formdef14a.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934
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Filed
by the Registrant T
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Filed
by a Party other than the Registrant o
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Check
the appropriate box:
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o Preliminary
Proxy Statement
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o Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
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T Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to §240.14a-12
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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):
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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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)
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Proposed
maximum aggregate value of
transaction:
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Fee
paid previously with preliminary
materials.
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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.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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MONARCH
CASINO & RESORT, INC.
___________________
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
June
18, 2008
___________________
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 Wednesday, June 18, 2008, at 10:00 a.m. local
time, for the following purposes:
1. To
elect John Farahi, Craig F. Sullivan and
Charles W. Scharer as directors of the Company;
2. To
transact such other business as may properly come before the
meeting.
Only
stockholders of record at the close of business on April 25, 2008 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 2007 Annual Report to Stockholders, including financial statements for the
year ended December 31, 2007, is enclosed.
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By
order of the Board of Directors,
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/s/
Bob Farahi
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BOB
FARAHI
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Secretary
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PROXY
STATEMENT
TABLE
OF CONTENTS
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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 Wednesday, June 18, 2008, 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 May 9, 2008. Any stockholder giving a
proxy has the power to revoke it prospectively by giving written notice to the
Company, addressed to Bob Farahi, Secretary, at the Company’s principal address
at 3800 South Virginia Street, Reno, Nevada 89502 to the attention of the
Monarch Corporate Office before the annual meeting; by delivering to the Company
a duly executed proxy bearing a later date or by attending the annual meeting
and voting the shares in person. 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
Company will pay the expenses of making the solicitation which 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 stockholders.
The close
of business on April 25, 2008 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.
The
number of outstanding shares of Common Stock at the close of business
on March 31, 2008, was 17,871,144. The number of shares
outstanding may change between such date and April 25, 2008, 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.
AND
CERTAIN OTHER BENEFICIAL OWNERS
The following is a list of persons who
beneficially owned more than 5% of the outstanding Common Stock 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, 2008,
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, 2008, which the Company solicited and received from each
executive officer and director:
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Title of Class
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Beneficial Owner
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Amount and Nature of Beneficial
Ownership(1)(2)
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Percent of Class
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Common
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John Farahi
3800 South Virginia Street
Reno,
NV 89502
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3,028,558 |
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16.8 |
% |
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Common
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Bob Farahi
3800 South Virginia Street
Reno,
NV 89502
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2,064,471 |
(3) |
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11.5 |
% |
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Common
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Ronald M. Rowan
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3,170 |
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* |
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Common
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Charles W. Scharer
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18,400 |
(4) |
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* |
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Common
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Craig F. Sullivan
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18,300 |
(5) |
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* |
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Common
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Ronald R. Zideck
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24,900 |
(6) |
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* |
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Common
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Ben Farahi
1175 W. Moana Lane, Suite 200
Reno,
NV 89509
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1,968,264 |
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11.0 |
% |
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Common
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Barclays
Global Investors NA
45 Freemont Street
San Francisco, CA 94105
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1,609,725 |
(7) |
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9.0 |
% |
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Common
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Akre Capital Management, LLC
Charles T. Akre,
Jr.
2 West Marshall Street
PO Box
998
Middleburg,
VA 20118
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1,497,854 |
(8) |
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8.4 |
% |
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Common
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Friedman, Billings, Ramsey Group,
Inc.
1001 19th Street North
Arlington,
VA 22209
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993,150 |
(9) |
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5.6 |
% |
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Common
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All executive officers and
directors
as a group (6
persons)
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5,157,799 |
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28.3 |
% |
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(1)
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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.
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(2)
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Includes
shares issuable upon exercise of options which are exercisable within 60
days of March 31, 2008.
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(3)
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Includes
600,000 shares that have been pledged as
security.
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(4)
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Includes
options to purchase 18,300 shares under the1993 Directors' Stock Option
Plan (the “Directors' Plan”).
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(5)
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Includes
options to purchase 18,300 shares under the Directors'
Plan.
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(6)
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Includes
options to purchase 24,400 shares under the Directors'
Plan.
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(7)
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Barclays
Global Investors NA ("Barclays") reported on a Schedule 13G/A dated
January 10, 2008, that it has sole voting power with respect to 1,356,389
shares and dispositive power with respect to 1,609,725
shares. Barclays reported on a Schedule 13G/A dated January 10,
2008, that it beneficially owns 1,609,725
shares.
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(8)
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Akre
Capital Management, LLC and Charles T. Akre, Jr. ("Akre")
reported on a Schedule 13G/A dated February 14, 2008, that it has shared
voting and dispositive power with respect to all such
shares. Akre reported on a Schedule 13G/A dated February 14,
2008, that it beneficially owns 1,497,854
shares.
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(9)
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Friedman,
Billings, Ramsey Group, Inc. ("FBR") reported on a Schedule 13G/A dated
February 14, 2008, that it has shared voting and dispositive power with
respect to all such shares. FBR reported on a Schedule 13G/A
dated February 14, 2008, that it beneficially owns 993,150
shares.
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The Board
is comprised of five 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 John Farahi,
Craig F. Sullivan and Charles W. Scharer for terms of office
expiring in 2010. 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. The Company, each director and executive officer who has been
required by the Nevada State Gaming Control Board and Nevada Gaming Commission
(collectively, the “Nevada Gaming Authorities”) to be found suitable has been
found suitable by the Nevada Gaming Authorities or has submitted an application
for such approval. 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. JOHN FARAHI,
CRAIG F. SULLIVAN AND CHARLES W. SCHARER 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 and Bob 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.
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Name
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Age
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Director Since
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Position
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John
Farahi
(Nominee
for term expiring in 2010)
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60
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1993
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Co-Chairman
of the Board,
Chief
Executive Officer and Director
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Bob
Farahi
(Term
expires in 2009)
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57
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1993
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Co-Chairman
of the Board,
President,
Secretary and Director
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Craig
F. Sullivan
(Nominee
for term expiring in 2010)
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61
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1998
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Director
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Ronald
R. Zideck
(Term
expires in 2009)
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70
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2000
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Director
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Charles W. Scharer
(Nominee
for term expiring in 2010)
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53
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2001
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Director
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JOHN FARAHI has been Co-Chairman of
the Board and Chief Executive 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 served on the
Washoe County Airport Authority as a Trustee from July 1997 until June
2005. Mr. Farahi is a former member of the Nevada Commission on
Tourism and is presently a Board Member of the Reno-Sparks Convention and
Visitors’ Authority. Mr. Farahi holds a political science degree from
the California State University at 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.
CRAIG F. SULLIVAN has been a member of the
Board since September 1998. He is also currently Chairman of the
Board of Park Cattle Company. 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 bachelor’s 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
and as a director of planned giving for the University of Nevada, Reno from
March 2003 to March 2006. On March 1, 2006, Mr. Zideck became Vice
President of Business Development for The Whittier Trust Company of
Nevada. 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 third 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.
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 two 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.
Officers
and Significant Employees
RONALD ROWAN, age 44, Chief
Financial Officer and Treasurer of the Company and of Golden Road, joined the
Company in June 2006. From December 2004 to June 2006, Mr. Rowan
served as the Chief Operating and Financial Officer of Ztrading Industries, LLC,
a retail software company. From June 2003 to December 2004, he served
as the CFO of Camco, Inc., a specialty finance lender. Mr. Rowan was
the CFO of the North/South American subsidiary of Aristocrat Technologies, Inc.,
a public Australian based systems and gaming device company, from June 2001
through June 2003 and was employed by Casino Data Systems, also a public systems
and gaming company, from September 1996 through June 2001 as its Controller and
then as its CFO. Prior to joining Casino Data Systems, Mr. Rowan was
employed by Price Waterhouse for the ten years in its audit practice for six
years and then in its strategic consulting practice for four
years. Mr. Rowan is a certified public accountant with a bachelor’s
degree from the University of Southern California and an MBA from the University
of California, Los Angeles.
DARLYNE SULLIVAN, age 53, has been the General
Manager of Golden Road since February 2006 and Executive Vice President of
Operations of Golden Road since 2004. From 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 60, 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 is a
certified public accountant with a bachelor’s degree in Business Administration
from the University of Nevada.
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.
Pursuant
to Nasdaq rules, The Company has a majority of independent
directors. Craig F. Sullivan, Charles W. Scharer and Ronald R. Zideck
are “independent directors” as such term is defined in Nasdaq Rule
4200(a)(15).
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, 2007. 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. A copy of the charter may be viewed on the Company’s
website at www.monarchcasino.com.
All
members of the Audit Committee are "independent directors”, as such term is
defined in Nasdaq 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 407(d)(5)(ii). 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 5
times during the fiscal year ended December 31, 2007. The
Compensation Committee recommends, and the Board ratifies, all compensation and
awards to the Company’s executive officers and administers the Employee Stock
Option Plan. The Compensation Committee reviews the performance and
the compensation of the chief executive officer and president and, following
discussions with those individuals, presents recommendations for their
compensation levels to the Board for review and ratification. For the
remaining executive officers, the chief executive officer makes recommendations
to the Compensation Committee that generally are approved and then passed onto
the full Board for ratification. The Compensation Committee has
not adopted a charter.
The
Incentive Plan Committee, comprised of Craig F. Sullivan, Ronald R. Zideck and
Charles W. Scharer, did not meet during the fiscal year ended December 31,
2007. 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,
did not meet during the fiscal year ended December 31, 2007. 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, Ronald Rowan,
Darlyne Sullivan and Richard Cooley, and chaired by
Charles W. Scharer, did not meet during the fiscal year ended December
31, 2007. The purpose of the Operations Committee is to provide a
formal communication link between Golden Road management and
the Board and to facilitate examination of, and feedback regarding,
various operational issues.
In
addition to the standing committees described above, on July 25, 2006, the Board
established a special committee comprised of the Company’s independent directors
(the “Special Committee”) to formulate and deliver a formal offer to purchase
the 18.95 acre shopping center adjacent to the Atlantis (the “Shopping Center”)
from Biggest Little Investments, L.P (“BLI”). The Special Committee consists of
Charles W. Scharer, Craig F. Sullivan and
Ronald R. Zideck. The Special Committee did not meet in
2007.
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.
For
stockholder meetings at which directors are to be elected, in compliance with
Nasdaq rule 4350(c)(4), director nominees are recommended for the Board’s
nomination by a majority of the independent directors. In making such
recommendation, the qualifications of the prospective nominee which will be
considered include the nominee’s personal and professional integrity,
experience, skills, ability and willingness to devote the time and effort
necessary to be an effective board member, and commitment to act in the best
interests of the Company and its stockholders.
The
requirements for nomination of a person to the Board by a security holder 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 for inclusion in this Proxy Statement under the guidelines
set forth above.
The Board
held 7 meetings in the fiscal year ended December 31, 2007. All
directors attended at least 75% of the Board 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, 2007.
The Board
has a policy that requires all directors to attend each Annual Meeting of
Stockholders absent exigent circumstances. All five directors
attended the 2007 Annual Meeting of Stockholders.
The
Company’s stockholders may contact directors by sending an email to Ronald Rowan
at rrowan@monarchcasino.com or by
addressing a letter to Monarch Casino & Resort, Inc., Board of Directors,
3800 South Virginia Street, Reno, Nevada 89502. Each communication
should specify the applicable director or directors to be
contacted.
Compensation
Objectives
We seek
to compensate our named executive officers “NEOs” in a manner that will attract
and retain qualified individuals who are responsible for the management, growth
and success of the Company. We believe that NEO compensation should
be designed to:
1)
compensate for service to us,
2)
motivate performance in areas consistent with our short and long-term
objectives,
3) reward
for achieving those objectives, and
4)
encourage NEOs to continue in our employ.
We
evaluate and establish the total compensation of our NEOs in light of what we
believe to be the compensation practices and relative corporate financial
performance of other companies in the gaming industry similar to us in terms of
asset size and target market. Because many of these companies are not
publicly held, their compensation practices are not published
publicly. As such, we rely on the industry experience and knowledge
of our Board of Directors in determining appropriate NEO
compensation.
Compensation
Elements
Our NEO
compensation program utilizes four primary components which include annual
salary, annual cash bonus awards, one-time cash awards and stock option
awards. Following is a discussion of each component.
Annual
Salary: The salary element compensates each NEO for
performance of the fundamental duties associated with that NEO’s
position. In addition to what we believe to be the compensation
practices and relative corporate financial performance of other companies in the
gaming industry similar to us in terms of asset size and target market, we
consider other factors in establishing NEO annual salaries including their
respective record of leadership and service to us, our growth during the NEO’s
term of employment, the relative importance of the NEO in overseeing our
day-to-day operations, the relative performance of our competitors and civic
leadership in the Reno area. Salaries are reviewed annually and are
adjusted as warranted.
Annual Cash Bonus
Awards: To align NEO performance with our short-term
operational and profit objectives, we utilize an annual cash bonus program (the
“Bonus Program”) with an annual target equal to 20% of the NEO’s annual
salary. The Bonus Program is comprised of both a quantitative and a
qualitative component. The quantitative component is awarded based on
achieving our annual profit goal, as established by the Board of Directors,
while the qualitative component is tied to specific NEO
performance.
The
profit target is defined as a determined level of Earnings Before Interest,
Taxes, Depreciation and Amortization (“EBITDA”). EBITDA can be
calculated from our audited financial statements by adding depreciation and
amortization expense to income from operations. An additional
evaluation is completed at year-end which allows for the potential to exceed the
20% bonus target up to a cap of 40% of the NEO’s annual salary. For
every whole percentage point that our actual EBITDA exceeds the full-year EBITDA
target, an additional 1% of NEO salary is awarded.
To
motivate and reward actions that directly translate into increased Company
profit, the Bonus Program is significantly weighted toward the quantitative
component. Both components, if awarded, are paid simultaneously on a
semi-annual basis. Based on the success the management team has had in achieving
the historical EBITDA and other performance targets, we believe it is likely
that future bonus awards will be paid fully.
One-Time Cash
Awards: We may award additional one-time cash payments based
on superior financial performance relative to the Board established annual
financial profit target when such performance is deemed to be
extraordinary. Such determination is based on several factors
including, but not limited to, comparison of our financial performance relative
to our competitors, the general market conditions in which those financial
results were generated and other operating criteria that indicate that the
financial results were abnormally strong given those market and operating
conditions. Such performance criteria could serve as the basis for
increasing an NEO’s salary level; however, by instead rewarding such performance
with one-time cash awards, we believe we are more accurately promoting
sustained, superior performance by more closely tying the reward with the timing
of the performance.
Stock Option
Awards: While it is difficult to predict the value an NEO will
ultimately realize from the stock option component, the compensation package is
designed with the expectation that the stock options will provide the highest
potential reward of the four components of the NEO compensation
package. As such, the most significant driver of NEO compensation is
designed to correlate directly with the financial gains of our
stockholders. As our stock price increases or decreases, the value of
NEO stock option awards also increases or decreases. By designing the
compensation program in this way, we believe that a significant portion of NEO
compensation has been directly aligned with the NEOs’ performance as measured
through increased value for our stockholders.
NEOs
generally receive an initial grant on their hire date and generally receive
subsequent annual replacement grants in amounts equal to the portion of the
initial grant that vests. Stock option awards are granted at strike
prices equal to the closing market price of our stock on the date the stock
option award is granted. As such, the value of the award only
increases if our stock price increases subsequent to the stock option’s grant
date. Because these awards vest over time, the stock option component
of NEO compensation also encourages NEO retention, as value related to unvested
stock options is forfeited if an NEO ceases to be employed by
us. Note that NEOs are prohibited from entering into short-sale
transactions involving our stock. Short-sale transactions are
sometimes used by investors to mitigate the risk of a stock price
decline.
Effective
January 1, 2006, we began recognizing the expense associated with stock option
awards in accordance with the requirements of SFAS 123R as further explained
in Note 1 of the Company’s Consolidated Financial Statements, included as
part of the Company’s 2007 Annual Report to Stockholders filed on Form
10-K.
Change
in Control
Our
senior managers and other employees have built Monarch Casino & Resort, Inc.
into the successful enterprise that it is today, and we believe that it is
important to protect them in the event we experience a change in
control. Further, it is our belief that the interests of our
stockholders are best served if the interests of our senior management are
aligned with those of our stockholders, and providing change in control benefits
should eliminate, or at least reduce, the reluctance of senior management to
pursue potential change in control transactions that may be in the best
interests of our stockholders. Relative to our overall value, these
potential change in control benefits are minor.
In the
event of a change in control, all unvested stock option awards immediately
vest. Any one of the following events would constitute a change in
control: 1) if any person or entity becomes the beneficial owner of 25% or more
of our outstanding stock; 2) if a majority of the Board is removed; 3) if
substantially all of our assets are sold; or 4) if our stockholders are
solicited, via a proxy statement, by someone other than current management
seeking approval for a plan of reorganization, merger or consolidation involving
us.
Other Benefits and Compensation
The NEOs
also participate in our other benefit plans on the same basis as other
employees. The plans include subsidized health insurance benefits and
an annual 401K matching contribution up to two percent of their annual
salary.
Board Process
The
Compensation Committee of the Board (the “Committee”) recommends, and the Board
ratifies, all compensation and awards to the NEOs. The Committee
reviews the performance and the compensation of the chief executive officer and
president and, following discussions with those individuals, presents
recommendations for their compensation levels to the Board for review and
ratification. For the remaining NEOs, the chief executive officer
makes recommendations to the Committee that generally are approved and then
passed onto the full Board for ratification.
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 shall not be incorporated by reference into any such
filings or otherwise deemed filed.
Compensation Committee
Report on Executive Compensation
The
Committee has reviewed and discussed the Compensation Discussion and Analysis
required by Item 402(b) of Regulation S-K with management and, based on such
review and discussion, the Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this Proxy
Statement.
|
|
THE
COMPENSATION COMMITTEE
|
|
|
|
|
|
|
By:
|
Craig F. Sullivan,
Chairman
|
|
|
|
Ronald R. Zideck,
Member
|
|
|
|
Charles W. Scharer,
Member
|
The
following table presents information regarding compensation of our NEOs for
services rendered during 2007.
|
Name and Position
|
|
Year
|
|
Salary ($)
|
|
|
Bonus ($)(4)
|
|
|
Stock Awards ($)
|
|
|
Option Awards ($)(1)
|
|
|
Non-Equity Incentive Plan Compensation
($)
|
|
|
Nonqualified deferred Compensation Earning
($)
|
|
|
All Other Compensation
($)(2)
|
|
|
Total ($)
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
|
John
Farahi, Co-Chairman of the Board and Chief Executive Officer
|
|
2006
|
|
$ |
400,000 |
|
|
$ |
400,000 |
|
|
|
- |
|
|
$ |
652,033 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
1,452,033 |
|
| |
2007
|
|
$ |
415,389 |
|
|
|
- |
|
|
|
- |
|
|
$ |
710,625 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
1,126,014 |
|
|
Bob
Farahi, Co-Chairman of the Board, Secretary and President
|
|
2006
|
|
$ |
240,000 |
|
|
$ |
150,000 |
|
|
|
- |
|
|
$ |
226,900 |
|
|
|
- |
|
|
|
- |
|
|
$ |
38,911 |
|
|
$ |
655,811 |
|
| |
2007
|
|
$ |
249,232 |
|
|
|
- |
|
|
|
- |
|
|
$ |
263,383 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
512,615 |
|
|
Ronald
Rowan, Chief Financial Officer and Treasurer(3)
|
|
2006
|
|
$ |
120,190 |
|
|
|
- |
|
|
|
- |
|
|
$ |
220,427 |
|
|
|
- |
|
|
|
- |
|
|
$ |
14,660 |
|
|
$ |
355,277 |
|
| |
2007
|
|
$ |
263,509 |
|
|
$ |
55,000 |
|
|
|
- |
|
|
$ |
378,596 |
|
|
|
- |
|
|
|
- |
|
|
$ |
4,500 |
|
|
$ |
701,605 |
|
________________
(1) The
amounts reported in column (f) of the table above reflect the compensation
expense, related to stock option awards, recognized for financial statement
reporting purposes for the respective year. For a discussion of the
assumptions and methodologies used to calculate this expense, please see the
discussion of share based compensation in Note 8 of the Company’s Consolidated
Financial Statements, included as part of the Company’s 2007 Annual Report to
Stockholders filed on Form 10-K.
(2) Amounts
for Bob Farahi represent the purchase of an automobile paid by the
Company. Amounts for Ronald Rowan in 2006 represent relocation
and temporary housing expense associated with his move to Reno after he joined
the Company. Amounts for Ronald Rowan in 2007 represent the
Company’s contribution to 401(k) plans.
(3)
Ronald Rowan joined the Company in June 2006.
(4) The
amount of bonus for John Farahi and Bob Farahi is not calculable through the
latest practicable date and is expected to be determined on or about June 18,
2008.
The
following table presents information regarding the equity incentive awards
granted to our NEOs for 2007.
|
|
|
|
|
Estimated Future Payouts Under Non-Equity
Incentive Plan Awards
|
|
|
Estimated Future Payouts Under Equity Incentive
Plan Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant Date
|
|
Threshold ($)
|
|
|
Target ($)
|
|
|
Maximum ($)
|
|
|
Threshold ($)
|
|
|
Target ($)
|
|
|
Maximum ($)
|
|
|
All Other Stock Awards: Number of Shares of Stock
or Units (#)
|
|
|
All Other Option Awards: Number of Securtiteis
Underlying Options (#)
|
|
|
Exercise or Base Price of Option Awards
($/Sh)(1)
|
|
|
Grant Date Fair Value of Stock and Option Awards
($)
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
|
(k)
|
|
|
(l)
|
|
|
John Farahi, Co-Chairman of the Board and Chief
Executive Officer (2)
|
|
10/21/2007
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
66,668 |
|
|
$ |
29 |
|
|
$ |
906,685 |
|
|
Bob Farahi, Co-Chairman of the Board, Secretary
and President (2)
|
|
10/21/2007
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
33,334 |
|
|
$ |
29 |
|
|
$ |
453,342 |
|
|
Ronald Rowan, Chief Financial Officer and
Treasurer
|
|
-
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
________________
|
|
(1)
|
The
Company’s policy is to set exercise prices for stock option awards equal
to the closing price of the Company’s stock on the grant
date. If the grant date falls on a date that the stock market
is closed, the exercise price is set at the closing price on the last day
that the market was open before the grant
date.
|
|
|
(2)
|
The
option awards listed in the above table for John Farahi and Bob Farahi
vest 100% on the third anniversary of the grant
date.
|
The
following table presents information regarding the outstanding equity awards
held by each of our NEO’s as of December 31, 2007.
|
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
|
|
Number
of Securites Underlying Unexercised Options Exercisable
(#)
|
|
|
Number
of Securites Underlying Unexercised Options Unexercisable
(#)
|
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#)
|
|
Option
Exercise Price ($)
|
|
Option
Expiration Date
|
|
Number
of Shares or Units of Stock That Have Not Vested (#)
|
|
Market
Value of Shares or Units of Stock That Have Not Vested ($)
|
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
That Have Not Vested (#)
|
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or
Other Rights That Have Not Vested ($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
John
Farahi, Co- Chairman
of the Board
and Chief Executive
Officer
|
|
|
200,000 |
|
|
|
- |
|
|
|
$ |
11.685 |
|
10/21/2014
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
70,000 |
(1) |
|
|
$ |
18.060 |
|
10/21/2015
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
66,666 |
(2) |
|
|
$ |
21.820 |
|
10/21/2016
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
66,668 |
(3) |
|
|
$ |
29.000 |
|
10/21/2017
|
|
|
|
|
|
|
|
|
|
Bob
Farahi, Co- Chairman
of the Board,
Secretary and
President
|
|
|
100,000 |
|
|
|
- |
|
|
|
$ |
11.685 |
|
10/21/2014
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
10,000 |
(1) |
|
|
$ |
18.060 |
|
10/21/2015
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
33,334 |
(2) |
|
|
$ |
21.820 |
|
10/21/2016
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
33,334 |
(3) |
|
|
$ |
29.000 |
|
10/21/2017
|
|
|
|
|
|
|
|
|
|
Ronald
Rowan, Chief
Financial Officer
and Treasurer
|
|
|
- |
|
|
|
100,000 |
(4) |
|
|
$ |
26.470 |
|
6/19/2016
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Vests
in full on October 21, 2008, subject to continued employment through that
date.
|
|
|
(2)
|
Vests
in full on October 21, 2009, subject to continued employment through that
date.
|
|
|
(3)
|
Vests
in full on October 21, 2010, subject to continued employment through that
date.
|
|
|
(4)
|
Vests
in one-third increments on June 19, 2009; June 19, 2010 and on June 19,
2011, subject to continued employment through the noted
dates.
|
Upon a
change in control (“CIC”), all unvested stock options issued by the Company
immediately vest. Any one of the following events would generally
constitute a change in control: 1) any person or entity becomes the beneficial
owner of 25% or more of our outstanding stock; 2) a majority of the Board is
removed; 3) substantially all of our assets are sold; or 4) our stockholders are
solicited, via a proxy statement, by someone other than current management
seeking approval for a plan of reorganization, merger or consolidation of the
Company. There are no other CIC agreements with any of our
employees.
The
Company has an agreement with Ronald Rowan, Chief Financial Officer and
Treasurer, that in the event that his employment is terminated “without cause”
he will receive severance pay in the amount equal to his then-applicable annual
base salary in exchange for his waiver of any and all causes of action against
us, our officers, directors, principals and affiliates, arising from his
employment. Termination “without cause” would be termination unless
Mr. Rowan committed an illegal act, violated our Business Ethics Policy and Code
of Conduct, committed gross neglect or abandonment of his professional
responsibilities, or was disqualification by a controlling regulatory
agency. The agreement prohibits Mr. Rowan from entering the employ of
any gaming enterprise located within 250 miles of a gaming enterprise owned by
the Company for the year following termination.
Director
Compensation – Fiscal 2007
|
Name
|
|
Fees Earned or Paid in Cash (1) ($)
|
|
|
Stock Awards ($)
|
|
|
Option Awards (2)(3)
|
|
|
Non-Equity Incentive Plan Compensation
($)
|
|
|
Chang in Pension Value and Nonqualified Deferred
Compensation Earnings
|
|
|
All Other Compensation ($)
|
|
|
Total ($)
|
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
Charles W. Scharer
|
|
$ |
50,000 |
|
|
|
- |
|
|
$ |
51,127 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
101,127 |
|
|
Craig F. Sullivan
|
|
$ |
50,000 |
|
|
|
- |
|
|
$ |
51,127 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
101,127 |
|
|
Ronald R. Zideck
|
|
$ |
50,000 |
|
|
|
- |
|
|
$ |
51,127 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
$ |
101,127 |
|
|
|
(1)
|
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 standing committee of the Board received an additional annual fee of
$10,000 for each standing committee chaired in
2007.
|
|
|
(2)
|
The
amounts reported in column (d) of the table above reflect the compensation
expense, related to stock option awards, recognized for financial
statement reporting purposes for the twelve months ended December 31,
2007. For a discussion of the assumptions and methodologies
used to calculate this expense, please see the discussion of share based
compensation in Note 8 of the Company’s Consolidated Financial Statements,
included as part of the Company’s 2007 Annual Report to Stockholders and
filed on Form 10-K.
|
|
|
(3)
|
On
the date of prior year’s Annual Stockholders Meeting, each non-employee
director received a grant of 6,100 stock options comprised of 4,800
options for service as a director and 1,300 options for service as a
committee chair. The options were issued at exercise prices
equal to the close price of the Company’s stock on the grant
date. The options vest on the six-month anniversary of the
grant date.
|
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.
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, 2007.
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,
2007.
|
|
THE
AUDIT COMMITTEE
|
|
|
|
|
|
|
By:
|
Ronald R. Zideck,
Chairman
|
|
|
|
Craig F. Sullivan,
Member
|
|
|
|
Charles W. Scharer,
Member
|
On July
26, 2006, the Company submitted a formal offer to Biggest Little Investments,
L.P. (“BLI”), formulated and delivered by a committee comprised of the Company’s
independent directors (the “Committee”), to purchase the 18.95 acre shopping
center (the “Shopping Center”) adjacent to the Atlantis Casino Resort
Spa. On October 16, 2006, the Committee received a letter from
counsel to BLI advising the Company that BLI, through its general partner,
Maxum, L.L.C., had “decided that such offer is not in the best interest of the
Partnership’s limited partners and, therefore, will not be entering into
negotiations with Monarch.” While there have been subsequent
communications between BLI and the Company from time to time regarding our
interest in the Shopping Center, nothing has resulted. The Board of Directors
continues to consider expansion alternatives.
Although
there is currently a dispute as to how the units are held, collectively John
Farahi, Bob Farahi and Ben Farahi beneficially own a controlling interest in
BLI. John Farahi is Co-Chairman of the Board, Chief Executive Officer
and a Director of Monarch. Bob Farahi is Co-Chairman of the Board,
President, Secretary and a Director of Monarch. Ben Farahi formerly was the
Co-Chairman of the Board, Secretary, Treasurer, Chief Financial Officer and a
Director of Monarch. Monarch’s board of directors accepted Ben
Farahi’s resignation from these positions on May 23, 2006.
The
Company currently rents various spaces in the Shopping Center which it uses as
office, storage space and guest parking and paid rent of approximately
$262,700 plus
common area expenses in 2007. The Company paid rent of approximately $95,520 and
$85,730 plus common area expenses in 2006 and 2005, respectively.
In
addition, a driveway that is being shared between the Atlantis and the Shopping
Center was completed on September 30, 2004. As part of this project,
in January 2004, the Company leased a 37,368 square-foot corner section of the
Shopping Center for a minimum lease term of 15 years at an annual rent of
$300,000, subject to increase every 60 months based on the Consumer Price Index.
The Company began paying rent to the Shopping Center on September 30, 2004. 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 periods, the Company has the option to purchase the leased
driveway 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 may use a portion of the parking
spaces at the Shopping Center. The total cost of the project was $2.0 million;
the Company was responsible for two thirds of the total cost, or $1.35 million.
The Company paid approximately $300,000 plus common area charges in each of the
years 2007, 2006 and 2005 for its leased driveway space at the Shopping
Center.
The
Company is currently leasing sign space from the Shopping Center. The lease took
effect in March 2005 for a monthly cost of $1. The lease was renewed for another
year with a monthly lease of $1,000 effective January 1, 2006. The
Company paid $12,420 and $12,000 for the
twelve months ended December 31, 2007 and 2006, respectively, and did not make
any payments during 2005.
On
September 23, 2003, the Company entered into an option agreement with an
affiliate of its principal stockholders to purchase property in South Reno for
development of a new hotel casino. Through the property owner, the Company filed
an application with the City of Reno for both master plan and zoning changes for
13 acres of the property. On January 20, 2005, the City of Reno Planning
Commission approved the application for zoning change on the property; the Reno
City Council would next have to approve the application. On April 13, 2005, the
Reno City Council rejected the application for master plan and zoning change. As
a result of the City Council’s decision, the Company expensed in 2005 a charge
of approximately $289,000 in gaming development costs related to the potential
new hotel casino. The option agreement was set to expire on September 15, 2005
and the Company’s Board of Directors voted to let the agreement expire on such
date without exercising the option to purchase.
The
Company is currently leasing billboard advertising space from affiliates of its
principal stockholders for a total cost of $49,000 in 2007, $42,000 in 2006 and
$31,500 in 2005.
Until
December 2006, the Company rented office and storage space from a company
affiliated with Monarch’s principal stockholders and paid rent of approximately
$26,000 in 2006, $28,000 in 2005 and did not incur any such expense in
2007. Effective December 2006, Monarch’s principal stockholders sold
this building and, through April 15, 2007, the Company continued to rent space
from the new owner which is not a related party to Monarch.
On
December 24, 2007, the Company entered into a lease with Triple “J” Plus, LLC
(Triple J) for the use of a facility on 2.3 acres of land (jointly “the
Property”) across Virginia Street from the Atlantis that the Company plans to
utilize for administrative staff offices. The managing partner of
Triple J is a first-cousin of John and Bob Farahi, the Company’s Chief Executive
Officer and President, respectively. The term of the lease is two
years requiring monthly rental payments of $20,256. Commensurate with
execution of the lease, the Company entered into an agreement that provides the
Company with a purchase option on the Property at the expiration of the lease
period while also providing Triple J with a put option to cause the Company to
purchase the Property during the lease period. The purchase price of
the Property has been established by a third party appraisal
company. Lastly, as a condition of the lease and purchase option, the
Company entered into a promissory note (the “Note”) with Triple J whereby the
Company advanced a $2.7 million loan to Triple J. The Note requires
interest only payments at 5.25% and matures on the earlier of i) the date the
Company acquires the Property or ii) January 1, 2010.
Audit
Committee Review
The
Company requires that the Audit Committee of the Board review and approve
related party transactions. The Audit
Committee reviews all related party transactions on a case by case basis and
approves any such transaction in accordance with Nevada corporate
law.
The
Company's principal accounting firm, Ernst & Young LLP, has audited the
Company's financial statements for the fiscal year ended December 31,
2007. 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 is currently negotiating the engagement of Ernst & Young, LLP as
the Company’s principal accounting firm for the fiscal year ending December 31,
2008.
Audit
Fees. The aggregate fees billed by the Company’s principal
accountants 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 $116,874 for the year ended December 31, 2007 and
$111,334 for the year ended December 31, 2006. The aggregate fees
billed for audit of internal control over financial reporting as required by
Section 404 of the Sarbanes-Oxley Act of 2002 totaled $128,687 for the year
ended December 31, 2007 and $130,280 for the year ended December 31,
2006.
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, 2007
and $0 for the year ended December 31, 2006.
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 $16,050 for the year ended December 31, 2007 and $16,050
for the year ended December 31, 2006. For 2007 and 2006, 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, 2007 and
2006.
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 2007 and 2006.
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, during 2007 all reports as required under Section
16(a) filing requirements were filed as required except as noted
below.
A Form 4
related to the sale of common stock by Bob Farahi on March 12, 2007 was
inadvertently filed late on March 20, 2007.
Forms 4
related to stock options granted to Craig F. Sullivan and Ronald R. Zideck on
May 22, 2007, were inadvertently filed late on February 7, 2008.
A Form 4
related to stock options granted to Charles W. Scharer on May 22, 2007, was
inadvertently filed late on August 13, 2007.
The
Company adopted a Business Ethics Policy and Code of Conduct, a copy of which
may be reviewed on the Company’s website, www.monarchcasino.com.
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.
The next
annual meeting of stockholders is expected to be held on or about May 20,
2009. 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 26, 2008. Unless a stockholder proposal for the Company's
2009 Annual Meeting of Stockholders is submitted to the Company prior
to March 5, 2009, 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.
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 2007 Annual Report to Stockholders, including financial statements for
the year ended December 31, 2007, accompanies these proxy materials, which are
being mailed on or about May 8, 2008, to all stockholders of record of the
Company as of April 25, 2008.
|
|
By
order of the Board of Directors,
|
|
|
|
|
|
/s/
Bob Farahi
|
|
|
|
|
|
BOB
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, 2007, 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 25, 2008.
REQUESTS
SHOULD BE ADDRESSED TO:
Monarch
Casino & Resort, Inc.
Corporate
Offices
Attention: Bob
Farahi, Secretary
3800
South Virginia Street
Reno,
Nevada 89502
APPENDIX
C
MONARCH
CASINO & RESORT, INC.
PROXY
FOR ANNUAL MEETING OF STOCKHOLDERS, JUNE 18, 2008
SOLICITED
BY THE BOARD
The
undersigned stockholder of Monarch Casino & Resort, Inc. (the "Company")
hereby acknowledges receipt of the Notice of Meeting of Stockholders, Proxy
Statement, and Annual Report to Stockholders in connection with the Annual
Meeting of Stockholders of the Company to be held at the Atlantis Casino Resort,
Reno, Nevada, on Wednesday, June 18, 2008 at 10:00 o'clock in the morning, local
time, and hereby appoints John Farahi and Bob Farahi, and each or any of them,
proxies, with power of substitution, to attend and to vote all shares the
undersigned would be entitled to vote if personally present at said annual
meeting and at any adjournment thereof. The proxies are instructed to
vote as follows:
(To be signed on reverse
side)
|
X
|
Please
mark your votes as
in
this example.
|
|
(1)
|
Election
of
|
FOR
|
WITHHELD
|
NOMINEES:
|
John
Farahi
|
|
|
Directors |
o
|
o
|
|
Craig
F. Sullivan
|
|
|
|
|
|
|
Charles
W. Scharer
|
(INSTRUCTION: to
withhold authority to vote for any individual nominee, write that nominee's name
on the space provided below):
| (2)
In
their discretion, act upon such other matters as may properly come before
this meeting. |
FOR
|
AGAINST
|
ABSTAIN
|
|
|
o
|
o
|
o
|
|
The
shares represented by this proxy will be voted as specified. If no
specification is made, the shares represented by this proxy will be voted in
favor of all nominees listed and in the discretion of the proxies on other
matters that may properly come before the annual meeting.
SIGNATURE(S)__________________________________________________________________
DATE_________________________
NOTE: PLEASE
SIGN PROXY EXACTLY AS YOUR NAME APPEARS. Date the Proxy in the space
provided. If shares are held in the name of two or more persons, all
must sign. When signing as attorney, executor, administrator,
trustee, or guardian, give full title as such. If signer is a
corporation, sign full corporate name by duly authorized officer.
23