EXHIBIT 10.1
EMPIRE RESORTS, INC.
2005 EQUITY INCENTIVE PLAN
1. PURPOSE OF THE PLAN.
This 2005 Equity Incentive 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." Stock granted pursuant to the Plan is hereinafter
referred to as "Restricted Stock."
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, 5 and 6 hereof, shall have full power and
authority to designate recipients of Options and grantees of Restricted Stock,
to determine the terms and conditions of respective Option and Restricted Stock
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, all Options and Restricted Stock grants 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 or Restricted Stock grants under the
Plan in the manner and to the extent that the Committee deems desirable to carry
into effect the Plan or any Options or Restricted Stock grants. 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 PARTICIPANTS.
The persons eligible for participation in the Plan as recipients of Options
(the "Optionees") and grantees of Restricted Stock (the "Grantees" and,
collectively with the Optionees, the "Participants") 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 Participants, and in determining
the number of shares to be covered by each Option granted to Optionees or
Restricted Stock grants, the Committee may consider any factors it deems
relevant, including without limitation, the office or position held by the
Participant or the Participant's relationship to the Company, the Participant's
degree of responsibility for and contribution to the growth and success of the
Company or any Subsidiary, the Participant'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. A Grantee
who has been granted Restricted Stock hereunder may be granted additional
Restricted Stock, if the Committee shall so determine.
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4. STOCK RESERVED FOR THE PLAN.
Subject to adjustment as provided in Section 9 hereof, a total of 3,500,000
shares of the Company's Common Stock, $0.01 par value per share (the "Stock"),
shall be subject to the Plan which may be allocated, at the discretion of the
Company, between Options and Restricted Stock grants. 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 2,500,000 (subject to
adjustment pursuant to Section 9 hereof) and the method of counting such shares
shall conform to any requirements 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 or Restricted Stock
grants 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 grants under the Plan, except
where such reissuance is inconsistent with the provisions of Section 162(m) of
the Code. Should any Restricted Stock be forfeited, the shares of Stock
theretofore subject to such Restricted Stock grant may be subject to future
grants under the Plan.
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 9 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.
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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
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. Except as may be provided in Section 8, 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.
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.
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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
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.
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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
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 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.
6. TERMS AND CONDITIONS OF RESTRICTED STOCK
a. GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of
the Plan, the Committee may grant shares of Restricted Stock in such amounts and
upon such terms and conditions as the Committee shall determine subject to the
restrictions described below.
b. RESTRICTED STOCK AGREEMENT. The Committee may require, as a
condition to the grant of Restricted Stock, that a Grantee enter into a
Restricted Stock agreement, setting forth the terms and conditions of the grant.
In lieu of a Restricted Stock Agreement, the Committee may provide the terms and
conditions of a grant in a notice to the Grantee of the grant, on the stock
certificate representing the Restricted Stock, in the resolution approving the
grant, or in such other manner as it deems appropriate.
c. TRANSFERABILITY. Except as otherwise provided in this Section 6,
the shares of Restricted Stock granted herein may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated until the end of the
applicable vesting period or periods established by the Committee and the
satisfaction of any other conditions or restrictions established by the
Committee (such period during which a share of Restricted Stock is subject to
such restrictions and conditions is referred to as the "Restricted Period").
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During the Restricted Period with respect to any shares of Restricted
Stock, the Company shall have the right to retain in the Company's possession
the certificate or certificates representing such shares.
d. REMOVAL OF RESTRICTIONS. Except as otherwise provided in this
Section 6 and Section 15, a share of Restricted Stock covered by a Restricted
Stock grant shall become freely transferable by the Grantee upon completion of
the Restricted Period, including the passage of any applicable period of time
and satisfaction of any conditions to vesting. The Committee, in its sole
discretion, shall have the right at any time immediately to waive all or any
part of the restrictions and conditions with regard to all or any part of the
shares held by any Grantee.
e. VOTING RIGHTS; DIVIDENDS AND OTHER DISTRIBUTIONS. During the
Restricted Period, Grantees holding shares of Restricted Stock granted hereunder
may exercise full voting rights and shall receive all regular cash dividends
paid with respect to such shares. Except as the Committee shall otherwise
determine, any other cash dividends and other distributions paid to Grantees
with respect to shares of Restricted Stock, including any dividends and
distributions paid in shares, shall be subject to the same restrictions and
conditions as the shares of Restricted Stock with respect to which they were
paid.
f. NOTICE OF SECTION 83(B) ELECTION. Any Participant making an
election under Section 83(b) of the Code with respect to Restricted Stock must
provide a copy thereof to the Company within 10 days of filing such election
with the Internal Revenue Service.
7. CHANGE OF CONTROL.
Upon the occurrence of a "Change in Control" (as hereinafter defined),
the Committee may accelerate the vesting of Restricted Stock and 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;
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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
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 7, 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.
8. TERM OF PLAN.
No Option or Restricted Stock shall be granted pursuant to the Plan on or
after May 23, 2015, but Options theretofore granted may extend beyond that date.
9. 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. Furthermore, the adjustments described above shall be made
in a manner consistent with Sections 162(m) and 409A of the Code
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10. 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.
11. TAXES.
The Company may make such provisions as it may deem appropriate, consistent
with applicable law, in connection with any Options or Restricted Stock granted
under the Plan with respect to the withholding of any taxes (including income or
employment taxes) or any other tax matters.
12. PUBLIC OFFERING.
As a condition of Participation in this Plan, each Participant shall be
obligated to cooperate with the Company and the underwriters in connection with
any public offering of the Company's securities and any transactions 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 Participants' obligations under this Section 12
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.
13. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on May 23, 2005, provided however that the Plan
shall subsequently be approved by majority vote of the Company's stockholders
not later than May 22, 2006.
14. 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 Participant under
any Option theretofore granted or any Restricted Stock grant without the
Participant'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 9;
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b. materially increase the benefits accruing to the Participants
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
8.
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 having
higher option prices, upon such terms as the Committee may deem appropriate.
Notwithstanding the foregoing, it is the intention of the Board that
the Plan comply strictly with the provisions of Section 409A of the Code and
Treasury Regulations and other Internal Revenue Service guidance promulgated
thereunder (the "Section 409A Rules) and the Committee shall exercise its
discretion in granting Options hereunder (and the terms of such Option grants),
accordingly. The Plan and any grant of an Option hereunder may be amended from
time to time without (in the case of an Option grant the consent of the
Optionee) as may be necessary or appropriate to comply with the Section 409A
Rules.
15. GOVERNMENT REGULATIONS.
The Plan, and the grant of Restricted Stock 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.
16. 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 Participant of the Company or any Subsidiary any right to continued
employment or, in the case of an Participant 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.
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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.
EMPIRE RESORTS, INC.
May 23, 2005
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EXHIBIT 99.1
2005 EQUITY INCENTIVE PLAN
On May 23, 2005, the Board of Directors approved a proposal to adopt the
Company's 2005 Equity Incentive Plan (the "Plan"). The purpose of the Plan is to
advance the interests of the Company and its subsidiaries by improving their
ability to attract and retain employees whose services are valuable to the
Company. The Company believes that this result can be achieved by rewarding such
employees' contributions to the success of the Company through ownership of
shares of the Company's common stock.
The Plan includes the issuance of both "options" to purchase stock at a
later date (such options consist of both Incentive Stock Options and
Nonqualified Options), and "restricted stock."
A summary of the Plan is set forth below, and its full text is attached
hereto as APPENDIX A. The following discussion is qualified in its entirety by
reference to APPENDIX A.
ADMINISTRATION OF THE PLAN
The Plan will be administered by the compensation committee of the Board of
Directors of the Company which shall have full power and authority to designate
recipients of options and grantees of restricted stock, to determine the terms
and conditions of respective option and restricted stock agreements and to
interpret the provisions and supervise the administration of the Plan. Any
decision made by all of the members of the compensation committee regarding the
Plan shall be final for all involved parties.
Section 162(m) of the Code places annual limitations on the deductibility
by public companies of compensation in excess of $1,000,000 paid to the chief
executive officer, and to the other four most highly compensated officers.
However, these limitations are not imposed if certain requirements are met. One
major requirement is that the compensation be based on performance. With respect
to the issuance of options under the Plan intended to be performance based, the
Plan must state a maximum number of shares with respect to options granted to an
individual during a specified period and must be approved by the Company's
stockholders, which Plan provides for a maximum of 2,500,000 options during any
calendar year. The grant of restricted stock under the Plan is not required to
be performance based and therefore may be subject to the limitations imposed by
Section 162(m) of the Code.
DESIGNATION OF PARTICIPANTS
Persons eligible to participate in the Plan include employees, officers and
directors of, as well as, consultants and advisors to, the Company or any
subsidiary. In selecting participants, and in determining the number of shares
to be covered by each option granted to optionees or restricted stock grants,
the compensation committee may consider any factors it considers relevant,
including the office or position held by the participant and the participants'
degree of responsibility for and contribution to the success of the Company.
STOCK RESERVED FOR THE PLAN
The Plan provides that a total of 3,500,000 shares of the Company's common
stock shall be subject to the Plan, which shares may be allocated, at the
discretion of the Company, between options and restricted stock. This discretion
is subject only to the occurrence of certain events that require the
compensation committee to fairly and appropriately adjust the number of shares
to be allocated. Such events include a merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in the Company's corporate
structure that affects the Company's common stock. This adjustment is necessary
so that the occurrence of the event does not affect each option holder's
proportionate interest in the Company prior to such event.
TERMS AND CONDITIONS OF 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 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 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 fix the term of each option; provided,
however, that the maximum term for which any option is exercisable shall not
exceed ten years. Moreover, the maximum term of 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 OF OPTIONS
Options cannot be transferred, and are exercisable only by the optionee
during his lifetime. After the optionee's death, options are assignable only by
will, or through the laws of descent and distribution. Any attempt to transfer,
assign, pledge, or in any other way dispose of an option contrary to these
provisions will be void.
Additionally, the aggregate fair market value of the shares (as determined
at the time the stock option is granted) for which an employee may first
exercise incentive stock options for the calendar year under the Plan, cannot
exceed $100,000. The compensation committee may impose any other conditions to
exercise as it deems appropriate.
TERMINATION
Except as otherwise provided by the compensation committee, if an optionee
dies, an option exercisable immediately prior to death may be exercised by the
optionee's executor, administrator, or transferee for a period ending on the
earlier of one year thereafter, or at the time when the options otherwise would
have expired.
Except as otherwise provided by the compensation committee, if an
optionee's employment is terminated for reasons other than death (disability or
retirement), an option exercisable immediately prior to termination may be
exercised for a period ending on the earlier of thirty days thereafter, or at
the time when the options otherwise would have expired.
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OTHER TERMS AND CONDITIONS OF RESTRICTED SHARES
Shares of restricted stock issued by the Company cannot be sold,
transferred, pledged, assigned, or similarly disposed of, until one of several
specified events occur. A share of restricted stock becomes freely transferable
by the grantee either at the end of the restricted period, at the end of a
period established by the compensation committee, or when and if the
compensation committee waives the restrictions. During the restricted period,
holders of restricted stock may exercise full voting rights and receive regular
card dividends paid with respect to such shares. In addition, any holder making
an election under Section 83(b) of the Code, must provide a copy of such
election to the Company within 10 days of the filing.
CHANGE OF CONTROL
The compensation committee has the sole discretion to reduce the period
that an optionee or grantee of restricted stock must wait to exercise his
option/restricted stock, where there is a change of control. A change of control
occurs where there is a major corporate event, such as a successful tender
offer, merger, consolidation, sale of substantially all of a corporation's
assets, or where a "person" (where "person" is given a special meaning by the
Exchange Act acquires 50% of the Company's outstanding voting securities.
AMENDMENT AND TERMINATION
The Board of Directors may generally amend, suspend or terminate the Plan,
except that the Plan cannot be changed in a way that would impair the rights of
any participant without the participant's consent. The Plan also cannot be
amended without stockholder consent where doing so would result in a major
change, such as substantially increasing the benefits that participants are to
receive, or decreasing the exercise price beneath certain specified thresholds.
The Plan and any option or restricted stock grant thereunder may be amended to
comply with the new rules applicable to deferred compensation as set forth in
Section 409A of the Code.
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 Exchange Act.
RECENT GRANTS
On May 23, 2005, in connection with his appointment as Chief Executive
Officer and President, David P. Hanlon was granted a ten-year non-qualified
stock option to purchase 1,044,092 of the Company's common stock pursuant to the
Plan at an exercise price of $3.99 per share, vesting 33% 90 days following the
grant date, 33% on the first anniversary of the grant date and 34% on the second
anniversary of the grant date. Mr. Hanlon also received an additional grant of a
non-qualified stock option to purchase 720,000 shares of common stock
conditioned upon the closing of the Concord Transaction vesting 33% on the later
to occur of (i) the closing of the Concord Transaction and (ii) ninety days
following the date of grant date, 33% on the first anniversary of the grant date
and 34% on the second anniversary of the grant date. The Company also issued Mr.
Hanlon 261,023 shares of restricted stock pursuant to the Plan vesting 33% on
the issuance date, 33% on the first anniversary of the issuance date and 34% on
the second anniversary of the issuance date. Mr. Hanlon received an additional
issuance of 180,000 shares of restricted stock conditioned upon the closing of
the Concord Transaction, vesting 33% on the issuance date, 33% on the first
anniversary of the issuance date and 34% on the second anniversary of the
issuance date.
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On May 23, 2005, in connection with his appointment as Chief Financial
Officer, Ronald J. Radcliffe was granted a ten-year non-qualified stock option
to purchase 150,000 shares of common stock pursuant to the Plan at an exercise
price at $3.99 per share, vesting 33% 90 days following the grant date, 33% on
the first anniversary of the grant date and 34% on the second anniversary of the
grant date.
On May 23, 2005, in connection with his appointment as non-executive
Chairman of the Board, John Sharpe was granted an option to purchase 50,000
shares of common stock pursuant to the Plan at an exercise price at $3.99 per
share.
All options and restricted stock grants described above are subject to
approval of the Plan. If the Plan is not approved, all such grants would become
void.
NEW PLAN BENEFITS
Benefits under the Plan to the named executive officers (as previously
defined) and the Company's other executive officers, non-employee directors and
other employees are not currently determinable because other grants under the
Plan are discretionary. All grants under the Plan have been and will be made in
consideration of services rendered or to be rendered to the Company or any of
its subsidiaries by the recipients. The following table sets forth the options
and restricted stock that have been granted pursuant to the Plan as of the date
hereof, subject to stockholder approval of the Plan.
2005 EQUITY PLAN
Number of Shares of
Name and Position Dollar Amount (1) Restricted Stock Number of Options
----------------- ----------------- ---------------- -----------------
John Sharpe, Chairman $9,500.00 -- 50,000
David P. Hanlon, Chief
Executive Officer and $2,178,653.62
President 441,023 1,764,092
Ronald J. Radcliffe, Chief
Financial Officer $28,500.00 -- 150,000
Executive Group $2,207,153.62 441,023 1,914,092
Non-Executive Director
Group $9,500.00 -- 50,000
(1) Assumes that all options and shares of restricted stock are fully vested.
Dollar amounts were calculated based on the closing price of the Company's
common stock on July 18, 2005 of $4.18 per share.
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FEDERAL TAX EFFECTS
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 or her income.
TAX TREATMENT OF RESTRICTED STOCK
A recipient of a restricted stock grant will not, except as provided below,
recognize income upon the receipt of a grant of restricted stock. The recipient
will recognize taxable income at such time as the restricted stock vests in an
amount equal to the fair market value of the stock upon the vesting date. A
recipient may elect pursuant to Section 83(b) of the Code to treat the
restricted stock as vested on the grant date, if certain conditions are met, in
which case the recipient may recognize taxable income upon the date of grant.
Unless the limitations set forth in Section 162(m) are applicable, the
Company generally will be entitled to a corresponding tax deduction at the time
the recipient is required to include the fair market value of the restricted
stock in his or her taxable income.
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WITHHOLDING OF TAX
The Company is permitted to deduct and withhold amounts required to satisfy
its withholding tax liabilities with respect to its employees.
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