SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14A-6(E)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-12
PENN NATIONAL GAMING, INC.
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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/ / Fee paid previously with preliminary materials.
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the offsetting fee was paid previously. Identify the previous
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schedule and the date of its filing.
(1) Amount Previously Paid:
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[LOGO]
PENN NATIONAL GAMING, INC.
825 BERKSHIRE BOULEVARD, SUITE 200
WYOMISSING, PENNSYLVANIA 19610
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 23, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Penn
National Gaming, Inc. (the "Company"), a Pennsylvania corporation, will be held
on May 23, 2001, at 10:00 a.m., local time, at the offices of Schnader Harrison
Segal & Lewis, LLP, 38th Floor, 1735 Market Street, Philadelphia, Pennsylvania
19103 for the following purposes:
1. To elect two Class I Directors for a term of three years and until their
successors are duly elected and qualified.
2. To consider and act upon a proposal to ratify the appointment of BDO
Seidman, LLP as independent public accountants for the Company for the
fiscal year ending December 31, 2001.
3. To consider and transact such other business as may properly come before
the Annual Meeting or any postponement or adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice of Annual Meeting.
Only shareholders of record at the close of business on April 6, 2001 are
entitled to notice of and to vote at the Annual Meeting and any postponement or
adjournment thereof. All shareholders are cordially invited to attend the Annual
Meeting in person. Any shareholder attending the Annual Meeting may vote in
person even if such shareholder previously signed and returned a proxy.
BY ORDER OF THE BOARD OF DIRECTORS,
Robert S. Ippolito
SECRETARY
Wyomissing, Pennsylvania
April 24, 2001
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
PROVIDED FOR THAT PURPOSE TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE
NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
[LOGO]
PENN NATIONAL GAMING, INC.
825 BERKSHIRE BOULEVARD, SUITE 200
WYOMISSING, PENNSYLVANIA 19610
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 23, 2001
This Proxy Statement and the enclosed Proxy are first being sent or given to
shareholders of Penn National Gaming, Inc. (the "Company") on or about
April 24, 2001, in connection with the solicitation of proxies for use at the
Company's 2001 Annual Meeting of Shareholders ("Annual Meeting") to be held
May 23, 2001, at 10:00 a.m., local 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 at the offices of Schnader
Harrison Segal & Lewis, LLP, 38th Floor, 1735 Market Street, Philadelphia,
Pennsylvania 19103. This solicitation is being made on behalf of the Board of
Directors of the Company.
INFORMATION CONCERNING SOLICITATION AND VOTING
RECORD DATE AND SHARES OUTSTANDING
The Board of Directors has fixed the close of business on April 6, 2001, as
the record date ("Record Date") for the determination of shareholders of the
Company entitled to notice of, and to vote at, the Annual Meeting. On the Record
Date, 15,061,100 shares of the Company's Common Stock were issued and
outstanding and entitled to vote at the Annual Meeting.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company written notice of revocation or a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person.
VOTING AND SOLICITATION
The presence, in person or by proxy, of shareholders entitled to cast at
least a majority of the votes which all shareholders are entitled to cast is
necessary for a quorum to be present at the Annual Meeting. Each share of the
Company's Common Stock outstanding is entitled to one vote on each matter which
may be brought before the Annual Meeting.
Proxies given in the form enclosed, unless previously revoked, will be voted
at the Annual Meeting in accordance with the instructions contained therein, AND
IF NO CHOICE IS SPECIFIED, WILL BE VOTED IN FAVOR OF THE PROPOSALS SET FORTH IN
THE NOTICE OF MEETING. Assuming a quorum is present, (a) the affirmative vote of
a plurality (the greatest number) of the votes cast at the Annual Meeting is
required for the election of directors; and (b) the affirmative vote of a
majority of the votes cast at the Annual Meeting is required for (i) the
ratification of BDO Seidman, LLP as the Company's independent public
accountant's for the year ending December 31, 2001; and (ii) the approval of any
other matters which may properly come before the Annual Meeting or any
postponement or adjournment thereof. For purposes of determining the number of
votes cast, only those cast "for" or "against" are counted. Abstentions and
broker non-votes are not considered "cast" but are counted for purposes of
determining whether a quorum is present at the Annual Meeting. Under
Pennsylvania law, a quorum is required to conduct business at the Annual
Meeting.
It is expected that the solicitation of proxies will be conducted primarily
by mail. Proxies also may be solicited personally or by telephone, telegraph,
telecopy or via the internet. The cost of this solicitation will be borne by the
Company. In addition, the Company may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Proxies also may be
solicited by certain directors, officers and employees of the Company, without
additional compensation, personally or by telephone, telegram, telecopy or via
the internet.
PROPOSAL 1: ELECTION OF DIRECTORS
INFORMATION ABOUT NOMINEES AND OTHER DIRECTORS
Two Class I Directors will be elected at the Annual Meeting to hold office,
subject to the provisions of the Company's By-Laws, until the annual meeting of
shareholders of the Company to be held in the year 2004 and until their
respective successors are duly elected and qualified.
The following table sets forth the name, age, principal occupation, and
respective service dates of each person who has been nominated to be a Director
of the Company:
DIRECTOR TERM
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE EXPIRES
--------------- -------- -------------------- -------- --------
William J. Bork............ 67 President and Chief Operating Officer 1995 2004
Robert P. Levy............. 69 Chairman of the Board of the Atlantic 1995 2004
City Racing Association
THE BOARD OF DIRECTOR UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" EACH OF THE NOMINEES.
WILLIAM J. BORK. Mr. Bork was elected President and a Director in 1995.
From 1987 to June 1995, he was Vice President for Ladbroke Racing Commission.
Prior to working with Ladbroke, Mr. Bork served as Vice President of Operations
of racetracks previously owned by Ogden Corporation, including: Fairmount Park
in Collinsville, Illinois; Mountaineer Park in Chester, West Virginia; Wheeling
Downs in Wheeling, West Virginia; and Suffolk Downs in Boston Massachusetts.
ROBERT P. LEVY. Mr. Levy has been Director since 1995. He is Chairman of
the Board of the Atlantic City Racing Association and served a two-year term
from 1989 to 1990 as President of the Thoroughbred Racing Association. Mr. Levy
has served as the Chairman of the Board of DRT Industries, Inc., a diversified
business based in the Philadelphia metropolitan area, since 1960. Mr. Levy owns
the Robert P. Levy Stable, a thoroughbred racing and breeding operation that has
bred and owned several award-winning horses, including the 1987 Belmont Stakes
winner, Bet Twice.
The following table sets forth the name, age, principal occupation, and
respective service dates of each Director whose term of office extends beyond
the date of the Annual Meeting:
DIRECTOR TERM
NAME AGE PRINCIPAL OCCUPATION SINCE EXPIRES
---- -------- -------------------- -------- --------
Peter M. Carlino........... 54 Chairman of the Board and Chief 1994 2002
Executive Officer
Harold Cramer.............. 73 Retired Partner, Schnader Harrison 1994 2002
Segal & Lewis, LLP
David A. Handler........... 36 Senior Managing Director at Bear 1994 2003
Sterns & Co., Inc.
John M. Jacquemin.......... 54 President Mooring Financial Group 1995 2003
2
PETER M. CARLINO. Mr. Carlino has served as the Company's Chairman of the
Board and Chief Executive Officer since 1994 and as a Director since 1994. Since
1976 he has been President of Carlino Financial Corporation, a holding company
that owns and operates various Carlino family businesses, in which capacity he
has been continuously active in strategic planning for Carlino Financial and
monitoring its operations. From 1972 until 1976, Mr. Carlino served as President
of Mountainview Thoroughbred Racing Association, a subsidiary of the Company.
HAROLD CRAMER. Mr. Cramer has been a Director since 1994. From
November 1996 to July 2000, Mr. Cramer was Counsel to Mesirov Gelman Jaffe
Cramer & Jamieson, LLP, which merged with Schnader Harrison Segal & Lewis, LLP
in July 2000. Schnader Harrison is a Philadelphia based law firm that provides
legal services to the Company. Mr. Cramer is now a retired partner of Schnader
Harrison Segal & Lewis, LLP. From November 1995 until November 1996, Mr. Cramer
was Chairman of the Board and Chief Executive Officer of HSI Management
Co., Inc. From 1989 until November 1995, Mr. Cramer was Chairman of the Board
and Chief Executive Officer of Graduate Health System, Inc. and has been a
Director of Graduate n/k/a/ Philadelphia Health Care Trust since November 1996.
He also serves as a Director of several of the Company's subsidiaries.
DAVID A. HANDLER. Mr. Handler has been a Director since 1994. Since
April 2000, Mr. Handler has been a Senior Managing Director at Bear Sterns &
Co., Inc. From July 1995 to April 2000, Mr. Handler was employed by Jefferies &
Company, Inc. where he became a Managing Director in March 1998. From
October 1991 to July 1995, he was a Vice President at Fahnestock & Co., Inc.
JOHN M. JACQUEMIN. Mr. Jacquemin has been a Director since 1995 and is
President of Mooring Financial Corporation, a financial services group
specializing in the purchase and administration of commercial loan portfolios
and equipment leases. Mr. Jacquemin joined Mooring Financial Corporation in 1982
and has served as its President since 1987. He also serves as Director of
Cel-Sci Corporation.
MEETINGS OF THE BOARD OF DIRECTORS AND INFORMATION ABOUT BOARD COMMITTEES
The Board of Directors held seven meetings during the fiscal year ended
December 31, 2000. Three of the meetings were conducted by telephone conference
calls. Mr. Carlino, Mr. Bork and Mr. Cramer attended all seven meetings;
Mr. Jacquemin and Mr. Levy attended six of the meetings; and Mr. Handler
attended five of the meetings. Each Director attended all the meetings of the
Board committees on which he served.
The Company has two standing Committees: the Audit Committee and
Compensation Committee. Harold Cramer, John M. Jacquemin and Robert P. Levy are
the members 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; review and appraise the audit efforts of the Company's independent
accountants; and maintain free and open communication with and among the
independent accountants, financial and senior management, and the Board of
Directors. Harold Cramer and David A. Handler are members of the Compensation
Committee. The Compensation Committee reviews compensation and benefits for the
Company's executives and administers the grant of stock options to executive
officers under the Company's Plan. One meeting of each of the Audit Committee
and the Compensation Committee was held in 2000. The Board of Directors does not
have a nominating committee.
3
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of March 10, 2001, by each
person known to the Company to own beneficially more than five percent of the
Company's outstanding Common Stock, each director, the chief executive officer
and each of the four other most highly compensated executive officers of the
Company and all of the executive officers and directors of the Company as a
group.
NUMBER OF SHARES PERCENTAGE OF
NAME AND ADDRESS(1) BENEFICIALLY OWNED CLASS(2)
------------------- ------------------ -------------
Peter D. Carlino(3)......................................... 4,668,386 31.0%
Peter M. Carlino(4)(5)...................................... 5,736,212 36.5%
Richard J. Carlino(6)....................................... 4,510,152 30.0%
Harold Cramer(5)(7)......................................... 4,706,886 31.2%
Carlino Family Trust(8)..................................... 4,485,808 29.8%
William J. Bork(5).......................................... 300,668 2.0%
Robert S. Ippolito(5)....................................... 89,600 0.6%
David A. Handler(5)......................................... 86,395 0.6%
John M. Jacquemin(5)........................................ 37,200 0.2%
Robert Abraham(5)........................................... 23,750 0.2%
Robert P. Levy(5)........................................... 22,500 0.1%
Joseph A. Lashinger Jr.(5).................................. 12,500 0.1%
George A. Connolly(5)....................................... 7,700 0.1%
Akre Capital Management, LLC
Potomac Tower, 6th Floor
1001 19th Street North
Arlington, Virginia 22209(9).............................. 1,099,998 7.3%
All executive officers and directors as a group (10
persons)(5)............................................... 6,537,603 43.4%
------------------------
(1) The persons named in the above table have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them except as otherwise shown in the succeeding footnotes, and the address
of each such person, other than Akre Capital Management, LLC is c/o the
Company, 825 Berkshire Boulevard, Suite 200, Wyomissing, Pennsylvania 19610.
(2) The percentage for each beneficial owner is calculated based on (i) the
aggregate number of shares reported to be owned by such group or individual
and (ii) the aggregate number of shares of Common Stock outstanding as of
March 10, 2001 (15,053,600 shares).
(3) The number of shares in the table includes 4,485,808 shares owned by an
irrevocable trust (the "Family Trust") among Peter D. Carlino and his eight
children, as settlors, and certain trustees, as to which Peter D. Carlino
has shared investment and voting power with respect to certain matters; and
182,578 shares owned by a marital trust for the benefit of Peter D. Carlino
and by a residuary trust for the benefit of Peter D. Carlino's children as
to both of which Peter D. Carlino has shared investment power and shared
voting power.
(4) The number of shares in the table includes 4,485,808 shares owned by the
Family Trust as to which Peter M. Carlino has sole voting power for the
election of directors and certain other matters, shared voting power with
respect to certain matters, and shared investment power; and 570,654 shares
owned jointly by Mr. Carlino and his wife, Marshia Carlino.
(5) Includes shares that may be acquired upon the exercise of outstanding
options and warrants that are exercisable within 60 days of March 10, 2001,
as follows: Peter M. Carlino, 679,750 shares; Harold Cramer, 22,500 shares,
William J. Bork, 290,668 shares; Robert S. Ippolito, 87,750 shares;
4
David A. Handler, 22,500 shares; John M. Jacquemin, 33,750 shares; Robert
Abraham, 22,750 shares, Robert P. Levy, 22,500 shares; Joseph A. Lashinger,
Jr., 12,500 shares, George A. Connolly, 7,500 shares; and all executive
officers and directors as a group, 1,202,608 shares.
(6) The number of shares in the table includes 4,485,808 shares of Common Stock
owned by the Family Trust, as to which Richard J. Carlino has shared
investment power and shared voting power as to certain matters.
(7) The number of shares in the table includes 4,485,808 shares owned by the
Family Trust, and an aggregate of 182,578 shares owned by a marital trust
for the benefit of Peter D. Carlino and by a residuary trust for the benefit
of Peter D. Carlino's children as to both of which Harold Cramer has shared
investment power and shared voting power.
(8) See note (3).
(9) The information in the table is based on information contained provided to
the Company by Akre Capital Management, LLC as of March 10, 2001.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth a summary of all compensation paid or accrued
by the Company for services rendered for the last three fiscal years to the
Company's Chief Executive Officer and each of the four most highly compensated
executive officers during the last completed fiscal year:
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ----------------------------
RESTRICTED SECURITIES ALL OTHER
NAME AND STOCK UNDERLYING ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS OPTIONS GRANTED COMPENSATION(1)
------------------ -------- -------- -------- ---------- --------------- ---------------
Peter M. Carlino................... 2000 $380,000 $126,000 -- 75,000 $4,969
Chairman of the Board 1999 $379,560 $126,000 -- 50,000 $5,000
Chief Executive Officer 1998 $361,670 $126,000 -- 53,000 $5,000
William J. Bork.................... 2000 $255,000 $ 60,000 -- 25,000 $4,534
President and Chief 1999 $253,780 $ 60,000 -- 20,000 $5,000
Operating Officer 1998 $246,071 $ 65,000 -- 24,000 $5,000
Robert S. Ippolito................. 2000 $155,500 $ 25,000 -- 15,000 $2,820
Chief Financial Officer 1999 $147,920 $ 20,000 -- 10,000 $4,172
Secretary/Treasurer 1998 $144,095 $ 20,000 -- 6,000 $2,881
Joseph A. Lashinger, Jr............ 2000 $200,000 $ 50,000 -- 15,000 $4,368
Vice President/General 1999 $173,577 $ 25,000 -- 10,000 $4,959
Counsel 1998 $153,520 $ 15,000 -- 5,000 $3,260
Steven T. Snyder................... 2000 $149,638 $ -- -- 54,500 $2,128
Vice President/Corporate
Development(2)
------------------------
(1) Includes amounts contributed by the Company to its profit sharing and 401(k)
plan for the account of such executive officers.
(2) Mr. Snyder joined the Company in February 2000. Mr. Snyder ceased to be an
officer of the Company in February 2001 and retired from the Company
effective March 2, 2001.
5
The following table sets forth certain information regarding stock options
granted during 2000 to the executive officers named in the Summary Compensation
Table.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------- POTENTIAL REALIZABLE
PERCENTAGE OF VALUE AT ASSUMED
NUMBER OF TOTAL OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OPTION TERM
OPTIONS FISCAL YEAR PRICE PER EXPIRATION -----------------------
NAME GRANTED(1) 2000(2) SHARE(3) DATE 5%(4) 10%(4)
---- ---------- ------------- --------- ---------- ---------- ----------
Peter M. Carlino.............. 75,000 25.46% $8.125 2/8/10 $383,232 $971,186
William J. Bork............... 25,000 8.48% $8.125 2/8/10 $127,744 $323,729
Robert S. Ippolito............ 15,000 5.09% $8.125 2/8/10 $ 49,615 $115,624
Joseph A. Lashinger, Jr....... 15,000 5.09% $8.125 2/8/10 $ 49,615 $115,624
Steven T. Snyder(5)........... 54,500 18.50% $8.125 2/8/10 $180,269 $420,103
------------------------
(1) Options granted to Mr. Bork vest one-third on the first anniversary of the
date of grant, and one-third on each succeeding such anniversary. Options
granted to Mr. Carlino, Mr. Ippolito, Mr. Lashinger and Mr. Snyder vest
one-quarter on the first anniversary of the date of grant, and one-quarter
on each succeeding such anniversary.
(2) Based on a total number of options granted to employees of 294,500.
(3) The exercise price is equal to the closing price of the Company's Common
Stock on February 8, 2000, the date of grant.
(4) Potential realizable value is based on an assumption that the market price
of the common stock appreciates at the stated rates compounded annually,
from the date of grant until the end of the respective option term. These
values are calculated based on requirements promulgated by the Securities
and Exchange Commission and do not reflect the Company's estimate of future
stock price appreciation.
(5) Mr. Snyder ceased to be an officer of the Company in February 2001 and
retired from the Company effective March 2, 2001.
The following table provides information with respect to the executive
officers shown in the Summary Compensation Table concerning the exercise of
stock options during 2000 and the value of vested and unvested unexercised
options held as of December 31, 2000. There are no outstanding stock
appreciation rights.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS
SHARES 2000 AT DECEMBER 31, 2000
ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------- ----------- ------------- ----------- -------------
Peter M. Carlino................. -- $ -- 643,750 134,250 $2,161,562 $342,712
William J. Bork.................. -- $ -- 275,667 43,333 $ 762,787 $114,497
Robert S. Ippolito............... -- $ -- 81,500 25,500 $ 471,940 $ 67,042
Joseph A. Lashinger, Jr.......... 17,500 $135,774 6,250 31,250 $ -- $ 65,167
Steven T. Snyder (1)............. -- $ -- -- 54,500 $ -- $112,433
------------------------
(1) Mr. Snyder ceased to be an officer in February 2001 and retired from the
Company effective March 2, 2001.
6
EMPLOYMENT AGREEMENTS
On April 12, 1994, the Company entered into employment agreements with Peter
M. Carlino, its Chairman and Chief Executive Officer, and Robert S. Ippolito,
its Chief Financial Officer, Secretary, and Treasurer, at annual base salaries
of $225,000 and $95,000, respectively. The agreements with Messrs. Carlino and
Ippolito were initially effective beginning June 1, 1994 and terminated on
June 30, 1999 and were amended on June 1, 1999. Each agreement provides for
additional compensation and bonuses as may be awarded from time to time by the
Board of Directors. Effective June 1, 1999, Mr. Carlino's annual base salary was
increased to $380,000, and effective June 1, 2000, Mr. Ippolito's annual base
salary was increased to $160,000. Each agreement prohibits the respective
employee from competing with the Company during its term and for one year
thereafter and requires a death benefit payment by the Company based on the
employee's annual salary in effect at the time of his death.
On June 1, 1995, the Company entered into an employment agreement with
William J. Bork, its President and Chief Operating Officer, at an annual base
salary of $210,000. Effective June 1, 1999, Mr. Bork's annual base salary was
increased to $255,000. The agreement prohibits Mr. Bork from competing with the
Company during its term and for two years thereafter, and requires a death
benefit payment by the Company equal to 50% of the employee's annual salary in
effect at the time of his death.
CERTAIN TRANSACTIONS
In August 1994, the Company signed a consulting agreement with Peter D.
Carlino, former Chairman of the Company. Pursuant to the consulting agreement,
as amended, Peter D. Carlino receives an annual fee of $135,000.
The Company has agreed to pay the premiums on four life insurance policies,
two payable when Peter M. Carlino dies and two payable when the survivor of
Peter M. Carlino and his wife, Marshia W. Carlino, dies, under a "split-dollar"
arrangement by which certain irrevocable trusts established by Peter M. Carlino
are obligated to reimburse the Company for all premiums paid when the insurance
matures or possibly sooner. The owners and beneficiaries of the life insurance
policies are the irrevocable trusts. In 2000, the Company paid a total of
$238,000 in premiums on the life insurance policies pursuant to this
arrangement.
The Company currently leases 7,362 square feet of office space in an office
building in Wyomissing, Pennsylvania for the Company's executive offices. The
lease expires in April 2005 and provides for an annual rental of $103,610 plus
common area expenses and electric utility charges. The office building is owned
by an affiliate of Peter M. Carlino, the Chairman and Chief Executive Officer of
the Company. The Company believes that the lease terms are not less favorable
than lease terms that could have been obtained from an unaffiliated third party.
The Company currently leases an aircraft from a company owned by
Mr. Jacquemin, a director of the Company. The lease expires in August 2007, and
provides for monthly payments of $26,203. The Company believes that the lease
terms are not less favorable than lease terms that could have been obtained from
an unaffiliated third party.
James A. Irwin, the former husband of Anne Carlino Irwin, a beneficiary of
the Family Trust, is an officer, director and minority shareholder in USI
MidAtlantic, Inc., the insurance agency, which is the broker for all of the
Company's property and casualty insurance. In 2000, the Company paid premiums of
$1,129,127 for such insurance. The Company believes that the premiums paid are
not less favorable than premiums that could have been obtained from an
unaffiliated third party.
7
COMPENSATION OF DIRECTORS
The Company pays director's fees to each Director who is not an employee of
the Company. During the year ending December 31, 2000, each outside Director
received an annual fee of $18,000, plus $1,500 for each Board meeting attended
and reimbursement for out-of-pocket expenses in connection with his attendance
at such meetings.
NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE FOLLOWING REPORTS OF THE
COMPENSATION COMMITTEE AND THE AUDIT COMMITTEE AND THE PERFORMANCE GRAPH ON PAGE
11 SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT
INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES EXCHANGE ACT OF
1934, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS
INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH
ACTS.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive officer compensation program is administered and
reviewed by the Compensation Committee of the Board of Directors. The
Compensation Committee consists of two independent, non-employee Directors of
the Company.
POLICIES AND MISSION
The Compensation Committee has determined that compensation of executive
officers should include a mixture of short and long range compensation plans
which attract, motivate and retain competent executive personnel, increase
executive ownership interests in the Company and encourage increases in the
Company's productivity and profitability. As such, the Company's policy is that
executive compensation should be directly and materially related to the
short-term and long-term operating performance and objectives of the Company. To
achieve these ends, executive compensation, including base salary and stock
option grants, is to a significant extent dependent upon the Company's financial
performance and the return on its Common Stock. However, to ensure that the
Company is strategically and competitively positioned for the future, the
Compensation Committee also attributes significant weight to other factors in
determining executive compensation, such as maintaining competitiveness,
implementing capital improvements, expanding markets and achieving other
long-range business and operating objectives. Key factors considered by the
Compensation Committee during the year 2000 were: the acquisition of the two
casinos in Mississippi, Casino Magic Bay St. Louis and Boomtown Biloxi, the
negotiation of the acquisition of CRC Holdings, Inc. which does business as
Carnival Resorts and Casinos, the $350 million senior secured credit facility
with a syndicate of lenders led by Lehman Brothers, Inc. and CIBC World Markets
Corp., and the expansion and performance of the Charles Town Entertainment
Complex in West Virginia.
COMPENSATION PLAN
To determine appropriate levels of executive compensation, the Compensation
Committee periodically reviews the executive compensation programs and policies
of the Company's competitors, in addition to a broader group of companies in its
marketplace, to ensure that the Company's plans and practices are competitive
and appropriately based on the Company's performance and compensation
philosophy.
8
BASE SALARY
The objective for computing executive base salaries is to structure salaries
that are competitive with those of similarly situated companies. In setting base
salary levels for individual executives in the future, the Compensation
Committee will consider such factors as the executive's scope of responsibility,
current performance, future potential and overall competitive positioning
relative to comparable positions at other companies. The base salaries for Peter
M. Carlino, William J. Bork, and Robert S. Ippolito are set pursuant to
employment agreements and currently are $475,000, $255,000, and $160,000 per
year, respectively.
STOCK OPTIONS
Stock options are granted under the provisions of the Company's Plan. Stock
options are granted to reinforce the importance of improving shareholder value
over the long-term and to encourage and facilitate executive stock ownership.
Stock options are granted at not less than 100% of the fair market value of the
stock on the date of grant to ensure that executives can be rewarded only for
appreciation in the price of the Common Stock where the Company's shareholders
are similarly benefited. For future grants, the Compensation Committee will
establish levels of participation for the stock option program based upon each
executive officer's or other employee's position in the Company. The number of
options to be granted to each executive officer will be contingent on the
individual executive's performance, tenure and future potential.
ANNUAL BONUS
Annual bonus awards recognize an executive's contribution to each year's
annual business results as measured against competitors and against the
Company's operating plans. Company and individual performance are assessed in
relation to the following major factors, listed in order of importance:
individual executive performance, revenue growth, earnings and cost management.
Performance, as measured by these factors, which meets operating plans and
equals the results of the competition, provided for bonus opportunities that are
comparable to the bonus level at other gaming and horse racing companies. Better
to worse performance can result in payments that are higher or lower than such
comparable companies. An individual's bonus, reflecting personal contribution to
business results, can range from 0 to 200% of the bonuses of comparable
companies for the individual's job.
PERFORMANCE EVALUATION
For the Chief Executive Officer ("CEO"), approximately 70% of the total
compensation opportunity target is base salary and approximately 30% is variable
compensation that is at risk and tied to competitive corporate business results.
The CEO's current base salary approximates the median salary of CEOs of
comparably-sized companies. The CEO's total compensation opportunity also is
consistent with the median compensation for CEO's in comparable companies.
Factors reviewed by the Compensation Committee's assessment of the Company's and
the CEO's performance include individual performance, profitability, profit
improvement, growth in revenue and expense management. The Compensation
Committee determined that the objective performance goals established by the
Company had been met and decided to grant a bonus to the CEO based on the
Company's earnings performance in 1999. Also taken into account were other
factors, including the significant acquisition activity to support
implementation of the Company's business strategy.
For the CEO, the awards of stock options are also shown in the Summary
Compensation Table. The option awards recognize the total shareholder return
achieved in 1999 as well as the Company's long-term needs and were intended to
link the CEO's future compensation opportunity to the creation of additional
shareholder value.
9
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:
Harold Cramer and David A. Handler
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of three
independent directors and operates under a written charter adopted by the Board
of Directors (a copy of which is attached hereto as Exhibit A). The Committee
recommends to the Board of Directors, subject to shareholders ratification, the
selection of the Company's independent accountants.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and to issue
a report thereon. The Committee's responsibility is to monitor and oversee these
processes.
In this context, the Committee has met and held discussions with management
and the independent accountants. Management represented to the Committee that
the Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Committee has reviewed and
discussed the consolidated financial statements with management and the
independent accountants. The Committee discussed with the independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees).
The Company's independent accountants also provided to the Committee the
written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Committee discussed
with the independent accountants that firm's independence.
Based upon Committee's discussion with management and the independent
accountants and the Committee's review of the representation of management and
the report of the independent accountants to the Committee, the 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 year
ended December 31, 2000 filed with the Securities and Exchange Commission.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS:
Harold Cramer, John M. Jacquemin and Robert P. Levy
10
COMPARATIVE STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return for the
Company's Common Stock since December 31, 1995 to the cumulative total returns
of (i) the NASDAQ Market Index and (ii) a Peer Group Index comprised of the
following gaming and thoroughbred horse racing companies: Churchill
Downs, Inc., Hollywood Casino Corp., Pinnacle Entertainment, Inc., International
Gaming Technologies, and MTR Gaming Group, Inc., assuming an investment of $100
in each of the Company's Common Stock, the Nasdaq Market Index and the Peer
Group Index.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Dollars
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
Penn National Gaming, Inc. 100 331.87 227.07 163.03 209.6 237.27
Peer Group 100 158.8 217.01 201.33 188.14 389.89
Nasdaq Market Index 100 124.27 152 214.39 378.12 237.66
Legend
YEAR ENDED
----------
INDEX DESCRIPTION 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
----------------- -------- -------- -------- -------- -------- --------
Penn National Gaming, Inc.................. 100.00 331.87 227.07 163.03 209.60 237.27
Peer Group................................. 100.00 158.80 217.01 201.33 188.14 389.89
Nasdaq Market Index........................ 100.00 124.27 152.00 214.39 378.12 237.66
NOTES:
A. The lines represent annual index levels, assuming reinvestment of all
dividends paid during the measurement period.
B. The indexes are re-weighted daily, using the market capitalization on the
previous trading day.
C. If the annual interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
11
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board, which is composed entirely of non-employee
Directors, has appointed BDO Seidman, LLP as certified public accountants to
audit the books, records and accounts of the Company and its subsidiaries for
the year ending December 31, 2001. The Board has endorsed this appointment and
it is being presented to the shareholders for ratification.
BDO Seidman has served as the independent public accountants for the Company
since December 1982. All audit services provided by BDO Seidman are approved by
the Audit Committee.
During 2000, BDO Seidman performed certain non-audit services for the
Company. The Audit Committee has considered whether the provision of these
non-audit services is compatible with maintaining BDO Seidman's independence. A
summary of the audit and non-audit fees paid to BDO Seidman in 2000 is as
follows:
AUDIT FEES--The aggregate fees billed by BDO Seidman for professional
services rendered for the audit and the reviews of the Company's financial
statements was approximately $296,221.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES--The Company
did not retain BDO Seidman for professional services relating to financial
information system design and implementation fees.
ALL OTHER FEES--The aggregate fees billed to the Company by BDO Seidman for
all other services, such as acquisitions, financings and taxes, was
approximately $330,372.
The Board of Directors considers BDO Seidman to be well qualified to serve
as the independent public accountants of the Company. If, however, the
shareholders do not ratify the appointment of BDO Seidman, the Board of
Directors may, but is not required to, reconsider the appointment.
Representatives of BDO Seidman will be present at the Annual Meeting, will have
an opportunity to make statements if they desire, and will be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL TO
RATIFY THE APPOINTMENT OF BDO SEIDMAN, LLP, AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 2001.
OTHER MATTERS
The Company has mailed a 2000 Annual Report to Shareholders and a proxy card
together with this proxy statement to all shareholders of record at the close of
business on April 6, 2001. The Board of Directors does not know of any other
business that will be presented for consideration at the Annual Meeting. Except
as the Board of Directors may otherwise permit, only the business set forth and
discussed in the Notice of Annual Meeting and Proxy Statement may be acted on at
the Annual Meeting. If any other business does properly come before the Meeting
or any postponement or adjournment thereof, the proxy holders will vote in
regard thereto according to their discretion insofar as such proxies are not
limited to the contrary.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who own more than ten percent of
the Company's Common Stock to file reports of ownership and changes in ownership
of the Company's Common Stock and any other equity securities of the Company
with the Securities and Exchange Commission ("SEC"). Executive officers,
directors and greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
12
Based solely on its review of the copies of Forms 3, 4 and 5 furnished to
the Company, or written representations from certain reporting persons that no
such Forms were required to be filed by such persons, the Company believes that
all its executive officers, directors and greater than 10% shareholders complied
with all filing requirements applicable to them during 2000, except that
Mr. Jacquemin failed to timely report on a Form 5 a gift of 900 shares made in
December, 2000.
SHAREHOLDER PROPOSALS
Shareholders who wish to submit proposals for inclusion in the Proxy
Statement for the Company's 2002 Annual Meeting of Shareholders must submit the
same to the Company on or before December 23, 2001, at the Company's principal
executive office, Wyomissing Professional Center, 825 Berkshire Blvd., Suite
200, Wyomissing, Pennsylvania 19610, directed to the attention of the Secretary.
The Board of Directors will review any shareholder proposals that are filed as
required and will determine whether such proposals meet applicable criteria for
inclusion in the Company Proxy noted for the 2002 Annual Meeting.
FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED BY THIS
PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K INCLUDING FINANCIAL STATEMENTS AND THE
SCHEDULES THERETO. SUCH WRITTEN REQUESTS SHOULD BE DIRECTED TO THE COMPANY AT
825 BERKSHIRE BOULEVARD, SUITE 200, WYOMISSING, PENNSYLVANIA 19610, ATTENTION:
CORPORATE SECRETARY.
By Order of the Board of Directors,
/s/ ROBERT S. IPPOLITO
------------------------------------------------------------------------------
SECRETARY
April 24, 2001
13
EXHIBIT A
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF
PENN NATIONAL GAMING, INC.
CHARTER
I. PURPOSE
The audit committee (the "Audit Committee") of the board of directors (the
"Board") of Penn National Gaming, Inc. (the "Corporation") shall provide
assistance to the Board in fulfilling its responsibility to shareholders,
potential investors and others for the oversight of the quality and integrity of
the accounting, auditing and reporting practices of the Corporation. The Audit
Committee's primary duties and responsibilities are to:
- Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.
- Review and appraise the audit efforts of the Corporation's independent
accountants.
- Maintain free and open communication with and among the independent
accountants, financial and senior management of the Corporation and the
Board.
In discharging this oversight role, the Audit Committee is empowered to
investigate any matter brought to its attention, with full power to retain
outside counsel or other experts for this purpose. The Audit Committee will
primarily fulfill these responsibilities by carrying out the activities
enumerated in Section IV of this Charter.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Corporation's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
accountants. Nor is it the duty of the Audit Committee to conduct
investigations, to resolve disagreements, if any, between management and the
independent accountants or to assure compliance with laws and regulations and
the Corporation's Ethical Code of Conduct.
II. COMPOSITION
The Audit Committee shall be comprised of three directors, each of whom
shall be independent directors. An independent director is a person other than
an officer or employee of the Corporation or its subsidiaries or any other
individual having a relationship which, in the opinion of the Board, would
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. The following persons shall not be considered
independent:
(a) a director who is employed by the Corporation or any of its affiliates
for the current year or any of the past three years;
(b) a director who accepts any compensation from the Corporation or any of
its affiliates in excess of $60,000 during the previous fiscal year,
other than compensation for board services, benefits under a
tax-qualified retirement plan, or non-discretionary compensation;
(c) a director who is a member of the immediate family of an individual who
is, or has been in any of the past three years, employed by the
Corporation or any of its affiliates as an executive officer. Immediate
family includes a person's spouse, parents, children, siblings,
mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law, and anyone who resides in such person's home;
(d) a director who is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which the
Corporation made, or from which the
Corporation received, payments (other than those arising solely from
investments in the Corporation's securities) that exceed 5% of the
Corporation's or business organization's consolidated gross revenues for
that year, or $200,000, whichever is more, in any of the past three
years;
(e) a director who is employed as an executive of another entity where any
of the Corporation's executives serve on that entity's compensation
committee.
All members of the Audit Committee shall be able to read and understand
fundamental financial statements, including a company's balance sheet, income
statement, and cash flow statement or will become able to do so within a
reasonable period of time after his or her appointment to the Audit Committee.
Additionally, at least one member of the Audit Committee must have past
employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities. The members of the Audit
Committee shall be elected by the Board at the annual organizational meeting of
the Board and shall serve until their successors shall be duly elected and
qualified. Unless an Audit Committee Chairman is elected by the full Board, the
members of the Audit Committee may designate a Chairman by majority vote of the
Audit Committee.
III. MEETINGS
The Audit Committee shall meet at least two times annually, or more
frequently as circumstances dictate. As part of its job to foster open
communications, the Audit Committee should also meet at least annually with
management and the independent accountants in separate executive sessions to
discuss any matters that the Audit Committee or either of these groups believe
should be discussed privately. In addition, the Audit Committee or at least its
Chairman may, if deemed necessary, meet with the independent accountants and/or
management quarterly to review the Corporation's financial statements consistent
with Section IV below.
IV. RESPONSIBILITIES AND DUTIES
THE AUDIT COMMITTEE SHALL:
A. DOCUMENTS/REPORTS REVIEW
1. Review and reassess this Charter at least annually. Submit this Charter
to the Board for approval and publish it in accordance with the rules and
regulations of the Securities and Exchange Commission.
2. Review and discuss the Corporation's audited financial statements for
each fiscal year with management and the independent accountants; discuss
with the independent accountants the matters required to be discussed by
Statement of Auditing Standards Number 61, as it may be modified or
supplemented; review the written disclaimer and the letter from the
independent accountants required by Independence Standards Board No. 1,
as it may be modified or supplemented; and discuss with the independent
accountants the independence of the independent accountants. Based on the
review and discussions in the preceding sentence, make a recommendation
to the Board on inclusion of the audited financial statements in the
Annual Report on Form 10-K for each fiscal year. The review shall also
include any certification, report or opinion rendered by the independent
accountants and discussions regarding the adequacy of disclosures and
content, quality of earnings, reserves and accruals, suitability of
accounting principles, reasonableness of estimates and other judgmental
matters and such other matters that the Audit Committee deems
appropriate.
A-2
3. Review and discuss, with management and the independent accountants,
adjustments recorded as a result of the audit of the Corporation's
financial statements for each fiscal year, and the effects of audit
findings that were not adjusted in the underlying accounting records of
the Corporation.
4. Review, discuss and assess, with management and the independent
accountants, the impact of new accounting pronouncements on the
Corporation's financial statements and related disclosures.
5. Review and discuss, with management and the independent accountants, any
reports on the Corporation's internal accounting controls rendered by the
independent accountants. The review shall include discussions regarding
the quality, adequacy and effectiveness of the Corporation's accounting
and financial controls including computerized information system controls
and security.
6. Review with the independent accountants the matters that the independent
accountants are required to communicate to the Audit Committee as a
result of their review of the Corporation's interim financial information
and Quarterly Reports on Form 10-Q. For this purpose, the Chairman of the
Audit Committee may act on behalf of the entire Audit Committee.
B. INDEPENDENT ACCOUNTANTS
1. Recommend to the Board on an annual basis the selection, retention or,
where appropriate, replacement of the independent accountants. In doing
so, the Audit Committee shall determine the independence of the
independent accountants by: (i) reviewing and considering the written
disclosures and the letter from the independent accountants required by
Independence Standards Board No. 1, as it may be modified or
supplemented, that they are independent; (ii) actively engaging in a
discussion with the independent accountants with respect to any disclosed
relationships or services that may impact the objectivity and
independence of the independent accountants; and (iii) taking, or
recommending that the Board take, appropriate action to oversee the
independence of the independent accountants. The independent accountants
shall have ultimate accountability to the Board and the Audit Committee,
as representatives of the sahreholders of the Corporation. The Audit
Committee shall also consider the effectiveness of the independent
accountants, and shall approve the auditing services to be rendered by
the independent accountants and the fees or other compensation to be paid
to the independent accountants related thereto.
2. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
3. Review, with the independent accountants, the nature, timing and scope
of the proposed audit of the Corporation's financial statements for each
fiscal year and the procedures to be utilized in each such audit.
4. Review all reports issued by the independent accountants and provide the
independent accountants with full access to the Audit Committee and the
Board to report on any and all matters deemed appropriate by the
independent accountants.
5. Periodically consult with the independent accountants outside the
presence of management regarding internal controls and the completeness
and accuracy of the Corporation's annual financial statements.
A-3
6. Direct the attention of independent accountants towards specific matters
or areas deemed to be of special significance, and authorizing the
independent accountants to perform supplemental reviews or audits that
the Audit Committee may deem advisable.
C. FINANCIAL REPORTING PROCESSES
1. Review the integrity of the Corporation's financial reporting processes,
both internal and external, by consultation with the independent
accountants at least once annually.
2. Consider the independent accountants' judgments regarding the quality
and appropriateness of the Corporation's accounting principles as applied
in its financial reporting.
3. Consider and approve, if appropriate, significant changes to the
Corporation's accounting principles and practices as suggested by the
independent accountants or management.
4. Make inquires, at least annually, of management and the independent
accountants with regard to significant risks and exposures facing the
Corporation and assess the steps management has taken to minimize such
risks.
D. PROCESS IMPROVEMENT
1. Establish regular and separate systems of reporting to the Audit
Committee by each of management and the independent accountants regarding
any significant judgments made in management's preparation of annual
financial statements and the view of each as to appropriateness of such
judgments.
2. Review, subsequent to the completion of the annual audit, separately
with management and the independent accountants any significant
difficulties encountered during the course of the audit, significant
changes in the audit plan or scope of work and any restrictions on the
scope of work or access to required information.
3. Review any significant disagreement among management and the independent
accountants in connection with the preparation of the financial
statements.
4. Review significant findings during the year with management and the
independent accountants, including status of previous audit
recommendations.
5. Review, with the independent accountants and management, the extent to
which changes or improvements in financial or accounting practices, as
approved by the Audit Committee, have been implemented. These reviews
should be conducted at appropriate times subsequent to implementation of
changes or improvements, as decided by the Audit Committee.
E. ETHICAL AND LEGAL COMPLIANCE
1. Review, at least annually, the Corporation's Code of Ethical Conduct and
the procedures that management has established to enforce the
Corporation's Code of Ethical Conduct.
2. Review with corporate counsel any legal compliance matters, including
corporate securities trading policies, as may be deemed appropriate by
the Audit Committee.
3. Discuss with management, and with corporate counsel when necessary, the
status of pending litigation, taxation matters and other areas of
oversight to the legal and compliance area as may be appropriate by the
Audit Committee.
4. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Audit Committee or the
Board deems necessary or appropriate.
A-4
F. AUDIT COMMITTEE REPORTING
1. Submit periodic reports to the Board regarding the activities of the
Audit Committee.
2. Issue annual summary reports regarding the composition of the Audit
Committee, its responsibilities, its activities and its oversight
conclusions to the Board.
3. Issue such reports as may be required by the Securities and Exchange
Commission for inclusion in the Corporation's annual proxy statement.
A-5
PROXY
PENN NATIONAL GAMING, INC.
ANNUAL MEETING OF SHAREHOLDERS, MAY 23, 2001
The undersigned hereby appoints Peter M. Carlino and Harold Cramer, and each
of them, the attorneys and proxies of the undersigned, with full power of
substitution, to vote on behalf of the undersigned all of the shares of Common
Stock of Penn National Gaming, Inc., (the "Company") which the undersigned is
entitled to vote at the Annual Meeting of Shareholders thereof to be held on
May 23, 2001 and at any and all postponements and adjournments thereof, upon the
following matters:
1. For the election of WILLIAM J. BORK and ROBERT P. LEVY to serve as Class I
Directors until the Annual Meeting of Shareholders of the Company to be held
in the year 2004 and until their successors are elected and qualified:
/ / For All Nominees / / Withhold Authority To Vote For All Nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME BELOW):
William J. Bork Robert P. Levy
2. To ratify the appointment of BDO Seidman, LLP, as independent public
accountants of the Company for the year ending December 31, 2001.
/ / For / / Against / / Abstain
3. In their discretion, such other business as may properly come before the
annual meeting and any and all adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS NOS. 1 AND 2. IF NO
SPECIFICATION IS MADE, SUCH PROXY WILL BE VOTED "FOR" EACH SUCH ITEM AND IN THE
DISCRETION OF THE PROXIES ON ALL OTHER MATTERS PROPERLY BROUGHT BEFORE THE
ANNUAL MEETING.
Dated _________________________, 2001
__________________________
Signature of Shareholder
__________________________
Signature of Shareholder
Please sign exactly as
name appears.
For joint accounts, each
joint owner must sign.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY.