Option Matching Rights, Warrants and Options

Option Matching Rights

On August 19, 2009, the Company entered into an investment agreement (the "Investment Agreement") with Kien Huat, pursuant to which Kien Huat purchased shares of common stock of the Company during the year ended December 31, 2009. Under the Investment Agreement, if any options or warrants outstanding at the time of the final closing under the Investment Agreement, or the first 200,000 granted to directors or officers as of the final closing date under the Investment Agreement, are exercised, Kien Huat has the right to purchase an equal number of additional shares of common stock as are issued upon such exercise at the exercise price for the applicable option or warrant. The Company refers to these rights as the “Option Matching Rights”.

Pursuant to the terms of the Investment Agreement, the Company is required to provide notice (an “Option Exercise Notice”) of any exercise within five business days, after which notice is received, Kien Huat is required to notify the Company of whether it decides to exercise such Option Matching Rights within ten business days. The Company did not provide such notice to Kien Huat pursuant to the Investment Agreement. On December 31, 2015, the Company and Kien Huat entered into a letter agreement (the “OMR Letter Agreement”) pursuant to which the parties agreed that, as a result of the Company’s failure to provide the Option Exercise Notice, Kien Huat’s right to elect to purchase an equal number of shares had not yet vested and would inure to Kien Huat’s benefit only upon the Company’s delivery of such Option Exercise Notice. To fulfill the Company’s obligations pursuant to the Investment Agreement pursuant to the OMR Letter Agreement, the Company provided the Option Exercise Notice as of December 31, 2015 for approximately 204,706 shares of common stock as required by the Investment Agreement. Kien Huat shall have ten business days following the date on which the Company’s Chief Compliance Officer provides written notice that Kien Huat is no longer unable to exercise the Option Matching Rights pursuant to the Company’s Insider Trading Policy (the “Effective Date Notice”) to elect whether to exercise such Option Matching Rights.

On February 17, 2016, the Company provided the Effective Date Notice to Kien Huat regarding Kien Huat's election to exercise its Option Matching Rights. On February 17, 2016, Kien Huat declined to exercise the Option Matching Rights to purchase 204,706 shares of common stock. At December 31, 2016, there were approximately 21,000 Option Matching Rights outstanding with various exercise prices and expiration dates through July 2018.

Warrants

During 2015, the Company issued an aggregate of 83,334 shares of common stock at $30.00 per share from the exercise of warrants from a warrant holder. The Company received proceeds of $2.5 million from the exercise of these warrants.

As of December 31, 2016, there are outstanding warrants to purchase an aggregate of approximately 133,300 shares of Empire’s common stock at $30.00 per share with an expiration date of May 10, 2020.

Options

Second Amended and Restated 2005 Equity Incentive Plan

In May 2015, the Company's Second Amended and Restated 2005 Equity Incentive Plan (the “2005 Equity Incentive Plan”) expired. Options to purchase approximately 33,600 shares of common stock were outstanding as of December 31, 2016 under the 2005 Equity Incentive Plan. Although the 2005 Equity Incentive Plan expired, the approximately 33,600 options still outstanding under such plan are still exercisable.

2015 Equity Incentive Plan

In September 2015, our Board approved, and in November 2015, our stockholders approved the Company's 2015 Equity Incentive Plan (the "2015 Equity Incentive Plan"). The 2015 Equity Incentive Plan provided for an aggregate of 952,498 shares of common stock to be available for Awards. Subject to adjustments based on the terms of the 2015 Equity Incentive Plan, on the 90th day after the Company is awarded a Gaming Facility License (the “Trigger Date”), the maximum shares of Common stock available for Awards were to automatically increase by the lesser of: (i) 1,633,209 shares of common stock; (ii) such number of shares as would increase the aggregate number of shares of Common stock available for Awards equal to 10% of the issued and outstanding shares of Common stock as of the Trigger Date; and (iii) such number of shares of Common stock as the Compensation Committee would otherwise determines. On March 8, 2016, pursuant to the terms of the 2015 Equity Incentive Plan, the Board determined to increase the number of shares of common stock available for grant under such plan by 1,663,209 shares for a total amount of shares available for grants of 2,600,707. Such change was effective as of March 20, 2016. At December 31, 2016, a total of 2,501,309 shares were available for future issuance under the Plan.

Stock-based compensation expense was approximately $2.7 million, $596,000 and $636,000 for the years ended December 31, 2016, 2015 and 2014, respectively. As of December 31, 2016, there was approximately $2.4 million of total unrecognized compensation cost related to non-vested share-based compensation awards granted under the Company’s plan. That cost is expected to be recognized over the remaining vesting period of 1.75 years. This expected cost does not include the impact of any future stock-based compensation awards.

In 2016, 2015 and 2014, the Company received approximately $163,000, $160,000 and $2.8 million, respectively, in proceeds from shares of common stock issued as a result of the exercise of stock options.

The following table sets forth the weighted average assumptions used in applying the Black Sholes option pricing model to the option grants in 2014. No options were granted in 2016 and 2015:



	2014
Weighted average fair value of options granted	$5.65
Expected dividend yield	—%
Expected volatility	101.6%
Risk-free interest rate	1.64%
Expected life of options	5 years

The following table reflects stock option activity in 2016, 2015 and 2014:



	Approximate number of shares		Range of exercise prices per share		Weighted average exercise price per share		Weighted average remaining contractual life (years)
Options outstanding at December 31, 2013	378,000		$7.95 - $131.10		$	33.15	1.46
Granted in 2014	1,600		$	35.85			3.87
Options exercised in 2014	(153,600	)	$13.95 - $34.50
Forfeited in 2014	(1,000	)	$	24.75
Canceled in 2014	(68,800	)	$15.00 - $213.75
Options outstanding at December 31, 2014	156,200		$7.95 - $131.10		$	33.25	1.47
Options exercised in 2015	(81,600	)	$13.95-$27.15
Forfeited in 2015	(18,000	)	$13.95 -$127.95
Options outstanding at December 31, 2015	56,600		$7.95 - $131.10		$	48.50	2.61
Options exercised in 2016	(18,000	)	$7.95-$9.90
Forfeited in 2016	(5,000	)	$14.85 -$82.95
Options outstanding at December 31, 2016	33,600		$7.95 - $131.10		$	68.92	1.11