sec document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to ss. 240.14a-12
EMPIRE RESORTS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials:
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/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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EMPIRE RESORTS, INC.
Monticello Raceway
Route 17B
Monticello, New York 12701
NOTICE OF MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 2004
To the Stockholders of Empire Resorts, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting (the "Meeting") of
Stockholders of Empire Resorts, Inc. (the "Company"), a Delaware corporation,
will be held at the W New York at Times Square, 1567 Broadway at 47th Street,
New York, New York 10036 on WEDNESDAY MAY 12, 2004, at 9:30 a.m. local time for
the following purposes:
(1) To elect three (3) Class I directors to serve on the
Company's Board of Directors until the stockholders' annual
meeting in 2007; and
(2) to approve the adoption of the Company's 2004 Stock Option
Plan; and
(3) to transact any such other business as may properly come
before the Meeting or any postponement or adjournment
thereof.
The Board of Directors of the Company has fixed March 24, 2004 as
the record date (the "Record Date") for the determination of stockholders
entitled to notice of, and to vote at, the Meeting or any postponement or
adjournment thereof. Accordingly, only stockholders of record at the close of
business on the Record Date are entitled to notice of, and shall be entitled to
vote at, the Meeting or any postponement or adjournment thereof.
You are requested to fill in, date and sign the enclosed proxy
card(s), which are being solicited by the Company's Board of Directors.
Submitting a proxy will not prevent you from voting in person, should you so
desire, but will help to secure a quorum and will avoid added solicitation
costs. You may revoke your proxy at any time before it is voted at the Meeting.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. YOUR
VOTE IS IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE
COMPLETE, SIGN AND PROMPTLY MAIL YOUR PROXY IN THE RETURN ENVELOPE PROVIDED.
By Order of the Board of Directors,
/s/ David Matheson /s/ Thomas W. Aro
------------------ -------------------------------------
David Matheson Thomas W. Aro
Chairman of the Board Chief Operating Officer and Secretary
April 12, 2004
EMPIRE RESORTS, INC.
Monticello Raceway
Route 17B
Monticello, New York 12701
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT 9:30 A.M. AT THE W NEW YORK AT TIMES SQUARE,
1567 BROADWAY AT 47TH STREET, NEW YORK, NEW YORK 10036 ON MAY 12, 2004
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Empire Resorts, Inc. (the
"Company") for use at the Annual Meeting of Stockholders of the Company and at
all adjournments and postponements thereof (the "Meeting"). The Meeting is to be
held at 9:30 a.m. local time on May 12, 2004 at the W New York at Times Square,
1567 Broadway at 47th Street, New York, New York 10036. This Proxy Statement,
with the accompanying Notice of Meeting and form of proxy, are first being sent
to stockholders on or about April 12, 2004.
A proxy card is enclosed. Even if you plan to attend the Meeting in
person, you should date, sign and return the enclosed proxy card as soon as
possible to be sure that your shares will be voted at the Meeting. A postage
prepaid envelope has been provided for your convenience. Please note that even
after submitting your proxy card, you can revoke it and/or change your vote
prior to the Meeting as described below.
The cost of preparing, assembling, printing and mailing this Proxy
Statement and the accompanying form of proxy, and the cost of soliciting proxies
relating to the Meeting, will be borne by the Company. Some banks and brokers
have customers who beneficially own Common Stock listed of record in names of
nominees. The Company intends to request banks and brokers to solicit such
customers and will reimburse them for their reasonable out-of-pocket expenses
for such solicitations. If any solicitation of the holders of the Company's
outstanding shares of Common Stock, Series B Preferred Stock and Series D
Preferred Stock is deemed necessary, the Company (through its directors and
officers) anticipates making such solicitation directly. The solicitation of
proxies by mail may be supplemented by telephone, telegram and personal
solicitation by officers, directors and other employees of the Company, but no
additional compensation will be paid to such individuals.
PURPOSE OF THE MEETING
At the Meeting, the Company's stockholders will be asked to consider
and vote upon the following matters: (i) a proposal to elect three (3) Class I
directors until the stockholders' annual meeting in 2007, (ii) a proposal to
approve the adoption of the Company's 2004 Stock Option Plan (the "Plan") and
(iii) such other business as may properly come before the Meeting.
VOTING AND SOLICITATION OF PROXIES
All shares of Common Stock, Series B Preferred Stock and Series D
Preferred Stock represented at the Meeting by properly executed proxies, unless
received after the vote at the Meeting or previously revoked as described below,
will be voted in accordance with the instructions thereon, or where a properly
signed proxy is returned and no instructions are given, FOR (1) the election of
all Class I director nominees and (2) the approval of the adoption of the Plan.
If any other matter should come before the Meeting, or any nominee is not
available for election, the person(s) named a proxy will have authority to vote
all proxies not marked to the contrary in their discretion as they deem
advisable. At this time, the Company does not know of any matters that may
properly come before the Meeting other than the proposals described in this
Proxy Statement.
Any proxy may be revoked by the person giving it at any time before
it is voted. A proxy may be revoked by filing with the Secretary of the Company
(Monticello Raceway, Route 17B, Monticello, New York) either (i) a written
notice of revocation bearing a date later than the date of such proxy or (ii) a
subsequent proxy relating to the same shares, or by attending the Meeting and
voting in person (although attendance at the Meeting will not, in and of itself,
constitute revocation of a proxy).
SHARES ENTITLED TO VOTE
The close of business on March 24, 2004 has been fixed as the record
date (the "Record Date") for determining the stockholders entitled to notice of
and to vote at the Meeting. As of the Record Date, there were 25,898,468 shares
of Common Stock, 44,258 shares of Series B Preferred Stock, 1,730,697 shares of
the Company's Series E Preferred Stock issued and outstanding and entitled to
vote.
Each share of Common Stock entitles the holder thereof to one vote,
and each share of Series B Preferred Stock entitles the holder thereof to
eight-tenths (.8) of a vote and each share of Series E Preferred Stock entitles
the holder thereof to twenty five hundredths (.25) of a vote. Accordingly, a
total of 26,366,548 votes may be cast at the Meeting. The holders of shares of
Common Stock, Series B Preferred Stock and Series E Preferred Stock entitled to
cast a majority of all votes that could be cast by the holders of all of the
outstanding shares of Common Stock, Series B Preferred Stock and Series E
Preferred Stock, present in person or represented by proxy at the Meeting,
constitute a quorum.
A broker who holds shares in "street name" will not be entitled to
vote without instructions from the beneficial owner of such shares. This
inability to vote is referred to as a broker non-vote. Stockholder abstentions
and broker non-votes will be counted for purposes of determining the existence
of a quorum at the Meeting.
VOTE REQUIRED
If a quorum is present at the Meeting, either in person or by proxy,
then (1) a plurality of the votes cast will be sufficient to elect the three
Class I director nominees and (2) a majority of the votes cast will be
sufficient to approve the adoption of the Plan.
NO APPRAISAL RIGHTS
Under the General Corporation Law of the State of Delaware,
stockholders of the Company do not have appraisal rights in connection with any
of the proposals upon which a vote is scheduled to be taken at the Meeting.
OWNERSHIP OF SECURITIES
The following table sets forth certain information regarding the
estimated beneficial ownership of the Company's voting securities following the
merger, based on data existing as of March 24, 2004, by all individuals expected
to be directors and executive officers following the consolidation; persons
expected to own 5% or more of any class of the Company's voting securities
following the consolidation; and all of the expected directors and executive
officers as a group. Unless otherwise indicated, the address of each
stockholder, director and executive officer listed below is c/o Empire Resorts,
Inc., Route 17B, P.O. Box 5013, Monticello, New York, 12701.
Series B Preferred Series E Preferred
Common Stock Beneficially Stock Beneficially Stock Beneficially
Owned(1) Owned(1) Owned(1)
------------------------- ---------------------- -------------------------
Shares Percentage Shares Percentage Shares Percentage
------------------------- ----------------------- -------------------------
Robert A. Berman 4,605,334(2) 17.59% -- -- -- --
Scott A. Kaniewski 1,000,610(3) 3.82% -- -- -- --
Watertone Holdings 4,565,010 17.63% -- -- -- --
Thomas W. Aro 47,700(4) * -- -- -- --
2
Paul A. deBary 187,684(5) * -- -- -- --
Morad Tahbaz 1,337,359(6) 5.16% -- -- -- --
David Matheson 15,000(7) * -- -- -- --
John Sharpe 17,000(8) * -- -- -- --
David P. Hanlon 15,000(9) * -- -- -- --
Arthur I. Sonnenblick 15,000(10) * -- -- -- --
Joseph E. Bernstein 2,423,253(11) 9.35% -- -- -- --
JB Trust 2,362,058(12) 9.12% -- -- -- --
Ralph J. Bernstein 2,324,753(13) 8.97% -- -- -- --
Americas Tower Partners 6,599,294 25.48% -- -- -- --
Maurice Dabbah 2,006,291(14) 7.75% -- -- -- --
Monticello Realty 5,732,261 22.13% -- -- -- --
Directors and executive 11,988,693 45.03% -- -- -- --
officers as a group (11
persons) (2)-(11), (13)
BP Group, Ltd. -- -- 44,258 100% -- --
8306 Tibet Butler Drive
Windemere, FL
The Bryanston Group, Inc. -- -- -- -- 1,551,213 89.6%
2424 Route 52
Hopewell Junction, NY
12533
Stanley Tollman -- -- -- -- 152,817 8.8%
The Bryanston Group, Inc.
2424 Route 52
Hopewell Junction, NY 12533
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* less than 1%
(1) A person is deemed to be the beneficial owner of voting securities that can
be acquired by such person within 60 days after the record date upon the
exercise of options and warrants and the conversion of convertible
securities. Each beneficial owner's percentage of ownership is determined
by assuming that all options, warrants or convertible securities held by
such person (but not those held by any other person) that are currently
exercisable or convertible (i.e., that are exercisable or convertible
within 60 days after the record date) have been exercised or converted.
(2) Includes 1,094,004 shares of common stock owned directly by Robert A.
Berman, options that are currently exercisable into 279,189 shares of
common stock and 3,232,141 shares of common stock held directly by
3
Watertone Holdings. Robert A. Berman directly holds a 46.305% limited
partnership interest in Watertone Holdings, representing an indirect
beneficial ownership interest in 2,113,828 shares of such 3,232,141 shares
of the Company's common stock held directly by Watertone Holdings. Through
BKB, LLC, 82% of which is owned by Robert A. Berman, Robert A. Berman
indirectly holds a general partnership interest of .0082% of Watertone
Holdings, representing an indirect beneficial ownership interest in an
additional 37,433 shares of such 3,232,141 shares of the Company's common
stock held directly by Watertone Holdings, and through Avon Road Partners,
LP, Robert A. Berman indirectly beneficially holds an addition 23.678%
limited partnership interest in Watertone Holdings, representing an
indirect beneficial ownership interest in an additional 1,080,880 of such
3,232,141 shares of the Company's common stock held directly by Watertone
Holdings. Avon Road Partners, LP is 88% owned by Robert A. Berman, 3% by
Debbie N. Berman and 9% by the Berman Family Trust whose beneficiaries are
Robert A. Berman's children. Debbie N. Berman, Robert A. Berman's wife, and
Philip B. Berman, Robert A. Berman's brother, are co-trustees of the Berman
Family Trust and have joint voting and dispositive power with respect to
its holdings. Robert A. Berman disclaims beneficial ownership of all shares
of common stock held by the Berman Family Trust.
(3) Includes 134,096 shares of common stock owned directly by Scott A.
Kaniewski, options that are currently exercisable into 295,689 shares of
common stock, 506,899 shares of common stock held directly by Watertone
Holdings, 28,940 shares of common stock held directly by The Kaniewski
Family Limited Partnership and 34,986 shares of common stock held directly
by The KFP Trust. Through BKB, LLC, 15.3% of which is owned by Scott A.
Kaniewski, Scott A. Kaniewski indirectly holds a general partnership
interest of .00153% of Watertone Holdings, representing an indirect
beneficial ownership interest in an additional 6,984 shares of such 506,899
shares of the Company's common stock held directly by Watertone Holdings.
The Kaniewski Family Limited Partnership, with respect to which Mr.
Kaniewski is a 1% limited partner and the general partner with sole voting
and dispositive power, holds a 4.95% limited partnership interest in
Watertone Holdings, representing an indirect beneficial ownership interest
in 225,968 shares of such 506,899 shares of the Company's common stock held
directly by Watertone Holdings, and through BKB, LLC, 0.05% of which is
owned by The Kaniewski Family Limited Partnership, The Kaniewski Family
Limited Partnership indirectly holds a general partnership interest of
.000005% of Watertone Holdings, representing an indirect beneficial
ownership interest in an additional 23 shares of such 506,899 shares of the
Company's common stock held directly by Watertone Holdings. Scott A.
Kaniewski disclaims beneficial ownership of all the shares of common stock
owned by the Kaniewski Family Limited Partnership for any purpose other
than voting and dispositive powers. The KFP Trust, whose sole trustee is
Stacey B. Kaniewski, Scott A. Kaniewski's wife, and whose sole
beneficiaries are Scott A. Kaniewski's children, holds a 6.00% limited
partnership interest in Watertone Holdings, representing an indirect
beneficial ownership interest in 273,901 shares of such 506,899 shares of
Empire Resorts' common stock held directly by Watertone Holdings, and
through BKB, LLC, 0.05% of which is owned by The KFP Trust, The KFP Trust
indirectly holds a general partnership interest of .000005% of Watertone
Holdings, representing an indirect beneficial ownership interest in an
additional 23 shares of such 506,899 shares of the Company's common stock
held directly by Watertone Holdings. Scott A. Kaniewski disclaims
beneficial ownership of all shares of common stock held by The KFP Trust.
(4) Represents options that are currently exercisable into 43,500 shares of
common stock and 4,200 shares of common stock held directly by Thomas W.
Aro.
(5) Includes 52,103 shares of common stock owned directly by Paul A. deBary and
135,581 shares of common stock held directly by Watertone Holdings. Mr.
deBary directly holds a 2.97% limited partnership interest in Watertone
Holdings, representing an indirect beneficial interest in such 135,581
shares of the Company's common stock held directly by Watertone Holdings.
(6) Includes options that are currently exercisable into 17,500 shares of
common stock and 1,319,859 shares of common stock of the Company held
directly by Americas Tower Partners. Morad Tahbaz beneficially owns a 20%
partnership interest of Americas Tower Partners, representing an indirect
beneficial interest in such 1,319,859 shares of the Company's common stock
held directly by Americas Tower Partners.
4
(7) Represents options that are currently exercisable into 15,000 shares of
common stock.
(8) Represents options that are currently exercisable into 15,000 shares of
common stock and 2,000 shares of common stock held directly by John Sharpe.
(9) Represents options that are currently exercisable into 15,000 shares of
common stock.
(10) Represents options that are currently exercisable into 15,000 shares of
common stock.
(11) Includes options that are currently exercisable into 15,000 shares of
common stock, 2,309,753 shares of common stock of the Company held directly
by Americas Tower Partners and 98,500 shares held in the name of Joseph E.
Bernstein on behalf of the JB Trust. Joseph E. Bernstein beneficially owns
a 1% economic interest and 50% voting power in Americas Tower Partners, and
the JB Trust, in which Mr. Bernstein's mother, Helen Bernstein, is sole
trustee and Mr. Bernstein's children are ultimate beneficiaries,
beneficially owns a 49% economic interest, with no voting rights. Joseph E.
Bernstein and the JB Trust beneficially own, 2% and 98%, respectively, of
35% of Americas Tower Partners' interest in the consolidation, representing
an aggregate indirect beneficial ownership interest in such 2,309,753
shares of the Company's common stock held directly by Americas Tower
Partners.
(12) Includes 98,500 shares of common stock held in the name of Joseph E.
Bernstein on behalf of the JB Trust and 2,263,558 shares of common stock of
the Company held directly by Americas Tower Partners. The JB Trust
beneficially owns a 49% economic interest, with no voting rights, in
Americas Tower Partners. The JB Trust beneficially owns 98% of 35% of
Americas Tower Partners' interest in the consolidation, representing an
indirect beneficial ownership interest in such 2,263,558 shares of the
Company's common stock held directly by Americas Tower Partners.
(13) Includes options that are currently exercisable into 15,000 shares of
common stock and 2,309,753 shares of common stock of the Company held
directly by Americas Tower Partners. Ralph Bernstein beneficially owns a
35% partnership interest of Americas Tower Partners, representing an
indirect beneficial ownership interest in such 2,309,753 shares of the
Company's common stock held directly by Americas Tower Partners.
(14) Represents 2,006,291 shares of common stock of the Company held directly by
Monticello Realty. Maurice Dabbah beneficially owns 35% of the membership
interests of Monticello Realty, representing an indirect beneficial
ownership interest in such 2,006,291 shares of the Company's common stock
held directly by Monticello Realty.
5
PROPOSAL 1
ELECTION OF DIRECTORS
Pursuant to Proposal No. 1, the nominees listed below have been
nominated to serve as Class I directors (subject to their respective earlier
removal, death or resignation) until the 2007 Annual Meeting of Stockholders and
until their successors are elected and qualified. Unless such authority is
withheld, proxies will be voted for the election of the persons named below, who
are all now serving as directors and each of whom has been designated as a
nominee. If, for any reason not presently known, any person is not available to
serve as director, another person who may be nominated will be voted for in the
discretion of the proxies.
REQUIRED VOTE
If a quorum is present at the Meeting, either in person or by proxy,
directors shall be elected by a plurality of the votes cast, in person or by
proxy, at the Annual Meeting. Abstentions and broker non-votes will not be
counted.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF EACH OF THE NOMINEES.
The following table sets forth information for each Class I director nominee:
Name Age Position
---- --- --------
Ralph J. Bernstein 46 Class I Director
John Sharpe 61 Class I Director
Paul A. deBary 57 Class I Director
RALPH J. BERNSTEIN. Ralph J. Bernstein is a co-founder and general
partner of Americas Partners, an investment and venture capital firm, and, since
1981 has been responsible for the acquisition, renovation, development and
financing of several million square feet of commercial space. Mr. Bernstein
started his career in agribusiness with a large European multi-national trading
and real estate development company, where he was later responsible for that
company's U.S. real estate activities. Mr. Bernstein also serves as a director
for Air Methods Corporation, a publicly traded company that provides air medical
emergency transport services and systems throughout the United States of
America. He holds a Bachelor of Arts degree in economics from the University of
California at Davis. Mr. Bernstein has served as a director of the Company since
August 2003.
JOHN SHARPE. John Sharpe most recently served as president and chief
operating officer of Four Seasons Hotels & Resorts, from which he retired in
1999, after 23 years of service. During his tenure at Four Seasons, the world's
largest operator of luxury hotels, Mr. Sharpe directed worldwide hotel
operations, marketing and human resources, and took great pride in helping
create Four Seasons' renowned reputation for the highest level of service in the
worldwide hospitality industry. In 1999, Mr. Sharpe was bestowed with the
"Corporate Hotelier of the World" award by Hotels Magazine, Inc. Mr. Sharpe also
received the "Silver Plate" award of the International Food Manufacturers
Association, and the "Gold Award" of the Ontario Hostelry Institute. Mr. Sharpe
graduated with a B.S. in hotel administration from Cornell University and is
currently a trustee of the Culinary Institute of America, and chair of the
Industry Advisory Council at the Cornell Hotel School. He serves on a number of
boards, including Fairmont Hotels & Resorts, Toronto, Canada. Mr. Sharpe
previously served as executive-in-residence, School of Hotel Administration,
Cornell University; chair, board of governors, Ryerson Polytechnic University,
Toronto, Canada; and, co-chair, American Hotel Foundation, Washington, D.C. Mr.
Sharpe has served as a director of the Company since August 2003.
PAUL A. DEBARY. Paul A. deBary is a managing director at Marquette
deBary Co., Inc., a New York based broker-dealer, where he serves as a financial
advisor for state and local government agencies, public and private corporations
and non-profits. Prior to assuming his current position, he served as managing
director in the Public Finance Department of Prudential Securities from 1994 to
6
1997. He was a partner in the law firm of Hawkins, Delafield & Wood in New York
from 1975 to 1994. Mr. deBary received an AB in 1968, and M.B.A. and J.D. in
1971 from Columbia University. He is a member of the American Bar Association,
the New York State Bar Association, the Association of the Bar of the City of
New York and the National Association of Bond Lawyers and serves as President
and as a Director of the Society of Columbia graduates. Mr. deBary has served as
a director of the Company since March 2002.
CLASS II AND CLASS III DIRECTORS
DAVID MATHESON. Over the years, David Matheson, who is a member of
the Coeur d'Alene Tribe of Coeur d'Alene, Idaho, has served as Tribal Council
leader, Tribal Chairman, and manager of various tribal operations. Mr. Matheson
is chief executive officer of the Coeur d'Alene Casino & Resort Hotel in Worley,
Idaho, which was voted #1 casino in the Spokesman Reader Review for three
consecutive years. Mr. Matheson was appointed by President George H. W. Bush,
Sr. to serve as Deputy Commissioner for Indian Affairs, U.S. Department of the
Interior, which he did for four years, during the time the Indian Gaming
Regulatory Act of 1988 was being implemented. Mr. Matheson was awarded a
Commendation from the Secretary of the Interior for Outstanding Service. More
recently, he was appointed by President George W. Bush, Jr. as an advisor to the
President's Commission on Reservation Economies. Mr. Matheson previously served
as a delegate to the People's Republic of China's Native American Trade Mission,
and as chief executive officer of Coeur d'Alene Development Enterprises. He
holds an M.A. in business administration from the University of Washington. Over
the past twenty years, he has held many esteemed positions and has received many
honors for his work in preserving cultural traditions, the native language, and
ceremonial practices. He recently published his first novel, Red Thunder, which
depicts the faith, courage and dedication of the Schi'tsu'umsh Indians, now
called the Coeur d'Alene Tribe.
ROBERT A. BERMAN. Robert A. Berman is the Company's chief executive
officer, a member of its Board of Directors and its former chairman. As the
managing director of Watermark Investments Limited from 1994 to 2000, Mr. Berman
oversaw a number of private partnerships investing in real estate, technology
and basic industries. From 1998 to 1999, Mr. Berman was vice chairman and a
director of Executone Information Systems, a telecommunications company. From
1995 to 1999, Mr. Berman served as chairman of the board and chief executive
officer of Hospitality Worldwide Services, Inc., a hotel services company with
average annual sales above $150 million.
DAVID P. HANLON. David P. Hanlon is presently a U.S. gaming industry
consultant, including Native American and international gaming ventures. He most
recently served as president and chief operating officer of Rio Suites Hotel
Casino, from 1996-1999, where he guided the corporation through a major
expansion and successful return to profitability. From 1994-1995, he served as
president and chief executive officer of International Game Technology, the
world's leading manufacturer of microprocessor gaming machines. From 1988-1993,
he served as president and chief executive officer of Merv Griffin's Resorts
International, where he completed two complex billion dollar restructurings,
while successfully selling off international properties in the Bahamas. From
1984-1988, he served as president of Harrah's Atlantic City (Harrah's Marina and
Trump Plaza), where he was responsible for casino and hotel operations and 9,000
employees. During his four-year leadership, Harrah's became the most profitable
operation in Atlantic City. Between 1978-1983, he served as chief financial
officer and executive vice president of Caesar's World, Inc., where he was in
charge of all East Coast operations. Prior to starting his career in the gaming
industry, Mr. Hanlon served as director of corporate finance for Fluor
Corporation, from 1975-1978. Mr. Hanlon's education includes a B.S. in hotel
administration from Cornell University, an M.S. in accounting and an M.B.A. in
finance from the Wharton School, University of Pennsylvania, and an [Advanced
Management Program at the Harvard Business School]. Mr. Hanlon is
executive-in-residence, School of Hotel Administration, Cornell University, and
a member of various boards.
ARTHUR I. SONNENBLICK. Arthur I. Sonnenblick is the senior managing
director of Sonnenblick-Goldman Company. Founded in 1893, Sonnenblick-Goldman is
the nation's leading independent real estate investment banking firm. Each year,
the firm handles billions of dollars of private equity, joint venture, mortgage
and sale transactions. Mr. Sonnenblick served as president of
Sonnenblick-Goldman Company from 1978-1987 and chief executive officer from
1978-1995. He is a member of Urban Land Institute and International Council of
Shopping Centers, and has lectured at the Urban Land Institute Practicing Law
Institute, International Council of Shopping Centers, Mortgage Bankers
7
Association, National Association of Home Builders, New York Chapter American
Institute of Appraisers, Columbia University, Fordham University, and New York
University. From 1979 to 1983, Mr. Sonnenblick was a partner and member of the
board of directors of Lehman Brothers Kuhn Loeb. He is also a past president of
the Mortgage Bankers Association of New York and a past member of the board of
governors of the Real Estate Board of New York. Mr. Sonnenblick is currently a
member of the board of directors of Alexanders, Inc. and is chairman of the
board of trustees of the Educational Alliance. He holds a Bachelor of Science in
economics from the Wharton School of the University of Pennsylvania and served
on active duty in the U. S. Naval Reserve as a Lieutenant Junior Grade from 1953
to 1957.
JOSEPH E. BERNSTEIN. Joseph E. Bernstein started his career as a
corporate tax attorney on Wall Street at Cahill Gordon & Reindel and as an
international tax attorney at Rosenman & Colin. He later started his own
international tax practice. Since the early 1980's, Mr. Bernstein (along with
his brother Ralph, and their partner, Morad Tahbaz, through their jointly-owned
entity, Americas Tower Partners) has been involved in the development of three
million square feet of commercial property in Manhattan, including Americas
Tower, a 50-story office building on Avenue of the Americas and 46th Street,
serving as world headquarters to PriceWaterhouseCoopers and US headquarters to
Israel's largest bank, Bank Hapoalim.
MORAD TAHBAZ. Morad Tahbaz is the president of Catskill Development,
a member of Monticello Raceway's Operating Board, the president of the Company
and a director of the Company. Mr. Tahbaz also serves on the board of directors
of Air Methods Corporation, a publicly traded company that provides air medical
emergency transport services and systems throughout the United States of
America. In 1983 Mr. Tahbaz joined Americas Partners, at which time he became
primarily responsible for acquisitions. Subsequently, Mr. Tahbaz took on the
added responsibility of the development of Americas Tower, a 1,000,000 square
foot office building in New York that is the headquarters for
PriceWaterhouseCoopers. Mr. Tahbaz remains a partner in Americas Partners. Mr.
Tahbaz holds a B.A. in philosophy and fine arts from Colgate University and
attended the Institute for Architecture and Urban Studies in New York. He also
holds an M.B.A. in finance from Columbia University Graduate School of Business,
where throughout his career, he has conducted a series of lectures on real
estate development and finance for graduate students.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met on sixteen occasions during the fiscal
year ended December 31, 2003. Each of the directors attended at least 75% of the
meetings held by the Board of Directors. The Board of Directors also acted by
unanimous written consents on ten occasions. There are three Committees of the
Board of Directors: the Audit Committee, the Compensation Committee and the
Corporate Governance and Nominations Committee.
AUDIT COMMITTEE
The Company has a separately-designated standing Audit Committee
established in accordance with section 3(a)(58)(A) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The Audit Committee has adopted a
written charter, which is included as APPENDIX A to this Proxy Statement.
Stockholders may obtain a copy of the Audit Committee charter, free of charge,
by writing to the Company's Comptroller at c/o Empire Resorts, Inc., 707 Skokie
Boulevard, Northbrook, IL 60062, or calling him at (847) 418-3806.
The members of the Audit Committee are Paul deBary (Chairman of the
committee), David Hanlon and John Sharpe. Each of Messrs. DeBary, Hanlon, and
Sharpe is independent from the Company, as independence is defined in Rule
4200(a)(15) of the National Association of Securities Dealers' ("NASD") listing
standards. In addition, the Board of Directors has determined that Mr. deBary is
an audit committee financial expert serving on the Audit Committee. The primary
purpose of the Audit Committee is to assist the Board of Directors in fulfilling
its responsibility to oversee the Company's financial reporting activities. The
Audit Committee is responsible for reviewing with both the Company's independent
certified public accountants and management, the Company's accounting and
reporting principles, policies and practices, as well as the Company's
accounting, financial and operating controls and staff. The Audit Committee has
reviewed and discussed the audited financial statements of the Company with
management, has discussed with the independent auditors the matters required to
be discussed by SAS 61, as may be modified or supplemented. Additionally, the
Audit Committee has received the written disclosures and the letter from the
8
independent accountants required by Independence Standards Board Standard No. 1
(Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees), as may be modified or supplemented, and has discussed with
the independent accountant the independent accountant's independence. Based upon
such review and discussion, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-KSB for the last fiscal year for filing with the
Securities and Exchange Commission (the "SEC").
The Audit Committee met on three occasions during the fiscal year
ended December 31, 2003. Each of the members of the Audit Committee attended
each of the meetings held by the Audit Committee.
COMPENSATION COMMITTEE
The Compensation Committee, which is comprised of David Matheson
(Chairman of the committee), Arthur Sonnenblick and Joseph Bernstein is
responsible for establishing and reviewing the appropriate compensation of
directors and officers of the Company, for reviewing employee compensation plans
and for considering and making grants and awards under, and administering, the
Company's stock option plans, including its 1993, 1998 and 2003 Stock Option
Plans.
The Compensation Committee met on two occasions during the fiscal year ended
December 31, 2003. Each of the members of the Compensation Committee attended
each of the meetings held by the Compensation Committee.
CORPORATE GOVERNANCE AND NOMINATIONS COMMITTEE
The Corporate Governance and Nominations Committee recommends
appropriate governance practices, recommends criteria for service as a director
and reviews candidates to serve as directors. The Corporate Governance and
Nominations Committee has adopted a written charter, which is included as
APPENDIX B to this Proxy Statement. The members of the Corporate Governance and
Nominations Committee are David Hanlon (Chairman of the committee), Ralph J.
Bernstein and Arthur I. Sonnenblick. Each of Messrs. Hanlon, Bernstein and
Sonnenblick is independent from the Company, as independence is defined in Rule
4200(a)(15) of the National Association of Securities Dealers' ("NASD") listing
standards.
The Corporate Governance and Nominations Committee develops,
recommends and oversees implementation of corporate governance principles for
the Company. In addition, it considers recommendations for director nominees
from a wide variety of sources, including members of our Board, business
contacts, community leaders, third-party advisory services and members of
management. The Corporate Governance and Nominations also considers stockholder
recommendations for director nominees that are properly received in accordance
with our Bylaws and applicable rules and regulations of the SEC.
The Board believes that all of its directors should have the highest
personal integrity and have a record of exceptional ability and judgment. The
Board also believes that its directors should ideally reflect a mix of
experience and other qualifications. There is no firm requirement of minimum
qualifications or skills that candidates must possess. The Corporate Governance
and Nominations Committee evaluates director candidates based on a number of
qualifications, including their independence, judgment, leadership ability,
expertise in the industry, experience developing and analyzing business
strategies, financial literacy, risk management skills, and, for incumbent
directors, his or her past performance. In making its recommendations, the
Corporate Governance and Nominations Committee seeks out outstanding talent
among minority groups and women.
Stockholders wishing to bring a nomination for a director candidate
prior to a shareholders meeting must give written notice to Thomas W. Aro,
Secretary, Empire Resorts, Inc., Monticello Raceway, Route 17B, Monticello, New
York 12701, either by personal delivery or by United States mail, postage
prepaid. The stockholder's notice must be received by the Secretary not later
than the close of business on the 120th calendar day prior to the date on which
notice of the prior year's annual meeting was first mailed to stockholders. The
stockholder's written notice to the Secretary shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Exchange Act,
9
including such person's written consent to being named in the proxy statement as
a nominee and to serving as a director if elected; and (b) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination is made (i) the name and address of such stockholder, as they appear
on the Company's books, and of such beneficial owner, (ii) the class and number
of shares of the Company which are owned beneficially and of record by such
stockholder and such beneficial owner and (iii) a representation that the
stockholder is a holder of record of shares of the Company and intends to appear
in person or by proxy at the meeting to propose such business.
The Corporate Governance and Nominations Committee initially
evaluates a prospective nominee on the basis of his or her resume and other
background information that has been made available to the Committee. A member
of the Corporate Governance and Nominations Committee will contact for further
review those candidates who the Committee believes are qualified, who may
fulfill a specific Board need and who would otherwise best make a contribution
to the Board. If, after further discussions with the candidate, and other
further review and consideration as necessary, the Corporate Governance and
Nominations Committee believes that it has identified a qualified candidate, it
will make a recommendation to the Board.
The Corporate Governance and Nominations Committee met on two
occasions during the fiscal year ended December 31, 2003. Each of the members of
the Corporate Governance and Nominations Committee attended each of the meetings
held by the Corporate Governance and Nominations Committee.
CODE OF ETHICS
The Company has adopted a code of ethics (the "Code") that applies
to its principal executive and senior financial officers. The following
principles will apply to all principal executive and senior financial officers:
o to act with honesty and integrity in fulfilling their duties and
responsibilities;
o to handle in an ethical manner all actual or apparent conflicts of
interest with respect to any personal and professional
relationships;
o to avoid any personal activities, investments, interests or
associations that interfere or appear to interfere with the
officer's good judgment or independent exercise of judgment;
o to avoid the actual or appearance of personal gain due to an
officer's position or relationship with the Company;
o to comply with any applicable government laws, rules and
regulations;
o to adhere to the Company's code of ethics; and
o not to engage in any conduct that represents a conflict of
interest.
If a principal executive or senior financial officer has concerns
regarding a real or potential conflict of interest, the officer should consult
with a person designated by the audit committee regarding compliance and ethics.
It is the responsibility of the principal executive and senior
financial officers to assure that:
o all records and reports fairly and accurately reflect the
Company's financial position and its respective transactions, do
not contain any false or misleading information, are supported by
accurate documentation and are in accordance with any applicable
law;
o there is full compliance with the Company's system of internal
accounting controls;
10
o there are no transactions that are intentionally misclassified
with respect to accounts departments or accounting periods; and
o no information has been concealed from any internal or independent
auditors.
Each principal executive and senior financial officer is responsible
for bringing to the attention of the audit committee:
o any material information or public information affecting the
Company's disclosures, Securities and Exchange Commission filings
or financial condition;
o any significant deficiencies in the design or operation of
internal controls which adversely affect the Company's financial
data;
o any fraud by management or other employees significantly involved
with the Company's financial reporting and disclosures or internal
controls; and
o any information regarding violations of the code of ethics, or any
securities laws or other laws, rules or regulations, by employees
or agents of the Company.
Any conduct that represents a conflict of interest is strictly
prohibited. In the event of a violation of the Company's code of ethics, the
Company will take appropriate action designed to deter further wrongdoing and
promote accountability. The Board of Directors may waive the code of ethics
provisions only with the specific written advice of counsel and, if appropriate,
outside auditors, and only on the condition that the waiver is appropriately
disclosed and mechanisms are in place to monitor the waiver.
Amendments to the Code and any grant of a waiver from a provision of
the Code requiring disclosure under applicable SEC rules will be disclosed on
the Company's website at www.empireresorts.com. The Code has been filed as an
exhibit to the Company's annual report on Form 10-KSB for the fiscal year ended
December 31, 2003 and is also available on the Company's website referenced
above. The Code may also be requested in print, without charge, by writing to:
Thomas W. Aro, Secretary, Empire Resorts, Inc., Monticello Raceway, Route 17B,
Monticello, New York 12701.
PROCEDURES FOR CONTACTING DIRECTORS
The Board of Directors has established a process for stockholders to
send communications to the Board of Directors. Stockholders may communicate with
the Board generally or a specific director at any time by writing to: Thomas W.
Aro, Secretary, Empire Resorts, Inc., Monticello Raceway, Route 17B, Monticello,
New York 12701. The Secretary reviews all messages received, and forwards any
message that reasonably appears to be a communication from a stockholder about a
matter of stockholder interest that is intended for communication to the Board
of Directors. Communications are sent as soon as practicable to the director to
whom they are addressed, or if addressed to the Board of Directors generally, to
the Chairman of the Corporate Governance and Nominations Committee. Because
other appropriate avenues of communication exist for matters that are not of
stockholder interest, such as general business complaints or employee
grievances, communications that do not relate to matters of stockholder interest
are not forwarded to the Board of Directors. The Secretary has the right, but
not the obligation, to forward such other communications to appropriate channels
within the Company.
NON-DIRECTOR EXECUTIVE OFFICERS
SCOTT A. KANIEWSKI. Scott A. Kaniewski is the chief financial
officer of the Company and was a member of its Board of Directors from March
2002 through July 2003. Mr. Kaniewski was a director of Watermark Investments
Limited from 1995 to 2000. From 1995-1999, Mr. Kaniewski served as a director of
Hospitality Worldwide Services, Inc. and president of its real estate advisory
group from 1998 to 1999. From 1989 to 1995, Mr. Kaniewski held several positions
with VMS Realty Partners, a real estate investment and development company,
including vice president of hotel investments. Mr. Kaniewski received his B.S.
from Indiana University and is a certified public accountant.
11
THOMAS W. ARO. Thomas W. Aro is the Company's chief operating
officer and secretary and was a member of its Board of Directors from 1994
through July 2003. Mr. Aro was also the Company's executive vice president since
its formation in 1993 through November 11, 2003 and has served as its secretary
since 1998. Mr. Aro also serves as chief operating officer of the Company's
gaming subsidiaries and has over 30 years experience in the hospitality and
gaming industries. Mr. Aro received his B.S. from the University of Arizona and
is a certified public accountant.
EMPLOYMENT AGREEMENTS
On February 12, 2002 the Company entered into employment agreements
with each of Robert Berman and Scott Kaniewski, providing for annual salaries of
$300,000 and $200,000, respectively, and options to purchase, at an exercise
price of $17.49 per share, up to an aggregate of 95,016 shares of the Company's
Common Stock, which number of shares were subject to increase to an aggregate of
up to 295,689 upon shareholder approval. These options were to originally vest
over a three year period. On January 9, 2003, the Board modified the employment
agreements of each of Robert Berman and Scott Kaniewski. The modifications,
among others, include the cancellation of the above options and the issuance of
new options to each of Robert Berman and Scott Kaniewski to purchase up to an
aggregate of 95,016 shares of the Company's Common Stock, at an exercise price
of $2.12 per share (which number of shares were subject to increase to an
aggregate of up to 295,689 each upon shareholder approval). These new options
vested immediately. Subsequently, in March 2003, the shareholders approved the
remaining grant of options, which vested immediately, to each of Robert Berman
and Scott Kaniewski to purchase up to an aggregate of 200,673 shares of the
Company's Common Stock, at an exercise price of $2.12 per share. The Board
determined that the purpose of the stock options were not being adequately
achieved with respect to these employees holding unvested options that were
exercisable at prices above current market value and that it was in the best
interests of the Company and its shareholders that the Company retain and
motivate such employees. The employment contracts are for a fixed period of 36
months without provisions for renewal stipulated. On January 12, 2004, these
contracts were again modified. The modifications, among others, included
terminations with thirty (30) days notice.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, Catskill Development, the Cayuga Nation of New York,
the Cayuga Catskill Gaming Authority, Robert A. Berman, the Company's chief
executive officer, a member of its Board of Directors and its former chairman,
and Morad Tahbaz, Catskill Development's and the Company's president and a
member of Catskill Development's and the Company's boards of directors, are
parties to a letter agreement, dated as of April 3, 2003, as amended, pursuant
to which the Company has agreed to fund the Cayuga Catskill Gaming Authority's
purchase of those 29 acres of land subject to the Land Purchase Agreement and
the development costs of building a Class III Gaming enterprise on such land.
The Company is to be reimbursed for up to $10,000,000 of these advances from any
third party construction financing that is received and, to the extent that such
third party financing or $10,000,000 cap is insufficient to fully reimburse the
Company, from distributions made to Monticello Casino Management under the
Gaming Facility Management Agreement.
Under this letter agreement, Catskill Development, the Company,
Robert A. Berman and Morad Tahbaz, on the one hand, and the Cayuga Nation of New
York, on the other hand, have also agreed that for 10 years, each shall have the
right to participate in the development or operation by the other of
o one or more hotels, motels or other similar facilities providing
overnight accommodations including ancillary beverage, food,
entertainment, commercial and or retail services within a 15 mile
radius of the 29 acres to be acquired by the Cayuga Nation of New
York under the Land Purchase Agreement; and
o any other entertainment, sports and/or retail facility within a 5
mile radius of the property
12
In each case, the non-developing party will have the right to
purchase up to 33.33% of the equity in the facility being developed, with the
purchase price being a pro rata share of the costs of such facility less any
amount advanced by any lender for any mortgage or other loan secured by the
facility's property or cash flow. The purchase price for this acquired interest
must be paid in cash at the time the interest is actually purchased. However,
with respect to any acquired interest purchased by the Cayuga Nation of New York
prior to the second anniversary of the primary gaming facility's public opening,
the Cayuga Nation of New York may pay for its acquired interest by delivery of a
non-recourse promissory note, payable over five years, with interest accruing on
the unpaid principal amount at the then existing prime rate. These parties have
further agreed that the first hotel facility to be built that is governed by the
letter agreement will be deemed the gaming enterprise's preferred provider, in
that the gaming enterprise shall be obligated to refer its customers to that
hotel.
In consideration of the agreements contained in the letter
agreement, each of the parties has agreed that for a period ending on the
earliest of (i) approval (A) by the Bureau of Indian Affairs of the application
to transfer the 29 acres of land to the United States of America in trust for
the Cayuga Nation of New York and to use such land for Class II and Class III
Gaming and (B) by the National Indian Gaming Commission of the Gaming Facility
Management Agreement, (ii) the termination of the Gaming Facility Management
Agreement because of Monticello Casino Management's material breach of its
obligations, (iii) the termination of the Gaming Facility Development and
Construction Agreement because of Monticello Raceway Development's material
breach of its obligations, and (iv) April 30, 2004, each party, respectively,
will refrain from having discussions regarding the development of another Class
III Gaming facility in Sullivan County, New York.
Finally, under the letter agreement, the Company made an award to
the Cayuga Nation of New York of 300,000 shares of the Company's restricted
common stock. 100,000 of these shares vested on April 11, 2003. 100,000
additional shares vest on October 11, 2003, and the remaining 100,000 shares
vest on April 11, 2004.
The Company and Monticello Realty are parties to a letter agreement,
dated July 30, 2003, pursuant to which the Company granted Monticello Realty the
right to appoint up to two observers for each of the Company's Board of
Directors' meetings until the first to occur of (i) 36 months from July 30, 2003
or (ii) the first day on which Monticello Realty and its beneficial owners cease
to own, together, at least 5% of the Company's outstanding common stock.
Robert A. Berman executed a Guarantee Agreement, dated October 29,
2003, in favor of The Berkshire Bank, guarantying the performance, subject to
the terms and conditions provided in the Guarantee Agreement, of Monticello
Raceway Management's performance under a $3.5 million Loan Agreement with The
Berkshire Bank. This obligation was paid in full on February 4, 2004.
All current transactions between the Company and its officers,
directors and principal stockholders or any affiliates thereof are, and in the
future such transactions will be, on terms no less favorable to the Company than
could be obtained from unaffiliated third parties.
STOCKHOLDER VOTE REQUIRED. IF A QUORUM IS PRESENT AT THE MEETING,
EITHER IN PERSON OR BY PROXY, THE AFFIRMATIVE VOTE OF A PLURALITY OF THE VOTES
CAST SHALL BE SUFFICIENT TO ELECT TO THE BOARD EACH NOMINEE ON THE COMPANY'S
SLATE OF DIRECTORS. ABSTENTIONS AND BROKER NON-VOTES WILL NOT BE COUNTED.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE ELECTION TO THE
BOARD OF DIRECTORS OF THE COMPANY OF EACH
OF THE CLASS I DIRECTOR NOMINEES.
13
PROPOSAL 2
TO APPROVE THE ADOPTION OF THE COMPANY'S 2004 STOCK OPTION PLAN
The following table provides information as of December 31, 2003
regarding compensation plans (including individual compensation arrangements)
under which equity securities of the Company are authorized for issuance. The
table does not include information regarding the 2004 Stock Option Plan that is
being submitted to stockholders for approval as Proposal No. 2 of this proxy
statement.
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES
REMAINING
AVAILABLE FOR FUTURE
ISSUANCE
UNDER EQUITY
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE COMPENSATION PLANS
ISSUED UPON EXERCISE OF EXERCISE PRICE OF (EXCLUDING SECURITIES
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, REFLECTED
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS IN COLUMN (a))
(a) (b) (c)
Equity compensation plans
approved by security holders 821,228 $2.67 88,400
Equity compensation plans
not approved by security holders 0 $0 0
Total 821,228 $2.67 88,400
2004 STOCK OPTION PLAN
The Board of Directors has unanimously approved for submission to a
vote of the stockholders a proposal to adopt the Company's 2004 Stock Option
Plan (the "Plan"). The purpose of the Plan is to retain current, and attract
new, employees, directors, consultants and advisors that have experience and
ability, along with encouraging a sense of proprietorship and interest in the
Company's development and financial success. The Board of Directors believes
that option grants and other forms of equity participation are an increasingly
important means to retain and compensate employees, directors, advisors and
consultants.
A summary of the Plan is set forth below, and its full text is
attached hereto as APPENDIX C. The following discussion is qualified in its
entirety by reference to APPENDIX C.
ADMINISTRATION OF THE PLAN
The Plan will be administered by the Compensation Committee of the
Board of Directors. The Compensation Committee will have the power to determine
eligible participants, when options may be granted, the number of shares subject
to options, their duration, any conditions to their exercise, and the manner and
price at which they may be exercised. In making such determinations, the
Compensation Committee shall take into account the nature and period of service
of eligible persons, their compensation level, their past, present and potential
contributions to us and such other factors as the Compensation Committee deems
relevant.
14
The Board of Directors is authorized to amend, suspend or terminate
the Plan, except that it is not authorized, without stockholder approval (except
with regard to adjustments resulting from changes in capitalization), to (i)
increase the number of shares issuable under the Plan; (ii) materially increase
the benefits accruing to the option holders under the Plan; (iii) materially
modify Plan eligibility requirements; (iv) decrease the exercise price of
options below 100% of the underlying stock's fair market value on the grant
date, or (v) extend the term of any option beyond that provided for in Section 5
of the Plan.
Unless terminated earlier by the Compensation Committee, the Plan
will expire on May 12, 2014.
COMMON STOCK SUBJECT TO THE PLAN
The Plan provides that options may be granted with respect to a
total of 250,000 shares of the Company's common stock. The maximum number of
shares of common stock that can be subject to options granted under the Plan to
any individual shall not exceed 100,000 in any calendar year. In the event of a
merger, reorganization, consolidation, recapitalization, stock dividend, or
other change in our corporate structure that affects the Company's common stock,
the Compensation Committee shall make an appropriate and equitable adjustment to
the terms of any outstanding options such that each option holder's
proportionate interest in us remains the same. If any options expire or
terminate prior to being fully exercised, the unpurchased underlying stock shall
remain available for future option grants.
PARTICIPATION
Any employee, officer or director of, and any consultant or advisor
to, the Company or any of its subsidiaries shall be eligible to receive stock
options under the Plan. However, only employees of the Company and its
subsidiaries can receive incentive stock options.
OPTION PRICE
The exercise price of each option shall be determined by the
Compensation Committee, but may not be less than 100% of the Fair Market Value
(as defined in the Plan) of the underlying common stock on the option grant
date. If an incentive stock option is granted to an employee who owns more than
10% of the total combined voting power of all the Company's capital stock, then
its exercise price may not be less than 110% of the Fair Market Value of the
underlying common stock on the option grant date.
TERM OF OPTIONS
The Compensation Committee shall, in its discretion, fix the term of
each option; provided, however, that the maximum term of any option shall not
exceed 10 years. Moreover, incentive stock options granted to employees who own
more than 10% of the total combined voting power of the Company's capital stock
shall not exceed five years. The Plan provides for the earlier expiration of
options of a participant in the event of certain terminations of employment or
engagement or, if the Compensation Committee so determines, in the event of a
change in control.
RESTRICTIONS ON TRANSFER AND EXERCISE
Generally, an option may not be transferred or assigned other than
by will or the laws of descent and distribution and, during the lifetime of the
option holder, may be exercised solely by him. The aggregate Fair Market Value
(determined at the time the incentive stock option is granted) of the shares as
to which an employee may first exercise incentive stock options in any one
calendar year under all of the Company and any of its subsidiaries' incentive
stock option plans may not exceed $100,000. The Compensation Committee may
impose any other conditions to exercise as it deems appropriate.
15
REGISTRATION OF SHARES
The Company may file a registration statement under the Securities
Act of 1933, as amended, with respect to the common stock issuable pursuant to
the Plan following stockholder approval.
RULE 16B-3 COMPLIANCE
In all cases, the terms, provisions, conditions and limitations of
the Plan shall be construed and interpreted so as to be consistent with the
provisions of Rule 16b-3 of the Securities Exchange Act of 1934, as amended.
COOPERATION IN PUBLIC OFFERINGS
As a condition to participation in the Plan, each option holder is
obligated to cooperate with the Company and its underwriters in connection with
any public offering of the Company's securities and will execute and deliver any
agreements and documents, including a lock-up agreement, that may be requested
by the Company or its underwriters.
TAX TREATMENT OF INCENTIVE STOCK OPTIONS
In general, no taxable income for federal income tax purposes will
be recognized by an option holder upon receipt or exercise of an incentive stock
option, and the Company will not then be entitled to any tax deduction. Assuming
that the option holder does not dispose of the option shares before the later of
(i) two years after the date of grant or (ii) one year after the exercise of the
option, upon any such disposition, the option holder will recognize capital gain
equal to the difference between the sale price on disposition and the exercise
price.
If, however, the option holder disposes of his option shares prior
to the expiration of the required holding period, he will recognize ordinary
income for federal income tax purposes in the year of disposition equal to the
lesser of (i) the difference between the fair market value of the shares at the
date of exercise and the exercise price, or (ii) the difference between the sale
price upon disposition and the exercise price. Any additional gain on such
disqualifying disposition will be treated as capital gain. In addition, if such
a disqualifying disposition is made by the option holder, the Company will be
entitled to a deduction equal to the amount of ordinary income recognized by the
option holder provided that such amount constitutes an ordinary and reasonable
expense of the Company.
TAX TREATMENT OF NONQUALIFIED STOCK OPTIONS
No taxable income will be recognized by an option holder upon
receipt of a nonqualified stock option, and the Company will not be entitled to
a tax deduction for such grant.
Upon the exercise of a nonqualified stock option, the option holder
will include in taxable income, for federal income tax purposes, the excess in
value on the date of exercise of the shares acquired pursuant to the
nonqualified stock option over the exercise price. Upon a subsequent sale of the
shares, the option holder will derive short-term or long-term gain or loss,
depending upon the option holder's holding period for the shares (commencing
upon the exercise of the option) and upon the subsequent appreciation or
depreciation in the value of the shares.
The Company generally will be entitled to a corresponding deduction
at the time that the participant is required to include the value of the shares
(less the exercise price) in his income.
WITHHOLDING OF TAX
The Company is permitted to deduct and withhold amounts required to
satisfy its withholding tax liabilities with respect to its employees.
16
REGISTRATION OF SHARES
Options to purchase shares of the Company's common stock have not
yet been granted pursuant to the Plan, although it is anticipated that options
will be granted in the near future.
BENEFITS OR AMOUNTS TO BE ALLOCATED
It is not presently possible to determine the benefits or amounts to
be received by or allocated to particular persons or groups pursuant to the
Plan. It is contemplated that the Compensation Committee will determine award
amounts under the Plan in the future consistent with the practices that have
been followed in previous years.
STOCKHOLDER VOTE REQUIRED. IF A QUORUM IS PRESENT AT THE MEETING,
EITHER IN PERSON OR BY PROXY, THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES
CAST SHALL BE SUFFICIENT TO APPROVE THE COMPANY'S 2004 STOCK OPTION PLAN.
ABSTENTIONS WILL HAVE THE SAME EFFECT AS VOTES AGAINST SUCH PROPOSAL AND BROKER
NON-VOTES WILL NOT BE COUNTED.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE APPROVAL OF
THE ADOPTION OF THE COMPANY'S 2004 STOCK OPTION PLAN
17
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
The executive officers of the Company are:
Robert A. Berman Chief Executive Officer
Morad Tahbaz President
Scott A. Kaniewski Chief Financial Officer and Treasurer
Thomas W. Aro Chief Operating Officer and Secretary
SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation for services
rendered in all capacities to the Company and its subsidiaries for the fiscal
years ended December 31, 2003, 2002 and 2001, paid to the Company's current
Chief Executive Officer and three executive officers (collectively the "Named
Executive Officers") whose total compensation exceeded $100,000 per annum. No
other executive officers' compensation exceeded $100,000 during the above fiscal
years.
Securities
Restricted Underlying All Other
Name and Principal Position Year Salary Stock Awards Options /SARS Compensation
--------------------------- ---- ------ ------------ ------------- ------------
Robert A. Berman 2003 $300,000 -- 295,689(1) --
Chief Executive 2002 263,150 -- 95,016(1) --
Officer 2001 0 -- -- --
Morad Tahbaz 2003 $173,000 -- 17,500 --
President 2002 0 -- -- --
2001 0 -- -- --
Scott A. Kaniewski 2003 $200,000 -- 295,689(1) --
Chief Financial 2002 175,433 -- 95,016(1) --
Officer and Treasurer 2001 0 -- -- --
Thomas W. Aro 2003 $210,000 -- 50,000 --
Chief Operating 2002 191,994 -- 5,500 --
Officer and Secretary 2001 215,000 -- 4,000 --
(1) In 2002, Robert A. Berman and Scott A. Kaniewski were granted
options to purchase, at an exercise price of $17.49 per share, up to an
aggregate of 190,032 shares of the Company's Common Stock. On January 9, 2003,
these options to purchase 190,032 shares were canceled and the employment
agreements of each of Robert Berman and Scott Kaniewski were modified. In
addition, on January 9, 2003, the Company issued options to purchase an
aggregate of 190,032 shares of the Company's Common Stock, at an exercise price
of $2.12 per share, to Robert A. Berman and Scott A. Kaniewski (which number of
shares were subject to increase to an aggregate of up to 591,378 upon
shareholder approval). Subsequently, in March 2003, the shareholders approved
the remaining grant of options to purchase an aggregate of 401,346 shares of the
Company's Common Stock, at an exercise price of $2.12 per share, to Robert A.
Berman and Scott A. Kaniewski. The Board determined that the purpose of the
stock options were not being adequately achieved with respect to these employees
holding unvested options that were exercisable at prices above current market
value and that it was in the best interests of the Company and its shareholders
that the Company retain and motivate such employees.
18
OPTION/SAR GRANTS IN LAST FISCAL YEAR.
The following table sets forth certain information regarding Common
Stock option grants made to the Named Executive Officers during 2003.
Number of
Securities Percent of Total
Underlying Options/SARs
Options/SARs Granted to Employees Exercise or Base
Name Granted(#) in FiscalYear Price ($/Sh) Expiration Date
---- ---------- ------------- ------------ ---------------
Robert A. Berman 295,689(1) 24% $2.12 January 9, 2008
Scott A. Kaniewski 295,689(1) 24% $2.12 January 9, 2008
Morad Tahbaz 17,500 2% $2.12 January 9, 2008
Thomas W. Aro 50,000 6% $2.12 January 9, 2008
(1) See footnote 1 on the summary compensation table above.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION/SAR VALUES
The following table sets forth certain information regarding
unexercised Common Stock options held by each of the Named Executive Officers as
of December 31, 2003:
Number of Securities Underlying Value of Unexercised In-The-
Shares Unexercised Options/SARs At Money Options/SARs At
Acquired Value FY-End FY-End
On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------- -------- ----------- ------------- ----------- -------------
Robert A. Berman . 16,500 $ 177,500 279,189 -- $1,926,404 --
Morad Tahbaz ..... -- -- 17,500 -- 120,750 --
Scott A. Kaniewski -- -- 295,689 -- 2,040,254 --
Thomas W. Aro .... 12,000 $ 139,700 43,500 -- $ 287,610 --
In January 2003, June 2001, November 2000 and December 1998, the
Company determined that the purposes of the Company's stock option plans were
not being adequately achieved with respect to those employees and consultants
holding options that were exercisable at prices above current market value and
that it was in the best interests of the Company and its shareholders that the
Company retain and motivate such employees and consultants. Therefore, in order
to provide such optionees the opportunity to exchange their above market value
options for options exercisable at the current market value in 2001, 2000 and
1998, respectively, the Company cancelled all options that were outstanding
under the 1998 and 1993 stock option plans at that time and reissued the options
at an exercise price equal to the closing NASDAQ bid prices on the respective
dates in July 2001, November 2000 and December 1998. In January 2003, the
Company cancelled 662,000 options and reissued 854,000 options at an exercise
price of $2.12 per share.
19
The following table sets forth certain information with respect to
all such cancellations and reissuances with respect to options held by any
executive officer from March 19, 1993 (date of inception) through December 31,
2003:
Length of
Number of Original Option
Securities Term
Underlying Market Price of Exercise Price at Remaining at
Options stock at time of at time of Date of
Cancellation/ Cancelled/ Canceling/ Canceling/ New Exercise Canceling/
Reissuance Date Reissued Reissuing Reissuing Price Reissuing
--------------- -------- --------- --------- ----- ---------
Robert Berman 1/09/03 95,016 $2.12 $17.49 $2.12 5 years
Scott Kaniewski 1/09/03 95,016 $2.12 $17.49 $2.12 5 years
Thomas W. Aro 12/12/98 60,000(1) $1.063(1) $ 3.25(1) $1.063(1) 6 years
12/12/98 100,000(1) $1.063(1) $ 2.00(1) $1.063(1) 6 years
10/12/00 75,000(1) $1.375(1) $ 2.00(1) $1.375(1) 8 years
10/12/00 130,000(1) $1.375(1) $ 4.25(1) $1.375(1) 8 years
6/13/01 6,000 $4.40 $10.63 $4.40 6 years
6/13/01 10,000 $4.40 $10.63 $4.40 6 years
6/13/01 5,500 $4.40 $13.75 $4.40 8 years
6/13/01 7,500 $4.40 $13.75 $4.40 8 years
6/13/01 13,000 $4.40 $13.75 $4.40 6 years
1/9/03 46,000 $2.12 $4.40 $2.12 10 years
(1) Represents amounts and prices prior to 1-for-10 reverse split in June 2001.
COMPENSATION OF DIRECTORS
DIRECTORS - CASH COMPENSATION
The members of the Company's Board of Directors each receive $20,000
per year and $1,000 per meeting. Directors that also serve on committees of the
Board of Directors, other than the audit committee, receive an additional $1,000
per committee meeting for non-employee committee members, with the chairperson
receiving $2,500 per meeting. With respect to the audit committee, its
non-employee chairperson receives an additional annual payment of $10,000, and
each audit committee member (including the chairperson) receives $2,500 per
audit committee meeting.
DIRECTORS - STOCK COMPENSATION
All members of the Board of Directors receive an annual grant of
10,000 stock options at the common stock's then current fair market value. All
stock options granted to the Company's directors vest immediately.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
During the Company's fiscal year ended December 31, 2003, the
Company's independent accountant was Friedman Alpren & Green LLP. The Audit
Committee has advised the full Board of Directors that it did not believe the
Company's audit was impaired by Friedman Alpren & Green LLP's provision of other
services. As a result, the Board of Directors believes that Friedman Alpren &
Green LLP was an independent accountant with respect to the Company.
20
Audit Fees
The aggregate fees billed by Friedman Alpren & Green LLP for
professional fees rendered in connection with the audit of the Company's annual
financial statements and the reviews of the Company's financial statements
included in the Company's quarterly reports on Form 10-Q, including services
related thereto, were approximately $176,000 for the fiscal year ended December
31, 2003 and approximately $167,000 for the fiscal year ended December 31, 2002.
Audit-Related Fees
The aggregate fees billed by Friedman Alpren & Green LLP for
assurance and related services that are reasonably related to the performance of
the audit or review of the Company's financial statements and are not reported
as "Audit Fees," including due diligence related to mergers and acquisitions and
consultations concerning financial accounting and reporting matters not
classified as audit, were approximately $100,000 for the fiscal year ended
December 31, 2003 and approximately $50,000 for the fiscal year ended December
31, 2002.
Tax Fees
The aggregate fees billed by Friedman Alpren & Green LLP for
professional services rendered for tax compliance, tax advice and tax planning
were approximately $34,000 for the fiscal year ended December 31, 2003 and
approximately $50,000 for the fiscal year ended December 31, 2002. The services
comprising the fees reported as "Tax Fees" included tax return preparation in
various jurisdictions, consultation regarding various tax issues, and support
provided to management in connection with income and other tax audits.
All Other Fees
Other than the fees described above, there were no other fees billed
by Friedman Alpren & Green LLP for products and services rendered to the
Company.
Pre-approval Policies and Procedures
All audit and non-audit services to be performed by the Company's
independent accountant must be approved in advance by the Audit Committee.
Consistent with applicable law, limited amounts of services, other than audit,
review or attest services, may be approved by one or more members of the Audit
Committee pursuant to authority delegated by the Audit Committee, provided each
such approved service is reported to the full Audit Committee at its next
meeting.
All of the engagements and fees for the Company's fiscal year ended
December 31, 2003 were approved by the Audit Committee. Of the total number of
hours expended on Friedman Alpren & Green LLP's engagement to audit the
Company's financial statements for its fiscal year ended December 31, 2003, all
of the hours were performed by Friedman Alpren & Green LLP's full-time,
permanent employees.
The Audit Committee of the Board of Directors considered whether the
provision of non-audit services by Friedman Alpren & Green LLP was compatible
with its ability to maintain independence from an audit standpoint and concluded
that Friedman Alpren & Green LLP's independence was not compromised.
Representatives from the Company's independent accountant are
expected to be in attendance at the annual meeting and be available for
questions. Stockholders will have the opportunity to make statements or ask
questions and representatives from the Company will be available to answer their
questions.
ADDITIONAL INFORMATION. The Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, Proxy Statements and other
information with the Securities and Exchange Commission (the "SEC"). Proxy
Statements, reports and other information can be inspected and copied at the
public reference facilities of the SEC at its principal office at Judiciary
21
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The SEC also
maintains a web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC.
Any statement contained herein (or in a document incorporated by
reference herein) shall be deemed to be modified or superseded for purposes of
this Proxy Statement to the extent that a statement contained in any
subsequently filed document that also is (or is deemed to be) incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement. All documents filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this Proxy Statement and prior to the date of the Meeting shall be deemed to
be incorporated by reference in this Proxy Statement and to be a part hereof
from the respective dates of filing of such documents.
The Company will provide, without charge, to each stockholder to
whom this Proxy Statement is delivered and who so requests, a copy of any or all
of the information that has been incorporated by reference in this Proxy
Statement (exclusive of exhibits to such information unless such exhibits are
specifically incorporated by reference into such information). Any such request
should be made orally or in writing to Empire Resorts, Inc., Chief Financial
Officer, 707 Skokie Boulevard, Suite 600, Northbrook, IL, 60062, telephone (847)
418-3804. Within one business day of receipt of such a request, the Company will
provide, by first class mail or other equally prompt means, a copy of the
information as requested.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's
directors, its executive (and certain other) officers, and any persons holding
ten percent or more of the Company's Common Stock must report on their ownership
of the Company's Common Stock and any changes in that ownership to the
Securities and Exchange Commission and to the National Association of Securities
Dealers, Inc. Automated Quotation System. Specific due dates for these reports
have been established. Based upon the Company's review of Forms 3, 4 and 5 and
amendments thereto, if any, furnished to the Company under Rule 16a-3(e) during
and with respect to the Company's most recent fiscal year and any written
representations provided to the effect that no Form 5 is required, there was
compliance with all Section 16(a) filing requirements applicable to its
officers, directors and greater-than ten percent stockholders, with the
exception of the following transactions that were inadvertantly reported late:
Name Number of Transactions Type of Form Number of Forms Filed Late
---- ---------------------- ------------ --------------------------
Paul deBary Ten Form 4 Three
(Director)
Robert A. Berman Six Form 4 Two
(Director/Officer)
Ssott A. Kaniewski Six Form 4 Four
(Officer)
New York Gaming, LLC One Form 3 One
(10% Owner)
One Form 4 One
BKB, LLC One Form 3 One
(10% Owner) One Form 4 One
Watertone Holdings, LP One Form 3 One
(10% Owner)
One Form 4 One
22
Morad Tahbaz One Form 3 One
(Director)
Thomas P. Puccio One Form 3 One
(Director)
William W. Hopson One Form 4 One
(Director)
One Form 5 One
David Matheson One Form 3 One
(Director)
John Sharpe One Form 4 One
(Director)
STOCKHOLDER PROPOSALS
Stockholders' proposals intended to be presented at the Company's
next Annual Meeting of Stockholders, pursuant to the provision of Rule 14a-8
promulgated under the Exchange Act, must be received at the Company's offices
not later than October 27, 2004 for inclusion in the Company's Proxy Statement
and form of proxy relating to that Meeting.
23
APPENDIX A
EMPIRE RESORTS, INC.
BOARD OF DIRECTORS
AUDIT COMMITTEE
CHARTER
This Charter governs the operations of the Audit Committee of the Board of
Directors of Empire Resorts, Inc. (the "Company"). The Audit Committee will
review and reassess the Charter at least annually and obtain the approval of the
Board for any amendments to the Charter.
Purpose
The Audit Committee is appointed by the Board to assist the Board in
fulfilling its oversight responsibility to the shareholders and others relating
to the integrity of the Company's financial statements and the financial
reporting process, the systems of internal accounting and financial controls,
the annual independent audit of the Company's financial statements, the
Company's compliance with legal and regulatory requirements, and its ethics
programs as established by management and the Board of Directors. The Committee
will also oversee the independent auditors' qualifications, independence, and
performance. In so doing, it is the responsibility of the Committee to maintain
free and open communication between the Committee, independent auditors, the
internal auditors, and management of the Company, so as to make the Board aware
of significant financial matters which require the Board's attention.
Committee Membership
The Audit Committee will consist of at least three directors, each of whom
is (i) "independent" under the rules of the NASDAQ Stock Market, Inc. ("NASDAQ")
except as may be permitted under NASDAQ rules and the Sarbanes-Oxley Act of 2002
and rules issue under that Act; (ii) does not accept any consulting, advisory or
other compensatory fee from the issuer other than in his or her capacity as a
member of the Board or any committee of the Board, (iii) is not an "affiliate"
of the Company or any subsidiary of the Company, as defined in Rule 10A-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (iv) does
not own or control 20% or more of the Company's voting securities. All members
of the Audit Committee must be able to read and understand fundamental financial
statements, including a company's balance sheet, income statement, and cash flow
statement, and the Audit Committee must have at least one member who has past
employment experience in finance or accounting, requisite professional
certification in accounting, or other comparable experience or background which
results in the member's financial sophistication.
Notwithstanding the immediately preceding paragraph, one director who is
not independent as defined in the NASDAQ rules, and is not a current employee or
an immediate family member of such employee, may be appointed to the Audit
Committee, if the Board, under exceptional and limited circumstances, determines
that membership on the Audit Committee by the individual is required by the best
interests of the Company and its shareholders, and the board discloses, in the
next annual proxy statement subsequent to such determination, the nature of the
relationship and the reasons for that determination. Any such member may only
serve for up to two years and may not chair the Audit Committee.
2
No member of the Audit Committee may receive, directly or indirectly, any
consulting, advisory or other compensatory fee from the company other than (i)
director's fees, including fees for committee service, which may be received in
cash, stock, stock options, or other consideration which may be ordinarily
available to directors; (ii) a pension or other deferred compensation for prior
service that is not contingent on future service; and (iii) any other regular
benefits that other directors may receive.
The initial members of the Audit Committee will be appointed by the Board.
Candidates to fill subsequent vacancies in the Committee will be appointed by
the Board based on nominations recommended by the Company's Corporate Governance
and Nominations Committee. Members will serve at the pleasure of the Board and
for such term or terms as the Board may determine. The Board will designate one
member of the Audit Committee as its chairperson. In the event of a tie vote on
any issue, the chairperson's vote will decide the issue. The Company will
disclose as required by the SEC whether at least one member of the Audit
Committee is an "audit committee financial expert" as defined by the SEC.
Committee Authority, Functions and Responsibilities
The function of the Audit Committee is oversight. The primary
responsibility of the Committee is to oversee the Company's financial controls
and reporting processes on behalf of the Board and report the results of its
activities to the Board. Management is responsible for preparing the Company's
financial statements. The independent auditors are responsible for planning and
carrying out a proper audit of those financial statements. Management and the
internal auditing professionals are responsible for maintaining appropriate
accounting and financial reporting principles and policies and internal controls
and procedures that provide for compliance with accounting standards and
applicable laws and regulations.
Members of the Audit Committee, in fulfilling their responsibilities
hereunder, are not full-time employees of the Company and are not, and do not
represent themselves to be, performing the functions of auditors or accountants.
As such, it is not the duty or responsibility of the Audit Committee or its
members to conduct field work or other types of auditing or accounting reviews
or procedures.
The Committee will have full power and authority to carry out the
following responsibilities:
I. With respect to oversight of the independent auditors:
A. The Committee will have the sole authority (1) to directly
appoint, retain, compensate, evaluate, and terminate the independent auditors,
including sole authority to approve all audit engagement fees and terms, and (2)
to pre-approve or to adopt appropriate procedures to pre-approve, all audit and
non-audit services to be provided by the independent auditors. The Committee
will annually review the qualifications and performance of the then-current
independent auditors and select the independent auditors for the next year. The
Committee will annually review and evaluate the lead partner of the independent
auditor's team.
B.(1) The Committee will require the independent auditors to submit to the
Audit Committee annually a formal written statement (the "Auditors' Statement)
describing: the auditors' internal quality-control procedures; any material
issues raised by the most recent internal quality-control review or peer review
of the auditors, or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years, respecting one or
more independent audits carried out by the auditors, and any steps taken to deal
with any such issues; and to assess the auditors' independence, all
relationships between the independent auditors and the Company.
(2) The Committee will also require the independent auditors to submit to
the Audit Committee annually a formal written statement of the fees billed in
each of the last two fiscal years for each of the following categories of
services rendered by the independent auditors: (i) the audit of the Company's
annual financial statements and the reviews of the financial statements included
in the Company's Quarterly Reports on Form 10-Q or services that are normally
provided by the independent auditors in connection with statutory and regulatory
filings or engagements; (ii) assurance and related services not included in
clause (i) that are reasonably related to the performance of the audit or review
of the Company's financial statements, in the aggregate and by each service;
(iii) tax compliance, tax advice and tax planning services, in the aggregate and
by each service; and (iv) all other products and services rendered by the
independent auditors, in the aggregate and by each service.
C. The Committee will review with management the timing and process for
implementing the rotation of the lead audit partner, the concurring partner, and
any other active audit engagement team partner and consider whether there should
be a regular rotation of the audit firm itself.
II. With respect to financial reporting principles and policies and internal
audit controls and procedures, the Audit Committee will:
A. Review and discuss with management and the independent auditors the
annual audited financial statements, including disclosures made in management's
discussion and analysis, and recommend to the Board whether the audited
financial statements should be included in the Company's Form 10-K. Obtain from
the independent auditors assurance that the audit was conducted in a manner
consistent with Section 10A of the Securities Exchange Act of 1934.
B. Review and discuss with management and the independent auditors the
Company's quarterly financial statements prior to the filing of its Form 10-Q,
including the results of the independent auditors' review of the quarterly
financial statements.
C. Discuss with management and the independent auditors significant
financial reporting issues and judgments made in connection with the preparation
of the Company's financial statements, including any significant changes in the
Company's selection or application of accounting principles, any major issues as
to the adequacy of the Company's internal controls and any measures required in
view of any control deficiencies.
3
D. Inquire about the impact of and, if appropriate, review new and
proposed releases and pronouncements by the Financial Accounting Standards Board
(FASB), the American Institute of Certified Public Accountants (AICPA) and the
SEC that may affect current or future financial statements or other disclosures
in financial reports.
E. Meet separately with management and the independent auditors, upon
completion of their audit, to review and discuss the Company's financial results
for the year, as reported in the Company's financial statements, or other
disclosures, and any other items required to be communicated by the independent
auditors to the Audit Committee.
F. Review quarterly reports from the independent auditors on (i) all
critical accounting policies and practices to be used; (ii) all alternative
treatments of financial information within generally accepted accounting
principles that have been discussed with management, ramifications of the use of
such alternative disclosures and treatments, and the treatment preferred by the
independent auditors; (iii) other significant written communications between the
independent auditors and management, such as any management letter or schedule
of unadjusted differences.
G. Evaluate the cooperation received by the independent auditors during
their audit examination, including their access to all requested records, data
and information, and elicit the comments of management regarding the
responsiveness of the independent auditors to the Company's needs. Review with
the independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61 relating to the conduct of the audit, including any
difficulties encountered in the course of the audit work, any restrictions on
the scope of activities or access to requested information, and any significant
disagreements with management.
H. Review with management the Company's earnings press releases, including
any use of pro forma or adjusted non-GAAP information, as well as financial
information and earnings guidance provided to analysts and rating agencies. Such
discussion may be done generally (consisting of discussing the types of
information to be disclosed and the types of presentations to be made) rather
than specifically as to individual press releases, analysts, and rating
agencies.
I. Obtain from management and review with management its analysis of the
Company's major financial risk exposures and the steps management has taken to
monitor and control such exposures, including the Company's risk assessment and
risk management policies.
J. Consult with the independent auditors and discuss with Company
management the scope and quality of internal accounting and financial reporting
controls in effect.
K. Review this Charter at least once annually and update as appropriate.
L. Establish procedures for (a) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters and (b) the confidential, anonymous submission by
employees of the Company regarding questionable accounting or auditing matters.
4
M. Investigate, review and report to the Board the propriety and ethical
implications of any transactions, as reported or disclosed to the Committee by
the independent auditors, employees, officers, members of the Board or
otherwise, between (a) the Company and (b) any employee, officer or member of
the Board of the Company, or any affiliates of the foregoing.
N. Perform such other functions and have such power as may be necessary or
convenient in the efficient and lawful discharge of the foregoing.
Performance Evaluation
The Committee will produce and provide to the Board an annual performance
evaluation of the Committee, which evaluation will compare the performance of
the Committee with the requirements of this charter. The performance evaluation
will also recommend to the Board any improvements to the Committee's charter
deemed necessary or desirable by the Committee. The performance evaluation by
the Committee will be conducted in such manner as the Committee deems
appropriate. The report to the Board may take the form of an oral report by the
chairperson of the Committee or any other member of the Committee designated by
the Committee to make this report.
Resources and Authority
The Committee will have the resources and authority appropriate to
discharge its duties and responsibilities, including the authority to select,
retain, terminate, and approve the fees and other retention terms of special
counsel or other experts or consultants, as it deems appropriate, without
seeking approval of the Board or management. The authority to retain consultants
or search firms used by the Committee shall be vested solely in the Committee.
Meetings
The Audit Committee will meet at least once every fiscal quarter, or more
frequently if circumstances dictate, to discuss with management the annual
audited financial statements and quarterly financial statements, as applicable.
The Audit Committee should meet separately periodically with management, the
chief internal auditor, and the independent auditors to discuss any matters that
the Audit Committee or any of these persons or firms believe should be discussed
privately.
The Audit Committee may request any officer or employee of the Company or
the Company's outside counsel or independent auditors to attend a meeting of the
Audit Committee or to meet with any members of, or consultants to, the Audit
Committee. Members of the Audit Committee may participate in a meeting of the
Audit Committee by means of a conference call or similar communications
equipment by means of which all persons participating in the meeting can hear
each other.
Minutes and Reports
Minutes of each meeting of the Committee will be kept and distributed to
each member of the Committee, members of the Board who are not members of the
Committee, and the Secretary of the Company. The Chairman of the Committee will
5
report to the Board on a periodic basis, but no less often than quarterly, or
whenever so requested by the Board.
Limitation of Audit Committee's Role
The Audit Committee has the responsibilities and powers set forth in this
Charter, but it is not the duty of the Audit Committee to plan or conduct audits
or to determine that the Company's financial statements and disclosures are
complete and accurate and are in accordance with generally accepted accounting
principles and applicable rules and regulations. Those are the responsibilities
of management and the independent auditors.
Amendment
This Charter and any provision contained herein may be amended or repealed
by the Board of Directors.
6
APPENDIX B
EMPIRE RESORTS, INC.
BOARD OF DIRECTORS
CORPORATE GOVERNANCE AND NOMINATIONS COMMITTEE
CHARTER
This Charter governs the operations of the Corporate Governance and Nominations
Committee of the Board of Directors of Empire Resorts, Inc. (the "Company"). The
purposes of the Committee are (i) to develop and recommend to the Board, and to
oversee the implementation and operation of, a set of corporate governance
principles applicable to in the Company; (ii) to determine the slate of director
nominees for election to the Board and to fill vacancies occurring between
annual meetings of shareholders, and (iii) to recommend individuals to the Board
for nomination as members of the standing committees of the Board. The Committee
will report to the Board on a regular basis and not less than once a year.
Organization
The Committee will have three members, or such greater number as may be
determined from time to time by the Board. The initial members of the Committee
will be appointed by the Board. Candidates to fill subsequent vacancies in the
Committee will be appointed by the Board based on nominations by the Committee.
Members will serve at the pleasure of the Board and for such term or terms as
the Board may determine.
Except as may be determined by the Board under the rules of the NASDAQ Stock
Market, Inc., the Committee will consist solely of "Independent Directors."
Independent Directors means those directors who are neither officers nor
employees of the Company, or its subsidiaries nor have a relationship which, in
the opinion of the Board, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director, and who are
otherwise "independent" under the NASDAQ rules.
As provided under the NASDAQ rules for the nominations committee, if the
Committee three has at least three members, one director who is not independent
and is not a current officer or employee, or a person who is a relative by
blood, marriage or adoption of, or who has the same residence as any current
officer or employee, may be appointed to the Committee if the Board, under
exceptional and limited circumstances, determines that such individual's
membership on the Committee is required by the best interests of the Company and
its shareholders, and the Board discloses, in the next annual meeting proxy
statement subsequent to such determination, the nature of the relationship, and
the reasons for the determination. Any such member appointed to the Committee
may serve for up to two years.
As also provided under the NASDAQ rules for the nominations committee, if the
Committee has at least three members, one director who owns 20% or more of the
Company's common stock or voting power outstanding, and is not independent
because such director is also an officer, may be appointed to the Committee if
the Board determines that such individual's membership on the Committee is
required by the best interests of the Company and its shareholders, and the
Board discloses, in the next annual meeting proxy statement subsequent to such
determination, the nature of the relationship, and the reasons for the
determination. This exception is available only if no director who is not
independent is appointed to the Committee under the provisions of the
immediately preceding paragraph.
Structure and Process
The Board will designate one member of the Committee as its chairperson. In the
event of a tie vote on any issue, the chairperson's vote will decide the issue.
The Committee will meet in person or telephonically at least twice a year in
conjunction with regularly scheduled meetings of the Board and at such other
regularly scheduled times and places as may be determined by the Committee
chairperson, with further meetings to occur, or actions to be taken by unanimous
written consent, when deemed necessary or desirable by the Committee or its
chairperson.
Duties and Responsibilities
The following are the duties and responsibilities of the Committee:
1. To assist the Board in organizing itself to discharge its duties and
responsibilities properly and effectively. To make recommendations to the Board
from time to time as to changes that the Committee believes to be desirable
concerning the size of the Board or any committee thereof.
2. To identify individuals believed to be qualified to become Board members,
and to determine the nominees to stand for election as directors at the annual
meeting of shareholders or, if applicable, at a special meeting of shareholders.
In the case of a vacancy in the office of a director (including a vacancy
created by an increase in the size of the Board), the Committee will determine a
nominee to fill such vacancy either through appointment by the Board or through
election by shareholders. In nominating candidates, the Committee will take into
consideration such factors as it deems appropriate. These factors may include
judgment, skill, diversity, experience with businesses and other organizations
of comparable size, the interplay of the candidate's experience with the
experience of other Board members, and the extent to which the candidate would
be a desirable addition to the Board and any committees of the Board. The
Committee may consider candidates proposed by management, but is not required to
do so.
3. To develop and recommend to the Board standards to be applied in making
determinations as to the absence of relationships between a director or
prospective director and the Company, its subsidiaries, or any entity with which
the Company does business which, in the opinion of the Board, would interfere
with the exercise of independent judgment in carrying out the responsibilities
of a director. To monitor ongoing compliance with Board and Board committee
membership criteria.
4. In the case of a director nominee to fill a Board vacancy created by an
increase in the size of the Board, to make a recommendation to the Board as to
the class of directors in which the individual should serve.
5. To identify Board members qualified to fill vacancies on any committee of
the Board other than this Committee, and to recommend that the Board appoint the
identified member or members to the respective committee. In nominating a
candidate for committee membership, the Committee will take into consideration
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the factors set forth in the charter of that committee, if any, as well as any
other factors it deems appropriate, including without limitation the consistency
of the candidate's experience with the goals of the committee and the interplay
of the candidate's experience with the experience of other committee members.
6. To establish procedures for the Committee to exercise oversight of the
evaluation of the Board and management.
7. To receive, through the Committee's chairperson, interested-party
communications directed to the non-management directors.
8. To develop and recommend to the Board a set of corporate governance
principles' applicable to the Company, to oversee the implementation and
operation of the corporate governance principles, and to review those principles
at least once a year.
9. To review and report to the Board concerning the corporate governance
implications of proposed changes to the charter of any committee of the Board.
10. To prepare and issue the evaluation required under "Performance
Evaluation" below.
11. To perform any other duties or responsibilities expressly assigned to the
Committee by the Board from time to time relating to corporate governance or to
the nomination of Board and committee members.
Performance Evaluation
The Committee will produce and provide to the Board an annual performance
evaluation of the Committee, which evaluation will compare the performance of
the Committee with the requirements of this charter. The performance evaluation
will also recommend to the Board any improvements to the Committee's charter
deemed necessary or desirable by the Committee. The performance evaluation by
the Committee will be conducted in such manner as the Committee deems
appropriate. The report to the Board may take the form of an oral report by the
chairperson of the Committee or any other member of the Committee designated by
the Committee to make this report.
Resources and Authority of the Committee
The Committee shall have the resources and authority appropriate to discharge
its duties and responsibilities, including the authority to select, retain,
terminate, and approve the fees and other retention terms of special counsel or
other experts or consultants, as it deems appropriate, without seeking approval
of the Board or management. The authority to retain consultants or search firms
used to identify director candidates shall be vested solely in the Committee.
Amendment
This Charter and any provision contained herein may be amended or repealed
by the Board of Directors.
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APPENDIX C
EMPIRE RESORTS, INC.
2004 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
This 2004 Stock Option Plan (the "Plan") is intended as an incentive, to
retain in the employ of and as directors, consultants and advisors to EMPIRE
RESORTS, INC., a Delaware corporation (the "Company") and any Subsidiary of the
Company, within the meaning of Section 424(f) of the United States Internal
Revenue Code of 1986, as amended (the "Code"), persons of training, experience
and ability, to attract new employees, directors, consultants and advisors whose
services are considered valuable, to encourage the sense of proprietorship and
to stimulate the active interest of such persons in the development and
financial success of the Company and its Subsidiaries.
It is further intended that certain options granted pursuant to the Plan
shall constitute incentive stock options within the meaning of Section 422 of
the Code (the "Incentive Options") while certain other options granted pursuant
to the Plan shall be nonqualified stock options (the "Nonqualified Options").
Incentive Options and Nonqualified Options are hereinafter referred to
collectively as "Options."
The Company intends that the Plan meet the requirements of Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and that transactions of the type specified in
subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors of
the Company pursuant to the Plan will be exempt from the operation of Section
16(b) of the Exchange Act. Further, the Plan is intended to satisfy the
performance-based compensation exception to the limitation on the Company's tax
deductions imposed by Section 162(m) of the Code with respect to those Options
for which qualification for such exception is intended. In all cases, the terms,
provisions, conditions and limitations of the Plan shall be construed and
interpreted consistent with the Company's intent as stated in this Section 1.
2. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"), which shall
consist of three or more directors who are "Non-Employee Directors" (as such
term is defined in Rule 16b-3) and "Outside Directors" (as such term is defined
in Section 162(m) of the Code) serving at the pleasure of the Board. The
Committee, subject to Sections 3 and 5 hereof, shall have full power and
authority to designate recipients of Options, to determine the terms and
conditions of respective Option agreements (which need not be identical) and to
interpret the provisions and supervise the administration of the Plan. The
Committee shall have the authority, without limitation, to designate which
Options granted under the Plan shall be Incentive Options and which shall be
Nonqualified Options. To the extent any Option does not qualify as an Incentive
Option, it shall constitute a separate Nonqualified Option.
Subject to the provisions of the Plan, the Committee shall interpret the
Plan and all Options granted under the Plan, shall make such rules as it deems
necessary for the proper administration of the Plan, shall make all other
determinations necessary or advisable for the administration of the Plan and
shall correct any defects or supply any omission or reconcile any inconsistency
in the Plan or in any Options granted under the Plan in the manner and to the
extent that the Committee deems desirable to carry into effect the Plan or any
Options. The act or determination of a majority of the Committee shall be the
act or determination of the Committee and any decision reduced to writing and
signed by all of the members of the Committee shall be fully effective as if it
had been made by a majority at a meeting duly held. Subject to the provisions of
the Plan, any action taken or determination made by the Committee pursuant to
this and the other Sections of the Plan shall be conclusive on all parties.
In the event that for any reason the Committee is unable to act or if the
Committee at the time of any grant, award or other acquisition under the Plan of
Options or Stock (as hereinafter defined) does not consist of two or more
Non-Employee Directors, or if there shall be no such Committee, then the Plan
shall be administered by the Board, and references herein to the Committee
(except in the proviso to this sentence) shall be deemed to be references to the
Board, and any such grant, award or other acquisition may be approved or
ratified in any other manner contemplated by subparagraph (d) of Rule 16b-3;
provided, however, that options granted to the Company's Chief Executive Officer
or to any of the Company's other four most highly compensated officers that are
intended to qualify as performance-based compensation under Section 162(m) of
the Code may only be granted by the Committee.
3. DESIGNATION OF OPTIONEES.
The persons eligible for participation in the Plan as recipients of
Options (the "Optionees") shall include employees, officers and directors of,
and consultants and advisors to, the Company or any Subsidiary; provided that
Incentive Options may only be granted to employees of the Company and the
Subsidiaries. In selecting Optionees, and in determining the number of shares to
be covered by each Option granted to Optionees, the Committee may consider any
factors it deems relevant, including without limitation, the office or position
held by the Optionee or the Optionee's relationship to the Company, the
Optionee's degree of responsibility for and contribution to the growth and
success of the Company or any Subsidiary, the Optionee's length of service,
promotions and potential. An Optionee who has been granted an Option hereunder
may be granted an additional Option or Options, if the Committee shall so
determine.
4. STOCK RESERVED FOR THE PLAN.
Subject to adjustment as provided in Section 7 hereof, a total of 250,000
shares of the Company's Common Stock, $0.01 par value per share (the "Stock"),
shall be subject to the Plan. The maximum number of shares of Stock that may be
subject to options granted under the Plan to any individual in any calendar year
shall not exceed 100,000 (subject to adjustment pursuant to Section 7 hereof)
and the method of counting such shares shall conform to any requirements
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applicable to performance-based compensation under Section 162(m) of the Code.
The shares of Stock subject to the Plan shall consist of unissued shares,
treasury shares or previously issued shares held by any Subsidiary of the
Company, and such amount of shares of Stock shall be and is hereby reserved for
such purpose. Any of such shares of Stock that may remain unsold and that are
not subject to outstanding Options at the termination of the Plan shall cease to
be reserved for the purposes of the Plan, but until termination of the Plan the
Company shall at all times reserve a sufficient number of shares of Stock to
meet the requirements of the Plan. Should any Option expire or be canceled prior
to its exercise in full or should the number of shares of Stock to be delivered
upon the exercise in full of an Option be reduced for any reason, the shares of
Stock theretofore subject to such Option may be subject to future Options under
the Plan, except where such reissuance is inconsistent with the provisions of
Section 162(m) of the Code.
5. TERMS AND CONDITIONS OF OPTIONS.
Options granted under the Plan shall be subject to the following
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
a. OPTION PRICE. The purchase price of each share of Stock purchasable
under an Incentive Option shall be determined by the Committee at the time of
grant, but shall not be less than 100% of the Fair Market Value (as defined
below) of such share of Stock on the date the Option is granted; provided,
however, that with respect to an Optionee who, at the time such Incentive Option
is granted, owns (within the meaning of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of the Company or
of any Subsidiary, the purchase price per share of Stock shall be at least 110%
of the Fair Market Value per share of Stock on the date of grant. The purchase
price of each share of Stock purchasable under a Nonqualified Option shall not
be less than the Fair Market Value of such share of Stock on the date the Option
is granted; provided, however, that if an option granted to the Company's Chief
Executive Officer or to any of the Company's other four most highly compensated
officers is intended to qualify as performance-based compensation under Section
162(m) of the Code, the exercise price of such Option shall not be less than
100% of the Fair Market Value (as such term is defined below) of such share of
Stock on the date the Option is granted. The exercise price for each Option
shall be subject to adjustment as provided in Section 7 below. "Fair Market
Value" means the closing price of publicly traded shares of Stock on the
principal securities exchange on which shares of Stock are listed (if the shares
of Stock are so listed), or on the NASDAQ Stock Market (if the shares of Stock
are regularly quoted on the NASDAQ Stock Market), or, if not so listed or
regularly quoted, the mean between the closing bid and asked prices of publicly
traded shares of Stock in the over-the-counter market, or, if such bid and asked
prices shall not be available, as reported by any nationally recognized
quotation service selected by the Company, or as determined by the Committee in
a manner consistent with the provisions of the Code. Anything in this Section
5(a) to the contrary notwithstanding, in no event shall the purchase price of a
share of Stock be less than the minimum price permitted under the rules and
policies of any national securities exchange on which the shares of Stock are
listed.
b. OPTION TERM. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than ten years after the date
such Option is granted and in the case of an Incentive Option granted to an
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Optionee who, at the time such Incentive Option is granted, owns (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or of any Subsidiary, no
such Incentive Option shall be exercisable more than five years after the date
such Incentive Option is granted.
c. EXERCISABILITY. Subject to Section 5(j) hereof, Options shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee at the time of grant.
Upon the occurrence of a "Change in Control" (as hereinafter defined),
the Committee may accelerate the vesting and exercisability of outstanding
Options, in whole or in part, as determined by the Committee in its sole
discretion. In its sole discretion, the Committee may also determine that, upon
the occurrence of a Change in Control, each outstanding Option shall terminate
within a specified number of days after notice to the Optionee thereunder, and
each such Optionee shall receive, with respect to each share of Company Stock
subject to such Option, an amount equal to the excess of the Fair Market Value
of such shares immediately prior to such Change in Control over the exercise
price per share of such Option; such amount shall be payable in cash, in one or
more kinds of property (including the property, if any, payable in the
transaction) or a combination thereof, as the Committee shall determine in its
sole discretion.
For purposes of the Plan, a Change in Control shall be deemed to have
occurred if:
i. a tender offer (or series of related offers) shall be made and
consummated for the ownership of 50% or more of the outstanding voting
securities of the Company, unless as a result of such tender offer more than 50%
of the outstanding voting securities of the surviving or resulting corporation
shall be owned in the aggregate by the shareholders of the Company (as of the
time immediately prior to the commencement of such offer), any employee benefit
plan of the Company or its Subsidiaries, and their affiliates;
ii. the Company shall be merged or consolidated with another
corporation, unless as a result of such merger or consolidation more than 50% of
the outstanding voting securities of the surviving or resulting corporation
shall be owned in the aggregate by the shareholders of the Company (as of the
time immediately prior to such transaction), any employee benefit plan of the
Company or its Subsidiaries, and their affiliates;
iii. the Company shall sell substantially all of its assets to
another corporation that is not wholly owned by the Company, unless as a result
of such sale more than 50% of such assets shall be owned in the aggregate by the
shareholders of the Company (as of the time immediately prior to such
transaction), any employee benefit plan of the Company or its Subsidiaries and
their affiliates; or
iv. a Person (as defined below) shall acquire 50% or more of the
outstanding voting securities of the Company (whether directly, indirectly,
beneficially or of record), unless as a result of such acquisition more than 50%
of the outstanding voting securities of the surviving or resulting corporation
shall be owned in the aggregate by the shareholders of the Company (as of the
4
time immediately prior to the first acquisition of such securities by such
Person), any employee benefit plan of the Company or its Subsidiaries, and their
affiliates.
For purposes of this Section 5(c), ownership of voting securities
shall take into account and shall include ownership as determined by applying
the provisions of Rule 13d-3(d)(I)(i) (as in effect on the date hereof) under
the Exchange Act. In addition, for such purposes, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof; however, a Person shall not include (A) the
Company or any of its Subsidiaries; (B) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
Subsidiaries; (C) an underwriter temporarily holding securities pursuant to an
offering of such securities; or (D) a corporation owned, directly or indirectly,
by the shareholders of the Company in substantially the same proportion as their
ownership of stock of the Company.
d. METHOD OF EXERCISE. Options to the extent then exercisable may
be exercised in whole or in part at any time during the option period, by giving
written notice to the Company specifying the number of shares of Stock to be
purchased, accompanied by payment in full of the purchase price, in cash, or by
check or such other instrument as may be acceptable to the Committee. As
determined by the Committee, in its sole discretion, at or after grant, payment
in full or in part may be made at the election of the Optionee (i) in the form
of Stock owned by the Optionee (based on the Fair Market Value of the Stock on
the trading day before the Option is exercised) which is not the subject of any
pledge or security interest, (ii) in the form of shares of Stock withheld by the
Company from the shares of Stock otherwise to be received with such withheld
shares of Stock having a Fair Market Value on the date of exercise equal to the
exercise price of the Option, or (iii) by a combination of the foregoing,
provided that the combined value of all cash and cash equivalents and the Fair
Market Value of any shares surrendered to the Company is at least equal to such
exercise price and except with respect to (ii) above, such method of payment
will not cause a disqualifying disposition of all or a portion of the Stock
received upon exercise of an Incentive Option. An Optionee shall have the right
to dividends and other rights of a stockholder with respect to shares of Stock
purchased upon exercise of an Option at such time as the Optionee has given
written notice of exercise and has paid in full for such shares and has
satisfied such conditions that may be imposed by the Company with respect to the
withholding of taxes.
e. NON-TRANSFERABILITY OF OPTIONS. Options are not transferable
and may be exercised solely by the Optionee during his lifetime or after his
death by the person or persons entitled thereto under his will or the laws of
descent and distribution. The Committee, in its sole discretion, may permit a
transfer of a Nonqualified Option to (i) a trust for the benefit of the Optionee
or (ii) a member of the Optionee's immediate family (or a trust for his or her
benefit). Any attempt to transfer, assign, pledge or otherwise dispose of, or to
subject to execution, attachment or similar process, any Option contrary to the
provisions hereof shall be void and ineffective and shall give no right to the
purported transferee.
f. TERMINATION BY DEATH. Unless otherwise determined by the
Committee at grant or at the time of such termination, if any Optionee's
employment with or service to the Company or any Subsidiary terminates by reason
of death, the Option may thereafter be exercised, to the extent then exercisable
(or on such accelerated basis as the Committee shall determine at or after
5
grant), by the legal representative of the estate or by the legatee of the
Optionee under the will of the Optionee, for a period of one year after the date
of such death or until the expiration of the stated term of such Option as
provided under the Plan, whichever period is shorter.
g. TERMINATION BY REASON OF DISABILITY. Unless otherwise
determined by the Committee at grant or at the time of such termination, if any
Optionee's employment with or service to the Company or any Subsidiary
terminates by reason of total and permanent disability, any Option held by such
Optionee may thereafter be exercised, to the extent it was exercisable at the
time of termination due to Disability (or on such accelerated basis as the
Committee shall determine at or after grant), but may not be exercised after 30
days after the date of such termination of employment or service or the
expiration of the stated term of such Option, whichever period is shorter;
provided, however, that, if the Optionee dies within such 30-day period, any
unexercised Option held by such Optionee shall thereafter be exercisable to the
extent to which it was exercisable at the time of death for a period of one year
after the date of such death or for the stated term of such Option, whichever
period is shorter.
h. TERMINATION BY REASON OF RETIREMENT. Unless otherwise
determined by the Committee at grant or at the time of such termination, if any
Optionee's employment with or service to the Company or any Subsidiary
terminates by reason of Normal or Early Retirement (as such terms are defined
below), any Option held by such Optionee may thereafter be exercised to the
extent it was exercisable at the time of such Retirement (or on such accelerated
basis as the Committee shall determine at or after grant), but may not be
exercised after 30 days after the date of such termination of employment or
service or the expiration of the stated term of such Option, whichever period is
shorter; provided, however, that, if the Optionee dies within such 30-day
period, any unexercised Option held by such Optionee shall thereafter be
exercisable, to the extent to which it was exercisable at the time of death, for
a period of one year after the date of such death or for the stated term of such
Option, whichever period is shorter.
For purposes of this paragraph (h) "Normal Retirement" shall mean
retirement from active employment with the Company or any Subsidiary on or after
the normal retirement date specified in the applicable Company or Subsidiary
pension plan or if no such pension plan, age 65, and "Early Retirement" shall
mean retirement from active employment with the Company or any Subsidiary
pursuant to the early retirement provisions of the applicable Company or
Subsidiary pension plan or if no such pension plan, age 55.
i. OTHER TERMINATION. Unless otherwise determined by the Committee
at grant or at the time of such termination, if any Optionee's employment with
or service to the Company or any Subsidiary terminates for any reason other than
death, Disability or Normal or Early Retirement, the Option shall thereupon
terminate, except that the portion of any Option that was exercisable on the
date of such termination of employment or service may be exercised for the
lesser of 30 days after the date of termination or the balance of such Option's
term if the Optionee's employment or service with the Company or any Subsidiary
is terminated by the Company or such Subsidiary without cause (the determination
as to whether termination was for cause to be made by the Committee). The
transfer of an Optionee from the employ of or service to the Company to the
employ of or service to a Subsidiary, or vice versa, or from one Subsidiary to
6
another, shall not be deemed to constitute a termination of employment or
service for purposes of the Plan.
j. LIMIT ON VALUE OF INCENTIVE OPTION. The aggregate Fair Market
Value, determined as of the date the Incentive Option is granted, of Stock for
which Incentive Options are exercisable for the first time by any Optionee
during any calendar year under the Plan (and/or any other stock option plans of
the Company or any Subsidiary) shall not exceed $100,000.
k. INCENTIVE OPTION SHARES. A grant of an Incentive Option under
this Plan shall provide that (a) the Optionee shall be required as a condition
of the exercise to furnish to the Company any payroll (employment) tax required
to be withheld, and (b)if the Optionee makes a disposition, within the meaning
of Section 424(c) of the Code and regulations promulgated thereunder, of any
share or shares of Stock issued to him upon exercise of an Incentive Option
granted under the Plan within the two-year period commencing on the day after
the date of the grant of such Incentive Option or within a one-year period
commencing on the day after the date of transfer of the share or shares to him
pursuant to the exercise of such Incentive Option, he shall, within 10 days
after such disposition, notify the Company thereof and immediately deliver to
the Company any amount of United States federal, state and local income tax
withholding required by law.
6. TERM OF PLAN.
No Option shall be granted pursuant to the Plan on or after May 11, 2014,
but Options theretofore granted may extend beyond that date.
7. CAPITAL CHANGE OF THE COMPANY.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares reserved for issuance under the Plan
and in the number and option price of shares subject to outstanding Options
granted under the Plan, to the end that after such event each Optionee's
proportionate interest shall be maintained as immediately before the occurrence
of such event. The Committee shall, to the extent feasible, make such other
adjustments as may be required under the tax laws so that any Incentive Options
previously granted shall not be deemed modified within the meaning of Section
424(h) of the Code.
8. PURCHASE FOR INVESTMENT.
Unless the Options and shares covered by the Plan have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or the
Company has determined that such registration is unnecessary, each person
exercising an Option under the Plan may be required by the Company to give a
representation in writing that he is acquiring the shares for his own account
for investment and not with a view to, or for sale in connection with, the
distribution of any part thereof.
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9. TAXES.
The Company may make such provisions as it may deem appropriate,
consistent with applicable law, in connection with any Options granted under the
Plan with respect to the withholding of any taxes (including income or
employment taxes) or any other tax matters.
10. PUBLIC OFFERING.
As a condition of Participation in this Plan, each Optionee shall be
obligated to cooperate with the Company and the underwriters in connection with
any public offering of the Company's securities and any transaction s relating
to a public offering, and shall execute and deliver any agreements and
documents, including without limitation, a lock-up agreement, that may be
requested by the Company or the underwriters. The Optionees' obligations under
this Section 10 shall apply to any Stock issued under the Plan as well as to any
and all other securities of the Company or its successor for which Stock may be
exchanged or into which Stock may be converted.
11. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on May 12, 2004, provided however that the
Plan shall subsequently be approved by majority vote of the Company's
stockholders not later than May 31, 2004.
12. AMENDMENT AND TERMINATION.
The Board may amend, suspend, or terminate the Plan, except that no
amendment shall be made that would impair the rights of any Optionee under any
Option theretofore granted without the Optionee's consent, and except that no
amendment shall be made which, without the approval of the stockholders of the
Company, would:
a. materially increase the number of shares that may be issued
under the Plan, except as is provided in Section 7;
b. materially increase the benefits accruing to the Optionees
under the Plan;
c. materially modify the requirements as to eligibility for
participation in the Plan;
d. decrease the exercise price of an Incentive Option to less than
100% of the Fair Market Value per share of Stock on the date of grant thereof or
the exercise price of a Nonqualified Option to less than 80% of the Fair Market
Value per share of Stock on the date of grant thereof; or
e. extend the term of any Option beyond that provided for in
Section 5(b).
The Committee may amend the terms of any Option theretofore
granted, prospectively or retroactively, but no such amendment shall impair the
rights of any Optionee without the Optionee's consent. The Committee may also
substitute new Options for previously granted Options, including options granted
under other plans applicable to the participant and previously granted Options
8
having higher option prices, upon such terms as the Committee may deem
appropriate.
13. GOVERNMENT REGULATIONS.
The Plan, and the grant and exercise of Options hereunder, and the
obligation of the Company to sell and deliver shares under such Options, shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies, national securities exchanges and interdealer
quotation systems as may be required.
14. GENERAL PROVISIONS.
a. CERTIFICATES. All certificates for shares of Stock delivered
under the Plan shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the Securities and Exchange Commission, or other
securities commission having jurisdiction, any applicable Federal or state
securities law, any stock exchange or interdealer quotation system upon which
the Stock is then listed or traded and the Committee may cause a legend or
legends to be placed on any such certificates to make appropriate reference to
such restrictions.
b. EMPLOYMENT MATTERS. The adoption of the Plan shall not confer
upon any Optionee of the Company or any Subsidiary any right to continued
employment or, in the case of an Optionee who is a director, continued service
as a director, with the Company or a Subsidiary, as the case may be, nor shall
it interfere in any way with the right of the Company or any Subsidiary to
terminate the employment of any of its employees, the service of any of its
directors or the retention of any of its consultants or advisors at any time.
c. LIMITATION OF LIABILITY. No member of the Board or the
Committee, or any officer or employee of the Company acting on behalf of the
Board or the Committee, shall be personally liable for any action, determination
or interpretation taken or made in good faith with respect to the Plan, and all
members of the Board or the Committee and each and any officer or employee of
the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation.
d. REGISTRATION OF STOCK. Notwithstanding any other provision in
the Plan, no Option may be exercised unless and until the Stock to be issued
upon the exercise thereof has been registered under the Securities Act and
applicable state securities laws, or are, in the opinion of counsel to the
Company, exempt from such registration in the United States. The Company shall
not be under any obligation to register under applicable federal or state
securities laws any Stock to be issued upon the exercise of an Option granted
hereunder in order to permit the exercise of an Option and the issuance and sale
of the Stock subject to such Option, although the Company may in its sole
discretion register such Stock at such time as the Company shall determine. If
the Company chooses to comply with such an exemption from registration, the
Stock issued under the Plan may, at the direction of the Committee, bear an
appropriate restrictive legend restricting the transfer or pledge of the Stock
represented thereby, and the Committee may also give appropriate stop transfer
9
instructions with respect to such Stock to the Company's transfer agent.
EMPIRE RESORTS, INC.
May 12, 2004
10
EMPIRE RESORTS, INC.
ROUTE 17B
MONTICELLO, NEW YORK 12701
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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The undersigned hereby appoints David Matheson and Thomas W. Aro
as Proxies, each with the power to appoint his substitute, and hereby authorizes
them, and each of them acting singly, to represent and vote, as designated
below, all the shares of Common Stock of Empire Resorts, Inc. (the "Company")
held of record by the undersigned on March 24, 2004 at the Annual Meeting of
Stockholders to be held on May 12, 2004 or any adjournment or postponement
thereof.
Please specify your vote by checking the box to the left of your
choice for each respective proposal.
(1) To elect the following individuals as Class I directors to the
Board of Directors of the Company:
Ralph J. Bernstein / / FOR / / WITHHOLD
John Sharpe / / FOR / / WITHHOLD
Paul A. deBary / / FOR / / WITHHOLD
(2) To approve the adoption of the Company's 2004 Stock Option
Plan:
/ / FOR / / AGAINST / / ABSTAIN
This proxy, when properly executed, will be voted in the manner
directed by the undersigned stockholder. If no direction is made, this proxy
will be voted FOR the two Proposals.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as your name appears below. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
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Signature
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Signature if held jointly
Dated: , 2004