Stockholders' Equity

12 Months Ended

Dec. 31, 2011

Stockholders' Equity [Abstract]

Stockholders' Equity

Note H. Stockholders' Equity

Authorized Capital

On February 16, 2011, Empire filed an amended and restated certificate of incorporation (the "Amended Charter") with the Secretary of State of the State of Delaware. The Amended Charter amended Empire's prior Amended and Restated Certificate of Incorporation, by: (1) increasing Empire's authorized capital stock from 100 million shares, consisting of 95 million shares of common stock and 5 million shares of preferred stock, to a total of 155 million shares, consisting of 150 million shares of common stock and 5 million shares of preferred stock (the "Authorized Capital Amendment"); and (2) eliminating the classified board provisions and providing for the annual election of all directors (the "Declassification Amendment"). The Authorized Capital Amendment and the Declassification Amendment were each approved by the requisite vote of Empire's stockholders at a special meeting of stockholders held on February 16, 2011.

Common Stock

On March 28, 2011, Empire commenced its rights offering. All holders of Empire's common stock were granted the non-transferrable right to purchase 0.18917 shares of Empire's common stock at a price of $2.65 per share for each share they hold. The expiration date of this rights offering originally set as April 29, 2011, was extended on April 15, 2011, until May 20, 2011.

On May 20, 2011 the rights offering was consummated and Empire's stockholders validly subscribed for 6,628,925 shares of its common stock, par value $0.01 per share, in the rights offering. The rights were exercised at $2.65 per share, resulting in total gross proceeds of approximately $17.6 million, which were used to repay the Bridge Loan (see Note G). Kien Huat exercised its entire allocation of basic subscription rights in the rights offering and acquired 6,608,794 of Empire's common shares. As of the date of the rights offering Kien Huat is the beneficial holder of 18,254,246 shares of Empire's common stock, representing approximately 61.2% of its voting power.

On August 19, 2009, the Company entered into an investment agreement with Kien Huat (the "Investment Agreement"), pursuant to which the Company issued to the Kien Huat 11,502,013 shares of Empire's common stock for the aggregate proceeds of $55 million in two tranches during the year ended December 31, 2009. Of the $55.0 million invested by Kien Huat, $36.6 million was allocated to common stock and additional paid-in capital and approximately $18.4 million was attributed to the fair value of the Option Matching Rights, as defined below, using the Black-Scholes valuation model. The shares of common stock issued pursuant to the Investment Agreement have not been registered under the Securities Act. As a result of the closing of the second tranche, as of November 12, 2009 (the "Second Tranche"), Kien Huat owned 11,502,013 shares of the Company's common stock, representing just under 50% of its voting power. As of the closing of the Second Tranche the Company had certain options and warrants outstanding. Under the Investment Agreement, if any of such options or warrants are exercised (or any of the 333,333 options or warrants issued after the closing of the First Tranche to the Company's officers and directors who held either of such positions as of July 31, 2009), 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, which right the Company refers to herein as the "Option Matching Right."

Under the terms of the Investment Agreement, Kien Huat is entitled to recommend three directors whom the Company is required to cause to be elected or appointed to its Board of Directors (the "Board"), subject to the satisfaction of all legal and governance requirements regarding service as a member of its Board and to the reasonable approval of the Governance Committee of the Board. Kien Huat will continue to be entitled to recommend three directors for so long as it owns at least 24% of the Company's voting power outstanding at such time, after which the number of directors whom Kien Huat will be entitled to designate for election or appointment to the Board will be reduced proportionally to Kien Huat's percentage of ownership. Under the Investment Agreement, for so long as Kien Huat is entitled to designate representatives to the Board, among other things, Kien Huat will have the right to nominate one of its director designees to serve as the Chairman of the Board. Until such time as Kien Huat ceases to own capital stock with at least 30% of the Company's voting power outstanding at such time, the Board will be prohibited under the terms of the Investment Agreement from taking certain actions relating to fundamental transactions involving Empire and its subsidiaries and certain other matters without the affirmative vote of the directors designated by Kien Huat.

During the year ended December 31, 2011, the Company granted approximately 27,000 Option Matching Rights at a weighted average exercise price of $5.20 and an aggregate fair value of $46,000 to Kien Huat, pursuant to the Investment Agreement. During the year ended December 31, 2011, approximately 78,000 Option Matching Rights with a weighted average price of $19.88 expired. As of December 31, 2011, there were approximately 1.8 million Option Matching Rights issued to Kien Huat outstanding at a weighted average exercise price of $8.93.

During the year ended December 31, 2010, the Company granted approximately 75,000 Option Matching Rights at a weighted average exercise price of $3.99 and an aggregate fair value of $229,000 to Kien Huat, pursuant to the Investment Agreement. During the year ended December 31, 2010, Kien Huat exercised approximately 45,000 of its Option Matching Rights with a weighted average price of $0.81 for total proceeds of $36,000 and approximately 650,000 Option Matching Rights with a weighted average price of $6.72 expired. As of December 31, 2010, there were approximately 1.9 million Option Matching Rights issued to Kien Huat outstanding at a weighted average exercise price of $9.45.

The Company's common stock is transferable only subject to the provisions of section three hundred three of the Racing, Pari-Mutuel Wagering and Breeding Law, so long as it holds directly or indirectly, a license issued by the New York Racing and Wagering Board, and may be subject to compliance with the requirements of other laws pertaining to licenses held directly or indirectly by it. The owners of common stock issued by the Company may be required by regulatory authorities to possess certain qualifications and may be required to dispose of their common stock if the owner does not possess such qualifications.

Preferred Stock and Dividends

The Company's Series B Preferred Stock has voting rights of 0.8 votes per share and each share is convertible into 0.8 shares of its common stock. It has a liquidation value of $29 per share and is entitled to annual cumulative dividends of $2.90 per share payable quarterly in cash. The Company has the right to pay the dividends on an annual basis by issuing shares of its common stock at the rate of $3.77 per share. The value of common shares issued as payment is based upon the average closing price for the common shares for the 20 trading days preceding January 30 of the year following that for which the dividends are due. At December 31, 2011 and 2010, there were 44,258 shares of Series B Preferred Shares outstanding.

At December 31, 2011, the Company had undeclared dividends on the Series B Preferred Stock of approximately $167,000. On March 13, 2012, the Board authorized issuance of 92,414 shares of Empire's common stock in payment of the amount due. The value of these shares when issued was approximately $234,000.

On March 14, 2011, the Board authorized the issuance of 59,548 shares of Empire's common stock as payment of dividends due for the year ended December 31, 2010 on its Series B preferred stock. The approximate value of these shares when issued was $114,000.

On February 23, 2010, the Board authorized issuance of 24,902 shares of Empire's common stock as payment of the dividends due for the year ended December 31, 2009 on its Series B preferred stock. The approximate value of these shares when issued was approximately $138,000.

The Company's Series E Preferred Stock is non-convertible and has no fixed date for redemption or liquidation. It has a redemption value of $10 per share plus accrued but unpaid dividends. It is entitled to cumulative dividends at the annual rate of 8% of redemption value and the holders of these shares are entitled to voting rights of 0.25 per share. Dividends on common stock and certain other uses of the Company's cash are subject to restrictions for the benefit of holders of the Series E Preferred Stock.

At December 31, 2011, the Company had cumulative undeclared dividends on its Series E Preferred Stock of approximately $12.5 million.