Document:

rigl_Ex10_4

		
			Exhibit 10.4
		

		
			 
		

		
			 
		

		
			RIGEL PHARMACEUTICALS, INC.
		

		
			2011 EQUITY INCENTIVE PLAN 
		

		
			 
		

		
			ADOPTED: MARCH 23, 2011
		

		
			APPROVED BY STOCKHOLDERS MAY 19, 2011
		

		
			AMENDED FEBRUARY 3, 2012
		

		
			APPROVED BY STOCKHOLDERS MAY 22, 2012
		

		
			AMENDED FEBRUARY 8, 2013
		

		
			APPROVED BY STOCKHOLDERS MAY 14, 2013 
		

		
			AMENDED JANUARY 26, 2016
		

		
			APPROVED BY STOCKHOLDERS MAY 10, 2016
		

		
			TERMINATION DATE: MARCH 22, 2021
		

		
			 
		

		
			1.                                      PURPOSES.
		

		
			 
		

		
			(a)                                 The persons eligible to receive Stock Awards are the Employees, Directors and Consultants of the Company and its Affiliates.
		

		
			 
		

		
			(b)                                 The purpose of the Plan is to provide a means by which eligible recipients of Stock Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
		

		
			 
		

		
			(c)                                  The Company, by means of the Plan, seeks to retain the services of the group of persons eligible to receive Stock Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.
		

		
			 
		

		
			2.                                      DEFINITIONS.
		

		
			 
		

		
			(a)                                 “Affiliate” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act. The Board shall have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.
		

		
			 
		

		
			(b)                                 “Board” means the Board of Directors of the Company.
		

		
			 
		

		
			(c)                                  “Code” means the Internal Revenue Code of 1986, as amended.
		

		
			 
		

		
			(d)                                 “Committee” means a committee of one or more members of the Board appointed by the Board in accordance with subsection 3(c).
		

		
			 
		

		
			(e)                                  “Common Stock” means the common stock of the Company.
		

		
			 
		

		
			(f)                                   “Company” means Rigel Pharmaceuticals, Inc., a Delaware corporation.
		

		
			 
		

		
			(g)                                 “Consultant” means any person, including an advisor, (i) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or (ii) who is a member of the Board of Directors of an Affiliate. However, the term “Consultant” shall not include either Directors who are not compensated by the Company for their services as Directors or Directors who are merely paid a director’s fee by the Company for their services as Directors.
		

		
			

		 

		

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			(h)                                 “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service. For example, a change in status without interruption from an Employee of the Company to a Consultant of an Affiliate or a Director will not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.
		

		
			 
		

		
			(i)                                    “Covered Employee” means the chief executive officer and the four (4) other highest compensated officers of the Company for whom total compensation is required to be reported to stockholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code.
		

		
			 
		

		
			(j)                                    “Director” means a member of the Board of Directors of the Company.
		

		
			 
		

		
			(k)                                 “Disability” means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.
		

		
			 
		

		
			(l)                                    “Employee” means any person employed by the Company or an Affiliate. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.
		

		
			 
		

		
			(m)                             “Exchange Act” means the Securities Exchange Act of 1934, as amended.
		

		
			 
		

		
			(n)                                 “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:
		

		
			 
		

		
			(i)                                    If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable.
		

		
			 
		

		
			(ii)                                In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board.
		

		
			 
		

		
			(o)                                 “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
		

		
			 
		

		
			(p)                                 “Non-Employee Director” means a Director who either (i) is not a current Employee or Officer of the Company or its parent or a subsidiary, does not receive compensation (directly or indirectly) from the Company or its parent or a subsidiary for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K and is not engaged in a business relationship as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.
		

		
			 
		

		
			(q)                                 “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.
		

		
			 
		

		
			

		 

		

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(r)                                  “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
		

		
			 
		

		
			(s)                                   “Option” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan. 
		

		
			(t)                                    “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.
		

		
			 
		

		
			(u)                                 “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
		

		
			 
		

		
			(v)                                 “Outside Director” means a Director who either (i) is not a current employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated corporation” receiving compensation for prior services (other than benefits under a tax qualified pension plan), was not an officer of the Company or an “affiliated corporation” at any time and is not currently receiving direct or indirect remuneration from the Company or an “affiliated corporation” for services in any capacity other than as a Director or (ii) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code.
		

		
			 
		

		
			(w)                               “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.
		

		
			 
		

		
			(x)                                 “Performance Criteria” means the one or more criteria that the Board shall select for purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria that shall be used to establish such Performance Goals may be based on any one of, or combination of, the following: (i) earnings per share; (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and amortization (EBITDA); (iv) net earnings; (v) total stockholder return; (vi) return on equity; (vii) return on assets, investment, or capital employed; (viii) operating margin; (ix) gross margin; (x) operating income; (xi) net income (before or after taxes); (xii) net operating income; (xiii) net operating income after tax; (xiv) pre- and after-tax income; (xv) pre-tax profit; (xvi) operating cash flow; (xvii) sales or revenue targets; (xviii) increases in revenue or product revenue; (xix) expenses and cost reduction goals; (xx) improvement in or attainment of expense levels; (xxi) improvement in or attainment of working capital levels; (xxii) economic value added (or an equivalent metric); (xxiii) market share; (xxiv) cash flow; (xxv) cash flow per share; (xxvi) share price performance; (xxvii) debt reduction; (xxviii) implementation or completion of projects or processes; (xxix) customer satisfaction; (xxx) total stockholder return; (xxxi) stockholders’ equity; and (xxxii) other measures of performance selected by the Board. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Stock Award Agreement. The Board shall, in its sole discretion, define the manner of calculating the Performance Criteria it selects to use for such Performance Period.
		

		
			 
		

		
			(y)                                 “Performance Goals” means, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the Performance Criteria. The Board is authorized at any time in its sole discretion, to adjust or modify the calculation of a Performance Goal for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants, (a) in the event of, or in anticipation of, any items that are “unusual” in nature or occur “infrequently” as determined under generally accepted accounting principles; (b) in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; or (c) in view of the Board’s assessment of the business strategy of the Company, performance of comparable organizations, economic and business conditions, and any other circumstances deemed relevant. Specifically, the Board is authorized to make adjustment in the method of calculating attainment of Performance Goals and objectives for a Performance Period as follows: (i) to exclude the dilutive effects of acquisitions or joint ventures; (ii) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; and (iii) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends. In addition, the Board 

		 

		

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is authorized to make adjustment in the method of calculating attainment of Performance Goals and objectives for a Performance Period as follows: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude the effects of changes to generally accepted accounting standards required by the Financial Accounting Standards Board; (iv) to exclude the effects to any statutory adjustments to corporate tax rates; and (v) to exclude the effects of items that are “unusual” in nature or occur “infrequently” as determined under generally accepted accounting principles.
		

		
			 
		

		
			(z)                                  “Performance Period” means the one or more periods of time, which may be of varying and overlapping durations, as the Board may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Stock Award.
		

		
			 
		

		
			(aa)                          “Plan” means this Rigel Pharmaceuticals, Inc. 2011 Equity Incentive Plan.
		

		
			 
		

		
			(bb)                          “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
		

		
			 
		

		
			(cc)                            “Securities Act” means the Securities Act of 1933, as amended.
		

		
			 
		

		
			(dd)                          “Stock Award” means any right granted under the Plan, including an Option, a stock bonus, a right to acquire restricted stock, a stock unit award and a stock appreciation right.
		

		
			 
		

		
			(ee)                            “Stock Award Agreement” means a written agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.
		

		
			 
		

		
			(ff)                              “Ten Percent Stockholder” means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates.
		

		
			 
		

		
			3.                                      ADMINISTRATION.
		

		
			 
		

		
			(a)  Administration by Board.  The Board shall administer the Plan unless and until the Board delegates administration to a Committee, as provided in subsection 3(c).
		

		
			 
		

		
			(b)  Powers of Board.  The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:
		

		
			 
		

		
			(i)                                    To determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how each Stock Award shall be granted; what type or combination of types of Stock Award shall be granted; the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive Common Stock pursuant to a Stock Award; and the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person.
		

		
			 
		

		
			(ii)                                To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.
		

		
			 
		

		
			(iii)                            To amend the Plan or a Stock Award as provided in Section 12.
		

		
			 
		

		
			(iv)                             To terminate or suspend the Plan as provided in Section 13.
		

		
			 
		

		
			

		 

		

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(v)                                 Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company which are not in conflict with the provisions of the Plan.
		

		
			 
		

		
			(c)  Delegation to Committee.
		

		
			 
		

		
			(i)  General.  The Board may delegate administration of the Plan to a Committee or Committees of one (1) or more members of the Board, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan.
		

		
			 
		

		
			(ii)  Committee Composition when Common Stock is Publicly Traded.  At such time as the Common Stock is publicly traded, in the discretion of the Board, a Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, and/or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such authority, the Board or the Committee may (1) delegate to a committee of one or more members of the Board who are not Outside Directors the authority to grant Stock Awards to eligible persons who are either (a) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Stock Award or (b) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code and/or (2) delegate to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant Stock Awards to eligible persons who are not then subject to Section 16 of the Exchange Act.
		

		
			 
		

		
			(d)  Effect of Board’s Decision.  All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.
		

		
			 
		

		
			(e)  Cancellation and Re-Grant of Stock Awards.  Notwithstanding anything to the contrary in the Plan, neither the Board nor any Committee shall have the authority to: (i) reprice any outstanding Stock Awards under the Plan, (ii) cancel any outstanding Options or Stock Appreciation Rights that have an exercise price or strike price greater than the current Fair Market Value of the Common Stock in exchange for cash or other Stock Awards under the Plan, or (iii) effect any other action that is treated as a repricing under generally accepted accounting principles unless, in each case, the stockholders of the Company have approved such an action within twelve (12) months prior to such an event.
		

		
			 
		

		
			4.                                      SHARES SUBJECT TO THE PLAN.
		

		
			 
		

		
			(a)  Share Reserve.  Subject to the provisions of subsection 11(a) relating to adjustments upon changes in Common Stock, the shares of Common Stock that may be issued pursuant to Stock Awards shall not exceed in the aggregate 13,250,000 shares of Common Stock, which number consists of (i) 3,500,000 shares of Common Stock initially reserved for issuance under the Plan plus (ii) 600,000 shares of Common Stock approved by the Board in February 2012 and subsequently approved by the Company’s stockholders plus (iii) 7,000,000 shares of Common Stock approved by the Board in February 2013 and subsequently approved by the Company’s stockholders plus (iii) 2,150,000 shares of Common Stock approved by the Board in January 2016 and subsequently approved by the Company’s stockholders..
		

		
			 
		

		
			(b)                                 Subject to subsection 4(c), the number of shares available for issuance under the Plan shall be reduced by: (i) one (1) share for each share of stock issued pursuant to (A) an Option granted under Section 6, or (B) a Stock Appreciation Right granted under subsection 7(d) with respect to which the strike price is at least one hundred percent (100%) of the Fair Market Value of the underlying Common Stock on the date of grant; and (ii) one and sixty-four hundredths (1.64) shares for each share of Common Stock issued pursuant to a Stock Bonus Award, Restricted Stock Award, Stock Unit Award or Performance Stock Award.
		

		
			

		 

		

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			(c)  Reversion of Shares to the Share Reserve.
		

		
			 
		

		
			(i)  Shares Available For Subsequent Issuance.  If any (i) Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, (ii) shares of Common Stock issued to a Participant pursuant to a Stock Award are forfeited to or repurchased by the Company, including any repurchase or forfeiture caused by the failure to meet a contingency or condition required for the vesting of such shares, or (iii) Stock Award is settled in cash, then the shares of Common Stock not issued under such Stock Award, or forfeited to or repurchased by the Company, shall revert to and again become available for issuance under the Plan. To the extent there is issued a share of Common Stock pursuant to a Stock Award that counted as one and sixty-four hundredths (1.64) shares against the number of shares available for issuance under the Plan pursuant to subsection 4(b) and such share of Common Stock again becomes available for issuance under the Plan pursuant to this subsection 4(c)(i), then the number of shares of Common Stock available for issuance under the Plan shall increase by one and sixty-four hundredths (1.64) shares.
		

		
			 
		

		
			(ii)  Shares Not Available For Subsequent Issuance.  If any shares subject to a Stock Award are not delivered to a Participant because the Stock Award is exercised through a reduction of shares subject to the Stock Award (i.e., “net exercised”), the number of shares that are not delivered to the Participant shall not remain available for issuance under the Plan. If any shares subject to a Stock Award are not delivered to a Participant because such shares are withheld in satisfaction of the withholding of taxes incurred in connection with the exercise of an Option or stock appreciation right, or the issuance of shares under a stock bonus award, restricted stock award or stock unit award, the number of shares that are not delivered to the Participant shall not remain available for subsequent issuance under the Plan. If the exercise price of any Stock Award is satisfied by tendering shares of Common Stock held by the Participant (either by actual delivery or attestation), then the number of shares so tendered shall not remain available for subsequent issuance under the Plan.
		

		
			 
		

		
			(d)  Source of Shares.  The shares of Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise.
		

		
			 
		

		
			5.                                      ELIGIBILITY.
		

		
			 
		

		
			(a)  Eligibility for Specific Stock Awards.  Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and (f) of the Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants; provided, however, Nonstatutory Stock Options and stock appreciation rights may not be granted to Employees, Directors, and Consultants who are providing Continuous Services only to any “parent” of the Company, as such term is defined in Rule 405 promulgated under the Securities Act, unless such Stock Awards comply with the distribution requirements of Section 409A of the Code.
		

		
			 
		

		
			(b)  Ten Percent Stockholders.  A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock at the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.
		

		
			 
		

		
			(c)  Section 162(m) Limitation.  Subject to the provisions of Section 11 relating to adjustments upon changes in the shares of Common Stock, no Employee shall be eligible to be granted Options covering more than one million five hundred thousand (1,500,000) shares of Common Stock during any calendar year.
		

		
			 
		

		
			(d)  Consultants.
		

		
			 
		

		
			(i)                                    A Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is not available to register either the offer or the sale of the Company’s securities to such Consultant because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8, unless the Company determines both (i) that 

		 

		

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such grant (A) shall be registered in another manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or (B) does not require registration under the Securities Act in order to comply with the requirements of the Securities Act, if applicable, and (ii) that such grant complies with the securities laws of all other relevant jurisdictions.
		

		
			 
		

		
			(ii)                                Form S-8 generally is available to consultants and advisors only if (i) they are natural persons; (ii) they provide bona fide services to the issuer, its parents, its majority-owned subsidiaries or majority-owned subsidiaries of the issuer’s parent; and (iii) the services are not in connection with the offer or sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the issuer’s securities.
		

		
			 
		

		
			6.                                      OPTION PROVISIONS.
		

		
			 
		

		
			Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:
		

		
			 
		

		
			(a)  Term.  Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders, no Option shall be exercisable after the expiration of ten (10) years from the date it was granted.
		

		
			 
		

		
			(b)  Exercise Price of an Incentive Stock Option.  Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.
		

		
			 
		

		
			(c)  Exercise Price of a Nonstatutory Stock Option.  The exercise price of each Nonstatutory Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code. 
		

		
			(d)  Consideration.  The purchase price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised or (ii) at the discretion of the Board (1) by delivery to the Company of other Common Stock; (2) according to a deferred payment or other similar arrangement with the Optionholder; (3) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such holding back of whole shares; provided, further, however, that shares of Common Stock will no longer be outstanding under an Option and will not be exercisable thereafter to the extent that (i) shares are used to pay the exercise price pursuant to the “net exercise,” (ii) shares are delivered to the Participant as a result of such exercise, and (iii) shares are withheld to satisfy tax withholding obligations; or (4) in any other form of legal consideration that may be acceptable to the Board. At any time that the Company is incorporated in Delaware, payment of the Common Stock’s “par value,” as defined in the Delaware General Corporation Law, shall not be made by deferred payment.
		

		
			 
		

		
			In the case of any deferred payment arrangement, interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid (1) the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement and (2) the treatment of the Option as a variable award for financial accounting purposes.
		

		
			 
		

		
			

		 

		

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(e)  Transferability of Options.  The Board may, in its sole discretion, impose such limitations on the transferability of Options, as the Board shall determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options shall apply:
		

		
			 
		

		
			(i)  Restrictions on Transfer.  An Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder; provided, however, that the Board may, in its sole discretion, permit transfer of the Option in a manner that is not prohibited by applicable tax and securities laws upon the Optionholder’s request. Except as explicitly provided herein, an Option may not be transferred for consideration.
		

		
			 
		

		
			(ii)  Domestic Relations Orders.  Notwithstanding the foregoing, an Option may be transferred pursuant to a domestic relations order; provided, however, that if an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.
		

		
			 
		

		
			(iii)  Beneficiary Designation.  Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect Option exercises, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option and receive the Common Stock or other consideration resulting from such exercise. In the absence of such a designation, the executor or administrator of the Optionholder’s estate shall be entitled to exercise the Option and receive the Common Stock or other consideration resulting from such exercise.
		

		
			 
		

		
			(f)  Vesting Generally.  The total number of shares of Common Stock subject to an Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this subsection 6(g) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised.
		

		
			 
		

		
			(g)  Termination of Continuous Service.  In the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.
		

		
			 
		

		
			(h)  Extension of Termination Date.  An Optionholder’s Option Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in the Option Agreement or (ii) the expiration of a total period of three (3) months (that need not be consecutive) after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements.
		

		
			 
		

		
			(i)  Disability of Optionholder.  In the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement) or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option shall terminate.
		

		
			 
		

		
			(j)  Death of Optionholder.  In the event (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the 

		 

		

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termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder’s death pursuant to subsection 6(e) or 6(f), but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement) or (2) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.
		

		
			 
		

		
			(k)  Early Exercise.  The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option. Any unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate. The Company will not exercise its repurchase option until at least six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option.
		

		
			 
		

		
			(l)  Non-Exempt Employees.  No Option granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Option. Notwithstanding the foregoing, consistent with the provisions of the Worker Economic Opportunity Act, (i) in the event of the Participant’s death or Disability, (ii) upon a Corporate Transaction (as defined in section 11(c)) in which such Option is not assumed, continued, or substituted, or (iii) upon the Participant’s retirement (as such term may be defined in the Participant’s Option Agreement or in another applicable agreement or in accordance with the Company’s then current employment policies and guidelines), any such vested Options may be exercised earlier than six months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay.
		

		
			 
		

		
			7.                                      PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
		

		
			 
		

		
			(a)  Stock Bonus Awards.  Each stock bonus agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of stock bonus agreements may change from time to time, and the terms and conditions of separate stock bonus agreements need not be identical, but each stock bonus agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
		

		
			 
		

		
			(i)  Consideration.  A stock bonus may be awarded in consideration for past services actually rendered to the Company or an Affiliate for its benefit.
		

		
			 
		

		
			(ii)  Vesting.  Shares of Common Stock awarded under the stock bonus agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board.
		

		
			 
		

		
			(iii)  Termination of Participant’s Continuous Service.  In the event a Participant’s Continuous Service terminates, the Company may reacquire any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination under the terms of the stock bonus agreement.
		

		
			 
		

		
			(iv)  Transferability.  Rights to acquire shares of Common Stock under the stock bonus agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the stock bonus agreement, as the Board shall determine in its discretion, so long as Common Stock awarded under the stock bonus agreement remains subject to the terms of the stock bonus agreement.
		

		
			 
		

		
			(b)  Restricted Stock Awards.  Each restricted stock purchase agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of the restricted stock purchase agreements may change from time to time, and the terms and conditions of separate restricted stock purchase 

		 

		

			9

		

		

			 

		

 

agreements need not be identical, but each restricted stock purchase agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
		

		
			 
		

		
			(i)  Purchase Price.  The purchase price under each restricted stock purchase agreement shall be such amount as the Board shall determine and designate in such restricted stock purchase agreement. The purchase price shall not be less than eighty-five percent (85%) of the Common Stock’s Fair Market Value on the date such award is made or at the time the purchase is consummated.
		

		
			 
		

		
			(ii)  Consideration.  The purchase price of Common Stock acquired pursuant to the restricted stock purchase agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the discretion of the Board, according to a deferred payment or other similar arrangement with the Participant; or (iii) in any other form of legal consideration that may be acceptable to the Board in its discretion; provided, however, that at any time that the Company is incorporated in Delaware, then payment of the Common Stock’s “par value,” as defined in the Delaware General Corporation Law, shall not be made by deferred payment.
		

		
			 
		

		
			(iii)  Vesting.  Shares of Common Stock acquired under the restricted stock purchase agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board.
		

		
			 
		

		
			(iv)  Termination of Participant’s Continuous Service.  In the event a Participant’s Continuous Service terminates, the Company may repurchase or otherwise reacquire any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination under the terms of the restricted stock purchase agreement.
		

		
			 
		

		
			(v)  Transferability.  Rights to acquire shares of Common Stock under the restricted stock purchase agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the restricted stock purchase agreement, as the Board shall determine in its discretion, so long as Common Stock awarded under the restricted stock purchase agreement remains subject to the terms of the restricted stock purchase agreement.
		

		
			 
		

		
			(c)  Stock Unit Awards.  Each stock unit award agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of stock unit award agreements may change from time to time, and the terms and conditions of separate stock unit award agreements need not be identical, provided, however, that each stock unit award agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
		

		
			 
		

		
			(i)  Consideration.  At the time of grant of a stock unit award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the stock unit award. The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a stock unit award may be paid in any form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.
		

		
			 
		

		
			(ii)  Vesting.  At the time of the grant of a stock unit award, the Board may impose such restrictions or conditions to the vesting of the stock unit award as it, in its sole discretion, deems appropriate.
		

		
			 
		

		
			(iii)  Payment.  A stock unit award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the stock unit award agreement.
		

		
			 
		

		
			(iv)  Additional Restrictions.  At the time of the grant of a stock unit award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a stock unit award after the vesting of such stock unit award.
		

		
			 
		

		
			(v)  Dividend Equivalents.  Dividend equivalents may be credited in respect of shares of Common Stock covered by a stock unit award, as determined by the Board and contained in the stock unit award 

		 

		

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agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the stock unit award in such manner as determined by the Board. Any additional shares covered by the stock unit award credited by reason of such dividend equivalents will be subject to all the terms and conditions of the underlying stock unit award agreement to which they relate.
		

		
			 
		

		
			(vi)  Termination of Participant’s Continuous Service.  Except as otherwise provided in the applicable stock unit award agreement, such portion of the stock unit award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.
		

		
			 
		

		
			(d)  Stock Appreciation Rights.  Each stock appreciation right agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of stock appreciation right agreements may change from time to time, and the terms and conditions of separate stock appreciation right agreements need not be identical; provided, however, that each stock appreciation right agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
		

		
			 
		

		
			(i)  Strike Price and Calculation of Appreciation.  Each stock appreciation right will be denominated in shares of Common Stock equivalents. The appreciation distribution payable on the exercise of a stock appreciation right will be not greater than an amount equal to the excess of (i) the aggregate Fair Market Value (on the date of the exercise of the stock appreciation right) of a number of shares of Common Stock equal to the number of shares of Common Stock equivalents in which the Participant is vested under such stock appreciation right, and with respect to which the Participant is exercising the stock appreciation right on such date, over (ii) an amount (the strike price) that will be determined by the Board at the time of grant of the stock appreciation right.
		

		
			 
		

		
			(ii)  Vesting.  At the time of the grant of a stock appreciation right, the Board may impose such restrictions or conditions to the vesting of such stock appreciation right as it, in its sole discretion, deems appropriate.
		

		
			 
		

		
			(iii)  Exercise.  To exercise any outstanding stock appreciation right, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the stock appreciation right agreement evidencing such stock appreciation right.
		

		
			 
		

		
			(iv)  Payment.  The appreciation distribution in respect to a stock appreciation right may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and contained in the stock appreciation right agreement evidencing such stock appreciation right.
		

		
			 
		

		
			(v)  Termination of Continuous Service.  In the event that a Participant’s Continuous Service terminates, the Participant may exercise his or her stock appreciation right (to the extent that the Participant was entitled to exercise such stock appreciation right as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the stock appreciation right agreement), or (ii) the expiration of the term of the stock appreciation right as set forth in the stock appreciation right agreement. If, after termination, the Participant does not exercise his or her stock appreciation right within the time specified herein or in the stock appreciation right agreement (as applicable), the stock appreciation right shall terminate.
		

		
			 
		

		
			8.                                      COVENANTS OF THE COMPANY.
		

		
			 
		

		
			(a)  Availability of Shares.  During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Stock Awards.
		

		
			 
		

		
			(b)  Securities Law Compliance.  The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking shall not require 

		 

		

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the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained.
		

		
			 
		

		
			(c)  No Obligation to Notify or Minimize Taxes.  The Company shall have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Stock Award. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of a Stock Award or a possible period in which the Stock Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder of such Stock Award.
		

		
			 
		

		
			9.                                      USE OF PROCEEDS FROM STOCK.
		

		
			 
		

		
			Proceeds from the sale of Common Stock pursuant to Stock Awards shall constitute general funds of the Company.
		

		
			 
		

		
			10.                               MISCELLANEOUS.
		

		
			 
		

		
			(a)  Corporate Action Constituting Grant of Stock Awards.  Corporate action constituting a grant by the Company of a Stock Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Stock Award is communicated to, or actually received or accepted by, the Participant.
		

		
			 
		

		
			(b)  Acceleration of Exercisability and Vesting.  The Board shall have the power to accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest.
		

		
			 
		

		
			(c)  Stockholder Rights.  No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award unless and until such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms.
		

		
			 
		

		
			(d)  No Employment or other Service Rights.  Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
		

		
			 
		

		
			(e)  Incentive Stock Option $100,000 Limitation.  To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options.
		

		
			 
		

		
			(f)  Investment Assurances.  The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such 

		 

		

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requirements, shall be inoperative if (1) the issuance of the shares of Common Stock upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act or (2) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.
		

		
			 
		

		
			(g)  Withholding Obligations.  To the extent provided by the terms of a Stock Award Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Stock Award, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid variable award accounting); or (iii) delivering to the Company (either by actual delivery or attestation) owned and unencumbered shares of Common Stock of the Company.
		

		
			 
		

		
			(h)  Performance Stock Awards.  A Stock Award may be granted, may vest, or may be exercised based upon service conditions, upon the attainment during a Performance Period of certain Performance Goals, or both. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained shall be conclusively determined by the Board in its sole discretion. The maximum benefit to be received by any individual in any calendar year attributable to Stock Awards described in this subsection 10(h) shall not exceed the value of one million five hundred thousand (1,500,000) shares of Common Stock.
		

		
			 
		

		
			(i)  Electronic Delivery.  Any reference herein to a “written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s intranet.
		

		
			 
		

		
			(j)  Compliance with Section 409A.  To the extent that the Board determines that any Stock Award granted hereunder is subject to Section 409A of the Code, the Stock Award Agreement evidencing such Stock Award shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Stock Award Agreements shall be interpreted in accordance with Section 409A of the Code. Notwithstanding anything to the contrary in this Plan (and unless the Stock Award Agreement specifically provides otherwise), if the Shares are publicly traded and a Participant holding a Stock Award that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount shall be made upon a “separation from service” before a date that is six (6) months following the date of such Participant’s “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) or, if earlier, the date of the Participant’s death.
		

		
			 
		

		
			11.                               ADJUSTMENTS UPON CHANGES IN STOCK.
		

		
			 
		

		
			(a)  Capitalization Adjustments.  If any change is made in the Common Stock subject to the Plan, or subject to any Stock Award, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Board shall appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to subsection 4(a) and the maximum number of securities subject to award to any person pursuant to subsection 5(c) and 10(h) and (ii) the class(es) and number of securities and price per share of Common Stock subject to such outstanding Stock Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.)
		

		
			 
		

		
			

		 

		

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(b)  Dissolution or Liquidation.  In the event of a dissolution or liquidation of the Company, then all outstanding Stock Awards shall terminate immediately prior to such event, and shares of Common Stock subject to the Company’s repurchase option may be repurchased by the Company notwithstanding the fact that the holder of such stock is still in Continuous Service. Notwithstanding the foregoing, Options granted under the 1997 Stock Option Plan shall be subject to subsection 11(c) below in the event of a dissolution or liquidation of the Company.
		

		
			 
		

		
			(c)  Corporate Transaction.  In the event of (i) a sale, lease or other disposition of all or substantially all of the securities or assets of the Company, (ii) a merger or consolidation in which the Company is not the surviving corporation or (iii) a reverse merger in which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, then any surviving corporation or acquiring corporation may assume any Stock Awards outstanding under the Plan or may substitute similar stock awards (including an award to acquire the same consideration paid to the stockholders in the transaction described in this subsection 11(c)) for those outstanding under the Plan. In the event any surviving corporation or acquiring corporation does not assume such Stock Awards or substitute similar stock awards for those outstanding under the Plan, then with respect to Stock Awards held by Participants whose Continuous Service has not terminated, the vesting of such Stock Awards (and, if applicable, the time during which such Stock Awards may be exercised) shall be accelerated in full, and the Stock Awards shall terminate if not exercised (if applicable) at or prior to such event. With respect to any other Stock Awards outstanding under the Plan, such Stock Awards shall terminate if not exercised (if applicable) prior to such event.
		

		
			 
		

		
			12.                               AMENDMENT OF THE PLAN AND STOCK AWARDS.
		

		
			 
		

		
			(a)  Amendment of Plan.  The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 11 relating to adjustments upon changes in Common Stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing requirements.
		

		
			 
		

		
			(b)  Stockholder Approval.  The Board may, in its sole discretion, submit any other amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to certain executive officers.
		

		
			 
		

		
			(c)  Contemplated Amendments.  It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it into compliance therewith.
		

		
			 
		

		
			(d)  No Impairment of Rights.  Rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.
		

		
			 
		

		
			(e)  Amendment of Stock Awards.  The Board at any time, and from time to time, may amend the terms of any one or more Stock Awards; provided, however, that the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.
		

		
			 
		

		
			13.                               TERMINATION OR SUSPENSION OF THE PLAN.
		

		
			 
		

		
			(a)  Plan Term.  Unless sooner terminated by the Board pursuant to Section 3, the Plan shall automatically terminate on the day before the tenth (10th) anniversary of the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
		

		
			 
		

		
			(b)  No Impairment of Rights.  Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the Participant.
		

		
			 
		

		
			

		 

		

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14.                               EFFECTIVE DATE OF PLAN.
		

		
			 
		

		
			The Plan shall become effective upon its adoption by the Board, but no Stock Award shall be exercised (or, in the case of a stock bonus, shall be granted) unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.
		

		
			 
		

		
			15.                               CHOICE OF LAW.
		

		
			 
		

		
			The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of laws rules.
		

		
			 
		

		
			 
		

		 

		

			15Exhibit

Exhibit 10.1
    
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
 
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of August 2, 2016 and effective as of July 1, 2016 (the “Commencement Date”), by and between Empire Resorts, Inc., a Delaware corporation (the “Company”), and Joseph A. D’Amato (the “Executive”, and the Company and the Executive collectively referred to herein as “the Parties”).
 
W I T N E S S E T H:
 
WHEREAS, the Company desires to continue to employ the Executive as Chief Executive Officer of the Company, and to enter into an agreement embodying the terms of such employment (this “Agreement”), and the Executive desires to continue employment with the Company, subject to the terms and conditions of this Agreement;
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants and promises of the Parties contained herein, the Parties, intending to be legally bound, hereby agree as follows:
 
1.            Term.  The term of employment under this Agreement shall be for the period beginning on the Commencement Date and ending on the close of business on June 28, 2019 (the “Term”), or such earlier date upon which the Executive’s employment is terminated by either Party in accordance with the provisions of this Agreement.
 
2.    Employment.
 
(a)    Position.  As of the Commencement Date, the Executive shall be employed as Chief Executive Officer and/or such other title or titles as may be granted by the Company.  The Executive shall perform such duties and responsibilities as may reasonably be assigned to him from time to time by the Company’s Executive Chairman and the Board of Directors and, in the absence of such assignment, such duties as are customary and commensurate with the position held by the Executive.  The Executive agrees to comply with the Company’s written policies and procedures throughout the Term; provided, however, that if any such policy or procedure conflicts with the terms of this Agreement, the terms of this Agreement shall prevail.  The Executive shall report to the Company’s Executive Chairman and Board of Directors.  
 
(b)    Obligations.  The Executive agrees to (i) perform his duties faithfully and devote substantially all of his full business time and attention to the business and affairs of the Company; (ii) devote his skill and ability to promote the interests of the Company; and (iii) carry out his duties in a competent and professional manner.  Anything herein to the contrary notwithstanding, nothing shall preclude the Executive from: (i) serving on the boards of directors of trade associations and/or charitable organizations; (ii) engaging in charitable activities and community affairs; and (iii) managing his personal investments and affairs, provided that the 

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activities described in the preceding clauses (i) through (iii) do not materially interfere with the proper performance of his duties and responsibilities hereunder and do not prevent him from devoting substantially all of his full business time and attention to the affairs of the Company.
 
3.     Base Salary.  The Company agrees to pay or cause to be paid to the Executive during the Term a base salary at the rate of Four Hundred Twenty Five Thousand Dollars ($425,000) per year for the Term which may increase if, in their sole discretion, the Company's Board of Directors (the "Board") shall determine based on a number of factors that the Executive's performance warrants such an increase (the base salary in effect shall be referred to herein as, the “Base Salary”).  Such Base Salary shall be payable, less applicable withholdings and deductions, in accordance with the Company’s reasonable and customary payroll practices applicable to its executive officers.
 
4.    Bonus.  The Executive shall be eligible to participate in any annual bonus plan maintained by the Company for its senior executives on such terms and conditions as may be determined from time to time by the Compensation Committee of the Board.  The payment of any such bonus shall be in the absolute discretion of the Board and based on a number of factors including but not limited to overall performance and profitability of the Company.  

5.    Additional Incentive.
 
(a)    The Compensation Committee of the Board has previously approved the grant(s) to Executive of options to purchase shares of the Company’s common stock (the “Options”) and shares of restricted common stock (the “Restricted Shares” and, together with the Options, the “Equity Awards”) pursuant to the Company’s 2005 Equity Incentive Plan (the “2005 Plan”) and the Company’s 2015 Equity Incentive Plan (the “2015 Plan” and, together with the 2005 Plan, the “Plans”)) and may, at the sole discretion of the Board, grant additional Equity Awards under the 2015 Plan.  The terms of existing Equity Awards and any additional Equity Awards shall be as described in the award letter relating to each Equity Award and the terms and conditions of the 2005 Plan or 2015 Plan, as applicable.  Upon the occurrence of a Change in Control (as defined below), the Equity Awards shall be deemed fully vested.  In the event of any conflict between the terms and provisions of this Section 5 and the 2005 Plan or the 2015 Plan, as applicable, the applicable Plan shall govern.
 
(b)    For the purposes of this Agreement, “Change in Control” shall have the same meaning as in the 2015 Plan.

(c)    Employee Benefits.  The Executive shall be eligible to participate in all employee benefit plans, practices and programs maintained by the Company and made available to senior level executive officers generally and as may be in effect from time to time, including any medical and health plans and any equity-based incentive programs that may be put into place, subject, however, to the terms and conditions of the various plans and programs and subject to the determinations of any person or committee administering such plans and programs.  The Executive’s participation in such plans, practices and programs shall be on the same basis and terms as are applicable to senior level executive officers of the Company generally.  Such level of benefits shall 

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be at a level commensurate with his position. For the avoidance of doubt, the Company shall be entitled to terminate or reduce any employee benefit enjoyed pursuant to the provision of this Section, if such reduction is applicable to all senior level executives of the Company who are at a level commensurate with Executive’s position.   Notwithstanding the foregoing, the Executive will not be eligible to participate in any severance plan of the Company.  The Executive severance benefits, if any, are to be solely set forth in Sections Section 9(b)(ii) and (iii). 
 
6.    Other Benefits.
 
(a)     Vacation.  During each calendar year of the Term, the Executive shall be eligible to accrue paid vacation up to twenty five (25) days in accordance with the Company’s vacation policy for senior level executive officers, as it may be amended from time to time.  The Executive agrees that vacation time is to be taken at such time(s) as shall not materially interfere with the Executive’s fulfillment of his duties hereunder.

The Executive shall be entitled to carry forward to the next following calendar year up to twenty five (25) vacation days (the “Carry-forward Vacation Days”); provided, however, the Executive shall solely be entitled to use the Carry-forward Vacation Days for purposes of vacation time and, except as set forth in Section 9 below, shall be entitled to no cash compensation in relation thereto.

(b)     Perquisites. The Executive shall be entitled to perquisites on the same basis as provided to other senior level executive officers at the Company.  In addition to the foregoing and Section 7 below, the Executive shall be entitled to the following perquisites.  At the end of the Term or on the Termination Date (as defined below), whichever occurs sooner, Executive shall immediately vacate the housing provided pursuant to Section 6(b)(i) and return to the Company the automobile provided pursuant to Section 6(b)(ii) in accordance with the policies and procedures of the Company applicable to all employees.

(i)Housing Allowance.  For the Term, the Company shall provide the Executive with furnished housing in Sullivan County, New York that is mutually agreeable to the Company and the Executive.  Executive will be responsible for any taxes due on such allowance.  In addition, the Executive shall be entitled to reimbursement of reasonable relocation expenses incurred in connection with the relocation to Sullivan County, New York. The Executive shall provide such appropriate documentation regarding these expenses as the Company may reasonably request.  

(ii)Automobile.  The Company shall lease or purchase an automobile for Executive’s sole and exclusive use, the approximate monthly value of which shall not exceed $1,500.  In addition, the Company shall be responsible for the payment of insurance, maintenance, gas and other expenses related to the business use of the automobile (“Car Expenses”) upon receipt of appropriate documentation of such Car Expenses by Executive.

(iii)Key Man Insurance.  The Company shall obtain and maintain during the Term a key man life insurance policy to insure Executive with death benefits in the amount of 

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$1 million for the Executive’s estate and in the amount of $3 million for Company.  The Company shall use its commercially reasonable efforts to obtain a life insurance policy to insure Executive with death benefits in the amount of an additional $1 million for the Executive’s estate.

     7.    Expenses.  The Executive shall be reimbursed on not less than a monthly basis for all reasonable, ordinary and necessary expenses incurred by him in connection with the performance of his duties hereunder or for promoting, pursuing or otherwise furthering the business or interests of the Company (including but not limited to travel costs, dining and entertainment), in each case in accordance with policies established by the Board from time to time in effect and upon receipt of appropriate documentation of such expenses.
  
8.    Termination.
 
(a)    Death.  The Executive’s employment hereunder shall terminate automatically upon the Executive’s death.
 
(b)    Disability.  If during the Term of this Agreement, Executive becomes physically or mentally unable to perform his duties for the Company hereunder and such incapacity has continued for a total of ninety (90) consecutive days or any one hundred twenty (120) days in a period of three hundred sixty-five (365) consecutive days (“Disability”), then the Company shall have the right to terminate Executive’s employment with the Company upon written notice to Executive.
 
(c)     Cause.  The Company shall be entitled to terminate the Executive’s employment for “Cause.” For purposes of this Agreement, “Cause” shall mean that the Executive: (i) pleads “guilty” or “no contest” to or is convicted of an act which is defined as a felony under federal or state law or as a crime under federal or state law which involves Executive’s fraud or dishonesty; (ii) in carrying out his duties, engages in conduct that constitutes willful neglect or willful misconduct; provided such plea, conviction, neglect or misconduct results in material economic harm to the Company; (iii) fails to obtain or maintain required licenses in the jurisdiction where the Company currently operates or has plans to operate; (iv) willfully and intentionally fails to perform the material responsibilities of the Executive’s position, (v) engages in an act of dishonesty in the performance of his duties hereunder, (vi) harasses or discriminates against the Company’s employees, customers, or vendors in violation of Company policies with respect to such conduct; (vii) engages in any conduct that is reasonably likely to cause harm to the reputation of the Company; (viii) makes a material disclosure as defined by Section 10(a) or (ix) materially breaches any term of this Agreement.  In the event any of the occurrences in (i) through (ix) above have occurred, the Executive shall be given written notice by the Company of its intention to so terminate his employment, such notice (i) to state in detail the particular act or acts or failure or failures to act that constitute the grounds on which the proposed termination for Cause is based and (ii) to be given within sixty (60) days after the Board knew of such acts or failures to act.  In the event such notice is timely given by the Company, the Executive shall have thirty (30) days after the date that the notice is given in which to cure such conduct, to the extent such cure is possible.  For the avoidance of doubt, any of the occurrences constituting Cause set forth in clauses (i), (ii) and (v) above cannot be cured.  No act or failure to act on Executive’s part will be considered “willful” 

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unless done, or omitted to be done by Executive not in good faith and without reasonable belief that his action or omission was in the best interests of the Company.

(d)    Good Reason.  The Executive may terminate his employment hereunder for “Good Reason”, which is defined to include the following events arising without the consent of the Executive: (A) a material diminution in the Executive’s Base Salary (unless such diminution is part of an across-the-board diminution affecting all senior officers of the Company equally); (B) a material diminution in the Executive’s title, authority, duties or responsibilities (including reporting responsibilities); (C) a material diminution in the authority, duties and responsibilities of the person to whom the Executive is required to report, including a requirement that the Executive report to a corporate officer or employee, other than the Executive Chairman, instead of reporting directly to the Executive Chairman and the Board; (D) a material diminution in the budget over which the Executive retains authority; (E) a material change in the geographic location at which the Executive must perform his duties and responsibilities for the Company; or (F) any other action or inaction that constitutes a material breach of the terms of this Agreement.  In the event any of the occurrences in (A) through (F) above have occurred, the Company shall be given written notice by the Executive of his intention to so terminate his employment, such notice; (i) to state in detail the particular act or acts or failure or failures to act that constitute the grounds on which the proposed termination for Good Reason is based and (ii) to be given within thirty (30) days after the Executive knew of such acts or failures to act.  In the event such notice is timely given by the Executive, the Company shall have thirty (30) days after the date that the notice is given in which to cure such conduct, to the extent such cure is possible.  In the event of the occurrence of an event described in (A) through (F) above, which event remains uncured after the Company has received written notice of Executive’s intention to terminate his employment to the Company, the Executive shall have sixty (60) days from the initial existence of the event(s) that constitute the grounds on which the proposed termination for Good Reason is based to terminate his employment for Good Reason.

(e)    Without Cause.  The Company may terminate the Executive’s employment hereunder without Cause at any time and for any reason (or for no reason) in the Company’s sole discretion by giving the Executive a Notice of Termination (as defined below).  Such termination shall not be deemed a breach of this Agreement. 

(f)    Voluntary.  Notwithstanding anything contained elsewhere in this Agreement to the contrary, the Executive may terminate his employment hereunder at any time and for any reason whatsoever (or for no reason) in the Executive’s sole discretion by giving the Company a Notice of Termination (as defined below).  Such termination shall not be deemed a breach of this Agreement.
 
(g)    Notice of Termination.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice which indicates the specific termination provision of this Agreement relied upon and which sets forth in reasonable detail, if applicable, the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.  For purposes of this Agreement, no purported termination of employment which requires a Notice of Termination shall be effective without such Notice of Termination.  The 

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Termination Date (as defined below) specified in such Notice of Termination shall be no less than thirty (30) days from the date the Notice of Termination is given.
 
(h)    Termination Date.  “Termination Date” shall mean the date of the termination of the Executive’s employment with the Company and specifically (i) in the case of the Executive’s death, his date of death; (ii) in the case of a termination of the Executive’s employment for Cause, the relevant date specified in Section 8(c) of this Agreement; (iii) in the case of a termination of the Executive’s employment for Good Reason, the relevant date specified in Section 8(d) of this Agreement; (iv) in the case of the expiration of the Term of this Agreement in accordance with Section 1, the date of such expiration; and (v) in all other cases, the date specified in the Notice of Termination.
 
9.    Compensation Upon Termination of Employment.
 
(a)    At End of Term; For Cause; Without Good Reason.  If during the Term of this Agreement, the Executive’s employment under this Agreement is terminated by the Company for Cause or by the Executive without Good Reason (and other than by reason of the Executive’s death or Disability), or at the end of the Term, the Company’s sole obligation hereunder shall be to pay the Executive the following amounts earned hereunder but not paid as of the Termination Date:
  
(i)          the Executive’s Base Salary through the Termination Date;
 
(ii)         reimbursement of any and all reasonable, ordinary, and necessary expenses incurred in connection with the Executive’s duties and responsibilities under this Agreement and for which the Company received appropriate documentation prior to the Termination Date; 
 
(iii)       any benefits to which Executive may be entitled to under the plans and programs described in Section 5(c) as of the Termination Date in accordance with the terms of such plans and programs; and

		
	(iv)
	 reimbursement for any unused vacation time in the current calendar year granted pursuant to Section 6(a) and any Carry-forward Vacation Days outstanding.

Subsections (i) through (iv) shall be referred to collectively as the “Accrued Obligation.” 

(b)    Without Cause or for Good Reason.  If the Executive’s employment hereunder is terminated by the Executive for Good Reason or by the Company without Cause, the Company’s sole obligation hereunder shall be to pay the Executive the following amounts:
 
(i)          the Accrued Obligation;
 
(ii)         a pro-rata portion (based on the days worked by the Executive during the applicable year) of any bonus awarded pursuant to any annual bonus plan maintained 

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by the Company for its senior executives to which the Executive would have been entitled had he not been terminated, which shall be paid at such time as other participants in the bonus plan are paid their respective bonuses in respect of that fiscal year, but no later than March 15 of the calendar year following the Termination Date;
 
(iii)        The Executive’s Base Salary for the following period (the “Salary Continuation Period”): (A) in the event that Executive’s employment hereunder is terminated prior to the occurrence of a Change in Control, the lesser of (x) eighteen (18) months following such termination or (y) the remaining duration of the Term; or (B) in the event that Executive’s employment hereunder is terminated on or following the occurrence of a Change in Control, the greater of (x) twenty four (24) months following such termination or (y) the remaining duration of the Term; in each instance such amount payable in equal installments in accordance with the Company’s payroll practices applicable to its executive officers which payments shall commence on the earlier of the first payroll date following the 75th day after the Termination Date, or thirty (30) days after the effective date of the Release referenced below in Section 9(g).  The first payment pursuant to this Section 9(b)(iii) shall include those payments that would have previously been paid if the payments described in this Section had begun on the first payroll date following the Termination Date.  This timing of the commencement of payments pursuant to this Section 9(b)(iii) is subject to Section 11 below; and
 
(iv)        that portion of any Equity Awards that is unvested on the Termination Date shall be deemed vested on the Termination Date and Options shall remain outstanding through the remainder of the original term of such Options.
 
(c)    Disability.  If the Executive’s employment hereunder is terminated by the Company by reason of the Executive’s Disability, the Company’s sole obligation hereunder shall be to pay the Executive the following amounts:
 
(i)          the Accrued Obligation; and
 
(ii)         any accrued benefits under the Company’s regular and any supplemental long-term disability plan or plans; and
 
(iii)        that portion of any Equity Awards that is unvested on the Termination Date shall be deemed vested on the Termination Date and Options shall remain outstanding through the remainder of the original term of such Options.
 
(d)    Death.  If the Executive’s employment hereunder is terminated due to his death, the Company’s sole obligation hereunder shall be to pay the Accrued Obligation to the person or persons designated in writing by the Executive to receive such payment, or if no such designation was made, to the Executive’s estate.  In addition, that portion of any Equity Awards that is unvested on the Termination Date shall be deemed vested on the Termination Date and Options shall remain outstanding through the remainder of the original term of such Options.
 

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(e)    Continuation of Employee Benefits.  Notwithstanding anything to the contrary, in addition to any amounts payable in the event of a termination under Section 9(b), the Company, the Company shall fully subsidize  the cost of all Consolidated Omnibus Budget Reconciliation Act (“COBRA”) premiums during the Salary Continuation Period and the Company shall continue to provide the Executive, during the Salary Continuation Period with any other benefits set forth under Section 5(c) as though the Executive’s employment had not terminated (to the extent such coverage may be continued under the terms of such plans and programs and exclusive of participation in any Section 401(k) Plan or any other plans for severance benefits). In accordance with the applicable provisions of COBRA, the Executive may continue COBRA coverage at the Executive’s sole cost for any remaining COBRA period after the Salary Continuation Period.  Notwithstanding the foregoing and subject to Executive’s group health plan coverage continuation rights under COBRA, the Company’s obligation to provide the continuation of benefits under this Section shall be reduced to the extent the same types are received or made available to Executive under the plans, programs or arrangements of a subsequent employer or is otherwise received by Executive during such period.  The Executive shall have the obligation to notify the Company, during the Salary Continuation Period, that he is eligible for, entitled to or receiving such benefits from a subsequent employer or is otherwise receiving such benefits.

(f)    No Mitigation; No Offset.  In the event of any termination of his employment hereunder, the Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation provided to the Executive in any subsequent employment, except as provided in Section 9(e) of this Agreement.
 
(g)    Release.   Any other provisions of this Agreement notwithstanding, Section 9(b)(ii) and (iii) shall not apply unless and until: (i) Executive has executed and delivered a full and complete general release of all claims in such form as is reasonably requested by the Company which Executive has not revoked in any time frame provided in the general release; and (ii) Executive has returned all the Company’s property.    Any obligation on the part of the Company for payments pursuant to Section 9(b)(ii) and (iii), shall cease if the Executive is in violation of the provisions of Section 10 below.

(h)     Timing of Payments.  Other than the benefits provided for in Section 9(e) above, unless otherwise specifically indicated herein, the payments provided for in this Section 9 shall begin within ninety (90)  days of the termination of the Executive’s employment with the Company provided the Executive has not revoked acceptance of the releases set forth in Section 9(g). 
 
(i)    Limitation on Benefits.  Notwithstanding anything to the contrary contained in this Agreement, to the extent that any of the payments and benefits provided for under this Agreement or any other agreement or arrangement between the Company and the Executive (collectively, the “Payments”) (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this Section 9(i), would be subject to the excise tax imposed by Section 4999 of the Code, then the Payments shall be reduced to the extent that such reduction would result in after-tax payments and benefits to the Executive that exceed the after-tax payments 

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and benefits to which the Executive be entitled without such reduction.  Any determination required under this Section shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon the Executive and the Company for all purposes and the Executive agrees not to take any position (in any tax return or otherwise) inconsistent with determination.  For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely in reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code.  The Company and the Executive shall furnish to the Accountants such information and documents as the Accountants may request in order to make a determination under this Section.  The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.  If the limitation set forth in this Section 9(i) is applied to reduce an amount payable to the Executive, and the Internal Revenue Service successfully asserts that, despite the reduction, the Executive has nonetheless received payments which are in excess of the maximum amount that could have been paid to the Executive without being subjected to any excise tax, then, unless it would be unlawful for the Company to make such a loan or similar extension of credit to the Executive, the Executive may repay such excess amount to the Company as though such amount constituted a loan to the Executive made at the date of payment of such excess amount, bearing interest at 120% of the applicable federal rate (as determined under Section 1274(d) of the Code in respect of such loan).
 
(j)    Valuation of Non-Competition Obligations.  The Company shall make reasonable efforts to cooperate with the Executive with regard to the value for tax purposes of the Executive’s non-competition obligations under this Agreement.
 
10.    Employee Covenants.
 
(a)    Unauthorized Disclosure.  The Executive shall not, during the Term of this Agreement and thereafter, make any Unauthorized Disclosure (as defined below).  For purposes of this Agreement, “Unauthorized Disclosure” shall mean disclosure by the Executive without the prior written consent of the Board to any person, other than an employee of the Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of his duties hereunder, of any confidential information relating to the business or prospects of the Company, including, but not limited to, any information with respect to any of the Company’s customers, products, finances or financial projections, methods of distribution, strategies, business and marketing plans and business policies and practices, including information disclosed to the Company by others under agreements to hold such information confidential (the “Confidential Information”).  Notwithstanding the foregoing, the Executive may disclose Confidential Information (i) to the extent such disclosure is or may be required by law, but only after providing (A) notice to the Company of any third party’s request for such information, which notice shall include the Executive’s intent with respect to such request, and (B) to the extent possible under the circumstances, sufficient opportunity for the Company to challenge or limit the scope of the disclosure, or (ii) in confidence to an attorney, accountant or other advisor for the purpose of securing professional advice concerning the Executive’s personal matters, provided that such attorney or other advisor agrees to observe these confidentiality provisions.  Confidential Information shall not include the use or disclosure by the Executive of any information known 

9

generally to the public or known within the Company’s trade or industry (other than as a result of any direct or indirect action or inaction by the Executive or any disclosure by the Executive in violation of this Section 10(a)).  This confidentiality covenant has no temporal, geographical or territorial restriction.

(b)    Non-Competition.  The Executive shall not, during the Term of this Agreement and during the Non-Competition Period (as defined below), directly or indirectly, without the prior written consent of the Board, own, manage, operate, join, control, be employed by, consult with or participate in the ownership, management, operation or control of, or be connected with (as a stockholder, partner, or otherwise) any business competing with, or substantially similar to, the businesses of Company and its present and future subsidiaries, joint ventures, partners or other affiliates (except that affiliates that are in a business unrelated to the Company’s business shall not be included)(the “Empire Companies”), as such businesses exist within 100 miles of the location in which any such entity conducts, or is actively investigating the possibility of conducting, its businesses as of the beginning of the Non-Competition Period.  Notwithstanding the foregoing, the provisions of this Section 10(b) shall not be deemed to prohibit the Executive’s ownership of up to 2% of the total shares of all classes of stock outstanding of any publicly held company.
 
(c)    Non-Solicitation.  During the period from the termination of the Executive’s employment with the Company through the one year anniversary of the date of termination, the Executive shall not, directly or indirectly, alone or in conjunction with another person, (i) hire, solicit, retain, compensate or otherwise induce or attempt to induce any individual who is an employee of any of the Empire Companies, to leave the employ of the Empire Companies or in any way interfere with the relationship between any of the Empire Companies and any employee thereof, (ii) hire, engage, send any work to, place orders with, or in any manner be associated with any supplier, contractor, subcontractor or other business relation of any of the Empire Companies if such action by the Executive would have a material adverse effect on the business, assets or financial condition of any of the Empire Companies, or materially interfere with the relationship between any such person or entity and any of the Empire Companies, or (iii) solicit or accept business from any customer of any of the Empire Companies.  In connection with the foregoing provisions of this Section 10, the Executive represents that his experience, capabilities and circumstances are such that such provisions will not prevent him from earning a livelihood.  The Executive further agrees that the limitations set forth in this Section 10 (including, without limitation, time and territorial limitations) are reasonable and properly required for the adequate protection of the current and future businesses of the Empire Companies.

(d)    Non-Competition Period.  For purposes of this Agreement, the “Non-Competition Period” means the period from the termination of the Executive’s employment with the Company through (i) in the case of a termination without Cause by the Company, the end of the Salary Continuation Period, (ii) in the case of a voluntary termination by the Executive without Good Reason, one (1) year following the date of such termination, (iii) in the case of Executive terminating his employment for Good Reason, the end of the Salary Continuation Period (iv) in the case of a termination by the Company with Cause, for one (1) year following such termination and (v) in the case of the expiration of the Term, for three (3) months following the expiration of the Term.  

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(e)    Remedies.  The Executive agrees that any breach of the terms of this Section 10 would result in irreparable injury and damage to the Company for which the Company would have no adequate remedy at law.  The Executive therefore also agrees that in the event of said breach or any threat of such a breach, the Company shall be entitled to seek an immediate injunction and restraining order to prevent such breach or continued breach by the Executive, in addition to any other remedies to which the Company may be entitled at law or in equity.  The Executive and the Company further agree that the provisions of the covenants not to compete and solicit in this Section 10 are reasonable and that the Company would not have entered into this Agreement but for the inclusion of such covenants herein.  Should a court determine, however, that any provision of the covenants is unreasonable, either in period of time, geographical area, or otherwise, the Parties agree that such covenants should be interpreted and enforced to the maximum extent which such court deems reasonable and such determination shall have no effect upon, and shall not impair the enforceability of, any other provision of this Agreement.  The existence of a claim, charge, or cause of action by the Executive against the Company shall not constitute a defense to the enforcement by the Company of the foregoing confidentiality, non-competition, and non solicitation sections.  
 
11.    Section 409A.  It is the intention of the Parties that this Agreement be exempt from or comply strictly with the provisions of Section 409A of the Code, and Treasury Regulations and other Internal Revenue Service guidance promulgated thereunder (the “Section 409A Rules”) and any ambiguity herein shall be interpreted so as to be consistent with the intent of this paragraph.  In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on the Executive by Section 409A or damages for failing to comply with Section 409A.  Notwithstanding anything contained herein to the contrary, all payments and benefits which are payable upon a termination of employment hereunder shall be paid or provided only upon those terminations of employment that constitute a “separation from service” from the Company within the meaning of the 409A Rules (determined after applying the presumption set forth in Treas. Reg. Section 1.09A-1(h)(1)).  Further, to the extent the Executive is a specified employee under the 409A Rules at the time of a termination of employment and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated recognition of income or additional tax under Section 409A, then the Company will defer the commencement of any payments or benefits hereunder (without any reduction in payments or benefits ultimately paid or provided to the Executive) until the date that is at least six (6) months following the Executive’s termination of employment with the Company (or the earliest date permitted under Section 409A Rules, e.g., immediately upon the Executive’s death), whereupon the Company will promptly pay the Executive a lump-sum amount equal to the cumulative amounts that would have otherwise been previously paid to the Executive under this Agreement during the period in which such payments or benefits were deferred.   Thereafter, the normal schedule for the remaining payments will commence.  Notwithstanding anything to the contrary in this Agreement, reimbursement payments shall be promptly made to the Executive following such submission, but in no event later than December 31st of the calendar year following the calendar year in which the expense was incurred.  In no event shall the Executive be entitled to any reimbursement payments after December 31st of the calendar year following the calendar year in which the expense was incurred.  

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Additionally, in the event that following the date hereof, the Company or the Executive reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 09A, the Company and the Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (x) exempt the compensation and benefits payable under this Agreement from Section 409A Rules and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (y) comply with the requirements of Section 409A Rules.
 
12.    Withholding of Taxes.  The Company may take such actions as are reasonably appropriate or consistent with applicable law and the Plans in connection with any compensation paid pursuant to this Agreement with respect to the withholding of any taxes (including income or employment taxes) or any other tax matters, including, but not limited to, requiring the Executive to furnish to the Company any applicable withholding taxes prior to the vesting of Restricted Shares or the issuance of common stock upon exercise of an Option.
 
13.     Indemnification; Insurance; Limitation of Liability.
 
(a)    The Company agrees that if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, the Executive shall be indemnified and held harmless by the Company to the fullest extent legally permitted or authorized by the Company’s certificate of incorporation, by-laws or resolutions of the Board against all cost, expense, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes or other liabilities or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity and shall inure to the benefit of the Executive’s heirs, executors and administrators.  The Company shall advance to the Executive all costs and expenses incurred by him in connection with a Proceeding within a reasonable time after submission of reasonable documentation of such costs and expenses.  Such request shall include an undertaking by the Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled by law to be indemnified against such costs and expenses. 
 
(b)    Neither the failure of the Company (including its Board, independent legal counsel or stockholders) to have made a determination prior to the commencement of any Proceeding concerning payment of amounts claimed by the Executive under Section 13(a) above that indemnification of the Executive is proper because he has met the applicable standard of conduct, nor a determination by the Company (including its Board, independent legal counsel or stockholders) that the Executive has not met such applicable standard of conduct, shall create a presumption in any judicial proceeding that the Executive has not met the applicable standard of conduct.
 

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(c)    The Company agrees to continue and maintain director’s and officer’s liability insurance policy covering the Executive, until such time as actions against the Executive are no longer permitted by law, with terms and conditions no less favorable than the most favorable coverage then applying to any other senior level executive officer or director of the Company.
 
14.    Representations.  

(a)     The Executive represents and warrants that he has the free and unfettered right to enter into this Agreement and to perform his obligations under it and that he knows of no agreement between him and any other person, firm or organization, or any law or regulation, that would be violated by the performance of his obligations under this Agreement.  The Executive represents that in connection with the Executive’s employment with the Company, the Executive shall not use or disclose any trade secrets or other proprietary information or intellectual property in which a prior employer or company has any right, title or interest and your employment with the Company will not infringe or violate the rights of any prior employer or company.  The Executive represents and warrants to the Company that he has returned all property and confidential information belonging to any prior employer, other than confidential information that has become generally known to the public or within the relevant trade industry.    

(b)    The Company represents and warrants that it is validly existing and in good standing under the laws of the State of Delaware and is registered or qualified to conduct business in all other jurisdictions in which the failure to be so registered or qualified would adversely affect the ability of the Company to perform its obligations under this Agreement.  The Company has taken all company action required to execute, deliver and perform this Agreement and to make all of the provisions of this Agreement the valid and enforceable obligations they purport to be and has caused this Agreement to be executed by a duly authorized officer of the Company.  All consents and approvals by any third party required to be obtained by the Company in order for it to be authorized to enter into and consummate this Agreement have been obtained and no further third party approvals or consents are required to consummate this Agreement. Execution and delivery of this Agreement and all related documents, and performance of the obligations hereunder by the Company do not conflict with any provision of any law or regulation to which the Company or any of its affiliates are subject, conflict with or result in a breach of or constitute a default under any of the terms, conditions or provisions of any agreement or instrument to which the Company or any of its affiliates are a party or by which the Company is bound or any order or decree applicable to the Company, or result in the creation or imposition of any lien on any assets or property of the Company, and/or which would materially and adversely affect the ability of the Company to perform its obligations under this Agreement. The Company has obtained all consents, approvals, authorizations or orders of any court or governmental agency or body, if any, required for the execution, delivery and performance by the Company of this Agreement.
 
15.    Successors and Assigns.
 
(a)    This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns and the Company shall require any successor or assign to expressly assume and agree to perform this Agreement in the same manner and to the same extent 

13

that the Company would be required to perform it if no such succession or assignment had taken place.  The term “the Company” as used herein shall include any such successors and assigns.  The term “successors” and “assigns” as used herein shall mean a corporation or other entity acquiring or otherwise succeeding to, directly or indirectly, all or substantially all the assets and business of the Company (including this Agreement) whether by operation of law or otherwise.
 
(b)    Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, his beneficiaries or legal representatives, except by will or by the laws of descent and distribution.  This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal personal representative.
 
16.    Notice.  For the purposes of this Agreement, notices and all other communications provided for in this Agreement (including the Notice of Termination) shall be in writing and shall be deemed to have been duly given when personally delivered or sent by registered or certified mail, return receipt requested, postage prepaid, or upon receipt if overnight delivery service or facsimile is used, and addressed as follows:
 
To the Executive:
 
Joseph A. D’Amato,
 
at the address in the payroll records of the Company
 
To the Company:
 
Empire Resorts, Inc.
c/o Monticello Casino and Raceway, Route 17B
P.O. Box 5013
Monticello, New York 12701
Attention: Nanette L. Horner, Chief Counsel
 
17.    Survivorship.  Except as otherwise set forth in this Agreement, the respective rights and obligations of the Executive and the Company hereunder shall survive any termination of the Executive’s employment.
 
18.    Waiver.  The waiver by either Party of a breach of any provision of this Agreement shall not be construed as a waiver of any subsequent breach.  The failure of a Party to insist upon strict adherence to any provision of this Agreement on one or more occasions shall not be considered a waiver or deprive that Party of the right thereafter to insist upon strict adherence to that provision or any other provision of this Agreement.  Any waiver must be in writing and signed by the Executive and the Company.
 
19.     Governing Law.  This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York without giving effect to the conflict of law principles thereof.  Any action, suit or other legal proceeding that is commenced to resolve any 

14

matter arising under or relating to any provision of this Agreement shall be submitted to the exclusive jurisdiction of any state or federal court in New York County.
 
20.    Severability.  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.
  
21.    Entire Agreement. This Agreement constitutes the entire agreement between the Parties and supersedes all prior agreements, understandings and arrangements, oral or written, between the Parties with respect to the subject matter hereof.  This Agreement may be executed in one or more counterparts.
 
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written.
 
EMPIRE RESORTS, INC.

By: /s/ Emanuel R. Pearlman             
Name: Emanuel R. Pearlman
Title: Executive Chairman of the Board

EXECUTIVE:

/s/ Joseph A. D’Amato            

15

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