SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
MONARCH CASINO & RESORT, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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MONARCH CASINO & RESORT, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 26, 2005
To the Stockholders of Monarch Casino & Resort, Inc.:
The Annual Meeting of Stockholders of Monarch Casino & Resort, Inc. (the
"Company") will be held at the Atlantis Casino Resort, 3800 South Virginia
Street, Reno, Nevada 89502, on Thursday, May 26, 2005, at 10:00 a.m. local
time, for the following purposes:
1. To elect Bob Farahi, Ben Farahi and Ronald R. Zideck as directors of
the Company;
2. To approve the increase of shares issuable under the Company's Employee
Stock Option Plan;
3. To approve the increase of shares issuable under the Company's
Executive Long-Term Incentive Plan; and
4. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on April 8, 2005 are
entitled to notice of, and to vote, at the annual meeting. The stock transfer
books will not be closed.
Stockholders are cordially invited to attend the annual meeting in
person. STOCKHOLDERS DESIRING TO VOTE IN PERSON MUST REGISTER AT THE ANNUAL
MEETING WITH THE INSPECTORS OF ELECTION PRIOR TO COMMENCEMENT OF THE ANNUAL
MEETING. IF YOU WILL NOT BE ABLE TO ATTEND THE ANNUAL MEETING IN PERSON, YOU
ARE REQUESTED TO EXECUTE AND DATE THE ENCLOSED FORM OF PROXY AND TO FORWARD IT
TO THE SECRETARY OF THE COMPANY WITHOUT DELAY SO THAT YOUR SHARES MAY BE
REGULARLY VOTED AT THE ANNUAL MEETING.
A copy of the 2004 Annual Report to Stockholders, including financial
statements for the year ended December 31, 2004, is enclosed.
/s/ Ben Farahi
--------------
BEN FARAHI
Secretary
MONARCH CASINO & RESORT, INC.
3800 South Virginia Street
Reno, Nevada 89502
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders of Monarch Casino &
Resort, Inc. (the "Company") in connection with the annual meeting of
stockholders of the Company to be held at the Atlantis Casino Resort, 3800
South Virginia Street, Reno, Nevada 89502, on Thursday, May 26, 2005, at 10:00
a.m. local time, and any adjournment thereof, for the purposes indicated in
the Notice of Annual Meeting of Stockholders.
The accompanying proxy is solicited by the Board of Directors of the
Company (the "Board"). This Proxy Statement and the accompanying form of
proxy are being mailed to stockholders on or about April 21, 2005. Any
stockholder giving a proxy has the power to revoke it prospectively by giving
written notice to the Company, addressed to Ben Farahi, Secretary, at the
Company's principal address at 1175 W. Moana Lane, Suite 200, Reno, Nevada
89509 before the annual meeting, by delivering to the Company a duly executed
proxy bearing a later date, by notifying the Company at the annual meeting
prior to the commencement of the annual meeting. The shares represented by
the enclosed proxy will be voted if the proxy is properly executed and
received by the Company prior to the commencement of the annual meeting, or
any adjournment thereof.
None of the proposals to be voted on at the annual meeting creates a
right of appraisal under Nevada law. A vote "FOR" or "AGAINST" any of the
proposals set forth herein will only affect the outcome of the proposal.
The expenses of making the solicitation will consist of the costs of
preparing, printing, and mailing the proxies and proxy statements and the
charges and expenses of brokerage firms, custodians, nominees or fiduciaries
for forwarding such documents to security owners. These are the only
contemplated expenses of solicitation, and they will be paid by the Company.
VOTING SECURITIES
The close of business on April 8, 2005 has been fixed by the Board as the
record date for determination of stockholders entitled to vote at the annual
meeting. The securities entitled to vote at the annual meeting consist of
shares of common stock, par value $.01 ("Common Stock"), of the Company, with
each share entitling its owner to one vote. Common Stock is the only
outstanding class of voting securities authorized by the Company's Articles of
Incorporation. The Company's Articles of Incorporation authorize the Company
to issue 10,000,000 shares of preferred stock, par value $.01 ("Preferred
Stock"). None of the Preferred Stock is issued or outstanding, and the
Company has no present plans to issue shares of Preferred Stock.
The Board is empowered to issue one or more series of Preferred Stock
with such rights, preferences, restrictions, and privileges as may be fixed by
the Board, without further action by the Company's stockholders. The issuance
of the Preferred Stock could adversely affect the rights, including voting
rights, of the holders of the Common Stock and could impede an attempted
takeover of the Company. The Preferred Stock does not presently possess
general voting rights.
Following a 2 for 1 split of our common stock effective March 31, 2005,
the number of outstanding shares of Common Stock at the close of business on
March 31, 2005, was 18,819,116. The number of shares outstanding may change
between such date and April 8, 2005, if any currently exercisable options to
purchase Common Stock are exercised, if the Company elects to repurchase and
cancel any shares in open market or privately negotiated transactions, or if
the Company otherwise authorizes the issuance of any shares. The stockholders
do not possess the right to cumulate their votes for the election of
directors.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN OTHER BENEFICIAL OWNERS
The following is a list of persons who beneficially owned more than 5% of
the outstanding Common Stock of the Company and the ownership of all executive
officers, directors, director nominees, and executive officers and directors
as a group at the close of business on March 31, 2005, according to record
ownership listings as of that date, according to the Securities and Exchange
Commission Forms 3, 4 and 5 and Schedules 13D and 13G of which the Company has
received copies, and according to verifications as of March 31, 2005, which
the Company solicited and received from each executive officer and director.
Amounts reflect a 2 for 1 stock split effective March 31, 2005:
Title of Amount and Nature Percent of
Class Beneficial Owner of Beneficial Ownership Class
(1),(2)
- -------- ---------------- ----------------------- ----------
Common Ben Farahi 3,925,886 (3) 20.9%
1175 W. Moana Lane,
Reno, NV 89509
Common John Farahi 2,828,558 15.0%
1175 W. Moana Lane,
Reno, NV 89509
Common Bob Farahi 2,778,956 14.8%
1175 W. Moana Lane,
Reno, NV 89509
Common Jila Farahi Trust 1,129,232 6.0%
1175 W. Moana Lane,
Reno, NV 89509
Common Craig F. Sullivan 12,200 (4) *
Common Ronald R. Zideck 24,400 (5) *
Common Charles W. Scharer 12,200 (6) *
Common Akre Capital Management, LLC 1,783,680 (7) 9.5%
2 West Washington Street
PO Box 998
Middleburg, VA 20118
Common Friedman, Billings, Ramsey
Group, Inc. 1,031,000 (8) 5.5%
Eric F. Billings
Emanuel J. Friedman
1001 19th Street North
Arlington, VA 22209
Common All executive officers and
Directors as a group
(6 persons) 9,582,200 50.9%
* Less than 1%.
(1) Unless otherwise noted, the persons identified in this table have sole voting and
sole investment power with regard to the shares beneficially owned by them.
(2) Includes shares issuable upon exercise of options which are exercisable within 60
days of April 8, 2004.
(3) Includes shared voting power for 1,129,232 shares registered under the Jila Farahi
Trust, of which Mr. Ben Farahi is a trustee.
(4) Includes options to purchase 12,200 shares under the 1993 Directors' Stock Option
Plan (the "Directors' Plan").
(5) Includes options to purchase 24,400 shares under the Directors' Plan.
(6) Includes options to purchase 12,200 shares under the Directors' Plan.
(7) Akre Capital Management, LLC ("Akre") reported on a Schedule 13G/A dated April 7,
2005, that it has sole voting and dispositive power with respect to all such
shares. Akre reported on a Schedule 13G/A dated April 7, 2005, that it
beneficially owns 1,783,680 shares.
(8) Friedman, Billings, Ramsey Group, Inc., Eric F. Billings and Emanuel J. Friedman
reported on a Schedule 13G dated February 15, 2005, that they have shared voting
and dispositive power with respect to all such shares. All three parties reported
on a Schedule 13G dated February 15, 2005, that they beneficially own 1,031,000
shares.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board is comprised of six persons. The Bylaws of the Company provide
for a board of directors consisting of three to twelve persons who are elected
generally for a term of two years. Directors are to serve until their
successors are elected and have qualified.
If the enclosed proxy is duly executed and received in time for the
annual meeting and if no contrary specification is made as provided therein,
the proxy will be voted in favor of electing the nominees Bob Farahi, Ben
Farahi and Ronald R. Zideck for terms of office expiring in 2007. If any such
nominee shall decline or be unable to serve, the proxy will be voted for such
person as shall be designated by the Board to replace any such nominee. The
Board presently has no knowledge or reason to believe that any of the nominees
will refuse or be unable to serve.
Any vacancies on the Board which occur during the year will be filled, if
at all, by the Board through an appointment of an individual to serve only
until the next annual meeting of stockholders.
The Company, through a wholly owned subsidiary, Golden Road Motor Inn,
Inc. ("Golden Road"), owns and operates the Atlantis Casino Resort (the
"Atlantis") in Reno, Nevada. Accordingly, the Company, each director who has
been required by the Nevada Gaming Authorities (as defined below) to be found
suitable, each executive officer, and each controlling person have been "found
suitable" by the Nevada State Gaming Control Board and Nevada Gaming
Commission (collectively, the "Nevada Gaming Authorities"). Future new
members of the Board, if any, may be required to be found suitable in the
discretion of the Nevada Gaming Authorities. Should any such new director not
be found suitable or should any director later be found not to be suitable by
the Nevada Gaming Authorities, that person will not be eligible to continue
serving on the Board and a majority of the remaining directors may appoint a
qualified replacement to serve as a director until the next annual meeting of
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ELECTION OF MESSRS.
BOB FARAHI, BEN FARAHI AND RONALD R. ZIDECK TO THE BOARD OF DIRECTORS.
The following information is furnished with respect to each member of the
Board or nominee thereto. Similar information is provided for the Company's
executive officers and certain significant employees who are not directors.
John Farahi, Bob Farahi and Ben Farahi are brothers. There are no other
family relationships between or among any directors, nominees to the Board, or
executive officers of the Company. The statements as to beneficial ownership
of Common Stock as to each director or nominee to the Board are based upon
information furnished by him.
Directors and Nominees
Director
Name Age Since Position
- -------------------- ---- -------- ----------------------------
John Farahi 57 1993 Co-Chairman of the Board,
(Term expires in Chief Executive Officer
2006) Chief Operating Officer, and
Director
Bob Farahi 54 1993 Co-Chairman of the Board,
(Nominee for term President, and Director
expiring in 2007)
Ben Farahi 52 1993 Co-Chairman of the Board,
(Nominee for term Chief Financial Officer,
expiring in 2007) Secretary, Treasurer and
Director
Craig F. Sullivan 58 1998 Director
(Term expires in
2006)
Ronald R. Zideck 67 2000 Director
(Nominee for term
expiring in 2007)
Charles W. Scharer 50 2001 Director
(Term expires in
2006)
JOHN FARAHI has been Co-Chairman of the Board, Chief Executive Officer,
and Chief Operating Officer of the Company since its inception, and of Golden
Road since June 1993. From 1973 until June 1993, Mr. Farahi was President,
Director, and General Manager of Golden Road. Mr. Farahi is a partner in
Farahi Investment Company ("FIC") which is engaged in real estate investment
and development. Mr. Farahi has served on the Washoe County Airport Authority
as a Trustee since July of 1997. Mr. Farahi is a former member of the Nevada
Commission on Tourism and has served as a Board Member of the Reno-Sparks
Convention and Visitors' Authority. Mr. Farahi holds a political science
degree from the California State University, Hayward.
BOB FARAHI has been Co-Chairman of the Board and President of the Company
since its inception, and of Golden Road since 1993. From 1973 until June
1993, Mr. Farahi was Vice President and a Director of Golden Road. Mr. Farahi
divides his working time between the Company and the other companies with
which he is involved. Mr. Farahi is a partner in FIC. Mr. Farahi holds a
biochemistry degree from the University of California at Berkeley.
BEN FARAHI has been Co-Chairman of the Board, Chief Financial Officer,
Secretary, and Treasurer of the Company since its inception, and of Golden
Road since June 1993. From 1973 until June 1993, Mr. Farahi was Secretary,
Treasurer, and a Director of Golden Road in charge of financial planning and
construction for the Company. Mr. Farahi is a partner in FIC. Mr. Farahi is
also the managing partner of Maxum LLC, a Nevada limited-liability company,
which, as of January 1, 2002, acquired all general partnership interests of
Biggest Little Investments L.P. (formerly Resources Accrued Mortgage Investors
2, L.P.), a Delaware limited partnership that invests in first and junior
mortgage loans and owns the shopping center adjacent to the Atlantis (see
"Certain Relationships and Related Transactions - Other Relationships). Mr.
Farahi divides his working time between the Company and the other companies
with which he is involved. Mr. Farahi holds a mechanical engineering degree
from the University of California at Berkeley and a MBA degree in accounting
from the California State University, Hayward.
CRAIG F. SULLIVAN has been a member of the Board since September 1998.
Since March 1998, Mr. Sullivan has been President of Sullivan & Associates, a
strategic and financial consulting firm geared to companies in the gaming
industry. From April 1995 to March 1998, Mr. Sullivan served as Chief
Financial Officer and Treasurer of Primadonna Resorts, Inc., and from February
1990 to April 1995, Mr. Sullivan served as Treasurer of Aztar Corporation.
Mr. Sullivan also served on the Board of New York-New York Hotel & Casino from
March 1996 to June 1998. Mr. Sullivan holds a degree in economics from The
George Washington University and holds a master's degree in international
management from the American Graduate School of International Management.
RONALD R. ZIDECK has been a member of the Board since March 2000. From
August 1981 to August 1997, he was Managing Partner for the Reno office of the
national accounting firm of Grant Thornton, LLP and served on that firm's
National Executive Committee. He also served as a director at Harveys Casino
Resorts from May 1997 to February 1999. He currently serves as Director of
Planned Giving for the University of Nevada, Reno. Mr. Zideck is a certified
public accountant with a bachelor's degree in business administration from the
University of Nevada.
CHARLES W. SCHARER has been a member of the Board since July 2001. Mr.
Scharer ended an eighteen-year career with Harveys Casino Resorts in January
2001, serving as Harveys' Chairman, President and Chief Executive Officer from
1995 until his retirement in January 2001 and as Chief Financial Officer from
1988 to 1995. Mr. Scharer is serving his second term as a commissioner of the
Nevada Commission on Tourism, having been appointed by Governor Kenny C. Guinn
in November 1999. Mr. Scharer also is a member of the Board of Directors of
Barton Healthcare System of South Lake Tahoe, California and is a member of
the Board of Advisors of InfomaCorp, LLC, a provider of High Speed Internet
Access and related products primarily to the lodging industry. Mr. Scharer, a
certified public accountant, graduated from San Jose State University in 1979.
The Company's Bylaws, as amended, currently provide for a staggered board
of directors divided into two categories: Category A consisting of three
directors and Category B consisting of three directors. Each director serves
two-year terms. A staggered board of directors may have the effect of
delaying or preventing a change of control of the Company. Executive officers
serve at the pleasure of the Board.
Certain Officers of Subsidiary
DARLYNE SULLIVAN, age 50, has been the Executive Vice President of
Operations of Golden Road since 2004. Since June 1993 until 2004, Mrs.
Sullivan was Vice President of Sales and Marketing and Assistant General
Manager of Golden Road. Mrs. Sullivan has held positions including Assistant
General Manager/Director of Sales and Marketing, Reservations and Sales
Manager, Front Desk Manager, Hotel Manager and Assistant Hotel Manager for
Golden Road from May 1977 through June 1993.
RICHARD COOLEY, age 57, has been Vice President of Finance of Golden Road
since May 2001. Mr. Cooley was Vice President of Administration of Golden
Road from March 2001 through May 2001, and served as Vice President of
Operations of Golden Road from July 1995 through March 2001. Mr. Cooley
served as Vice President of Finance of Golden Road from June 1993 through July
1995, and served as Controller of Golden Road from March 1993 through March
1994. Mr. Cooley was President and General Manager of the Reno Ramada Hotel
Casino from May 1988 to March 1993, and he was Chief Financial Officer and
Assistant General Manager from 1981 to 1988. From July 1977 to June 1981, Mr.
Cooley was Controller and Co-General Manager of the Shy Clown Casino in Reno.
Mr. Cooley has a bachelor's degree in Business Administration from the
University of Nevada and is a certified public accountant licensed to practice
in Nevada.
MICHAEL SHAUNNESSY, age 51, has been Vice-President of Administration of
Monarch since June 2004. Mr. Shaunnessy served as Executive Vice President
and Chief Financial Officer of Full House Resorts, Inc. from 1998 to 2004.
From 1995 to 1998 he was Vice President of Finance and Chief Accounting
Officer of Primadonna Resorts, Inc. Prior to that he spent over 12 years with
Aztar Corporation (1983 to 1995) serving in senior finance positions in New
Jersey and Nevada, including the last 7 years as Vice President of Finance at
the Las Vegas Tropicana. Mr. Shaunnessy received his Masters in Accountancy
from Northern Illinois University.
Committees of the Board
The Board has certain standing committees including the Audit Committee,
the Compensation Committee, the 1993 Executive Long-Term Incentive Plan
Committee (the "Incentive Plan Committee"), the 1993 Directors' Stock Option
Plan Committee (the "Directors' Plan Committee") and the Operations Committee.
Because the Company is considered a "Controlled Company" under Nasdaq
rules, the Company believes that it is exempt from Nasdaq requirements to have
a majority of independent directors and to have director nominees selected by
either a majority of independent directors or by a nominating committee
consisting solely of independent directors. The Company believes that it is a
"Controlled Company" because more than fifty percent (50%) of the Company's
voting power is held by the Farahi family, including John Farahi, Bob Farahi,
Ben Farahi and the Jila Farahi Trust.
The Audit Committee, comprised of Craig F. Sullivan and Charles W.
Scharer, and chaired by Ronald R. Zideck, met 10 times during the fiscal year
ended December 31, 2004. The Audit Committee is comprised exclusively of
directors who are not salaried employees and a majority of whom are, in the
opinion of the Board, free from any relationship that would interfere with the
exercise of independent judgment as a committee member. The Audit Committee's
function is to review reports of the auditors to the Company; to review
Company financial practices, internal controls and policies with officers and
key employees; to review such matters with the Company's auditors to determine
scope of compliance and any deficiencies; to consider selection of independent
public accountants; to review and approve certain related party transactions;
and to make periodic reports on such matters to the Board. The Audit Committee
adopted an Audit Committee Charter on June 14, 2000, and subsequently amended
it effective June 7, 2001 and April 9, 2004.
All members of the Audit Committee are "independent" directors, as such
term is defined in Rule 4200(a)(15) of the National Association of Securities
Dealers' Listings Standard.
The Company believes that each member of the Audit Committee is a
financial expert, as defined by the SEC rules applied pursuant to the
Sarbanes-Oxley Act of 2002, and as defined in Regulation S-K, Item 401(h)(2).
The relevant experience of such directors is summarized under "Election of
Directions - Directors and Nominees" above.
The Compensation Committee, comprised of Ronald R. Zideck and Charles W.
Scharer, and chaired by Craig F. Sullivan, met 2 times during the fiscal year
ended December 31, 2004. The Compensation Committee's function is to review
and make recommendations to the Board with respect to the salaries and bonuses
of the Company's executive officers and to administer the 1993 Employee Stock
Option Plan (the "Employee Plan").
The Incentive Plan Committee, comprised of Craig F. Sullivan, Ronald R.
Zideck and Charles W. Scharer, met once during the fiscal year ended December
31, 2004. The Incentive Plan Committee's function is to administer the 1993
Executive Long-Term Incentive Plan (the "Incentive Plan"), including
determining such matters as the persons to whom awards shall be granted, the
number of shares to be awarded, when the awards shall be granted, when the
awards shall vest, and the terms and provisions of the instruments evidencing
the awards, interpreting the Incentive Plan and notifying the Board of all
decisions concerning awards granted to Incentive Plan participants.
The Directors' Plan Committee, comprised of John Farahi and Bob Farahi,
met once during the fiscal year ended December 31, 2004. Neither John Farahi
nor Bob Farahi is eligible to participate in the Directors' Plan. The
Directors' Plan Committee consists of not less than 2 directors of the Company
selected by, and serving at the pleasure of, the Board and its function is to
administer the 1993 Directors' Stock Option Plan (the "Directors' Plan"). The
Directors' Plan Committee has the authority to interpret the Directors' Plan
and make all determinations necessary or advisable for its administration.
All decisions of the Directors' Plan Committee are subject to approval by the
Board.
The Operations Committee, comprised of John Farahi, Darlyne Sullivan and
Richard Cooley, and chaired by Charles W. Scharer, met once during the fiscal
year ended December 31, 2004. The purpose of the Operations Committee is to
provide a formal communication link between Golden Road management and the
Monarch Board and to facilitate examination of, and feedback regarding,
various operational issues.
The Company does not have a standing Nominating Committee, nor has the
Board of Directors adopted a charter addressing the director nomination
process. The Board of Directors believes that it is appropriate for the
Company not to have a nominating committee because the entire Board of
Directors can adequately serve the function of considering potential director
nominees from time to time as needed.
The requirements for nomination by a security holder of a person to the
Company's Board of Directors are set forth in Article II, Section 16 of the
Company's Bylaws and the qualifications for a person to be a director of the
Company are set forth in Article II, Section 14 of the Bylaws. Both sections
of the Bylaws are set forth below.
14. Eligibility of Directors. No Director is eligible to continue to
serve as a Director of the Corporation who is required under Nevada
gaming laws to be found suitable to serve as a director and who is not
found suitable or whose finding of suitability is suspended or revoked by
Nevada gaming authorities. Such eligibility shall cease immediately
following whatever act or event terminates the director's eligibility
under the laws and gaming regulations of the State of Nevada.
16. Nomination of Directors. Only persons who are nominated in
accordance with the procedures set forth in this Section 16 of Article II
shall be eligible for election as Directors. Nominations of persons for
election to the Board of Directors of the Corporation at the Annual
Meeting may be made at a meeting of stockholders by or at the direction
of the Board of Directors by any nominating committee or person appointed
by the Board or by any stockholder of the Corporation entitled to vote
for the election of Directors at the meeting who complies with the Notice
procedures set forth in this Section 16 of Article II. Such nominations,
other than those made by or at the direction of the Board, shall be made
pursuant to timely notice in writing to the secretary of the Corporation.
To be timely, unless waived by the Board of Directors, no person not
already a Director shall be eligible to be elected or to serve as a
Director unless such person's notice of nomination shall be received at
the principal executive offices of the Corporation at least seventy five
(75) days before initiation of solicitation to the stockholders for
election in the event of an election other than at an Annual Meeting and
seventy five (75) days before the corresponding date that had been the
record date for the previous year's Annual Meeting or seventy five (75)
days before the date of the next Annual Meeting of shareholders announced
in the previous year's proxy materials in the event of an election at an
Annual Meeting. To be timely, no stockholder's notice shall be received
at the principal executive offices of the Corporation more than ninety
(90) days before the meeting; provided, however, that in the event that
less than ninety (90) days' notice or prior public disclosure of the date
of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be received not later than the close of
business on the 15th day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made,
whichever first occurs. The stockholder's notice to the Secretary shall
set forth (a) as to each person whom the stockholder proposes to nominate
for election or reelection as a Director, (i) the name, age, business
address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of
shares of stocks of the Corporation which are beneficially owned by the
person, (iv) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations
are to be made by the stockholder, and (b) any other information relating
to the person that is required to be disclosed in solicitations for
proxies for election of Directors pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (vi) the consent of such
nominee to serve as Director of the Corporation, if he is so elected; and
(c) as to the stockholder giving the notice, (i) the name and record
address of stockholder, and (ii) the class and number of shares of stock
of the Corporation which are beneficially owned by the stockholder. The
Corporation may require any proposed nominee to furnish such other
information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as Director of the
Corporation. No person shall be eligible for election as a Director of
the Corporation unless nominated in accordance with the procedures set
forth in this Article II, Section 16. The Chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the foregoing procedure, and
if he should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
The Company did not receive the names of any proposed director candidates
submitted by any stockholder by December 31, 2004 for inclusion in this Proxy
Statement.
Board Meetings
The Board held 8 meetings in the fiscal year ended December 31, 2004.
All directors attended at least 75% of the Board of Directors meetings and all
committee members attended at least 75% of the meetings for the committees on
which they serve during the fiscal year ended December 31, 2004.
Annual Meetings
The Board of Directors has a policy that requires all directors to attend
each Annual Meeting of Stockholders absent exigent circumstances. All six
directors attended the 2004 Annual Meeting of Stockholders.
Communication with Directors
The Company's stockholders may contact directors by going to the
Company's web site, www.monarchcasinos.com, selecting "Company Info" and
then selecting "Board of Directors/Executive Officers." Each director's and
executive officer's email address is set forth and provides a means to contact
such person directly.
Compensation of Non-Employee Directors
From March 2002 until March 2004, annual fees of $30,000 were paid to
directors who were not employees of the Company and, as of March 2004, annual
fees of $40,000 are paid to directors who are not employees of the Company.
Each non-employee director serving as the chairman of a committee of the Board
received an additional annual fee of $10,000 for each committee chaired in
2004. Each director may be reimbursed for certain expenses incurred in
connection with attendance at Board and committee meetings. Certain non-
employee directors have been granted options to purchase Common Stock under
the Directors' Plan.
Existing 1993 Directors' Stock Option Plan. The Directors' Plan is
designed to encourage non-employee directors to take a long-term view of the
affairs of the Company, to attract and retain superior non-employee directors
and to aid in compensating non-employee directors for their services to the
Company. The Company's non-employee directors for the year ended December 31,
2004 were Craig F. Sullivan, Ronald R. Zideck and Charles W. Scharer.
An eligible director, upon becoming a member of the Board of Directors,
will receive an initial grant to purchase 4,800 shares of Common Stock
("Initial Director Grant"), plus an additional grant to purchase 1,300 shares
of Common Stock for each committee chaired. Thereafter, immediately following
the close of the annual stockholders' meeting, each eligible director will
receive an annual option grant to purchase 4,800 shares of Common Stock
("Annual Director Grant") plus an additional grant to purchase 1,300 shares of
Common Stock for each committee chaired for the first five years following
election to the Board. The Directors' Plan Committee may also recommend
discretionary grants of options on terms deemed appropriate by the Directors'
Plan Committee, subject to the approval of the Board.
The exercise price of all director option grants is 100% of the fair
market value of the Common Stock on the date of grant. Initial Director
Grants and Annual Director Grants may not be exercised until six months and
one day after the date of the grant. All options granted under the Directors'
Plan are non-qualified options, the tax treatment of which is determined under
Section 422 of the Internal Revenue Code of 1986, as amended. In 2003, the
Company's stockholders approved the extension of grants previously granted
under the Directors' Plan from five years to ten years.
In 2004, Craig F. Sullivan, Ronald R. Zideck and Charles W. Scharer each
received an Annual Director Grant of options to purchase 6,100 shares of
Common Stock, post stock split, in accordance with the Directors' Plan.
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK ISSUABLE UNDER THE COMPANY'S EMPLOYEE PLAN
General
At the annual meeting, the stockholders will be asked to approve an
amendment to the Monarch Casino & Resort, Inc. Employee Plan (the "Employee
Plan") to increase the number of shares of Common Stock reserved for issuance
under the Employee Plan from 300,000 shares to 1,000,000 shares.
The purpose of the amendment is to ensure that we will continue to have a
sufficient reserve of common stock available under the Employee Plan to
provide eligible employees of the Company with the opportunity to purchase
shares of our Common Stock. The increased number of shares proposed has been
adjusted to reflect the March 31, 2005, 2 for 1 stock split.
The following is a summary of the principal features of the Employee Plan
as modified by the proposed amendment. The summary, however, does not purport
to be a complete description of all the provisions of the Employee Plan.
Unless the context clearly indicates to the contrary, the term of "Employee
Option" used herein shall mean a non-statutory stock option and the term
"Employee Optionee" shall mean any person holding an Employee Option granted
under the Employee Plan. Any stockholder who wishes to obtain a copy of the
actual plan documents may do so upon written request to our Corporate
Secretary at our principal executive offices at 1175 West Moana Lane, Suite
200, Reno, Nevada 89502.
The Company granted options for 422,000 shares of common stock, adjusted
for 2 for 1 stock split, under the Employee Plan during the fiscal year ended
December 31, 2004.
Administration and Eligibility
The Employee Plan is administered by the Company's Compensation
Committee, consisting of not less than two members of the Board who are not
eligible to participate in the Employee Plan and who have not, within one year
prior to their appointment to the Compensation Committee, participated in the
Employee Plan. The Compensation Committee administers and interprets the
Employee Plan and adopts such rules, regulations, agreements, guidelines and
instruments of the administration of the Employee Plan as the Compensation
Committee deems necessary or advisable. In this regard, the Compensation
Committee's powers include the authority to determine the employees to be
granted Employee Options under the Employee Plan, the power to determine the
size and applicable terms and conditions of grants to be made to such
employees, and to authorize grants to eligible employees.
Employees which are eligible to participate in the Employee Plan are (a)
full-time, salaried or hourly, union-represented or unrepresented employees
regularly scheduled for and working at least 30 hours per week; (b) part-time,
salaried or hourly, union-represented or unrepresented employees regularly
scheduled for and less than 30 hours per week and at least two weeks per
month; and (c) all other employees of the Company as determined from time to
time by the Compensation Committee. However, no person then eligible to be
granted an option under the Incentive Plan (defined below), 1993 Directors'
Employee Plan ("Directors' Plan") or any other Company-sponsored Employee Plan
may be granted an Employee Option.
Option Price
Stock options granted under the Employee Plan have an option price equal
to the last reported sale price of the Common Stock on the Nasdaq National
Market, or such other stock exchange on which the Common Stock may be listed
from time to time, on the date of grant, or, if no sale of Common Stock is
reported on such date, then on the next preceding day on which there was such
a sale.
Employee Options may be exercised by payment of the option price in full
in cash, money order or certified check or, if the Compensation Committee in
its discretion agrees to accept, in shares of Common Stock.
Option Exercise and Term
An Employee Option may be exercised one year after the date of grant
unless a longer period is provided in such grant. An Employee Option may not
be transferred or assigned other than by will or the laws of descent and
distribution. During the lifetime of the Employee Optionee, the Employee
Option may only be exercised by that Employee Optionee.
Except in special circumstances, each Employee Option will expire on the
tenth anniversary of the date of grant.
Termination of Employee Option
If the employment of an Employee Optionee terminates, for whatever
reason, prior to the date upon which an Employee Option becomes exercisable,
that Employee Option will terminate and lapse upon the date employment is
terminated.
If an Employee Optionee ceases to be employed by the Company for a reason
other than for cause, or by reason of retirement, disability or death, the
Employee Optionee must exercise an Employee Option within the earlier of
either the tenth anniversary after the date of grant or the first anniversary
of the date employment was terminated. However, such Employee Options, to the
extent unexercised, will expire on the date that an Employee Optionee (i) uses
for profit or discloses to unauthorized persons, confidential information or
trade secrets of the Company; (ii) breaches any contract with or violates any
fiduciary obligation to the Company; (iii) engages in unlawful trading in the
Company's securities or the securities of another company based on information
gained as a result of that Employee Optionee's employment with the Company; or
(iv) violates, as determined by the Compensation Committee, any covenant not
to compete in effect between the Company and the Employee Optionee. In the
event that an Employee Optionee is terminated for cause, including activities
discussed in the preceding sentence, the Employee Optionee forfeits all rights
to any unexercised Employee Options granted under the Employee Plan and any
outstanding Employee Options then held by the Employee Optionee will
automatically terminate and lapse, unless otherwise determined by the
Compensation Committee.
Term and Amendment of Plan
The Employee Plan will terminate on June 13, 2013, except as to Employee
Options outstanding on such date. The Compensation Committee may alter, amend,
or suspend the Employee Plan or any Employee Option, or may at any time
terminate the Employee Plan, except that the Employee Plan may not be modified
to increase eligibility to include directors and/or executive officers, who
are otherwise eligible to participate in the Incentive Plan and Directors'
Plan without the approval of the holders of the majority of the outstanding
common stock. Moreover, the Compensation Committee may not, either with or
without the approval of the stockholders of the Company, take action which may
materially and adversely affect any outstanding Employee Option without the
consent of the holder of that option.
If The Company is acquired by a merger or a sale of all or substantially
all of its assets or securities possessing more than 50% of the total combined
voting power of its outstanding securities, then the successor entity (or its
parent corporation) may assume the Company's obligations under the Employee
Plan and the outstanding purchase rights. In the event of such assumption,
each purchase right will be appropriately adjusted to preclude any dilution or
enlargement of benefits thereunder, and the accumulated payroll deductions
will automatically be applied to the purchase of shares of common stock (or
such other securities as may then be subject to the purchase rights) on the
next scheduled purchase date.
Accounting Treatment
Under current accounting principles applicable to employee stock option
plans qualified under Section 423 of the Internal Revenue Code, the issuance
of common stock under the Employee Plan will not result in a compensation
expense chargeable against our reported earnings. However, we must disclose,
in pro-forma statements to our financial statements, the impact the stock
option grants under the Employee Plan would have upon our reported earnings
were the value of those purchase rights treated as compensation expense.
On March 31, 2004, the Financial Accounting Standards Board ("FASB")
issued an exposure draft of its Proposed Statement of Financial Accounting
Standards for Share-Based Payments (the "Exposure Draft") which, if approved
by FASB without change, will substantially change the accounting treatment for
the Employee Plan beginning in calendar year 2005. Pursuant to the Exposure
Draft, the fair value of each stock option which is granted or vests under the
Employee Plan on or after January 1, 2005 will be charged as a direct
compensation expense to our reported earnings over the offering period to
which that purchase right pertains. The fair value of each stock option will
be determined as of its grant date.
Vote Required and Recommendation of the Company Board of Directors
The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote this proposal is
required for approval of the amendment to the Employee Plan. Abstentions and
broker non-votes will each be counted as present for purposes of determining
the presence of a quorum. Broker non-votes will have no effect on the outcome
of this vote.
The approval of this proposal is not a condition to the approval of any
other proposals submitted to the stockholders. Should stockholder approval not
be obtained, then the proposed increase of 700,000 shares to the number of
shares reserved for issuance under the Employee Plan will not be implemented,
no stock options will be granted on the basis of such increase. However, the
Employee Plan as in effect prior to the share increase which is the subject of
this proposal will continue to remain in effect, and stock purchases will
continue to be made pursuant to the provisions of the Employee Plan until the
Employee Plan terminates or the available reserve of 300,000 shares is
exhausted.
The Board believes that it is in our best interests to continue providing
our employees with the opportunity to acquire an ownership interest in us
through their participation in the Employee Plan and thereby encourage them to
remain in our employ and more closely align their interests with those of our
stockholders. Therefore, the Board unanimously recommends a vote "FOR"
approval of the amendment to the Employee Plan.
PROPOSAL 3: APPROVAL OF AN AMENDMENT TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK ISSUABLE UNDER THE COMPANY'S EXECUTIVE LONG-TERM INCENTIVE PLAN
General
At the annual meeting, the stockholders will be asked to approve an
amendment to the Monarch Casino & Resort, Inc. Executive Long-Term Incentive
Plan (the "Incentive Plan") to increase the number of shares of common stock
reserved for issuance under the Incentive Plan from 350,000 shares to
1,000,000 shares.
The purpose of the amendment is to ensure that we will continue to have a
sufficient reserve of Common Stock available under the Incentive Plan to
provide eligible employees of the Company with the opportunity to purchase
shares of our Common Stock. The increased number of shares proposed has been
adjusted to reflect the March 31, 2005, 2 for 1 stock split.
The following is a summary of the principal features of the Incentive
Plan as modified by the proposed amendment. The summary, however, does not
purport to be a complete description of all the provisions of the Incentive
Plan. Unless the context clearly indicates to the contrary, the term of
"Option" used herein shall mean either an incentive stock option ("ISO")
or non-qualified stock option, and the term "Optionee" shall mean any person
holding an Option granted under the Incentive Plan. Any stockholder who
wishes to obtain a copy of the actual plan documents may do so upon written
request to our Corporate Secretary at our principal executive offices at 1175
West Moana Lane, Suite 200, Reno, Nevada 89503.
Administration and Eligibility
The Incentive Plan is administered by the Company's Incentive Plan
Committee, consisting of not less than two nonemployee directors of the
Company selected by, and serving at, the pleasure of the Company's Board.
Directors who are also employees of the Company or any of its subsidiaries, or
who have been such employees within one year, may not serve on the Incentive
Plan Committee. Based upon the recommendations from the Company and its
operating subsidiaries, the Incentive Plan Committee recommends to the Board
the persons to whom awards shall be granted ("Participants"), the number of
shares to be awarded, when the awards shall be granted, when the awards shall
vest, and the terms and provisions of the instruments evidencing the awards.
The Incentive Plan Committee also interprets the Incentive Plan and makes
recommendations for its administration. Only employees who serve in the
positions of Chief Executive Officer, Chief Financial Officer, Corporate
President, Corporate Secretary and Corporate Treasurer are eligible for
selection as Participants in the Incentive Plan. An ISO may not be issued to a
person who, at the time of grant, is not an employee of the Company.
The Company granted options for 400,000 shares of Common Stock, adjusted
for 2 for 1 stock split, under the Incentive Plan during the fiscal year ended
December 31, 2004.
Option Price
Stock options granted under the Incentive Plan have an option price equal
to the last reported sale price of the Common Stock on the date of grant on
the Nasdaq National Market, or such other stock exchange on which the Common
Stock may be listed from time to time. The option price per share for ISOs
shall be an amount equal to the price of the Common Stock under option, as
determined above, unless the proposed option recipient, at the time of grant,
owns (within the meaning of Section 422(b)(6) of the Internal Revenue Code)
stock possessing more than 10% of the total combined voting power of all
classes of stock of Monarch or any subsidiary of Monarch. In such case, the
purchase price of the shares covered by such ISO shall not be less than 110%
of the fair market value per share of the Common Stock on the ISO is granted.
Options may be exercised by payment of the option price in full (i) in
cash, (ii) in Common Stock, including Common Stock underlying the Option being
exercised, having a fair market value equal to such Option price, or (iii) a
combination of cash and Common Stock, including the Common Stock underlying
the Option being exercised.
Option Term
An Option may not be transferred or assigned other than by will or the
laws of descent and distribution. During the lifetime of the Optionee, the
Option may only be exercised by that Optionee. Except in special
circumstances, each Option shall expire on the tenth anniversary of the date
of its grant and shall be exercisable according to a vesting schedule to be
determined by the Incentive Plan Committee. The Incentive Plan Committee may
include in any Option instrument, initially or by amendment at any time, a
provision making any installment exercisable at such earlier date, if the
Incentive Plan Committee deems such provision to be in the interest of the
Company or its subsidiaries, or necessary to realize the reasonable
expectation of the Optionee.
Restricted Share Awards
Under the Incentive Plan, the Incentive Plan Committee may also award
Participants restricted shares of Common Stock. Under the Incentive Plan, all
restricted shares will be forfeited to the Company or the applicable operating
subsidiary if a Participant fails to be continuously employed with the Company
or any of its subsidiaries during the restriction.
Term and Amendment of Plan
The Incentive Plan shall expire on June 13, 2013, except with respect to
Options and restricted shares outstanding on that date. The Board may
terminate or amend the Incentive Plan in any respect, at any time; provided,
however, without the approval of the holders of a majority of the outstanding
Common Stock the total number of shares that may be sold, issued, or
transferred under the Incentive Plan may not be increased (except for
proportional adjustment for stock dividend or split, recapitalization, merger,
consolidation, spin-off, or other similar corporate changes); the eligibility
requirements for participation may not be modified; the exercise price of an
Option cannot be reduced; and the termination date of the Incentive Plan may
not be extended.
Accounting Treatment
Under current accounting principles applicable to employee stock option
plans qualified under Section 423 of the Internal Revenue Code, the issuance
of common stock under the Incentive Plan will not result in a compensation
expense chargeable against our reported earnings. However, we must disclose,
in pro-forma statements to our financial statements, the impact the stock
option grants under the Incentive Plan would have upon our reported earnings
were the value of those purchase rights treated as compensation expense.
On March 31, 2004, the Financial Accounting Standards Board ("FASB")
issued an exposure draft of its Proposed Statement of Financial Accounting
Standards for Share-Based Payments (the "Exposure Draft") which, if approved
by FASB without change, will substantially change the accounting treatment for
the Incentive Plan beginning in calendar year 2005. Pursuant to the Exposure
Draft, the fair value of each stock option which is granted or vests under the
Incentive Plan on or after January 1, 2005 will be charged as a direct
compensation expense to our reported earnings over the offering period to
which that purchase right pertains. The fair value of each stock option will
be determined as of its grant date.
Vote Required and Recommendation of the Company Board of Directors
The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote this proposal is
required for approval of the amendment to the Incentive Plan Abstentions and
broker non-votes will each be counted as present for purposes of determining
the presence of a quorum. Broker non-votes will have no effect on the outcome
of this vote.
The approval of this proposal is not a condition to the approval of any
other proposals submitted to the stockholders. Should stockholder approval not
be obtained, then the proposed increase of 650,000 shares to the number of
shares reserved for issuance under the Incentive Plan will not be
implemented, no stock options will be granted on the basis of such increase,.
However, the Incentive Plan as in effect prior to the share increase which is
the subject of this Proposal will continue to remain in effect, and stock
purchases will continue to be made pursuant to the provisions of the
Incentive Plan until the Incentive Plan terminates or the available reserve of
350,000 shares is exhausted.
The Board believes that it is in our best interests to continue providing
our employees with the opportunity to acquire an ownership interest in us
through their participation in the Incentive Plan and thereby encourage them
to remain in our employ and more closely align their interests with those of
our stockholders. Therefore, the Board unanimously recommends a vote "FOR"
approval of the amendment to the Incentive Plan.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
Annual Compensation Awards
-------------------------- --------------
Securities
Name and Underlying All Other
Principal Positions Year Salary($) Bonus($) Options/SARs(#) Compensation($)(1)
- ------------------- ---- --------- -------- --------------- ------------------
John Farahi, Co-Chairman 2004 386,155 200,000 200,000 -
of the Board and 2003 337,232 150,000 - 52,357
Chief Executive Officer 2002 280,000 75,000 - -
Bob Farahi, Co-Chairman 2004 226,155 50,000 100,000 12,118
of the Board and 2003 182,770 75,000 - 17,588
President 2002 240,000 75,000 - 2,852
Ben Farahi, Co-Chairman 2004 226,155 100,000 100,000 2,034
of the Board, Chief Financial 2003 182,770 75,000 - 10,930
Officer, Secretary and 2002 240,000 75,000 - 12,884
Treasurer
Darlyne Sullivan, Executive 2004 173,371 36,000 100,000 667
Vice-President - Operations 2003 176,793 35,000 - 529
and Assistant General 2002 145,385 30,000 - 439
Manager of Golden Road
Richard Cooley 2004 165,092 36,000 60,000 1,031
Vice-President - Finance 2003 142,220 35,000 - 936
of Golden Road 2002 145,770 30,000 - 877
(1) Amounts for John Farahi, Bob Farahi and Ben Farahi represent the lease value of automobiles
paid for by the Company, except the 2003 amount for John Farahi which represents a purchased
automobile. Amounts for Richard Cooley and Darlyne Sullivan represent the Company's contribution
to 401(k) plans.
Option Grants in 2004
During the fiscal year ended December 31, 2004, the Company awarded the
following stock options, adjusted for the March 31, 2005, 2 for 1 stock split,
to its executive officers:
Percentage Potential Realizable
of Total Value Assuming
Number Options -------------------------
of Granted
Options During Exercise Expiration 5% Annual 10% Annual
Name Awarded 2004 Price Date Increase Increase
- ---------------- -------- ----------- ---------- ---------- ----------- ----------
John Farahi 200,000 24.3% $11.69 10/21/2014 $1,470,000 $3,726,000
Bob Farahi 100,000 12.2% $11.69 10/21/2014 735,000 1,863,000
Ben Farahi 100,000 12.2% $11.69 10/21/2014 735,000 1,863,000
Darlyne Sullivan 100,000 12.2% $11.69 10/21/2014 735,000 1,863,000
Richard Cooley 60,000 7.3% $11.69 10/21/2014 441,000 1,117,800
Aggregated Option Exercises in 2004 and Fiscal Year-End Option Values
(adjusted for 2 for 1 stock split)
Number of Securities
underlying unexercised Value of unexercised
Shares options at fiscal in-the-money options
acquired on Value year end(#) at fiscal year-end($)
Name exercise(#) realized($) Exercisable / Unexercisable Exercisable / Unexercisable
- ------------- ----------- ----------- --------------------------- ---------------------------
John Farahi - $ - - / 200,000 $ - / $1,718,000
Bob Farahi - - - / 100,000 - / 859,000
Ben Farahi - - - / 100,000 - / 859,000
Darlyne Sullivan - - - / 100,000 - / 859,000
Richard Cooley 54,400 357,055 - / 60,000 - / 515,400
(1) Represents the difference between the last reported sale price (adjusted for stock split) of
the Common Stock reported on The Nasdaq Stock Market on December 31, 2004, and the exercise
price of the options.
Committee Reports
Notwithstanding any statement to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
Compensation Committee Report on Executive Compensation and the Stock
Performance Chart presented shall not be incorporated by reference into any
such filings.
Compensation Committee Report on Executive Compensation
April 9, 2005
The Compensation Committee (the "Committee"), which is composed entirely
of directors who have never served as executive officers of the Company,
determines and administers the compensation of the Company's executive
officers.
Compensation Philosophy. The Committee seeks to compensate the Company's
executive officers in such a fashion that will attract and retain individuals
who are responsible for the management, growth, and success of the Company.
The Committee believes that executive compensation should be designed to
reward those individuals for their services to the Company and encourage them
to continue in its employ. The Committee's actions related to compensation of
the Company's executive officers are submitted to the full Board of Directors
for ratification and approval.
The Committee believes that the Company's overall financial performance
is an important factor in the compensation of the Company's executive officers
and, therefore, applies a quantitative formula in making compensation
decisions related to some bonus plans. The Committee also recognizes
qualitative factors such as successful supervision of the Company's
operations, development of corporate projects, promotion of the Company's
corporate image, and participation in industry and community activities.
The Committee also evaluates the total compensation of the Company's
executive officers in light of the compensation practices and relative
corporate financial performance of other companies in the gaming industry
similar to the Company in terms of asset size and target market. The
Committee's goal is that the base salaries for the Chief Executive Officer and
other executive officers should be established at levels considered
appropriate in light of the duties and scope of responsibilities of each
officer's position. Salaries are reviewed annually and are warranted to
reflect sustained individual officer performance. The Chief Executive Officer
and other executive officers are also eligible to receive incentive
compensation in the form of stock options under the Incentive Plan (see
"Option Grants in 2004" table above").
Chief Executive Officer Compensation. Following the recommendation of
the Compensation Committee, the Board established the Chief Executive
Officer's salary at $400,000 for 2004. In determining the Chief Executive
Officer's salary, the Compensation Committee considered (a) the Chief
Executive Officer's record of leadership and service to the Company over the
past three years, (b) the growth of the Company during the same period, (c)
the Chief Executive Officer's pivotal role in overseeing the day-to-day
operations of the Company, (d) the Company's performance over the same period
in relation to its competitors in a very competitive environment, and (e) the
Chief Executive Officer's civic leadership in the Reno area.
COMPENSATION COMMITTEE
By: Craig F. Sullivan, Chairman
Ronald R. Zideck, Member
Charles W. Scharer, Member
Audit Committee Report
The following Report of the Audit Committee does not constitute
soliciting material and should not be deemed filed or incorporated by
reference into any other Company filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this Report by reference
therein.
April 9, 2005
To the Board of Directors of Monarch Casino & Resort, Inc.:
Our role is to assist the Board of Directors in its oversight of the
Company's financial reporting process. As set forth in our charter, the
Company's management is responsible for the preparation, presentation and
integrity of our financial statements, and for maintaining appropriate
accounting and financial reporting principles and policies and internal
controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent auditors are
responsible for auditing our financial statements and expressing an opinion as
to their conformity with generally accepted accounting principles.
We have reviewed and discussed with management the Company's audited
financial statements as of and for the year ended December 31, 2004.
We have discussed with the independent auditors the matters required to
be discussed by Statement on Auditing Standards No. 61, Communication with
Audit Committees, as amended, by the Auditing Standards Board of the American
Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter from
the independent auditors required by Independence Standard No. 1, Independence
Discussions with Audit Committees, as amended, by the Independence Standards
Board, and have discussed with the auditors the auditors' independence.
Based on the reviews and discussions referred to above, we recommend to
the Board of Directors that the financial statements referred to above be
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2004.
By: Ronald R. Zideck, Chairman
Craig F. Sullivan, Member
Charles W. Scharer, Member
Stock Performance Chart
The following chart reflects the cumulative total return (change in stock
price plus reinvested dividends) of a $100 investment in the Company's Common
Stock for the five year period from January 1, 2000, through December 31,
2004, in comparison to the Standard & Poor's 500 Composite Stock Index and an
industry peer group index. The comparisons are not intended to forecast or be
indicative of possible future performance of the Company's Common Stock.
MONARCH CASINO & RESORT, INC.
TOTAL RETURN
JANUARY 1, 1999 - DECEMBER 31, 2003
Base
Period
12/31/99 12/31/00 12/31/01
-------- -------- --------
Monarch Casino & Resort, Inc. 100 90.48 152.38
S&P 500 Index 100 90.90 80.09
Self Determined Peer Group (1) 100 110.67 143.44
12/31/02 12/31/03 12/31/04
-------- -------- --------
Monarch Casino & Resort, Inc. 261.52 212.38 772.38
S&P 500 Index 62.39 80.29 89.03
Self Determined Peer Group (1) 158.03 222.85 323.35
(1) The companies included in the peer group are as follows: Alliance
Gaming Corp.; Archon Corp.; Argosy Gaming Corp.; Aztar Corp.; Black Hawk
Gaming & Development Company, Inc.; Harrah's Entertainment, Inc.;
Hollywood Casino Corporation-Cl. A; Mandalay Resort Group (Formerly
Circus Circus Enterprise, Inc.); President Casinos, Inc.; Sands Regent;
Station Casinos, Inc.; and Winwin Gaming, Inc.
Note: For the companies that have been acquired, the peer line on the graph
includes the acquired company's performance up to the acquisition date,
and the acquiring company's performance since the acquisition date.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Guarantee Fees
The Company's Compensation Committee approved the payment of a guarantee
fee of two percent of the average outstanding guaranteed debt as compensation
for bank debt personal guarantees granted for the benefit of the Company by
John Farahi, Bob Farahi and Ben Farahi. These guarantee fees were no longer
required following the refinancing of the Company's reducing revolving credit
facility in February 2004. For the year ended December 31, 2004, the Company
paid approximately $136,000 in guarantee fees to these persons.
Other Relationships
The three principal stockholders of the Company, through their
affiliates, directly or indirectly control the ownership and management of a
shopping center directly adjacent to the Atlantis (the "Shopping Center").
The shopping center occupies 18.7 acres and consists of 213,000 square feet of
retail space. The Company currently rents approximately 7,700 square feet in
the shopping center and pays rent of approximately $67,200 per year plus
common area expenses.
In 2004, the Shopping Center constructed of a new driveway that is being
shared between the Atlantis and the Shopping Center. As part of this project,
the Company has leased a 37,368 square-foot corner section of the Shopping
Center for a minimum lease term of 15 years at a monthly rent of $25,000,
subject to increase every 60 months based on the Consumer Price Index. The
Company also uses part of the common area of the Shopping Center and pays its
proportional share of the common area expense of the Shopping Center. The
Company has the option to renew the lease for 3 five-year terms, and at the
end of the extension period, the Company has the option to purchase the leased
section of the Shopping Center at a price to be determined based on an MAI
Appraisal. The leased space is being used by the Company for pedestrian and
vehicle access to the Atlantis, and the Company has use of a portion of the
parking spaces at the Shopping Center. The total cost of the project was $2.0
million; we were responsible for two thirds of the total cost, or $1.35
million. The project was completed, the driveway was put into use and we
began paying rent on September 30, 2004.
In 2003, the Company entered into an option agreement with an affiliate
of its controlling stockholders to purchase property in South Reno for
development of a new hotel casino. Commencement of any development of the
property will require completion of property due diligence and receipt of
numerous approvals, including master plan changes and zone changes, neither of
which can be assured. Through the current property owner, the Company has
filed an application with the City of Reno for master plan change and zone
change for 13 acres of the property. On January 20, 2005, the City of Reno
Planning Commission approved our application for zoning change on the
property. The Reno City Council and regional governing authorities must next
approve the application.
The Company is currently leasing billboard advertising space from
affiliates of its controlling stockholders for a total annual cost of $53,000
in 2004 and $54,000 in 2003. There were no billboard advertising costs in
2002.
The Company is currently renting office and storage space from a company
affiliated with Monarch's controlling stockholders and paid annual rent of
approximately $27,900 for these spaces for each of the years 2004, 2003 and
2002.
Indemnification of Directors and Officers
Section 78.751 of Chapter 78 of the Nevada Revised Statutes ("NRS"),
Article IX of the Company's Articles of Incorporation, and Article VII of the
Company's Bylaws contain provisions for indemnification of officers and
directors of the Company. The Articles of Incorporation require the Company
to indemnify such persons to the full extent permitted by Nevada law. Each
person will be indemnified in any proceeding provided that such person's acts
or omissions did not involve intentional misconduct, fraud or knowing
violation of law, or the payment of dividends in violation of NRS 78.300.
Indemnification would cover expenses, including attorneys' fees, judgments,
fines, and amounts paid in settlement
The Company's Articles of Incorporation also provide that the Board may
cause the Company to purchase and maintain insurance on behalf of any present
or past director or officer insuring against any liability asserted against
such person incurred in the capacity of director or officer or arising out of
such status, whether or not the corporation would have the power to indemnify
such person.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, or persons controlling
the Company pursuant to the foregoing provisions, the Company has been
informed that in the opinion of the Securities and Exchange Commission (the
"SEC") such indemnification is against public policy as expressed in the
Securities Act of 1933 and is therefore unenforceable.
Audit Committee Review
The Company requires that the Audit Committee of the Board review and
approve related party transactions.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Company's independent registered public accounting firm, Ernst &
Young LLP, have audited the Company's financial statements for the fiscal year
ended December 31, 2004. Ernst & Young LLP is expected to have a
representative present at the annual meeting who will have the opportunity to
make a statement if such representative desires to do so and is expected to be
available to respond to appropriate questions.
The Audit Committee has not yet formally engaged an independent
registered public accounting firm to audit the Company's financial statements
for the fiscal year ending December 31, 2005. In the event the Audit
Committee selects a firm other than Ernst & Young LLP prior to the 2005 Annual
Meeting, a representative of that firm will be invited to the stockholders'
meeting.
AUDIT AND RELATED FEES
Audit Fees. The aggregate fees billed by the Company's principal
accountant for the audit of the Company's annual financial statement and
review of financial statements included in the Company's Form 10-Q or services
that are normally provided by the accountant in connection with statutory and
regulatory filings or engagements were $88,000 for the year ended December 31,
2004 and $76,000 for the year ended December 31, 2003.
Audit Related Fees. The aggregate fees billed for assurance and related
services by the Company's principal accountant that are reasonably related to
the performance of the audit or review of the Company's financial statements
not included under "Audit Fees" above were $0 for the year ended December
31, 2004 and $0 for the year ended December 31, 2003.
Tax Fees. The aggregate fees billed for professional services rendered
by the Company's principal accountant for the compilation, tax advice and tax
planning were $12,000 for the year ended December 31, 2004 and $12,000 for the
year ended December 31, 2003. For 2004 and 2003, these services consisted of
the preparation of the Company's federal corporate tax return.
All Other Fees. There were no other fees billed by the Company's
principal accountants for the years ended December 31, 2004 and 2003.
Audit Committee Pre-Approval Policies and Procedures
As required by the Audit Committee Charter, as revised on April 9, 2004,
all services proposed to be provided by outside independent auditors must be
approved in advance by the Audit Committee.
There were no non-audit services performed by the independent registered
public accounting firm in 2004 and 2003.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the SEC initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors,
and stockholders holding more than 10% of the class of stock are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during 2004 all reports as required under Section 16(a)
filing requirements were filed as required.
CODE OF ETHICS
The Company adopted a Business Ethics Policy and Code of Conduct (Code of
Ethics), a copy of which may be reviewed on the Company's website,
www.monarchcasino.com.
VOTING PROCEDURES
A majority of a quorum of stockholders present in person or represented
by proxy voting "FOR" the election of the nominees to the Board is sufficient
to approve the election of the nominees to the Board. A quorum of
stockholders exists when a majority of the stock issued and outstanding and
entitled to vote at a meeting is present, in person, or represented by proxy,
at the meeting. Abstentions are effectively treated as votes "AGAINST" a
matter presented. Neither the Company's Articles of Incorporation, Bylaws, or
Nevada corporate statutes address the treatment and effect of abstentions and
broker non-votes.
The Company will appoint three inspectors of election to: determine the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, and the authenticity,
validity, and effect of a proxy; receive votes, ballots, or consents; hear and
determine all challenges and questions in any way arising in connection with
the right to vote; count and tabulate all votes or consents; determine when
the polls shall close; determine the results; and do any other acts which may
be proper to conduct the election or vote with fairness to all stockholders.
2006 ANNUAL MEETING OF STOCKHOLDERS
The next annual meeting of stockholders will be held on or about June 7,
2006. Stockholders desiring to present proper proposals at that meeting and
to have their proposals included in the Company's proxy statement and form of
proxy for that meeting must meet the eligibility and other criteria under Rule
14a-8 of the Securities Exchange Act of 1934 and must submit the proposal to
the Company. Such proposal must be received no later than December 21, 2005.
Unless a stockholder proposal for the Company's 2006 Annual Meeting of
Stockholders is submitted to the Company prior to March 10, 2006, management
may use its discretionary voting authority to vote management proxies on the
stockholder proposal without any discussion of the matter in the proxy
statement.
OTHER BUSINESS
The Board does not know of any other business which will be presented for
action by the stockholders at this annual meeting. However, if any business
other than that set forth in the Notice of Annual Meeting of Stockholders
should be presented at the annual meeting, the proxy committee named in the
enclosed proxy intends to take such action as will be in harmony with the
policies of the Board and will use their discretion and vote all proxies in
accordance with their judgment.
The Company's 2004 Annual Report to Stockholders, including financial
statements for the year ended December 31, 2004, accompanies these proxy
materials, which are being mailed on or about April 21, 2005, to all
stockholders of record of the Company as of April 8, 2005.
/s/ Ben Farahi
--------------
BEN FARAHI
Secretary
OUR ANNUAL REPORT ON SEC FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND THE SCHEDULES THERETO, FOR THE 12 MONTHS ENDED
DECEMBER 31, 2004, WILL BE FURNISHED WITHOUT CHARGE TO ANY
BENEFICIAL OWNER OF SECURITIES ENTITLED TO VOTE AT THIS ANNUAL
MEETING. TO OBTAIN A COPY OF THE FORM 10-K, WRITTEN REQUEST
MUST BE MADE TO MONARCH CASINO & RESORT, INC. AND THE
REQUESTING PERSON MUST REPRESENT IN WRITING THAT SUCH PERSON
WAS A BENEFICIAL OWNER OF OUR SECURITIES AS OF APRIL 8, 2005.
REQUESTS SHOULD BE ADDRESSED TO:
Monarch Casino & Resort, Inc.
Attention: Ben Farahi, Secretary
1175 W. Moana Lane, Suite 200
Reno, Nevada 89509