Option Matching Rights

Warrants

As of December 31, 2018, 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 and warrants to purchase 60,000 shares of common stock at $81.50 per share with an expiration date of March 15, 2025.

On November 1, 2014, MRMI and the Monticello Harness Horsemen’s Association (the “MHHA”) entered into an agreement that governs the conduct of MRMI and MHHA relating to horseracing purse payments, the simulcasting of horse races and certain other payments (the “2014 MHHA Agreement”). Pursuant to the 2014 MHHA Agreement, on March 16, 2018, Empire issued to MHHA 200,000 shares of common stock, and on March 15, 2018, Empire issued to MHHA a warrant to purchase 60,000 shares of common stock at $81.50 per share, the proceeds of any sales of which will provide additional monies for the harness horsemen’s purse account. Under the terms of the 2014 MHHA Agreement, the MHHA may dispose of the common stock beginning six months after receipt the common stock, subject to limitations upon the quantity of common shares disposed at any one time, as prescribed by the MHHA Agreement. The Company also provided a guaranty on the value of the shares provided to MHHA upon the termination of the MHHA Agreement, which is approximately seven years after issuance.

Restricted Stock, Restricted Stock Units and Options

Second Amended and Restated 2005 Equity Incentive Plan

In May 2015, the Company's Second Amended and Restated 2005 Equity Incentive Plan expired. Options to purchase approximately 13,300 shares of common stock were outstanding as of December 31, 2017 under the 2005 Equity Incentive Plan. During the year ended December 31, 2018 approximately 1,700 shares were exercised and approximately 11,60 shares were forfeited. There were no options outstanding at December 31, 2018.

In 2018, 2017 and 2016, the Company received approximately $25,000, $16,000 and $54,000 , respectively, in proceeds from shares of common stock issued as a result of the exercise of stock options. No options were granted under the 2005 Equity Incentive Plan in 2015.

The following table reflects stock option activity in 2018, 2017 and 2016:



	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, 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
Options exercised in 2017	(2,000	)	$7.95
Forfeited in 2017	(18,300	)	$14.85 -$131.10
Options outstanding at December 31, 2017	13,300		$15.00 - $40.05	$	26.03	0.74
Options exercised in 2018	(1,700	)	$15.00
Forfeited in 2018	(11,600	)	$24.75 -$40.05
Options outstanding at December 31, 2018	—		—	$	—	—

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 provides for an aggregate of 2,600,707 shares of common stock to be available for Awards. At December 31, 2018, a total of 2,280,701 shares were available for future issuance under the 2015 Equity Incentive Plan.

Stock-based compensation expense was approximately $7.2 million, $2.8 million and $2.7 million for the years ended December 31, 2018, 2017 and 2016, respectively. Stock based compensation expense for the 2015 Equity Plan was approximately $1.9 million in fiscal 2018 and stock based compensation expense related to the 2014 MHHA Agreement was approximately $5.3 million. As of December 31, 2018, there was approximately $2.2 million of total unrecognized compensation cost related to non-vested share-based compensation awards granted under the 2015 Equity Incentive Plans. That cost is expected to be recognized over the remaining vesting period of 2.5 years. This expected cost does not include the impact of any future stock-based compensation awards.

The following table reflects restricted stock and restricted stock unit activity in 2018, 2017 and 2016:



	Number of Restricted Shares		Number of Restricted Stock Units
Outstanding at December 31, 2015	137,000		—
Grants in 2016	105,000		—
Vested in 2016	(22,000	)	—
Forfeited in 2016	(4,000	)	—
Outstanding at December 31, 2016	216,000		—
Grants in 2017	1,000		74,500
Vested in 2017	(55,000	)	—
Forfeited in 2017	(22,000	)	(1,600	)
Outstanding at December 31, 2017	140,000		72,900
Grants in 2018	—		161,200
Vested in 2018	(56,500	)	(18,600	)
Forfeited in 2018	(46,000	)	(20,000	)
Outstanding at December 31, 2018	37,500		195,500

Option Matching Rights

On August 19, 2009, the Company entered into an investment agreement (the "2009 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 2009 Investment Agreement, if any options or warrants outstanding at the time of the final closing under the 2009 Investment Agreement, or the first 200,000 granted to directors or officers as of the final closing date under the 2009 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 2009 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 10 business days. The Company did not provide such notice to Kien Huat pursuant to the 2009 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 2009 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 had 10 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, 2017, there were approximately 3,000 Option Matching Rights outstanding with various exercise prices and expiration dates through July 2018. On January 24, 2018, Kien Huat elected to exercise its Option Matching Rights for 1,666 shares of the Company's common stock, after a former officer exercised his stock option which was due to expire on January 15, 2018. The Option Matching Rights were exercised at a price of $14.95 per share. The last remaining Option Matching Rights expired in July 2018.