Exhibit 10.1

 

PENN NATIONAL GAMING, INC.
PERFORMANCE SHARE PROGRAM

 

ARTICLE 1.
PURPOSE

 

This Penn National Gaming, Inc. Performance Share Program (as it may be amended
or restated from time to time, the “Program”) has been adopted by the
Compensation Committee of the Board of Directors of Penn National Gaming, Inc.
(the “Company”), as a defined program under the Company’s  2008 Long Term
Incentive Compensation Plan (as amended from time to  time, the “LTIP”), and is
intended to assist in  attracting, motivating and retaining key executives who
are expected to contribute meaningfully to the development and growth of the
Company by providing such individuals with an additional equity-based incentive
for outstanding performance, in this case, one tied directly to the Company’s
financial performance.  The Program and Awards hereunder are made under and are
subject to the terms of the LTIP, including the limitation on the maximum Award
that may be granted to a Participant pursuant to Section 7.2 of the LTIP.

 

ARTICLE 2.
DEFINITIONS AND CONSTRUCTION

 

The defined terms used in this Program without definition shall have the
meanings set forth in the LTIP, unless varied in this Program.  In addition,
wherever the following terms are used in the Program, they shall have the
meanings specified below, unless the context clearly indicates otherwise.  The
singular pronoun shall include the plural where the context so indicates.

 

2.1                               “Applicable Law” means any applicable law,
including without limitation: (a) provisions of the Code, the Securities Act,
the Exchange Act and any rules or regulations thereunder; (b) corporate,
securities, tax or other laws, statutes, rules, requirements or regulations,
whether federal, state, local or foreign; and (c) rules of any securities
exchange or automated quotation system on which the Shares are listed, quoted or
traded.

 

2.2                               “Award” means, with respect to each
Participant an award of Restricted Stock made under the LTIP and subject to the
provisions of this Program.

 

2.3                               “Award Certificate” means the Certificate
setting forth the specific terms of each Award granted under this Program.

 

2.4                               “Award Period” means a period of three
consecutive Performance Periods, beginning with the Performance Period beginning
on or after January 1, 2016, and a three-year Restriction Period beginning on
the date the Award is made, and ending on the date on which the Committee makes
its determination with respect to final vesting of the Award within 90 days
after the end of the three-year Restriction Period or, if earlier, the date of
the Committee determination following the occurrence of a Change in Control. 
Notwithstanding the foregoing, no new Award Period shall commence on or after
the date upon which a Change in Control occurs, unless otherwise determined by
the Committee.

 

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

 

2.5                               “Award Target” means, with respect to each
Participant for an Award  Period, thirty percent (30%) of such Participant’s
targeted long-term incentive value calculated at the beginning of the Award
Period and expressed as a number of Performance Shares.  One-third of the Award
Target will apply to each of the Performance Periods in an Award Period.

 

2.6                               “Common Stock” means the common stock of the
Company, $0.01 par value per share.

 

2.7                               “EBITDA” means, on an annual basis, the
Company’s total earnings before interest taxes depreciation and amortization, as
calculated by the Committee.

 

2.8                               “Eligible Employee” means any person who is an
executive  and determined by the Committee to be eligible to participate in the
Program.

 

2.9                               “Entry Level EBITDA” means, with respect to a
Performance Period, 85% of the Performance Goal established by the Committee
with respect to such Performance Period.

 

2.10                        “Maximum Level EBITDA” means, with respect to a
Performance Period, 115% of the Performance Goal established by the Committee
with respect to such Performance Period.

 

2.11                        “Participant” means an Eligible Employee who has
received an Award under the Program pursuant to Section 3.2. For purposes of the
LTIP, references to “Grantee” in the LTIP will refer to a Participant hereunder.

 

2.12                        “Performance Goal” means, with respect to a
Performance Period, the target level of EBITDA that must be achieved for such
Performance Period in order for a Participant’s  Performance Shares for such
Performance Period to be credited to his or her account.  Achievement of the
Performance Goal for a Performance Period means that the EBITDA with respect to
such Performance Period equals or exceeds the Entry Level EBITDA for such
Performance Period.

 

2.13                        “Performance Shares” means the number of shares of
Restricted Stock equal to the Award Target, calculated by dividing the Award
Target amount by the closing price of the Company’s Common Stock, as of the day
immediately prior to the date the Award is granted.

 

2.14                        “Performance Period” means each one-year period
commencing on the first day of the first, second and third calendar year in each
Award Period and ending on the last day of such calendar year or, if earlier,
the date of consummation of a Change in Control.

 

2.15                        “Restriction Period” means the period beginning on
the date an Award is made and ending at the end of the applicable Award Period,
subject to acceleration as set forth in Section 4.3.

 

2.16                        “Shares” means shares of Common Stock.

 

2

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

 

2.17                        “Target Level EBITDA” means, with respect to a
Performance Period, 100% of the Performance Goal established by the Committee
with respect to such Performance Period .

 

2.18                        “Termination of Service” means the time when the
employee-employer relationship between a Participant and the Company or any
Subsidiary is terminated for any reason, including, without limitation, a
termination by resignation, discharge, death, disability or retirement; but
excluding terminations where the Participant simultaneously commences or remains
in employment or service with the Company or any Subsidiary. The Committee, in
its sole discretion, shall determine the effect of all matters and questions
relating to any Termination of Service, including, without limitation, the
question of whether a Termination of Service resulted from a discharge for cause
and all questions of whether particular leaves of absence constitute a
Termination of Service; provided, however, that, for purposes of the Program, a
Participant’s employee-employer relationship or consultancy relationship shall
be deemed to be terminated in the event that the Subsidiary employing or
contracting with such Participant ceases to remain a Subsidiary following any
merger, sale of stock or other corporate transaction or event (including,
without limitation, a spin-off).

 

ARTICLE 3.
PARTICIPATION AND AWARDS

 

3.1                               Participation.  The Committee shall establish
the Participants eligible to receive an Award under the Program within the first
90 days of an Award Period for such Eligible Employee in its sole discretion
(subject to the terms of any applicable employment agreement).

 

3.2                               Awards and Award Certificates.

 

(a)                                 Within 90 days after the first day of each
Award Period commencing on or after January 1, 2016 (but in no event after the
date required for a performance goal to be considered pre-established under
section 162(m) of the Code) the Committee shall establish in writing the Award
terms, including the Award Target, and the applicable Performance Goals, the
Entry Level EBITDA, Target Level EBITDA and Maximum Level EBITDA (such that at
all times the Maximum Level EBITDA shall be equal to or higher than the Target
Level EBITDA, which in turn shall be equal to or higher than the Entry Level
EBITDA) for the first Performance Period in the Award Period, and the
Restriction Period. Thereafter the Committee shall establish the applicable
Performance Goals for each of the second and third Performance Period in an
Award Period within 90 days after the first day of each such Performance Period
in such Award Period. The targets and other amounts established by the Committee
pursuant to the preceding sentences shall in each case be subject to adjustment
as determined by the Committee in its discretion as a result of changes in
accounting principles and other significant extraordinary items or events;
provided that in respect of any Award intended to qualify as performance-based
compensation within the meaning of section 162(m) of the Code, such adjustments
may only be made if and to the extent permitted by section 162(m) of the Code.

 

(b)                                 The Company shall provide an Award
Certificate to each Eligible Employee who becomes a Participant with respect to
an Award Period as promptly as practicable, and shall provide an amendment with
the applicable Performance Goals for the

 

3

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

 

second Performance Period and third Performance Period promptly after such
Performance Goals are established by the Committee.

 

ARTICLE 4.
DETERMINATION OF PERFORMANCE GOAL ACHIEVEMENTS AND AWARD PAYOUTS

 

4.1                               Determinations and Certification by the
Committee.

 

(a)                                 As soon as administratively feasible after
the end of each Performance Period, the Committee shall determine whether the
Performance Goals have been achieved for such Performance Period, and the level
of such achievement (i.e., at or below the Entry Level EBITDA, between the Entry
Level EBITDA and the Target Level EBITDA, between the Target Level EBITDA and
the Maximum Level EBITDA, or above the Maximum Level EBITDA).  The Committee’s
determination as to whether the applicable Performance Goals for a Performance
Period have been satisfied shall be certified by the Committee in writing
(including by electronic mail transmission).  Upon such determination and
certification, the Participant will have credited to his or her account the
number of Performance Shares for such Performance Period based upon the
following:

 

·                                          If the Performance Goal is less than
the Entry Level EBITDA, no Performance Shares are credited to the Participant;

 

·                                          If the Performance Goal is achieved
at the Entry Level EBITDA, the number of Performance Shares credited for such
Performance Period shall be 50% of the one-third of the Award Target Performance
Shares applicable to such Performance Period;

 

·                                          If the Performance Goal is achieved
at the Target Level EBITDA, the number of Performance Shares credited for such
Performance Period shall be 100% of the one-third of the Award Target
Performance Shares applicable to such Performance Period;

 

·                                          If the Performance Goal is achieved
at or above the Maximum Level EBITDA, the number of Performance Shares credited
for such Performance Period shall be 150% of the one-third of the Award Target
Performance Shares applicable to such Performance Period;

 

·                                          If the Performance Goal is achieved
at an amount between 85% (the Entry Level EBIDTA) and 100% (the Target Level
EBITDA), the number of credited Performance Shares shall be determined in
accordance with straight line interpolation and adjusted accordingly, and if the
Performance Goal is achieved at an amount between 100% (the Target Level EBITDA)
and 115% (the Maximum Level EBITDA), the number of  credited Performance Shares
shall be determined in accordance with straight line interpolation and adjusted
accordingly.  For example, if the target Performance Shares equal 16,000 and the
EBIDTA Performance Goal is achieved at a 110% level, then the Performance Shares

 

4

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

 

credited and banked for that Performance Period would be 21,360 (2/3rds of
maximum times 16,000).

 

Any Performance Shares credited in accordance with this Section 4.1 shall remain
subject to the Restriction Period until the end of the Award Period and the
subsequent determination and certification by the Committee of the Performance
Goal achieved and Performance Shares credited for the third Performance Period
in the Award Period, unless the lapse of the Restriction Period forfeiture is
accelerated as set forth in Section 4.3 of this Program.

 

(b)                                 For purposes of this Section 4.1, approved
minutes of the Committee meeting in which a certification is made shall be
treated as a written certification.  Notwithstanding the foregoing, each written
certification by the Committee (including a certification by electronic email
transmission) under this Section 4.1 shall be made by a date which will permit
the Company to comply with any requirements under Section 162(m) of the Code.

 

(c)                                  Maximum Restricted Stock Award Limitation. 
Notwithstanding any provision of this Program, in no event shall the Restricted
Stock awarded under the Program to a Participant  exceed the limitation set
forth in Section 7.2 of the LTIP.

 

4.2                               Continued Eligibility for and Forfeiture of
Awards.

 

(a)                                 Continued Eligibility.  Except as provided
in Section 4.3, each Participant who receives an Award must remain continuously
employed by, or otherwise provide service to, the Company or any Subsidiary from
the date he or she receives such Award until the last day of the Award Period.

 

(b)                                 Forfeiture.  Except as provided under
Section 4.3, if a Participant has a voluntarily Termination of  Service or is
terminated for Cause prior to the last day of an Award Period, then such
Participant shall not be entitled to receive any payment under the Program with
respect to his or her Award for any Performance Periods within that Award
Period, regardless of whether credited to his or her account or not under
Section 4.1.

 

4.3                               Lapse of Forfeiture Restrictions on Awards.

 

(a)                                 Involuntary Termination of Service.  If a
Participant has an involuntary Termination of Service without Cause prior to the
last day of an Award Period, such Participant shall be entitled to receive the
issuance of Shares credited to his or her account, free of restrictions, with
respect to the Performance Period(s) that have been completed as of the date of
his or her termination.  The Committee has the discretion to vary this
Section 4.3(a) prior to the date of termination.  All remaining Performance
Shares that were not credited to the Participant’s account and do not have the
forfeiture restrictions lapse shall be forfeited on the date of termination.

 

(b)                                 Death and Disability.  A Participant who
dies or becomes Disabled prior to the last day of an Award Period shall be
entitled to receive the issuance of Shares credited to his or her account, free
of restrictions, with respect to the Performance Period(s) that have been
completed as of the date of his or her death or Disability, and a pro-rata
portion of the

 

5

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

 

Performance Shares applicable to the Performance Period in which such death or
Disability occurs, but which has not been completed.  The forfeiture
restrictions applicable to all Performance Shares credited to the Participant’s
account shall lapse on the date of death or Disability, and the Company shall
issue such Shares promptly to the Participant or to his or her estate.  The
Performance Shares for which a Performance Period has not yet been completed
shall continue in full force and effect until the end of the applicable
Performance Period and until  the Committee makes the determination with respect
to the achievement of the Performance Goal, at which point the pro-rata
calculation shall be made at the same time as issued to other Participants, and
the Shares issued promptly thereafter.  All remaining Performance Shares that
were not credited to the Participant’s account and do not have the forfeiture
restrictions lapse shall be forfeited on the date of the Committee’s
determination.

 

(c)                                  Retirement.  A Participant who Retires from
service prior to the last day of an Award Period shall be entitled to receive to
receive the issuance of Shares credited to the Participant’s account, free of
restrictions, with respect to the Performance Period(s) that have been completed
as of the date of his or her Retirement, and a pro-rata portion of the
Performance Shares applicable to the Performance Period in which such Retirement
occurs, but which has not been completed.  The forfeiture restrictions
applicable to all Performance Shares credited to the Participant’s account shall
lapse on the date of Retirement, and the Company shall issue such Shares
promptly to the Participant.  The Performance Shares for which a Performance
Period has not yet been completed shall continue in full force and effect until
the end of the applicable Performance Period and until  the Committee makes the
determination with respect to the achievement of the Performance Goal, at which
point the pro-rata calculation shall be made and the Shares issued at the same
time as issued to other Participants.  All remaining Performance Shares that
were not credited to the Participant’s account and do not have the forfeiture
restrictions lapse shall be forfeited on the date of the Committee’s
determination.

 

(d)                                 Change in Control. Upon the occurrence of a
Change in Control, the applicable Performance Period which contains the date of
the Change in Control shall end, and the Committee shall determine the
achievement of the Performance Goal in compliance with Section 4.1.  Any
remaining forfeiture restrictions on the Performance Shares for that Performance
Period shall lapse on the date of the Committee’s determination, and the Company
shall promptly issue the Shares to the Participant.  In addition, all previously
credited shares within outstanding Restriction Periods shall be released to the
Participant. All remaining Performance Shares for any future Performance
Period(s) remaining in the Award Period shall be forfeited.

 

ARTICLE 5.
ADDITIONAL TERMS OF AWARDS

 

5.1                               Applicable Provisions of the LTIP. The
provisions of the LTIP relating to Restricted Stock and all administrative,
governance and general provisions of the LTIP, including Articles XII and XIV of
the LTIP, apply to this Program. In the event of an inconsistency between the
LTIP and this Program, this Program will control.

 

5.2                               Tax Withholding. The Company or any Subsidiary
shall have the authority and the right to deduct or withhold, or require a
Participant to remit to the Company, an amount

 

6

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

 

sufficient to satisfy federal, state, local and foreign taxes (including the
Participant’s FICA, employment tax or other social security contribution
obligation) required by law to be withheld with respect to any taxable event
concerning a Participant arising as a result of the Program. The Committee, in
its sole discretion and in satisfaction of the foregoing requirement, may
withhold, or allow a Participant to elect to have the Company withhold, Shares
otherwise issuable under an Award (or allow the surrender of Shares). The number
of Shares which may be so withheld or surrendered shall be limited to the number
of Shares which have a fair market value on the date of withholding or
repurchase equal to the aggregate amount of such liabilities based on the
minimum statutory withholding rates for federal, state, local and foreign income
tax and payroll tax purposes that are applicable to such supplemental taxable
income.

 

5.3                               Designation of Beneficiary.  A Participant
may, in the manner determined by the Committee, designate a beneficiary to
exercise the rights of the Participant and to receive any distribution with
respect to any Award upon the Participant’s death. A beneficiary, legal
guardian, legal representative, or other person claiming any rights pursuant to
the Program is subject to all terms and conditions of the Program and any Award
Certificate applicable to the Participant, except to the extent the Program or
any Award Certificate otherwise provides, and to any additional restrictions
deemed necessary or appropriate by the Committee. If the Participant is married
or a domestic partner in a domestic partnership qualified under Applicable Law
and resides in a community property state, a designation of a person other than
the Participant’s spouse or domestic partner, as applicable, as the
Participant’s beneficiary with respect to more than 50% of the Participant’s
interest in the Award shall not be effective without the prior written or
electronic consent of the Participant’s spouse or domestic partner. If no
beneficiary has been designated or survives the Participant, payment shall be
made to the person entitled thereto pursuant to the Participant’s will or the
laws of descent and distribution. Subject to the foregoing, a beneficiary
designation may be changed or revoked by a Participant at any time; provided
that the change or revocation is filed with the Committee prior to the
Participant’s death.

 

5.4                               Conditions to Issuance of Shares.

 

(a)                                 All share certificates delivered pursuant to
the Program and all Shares issued pursuant to book entry procedures are subject
to any stop-transfer orders and other restrictions as the Committee deems
necessary or advisable to comply with Applicable Law. The Committee may place
legends on any share certificate or book entry to reference restrictions
applicable to the Shares.

 

(b)                                 No fractional Shares shall be issued and the
Committee, in its sole discretion, shall determine whether cash shall be given
in lieu of fractional Shares or whether such fractional Shares shall be
eliminated by rounding up or down.

 

5.5                               Claw-Back Provisions. Pursuant to its general
authority to determine the terms and conditions applicable to Awards under the
Program, the Committee shall have the right to provide, in an Award Certificate
or otherwise, or to require a Participant to agree by separate written or
electronic instrument, that all Awards (including any proceeds, gains or other
economic benefit actually or constructively received by the Participant upon any
receipt of any Award or upon the receipt or resale of any Shares underlying the
Award) shall be subject to the

 

7

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

 

provisions of any claw-back policy implemented by the Company, including,
without limitation, any claw-back policy adopted to comply with the requirements
of Applicable Law, including without limitation the Dodd-Frank Wall Street
Reform and Consumer Protection Act and any rules or regulations promulgated
thereunder, to the extent set forth in such claw-back policy and/or in the
applicable Award Certificate.

 

ARTICLE 6.
MISCELLANEOUS PROVISIONS

 

6.1                               Amendment, Suspension or Termination of the
Program.  Subject to the terms of this Section 6.1, the Committee may amend the
Program at any time and from time to time, and the Committee may at any time
terminate the Program (in its entirety or as it applies to one or more specified
Subsidiaries) with respect to Performance Periods that have not commenced as of
the date of such Committee action; provided, however, that, the Program may not
be amended in a manner that would impair the rights of any Participant with
respect to any outstanding Award without the consent of such Participant.  No
Participant’s participation herein may be terminated in contemplation of or in
connection with a Change of Control.  The Program may not be amended or
terminated in contemplation of or in connection with a Change of Control unless
adequate and effective provision for the making of all payments otherwise
payable pursuant to Section 4.3(e) (as in effect on the date of the grant of the
affected Award) with respect to such Change of Control shall be made in
connection with any such amendment or termination. The Committee shall remain in
existence after the termination of the Program for the period determined
necessary by the Committee to facilitate the termination of the Program and the
payment of any outstanding Awards hereunder, and all provisions of the Program
that are necessary, in the opinion of the Committee, for equitable operation of
the Program during such period shall remain in force.

 

6.2                               Changes in Common Stock or Assets of the
Company and Other Corporate Events.

 

(a)                                 In the event of any stock dividend, stock
split, combination or exchange of shares, merger, consolidation or other
distribution (other than normal cash dividends) of Company assets to stock
Participants, or any other change affecting the Shares of the Company’s stock or
the share price of the Company’s stock the Committee shall make equitable
adjustments, if any, to reflect such change with respect to: (i) the aggregate
number and kind of Restricted Stock or Shares  that may be issued under the
Program (including, but not limited to, adjustments of the limitations on the
maximum number and kind of Restricted Stock or Shares which may be issued under
the Program); (ii) the number and kind of Restricted Stock or Shares (or other
securities or property) subject to outstanding Awards; (iii) the terms and
conditions of any outstanding Awards (including, without limitation, any
applicable Award Targets); and (v) purchase price per share, if any, for any
outstanding Awards under the Program.

 

(b)                                 The Committee, in its sole discretion, may
include such further provisions and limitations in any Award and related Award
Certificate, as it may deem equitable and in the best interests of the Company
that are not inconsistent with the provisions of the Program.

 

8

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

 

6.3                               Effect of Program upon Other Compensation
Plans. The adoption of the Program shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary.  Nothing in the
Program shall be construed to limit the right of the Company or any Subsidiary:
(a) to establish any other forms of incentives or compensation for Employees, of
the Company or any Subsidiary, or (b) to grant or assume options or other rights
or awards otherwise than under the Program in connection with any proper
corporate purpose including without limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
partnership, limited liability company, firm or association.

 

6.4                               Compliance with Laws. The Program, the
granting, crediting, and lapse of forfeiture restrictions applicable to Awards
under the Program and the issuance and delivery of Shares under Awards granted
or awarded under the Program are subject to compliance with all Applicable Law
(including but not limited to state, federal and foreign securities law and
margin requirements), and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
the Program shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all Applicable Law. To the extent permitted by Applicable
Law, the Program and Awards granted or awarded hereunder shall be deemed amended
to the extent necessary to conform to Applicable Law.

 

6.5                               No Right to Awards. No Eligible Employee shall
have any claim to be granted any Award pursuant to the Program, and neither the
Company nor the Committee is obligated to treat Eligible Employees uniformly.

 

6.6                               Unfunded Status of Awards. The Program is
intended to be an “unfunded” plan for incentive compensation. With respect to
any payments not yet made to a Participant pursuant to an Award, nothing
contained in the Program or any Award Certificate shall give the Participant any
rights that are greater than those of a general creditor of the Company or any
Subsidiary.

 

6.7                               Relationship to Other Benefits. No issuance of
Restricted Stock or Shares pursuant to the Program shall be taken into account
in determining any benefits under any pension, retirement, savings, profit
sharing, group insurance, welfare or other benefit plan of the Company or any
Subsidiary except to the extent otherwise expressly provided in writing in such
other plan or an agreement thereunder.

 

6.8                               Rights as Shareholders. During the Award
Period, the Participant shall be entitled to vote any Restricted Stock  credited
to his or her account during the Restriction Period.  During the Award Period, a
Participant shall be entitled to dividends on Performance Shares credited to his
or her account, which dividends shall be accrued and paid, if and when the
Performance Shares are vested and paid out to the Participant in accordance with
this Program.

 

9

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