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2021 was another transformative year for Penn National Gaming, as we continued our journey as North America’s leading provider of integrated entertainment, sports content, and casino gaming experiences. We generated record free cash flow in 2021 and ended the year with the strongest balance sheet in our Company’s history thanks to the hard work and dedication of our 22,000 team members, who provided best-in-class service to our guests despite the ongoing impact of COVID-19. We also continued our commitment to responsible corporate citizenship, launching a series of new environmental, social and governance (“ESG”) initiatives in support of our team members, our communities, and the planet.

Our key 2021 accomplishments include:

Penn’s highly differentiated strategy, which is focused on organic cross-sell opportunities, is reinforced by its investments in owned technology, including a state-of-the-art media and betting platform and an in-house iCasino content studio. The Company’s portfolio is further bolstered by its industry-leading mychoice® customer loyalty program, which offers its over 25 million members a unique set of rewards and experiences across business channels.

During the remainder of 2022, we will continue to execute on our differentiated strategy to drive shareholder value with additional mobile and retail sports book launches, the transition to theScore’s proprietary risk and trading platform in Canada, and the integration of the Barstool Sportsbook into theScore media app, while remaining committed to good corporate citizenship. I encourage you to read our 2021 Corporate Social Responsibility Report, released in conjunction with this proxy statement, which provides details on our rapidly-expanding ESG initiatives.

As always, I’d like to thank all our valued shareholders for your ongoing support and confidence.

Your vote is important. Whether or not you plan to attend the Annual Meeting, we urge you to vote your shares now as instructed in the proxy statement.

This Proxy Statement contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified using forward-looking terminology such as “expects,” “believes,” “estimates,” “projects,” “intends,” “plans,” “goal,” “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. Such statements are all subject to risks, uncertainties and changes in circumstances that could significantly affect the Company’s future financial results and business. 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 those factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, each as filed with the U.S. Securities and Exchange Commission. The Company does not intend to update publicly any forward-looking statements except as required by law. Considering these risks, uncertainties and assumptions, the forward-looking events discussed in this Proxy Statement may not occur.

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all the information that you should consider, and you should read the entire Proxy Statement carefully before voting.

The board of directors (the “Board of Directors” or “Board”) of Penn National Gaming, Inc. (“Penn National,” “Penn,” “the Company,” “we,” “us” and “our”) is soliciting proxies to be voted at the 2022 Annual Meeting of Shareholders (the “Annual Meeting”). This proxy statement (the “Proxy Statement”) provides the information shareholders need to know to vote by proxy or in person (virtually) at the Annual Meeting. Shareholders do not need to attend the Annual Meeting to vote. If, at the close of business on April 8, 2022, you were a shareholder of record or held shares through a broker, bank or other nominee, you may vote your shares by proxy via the Internet, by telephone or by mail. For shares held through a broker, bank or other nominee, you may vote by submitting voting instructions to your broker, bank or other nominee. Please refer to information from your broker, bank or other nominee on how to submit voting instructions.

The Annual Meeting will be a “virtual meeting” of shareholders, which will be conducted exclusively online via audio webcast. You will be able to attend the virtual meeting online by visiting

www.virtualshareholdermeeting.com/PENN2022

. You also will be able to vote your shares electronically at the virtual meeting. Penn National believes that hosting a virtual meeting will enable greater shareholder attendance and

participation, particularly in light of the COVID-19 pandemic. Importantly, the virtual meeting has been designed to provide the same rights to participate as you would have at an in-person meeting. Additional information about how to vote and participate at our virtual meeting can be found at the end of this Proxy Statement under “About the Meeting: Questions and Answers.”

Penn National is utilizing the Securities and Exchange Commission (the “SEC”) rule that allows companies to furnish their proxy materials over the Internet. As a result, we mailed to our shareholders a Notice Regarding the Availability of Proxy Materials (the “Notice of Availability”) instead of a paper copy of the proxy materials (including the proxy card (the “Proxy Card”), the Proxy Statement, and our 2021 Annual Report) on or about April 26, 2022. We also provided access to our proxy materials over the Internet beginning on that date. The Notice of Availability contained instructions on how to access the Proxy Statement and the 2021 Annual Report and how to vote online or by toll-free number. After receiving the Notice of Availability, all shareholders can access the proxy materials over the Internet and request to receive a paper copy of the proxy materials by mail. Additionally, shareholders can access a copy of the proxy materials at

www.proxyvote.com

.

Penn National Gaming (NASDAQ: PENN) is North America’s leading provider of integrated entertainment, sports content, and casino gaming experiences. A member of the S&P 500, Penn operates 44 properties in 20 states, online sports betting in 13 jurisdictions and iCasino in five under a portfolio of well-recognized brands including Hollywood Casino^®, L'Auberge^®, Barstool Sportsbook^® and theScore Bet^®. Penn’s highly differentiated strategy, which is focused on organic cross-sell opportunities, is reinforced by its investments in owned technology, including a state-of-the-art media and betting platform and an in-house iCasino content studio. The Company’s portfolio is further bolstered by its industry-leading mychoice® customer loyalty program, which offers its over 25 million members a unique set of rewards and experiences across business channels. Penn is deeply committed to fostering a culture that welcomes a diverse set of customers and dedicated team members. The Company has been consistently ranked in the top two as “Employer of First Choice” over the last nine years in the Bristol Associates-Spectrum Gaming’s Executive Satisfaction Survey. In addition, as a long-standing good corporate citizen, Penn is also committed to being a trusted and valued member of its communities and a responsible steward of our finite natural resources.

2021 was a transformative year for Penn National that highlighted our ability to execute our differentiated strategy spearheaded by CEO and President Jay Snowden upon his promotion to the role in January 2020. In just two years, Mr. Snowden has led Penn on a journey that transformed us from a traditional retail casino operator into a highly-innovative provider of integrated entertainment, sports content, and casino gaming experiences with multiple organic cross-selling opportunities across our powerful business verticals. Under Mr. Snowden’s leadership, the executive team is reimagining Penn National’s operational norms and product offerings, creating a more modern and efficient operating model. These efforts enabled us to achieve all-time high margins and record free cash flow in 2021 and to end the year with the strongest balance sheet in our Company’s history.

In 2022, we will continue to execute on our highly differentiated strategy to organically expand our ecosystem and drive shareholder value with additional mobile and retail sports book and iCasino launches, the transition to theScore’s proprietary risk and trading platform in Canada, and the integration of the Barstool Sportsbook into theScore media app, all while remaining committed to good corporate citizenship.

 

Our Board is composed of highly-experienced directors who have led, advised, and established leading organizations and institutions. Our Board has taken a thoughtful approach to board composition to ensure that our directors have backgrounds that collectively add significant value to the strategic decisions made by the Company and that enable them to provide oversight of management to ensure accountability to our shareholders. Our directors have extensive backgrounds as entrepreneurs, operational and financial experts, investors, advisors, and public and nonprofit board members. We believe our Board has struck the right balance between long-term understanding of our business and fresh external perspectives, adding four new directors in the past five years, as well as to ensure diversity of backgrounds and perspectives within the boardroom. Our efforts have been recognized by two prominent organizations that have honored Penn National for the gender diversity of our Board.

In addition to gender and demographic diversity, we also recognize the value of other diverse attributes that directors may bring to our Board, including service in the U.S. military. We are proud to report that of our nine current directors, three are also military veterans.

Penn National’s Board believes that having a diverse mix of directors with complementary qualifications, expertise, and attributes is essential to meeting its oversight responsibility. The table below summarizes the desirable types of qualifications, expertise and attributes possessed by one or more of Penn National’s directors because of their particular relevance to the Company’s business and structure, but does not encompass all qualifications, expertise and attributes of Penn National’s directors. These factors were considered by the Nominating and Corporate Governance Committee and the Board in connection with this year’s director nomination process.

 

We are committed to sustainable corporate governance practices that promote long-term value creation, transparency and accountability to our shareholders. Below are the highlights of our corporate governance practices.

CORPORATE GOVERNANCE BEST PRACTICES

Shareholder engagement is vital to the achievement of our strategic and business objects and to our ongoing review of our corporate governance, environmental sustainability, social responsibility, and executive compensation programs and practices. We regularly communicate with our investors on matters relating to our business, strategy and performance, corporate governance, board composition and structure, executive compensation program and corporate responsibility and sustainability initiatives.

We also regularly communicate with shareholders through a number of routine forums, including:

We relay shareholder feedback and trends on corporate governance, environmental sustainability, social responsibility, and executive compensation developments to our Board and its committees and work with them to enhance our practices and improve our disclosures.

You can read more about the many ways we are continuing to care for our people, our communities and the planet in our 2021 Corporate Social Responsibility Report on our website at

www.pngaming.com/community/corporate-responsibility

. Our 2020 EEO-1 survey data is available at

https://www.pngaming.com/careers/diversity-inclusion-belonging/data

. This information is provided for convenience only and the 2021 Corporate Social Responsibility Report, the EEO-1 survey data, and the website references throughout this Proxy Statement are not incorporated by reference in, and do not form a part of, this Proxy Statement.

The following is an overview of the primary components of our executive compensation program.

Our program is aligned with long-term shareholder returns, with a significant portion of our executive compensation at risk. In 2021, 87.5% of our Chief Executive Officer’s total target compensation and 77.3% (on average) of our other Named Executive Officers’ total target compensation was variable and at risk, subject to achievement of pre-set performance goals or was tied to our long-term stock price performance.

 

The COVID-19 pandemic continued to have a significant impact on our operations through 2021, making it challenging to set reliable financial and long-term performance targets. At the start of 2021, many of our retail casino locations continued to be closed or operated at a reduced capacity due to COVID-19 safety measures. We were also just at the initial stages of deploying our interactive product offerings, and the pandemic’s impact on our efforts remained uncertain. These circumstances made it challenging to forecast reliable long-term performance goals. To align our customary focus on operational efficiency with our differentiated strategy of delivering integrated entertainment, sports content, and casino gaming experiences, in 2021, the Compensation Committee approved the following performance goals, applicable to our annual incentive program and the 2021 portion of the long term incentive program: (i) Adjusted EBITDAR margin improvement in 2021 as compared to 2019; and (ii) online sports betting and/or iCasino platforms in operation as of December 31, 2021. These two metrics were the best indicators of our short-term tactical success and future ability to create long-term shareholder value, incentivizing the executive team to make progress on key strategic priorities for our success.

We delivered financial and operational results in 2021. We leveraged the strong recovery of our land-based operations to drive 655 basis points of Adjusted EBITDAR margin improvement versus fiscal 2019, while also achieving record Adjusted EBITDAR and record free cash flow, and we ended the year with the lowest lease-adjusted net leverage in the Company’s history. Additionally, we scaled our Interactive segment with

15 online platforms operational across 11 states at year end, which is a testament to the team’s ability to build the Interactive segment capacity rapidly with a more than 5.6x increase in the Interactive division headcount, exclusive of theScore acquisition, despite the challenging talent market environment. These record performance results exceeded the stretch goals under our annual incentive program and the performance-based long-term incentives for 2021.

The table below summarizes the total regular annual compensation awarded to each named executive officer with respect to 2021. See pages 42 through 72 of this Proxy Statement for further detail.

Positive Say-On-Pay Results

Below is the biographical information about the director nominees, including the specific experience, qualifications, attributes and skills that led to our Board of Directors and Nominating and Corporate Governance Committee to conclude that each should be nominated to serve as a director.

Our Audit Committee has appointed the accounting firm of Deloitte & Touche LLP (“Deloitte”) to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2022. Action by shareholders is not required by law, the current Listing Rules of the NASDAQ Stock Market (the “NASDAQ Rules”) or our organizational documents in the appointment of an independent registered public accounting firm, but this appointment is submitted by our Board of Directors for ratification as a matter of good corporate governance to give our shareholders a voice in the designation of auditors. If the appointment is not ratified by our shareholders, our Board of Directors will further consider its choice of Deloitte as our independent registered public accounting firm and may, but will not be required to, appoint a different independent registered public accounting firm. Deloitte has served as our independent registered public accounting firm since 2017 and is considered by our management to be well-qualified. Deloitte has advised us that neither it nor any member thereof has any financial interest, direct or indirect, in our Company or any of our subsidiaries in any capacity.

For additional information regarding our independent registered public accounting firm, see “Principal Accountant Fees and Services” below. A representative of Deloitte will be present at the Annual Meeting. The representative will have an opportunity to make a statement if he or she desires and will be available to respond to appropriate questions.

Prior to selecting Deloitte for the fiscal year ending December 31, 2022, the Audit Committee evaluated Deloitte’s performance with respect to fiscal year 2021. In conducting this annual evaluation, the Audit Committee considered management’s assessment of Deloitte’s performance in areas such as: (i) independence; (ii) the quality and the efficiency of the services provided, including audit planning and coordination; (iii) the adequacy of information provided on accounting issues, auditing issues and regulatory developments; (iv) the quality and effectiveness of communications with the Audit Committee and management, including the ability to meet deadlines and respond quickly; (v) reports of the Public Company Accounting Oversight Board and other available data regarding the quality of work performed by Deloitte; and (vi) the geographic reach and expertise of Deloitte in terms of quantity, quality and location of staff.

The Audit Committee also considered Deloitte’s tenure, the relative costs, benefits, challenges, overall advisability and potential impact on the Company of changing auditors and the reasonableness of Deloitte’s historical and proposed billable rates. The Audit Committee is responsible for the audit fee negotiations associated with the retention of Deloitte. To assure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent registered accounting firm. Further, in conjunction with the rotation of the auditing firm’s lead engagement partner every five years, the Audit Committee and its chair will continue to be involved in the selection of Deloitte’s new lead engagement partner. A new lead engagement partner began a five-year rotation during this fiscal year ending December 31, 2022. The members of the Audit Committee and the Board believe that the continued retention of Deloitte to serve as our independent external auditor is in the best interests of us and our shareholders.

The affirmative vote of a majority of the votes cast is required for approval of the ratification of the appointment of Deloitte as our independent registered public accounting firm for the fiscal year ending December 31, 2022. As a result, for purposes of the vote on this proposal, abstentions will not be counted as votes cast and will have no effect on the result of the vote, although they will be considered present for the purpose of determining the presence of a quorum.

Our commitment to corporate governance is integral to our business and reflects not only regulatory requirements, the NASDAQ Rules and broadly recognized governance practices, but also effective leadership and oversight by our senior management team and Board. 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. Notable features of our corporate governance framework include the following:

We are committed to maintaining high standards of corporate governance, which we believe promotes long-term value creation, transparency and accountability to our shareholders. Because corporate governance practices evolve over time, based on our ongoing evaluation of best practices and investor feedback on our governance practices, we have made a number of recent governance and disclosure enhancements.

 

The Board has determined that all the directors, other than Mr. Snowden, are independent under 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 and Committee evaluations play a critical role in ensuring the effective functioning of our Board of Directors. It is important to take stock of Board, committee and director performance and to solicit and act upon feedback received from each member of our Board of Directors. To this end, the Board of Directors and each committee regularly conduct a comprehensive self-evaluation process overseen by the Nominating and Corporate Governance Committee.

The Nominating and Corporate Governance Committee considers candidates for Board membership suggested by, among others, its members, other Board members and management. The Nominating and Corporate 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 84). In addition, the Nominating and Corporate 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 Nominating and Corporate Governance Committee considers a number of factors, including, but not limited to:

During the process of considering a potential nominee, the Nominating and Corporate Governance Committee and its 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 gaming regulators. In addition, the Nominating and Corporate 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 highly-regulated, multi-jurisdictional company subject to gaming regulatory oversight.

David Handler, who is an independent director, has served as our Board Chair 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 our Board Chair 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 Board Chair 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 Board Chair 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.

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:

Each member of the Board contributes a substantial amount of time and effort to serve as a Board and Committee member. During 2021:

In addition to the Board and Committee meetings set forth above, our Board of Directors and its committees acted by written consent from time to time as appropriate. Further, Board members are encouraged to, and regularly do, engage in informal discussions with each other and members of management, and they are provided periodic management reports and updates. The independent directors meet periodically in executive session.

During the year ended December 31, 2021, 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 2021 Annual Meeting of Shareholders.

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 and the Nominating and Corporate Governance Committee is independent under the NASDAQ Rules and the applicable rules and regulations of the SEC. The Compliance Committee also includes an independent non-director subject matter expert. 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

.

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 and has significant experience as an audit committee member on several public-company boards, which makes her particularly well qualified to serve as Chair of the Audit Committee.

The principal functions of the Audit Committee are to:

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.

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:

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 regularly holds meetings in executive session regarding executive performance and compensation, including establishing the CEO’s compensation.

The Nominating and Corporate Governance Committee is responsible for:

The Compliance Committee is chaired by an independent non-director member, Thomas N. Auriemma and comprised of three independent members of the Board. Mr. Auriemma 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.

The Compliance Committee’s primary responsibilities are to serve as an independent party to:

A key component of the Board’s role is to provide guidance on and oversight of the Company’s strategy. In connection with these responsibilities, the Board has an obligation to keep informed about the Company’s business and strategies. This involvement enables the Board to provide guidance to management in formulating and developing plans and to exercise independently the Board’s decision-making authority on matters of importance to the Company. Acting as a full Board and through the Board’s standing committees, the Board is directly involved in the Company’s strategic planning process.

Each year, senior management convenes to review and refine the Company’s overall corporate strategy. Strategic areas of importance and specific operating priorities are identified, which, in turn, inform the Company’s long-range planning. Some of the priorities will be short-term in focus; others will be based on longer time horizons. Senior management then reviews the conclusions reached with the Board at one or more meetings. These meetings involve both management presentations and input from the Board regarding the assumptions, priorities and strategies that form the basis for management’s operating plans.

At subsequent Board meetings, the Board continues to review the Company’s progress against its strategic priorities and to exercise oversight and decision-making authority regarding strategic areas of importance and associated authorizations. For example, at the end of each year the Board typically reviews the Company’s overall annual performance and considers the operating budget and capital plan for the coming year. Shortly thereafter, the Board usually finalizes specific criteria against which the Company’s performance will be evaluated for the coming year. In addition, Board meetings held throughout the year target areas of the business for extended, focused Board input and discussion. These time frames are flexible, however, and the Board adjusts its meeting agendas and plans to reflect business priorities and developments.

The oversight and input provided is integral to the development and review of the Company’s strategy and operating plans. Through this rigorous and interactive process, the Board encourages the long-term success of the Company by exercising sound and independent business judgment on the strategic issues that are important to the Company’s business.

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 (as part of its meetings and through its committees as described below) provides oversight with respect to our enterprise risk assessment and enterprise risk management activities that are designed to identify, prioritize, assess, monitor, and mitigate the various risks that have the potential to significantly impact the Company. These risks include those that are related to competition, gaming legislation, regulatory matters, legal issues, information and cyber security, system disruption, capital allocation, macroeconomic issues, capital markets, succession, executive compensation, financial statements, corporate social responsibility and other inherent and exogenous risks to our business, operations or prospects. Management is responsible for establishing and supervising day-to-day risk management processes and reporting to the Board and its Committees as necessary.

Where appropriate, the Board has delegated responsibility with respect to oversight of certain key risk areas to various Board and management committees. These committees report on their assigned risk oversight matters directly to the Board on a regular basis.

Pursuant to our Corporate Governance Guidelines and the NASDAQ Rules, to promote open discussion among non-management directors, the non-management directors regularly meet in executive session without management participation. The executive sessions occur after regularly scheduled meeting of the Board of Directors and at such other times that the non-management directors deem necessary or appropriate. The Board Chair, or, in the absence of a Board Chair, the Lead Independent Director, shall preside at such sessions; in the absence of the Lead Independent Director, the non-management directors present will elect a committee chair to preside at such session. If the group of non-management directors includes any directors who are not “independent” (as such term is defined from time to time under the NASDAQ Rules), an executive session of the independent directors shall be scheduled at least once per year. Currently, all our non-management directors are independent.

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, 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 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, 2021, the Company maintained a 53-person internal audit staff overseen by the Company’s Vice President, Internal Audit, who reports to the Audit Committee, and a 41-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 independent Chair 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.

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 2021, Exequity LLP (“Exequity”). 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 because of such other activities. In 2021, 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.

During 2021, the Company continued its long-standing practice of detailed, frequent communication and discussion with shareholders regarding executive compensation and corporate governance issues as well as typical investor relations matters. In 2021, we had director outreach to our top shareholders with Mr. Handler, our Board Chair, and Ms. Shattuck Kohn, the Chair of our Compensation Committee and our Lead Independent Director to discuss executive compensation and corporate governance matters.

The Company holds quarterly conference calls in which management provides brief prepared remarks followed by an open forum for questions, during which the Company provides 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. Further, members of the Company’s senior management team actively engage in investor relations efforts including frequent participation at institutional investor conferences, shareholder meetings and management staffed tours of our properties. These regular, ongoing 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 regarding our compensation program. For instance, based in part on our dialogue with shareholders, the Compensation Committee engaged its compensation advisor, Exequity, to study enhanced CEO retention practices for the Company’s CEO and President, Jay Snowden. Upon the Compensation Committee’s recommendation, the Board approved a two-phased, performance-based supplemental equity award during 2021, designed with the interests of shareholders in mind with vesting contingent upon both achieving absolute stock price milestones and relative total shareholder return milestones and continued employment with the Company for additional periods after achievement.

Our Board, in coordination with our Compensation Committee, carefully oversees CEO and senior management succession planning, most recently with respect to Mr. Snowden’s appointment as CEO and President on January 1, 2020. Our CEO, in consultation with our Senior Vice President, Chief Human Resources Officer, provides 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, including the qualifications, experience and development priorities for these individuals. 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, Operations and our Senior Vice President, Chief Human Resources Officer and is complementary to the Board’s succession planning.

Pursuant to the terms of its charter, the Company’s Audit Committee reviews and pre-approves all conflicts of interest and related person transactions. For purposes of the Audit Committee’s review, related-person transactions are transactions, arrangements or relationships where the Company is a participant and in which an executive officer, a director or an owner of 5% or greater of the Company’s common stock (or any immediate family member of the foregoing persons) has a direct or indirect material interest. The Company’s Code of Conduct has a broad definition of conflict of interest, which includes related person transactions, and requires employees to report potential conflicts to the Chief Compliance Officer. All potential conflicts of interest involving an executive officer, director or 5% or greater shareholder of the Company are communicated by the Chief Compliance Officer (or other members of Company management) to the Vice President of Internal Audit. The Vice President of Internal Audit then consults with members of the compliance, legal and finance staffs to determine whether the proposed transaction represents a conflict of interest or a related-person transaction that must be presented to the Audit Committee. For transactions determined to require Audit Committee review, the Vice President of Internal Audit collaborates with members of the legal and finance staffs to prepare and present the transaction to the Audit Committee. In terms of standards applied by the Audit Committee in reviewing related person transactions, a director will not participate in the review of transactions in which such director or his or her immediate family member has an interest. The Audit Committee will only approve related person transactions that are not inconsistent with the best interests of the Company and its shareholders, based on a review of (i) the benefits to the Company of the transaction and (ii) the terms of the transaction and the terms available to or from unrelated third parties, as applicable.

Currently, the policy to review related-person transactions is evidenced in the Audit Committee charter, the Code of Conduct and the Corporate Governance Guidelines, and certain of the procedures followed in considering related-person transactions are based on past practice and the advice of counsel.

Allison Bassman, Senior Director of People and Culture for Penn Interactive Ventures, LLC, is the daughter of Jane Scaccetti, a member of the Company’s Board of Directors. Ms. Bassman joined the Company in 2020. For 2021, Ms. Bassman annual salary was $140,000 and she received a bonus of $25,400.

The Company pays fees to each director who is not an employee of the Company. During the year ended December 31, 2021, the annual compensation for each non-employee director (other than Vimla Black-Gupta who joined in June 2021) 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, and $5,000 for service on the Nominating and Corporate Governance Committee. In addition, the Chair of the Audit Committee receives a $15,000 annual retainer, the Chair of the Compensation Committee and the Chair of the Nominating and Corporate Governance Committee each receives a $10,000 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. Ms. Black-Gupta received a prorated portion of her 2021 cash retainer.

In 2021, each non-employee director other than the Board Chair received a grant of restricted stock units or restricted stock at his or her election with a value of $250,000, and the Board Chair received a grant of restricted stock units or restricted stock at his election with a value of $375,000. Each award of restricted stock units or shares of restricted stock vests on the first anniversary of the date of grant.

The following table sets forth information with respect to all compensation awarded to the Company’s non-employee directors for 2021.

Set forth below is certain information regarding each of our current executive officers, other than Mr. Snowden, whose biographical information is presented under “Proposal 1: Election of Class II Directors—Continuing Directors.”

Felicia Hendrix has served as or Executive Vice President, Chief Financial Officer since March 2021. Ms. Hendrix joined us following more than 20 years as an equity research analyst covering the gaming, lodging and leisure industries. Prior to joining Penn, Ms. Hendrix was most recently a Managing Director and Equity Research Analyst at Barclays, covering the gaming, lodging and leisure industries and had been consistently recognized in the Institutional Investor All Americas Research Team polls. Her diverse coverage universe enables Ms. Hendrix to bring a unique perspective to Penn National. Prior to joining Barclays, Ms. Hendrix was a Managing Director at Lehman Brothers. Ms. Hendrix holds a bachelor’s degree from the University of Virginia and an M.B.A. from the Darden School of Business at the University of Virginia.

Todd George has served as our Executive Vice President, Operations since January 2020. Mr. George joined us in October 2012 as Vice President and General Manager of Hollywood Casino in Lawrenceburg, Indiana, transitioning to the role of Vice President and General Manager of Hollywood Casino St. Louis in 2014. In 2017, he was promoted to his previous role as Senior Vice President, Regional Operations, overseeing nine properties in the Company’s Midwest Region. Prior to joining Penn National, Mr. George spent 12 years in various management positions at Pinnacle Entertainment Inc., including leading the development and launch of Pinnacle Entertainment, Inc.’s two St. Louis, Missouri properties. Mr. George holds a bachelor’s degree from LeMoyne College and an M.B.A. from Villanova University.

Chris Rogers has served as our Executive Vice President, Chief Strategy Officer since January 2020. Mr. Rogers joined us in 2013 and has served in various roles, including Senior Vice President, Corporate Development and Vice President, Deputy General Counsel. Prior to joining Penn, he was a corporate attorney at the Dallas-based law firm Vinson & Elkins and the Boston-based law firm Ropes & Gray, as well as a CPA for PricewaterhouseCoopers and Arthur Andersen. Mr. Rogers holds a Bachelor of Business Administration from the University of Oklahoma’s Price College of Business and a J.D. from Harvard Law School.

The following table sets forth certain information regarding the beneficial ownership of the Company’s common stock, as of April 8, 2022, by (i) each person known to us to beneficially own more than 5% of any class of the outstanding voting securities of the Company, (ii) each of our directors, (iii) each of our named executive officers listed in the table entitled “2021 Summary Compensation Table” below and (iv) all of our current directors and executive officers as a group. Beneficial ownership of shares is determined under rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Except as noted by footnote, and subject to community property laws where applicable, we believe based on the information provided to us that the persons and entities named in the table below have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them. Unless otherwise noted below, the address of the persons listed in the table is c/o Penn National Gaming, Inc., 825 Berkshire Blvd., Wyomissing, PA 19610. The percentages shown in this table are calculated based on 166,200,380 shares of our common stock outstanding as of April 8, 2022.

cont.

During 2021, the members of the Compensation Committee were:

None of the members of the Compensation Committee during 2021 was an officer or employee or former officer or employee of the Company or its subsidiaries during 2021 or has any interlocking relationships that are subject to disclosure under the rules of the SEC relating to compensation committees.

The following Compensation Committee report to shareholders shall not, in accordance with the rules of the SEC, be incorporated by reference into any of our future filings made under the Exchange Act or under the Securities Act, and shall not be deemed to be soliciting material or to be filed under the Exchange Act or the Securities Act.

The Committee has reviewed and discussed the following Compensation Discussion and Analysis (the “CD&A”) with the management of the Company. Based on the review and discussions described above, the Compensation Committee has recommended to the Board of Directors that the CD&A be included in this Proxy Statement.

Barbara Shattuck Kohn, Chair

Vimla Black-Gupta

Marla Kaplowitz

Saul Reibstein

The following Compensation Discussion and Analysis (“CD&A”) discusses the principles underlying our executive compensation

policies and decisions for 2021. Our named executive officers for 2021 were:

2021 was a transformative year for Penn National that highlighted our ability to execute our differentiated strategy spearheaded by CEO and President Jay Snowden upon his promotion to the role in January 2020. In just two years, Mr. Snowden has led Penn on a journey that transformed us from a traditional retail casino operator into a highly- innovative provider of integrated entertainment, sports content, and casino gaming experiences with multiple organic cross-selling opportunities across our powerful business verticals. Under Mr. Snowden’s leadership, the executive team is reimagining Penn National’s operational norms and product offerings, creating a more modern and efficient operating model.

While the outbreak of the COVID-19 pandemic presented significant operating challenges, including temporary closures and then limited operating capacity at all the Company’s properties during 2020 and part of 2021, Mr. Snowden successfully navigated Penn National through a series of strategic initiatives, mitigation efforts and capital raises that reinforced the Company’s resilience, including:

Monetization of excess “skins.” In the beginning of 2020, we monetized Penn National’s excess sports betting and iCasino “skins” through partnerships with several leading operators, including DraftKings, PointsBet and theScore, creating valuable recurring revenue and equity value that have been pivotal for the success of our transformation efforts.

Investment in Barstool Sports. In February 2020, we acquired a minority interest in Barstool Sports, a leading sports media and entertainment company with a fully integrated media platform. We became Barstool Sports’ exclusive gaming partner for up to 40 years with the right to utilize the Barstool Sports brand for all of our online and retail sports betting and iCasino apps.

Joined the S&P 500. On March 22, 2021, we joined the S&P 500 index.

Acquisition of theScore. In October 2021, we completed the acquisition of theScore, one of North America’s leading sports media companies which provided us with a large, dedicated userbase and full control of our product and technology roadmap.

Evolution of our wholly-owned Interactive Division. Our Penn Interactive division evolved into a sophisticated operator of sports betting in the Company’s retail properties, as well as online sports betting and online social casino, bingo and iCasino products. In May 2021, we acquired HitPoint, Inc. and LuckyPoint, Inc. to create Penn Game Studios, which successfully launched its first two in-house developed games and continues to develop customized and highly engaging entertainment. The combined power of theScore, Barstool Sports, and Penn Game Studios has propelled the Company’s Interactive division to become a leading North American digital sports content, gaming and technology company, supporting our disciplined approach to customer acquisition in a highly-competitive market environment.

Continued retail gaming growth through acquisitions and development. During 2021, we acquired the operations of Hollywood Casino Perryville, and we opened two Category 4 Casinos in Morgantown and York, Pennsylvania.

Investment in technologies to enhance the customer experience. In 2021, we made meaningful investments in technology that will enhance the customer experience and improve efficiencies at our land-based properties. We also launched our mychoice® mobile app, followed by the implementation of our revolutionary cardless, cashless, contactless ‘mywallet’ experience (“3Cs”) at all eight of our properties in Pennsylvania and Ohio. These new technologies removes friction from transactions, reduces wait times and lines, and relieves some of the burden created by the challenging labor market. These technologies position Penn National for the future by aligning our communication and fintech experience with the expectations of younger consumers who are accustomed to cashless options in all aspects of their day-to-day lives. We expect to introduce the 3Cs technology across all of our regions throughout 2022 pending regulatory approval.

Enhancement of our ESG efforts. In 2021, we continued to advance our commitment to responsible corporate citizenship, launching a series of new ESG initiatives to help take care of our team members, our communities and the planet, including:

Under Mr. Snowden’s leadership, the executive team is reimagining Penn National’s operational norms and product offerings, creating a more modern and efficient operating model. These efforts enabled us to achieve all-time high margins and record free cash flow in 2021 and to end the year with the strongest balance sheet in our Company’s history.

In 2022, we will continue to execute on our highly-differentiated strategy to expand our ecosystem and drive shareholder value with additional mobile and retail sports book and iCasino launches, the transition to theScore’s proprietary risk and trading platform in Canada and the integration of the Barstool Sportsbook into theScore media app, all while remaining committed to good corporate citizenship.

 

Our program is aligned with long-term shareholder returns, with a significant portion of our executive compensation at risk. In 2021, 87.5% of our Chief Executive Officer’s total target compensation, and 77.3% (on average) of our other Named Executive Officers’ total target compensation was variable and at risk, subject to achievement of pre-set performance goals or tied to our long-term stock price performance.

 

The COVID-19 pandemic continued to have a significant impact on our operations through 2021, making it challenging to set reliable financial and long-term performance targets. At the start of 2021, many of our retail casino locations continued to be closed or operated at a reduced capacity due to COVID-19 safety measures. We were also just at the initial stages of deploying our interactive product offerings, and the pandemic’s impact on our efforts remained uncertain. Due to the impacts of COVID-19 in 2020, the Company was not able to achieve the target for Adjusted EBITDA after Lease Payments, which resulted in no payment of short-term incentive awards to named executive officers and senior management. In addition, the Compensation Committee made the difficult decision to revisit the 2020 long-term incentive metrics under the 2018, 2019 and 2020 performance plans and exclude the Adjusted EBITDA after Lease Payments metric due to the significant impact of retail casino closures, while concurrently noting the significant stock price appreciation in 2020, the efforts of the named executive officers in 2020 and the important retention value of the LTI awards. These circumstances made it challenging to forecast reliable long-term performance goals at the

beginning of 2021. To align our customary focus on operational efficiency with our differentiated strategy of delivering integrated entertainment, sports content, and casino gaming experiences, the Compensation Committee approved the following performance goals, applicable to our annual incentive program and the 2021 portion of the long term incentive program: (i) Adjusted EBITDAR margin improvement in 2021 as compared to 2019; and (ii) online sports betting and/or iCasino platforms in operation as of December 31, 2021. These two metrics were the best indicators of our short-term tactical success and future ability to create long-term shareholder value, incentivizing the executive team to make progress on key strategic priorities for our success.

We delivered financial and operational results in 2021. We leveraged the strong recovery of our land-based operations to drive 655 basis point of Adjusted EBITDAR margin improvement versus fiscal 2019, while also achieving record Adjusted EBITDAR and record free cash flow and we ended the year with the lowest lease-adjusted net leverage in the Company’s history. Additionally, we scaled our interactive segment with 15 online platforms operational across 11 states at year end, which is a testament to the team’s ability to build the interactive segment capacity rapidly with a more than 5.6x increase in the interactive division headcount, despite the challenging talent market environment. These record performance results exceeded the stretch goals under our annual incentive program and the performance-based long-term incentives for 2021.

To incentivize long-term value creation and retention, the Compensation Committee approved a two-part wholly performance-based equity award for the CEO. The award is aligned with and supports our execution on this strategy and requires extraordinary shareholder value creation that would generate and sustain between $4.7 billion and $34.8 billion in market capitalization growth based on the grant date stock price. Reflective of our stock price on the record date, our market capitalization would need to appreciate by approximately 238%⁽¹⁾ for the award to deliver any value to the CEO. Any shares earned at the end of each phase of the performance periods are subject to the additional service-based vesting requirements, with the vesting of the last portion of the second phase of the award extending through the end of fiscal 2029. We are not aware of any similar incentive award structures in the market that apply a two-phased approach that includes extraordinarily rigorous absolute and relative stock price performance hurdles, an incentive opportunity that is conditional in nature, a combination of performance- and service-based requirements that extend vesting over a full eight-year period to create long-term alignment with the shareholders’ interests. No portion of the award has vested as of the record date, and its outcome remains uncertain.

The primary components of our executive compensation program are base salary, short-term incentive compensation (cash bonus plan) and long-term incentive compensation (equity). These components are described in more detail below.

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.

As a foundation of this philosophy, Penn National has implemented the following fundamental compensation policies and governance practices:

The Compensation Committee of our Board of Directors oversees our executive compensation program and evaluates and determines the appropriate executive compensation philosophy and objectives for Penn National, the process for establishing executive compensation, and the appropriate design and levels of our executive compensation program and compensation arrangements. The Compensation Committee consists entirely of independent directors who review and approve our overall executive compensation programs and practices and set the compensation of our executive officers (the compensation of our Chief Executive Officer is approved by the Board following the recommendation of the Compensation Committee). In determining compensation for our executive officers, other than our Chief Executive Officer, the Committee considers, among other things, the recommendations of our Chief Executive Officer. The Compensation Committee has the authority to delegate any of its responsibilities to subcommittees as the Compensation Committee may deem appropriate, in its sole discretion, and also is supported in its work by an independent compensation consultant, as described below. The Compensation Committee is, however, solely responsible for making the final decisions on compensation for our executive officers.

In order to ensure that compensation programs are aligned with our strategic objectives and appropriate performance goals, management provides input to the Compensation Committee with respect to the compensation-setting process. The Chief Executive Officer, the Executive Vice President, Chief Legal Officer and Secretary, and the Senior Vice President, Chief Human Resources Officer are the officers who interact most closely with the Compensation Committee. These individuals work with the Compensation Committee to provide their perspective on aligning executive compensation strategies with our business objectives. When determining compensation for our executive officers, the Chief Executive Officer provides the Compensation Committee with his input regarding executive performance and recommends base salary and annual and long-term incentive targets for each of our executive officers (other than himself). The performance of the Chief Executive Officer is assessed directly by the Compensation Committee (with input from other independent directors) in executive session.

The Compensation Committee engaged an independent third-party executive compensation consultant for 2021, Exequity LLP (“Exequity”). 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. The Compensation Committee, in its sole discretion, has sole authority to select, approve, retain, terminate and oversee its relationship with the firm. Exequity did not provide other consulting services to Penn National or any of its executive officers in 2021. In selecting its compensation consultant, the Compensation Committee considered the independence of such consultant in accordance with the standards of the NASDAQ Rules, any applicable rules and regulations of the SEC and other applicable laws relating to independence of advisors and consultants. The Compensation Committee concluded that no conflict of interest exists that would prevent Exequity from independently advising the Compensation Committee.

At the Compensation Committee’s request, Exequity regularly attends Compensation Committee meetings. Exequity also communicates with the Chair of the Compensation Committee outside committee meetings regarding matters related to the Compensation Committee’s responsibilities.

The Company has a long tradition of regularly engaging in constructive and meaningful conversations with shareholders about its compensation practices, corporate governance and sustainability priorities. The Board values the input and insights of our shareholders and believes that consistent and effective Board-shareholder communication strengthens the Board’s role as an active, informed, and engaged fiduciary.

In 2021, we contacted representatives of shareholders representing holders of approximately 59% of our then-outstanding shares of common stock. Mr. Handler, our Board Chair, and Ms. Kohn, our Compensation Committee Chair, Lead Independent Director, and, at the time, Chair of our Nominating and Corporate Governance Committee, engaged in in-depth discussions regarding compensation practices with shareholders representing approximately 38% of our then-outstanding shares of common stock. We gained valuable feedback related to our compensation practices as well as our strategy and value proposition and corporate governance. Specifically, in response to shareholder feedback as it relates

to the importance of talent and appropriate incentives related to talent retention, the Board and the Compensation Committee formulated the concept and design of Mr. Snowden’s supplemental performance-based equity award. Shareholder feedback also informed our 2021 compensation related to the use of “online sports betting and/or iCasino platforms in operation” as a performance metric for our short and long-term incentive plans.

In addition, the Compensation Committee, in consultation with its 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 regular 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. 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.

The Compensation Committee’s responsibilities include, among others, oversight of risks related to our compensation practices and plans to ensure that such practices and plans are designed with an appropriate balance of risk and reward in relation to our overall business strategy and do not encourage excessive or unnecessary risk-taking behavior. As a result, the Committee carefully reviews the Company’s compensation and benefits programs in the context of potential risks. The executive compensation program is structured as a balanced mix between fixed and variable, annual and long-term, and cash and equity 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 and operational 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 and performance-based common stock awards 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 the performance awards are subject to maximum payout schedules. In addition, we have share ownership guidelines that require our executive officers own a certain multiple of their base salary in form of our common stock (ranging from six times for the CEO to three times for other executive officers) to help ensure that executives always have significant value tied to long-term stock price performance. The ownership guidelines must be achieved within five years of assuming the individual’s 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. These cash and incentive awards, especially when combined with the compensation clawback policy described on page 61 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 foregoing, we do not believe that our compensation policies and practices create risks that are reasonably likely to have a material adverse effect on the Company. We also believe that our incentive compensation arrangements provide incentives that do not encourage risk-taking beyond the Company’s ability to effectively identify and manage significant risks, are compatible with effective internal controls and are supported by the oversight of the Compensation Committee with regard to executive compensation programs.

The Compensation Committee reviews the potential total compensation package for each of the executive officers against a pre-selected peer group of companies, based on data compiled by its independent compensation consultant. Consistent with the objectives of the Company’s executive compensation program, the Compensation Committee compares executive officer compensation against the median compensation opportunities of these peer companies (“benchmarking analysis”) to ensure that the Company is able to attract and retain highly qualified executive officers by providing a total compensation package that is competitive with those provided by the Company’s peers. The Compensation Committee with the assistance of its independent compensation consultant reviews the Company’s peer group annually to determine whether any changes are warranted from the prior year’s peer group.

Gaming is a specialized and regulated industry, and 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 a digital sports content, gaming and technology company). Many of the Company’s executives have been recruited from other gaming enterprises and 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 digital sports content, gaming and technology 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 setting executive compensation opportunities for fiscal 2021, the Compensation Committee determined that it was appropriate to continue using our 2020 peer group:

As our business continues its journey to becoming North America’s leading provider of retail and online gaming, live racing and sports betting entertainment, the companies that we consider to be our business competitors are evolving rapidly to include companies from media, social platforms and other industry segments. As such, for fiscal 2022 compensation, we expanded our peer group universe to align with our needs for executive talent skill set and experience in support of our long-term growth strategy. Technology expertise in particular is becoming a core competency for our executive officers. For these reasons, along with the continued growth of our Company, the Compensation Committee, with the assistance of Exequity, reviewed the composition of our peer group during 2021 and determined that the appropriate peer group for determining relative industry performance as well as for recruitment and retention purposes for 2022 pay alignment consists of the following companies:

At the 2021 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 approximately 88% of votes cast, excluding abstentions and broker non-votes. The Committee reviewed and considered the final vote results for that resolution, and together with feedback received through shareholder engagement, this collective feedback informed changes to our compensation practices in 2021. Specifically, shareholder feedback as it relates to the importance of talent and appropriate incentives related to talent retention was instrumental in the concept and design of Mr. Snowden’s supplemental performance-based equity award. Shareholder feedback also informed our 2021 compensation related to the use of “number of online sports betting and/or iCasino platforms in operation” as a performance metric for our short and long-term incentive plans.

Our executive compensation program consists of the following primary components: base salary, annual short-term incentive compensation (annual cash bonus plan) and long-term incentive compensation (equity).

Base salary is the fixed element of an executive officer’s annual cash compensation and is intended to attract and retain highly qualified executives and to compensate for expected day-to-day performance. The Compensation Committee reviews the base salary for each of our executive officers on an annual basis and considers the following factors in making its determinations: the executive officer’s position, responsibilities associated with that position, experience, expertise, knowledge and qualifications, market factors, the industry in which we operate and compete, recruitment and retention factors, the executive officer’s individual compensation history, salary levels of the other members of our executive team, the median salaries of similarly situated/comparable executives in our peer group, and our overall compensation philosophy. The Compensation Committee benchmarks the Company’s named executive officer salaries in reference to the peer median salaries.

Set forth in the table below are the 2020 and 2021 base salaries for each of our named executive officers, indicating the year-over-year percentage increase. Effective as of January 1, 2021, the Board increased Mr. Snowden’s base salary to $1,800,000 to bring his total target compensation into closer alignment with the CEO peer median and to bring his base salary closer to the CEO peer median base salary of $2,000,000. Also, effective as of January 1, 2021, the Compensation Committee increased Mr. George’s salary to $725,000 in recognition of his increased responsibilities as an executive officer.

Our executive officers are eligible for short-term cash incentive compensation, which is intended to motivate the executive officers to achieve short-term company performance goals that will inure to the benefit of our Company and shareholders and to align executive officers’ interests with those of the shareholders. The STIP provides payout opportunities based on the achievement of pre-determined corporate performance objectives, with actual STIP bonuses earned based on the achievement of such performance objective(s) each fiscal year. Each fiscal year, the Compensation Committee sets the range of STIP opportunity 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. The Compensation Committee benchmarks the Company’s named executive officer target bonuses in reference to the peer median target bonus levels. With respect to 2021, the 2021 STIP opportunity for our named executive officers are set forth in the table below:

No compensation is awarded for below-threshold performance. If corporate performance is between performance levels (i.e., between threshold and target, or between target and stretch), the actual amount of the award that is earned will be determined by linear interpolation using the two identified levels of performance. 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.

The “threshold”, “target” and “stretch” performance levels for 2021 performance metrics were established by the Compensation Committee in early 2021. In order to determine the appropriate rigor of such performance levels with respect to the 2021 STIP, the Compensation Committee reviewed the Company’s 2021 operating plan and considered various performance metrics related to the objective of the operating plan. Based on this analysis, the Compensation Committee adopted the following performance metrics it determined to be rigorous but achievable in order to challenge our executive team to deliver consistent margin improvement and an aggressive rollout of our online sports betting and iCasino platforms:

The Compensation Committee believes that these were appropriate measures to use for the 2021 annual incentive program because they balanced an aggressive approach to executing on our highly differentiated strategy with a disciplined approach to spending.

The metrics and the bonus payment thresholds corresponding to such metrics are set forth below:

During the first quarter of 2022, Adjusted EBITDAR margin improvement in 2021 as compared to 2019 and total online sports betting and/or iCasino platform results were determined against the 2021 performance metrics under the STIP. Based on our Adjusted EBITDAR margin improvement of 655 basis points in 2021 as compared to 2019 and operation of 15 online sports betting or iCasino platforms as of December 31, 2021, the Compensation Committee approved the following STIP awards for the named executive officers (the Board approves the Chief Executive Officer’s STIP award following the recommendation of the Compensation Committee):

We maintain a long-term incentive program, which provides for the granting of time-based and performance-based equity incentive awards under the Penn National Gaming, Inc. 2018 Long Term Incentive Plan (the “2018 Plan”) to the Company’s executive officers and to other employees, consultants and advisors as designated by the Chief Executive Officer. The LTIP was established in consultation with the Compensation Committee’s independent compensation consultant and is intended to closely align the interest of the Company’s executive officers, employees, consultants and advisors with the interests of our shareholders by encouraging participants to “think like owners” and to increase the long-term value of the Company by aligning their interests with those with those of the Company’s shareholders through a combination of time-based awards and performance-based awards with rigorous financial and operational performance metrics. There were 848 recipients of grants under the 2018 Plan during 2021.

Each fiscal year, the Compensation Committee determines an aggregate target value for the time-based and performance-based portions of annual LTIP award for each executive officer generally consistent with the incentive programs and practices used by the Company’s peer group and establishes the performance conditions used for the performance-based portion of the LTIP, as well as the levels of performance (threshold, target and stretch) required to be achieved under the program (the Board approves the Chief Executive Officer’s LTIP award following the recommendation of the Compensation Committee). When establishing long-term incentive levels, the Compensation Committee references the median peer long-term incentive values among the peers. The following table sets forth the aggregate 2021 annual long-term incentive award targets for our named executive officers:

The illustration below sets forth the structure of our 2021 regular annual LTIP:

As shown in the illustration above, for 2021, the LTIP provides for annual grants of equity awards that are issued in two parts. 50% are time-based awards consisting of non-qualified stock options (“Time-Based Awards”) that vest ratably, annually over a four-year period. 50% are performance-based awards consisting of performance shares and units (“Performance Awards”) that vest based on the achievement of certain performance conditions over a three-year period consisting of three one-year performance periods. One or more performance goals are established for each one-year performance period. The terms of the Performance Awards and Time-Based Awards are described below.

The Compensation Committee approved the grant of the following LTIP awards to the Company’s executive officers for 2021 as set forth in the table below.