Exhibit 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of this 10th day
of June, 2003 by and between Penn National Gaming, Inc., a Pennsylvania
corporation (the “Company”), and Leonard DeAngelo, an individual residing in New
Jersey (“Executive”).

WHEREAS, Executive desires to become employed by the Company, and the Company
desires to employ Executive upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as follows:

1.     Employment.  The Company hereby agrees to employ Executive and Executive
hereby accepts such employment, in accordance with the terms, conditions and
provisions hereinafter set forth.

1.1.          Duties and Responsibilities.  Executive shall serve as Executive
Vice President, Operations of the Company.  Executive shall perform all duties
and accept all responsibilities incident to such position as may be reasonably
assigned to him by the President and Chief Operating Officer or by the Board of
Directors of the Company (the “Board”).  Executive’s principal place of
employment shall be in Wyomissing, Pennsylvania.

1.2.          Term.

(a)           Initial Term.  The term of this Agreement shall begin on a date to
be agreed upon in writing between Executive and the Company, but in no event
later than February 1, 2004 (the “Commencement Date”), and shall terminate at
the close of business on the third anniversary of the Commencement Date (the
“Initial Term”), unless earlier terminated in accordance with Section 3 hereof.

(b)           Renewal Terms.  This Agreement may be renewed for such additional
periods as the parties may agree (each, a “Renewal Term” and, together with the
Initial Term, the “Employment Term”) only upon execution of a written renewal
agreement signed by each party.  In the event the parties have not executed a
renewal agreement prior to the expiration of the Employment Term but Executive
continues to be employed by the Company after such time, Executive shall be
deemed to be employed “at will” and the parties will have no further obligations
to each other under this Agreement other than under Sections 3.4(b), 5, 7 and 9
through 19.

1.3.          Extent of Service.  Executive agrees to use Executive’s best
efforts to carry out Executive’s duties and responsibilities and, consistent
with the other provisions of this Agreement, to devote substantially all of
Executive’s business time, attention and energy thereto.  The foregoing shall
not be construed as preventing Executive from serving on the board of
philanthropic organizations (so long as such service does not materially
interfere with Executive’s duties hereunder) or investing assets in such form or
manner as will not require services on the part of Executive.

CONFIDENTIAL

 

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2.     Compensation.  For all services rendered by Executive to the Company, the
Company shall compensate Executive as set forth below.

2.1.          Base Salary.  The Company shall pay Executive a base salary (“Base
Salary”), commencing on the Commencement Date, at the annual rate of $450,000,
payable in installments at such times as the Company customarily pays its other
senior executives (“Peer Executives”).  Executive’s performance and Base Salary
shall be reviewed annually.  Any changes in Base Salary or other compensation
shall be made at the discretion of the President and Chief Operating Officer,
subject to the review of the compensation committee of the Board (the
“Compensation Committee”).

2.2.          Cash Bonuses.

(a)           Annual Bonus.  Executive shall participate in the Company’s Senior
Management Incentive Compensation Plan as such may be adopted, amended and
approved, from time to time, by the Compensation Committee.  Executive’s
participation in such plan shall be pro rated during Executive’s first year of
employment based on the number of days of actual employment.

(b)           Start Bonus.  Executive shall receive a cash bonus of $150,000 on
the Commencement Date.  Such bonus shall be paid together with the first payment
of Base Salary in accordance with the Company’s standard payroll practices.

(c)           Transition Bonus.  In the event that Executive is unable to
commence employment with the Company prior to December 31, 2003 due to
contractual obligations to Executive’s prior employer and such prior employer
fails to pay Executive the full amount of Executive’s 2003 bonus as required by
the terms of Executive’s employment agreement with such prior employer, then the
Company will pay to Executive an amount equal to such shortfall up to a maximum
of $100,000 (the “Transition Bonus”).  Such payment shall be conditioned upon
Executive providing a written statement to the Company setting forth the amount
of such shortfall, the formula Executive believes should have been used to
calculate such bonus and such other detail or documents as may be reasonably
necessary for the Company to verify the basis of such claim.  Such payment shall
be made as soon as possible following the Company’s review and verification of
such claim.

2.3.          Equity Compensation.  The Company shall grant to Executive options
pursuant to, and subject to the terms and conditions of, the then current equity
compensation plan of Penn National Gaming, Inc. for 150,000 shares of Penn
National Gaming, Inc. common stock at an exercise price based on the closing
market price of the stock on the Commencement Date.  Such options will vest as
follows:

i.              25% on the first anniversary of the Commencement Date;

ii.             25% on the second anniversary of the Commencement Date;

iii.            25% on the third anniversary of the Commencement Date; and

iv.                                   25% on the fourth anniversary of the
Commencement Date.

 

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2.4.          Other Benefits.  Executive shall be entitled to participate in all
other employee benefit plans and programs, including, without limitation,
health, vacation, retirement, deferred compensation or SERP, made available to
other Peer Executives, as such plans and programs may be in effect from time to
time and subject to the eligibility requirements of the each plan.  Nothing in
this Agreement shall prevent the Company from amending or terminating any
retirement, welfare or other employee benefit plans or programs from time to
time, as the Company deems appropriate.  In the event that Executive is not
immediately eligible for medical coverage on Commencement Date, the Company
shall reimburse Executive for any COBRA payments from the Commencement Date
until such time as the Company’s medical coverage commences.

2.5.          Insurance.  The Company shall maintain life insurance on the life
of Executive in the amount of $1,000,000, to the extent it can be issued at
standard rates, and Executive may name the beneficiary of such policy.

2.6.          Vacation, Sick Leave and Holidays.  Executive shall be entitled in
each calendar year to four (4) weeks of paid vacation time, prorated for the
current year.  Each vacation shall be taken by Executive at such time or times
as agreed upon by the Company and Executive, and any portion of Executive’s
allowable vacation time not used during the calendar year shall be subject to
the Company’s payroll policies regarding carryover vacation.  Executive shall be
entitled to holiday and sick leave in accordance with the Company’s holiday and
other pay for time not worked policies.

2.7.          Reimbursement of Expenses.  Executive shall be provided with
reimbursement of reasonable expenses related to Executive’s employment by the
Company on a basis no less favorable than that authorized from time to time for
Peer Executives.

3.     Termination.  Executive’s employment may be terminated prior to the end
of the Employment Term in accordance with, and subject to the terms and
conditions, set forth below.

3.1.          Termination by the Company.

(a)           Without Cause.  The Company may terminate Executive at any time
without Cause (as defined in subsection (b) below) upon the delivery of written
notice to Executive, which notice shall set forth the effective date of such
termination.

(b)           With Cause.  The Company may terminate Executive at any time for
Cause effective immediately upon delivery of written notice to Executive.  As
used herein, the term “Cause” shall mean:

(i)            Executive shall have been convicted of a felony or any
misdemeanor involving allegations of fraud, theft, perjury or conspiracy;

(ii)           Executive is found disqualified or not suitable to hold a casino
or other gaming license by a governmental gaming authority in any jurisdiction
where Executive is required to be found qualified, suitable or licensed;

 

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(iii)          Executive materially breaches any Company policy and fails to
cure such breach within 15 days after receipt of written notice thereof or
Executive materially breaches the terms of Sections 4, 5 or 6 this Agreement; or

(iv)          Executive misappropriates corporate funds or commits other acts of
dishonesty as determined in good faith by the Board.

3.2.          Termination by the Executive.  Executive may voluntarily terminate
employment for any reason effective upon 60 days’ prior written notice to the
Company, unless the Company waives such notice requirement (in which case the
Company shall notify Executive in writing as to the effective date of
termination).  The Company and Executive, however, recognize and agree that they
mutually agreed upon term of this Agreement and that Executive is expected to
complete fully the Employment Term.  In the event Executive terminates
employment under this Section 3.2 prior to the completion of the Initial Term,
the Company may, without limiting any other rights or remedies available to it,
request that Executive repay any bonuses paid under Sections 2.2(b) or 2.2(c)
pro rata to the number of days remaining in the Initial Term following the
effective date of termination.  Such payment shall be made in cash within 10
days of delivery of written notice from the Company to Executive.

3.3.          Termination for Death or Disability.  In the event of the death or
total disability of Executive, this Agreement shall terminate effective as of
the date of Executive’s death or total disability.  The term “total disability”
shall have the definition set forth in the Company’s Long Term Disability
Insurance Policy in effect at the time of such determination.

3.4.          Payments Due Upon Termination.

(a)           Generally.  Upon any termination described in Sections 3.1, 3.2 or
3.3 above, Executive shall be entitled to receive any amounts due for Base
Salary earned or expenses incurred through the effective date of termination and
any benefits accrued or earned on or prior to such date in accordance with the
terms of any applicable benefit plans and programs.

(b)           Without Cause.  In the event the Company terminates Executive’s
employment without Cause (either before or after expiration of the Employment
Term), and subject to Executive executing a mutual release in a form reasonably
acceptable to the Company and Executive, Executive shall be entitled to receive
the following in lieu of any other severance:

(i)            Executive shall receive a cash payment equal to Executive’s
monthly Base Salary at the rate in effect on the effective date of termination
multiplied by the greater of (i) the number of months remaining in the Initial
Term or (ii) twelve months (the “Severance Period”).

(ii)           Executive shall continue to receive the health benefits coverage
in effect on the effective date of termination (or as the same may be changed
from time to time for Peer Executives) for Executive and, if any, Executive’s
spouse and dependents for the Severance Period.  At the option of the Company,
the Company may elect to pay Executive cash in lieu of such coverage in an
amount equal to Executive’s after-tax cost of obtaining generally comparable
coverage for such period.

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(c)           Death or Disability.  In the event the Company terminates
Executive’s employment due to the death or total disability of Executive,
Executive shall be entitled to receive the following in lieu of any other
severance:

(i)            Executive shall receive a cash payment equal to 175% of
Executive’s monthly Base Salary at the rate in effect on the effective date of
termination multiplied by the number of months remaining in the Severance
Period.

(ii)           Executive shall continue to receive the health benefits coverage
in effect on the effective date of termination (or as the same may be changed
from time to time for Peer Executives) for Executive and, if any, Executive’s
spouse and dependents for the Severance Period.  At the option of the Company,
the Company may elect to pay Executive cash in lieu of such coverage in an
amount equal to Executive’s after-tax cost of obtaining generally comparable
coverage for such period.

(d)           Payments.   All payments due under this Section 3.4 shall be made
within 15 days of the effective date of termination provided the release, if
applicable, has been executed by Executive.  Except as otherwise provided in
this Section 3.4 or Section 8 below, no other payments or benefits shall be due
under this Agreement to Executive.

3.5.          Options.  Except as otherwise provided in the relevant option plan
or option agreement or as otherwise approved by the Compensation Committee, all
options granted to Executive shall cease vesting on the effective date of
termination, regardless of the reason therefore.

3.6.          Notice of Termination.  Any termination of Executive’s employment
shall be communicated by a written notice of termination delivered within the
time period specified in this Section 3.  The notice of termination shall (i)
indicate the specific termination provision in this Agreement relied upon, (ii)
briefly summarize the facts and circumstances deemed to provide a basis for a
termination of employment and the applicable provision hereof, and (iii) specify
the termination date in accordance with the requirements of this Agreement.

4.     No Conflicts of Interest.  Executive agrees that throughout the period of
Executive’s employment hereunder or otherwise, Executive will not perform any
activities or services, or accept other employment relationship that would
interfere with or present a conflict of interest concerning Executive’s
employment with the Company.  Executive agrees and acknowledges that Executive’s
employment by the Company is conditioned upon Executive adhering to and
complying with the business practices and requirements of ethical conduct set
forth in writing from time to time by the Company in its employee manual or
similar publication.  Executive represents and warrants that no other contract,
agreement or understanding to which Executive is a party or may be subject will
be violated by the execution of this Agreement by Executive.

5.     Confidentiality.  Executive recognizes and acknowledges that Executive
will have access to certain confidential information of the Company and that
such information constitutes valuable, special and unique property of the
Company (including, but not limited to, information such as business strategies,
identity of acquisition or growth targets, marketing plans, customer lists, and
other business related information for the Compan’s customers).  Executive
agrees

 

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that Executive will not, for any reason or purpose whatsoever, during or after
the term of employment, disclose any of such confidential information to any
party, and that Executive will keep inviolate and secret all confidential
information or knowledge which Executive has access to by virtue of Executive’s
employment with the Company, except as otherwise may be necessary in the
ordinary course of performing Executive’s duties with the Company.

6.     Non-Competition.

(a)           As used herein, the term “Restriction Period” shall mean a period
equal to the remainder of the Employment Term in effect on the effective date of
termination.

(b)           During Executive’s employment by the Company and for the duration
of the Restriction Period thereafter, Executive shall not, except with the prior
written consent of the Company, directly or indirectly, own, manage, operate,
join, control, finance or participate in the ownership, management, operation,
control or financing of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise with, or use
or permit Executive’s name to be used in connection with, any business or
enterprise which owns or operates a gaming or pari-mutuel facility located
within 150 miles of any gaming or pari-mutuel facility owned or operated by the
Company or any of its affiliates; provided, however, that this Section 6(b)
shall not apply in the event the Company terminates Executive without cause
under Section 3.1(a).

(c)           The foregoing restrictions shall not be construed to prohibit
Executive’s ownership of less than 5% of any class of securities of any
corporation which is engaged in any of the foregoing businesses and has a class
of securities registered pursuant to the Securities Exchange Act of 1934,
provided that such ownership represents a passive investment and that neither
Executive nor any group of persons including Executive in any way, either
directly or indirectly, manages or exercises control of any such corporation,
guarantees any of its financial obligations, otherwise takes any part in its
business, other than exercising Executive’s rights as a shareholder, or seeks to
do any of the foregoing.

7.     Non-Solicitation.  During Executive’s employment by the Company and for a
period equal to the greater of the Restriction Period or one year after the
effective date of termination, Executive will not, except with the prior written
consent of the Company, (i) directly or indirectly, solicit or hire, or
encourage the solicitation or hiring of, any person who is, or was within a six
month period prior to such solicitation or hiring, an employee of the Company or
any of its affiliates for any position as an employee, independent contractor,
consultant or otherwise or (ii) divert or attempt to divert any existing
business of the Company or any of its affiliates.

8.     Change of Control.  In the event that a change in control of the Company
occurs (as such may be defined by the Company’s current equity compensation
plan, a “Change of Control”), Executive shall be entitled to any payments and/or
benefits that may become payable as a result of such event on substantially the
same terms and conditions as any payments and/or benefits provided to Peer
Executives taking into account Executive’s position as the Executive Vice
President, Operations.

 

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9.     Document Surrender.  Upon the termination of Executive’s employment for
any reason, Executive shall immediately surrender and deliver to the Company all
documents, correspondence and any other information, of any type whatsoever,
from the Company or any of its agents, servants, employees, suppliers, and
existing or potential customers, that came into Executive’s possession by any
means whatsoever, during the course of employment.

10.   Governing Law.  This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the
Commonwealth of Pennsylvania.

11.   Jurisdiction.  The parties hereby irrevocably consent to the jurisdiction
of the courts of the Commonwealth of Pennsylvania for all purposes in connection
with any action or proceeding which arises out of or relates to this Agreement
and agree that any action instituted under this Agreement shall be commenced,
prosecuted and continued only in the state or federal courts having jurisdiction
for matters arising in Wyomissing, Pennsylvania, which shall be the exclusive
and only proper forum for adjudicating such a claim.

12.   Notices.  All notices and other communications required or permitted under
this Agreement or necessary or convenient in connection herewith shall be in
writing and shall be deemed to have been given when hand delivered, delivered by
guaranteed next-day delivery or sent by facsimile (with confirmation of
transmission) or shall be deemed given on the third business day when mailed by
registered or certified mail, as follows (provided that notice of change of
address shall be deemed given only when received):

                If to the Company, to:

Penn National Gaming, Inc.

825 Berkshire Boulevard, Suite 200

Wyomissing, PA 19610

Fax: (610) 376-2842

 

Attention: President

 

                If to Executive, to:

Leonard DeAngelo

c/o Penn National Gaming, Inc.

825 Berkshire Boulevard, Suite 200

Wyomissing, PA 19610

Fax: (610) 373-4966

 

 

or to such other names or addresses as the Company or Executive, as the case may
be, shall designate by notice to each other person entitled to receive notices
in the manner specified in this Section.

13.           Contents of Agreement; Amendment and Assignment.

 

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13.1.        This Agreement sets forth the entire understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior or contemporaneous agreements or understandings with respect to thereto
and cannot be changed, modified, extended, waived or terminated except upon a
written instrument signed by the party against which it is to be enforced.

13.2.        All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
executors, administrators, legal representatives, successors and assigns of the
parties hereto, except that the duties and responsibilities of Executive under
this Agreement are of a personal nature and shall not be assignable or
delegatable in whole or in part by Executive.

14.           Severability.  If any provision of this Agreement or application
thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision or application in any
other jurisdiction.  If any provision is held void, invalid or unenforceable
with respect to particular circumstances, it shall nevertheless remain in full
force and effect in all other circumstances.

15.   Remedies.

15.1.        No remedy conferred upon a party by this Agreement is intended to
be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to any other remedy given under this
Agreement or now or hereafter existing at law or in equity.

15.2.        No delay or omission by a party in exercising any right, remedy or
power under this Agreement or existing at law or in equity shall be construed as
a waiver thereof, and any such right, remedy or power may be exercised by such
party from time to time and as often as may be deemed expedient or necessary by
such party in its sole discretion.

15.3.        In the event the Company, in the exercise of its sole reasonable
judgment, determines that Executive has breached any term or condition of
Sections 5, 6 or 7 of this Agreement, the Company may, by delivering written
notice to Executive, (i) terminate and declare null and void any and all vested
options, (ii) demand repayment of the proceeds of all option shares sold by
Executive during the preceding 12 month period, and/or (iii) demand repayment of
all amounts paid as severance hereunder or otherwise.  Any repayments to be made
by Executive shall be made within five business days of the giving of such
notice.  This subsection (c) shall terminate and be of no further force and
effect immediately prior to a Change of Control.

16.   Beneficiaries/References.  Executive shall be entitled, to the extent
permitted under any applicable law, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit payable under this
Agreement following Executive’s death by giving the Company written notice
thereof.  In the event of Executive’s death or a judicial determination of

 

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Executive’s incompetence, reference in this Agreement to Executive shall be
deemed, where appropriate, to refer to Executive’s beneficiary, estate or other
legal representative.

17.   Withholding.  All payments under this Agreement shall be made subject to
applicable tax withholding, and the Company shall withhold from any payments
under this Agreement all federal, state and local taxes, as the Company is
required to withhold pursuant to any law or governmental rule or regulation. 
Except as specifically provided otherwise in this Agreement, Executive shall
bear all expense of, and be solely responsible for, all federal, state and local
taxes due with respect to any payment received under this Agreement.

18.   Regulatory Compliance.  The terms and provisions hereof shall be
conditioned on and subject to compliance with all laws, rules, and regulations
of all jurisdictions, or agencies, boards or commissions thereof, having
regulatory jurisdiction over the employment or activities of Executive
hereunder.

19.   Legal Fees.  Each party shall bear its own costs and expenses with respect
hereto except that the Company will defend, indemnify and hold harmless
Executive for any costs and expenses relating to claims made by any third party
with respect to Executive’s employment with the Company or this Agreement.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement as of the date first above written.

 

 

 

 

 

 

 

 

PENN NATIONAL GAMING, INC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Kevin G. DeSanctis

 

 

 

 

 

 

 

Name:  Kevin G. DeSanctis

 

 

 

 

 

 

 

Title:   President and Chief Operating

 

 

 

 

 

 

 

Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXECUTIVE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Leonard DeAngelo

 

 

 

 

 

 

 

Leonard DeAngelo

 

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