Proxy Statement - Other Information (preliminary) (pre 14c)

Date : 08/26/2019 @ 9:27PM
Source : Edgar (US Regulatory)
Stock : Empire Resorts Inc (NYNY)
Quote : 9.75  0.01 (0.10%) @ 9:30PM
Empire Resorts share price Chart

Proxy Statement - Other Information (preliminary) (pre 14c)

 

 

SCHEDULE 14C

INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Amendment No.    )

 

 

Check the appropriate box:

  

Preliminary Information Statement

  

Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))

  

Definitive Information Statement

EMPIRE RESORTS, INC.

(Name of Registrant as Specified in Its Charter)

Payment of Filing Fee (check the appropriate box):

 

  No fee required.
  Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (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):

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  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:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 

 


NOTICE OF ACTION BY WRITTEN CONSENT OF STOCKHOLDERS

EMPIRE RESORTS, INC.

C/O MONTICELLO CASINO AND RACEWAY

204 STATE ROUTE 17B, P.O. BOX 5013

MONTICELLO, NEW YORK 12701

DATE FIRST MAILED TO STOCKHOLDERS: ON OR ABOUT                 , 2019

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED

NOT TO SEND US A PROXY

To the Stockholders of Empire Resorts, Inc.:

On November 6, 2018, Empire Resorts, Inc. (“Empire,” and, together with its subsidiaries, the “Company,” “us,” “our” or “we”) entered into a letter agreement (as amended and restated on November 9, 2018, the “KH 2018 Preferred Stock Commitment Letter”) with Kien Huat Realty III Limited (“Kien Huat”), the Company’s largest stockholder, pursuant to which Kien Huat committed to provide additional equity financing in support of the general corporate and working capital requirements of the Company and its subsidiaries.

Pursuant to the KH 2018 Preferred Stock Commitment Letter, Kien Huat had agreed to purchase up to $126 million (the “Commitment Amount”) of Series F Convertible Preferred Stock, $0.01 par value per share (the “Series F Preferred Stock”) of the Company between November 2018 and March 2020 on the terms set forth in the KH 2018 Preferred Stock Commitment Letter and in accordance with the terms of the Certificate of the Designations, Powers, Preferences and Rights of the Series F Convertible Preferred Stock ($0.01 Par Value Per Share), which the Company filed with the Secretary of State of the State of Delaware on November 5, 2018 and amended and restated on November 9, 2018 (as amended and restated, the “Series F Certificate of Designation”).

On May 7, 2019, the Company and Kien Huat amended the KH 2018 Preferred Stock Commitment Letter to accelerate its commitment to purchase up to the full Commitment Amount from March 15, 2020 to November 15, 2019 (the “May 2019 KH Commitment Amendment”). Pursuant to the KH 2018 Preferred Stock Commitment Letter, as amended by the May 2019 KH Commitment Amendment, Kien Huat had committed to purchase the Series F Preferred Stock pursuant to the following schedule: (i) up to $12 million no earlier than November 9, 2018; (ii) up to $20 million no earlier than February 15, 2019; (iii) up to $27 million no earlier than May 15, 2019; (iv) up to $15 million no earlier than June 17, 2019; (v) up to $15 million no earlier than August 15, 2019; and (vi) up to $37 million no earlier than November 15, 2019. In accordance with this schedule, on each of November 13, 2018, February 20, 2019, May 21, 2019, June 17, 2019 and August 26, 2019, the Company and Kien Huat entered into subscription agreements (the “KH Subscription Agreements”) to purchase an aggregate of 890 shares of Series F Preferred Stock for an aggregate purchase price of $89 million, resulting in net proceeds to the Company (after deducting a $890,000 funding fee due to Kien Huat) of $88.1 million.

On August 18, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Hercules Topco LLC, a Delaware limited liability company (“Parent”), Hercules Merger Subsidiary Inc., a Delaware corporation (“Merger Sub” and together with Parent, “Hercules”), and the Company. Parent and Merger Sub are affiliates of Kien Huat and Genting Malaysia Berhad (“Genting Malaysia”). The Merger Agreement provides for, upon the terms and subject to the conditions set forth in the Merger Agreement, the merger of Merger Sub with and into the Company, with the Company surviving as a subsidiary of Parent (the “Merger”). Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of the Company’s common stock, par value $0.01 per share (the “Common Stock”) (other than any Rollover Shares, Canceled Shares or Dissenting Shares, as defined below), will be converted into the right to receive $9.74 in cash, without interest (the “Common Merger Consideration”), and each issued and outstanding share of the Company’s Series B Preferred Stock, par value $0.01 per share (other than Rollover Shares, Canceled Shares or Dissenting Shares), will be converted into the


right to receive an amount in cash equal to the product of the Common Merger Consideration, multiplied by the number of shares of Common Stock into which such share of Series B Preferred Stock is convertible. In addition, pursuant to the Merger Agreement, at the Effective Time, (i) shares of the Company’s Common Stock or Series F Preferred Stock owned by Kien Huat, Genting Malaysia or their respective affiliates (the “Rollover Shares”) will remain outstanding, (ii) shares of Common Stock or any series of the Company’s preferred stock owned by the Company or any of its wholly-owned subsidiaries will be canceled (the “Canceled Shares”) and (iii) shares owned by any stockholder who properly exercises appraisal rights under Delaware law (the “Dissenting Shares”) will entitle the holder thereof only to such appraisal rights.

Stockholders of the Company will be asked to vote on the adoption of the Merger Agreement at a special meeting that will be held on a date to be announced. Consummation of the Merger is also subject to a number of other customary conditions, including without limitation that certain requisite gaming authority approvals have been obtained and remain in full force and effect, the absence of any law or order enjoining or prohibiting the Merger.

In connection with the execution of the Merger Agreement, on August 18, 2019 the Company and Kien Huat further amended the KH 2018 Preferred Stock Commitment Letter (such amendment, the “August 2019 KH Commitment Amendment”) to, among other things, increase the Commitment Amount from $126 million to $151 million and modify the schedule on which Kien Huat will purchase additional shares of Series F Preferred Stock to adjust for the increased Commitment Amount. Accordingly, as a result of the August 2019 KH Commitment Amendment, Kien Huat has committed to purchase the Series F Preferred Stock pursuant to the following schedule: (i) up to $12 million no earlier than November 9, 2018; (ii) up to $20 million no earlier than February 15, 2019; (iii) up to $27 million no earlier than May 15, 2019; (iv) up to $15 million no earlier than June 17, 2019; (v) up to $15 million no earlier than August 15, 2019; (vi) up to $7.5 million no earlier than September 15, 2019; (vii) up to $7.5 million no earlier than October 15, 2019; (viii) up to $37 million no earlier than November 15, 2019; and (ix) up to $10 million no earlier than February 15, 2020.

Additionally, the August 2019 KH Commitment Amendment obligates Kien Huat to execute a written consent to: (i) approve the issuance of an incremental $25 million of shares of Series F Preferred Stock (the “Additional Series F Shares”) and shares of Company common stock underlying such Additional Series F Shares and the terms of any specific financing consummated in connection with the August 2019 KH Commitment Amendment and (ii) approve an amendment to the Series F Certificate of Designation to (a) increase the number of shares designated as Series F Preferred Stock from 1,500 to 1,600 and (b) to change the definition of “Change of Control Transaction” to exempt from such definition (1) the proposed acquisition of shares of capital stock of the Company by Kien Huat, Genting (USA) Limited (“Gen USA”) or any of their respective affiliates or any person that is a “group” of which Kien Huat, Gen USA or their respective affiliates is a member (including the “Purchase” and the “Contributions”, each pursuant to, and as defined in, that certain Term Sheet dated August 5, 2019) and (2) the consummation of the Merger (the proposed amendments to the Series F Certificate of Designation in (ii) are collectively referred to herein as the “Series F COD Amendment”). The August 2019 KH Commitment Amendment, and Kien Huat’s commitment to provide incremental financing contemplated thereby, terminates if the Merger Agreement is terminated by the Company to accept a Superior Proposal (as such term is defined in the Merger Agreement), or by Parent due to the Company’s willful and material breach, however any such termination will not relieve Kien Huat of its obligations and remaining commitments under the KH 2018 Preferred Stock Commitment Letter, as amended by the May 2019 KH Commitment Amendment.

On November 14, 2018, an affiliate of bet365 Group Limited (“bet365”) entered into a common stock purchase agreement (the “bet365 Common Stock Purchase Agreement”) to purchase up to $50 million in shares of common stock of the Company in connection with the Company’s collaboration with another bet365 affiliate to develop a physical and online sportsbook and digital gaming services at Resorts Word Catskills. $33.715 million (the “bet365 proceeds”) of the $50 million was purchased on November 14, 2018, with the balance to acquire at a future date, subject to certain conditions. In accordance with the KH 2018 Preferred Stock Commitment Letter, as amended by the May 2019 KH Commitment Amendment and the August 2019 KH Commitment Amendment, the Commitment Amount is reduced by the amount of bet365 proceeds exceeding


$29 million, from $151 million to $146.28 million. Any future sales to bet365 pursuant to the bet365 Common Stock Purchase Agreement would further reduce the Commitment Amount by such additional amount.

Kien Huat is entitled to a funding fee in the amount of 1% of the portion of the Commitment Amount funded by Kien Huat.

Unless earlier terminated by mutual agreement, the KH 2018 Preferred Stock Commitment Letter (as amended by the May 2019 KH Commitment Amendment) will terminate upon the earlier of (a) the Company’s receipt of third-party financing in the Commitment Amount or (b) April 15, 2020.

Pursuant to the Series F Certificate of Designation, the Series F Preferred Stock is convertible into shares of the Company’s Common Stock (the shares of Common Stock into which the Series F Preferred Stock is convertible, the “Conversion Shares”) at any time and from time to time (and in certain cases, automatically) prior to December 31, 2038 (the “Maturity Date”), and is automatically convertible on the Maturity Date. Subject to certain voting limitations prior to effectiveness of stockholder approval described below, the Series F Preferred Stock is entitled to vote on all matters submitted to the vote of the holders of Common Stock, with each share of Series F Preferred Stock having a number of votes equal to the number of shares of Common Stock into which such share is convertible at any given time.

The transactions contemplated by the KH 2018 Preferred Stock Commitment Letter, including the issuance of the Series F Preferred Stock pursuant thereto and the Conversion Shares in respect of such Series F Preferred Stock, were approved by the Company’s Board of Directors and Audit Committee, and the total number of Conversion Shares issuable along with the total number of votes represented by the Series F Preferred Stock on an as-converted basis were approved by a majority of the voting power of the Company’s issued and outstanding voting stock on February 1, 2019, which action took effect pursuant to Rule 14c-2 under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) on March 5, 2019.

On August 18, 2019, the Company’s Audit Committee, the Special Committee and the Board of Directors approved the August 2019 KH Commitment Amendment and the transactions contemplated therein, including the filing of the Series F COD Amendment with the Secretary of State of Delaware.

The Company’s entry into the August 2019 KH Commitment Amendment did not require the approval of our stockholders. However, pursuant to the Series F Certificate of Designation, any amendment to the Series F Certificate of Designation requires the written consent of the holders representing at least a majority of the outstanding Series F Preferred Stock and, pursuant to Section 242 of the General Corporation Law of the State of Delaware (the “DGCL”), the Series F COD Amendment requires the written consent of the holders representing a majority of voting power of the Company’s issued and outstanding Voting Stock (as defined below). Additionally, in accordance with the applicable listing rules (the “Nasdaq Rules”) of The Nasdaq Stock Market LLC, the issuance of the Additional Series F Shares may constitute a “20% Issuance” requiring approval of a majority of the Company’s issued and outstanding Voting Stock. Pursuant to Rule 5635(d) of the Nasdaq Rules, a “20% Issuance” means a transaction, other than a public offering, involving the sale, issuance or potential issuance by the issuer of common stock (or securities convertible into or exercisable for common stock), which alone or together with sales by officers, directors or substantial shareholders of the issuer, equals 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance.

This Notice and the accompanying Information Statement are being furnished to the stockholders of the Company to advise our stockholders that the holders of a majority of voting power of the issued and outstanding shares of the Company’s Common Stock, Series B Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), and Series F Preferred Stock (the Series F Preferred Stock, together with the Series B Preferred Stock and the Common Stock, the “Voting Stock”), as well as the holders representing at least a majority of the Series F Preferred Stock, voting as a separate class, have acted by written consent to approve the Series F COD Amendment and the issuance of the Additional Series F Shares on August 18, 2019.


Please review the Information Statement included with this Notice for a more complete description of these matters.

Pursuant to Section 228(e) of the General Corporation Law of the State of Delaware, the close of business on August 18, 2019, the date that the holders of a majority of the voting power of the Voting Stock delivered to the Company a written consent approving the Series F COD Amendment and the issuance of the Additional Series F Shares, is the record date for the determination of stockholders entitled to notice of the action by written consent. Pursuant to Rule 14c-2 under the Exchange Act, the actions taken by the holders of a majority of the voting power of the Voting Stock will not become effective until 20 calendar days after the mailing of the Information Statement to the Company’s stockholders, or                    , 2019. This Notice and accompanying Information Statement are first being mailed to stockholders on or about                    , 2019.

IMPORTANT NOTICE: THIS NOTICE AND THE COMPANY’S INFORMATION STATEMENT CAN BE ACCESSED DIRECTLY AT THE FOLLOWING INTERNET ADDRESS:

http://www.cstproxy.com/empireresorts/[        ].


WE ARE NOT ASKING YOU FOR A PROXY AND

YOU ARE REQUESTED NOT TO SEND US A PROXY.

As the matters set forth in this Notice and accompanying Information Statement have been duly authorized and approved by the written consent of the holders of a majority of the voting power of the Voting Stock, your vote or consent is not requested or required to approve these matters. The accompanying Information Statement is provided solely for your information, and we are not, by sending such Information Statement, asking any of our security holders to vote or take any other action. This Notice and the accompanying Information Statement also serves as the notice required by Section 228 of the General Corporation Law of the State of Delaware of the taking of a corporate action without a meeting by less than unanimous written consent of the Company’s stockholders.

 

By the Order of the Board of Directors,

/s/ Emanuel R. Pearlman

Name: Emanuel R. Pearlman

Title: Executive Chairman of the Board

Monticello, New York

August 26, 2019

 


EMPIRE RESORTS, INC.

c/o Monticello Casino and Raceway

204 State Route 17B, P.O. Box 5013

Monticello, New York 12701

 

 

INFORMATION STATEMENT

 

 

WE ARE NOT ASKING FOR YOU FOR A PROXY AND

YOU ARE REQUESTED NOT TO SEND US A PROXY

General

On November 6, 2018, Empire Resorts, Inc. (“Empire,” and, together with its subsidiaries, the “Company,” “us,” “our” or “we”) entered into a letter agreement (the “Original KH 2018 Preferred Stock Commitment Letter”, as amended and restated on November 9, 2018, the “KH 2018 Preferred Stock Commitment Letter”) with Kien Huat Realty III Limited (“Kien Huat”), the Company’s largest stockholder, pursuant to which Kien Huat committed to provide additional equity financing in support of the general corporate and working capital requirements of the Company and its subsidiaries.

Pursuant to the KH 2018 Preferred Stock Commitment Letter, Kien Huat had agreed to purchase up to $126 million (the “Commitment Amount”) of Series F Convertible Preferred Stock, $0.01 par value per share (the “Series F Preferred Stock”) of the Company between November 2018 and March 2020 on the terms set forth in the KH 2018 Preferred Stock Commitment Letter and in accordance with the terms of the Certificate of the Designations, Powers, Preferences and Rights of the Series F Convertible Preferred Stock ($0.01 Par Value Per Share), which the Company filed with the Secretary of State of the State of Delaware on November 5, 2018 (the “Original Series F Certificate of Designation”) and amended and restated on November 9, 2018 (as amended and restated, the “Series F Certificate of Designation”).

On May 7, 2019, the Company and Kien Huat amended the KH 2018 Preferred Stock Commitment Letter to accelerate its commitment to purchase up to the full Commitment Amount from March 15, 2020 to November 15, 2019 (the “May 2019 KH Commitment Amendment”). Pursuant to the KH 2018 Preferred Stock Commitment Letter, as amended by the May 2019 KH Commitment Amendment, Kien Huat had committed to purchase the Series F Preferred Stock pursuant to the following schedule: (i) up to $12 million no earlier than November 9, 2018; (ii) up to $20 million no earlier than February 15, 2019; (iii) up to $27 million no earlier than May 15, 2019; (iv) up to $15 million no earlier than June 17, 2019; (v) up to $15 million no earlier than August 15, 2019; and (vi) up to $37 million no earlier than November 15, 2019. In accordance with this schedule, on each of November 13, 2018, February 20, 2019, May 21, 2019, June 17, 2019 and August 26, 2019, the Company and Kien Huat entered into subscription agreements (the “KH Subscription Agreements”) to purchase an aggregate of 890 shares of Series F Preferred Stock for an aggregate purchase price of $89 million, resulting in net proceeds to the Company (after deducting a $890,000 funding fee due to Kien Huat) of $88.1 million.

On August 18, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Hercules Topco LLC, a Delaware limited liability company

 

1


(“Parent”), Hercules Merger Subsidiary Inc., a Delaware corporation (“Merger Sub” and together with Parent, “Hercules”), and the Company. Parent and Merger Sub are affiliates of Kien Huat and Genting Malaysia Berhad (“Genting Malaysia”). The Merger Agreement provides for, upon the terms and subject to the conditions set forth in the Merger Agreement, the merger of Merger Sub with and into the Company, with the Company surviving as a subsidiary of Parent (the “Merger”). Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of the Company’s common stock, par value $0.01 per share (the “Common Stock”) (other than any Rollover Shares, Canceled Shares or Dissenting Shares, as defined below), will be converted into the right to receive $9.74 in cash, without interest (the “Common Merger Consideration”), and each issued and outstanding share of the Company’s Series B Preferred Stock, par value $0.01 per share (other than Rollover Shares, Canceled Shares or Dissenting Shares), will be converted into the right to receive an amount in cash equal to the product of the Common Merger Consideration, multiplied by the number of shares of Common Stock into which such share of Series B Preferred Stock is convertible. In addition, pursuant to the Merger Agreement, at the Effective Time, (i) shares of the Company’s Common Stock or Series F Preferred Stock owned by Kien Huat, Genting Malaysia or their respective affiliates (the “Rollover Shares”) will remain outstanding, (ii) shares of Common Stock or any series of the Company’s preferred stock owned by the Company or any of its wholly-owned subsidiaries will be canceled (the “Canceled Shares”) and (iii) shares owned by any stockholder who properly exercises appraisal rights under Delaware law (the “Dissenting Shares”) will entitle the holder thereof only to such appraisal rights.

Stockholders of the Company will be asked to vote on the adoption of the Merger Agreement at a special meeting that will be held on a date to be announced. Consummation of the Merger is also subject to a number of other customary conditions, including without limitation that certain requisite gaming authority approvals have been obtained and remain in full force and effect, the absence of any law or order enjoining or prohibiting the Merger.

In connection with the execution of the Merger Agreement, on August 18, 2019 the Company and Kien Huat further amended the KH 2018 Preferred Stock Commitment Letter (such amendment, the “August 2019 KH Commitment Amendment”) to, among other things, increase the Commitment Amount from $126 million to $151 million and modify the schedule on which Kien Huat will purchase additional shares of Series F Preferred Stock to adjust for the increased Commitment Amount. Accordingly, as a result of the August 2019 KH Commitment Amendment, Kien Huat has committed to purchase the Series F Preferred Stock pursuant to the following schedule: (i) up to $12 million no earlier than November 9, 2018; (ii) up to $20 million no earlier than February 15, 2019; (iii) up to $27 million no earlier than May 15, 2019; (iv) up to $15 million no earlier than June 17, 2019; (v) up to $15 million no earlier than August 15, 2019; (vi) up to $7.5 million no earlier than September 15, 2019; (vii) up to $7.5 million no earlier than October 15, 2019; (viii) up to $37 million no earlier than November 15, 2019; and (ix) up to $10 million no earlier than February 15, 2020.

Additionally, the August 2019 KH Commitment Amendment obligates Kien Huat to execute a written consent to: (i) approve the issuance of an incremental $25 million of shares of Series F Preferred Stock (the “Additional Series F Shares”) and shares of Company common stock underlying such Additional Series F Shares and the terms of any specific financing consummated in connection with the August 2019 KH Commitment Amendment and (ii) approve an amendment to the Series F Certificate of Designation to (a) increase the number of shares designated as Series F Preferred Stock from 1,500 to 1,600 and (b) to change the definition of “Change of Control Transaction” to exempt from such definition (1) the proposed acquisition of shares of capital stock of the Company by Kien

 

2


Huat, Genting (USA) Limited (“Gen USA”) or any of their respective affiliates or any person that is a “group” of which Kien Huat, Gen USA or their respective affiliates is a member (including the “Purchase” and the “Contributions”, each pursuant to, and as defined in, that certain Term Sheet dated August 5, 2019) and (2) the consummation of the Merger (the proposed amendments to the Series F Certificate of Designation in (ii) are collectively referred to herein as the “Series F COD Amendment”). The August 2019 KH Commitment Amendment, and Kien Huat’s commitment to provide incremental financing contemplated thereby, terminates if the Merger Agreement is terminated by the Company to accept a Superior Proposal (as such term is defined in the Merger Agreement), or by Parent due to the Company’s willful and material breach, however any such termination will not relieve Kien Huat of its obligations and remaining commitments under the KH 2018 Preferred Stock Commitment Letter, as amended by the May 2019 KH Commitment Amendment.

On November 14, 2018, an affiliate of bet365 Group Limited (“bet365”) entered into a common stock purchase agreement (the “bet365 Common Stock Purchase Agreement”) to purchase up to $50 million in shares of common stock of the Company in connection with the Company’s collaboration with another bet365 affiliate to develop a physical and online sportsbook and digital gaming services at Resorts Word Catskills. $33.715 million (the “bet365 proceeds”) of the $50 million was purchased on November 14, 2018, with the balance to acquire at a future date, subject to certain conditions. In accordance with the KH 2018 Preferred Stock Commitment Letter, as amended by the May 2019 KH Commitment Amendment and the August 2019 KH Commitment Amendment, the Commitment Amount is reduced by the amount of bet365 proceeds exceeding $29 million, from $151 million to $146.28 million. Any future sales to bet365 pursuant to the bet365 Common Stock Purchase Agreement would further reduce the Commitment Amount by such additional amount.

Kien Huat is entitled to a funding fee in the amount of 1% of the portion of the Commitment Amount funded by Kien Huat. Unless earlier terminated by mutual agreement, the KH 2018 Preferred Stock Commitment Letter (as amended by the May 2019 KH Commitment Amendment) will terminate upon the earlier of (a) the Company’s receipt of third-party financing in the Commitment Amount or (b) April 15, 2020.

Pursuant to the Series F Certificate of Designation, the Series F Preferred Stock is convertible into shares of the Company’s Common Stock (the shares of Common Stock into which the Series F Preferred Stock is convertible, the “Conversion Shares”) at any time and from time to time (and in certain cases, automatically) prior to December 31, 2038 (the “Maturity Date”), and is automatically convertible on the Maturity Date. Subject to certain voting limitations prior to effectiveness of stockholder approval described below, the Series F Preferred Stock is entitled to vote on all matters submitted to the vote of the holders of Common Stock, with each share of Series F Preferred Stock having a number of votes equal to the number of shares of Common Stock into which such share is convertible at any given time.

The transactions contemplated by the KH 2018 Preferred Stock Commitment Letter, including the issuance of the Series F Preferred Stock pursuant thereto and the Conversion Shares in respect of such Series F Preferred Stock, were approved by the Company’s Board of Directors and Audit Committee, and the total number of Conversion Shares issuable along with the total number of votes represented by the Series F Preferred Stock on an as-converted basis were approved by a majority of the voting power of the Company’s issued and outstanding voting stock on February 1, 2019, which action took effect pursuant to Rule 14c-2 under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) on March 5, 2019.

 

3


On August 18, 2019, the Company’s Audit Committee, the Special Committee and the Board of Directors approved the August 2019 KH Commitment Amendment and the transactions contemplated therein, including the filing of the Series F COD Amendment with the Secretary of State of Delaware.

The Company’s entry into the August 2019 KH Commitment Amendment did not require the approval of our stockholders. However, pursuant to the Series F Certificate of Designation, any amendment to the Series F Certificate of Designation requires the written consent of the holders representing at least a majority of the outstanding Series F Preferred Stock and, pursuant to Section 242 of the General Corporation Law of the State of Delaware (the “DGCL”), the Series F COD Amendment requires the written consent of the holders representing a majority of voting power of the Company’s issued and outstanding Voting Stock (as defined below). Additionally, in accordance with the applicable listing rules (the “Nasdaq Rules”) of The Nasdaq Stock Market LLC, the issuance of the Additional Series F Shares may constitute a “20% Issuance” requiring approval of a majority of the Company’s issued and outstanding Voting Stock. Pursuant to Rule 5635(d) of the Nasdaq Rules, a “20% Issuance” means a transaction, other than a public offering, involving the sale, issuance or potential issuance by the issuer of common stock (or securities convertible into or exercisable for common stock), which alone or together with sales by officers, directors or substantial shareholders of the issuer, equals 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance.

This Notice and the accompanying Information Statement are being furnished to the stockholders of the Company to advise our stockholders that the holders of a majority of voting power of the issued and outstanding shares of the Company’s Common Stock, Series B Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), and Series F Preferred Stock (the Series F Preferred Stock, together with the Series B Preferred Stock and the Common Stock, the “Voting Stock”), as well as the holders representing at least a majority of the Series F Preferred Stock, voting as a separate class, have acted by written consent to approve the Series F COD Amendment and the issuance of the Additional Series F Shares on August 18, 2019.

This Information Statement is being mailed on or about                    , 2019 to stockholders of record of the Company as of the close of business on August 18, 2019 (the “Record Date”) and is being delivered to inform you of the corporate actions described herein before they take effect in accordance with Rule 14c-2 of the Exchange Act. You are urged to review this Information Statement for a more complete description of transactions contemplated therein.

None of the corporate actions described above may become effective until                     , 2019, which is 20 calendar days following the date on which this Information Statement is first sent to our stockholders.

Our principal executive offices are located at c/o Monticello Casino and Raceway, 204 State Route 17B, P.O. Box 5013, Monticello, New York 12701.

 

4


Approval of the KH 2018 Preferred Stock Commitment Letter and the Original Series F Certificate of Designation by the Board of Directors and Audit Committee

On November 5, 2018, the Company’s Audit Committee and Board of Directors approved the Original KH 2018 Preferred Stock Commitment Letter and the transactions contemplated therein, along with the filing of the Original Series F Certificate of Designation with the Secretary of State of Delaware. On November 9, 2018, for purposes of complying with Nasdaq Rule 5635(d), the Audit Committee and the Board of Directors approved the amendment and restatement of each of the Original KH 2018 Preferred Stock Commitment Letter and the Original Series F Certificate of Designation to add reference to certain limitations on voting and conversion with respect to the Series F Preferred Stock (the “Series F Caps”) and related consent requirements. The removal of Series F Caps with respect to the then-authorized Series F Preferred Stock was approved by a majority of the voting power of the Company’s issued and outstanding voting stock on February 1, 2019, which action took effect pursuant to Rule 14c-2 under the Exchange Act on March 5, 2019.

Approval of the August 2019 KH Commitment Amendment and the Series F COD Amendment by the Board of Directors, Audit Committee and Special Committee

On August 18, 2019, the Company’s Audit Committee, the Special Committee and the Board of Directors approved the August 2019 KH Commitment Amendment and the transactions contemplated therein, including the filing of the Series F COD Amendment with the Secretary of State of Delaware. Copies of the August 2019 KH Commitment Amendment and the Series F COD Amendment, as approved and executed by the parties, are attached as Annex A and Annex B, respectively. The August 2019 KH Commitment Amendment and a form of the Series F COD Amendment have also been filed as exhibits to the Company’s filings with the Securities and Exchange Commission (the “SEC”). For more information regarding the approval of the August 2019 KH Commitment Amendment and the Series F COD Amendment, please refer to the section entitled “Background and Reasons for the Entry into the August 2019 KH Commitment Amendment, the Approval of the Issuance of Additional Series F Shares and the Series F COD Amendment” below.

Requirement to Obtain Stockholder Approval – Series F Certificate of Designation

Section 8(a) of the Series F Certificate of Designation requires the written consent of the holders representing at least a majority of the outstanding shares of Series F Preferred Stock to approve any amendment to the Series F Certificate of Designation.

Additionally, Section 242 of the General Corporation Law of the State of Delaware (the “DGCL”) requires that any amendment to the Series F Certificate of Designation be approved by the affirmative vote of the holders of a majority of the voting power of the outstanding stock of the Company entitled to vote and, if the amendment would adversely affect the rights, preferences or powers of Series F Preferred Stock, by the affirmative vote of a majority of the outstanding shares of Series F Preferred Stock.

Requirement to Obtain Stockholder Approval – Nasdaq Rule 5635(d)

We are subject to the Nasdaq Rules because our Common Stock is currently listed on the Nasdaq Global Market. Pursuant to Nasdaq Rule 5635(d), stockholder approval is required prior to a

 

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20% Issuance at a price that is less than the Minimum Price. Pursuant to Rule 5635(d) of the Nasdaq Rules, a “20% Issuance” means the issuance by the Company of Common Stock (or securities convertible into or exercisable for Common Stock) in connection in a transaction other than a public offering of securities involving the sale, issuance or potential issuance of Common Stock (or securities convertible into or exercisable for Common Stock), which alone or together with sales by officers, directors or substantial stockholders of the Company, equals 20% or more of the Common Stock or 20% or more of the voting power outstanding before the issuance. “Minimum Price” is defined by Nasdaq Rule 5635(d) as a price that is the lower of: (i) the closing price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement; or (ii) the average closing price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the binding agreement. On August 18, 2019, the date of entry into the August 2019 KH Commitment Amendment, the effective Minimum Price relating to the Series F Preferred Stock issued thereunder was $8.33.

We cannot currently determine the total number of Conversion Shares that will be issued upon conversion of the Series F Preferred Stock (including any Additional Series F Shares) or whether such Conversion Shares will be issued at a price less than the Minimum Price because such number depends on the circumstances under which the Series F Preferred Stock may be converted, the timing of any such conversion in accordance with the terms of the Series F COD Amendment, and the effective conversion price of the Series F Preferred Stock at such time. For instance, prior to the Maturity Date, each Series F Preferred Stock is convertible at the holder’s option into that number of Conversion Shares determined by dividing the Stated Value (as defined below) by a conversion price of $20.00 (subject to adjustment). If the Series F Preferred Stock have not been converted prior to the Maturity Date, the conversion price on the Maturity Date will be based on the volume-weighted average price for a share of Common Stock for the 90 consecutive trading days ending on the trading day immediately prior to the Maturity Date. Additionally, in the event of a Change of Control Transaction (as defined below) prior to the Maturity Date, the Series F Preferred Stock will be converted into that number of Conversion Shares determined by dividing the Stated Value by the per share consideration being offered to any holder of Common Stock in connection with any such Change of Control Transaction.

Further, we cannot determine the total number of votes that each share of Series F Preferred Stock will represent at any given time because such number depends on the number of Conversion Shares into which such share of Series F Preferred Stock is convertible into at any given time.

Due to these uncertainties, although the Company’s stockholders already approved the removal of the Series F Caps on the Series F Preferred Stock issuable under the KH 2018 Preferred Stock Commitment Letter, the issuance of the Additional Series F Shares (and any underlying Conversion Shares) as contemplated by the August 2019 KH Commitment Amendment may result in a 20% Issuance to Kien Huat for less than the Minimum Price. As a result of the foregoing, in accordance with Nasdaq Rule 5635(d), the issuance of Additional Series F Shares may require stockholder approval.

The Action by Written Consent

On August 18, 2019, the holders of a majority of the voting power of our outstanding Voting Stock approved by written consent (the “Written Consent”) the Series F COD Amendment and the issuance of Additional Series F Shares. Additionally, the holders of a majority of the outstanding

 

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Series F Preferred Stock entitled to vote, voting as a separate class, approved by written consent the Series F COD Amendment, including the increase in authorized shares of Series F Preferred Stock. Pursuant to the Exchange Act, the corporate actions approved by the Written Consent will become effective 20 calendar days after this Information Statement is first sent or given to our stockholders, which would be                , 2019.

No Voting Required

We are not seeking a vote, authorizations or proxies from you. Our Second Amended and Restated Certificate of Incorporation, Third Amended and Restated Bylaws and Section 228 (“Section 228”) of the General Corporation Law of the State of Delaware (the “DGCL”) provide that stockholders may take action without a meeting of the stockholders and without prior notice if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock holding not less than the minimum number of votes that would be necessary to approve such action at a stockholders meeting at which all shares entitled to vote thereon were present and voted. The approval, by way of written consent, of a majority of the Company’s Voting Stock and of at least a majority of the voting power of the Series F Preferred Stock, voting as a separate class, was required to approve the Series F COD Amendment, and the approval, by written consent, of at least a majority of the voting power of the outstanding Voting Stock was required to approve the issuance of the Additional Series F Shares for purposes of the Nasdaq Rules. Such approvals have been obtained and will become effective on                , 2019.

As of the Record Date, we had 34,435,907 shares of Common Stock, 44,258 shares of Series B Preferred Stock and 740 shares of Series F Preferred Stock issued and outstanding and entitled to vote. As of the Record Date, each share of Common Stock entitled the holder thereof to one vote, each share of Series B Preferred Stock entitled the holder thereof to fifty-four thousandths (.054) of one vote and each share of Series F Preferred Stock entitled the holder thereof to 5,000 votes. Accordingly, as of the Record Date, a total of 38,138,297 shares were entitled to vote on the Series F COD Amendment and the issuance of the Additional Series F Shares.

Notice Pursuant to Section 228

Pursuant to Section 228, we are required to provide prompt notice of the taking of a corporate action by written consent to our stockholders who have not consented in writing to such action. The Notice and this Information Statement serves as the notice required by Section 228.

IMPORTANT NOTICE: THIS NOTICE AND THE COMPANY’S INFORMATION STATEMENT CAN BE ACCESSED DIRECTLY AT THE FOLLOWING INTERNET ADDRESS: http://www.cstproxy.com/empireresorts/[        ].

Dissenters’ Rights of Appraisal

The DGCL does not provide dissenters’ rights of appraisal to our stockholders in connection with the matters approved by the Written Consent.

 

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BACKGROUND AND REASONS FOR THE ENTRY INTO THE AUGUST 2019 KH COMMITMENT AMENDMENT, THE APPROVAL OF THE ISSUANCE OF ADDITIONAL SERIES F SHARES AND THE SERIES F COD AMENDMENT

Background for the Entry into the August 2019 KH Commitment Amendment and the Approval of the Issuance of Additional Series F Shares and the Series F COD Amendment

The Board of Directors and the Company’s management regularly evaluate the Company’s liquidity and capital requirements. On November 5, 2018, the Company’s Audit Committee and the Board of Directors approved the KH 2018 Preferred Stock Commitment Letter with Kien Huat, our largest stockholder, pursuant to which Kien Huat committed to provide equity financing in support of the general corporate and working capital requirements of the Company and its subsidiaries, along with the filing of the Series F Certificate of Designation with the Secretary of State of Delaware. On November 9, 2018, for purposes of complying with Nasdaq Rule 5635(d), the Audit Committee and the Board of Directors approved the amendment and restatement of each of the KH 2018 Preferred Stock Commitment Letter and the Series F Certificate of Designation to add reference to the Series F Caps and related stockholder consent requirements for removal of such Series F Caps, determined that the transactions contemplated thereby were fair to, and in the best interest of, the Company and its stockholders, and recommended that its stockholders approve the removal of the Series F Caps.

On November 6, 2018, and as amended and restated on November 9, 2018 and further amended on May 7, 2019, we entered into the KH 2018 Preferred Stock Commitment Letter with Kien Huat.

On November 14, 2018, the Company entered into a sportsbook and digital gaming collaboration agreement (the “Collaboration Agreement”) with Hillside (New York) LLC, an affiliate of bet365. Directly and through its affiliates, bet365 operates, owns, controls and manages online gaming and sports betting services throughout the world. The Collaboration Agreement provides the terms and conditions on which bet365 will participate with the Company in the offering of retail sports betting, an online sportsbook, online casino/table games and online poker in the State of New York if and when permitted by applicable law (the “Collaboration”). In connection with the Collaboration, the Company entered into the bet365 Common Stock Purchase Agreement with Hillside (New Media Holdings) Limited (the “bet365 Investor”), another bet365 affiliate, pursuant to which the bet365 Investor agreed to purchase up to 2,500,000 shares of Common Stock of the Company at $20 per share for an aggregate potential investment of up to $50 million. The bet365 Investor purchased 1,685,759 shares of common stock upon the execution of the bet365 Common Stock Purchase Agreement (the “Initial Closing Shares”). The execution of the KH 2018 Preferred Stock Commitment Letter and Kien Huat’s subscription for the initial $12 million of the Commitment Amount were conditions to the closing on the sale of the Initial Closing Shares.

On February 1, 2019, the holders of a majority of the voting power of the Voting Stock delivered to the Company its written consent approving the removal of the Series F Caps, which action took effect pursuant to Rule 14c-2 under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) on March 5, 2019.

On each of November 13, 2018, February 20, 2019, May 21, 2019, June 17, 2019 and August 26, 2019, the Company and Kien Huat entered into the Subscription Agreements to purchase an aggregate of 890 shares of Series F Preferred Stock for an aggregate purchase price of $89 million, resulting in net proceeds to the Company (after deducting a $890,000 funding fee due to Kien Huat) of $88.1 million.

 

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On July 25, 2019, the Special Committee of the Company’s Board of Directors (the “Board”) received a letter from Kien Huat (the “Kien Huat 13D Letter”) indicating that, among other things, as of the date of the Kien Huat 13D Letter, Kien Huat did not intend to provide further equity or debt financing to the Company beyond its obligations under the KH 2018 Preferred Stock Commitment Letter, as amended by the May 2019 KH Commitment Amendment, while the Company remains a public company. The Kien Huat 13D Letter further indicated that Kien Huat was willing to entertain an invitation from the Company to acquire all outstanding equity of the Company not already owned by Kien Huat.

On August 5, 2019, the Special Committee of the Board received a non-binding proposal letter (the “Proposal Letter”) from Kien Huat and Genting Malaysia, an affiliate of Kien Huat. Pursuant to the Proposal Letter, Kien Huat and Genting Malaysia submitted a non-binding proposal to acquire all outstanding equity of the Company not already owned by Kien Huat or its affiliates for $9.74 per share of Common Stock, with each share of the Company’s Series B Preferred Stock receiving the same consideration on an as-converted basis.

On August 18, 2019, the Company entered into the Merger Agreement, providing for the Merger. Pursuant to the Merger Agreement, at the Effective Time, each issued and outstanding share of the Company’s Common Stock, par value $0.01 per share (other than any Rollover Shares, Canceled Shares or Dissenting Shares), will be converted into the right to receive the Common Merger Consideration, and each issued and outstanding share of the Company’s Series B Preferred Stock (other than Rollover Shares, Canceled Shares or Dissenting Shares), will be converted into the right to receive an amount in cash equal to the product of the Common Merger Consideration, multiplied by the number of shares of Common Stock into which such share of Series B Preferred Stock is convertible. In addition, pursuant to the Merger Agreement, at the Effective Time, (i) the Rollover Shares will remain outstanding, (ii) the Canceled Shares will be canceled and (iii) the Dissenting Shares will entitle the holder thereof only to such appraisal rights.

Stockholders of the Company will be asked to vote on the adoption of the Merger Agreement at a special meeting that will be held on a date to be announced. Consummation of the Merger is also subject to a number of other customary conditions, including without limitation that certain requisite gaming authority approvals have been obtained and remain in full force and effect, the absence of any law or order enjoining or prohibiting the Merger.

In connection with the execution of the Merger Agreement, on August 18, 2019 the Company and Kien Huat further amended the KH 2018 Preferred Stock Commitment Letter (such amendment, the “August 2019 KH Commitment Amendment”) to, among other things, increase the Commitment Amount from $126 million to $151 million and modify the schedule on which Kien Huat will purchase additional shares of Series F Preferred Stock to adjust for the increased Commitment Amount. Accordingly, as a result of the August 2019 KH Commitment Amendment, Kien Huat has committed to purchase the Series F Preferred Stock pursuant to the following schedule: (i) up to $12 million no earlier than November 9, 2018; (ii) up to $20 million no earlier than February 15, 2019; (iii) up to $27 million no earlier than May 15, 2019; (iv) up to $15 million no earlier than June 17, 2019; (v) up to $15 million no earlier than August 15, 2019; (vi) up to $7.5 million no earlier than September 15, 2019; (vii) up to $7.5 million no earlier than October 15, 2019; (viii) up to $37 million no earlier than November 15, 2019; and (ix) up to $10 million no earlier than February 15, 2020.

Additionally, the August 2019 KH Commitment Amendment obligates Kien Huat to execute a written consent to: (i) approve the issuance of an incremental $25 million of shares of Series F

 

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Preferred Stock (the “Additional Series F Shares”) and shares of Company common stock underlying such Additional Series F Shares and the terms of any specific financing consummated in connection with the August 2019 KH Commitment Amendment; (ii) approve an amendment to the Series F Certificate of Designation to (a) increase the number of shares designated as Series F Preferred Stock from 1,500 to 1,600 and (b) to change the definition of “Change of Control Transaction” to exempt from such definition (1) the proposed acquisition of shares of capital stock of the Company by Kien Huat, Genting (USA) Limited (“Gen USA”) or any of their respective affiliates or any person that is a “group” of which Kien Huat, Gen USA or their respective affiliates is a member (including the “Purchase” and the “Contributions”, each pursuant to, and as defined in, that certain Term Sheet dated August 5, 2019) and (2) the consummation of the Merger (the proposed amendments to the Series F Certificate of Designation in (ii) are collectively referred to herein as the “Series F COD Amendment”). The August 2019 KH Commitment Amendment, and Kien Huat’s commitment to provide incremental financing contemplated thereby, terminates if the Merger Agreement is terminated by the Company to accept a Superior Proposal (as such term is defined in the Merger Agreement), or by Parent due to the Company’s willful and material breach, however any such termination will not relieve Kien Huat of its obligations and remaining commitments under the KH 2018 Preferred Stock Commitment Letter, as amended by the May 2019 KH Commitment Amendment.

On August 18, 2019, the Company’s Audit Committee, Special Committee and Board of Directors approved the August 2019 KH Commitment Amendment and the transactions contemplated therein, including the filing of the Series F COD Amendment with the Secretary of State of Delaware. The Audit Committee, the Special Committee and the Board of Directors determined that the transactions contemplated thereby were fair to, and in the best interest of, the Company and its stockholders, and recommended that its stockholders approve the Series F COD Amendment and the issuance of the Additional Series F Shares.

On August 18, 2019, the holders of a majority of the voting power of our outstanding Voting Stock approved by written consent the Series F COD Amendment and the issuance of Additional Series F Shares. Additionally, the holders of a majority of the outstanding Series F Preferred Stock entitled to vote, voting as a separate class, approved by written consent the Series F COD Amendment, including the increase in authorized shares of Series F Preferred Stock.

KH 2018 Preferred Stock Commitment Letter

On November 6, 2018, we entered into the KH 2018 Preferred Stock Commitment Letter with Kien Huat. Pursuant to the KH 2018 Preferred Stock Commitment Letter, Kien Huat agreed to purchase up to $126 million of Series F Preferred Stock of the Company pursuant to the following schedule: (i) up to $12 million no earlier than November 9, 2018, (ii) up to $20 million no earlier than February 15, 2019, (iii) up to $20 million no earlier than May 15, 2019, (iv) up to $15 million no earlier than August 15, 2019, (v) up to $37 million no earlier than November 15, 2019 and (vi) up to $22 million no earlier than March 15, 2020. The Company agreed to use its reasonable efforts to secure third-party financing in an amount equal to the Commitment Amount and the Commitment Amount will be reduced by the amount of any third-party financing raised by the Company. However, any equity financing raised by the Company from any person entering into a commercial agreement relating to online gaming and sports betting at Resorts World Catskills in an amount up to $29 million will not reduce the Commitment Amount.

On November 9, 2018, the Company and Kien Huat amended and restated the KH 2018 Preferred Stock Commitment Letter to add references to certain limitations on voting and conversion

 

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with respect to the Series F Preferred Stock and related stockholder consent requirements for removing such Series F Caps. In addition, pursuant to the KH 2018 Preferred Stock Commitment Letter, Kien Huat, as the holder of a majority of voting power of the Company’s outstanding Voting Stock, agreed to execute a written consent to approve the removal of the Series F Caps. Furthermore, the Company agreed that its Board of Directors, including each director independent of Kien Huat, would approve and recommend to its stockholders the actions contemplated by such stockholder approval.

On November 14, 2018, we entered into the bet365 the bet365 Common Stock Purchase Agreement with an affiliate of bet365 to sell up to $50 million in shares of common stock of the Company in connection with the Company’s collaboration with another bet365 affiliate to develop a physical and online sportsbook and digital gaming services at Resorts Word Catskills. $33.715 million of the $50 million was purchased on November 14, 2018, with the balance to be acquired at a future date, subject to certain conditions. In accordance with the KH 2018 Preferred Stock Commitment Letter, the Commitment Amount under the KH 2018 Preferred Stock Commitment Letter was reduced by the amount of bet365 proceeds exceeding $29 million, from $126 million to $121.28 million (if including the additional Commitment Amount resulting from the August 2019 KH Commitment Amendment, such Commitment Amount would be reduced from $151 million to $146.28 million). Any future sales to bet365 pursuant to the bet365 Common Stock Purchase Agreement would further reduce the Commitment Amount by such additional amount.

On May 7, 2019, the Company and Kien Huat entered into the May 2019 KH Commitment Amendment to accelerate its commitment to purchase up to the full Commitment Amount from March 15, 2020 to November 15, 2019. Pursuant to the KH 2018 Preferred Stock Commitment Letter, as amended by the May 2019 KH Commitment Amendment, Kien Huat had committed to purchase the Series F Preferred Stock pursuant to the following schedule: (i) up to $12 million no earlier than November 9, 2018; (ii) up to $20 million no earlier than February 15, 2019; (iii) up to $27 million no earlier than May 15, 2019; (iv) up to $15 million no earlier than June 17, 2019; (v) up to $15 million no earlier than August 15, 2019; and (vi) up to $37 million no earlier than November 15, 2019. Other than the acceleration of the schedule pursuant to which Kien Huat would purchase up to the Commitment Amount, all other terms of the KH 2018 Preferred Stock Commitment Letter remain unchanged.

Kien Huat is entitled to a funding fee in the amount of 1% of the portion of the Commitment Amount funded by Kien Huat. Unless earlier terminated by mutual agreement, the KH 2018 Preferred Stock Commitment Letter (as amended by the May 2019 KH Commitment Amendment) will terminate upon the earlier of (a) the Company’s receipt of third-party financing in the Commitment Amount or (b) April 15, 2020.

The foregoing description of the KH 2018 Preferred Stock Commitment Letter and the May 2019 KH Commitment Amendment do not purport to be complete and are qualified in their entirety by reference to the complete text of each of the KH 2018 Preferred Stock Commitment Letter and the May 2019 KH Commitment Amendment, copies of which are attached as Annex C and Annex D to this Information Statement and are incorporated herein by reference.

The KH 2018 Preferred Stock Commitment Letter and the May 2019 KH Commitment Amendment should not be read alone, but should instead be read in conjunction with the other information regarding the Company and its operations and Kien Huat and that is contained in this Information Statement, as well as in the filings that we have made and may make with the SEC.

 

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August 2019 KH Commitment Amendment

In connection with the execution of the Merger Agreement, on August 18, 2019 the Company and Kien Huat entered into the August 2019 KH Commitment Amendment to, among other things, increase the Commitment Amount from $126 million to $151 million and modify the schedule on which Kien Huat will purchase additional shares of Series F Preferred Stock to adjust for the increased Commitment Amount. Accordingly, as a result of the August 2019 KH Commitment Amendment, Kien Huat has committed to purchase the Series F Preferred Stock pursuant to the following schedule: (i) up to $12 million no earlier than November 9, 2018; (ii) up to $20 million no earlier than February 15, 2019; (iii) up to $27 million no earlier than May 15, 2019; (iv) up to $15 million no earlier than June 17, 2019; (v) up to $15 million no earlier than August 15, 2019; (vi) up to $7.5 million no earlier than September 15, 2019; (vii) up to $7.5 million no earlier than October 15, 2019; (viii) up to $37 million no earlier than November 15, 2019; and (ix) up to $10 million no earlier than February 15, 2020.

Additionally, the August 2019 KH Commitment Amendment obligates Kien Huat to execute a written consent to: (i) approve the issuance of the Additional Series F Shares and shares of Company common stock underlying such Additional Series F Shares and the terms of any specific financing consummated in connection with the August 2019 KH Commitment Amendment and (ii) approve the Series F COD Amendment. The August 2019 KH Commitment Amendment, and Kien Huat’s commitment to provide incremental financing contemplated thereby, terminates if the Merger Agreement is terminated by the Company to accept a Superior Proposal (as such term is defined in the Merger Agreement), or by Parent due to the Company’s willful and material breach, however any such termination will not relieve Kien Huat of its obligations and remaining commitments under the KH 2018 Preferred Stock Commitment Letter, as amended by the May 2019 KH Commitment Amendment.

The foregoing description of the August 2019 KH Commitment Amendment does not purport to be complete and is qualified in its entirety by reference to the complete text of August 2019 KH Commitment Amendment, a copy of which is attached as Annex A to this Information Statement and is incorporated herein by reference.

The August 2019 KH Commitment Amendment should not be read alone, but should instead be read in conjunction with the other information regarding the Company and its operations and Kien Huat and that is contained in this Information Statement, as well as in the filings that we have made and may make with the SEC.

The Subscription Agreements

On each of November 13, 2018, February 20, 2019, May 15, 2019, June 17, 2019 and August 26, 2019, the Company and Kien Huat entered into the Subscription Agreements to purchase an aggregate of 890 shares of Series F Preferred Stock for an aggregate purchase price of $89 million, resulting in net proceeds to the Company (after deducting a $890,000 funding fee due to Kien Huat) of $88.1 million.

 

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Series F Preferred Stock

On November 9, 2018, the Company filed an Amended and Restated Certificate of Designations, Preferences and Rights of Series F Convertible Preferred Stock with the Secretary of State of the State of Delaware, which amended the Certificate of Designations, Preferences and Rights of Series F Convertible Preferred Stock, originally filed with the Secretary of State of the State of Delaware on November 5, 2018.

On August 18, 2019, the Board of Directors and holders representing a majority of the Company’s Voting Stock approved the Series F COD Amendment.

The material terms and conditions of the Series F Preferred Stock, set forth in the Series F Certificate of Designation and as proposed to be amended by the Series F COD Amendment, are as follows:

Designation and Amount

One Thousand Six Hundred (1,600) shares of Series F Preferred Stock constitute the class of preferred stock and each share has a stated value of $100,000 (the “Stated Value”).

Ranking; Dividends

The Series F Preferred Stock ranks, with respect to its rights, preferences and privileges, including but not limited to the distribution of assets, senior to all classes or series of equity securities of the Company, except the Company’s outstanding Series B Preferred Stock, par value $0.01 per share, which shall remain senior in all respects to the Series F Preferred Stock. The Series F Preferred Stock is entitled to receive, and the Company will pay, dividends on shares of Series F Preferred Stock equal (on an-converted basis) to and in the same form as dividends actually paid on shares of Common Stock of the Company, when, as and if such dividends are paid on shares of the Common Stock.

Voting Rights

Holders of Series F Preferred Stock are entitled to receive notice of all stockholders’ meetings of the Company and to vote on all matters submitted to the vote of holders of Common Stock on an as-converted basis and not as a separate class. Each share of Series F Preferred Stock represents such number of votes equal to the number of Conversion Shares into which such share is convertible at such time; provided, that, subject to stockholder approval of the issuance of Additional Series F Shares, the votes represented by such outstanding Additional Series F Shares will be adjusted downward until the aggregate votes represented by such Additional Series F Shares do not exceed 20% or more of the Company’s issued and outstanding Common Stock or voting power.

Optional Conversion

The Series F Preferred Stock is convertible into shares of the Company’s Common Stock at any time and from time to time prior to December 31, 2038 (the “Maturity Date”). Each share of Series F Preferred Stock will be convertible into Conversion Shares in an amount equal to (a) the Stated Value divided by $20.00 (the “Base Conversion Price”) (subject to adjustments), multiplied by (b) the number of shares of Series F Preferred Stock being converted. Following any conversion of the Series F Preferred Stock, the holder of the Conversion Shares will be entitled to receive any dividends that were declared but unpaid at the time of such conversion if and to the extent that such holder would have been entitled to receive such dividend had the conversion not occurred.

 

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Mandatory Conversion

Each Series F Preferred Stock that is outstanding on the Maturity Date shall automatically be converted into that number of Conversion Shares determined by dividing the Stated Value by the volume-weighted average price for a share of Common Stock for the 90 consecutive trading days ending on the trading day immediately prior to the Maturity Date.

In addition, in the event of a Change of Control Transaction (as defined below), each share of Series F Preferred Stock outstanding at such time will automatically be converted into that number of Conversion Shares determined by dividing the Stated Value by the per share consideration being offered to any holder of Common Stock in connection with any such Change of Control Transaction. Following such conversion, the holder of the Conversion Shares will be entitled to participate in such Change of Control Transaction and to receive the same per share consideration that any other holder of Common Stock is entitled to receive as a result of such Change of Control Transaction. A “Change of Control Transaction” includes: (i) consummation of a tender offer for the ownership of 50% or more of the outstanding voting securities of the Company, (ii) a merger or consolidation of the Company with another corporation, or (iii) a person acquiring 50% or more of the outstanding voting securities of the Company, unless as a result of (i), (ii) or (iii), more than 50% of the outstanding voting securities of the surviving corporation shall be owned by (a) the stockholders of the Company as of the time immediately prior to commencement of such tender offer, or the consummation of such merger or acquisition, as applicable, or (b) any employee benefit plan of the Company or its subsidiaries and their affiliates. Notwithstanding anything to the contrary herein, neither (i) the acquisition of shares of capital stock of the Company by Kien Huat, Gen USA or any of their respective affiliates or any person that is a “group” of which Kien Huat, Gen USA or their respective affiliates is a member (including the Purchase and the Contributions, as defined in that certain Term Sheet, dated as of August 5, 2019, entered into by Kien Huat, Genting Malaysia and Gen USA) nor (ii) the consummation of the Merger pursuant to the Merger Agreement shall constitute a Change of Control Transaction.

Limitation on Conversion

The Company may not issue Conversion Shares underlying the Additional Series F Shares equal to 20% or more of the Company’s issued and outstanding Common Stock or voting power prior to a conversion of the Additional Series F Shares unless and until the Company obtains the approval for the issuance of the Additional Series F Shares by a majority of the voting power of the Company’s issued and outstanding Voting Stock in accordance with the applicable Nasdaq Rules, and such approval becomes effective in accordance with Rule 14c-2 under the Exchange Act.

Share Reserve

So long as shares of Series F Preferred Stock are outstanding, the Company shall reserve and keep available such number of shares of Common Stock to be sufficient to issue the Conversion Shares.

Subsequent Rights Offerings

In the event that the Company issues additional shares of Common Stock and/or any rights, warrants, or other securities exercisable or exchangeable for shares of Common Stock pro rata to all (or substantially all) of the record holders of any class of shares of Common Stock (the “Purchase

 

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Rights”), then each holder of Series F Preferred Stock will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if the holder held the number of shares of Common Stock acquirable upon complete conversion of its Series F Preferred Stock immediately prior to the date the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

Liquidation Preference

In the event of a liquidation, dissolution or winding up of the Company, then the holders of the Series F Preferred Stock shall receive the Stated Value per share plus an amount equal to all declared, and accrued but unpaid dividends and distributions thereon to the date of such payment. No distributions shall be made to holders of junior securities, including holders of the Company’s Common Stock, until such liquidation payment is made to the holders of Series F Preferred Stock.

This section describes the material terms of the Series F Certificate of Designation, as amended by the Series F COD Amendment. The foregoing description of the Series F Certificate of Designation does not purport to be complete and is qualified in its entirety by reference to the complete text of the Series F COD Amendment and the Series F Certificate of Designation, copies of which are attached as Annex B and Annex E, respectively, to this Information Statement and are incorporated herein by reference.

The Series F Certificate of Designation and Series F COD Amendment should not be read alone, but should instead be read in conjunction with the other information regarding the Company and its operations and Kien Huat and that is contained in this Information Statement, as well as in the filings that we have made and may make with the SEC.

Reasons for Entry into the August 2019 KH Commitment Amendment and Effect of the Issuance of Additional Series F Shares and Conversion Shares on Current Stockholders

The additional financing contemplated by the August 2019 KH Commitment Amendment and the issuance of Additional Series F Shares are being undertaken to strengthen the Company’s capital structure, enhance its financial flexibility, as well as to induce Hercules to enter into the Merger Agreement so as to provide equity financing sufficient to fund the Company’s payment obligations until consummation of the proposed merger.

The potential issuance of shares of the Company’s common stock upon conversion of the Series F Preferred Stock, including the Additional Series F Shares, would result in an increase in the number of shares of Common Stock outstanding, and our stockholders will incur dilution of their percentage ownership to the extent that Kien Huat converts its shares of Series F Preferred Stock, which may be material to the current stockholders.

Based on the capitalization of the Company as of the Record Date, the conversion of all shares of Series F Preferred Stock at the Base Conversion Price would result in the holders thereof owning approximately 85.5% of our outstanding Common Stock after giving effect to such conversion. This would amount to a dilution of approximately 10.7% to existing holders of Common Stock.

The Series F Preferred Stock is entitled to the same dividend and distribution rights as holders of the Common Stock on as-converted basis. As such, another dilutive effect resulting from the issuance of Series F Preferred Stock will be a dilution to dividends and distributions.

 

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Agreements with Kien Huat and Other Interests of Certain Persons

KH 2018 Preferred Stock Commitment Letter

The KH 2018 Preferred Stock Commitment Letter is described above in the section entitled “The KH 2018 Preferred Stock Commitment Letter”.

August 2019 KH Commitment Amendment

The August 2019 KH Commitment Amendment is described above in the section entitled “August 2019 KH Commitment Amendment”.

Subscription Agreement

The Subscription Agreements are described above in the section entitled “The Subscription Agreements”.

August 2019 Merger Agreement

On August 18, 2019, the Company entered into the Merger Agreement, providing for the Merger. Pursuant to the Merger Agreement, at the Effective Time, each issued and outstanding share of the Company’s Common Stock (other than any Rollover Shares, Canceled Shares or Dissenting Shares), will be converted into the right to receive the Common Merger Consideration, and each issued and outstanding share of the Company’s Series B Preferred Stock (other than Rollover Shares, Canceled Shares or Dissenting Shares), will be converted into the right to receive an amount in cash equal to the product of the Common Merger Consideration, multiplied by the number of shares of Common Stock into which such share of Series B Preferred Stock is convertible. In addition, pursuant to the Merger Agreement, at the Effective Time, (i) the Rollover Shares will remain outstanding, (ii) the Canceled Shares will be canceled and (iii) the Dissenting Shares will entitle the holder thereof only to such appraisal rights.

Stockholders of the Company will be asked to vote on the adoption of the Merger Agreement at a special meeting that will be held on a date to be announced (the “Special Meeting”). A condition to the consummation of the Merger is the adoption of the Merger Agreement by (A) holders of a majority of the voting power of the outstanding shares of the Company’s Common Stock, Series B Preferred Stock and Series F Preferred Stock, voting as a single class, entitled to vote thereon as of the record date for the Special Meeting; and (B) holders of a majority of the voting power of the outstanding shares of the Company’s Common Stock and Series B Preferred Stock, voting as a single class, that are not owned by Kien Huat, Genting Malaysia, their respective affiliates or any officer or director of the Company (the “Requisite Company Vote”). Consummation of the Merger is also subject to a number of other customary conditions, including without limitation that certain requisite gaming authority approvals have been obtained and remain in full force and effect, the absence of any law or order enjoining or prohibiting the Merger, and that at least twenty-one calendar days shall have elapsed since this Information Statement is cleared by the staff of the SEC and mailed to the Company’s stockholders. Moreover, each party’s obligation to consummate the Merger is subject to certain other conditions, including without limitation: (a) the accuracy of the other party’s representations and warranties contained in the Merger Agreement (subject to certain materiality qualifiers); and (b) the other party’s compliance with its covenants and agreements contained in the Merger Agreement in all material respects. In addition, the obligation of Parent to consummate the Merger is subject to the

 

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non-occurrence of an event of default under certain of the Company’s outstanding indebtedness, subject to certain exceptions, and the non-occurrence of a Company Material Adverse Effect (as defined in the Merger Agreement) from the date of the Merger Agreement to the Effective Time. Availability of financing for the Merger is not a condition to Parent’s obligations to consummate the Merger.

The Company has made customary representations and warranties to Parent and Merger Sub in the Merger Agreement. The Company has also entered into certain customary covenants and agreements in the Merger Agreement, including, without limitation, covenants regarding: (i) the conduct of the business of the Company prior to the consummation of the Merger; (ii) the calling and holding of the Special Meeting for the purpose of obtaining the Requisite Company Vote; and (iii) the use of its reasonable best efforts to cause the Merger to be consummated.

Under the Merger Agreement, during the 10-business day period beginning on the date of the Merger Agreement (the “Go-Shop Period”), the Company has the right to solicit, initiate, knowingly facilitate or knowingly encourage any alternative takeover proposal and to participate or engage in discussions or negotiations with respect to any takeover proposal. At the end of the Go-Shop Period, the Company will cease such activities, and be subject to customary covenants restricting its ability to solicit takeover proposals from third parties or to provide information to and engage in discussions with a third party in relation to a takeover proposal, subject to certain customary exceptions to permit the Board of Directors of the Company (the “Board”) to comply with its fiduciary duties summarized further below. However, if a third party has submitted a takeover proposal during the Go-Shop Period that the Board or the special committee of disinterested directors of the Company who are also independent of Kien Huat and its affiliates (the “Special Committee”) determines in good faith, after consultation with its financial advisor and outside legal counsel, is or would reasonably be expected to result in a Superior Proposal (as defined below) (the person making such an alternative proposal, an “Exempted Party”), then the Company may continue discussions or negotiations with such Exempted Party until the tenth day after the Go-Shop Period ends (the “Cut-Off Date”).

Following the end of the Go-Shop Period (or the end of the Cut-Off Date in respect of an Exempted Party) and until the Requisite Company Vote is obtained, the Board or the Special Committee may (i) change its recommendation that stockholders vote to adopt the Merger Agreement in response to an “Intervening Event” (as defined in the Merger Agreement) or (ii) change its recommendation in response to, or terminate the Merger Agreement to accept, a Superior Proposal, in each case, if the Board (acting on the recommendation of the Special Committee) determines in good faith, after consultation with its outside financial advisors and outside legal counsel, that failing to so act would be inconsistent with its fiduciary duties and if the Company first provides Parent an opportunity of up to five business days to negotiate amendments to the Merger Agreement that, if accepted by the Company, would, in the case of a Superior Proposal, cause the applicable takeover proposal to cease to be a Superior Proposal or, in the case of an Intervening Event, to cease to require a change to the Board’s recommendation that stockholders vote to adopt the Merger Agreement in response to such Intervening Event. A “Superior Proposal” is a bona fide written takeover proposal to acquire at least 75% of the outstanding equity or assets of the Company that the Special Committee has determined in good faith, after consultation with its outside legal counsel and financial advisors, (i) is on terms and conditions more favorable, from a financial point of view, to the stockholders of the Company than those contemplated by the Merger Agreement and (ii) is reasonably capable of being completed, taking into account all material financial, regulatory, legal and other aspects of such

 

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proposal, but excluding whether Parent and any of its affiliates that are stockholders of the Company would support the takeover proposal.

In addition to the right of the Company to terminate the Merger Agreement to accept a Superior Proposal, the Merger Agreement contains certain customary termination rights for both the Company and Parent. The Merger Agreement provides that, upon termination under specified circumstances, including if the Company terminates to accept a Superior Proposal, the Company is required to pay Parent a termination fee in the amount of $1.75 million.

Equity Commitment Letter

Pursuant to separate equity commitment letters, each dated August 18, 2019, each of Kien Huat and Resorts Worlds Omni, LLC, an affiliate of Genting Malaysia, have committed to, among other things, provide equity support sufficient, in the aggregate, to fund all of Parent’s payment obligations and relevant fees and expenses to be reimbursed by Parent under the Merger Agreement (such amount, the “Equity Commitment” and such equity commitment letter of Kien Huat, the “Kien Huat Equity Commitment Letter”). Pursuant to the Kien Huat Equity Commitment Letter, Kien Huat is obligated, subject to the terms and conditions thereof, to make a contribution to Parent of $30.7 million to fund the Equity Commitment. The Company has customary third party beneficiary rights under each of the equity commitment letters.

Voting Agreement

In connection with the execution of the Merger Agreement, Kien Huat entered into a voting agreement (the “Voting Agreement”) with the Company pursuant to which Kien Huat has agreed to vote its shares in the Company in favor of the Merger and the adoption of the Merger Agreement, subject to the limitations set forth in the Voting Agreement. Under the Voting Agreement, Kien Huat agreed not to transfer any of its shares in the Company, except to certain permitted transferees that agree to join the Voting Agreement. Kien Huat’s obligations under the Voting Agreement will automatically terminate upon the earliest to occur of (i) the mutual agreement of the parties thereto to terminate the Voting Agreement; (ii) the termination of the Merger Agreement in accordance with its terms, and (iii) the Effective Time.

Kien Huat Backstop Loan Agreement

On December 28, 2017, concurrently with, and as a condition to the closing of, the Delayed Draw Term Loan Credit Agreement, dated as of December 28, 2017, by and between the Company, Bangkok Bank PCL, New York Branch, as lender, and Monticello Raceway Management, Inc., as guarantor (the “Bangkok Bank Loan Agreement” and amounts lent thereunder, the “Bangkok Bank Loan”), the Company and Kien Huat entered into a loan agreement (the “Kien Huat Backstop Loan Agreement”), providing for loans to the Company in an aggregate principal amount of up to $20 million (the “Kien Huat Backstop Loan”). Any amounts borrowed under the Kien Huat Backstop Loan will be used exclusively to make payments required under the Bangkok Bank Loan Agreement and will mature on the one-year anniversary of the maturity date of the Bangkok Bank Loan, or such earlier date that the Bangkok Bank Loan is terminated (the “Backstop Maturity Date”). As of August 18, 2019, no amounts had been borrowed under the Kien Huat Backstop Loan.

The Kien Huat Backstop Loan bears interest at a rate of 12% per annum. Prior to the Backstop Maturity Date, interest on any principal amount outstanding under the Kien Huat Backstop Loan will

 

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accrue and be added to the outstanding principal of the Kien Huat Backstop Loan on the first business day of each calendar month beginning on January 1, 2018 and will thereafter be deemed to be part of the principal indebtedness. The Kien Huat Backstop Loan, including all interest and any other amounts due under the Kien Huat Backstop Loan, will be payable in cash on the Backstop Maturity Date. Kien Huat was paid a commitment fee of $200,000 on December 28, 2017 in connection with the entry into the Kien Huat Backstop Loan Agreement.

The Kien Huat Backstop Loan Agreement contains customary representations and warranties and affirmative covenants, including representations, warranties and covenants that restrict the Company’s use of the proceeds of the Kien Huat Backstop Loan to pay amounts due and payable under the Bangkok Bank Loan. Obligations under the Kien Huat Backstop Loan Agreement may be accelerated upon certain customary events of default (subject to grace periods, as applicable), including among others: nonpayment of principal, interest or fees; and breach of the affirmative covenants.

Kien Huat Subordinate Loan Agreement

On June 25, 2018, Kien Huat and the Company entered into a loan agreement (the “Kien Huat Subordinate Loan Agreement”), which provides for loans of up to $30 million (the “Kien Huat Subordinate Loan”). The Kien Huat Subordinate Loan is subordinate to the Bangkok Bank Loan. The proceeds of the Kien Huat Subordinate Loan may be used exclusively to make capital contributions to Montreign. Montreign may use such funds for marketing and general corporate purposes (including the payment of debt service). All amounts due under the Kien Huat Subordinate Loan will mature on December 28, 2020, which date may be extended for additional one-year periods if the Bangkok Bank Loan is similarly extended or accelerated in the event the Bangkok Bank Loan is accelerated. The maturity of the Kien Huat Subordinate Loan may also be extended for up to one year at the sole discretion of Kien Huat. Advances under the Kien Huat Subordinate Loan were made in four installments as follows: (i) $5 million was advanced on July 5, 2018; (ii) $5 million was advanced on July 31, 2018; (iii) $10 million was advanced on September 11, 2018; and (iv) $10 million was advanced on October 16, 2018. The only condition to each advance was the delivery of a request for an advance not less than five business days prior to the date of an advance and that the representations contained in the Kien Huat Subordinate Loan Agreement were true and correct. At June 30, 2019, $30 million was outstanding under the Kien Huat Subordinate Loan. The Company paid Kien Huat a commitment fee of $300,000 (or 1% of the principal amount) out of the proceeds of the first advance.

The Kien Huat Subordinate Loan bears interest at a rate of 12% per annum, compounded monthly, and will be payable monthly in arrears. Prior to the maturity of the Kien Huat Subordinate Loan, interest will not be required to be paid in cash and will be added to the outstanding principal of the Kien Huat Subordinate Loan and will thereafter be deemed to be part of the principal indebtedness due thereunder upon maturity. The Kien Huat Subordinate Loan may be repaid in full or in part at any time without premium or penalty.

The Kien Huat Subordinate Loan Agreement contains customary representations and warranties and affirmative covenants, including a restriction on the use of the proceeds of the Kien Huat Subordinate Loan as described above. Obligations under the Kien Huat Subordinate Loan Agreement may be accelerated upon certain customary events of default (subject to grace periods, as applicable), including among others: nonpayment of principal, interest or fees; breach of the affirmative covenants; and a default in payment of or acceleration of the Bangkok Bank Loan. Additionally, any future amendments to the Bangkok Bank Loan Agreement relating to default

 

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provisions thereunder, prepayment provisions or an increase of the maximum principal amount thereunder will be subject to Kien Huat’s prior written consent.

The Company agreed to indemnify and defend Kien Huat and its affiliates from negligent acts or omissions of the Company and its affiliates, any failure of the Company to comply with the terms of the Kien Huat Subordinate Loan Agreement and any failure of the Company to comply with any laws, except to the extent resulting from the gross negligence or willful misconduct of Kien Huat or its affiliates.

Kien Huat Investment Agreement

On August 19, 2009, the Company entered into the Investment Agreement by and between Kien Huat and the Company, dated August 19, 2009 (as amended on September 30, 2009, on August 19, 2009, the “Investment Agreement”), pursuant to which the Company issued 6,901,208 shares of Common Stock, representing just under 50% of its voting power at the time. 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 the Board of Directors, subject to the satisfaction of all legal and governance requirements regarding service as a member of the Board of Directors and to the reasonable approval of the Governance Committee of the Board of Directors. In 2017, Kien Huat recommended Messrs. Emanuel Pearlman, Ryan Eller and Gerard Lim for appointment to the Board of Directors pursuant to the Investment Agreement. On July 17, 2019, Mr. Eller resigned his position as a director on the Board of Directors. Kien Huat will continue to be entitled to recommend three nominees for 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 of Directors 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 nominees for directors to the Board of Directors, among other things, Kien Huat will have the right to nominate one of its nominees elected to serve as a director to serve as the Chairman of the Board of Directors, and Mr. Pearlman was appointed to serve as Executive Chairman of the Board of Directors pursuant to Kien Huat’s recommendation. 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 of Directors will be prohibited under the terms of the Investment Agreement from taking certain actions relating to fundamental transactions involving the Company and its subsidiaries and certain other matters without the affirmative vote of the directors nominated by Kien Huat.

Registration Rights

Pursuant to the Investment Agreement, the Company entered into a Registration Rights Agreement with the Kien Huat (the “Registration Rights Agreement”). The Registration Rights Agreement provides, among other things, that Kien Huat may require that the Company file one or more “resale” registration statements, registering under the Securities Act of 1933, as amended, the offer and sale of all of the Common Stock issued or to be issued to Kien Huat pursuant to the Investment Agreement as well as any shares acquired by way of a share dividend or share split or in connection with a combination of such shares, recapitalization, merger, consolidation or other reorganization with respect to such shares. In addition, pursuant to a series of commitment letters between the Company and Kien Huat, last amended on September 22, 2015, the Company agreed to register for resale all of the shares of Common Stock issued to Kien Huat in a rights offering commenced by the Company on January 5, 2015 and a rights offering commenced by the Company on January 4, 2016 (the “January 2016 Rights Offering”), as well as any follow-on rights offering, as well

 

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as any other unregistered shares of Common Stock (including the Conversion Shares) held by Kien Huat.

Kien Huat Letter Agreement

As a result of Kien Huat’s increased proportionate ownership following the consummation of the January 2016 Rights Offering and the conversion of a convertible promissory note issued to Kien Huat on November 17, 2010, at the request of the Company, on February 17, 2016, Kien Huat and the Company entered into a letter agreement (the “Kien Huat Letter Agreement”) pursuant to which, during the period commencing on February 17, 2016 and ending on the earlier of (i) the three year anniversary of the closing of the January 2016 Rights Offering and (ii) the one-year anniversary of the opening of Resorts World Catskills, Kien Huat has agreed not to take certain actions with respect to the Company. In particular, during such time period, Kien Huat has agreed not to, and to cause the Kien Huat parties not to, take certain actions in furtherance of a “going-private” transaction (as such term is defined in the Kien Huat Letter Agreement) involving the Company unless such transaction is subject to the approval of (x) holders of a majority of the votes represented by the common stock, Series B Preferred Stock and any other capital stock of the Company entitled to vote together with the common stock in the election of the Board (other than any such capital stock owned by any Kien Huat parties) and (x) either (A) a majority of disinterested members of the Board or (y) a committee of the Board composed of disinterested members of the Board. In addition, during such period, the Company and Kien Huat have agreed to cooperate to ensure that, to the greatest extent possible, the Board includes no fewer than three independent directors (the definition of independence as determined under the standards of The NASDAQ Stock Market LLC or any other securities exchange on which the common stock of the Company is then listed).

On December 28, 2017, the Company and Kien Huat amended the Kien Huat Letter Agreement to extend by one year Kien Huat’s obligation not to engage in a going-private transaction with the Company without the prior approval of the majority of the Company’s minority stockholders and a majority of the disinterested directors of the Company. As a result of the amendment, such restriction now covers a period ending in February 2020. Other than this one-year extension, all other terms of the Kien Huat Letter Agreement remain unchanged.

Other Interests

Mr. Gerard Ewe Keng Lim, our Director, is also a director of Kien Huat. Messrs. Pearlman and Lim were recommended by Kien Huat to the Board of Directors.

Pursuant to our Audit Committee Charter, the Audit Committee reviews and approves all transactions between the Company and its officers, directors, director nominees, principal stockholders and their immediate family members. We intend that any such transactions will be on terms no less favorable to the Company than the Company could obtain from unaffiliated third parties.

The transactions contemplated by the August 2019 Commitment Amendment, including the issuance of the Additional Series F Shares and the Conversion Shares, were approved by the Audit Committee, the Special Committee and the Board of Directors and of the Company on August 18, 2019, with Mr. Lim abstaining from such approvals. The Audit Committee and the Special Committee determined that the transactions contemplated thereby were fair to, and in the best interest of, the Company and its stockholders.

 

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Vote Required of the Outstanding Voting Stock

As of the Record Date, we had 34,435,907 shares of Common Stock, 44,258 shares of Series B Preferred Stock and 740 shares of Series F Preferred Stock issued and outstanding and entitled to vote. As of the Record Date, each share of Common Stock entitled the holder thereof to one vote, each share of Series B Preferred Stock entitled the holder thereof to fifty-four thousandths (.054) of one vote and each share of Series F Preferred Stock entitled the holder thereof to 5,000 votes. Accordingly, as of the Record Date, a total of 38,138,297 votes were entitled to vote on the Series F COD Amendment and the issuance of the Additional Series F Shares.

On the Record Date, Kien Huat, which owned a total of 28,914,606 shares of Common Stock and 740 shares of Series F Preferred Stock, which together represented approximately 85.5% of the voting power of the Voting Stock outstanding on the Record Date, executed and delivered the Written Consent.

 

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Description of Capital Stock

General

Our authorized capital stock consists of 150,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, of which 821,496 shares have been designated Series B Preferred Stock, $.01 par value per share, and 1,500 shares have been designated Series F Preferred Stock, $.01 par value per share (excluding the additional 100 shares that will be designated as Series F Preferred Stock upon the filing of the Series F COD Amendment on or about                 , 2019).

The transfer agent and registrar for our Common Stock and Series F Preferred Stock is Continental Stock Transfer & Trust Company.

Common Stock

As of the Record Date, there were 34,435,907 shares of Common Stock outstanding and 206 holders of record of our Common Stock.

Voting. Each holder of Common Stock is entitled to one vote for each share on all matters to be voted upon by the holders of Common Stock.

Dividends. Subject to preferences that may be applicable to any then outstanding preferred stock, holders of Common Stock are entitled to receive ratably those dividends, if any, as may be declared from time to time (in accordance with relevant laws and then-applicable contractual limitations) by our board of directors out of legally available funds.

Liquidation. In the event of our liquidation, dissolution or winding up, holders of Common Stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preferences that may be granted to the holders of any then outstanding shares of preferred stock.

Rights and Preferences The Common Stock has no preemptive, conversion or other subscription rights, and there are no redemption or sinking fund provisions applicable to the Common Stock. The rights, preferences and privileges of the holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock, which we may designate and issue in the future.

New York State Gaming Commission. Our Common Stock is transferable only subject to the provisions of Section 303 of the Racing, Pari-Mutuel Wagering and Breeding Law, so long as we hold directly or indirectly, a racing license issued by the New York State Gaming Commission (formerly 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 us. 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.

Our Common Stock is admitted for trading on The Nasdaq Global Market under the symbol “NYNY”.

 

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Preferred Stock

Our board of directors has the authority to issue up to an aggregate of 5,000,000 shares of preferred stock in one or more series and to fix the voting powers, designations, preferences and rights, and qualifications, limitations or restrictions thereof, of each such series without any further vote or action by the stockholders, of which an aggregate of 822,996 shares have been designated as a specific series of preferred stock. As of the date hereof, 44,258 shares of Series B Preferred Stock and 890 shares of Series F Preferred Stock are currently outstanding.

New York State Gaming Commission. Once designated and issued, our preferred stock is transferable only subject to the provisions of Section 303 of the Racing, Pari-Mutuel Wagering and Breeding Law, so long as we hold directly or indirectly, a racing license issued by the New York State Gaming Commission (formerly 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 us. The owners of preferred stock issued by the Company may be required by regulatory authorities to possess certain qualifications and may be required to dispose of their preferred stock if the owner does not possess such qualifications.

Series B Preferred Stock

We are authorized to issue up to 821,496 shares of Series B Preferred Stock, of which 44,258 shares are issued and outstanding. Each share of Series B Preferred Stock is convertible into 0.054 of a share of Common Stock and represents the right to 0.054 of a vote on all matters to be voted upon by the holders of Common Stock. The holders of Series B Preferred Stock are entitled to receive, out of assets legally available for payment, a cash dividend of $2.90 per annum per share of Series B Preferred Stock. This dividend to the holders of Series B Preferred Stock accrues from the date of initial issuance and is payable on the first day of each January, April, July and October. If any dividend on any share shall for any reason not be paid at the time such dividend becomes due, such dividend in arrears shall be paid as soon as payments are permissible under Delaware law. However, any dividend payment which is not made on or before January 30 of the following calendar year shall be payable in the form of shares of Common Stock in such number of shares as shall be determined by dividing (A) the product of (x) the amount of the unpaid dividend and (y) 1.3 by (B) the fair market value of the Common Stock. Finally, in the event of our liquidation, dissolution or winding up, the holders of our Series B Preferred Stock are entitled to receive a preferential distribution of $29 per share, plus all unpaid accrued dividends.

Series F Preferred Stock

For a description of our Series F Preferred Stock, see the section entitled “Background and Reasons for the Entry into the August 2019 Commitment Amendment, the Approval of the Issuance of Additional Series F Shares and the Series F COD Amendment—Series F Preferred Stock.”

 

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Delaware Anti-Takeover Law and Provisions of our Certificate of Incorporation and Bylaws

Delaware Anti-Takeover Law

We are subject to Section 203 of the DGCL. Section 203 generally prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the time that the person became an interested stockholder, unless:

 

   

prior to such time, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

   

the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced that resulted in the stockholder becoming an interested stockholder, excluding for purposes of determining the voting stock outstanding (i) shares owned by persons who are directors and also officers and (ii) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

   

on or subsequent to the time that the stockholder became an interested stockholder, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.

Section 203 defines a business combination to include:

 

   

any merger or consolidation involving the corporation and the interested stockholder;

   

any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;

   

subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; or

   

the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with, or controlling, or controlled by, the entity or person. The term “owner” is broadly defined to include any person that, individually, with or through that person’s affiliates or associates, among other things, beneficially owns the stock, or has the right to acquire the stock, whether or not the right is immediately exercisable, under any agreement or understanding or upon the exercise of warrants or options or otherwise or has the right to vote the stock under any agreement or understanding, or has an agreement or understanding with the beneficial owner of the stock for the purpose of acquiring, holding, voting or disposing of the stock.

The restrictions in Section 203 do not apply to corporations that have elected, in the manner provided in Section 203, not to be subject to Section 203 of the DGCL or, with certain exceptions, which do not have a class of voting stock that is listed on a national securities exchange or authorized for quotation on the Nasdaq Stock Market or held of record by more than 2,000 stockholders. Our Second Amended and Restated Certificate of Incorporation and our Third Amended and Restated Bylaws do not opt out of Section 203.

 

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Section 203 could delay or prohibit mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

Certificate of Incorporation and Bylaws

Provisions of our Second Amended and Restated Certificate of Incorporation and Third Amended and Restated Bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might

otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our Common Stock. Among other things, our Second Amended and Restated Certificate of Incorporation and Third Amended and Restated Bylaws:

 

   

permit our board of directors to issue up to an additional 4,954,852 shares of preferred stock, without further action by the stockholders, with any rights, preferences and privileges as they may designate, including the right to approve an acquisition or other change in control;

   

provide that the authorized number of directors may be changed only by resolution of the board of directors;

   

provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

   

do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of Common Stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose);

   

provide that special meetings of our stockholders may be called only by the chairman of the board or by the board of directors; and

   

set forth an advance notice procedure with regard to the nomination, other than by or at the direction of our board of directors, of candidates for election as directors and with regard to business to be brought before a meeting of stockholders.

Limitation of Liability; Indemnification

Our certificate of incorporation contains certain provisions permitted under the DGCL relating to the liability of our directors. These provisions eliminate a director’s personal liability for monetary damages resulting from a breach of fiduciary duty, except in certain circumstances involving wrongful acts, including:

 

   

for any breach of the director’s duty of loyalty to us or our stockholders;

   

for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

   

any unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions as provided in Section 174 of the DGCL; or

   

for any transaction from which the director derives an improper personal benefit.

 

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These provisions do not limit or eliminate our rights or those of any stockholder to seek non-monetary relief, such as an injunction or rescission, in the event of a breach of a director’s fiduciary duty. These provisions will not alter a director’s liability under federal securities laws.

Our Second Amended and Restated Certificate of Incorporation also provides that if the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of our directors will be eliminated or limited to the fullest extent permitted by the DGCL. We believe that these provisions are necessary to attract and retain qualified individuals to serve as directors and officers.

Our Third Amended and Restated Bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the DGCL, as it now exists or may in the future be amended, against all expenses and liabilities reasonably incurred for their service. Our Third Amended and Restated Bylaws provide that we will advance the expenses incurred by a director or officer in advance of the final disposition of an action or proceeding; provided that such advances shall be repaid to us to the extent that it is ultimately determined that the director or officer is not entitled to be so indemnified. The Third Amended and Restated Bylaws, together with our Second Amended and Restated Certificate of Incorporation, also authorize us to indemnify, on a case-by-case basis, any of our employees or agents and permit us to secure insurance on behalf of any officer, director, employee or agent for any liability arising out of his or her action in that capacity, whether or not the DGCL would otherwise permit indemnification.

 

27


PRINCIPAL STOCKHOLDERS

The following table sets forth information concerning beneficial ownership of our capital stock outstanding at August 18, 2019, by: (i) each stockholder known to be the beneficial owner of more than five percent of any class of our voting stock then outstanding; (ii) each of our directors; (iii) each of our “named executive officers” as defined in Item 402(a)(3) of Regulation S-K promulgated under the Exchange Act; and (iv) our current directors and executive officers as a group.

As of August 18, 2019, there were 34,435,907 shares of our Common Stock, 44,258 shares of Series B Preferred Stock and 740 shares of Series F Preferred Stock issued and outstanding and entitled to notice of and to vote on all matters presented to stockholders. As of August 18, 2019, each share of Common Stock entitles the holder thereof to one vote, each share of Series B Preferred Stock entitles the holder thereof to fifty-four thousandths (.054) of one vote and each share of Series F Preferred Stock entitles the holder thereof to 5,000 votes.

The information regarding beneficial ownership of our Common Stock has been presented in accordance with the rules of the SEC. Under these rules, a person may be deemed to beneficially own any shares of capital stock as to which such person, directly or indirectly, has or shares voting power or investment power, and to beneficially own any shares of our capital stock as to which such person has the right to acquire voting or investment power within 60 days through the exercise of any stock option or other right. The percentage of beneficial ownership as to any person as of a particular date is calculated by dividing (a) (i) the number of shares beneficially owned by such person plus (ii) the number of shares as to which such person has the right to acquire voting or investment power within 60 days by (b) the total number of shares outstanding as of such date, plus any shares that such person has the right to acquire from us within 60 days. Including those shares in the tables does not, however, constitute an admission that the named stockholder is a direct or indirect beneficial owner of those shares. Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares that power with that person’s spouse) with respect to all shares of capital stock listed as owned by that person or entity.

Beneficial Ownership of Common Stock as of the Record Date

 

Name and Address of                                                 
Beneficial Owner (1)                                                 
     Common Stock
Beneficially Owned
   Series B Preferred Stock
Beneficially Owned
   Series F Preferred Stock
Beneficially Owned
 

Directors

   Shares                 Percentage        Shares        Percentage        Shares                  Percentage  

Emanuel R. Pearlman

     58,331        (2   *                       

Keith L. Horn

     9,250        (3   *                       

Edmund Marinucci

     10,622        (4   *                       

Nancy Palumbo

     21,372        (5   *                       

Gerard Ewe Keng Lim

     4,875        (6   *                       

Current Officers

                      

Nanette L. Horner

     8,734        (7   *                       

Jamie M. Sanko

     0        (8   *                       

Kevin D. Kline

     0        (9   *                       

Ryan Eller

     0        (10   *                       

Directors and Officers as a
Group (9 people)

     113,184        (11   *               

 

28


Name and Address of                                        
Beneficial Owner (1)                                        
     Common Stock
Beneficially Owned
  Series B Preferred Stock
Beneficially Owned
  Series F Preferred Stock
Beneficially Owned

Directors

   Shares                Percentage       Shares        Percentage       Shares              Percentage

Stockholders

                                       

Kien Huat Realty III Limited

c/o Kien Huat Realty Sdn Bhd.

22nd Floor Wisma Genting

Jalan Sultan Ismail

50250 Kuala Lumpur

Malaysia

   28,914,606      (12)      84.0%        740    (13)    100%

Patricia Cohen

6138 S. Hampshire Ct.

Windermere, FL 34786

           44,258    100%        

 

*

less than 1%

(1)

Unless otherwise indicated, the address of each stockholder, director, and executive officer listed above is Empire Resorts, Inc., c/o Monticello Casino and Raceway, State Route 17B, P.O. Box 5013, Monticello, New York 12701.

(2)

Consists of 39,581 shares of our common stock owned directly by Mr. Pearlman and 18,750 shares of restricted stock issued pursuant to the Company’s 2015 Equity Incentive Plan which vest on March 16, 2020; however, there is immediate vesting in the event (i) Mr. Pearlman is removed from the Board other than for cause, (ii) if he is not re-nominated by Kien Huat to stand for election to the Board, or (iii) upon a Change in Control (as defined in the award). Does not reflect 25,000 shares of Restricted Stock Units (“RSUs”) issued pursuant to the Company’s 2015 Equity Incentive Plan, which vest as follows: 8,333 shares vested on June 5, 2018, 8,333 shares vested on June 5, 2019 and 8,334 shares vest on June 5, 2020; 25,000 RSUs issued pursuant to the Company’s 2015 Equity Incentive Plan, which vest as follows: 8,333 shares vested on March 13, 2019, 8,333 shares vest on March 13, 2020 and 8,334 shares vest on March 13, 2021; and 50,000 RSUs issued pursuant to the Company’s 2015 Equity Incentive Plan, which vest as follows: 16,667 shares vest on January 21, 2020, 16,667 shares vest on January 21, 2021 and 16,666 shares vest on January 21, 2022; however, there is immediate vesting in the event (i) Mr. Pearlman is removed from the Board other than for cause, (ii) if he is not re-nominated by Kien Huat to stand for election to the Board, or (iii) upon a Change in Control (as defined in the award).

(3)

Consists of 9,250 shares of our common stock owned directly by Mr. Horn. Does not reflect 11,000 shares of RSUs issued pursuant to the Company’s 2015 Equity Incentive Plan which vest on January 6, 2020 and 6,400 shares of RSUs issued pursuant to the Company’s 2015 Equity Incentive Plan which vest on May 6, 2020.

(4)

Consists of 10,622 shares of our common stock owned directly by Mr. Marinucci. Does not reflect 11,000 shares of RSUs issued pursuant to the Company’s 2015 Equity Incentive Plan which vest on January 6, 2020 and 6,400 shares of RSU’s issued pursuant to the Company’s 2015 Equity Incentive Plan which vest on May 6, 2020.

(5)

Consists of 21,372 shares of our common stock owned directly by Ms. Palumbo. Does not reflect 11,000 shares of RSUs issued pursuant to the Company’s 2015 Equity Incentive Plan which vest on January 6, 2020 and 6,400 shares of RSU’s issued pursuant to the Company’s 2015 Equity Incentive Plan which vest on May 6, 2020.

(6)

Consists of 4,875 shares of our common stock owned directly by Mr. Lim. Does not reflect 11,000 shares of RSUs issued pursuant to the Company’s 2015 Equity Incentive Plan which vest on January 6, 2020 and 6,400 shares of RSU’s issued pursuant to the Company’s 2015 Equity Incentive Plan which vest on May 6, 2020.

(7)

Consists of 8,734 shares of our common stock owned directly by Ms. Horner. Does not reflect 1,000 RSUs issued pursuant to the Company’s 2015 Equity Incentive Plan, 333 shares of which vested on May 1, 2018, 333 shares vested on May 1, 2019 and 334 shares vest on May 1, 2020; however, there is immediate vesting

 

29


  in the event of a Change in Control (as defined in the award); and 6,600 RSUs issued pursuant to the Company’s 2015 Equity Incentive Plan, which vest as follows: 2,200 shares vested on March 12, 2019, 2,200 shares vest on March 12, 2020 and 2,200 shares vest on March 12, 2021; however, there is immediate vesting in the event of a Change in Control (as defined in the award). On January 20, 2019, Ms. Horner was granted 22,500 RSUs issued pursuant to the Company’s 2015 Equity Incentive Plan, which vest as follows: 11,250 shares vested immediately on the date of grant and 11,250 shares vest on March 20, 2020; however, there is immediate vesting in the event of a Change in Control (as defined in the award).
(8)

Consists of 40,000 RSUs issued to Mr. Sanko pursuant to the Company’s 2015 Equity Incentive Plan, which vest as follows: 3,333 shares vested on March 13, 2019, 3,333 shares vest on March 13, 2020 and 3,334 shares vest on March 13, 2020; however, there is immediate vesting in the event of a Change in Control (as defined in the award). On January 20, 2019, Mr. Sanko was granted 30,000 RSUs issued pursuant to the Company’s 2015 Equity Incentive Plan, which vest as follows: 15,000 shares vested immediately on the date of grant and 15,000 shares vest on March 20, 2020; however, there is immediate vesting in the event of a Change in Control (as defined in the award).

(9)

Consists of 40,000 RSUs issued to Mr. Kline pursuant to the Company’s 2015 Equity Incentive Plan, which vest as follows: 3,333 shares vested on March 13, 2019, 3,333 shares vest on March 13, 2020 and 3,334 shares vest on March 13, 2020; however, there is immediate vesting in the event of a Change in Control (as defined in the award). On January 20, 2019, Mr. Kline was granted 30,000 RSUs issued pursuant to the Company’s 2015 Equity Incentive Plan, which vest as follows: 15,000 shares vested immediately on the date of grant and 15,000 shares vest on March 20, 2020; however, there is immediate vesting in the event of a Change in Control (as defined in the award).

(10)

Does not reflect 90,000 RSUs issued pursuant to the Company’s 2015 Equity Incentive Plan. On June 5, 2017, Mr. Eller was granted 20,000 RSUs, which vest as follows: 6,667 shares vested on June 5, 2018, 6,667 shares vested on June 5, 2019 and 6,666 shares vest on June 5, 2020; however, there is immediate vesting in the event of a Change in Control (as defined in the award). On March 13, 2018, Mr. Eller was granted 20,000 RSUs, which vest as follows: 6,667 shares vested on March 13, 2019, 6,667 shares vest on March 13, 2020 and 6,666 shares vest on March 13, 2021; however, there is immediate vesting in the event Mr. Eller is (i) terminated by the Company other than for cause (as such term is defined in the award), (ii) removed from the Board other than for cause or he is not re-nominated by Kien Huat to stand for election to the Board, or (iii) upon a Change in Control (as defined in the award). On January 21, 2019, Mr. Eller was granted 50,000 RSUs, which vest as follows: 16,667 shares vest on January 21, 2020, 16,667 shares vest on January 21, 2021 and 16,666 shares vest on January 21, 2022; however, there is immediate vesting in the event Mr. Eller is (i) terminated by the Company other than for cause (as such term is defined in the award), (ii) removed from the Board other than for cause or he is not re-nominated by Kien Huat to stand for election to the Board, or (iii) upon a Change in Control (as defined in the award).

(11)

Consists of 94,434 shares of our common stock owned directly by directors and officers of the Company and 18,750 shares of restricted stock issued pursuant to the Company’s 2015 Equity Incentive Plan which currently have voting rights but vest on March 16, 2020. Does not include 369,699 RSUs issued to officers and directors pursuant to the Company’s 2015 Equity Incentive Plan.

(12)

Based solely on the Schedule 13D/A filed jointly by Kien Huat and Tan Sri Lim Kok Thay on August 19, 2019. Kien Huat is indirectly controlled by Tan Sri Lim Kok Thay. Tan Sri Lim Kok Thay and Kien Huat share voting and dispositive power over the equity securities.

(13)

Excludes an additional 150 shares of Series F Preferred Stock which Kien Huat acquired from the Company on August 26, 2019 pursuant to the KH 2018 Preferred Stock Commitment Letter, as amended by the May 2019 KH Commitment Amendment.

 

30


HOUSEHOLDING INFORMATION

Unless we have received contrary instructions, we may send a single copy of this Information Statement to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. This process, known as “householding,” reduces the volume of duplicate information received at any one household and helps to reduce our expenses. However, if stockholders prefer to receive multiple sets of our disclosure documents at the same address this year or in future years, the stockholders should follow the instructions described below. Similarly, if an address is shared with another stockholder and together both of the stockholders would like to receive only a single set of our disclosure documents, the stockholders should follow these instructions:

 

   

If the shares are registered in the name of the stockholder, the stockholder should contact us at our offices at Empire Resorts, Inc., c/o Monticello Casino and Raceway, State Route 17B, P.O. Box 5013, Monticello, New York 12701, to inform us of their request; or

   

If a bank, broker or other nominee holds the shares, the stockholder should contact the bank, broker or other nominee directly.

WHERE YOU CAN FIND MORE INFORMATION

We file annual and quarterly reports and other reports and information with the SEC. We distribute to our stockholders annual reports containing financial statements audited by our independent registered public accounting firm and, upon request, quarterly reports for the first three quarters of each fiscal year containing unaudited financial information. In addition, these reports and other information are filed through Electronic Data Gathering, Analysis and Retrieval (known as “EDGAR”) system and are publicly available on the Securities and Exchange Commission’s site on the Internet, located at http://www.sec.gov. We will provide without charge to you, upon written or oral request, a copy of the reports and other information filed with the SEC.

Any requests for copies of information, reports or other filings with the SEC should be directed to Empire Resorts, Inc., c/o Monticello Casino and Raceway, 204 State Route 17B, P.O. Box 5013, Monticello, New York 12701, Attn: Secretary.

We have not authorized anyone to give you any information or to make any representations about us or the transactions we discuss in this Information Statement other than those contained in this Information Statement. If you are given any information or representations about these matters that is not discussed in this Information Statement, you must not rely on that information.

EMPIRE RESORTS, INC.

c/o Monticello Casino and Raceway

204 State Route 17B, P.O. Box 5013

Monticello, New York 12701

(845) 807-0001

 

 

31


Annex A

Kien Huat Realty III Limited

August 18, 2019

Empire Resorts, Inc.

c/o Monticello Casino and Raceway

204 State Route 17B, P.O. Box 5013

Monticello, New York 12701

Attention:

Emanuel R. Pearlman, Executive Chairman of the Board of Directors

Ryan Eller, President and Chief Executive Officer

Re: Amendment to Letter Agreement, as last amended on May 7, 2019

Gentlemen:

Reference is made to that certain letter agreement between the Empire Resorts, Inc. (“Empire”) and Kien Huat Realty III Ltd. (“KHRL”) entered into on November 6, 2019 (as amended and restated on November 9, 2018 and May 7, 2019, the “2018 KHRL Preferred Stock Commitment Letter”), pursuant to which KHRL committed to provide equity financing in support of the general corporate and working capital requirements of Empire and its subsidiaries. Pursuant to the 2018 KHRL Preferred Stock Commitment Letter, KHRL agreed to purchase up to $126 million of Empire’s Series F Preferred Stock on the terms set forth in the 2018 KHRL Preferred Stock Commitment Letter pursuant to the following schedule: (i) up to $12 million no earlier than November 9, 2018; (ii) up to $20 million no earlier than February 15, 2019; (iii) up to $27 million no earlier than May 15, 2019; (iv) up to $15 million no earlier than June 17, 2019; (v) up to $15 million no earlier than August 15, 2019; and (v) up to $37 million no earlier than November 15, 2019 (the “Original Commitments”). Capitalized or other terms used and not defined herein but defined in the 2018 KHRL Preferred Stock Commitment Letter shall have the meanings ascribed to them in the 2018 KHRL Preferred Stock Commitment Letter.

KHRL and Empire hereby agree to amend the 2018 KHRL Preferred Stock Commitment Letter as follows:

 

  1.

The Principal Amount shall be increased from $126 million to $151 million of which $74 million has been funded prior to the date hereof.

 

  2.

Schedule 2 of the 2018 KHRL Preferred Stock Commitment Letter shall be amended and restated in its entirety to reflect purchase of the Series F Preferred Stock pursuant to the following schedule: (i) up to $12 million no earlier than November 9, 2018; (ii) up to $20 million no earlier than February 15, 2019; (iii) up to $27 million no earlier than May 15, 2019; (iv) up to $15 million no earlier than June 17, 2019; (v) up to $15 million no earlier than August 15, 2019; (vi) up to $7.5 million no earlier than September 15, 2019; (vii) up to $7.5 million no earlier than October 15, 2019; (viii) up to $37 million no earlier than November 15, 2019; and (ix) $10 million no earlier than February 15, 2020 (as attached hereto).

 

 

A-1


  3.

KHRL, as holder of a majority of the shares of Empire voting stock entitled to vote and as the sole holder of the issued and outstanding Convertible Preferred Stock, will execute a written consent (the “Stockholder Consent”) to approve (i) the issuance of an incremental $25 million of shares of Convertible Preferred Stock and the shares of common stock of Empire underlying the Convertible Preferred Stock pursuant to the terms of the 2018 KHRL Preferred Stock Commitment Letter, if any, and the terms of any specific financing consummated in connection herewith, and (ii) to adopt and approve an amendment to the Restated Certificate of the Designations, Powers Preferences and Rights of the Series F Convertible Preferred Stock ($0.01 par value per share) of Empire attached hereto as Exhibit A (the “Amendment”). Further, the Board of Directors of Empire, including each director that is independent of KHRL, shall (i) approve the Amendment, (ii) declare the Amendment advisable, (iii) direct that the Amendment be submitted to the stockholders of Empire entitled to vote thereon and (iv) recommend that stockholders of Empire vote in favor of the adoption of the Amendment (together with the Stockholder Consent, the “Approvals”). If applicable, Empire will file an information statement (the “Information Statement”) with respect to the Stockholder Consent with the Securities and Exchange Commission (the “SEC”) and mail to Empire stockholders such Information Statement. Empire shall file the Amendment with the Secretary of State of the State of Delaware as soon as practicable on the twenty-first day following the date the Information Statement was mailed to Company stockholders. The Approvals shall be obtained, and the Information Statement shall be filed with the SEC no later than August 26, 2019. Empire will agree to maintain at all times sufficient authorized shares of Company common stock to account for the conversion of all the Convertible Stock contemplated hereby.

 

  4.

Upon any termination of the Agreement and Plan of Merger by and between Empire, Hercules Topco LLC, a Delaware limited liability company, and Hercules Merger Subsidiary Inc., a Delaware corporation, dated as of the date hereof (the “Merger Agreement”), pursuant to Sections 7.3(b) or 7.4(a) of the Merger Agreement, this letter agreement shall automatically terminate and shall be null and void (provided, that any termination of the Merger Agreement pursuant to Section 7.3(b) thereof shall only result in the automatic termination of this letter agreement if such termination resulted from a Willful and Material Breach (as defined in the Merger Agreement) of the Merger Agreement). Notwithstanding anything in this letter agreement to the contrary, upon termination of this letter agreement, the 2018 KHRL Preferred Stock Commitment Letter shall remain in full force and effect, including the Original Commitments thereunder.

The parties hereto hereby agree that, except as specifically provided in and modified by this letter agreement, the 2018 KHRL Preferred Stock Commitment Letter is in all other respects hereby ratified and confirmed and references to the 2018 KHRL Preferred Stock Commitment Letter shall be deemed to refer to the 2018 KHRL Preferred Stock Commitment Letter as modified by this letter agreement. This letter agreement shall be governed by the laws of the State of Delaware, without giving effect to the conflict of laws provisions thereof.

[signature page follows]

 

A-2


Sincerely,

KIEN HUAT REALTY III LIMITED

By:   /s/ Gerard Lim Ewe Keng
Name:   Gerard Lim Ewe Keng

Title:

 

Authorized Signatory

Accepted as of the date above written:

 

EMPIRE RESORTS, INC.
By:   /s/ Ryan Eller
Name:   Ryan Eller

Title:

 

President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

[Signature Page to 2018 KHRL Preferred Stock Commitment Letter Amendment]

 

A-3


Schedule 2

Funding Dates

 

Draw Date
No Earlier Than

  

Maximum
Funding Amount

 

11/9/2018

   $ 12 million  

2/15/2019

   $ 20 million  

5/15/2019

   $ 27 million  

6/17/2019

   $ 15 million  

8/15/2019

   $ 15 million  

9/15/2019

   $ 7.5 million  

10/15/2019

   $ 7.5 million  

11/15/2019

   $ 37 million  

2/15/2020

   $ 10 million  

 

A-4


EXHIBIT A

 

A-5


Annex B

CERTIFICATE OF AMENDMENT

OF

AMENDED AND RESTATED

CERTIFICATE OF THE DESIGNATIONS, POWERS

PREFERENCES AND RIGHTS

OF THE

SERIES F CONVERTIBLE PREFERRED STOCK

($0.01 PAR VALUE PER SHARE)

OF

EMPIRE RESORTS, INC.

A DELAWARE CORPORATION

PURSUANT TO SECTION 242 OF THE

GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

Empire Resorts, Inc., a corporation duly organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify that:

1.    The Amended and Restated Certificate of the Designations, Powers Preferences and Rights of the Series F Convertible Preferred Stock ($0.01 Par Value per Share) of the Corporation is hereby amended by:

a.    Replacing the words “One Thousand Five Hundred (1,500)” in Section 1 thereof with the words “One Thousand Six Hundred (1,600)”; and

b.    Adding a new Subsection 4(b)(iv) to provide in full as follows:

“(iv) Notwithstanding anything to the contrary herein, neither (i) the acquisition of shares of capital stock of the Corporation by Kien Huat Realty III Limited (“Kien Huat”), Genting (USA) Limited (“Gen USA”) or any of their respective affiliates or any Person that is a “group” of which Kien Huat, Gen USA or their respective affiliates is a member (including the Purchase and the Contributions pursuant to that certain Term Sheet, dated as of August 5, 2019, entered into by Kien Huat, Genting Malaysia Berhad and Gen USA) nor (ii) the consummation of a merger pursuant to that certain Agreement and Plan of Merger, dated August 18, 2019 (as it may be amended from time to time), by and between Hercules Topco LLC, Hercules Merger Subsidiary Inc. and the Corporation shall constitute a Change of Control Transaction.”

2.    The foregoing amendment was duly adopted in accordance with the provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware.

[Signature Page Follows]

 

B-1


IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed by its duly authorized officer on this                  day of August, 2019.

 

EMPIRE RESORTS, INC.
By:    
Name:   Ryan Eller
Title:   President and Chief Executive Officer

 

B-2


Annex C

Kien Huat Realty III Limited

November 5, 2018

Empire Resorts, Inc.

c/o Monticello Casino and Raceway

204 State Route 17B, P.O. Box 5013

Monticello, New York 12701

Attention:

Emanuel R. Pearlman, Executive Chairman of the Board of Directors

Ryan Eller, President and Chief Executive Officer

Re: Financing

Gentlemen:

We understand that Empire Resorts, Inc. (the “Company”) may raise additional financing (“Financing”) to supplement the Company’s existing resources.

The purpose of this letter is to confirm the commitment of Kien Huat Realty III Limited (“KHRL”) to participate in the Financing in accordance with the terms, and subject to the conditions, set forth in the Term Sheet attached as Exhibit A hereto.

Unless the parties mutually agree to its earlier termination, KHRL’s commitment set forth in this letter shall expire upon the earlier to occur of (i) the Company’s receipt of funding of Third Party Financing (as defined in the Term Sheet) in an amount no less than the Required Funding Amount (as defined in the Term Sheet) and (ii) April 15, 2020. The Company hereby agrees to use its reasonable efforts to secure Third Party Financing in an amount at least equal to the Required Funding Amount.

This commitment letter, including the attached Term Sheet, (a) supersedes all prior discussions, agreements, commitments, arrangements, negotiations or understandings, whether oral or written, of KHRL and the Company with respect to the subject matter hereof; (b) shall be governed by the laws of the State of New York; (c) shall not be assignable by the Company without the prior written consent of KHRL (and any purported assignment without such consent shall be null and void); (d) is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto; and (e) may not be amended or waived except by an instrument in writing signed by the Company and KHRL.

[signature page follows]


Sincerely,

KIEN HUAT REALTY III LIMITED

By:

 

/s/ Gerard Lim Ewe Keng

Name:

  Gerard Lim Ewe Keng

Title:

  Director

Accepted as of the date above written:

 

EMPIRE RESORTS, INC.
By:  

/s/ Ryan Eller

Name:   Ryan Eller
Title:   President and Chief Executive Officer

[Signature Page to Commitment Letter]


Exhibit A

November 5, 2018

 

Financing Summary of Terms
Issuer:    Empire Resorts, Inc. (“Empire” and, together with its subsidiaries, the “Company”) and/or such other direct or indirect subsidiaries of the Company as mutually agreed by Kien Huat Realty III Limited (“KHRL”) and the Company.
Maximum Amount of Financing to be Raised:    Up to $126 million (the “Principal Amount”)
KHRL Commitment:    KHRL will provide financing to the Company on the terms set forth in this Term Sheet and otherwise on commercially reasonable and market terms to be mutually and reasonably agreed to by the Company and KHRL (the “KHRL Financing”) in an aggregate amount (the “Maximum KHRL Financing Amount”) up to the excess (if any) of (i) the Principal Amount (the “Required Funding Amount”) less (ii) the aggregate amount of additional financing (whether debt or equity) raised by Empire from third parties (net of fees and transaction costs) after the date hereof (the “Third Party Financing”). For purposes of this Term Sheet, Third Party Financing shall exclude $29 million of equity financing raised by Empire from any person (or affiliate thereof) with which Empire enters into a commercial agreement relating to online gaming and sports betting at Resorts World Catskills.
Preferred Stock Financing:    In the KHRL Financing, the Company shall issue shares of convertible preferred stock (the “Convertible Preferred Stock”) having substantially the terms set forth on Schedule 1 hereto.
Written Consent:    KHRL, as holder of a majority of the shares of the Company entitled to vote, will execute a written consent (the “Stockholder Consent”) approving the issuance of shares of Convertible Preferred Stock and the shares of common stock of the Company underlying the Convertible Preferred Stock pursuant to the terms of this Term Sheet, if any, and the terms of any specific financing consummated in connection herewith. The Company will file an information statement with respect to the Stockholder Consent with the Securities and Exchange Commission. The Company will agree to maintain at all times sufficient authorized shares of Company Common stock to account for the conversion of all the Convertible Stock contemplated hereby.

 

A-1


Funding Fee:    KHRL shall be entitled to a funding fee (the “Funding Fee”) in connection with each funding of any portion of the KHRL Financing in an amount of 1% of the amount so funded by KHRL, or such other amount as is mutually agreed by the Company and KHRL. Each Funding Fee payment shall be due and payable simultaneously with the applicable funding by KHRL.
Use of Proceeds:    Proceeds will be used for general working capital and corporate purposes of the Company and/or such other direct or indirect subsidiaries of the Company as mutually agreed by KHRL and the Company.
Funding Dates and Amounts:    The Company may draw-down the KHRL Financing (but not more than the Maximum KHRL Financing Amount in the aggregate) on such dates as mutually agreed by KHRL and the Company but in any event no earlier than pursuant to the installment schedule set forth on Schedule 2 hereto. In connection with each draw-down, the Company and KHRL shall enter into separate subscription agreements, each substantially in the form attached hereto as Exhibit A.
Additional Agreements:    The receipt of any Third Party Financing will be subject to the approval of the New York State Gaming Commission (if required).
Expenses    The Company shall pay for or reimburse KHRL for all of its legal expenses in connection with the negotiation, execution, and delivery hereof and the consummation of the transactions contemplated hereby.

 

A-2


Schedule 1

Terms of Preferred Stock

 

Securities:    Convertible preferred stock (the “Convertible Preferred Stock”)
Price Per Share:    $100,000 (“Original Purchase Price”)
Maturity:    December 31, 2038 (“Maturity Date”)
Priority:    The Convertible Preferred Stock shall be senior to the rights, preferences and privileges of all other equity securities of the Company, except for the Series B Preferred Stock, par value $.01 per share, of the Company (the “Series B Preferred Stock”).

Voluntary Conversion; Mandatory Conversion at Maturity:

   The holder of the Convertible Preferred Stock will have the right to convert its shares of Convertible Preferred Stock into shares of common stock at any time prior to the Maturity Date at a conversion price of $20 per share of common stock, which conversion price shall be subject to adjustment for certain customary corporate events to be agreed by the holder and the Company (as adjusted, the “Original Conversion Price”). Unless the holder has given notice of conversion prior to the Maturity Date to voluntarily convert the Convertible Preferred Stock, if the Convertible Preferred Stock is outstanding on the Maturity Date, then the outstanding Convertible Preferred Stock shall automatically convert into shares of common stock at a conversion price equal to the 90-day volume-weighted average price for a share of common stock of the Company for the period ending the day immediately prior to the Maturity Date.
Mandatory Conversion upon Change in Control:    In the event of a change in control (as shall be defined in the certificate of designations for the Convertible Preferred Stock), the Convertible Preferred Stock will participate on an as-converted basis with the holders of all other equity of the Company at a conversion price equal to the purchase price of the common stock of the Company in such change in control transaction. The Company shall provide the

 

Schedule 1 - 1


   holder of the Convertible Preferred Stock with notice of such change in control prior to the record date for such transaction and such holder shall have the right to provide a notice of voluntary conversion up until the record date relating to such change of control transaction.
Dividends:    Subject to the rights of the Series B Preferred Stock with respect to dividends and distributions, dividends will be paid on the Convertible Preferred Stock on an as-converted basis when, as and if paid on the Common Stock.
Liquidation Preference:    In the event of liquidation, dissolution or winding up of the Company, the proceeds shall be paid as follows: Subject to the rights of the Series B Preferred Stock, first pay one time the Original Purchase Price plus declared and unpaid dividends on each share of Convertible Preferred Stock that the Convertible Preferred Stock would receive on an as-converted basis. The balance of the proceeds shall be distributed pro-rata to the holders of common stock.
Voting Rights:    The Convertible Preferred Stock shall vote together with the common stock on an as-converted basis and not as a separate class, except as required by law. The Company’s certificate of incorporation will provide that the number of authorized shares of common stock may be increased or decreased with the approval of a majority of the Convertible Preferred Stock and common stock voting together as a single class and without a separate vote by the common stock subject to the Company’s obligation to maintain sufficient authorized shares of common stock to meet any reasonably foreseeable conversion event with respect to the Convertible Preferred Stock.

 

Schedule 1 - 2


Written Consent:    If necessary, KHRL, as holder of a majority of the Company common stock will execute a written consent (the “Stockholder Consent”) approving the issuance of the Convertible Preferred Stock and the shares of common stock issuable upon conversion thereof. If necessary, the Company will file an information statement with respect to the Stockholder Consent with the Securities and Exchange Commission.
Registration Rights:    The registration rights granted to KHRL in that certain commitment letter, dated June 26, 2014, by and between the Company and KHRL, shall apply to the shares of common stock issuable upon conversion of the Convertible Preferred Stock.

 

Schedule 1 - 2


Schedule 2

Funding Dates

 

Draw Date

No Earlier Than

   Maximum
Funding Amount
 

11/9/2018

   $ 12 million  

2/15/2019

   $ 20 million  

5/15/2019

   $ 20 million  

8/15/2019

   $ 15 million  

11/15/2019

   $ 37 million  

3/15/2020

   $ 22 million  

 

Schedule 2 - 1


Exhibit A

Form of Subscription Agreement


Annex D

Kien Huat Realty III Limited

May 7, 2019

Empire Resorts, Inc.

c/o Monticello Casino and Raceway

204 State Route 17B, P.O. Box 5013

Monticello, New York 12701

 

Attention:

Emanuel R. Pearlman, Executive Chairman of the Board of Directors

    

Ryan Eller, President and Chief Executive Officer

Re: Amendment to November 6, 2018 Letter Agreement

Gentlemen:

Reference is made to that certain letter agreement between the Empire Resorts, Inc. (“Empire”) and Kien Huat Realty III Ltd. (“KHRL”) entered into on November 6, 2019 (as amended and restated on November 9, 2018, the “2018 KHRL Preferred Stock Commitment Letter”), pursuant to which KHRL committed to provide equity financing in support of the general corporate and working capital requirements of Empire and its subsidiaries. Pursuant to the 2018 KHRL Preferred Stock Commitment Letter, KHRL agreed to purchase up to $126 million of Empire’s Series F Preferred Stock on the terms set forth in the 2018 KHRL Preferred Stock Commitment Letter pursuant to the following schedule: (i) up to $12 million no earlier than November 9, 2018; (ii) up to $20 million no earlier than February 15, 2019; (iii) up to $20 million no earlier than May 15, 2019; (iv) up to $15 million no earlier than August 15, 2019; (v) up to $37 million no earlier than November 15, 2019; and (vi) up to $22 million no earlier than March 15, 2020. Capitalized or other terms used and not defined herein but defined in the 2018 KHRL Preferred Stock Commitment Letter shall have the meanings ascribed to them in the 2018 KHRL Preferred Stock Commitment Letter.

KHRL and Empire hereby agree to amend the 2018 KHRL Preferred Stock Commitment Letter as follows:

 

  1.

Schedule 2 of the 2018 KHRL Preferred Stock Commitment Letter shall be amended and restated in its entirety to reflect purchase of the Series F Preferred Stock pursuant to the following schedule: (i) up to $12 million no earlier than November 9, 2018; (ii) up to $20 million no earlier than February 15, 2019; (iii) up to $27 million no earlier than May 15, 2019; (iv) up to $15 million no earlier than June 17, 2019; (v) up to $15 million no earlier than August 15, 2019; and (vi) up to $37 million no earlier than November 15, 2019 (as attached hereto).

The parties hereto hereby agree that, except as specifically provided in and modified by this letter agreement, the 2018 KHRL Preferred Stock Commitment Letter is in all other respects hereby ratified and confirmed and references to the 2018 KHRL Preferred Stock Commitment Letter shall be deemed to refer to the 2018 KHRL Preferred Stock Commitment Letter as modified by this letter agreement. This letter agreement shall be governed by the laws of the State of Delaware, without giving effect to the conflict of laws provisions thereof.

[signature page follows]


Sincerely,

 

KIEN HUAT REALTY III LIMITED

By:  

/s/ Gerard Lim Ewe Keng

Name:   Gerard Lim Ewe Keng
Title:   Authorized Signatory

Accepted as of the date above written:

 

EMPIRE RESORTS, INC.
By:  

/s/ Ryan Eller

Name:   Ryan Eller
Title:   President and Chief Executive Officer

 

 

 

[Signature Page to 2018 KHRL Preferred Stock Commitment Letter Amendment]


Schedule 2

Funding Dates

 

Draw Date

No Earlier Than

   Maximum
Funding Amount
 

11/9/2018

   $ 12 million  

2/15/2019

   $ 20 million  

5/15/2019

   $ 27 million  

6/17/2019

   $ 15 million  

8/15/2019

   $ 15 million  

11/15/2019

   $ 37 million  


Annex E

AMENDED AND RESTATED

CERTIFICATE OF THE DESIGNATIONS, POWERS,

PREFERENCES AND RIGHTS

OF THE

SERIES F CONVERTIBLE PREFERRED STOCK

($0.01 PAR VALUE PER SHARE)

OF

EMPIRE RESORTS, INC.

A DELAWARE CORPORATION

 

 

PURSUANT TO SECTION 151 OF THE

GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

 

 

The undersigned officers of Empire Resorts, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), do hereby certify:

1. The name of the Corporation is “Empire Resorts, Inc.”

2. The original Certificate of Designations, Preferences and Rights of Series F Convertible Preferred Stock of the Corporation was filed with the Secretary of State of the State of Delaware on November 5, 2018 (the “Original Certificate”).

3. Pursuant to the authority conferred upon the Corporation’s Board of Directors by the Certificate of Incorporation of the Corporation, as amended (the “Certificate of Incorporation”), this Amended and Restated Certificate of Designations, Preferences and Rights of Series F Convertible Preferred Stock (the “Amended and Restated Certificate”) hereby restates and amends the provisions of the Original Certificate.

4. This Amended and Restated Certificate shall become effective on the date of filing with Secretary of State of Delaware. Prior to such filing, no shares of Series F Convertible Preferred Stock have been issued.

5. The text of the Original Certificate is hereby restated and amended in its entirety to read as follows:

1. DESIGNATIONS AND AMOUNT. One Thousand Five Hundred (1,500) shares of the Preferred Stock of the Corporation, $0.01 par value per share, shall constitute a class of Preferred Stock designated as “Series F Preferred Stock” (the “Series F Preferred Stock”). The Series F Preferred Stock shall be offered for sale at a purchase price of $100,000 per share and shall have a stated value of $100,000 per share (the “Stated Value”).

 

E-1


2. DIVIDENDS. Except for stock dividends or distributions for which adjustments are to be made pursuant to Section 5 herein, the holders of shares of Series F Preferred Stock shall be entitled to receive, and the Corporation shall pay, dividends on shares of Series F Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the common stock, par value $0.01 per share, of the Corporation (the “Common Stock”), when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of Series F Preferred Stock, subject to and in accordance with Section 5 herein.

3. RIGHTS ON LIQUIDATION, DISSOLUTION OR WINDING UP, ETC. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation (each, a “Liquidation”), no distribution shall be made to the holders of Junior Securities (as defined in Section 6) unless, prior thereto, the holders of such shares of Series F Preferred Stock shall have received the Stated Value per share (the “Liquidation Value”), plus an amount equal to all declared, and accrued but unpaid dividends and distributions thereon to the date of such payment. For the avoidance of any doubt, a Change of Control Transaction (as defined in Section 4(b)(iii) herein) shall not be deemed a Liquidation.

4. RIGHT TO CONVERT.

(a) Conversion at Option of Holder. At any time and from time to time prior to December 31, 2038 (the “Maturity Date”), the Series F Preferred Stock is convertible in whole or in part, at the option of the holder of the Series F Preferred Stock, into shares (the “Conversion Shares”) of Common Stock upon surrender of the Series F Preferred Stock, at the office of the Corporation, accompanied by a written notice of conversion in a form reasonably satisfactory to the Corporation, duly executed by the registered holder or its duly authorized attorney. The Series F Preferred Stock shall be convertible at any time into shares of Common Stock in such amount equal to (a) the Stated Value divided by $20.00 (the “Base Conversion Price”) (subject to the adjustments as provided for in Section 5 herein), multiplied by (b) the number of shares of Series F Preferred Stock being converted. In the event the Series F Preferred Stock is converted in part, the Corporation shall deliver a new certificate of like tenor in the amount equal to the remaining balance of the Series F Preferred Stock after giving effect to such partial conversion. Following any conversion of the Series F Preferred Stock, the holder of the Conversion Shares received in connection with such conversion shall be entitled to receive any dividends that were declared but unpaid at the time of such conversion if and to the extent that such holder would have been entitled to receive such dividend under Section 2 had the conversion not occurred.

(b) Mandatory Conversion.

(i) Unless the holder has given notice of conversion pursuant to Section 4(a) prior to the Maturity Date, each Series F Preferred Stock that is outstanding on the Maturity Date shall automatically be converted into that number of shares of Common Stock determined by dividing the Stated Value of such share of Series F Preferred Stock by the volume-weighted average price for a share of Common Stock as displayed under the heading “Bloomberg VWAP” on Bloomberg page “NYNY <equity> AQR” for the ninety (90) consecutive Trading Days ending on the Trading Day immediately prior to the Maturity Date. As used herein, “Trading Day” means a day on which national stock exchanges are open for trading.

 

E-2


(ii) In the event of a Change of Control Transaction, each share of Series F Preferred Stock shall automatically be converted into that number of shares of Common Stock determined by dividing the Stated Value of such share of Series F Preferred Stock by the per share consideration being offered to any holder of Common Stock in connection with any such Change of Control Transaction. Following any such conversion, the holder of the Conversion Shares received in connection with such conversion shall be entitled to participate in such Change of Control Transaction and to receive the same per share consideration, in both amount and form, that any other holder of Common Stock is entitled to receive as a result of such Change of Control Transaction. The Corporation shall provide the holder of the Series F Preferred Stock with notice of any such proposed Change of Control Transaction prior to the record date (or effective date, as the case may be) for such transaction and such holder shall have the right to provide a written notice of conversion pursuant to Section 4(a) at any time prior to the record date (or effective date, as the case may be) relating to such Change of Control Transaction.

(iii) As used herein, “Change of Control Transaction” means the occurrence after the date hereof of:

(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 Corporation, unless as a result of such tender offer more than 50% of the outstanding voting securities of the surviving or resulting corporation or entity shall be owned in the aggregate by (A) the stockholders of the Corporation (as of the time immediately prior to the commencement of such offer), or (B) any employee benefit plan of the Corporation or its subsidiaries, and their affiliates;

(II) The Corporation 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 or entity shall be owned in the aggregate by (A) the stockholders of the Corporation (as of the time immediately prior to such transaction); provided, that a merger or consolidation of the Corporation with another company which is controlled by persons owning more than 50% of the outstanding voting securities of the Corporation shall constitute a Change of Control Transaction unless the Board of Directors, in its discretion, determines otherwise, or (B) any employee benefit plan of the Corporation or its subsidiaries, and their affiliates; or

(III) A Person (as defined below) shall acquire 50% or more of the outstanding voting securities of the Corporation (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 or entity shall be owned in the aggregate by (A) the stockholders of the Corporation (as of the time immediately prior to the first acquisition of such securities by such Person), or (B) any employee benefit plan of the Corporation or its subsidiaries, and their affiliates. As used herein, “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 Corporation or any of its subsidiaries; (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation 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 stockholders of the Corporation in substantially the same proportion as their ownership of stock of the Corporation.

(c) Share Reserve. So long as any shares of Series F Preferred Stock are outstanding, the Corporation shall reserve and keep available out of its duly authorized but unissued shares of Common

 

E-3


Stock such number of Common Stock and other securities as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series F Preferred Stock.

(d) Issuance Limitations. Notwithstanding anything herein to the contrary, if the Corporation has not obtained Shareholder Approval, then the Corporation may not issue, upon conversion of the Series F Preferred Stock, a number of shares of Common Stock which, when aggregated with any Conversion Shares issued prior to such conversion date, would equal 20% or more of the common stock or 20% or more of the voting power of the Corporation outstanding immediately before the issuance (such number of shares, the “Issuable Maximum”). Until Shareholder Approval is obtained and in the event of a conversion that would otherwise exceed the Issuable Maximum, each holder of Series F Preferred Stock shall be entitled to a portion of the Issuable Maximum, determined at the time of any applicable conversion, equal to the quotient obtained by dividing (x) the original Stated Value of such holder’s Series F Preferred Stock by (y) the aggregate Stated Value of all Series F Preferred Stock then-issued to all holders of Series F Preferred Stock. As used herein, “Shareholder Approval” means such approval as may be required by the applicable rules and regulations of the Nasdaq Stock Market (or any successor entity) from the stockholders of the Corporation with respect to a “20% Issuance” (as defined by the applicable rules and regulations of the Nasdaq Stock Market (or any successor entity)).

5. CERTAIN ADJUSTMENTS; ADDITIONAL RIGHTS.

(a) Stock Dividends and Stock Splits. If the Corporation, at any time while this Series F Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions that is payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, this Series F Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the applicable conversion price shall be (a) multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event or (b) as otherwise customarily calculated in accordance with any similar calculations previously agreed to by the parties consistent with their past practice. Any adjustment made pursuant to this Section 5(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re classification.

(b) Subsequent Rights Offerings. If at any time the Corporation grants, issues or sells any Common Stock or rights to purchase stock, warrants, securities or other property pro rata to all (or substantially all) of the record holders of any class of shares of Common Stock (the “Purchase Rights”), then each holder of Series F Preferred Stock will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete conversion of such holder’s Series F Preferred Stock immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

 

E-4


6. RANK. The Series F Preferred Stock shall rank, with respect to the rights, preferences and privileges, including but not limited to the distribution of assets, senior to all classes or series of equity securities of the Corporation (the “Junior Securities”) except the Series B Preferred Stock, par value $.01 per share, of the Corporation, which is and shall remain senior in all respects to the Series F Preferred Stock.

7. VOTING RIGHTS. The holders of Series F Preferred Stock shall be entitled to notice of all stockholders’ meetings in accordance with the By-laws of the Corporation and, subject to the restrictions contained in this Section 7, to vote on all matters submitted to the vote of the holders of Common Stock on an as-converted basis and not as a separate class, except as required by law. Each share of Series F Preferred Stock shall represent such number of votes as shall equal the number of shares of Common Stock into which such share is convertible at such time in accordance with the provisions of Section 4 hereof; provided, that, if at any given time, the total number of votes represented by the Series F Preferred Stock on an as-converted basis would exceed the Issuable Maximum, determined at any such time, then, at such relevant times, the votes represented by any given holder’s shares of Series F Preferred Stock shall equal a portion of the aggregate votes represented by the Issuable Maximum, determined at any such time, equal to the quotient obtained by dividing (x) the original Stated Value of such holder’s Series F Preferred Stock by (y) the aggregate Stated Value of all Series F Preferred Stock then-issued to all holders of Series F Preferred Stock, unless and until Shareholder Approval has been obtained, at which time this proviso will no longer be in effect. Notwithstanding the foregoing, the Corporation shall not, without the affirmative vote of the holders of a majority of the then-outstanding shares of the Series F Preferred Stock, voting together as a single class and without a separate vote of the holders of Common Stock, amend its Certificate of Incorporation, this Amended and Restated Certificate or the by-laws of the Corporation in any manner to increase or decrease the number of authorized shares of Common Stock or in any manner that would otherwise adversely affect the rights, preferences or privileges of the holders of the Series F Preferred Stock; and provided, further, that any such increase or decrease to the number of authorized shares of Common Stock referenced in the foregoing proviso shall be subject to the Corporation’s obligation to maintain sufficient authorized shares of Common Stock to meet any reasonably foreseeable event pursuant to which the then-outstanding shares of Series F Preferred Stock would be convertible pursuant to Section 4.

8. MISCELLANEOUS.

(a) Amendments in Writing. Except as otherwise provided herein, the provisions of the Series F Preferred Stock may be amended and the Corporation may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Corporation has obtained the written consent of the holders representing at least a majority of the outstanding Series F Preferred Stock.

(b) Stamp or Transfer Tax. The Corporation will pay any documentary stamp or transfer taxes attributable to the initial issuance of the Common Stock issuable upon the conversion of the Series F Preferred Stock; provided, however, that the Corporation shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for the Common Stock in a name other than that of the holder of Series F Preferred Stock in respect of which such Common Stock is issued, and in such case the Corporation shall not be required to issue or deliver any certificate for the Common Stock until the person requesting the same has paid to the Corporation the amount of such tax or has established to the Corporation’s satisfaction that such tax has been paid.

 

E-5


(c) Mutilated, Lost, Stolen or Destroyed Certificate. In case the Series F Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall issue and deliver in exchange and substitution for and upon cancellation of the mutilated certificate, or in lieu of and substitution for the certificate, mutilated, lost, stolen or destroyed, a new certificate of like tenor and representing an equivalent right or interest, but only upon receipt of evidence reasonably satisfactory to the Corporation of such loss, theft or destruction and an indemnity or bond, if requested, also reasonably satisfactory to it.

*********************

 

E-6


IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Designations, Preferences and Rights to be signed in its name and on its behalf on this 9th day of November, 2018 by a duly authorized officer of the Corporation.

 

EMPIRE RESORTS, INC.
By:  

/s/ Ryan Eller

Name:   Ryan Eller
Title:   President and Chief Executive Officer

 

E-7

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