Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

---

Penn National Gaming, Inc.
825 Berkshire Boulevard, Suite 200
Wyomissing, Pennsylvania 19610

---

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on June 6, 2012

---

        NOTICE IS HEREBY GIVEN that the 2012 Annual Meeting of Shareholders of Penn National Gaming, Inc. (the "Company"), a Pennsylvania corporation, will be held on June 6, 2012, at 10 a.m., local time, at Ballard Spahr LLP, 1735 Market Street, 51^st Floor, Philadelphia, PA 19103 for the following purposes:

1.

To elect two Class I directors to serve until the 2015 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified.



2.

To ratify the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for 2012.



3.

To hold an advisory vote on the compensation paid to the Company's executive officers.



4.

To consider a shareholder proposal if properly presented at the Annual Meeting.



5.

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

        The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice of Annual Meeting. Management currently knows of no other business to be presented at the meeting. If any other matters come before the meeting, the persons named in the enclosed proxy will vote in their judgment on those matters.

        Only shareholders of record at the close of business on April 13, 2012 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 of record at the close of business on April 13, 2012 attending the Annual Meeting may vote in person even if such shareholder previously signed and returned a proxy.

Wyomissing, Pennsylvania
April 30, 2012

---

WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, YOU CAN ENSURE THAT YOUR SHARES ARE VOTED AT THE MEETING BY SUBMITTING YOUR INSTRUCTIONS BY PHONE, BY INTERNET OR BY COMPLETING, SIGNING, DATING AND MAILING THE ENCLOSED PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE PROVIDED FOR THAT PURPOSE (NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES).

---

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2012
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 6, 2012.

        Penn National Gaming, Inc.'s Proxy Statement for the 2012 Annual Meeting of Shareholders and the Annual Report for the year ended December 31, 2011, are available via the Internet at https://materials.proxyvote.com/707569.

---

TABLE OF CONTENTS

i

---

ii

---

Table of Contents

Penn National Gaming, Inc.
825 Berkshire Boulevard, Suite 200
Wyomissing, Pennsylvania 19610

---

PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
June 6, 2012

---

        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 30, 2012, in connection with the solicitation of proxies for use at the Company's 2012 Annual Meeting of Shareholders (the "Annual Meeting") to be held on June 6, 2012 at 10 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 Ballard Spahr LLP, 1735 Market Street, 51^st Floor, Philadelphia, PA 19103. This solicitation is being made on behalf of the Board of Directors of the Company (the "Board of Directors" or the "Board").

INFORMATION CONCERNING VOTING AND SOLICITATION

Record Date and Shares Outstanding

        The Board of Directors has set the close of business on April 13, 2012 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, 76,423,682 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

Quorum for the Annual Meeting

        In order for business to be conducted at the Annual Meeting, a quorum must be present. The presence, in person or by valid 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.

In Person or By Proxy

        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. The shares represented by all valid proxies received by phone, by internet or by mail, unless previously revoked, will be voted at the Annual Meeting in accordance with the instructions contained therein. If any other matters properly come before the

---

Table of Contents

meeting, the persons named in the enclosed proxy or their duly appointed substitutes acting at the meeting will be authorized to vote or otherwise act in their discretion on those matters.

Through Your Brokerage Firm

        In the event that your shares are held in "street name" by a brokerage firm, your brokerage firm is the record holder of your shares but is required to vote your shares in accordance with your instructions. In order to do so, you will need to follow the instructions for voting provided by your broker. In the event that you do not provide the proper voting instructions to your broker, it will only be permitted to vote on "routine" or "discretionary" matters (such as Proposal 2) but will not be permitted to vote your shares with respect to "non-routine" or "non-discretionary" matters (such as Proposals 1, 3 and 4). Prior to 2010, the election of directors was considered to be a "routine" or "discretionary" matter for which your broker could vote your shares without instruction. However, as a result of certain rules imposed on many brokerage firms in 2010, the election of directors is no longer considered a "routine" or "discretionary" item and your broker may not vote your shares with respect to this proposal. Votes with respect to matters for which brokers do not have discretionary authority to vote are considered "broker non-votes" with respect to such matters. The ratification of the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for 2012 is the only routine matter and, if no voting instructions are provided, your broker may vote your shares on this proposal.

Votes Required for Each Proposal

        Assuming a quorum is present, the following votes will be required for approval:

        For purposes of determining the number of votes cast, only those cast "for" or "against" are counted. Abstentions, "withhold" votes and broker non-votes are not considered "cast" but are counted for purposes of determining whether a quorum is present at the Annual Meeting. The Board knows of no other matters that are likely to be brought before the meeting other than the matters specifically referred to in the notice of the meeting.

Solicitation of Votes

        It is expected that the solicitation of proxies will be conducted primarily by mail. 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. In addition, the Company has engaged the services of Innisfree M&A Incorporated, a third party proxy solicitation firm, to assist in its proxy solicitation efforts. The Company estimates that the fees to be paid to Innisfree M&A Incorporated for this service will be approximately $20,000, plus reimbursement for out-of-pocket expenses.

2

---

Table of Contents

GOVERNANCE OF THE COMPANY

Board of Directors

Overview

        The Company is a growth-oriented, publicly traded, multi-jurisdictional gaming and racing company that has consistently generated attractive returns for its shareholders through prudent capital investment, including the development of new facilities, the expansion of existing facilities and the strategic acquisition of existing gaming and racing companies. Existing properties are managed to maximize profitability and free cash flow while at the same time endeavoring to deliver outstanding entertainment experiences for their customers. The Company operates in a highly regulated industry, which demands a correspondingly high level of integrity, transparency and accountability in all key aspects of its operations.

        The Board believes that its structure and composition have been an important element of the Company's growth and success over the years. The Board is composed of individuals who each bring unique talents and perspectives to their service on the Board and, as a group, have a proven track record of effectively working together to responsibly oversee management's operation of the Company so that shareholder value is maximized. In furtherance of this objective, the Board strives to maintain a governance environment where (i) value creation is carefully considered in connection with each major decision made by the Company, (ii) candid and comprehensive disclosure is routinely made available to the Company's shareholders and other investors, (iii) integrity and accountability are integrated into the Company's operations and (iv) the Company continuously seeks to attract, develop and retain the best possible executive talent to manage the Company's operations.

        The Board continuously evaluates the governance environment to enable the Company to respond appropriately to changes in law and prevailing practice as well as suggestions from our shareholders and other stakeholders in a manner that we believe will protect and promote the Company's proven track record of growing long-term shareholder value. The Board also monitors and considers the vast amount of commentary that is now produced on the topic of corporate governance, including reports rendered by proxy advisory firms. In doing so, the Board has noted three trends that have made it increasingly difficult to evaluate input from our shareholders: (i) an increasingly dogmatic reliance on the recommendations of proxy advisory firms that are based on a "one-size-fits-all" approach to corporate governance that is both broad in its application and blind to the individual realities facing each company—recommendations that, ironically, certain of those advisory firms fail to embrace in the governance of their own parent companies; (ii) the accelerating tendency of "special interest" shareholders, such as unions, who, with virtually no economic stake in the future of the Company, seek to use the governance process as a platform to pursue their own private agendas even where such agendas are directly in conflict with the Company's efforts to generate long-term shareholder value; and (iii) a growing gulf within many shareholder organizations between the interests of those who are responsible for making investment decisions and those who are responsible for making proxy decisions. For example, it is not uncommon for portfolio managers to suggest that they would view it negatively if there were any material changes to the Board or management yet, at the same time, the same organization's governance advisors tell us that their policies require them to withhold votes for the Company's Board nominees. These are difficult trends to reconcile; however, the Board believes that they are best reconciled by carefully evaluating each proposal and practice in the context of the opportunities available to the Company and then taking the actions that it believes are most likely to support the Company's overarching goal of continuing to create long-term shareholder value.

Composition and Independence

        The Company's Board of Directors currently consists of eight members: Peter M. Carlino, Harold Cramer, Wesley R. Edens, David A. Handler, John M. Jacquemin, Barbara Shattuck Kohn, Robert P.

3

---

Table of Contents

Levy and Saul V. Reibstein. The Board believes that its relatively small size permits each of its members to communicate frequently with management and allows for the calling of meetings on short notice to facilitate the Company's timely consideration of opportunities and challenges as they arise. This is especially critical to support the Company's efforts to strategically acquire new gaming and racing properties, which often arise on relatively short notice in the context of competitive bidding situations. Further, consideration of these opportunities is often complicated by rapidly emerging legislative or regulatory developments or distressed financial situations that require a great deal of experience to properly evaluate. By having a relatively small Board with collectively a strong background in capital markets, legal and government affairs, and long-term experience with how the Company operates its properties within the gaming and racing industry, the Board believes its composition is optimized to support and oversee the Company's efforts. The Board has determined that all of the directors and nominees for director, other than Mr. Carlino, are independent under the current Marketplace Rules of The Nasdaq Stock Market (the "Marketplace Rules") and the rules and regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Because of his position as one of five trustees for the Carlino Family Trust, an irrevocable trust (see "Security Ownership of Principal Shareholders and Management" beginning on page 57 of this Proxy Statement), Harold Cramer falls outside the U.S. Securities and Exchange Commission (the "SEC") safe harbor providing that a person will not be deemed an affiliate for purposes of determining audit committee member independence if he or she beneficially owns 10% or less of an issuer's voting stock. Mr. Cramer's voting and investment power in connection with the shares of the Company's common stock held by the Carlino Family Trust is, however, shared with four other trustees. Further, Peter M. Carlino has the sole power to vote the shares held by the Carlino Family Trust, except in the case of a sale of all or substantially all of the Company's assets, a merger where the Company will not be the surviving entity or a liquidation, in which event the trust's shares are voted as determined by a vote of all five trustees. The Board considered Mr. Cramer's beneficial ownership as a result of being a trustee of the Carlino Family Trust and, in light of the identity of beneficiaries and purposes of the Carlino Family Trust, the Board has determined that Mr. Cramer is independent for the purpose of the SEC regulations and the Marketplace Rules.

Board Leadership

        Since the time of the Company's initial public offering in 1994, Mr. Carlino, the Company's Chief Executive Officer, has also served as the Chairman of the Board. The Board believes that Mr. Carlino is best situated to serve as Chairman because of his proven track record of generating significant shareholder value over the years that, in large part, has been based on his vision for the Company and his talent for successfully identifying and developing opportunities in the gaming and racing industry. Moreover, the Board believes that Mr. Carlino's substantial beneficial ownership of the Company's equity strongly aligns his interests with the interests of shareholders.

        The Board also believes that it has substantial structural mechanisms for effective independent oversight of management's accountability. Seven of the eight members of the Board are independent directors and only independent directors serve on each of the Board's committees (as well as two non-director members of the Compliance Committee, as described below). The independent directors meet at least twice per year in executive session. Both the Audit Committee and the Compliance Committee have substantial staff resources to assist them in carrying out their responsibilities. The Company maintains a 30 person internal audit staff overseen by the Company's Vice President, Internal Audit, who provides reports to the Audit Committee, and a 27 person compliance staff overseen by the Company's Vice President of Regulatory Affairs and Chief Compliance Officer, who provides reports to the Compliance Committee. Additionally, the Company retained two non-director members to serve on its Compliance Committee: Steve DuCharme, a former Chairman of the Nevada State Gaming Control Board with over 30 years of experience in law enforcement and gaming regulation, serves as the Chairman of the Committee and Thomas N. Auriemma, the Company's former Vice President, Chief

4

---

Table of Contents

Compliance Officer and former Director of the Division of Gaming Enforcement in New Jersey, with over 28 years of experience as a gaming regulator in the State of New Jersey, serves as a non-director member.

Risk Oversight

        The Company's Board of Directors does not view risk in isolation and recognizes that a prudent level of risk-taking is an essential element of the Company's competitive strategy. As such, the Board takes an active role in the oversight of risks impacting the Company and the management team is charged with managing such risks. The Board and management work closely to ensure that integrity and accountability are integrated into the Company's operations. In fulfilling its objective, many of the direct oversight functions are performed by two of the Board's committees with support from within the Company, namely, the Audit Committee and our internal audit staff, and the Compliance Committee and our compliance staff. Additionally, the Company's independent registered public accounting firm, Ernst & Young LLP, provides support through its annual audit and quarterly reviews of the Company's financial statements.

        Further, the Board has adopted a Code of Business Conduct (the "Code of Conduct"), which is applicable to all employees of the Company, including the directors, the Company's principal executive officer, the principal financial officer and the principal accounting officer. The Code of Conduct is designed, among other things, to deter wrongdoing and promote ethical conduct, full and accurate reporting in the Company's filings with the SEC, and compliance with applicable laws. The Code of Conduct mandates a 24-hour hotline that any employee, customer or third party can use to report, anonymously if they so choose, any suspected fraud, financial impropriety or other alleged wrongdoing. All calls are handled by the Vice President of Regulatory Affairs and Chief Compliance Officer and the Vice President, Internal Audit, as appropriate, who regularly report to the Compliance Committee on calls received. A copy of the current Code of Conduct is available on the Company's website at http://www.pngaming.com/About.

        The Board regularly reviews the Company's corporate governance practices to evaluate their effectiveness in identifying, assessing and managing risks and to ensure that such practices comply with the requirements of Pennsylvania law (the state in which the Company is incorporated), the Marketplace Rules and SEC rules and regulations.

2011 Board and Committee Meetings

        Each member of the Company's Board is expected to contribute a substantial amount of time and effort in connection with his or her service as Board and committee members. The Board held four (4) formal meetings during the fiscal year ended December 31, 2011. During that same period, the Audit Committee held ten (10) formal meetings, the Compliance Committee held four (4) formal meetings, the Compensation Committee held five (5) formal meetings and the Nominating Committee held one (1) formal meeting. Further, Board members are encouraged to engage in, and regularly do engage in, informal discussions with members of management.

        During the year ended December 31, 2011, each of the Company's directors attended at least 75% of all meetings of the Board and at least 75% of the meetings of each committee of the Board of which he or she was a member. The Company encourages directors to attend shareholder meetings. Seven of eight of the Company's directors, including then-nominee Saul V. Reibstein, attended the 2011 Annual Meeting of Shareholders held on June 9, 2011.

Committees of the Board

        The Board maintains four standing committees—the Audit Committee, the Compensation Committee, the Compliance Committee and the Nominating and Corporate Governance Committee

5

---

Table of Contents

(prior to 2012, the Nominating Committee)—to assist in achieving its objectives. The specific duties and operation of each committee are described in more detail below. The Board has determined that each director serving on one or more Board committees is independent under the Marketplace Rules and the SEC rules and regulations.

Audit Committee

        Saul V. Reibstein (Chairman), John M. Jacquemin, Harold Cramer and Barbara Shattuck Kohn are the members of the Audit Committee, which was established in accordance with Section 3(a)(58)(A) of the Exchange Act of 1934, as amended. The Board has determined that Mr. Reibstein, the Chairman of the Audit Committee, and Mr. Jacquemin satisfy the SEC criteria of a "financial expert" and both are "financially sophisticated" for the purposes of the Marketplace Rules. The Audit Committee operates under a written charter adopted by the Board of Directors that is reviewed annually and complies with the current Marketplace Rules, which is available at http://www.pngaming.com/About.

        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;



•

appoint, compensate and, where appropriate, discharge and replace the Company's independent registered public accounting firm;



•

oversee, review and appraise the audit efforts of the Company's independent registered public accounting firm and internal auditors; and



•

maintain free and open communication with and among the independent registered public accounting firm, financial and senior management and the Board of Directors.

Compensation Committee

        Harold Cramer (Chairman), David A. Handler and Barbara Shattuck Kohn are the members of the Compensation Committee. The Compensation Committee operates under a written charter adopted by the Board of Directors, which is available at http://www.pngaming.com/About.

        The Chairman of the Compensation Committee is responsible for leadership of the Compensation Committee and sets meeting agendas. The Compensation Committee may form subcommittees and delegate authority to them, as it deems appropriate. The CEO, the Senior Vice President, Human Resources, and the Senior Vice President and General Counsel generally attend Compensation Committee meetings, but they are not present for executive sessions and do not participate in any discussion of their own compensation.

        The Compensation Committee is in charge of reviewing executive compensation programs annually to determine whether they are properly coordinated and achieving their intended purposes as well as periodically reviewing the policies for administration of the Company's executive compensation programs.

        The Compensation Committee is also responsible for:

•

assessing the Company's management succession planning;



•

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

6

---

Table of Contents

•

determining director compensation; and



•

administering and interpreting the Company's Amended and Restated 1994 Stock Option Plan, as amended, the 2003 Long Term Incentive Compensation Plan and the 2008 Long Term Incentive Compensation Plan, as amended.

        The Compensation Committee has authority to evaluate the annual performance of the CEO and other executive officers and set their annual compensation, which includes:

•

setting salary, bonus, stock options and other benefits; and



•

reviewing and approving, consistent with the compensation philosophy adopted by the Compensation Committee, any annual incentive compensation plan for the CEO and other executive officers, and the related review and approval of the performance criteria, goals and objectives provided for in such plan.

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

        Pursuant to the Compensation Committee's charter, the Compensation Committee is authorized to retain the services of independent compensation consultants or advisors, as it may deem appropriate in its sole discretion, to provide advice and assistance as the Compensation Committee deems appropriate. The Compensation Committee is also free to terminate the services of such independent compensation consultants and advisors and to approve their related fees and retention terms. The Compensation Committee engaged an independent third party executive compensation consultant in 2011, Exequity LLP (the "Consultant"), to provide advice and assistance to the Compensation Committee in executing its duties and responsibilities with respect to the Company's executive compensation programs and non-employee director compensation. Prior to engaging the Consultant, and periodically during the engagement, the Compensation Committee evaluates the independence of the Consultant. Such review includes receiving information regarding other services, if any, provided by the compensation consultant to the Company, the Board of Directors or other committees of the Board of Directors, and periodically reviewing the fees incurred as a result of such other activities.

        As part of its ongoing services to the Compensation Committee, the Consultant attends most of the Compensation Committee meetings and supports the Compensation Committee in executing its duties and responsibilities with respect to the Company's executive compensation programs by accumulating and summarizing market data at the request of the Compensation Committee regarding compensation of the Company's executives in comparison to its peer group and others, as appropriate. The Consultant also gathers data and provides advice regarding the Company's performance relative to its peer group, the structure of annual and long-term incentive compensation, the appropriateness of financial and other performance measures and the design of equity incentive plans. The Consultant reports directly to the Compensation Committee and has been authorized by them to work with certain executive officers of the Company as well as other employees in the Company's human resources, legal, and finance departments in connection with the Consultant's work for the Compensation Committee.

Compliance Committee

        The Compliance Committee has four members. David A. Handler and Robert P. Levy are the current Board members of the Compliance Committee. Steve DuCharme, a former Chairman of the Nevada State Gaming Control Board with over 30 years of experience in law enforcement and gaming

7

---

Table of Contents

regulation, is the Chairman and Thomas N. Auriemma, the Company's former Vice President, Chief Compliance Officer and former Director of the Division of Gaming Enforcement in New Jersey, with over 28 years of experience as a gaming regulator in the State of New Jersey, is a non-director member. The Compliance Committee operates under a written charter adopted by the Board of Directors.

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

Nominating and Corporate Governance Committee

        Harold Cramer (Chairman), David A. Handler and Barbara Shattuck Kohn are the members of the Nominating and Corporate Governance Committee, formerly the Nominating Committee. In 2012, the Board expanded the responsibilities of the Nominating Committee to include oversight of all corporate governance matters. The committee operates under a written charter that complies with the current Marketplace Rules, which is available at http://www.pngaming.com/About. Although the committee does not have a formal policy on diversity, per se, it has been the long-standing practice of the committee to seek to include on the Board a complementary mix of individuals with diverse backgrounds and skills reflective of the varied challenges facing the Company's management as it strives to generate increased shareholder value.

        The Nominating and Corporate Governance Committee is responsible for:

•

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



•

advising the Board with respect to Board structure, composition and size of the Board and its committees;



•

making recommendations on the range of skills and expertise which should be represented on the Board, and the eligibility criteria for individual Board and committee membership; and



•

overseeing the Company's corporate governance practices, including reviewing and recommending to the Board for approval any guidelines, documents or policies, or any changes thereto, that comprise the Company's corporate governance framework.

Director Selection Process

        The Nominating and Corporate Governance Committee considers candidates for Board membership suggested by, among others, its members, other Board members and management. The committee will also consider recommendations of nominees for directors by shareholders (for information relating the nominations of directors by our shareholders, please see "Director Nominations by Shareholders" below). In addition, the committee has authority to retain and terminate a search firm to assist in the identification of director candidates, including the authority to approve the search firm, fees and other retention terms, and the authority to obtain advice and assistance from internal and external legal, accounting or other advisers.

        In selecting nominees for director, the committee considers a number of factors, including, but not limited to:

•

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

8

---

Table of Contents

•

a candidate's ability to meet the rigorous suitability and filing requirements of the relevant regulatory agencies in each of the jurisdictions where the Company operates;



•

a candidate's ability to represent the interests of the shareholders;



•

a candidate's independence from management and freedom from potential conflicts of interest with the Company;



•

a candidate's financial literacy, including whether the candidate will meet the audit committee membership standards set forth in the Marketplace Rules;



•

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



•

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



•

a candidate's availability, including the number of other boards on which the candidate serves, and his or her ability to dedicate sufficient time and energy to his or her board duties.

During the process of considering a potential nominee, the Nominating and Corporate Governance Committee generally requests additional information about and interviews the potential nominee. Such information would be expected to include the detailed financial and personal history customarily required by the Company's gaming and racing regulators. In addition, the Committee will also request that the candidate submit to an investigation by the Company's Vice President of Regulatory Affairs and Chief Compliance Officer to evaluate whether the candidate is suitable to serve on the Board of a publicly traded, multi-jurisdictional gaming and racing company.

Director Nominations by Shareholders

        Shareholders who have beneficially owned at least 1% of the Company's common stock for a continuous period of not less than 12 months before making such recommendation, may submit director nominations to the Nominating and Corporate Governance Committee for consideration provided that such recommendations are in proper written form and timely received by the Secretary of the Company. To be timely, a shareholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Company not less than 120 nor more than 150 days prior to the anniversary date of the immediately preceding annual meeting of shareholders. However, in the event that the annual meeting is called for a date that is not within 60 days before or after the anniversary date, notice must be received not later than the close of business on the tenth day following the day on which notice of the date of the annual meeting is mailed or public disclosure of the date of the annual meeting is made, whichever first occurs.

        To be in proper written form, a shareholder's notice must contain (i) the name, age, business address and residence address of the recommended nominee, (ii) the principal occupation or employment of the nominee, (iii) the class or series and number of shares of capital stock of the Company which are owned beneficially or of record by the nominee and (iv) any other information relating to the nominee that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. In addition, the shareholder's notice must contain (1) the name and record address of such shareholder, (2) the class or series and number of shares of capital stock of the Company which are owned beneficially or of record by such shareholder, (3) a description of all arrangements or understandings between such shareholder and each recommended nominee and any other person or persons (including their names) pursuant to which the recommendations are to be made by such shareholder and (4) any other information relating to such shareholder that would be required to be disclosed in a proxy statement or other filings

9

---

Table of Contents

required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must also be accompanied by a written consent of each recommended nominee to provide all information necessary to respond fully to any suitability inquiry conducted under the executive, administrative, judicial and/or legislative rules, regulations, laws and orders of any jurisdiction to which the Company is then subject and such additional information concerning the nominee as may be requested by the Nominating and Corporate Governance Committee and/or Board of Directors and being named as a nominee and to serve as a director if nominated and if elected. In evaluating recommendations received from shareholders, the committee will apply the criteria and follow the process described above. The Company did not receive any nominations from shareholders for the Annual Meeting.

Compensation of Directors

        The Company pays director fees to each director who is not an employee of the Company. During the year ended December 31, 2011, each outside director received an annual cash fee of $50,000, plus an additional $10,000 for service on each of the Audit Committee and the Compensation Committee. On January 3, 2011, each outside director, with the exception of Saul V. Reibstein who became a director on June 9, 2011, also received an award of phantom stock units equal to 7,113 shares at the fair market value of $35.15 per share (the closing share price of the Company's Common Stock on December 31, 2010). Following his election to the Board, Saul V. Reibstein received an award of phantom stock units equal to 3,741 shares at the fair market value of $37.72 per share (the closing share price of the Company's Common Stock on June 8, 2011).

2011 Director Compensation Table

        The following table sets forth information with respect to all compensation awarded to the Company's non-employee directors during the last completed fiscal year:

10

---

Table of Contents

Stock Ownership Guidelines

        The Company's Board of Directors has established stock ownership guidelines for non-employee directors of the Company. Each non-employee director is expected to own and hold shares of common stock, including restricted and phantom stock units, equal in value to at least five times the annual cash retainer (exclusive of separate committee retainers) for non-employee directors in the applicable year. New non-employee directors have a period of three years from the date of initial election to achieve this ownership guideline. As of December 31, 2011, all non-employee directors who have served on the Board for at least three years are in compliance with these guidelines.

        The Company's Compensation Committee also established stock ownership guidelines for senior officers as follows:

        As with the director stock ownership guidelines, the value of an executive's stock ownership at any time will be based on the aggregate value of common stock, restricted stock and phantom stock units held by such senior officer. Newly hired senior officers will have five years from their date of hire to comply with these guidelines. As of December 31, 2011, all senior officers, other than our most recently hired Senior Vice President of Regional Operations, are in compliance with this policy.

Shareholder Access Policy

        Shareholders who wish to communicate with directors should do so by writing to Penn National Gaming, Inc., 825 Berkshire Boulevard, Suite 200, Wyomissing, PA 19610, Attention: Secretary. The Secretary of the Company reviews all such correspondence and forwards to the Board a summary of all such correspondence and copies of all correspondence that, in the opinion of the Secretary, deals with the functions of the Board or Board committees or that he otherwise determines requires their attention. Directors may at any time review a log of all correspondence received by the Company that is addressed to members of the Board and request copies of any such correspondence. Concerns relating to accounting, internal controls or auditing matters will be brought to the attention of the Company's Audit Committee.

11

---

Table of Contents

PROPOSAL NO. 1

ELECTION OF CLASS I DIRECTORS

        The Company's Board of Directors currently consists of eight members: Peter M. Carlino, Harold Cramer, Wesley R. Edens, David A. Handler, John M. Jacquemin, Barbara Shattuck Kohn, Robert P. Levy and Saul V. Reibstein. The directors are currently organized into three classes with each class elected to a three year term. Following the shareholder vote at our 2011 Annual Meeting of Shareholders approving an advisory proposal to adopt a majority vote standard for the election of directors, the Board requested the Nominating and Corporate Governance Committee to consider the potential effects of such a change in voting structure. In doing so, the committee weighed the advantages that a majority voting standard provides to the Company in the highly-regulated gaming and racing industry against the disadvantages of a majority standard, including the associated risk of a failed election (which is increased with the recent changes prohibiting brokers from voting for directors without instruction). The committee also considered the views and interests of other stakeholders, including those of the principal holder of its Series B Redeemable Preferred shares, which upon conversion could represent up to 27.3 million shares of common stock. The committee also considered the identity and apparent motives of the proponent of the shareholder proposal. Further, the committee considered the Company's proven track record of growing shareholder value and the importance to that effort of the stability of the Board and its willingness to consider sale opportunities when such opportunities are desirable, such as the Company's attempt in 2007 and 2008 to sell the Company at what in retrospect was clearly an attractive price for shareholders. Following such analysis and in light of these considerations, the Board decided to avoid the uncertainty that could arise with a majority voting standard and to accept the recommendation of the Nominating and Corporate Governance Committee to retain the current plurality standard.

Information about Nominees and Other Directors

        Two Class I directors have been nominated for election at the Annual Meeting to hold office, subject to the provisions of the Company's bylaws, until the annual meeting of shareholders of the Company to be held in the year 2015 and until their respective successors are duly elected and qualified. The Board has determined that all of the directors, other than Mr. Carlino, and all of the director nominees are independent under the current Marketplace Rules and the SEC rules and regulations.

Class I Nominees

        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. Each nominee has consented to be named as a nominee and, to the knowledge of the Company, is willing to serve as a director, if elected. Should any of the nominees not remain a nominee at the end of the meeting (a situation which is not anticipated), solicited proxies will be voted in favor of the remaining nominees and may be voted for a substitute nominee or nominees.

Nominee Qualifications

        In addition to the qualifications of each nominee for director set forth below, David A. Handler and John J. Jacquemin are each standing for re-election based upon the judgment, financial acumen

12

---

Table of Contents

and skill they have previously demonstrated as Board members, as well as their commitment to service on our Board.

        David A. Handler.    Mr. Handler has been a director since 1994. In August 2008, Mr. Handler joined Centerview Partners as a Partner. Centerview Partners is a boutique financial advisory and private equity firm. From April 2006 to August 2008, he was a Managing Director at UBS Investment Bank. From April 2000 until April 2006, he was a Senior Managing Director at Bear Stearns & 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.

        The Board supports and approves the nomination of Mr. Handler because of his experience in investment banking and capital markets that has included a focus on mergers and acquisitions and other significant transactions. Mr. Handler's background has been an invaluable asset to the Company over the years, particularly in connection with evaluating potential acquisition and financing opportunities.

        John M. Jacquemin.    Mr. Jacquemin has been a director since 1995. Mr. Jacquemin is President of Mooring Financial Corporation, a group of financial services companies founded by Mr. Jacquemin in 1982 that specialize in the purchase and administration of commercial loan portfolios.

        The Board supports and approves the nomination of Mr. Jacquemin because of his experience with private equity funds specializing in restructurings, workouts and the valuation of distressed debt. The nature of these investments requires an intimate and sophisticated understanding of financial statements to enable the identification of growth opportunities in troubled companies. This experience brings unique perspectives to the Board and enhances Mr. Jacquemin's financial sophistication and financial statement expertise, which is a critical element to service on our Audit Committee.

Continuing Directors

        The following table sets forth the name, age, principal occupation and respective service dates of each person who will continue as a director after the Annual Meeting.

        Wesley R. Edens.    Mr. Edens has been a director since 2008. Mr. Edens has been Co-Chairman of the Board of Fortress Investment Group LLC ("Fortress") since August 2009, and he has been a member of the Board of Fortress since November 2006. Mr. Edens has been a member of the Management Committee of Fortress since co-founding the company in 1998. Mr. Edens is responsible

13

---

Table of Contents

for the Fortress' private equity and publicly traded alternative investment businesses. He is Chairman of the board of directors of each of Aircastle Limited, Brookdale Senior Living Inc., Florida East Coast Railway Corp., GateHouse Media, Inc., Newcastle Investment Corp. and RailAmerica, Inc. and a director of GAGFAH S.A., Springleaf Finance Corporation and Springleaf Finance Inc. Mr. Edens was Chief Executive Officer of Global Signal Inc. from February 2004 to April 2006 and Chairman of the board of directors from October 2002 to January 2007. Mr. Edens also previously served on the boards of the following publicly traded company and registered investment companies: Crown Castle Investment Corp. (merged with Global Signal Inc.) from January 2007 to July 2007; Eurocastle Investment Limited from August 2003 to November 2011; Fortress Brookdale Investment Fund LLC, from August 13, 2000 (deregistered with the SEC in March 2009); Fortress Pinnacle Investment Fund, from July 24, 2002 (deregistered with the SEC in March 2008); Fortress Investment Trust II, from July 2002 (deregistered with the SEC in January 2011); and RIC Coinvestment Fund LP, from May 10, 2006 (deregistered with the SEC in June 2009). Prior to forming Fortress, Mr. Edens was a partner and managing director of BlackRock Financial Management Inc., where he headed BlackRock Asset Investors, a private equity fund. In addition, Mr. Edens was formerly a partner and managing director of Lehman Brothers.

        The Board supported and approved Mr. Edens' nomination in 2010 because of his significant experience as a chief executive officer and his proven ability to manage multiple properties and businesses. He also has significant capital investment, financing and mergers and acquisitions experience. As part of his role at Fortress, Mr. Edens serves as a director of certain public portfolio companies in which Fortress has an investment, including the Company. Mr. Edens' contribution to the Company's Board is enhanced both by the valuable perspectives he obtains in connection with such other board service as well as by the substantial resources available to him to support his work as a director of this limited number of portfolio companies.

        Additionally, in connection with the termination of the Agreement and Plan of Merger (the "Merger Agreement"), dated as of June 15, 2007, by and among the Company, certain affiliates of Fortress and certain affiliates of Centerbridge Partners, L.P. ("Centerbridge"), the Company entered into an Investor Rights Agreement with an affiliate of Fortress, an affiliate of Centerbridge, Deutsche Bank Investment Partners, Inc. and Wachovia Investment Holdings, LLC (collectively, the "Investors") providing for, among other things, the appointment of Mr. Edens or, in certain circumstances where Mr. Edens is no longer able to serve in such capacity, a subsequent designee to serve as a Class II director on the Board of Directors (the "Investor Designee"). The Investors will retain the right to appoint an Investor Designee for so long as one or more affiliates of Fortress hold at least two-thirds of the shares of the Company's Series B Redeemable Preferred Stock issued to them; provided that each Investor Designee, other than Mr. Edens, must be recommended to and approved by the Nominating and Corporate Governance Committee prior to being nominated for election at a meeting of shareholders. The Company is required to use commercially reasonable efforts to cause the election of the Investor Designee at each shareholder meeting at which an Investor Designee has been recommended by the Nominating and Corporate Governance Committee and is up for election.

        Robert P. Levy.    Mr. Levy has been a director since 1995 and is Chairman of the Board of Robert P. Levy LLC. He is a past Chairman of the Board of the Atlantic City Racing Association and served a two-year term from 1989 through 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, from 1960 to 2011. He is currently a consultant to Betfair Limited. Mr. Levy is also a past director of Fasig-Tipton Company, an equine auction company. Mr. Levy owns the Robert P. Levy Stable, a thoroughbred racing and breeding operation.

        The Board supported and approved Mr. Levy's nomination in 2010 because of his extensive experience in the horse racing and pari-mutuel industry, the knowledge and insight he brings to the Board in connection with the gaming and racing business in general, and his long-term service to and

14

---

Table of Contents

knowledge of the Company over the years. By virtue of his experience, Mr. Levy has added significant value helping the Company to grow from a single racetrack into a multi-jurisdictional gaming and racing company operating in a highly regulated industry.

        Barbara Shattuck Kohn.    Ms. Shattuck Kohn has been a director since 2004. She is a Managing Director of Morgan Keegan--Raymond James. Morgan Keegan & Company, Inc. was recently acquired by Raymond James Financial from Regions Financial Corp. and was the successor to Shattuck Hammond Partners, an investment banking firm Ms. Shattuck Kohn co-founded in 1993. Prior to 1993, she spent 11 years at Cain Brothers, Shattuck & Company, Inc., an investment banking firm she also co-founded. From 1976 to 1982, she was a Vice President of Goldman, Sachs & Co. Ms. Shattuck Kohn began her career as a municipal bond analyst at Standard & Poor's Corporation. She is also a member of the board of directors of Sun Life Insurance & Annuity Company of New York, a wholly owned subsidiary of Sun Life Assurance of Canada.

        The Board supported and approved Ms. Shattuck Kohn's nomination in 2010 because of her vast experience in investment banking, capital markets and project finance. Further, she possesses the experience, financial sophistication and financial statement expertise necessary to evaluate potential acquisition and financing opportunities for the Company.

        Peter M. Carlino.    Mr. Carlino has served as the Company's Chairman of the Board and Chief Executive Officer since April 1994. Since 1976, he has been President of Carlino Capital Management Corp. (formerly known as Carlino Financial Corporation), a holding company which owns and operates Carlino family businesses and oversees investments, in which capacity he has been continuously active in strategic planning and monitoring operations.

        The Board supported and approved the nomination of Mr. Carlino in 2011 because Mr. Carlino has been the driving force behind the Company's proven track record of growing long-term shareholder value since its initial public offering in 1994. It has been primarily due to Mr. Carlino's vision and leadership that the Company has been able to identify and successfully pursue the development opportunities that have been the basis of the Company's long-term growth. Moreover, as the largest beneficial owner of the Company's common stock, his interests are uniquely and significantly aligned with the Company's efforts to continue to grow long-term shareholder value.

        Harold Cramer.    Mr. Cramer has been a director since 1994. Until November 1996, Mr. Cramer was the Chairman and Chief Executive Officer of the Graduate Health System. 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. Mr. Cramer is now a retired partner of Schnader Harrison Segal & Lewis LLP.

        The Board supported and approved the nomination of Mr. Cramer in 2011 because of his extensive experience building and managing a law firm and serving as chief executive officer of a large health care provider, which included multiple hospitals in two states, a health maintenance organization and a captive insurance company, among other entities. His legal and business background provide the Board and the Company with a critical understanding of the issues from a variety of perspectives—legal, business and regulatory—affecting the Company.

        Saul V. Reibstein.    Mr. Reibsten has been a director since June 2011. Since 2004, Mr. Reibstein has served as a member of the senior management team of CBIZ, Inc., a New York Stock Exchange-listed professional services company, where his current primary responsibility is managing business development on a national basis as Executive Managing Director. Mr. Reibstein has also managed nine business units in CBIZ's Financial Services Group and is part of a team that is responsible for acquisitions of accounting firms for CBIZ on a national basis. Mr. Reibstein also serves as a director of Vishay Precision Group, Inc., where he is the Chairman of the Audit Committee and a member of the Compensation Committee and the Nominating and Corporate Governance Committee. Mr. Reibstein

15

---

Table of Contents

has over 35 years of public accounting experience, including 11 years serving as a partner in BDO Seidman, LLP, (now BDO USA, LLP) a national accounting services firm, where he was the partner in charge of the Philadelphia office from June 1997 to December 2001 and Regional Business Line Leader from December 2001 until September 2004.

        The Board supported and approved the nomination of Mr. Reibstein in 2011 because of his extensive accounting, finance and strategic management expertise for both public and private companies, including representation of gaming companies. Further, Mr. Reibstein's financial sophistication and financial statement expertise as a licensed CPA, as well as his experience in reporting to, and serving on, Audit Committees of publicly-held companies, presented a well-qualified candidate to serve as the Chairman of our Audit Committee.

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

16

---

Table of Contents

PROPOSAL NO. 2

RATIFICATION OF SELECTION OF ERNST & YOUNG LLP AS
THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2012

        The Audit Committee has selected Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2012 and the shareholders are asked to ratify this selection. Ernst & Young has served as the Company's independent registered public accounting firm since 2006. All audit and non-audit services provided by Ernst & Young LLP are approved by the Audit Committee. Ernst & Young LLP has advised the Company that it has no direct or material indirect interest in the Company or its affiliates. Representatives of Ernst & Young LLP are expected to attend the meeting, will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions. The favorable vote of a majority of the votes cast at the meeting is required to approve the ratification of the selection of the Company's independent registered public accounting firm.

        A description of aggregate fees for professional services performed by Ernst & Young LLP in relation to 2011 and 2010 is as follows:

Audit Committee Pre-Approval Policy

        The Audit Committee's Audit and Non-Audit Services Pre-Approval Policy provides for the pre-approval of audit and non-audit services performed by the Company's independent registered public accounting firm. Under the policy, the Audit Committee may pre-approve specific services, including fee levels, by the independent registered public accounting firm in a designated category (audit, audit related, tax services and all other services). The Audit Committee may delegate, in writing, this authority to one or more of its members, provided that the member or members to whom such authority is delegated must report their decisions to the Audit Committee at its next scheduled meeting. In 2011, all of the services provided by Ernst & Young LLP were pre-approved by the Audit Committee.

        The Board of Directors unanimously recommends that shareholders vote "FOR" the ratification of the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2012.

17

---

Table of Contents

PROPOSAL NO. 3

ADVISORY VOTE ON EXECUTIVE COMPENSATION

        The Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Securities Exchange Act of 1934, as amended, requires public companies to give their shareholders the opportunity to cast advisory votes relating to the compensation paid to the Company's named executive officers at the first annual meeting of shareholders held after January 21, 2011 and no less frequently than once every three years thereafter. At last year's annual meeting, our shareholders supported an annual "say-on-pay" advisory vote and the Board subsequently agreed. Accordingly, we are providing shareholders the opportunity to advise the Compensation Committee and the Board of Directors regarding the compensation of our named executive officers, as such compensation is described in the Compensation Discussion and Analysis section, beginning on page 26. We are requesting your nonbinding vote on the following resolution:

"RESOLVED, that the shareholders of the Company approve, on an advisory basis, the compensation of the Company's named executive officers, as described in the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative disclosure included in the Company's proxy statement for the 2012 Annual Meeting of Shareholders."

        We believe shareholders should approve of the Company's compensation program because it is heavily weighted towards performance-based compensation and, as exemplified by the 75% growth of the Company's common stock over the last three calendar years, the Company's performance supports the compensation paid to executives. We urge you to carefully review our compensation analysis so that you have a complete understanding of how important our compensation program is to the continued success of the Company. You can find a complete discussion of the Company's pay-for-performance compensation philosophy, the elements of our compensation program and the specific payments made to named executive officers in 2011 and thus far in 2012 under "Compensation Discussion and Analysis" beginning on page 26.

        Like all companies, the Company's compensation program is the cornerstone of how we attract, motivate and, most importantly, retain our management team. To that end, we have designed a compensation program that is strongly grounded on pay-for-performance principles. As illustrated in the chart below, for example, in 2011 the target potential compensation opportunity (including stock option grants) of the Company's named executive officers consisted of approximately 19% of guaranteed compensation (primarily in the form of base salary) and 81% of potential performance based compensation:

Target Potential 2011
Executive Compensation
(Including Stock Options)

18

---

Table of Contents

        We believe that the Company's performance over both the short-term and the long-term amply supports the compensation paid to management. As described in detail under "Company Performance" beginning on page 27, the Company had a total shareholder return of over 75% during the three year period ending December 2011 as compared to the 49.6% median total shareholder return of the Company's peer group over the same period.

        Further, the Company has continued to outperform its peer group over the long term. As demonstrated in the chart below, an investment of $100 in the Company made on January 1, 2001 would have been worth $1,692 on January 1, 2012 versus an average of $254 for the same investment in our peer group companies with comparable trading histories:

Total Shareholder Return(1) vs. Peer Group(2)
1/1/2000 to 1/1/2012

(1)

Total shareholder return is determined by assuming quarterly reinvestment of dividends.

(2)

Peer group companies with comparable trading histories include Ameristar Casinos, Inc., Boyd Gaming Corporation, Isle of Capri Casinos, Inc., MGM Resorts International and Pinnacle Entertainment, Inc.

        As an advisory vote, the results of this vote will not be binding on the Board or the Company. However, we urge you to endorse our pay-for-performance compensation program, particularly in light of the Company's strong performance over both the short-term and long-term.

        The Board of Directors unanimously recommends that shareholders cast their advisory vote FOR approval of the compensation of the Company's named executive officers described in the Compensation Discussion and Analysis and otherwise disclosed in this Proxy Statement.

19

---

Table of Contents

PROPOSAL NO. 4

SHAREHOLDER PROPOSAL REQUESTING THAT THE COMPANY ADOPT A MAJORITY
VOTE STANDARD FOR THE ELECTION OF DIRECTORS

        UNITE-HERE (the "Union"), 1775 K Street, NW, Suite 620, Washington, DC 20006, which is the beneficial owner of 135 shares of the Company's common stock, and which intends to hold such shares of the Company's common stock through the date of the 2012 Annual Meeting of Shareholders, such ownership being in excess of $2,000 in market value, submitted the following proposal (the "Union Proposal") and supporting statement:

Proposal from the Shareholder

        RESOLVED, that the shareholders of Penn National Gaming, Inc. (the "Company") recommend that the Board of Directors take the steps necessary to amend the Company's articles and bylaws to provide that director nominees shall be elected by the affirmative vote of the majority of votes cast at an annual meeting of shareholders, with a plurality vote standard retained only for contested director elections (that is, when the number of director nominees exceeds the number of board seats).

Supporting Statement from the Shareholder

        The accountability of the Board to its shareholders is integral to the success of our Company. The plurality vote standard is an outdated corporate governance practice that serves to protect entrenched boards and frustrate shareholders' ability to hold directors accountable. The Council of Institutional Investors and ISS support a majority vote standard. ISS reports that this proposal received majority support from shareholders in each of the past four years.

        Under the plurality standard, a nominee for the board can be elected with as little as a single vote, even if a substantial majority of the votes cast are "withheld" from the nominee. For this reason, we believe that plurality voting should only be used in contested director elections, and otherwise our Company should change to a majority vote standard. We believe increased accountability is especially needed at our Company.

Board Unresponsive to Shareholder Concerns

        In 2011 a majority of Penn shareholders voted in favor of a proposal to adopt a majority vote standard, yet the Board has not implemented the recommended change. In 2010, shareholders voted overwhelmingly to recommend a declassification of the Penn Board. The Board's failure to take this action led ISS to recommend that shareholders cast "withhold" votes for all director nominees.

Directors Tied to Executives

        Several directors have longstanding ties to the CEO and his family. Cramer is a trustee of the Carlino Family Trust and has sat with Peter D. Carlino on two additional boards. Levy's businesses have bred three race horses with Peter Carlino. Jacquemin was employed by the Carlino Family Corporation in the 1970's.

Excessive Compensation

        In 2010, Peter M. Carlino received over $9.4 million in total compensation. Base salaries for three executives are above the tax deductible cap of $1 million. Penn's director compensation is above the median for publicly-traded gaming companies. The personal air travel of executives cost our Company over $266,000 in 2010.

20

---

Table of Contents

Windfall to Executives with a Change in Control

        Penn maintains a single trigger change in control payment that generously pays executives three times their annual base salary and annual cash bonus in the event of a change in control without requiring a subsequent termination to receive payment. ISS has recommended withhold votes because of this arrangement. Compensation committee members have received substantial withhold votes in recent elections.

        We urge shareholders to vote FOR this proposal.

Statement in Opposition from the Company

Company Position

        In years past, we have expressed to our shareholders our genuine belief that the Union's various proposals have nothing to do with executive compensation, board relationships or accountability (as the Union would have shareholders believe). By submitting its fourth shareholder proposal in four years, while at the same time continuing to take actions throughout the year intended to materially harm the Company, the Union has confirmed our belief that their shareholder proposals are motivated only by their desire to organize the Company's employees. A traditional shareholder has a singular and laudable objective—to participate in the growth of the company in which it has invested. In our view, the Union is anything but a traditional shareholder. In 2006 (shortly after its attempts to bully Company in Pennsylvania failed), the Union purchased slightly more Company shares (135) than necessary to manufacture standing to submit a shareholder proposal. Since then, consistent with the explicit threats made by two of the Union's executives (as more fully described below), it has submitted four consecutive shareholder proposals and employed every trick known to organized labor to harass the Company.

        Why would a shareholder purportedly interested in protecting shareholder value instead go to such great lengths to try to destroy it? Reduced to its simplest form, we have every reason to believe the Union Proposal is yet another tactic in a long line of attempts to exert pressure on the Company's management to accept their demand for a very lucrative card check arrangement—an arrangement under which employees can be forced into unionized status (and, critically from Union's perspective, pay union dues) without the benefit of a secret ballot election and without hearing the employer's or anyone else's side of the story. Simply put, a vote for the Union on this proposal is a vote against shareholder value—a loss that will manifest itself by emboldening the Union to try to further harass and distract senior management of the Company in a manner contrary to shareholder interests.

        UNITE HERE, an aggressively anti-business labor organization, seems incapable of generating enough support to win a typical secret ballot election. As a result, UNITE HERE depends on a coercive top down approach to gaining new members. In order to implement this top down approach and card check plan, the Union needs the acquiescence of the Company. When the Company refused to give that consent, UNITE HERE's executives explicitly declared a long and bitter war on the Company, employing tactics that clearly demonstrate that they have no concern for employees, shareholders or shareholder value. While the Company maintains good relationships with a number of labor unions, we believe that we must strongly oppose the Union both to protect our employees' right to participate in fair and open union elections as well as to defend against the Union's unwarranted attacks on shareholder value.

        In this instance, we believe that the Union is yet again abusing the shareholder proposal process in an effort to pressure management into making decisions that we think are contrary to the best interests of the Company, its employees and its shareholders. In doing so, it appears to us that they are attempting to manipulate shareholders into voting against their own interests by supporting their seemingly innocuous proposals. The Company encourages its shareholders to look carefully through the

21

---

Table of Contents

facade of the Union Proposal and instead focus on the many actions UNITE HERE has taken against the Company and the alarming implications of such continued actions for shareholder value. If you take the time to review this laundry list of anti-shareholder actions, we believe you will understand why it is imperative that you cast a vote against the Union Proposal.

Background on Union

        To understand the basis for the Company's concerns, it is useful to briefly review the Union's history and the Company's interactions with the Union, all of which we think clearly demonstrate the Union's desperate need for additional income (i.e. union dues) and its repeated pattern of destructive actions designed entirely to pressure the Company into permitting UNITE HERE to obtain union dues without bothering to hold an election. UNITE HERE was formed in 2004 when the Union of Needletrades, Industrial, and Textile Employees (UNITE) merged with the Hotel Employees and Restaurant Employees (HERE). This merger was a lifeline for HERE, which for years had suffered from allegations of cronyism, financial mismanagement and fraud. See Two Unions in Marriage Now Face Divorce Talks, The New York Times, February 8, 2009; Organization Man, David Moberg, The Nation, July 16, 2001 (available at http://www.thenation.com/article/organization-man?page=0,0). In 1986, the President's Commission on Organized Crime concluded: "During the Commission's investigation it became clear that legitimate trade unionists are aware of the mob ties to HERE International Union and await government action to oust the mob from the union." See The Edge: Organized Crime, Business and Labor Unions, President's Commission on Organized Crime, 1986. By 1995, the government had filed a racketeering lawsuit and installed a federal monitor to oversee the international office of HERE. In 2001 The Nation, a reliable union supporter, noted that the monitor, who had expelled 18 union officials and five other individuals, issued a report that painted a "sordid picture of financial abuse, cronyism, use of union funds for officers' personal expenses, ghost payrolling, undemocratic procedures, minimal training of staff, inadequate auditing, nepotism, questionable charitable contributions, dubious consultant payments and much more under former International president Edward Hanley." Organization Man, David Moberg, The Nation, July 16, 2001 (available at http://www.thenation.com/article/organization-man?page=0,0). The Nation added that Hanley's successor and UNITE HERE's current president for hospitality industries, John Wilhelm, "remains an ardent defender of Hanley."

        At the time of HERE's merger with UNITE, it seemed like a perfect marriage. UNITE was financially strong, even controlling its own bank, but its membership rolls had grown progressively smaller. HERE had a large membership base, but dwindling resources. From the outset, however, the marriage was anything but perfect. UNITE HERE has had well-publicized internal strife, lawsuits and dysfunction. The President of UNITE HERE has publicly conceded that the union is "engaged in a civil war ... with irreconcilable differences," one so heated that violent confrontations have erupted among union officials. Certain Union officials have accused the HERE faction of the Union of spending recklessly, failing to represent their members, squandering resources and, pursuant to a federal lawsuit, inappropriate use of union funds and usurpation of the powers of the elected officials (see Two Unions in Marriage Now Face Divorce Talks, The New York Times, February 8, 2009). In addition to being the subject of criminal inquiries, since 2000, HERE and its successor, UNITE HERE, have participated in over 100 strikes, been the subject of over 1,000 Unfair Labor Practice charges, been the subject of over 150 decertification petitions, and are now facing very serious underfunding of the Union's pension (see http://unionfacts.org/).

22

---

Table of Contents

Union's Obvious Anti-Growth Initiatives

        In an effort to increase membership and, ultimately, dues, the Union has taken numerous troubling actions aimed at applying pressure on the Company and, even more remarkably, on other labor organizations that are perceived to stand in the way of its crusade:

•

UNITE HERE confirms a national corporate campaign against the Company just as it was becoming a larger, more successful gaming company.  In a 2005 meeting in King of Prussia, Pennsylvania, with the Vice President and Deputy General Counsel of the Company, the Union's Eastern Regional Head indicated that the Company was a target for the Union's card check campaign and that it would not stop the campaign until the card check relationship they demanded for Company's upcoming Pennsylvania casino is accepted by the Company.



•

UNITE HERE purchases 135 shares of the Company's Common Stock in 2006.  Soon after Company's refusal to agree to the card check demand, the Union became a shareholder of the Company in September 2006 with the purchase of 135 shares, thereby expanding the Union's available pressure tactics by enabling it to attend shareholder meetings and providing access to the shareholder proposal process—all for a relatively minimal investment and consistent with its approach with other target companies. We do not believe that the timing of this purchase or the amount (scarcely more than the minimum required by law to have standing to submit a shareholder proposal) are coincidental.



•

UNITE HERE attempts to interfere with the Company's purchase of certain properties from Argosy Gaming Company.  In July 2007, the Union attempted to interject itself into the Illinois Gaming Board's review of the Company's request to retain ownership of the Empress Casino in connection with the purchase of Argosy Gaming Company. The Company was eventually permitted to retain the Empress Casino, now Hollywood Casino Joliet, and, despite the challenges that have plagued the Illinois gaming market, it has generated significant revenues for the Company since the acquisition.



•

UNITE HERE testified against the Company's participation in Maryland gaming opportunities.  In November 2007, the Union testified at a legislative committee hearing in Maryland in favor of introducing gaming, but specifically against Rosecroft Raceway being included in the legislation due to the Company's proposed purchase of the site at the time.



•

UNITE HERE claimed to be behind efforts to defeat the Company's bid for table games in West Virginia in 2007.  During a July 2008 meeting in Atlantic City, New Jersey, with the Company's President and Chief Operating Officer, the Company's Senior Vice President Human Resources and the Company's Vice President and Deputy General Counsel, an executive of the Union boasted about participating in the defeat of the Company's 2007 campaign to offer table games at Hollywood Casino at Charles Town Races. The voters in West Virginia subsequently approved the Company's request to offer tables games in Charles Town, but not until December 2009. Taking the Union at its word on the defeat of our 2007 table games initiative, the Union cost the Company an estimated $250,000,000 in lost revenue from table games from the period from July 2008 through July 2010. Along with taking credit for this significant setback, the Union representative assured the Company representatives that it would not cease its campaign against the Company until the Company accepted the card check relationship.



•

UNITE HERE engages in disruptive organizing tactics.  In their attempts to organize the Company's employees, the Union has engaged in several irresponsible and inappropriate organizing tactics. The Company has received a number of candid reports from employees that representatives of UNITE HERE have been involved in aggressive recruiting and harassment, including repeated and unwelcomed home visits, physically intimidating conduct, late night phone calls and recruiters posing as government officials.

23

---

Table of Contents

•

UNITE HERE submitted a shareholder proposal for the 2009 Annual Meeting of Shareholders.  In December 2008, the Union submitted a shareholder proposal for the Company's 2009 Annual Meeting of Shareholders, which was subsequently withdrawn, requesting that the Company's shareholder rights plan be withdrawn. The timing of the withdrawal coincided with the well-publicized and documented internal disputes of the Union regarding the failure of the merger of UNITE and HERE to boost membership and dues and the corresponding financial distress.



•

UNITE HERE submitted a shareholder proposal for the 2010 Annual Meeting of Shareholders.  In December 2009, the Union submitted a shareholder proposal for the Company's 2010 Annual Meeting of Shareholders, requesting that the Company de-classify its board of directors into one class with each director elected annually.



•

UNITE HERE attempted to disrupt the Company's efforts to open its new casino in Perryville, Maryland.  During early 2010, the Union continued its attempts to disrupt the Company's growth activities by demanding that the Company execute an extremely one-sided "labor peace agreement" in connection with the opening of a new gaming facility in Maryland. The Union made this demand despite knowing that the Company had already executed a balanced labor peace agreement with a local, credible union coalition comprised of SEATU (a Maryland-based union subsidiary of the Seafarer's union with whom the Company has a national relationship) and the UFCW Local 27 (a Maryland-based union with membership in excess of 25,000 workers in the region). Significantly, the Union rejected the same labor peace agreement signed by SEATU and the UFCW because it would have prohibited the national harassment tactics that the Union is fond of and clearly intends to continue to employ. Following the Union's rejection of the neutrality agreement, the Union attempted to persuade the Maryland State Lottery Commission that the Company was acting in violation of applicable gaming law, despite the Company's clear willingness to offer the Union the same terms agreed to with other union organizations. Finally, failing to persuade the Maryland State Lottery Commission and finding itself on the outside looking in following a secret ballot election by employees overwhelmingly accepting SEATU and the UFCW, the Union focused intense and inordinate efforts on disrupting this small facility (less than 200 union members) by picketing the facility opening and by contacting employees at home (following an intrusive Freedom of Information Act request to obtain personal information about facility employees).



•

UNITE HERE filed an unfair labor practice claim against the Company as well as fellow labor organizations in connection with the opening of our facility in Perryville, Maryland.  Following their inability to garner any real employee support for an election at this facility, on December 26, 2010, the Union filed various unfair labor practice claims with the National Labor Relations Board against the Company as well as the two local unions who won their representation elections with the Perryville employees by a significant margin. The Company believes that the objectives of these claims are to disrupt this new operation and to give the Union a second chance at representation by seeking another near term election with the same employees. The vast majority of the Union's allegations were summarily dismissed.



•

UNITE HERE presented information against the Company at a Maryland legislative committee hearing on support for race tracks.  Just a mere two weeks after the Union touted to the SEC its supposed "proven track record" of enhancing shareholder value, the Union presented a self-styled "Legislative Research Report" prepared by UNITE HERE's "legislative research group" entitled Penn National: Broken Promises and Hardball Tactics at a legislative committee hearing on providing support for race tracks in Maryland, which includes the Company's recent purchase of Rosecroft Raceway. This "report" attempts to paint the Company as dishonest by purporting to describe various past events involving the Company. In our view, however, the Union's recitations are rife with intentionally misleading inaccuracies and statements deliberately

24

---

Table of Contents

taken out of context. Quite simply, we believe the report is a malicious attempt to damage the Company's operations and growth initiatives in Maryland and across the country thereby directly harming shareholder value. It is also a technique that is not new to UNITE HERE—they have published similar self-serving reports with respect to Pinnacle Entertainment, Inc., Harrah's Entertainment, Lakes Entertainment, Revel Entertainment Group and Tropicana Entertainment.

Union's Continued Anti-Growth Initiatives

        We believe that the actions described are egregious, designed specifically to reduce the Company's profitability and, ultimately, shareholder value. The Union has had numerous opportunities to deny its involvement in the many anti-growth actions involved in its corporate campaign, yet, tellingly it has not contested a single one of the Company's charges. In fact, emboldened by the vote relative to its 2011 shareholder proposal, the Union has continued its corporate campaign and its path of destructive tactics. Since just last year, the Union has engaged in the following conduct:

•

UNITE HERE submits yet another shareholder proposal for 2012.  On December 30, 2011, Union submitted a proposal nearly identical to its proposal from the prior year. Significantly, this is the Union's fourth proposal in four years against Company—an act unprecedented in Union's long history of anti-shareholder activity. Based on a review of shareholder proposals submitted by Union in the last 3 years, it appears that Company is the only target to receive three consecutive proposals. Additionally, it appears that Union only makes shareholder proposals against companies with which it has a labor dispute or against which it is conducting a corporate campaign.



•

UNITE HERE disrupts Company's newest casino.  In connection with the Company's acquisition of The M Resort in Henderson, Nevada, in May 2011, a local affiliate of the Proponent/Union began distributing provocative literature to employees of The M Resort. The Proponent/Union had not initiated any organization efforts among employees at The M Resort prior to the Company's purchase of The M Resort. The documents were clearly designed to create concern and discontent relative to the Company's ownership of The M Resort, going so far as suggesting, without any factual basis, that the Company would introduce another union to the workplace other than the Proponent/Union.



•

UNITE HERE lobbies against Company's development plans in Maryland.  Company has spent significant time and resources in 2011 to develop a gaming facility in Prince George's County, Maryland—a project that by all accounts would represent a good opportunity for the Company and its shareholders. However, at its first opportunity to oppose this development, in late 2011, Union lobbied Prince George's County Council to pass a zoning law that would have prevented the Company's proposed casino development.

The Board of Directors' Recommendation

        We think it is clear that the Union is trying to use the shareholder proposal process to further its own agenda and doing so in a manner that demonstrates a complete disregard for shareholder value. We urge shareholders to consider the source of the Union Proposal as well as the underlying motives of UNITE HERE. We further encourage shareholders to carefully assess the recommendation of the real and proven stewards of shareholder value—the Board and the Company's management team.

        The Board of Directors unanimously recommends that shareholders vote "AGAINST" Proposal No. 4.

25

---

Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

        For purposes of the following Compensation Discussion and Analysis, the terms "executives" and "executive officers" refer to the Named Executive Officers of the Company as set forth in the Summary Compensation Table, which appears on page 43 of this Proxy Statement.

Executive Summary

        In 2011, the Company generated a substantial increase in adjusted EBITDA from 2010. Due primarily to the impressive performance of new table game offerings in the Company's East/West segment, the continued success of management's efforts to improve operating margins and increased earnings from investments in unconsolidated subsidiaries, the Company's adjusted EBITDA increased to $730.2 million in 2011 from $585.9 million in 2010. This represents a $144.3 million, or 25%, year over year increase in adjusted EBITDA. In addition, despite the negative drag on equity markets in 2011 from, among other things, continued concern about economic recovery, domestic fiscal policies and European sovereign debt, the Company's total shareholder return, as measured by its TSR Plan (as defined below), exceeded the median of its industry peers over each of the prior one, three and five year periods. Notably, the Company had a total shareholder return of over 75% during the three year period ending in December 2011 as compared to 49.6% median total shareholder return of the Company's peer group over the same period.

        In light of the Company's performance in 2011 and in line with its long-standing pay for performance philosophy, the compensation paid to the Company's executive officers increased from the prior year commensurate with the Company's performance. As was the case last year, due to the exceptional operating results, all executives earned the maximum bonus under the internal measure of our annual incentive plan as the Company's adjusted EBITDA substantially exceeded the initial adjusted EBITDA target. The value of the executives' equity grants also increased due to the increase in the Company's stock price. We should note, though, that since the number of shares granted to executives has not changed from year to year, the increase in equity compensation was driven entirely by the increase in the Company's share price, not because the size of the option grants changed. Base salaries for executive officers increased by 3% for 2011, which is the same increase received by the Company's corporate staff generally and consistent with national averages.

        Unlike last year, the TSR Plan did not offset the increase in total compensation since the Company's total shareholder return outperformed seven of the nine benchmarks set under the TSR Plan. As described in more detail below, our TSR Plan, which is the external measure component of our annual incentive plan, measures the Company's performance against the performance of the Company's industry peer group, a broader group of consumer spending dependent businesses and the overall S&P 500. As noted above, the Company continued to perform well against its peers, where the Company's share price growth exceeded the median growth rate of its peer group over each of the one, three and five year periods measured by the TSR Plan. The Company's share price growth also exceeded the S&P Leisure Time Select Index over the one and five year period as well as the S&P 500 Index over the one and three year period.

        The compensation paid to the Company's Chief Executive Officer remains reasonable and appropriate in light of the Company's scale and performance and continues to reflect our pay for performance philosophy. Mr. Carlino's target potential compensation opportunity (including stock options) in 2011 consisted of approximately 17% guaranteed compensation and 83% performance-based compensation. Consistent with this, in 2011, Mr. Carlino's base salary increased by 3% from the prior year, his internal measure bonus increased by 3%, his external measure bonus increased by 107% (which reflects that the Company's share price outperformed seven of nine benchmarks under the TSR Plan in 2011 as compared to three of nine benchmarks in 2010), the number of options granted to him remained unchanged from prior years and his other compensation increased by less than $90,000.

26

---

Table of Contents

Accordingly, his overall compensation increased by 26%, which is clearly in line with the 25% increase in adjusted EBITDA over the same period.

Company Performance

        In 2011, the Company successfully completed, or made significant progress on, a number of operational, developmental and financial initiatives that drove, and are expected to continue to drive, increases in the Company's share price, including:

•

Excluding the M Resort, which we acquired in July 2011, four consecutive quarters of margin improvement in 2011, with 15 of the Company's 16 gaming properties successfully increasing adjusted EBITDA margins from the prior year and 15 of its 16 gaming properties generating year-over-year improvement in adjusted EBITDA, resulting in a 280 basis point improvement in the Company's consolidated operating margin, which increased its full year operating margin to 26.6%.



•

Significant year over year revenue growth due to a full year contribution of new table game offerings in West Virginia and Pennsylvania, a full year of operation from the Company's new Hollywood Casino facility in Perryville, Maryland, and a seven month contribution from the M Resort (a restructuring opportunity that we were able to fully complete in May 2011).



•

Significant progress in 2011 on three major gaming projects that the Company either has opened, in the case of the new Hollywood Casino at Kansas Speedway, or plans to open this year, in the case of Hollywood Casino Toledo and Hollywood Casino Columbus. These projects represent over $1.1 billion of capital being invested in new gaming facilities in new markets that the Company believes will create significant returns for shareholders.



•

Continued focus on opportunities for growth in potential new and expanding markets through the consummation of a joint venture to own and operate the Sam Houston Race Park in Houston, Texas, the Valley Race Park in Harlingen, Texas and a planned racetrack in Laredo, Texas; the acquisition of Rosecroft Raceway in Prince Georges County, Maryland; and the entry into a non-binding memorandum of understanding with State of Ohio that would permit the Company to relocate its two existing race tracks to two new markets in Ohio, Dayton and Youngstown.



•

Capital market initiatives to manage the Company's capital structure through the repurchase of 2,981,406 shares of its common stock at an average price of $35.29 per share; entry into a new $2.15 billion senior secured credit facility with favorable financing terms and improved financial flexibility; and redemption of all of its $250 million 6³/4% senior subordinated notes.

        As a result of its accomplishments in 2011, the Company continued to generate positive returns for shareholders and continued to outperform its peer group over the long term. As demonstrated in the chart below, an investment of $100 in the Company made on January 1, 2000 would have been worth

27

---

Table of Contents

$1,692 on January 1, 2012 versus an average of $254 for the same investment in our peer group companies with comparable trading histories:

Total Shareholder Return(1) vs. Peer Group(2)
1/1/2000 to 1/1/2012

(1)

Total shareholder return is determined by assuming quarterly reinvestment of dividends.

(2)

Peer group companies with comparable trading histories include Ameristar Casinos, Inc., Boyd Gaming Corporation, Isle of Capri Casinos, Inc., MGM Resorts International and Pinnacle Entertainment, Inc.

        For a complete discussion of the Company's performance in 2011, reference should be made to Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 34 to 60 of the Company's Annual Report on Form 10-K for the year ended December 31, 2011, a copy of which is included in the Annual Report to Shareholders delivered in connection with this Proxy Statement.

Key Compensation Practices

        The Compensation Committee, in consultation with our independent compensation consultant, management and the full Board, routinely considers compensation practices suggested by our shareholders as a result of the shareholder outreach efforts described below as well as those identified as "best practices" by various market constituents. With all such suggestions, we strive to incorporate into our compensation program those practices we believe will most effectively support the Company's continuing efforts to create shareholder value. Accordingly, we have incorporated many of these "best practices" into our compensation program in areas where we believe they benefit the Company and its shareholders, including:

•

Compensation that includes a combination of relative and absolute incentive opportunities



•

Compensation largely based on multiple performance metrics, including EBITDA, relative total shareholder return and absolute stock price performance

28

---

Table of Contents

•

Established maximum bonus opportunities.



•

Prohibition on discounting and repricing options.



•

Share ownership guidelines for directors and executive officers.



•

History of active share repurchase programs to capitalize on prudent stock repurchase opportunities which offset the potential dilution from shares granted pursuant to incentive awards.



•

Incentive awards that incorporate a fungible share feature applicable to all full value awards.



•

Improved disclosure of the Company's compensation clawback policies.



•

Incorporation of a "double trigger" for severance payments following a change of control in the employment agreement with our executive officer hired in 2011.

        In addition, we will continue to evaluate and consider input from our shareholders and emerging "best practices" to ensure that our compensation programs contain the features necessary to properly align the interests of our executives with the interests of our shareholders.

Shareholder Outreach and Say on Pay Vote

        During 2011, we continued our long-standing practice of robust communication and discussion with shareholders, including direct dialogue with most of our top 25 shareholders specifically regarding our 2011 Say on Pay Vote. By way of overview, the Company continues to hold quarterly conference calls in which management limits its prepared remarks in favor of creating an open forum to allow shareholders to ask about matters of most interest to them. The Company continues to provide financial and other disclosure beyond that required by the SEC on matters such as management's views on pending litigation and quarterly and annual earnings estimates. Further, members of the Company's senior management team participated at approximately 25 investor conferences throughout 2011 and regularly hosted analysts and institutional investors at its corporate headquarters. The Company also hosted over 30 facility tours and meetings across its property portfolio for analysts and institutional investors. At the Global Gaming Expo, the gaming industry's annual trade show in Las Vegas, executives conducted group meetings and also hosted several investor events at our M Resort property. Finally, the Company hosted and/or plans to host events for the institutional investor community in connection with the opening of its newest gaming facilities, including Hollywood Casino at Kansas Speedway, Hollywood Casino Toledo and Hollywood Casino Columbus. These outreach efforts provide numerous forums for investors and prospective investors to discuss with management a wide variety of subjects important to such investors, including executive compensation.

        The results of the shareholder advisory vote on executive compensation at our 2011 Annual Meeting of Shareholders were supportive of our compensation programs. Following the 2011 Annual Meeting, we reviewed the various views expressed by our shareholders with respect to our compensation program and evaluated what changes may be appropriate in light of these views as well as our own views on compensation matters. As a result of our evaluation as well as consideration of other factors, we implemented the following:

•

share ownership guidelines for executive officers;



•

improved disclosure of the Company's compensation clawback policies;



•

incorporation of a "double trigger" for severance payments following a change of control in the employment agreement with our executive officer hired in 2011; and



•

repurchase of 2,981,406 shares of the Company's Common Stock in open market transactions for approximately $105.2 million at an average price of $35.29 per share.

29

---

Table of Contents

Peer Group

        We review the Company's peer group at the beginning of each fiscal year to determine whether any changes are warranted from the prior year's peer group. The companies that make up the Company's peer group are its business competitors as well as its primary source of, and primary competition for, executive talent. Many of the Company's executives have been recruited from other gaming operations. In addition, since gaming and racing are highly regulated industries, it takes a high degree of experience and prior knowledge to provide effective oversight to multiple gaming and racing properties in a variety of jurisdictions. Also, the Company's executive officers are required to submit to extensive investigations conducted by the State Police, or an equivalent investigatory agency, of their personal financial records, their character and competency in order to be found "suitable" to serve in their respective capacities in each of the jurisdictions in which the Company operates. Accordingly, the pool for executives capable and willing to serve in an executive capacity in a publicly traded, multi-jurisdictional gaming and racing company tends to consist mostly of individuals who are already working within the gaming industry and among our peer group. For these reasons, we have determined that the appropriate peer group for the Company consists of the largest companies in the commercial gaming industry. We believe that this peer group is appropriate for determining relative industry performance as well as for recruiting and retention purposes.

        For 2011 and 2012, we confirmed that the peer group to be used for benchmarking purposes would consist of Ameristar Casinos, Inc., Boyd Gaming Corporation, Isle of Capri Casinos, Inc., Las Vegas Sands Corp., MGM Resorts International, Pinnacle Entertainment, Inc. and Wynn Resorts, Ltd. In addition, we take into consideration any available compensation data from Trump Entertainment Resorts, Inc., which entered into bankruptcy in 2009, as well as Caesars Entertainment, Inc., which was taken private but conducted an initial public offering in 2012, and Station Casinos, Inc., which was taken private but continues to file periodic reports under the Exchange Act.

Overview of Compensation Program

Objectives of Compensation Program

        The overall objective of the Company's executive compensation program is to compensate members of management in a manner that most effectively incentivizes them to maximize shareholder value without taking undue financial risks. At the same time, the executive compensation program is intended to enable the Company to attract and retain the executive talent needed to grow and further its strategic interests. Specifically, the Company's compensation objectives are as follows:

•

Attract and retain the best possible management team for the Company to increase shareholder value and preserve the Company's credibility in the capital markets.



•

Create a pay for performance compensation program that will incentivize management to perform across a range of business and economic circumstances.

Compensation Philosophy

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

        The Company intends to maintain an executive compensation program that will help it attract and retain the executive talent needed to grow and further the strategic interests of the business. To this end, the Company provides a compensation and benefits program that will be sufficiently attractive to provide talented executives with good reason for remaining with the Company and continuing in their efforts to improve shareholder value. The Company's program is designed to motivate and reward executives to achieve and exceed targeted results. Pay received by the executives will be commensurate

30

---

Table of Contents

with the performance of the Company, the business unit they are part of, and their own individual contribution.

Risk Assessment

        In establishing and reviewing our executive compensation program, we consider, among other things, whether the program properly balances performance-based pay and fixed compensation to motivate executives to focus on the creation of shareholder value without encouraging unnecessary or excessive risk taking. To this end, the Committee carefully reviews the principal components of executive compensation. Base salaries are reviewed annually and fixed in amount. Annual incentive pay is focused on achievement of certain specific overall financial goals and is determined using multiple performance criteria, including announced adjusted EBITDA targets and total shareholder return. The other major component of our executive officers' compensation is long-term incentives through a mix of stock options and restricted stock that we believe are important to help further align executives' interests with those of our shareholders. Such grants are subject to long-term vesting schedules, and executives are subject to stock holding requirements in the Stock Ownership Guidelines, to help ensure that executives always have significant value tied to long-term stock price performance. We believe that these cash and incentive awards appropriately balance risk, payment for performance and align executive compensation with shareholders without encouraging unnecessary or excessive risk taking.

Elements of Compensation

        We have designed a compensation program that is heavily weighted towards performance based compensation but utilizes several different performance metrics designed to ensure that management is appropriately incentivized across a number of different business and economic environments and appropriately considers each of the principal objectives of the Company's business strategy. In 2011, the total potential compensation opportunity of the Company's named executive officers consisted of approximately 19% of guaranteed compensation (primarily in the form of base salary) and 81% of potential performance based compensation.

Target Potential 2011
Executive Compensation
(Including Stock Options)

        The principal elements of the compensation program are described below. Please see "Analysis of Compensation" starting on page 35 for a discussion of the specific actions taken with respect to executive compensation in fiscal year 2011 and thus far in 2012. For a detailed description of the Compensation Committee's role and responsibilities, as well as the retention and use of our

31

---

Table of Contents

independent compensation consultant, Exequity LLP, please see "Compensation Committee" beginning on page 6.

        Base Salary.    The base salary of our named executive officers as a group is targeted to approximate the 50th percentile (median) of base salaries of comparable executives within the Company's peer group. We target the 50th percentile in order to set salaries that are competitive in the gaming industry and that will attract and retain qualified executives. Base salaries are then adjusted for certain qualitative factors, including specific position duties and responsibilities, tenure with the Company, individual contribution and position value to the Company and the overall reasonableness of an executive's pay package.

        Annual Incentive.    The Company's annual incentive plan is designed to motivate the executive officers and other members of management to achieve the objectives that we believe are most likely to increase shareholder value without undermining the Company's credibility in the capital markets, which is critical to fund capital intensive future growth opportunities at the lowest possible cost of capital. To ensure that such executives are appropriately incentivized across a variety of business and economic conditions, we set one measure referenced by an internal goal and another measure referenced by one or more external goals based on the Company's performance against its peer group and other external benchmarks. We believe that the best internal measures of performance are focused on earnings while external measures should expand and further align management and shareholder interests by focusing on shareholder value. Accordingly, in 2011, we utilized an internal and an external measure to determine the annual incentive opportunity for our executives.

        For 2011, the internal measure for the annual incentive plan provided for the payment of incentive compensation based upon the Company's achievement of its adjusted EBITDA goal for the year. Conceptually, the term adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization, adjusted for certain non-recurring or unforeseen events. In order to provide a clear reconciliation to generally accepted accounting principles, or GAAP, we base our adjusted EBITDA calculation on the Company's income from operations excluding charges for stock compensation, depreciation and amortization, gain or loss on disposal of assets and other non-recurring events, and inclusive of gain or loss from the Company's joint ventures. Each quarter, the Company publicly discloses its adjusted EBITDA in connection with its quarterly announcement of earnings, and provides a reconciliation of adjusted EBITDA to net income (GAAP) and income from operations (GAAP) to adjusted EBITDA in connection with each such announcement.

        We set the ranges of bonuses payable pursuant to the internal measure for each executive as a percentage of annual base salary, consistent with the incentive programs and practices used by the Company's peer group. The following table shows the range of awards payable pursuant to the internal measure for each executive as a percentage of annual base salary for the 2011 and 2012 fiscal years:

        The target bonus is payable when the Company meets or exceeds its adjusted EBITDA goal for a given year, subject to any required adjustments under the 2008 Long-Term Incentive Compensation Plan, as amended (the "2008 Plan") for certain extraordinary or unforeseen events. For any portion of executives' annual incentive bonuses to be paid with respect to the internal measure, the Company must achieve a threshold amount of adjusted EBITDA. This threshold was set at 10% less than the

32

---

Table of Contents

adjusted EBITDA goal in 2011 and 2012. In order to help manage potential payouts, annual incentive opportunities are capped at 150% of top executives' targeted bonus levels, regardless of the extent to which performance exceeds targeted levels. We have discretion to pay this award in cash, equity or any combination of cash and equity.

        In 2011, the external measure for the annual incentive plan provided for payment of incentive compensation based on how the Company's total shareholder return compared to the total shareholder return of companies included in three different indices: (a) the Company's industry peer group; (b) the S&P Leisure Time Select Industries Index; and (c) the S&P 500. We refer to this external measure for the annual incentive compensation plan as the total shareholder return plan (the "TSR Plan"). Total shareholder return, or TSR, is an indicator of a company's overall performance and, as used in connection with the TSR Plan, means the total return measured by share price movements on an investment in the stock of a public company over a specified period, taking into account the reinvestment of dividends, if any.

        Under the TSR Plan, the payment of incentive bonuses is based on the Company's share performance over a one, three and five year period as compared against the TSR of the companies listed in each index. Accordingly, as shown in the table below, TSR is measured against nine benchmarks: the median of the one, three and five year TSR for the Company's peer group and for the S&P Leisure Time Select Industries Index and the one, three and five year TSR for the S&P 500:

        The Company's share performance is required to exceed the applicable target for any portion of the external measure bonus to be paid. For each target exceeded, the executive will receive an amount equal to the bonus per target noted below, with a maximum bonus only paid if all nine targets are achieved. We have discretion to pay the external measure bonus in cash, equity or any combination of cash and equity. The bonus per target and maximum bonus payable under the TSR Plan for 2011 and 2012 for each named executive officer as a percentage of annual base salary is as follows:

        Equity Compensation.    We believe that the award of equity compensation is the most critical component of the Company's executive compensation program because equity compensation most directly ties executive compensation to management's ability to increase shareholder value, with respect to which, as illustrated by the total shareholder return table on page 28 of this Proxy Statement, the Company has historically outperformed its peer group. Our experience shows us that equity compensation fosters an atmosphere where employees "think like owners" and are motivated to increase the long-term value of the Company by aligning their interests with those of the Company's shareholders. Accordingly, we believe that equity compensation is an excellent tool to reflect the Company's principles of "pay for performance" so that a portion of each executive's compensation package, particularly stock options and SARs, will grow in value as shareholder value is increased—even for executives who already hold a sizable number of shares of the Company, such as Mr. Carlino. We also believe that this culture of employee ownership has been a significant contributing factor to

33

---

Table of Contents

the Company's success and will continue to play a vital role in future success. More specifically, we believe that equity compensation has been a critical tool in attracting and retaining executives with the type of entrepreneurial spirit that we believe is integral to the Company's success.

        Consistent with the Board's desire to maximize shareholder value, we have taken steps to protect shareholder interests and promote shareholder value in both the design and the administration of the equity compensation program. Under the terms of the 2008 Plan, awards to employees are administered by the Compensation Committee. The vesting schedules for awards are designed to encourage employees to focus on the long-term success of the Company by requiring employees to remain with the Company for a number of years (typically four years for options and SARs) before all or a portion of their awards may be settled. The 2008 Plan neither permits the exercise price of outstanding stock options or SARs rights to be reduced nor permits the grant of discounted stock options or SARs. Finally, the 2008 Plan includes a "fungible share" concept that requires the Company to count each share awarded as restricted stock, or pursuant to any other full value award, as an award of 2.44 shares (increased from 2.16 shares as of the 2011 Annual Meeting of Shareholders) for purposes of counting the shares available for issuance under the 2008 Plan; provided that awards settled only in cash are not counted against the 2008 Plan limit.

        To counter the dilutive effects of equity compensation, on July 3, 2008, the Company announced the Board's authorization to repurchase up to $200 million of the Company's common stock through open market or privately negotiated transactions, subject to applicable securities laws and appropriate market conditions. This authorization has been increased and extended several times since 2008, and, as of March 31, 2012, there remains available authorization of $160.1 million for the Company to repurchase shares of its common stock, which will expire at the Annual Meeting of Shareholders in 2012, unless otherwise extended or shortened by the Board. In aggregate, the Company has repurchased over 13.4 million shares of its common stock and common share equivalents since 2008, which it believes has more than offset the dilutive impact of all options and other equity awards that have been and may be granted under the 2008 Plan. By way of contrast, the 2008 Plan (inclusive of additional shares approved at the 2011 Annual Meeting of Shareholders) only authorizes equity awards for a maximum of 9.25 million shares of common stock.

        In determining the amount of shares subject to options granted under the 2008 Plan, we seek to grant a fixed number of stock options to employees, including the named executive officers, unless individual performance or Company performance merits an adjustment from such amount. We believe that this fixed approach to equity compensation has helped account for the stability that the Company has experienced in its executive management team. By providing a reasonable and predictable amount of equity compensation each year, we have generally been able to retain and strengthen the Company's executive management team through both up years and down years and through, most notably, the extraordinarily long period during which the merger transaction with Fortress and Centerbridge (the "Merger") was pending. In addition, we believe that the fixed grant approach is better for shareholders than an approach that seeks to obtain a particular dollar target based on the presumed value of an option on the date of grant because it awards option holders for performance with the value of an option directly correlated to the Company's share price. Under the latter approach, while the amount of stock options needed to meet such target decreases as stock price rises, the reverse is true in declining markets—as stock price declines, the amount of stock options needed to meet such targets increases, exacerbating the dilutive impact of the options. In our view, dollar-based stock option grants are not desirable especially in light of the fact that stock options by their very nature are designed to provide compensation to executives only to the extent that the stock price rises above the exercise price. As shown by market trends over the last few years, such compensation is by no means guaranteed. Further, we do not consider the ASC 718 value of the stock options because we do not believe that the value assigned for this purpose provides as meaningful an indication of value to an

34

---

Table of Contents

executive (particularly in the context of attracting and retaining executives) as reflected for accounting purposes.

        Deferred Compensation.    The Company does not maintain any defined benefit pension programs for its executives. Instead, consistent with the competitive practices of the Company's peer group, the Company maintains an elective non-qualified deferred compensation plan for executives. Pursuant to the plan, the Company provides a match of up to 5% of the executive's base salary and annual bonus. All amounts deferred by the executive are notionally invested, as directed by the executive, in commonly available mutual funds, and the Company does not guarantee any minimum returns. The plan is unfunded and benefits are paid from the Company's general assets; however, the Company currently funds into a trust on a monthly basis. The Company generally sets aside separately the amounts deferred by the executives and the matching contributions thereon and, to protect against excess liabilities, invests such amounts in the mutual funds notionally selected by each executive. This program is described in more detail beginning on page 47 of this Proxy Statement.

        Benefits and Perquisites.    We believe that executives should be offered customary benefits and perquisites that are reasonable relative to the benefits provided to all employees, are consistent with competitive practices among the Company's peer group and, in certain circumstances, may address a particular reasonable issue or concern of an executive. The standard benefits offered to all of the Company's employees include medical, dental and vision insurance, group life insurance, short and long-term disability and a 401(k) with certain contributions matched by the Company. Consistent with the objectives described above, the Company also provides certain executive officers with additional supplemental benefits and perquisites. The description and value of such supplemental benefits and perquisites in 2011 can be found on page 44 of this Proxy Statement.

Analysis of Compensation

        Base Salary.    Each year, we review the base salary of each named executive officer against the base salaries of similarly positioned executives in the Company's peer group. In doing so, we compare the base salary information contained in our peer groups' most recently available proxy statements with comparable data for the Company's named executive officers. In 2011, our review indicated that the base salary of the Company's Chief Executive Officer was at the 77^th percentile relative to similarly positioned executives in the Company's peer group (based on information in the peer group Company's 2011 proxy statements), and the base salaries of the other named executive officers ranged from the 27^th percentile to the 57^th percentile.

        In 2011, based on our review of comparable base salaries and the individual qualitative factors described above, we deemed it appropriate to increase the base salary of the Chairman and Chief Executive Officer's and the President and Chief Operating Officer by 3%, which is the same increase generally received by the Company's corporate staff and is consistent with national compensation trends across all industries. We increased the base salary of the Senior Vice President and General Counsel and the Senior Vice President of Corporate Development by 12%. These increases were intended to better align their base salaries with the base salaries of similarly situated executives in the Company's peer group as well as to recognize their continuing exceptional efforts on behalf of the Company. We also determined to increase the base salary of the Senior Vice President and Chief Financial Officer by 42%. We believe this adjustment was warranted due primarily to the fact that, over his ten years of service to the Company, his role with the Company has grown substantially beyond the customary duties of a chief financial officer. He has repeatedly proved to be instrumental in formulating and implementing many of the Company's notable accomplishments with respect to its operations, development program and capital markets activities. He also is the Company's principal spokesmen to the investment community and has a proven track record of credibly and comprehensively providing investors clear, concise and transparent communication about the Company's operating performance.

35

---

Table of Contents

        For 2012, we conducted a similar review of base salaries. Based on our review, we deemed it appropriate to increase the base salary of each named executive officer (other than our recently hired Senior Vice President of Regional Operations, whose increase was prorated to his hire date of October 2011) by 3%, which is the same increase generally received by the Company's corporate staff and is consistent with national compensation trends across all industries. The base salary of the new Senior Vice President of Regional Operations was increased by 0.8%.

        Set forth below are the 2012 base salaries for each of the named executive officers:

        Annual Incentive—Internal Measure.    In 2011, the named executive officers earned the maximum payout under the internal measure of the annual incentive plan based on the Company exceeding the maximum adjusted EBITDA target of $696.2 million, which as described in the proxy statement for the 2011 Annual Meeting of Shareholders, was 105% of the Company's publicly announced adjusted EBITDA target of $663.0 million. For purposes of the 2008 Plan, adjusted EBITDA for 2011 was $720.6 million, which reflects a downward adjustment from the Company's publicly announced adjusted EBITDA to exclude the impact of certain non-recurring events as required by the terms of the 2008 Plan.

        The following table indicates the actual amount paid to each named executive officer as a percentage of annual base salary for 2011 for the internal measure of the annual incentive:

        For 2012, the target amount for the internal measure for the Company's annual incentive plan was established at $720.6 million, which is the Company's estimate of adjusted EBITDA for 2012 as publicly announced in connection with Company's quarterly earnings call on February 2, 2012. For a complete discussion of the assumptions underlying the Company's estimate of 2012 adjusted EBITDA and the other risk factors to be considered in connection therewith, please refer to the Company's press release included as Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on February 6, 2012. Absent an adjustment as required under the 2008 Plan for certain extraordinary circumstances outside of management's control, the adjusted EBITDA required to be generated in 2012 before any compensation becomes payable under the internal measure would be $648.5 million, and the adjusted EBITDA required to be generated in order to earn the maximum amount of incentive compensation under the internal measure would be $756.6 million.

36

---

Table of Contents

        Annual Incentive—External Measure.    For 2011, the Company's TSR exceeded the targets for seven of the nine performance measures. As a result, the named executive officers earned 77.8% of the maximum bonus payable under the external measure of the annual incentive plan. We elected to pay this amount in shares of phantom stock units that vest over four years, 25% on the first anniversary of the date of grant and 25% on each succeeding anniversary, in order to encourage management retention and foster alignment with shareholder interests. The numbers of units were determined by dividing the bonus amount by the fair market value of the common stock on the first trading day of the performance period, which was January 3, 2011. By using this form of award, we believe that we are both appropriately compensating management for the Company's superior performance relative to its peer group in 2011 while at the same time creating a significant long-term retention incentive for the management team.

        The following table indicates the maximum shares that could have been earned by management under the TSR Plan in 2011, the actual number of shares awarded based on the Company having met seven of the TSR targets and the grant date value of such awards:

        As evidenced by the Company's share price growth exceeding the one, three and five year median growth rate of its industry peer group, the Company continued to perform well against its peers. We believe this is due to a combination of (i) the strength of the Company's development pipeline, which has recently yielded the table game opportunities in West Virginia and Pennsylvania, the newly opened casinos in Maryland and Kansas City, the planned casino openings in Ohio and the acquisition of the M Resort as well as several meaningful longer term development opportunities, (ii) the ability of management to continue to improve the Company's operating margins through operating efficiencies and rational spending on marketing, (iii) the relatively lower volatility of the Company's regional gaming portfolio during the economic downturn of the last several years and (iv) the relatively lower debt levels maintained by the Company during those years.

        The Company's TSR exceeded the median TSR of the S&P Leisure Time Select Industries Index over both the one year and five year periods and exceeded the TSR of the S&P 500 Index over the one and three year period. Notably, the median TSR of the Company's peer group only exceeded one of the possible six benchmarks against the broader indices. As we noted last year, the factors underlying the relative performance of the Company's TSR against the broader indices appear, in large part, to be due to structural factors beyond management's control. The Leisure Time Index consists of gaming operators and suppliers, hotel, cruise line, and ski resort operators and a number of fast food and casual quick service restaurant operators. Unlike the gaming industry, most of these businesses are able to expand as demand dictates where the Company's ability to expand is limited by the number of states that have legalized gaming and, even in those that have legalized gaming, by the limited number of licenses issued by each state. Moreover, our industry is subject to substantially higher regulatory burdens and legislative risks. We believe these factors also affect the Company's and our industry's performance against the S&P 500 but are offset to some degree by our industry's ability to operate at relatively higher operating margins and to incur relatively higher levels of debt.

37

---

Table of Contents

        Equity Compensation.    Consistent with the Company's practice to make its annual equity compensation grants on the first business day of the year, on January 3, 2011, options to purchase shares of common stock were granted to our named executive officers as follows: Peter M. Carlino, options to purchase 300,000 shares; Timothy J. Wilmott, options to purchase 200,000 shares; William J. Clifford, options to purchase 150,000 shares; and Jordan B. Savitch, options to purchase 70,000 shares. The exercise price of each option was set at $35.15 per share, which represents the closing price of a share of common stock on the trading day immediately prior to the date of grant as required by the terms of the 2008 Plan. In connection with his commencement of employment with the Company and as required by the terms of his employment agreement, Mr. Snowden received on October 10, 2011, his date of hire, a one-time option award to purchase 150,000 shares. The exercise price of this option was set at $38.08 per share, which represents the closing price of a share of common stock on the trading day immediately prior to his hire date as contemplated by the terms of the 2008 Plan. All options granted in 2011 vest at the rate of 25% per year, generally subject to the executive's continued employment.

        Consistent with our philosophy regarding stock option grants, we granted the same fixed number of shares in 2011 to Mr. Carlino as were granted in 2010. In granting a fixed number of stock options to the Chief Executive Officer for 2011, we considered the extent to which the grant would reward the Chief Executive Officer for increasing shareholder value and the Chief Executive's central role in overseeing the Company's success. We also considered the size of the grant in relation to the diluted shares outstanding, which represented approximately 0.3% of the total shares outstanding. Further, we considered the Company's recent and long-term performance. Based on these factors, we determined, as we have in previous years, that the fixed grant of 300,000 stock options was appropriate to reward and incentivize the Chief Executive Officer to increase shareholder value.

        With respect to the other named executive officers, we utilized a methodology based on the number of options granted to the Chief Executive Officer and then adjusted downward so that the size of the grants were approximately proportionate to the difference in the total cash opportunity available to each of the named executive officers. If appropriate, we may further adjust the amounts based on input from the Chief Executive Officer regarding such qualitative factors as specific position duties and responsibilities, tenure with the Company, individual contribution and position value to the Company. In 2011, no other adjustments were deemed necessary or appropriate and, accordingly, we granted the same fixed number of shares in 2011 to the other named executive officers as were granted in 2010.

        On January 3, 2012, we made annual stock option grants to the Company's officers and key employees for 2012. Consistent with our philosophy regarding option grants, we granted the same fixed number of shares in 2012 to the Chief Executive Officer and the other named executive officers as were granted in 2011, with the exception of Jay A. Snowden whose grant was prorated based on his October 2011 hire date. Options to purchase shares of common stock were granted to the named executive officers as follows: Peter M. Carlino, options to purchase 300,000 shares; Timothy J. Wilmott, options to purchase 200,000 shares; William J. Clifford, options to purchase 150,000 shares; Jay A. Snowden, options to purchase 10,000 shares; and Jordan B. Savitch, options to purchase 70,000 shares. The exercise price of such options was set at $38.07 per share, which was the closing price of the common stock on December 30, 2011, the trading day prior to the date of grant in accordance with the 2008 Plan. The 2012 options vest at the rate of 25% per year, generally subject to continued employment.

38

---

Table of Contents

Employment Agreements

        The Company has employment agreements with each of its named executive officers. There are a number of strategic objectives that we expect to achieve by entering into employment agreements with our executive officers, including:

•

attract and retain talented executives;



•

limit potential liability emanating from the termination of executives, including the total severance that may be paid to an executive in the event that the Company elects to terminate him or her without cause; and



•

provide the Company with effective and comprehensive protection of its strategic plans, intellectual property and human capital.

        In the event of a change in control, each named executive officer is entitled to receive a cash payment equal to between two and three times the sum of his base salary and annual cash bonus (based on the highest amount paid in the two preceding calendar years). Such payment would generally be made either in two lump sums, with 75% paid on the closing date of the change in control and 25% paid on the 75^th day following the change in control, or in one lump sum on the effective date of termination following a change in control. Further, any unvested equity compensation held by any employee of the Company, including any named executive officer, will become vested. To the extent that an executive receives a cash change-in-control payment, such executive will not be eligible to receive any additional cash severance in the event of a termination of employment during the employment term. In addition, each executive's employment agreement provides him with indemnity protection if a change in control or termination payment results in an excise tax under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"). In such event, the executive officer is entitled to an indemnity payment to the extent necessary so that the net amount paid to the executive is equal to the amount that would have otherwise been due to the executive under the applicable terms of the employment agreement absent the impact of Section 280G of the Code.

        For a detailed discussion of the terms contained in each named executive officer's employment agreement, please refer to pages 51 to 56 of this Proxy Statement.

Other Compensation Policies

        Compensation Clawback Policy.    As a highly regulated, multi-jurisdictional gaming and racing company, the Company has had a long-standing commitment to ensure that its executive officers adhere to the highest professional and personal standards. Accordingly, the Company has long held that under current law misconduct by the Chief Executive Officer or any other executive officer that leads to a restatement of the Company's financial results could subject such individuals to a disgorgement of prior compensation and, in light of the highly regulated nature of the Company's business, that the Committee would likely pursue such remedy, among others, where appropriate based on the facts and circumstances surrounding the restatement and existing laws. The Committee will amend the Company's clawback policy, as needed, once the SEC adopts the final implementing rules regarding compensation clawbacks mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act").

        Statutory and Regulatory Considerations.    In designing the Company's compensatory programs, we consider the various tax, accounting and disclosure rules associated with various forms of compensation. We also review and consider the deductibility of executive compensation under Section 162(m) of the Code, which generally provides that the Company may not deduct certain compensation of more than $1 million that is paid to certain individuals. The Company generally will be entitled to take tax deductions related to performance-based compensation or to compensation not payable until the executive leaves the Company, which may include cash incentives, stock options, restricted stock or

39

---

Table of Contents

other performance-based award. We seek to preserve the Company's tax deductions for executive compensation to the extent consistent with the Company's executive compensation objectives. However, we may also from time to time consider compensation that may not be fully tax deductible if we believe such compensation is warranted to achieve the Company's objectives.

        Timing of Option Grants.    In December 2006, we adopted a stock option grant procedure, pursuant to which, for annual stock option awards to eligible executive officers, the grant date will be the first trading day of the calendar year. In addition, with respect to executive officers subject to the reporting requirements of Section 16 of the Exchange Act, grants made by us upon commencement of employment, promotions and upon the renewal of employment contracts are made on the day employment commences, the promotion is effective or the employment contract is renewed, respectively. The stock option procedure is designed to make the timing of option grants predictable and prevent grant timing abuses. Options granted in 2011 to executives were granted in accordance with this procedure. All grants are priced in accordance with the terms of the applicable equity compensation plans, which require, among other things, that the exercise price of all stock options be established by reference to the closing price on the trading day immediately prior to the date of grant.

40

---

Table of Contents

Compensation Committee Report

        The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth on pages 26 through 40 of this Proxy Statement (the "Compensation Discussion and Analysis") with the management of the Company.

        Based on the review and discussions described above, the Compensation Committee recommended to the Company's Board of Directors that the Company's Compensation Discussion and Analysis be included in this Proxy Statement and, by reference, in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

41

---

Table of Contents

EQUITY COMPENSATION PLAN INFORMATION

        The following table summarizes certain information with respect to the Company's compensation plans and individual compensation arrangements under which the Company's equity securities have been authorized for issuance as of the fiscal year ended December 31, 2011:

---

*

The 2008 Long Term Incentive Compensation Plan, as amended, provides that while awards of stock options and stock appreciation rights are counted as one share of common stock granted under such plan, awards of restricted stock, or shares issued pursuant to any other full value awards, are counted as issuing 2.44 shares of common stock per share awarded for purposes of determining the number of shares available for issuance under such plan. Awards that are settled in cash rather than shares of stock are not counted against the plan limit.

Option Grant to the Company's Chairman

        On February 6, 2003, the Compensation Committee granted Peter M. Carlino stock options to purchase 95,000 shares, of which 23,750 shares are vested and unexercised, of the Company's common stock at an exercise price of $7.95 per share (adjusted to reflect the Company's March 7, 2005 two-for-one stock split), which was the closing price of the Company's common stock on the day before the options were granted. These stock options, which were granted prior to the adoption of the Company's 2003 Long Term Incentive Compensation Plan, were not granted under the 1994 Stock Option Plan because sufficient shares did not remain available for grant under such plan. The stock options vested 25% on each of February 6 of 2004, 2005, 2006 and 2007 and expire on February 6, 2013. The terms of the stock options may be amended only by a written agreement between Peter M. Carlino and the Company that is approved by the Compensation Committee.

42

---

Table of Contents

COMPENSATION TABLES

Summary Compensation Table

        The following table sets forth information concerning the compensation earned during the fiscal years ended December 31, 2011, 2010 and 2009 by the Company's Chief Executive Officer, Chief Financial Officer and the three other most highly compensated individuals serving as executive officers on December 31, 2011 (collectively, the "Named Executive Officers"):

---

(1)

The amounts reflect the full grant date fair value calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 ("ASC 718"), for stock option awards, restricted stock awards, and phantom stock unit awards. Assumptions used in the calculation of these amounts are included in footnote 3 to the Company's audited financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2011. Included in Stock Awards for the year 2011 are phantom stock unit awards granted on February 6, 2012, relating to the Company's payment of the external portion of the Company's annual incentive plan for 2011. Also included in Stock Awards for 2011 for Mr. Snowden are phantom stock unit awards granted on October 11, 2011 pursuant to his employment agreement. Included in Stock Awards for the year 2010 are restricted stock awards granted on April 15, 2011, relating to the Company's payment of the external portion of the Company's annual incentive plan for 2010. Included in Stock Awards for the year 2009 are restricted stock awards granted on February 19, 2010 for 44% of the Annual Bonus Target as a payout for the internal measure. Also, included in Stock Awards for the year 2009 are phantom stock unit awards granted on October 20, 2010 relating to the Company's payment of the external measure portion of the Company's annual incentive plan for 2009. The external free cash flow measure for 2009 was calculated using publicly available information regarding the peer group, and, as a result, the payout was not determined until October 2010.

(2)

These amounts reflect cash payments in 2011, 2010 and 2009, pursuant to the internal measure portion of the Company's annual incentive plan, which provided for the payment of incentive compensation upon the Company's achievement of pre-established EBITDA goals. Based on the Company's EBITDA performance for 2011 and 2010, the executives received the maximum payout for the internal measure. Based on the Company's EBITDA performance for 2009, the executives received 56% of the Annual Bonus Target as a payout for the internal measure. For more information on the Company's annual incentive plan, see the discussion in "Compensation Discussion and Analysis" beginning on page 26.

(3)

See All Other Compensation Table below for more information.

(4)

Mr. Snowden joined the Company on October 11, 2011.

43

---

Table of Contents

All Other Compensation Table

        The following table describes each component of the All Other Compensation column of the Summary Compensation Table:

---

(1)

This column reports the Company's matching contributions under the Company's Deferred Compensation Plan.

(2)

This column reports the Company's contributions to the Named Executive Officers' 401(k) savings accounts.

(3)

This column reports life insurance policy premiums and other insurance premiums paid by the Company on behalf of the executives.

(4)

The amount allocated for personal aircraft usage is calculated based on the incremental cost to the Company for fuel, landing fees and other variable costs of operating the airplane. Since the Company's aircraft are primarily used for business travel, the Company does not include fixed costs that do not change based on usage, such as pilots' salaries, depreciation of the purchase cost of the aircraft and the cost of general maintenance.

(5)

This column represents the amount of Mr. Snowden's relocation and employer covered COBRA medical expenses for the period April through October 2011.

44

---

Table of Contents

2011 Grants of Plan-Based Awards

        The following table sets forth certain information regarding grants of plan-based awards relating to 2011:

See the discussion in "Compensation Discussion and Analysis" beginning on page 26.

45

---

Table of Contents

Outstanding 2011 Equity Awards at Fiscal Year-End

        The following table sets forth information concerning equity awards outstanding as of December 31, 2011:

46

---

Table of Contents

2011 Option Exercises and Stock Vested

        The following table sets forth information concerning options exercised, restricted stock awards vested, and phantom stock unit awards vested during fiscal 2011:

2011 Nonqualified Deferred Compensation

        The following table sets forth information concerning nonqualified deferred compensation of the Named Executive Officers:

        Penn National Gaming, Inc. Deferred Compensation Plan.    Pursuant to the Company's Deferred Compensation Plan, as amended, most management and certain other highly compensated employees selected by the Compensation Committee may elect to defer, on a pre-tax basis, a percentage of his or her salary and/or bonus. The minimum amount deferrable is $3,000 and the maximum is 90% of his or her base annual salary and/or bonus. Generally, deferral elections must be made before the beginning of the year in which compensation will be deferred. The Company's contributions under the plan are equal

47

---

Table of Contents

to 50% of the participant's deferral for the first 10% of the salary and/or bonus deferred, subject to a maximum annual Company contribution equal to 5% of the participant's salary and/or bonus. With the Board of Directors' approval, the Company is also permitted to make discretionary contributions. Participants are always 100% vested in their own contributions, but Company contributions vest 20% per year of service with the Company. Therefore, employees with five or more years of service are fully vested in Company contributions under the plan. However, for employees with less than five years of service, all Company contributions become immediately and fully vested upon death, retirement (on or after age 65) or a change in control of the Company, as defined in the Deferred Compensation Plan. The Compensation Committee may accelerate vesting of the Company's contributions if a participant terminates his or her employment because of disability. For the purposes of the Company's Deferred Compensation Plan, generally, a change in control occurs when a person, entity or group acquires 25% or more of the Company's common stock; the Company reorganizes, merges or consolidates, except under circumstances, described in the plan, where control of the Company and its successor remains relatively consistent before and after such transaction; the Company's shareholders approve a complete liquidation or disposition of all of the assets of the Company, except under circumstances, described in the plan, where control of the Company and its successor remains relatively consistent before and after such transaction; and any time the incumbent directors on March 1, 2001, or subsequent directors approved by a majority of the incumbent directors, do not constitute a majority of the Board of Directors.

        Subject to the exceptions discussed below, participants in the Deferred Compensation Plan, or their beneficiaries, receive distributions upon retirement, death or termination. Participants can elect to receive distributions following retirement or death in the form of a lump sum payment or payment in five or ten annual installments. Distributions following retirement can be deferred for up to five years.

        For purposes of the Deferred Compensation Plan, termination of employment as a result of a disability will be considered retirement. Distributions following termination of employment other than as a result of retirement or death will be in the form of a lump sum payment or payment in five or ten annual installments, at the election of the Compensation Committee. Participants can also elect to receive a scheduled distribution with respect to an annual deferral amount, which is payable in a lump sum at the beginning of any subsequent calendar year, subject to certain limitations. In the event of an unforeseeable financial emergency and with the approval of the Compensation Committee, a participant can suspend deferrals or receive a partial or full payout under the plan. In addition, participants can withdraw sums deferred prior to December 31, 2004 at any time subject to a 10% withdrawal penalty. Certain specified employees have a six-month delay imposed upon distributions pursuant to a severance from service, as required by the final Code section 409A regulations. In the event of a Change of Control, the Company will accelerate installment payments by paying the Account Balance in lump sum.

        Participants in the Deferred Compensation Plan may invest deferred amounts, including Company contributions, in mutual funds selected by the Compensation Committee. Participants may change their investment elections at any time.

Potential Payments Upon Termination or Change in Control

        The information below describes and quantifies compensation that would become payable under existing arrangements in the event of a termination of such Named Executive Officer's employment under several different circumstances or a change in control. The amounts shown assume that such termination or change in control was effective as of December 31, 2011, and thus include amounts earned through such time and are based (where applicable) on the closing price of the Company's common stock on such date (which was $38.07 per share) and are estimates of the amounts that would be paid to the Named Executive Officers upon their termination or a change in control. The actual amounts to be paid can only be determined at the time of such Named Executive Officer's separation from the Company or a change in control.

48

---

Table of Contents

        The following tables quantify the amounts payable to each of the Named Executive Officers under the described termination circumstances and upon a change in control. For a description of the severance and change of control provisions giving rise to the payments set forth below, see pages 51 through 54 of this Proxy Statement.

Post-Employment Payments—Peter M. Carlino

Post-Employment Payments—Timothy J. Wilmott

Post-Employment Payments—William J. Clifford

49

---

Table of Contents

Post-Employment Payments—Jay A. Snowden

Post-Employment Payments—Jordan B. Savitch

50

---

Table of Contents

(8)

The amounts in the table were calculated in accordance with Sections 4999 and 280G of the Code.

(9)

The amounts reflected exclude net benefit payments under life insurance policies maintained by the Company covering Mr. Wilmott for the benefit of his named beneficiaries with a face value of $3,900,000.