring unique talents and perspectives to their service on the Board and, as a group, strike a balance between those who have a proven record of effectively working together to responsibly oversee management’s operation of the Company and those who bring fresh perspectives and unique insights to the Board. In fact, over the last seven years, the Company has added four talented new directors and looks forward to the long-term benefits of the diversity of their experiences and views. In November 2020, we added a new independent board member, Marla Kaplowitz, to our Board. In addition, no member of the Board serves on the board of more than one other public company, which helps to ensure that each member is fully engaged in his or her duties to the Company.

    

 

To maximize shareholder value, the Board strives to maintain a governance environment where (i) entrepreneurship and prudent risk taking are encouraged, with a focus on both long- and short-term value creation, (ii) shareholder perspectives are understood and long-term relationships with shareholders are fostered through frequent, candid and comprehensive engagement with and disclosure to the Company’s shareholders and the investment community, (iii) integrity and accountability are integrated into the Company’s management philosophy and operations and (iv) the Company is able to attract, develop and retain industry-leading executive talent to manage the Company’s increasingly complex operations.

 

The Board regularly evaluates the governance environment to enable the Company to respond appropriately to changes, practices and market conditions, as well as suggestions from shareholders and other stakeholders, all in a manner that we believe will continue the Company’s long-term record of increasing shareholder value.

 


 

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Composition, Skills and Independence

The Company’s Board of Directors currently consists of eight members. The Board believes it is appropriately sized to effectively carry out its responsibilities. The Board is small enough to facilitate individual engagement and involvement, to allow directors to communicate frequently with management and each other, and to permit meetings to be conducted on short notice. This is especially critical to support the Company’s efforts to grow strategically (such as through the Barstool Sports and Pinnacle transactions) and to create new value for shareholders through complex and innovative transactions. At the same time, the Board believes that it is large enough and has the appropriate composition and skills to encourage diverse viewpoints and better collaborative decision making. In 2020, the Board increased its size from seven to eight members and appointed Marla Kaplowitz to the Board. The Board believes Ms. Kaplowitz’s proven leadership in the marketing, consumer data, and digital transformation spaces will serve us well as the Company continues to evolve into the nation’s leading omnichannel provider of retail and interactive gaming, sports betting and entertainment.

The collective membership of the Board has a strong background in gaming, hospitality, capital markets, accounting, tax, technology, risk management, marketing, media and governmental affairs, as well as long-term experience with the Company’s operations in an increasingly competitive industry. These backgrounds and experiences prove especially valuable in light of the complexities inherent in our industry and the fact that we operate across 19 different states throughout North America. Consequently, the Board believes that its composition is optimized to support and oversee the Company’s business and strategy.

The Board has determined that all of the directors, other than Mr. Snowden, are independent under the current Listing Rules of the NASDAQ Stock Market (the “NASDAQ Rules”). Notably, the Board’s Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee are comprised exclusively of independent directors. The independent Board directors typically meet several times per year in executive session.

Board Leadership

David Handler, who is an independent director, has served as our Chairman of the Board since June 12, 2019. Mr. Handler joined our Board in 1994 and is a partner at Centerview Partners, an independent financial advisory and private equity firm. The Board believes that Mr. Handler is best suited to serve as Chairman of the

 


Board because of his considerable investment banking and capital markets experience, which includes a focus on mergers and acquisitions and other significant transactions (including many in the technology space), which compliments his long-term exposure to the gaming industry. Mr. Handler’s background has been an invaluable asset to the Company over the years, particularly in connection with evaluating potential acquisitions and financing opportunities.

The roles of our Chairman of the Board and Chief Executive Officer have been split for over seven years. Our Chief Executive Officer is responsible for the general management and operation of the business, providing guidance and oversight to senior management and formulating the strategic direction of the Company. The Chairman of the Board is responsible for the content, quality and timeliness of information provided to our Board and consults with our Board and Chief Executive Officer regarding oversight of our business affairs. The Board believes that the decision to separate the roles of Chairman of the Board and Chief Executive Officer has been beneficial, both with regards to corporate governance and operational execution.

In addition, the Board has appointed Barbara Shattuck Kohn as its lead independent director to, among other things, facilitate communication between management and the independent directors. The responsibilities of the lead independent director include:

 

   

Consulting with the Chairman of the Board regarding the information, agendas and schedules of Board and Board committee meetings, including the ability to add items to the agendas for any meeting.

 

   

Scheduling, setting the agenda for and serving as chair of meetings of independent directors.

 

   

Serving as principal liaison between the independent directors and the Chairman of the Board and between the independent directors and senior management.

 

   

Presiding at all meetings of the Board at which the Chairman of the Board is not present, including executive sessions of the independent directors.

 

   

In the event of the death, incapacity, resignation or removal of the Chairman of the Board, serving as the acting Chairperson of the Board until a new Chairperson is selected.

Chairman Emeritus

Peter M. Carlino, retired Chairman and founder of the Company, was appointed Chairman Emeritus on

 

 


 

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June 12, 2019 and continues in this role at the request of the Board of Directors. For additional detail on the role of Chairman Emeritus, please see Section 4.02(e) of the Company’s bylaws.

Board Resources

In fulfilling its objectives, many of the direct oversight functions of the Board are performed by the Board’s committees with support from both senior internal resources as well as independent outside advisors. For example, the Audit Committee receives frequent reports directly from the Company’s Vice President, Internal Audit; Chief Financial Officer; Chief Accounting Officer; Chief Legal Officer; Executive Vice President of Operations and Chief Compliance Officer. The Audit Committee also has express authority to direct the Company’s internal audit staff. Additionally, the Company’s independent registered public accounting firm provides support through its annual audit and quarterly reviews of the Company’s financial statements. The Compliance Committee is structured in the same manner relative to the Chief Compliance Officer and the Company’s compliance staff and also has regular access to the Company’s senior management team.

Both the Audit Committee and the Compliance Committee have substantial internal staff and outside resources to assist them in carrying out their responsibilities. As of December 31, 2020, the Company maintained a 44 person internal audit staff overseen by the Company’s Vice President, Internal Audit, who reports to the Audit Committee, and a 42 person compliance staff overseen by the Company’s Chief Compliance Officer, who provides frequent reports to the Compliance Committee. Additionally, the Company has retained Thomas N. Auriemma, a non-director member, as the Chairman of the Compliance Committee and who is the Company’s former Vice President, Chief Compliance Officer and former Director of the Division of Gaming Enforcement in New Jersey, with over 30 years of experience as a gaming regulator in the State of New Jersey.

Risk Oversight

The Board does not view risk in isolation and recognizes that a prudent level of risk taking is an essential element of the Company’s strategy. As such, the Board and its Committees take an active role in the oversight of risks that have the potential to significantly impact the Company (including, among other things, competition, including new forms of competition, gaming legislation, regulatory matters, legal issues, cyber security, capital allocation, macroeconomic

 


issues, capital markets, succession, executive compensation and financial statements) and the management team is charged with managing those risks. The management team also monitors risk on an enterprise level to help the Board and the Company better understand, mitigate and manage the various risks the Company faces across the enterprise that could potentially impair its ability to execute the corporate strategy and achieve its goals. In addition, members of senior management attend all meetings of the Board and its Committees, and the Board and senior management work closely together to ensure that awareness of salient risks are integrated into the Company’s operations and key decisions. The Company also has a well-established cyber security committee comprised of senior management from different departments within the Company, which provides frequent reports to the Audit Committee and the Board on cyber security threats. A discussion of the compensation risk assessment process undertaken by the Compensation Committee is described on page 55 of this Proxy Statement.

Key Policies and Procedures

The Board has adopted and regularly reviews the Company’s Code of Business Conduct (the “Code of Conduct”), which applies to all directors and employees of the Company, including its principal executive officer, principal financial officer and principal accounting officer. The Code of Conduct is designed to, among other things, promote ethical behavior, deter wrongdoing, address potential conflicts of interest, and encourage full and accurate reporting in the Company’s filings with the SEC and compliance with applicable laws. The Code of Conduct also provides for a 24-hour hotline that any employee, patron, vendor or other third party can use to report, anonymously if they so choose, any suspected fraud, financial impropriety or other alleged wrongdoing. These reports are promptly investigated and receive the highest level of management attention, with particular focus from the Company’s Chief Compliance Officer; Vice President, Internal Audit; Chief Legal Officer and Senior Vice President, Chief Human Resources Officer, as appropriate. Subsequently, senior management provides investigation summaries to the Compliance Committee and the Audit Committee. A copy of the current Code of Conduct is available on the Company’s website at www.pngaming.com/about-us.

The Board also has adopted Corporate Governance Guidelines (the “Corporate Governance Guidelines”) that are intended to provide a structure within which our Board and management can effectively pursue the

 

 


 

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Company’s objectives for the benefit of its shareholders and other constituencies. The Corporate Governance Guidelines include policies and procedures relating to, among other items, the role, structure and composition of the Board; Board procedures and leadership; risk oversight; use of outside consultants; and conflicts of interest. The Board and the Nominating and Corporate Governance Committee regularly consider the efficacy of these policies. A copy of the current Corporate Governance Guidelines is available on the Company’s website at www.pngaming.com/about-us.

In addition, the Company has adopted various other policies and procedures addressing the Company’s operations and corporate governance:

 

   

stock ownership guidelines;

 

   

an executive compensation clawback policy;

 

   

an equity based award administration policy (to ensure the consistency and efficiency of the Company’s equity award process);

 

   

a corporate signature authority policy (to provide accountability with respect to significant commitments);

 

   

a sexual harassment and discrimination policy (developed by a diverse internal committee and accompanied by company-wide training); and

 

   

a compliance plan.

The Board regularly reviews the Company’s corporate governance policies and practices to evaluate their effectiveness in identifying, assessing and managing risks and to achieve compliance with the requirements of Pennsylvania law (the state in which the Company is incorporated), the NASDAQ Rules, the SEC rules and regulations and state gaming regulations, all in the context of pursuing best practices and increasing shareholder value.

Stock Ownership Guidelines for Directors

The Board of Directors has established stock ownership guidelines for non-employee directors of the Company to incentivize directors to maximize shareholder value. Each non-employee director is expected to own and hold shares of common stock, including restricted stock and phantom stock units, equal in value to at least five times the annual cash retainer (exclusive of separate committee retainers) for non-employee directors in the applicable year. New non-employee directors have a period of three years from the date of initial election to achieve this ownership guideline. As of December 31, 2020, all of the non-employee directors were in compliance with these guidelines.

 


Succession Planning for Senior Management

Our Board, in coordination with our Compensation Committee, carefully oversees Chief Executive Officer (“CEO”) and senior management succession planning, most recently with respect to Mr. Snowden’s appointment to CEO on January 1, 2020. Our CEO and our Senior Vice President, Chief Human Resources Officer provide the Board with recommendations on, and evaluations of, potential successors to the CEO and other members of senior management. Our Board reviews potential internal candidates with our CEO and our Senior Vice President, Chief Human Resources Officer, including the qualifications, experience and development priorities for these individuals. Directors engage with potential CEO and senior management successors at Board and committee meetings and in less formal settings to allow them to personally assess candidates. Further, our Board periodically reviews the overall composition of our senior management’s qualifications, tenure and experience. The Company’s talent management program, which seeks to develop, hire and retain talent below the senior management level, is led by our Executive Vice President of Operations and our Senior Vice President, Chief Human Resources Officer and is complementary to the Board’s succession planning.

2020 Board and Committee Meetings

Each member of the Board contributes a substantial amount of time and effort to serve as a Board and committee member. During 2020:

 

   

the Board held eleven formal meetings;

 

   

the Audit Committee held six formal meetings;

 

   

the Compensation Committee held six formal meetings;

 

   

the Nominating and Corporate Governance Committee held two formal meetings; and

 

   

the Compliance Committee held five formal meetings.

Further, Board members are encouraged to, and regularly do, engage in informal discussions with each other and members of management, and they are provided daily industry media coverage and property results as well as frequent management reports and updates. The independent directors meet periodically in executive session.

During the year ended December 31, 2020, each of the Company’s directors attended at least 75% of the meetings of the Board and committees of the Board of which he or she was a member. The Company encourages directors to attend shareholder meetings. Each of the Company’s directors attended the 2020 Annual Meeting of Shareholders.

 

 


 

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Committees of the Board

The Board maintains four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Compliance Committee. The specific duties and operation of each committee are described in more detail below. The Board has determined that each director serving on the Audit Committee, the Compensation Committee or the Nominating and Corporate Governance Committee is independent under the NASDAQ Rules and the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”). The Compliance Committee also includes subject matter experts who are not directors. Each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee operates under a written charter adopted by the Board of Directors that is reviewed annually and is available at www.pngaming.com/about-us.

Committee Membership

 

Audit Committee
Members
  Compensation Committee
Members
 

Nominating and

Corporate Governance

Committee Members

 

Compliance Committee

Members

       

Jane Scaccetti, Chair

 

John M. Jacquemin

 

Barbara Shattuck Kohn

 

Barbara Shattuck Kohn, Chair

 

John M. Jacquemin

 

Ronald J. Naples

 

Marla Kaplowitz

 

Barbara Shattuck Kohn, Chair

 

John M. Jacquemin

 

Ronald J. Naples

 

Thomas A. Auriemma, Chair (non-director)

 

Ronald J. Naples

 

Saul V. Reibstein

 

Marla Kaplowitz

 

 

Audit Committee

 

In addition to being independent as noted above, the Board has determined that each member of the Audit Committee also meets the financial literacy requirements under the NASDAQ Rules and is an “audit committee financial expert” within the meaning of the rules and regulations of the SEC. In addition, Ms. Scaccetti has practiced as a certified public accountant since 1977, which makes her particularly well-qualified to serve as Chair of the Audit Committee.

 

The principal functions of the Audit Committee are to:

 

•  serve as an independent and objective party to monitor the integrity of the Company’s financial reporting process and internal control system;

 

•  engage the independent registered public accounting firm, review and appraise the audit efforts of the Company’s independent registered public accounting firm and internal auditors and monitor the registered public accounting firm’s independence; and

 

•  maintain free and open communication with and among the independent registered public accounting firm, the internal auditors, the Company’s finance department, senior management and the Board of Directors.

 

The Audit Committee is also responsible for reviewing and pre-approving all conflicts of interest and related

    

person transactions involving the Board or the Company’s executive officers. In discharging its oversight role, the Audit Committee is empowered to investigate any matter brought to its attention and any other matters that the Audit Committee believes should be investigated. The Audit Committee may at any time engage, at the expense of the Company, independent counsel or other advisors, as it deems necessary to carry out its duties.

 

Compensation Committee

 

In addition to being independent as noted above, each member of the Compensation Committee is also a non-employee director, as defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and an outside director, as defined under Section 162(m) of the Internal Revenue Code of 1986, as amended.

 

The Compensation Committee’s authority and responsibilities include:

 

•  evaluating the annual performance of the CEO and recommending to the Board for approval all CEO compensation and employment agreements and separation agreements;

 

•  evaluating and approving for the other executive officers (other than the CEO) salary, annual short-term incentive opportunities, long-term equity based incentives and other benefits;

 


 

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reviewing and approving employment agreements and separation agreements for the other executive officers (other than the CEO);

 

   

monitoring trends and best practices with regard to executive compensation;

 

   

reviewing and approving awards under the long-term incentive compensation plan and annual short-term incentive compensation plan for the other executive officers (other than the CEO), and reviewing and recommending that the Board approve of awards under the long-term incentive compensation plan and annual short-term incentive compensation plan for the CEO, including the performance criteria, goals and objectives provided for in such plan;

 

   

reviewing executive compensation programs annually to determine whether they are properly coordinated and are achieving their intended purposes;

 

   

periodically reviewing the policies for administration of the Company’s executive compensation programs;

 

   

assessing the Company’s management and leadership succession planning;

 

   

approving incentive awards that the CEO may grant to employees other than executive officers;

 

   

formulating and administering the Company’s stock ownership guidelines;

 

   

recommending director compensation to the Board; and

 

   

administering and interpreting the Company’s long-term incentive compensation plans.

The CEO provides the Compensation Committee performance assessments and compensation recommendations for each executive officer of the Company (other than himself). The Compensation Committee considers the CEO’s recommendations with the assistance of the compensation consultant and sets the compensation of those executive officers based on its deliberations. The Compensation Committee holds executive sessions without management to facilitate candid discussion regarding executive performance and compensation, including establishing the CEO’s compensation.

The Compensation Committee retains the services of compensation consultants and legal advisors to provide such advice and assistance as it deems appropriate in its sole discretion. The Compensation Committee has the sole responsibility to oversee the

 


work of any of its advisors. The Compensation Committee can terminate the services of such compensation consultants and advisors and approves their fees and retention terms, which are funded by the Company. The Compensation Committee engaged an independent third party executive compensation consultant for 2020, Exequity LLP (“Exequity”), who has served as the Compensation Committee’s consultant for the previous eight years. Exequity provides advice and assistance to the Compensation Committee in carrying out its duties and responsibilities with respect to the Company’s executive compensation programs and non-employee director compensation. Prior to engaging Exequity, and at least annually during the engagement, the Compensation Committee evaluates the independence of Exequity. This review includes receiving information regarding other services, if any, provided by Exequity to the Company, the Board of Directors or other committees of the Board of Directors, and periodically reviewing the fees incurred as a result of such other activities. In 2020, the Compensation Committee determined that Exequity was independent and that the retention of Exequity by the Compensation Committee did not give rise to any conflicts of interest.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee (“Governance Committee”) is responsible for:

 

   

reviewing and making recommendations on the eligibility criteria for individual Board and committee membership, including the range of skills and expertise, diversity and independence that should be represented on the Board and its committees;

 

   

reviewing and recommending the appropriate structure, composition and size of the Board and its committees, including the diversity and gender of the members of the Board and its committee members;

 

   

identifying and recommending, for the Board’s selection, nominees for election to the Board;

 

   

considering the Board’s leadership structure, including the separation of the Chairman of the Board and CEO roles and the election of a lead independent director;

 

   

annually reviewing the Company’s Corporate Governance Guidelines and overseeing other corporate governance practices, including reviewing and recommending to the Board for approval any new or revised guidelines, documents or policies;

 

 


 

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overseeing the Company’s policies relating to Environmental, Social and Governance (“ESG”) issues; and

 

   

overseeing periodic evaluations of the Board and its committees and making recommendations to the Board as may be appropriate in light of the results of such evaluations.

Compliance Committee

The members of the Compliance Committee are individuals who, by virtue of their familiarity with law enforcement, regulated businesses, and the business activities of the Company, are sensitive to the concerns of state gaming regulators and are capable of ensuring compliance or determining the existence or likelihood of a violation of a law, rule, regulation, policy or procedure applicable to the Company.

The Compliance Committee was established to foster, through robust self-regulatory policies and procedures, compliance with applicable laws relating to the Company’s gaming businesses and to prevent, to the fullest extent possible, any involvement by the Company in any activities that could pose a threat to the reputation and integrity of the Company’s operations.

Director Selection Process

The Governance Committee considers candidates for Board membership suggested by, among others, its members, other Board members and management. The Governance Committee will also consider recommendations of nominees for directors by shareholders (for information relating to the nominations of directors by our shareholders, please see “Director Nominations by Shareholders” on page 79). In addition, the Governance Committee has authority to engage a search firm to assist in the identification of director candidates, to approve the search firm fees (which are paid by the Company) and other retention terms, and to obtain advice and assistance from internal and external legal, accounting or other advisors. In selecting nominees for director, the Governance Committee considers a number of factors, including, but not limited to:

 

   

a candidate’s ability to effectively represent the interests of the shareholders;

 

   

whether a candidate has demonstrated business and industry experience that is relevant to the Company, including recent experience at the senior management level (preferably as chief executive officer or a similar position);

 


   

a candidate’s ability to meet the suitability standards set forth in the Company’s bylaws, as well as the rigorous suitability, investigation and filing requirements of the relevant regulatory agencies in each of the numerous jurisdictions where the Company operates;

 

   

a candidate’s background and diversity of experience, skill set, independence from management and freedom from potential conflicts of interest with the Company;

 

   

a candidate’s financial literacy, including whether the candidate can meet the audit committee membership standards set forth in the NASDAQ Rules and SEC rules;

 

   

whether a candidate is recognized for his or her reputation, integrity, judgment, skill, leadership ability, honesty and moral values;

 

   

a candidate’s ability to work constructively with the Company’s management and other directors; and

 

   

a candidate’s capacity, taking into consideration the number of other boards on which the candidate serves, to dedicate sufficient time and energy to his or her board and committee duties.

During the process of considering a potential nominee, the Governance Committee and its Company delegates generally request extensive additional information about, and conduct interviews with, the potential nominee. The information expected to be provided includes detailed financial and personal history customarily required by the Company’s regulators. In addition, the Governance Committee will also request that the candidate submit to an investigation overseen by the Chief Compliance Officer to evaluate whether the candidate is suitable to serve on the Board of a publicly traded, multi-jurisdictional, highly regulated omni-channel gaming, sports betting and racing company.

 

 


 

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Compensation of Directors

The Company pays fees to each director who is not an employee of the Company. During the year ended December 31, 2020, the annual compensation for each non-employee director (other than Marla Kaplowitz who joined in November 2020) consisted of an annual cash fee of $50,000, plus an additional $10,000 for service on each of the Audit Committee, the Compensation Committee and the Compliance Committee, as applicable. In addition, the Chair of the Audit Committee receives a $15,000 annual retainer, the Chair of the Compensation Committee receives a $10,000 annual retainer, and the Chair of the Nominating and Corporate Governance Committee receives a $5,000 annual retainer. Each non-employee director had the opportunity to elect to receive his or her annual fees in the form of shares of restricted stock with forfeiture restrictions lapsing on the first anniversary of the date of grant. In 2020, each non-employee director (who elected to receive cash compensation in lieu of shares of restricted stock) elected to forgo any of their cash compensation from April 1, 2020 until October 1, 2020.

In 2020, each non-employee director (other than Marla Kaplowitz) received a grant of phantom stock units or restricted stock at his or her election with a value of $250,000 and the Chairman of the Board received a grant of phantom stock units or restricted stock at his election with a value of $375,000. Each award of phantom stock units or shares of restricted stock vests in three equal annual installments from the date of grant. Ms. Kaplowitz joined the Board of Directors on November 23, 2020 and did not receive any compensation in 2020.

2020 Director Compensation Table

The following table sets forth information with respect to all compensation awarded to the Company’s non-employee directors for 2020.

 

Name  

 

Fees
Earned or
Paid in
Cash ($)(2)

  Stock
Awards
($)(3)(4)
  Total
($)

David A. Handler

  50,000   375,004   425,004

John M. Jacquemin

  70,000   250,003   320,003

Marla Kaplowitz(1)

  0   0   0

Barbara Shattuck Kohn

  42,500   250,003   292,503

Ronald J. Naples

  35,000   250,003   285,003

Saul V. Reibstein

  60,000   250,003   310,003

Jane Scaccetti

  37,500   250,003   287,503

 

  (1)

Ms. Kaplowitz joined the Company’s Board of Directors on November 23, 2020. During 2020, Ms. Kaplowitz did not receive any compensation for her service as director, including any cash compensation or stock awards.

 

  (2)

In 2020, each non-employee director was permitted to elect to receive his or her fees in shares of restricted stock, which vest on the first anniversary of the date of grant. In 2020, Messrs. Handler, Jacquemin, and Reibstein elected to receive shares of restricted stock in lieu of cash. In 2020, Mr. Naples and Messes. Kohn and Scaccetti (who elected to receive his or her fees in cash) forwent these payments from April 1, 2020 to October 1, 2020.

 

  (3)

The amounts listed are calculated based on the closing price on the day prior to grant date computed in accordance with FASB ASC Topic 718.

 

  (4)

As of December 31, 2020, the following stock awards were outstanding: (i) for Mr. Handler, 8,498 phantom stock units and 27,448 shares of restricted stock; (ii) for Mr. Jacquemin, 8,498 phantom stock units and 20,810 shares of restricted stock; (iii) for Ms. Kaplowitz, there were no outstanding stock awards; (iv) for Ms. Kohn, 8,498 phantom stock units and 18,132 shares of restricted stock; (v) for Mr. Naples, 17,066 phantom stock units and 9,564 shares of restricted stock; (vi) for Mr. Reibstein, 14,331 phantom stock units and 10,863 shares of restricted stock; and (vii) for Ms. Scaccetti, 18,062 phantom stock units and 8,568 shares of restricted stock. As of December 31, 2020, Mr. Reibstein also had 54,543 stock options outstanding related to his previous service as Chief Financial Officer of the Company.

 


 

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LOGO

Caring for our People, our Communities and our Planet #ThisisPENN
ENVIRONMENTAL, HUMAN CAPITAL MANAGEMENT AND SOCIAL RESPONSIBILITY

 


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LOGO

At Penn National Gaming, as we continue our evolution from what began as a single racetrack operator into what is today the nation’s leading omni-channel provider of retail and online gaming and sports betting entertainment, our Board of Directors and Management Team remain deeply committed to fostering a culture that helps to attract and retain a diverse, talented pool of dedicated team members.

In addition, as a longstanding good corporate citizen, we’re committed to being a trusted and valued member of our communities and a responsible steward of our finite natural resources.

Penn National’s Environmental, Social and Governance (“ESG”) Committee, which reports directly to our President & CEO Jay Snowden and our Nominating and Corporate Governance Committee and the Board of Directors, is comprised of:

 

Todd George

Executive Vice President of Operations

 

Felicia Hendrix

Executive Vice President and Chief Financial Officer

 

Harper Ko

Executive Vice President, Chief Legal Officer and
Secretary

 

D. Eric Schippers

Senior Vice President, Public Affairs and
Chairman of the Penn National Gaming Foundation

  

Justin Carter

Senior Vice President of Regional Operations and
Chairman of the Penn Diversity Committee

 

Wendy Hamilton

Senior Vice President,
Chief Human Resources Officer

 

Justin Sebastiano

Senior Vice President, Finance & Treasurer

 

Richard Primus

Senior Vice President and Chief Information Officer

 


 

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Caring for Our Planet

 

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Penn National is dedicated to creating a positive and lasting impact on the environment and has launched sustainability initiatives, led by our Corporate and property-level operating teams and designated “Green Teams,” at our 41 casinos, racetracks and resorts in 19 states throughout the United States.

All three of Penn National’s latest greenfield developments were certified as LEED® Gold or LEED® Silver by the U.S. Green Building Council.

At our two newest casinos under development in Pennsylvania in York and Morgantown, which are scheduled to open later this year, we have implemented new energy efficiencies, including:

 

    LED lighting

 

    EV charging stations

 

    Water conserving toilets

 

    Water bottle refilling stations

 

    HVAC improvements to maximize efficiencies

 

    AER-DEC® integrated sinks, which are the future of sustainable restroom design, combining a soap dispenser, faucet, hand dryer and sink basin all in one touch-free, hygienic, highly efficient system

We are planning to incorporate similar improvements to those listed above at all of our 23 hotel properties as we continue our regular room refreshing and remodeling plans in 2021 and beyond. Already, more than 80 percent of our properties have completed an energy-efficient lighting retrofit program. With a longer lifespan than incandescent bulbs and a more efficient use of electricity, LED bulbs allow our properties to collectively reduce their annual energy consumption by millions of kilowatt hours annually (see chart below).

Given the significant COVID-19 related temporary property closures in 2020, the following summary is from 2019:

 

    Total LED projects have reduced kWh consumption by 52.4 million kWh, which equates to an 11% reduction for all impacted properties.

 

    Reduced Greenhouse Gas emissions by 40,830 tons per the EPA Greenhouse Gas Conversion Calculator.

 

    Through our power purchasing program with Constellation Energy, 145 million kWh’s were contracted as carbon free power.

 


 

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Plainridge Park Casino in Massachusetts, which opened in 2015, is a certified LEED® Gold facility in which 75 percent of the existing building structure was constructed from reclaimed materials. Approximately 98 percent of its construction waste was diverted for recycling and re-use and 50 percent of the wood on the project was from Forest Stewardship Council (FSC) certified forests. In addition, the building derives 12 percent of its electricity from a solar panel system on the roof of the casino and the parking garage. Overall, the building uses 26 percent less energy through the use of the solar panels and high efficiency equipment in our restaurants. The building also uses 42 percent less water through the use of high efficiency plumbing fixtures and equipment, and it has water efficient landscaping that provides a 55 percent water use savings with no potable water used. Finally, the property has 20 fleet car charging stations on the second-floor garage parking and spaces for low emission fuel vehicles throughout our parking lots.

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In addition, through regular audits of energy consumption at our properties, we’re continuing to develop custom initiatives, such as HVAC energy management projects and thermostat control systems, to ensure the most efficient use of electricity.

Last year, we installed integrated shower amenity dispensers containing shampoo, conditioner and body wash at more than half of our hotel properties. These new containers can significantly reduce the plastic and product waste generated annually by single-use

 

 


 

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amenity bottles. For example, at Hollywood Casino St. Louis, which features a 502-room hotel, we’ve reduced plastic bottle use by 91% — or 550 pounds annually — which translates to nearly $50,000 in annual savings for that hotel alone. In addition, replacing paper towels with electric hand dryers and using coreless toilet paper rolls at the casino has led to a reduction of 22,000 pounds of paper waste annually.

 

In an effort to conserve water, most of our hotel locations encourage guests to participate in linen and towel reuse programs. Behind the scenes, low-flow plumbing fixtures and efficient use of laundry facilities help further curb water waste.

 

We currently have robust recycling programs in place at most of our properties nationwide (with plans to further expand the program), diverting recyclable materials produced by the casino and hotel operations away from landfills. Composting facilities, currently implemented at five locations, allow even more waste

    

to be redirected. Additional waste reduction efforts at select properties — such as the use of plant-based and paper straws, the replacement of paper towels with electric hand dryers, and the elimination of Styrofoam — help further reduce waste directly at the source. These types of broad sustainability programs are designed to eliminate over 25,000 pounds of waste annually at each property.

 

Additionally, our operations and IT teams have laid the groundwork for implementing a new generation of cashless, cardless, and contactless technology at our casinos, which we refer to as the 3Cs, that will help to eliminate a significant amount of plastic and paper waste from membership cards and printed tickets from our slot machines, self-serve kiosks and ATMs. It will also lead to an ongoing reduction of direct mail to consumers. We intend to launch this technology initially at our Pennsylvania casinos in the first half of 2021, subject to regulatory approval, and plan to continue rolling it out to other regions in 2021.

 

 

Penn National Gaming Casino and Hotel — Energy Efficieny Projects

ESG — KWH Reduction, Green House Gas Emissions and Carbon Footprint Reduction Annually

 

             
Locations   Total KWH
Annually - 2019
    LED Lighting
Retrofits and Total
KWH Reduction
    Annual Percentage of
KWH Reduction
    Greenhouse Gas
Emissions Reduction
(Tons)1
    Equivalent from
switching to LED
from incandescent
light  bulbs1
    Carbon Free Power
Generation w/
Constellation Energy
 
     

Charles Town

    32,063,541       4,910,806       15     3,827       131,905    
             

Aurora

    10,873,000       1,555,303       14     1,212       41,776       10,873,000  
     

Grantville

    25,368,000       1,053,204       4     821       28,289       25,368,000  
             

Tunica

    15,054,000       2,350,355       16     1,832       63,131          
     

Riverside

    15,429,999       3,814,101       25     2,973       102,447    
             

Joliet

    17,819,000       3,041,119       17     2,370       81,685       17,819,000  
     

Dayton

    8,705,000       508,560       6     396       13,660       8,705,000  
             

Tropicana

    26,589,948       5,383,320       20     4,196       144,597          
     

Zia Park

    5,779,145       64,743       1     51       1,739    
             

Columbus

    19,404,000       2,174,040       11     1,694       58,395       19,404,000  
     

Youngstown

    9,025,000       421,497       5     329       11,321       9,025,000  
             

Lawrenceburg

    15,624,000       2,229,072       14     1,737       59,873          
     

KC Speedway

    17,652,900       1,510,210       9     1,177       40,564    
             

1st Jackpot

    6,894,000       727,032       11     567       19,528          
     

Boomtown Bilioxi

    11,879,764       1,142,208       10     890       30,680    
             

M Resort

    26,023,496       1,719,828       7     1,340       46,195          
     

Plainridge

    9,812,000       1,459,476       15     1,137       39,202       9,812,000  
             

L’Auberge Baton Rouge

    24,435,629       1,130,776       5     881       30,373          
     

Bay St. Louis

    14,500,000       2,631,420       18     2,051       70,680       14,500,000  
             

St. Louis

    27,926,410       1,242,445       4     968       33,372          
     

Bangor

    9,471,000       2,423,952       26     1,889       65,108       9,471,000  
             

Toledo

    20,875,000       1,737,845       8     1,354       46,679       20,875,000  
     

Council Bluffs-Iowa

    17,936,825       1,043,700       6     813       28,034    
             

Ameristar-East Chicago

    23,696,400       2,376,590       10     1,852       63,836          
     

L’Auberge Lake Charles

    39,873,314       2,171,115       5     1,692       58,316    
             

Boomtown New Orleans

    14,687,859       1,142,892       8     891       30,698          
     

Black Hawk-Colorado

    19,412,028       2,412,270       12     1,880       64,794    
             

Total

    486,811,258       52,377,879       11     40,820       1,406,877       145,852,000 2 

Notes:

1. Information from the EPA website listed below:

Greenhouse Gas Equivalencies Calculator | Energy and the Environment | US EPA

https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

2. Completely Carbon Free Power Generation

 


 

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Caring for Our People and Our Communities

Penn National is deeply committed to cultivating a culture and environment where all of our team members, regardless of their differences, feel like they truly belong. Last year, amidst one of the most challenging times in our nation’s history, as the world grappled with an outpouring of racial and social anguish, we formed the Penn Diversity Committee. Its mission is to put Penn National’s longstanding support of diversity and inclusion into action.

The Diversity Committee is chaired by Justin Carter, Senior Vice President of Regional Operations. The committee, which reports directly to our CEO Jay Snowden, is comprised of underrepresented team members from around the country and at varying levels in the organization to ensure our Company has mechanisms in place to listen to team members about important ongoing social justice issues, and to help implement the following key initiatives:

 

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  Recruitment & Company Demographics

 

  a.

Increase recruiting efforts and support of Historic Black Colleges and Universities (HBCUs) and Universities with diverse populations and organizations.

 

  b.

Integrate HBCUs and Universities that promote diversity into our Leadership Excellence at Penn National Gaming (“LEAP”) Program, which provides hands-on-training, mentoring and real-world experience to new or recent college graduates who are interested in building a long-term career in the gaming industry.

 

  i.

20% of all LEAP candidates in 2021 attend HBCUs

 

  ii.

HBCU representation in the LEAP program has grown from 1 school (.6%) in 2020 to 15 in 2021 (9.8%)

 

  c.

Track adherence to our minority interview initiative, “The Penn Way,” for executive roles at our Company.

 

  i.

100% of open executive roles within Penn included either female or ethnically diverse candidates

 


  Leadership Development

 

  a.

Initiate companywide mentorship and leadership development program for underrepresented team members.

 

  b.

Provide unconscious bias and inclusion training for managers and above.

 

  c.

Provide diversity and inclusion training in our mandatory companywide training program (“RESPECT”).

 

  Procurement

 

  a.

Create benchmarks for qualified minority supplier spend across our organization, with an initial target of 3% annual growth companywide.

 

  b.

Increase the number of minority business networking events we attend and host.

 

  Scholarship Fund

 

  a.

In March, we launched the Penn National Gaming Diversity Scholarship program, funded through a $1 million annual commitment from Penn to our diversity initiatives. We plan to extend up to 65 scholarships this year to the children of our team members, which reflects our commitment to equity in post-secondary education opportunities for students.

 

  Community Engagement

 

  a.

Support organizations in our communities that promote equality, justice, diversity, and inclusion through direct donations and by encouraging our team members to volunteer their time and energy to help aid underrepresented and disadvantage individuals.

 

 

According to the world-renowned diversity and inclusion
expert Verna Myers,
“Diversity is like
being invited to the party,
inclusion is being asked to dance,
and belonging is dancing
like no one’s watching.”

 

 

 


 

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Diversity Procurement

 

In 2019, following our acquisition of Pinnacle Entertainment, we formally established a committee to implement a corporate-wide Supplier Diversity Initiative to coordinate efforts across all properties regardless of jurisdictional requirements, with the goal of developing new opportunities for diversity businesses. This initial effort resulted in us more than doubling our diversity spend to $104 million in 2019 with businesses-owned by minorities, women, disabled individuals and veterans. In 2020, we’ve enhanced our efforts through a membership in the National Minority Supplier Diversity Council (NMSDC). Our head of procurement, Drew Misher, serves on its Corporate Advisory Board, and we were honored last year to sponsor and attend their annual national vendor fair, which was held virtually. We also held a regional networking event in conjunction with the Chicago Minority Supplier Diversity Council last December.

 

In addition, we are in the process of creating a Penn Small Business Incubator program that will help to onboard minority businesses as suppliers with Penn National. It will also assist them in growing from local to regional and ultimately national suppliers with our Company.

     

 

 

Penn National is proud to partner with the All-in

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Diversity Project, an industry-driven initiative supporting diversity, equality and inclusion in business. Recently we sponsored their #OpenDoors 2021 social media campaign. Spanning Black History Month and International Women’s Day, the #OpenDoors campaign is designed to raise awareness of how others affect our professional development and recognize that people do not progress in their careers without the help of someone along the way. The campaign asked contributors to thank someone who opened a door for them, and then pledge to pay it forward and hold the door open for someone else.

           

 

 

  Category

 

 

 

2019 actual

 

 

 

2021 target

 

 

  Qualified Diversity Spend

 

 

18%—property spend

14%—corporate spend

WBE—8.3%

MBE—2.2%

WMBE—3.7%

 

 

 

22%—property spend

16%—corporate spend

WBE—10%

MBE—4%

Other—1%

 

         

 

Diversity Recruitment

 

Building a diverse workforce is critical to helping us attract and retain the talent needed to advance our business and create outstanding guest experiences at our properties across the country. We welcome and value customers and team members of all backgrounds and are committed to creating both a work force reflective of the local markets and a supplier base that promotes an environment of diversity, equity, inclusion and empowerment. We are proud that 48% of our team members identify as female and 47% identify as minority across the entire enterprise. We also fully support our LGBTQ+ team members and guests. In 2019, we developed standards at each of our properties to ensure accessibility of facilities and training and communication to team members regarding LGBTQ+ rights. In addition, we support local community organizations, such as

    

The LGBTQ Center in Las Vegas, which fights to “protect the well-being, positive image, and human rights of the lesbian, gay, bisexual, transgender, and queer community, its allies, and low to moderate income residents in Southern Nevada.”

 

  Ethnic Diversity:

 

  25% of all Penn National team members self-identify as African American

 

  18% of all Penn National managers self-identify as African American

 

  8% of all Penn National team members self-identify as Asian Americans

 

  10% of all Penn National team members self-identify as Latino/Hispanic

          

 

 


 

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We are committed to supporting the well-being and professional development of all of our team members, including tuition reimbursement and other certification programs, with a particular focus on minority and female leadership development. For example, our Women Leading at Penn (“WLP”) program continued to grow in its third year of operations.

The goal of WLP is to network, inspire, and encourage women to pursue leadership roles

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and to have female executives champion growth and development at the property and corporate levels. As a result, women held 34% of the leadership positions at the Company in 2019 and we’ve seen continued growth since then. Today, our Corporate Senior Management Team is 35% female and our Executive Team is 37.5% female, including our new Executive Vice President and Chief Financial Officer; Executive Vice President, Chief Legal Officer and Secretary; and our Senior Vice President, Chief Human Resources Officer.

 

In addition, we are very proud of the fact that two members of our Board of Directors – Barbara Shattuck Kohn and Jane Scaccetti – were named to Women Inc.’s list of “2019 Most Influential Corporate Directors.” The Women Inc.’s list features a comprehensive directory of influential female directors, executives, influencers and achievers who are currently serving on the boards of S&P 500/Large-Cap publicly-held companies and making impacts through their leadership. We also welcomed the addition of Marla Kaplowitz to our Board at the end of last year. Ms. Kaplowitz is President and Chief Executive Officer of the American Association of Advertising Agencies (4A’s), a trade association serving more than 600 member agencies across 1,200 offices

    

throughout the U.S., who are responsible for more than 85% of total domestic advertising spend. With the addition of Ms. Kaplowitz, our Board of Directors is now 38% female.

 

Supporting our Veterans

 

Later this year we’ll be launching the U.S. Chamber of Commerce Foundation’s Hiring Our Heroes initiative, which connects veterans, service members, and military spouses with meaningful employment opportunities. We are committed to identifying and hiring full-time team members through this program to further unite the military community with our company in order to create economic opportunity and a stronger, more diversified workforce.

 

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  Program Overview:

 

  12-week intern fellowship program for exiting military personnel to gain hands-on, practical experiences in one functional area (e.g., F&B, HR, IT, etc.)

 

  Fellows are placed in exempt roles and report to their properties Monday-Thursday, and to their military base on Fridays for training

 

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The Penn National Gaming Foundation and our properties around the country are proud to support numerous local non-profit organizations serving our veterans and active service members. For example:

 

    Penn National is a founding supporter of “Operation Lead from the Front,” a program launched by the IM ABLE Foundation that is designed to match military veterans with children with disabilities to help the veterans rediscover meaning, purpose, and connection through a new mission of mentoring and helping them stay active.

 

    This Memorial Day we will be launching the “Harold Cramer Memorial Scholarship” program at the University of Pennsylvania Carey Law School in honor of our long-serving Board member who passed away in 2017. Mr. Cramer attended the Judge Advocate General’s School before becoming chief prosecutor for the Eighth Army in Korea. This scholarship program is a multi-year commitment to provide financial assistance to veterans pursuing a law degree at UPENN.

 

    We provide annual support for the Jarett Yoder Foundation/Operation Heroes, which runs nine veteran group homes called “Patriot” houses and serves over 200 homeless veterans and more than 50 service animals in Central Pennsylvania.

 

    Penn National is a founding sponsor of the Berks County, Pennsylvania “Veterans Celebration” event, which has raised over $500,000 in funds to support local veterans in the Greater Reading area. Proceeds also go towards a scholarship program at Reading Area Community College for career-vocational training for veterans and those actively serving in the Reserves or National Guard who are ineligible for funding under the GI Bill and other education-benefit programs.

 

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Penn National is also proud to spotlight our team members who served in the military through back-of-house “Honor Wall” displays and in our internal newsletter, “The Insider.” In addition, we host special

 


recognitions and events for team members and customers who are actively serving, or are veterans,

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on Veterans Day, Memorial Day and throughout the year. For example, our property teams in Bossier City, Louisiana delivered over 3,000 freshly baked cookies last Christmas to our service men and women at Barksdale Airforce Base near Shreveport.

This year, we’re excited to launch a new program called myHeroes, which will honor our veterans, first responders, and their families through team member recognition, employment opportunities, and we’ll be providing an exclusive, fully integrated extension of our mychoice rewards loyalty program.

Team Member Wellness

 

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We believe a healthy lifestyle contributes to a long and happy life. Part of our commitment to our team members is to promote a culture of wellness that encourages and supports healthy decisions. We want our team members to enjoy their work environment, which includes looking forward to the meals and snacks they consume while they are at work. Our company dining program is a key component of our commitment to our global wellness initiative.

 

  The global goals of this initiative include:

 

    Providing a high-quality and healthy dining option that positively contributes to the team member experience.

 

    Reducing the cost of food and providing standardized portions with healthier ingredients.

 

    Creating and implementing “MicroMarkets” that are designed to offer a substantial variety of fresh and healthy foods.

 

    Offering healthy dining education to all team members to assist them in making informed choices about what they consume and purchase.
 

 


 

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Serving our Communities

The Penn National Gaming Foundation, a 501(c)(3) not-for-profit organization, was launched in 2005 in the wake of Hurricane Katrina to assist the nearly 2,000 of our team members in Mississippi and Louisiana who were impacted by one of the most devastating storms in our nation’s history. Today, the Penn National Gaming Foundation focuses its efforts on supporting charities within our corporate regions, which includes Wyomissing, PA and our Las Vegas Service Center, as well as supplementing the significant contributions our properties separately make in their communities. The Foundation has also supported relief efforts for multiple other natural disasters through the years, such as Hurricanes Gustav and Harvey, as well as helping with the medical expenses of one of our team members who was a victim in the Route 91 Harvest Music Festival shooting in Las Vegas. Most recently, we created the Hurricane Laura Relief Fund and have contributed more than $6.5 million to assist L’Auberge Lake Charles and the community, which includes covering full wages and benefits for our team members while the property was closed. In addition, our partners at Barstool Sports designed a special “Lake Charles Strong” t-shirt and hoodie, with 100% of net proceeds going to support our emergency relief fund.

When not addressing a public health crisis or responding to a natural disaster, the Foundation generally focuses on the following key areas of need: Community Development, Human Services, Cultural Affairs & Diversity, Health and Medical-related initiatives and programs that support veterans, active members of the military and their families.

 

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Last year, despite the financial impact from the ongoing COVID-19 pandemic, which saw all of our properties temporarily closed, we continued to support our charitable partners, contributing $6 million from the Penn National Gaming Foundation and our properties to worthwhile charities and civic organizations in our host communities. In addition, we generated more than $14 million in economic development funds for our host communities in Kansas, Indiana and Iowa. We also donated thousands of volunteer hours by team members in our respective communities.

 


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Here are two examples of the more than 2,000 organizations on average around the country that annually benefit from our support:

While the American Cancer Society’s (ACS) Relay for Life events were temporarily placed on hold due to COVID-19, our team members around the country remained involved in support of their critical mission. In our first three years of participating, we have raised more than $1 million companywide for important cancer research. Each year, our Corporate office has provided a $50,000 match to what our properties can raise through this effort, as well as contributing $50,000 annually to the ACS’ “CEOs Against Cancer,” of which Jay Snowden is a member of the Board of Directors.

Penn National and our Louisiana properties in Baton Rouge and Lake Charles are leading sponsors and active volunteers for Metanoia Manor, a one-of-a-kind refuge for adolescent victims of human trafficking. Metanoia’s shelter near Baton Rouge can house nearly two dozen children, each with a private room and bath. Staffed by professionals that include physicians, nurses, social workers, educators, and others, Metanoia seeks to rehabilitate the children until they are ready to return safely into society.

We have contributed more than $160,000 to the cause over the last three years. In addition, we have hosted multiple law enforcement summits at our Lake Charles, Louisiana facility for officials from Texas, Louisiana, Arkansas and Mississippi to share best practices and discuss potential new legislation to help fight human trafficking.

 

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At Metanoia Gala, from left: Michelle and State Senator Ronnie Johns, Donna and Governor John Bel Edwards, Reverend Jeff Bayh, Mary Kadair, and Eric Schippers, Sr. Vice President, Penn National Gaming.

 

 

 

COVID-19 Response

 

Our team members are the life blood of our Company. During the time our properties were temporarily closed as a result of the COVID-19 outbreak, we extended health benefits to all furloughed team members and provided $13 million in holiday cash bonuses to our non-executive team members companywide to help with the financial impact to their families. Meanwhile, our executives took significant pay cuts and sacrificed end-of-year performance bonuses.

 

Through our Penn National Gaming Foundation, we created a COVID-19 Emergency Relief Fund for our team members and raised over $4 million through personal donations from our CEO, Senior Management team, Corporate Board of Directors and property general managers, in addition to contributions from our Foundation and property employee assistance funds.

 

Most recently, we joined Barstool Sports Founder Dave Portnoy’s personal mission to help save and sustain small businesses which have been impacted by COVID-19, contributing more than $4.6 million, and counting, to the non-profit “Barstool Fund.” To date, the Fund has raised over $36 million and is actively supporting 288 small businesses around the country.

    

 

This initiative is in addition to our collective effort in October to save the historic Reading Terminal Market in Philadelphia, which was suffering from decreased business as a result of COVID-19 and launched an online fundraising campaign to assist with its survival. Within 24 hours, Penn National and Barstool raised enough money to meet and exceed their fundraising goal. Our effort ensured the survival of an organization that supports family businesses, educational opportunities for low-income Philadelphia youth, and is one of the largest sites for the redemption of SNAP benefits in Pennsylvania.

 

Meanwhile, during the mandatory COVID-19 temporary closures, our 41 properties in 19 states throughout the country donated more than 45 tons of food to local food banks and homeless shelters in our communities, ensuring our perishable food items could help those in need at the height of the pandemic. In addition, our properties donated thousands of unused masks and surgical gloves to first responders and health care providers. Many of our properties served as COVID-19

test sites and housed emergency personnel, in addition to organizing food drives and blood donations.

 

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Charitable Efforts
At the onset of the COVID-19 pandemic, our properties across the country stepped up to donate food items to our local communities, ensuring our perishables would go to the homes of our neighbors in need. In times of crisis, we come together. We support the communities in which we live and work.
River City Casino & Hotel
St. Louis, MO
River City Casino & Hotel has donated $7,000 in produce and dairy to a variety of charities, including Feed My People, Arnold Food Pantry, Aging Ahead and St. Louis Area Food Bank. These are the organizations River City supports regularly.
Hollywood Casino Aurora & Hollywood Casino Joliet
Aurora & Joliet, IL
Hollywood Casino Joliet recently donated more than $8,000 of food to Catholic Charities Homeless Shelter in Joliet, and Hollywood Casino Aurora donated perishables to Aurora Interfaith Food Pantry, with its executive team staying to help with pantry bag items.
Greektown Casino
Detroit, MI
Greektown donated perishable food items, water, gloves and toilet paper to Gleaners Community Food Bank, Wayne County Meals on Wheels, Mariners Inn (housing for displaced veterans) and Veterans Solutions. Greektown is also working with the city of Detroit and local medical facilities to offer their facilities as a makeshift hospital and drive through testing center.
Zia Park Casino Hotel
& Racetrack
Hobbs, NM
Zia Park donated $6,000 in food to Hearts Desire Inc., Hobbs Guidance Center, Isaiah's Soup Kitchen and Options Inc. woman's shelter.

 


 

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The Meadows Racetrack & Casino
Washington, PA
The Meadows donated more than 10 pallets of food, totaling more than $6,600, to 412 Food Rescue, Agency on Aging, City Mission and Greater Washington County Food Bank.
Medical Equipment Donations
Our properties also donated our stocked surgical masks and gloves to hospitals and first responders during the crisis
Hollywood Casino Toledo
Toledo, OH
Hollywood Toledo donated $5,000 in perishable food items to local food banks and charities, including the Cherry Street Mission in Toledo, among others.
Over 60 organizations & community centers helped
Hollywood Casino at Kansas Speedway
Kansas City, KS
Hollywood Casino at Kansas Speedway donated 3,628 pounds of dairy and produce to Harvesters-The Community Food Network.
Hollywood Casino at Charles Town Races
Ranson, WV
Hollywood Casino at Charles Town Races is distributed perishable foods to charitable organizations, including partnering with the Jefferson County Community Ministries.
Ameristar Black Hawk Casino Hotel
Black Hawk, CO
Ameristar Black Hawk donated 7,778 lbs of food to the Food Bank of the Rockies. Estimated value of the donation was $20,000-25,000.
M Resort Spa Casino
Las Vegas, NV
M Resort donated perishable food items to team members. Pre-loaded pantry bags were given out by the management team to team members through a drive-up distribution process.

 


 

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Ameristar Casino Hotel East Chicago & Hollywood Casino and Hotel Lawrenceburg
Chicagoland
Ameristar East Chicago and Hollywood Lawrenceburg have donated perishable food items to the East Chicago Salvation Army, Northwest Indiana Food Bank, and the Dearborn Food Pantry.
Ameristar Casino Hotel Council Bluffs
Council Bluffs, IA
Ameristar Council Bluffs has donated $9,600 in food items to MOHM's Place, which provides meals to single men, women, children and families who are experiencing food insecurity.
Ameristar Casino Hotel Vicksburg
Vicksburg, MS
Ameristar Casino donated food to the Salvation Army and Caffe Paradiso. Caffe Paradiso works with other local restaurants, including Fit Chef and Gumbo Pot, to deliver meals from donations to over 300 people in need per day.
75,000 LBS of food donated
Hollywood Casino & Hotel Tunica & 1st Jackpot Casino Tunica
Robinsonville, MS
Hollywood Tunica and 1st Jackprt donated over five pallets of food to Sacred Heart Southern Mission to help support them in their mission to provide critically needed assistance to families in difficult times.

 


 

     30     PENN NATIONAL GAMING, INC.


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LOGO

Hollywood Casino St. Louis Maryland Heights, MO Hollywood St. Louis sent 7 pallets of goods worth more than $8,600 to the St Louis Area Food-bank. In addition, they donated surplus food to various charities, including Mimi's Food Kitchen, the St. Louis Area Food Bank, Feed My People, and Arnold Food Pantry, and are working with Mrs. Kehoe to facilitate food delivery to children in central Missouri. Hollywood Gaming at Mahoning Valley Race Course Youngstown, OH Hollywood Mahoning Valley delivered everything from its kitchens that couldn't be frozen to Harvest Food Bank. In addition, they donated non-perishable items from their March food drive promotion. Boomtown Casino & Hotel New OrleansHarvey, LA Boomtown New Orleans has donated perishable foods to charitable organizations, including Grace Baptist Church. Margaritaville Resort Casino& Boomtown Casino HotelBossier City, LAMargaritaville and Boomtown Bossier City donated 2 pallets of food to the Rescue Mission, VA, Providence House, the Bossier Council on Aging and NWLA Veterans Home. Hollywood Casino Hotel & Raceway Bangor
Bangor, ME
Hollywood Bangor donated $3,000 in food to the Good Shepard Food Bank.
Hollywood Casino Columbus
Columbus, OH
Hollywood Columbus put together 200 boxes of perishable items (each box worth approximately $24 in food items each) and distributed the same to our lower-paid team members. Total contribution was $5,000.
Hollywood Gaming at Dayton Raceway and Hollywood Casino Toledo
Dayton, OH
Hollywood Dayton donated $2,500 in food items to the Dayton Food Bank. Hollywood Toledo donated $5,000 in perishable food items to local food banks and charities, including the Mahoning Valley Second Harvest Food Bank and the Cherry Street Mission in Toledo, among others.

 


 

2021 PROXY STATEMENT     31     


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Caring for our Guests

Penn National recognizes that caring for our people and our communities includes caring for our valued guests and customers. In conjunction with our Gold Level partnership with the International Center for Responsible Gaming (ICRG), our Company has established a comprehensive framework to promote a culture of responsible gaming throughout our organization.

Penn National maintains a Corporate Responsible Gaming Committee to oversee its responsible gaming programs and regularly consults with the ICRG and other partner responsible gaming organizations. The Committee’s goals include:

 

    Promoting a culture of responsible gaming.

 

    Establishing minimum responsible gaming related policies and procedures including the establishment of programs designed to allow patrons to self-exclude and set up financial restrictions and marketing restrictions.

 

    Overseeing ongoing reporting by property based Responsible Gaming Committees at each Penn National property.

 

    Preventing underage gambling and unattended minors in casinos.

 

    Serving alcoholic beverages responsibly.

 

    Advertising responsibly.

 

    Training team members on responsible gaming.

 

    Supporting and promoting research-based policies on responsible gaming.

 

    Providing ongoing oversight and review of compliance with all responsible gaming policies and programs.

This Committee meets quarterly and consists of senior Penn National executives, including our President & CEO, Chief Legal Officer, Chief Compliance Officer, and senior executives in Human Resources, Marketing, Internal Audit, as well as the Senior Vice Presidents of Regional Operations.

The Penn National Corporate Responsible Gaming Committee has established a comprehensive Corporate Responsible Gaming Program (“Corporate RG Program”) based on the American Gaming Association’s (“AGA”) Code of Conduct for Responsible Gaming to meet the goals described above that governs all of its casino facilities and online products.

 


As required by the Corporate RG Program, each individual Penn National property maintains a property Responsible Gaming Committee, chaired by the property general manager, that sets property responsible gaming standards in accordance with Corporate RG Program standards, ICRG recommended practices, and the AGA’s Code of Conduct. In addition, Penn National’s internal audit department conducts regular responsible gaming audits at each property and its Interactive Division to ensure compliance with established responsible gaming standards.

 

LOGO

In addition, to address our Interactive Division’s customers, our Company has developed a robust responsible gaming program, including internal controls for account registration. Part of a registrant’s information is checked through a database of public records to confirm the individual’s information and identity. Only upon verifying an identity is an individual allowed to deposit funds into their sports betting or online casino account and wager when physically located in a legally approved jurisdiction. There is no anonymous gaming on our online gaming offerings. Penn National goes above and beyond to ensure that registrants are not part of Penn National’s database of excluded patrons. At registration, each registrant’s name and date of birth is checked against that database. Penn National voluntarily employs an “exclude one, exclude all” policy, meaning that any individual excluded at any Penn National property is not allowed to gamble at sister properties or register for our online gaming products. Further, the Company will block any individual’s account if the individual subsequently places themselves on a respective jurisdiction’s voluntary or involuntary exclusion list. Penn National performs daily checks of its online players list to ensure that no one listed on a jurisdiction’s voluntary or involuntary exclusion list is allowed to participate in our online offerings.

Beyond its gatekeeping measures, Company online operations provide customers with a number of services to promote responsible gaming. Primarily, the online applications (“app”) provide a number of resources and literature to players in its “Responsible Gaming and Patron Protection” and “Limits” sections. Players can set

 

 


 

     32     PENN NATIONAL GAMING, INC.


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various monetary limits in an effort to stay within their budget. This includes deposit, single wager, and total wager (daily, weekly, or monthly) limits. Our online offerings further provide the option of setting time limits, which prevent players from logging into their account for 24 hours after the voluntarily set time limit is met. In addition, players can set a “check-in” alert that will notify a player when they have been active on the app for a certain amount of time.

To further promote responsible gaming, there are waiting periods of 24 hours, seven days, and one month to increase or remove limits, aimed at preventing a vulnerable player from changing responsible gaming settings impulsively. In addition, players can set a timeout of at least 72 hours where they will not be able to login during this cooling off period.

Further, consistent with the Penn National’s omni-channel approach, Penn National and Barstool Sports are creating a cohesive, consistent message regarding responsible gaming across its interactive products, including the Barstool Sportsbook and Casino.

When the Barstool Sportsbook launched, it did so alongside an authentic public service announcement from Barstool Sports founder Dave Portnoy and lead talent Dan “Big Cat” Katz, reminding their audience that “if you have a problem, call 1-800-GAMBLER”. In just seven months, that PSA has received over 570,000

 

LOGO

views. Moreover, Penn National and Barstool Sports launched Barstool Sportsbook responsible gaming platforms on Twitter and Instagram, providing dedicated platforms with the sole goal of delivering meaningful responsible gaming messaging under the Barstool brand.

Penn National and Barstool Sports incorporate the traditional, industry standard responsible gaming message in its gaming content, focusing on the 1-800-GAMBLER hotline number to provide its audience with the industry leading, easily recalled, and nationally available avenue of support if in need. The app provides this number at several customer interaction points, from the account section, to the customer’s bet slip, to

 


an inactivity timeout. Moreover, because the bet slip provides the hotline number, any time a customer shares their bet slip with friends or on social media, that customer is joining our responsible gaming effort by sharing the 1-800-GAMBLER resource.

In addition, Barstool incorporates this messaging in its day-to-day content. For example, the nation’s leading sports podcast, Barstool’s “Pardon My Take”, often reminds its multi-million-person audience that gambling should always be viewed as a form of entertainment. In Big Cat’s own words, “Gambling should be for entertainment. 1-800-GAMBLER if you have a problem….this…should be fun, entertainment. Don’t bet more than you can afford.”

Beyond merely words, Barstool transparently tracks and discloses gambling picks and results. A constant part of Barstool content is personalities admitting their lack of expertise and discussion of gaming losses. Barstool routinely shares daily win/loss records in shows, podcasts, and on social media. As Big Cat has said, “I’m still a bad gambler. Maybe I should put this into my Twitter bio. Don’t follow my picks expecting to win. I lose. I am a lifelong loser. A Loser with a capital ‘L’.”

 

Penn National and Barstool are improving the way we talk about responsible gaming to engage our entire audience in a meaningful way and will continue to focus on the well-being of our customers.   LOGO
 

 


 

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PROPOSAL NO. 1

ELECTION OF CLASS I DIRECTORS

Information about Nominees and Other Directors

The Board of Directors currently consists of eight members: David A. Handler (Chairman), John M. Jacquemin, Marla Kaplowitz, Barbara Shattuck Kohn, Ronald J. Naples, Saul V. Reibstein, Jane Scaccetti and Jay A. Snowden. The directors are organized into three classes, with each class elected to serve a three year term. Two Class I directors will be elected at the Annual Meeting to hold office, subject to the provisions of the Company’s bylaws, until the annual meeting of shareholders of the Company to be held in 2024 and until their respective successors are duly elected and qualified.

Class I Nominees

The following table sets forth the name, independence status, number of other public company boards, principal occupation and term of service of each person who has been nominated to be a director of the Company. Each nominee has consented to be named as a nominee and, to the knowledge of the Company, is willing to serve as a director, if elected. Should either of the nominees not remain a nominee at the end of the meeting (a situation which is not anticipated), solicited proxies may be voted by the holders of the proxies for a substitute nominee (unless a proxy contains instructions to the contrary).

 

         
Name of Nominee   Independent   Other Public
Company Boards
  Principal Occupation  

Term

(if elected)

       

David A. Handler

  Yes   None  

 

Partner, Centerview
Partners

  2024
       

John M. Jacquemin

  Yes   None  

 

President, Mooring
Financial Corporation

  2024

 


 

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Nominee Qualifications

 

 

David A. Handler

 

Class I Director

 

Age: 56

 

Director Since: 1994

  

 

Business Experience: Mr. Handler has served as the Company’s Chairman of the Board since June 2019 and as a director since 1994. In August 2008, Mr. Handler joined Centerview Partners as a Partner. Centerview Partners is an independent financial advisory and private equity firm. From April 2006 to August 2008, he was a Managing Director at UBS Investment Bank.

 

Other Public Company Boards: None.

 

Mr. Handler has considerable investment banking and capital markets experience, which includes a focus on mergers and acquisitions and other significant transactions (including many in the technology space), which compliments his long-term exposure to the gaming industry. Mr. Handler’s background has been an invaluable asset to the Company over the years, particularly in connection with evaluating potential acquisitions and financing opportunities.

 

 

John M. Jacquemin

 

Class I Director

 

Age: 74

 

Director Since: 1995

  

 

Business Experience: Mr. Jacquemin is President of Mooring Financial Corporation, a group of financial services companies founded by Mr. Jacquemin in 1982 that specializes in the purchase and administration of commercial loan portfolios.

 

Other Public Company Boards: None.

 

Mr. Jacquemin has significant experience with private equity funds specializing in restructurings, workouts and the valuation of distressed debt. The nature of these investments requires a sophisticated understanding of financial statements to enable the identification of growth opportunities in troubled companies, as well as valuation expertise. This experience brings unique perspective to the Board and is enhanced by Mr. Jacquemin’s financial sophistication and financial statement expertise and long-term exposure to the gaming industry.

 

In addition to the qualifications of each nominee for director described above, David A. Handler and John M. Jacquemin are standing for re-election based upon the judgment, financial acumen and skill they have demonstrated as Board members, as well as their demonstrated commitment to serve on the Board.

The Board of Directors unanimously recommends that the shareholders vote “FOR” each of the nominees.

 


 

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Continuing Directors

The following table sets forth the name, independence status, number of other public company boards, principal occupation and term of service of each person who will continue as a director after the Annual Meeting.

 

         
Name   Independent   

 

Other Public 
Company
Boards

  Principal Occupation   Term
Expires

 

Class II Directors:

 

       
Barbara Shattuck Kohn   Yes   1   Director of Fluent, Inc. and former Principal of Hammond Hanlon Camp LLC   2022
       

Ronald J. Naples

  Yes   1   Director of P.H. Glatfelter Company, Glenmede Trust Company and the Philadelphia Contributionship   2022
       
Saul V. Reibstein   Yes   1   Director of Vishay Precision Group, Inc. and former Executive Vice President, Chief Financial Officer and Treasurer of Penn National Gaming, Inc.   2022

 

Class III Directors:

 

       
Marla Kaplowitz   Yes   None   President and Chief Executive Officer of the American Association of Advertising Agencies   2023
       

Jane Scaccetti

  Yes   1   Chief Executive Officer of Drucker & Scaccetti, P.C. and Director of Myer Industries, Inc.   2023
       
Jay A. Snowden   No   None   President and Chief Executive Officer of Penn National Gaming, Inc.   2023

 


 

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Continuing Directors’ Qualifications

 

 

  Barbara Shattuck

  Kohn

 

  Class II Director

 

  Age: 70

 

  Director Since:

  2004

  

 

Business Experience: Ms. Kohn serves as a director of Fluent, Inc. Ms. Kohn was a Principal at Hammond Hanlon Camp LLC, a strategic advisory and investment banking firm from 2012 to 2018. Ms. Kohn also serves as a director of Emblem Health, one of the nation’s largest nonprofit health plans. She has previously served as a director of Computer Task Group and a division of Sunlife Financial Corporation. Prior to joining Hammond Hanlon Camp LLC in 2012, Ms. Kohn was a Managing Director of Morgan Keegan – Raymond James. Morgan Keegan & Company, Inc. was acquired by Raymond James Financial from Regions Financial Corp. and was the successor to Shattuck Hammond Partners, an investment banking firm Ms. Kohn co-founded in 1993. Prior to 1993, she spent 11 years at Cain Brothers, Shattuck & Company, Inc., an investment banking firm she also co-founded. From 1976 to 1982, she was a Vice President of Goldman, Sachs & Co. Ms. Kohn began her career as a municipal bond analyst at Standard & Poor’s Corporation. Ms. Kohn was named to Women Inc.’s list of “2019 Most Influential Corporate Directors.”

 

Other Public Company Boards: Fluent, Inc.

 

Ms. Kohn has substantial experience in investment banking, capital markets and project finance. Further, she possesses the experience, financial sophistication and financial statement expertise necessary to evaluate potential acquisition and financing opportunities for the Company, and she was instrumental in evaluating both the preferred equity investment in the Company by Fortress Investment Group, LLC in 2008 and the spin-off of the Company’s real estate in 2013. This financial background is ideally suited for Ms. Kohn’s service on the Audit and Compensation Committees, and her reputation, integrity, judgment and proven leadership ability meets both the Board’s high standards and the rigorous requirements of the various regulatory agencies with jurisdiction over the Company.

 

 

  Ronald J. Naples

 

  Class II Director

 

  Age: 75

 

  Director Since: 2013

  

 

Business Experience: Mr. Naples serves as a director of P.H. Glatfelter Company, Glenmede Trust Company and the Philadelphia Contributionship. Mr. Naples served as Chairman of the Pennsylvania Stimulus Oversight Commission and Chief Accountability Officer for the Commonwealth of Pennsylvania, having been appointed to that position by the Governor of Pennsylvania, from April 2009 until February 2011. From 1997 until May 2009, Mr. Naples was the Chairman of Quaker Chemical Corporation, a public specialty chemical company serving the metalworking and manufacturing industries worldwide, and served as Quaker’s Chief Executive Officer from 1995 to 2008. Previously, Mr. Naples was Chairman and Chief Executive Officer of Hunt Manufacturing Company, a public company, from 1981 to 1995. He also served as Chairman of the Federal Reserve Bank of Philadelphia.

 

Other Public Company Boards: P.H. Glatfelter Company

 

Mr. Naples has significant business experience as a chief executive officer and director of large, publicly traded corporations. Mr. Naples has significant government and regulatory experience as Chairman of the Pennsylvania Stimulus Oversight Commission and Chief Accountability Officer for the Commonwealth of Pennsylvania and as Chairman of the Federal Reserve Bank of Philadelphia. Mr. Naples’ impressive educational background and distinguished military career as well as his reputation, integrity, judgment and proven leadership ability meets both the Board’s high standards and the rigorous requirements of the various regulatory agencies with jurisdiction over the Company. In addition, Mr. Naples’ military, leadership and regulated company experience is invaluable in the context of his service on the Compliance Committee.

 

 


 

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  Saul V. Reibstein

 

  Class II Director

 

  Age: 72

 

  Director Since: 2018

 

  (and previously

  a director from

  2011 to 2014)

  

 

Business Experience: Mr. Reibstein served on the Company’s board of directors and was Chairman of the Audit Committee from June 2011 until his appointment as Senior Vice President and Chief Financial Officer in November 2013. Mr. Reibstein retired as the Company’s Executive Vice President, Chief Financial Officer and Treasurer on December 31, 2016 and was employed by the Company as an executive advisor from January 1, 2017 through December 31, 2017. From 2004 until joining the Company as an executive, Mr. Reibstein served as a member of the senior management team of CBIZ, Inc., a New York Stock Exchange-listed professional services company, where, as Executive Managing Director, he was responsible for the management of the CBIZ New York City Financial Services office operations and the overall international activities of the Financial Services Group. Mr. Reibstein has over 40 years of public accounting experience, including 11 years serving as a partner in BDO Seidman, a national accounting services firm, where he was the partner in charge of the Philadelphia office from June 1997 to December 2001 and Regional Business Line Leader from December 2001 until September 2004. In addition, since July 2010, Mr. Reibstein has served as a member of the Board of Directors of Vishay Precision Group, Inc., a publicly traded company, where he is Chairman of the Audit Committee and a member of both of its Compensation and Nominating and Corporate Governance Committees. Mr. Reibstein is a licensed CPA in Pennsylvania and received a Bachelor of Business Administration from Temple University.

 

Other Public Company Boards: Vishay Precision Group, Inc.

 

Mr. Reibstein brings to our Board extensive familiarity with the Company and the gaming industry, having previously served as the Company’s Executive Vice President, Chief Financial Officer and Treasurer, as well as accounting, finance, risk management and strategic management expertise for both public and private companies, including gaming companies.

 

 

 

  Marla Kaplowitz

 

  Class III Director

 

  Age: 55

 

  Director Since:

  2020

  

 

Business Experience: Ms. Kaplowitz has served as President and Chief Executive Officer of the American Association of Advertising Agencies (4A’s), a trade association serving more than 600 member agencies throughout the United States since 2017. From 2011 to 2017, Ms. Kaplowitz served as Chief Executive Officer of North America of MEC Global (now Wavemaker Global), a global media agency. Ms. Kaplowitz also spent 12 years at MediaVest, where she led Procter & Gamble’s communications planning for North America and worked with brands including Avon, Denny’s, Heineken and Norelco. She began her career at DMB&B and later joined Ammirati Puris Lintas, where she managed the agency’s Labatt, Nickelodeon Networks and Unilever accounts.

 

Other Public Company Boards: None

 

Ms. Kaplowitz brings marketing and digital transformation expertise to the Board as

President and Chief Executive Officer of the American Association of Advertising Agencies (4A’s) and other senior management positions. Her experience brings to our Board significant marketing and digital experience, which is invaluable in the context of the Company evolving into a leading ominichannel provider of retail and interactive gaming, sports betting and entertainment.

 

 


 

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  Jane Scaccetti

 

  Class III Director

 

  Age: 67

 

  Director Since: 2015

  

 

Business Experience: Ms. Scaccetti is the Chief Executive Officer of Drucker & Scaccetti, P.C., a public accounting and business advisory firm, of which she has been a principal since 1990. In addition, Ms. Scaccetti is a member of the Board of Directors of Myers Industries, Inc., a New York Stock Exchange listed company, and is a member of its Audit and Governance Committees. Ms. Scaccetti also serves as Chair of the Board of Directors of Mathematica Policy Research, Inc., trustee of Temple University, and a trustee of Salus University. In addition, Ms. Scaccetti served as a director and audit committee chair of The Pep Boys – Manny, Moe & Jack from 2002 until 2016, and of Nutrition Management Services Company from 1992 until 2010. Ms. Scaccetti was named to Women Inc.’s list of “2019 Most Influential Corporate Directors.”

 

Other Public Company Boards: Myers Industries, Inc.

 

Ms. Scaccetti brings financial expertise as a practicing CPA since 1977, as well as her management expertise as chief executive officer of a public accounting and business advisory firm and as a director of other publicly traded companies. Her experience brings unique perspective to the Board and the Board is enhanced by Ms. Scaccetti’s financial sophistication and expertise.

 

 

  Jay A. Snowden

 

  Class III Director

 

  Age: 45

 

  Director Since: 2019

  

 

Business Experience: In August 2019, the Board elected Mr. Snowden as a Board member. Effective January 1, 2020, Mr. Snowden became the Company’s Chief Executive Officer. One of his first actions as Chief Executive Officer was to acquire a minority interest in Barstool Sports, a leading sports media and entertainment company, which is the centerpiece of his vision to evolve Penn National from a regional casino operator into a leading omnichannel provider of land-based and interactive gaming, sports betting and entertainment. Despite the challenges presented by the COVID-19 pandemic in his first few months as Chief Executive Officer, which included the temporary closure of all of the Company’s properties, Mr. Snowden successfully navigated Penn National through a series of mitigation efforts and capital raises to help secure the Company’s future. Mr. Snowden joined the Company in October 2011 as Senior Vice President-Regional Operations and was promoted to Chief Operating Officer in January 2014. In March 2017, Mr. Snowden was named President and Chief Operating Officer and led the Company’s successful margin improvement plan, as well as the integration of Pinnacle Entertainment, an acquisition which nearly doubled the size of Penn National. Prior to joining the Company, Mr. Snowden was the Senior Vice President and General Manager of Caesars and Harrah’s in Atlantic City, and prior to that, held various leadership positions with them in St. Louis, San Diego and Las Vegas.

 

Other Public Company Boards: None

 

Mr. Snowden brings well-established gaming, hospitality and interactive gaming, sports betting, and entertainment experience to our Board of Directors based on his extensive experience in the rapidly evolving gaming industry. Given his achievements in leading the Company as President and Chief Operating Officer and now as President and Chief Executive Officer, he has unique perspectives and experience related to the strategic direction of the Company and the broader gaming industry.

 

 


 

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PROPOSAL NO. 2

APPROVAL OF THE COMPANY’S SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 200,000,000 TO 400,000,000

 


The Board has adopted a resolution approving, and recommending to our shareholders for their approval and adoption, the Company’s Second Amended and Restated Articles of Incorporation (“Articles of Incorporation”), to increase the number of authorized shares of our common stock, par value $0.01 per share, from the 200,000,000 shares currently authorized to 400,000,000 shares (the “Amendment”).

Reasons for the Proposed Increase in Authorized Shares of Common Stock

As of April 6, 2021, 156,568,828 shares of the Company’s common stock were outstanding, and the number of shares of common stock issuable upon the exercise of options outstanding is 3,713,926. In addition, as of April 6, 2021, the Company has also reserved for issuance 1,153,197 shares of Company common stock pursuant to our 2008 Long Term Incentive Compensation Plan and 7,360,998 shares of Company common stock pursuant to our 2018 Long Term Incentive Compensation Plan.

The Board believes that increasing the number of authorized shares of our common stock is in the best interests of the Company and its shareholders. The Board further believes that the additional shares of common stock will provide the Company with the necessary flexibility to utilize shares for various corporate purposes that may be identified in the future. These corporate purposes may include, but are not limited to, potential strategic transactions (such as mergers, acquisitions and other business combinations), stock dividends, equity or equity-linked offerings and other capital-raising or financing transactions, grants and awards under equity compensation plans and other types of general corporate purpose transactions. We believe that it is crucial to have the flexibility to issue shares of common stock beyond the amount remaining, and we believe the failure to approve the proposed Amendment would likely hinder our ability to pursue shareholder value-enhancing transactions.

The Board has not proposed the increase in the number of authorized shares with the intention of discouraging tender offers or takeover attempts of the Company. Rather, the proposed Amendment has been prompted by business and financial considerations, as set forth above, and it is the intended purpose of the Amendment to provide greater flexibility to the Board in considering and planning for our potential future

 


corporate needs. The availability of additional authorized shares for issuance may, however, have anti-takeover effects in that it may discourage a merger, tender offer, proxy contest or other attempt to obtain control of the Company. In this regard, if the Company was to become concerned that it may be a potential target of an unsolicited acquisition attempt, it could try to impede the acquisition by issuing additional shares of common stock or rights or other equity interests related thereto, thereby diluting the voting power of the other outstanding shares and increasing the potential cost to the bidder of the acquisition. The Board is not currently aware of any attempt or plan to acquire control of the Company.

The additional shares of common stock to be authorized by the adoption of the Amendment would have rights identical to our currently outstanding shares of common stock. Adoption of the proposed Amendment would not affect the rights of holders of currently outstanding shares of the Company’s common stock, except for effects incidental to increasing the number of shares of the Company’s common stock outstanding, such as dilution of earnings per share and voting rights of current holders of common stock, if and to the extent additional shares of common stock are ultimately issued. The proposed Amendment will not affect the number of shares of preferred stock authorized.

The Amendment is attached to this Proxy Statement as Appendix A. If the Amendment is approved, it will become effective upon its filing with the Department of State of the Commonwealth of Pennsylvania, which will occur as soon as practicable after the approval.

The Board of Directors unanimously recommends that shareholders vote “FOR” approval of the Company’s Second Amended and Restated Articles of Incorporation to increase the number of authorized shares of common stock from 200,000,000 to 400,000,000.

 

 


 

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PROPOSAL NO. 3

APPROVAL OF THE COMPANY’S AMENDED AND RESTATED 2018 LONG TERM INCENTIVE COMPENSATION PLAN

 


We are asking shareholders to approve an amendment and restatement (the “Amendment and Restatement”) of the Penn National Gaming, Inc. 2018 Long Term Incentive Compensation Plan (the “2018 Plan”).

The key change made by the Amendment and Restatement is to expand the eligibility provisions in the 2018 Plan to allow us to grant awards to consultants and advisors of the Company and our subsidiaries (which is a standard provision in most public companies equity plans). Currently, the 2018 Plan only permits grants to employees and directors.

As described in more detail in the Compensation Discussion and Analysis beginning on page 51 of this Proxy Statement, we believe that the award of equity compensation is a critical component of the Company’s compensation program. Our equity compensation program has encouraged strong shareholder alignment and has been an integral component in the substantial increase in shareholder value generated by the Company over the last decade.

We believe it is important that the 2018 Plan’s eligibility provisions be expanded to allow us to grant equity-based awards to consultants and advisors, as our ability to attract, incentivize and retain talented consultants and advisors has become increasingly important to our success, and we believe providing equity-based awards under the 2018 Plan will help us attract, incentivize and retain these consultants and advisors.

Other changes made in the Amendment and Restatement, which are of a more technical nature, include making drafting changes to the no-repricing, tax withholding and Section 409A provisions of the 2018 Plan.

The Amendment and Restatement does not increase the number of shares reserved for issuance under the 2018 Plan or extend the term of the 2018 Plan.

If shareholders approve this proposal, the Amendment and Restatement of the 2018 Plan will become effective immediately.

If shareholders do not approve the Amendment and Restatement, the 2018 Plan will remain in place and the Amendment and Restatement will not become effective.

 


Information About Our Historic Use of the 2018 Plan and Best Practice Plan Features.

The Company has a strong record of using equity compensation prudently, as evidenced by our “overhang” and “burn rate” statistics. Overhang is a measure of the dilution to which the Company’s shareholders are exposed due to the possibility that future equity compensation will be awarded to employees of the Company, and it is calculated based on the total equity awards outstanding divided by the total number of shares of common stock outstanding. The Company’s overhang in 2020 was approximately 5.9%, which represents a reduction of approximately 2.3% from 2019 and 0.3% from 2018. Burn rate is a measurement of how quickly the Company is granting equity to employees and is calculated based on the number of awards granted divided by the weighted average shares of common stock outstanding. The Company’s burn rate in 2020 was 1.0%, and the average three-year burn rate (from 2018 to 2020) was 1.8%, which is far below the applicable 3.64% category burn rate benchmark established by Institutional Shareholder Services (ISS).

In addition, the 2018 Plan was designed to protect shareholder interests and promote shareholder value by incorporating, among other things, the following:

 

   

a minimum vesting period of one year from the date of grant to encourage employees to focus on the long-term success of the Company;

 

   

a “fungible share” concept that requires the Company to count each share awarded as restricted stock, or pursuant to any other full value stock award, as an award of 2.30 shares for purposes of counting the shares available for issuance under the 2018 Plan;

 

   

stock options or stock appreciation rights are issued with an exercise price equal to at least 100% of the fair market value of a share of common stock on the date of grant, and the term of each stock option or stock appreciation right may not exceed ten years from the date of grant;

 

   

prohibitions on discounting and repricing options, (except in connection with a corporate transaction involving the Company including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up,

 

 


 

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spin-off, combination or exchange of shares), and a prohibition on amending the terms of any award to reduce the exercise price of outstanding stock options or stock appreciation rights and on cancelling outstanding stock options or stock appreciation rights with exercise prices that are below the then-current fair market value of the applicable stock option or stock appreciation right in exchange for cash or other awards or taking any other action that is considered a “repricing” for purposes of the shareholder approval rules of the applicable securities exchange or inter-dealer quotation system on which the shares of the Company’s common stock are listed or quoted, in each case, without shareholder approval;

 

   

prohibitions on the Company’s directors and executive officers from engaging in hedging transactions or pledging Company shares;

 

   

no automatic vesting of equity following a change in control; and

 

   

prohibitions on “liberal sharing counting.”

Summary of Material Terms of the 2018 Plan and Changes Made by the Amendment and Restatement

The following is a summary of the material terms of the 2018 Plan and the changes made in the Amendment and Restatement. The summary is not exhaustive and is qualified by reference to the full text of the 2018 Plan (as amended by the Amendment and Restatement) in its entirety, which is attached hereto as Appendix B of this proxy statement.

General. The 2018 Plan was first adopted by our Board of Directors on March 21, 2018 and was approved by our shareholders on June 13, 2018. The 2018 Plan permits the Company to issue stock options (incentive and/or non-qualified), stock appreciation rights, restricted stock, phantom stock units and other equity and cash awards to employees. Non-employee directors, any director emeritus, or chairman emeritus are also eligible to receive all such awards, other than incentive stock options.

On April 6, 2021, the Board of Directors approved, subject to shareholder approval, the Amendment and Restatement, which we are asking shareholders to approve in this Proposal No. 3. If shareholders approve the Amendment and Restatement, consultants and advisors of the Company and our subsidiaries will also be eligible to receive all such awards, other than incentive stock options. We provide more information regarding this proposed change to the 2018 Plan in the discussion of the 2018 Plan’s “Eligibility” provisions below.

 


Term. Awards may not be granted under the 2018 Plan after June 13, 2028, or such earlier date as may be determined by the Board of Directors.

Purpose. The purpose of the 2018 Plan is threefold:

 

   

To advance the interests of the Company and its shareholders by providing a means by which the Company and its participating subsidiaries and affiliates can motivate selected participants to direct their efforts to those activities that will contribute materially to the Company’s success;

 

   

To link remunerative benefits paid to participants who have substantial responsibility for the successful operation, administration and management of the Company and/or its subsidiaries and affiliates with the enhancement of shareholder value; and

 

   

To enable the Company to attract and retain in its service highly qualified persons for the successful conduct of its business.

Eligibility. Employees (including officers) of the Company and our subsidiaries and any parent entity are eligible to receive awards under the 2018 Plan. Non-employee directors of the Company and our subsidiaries are also eligible to receive all such awards, other than incentive stock options. If the Amendment and Restatement is approved by shareholders, consultants and advisors of the Company and our subsidiaries will also be eligible to receive awards under the 2018 Plan. Consultants and advisors who may be eligible to receive awards include those who are eligible to be offered securities registrable on Form S-8 under the Securities Act as well as those who do not comply with the requirements for Form S-8, provided they satisfy an exemption under the Securities Act.

For purposes of the 2018 Plan, the term “subsidiary” includes any corporation, partnership, joint venture or other entity in which we have made, directly or indirectly through one or more intermediaries, a substantial investment or commitment, including, without limitation, through the purchase of equity or debt or the entering into of a management agreement or joint operating agreement.

As of December 31, 2020 the Company had approximately 18,400 employees and seven directors eligible to participate in the 2018 Plan. If the Amendment and Restatement is approved by shareholders, approximately 9 consultants and advisors of the Company and our subsidiaries would become eligible to be selected to receive awards under the 2018 Plan.

Number of Shares Available for Issuance. Not more than 12,700,000 shares of the Company’s common stock may be issued under the 2018 Plan. Shares issued under

 

 


 

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the 2018 Plan that are subsequently forfeited back to the Company before becoming fully vested will be available for future grants under the 2018 Plan. In addition, if an award under the 2018 Plan pursuant to which shares of the Company’s common stock are issuable is forfeited, expires or terminates, then the shares underlying such award will be available for future issuance under the 2018 Plan. Awards of stock options and stock appreciation rights will be counted against the 12,700,000 limit as one share of common stock for each share granted. Each share awarded in the form of restricted stock, phantom stock units or any other full value stock award will be counted as issuing 2.30 shares of common stock for purposes of determining the number of shares available for issuance under the 2018 Plan. The Compensation Committee will adjust the aggregate 12,700,000 share limit if it determines that a dividend, recapitalization, stock split, merger, consolidation or other similar corporate transaction or event equitably requires an adjustment.

Types of Awards. The 2018 Plan provides for the issuance of stock options, stock appreciation rights (“SARs”), restricted stock, phantom stock units and other equity-based awards. Rights to awards may be contingent on the continued employment or service or achievement of performance goals, which may be applied to the Company as a whole or a business unit or related company, and may be measured either annually or cumulatively over a period of years on an absolute basis or relative to a pre-established target, to a previous year’s results or to a designated comparison group.

Administration. The 2018 Plan is administered by or under the direction of the Compensation Committee. Except for matters required by the terms of the 2018 Plan to be decided by the Board of Directors or the CEO, the Compensation Committee has full power and authority to interpret and construe the 2018 Plan, to prescribe, amend and rescind rules, regulations, policies and practices, to impose such conditions and restrictions on awards as it deems appropriate and to make all other determinations necessary or desirable in connection with the administration of, or the performance of its responsibilities under, the 2018 Plan. Subject to limitations set forth in the Plan and as prescribed by the Compensation Committee, the Compensation Committee may delegate to the Company’s Chief Executive Officer or a designee thereof, the authority to grant awards to certain persons under the 2018 Plan.

Minimum Vesting Period. Subject to limited exceptions in the event of a change of control of the Company, stock options, restricted stock, phantom

 


performance units and any other award granted under the 2018 Plan are subject to a minimum vesting period of one year after the date of grant.

Amendment and Termination. The Board may at any time amend or modify the 2018 Plan in any or all respects, except that any such amendment or modification may not adversely affect the rights of any holder of an award previously granted under the 2018 Plan unless such holder consents. The Board may also terminate the 2018 Plan at any time.

Dividends. No dividends may be paid to a plan participant with respect to an award prior to the vesting of such award. An award may provide for dividends or dividend equivalents to accrue on behalf of a participant as of each dividend payment date during the period between the date the award is granted and the date the award is exercised, vested, expired, credited or paid, and to be converted to vested cash or shares at the same time and subject to the same vesting conditions that apply to the shares to which such dividends or dividend equivalents relate.

Adjustments. The Compensation Committee shall make certain adjustments to the 2018 Plan and to the outstanding awards under the 2018 Plan in the event that the Compensation Committee determines any dividend or other distribution (whether in the form of cash, shares of the Company’s common stock or other securities), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares of the Company’s common stock, other securities of the Company, issuance of warrants or other rights to purchase shares of common stock or other securities of the Company, or other similar corporate transaction or event constitutes an equity restructuring transaction, as that term is defined in ASC Topic 718, Compensation – Stock Compensation, or otherwise affects the shares of the Company’s common stock. In the event of such a change, appropriate adjustments will be made to:

 

   

the number and type of shares of the Company’s common stock or other securities which thereafter may be made the subject of Awards, including the aggregate and individual limits specified in the 2018 Plan;

 

   

the number and type of shares of the Company’s common stock or other securities subject to outstanding awards under the 2018 Plan;

 

   

the grant, purchase, SAR Base Amount or Option Price with respect to any award, or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding award; and

 

 


 

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other value determinations applicable to outstanding awards.

Any such adjustments to the outstanding awards will generally be effected in a manner as to preclude the enlargement or dilution of rights and benefits under such awards. However, in no event will fractions of an ordinary share be issued and the Compensation Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding down as appropriate.

No Repricing Without Shareholder Approval. The 2018 Plan prohibits the repricing of stock options and SARs without first obtaining stockholder approval. Specifically, except in connection with anti-dilution and similar equitable adjustments to awards to account for certain business transactions or other changes in capital structure, without first obtaining approval of the Company’s stockholders, the base amount or exercise price, as applicable, of stock options or SARs may not be reduced, whether through amendment, cancellation or replacement grant, or any other means. While not intended to be a substantive change to this provision, to conform to current drafting conventions, the Amendment and Restatement revises and elaborates on the wording of this provision to explicitly state that, except in connection with anti-dilution and similar equitable adjustments to awards to account for certain business transactions or other changes in capital structure, without first obtaining approval of the Company’s stockholders, we may not (1) cancel, surrender, replace or otherwise exchange any outstanding stock option or SAR where the fair market value of the common stock underlying such stock option or SAR is less than its exercise price for a new stock option or SAR, another award, cash, shares of common stock or other securities; or (2) take any other action that is considered a “repricing” for purposes of the shareholder approval rules of the applicable securities exchange or inter-dealer quotation system on which the Company’s common stock is quoted.

Withholding Tax. The 2018 Plan authorizes us to withhold taxes due with respect to awards in cash, shares of our Common Stock, other securities or other awards. While not intended to be a substantive change, the Amendment and Restatement revises this provision in light of changes to applicable accounting rules to address certain limitations applicable when tax withholding is satisfied via tendering, withholding or returning of shares of our Common Stock, including the condition that such withholding may not exceed, in the case of shares underlying awards that are withheld or

 


returned, the maximum statutory tax rates of the grantee’s applicable jurisdiction (or such other rate as would not trigger a negative accounting impact).

Section 409A Provisions. The 2018 Plan contains provisions relating to Section 409A of the Code. The Amendment and Restatement makes technical changes to these provisions, including to provide that all awards made under the 2018 Plan are intended to be exempt from or, in the alternative, to comply with Section 409A of the Code and the interpretive guidance thereunder, including the exceptions for stock rights and short-term deferrals, and that the 2018 Plan will be construed and interpreted in accordance with such intent. The Amendment and Restatement also clarifies that each payment under an award is treated as a separate payment for purposes of Section 409A of the Code.

 

 


 

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Grants Under the 2018 Plan

Grants under the 2018 Plan are discretionary and no grants have been made that are conditioned upon approval of the Amendment and Restatement. Consequently, it is not possible to predict the future grants that will be made and benefits that will be received by participants in the 2018 Plan. The table below reflects all equity awards granted under the 2018 Plan from its adoption through April 6, 2021 to the individuals and groups listed in the table. Note that the amounts in the table reflect the actual number of shares underlying awards, not the 2.3 shares that are counted against the 2018 Plan’s share reserve with respect to full-value awards, as described under Number of Shares Available for Issuance above. As of April 6, 2021, the closing price of the Company’s common stock was $104.09.

 

Name and Title(1) Number
of Shares
Underlying
Options Granted 
Target Number of Shares
Underlying  Other Awards Granted(2)

 

Jay A. Snowden

President and Chief Executive Officer

 

1,278,548 43,397

 

Carl Sottosanti

Former EVP, General Counsel and Secretary

 

146,029 37,901

 

David Williams

Former EVP and Chief Financial Officer

 

44,905 14,469

 

William J. Fair

Former EVP and Chief Financial Officer

 

86,218 23,953

 

All current executive officers, as a group

 

1,411,238 70,137

 

All current directors who are not current executive officers as a group

 

0 148,393

 

David A. Handler

 

0 41,383

 

John M. Jacquemin

 

0 29,051

 

Each associate of any such directors, executive officers or nominees

 

0 0

 

Each other person who received or is to receive 5 percent of such options or awards

 

0 0

 

All employees, including officers who are not current executive officers, as a group

 

 

895,698

 

2,116,695

 

(1)

Mr. Sottosanti retired from the Company as Executive Vice President, General Counsel and Secretary on December 31, 2020. Mr. Williams became Executive Vice President and Chief Financial Officer on March 3, 2020 and resigned on December 31, 2020. Mr. Fair resigned as Executive Vice President and Chief Financial Officer on March 3, 2020. For summaries of the agreements relating to each of these departures, see “Sottosanti Retirement Agreement,” “Williams Separation Agreement,” and “Fair Executive Agreement” in this Proxy Statement.

 

(2)

Amounts shown in this column represent the number of performance-based restricted stock and performance-based phantom stock units granted under the 2018 Plan at target levels. Depending on the level of achievement of applicable performance goals, an amount in excess of the target award may be earned.

For further information regarding shares of our common stock that we may issue upon the exercise of options and rights under our equity compensation plans, see “Equity Compensation Plan Information” on page 70 of this Proxy Statement.

 


 

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U.S. Federal Income Tax Consequences

The following is a general summary as of the date of this proxy statement of the United States federal income tax consequences to the Company and persons participating in the 2018 Plan. Tax laws may change and the federal, state and local tax consequences for any participating employee will depend upon his or her individual circumstances. In addition, the following discussion does not purport to describe state or local income tax consequences in the United States. The following general description does not constitute tax advice and should not be relied upon as such. Each participating person is encouraged to seek the advice of a qualified tax adviser regarding the tax consequences of participation in the 2018 Plan.

Nonqualified Stock Options. A participant will generally not recognize any taxable income upon the grant of a nonqualified stock option and the Company will not receive a deduction at the time of such grant. Upon exercise of a nonqualified stock option, the participant generally will realize ordinary income in an amount equal to the excess of the fair market value of the ordinary shares on the date of exercise over the exercise price. The participant’s tax basis in the shares received will be equal to the exercise price plus the amount recognized as ordinary income. Upon a subsequent sale of such shares, the participant will recognize capital gain or loss. The Company or a subsidiary will generally be entitled to a deduction equal to the amount included in the participant’s ordinary income in the year in which such amount is recognized by the participant, subject to possible limitations imposed by Section 162(m) or Section 280G of the Code.

Incentive Stock Options. No taxable income is recognized by a participant at the time of grant of an incentive stock option, and no taxable income is generally recognized at the time the option is exercised. (However, the excess of the fair market value of the Company’s common stock received upon exercise over the option exercise price is an item of tax preference income which may be subject to the alternative minimum tax.) Instead, the participant will recognize taxable income in the year in which the acquired shares are sold or otherwise disposed of. If the sale or other disposition is made after the participant has held the shares for more than two years after the option grant date and more than one year after the date on which the shares are transferred to the participant (referred to as a “qualifying disposition”) pursuant to the option’s exercise, any gain or loss, generally measured by the difference between the amount realized on the sale of shares and the option exercise price, will be treated as long-term capital gain or loss. However, if either of

 


these two holding period requirements is not satisfied (referred to as a “disqualifying disposition”), then upon the disqualifying disposition, the participant generally recognizes ordinary income in the amount of the lesser of (i) the difference between the fair market value of the shares at the time of the option’s exercise and the option’s exercise price, or (ii) the difference between the amount realized on the sale and the option’s exercise price. Any ordinary income recognized is added to the participant’s basis for purposes of determining any additional gain on the sale and any such additional gain will be capital gain. If the participant makes a disqualifying disposition of the acquired shares, the Company or a subsidiary will generally be entitled to a deduction from its U.S. taxable income for the taxable year in which such disposition occurs, equal to the amount of ordinary income the participant recognizes, subject to possible limitations imposed by Section 162(m) and Section 280G of the Code. In no other instance will we be allowed a deduction with respect to the participant’s disposition of the acquired shares.

Share Appreciation Rights. The grant of a share appreciation right will generally not create any tax consequences for the participant or the Company. Upon the exercise of a share appreciation right, the participant will recognize ordinary income in an amount equal to the cash or fair market value of the ordinary shares received from the exercise. The participant’s tax basis in any ordinary shares received upon the exercise of the share appreciation right will be equal to the ordinary income recognized with respect to the shares. Upon disposition of the shares, the participant will recognize capital gain or loss equal to the difference between the amount realized and his or her basis in the shares. Upon the exercise of a share appreciation right, the Company or a subsidiary will generally be entitled to a deduction in the amount of the compensation income recognized by the participant, subject to possible limitations imposed by Section 162(m) and Section 280G of the Code.

Restricted Stock. In general, a participant will not recognize income with respect to restricted stock awards, including restricted stock with performance-based vesting conditions, until the date that the restrictions lapse. Upon vesting, the participant will recognize ordinary income in an amount equal to the difference of the amount paid for such stock (if any) and the fair market value of the shares received. Generally, the participant’s tax basis in any shares is the amount included in his or her income and the amount paid for the stock (if any), and the participant’s holding period in the shares commences on the day after the restrictions lapse. Upon disposition of the shares, the participant

 

 


 

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will recognize capital gain or loss equal to the difference between the amount realized and his or her basis in the shares.

A participant receiving restricted stock, including restricted stock with performance-based vesting conditions, may; however, make an election under Section 83(b) of the Code, commonly referred to as a “section 83(b) election,” to recognize as ordinary compensation income in the year that such restricted stock is granted, the amount equal to the spread between the amount paid for such stock (if any) and the fair market value on the date of the issuance of the stock. If such an election is made, the participant recognizes no further amounts of compensation income upon the lapse of any restrictions and any gain or loss on subsequent disposition will be long or short-term capital gain to the recipient. The section 83(b) election must be made within 30 days from the time the restricted stock is issued.

The Company or a subsidiary will generally be entitled to a deduction equal to the amount included in the participant’s ordinary income with respect to restricted stock awards in the year in which such amount is recognized by the participant, subject to possible limitations imposed by Section 162(m) and Section 280G of the Code.

Phantom Stock Units. In general, a participant will not recognize income with respect to phantom stock unit awards until there is a settlement of the award, unless Section 409A of the Code applies. Upon settlement, the participant will recognize ordinary income in an amount equal to the cash or fair market value of the shares received. The participant’s tax basis in any shares received is the amount included in his or her income, and the participant’s holding period in the shares commences on the day after receipt of the shares. Upon disposition of the shares received upon settlement of the phantom stock units, the participant will recognize capital gain or loss equal to the difference between the amount realized and his or her basis in the shares. The Company or a subsidiary will generally be entitled to a deduction equal to the amount included in the participant’s ordinary income in the year in which such amount is recognized by the participant, subject to possible limitations imposed by Section 162(m) or Section 280G of the Code.

Compliance with Section 409A of the Internal Revenue Code. To the extent applicable, it is intended that the 2018 Plan and any grants made under the 2018 Plan will comply with or be exempt from the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the participants. The 2018 Plan and any

 


grants made under the 2018 Plan will be administered and interpreted in a manner consistent with this intent.

Section 162(m) of the Code

Section 162(m) of the Code (“Section 162(m)”) generally imposes a $1 million limit on the amount a public company may deduct for compensation paid to certain current and former executive officers. Prior to 2018, this limitation did not apply to compensation that met Section 162(m)’s requirements for qualifying performance-based compensation. This performance-based compensation exemption was repealed, effective for taxable years beginning after December 31, 2017, such that awards paid to our covered executive officers in excess of $1 million will not be deductible, unless such award qualifies for transition relief applicable to certain arrangements that were in effect as of November 2, 2017 and are not materially modified thereafter (“grandfathered awards”). Consequently, although the Amendment and Restatement includes provisions that are applicable to awards intended to qualify as performance-based compensation under Section 162(m), the Company will not grant any such awards.

As in prior years, while deductibility of executive compensation for federal income tax purposes is among the factors we consider when structuring our executive compensation arrangements, it is not the sole or primary factor considered. We retain the flexibility to authorize compensation that may not be deductible if we believe it is in the best interests of the Company.

Summary of the Proposal

Approval of this proposal will approve the 2018 Plan. A full text of the 2018 Plan is attached as Appendix B to this Proxy Statement.

The Board of Directors unanimously recommends that shareholders vote “FOR” the proposal to approve the Company’s Amended and Restated 2018 Long Term Incentive Compensation Plan, as described in this Proposal No. 3.

 

 


 

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PROPOSAL NO. 4

RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2021 FISCAL YEAR

The Audit Committee has selected Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021, and the shareholders are being asked to ratify this selection. Deloitte has served as the Company’s independent registered public accounting firm since 2017. All audit and non-audit services provided by Deloitte are approved by the Audit Committee. Deloitte has advised the Company that it has no direct or material indirect interest in the Company or its affiliates. Representatives of Deloitte are expected to virtually attend the Annual Meeting, will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.

Professional Fees

A description of aggregate fees for professional services performed by Deloitte, which served as our independent public accounting firm for fiscal 2020 and 2019, is as follows:

 

     
    

 

Fiscal 2020

 

 

Fiscal 2019

     

Audit Fees(1)

  $6,406,587   $6,302,934
     

Audit-Related Fees(2)

  $222,500   $160,000
     

Tax Fees(3)

  $118,616  
     

Other Fees(4)

    $6,895
     

Total Fees

  $6,747,703   $6,469,829

(1) Audit fees include fees associated with the annual audit, reviews of the Company’s quarterly reports on Form 10-Q, registration statement on Form S-3 (including equity and debt offerings in 2020), annual audits required by law for certain jurisdictions, comfort letters, consents and other audit and attestation services related to statutory or regulatory filings. Audit fees also include the audit of the Company’s internal controls over financial reporting, as required by Section 404 of the Sarbanes Oxley Act of 2002. In addition, audit fees in 2019 included $600,000 for regulatory audits for Greektown and Penn Interactive and audit procedures related to Margaritaville.

(2) Audit related fees in 2020 included fees associated with an enterprise risk program and due diligence related to the Perryville transaction. Audit related fees in 2019 included purchase price accounting and lease assessments for the Greektown and Margaritaville transactions.

(3) Tax fees for 2020 included fees for tax compliance services for Sam Houston and analysis of non-operating losses utilization.

(4) Other fees for 2019 include fees with respect to state regulatory filings.

Audit Committee Pre-Approval Policy

The Audit Committee’s Audit and Non-Audit Services Pre-Approval Policy provides for the pre-approval of audit and non-audit services performed by the Company’s independent registered public accounting firm. Under the policy, the Audit Committee may pre-approve specific services, including fee levels, by the independent registered public accounting firm in a designated category (audit, audit-related, tax services and all other services). The Audit Committee may delegate, in writing, this authority to one or more of its members, provided that the member or members to whom such authority is delegated must report their decisions to the Audit Committee at its next scheduled meeting. In 2020, all of the services provided by Deloitte were approved by the Audit Committee prior to commencement of services.

The Board of Directors unanimously recommends that shareholders vote “FOR” the ratification of the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021.

 


 

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Audit Committee Report

Management is responsible for the preparation, presentation and integrity of the Company’s financial statements, accounting and financial reporting principles, internal controls and procedures designed to ensure compliance with accounting standards, applicable laws and regulations. The Audit Committee is responsible for appointing, compensating, overseeing and, where appropriate, discharging and replacing the Company’s independent registered public accounting firm (the “independent accounting firm”). In addition, the Audit Committee is involved in the selection of the lead audit engagement partner whenever a rotational change is required by applicable law or listing standards or for any other reason. The independent accounting firm is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with generally accepted accounting principles. In addition, the independent accounting firm will express its own opinion on the effectiveness of the Company’s internal controls over financial reporting. The Audit Committee is responsible for monitoring and overseeing these processes.

The function of the Audit Committee is not intended to duplicate or attest as to the activities of management and the independent accounting firm, nor can the Audit Committee certify that the independent accounting firm is “independent” under applicable rules. The Audit Committee serves a board level oversight role, in which it provides advice, counsel and direction to management and the independent accounting firm on the basis of the information it receives, discussions with management and the independent accounting firm and the experience of the Audit Committee’s members in business, financial and accounting matters.

In this context, the Audit Committee met and held numerous discussions with management and the independent accounting firm during 2020. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and the independent accounting firm. The Audit Committee discussed with the independent accounting firm matters required to be discussed by the applicable standards of the Public Company Accounting Oversight Board.

The independent accounting firm also provided to the Audit Committee the written disclosures and the letter required by Rule 3526 of the Public Company Accounting Oversight Board, Communications with Audit Committees Concerning Independence, and the Audit Committee discussed with the independent accounting firm the firm’s independence.

Based upon the Audit Committee’s discussion with management and the independent accounting firm and the Audit Committee’s review of the representations of management and the report of the independent accounting firm on the Consolidated Financial Statements, the Audit Committee recommended that the Board of Directors include the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on February 26, 2021.

Audit Committee of the Board of Directors

Jane Scaccetti, Chair

John M. Jacquemin

Barbara Shattuck Kohn

 


 

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PROPOSAL NO. 5

APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION PAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS

 


We are pleased to provide our shareholders with the opportunity to approve, on an advisory basis, the compensation of our named executive officers for 2020, pursuant to Section 14A of the Exchange Act, as described in the Compensation Discussion and Analysis section, and the subsequent tabular and narrative disclosure beginning on page 51 of this Proxy Statement (the “CD&A”). We currently conduct this advisory vote on an annual basis. We are requesting your nonbinding vote on the following resolution:

“RESOLVED, that the shareholders of the Company approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative disclosure included in the Company’s proxy statement for the 2021 Annual Meeting of Shareholders.”

We believe shareholders should approve of the Company’s 2020 compensation program because it is appropriate in the context of industry standards and is heavily weighted towards performance-based compensation that aligns executive compensation with shareholder interests. As more specifically described in the CD&A, the Committee believes the compensation paid to Mr. Snowden, the Company’s Chief Executive Officer in 2020, is reasonable and appropriate in light of the Company’s scale, objectives, achievements and performance.

We urge you to carefully review the CD&A so that you have a complete understanding of how important our compensation program is to the continued success of the Company. You will find in the CD&A a detailed discussion of the Company’s pay-for-performance compensation philosophy, the elements of our compensation program and the specific payments made to named executive officers with respect to 2020. The Company’s compensation program is fundamental to the approach we employ to attract, motivate and, most importantly, retain our named executive officers. To that end, we believe we have designed a compensation program that is strongly grounded on pay-for-performance principles, and which features a significant amount of “at risk” compensation, as described in more detail in the CD&A. This strategy continues to pay dividends. The Company’s recent

 


performance, inclusive of 2020, has been strong, based in large part on the focused and strategic leadership of the Company’s management team.

We believe that the Company’s 2020 achievements, as illustrated on page 52, coupled with the Company’s record of providing long-term value creation amply supports the compensation paid to the named executive officers. As an advisory vote, the results of this vote will not be binding on the Board or the Company. However, we urge you to endorse our pay-for-performance compensation program, particularly in light of the Company’s strong performance and significant achievements over both the short-term and long-term.

The next advisory vote to approve the compensation of our named executive officers will take place at the 2022 Annual Meeting of Shareholders.

The Board of Directors unanimously recommends that shareholders cast their advisory vote “FOR” approval, on an advisory basis, of the compensation paid to the Company’s named executive officers.

 

 


 

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Compensation Discussion and Analysis

For purposes of the following CD&A, unless context otherwise requires, the terms “Committee,” “we” or “our” refer to the Compensation Committee of the Board, a committee made up of entirely independent directors.

Executive Compensation Highlights

Our compensation program:

 

   

Includes a combination of fixed and variable pay, with objective measures designed to create sustainable long-term value for our shareholders;

 

   

Defers a significant portion of variable pay as equity based awards, encouraging both shareholder alignment and executive retention;

 

   

Includes both long-term and short-term components;

 

   

Focuses on “at risk” compensation, with 71% of our named executive officers’ total compensation at risk in 2020;

 

   

Benchmarks compensation at the median of an appropriate industry peer group; and

 

   

Implements performance based vesting for a meaningful portion of equity awards for the Company’s named executive officers.

    Key Features of Our Executive Compensation Program

 

       
           

 

What We Do

             

 

What We Don’t Do

   
  

 

Align Pay with Performance – Our program design and outcomes focus on “at risk” compensation to better align compensation earned with the Company’s performance

 

 

Ó

  

 

No Single Trigger Change in Control – We do not provide for single trigger vesting or unusual severance multiples upon a change in control in our equity plan and employment agreements

   
  

 

Performance Awards – Our program includes equity awards with performance based vesting paid at the end of the three-year period with 67% of long-term incentive pay to named executive officers tied to performance metrics

  Ó   

 

No Discounting or Repricing of Options – We prohibit discounting or repricing options and restrict margin lending

   
  

 

Multiple and Objective Performance Metrics – Incentive compensation is tied to both short- and long-term measures to ensure balanced incentives

  Ó   

 

No Supplemental Retirement Plans – We do not have any defined benefit pension programs or other supplemental executive retirement plans

   
  

 

Share Ownership Guidelines – All directors and named executive officers exceed the Company’s significant stock ownership requirements

  Ó   

 

No Excessive Perquisites – Our executive officers have very limited perquisites

   
  

 

Clawback Policy – Our policy provides for the recovery of compensation in certain circumstances

  Ó   

 

No Hedging or Pledging – Hedging and pledging of the Company’s stock is prohibited

   
  

 

Equity Awards Policy – Our policy ensures consistency in application of the Company’s equity award process

  Ó   

 

No Liberal Share Counting – We prohibit “liberal share counting” under the Company’s equity plans

   
  

 

Minimum Vesting – Our current long-term equity plan includes a minimum vesting period of one year for all awards

  Ó   

 

No Excess Dilution – We limit dilution by carefully monitoring burn rate and overhang

   
  

 

Fungible Share Ratio – Our long-term equity plan incorporates a fungible share ratio feature

  Ó   

 

No Minimum Payouts – Our long-term equity plan does not include a minimum payout

   
  

 

Independent Consultant – We utilize an independent compensation consultant

  Ó   

 

No Block Equity Grants – We do not make block equity grants

   
  

 

Appropriate Peer Group – We benchmark our compensation against appropriate industry peers with whom we compete for talent

      
   
  

 

Share Repurchase Program – We use share repurchase programs (when appropriate) to capitalize on prudent stock repurchase opportunities that help offset the potential dilution from shares granted pursuant to incentive awards

        

 


 

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Executive Summary

2020 AND 2021 ACHIEVEMENTS

 

  

Decisive Actions in Response to COVID-19

 

In 2020, we were faced with the novel coronavirus (known as “COVID-19”) pandemic, which had a devastating impact on the gaming industry. To help combat the spread of COVID-19, we were required to temporarily suspend operations at all of our properties for single or multiple time periods during the year. Once re-opened, our properties operated with reduced gaming and hotel capacity and limited food and beverage offerings in order to accommodate social distancing and health and safety protocols.

 

In light of COVID-19, we took the following actions to strengthen our balance sheet and improve our liquidity:

 

•  We entered into an agreement with our principal landlord, Gaming and Leisure Properties, Inc. (“GLPI”) and closed on the sale of the Tropicana Las Vegas real estate assets and a new ground lease for our planned Category 4 casino in Morgantown, Pennsylvania, in exchange for $337.5 million in rent credits and the ability to participate in additional upside from the eventual sale of Tropicana Las Vegas by GLPI;

 

•  In April 2020, we entered into an amendment to our credit agreement to obtain relief from our financial covenants for a period up to one year.

 

•  In May 2020, we completed a public offering of $330.5 million aggregate principal amount of 2.75% unsecured convertible notes due May 15, 2026;

 

•  In May 2020, we completed a $345.0 million public offering of 19,166,667 shares of common stock; and

 

•  In September 2020, we completed a $982.1 million public offering of 16,100,000 shares of common stock.

 

As a result of these actions, as of December 31, 2020, we had $1,853.8 million in cash on our balance sheet and no outstanding balance under our $700 million revolving credit facility.

     

Evolution as an Omni-Channel Provider of Retail and Online Gaming and Sports Betting Entertainment

 

In 2020 and early 2021, we undertook meaningful actions in our evolution from an owner and manager of gaming and racing properties into an omni-channel provider of retail and online gaming and sports betting entertainment.

 

Investment in Barstool Sports - In February 2020, we acquired 36% of the common stock of Barstool Sports, a leading digital sports, entertainment and media platform. In connection with the Barstool Sports investment, we became Barstool Sports’ exclusive gaming partner for up to 40 years and have the right to utilize the Barstool Sports brand for all of our online and retail sports betting and iCasino apps.

 

Interactive – In 2020, we launched our Barstool Sportsbook app in Pennsylvania with over 72,000 registered customers. On January 22, 2021, we launched the Barstool Sportsbook app in Michigan with over 48,000 registered customers. Further, on March 10, 2021, we successfully launched the Barstool Sportsbook app in Illinois. We expect to have our Barstool Sportsbook app live in at least 10 states by the end of 2021.

 

We currently operate online casino games in Pennsylvania through our HollywoodCasino.com gaming platform. We also launched our online casino games in Michigan in 2021. We currently operate a number of our retail sports books in Colorado, Illinois, Indiana, Iowa, Michigan, Mississippi, Pennsylvania and West Virginia. In 2020, we opened retail sportsbooks at our properties in Colorado and Illinois. In addition, we continued to enter into long-term market access agreements with leading sports betting operators (BetMGM, Unibet and Rush Street), which we expect to fund our own online sports betting and iCasino business.

 

Further, we have entered into long-term market access agreements with third parties (Rush Street and Resorts) to gain access to new states, including sports betting in New York (Rush Street) and iCasino in New Jersey (Resorts).

 

  

 

Team Member Assistance

 

In response to COVID-19, we created a COVID-19 Emergency Relief Fund for our team members and raised over $4 million in contributions from our Board of Directors, senior management team and from our Penn National Gaming Foundation. We also extended health benefits to all furloughed team members and provided $13 million in one-time holiday cash bonuses to our non-executive team members companywide to help with the financial impact to their families. Further, in response to Hurricane Laura, we contributed more than $6.5 million to L’Auberge Lake Charles and the community, including payment of full wages and benefits for our team members.

  

 

  

 

Diversity

 

In 2020, we formed a new Diversity Committee and established a $1 million annual diversity scholarship program to support the children of our team members. We also implemented a series of new inclusion-related initiatives to educate our team members across the organization, while continuing to foster a respectful and inclusive workplace. We continue to strive to find the best and most talented executives and Board members. Currently, we are well represented from a gender diversity perspective; 50% of our executive officers and 38% of our Board of Directors are women.

 

  

 

Growth by Acquisitions and Development

 

We entered into an agreement with GLPI to acquire the operations of Hollywood Casino Perryville for $31.1 million, which is expected to close in the second or third quarter of 2021, subject to regulatory approval. Upon completion of this transaction, we will be in our 20th state. We expect to open our Category 4 Casinos in Morgantown and York, Pennsylvania in late 2021, subject to regulatory approval.

     

 


 

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Comparison of Total Target Compensation and Stock Performance

Among Penn National Gaming, Inc. and Peer Group

The Company’s total target compensation in 2020 for its top three executive officers (i.e., Chief Executive Officer, Chief Financial Officer and General Counsel) was approximately 54% below the market median for the top three executives (i.e., Chief Executive Officer, Chief Financial Officer and General Counsel) at peer companies (based on a comparison of the Company’s top three executives’ 2020 total target pay to the 2019 peer company total target pay levels, as disclosed in the peer companies’ 2020 proxy statements).* During 2020, the Company’s stock performance increased 237.9% compared to -7.6% of its peer group.

 

 

LOGO

 

*

Excludes CEO pay for Red Rock Resorts, Inc. due to lack of participation in a long-term incentive program. In 2020, Mr. Snowden did not receive an equity award due to his promotion as Chief Executive Officer in 2019, in which he received a grant of options worth $6.3 million in 2019.

 


Key Compensation Practices

The Committee, in consultation with our compensation consultant, Exequity, management and the full Board, routinely considers compensation practices suggested by the Company’s shareholders as a result of the Company’s shareholder outreach efforts, as well as those identified as “best practices” by various market constituents. With all such suggestions, we strive to incorporate into our compensation program the practices we believe will most effectively support the Company’s continuing efforts to create shareholder value. Over the last several years we have incorporated many of these practices into our compensation program, which are discussed on page 55 of this Proxy Statement.

We will continue to evaluate and consider input from our shareholders and emerging “best practices” to ensure that our compensation programs contain the features necessary to properly align the interests of our executives with the interests of our shareholders.

Consideration of “Say on Pay Vote”

At the 2020 Annual Meeting, the shareholders approved, on an advisory basis, the compensation of our named executive officers, as disclosed pursuant to the compensation disclosure rules of the SEC, by 99% of votes cast, excluding abstentions and broker non-votes. The Committee reviewed and considered the final vote results for that resolution, and we have not made any

 


changes to our executive compensation policies or decisions as a result of the vote. We believe this overwhelming level of support demonstrates that our shareholders recognize our commitment to incorporating “best practices” into our compensation program, as well as our continuing sensitivity to shareholder views on compensation.

Shareholder Outreach

During 2020, the Company continued its long standing practice of detailed, frequent communication and discussion with shareholders, including outreach to most of our top 40 shareholders regarding executive compensation and corporate governance issues as well as typical investor relations matters. In 2020, we had director outreach to our top shareholders with our Chairman of the Board and the Chair of our Compensation Committee, Nominating and Corporate Governance Committee and Lead Independent Director to discuss executive compensation and corporate governance matters.

The Company continues to hold quarterly conference calls in which management limits its prepared remarks in favor of creating an open forum to allow shareholders and analysts to ask questions. The Company also continues to provide financial and other disclosure beyond that which is required by the SEC on matters such as management’s views on Company performance, industry trends and pending legislation.

 

 


 

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Further, members of the Company’s senior management team maintain an active schedule of participation at institutional investor conferences, shareholder meetings and management staffed tours of our properties. These outreach efforts provide investors and prospective investors with constructive forums to discuss a wide variety of important subjects with management, including executive compensation, and provide useful feedback for management.

We believe our discussions with investors have been especially important with regard to our compensation program. For instance, based in part on our dialogue with shareholders, the Company has implemented performance share programs for the Company’s top executives, which contain performance based vesting for a meaningful portion of equity awards.

Executive Compensation Benchmarking Peer Group

We review the Company’s peer group each year to determine whether any changes are warranted from the prior year’s peer group. The companies that make up the Company’s peer group are its business competitors and are changing dramatically and will do so in the future. While our business competitors are our primary source for executive talent, we may need to find executive officers from other industries. As our business continues to evolve into an omni-channel gaming and sports betting operator, we will need to expand our executive talent and find additional executives from media and social platforms as well as other industries. Technology expertise will become a core competency for our executive officers. Many of the Company’s executives have been recruited from other gaming enterprises. In addition, since gaming is an increasingly specialized and regulated industry, it takes a high degree of experience and prior knowledge to provide effective oversight and guidance to multiple gaming properties in a variety of jurisdictions (all of which are even more important as the Company evolves into more interactive businesses). Further, the Company’s executive officers are required to submit to extensive investigations conducted by the state police, or an equivalent investigatory agency, of their personal and family financial records, their character and their competency in order to be found “suitable” to serve in their respective capacities in each of the jurisdictions in which the Company operates. Accordingly, the pool for executives capable of and willing to serve in an executive capacity in a publicly traded, multi-jurisdictional omni-channel gaming, sports betting and racing company tends to be limited, and in many cases consists mostly of individuals who are already working within the gaming industry and within our peer group. For these reasons, along with the

 


continued growth of our Company, we have determined that the appropriate peer group for the Company consists of the most prominent companies in the commercial gaming industry. We believe that this peer group is appropriate for determining relative industry performance as well as for recruitment and retention purposes.

For compensation comparison purposes for 2020, we used the following peer group:

 

   

Boyd Gaming Corporation,

 

   

Caesars Entertainment Corporation,

 

   

Eldorado Resorts, Inc.,

 

   

Las Vegas Sands Corp.,

 

   

MGM Resorts International,

 

   

Red Rock Resorts, Inc., and

 

   

Wynn Resorts, Ltd.

 

 


 

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OVERVIEW OF COMPENSATION PROGRAM

Objectives of the Compensation Program

The overall objective of the Company’s executive compensation program is to compensate members of management in a manner that most effectively incentivizes them to maximize shareholder value without taking undue financial risks. At the same time, the executive compensation program is intended to enable the Company to attract and retain the executive talent needed to grow and advance the strategic interests of an increasingly larger and more complex entity. For context, as of December 31, 2020, the Company operated 41 properties in 19 states, employed approximately 18,321 full and part-time employees. In an environment where (i) the number of traditional gaming venues has grown exponentially in the U.S. and abroad over the last decade (increasing both the number of business competitors and competitors for talent, (ii) alternatives such as gaming REITs (of which there are now three) and spin-offs, as well as the continued involvement of private equity investment, are continuing to proliferate and (iii) internet gaming, sports wagering, social gaming, fantasy sports, and e-sports are rapidly gaining in popularity, the competition for executive talent in our industry has grown sharply. These factors are specifically contemplated in the Company’s compensation objectives, which are to:

 

   

Align executive pay opportunities with shareholder value creation;

 

   

Create a pay-for-performance compensation program that will appropriately reward management for operational and strategic development success; and

 

   

Attract and retain the best possible management team for the Company to increase shareholder value and maintain the Company’s well-established reputation in the capital markets.

Compensation Philosophy

To support the Company’s compensation program objectives, we have adopted and annually review and confirm a compensation philosophy that serves as the guide for all executive compensation decisions. Our compensation philosophy is as follows:

The Company intends to maintain an executive compensation program designed to attract and retain the executive talent needed to grow and further the strategic interests of the business. To this end, the Company provides a compensation and benefits program that is competitive with that of its peers and rewards the skills and expertise of its executive team. The Company’s program is designed to motivate and reward executives to achieve and exceed targeted results and improve shareholder value. Compensation received by the executives will be commensurate with

 


the performance of the Company, prevailing market rates in the industry, and their own individual contributions by linking compensation to the achievement of objectively measured goals.

Risk Assessment

In establishing and reviewing our executive compensation program, we consider, among other things, whether the program properly motivates executives to focus on the creation of shareholder value without encouraging unnecessary or excessive risk-taking. As a result, the Committee carefully reviews the principal components of executive compensation. Base salaries are reviewed and set annually. Annual short-term incentive pay is focused on achievement of certain specific, readily quantifiable and meaningful financial goals and is determined using absolute and objective performance criteria. The other major component of our executive officers’ compensation is long-term incentives through a mix (which may vary from year to year and by level) of stock options, performance-based restricted stock awards and phantom stock units that we believe are important to help further align executives’ interests with those of our shareholders. Such grants are subject to long-term vesting schedules, and senior executives are subject to minimum stock ownership requirements, to help ensure that executives always have significant value tied to long-term stock price performance. In addition, we have share ownership guidelines that require our senior executives own a certain multiple of their base salary (ranging from two to five times) of Penn equity within five years of assuming their current position. Once achieved, ownership of the required amount must be maintained for as long as the individual is subject to the guidelines. We believe that the annual short-term incentive pay is balanced by our long-term incentive compensation, which are granted annually, always leaving our executives subject to risk of stock price movement. In addition, both our short term incentive pay and long-term incentive pay are subject to maximum payout ceilings. These cash and incentive awards, especially when combined with the compensation clawback policy described on page 65 of this Proxy Statement, appropriately balance payment for performance and alignment of executive compensation with shareholders without encouraging imprudent or excessive risk taking. Based on the Committee’s review of the above factors, the Committee determined that the Company’s compensation programs do not create risks that are reasonably likely to have a material adverse effect on the Company.

 

 


 

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2020 Named Executive Officers

For 2020, our named executive officers were:

 

 

Executive

 

 

 

2020 Title

 

   

Jay A. Snowden

  President and
Chief Executive Officer
   

Carl Sottosanti

  Former EVP, General Counsel and Secretary
   

David Williams

  Former EVP and Chief Financial Officer
   

William J. Fair

  Former EVP and Chief Financial Officer

Mr. Sottosanti retired from the Company as EVP, General Counsel and Secretary on December 31, 2020. Mr. Williams became EVP and Chief Financial Officer on March 3, 2020 and resigned on December 31, 2020. Mr. Fair resigned as EVP and Chief Financial Officer on March 3, 2020. For summaries of the agreements relating to each of these departures, see “Sottosanti Retirement Agreement,” “Williams Separation Agreement,” and “Fair Executive Agreement” in this Proxy Statement. On January 1, 2021, Harper Ko joined the Company as the Executive Vice President, Chief Legal Officer and Secretary and on March 2, 2021, Felicia Hendrix joined the Company as the Executive Vice President and Chief Financial Officer.

Elements of Compensation

We have designed a compensation program that is substantially weighted towards performance-based compensation, and which uses performance metrics designed to ensure that management is appropriately incentivized across a number of different business environments, while also appropriately considering each of the principal objectives of the Company’s business strategy. To that end, our compensation program is strongly grounded in pay-for-performance principles. As illustrated in the following chart in 2020 the Company’s target performance based compensation (or “at risk” compensation), which includes performance-based equity awards, stock options and cash bonuses tied to Adjusted EBITDA, after Lease Payments, for the Company’s named executive officers comprises 71% of total target compensation in 2020. Of this amount, 34% of the value at award date of long-term incentive grants awarded to such officers in 2020 were performance awards that are subject to performance-based vesting only upon the achievement of annual financial performance goals and synergies in connection with the Pinnacle acquisition and a three year restriction period.

 


Target 2020

Named Executive Officers Compensation*

 

 

LOGO

 

*

The foregoing chart excludes William J. Fair who was only with the Company until March 3, 2020. In addition, Mr. Snowden did not receive in 2020 any grants of Long-Term Incentives.

The principal elements of the compensation program are described below. Please see “Analysis of 2020 Compensation” starting on page 60 for a discussion of the specific actions taken and payouts with respect to executive compensation for fiscal year 2020. For a detailed description of the Committee’s role and responsibilities, as well as the retention and use of Exequity, please see “Compensation Committee” beginning on page 14 of this Proxy Statement.

Base Salary. The base salary of our executive officers as a group is benchmarked against the 50th percentile (median) of base salaries of comparable executives within the Company’s peer group. We benchmark against the median in order to set salaries that are competitive in the gaming industry and that will attract and retain qualified executives. Base salaries are then adjusted for certain qualitative factors, including specific position duties and responsibilities, tenure with the Company, individual contribution and position value to the Company and the overall positioning of an executive’s pay package. Our objectives with establishing base salaries for our executive officers are to attract and retain talent, recognize career experience and individual performance, provide a competitive salary and recognize the internal relationship between pay and responsibility by level.

Annual Short-Term Incentive. The annual target short-term incentive compensation of our executive officers as a group is benchmarked against the 50th percentile (median) of annual short-term incentive compensation of comparable executives within the Company’s gaming peer group. The Company’s annual short-term incentive plan is designed to motivate the executive officers and other members of management

 

 


 

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to achieve the Company’s carefully crafted short-term operational objectives. To ensure that such executives are appropriately incentivized to maximize earnings for the Company, our annual short-term incentive plan in 2020 provided for the payment of cash incentive compensation based upon the Company’s achievement of Adjusted EBITDA, after lease payments (“Adjusted EBITDA, after Lease Payments”) goals for the year. The Committee believes that an annual incentive program that relies on Adjusted EBITDA, after Lease Payments focuses our executives on the achievement of annual objectives that will most tangibly contribute to both short and long-term shareholder gains.

Adjusted EBITDA, after Lease Payments refers to Adjusted EBITDAR less Lease Payments, which is defined as cash lease payments made to our REIT landlords under our triple net leases. Adjusted EBITDA is defined as earnings before interest expense, net; income taxes; depreciation and amortization; stock-based compensation; debt extinguishment and financing charges; impairment losses; insurance recoveries and deductible charges; changes in the estimated fair value of our contingent purchase price obligations; gain or loss on disposal of assets; the difference between budget and actual expense for cash-settled stock-based awards; pre-opening and acquisition costs; and other income or expenses. Adjusted EBITDA is inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (principally consisting of interest expense, net; income taxes; depreciation and amortization; and stock-based compensation expense) added back for our joint ventures in Kansas Entertainment and Barstool Sports and rent expense associated with triple net operating leases. Adjusted EBITDAR is defined as Adjusted EBITDA (as defined above) plus rent expense associated with our triple net operating leases. A reconciliation of Net Income (Loss) to Adjusted EBITDA, after Lease Payments is included as Appendix C.

We measure our annual short-term incentive plan based on Adjusted EBITDA, after Lease Payments because it is an objective and quantifiable measurement for the Company’s financial performance, as well as for comparing the Company’s performance to others within the industry, as EBITDA is the most commonly used performance metric in the gaming industry. The Compensation Committee believes that Adjusted EBITDA, after Lease Payment is a useful performance measure because it illustrates the performance of the Company’s ongoing business operations after deducting the lease payments made only to our REIT landlords, pursuant to our triple net leases.

 


From time to time, we make adjustments to Adjusted EBITDA, after Lease Payments to determine the annual short-term incentive compensation in accordance with the terms of the 2018 Long Term Incentive Compensation Plan (the “2018 Plan”). These adjustments are made in connection with unanticipated, one time and non-recurring events.

The target bonus is payable when the Company meets or exceeds its Adjusted EBITDA, after Lease Payments goal for a given year, subject to any adjustments permitted under the 2018 Plan to account for certain extraordinary or unforeseen events (“Target EBITDA”). The Company must achieve at least a “threshold” amount of Adjusted EBITDA, after Lease Payments (currently set at 85% of Target EBITDA) in order for executives to receive any portion of the annual short-term incentive bonus. In order for the Company’s executives to receive the maximum amount of annual short-term incentive bonus the Company must achieve a “stretch” amount of Adjusted EBITDA, after Lease Payments (currently set at 115% of Target EBITDA). In order to help manage potential payouts, annual short-term incentive opportunities are capped at the maximum bonus levels for each executive, regardless of the extent to which performance exceeds targeted levels. In addition, the amount of bonus for each executive is subject to reduction in the event that such executive does not achieve certain pre-approved and measurable individual goals for the year. We have typically elected to pay this award in cash, although we have discretion to pay this award in cash, equity or any combination of cash and equity. We set the ranges of bonuses payable to each executive as a percentage of annual base salary, consistent with the incentive programs and practices used by the Company’s peer group. For 2020, the target bonus opportunities for the named executive officers were as follows:

 

Executive

 

  

 

 

Target Bonus
Opportunity as
Percentage of Salary  

 

   
President and
Chief Executive Officer
   150%
   
EVP, General Counsel
and Secretary
   100%
   

EVP, Chief Financial Officer

 

   100%

 

For 2020, the Committee established the following Adjusted EBITDA, after Lease Payments goals for the annual incentive compensation metric:

 

 

Metric

($ in millions)

 

 

 

Threshold
(85%)

 

 

Target
(100%)

 

 

 

Maximum
(115%)

 

   

Adjusted
EBITDA,
after Lease
Payments

 

  $658.2

 

  $774.4

 

  $890.6

 

 

 


 

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Equity Compensation. We believe that the award of equity compensation is a critical component of the Company’s executive compensation program because equity compensation directly and tangibly ties executive compensation to management’s ability to increase shareholder value. Our experience has shown us that equity compensation fosters an atmosphere where employees “think like owners” and are motivated to increase the long-term value of the Company by aligning their interests with those of the Company’s shareholders. Accordingly, we believe that equity compensation is an excellent tool to reflect the Company’s emphasis on “pay for performance” so that an appropriate portion of each executive’s compensation package will align with the creation of shareholder value. We also believe that this culture of employee ownership has been a significant contributing factor to the Company’s success and will continue to play a vital role in future success. More specifically, in an industry that is growing in scope and complexity, we believe that equity compensation is a critical tool in attracting and retaining executives with the type of entrepreneurial spirit that we believe is integral to the Company’s success, as well as for incentivizing them to explore creative approaches to unlock shareholder value, such as the spin-off of Gaming and Leisure Properties, Inc. (“GLPI”), our new business lines (particularly interactive gaming and retail sportsbooks), and the Pinnacle and Barstool Sports transactions.

Consistent with the Board’s desire to maximize shareholder value, we have taken steps to protect shareholder interests and promote shareholder value in both the design and the administration of the equity compensation program. Under the terms of the 2018 Plan, awards to employees are administered by the Committee. The vesting schedules for awards are designed to encourage employees to focus on the long-term success of the Company by requiring employees to remain with the Company for a number of years (in all cases three or four years, with a minimum vesting period of one year under our 2018 Plan) before all of their awards are vested and may be settled. The 2018 Plan does not provide for automatic vesting of equity following a change in control. In addition, the 2018 Plan does not permit the exercise price of outstanding stock options or stock appreciation rights to be reduced, nor does it permit the grant of discounted stock options or stock appreciation rights. Finally, the 2018 Plan includes a “fungible share ratio” concept that requires the Company to count each share awarded as restricted stock, or pursuant to any other full value award, as an award of 2.30 shares for purposes of counting the shares available for issuance under the 2018 Plan, provided that awards settled only in cash are not counted against the shares available under the 2018 Plan.

 


Under the Performance Share Program, the Compensation Committee establishes performance-based awards for each eligible participant. The awards are denominated at target as restricted stock and/or phantom stock units equal to a determined percentage of the participant’s base salary in effect at the date of grant. Each award has a three-year award period consisting of three one-year performance periods and a minimum three-year service period. In 2020, 67% of long-term incentive compensation of our named executive officers was based on specified performance conditions, while the remaining 33% was granted in stock options, which are inherently performance-based. One or more performance goals for each performance period are established for each one-year performance period. Consequently, the number of performance awards credited to the participant’s account for each one-year performance period will increase or decrease from the target award depending on the extent to which the applicable performance goal is actually achieved. For example, if at least 85% of the applicable performance goal is not achieved, no performance awards will be credited for the performance period, and if at least 115% of the applicable performance goal is achieved, an amount equal to 150% of the target performance shares will be credited for that performance period. Following the end of each performance period, the Committee will determine the level of performance goals achieved and credit, to each participant’s account, the number of performance awards for such period. All credited performance awards that were granted in 2020 will remain subject to forfeiture during the full three-year service period, subject to lapse of such forfeiture restrictions earlier in the event of involuntary termination of service, retirement, death or disability, or a qualifying termination following a change in control of the Company.

In 2020, the Committee considered various performance metrics for the Performance Share Program and ultimately selected, in equal weight, (i) an Adjusted EBITDA-based goal and (ii) a synergies goal relating to the Pinnacle acquisition for the second performance period of the 2020 performance awards:

 

   

Adjusted EBITDA Metric. The Committee selected Adjusted EBITDA after Lease Payments because (i) many of the Company’s peer gaming companies operate in different markets than the Company, and relative stock performance between the Company and its peers may be skewed by differences in local, regional or international market conditions, as well as external factors such as M&A activity, and (ii) Adjusted EBITDA, after Lease Payments is the key metric to incentivize management to enhance shareholder value.

 

 


 

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Further, because the Company’s Adjusted EBITDA after Lease Payments targets may vary significantly from year-to-year due to mergers and acquisitions, new development projects, macro-economic events, regulatory events and changes in the competitive landscape, the Committee determined that a one-year performance period was appropriate. Nevertheless, because grants under the program do not fully vest until the third anniversary of the grant date, and performance awards are earned in the form of restricted stock and phantom stock units, the Committee determined that the Performance Share Program incentivizes the long-term growth of shareholder value and encourages executive retention.

 

   

Synergies Metric. The Committee determined that synergies achieved was an appropriate second performance metric from the Pinnacle transaction to align Company performance with the previously announced goal of $100 million in expected synergies within the two year period following the Company’s acquisition of Pinnacle.

For 2020, the Compensation Committee established the following goals for the first performance period of the 2020 performance awards:

 

 

Metric

($ in millions)

 

 

Threshold
(85%)

  

 

Target
(100%)

  

 

Maximum      

(115%)

 

Adjusted EBITDA, after Lease Payments

 

$658.2

  

$774.4

  

$890.6

   

Synergies

 

 

$11.1

 

  

$13.0

 

  

$15.0

 

Deferred Compensation. The Company does not maintain any defined benefit pension programs for its executives. Consistent with the Company’s peer group, the Company maintains an elective nonqualified deferred compensation plan (the “Deferred Compensation Plan”) for tax planning and retirement purposes for our executives. In 2020, the Company provided a matching contribution on an executive’s deferrals to the plan of up to 5% of the executive’s base salary and annual bonus. All amounts credited to an executive’s account are invested, as directed by the executive, in commonly available mutual funds, and the Company does not guarantee any minimum returns. The plan is unfunded and benefits are paid from the Company’s general assets; however, the Company currently contributes funds into a grantor trust on a monthly basis in respect of these deferred compensation obligations. The Company generally sets aside separately the amounts deferred by the executives and the matching contributions thereon and, to protect against excess liabilities, invests such amounts in the mutual funds notionally selected by each executive. This program is described in more detail beginning on page 71 of this Proxy Statement.

 


The Committee believes that the Deferred Compensation Plan is necessary to attract and retain our executives and is consistent with competitive and industry practices among the Company’s peer group.

To help mitigate the financial impact of the ongoing COVID-19 pandemic, the Company suspended its contributions under the Deferred Compensation Plan effective on April 1, 2020 and restarted the contributions on October 1, 2020.

Benefits and Perquisites. We offer a set of benefits to all of our employees, including medical, dental and vision insurance, group life insurance, short- and long-term disability and a 401(k) with certain contributions matched by us in 2020. We believe that executives should be offered additional benefits and perquisites that are reasonable relative to the benefits provided to all employees, are consistent with competitive and industry practices among the Company’s peer group, and, in certain circumstances, may address a particular reasonable issue or concern of an executive. Consistent with these objectives, the Company also provides certain executive officers with selected supplemental benefits and perquisites, including matching contributions under the Company’s Deferred Compensation Plan and financial and tax planning services. In addition, Mr. Snowden is entitled to life insurance in the amount of three times his base salary and a travel allowance for commercial or private travel of up to $100,000 per year which is consistent with other companies in our peer group that permit their chief executive officers to use the company’s aircrafts for personal use and commuting. In determining the supplemental benefits and perquisites that our executive officers are entitled to receive, the Committee evaluates the benefits and perquisites given by companies in the Company’s peer group. The description and value of such supplemental benefits and perquisites in 2020 can be found in the “All Other Compensation” column of the Summary Compensation Table in this Proxy Statement.

To help mitigate the financial impact of the ongoing COVID-19 pandemic, the Company suspended its 401(k) contribution match, effective on April 1, 2020 and restarted the contributions on October 1, 2020.

 

 


 

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Analysis of 2020 Compensation

Total Target Compensation

Each year, we review the base salary of each executive officer against the base salaries of similarly positioned executives in the Company’s peer group. In doing so, we compare the base salary information contained in our peer group’s most recently available proxy statements (generally 2018 pay levels as reported in 2019 proxy statements) with 2020 pay targets for the Company’s executive officers. For instance, in 2020, our review indicated that the target total compensation of Mr. Snowden, our Chief Executive Officer, was in the bottom 10th percentile relative to similarly positioned executives (Chief Executive Officers) in the Company’s peer group (based on information in the peer group companies’ 2020 proxy statements). In addition, the total compensation of each of the Company’s named executive officers was also below the median of similarly positioned executives in the Company’s peer group.

Base Salary

For 2020, in connection with Mr. Snowden’s promotion to Chief Executive Officer of the Company, we increased Mr. Snowden’s base salary from $1.1 million to $1.4 million effective as of January 1, 2020. In addition, to better align with the benchmark median pay levels among our peers, Mr. Sottosanti received a 3% raise which increased his salary to $695,250 effective as of January 1, 2020. To help mitigate the financial impact of the ongoing COVID-19 pandemic, the Committee and the executive officers agreed to a reduction in base salaries, effective on April 1, 2020 until October 1, 2020. Specifically, Mr. Snowden’s base salary was reduced by $350,000, Mr. Sottosanti’s base salary was reduced by $139,050 and Mr. Williams’ base salary was reduced by $130,000.

The following table indicates the base compensation of each named executive officer for 2020:

 

 

Executive

 

 

 

    2020 Base Salary    

 

 

 

    2020 Actual Salary Paid    

 

     

Jay A. Snowden

President and Chief Executive Officer

 

$1,400,000

 

$1,215,577

     

Carl Sottosanti

Former EVP, General Counsel and

Secretary

 

$695,250

 

$628,683

     

David Williams

Former EVP, Chief Financial Officer

 

$650,000

 

$522,000

     

William J. Fair

Former EVP, Chief Financial Officer

 

$721,000

 

$199,662

Effective as of January 1, 2021, the Compensation Committee increased Mr. Snowden’s base salary to $1,800,000, which is below the base salary median pay level of $2,000,000 among our peer group.

Annual Short-Term Incentive Plan

In 2020, the Company achieved Adjusted EBITDA, after Lease Payments for purposes of the annual short-term incentive plan of $203.7 million, which is 26.3% of the target of $774.4 million. The Company did not achieve target due to the Company’s gaming facilities being closed because of the COVID-19 pandemic. Specifically, we began the temporary suspension of the operations of all of our 41 properties starting between March 13, 2020 and March 19, 2020, pursuant to various orders from state gaming regulatory bodies and governmental authorities to combat the rapid spread of COVID-19. We began reopening our properties on May 18, 2020 with approximately 10% to 50% reduced gaming and hotel capacity and limited food and beverage offerings in order to accommodate comprehensive social distancing and health and safety protocols required by state regulators and local and state public health officials. By September 30, 2020, all of our properties had reopened (except for Zia Park in New Mexico). In the fourth quarter, we were again required to temporarily suspend operations in Pennsylvania, Michigan and Illinois and were subject to increased operational restrictions in Ohio and Massachusetts. In Michigan, our Greektown facility was temporarily closed on November 17, 2020 and reopened on December 23, 2020. In addition, our Pennsylvania properties closed on December 12, 2020 and reopened on January 4, 2021. Further, in Illinois, our properties temporarily closed on November 20, 2020 and began reopening with limited hours of operations beginning on January 16, 2021. As a result of these property closures and our inability to achieve target under our annual short term incentive plan, the Committee determined that it was not appropriate to pay a bonus for 2020.

 


 

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The following table indicates the target bonus and actual amount paid to each named executive officer (other than William J. Fair) for the annual short-term incentive for 2020:

 

 

Executive

 

 

 

    Target Bonus    

 

 

 

    Actual Bonus    

 

     

Jay A. Snowden

President and Chief Executive Officer

 

 

$2,100,000

 

 

$0

 

     

Carl Sottosanti

Former EVP, General Counsel and Secretary

 

 

$695,250

 

 

$0

 

     

David Williams

Former EVP and Chief Financial Officer

 

 

$650,000

 

 

$0

 

 

Equity Compensation

 

  

In 2020, we made annual equity compensation grants to our executive officers (other than Messrs. Snowden and Fair), which were based on a percentage of each such executive’s base salary. In connection with his promotion to Chief Executive Officer as of January 1, 2020, the Committee granted Mr. Snowden options in August 2019 (which vest in four annual installments from the date of grant) with a grant date fair value of $6.3 million in lieu of any equity grant in 2020. In determining the amount of such grants, the Committee considered the extent to which the grant would reward such officers for increasing shareholder value and such qualitative factors as specific position duties and responsibilities, tenure with the Company, individual contribution and position value to the Company. The Committee also considered the size of the grant in relation to the diluted shares outstanding, the Company’s recent and long-term performance and the Company’s total long-term incentive and total target pay positioning relative to the Company’s peers.

  

In 2020, the Committee approved a structure of long-term equity incentive compensation to consist of three components: (i) 33% of value at award date was in the form of options which vest at the rate of 25% per year, subject to the executive’s continued employment; (ii) 33% of the value at award date was in the form of performance-based restricted stock, with each grant subject to a three-year vesting period and only to the extent certain performance hurdles (described below) have been achieved; and (iii) 33% of value at award date was in the form of performance-based phantom stock units, which are payable, if at all, in cash, with each grant subject to a three-year vesting period and only to the extent certain performance hurdles (described below) have been achieved.

  

 

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In 2020, as described above, with respect to the third performance period of the 2018 performance awards, the second performance period for the 2019 performance awards and first performance period of the 2020 performance awards under the Performance Share Program, the Committee established an Adjusted EBITDA, after Lease Payments goal with a target of $774.4 million. In addition, with respect to the second performance period of the 2019 performance awards and first performance period of the 2020 performance awards, the Committee established a synergies goal with a target of $13 million related to the Pinnacle transaction. In connection with the Pinnacle transaction, the Committee established a $100 million synergy target over the two-year period following the closing of the Pinnacle transaction. The Company

  

achieved $87 million in synergies in 2019. In 2020, the Company achieved $49.1 million in synergies.

 

The Committee believes the long-term incentive allocation strikes an appropriate balance between incentivizing long-term objectives (through performance-based awards in the form of restricted stock and phantom stock units) and long-term shareholder performance (through options and the performance-based restricted stock and performance-based phantom stock units issued upon achievement of performance share objectives).

 

The following table indicates the option grants and target performance awards made to each of the named executive officers in 2020 as long-term incentive compensation:

 

             

Executive

 

 

Option
Awards    

 

 

Value of

Option
Awards

 

 

Target
Phantom
Stock Units

 

 

 

Value of
Target
Phantom
Stock Units

 

 

Target

Performance
Awards

 

 

Value of Target

Performance

Awards

 

             

Carl Sottosanti

 

Former EVP,

General Counsel and Secretary

  65,312   $556,200   15,476   $556,200   15,476   $556,200
             

David Williams

 

Former EVP and

Chief Financial Officer

  44,905   $520,000   14,469   $520,000   14,469   $520,000

 

In 2020, the Committee did not grant any options or performance awards to Messrs. Snowden or Fair. As discussed above, in connection with his promotion to Chief Executive Officer as of January 1, 2020, Mr. Snowden received a grant of stock options in 2019, which is in lieu of any equity grant in 2020. In 2021, the Company resumed regular, annual long-term incentive awards for Mr. Snowden, at the same time as awards are made to the other named executive officers.

 

In 2020, given the closure of all of the Company’s casinos during certain months, the Company was not able to achieve target for Adjusted EBITDA, after lease 2020 performance plans. The Committee determined not to use actual Adjusted EBITDA, after Lease Payments, as a performance metric for the 2018, 2019 and 2020 performance plans for the following reasons: (1) no bonuses are being paid to any of the officers of the Company as well as other members of senior management; (2) the stock price of the Company has shown a significant increase since the beginning of 2020; (3) the named executive officers of the Company should be rewarded for their work done in payments under the Company’s 2018, 2019 and 2020 performance awards; and (4) the performance shares are important for retention purposes, which performance shares would be paid out in 2022 and 2023. Following consultation with the Company’s compensation consultant, the Committee determined that, with

  

respect to the 2018 performance plan, it was in the best interests of the Company to use an average of the performance achievement for the first and second performance periods for 2018 and 2019, which were 116.057% and 116.82%, respectively. Based on using an average, the Committee determined that for the third performance period the percentage of target achieved would be 116.44%.

 

In addition, with respect to the 2019 and 2020 performance plans, the Committee determined that the performance should be determined based on synergies with the respect to the Pinnacle acquisition, which the Company achieved $49.1 million. As a result, the Committee determined that the percentage of target achieved was 150% for 2020 under the 2019 and 2020 in light of COVID-19.

 


 

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As a result, the following shares of restricted stock or phantom stock units were earned and credited to our named executive officers under our 2018, 2019 and 2020 performance plans. The 2019 and 2020 performance awards remain subject to forfeiture for three years following the grant date during the full three year service period, subject to lapse of such forfeiture restrictions earlier in the event of involuntary termination of service, retirement, death or disability, or a change in control of the Company. The 2018 performance awards have completed their full three-year performance cycle and therefore have vested in full.

 

 

Executive*

 

  

 

Phantom
Stock Units

Earned from 2020
Performance
Awards

 

  

 

Restricted
Stock

Earned from 2020
Performance
Awards  

 

  

 

Phantom
Stock Units

Earned from 2019
Performance
Awards

 

  

 

Restricted
Stock

Earned from 2019
Performance

Awards

 

  

 

Restricted
Stock
Earned from 2018
Performance
Awards

 

           

Jay A. Snowden

President and

Chief Executive Officer

         21,699    21,699    13,537
           

Carl Sottosanti

Former EVP, General Counsel

and Secretary

   5,159    5,159    7,475    7,475    5,340
           

William J. Fair

Former EVP and Chief Financial Officer

         7,984    7,984    6,417

* For 2020, Mr. Snowden did not receive any performance awards under the 2020 performance plan. Pursuant to his Retirement Agreement, Mr. Sottosanti received target under all of the performance awards under the 2018, 2019 and 2020 performance plans. Pursuant to his Executive Agreement, Mr. Fair received target under the 2018 and 2019 performance plans. Pursuant to his Separation Agreement, Mr. Williams did not receive any performance awards under the 2020 performance plan.

 


CEO Performance-Based Supplemental Equity Awards

On April 12, 2021, the Board approved two performance-based supplemental equity awards for Jay Snowden with vesting contingent upon achieving absolute stock price milestones and relative total shareholder return (“TSR”) milestones.

The Board believes these awards are an important tool for incentivizing Mr. Snowden to continue achieving transformational growth and creating long-term value for Penn National shareholders.

In approving the awards, the Committee, with the advice of the Committee’s independent compensation consultant, Exequity LLP, recognized the potential for continued strong absolute and relative share value growth. The Committee believes that Mr. Snowden brings a unique blend of leadership acumen, experience, and knowledge of the Company’s industry and business. Further, it believes Mr. Snowden has the right vision for the Company and that his leadership is critical in driving the continued execution of that vision.

These awards, which have been designed with the interests of shareholders in mind, consist of (i) a restricted stock grant with performance vesting conditions tied to the achievement of stock price hurdles, which must be maintained for 60 consecutive trading days, during the period ending December 31, 2025 (the “Stock Price Hurdle Award”), and (ii) an award of stock-settled restricted stock units that provides an opportunity to earn additional shares if the Company’s

 


five-year TSR measured at the end of 2026 and 2027 equals or exceeds the 75th percentile of the S&P 500 (the “Relative TSR Hurdle Award”). The Stock Hurdle Award and the Relative TSR Hurdle Award were both awarded under the Company’s 2018 Long Term Incentive Compensation Plan, as amended.

A History of Driving Significant Shareholder Returns

Mr. Snowden previously served as the Company’s President and Chief Operating Officer from March 2017 until his promotion to President and CEO in January 2020. During this period, he led the Company’s successful margin improvement plan, which generated significant shareholder value and set the stage for a stronger, more efficient Penn National, which would later help the Company weather the impact of the COVID-19 pandemic. Mr. Snowden also led the Company’s integration efforts following the highly accretive acquisition of Pinnacle Entertainment, which nearly doubled the size of Penn National, creating the nation’s largest regional gaming operator. The transaction provided the Company with significantly increased scale and geographic diversification, as well as what would become one of the industry’s leading loyalty programs, mychoice. Penn National’s footprint — which will soon include 42 properties across 20 states following the addition of Hollywood Casino Perryville in Maryland — and a database of over 20 million gaming customers, has positioned the Company to take advantage of tremendous additional growth opportunities in sports betting and iCasino.

 

 


 

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As the primary architect of the Company’s interactive strategy, one of Mr. Snowden’s first steps as CEO was to enter into a series of transactions to monetize Penn National’s excess sports betting and iCasino “skins” with a portfolio of leading operators, including DraftKings, PointsBet and theScore, thereby creating valuable recurring revenue and equity value from the Company’s skin partners. Soon after, Mr. Snowden led the Company’s acquisition of a minority interest in Barstool Sports, a leading sports media and entertainment company with a fully integrated media platform. The Company’s market leading regional footprint of best-in-class gaming operations, combined with Barstool’s expertise in sports media and entertainment, was a major driver of his vision to evolve Penn National from a retail casino operator into the leading omni-channel provider of retail and interactive gaming, sports betting and entertainment. Shortly following the Barstool acquisition, Penn National’s stock achieved a then-record high of $38.28 on February 13, 2020 – a 46% increase.

While the subsequent outbreak of the COVID-19 pandemic presented significant operating challenges, including the temporary closure of all of the Company’s properties, Mr. Snowden successfully navigated Penn National through a series of mitigation efforts and capital raises, underscoring the Company’s resilience. He and his team also reimagined Penn National’s operational norms and product offerings, creating a more modern and efficient operating model and achieving all-time high margins. To put this in perspective, Penn National achieved a 237.9% TSR in 2020, compared to -7.6% among its peer group and 18.4% for the S&P 500 index.

Aligned with Shareholders

The awards were granted with the principal objective of linking Mr. Snowden’s long-term compensation opportunity with shareholder value creation, both on an absolute stock performance basis and relative to the S&P 500 index. The awards require tremendous stock price appreciation and significant relative shareholder returns in order for Mr. Snowden to earn them, consistent with Penn National’s pay-for-performance approach to executive compensation. These returns are also consistent with the Company’s long track record of creating substantial value for shareholders – since its initial public offering nearly 27 years ago, Penn National has delivered 43,085% TSR.

Because the awards are structured to motivate extraordinary long-term performance, are entirely at risk, and correlate directly with shareholder outcomes,

 


the Board believes that they directly align with the interests of all Penn National shareholders. The Board also believes that, because the maximum number of shares available under the awards represents less than 0.6% of the shares outstanding as of the date of grant, the dilutive effect on shareholders is reasonable given the increase in shareholder value that would be represented by achievement of the stock price and TSR milestones. In addition, both awards impose follow-on continued employment vesting conditions that must be satisfied for the awards to fully vest. Finally, the Board believes that the provisions of the awards concerning change in control and termination are in keeping with shareholders’ interests.

Terms of the Performance Awards

The Stock Price Hurdle Award provides an opportunity to earn between 20,000 and 300,000 shares if the stock price hurdles in the following table are achieved during the period ending December 31, 2025.

 

 

Stock Price
Hurdle

 

 

 

Number of
Shares Earned

 

   

$132.00

  20,000
   

$140.94

  30,000
   

$186.04

  50,000
   

$245.58

  75,000
   

$324.16

  125,000
   

Total Shares

  300,000

To satisfy a stock price hurdle, the price of the Company’s common stock must close above the stock price hurdle for 60 consecutive trading days. The total number of shares earned under the Stock Price Hurdle establishes the maximum number of shares in each of the two performance periods established in the Relative TSR Hurdle Award.

The Relative TSR Hurdle Award provides an opportunity to earn, in each of two, five-year performance periods, restricted stock units representing between 0% and 100% of the total number of restricted shares earned under the Stock Price Hurdle Award, subject to achieving the following relative TSR hurdles:

 

 

Penn’s TSR Percentile
Performance vs. the S&P 500

 

 

 

Percent of
Stock Price Hurdle
Restricted Shares Earned

 

   

Below 75th Percentile

  0%
   

75th Percentile

  50%
   

90th Percentile

  75%
   

95th Percentile

  100%
 

 


 

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Relative TSR performance will be measured at the end of 2026 and 2027 based on Penn National’s relative TSR performance (compared to that of the S&P 500 index) over the following periods, with restricted stock units potentially earned in each period.

 

 

Measurement Year

 

 

 

Relative TSR Measurement
Period

 

   

2026

  2022–2026
   

2027

  2023–2027

To encourage the long-term retention of Mr. Snowden, both awards impose follow-on continued employment vesting conditions that must be satisfied for the awards to fully vest. Specifically, any shares earned based on satisfaction of a performance condition under the Stock Price Hurdle Award vest in annual 1/3 increments over three years following achievement of the performance condition, subject to Mr. Snowden’s continued employment, subject to certain exceptions. The Stock Price Hurdle Award provides an additional retention-driven condition, under which the award’s 3-year employment vesting schedule may not begin before April 1, 2022. Any restricted stock units earned under the Relative TSR Hurdle Award will vest in annual 12 increments over two years following achievement of the performance condition, subject to Mr. Snowden’s continued employment.

The grant date fair value of the full award is estimated to be approximately $48.7 million. The Company expects the stock-based compensation expense to be recognized in connection with the Stock Price Hurdle Award to be approximately $19.4 million, which will be amortized over a weighted average period of approximately 4.25 years, and approximately $29.3 million in connection with the Relative TSR Hurdle Award, which will be amortized over a weighted average period of approximately 7.71 years.

Other Compensation Policies

Hedging and Pledging Policy. We believe that equity ownership fosters an atmosphere where directors and officers “think like owners” and are motivated to increase the long-term value of the Company by aligning their interests with those of the Company’s shareholders. Accordingly, we have adopted policies prohibiting each of the Company’s directors and employees (including executive officers) from engaging in hedging transactions (such as short sales, puts and calls and other derivatives), pledging Company shares as collateral for a loan or holding shares in a margin account.

Compensation Clawback Policy. As a highly regulated, multi-jurisdictional gaming and racing company, the

 


Company has maintained a long standing commitment to ensure that its executive officers adhere to the highest professional and ethical standards. Accordingly, the Company has adopted a policy pursuant to which misconduct by any executive officer that leads to a restatement of the Company’s financial results could subject such individuals to a disgorgement of prior compensation. In the event of a restatement, in light of the highly regulated nature of the Company’s business, the Committee has the authority to pursue an appropriate remedy, based on the facts and circumstances surrounding the restatement and existing laws.

Stock Ownership Guidelines for Senior Management. The Committee has established the following stock ownership guidelines for senior management, which are re-evaluated periodically.

 

 

Position

 

  

 

Required Value
of Shares Held

 

   

Chief Executive Officer

   Five (5) times base salary
   

Chief Financial Officer

   Three (3) times base salary
   

Chief Legal Officer

   Two (2) times base salary

The Chief Executive Officer is authorized to set ownership requirements for other members of the senior management team as appropriate. As with the director stock ownership guidelines, the value of a named executive officer’s stock ownership at any time will be based on the aggregate value of common stock, restricted stock and phantom stock units held by such named executive officer. Each named executive officer is required to achieve compliance with these guidelines within five years of assuming his or her current position and, once achieved, ownership of the required amount must be maintained for as long as the individual is subject to these guidelines. As of December 31, 2020, all named executive officers were in compliance with these guidelines.

Timing of Equity-Based Awards. In December 2015, the Company adopted an Equity Based Award Policy, under which, for annual equity-based awards to executive officers, the grant date will be the second trading day of the calendar year. From time to time, annual grants may be made on a later date in the year as a result of the timing of the determination of the awards, the determination of terms or other factors, such as performance metrics for a given year. Similarly, special equity-based awards granted outside of the regular annual pay program may be granted at other times throughout the year. All equity-based grants, whether granted on the second trading day of the calendar year or later in the year, are priced in

 

 


 

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accordance with the terms of the applicable equity compensation plans or performance share programs, which require, among other things, that the exercise price of all stock options be established by reference to the closing price on the trading day immediately prior to the date of grant.

Reconciliations and Non-GAAP Financial Measures

Adjusted EBITDA, Adjusted EBITDAR and Adjusted EBITDA, after Lease Payments are non-GAAP financial measures. For a discussion of Adjusted EBITDA and Adjusted EBITDAR and a reconciliation of Adjusted EBITDA, and Adjusted EBITDAR to net income, see the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 26, 2021.

For a discussion of Adjusted EBITDA, after Lease Payments and a reconciliation to net income (loss), see Appendix C to this Proxy Statement.

Compensation Committee Report

The Committee has reviewed and discussed the foregoing CD&A with the management of the Company. In addition, as discussed on page 15 of this Proxy Statement, the Committee retained the services of Exequity LLP as its independent compensation consultant in order to receive independent expert advice on executive compensation matters and guidance with respect to compensation best practices, among other things. The compensation actions taken in 2020 and described in this CD&A were taken in consultation with, and were supported by, Exequity. Based on the review and discussions described above, the Committee recommended to the Board of Directors that the CD&A be included in this Proxy Statement and incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

 

  Compensation Committee of the Board of Directors
 

Barbara Shattuck Kohn, Chair

Marla Kaplowitz

John M. Jacquemin

Ronald J. Naples

 


 

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Compensation Tables

Summary Compensation

The following table sets forth information concerning the compensation earned during the fiscal years ended December 31, 2020, 2019 and 2018 by the Company’s Chief Executive Officer, Chief Financial Officer and the Company’s other most highly compensated individuals serving as executive officers during 2020 (collectively, the “Named Executive Officers”):

 

               
Name and Principal
Position(1)
  Year     Salary ($)   Stock
Awards
($)(2)
  Option
Awards
($)(3)
 

 

Non-Equity
Incentive Plan
Compensation  

($)(4)

 

All Other
Compensation  

($)(5)

  Total
($)

 

Jay A. Snowden

 

President and Chief

 

Executive Officer

   

 

 

 

2020  

 

   

 

 

 

1,215,677  

 

   

 

 

 

2,431,391  

 

   

 

 

 

0  

 

   

 

 

 

0

 

   

 

 

 

251,587

 

   

 

 

 

3,898,655  

 

   

 

 

 

2019  

 

   

 

 

 

1,100,000  

 

   

 

 

 

1,224,213  

 

   

 

 

 

7,229,814  

 

   

 

 

 

1,285,167

 

   

 

 

 

138,774

 

   

 

 

 

10,977,968  

 

   

 

 

 

2018  

 

   

 

 

 

1,100,000  

 

   

 

 

 

958,081  

 

   

 

 

 

1,044,998  

 

   

 

 

 

1,276,629

 

   

 

 

 

122,550

 

   

 

 

 

4,502,258  

 

                                                                       

 

Carl Sottosanti

 

Former Executive Vice

 

President, General

 

Counsel and Secretary

   

 

 

 

2020  

 

   

 

 

 

628,683  

 

   

 

 

 

1,686,715  

 

   

 

 

 

541,395  

 

   

 

 

 

0

 

   

 

 

 

473,314

 

      3,330,107  
   

 

 

 

2019  

 

   

 

 

 

675,000  

 

   

 

 

 

585,242  

 

   

 

 

 

539,756  

 

   

 

 

 

788,625

 

   

 

 

 

87,186

 

   

 

 

 

2,675,809  

 

   

 

 

 

2018  

 

   

 

 

 

600,000  

 

   

 

 

 

397,130  

 

   

 

 

 

480,000  

 

   

 

 

 

696,343

 

   

 

 

 

61,133

 

   

 

 

 

2,234,606  

 

                                                                       
               

David Williams

 

Former Executive Vice

 

President and Chief

 

Financial Officer

      2020         522,000         520,016         513,975         0       11,850       1,567,841  
                                                                       

 

William J. Fair

 

Former Executive Vice

 

President and Chief Financial

 

Officer

   

 

 

 

2020  

 

   

 

 

 

199,662  

 

   

 

 

 

1,835,677  

 

   

 

 

 

0  

 

   

 

 

 

0

 

   

 

 

 

2,764,485

 

   

 

 

 

4,799,824  

 

   

 

 

 

2019  

 

   

 

 

 

721,000  

 

   

 

 

 

706,581  

 

   

 

 

 

576,541  

 

   

 

 

 

842,368

 

   

 

 

 

96,284

 

   

 

 

 

2,942,774  

 

   

 

 

 

2018  

 

   

 

 

 

721,000  

 

   

 

 

 

524,600  

 

   

 

 

 

576,804  

 

   

 

 

 

836,773

 

   

 

 

 

79,156

 

   

 

 

 

2,738,333  

 

 

(1)

Mr. Sottosanti retired as Executive Vice President, General Counsel and Secretary on December 31, 2020. Mr. Williams resigned as Executive Vice President and Chief Financial Officer on December 31, 2020. Mr. Fair resigned as Executive Vice President and Chief Financial Officer on March 3, 2020.

 

(2)

The value in this column reflects the aggregate grant date fair value calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”) for stock awards. Assumptions used in the calculation of these amounts are described in footnote 2 to the Company’s audited financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The grant date fair value assuming the maximum level of performance achieved under performance awards are as follows: (a) $2,886,740 for Mr. Snowden; (b) $2,168,544 for Mr. Sottosanti; (c) $780,024 for Mr. Williams and (d) $2,336,405 for Mr. Fair.

 

(3)

The value in this column reflects the full grant date fair value calculated in accordance with ASC 718 for option awards. Assumptions used in the calculation of these amounts are described in Note 2 to the Company’s audited financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

 

(4)

In 2020, the Company did not achieve the pre-established performance goals to receive a cash payment pursuant to the Company’s annual short-term incentive plan. As a result, there were no cash payments made to any of the named executive officers.

 

(5)

For Mr. Snowden, All Other Compensation in 2020 consisted of (1) $97,980 in Company matching contributions under the Company’s Deferred Compensation Plan (“DCP”); (2) $8,551 in Company paid insurance premiums; (3) $7,094 for taxes associated with the Company paid insurance premiums; (4) $15,293 in tax and financial planning; (5) $5,700 in matching 401(k) contributions; and (6) $116,969 representing aggregate incremental cost for use of the Company’s aircraft which is based on variable costs of operating the aircraft including fuel costs, landing costs and repairs and maintenance. For Mr. Sottosanti, All Other Compensation in 2020 consisted of (1) $56,640 in Company matching contributions under the DCP; (2) $14,000 in tax and financial planning; (3) $2,674 in matching 401(k) contributions; and (4) $400,000 transition payment in connection with his retirement as Executive Vice President, General Counsel and Secretary. For Mr. Williams, All Other Compensation in 2020 consisted of (1) $10,925 in Company matching contributions under the DCP; and (2) $925 in matching 401(k) contributions. For Mr. Fair, All Other Compensation in 2020 consisted of (1) $50,438 in Company matching contributions under the DCP; (2) $5,700 in matching 401(k) contributions; (3) $6,991 in tax and financial planning; and (4) $2,701,356 in severance in connection with his resignation as the Company’s Executive Vice President and Chief Financial Officer.

 


 

2021 PROXY STATEMENT     67     


Table of Contents

2020 Grants of Plan Based Awards

The following table sets forth certain information regarding grants of plan based awards relating to 2020 for the Named Executive Officers.

 

       

 

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards ($) (1)

 

 

 

Estimated Future Payouts

Under Equity Incentive
PlanAwards (#)

 

           

Name

  Grant
Date
  Threshold
($)
  Target
($)
  Maximum  

($)

  Threshold
(#)
  Target
(#)
  Maximum
(#)
  All
Other
Option
Awards
(#)(2)
  Exercise
Price of
Option
Awards
($)/share)  
  Grant Date
Fair Value of  
Stock and
Option
Awards
($)(3)

Jay A. Snowden

 

 

 

 

1,050,000  

 

 

2,100,000  

 

 

2,800,000  

 

 

 

 

 

 

 

 

 

 

 

 

   

 

2/21/2020(4)  

 

 

 

 

 

 

 

 

4,931

 

 

9,861

 

 

14,792

 

 

 

 

 

 

439,718

   

 

2/21/2020(5)  

 

 

 

 

 

 

 

 

5,813

 

 

11,626

 

 

17,439

 

 

 

 

 

 

518,463

   

 

2/21/2020(6)  

 

 

 

 

 

 

 

 

7,233

 

 

14,466

 

 

21,699

 

 

 

 

 

 

736,605

   

 

2/21/2020(7)  

 

 

 

 

 

 

 

 

7,233

 

 

14,466

 

 

21,699

 

 

 

 

 

 

736,605

                                         

 

Carl Sottosanti

 

 

 

 

347,600  

 

 

695,200  

 

 

1,042,800  

 

 

 

 

 

 

 

 

 

 

 

 

   

 

1/3/2020    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

65,312  

 

 

26.14

 

 

541,395

   

 

2/18/2020(4)  

 

 

 

 

 

 

 

 

1,918

 

 

3,835

 

 

5,753

 

 

 

 

 

 

165,178

   

 

2/18/2020(5)  

 

 

 

 

 

 

 

 

2,670

 

 

5,340

 

 

8,010

 

 

 

 

 

 

229,995

   

 

2/18/2020(6)  

 

 

 

 

 

 

 

 

3,738

 

 

7,475

 

 

11,213

 

 

 

 

 

 

367,668

   

 

2/18/2020(7)  

 

 

 

 

 

 

 

 

3,738

 

 

7,475

 

 

11,213

 

 

 

 

 

 

367,668

   

 

2/25/2020(8)  

 

 

 

 

 

 

 

 

7,738

 

 

15,476

 

 

23,214

 

 

 

 

 

 

556,206

                                         

 

David Williams

 

 

 

 

325,000  

 

 

650,000  

 

 

975,000  

 

 

 

 

 

 

 

 

 

 

 

 

   

 

2/11/2020   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44,905  

 

 

36.31

 

 

513,975

   

 

2/25/2020(8)  

 

 

 

 

 

 

 

 

7,235

 

 

14,469

 

 

21,704

         

 

520,016

                                         

 

William J. Fair

                                       
   

 

2/18/2020(4)  

             

 

3,351

 

 

6,702

 

 

10,053

         

 

288,655

   

 

2/18/2020(5)  

             

 

3,209

 

 

6,417

 

 

9,626

         

 

276,378

   

 

2/18/2020(6)  

             

 

3,992

 

 

7,984

 

 

11,976

         

 

392,739

   

 

2/18/2020(7)  

             

 

3,992

 

 

7,984

 

 

11,976

         

 

392,739

   

 

4/01/2020(9)  

             

 

3,209

 

 

6,417

 

 

9,626

         

 

81,174

   

 

4/01/2020(9)  

             

 

3,992

 

 

7,984

 

 

11,976

         

 

100,998

   

 

4/01/2020(9)  

             

 

3,992

 

 

7,984

 

 

11,976

         

 

100,998

   

 

4/01/2020(9)  

             

 

3,992

 

 

7,984

 

 

11,976

         

 

100,998

   

 

4/01/2020(9)  

             

 

3,992

 

 

7,984

 

 

11,976

         

 

100,998

 

(1)

As discussed in the “CD&A” section above, there were no cash bonuses awarded for 2020. Mr. Fair was not eligible to receive a bonus for 2020.

 

(2)

Option awards represent stock options granted to the executives as part of their annual equity incentive compensation. The option awards vest over four years, 25% on the first anniversary of the date of grant and 25% on each succeeding anniversary.

 

(3)

Represents the full grant date fair value of awards under ASC 718. Generally, the full grant date fair value is the amount the Company expenses in its financial statements over the award’s vesting period. Assumptions used in the calculation of the amounts for stock option awards and performance awards are included in Note 2 to the Company’s audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

 

(4)

Equity incentive awards represent performance-based restricted stock awards approved on February 17, 2017 in connection with the Company’s 2017 performance share program. The aggregate target number of restricted stock having a three-year award period consisting of three one-year performance periods and a three-year service period were: (i) 29,585 for Mr. Snowden; (ii) 20,106 for Mr. Fair; and (iii) 11,505 for Mr. Sottosanti. As of December 31, 2019, performance goals for three performance periods had been established for the 2017 awards. The grant date in the table above reflects the third tranche of these three-year performance awards.

 

(5)

Equity incentive awards represent performance-based restricted stock awards approved on February 6, 2018 in connection with the Company’s 2018 performance share program. The aggregate target number of restricted stock having a three-year award period consisting of three one-year performance periods and a three-year service period were: (i) 34,880 for Mr. Snowden; (ii) 19,252 for Mr. Fair; and (iii) 16,021 for Mr. Sottosanti. As of December 31, 2020, performance goals for three performance periods had been established for the 2018 awards. The grant date in the table above reflects the second tranche of these three-year performance awards.

 


 

     68     PENN NATIONAL GAMING, INC.


Table of Contents
(6)

Equity incentive awards represent performance-based restricted stock awards approved on February 14, 2019 in connection with the Company’s 2019 performance share program. The aggregate target number of restricted stock having a three-year award period consisting of three one-year performance periods and a three-year service period were: (i) 43,397 for Mr. Snowden; (ii) 23,953 for Mr. Fair; and (iii) 22,425 for Mr. Sottosanti. As of December 31, 2020, performance goals for the second performance period had been established for the 2019 award. The grant date in the table above reflects the first tranche of these three-year performance awards.

 

(7)

Equity incentive awards represent performance-based phantom stock units that vest in cash approved on February 14, 2019 in connection with the Company’s 2019 performance share program. The aggregate target number of phantom stock units having a three-year award period consisting of three one-year performance periods and a three-year service period were: (i) 43,397 for Mr. Snowden; (ii) 23,953 for Mr. Fair; and (iii) 22,425 for Mr. Sottosanti. As of December 31, 2020, performance goals for the second performance period had been established for the 2019 award. The grant date in the table above reflects the first tranche of these three-year performance awards.

 

(8)

Equity incentive awards represent performance-based restricted stock awards approved on February 18, 2020 in connection with the Company’s 2020 performance share program. The aggregate target number of restricted stock having a three-year award period consisting of three one-year performance periods and a three-year service period were: (i) 15,476 for Mr. Sottosanti and (ii) 14,469 for Mr. Williams. As of December 31, 2020, performance goals for the first performance period had been established for the 2020 award. The grant date in the table above reflects target for these three-year performance awards.

 

(9)

Pursuant to Mr. Fair’s executive agreement with the Company, he received target under the 2018 performance plan for the year 2020. In addition, Mr. Fair received target under the 2019 performance plan for performance-based restricted stock and performance-based phantom stock units for the second and third tranches.

Outstanding Equity Awards at Fiscal Year End

The following table sets forth information concerning equity awards outstanding as of December 31, 2020 for the Named Executive Officers:

 

     
Option Awards        Stock Awards
               
  Name  

 

 

 

Number of Securities Underlying
Unexercised Options:

  Option
Exercise
Price ($)
  Option
Expiration
Date
  Number of
Shares or
Units Held that
Have Not
Vested (#) (g)
    Market Value of
Shares or Units
Held that Have
Not Vested ($) (j)
  Equity incentive
plan awards:
number of
unearned shares,
units or other
rights that have
not vested (#)
  Equity incentive
plan awards:
market or payout
value of unearned
shares, units or
other rights that
have not vested
($) (k)
  Exercisable
(#)
  Unexercisable
(#)
                 

  Jay A. Snowden

  234,827     13.19   1/6/2022     40,614(h)     $3,507,831   -   -
                 
    237,437     12.87   2/9/2023     40,997(i)     $3,540,911   21,699(k)   $1,874,143