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:
_____________________________________________________
(2) Aggregate number of securities to which transaction applies:
_____________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
_____________________________________________________
(4) Proposed maximum aggregate value of transaction:
_____________________________________________________
(5) Total fee paid:
_____________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
_____________________________________________________
(2) Form, Schedule or Registration Statement No.:
_____________________________________________________
(3) Filing Party:
_____________________________________________________
(4) Date Filed:
_____________________________________________________
MONARCH CASINO & RESORT, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 12, 2002
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 12, 2002, 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; and
2. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on May 3, 2002 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 2001 Annual Report to Stockholders, including financial
statements for the year ended December 31, 2001, is enclosed.
By order of the Board of Directors,
/s/BEN FARAHI
Ben Farahi
Secretary
Dated: April 30, 2002
MONARCH CASINO & RESORT, INC.
PROXY STATEMENT
TABLE OF CONTENTS
Page
VOTING SECURITIES .........................................................1
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN OTHER BENEFICIAL OWNERS ......2
ELECTION OF DIRECTORS .....................................................3
Directors and Nominees .................................................3
Certain Officers of Subsidiary .........................................4
Committees of the Board ................................................5
Board Meetings .........................................................5
Compensation of Non-Employee Directors .................................6
COMPENSATION OF EXECUTIVE OFFICERS ........................................6
Summary Compensation Table .............................................6
Option Grants in 2001 ..................................................7
Aggregated Option Exercises in 2001 and Fiscal Year-End Option Values ..7
Compensation Committee Interlocks and Insider Participation ............7
Compensation Committee and Incentive Plan Committee Report on Executive
Compensation ...........................................................7
Audit Committee Report .................................................8
Stock Performance Chart ................................................9
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...........................10
Guarantee Fees ........................................................10
Indemnification of Directors and Officers .............................10
INDEPENDENT PUBLIC ACCOUNTANTS ...........................................10
AUDIT AND RELATED FEES ...................................................11
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 .....11
VOTING PROCEDURES ........................................................11
2003 ANNUAL MEETING OF STOCKHOLDERS ......................................12
OTHER BUSINESS ...........................................................12
PROXY CARD ...............................................................S1
ii
MONARCH CASINO & RESORT, INC.
3800 South Virginia Street
Reno, Nevada 89509
April 30, 2002
-------------------
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 12, 2002, 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 OF DIRECTORS"). This Proxy Statement and the accompanying
form of proxy are being mailed to stockholders on or about May 8, 2002. 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, or by voting in person by
ballot at the annual meeting after notifying the inspectors of election of the
stockholder's intention to do so 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 May 3, 2002, 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.
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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 April 30, 2002, was 9,436,275. The number of shares outstanding may change
between such date and May 3, 2002, 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 April 17, 2002, 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 April 17, 2002, which
the Company solicited and received from each executive officer and director:
Title of Amount and Nature Percent of
Class Beneficial Owner of Beneficial Ownership Class
(1),(2)
-------- ---------------- ----------------------- ----------
Common John Farahi 2,070,834 21.9%
1175 W. Moana Lane,
Reno, NV 89509
Common Bob Farahi 2,070,833 21.9%
1175 W. Moana Lane,
Reno, NV 89509
Common Ben Farahi 2,061,833 21.9%
1175 W. Moana Lane,
Reno, NV 89509
Common Jila Farahi 870,400 9.2%
1175 W. Moana Lane,
Reno, NV 89509
Common Craig F. Sullivan 12,200 (3) *
Common Ronald R. Zideck 9,150 (4) *
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Common Charles W. Scharer 3,050 (5) *
Common Liberty Wanger Asset 752,700 (6) 8.0%
Management, L.P.
WAM Acquisition GP, Inc.
Liberty Acorn Trust
227 W. Monroe Street, Suite 3000
Chicago, IL 60606
Common Aaron H. Braun 536,900 (7) 5.7%
Willow Creek Capital
Management
WC Capital Management, LLC
17 E. Sir Francis Drake Blvd.
Suite 100
San Rafael, CA 94939
Common All executive officers and 6,227,900 66.0%
directors as a group
(6 persons)
* 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 30, 2002.
(3) Includes options to purchase 12,200 shares under the 1993 Directors'
Stock Option Plan (the "Directors' Plan").
(4) Includes options to purchase 9,150 shares under the Directors' Plan.
(5) Includes options to purchase 3,050 shares under the Directors' Plan.
(6) Liberty Wanger Asset Management, L.P. ("WAM"), WAM Acquisition GP,
Inc., the general partner of WAM ("WAM GP"), and Liberty Acorn Trust
("Acorn") reported on a Schedule 13G dated February 13, 2002, that they
have shared voting and dispositive power with respect to all such shares.
WAM and WAM GP reported on a Schedule 13G dated February 13, 2002, that
they beneficially own 752,700 shares, of which Acorn beneficially owns
535,000 shares.
(7) Aaron H. Braun ("Mr. Braun"), Willow Creek Capital Management ("WC"), and
WC Capital Management, LLC ("WC LLC") reported on a Schedule 13G dated
February13, 2002, that they have shared voting and dispositive power with
respect to all such shares. Mr. Braun and WC reported on a Schedule 13G
dated February 13, 2002, that they beneficially own 536,900 shares, of
which WC LLC beneficially owns 497,951 shares.
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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 John Farahi, Craig
F. Sullivan and Charles W. Scharer for terms of office expiring in 2004. 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 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.
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, 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.
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DIRECTORS AND NOMINEES
Director
Name Age Since Position
-------------------- ----- -------- ----------------------------
John Farahi 53 1993 Co-Chairman of the Board,
(Nominee for term Chief Executive Officer,
expiring in 2004) Chief Operating Officer
and Director
Bob Farahi 51 1993 Co-Chairman of the Board,
(Term expires in 2003) President and Director
Ben Farahi 49 1993 Co-Chairman of the Board,
(Term expires in 2003) Chief Financial Officer,
Secretary, Treasurer
and Director
Craig F. Sullivan 55 1998 Director
(Nominee for term
expiring in 2004)
Ronald R. Zideck 64 2000 Director
(Term expires in 2003)
Charles W. Scharer 47 2001 Director
(Nominee for term
expiring in 2004)
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 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
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
Resources Accrued Mortgage Investors 2, L.P., a Delaware limited partnership
that invests in first and junior mortgage loans. 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.
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CRAIG F. SULLIVAN has been a member of the Board since September 1998.
Since March 1998, Mr. Sullivan has been President of Sullivan & Associates,
Las Vegas, Nevada, 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, and served on the Board of
Windsor Woodmont Black Hawk Resort Corporation from March, 2000, to January,
2002. Mr. Sullivan holds a degree in Economics from The University of George
Washington, 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 a director and
Vice Chairman for the Utility Shareholder's Association of Nevada, and as a
director of Saint Mary's Health Network. 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. A
twenty two-year veteran of the gaming industry, Mr. Scharer ended an eighteen-
year career with Harveys Casino Resorts in January 2001, serving as Harveys'
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
a member of the Nevada Commission on Tourism, having been appointed by
Governor Kenny C. Guinn in November, 1999. Mr. Scharer is a director of
GameTech International, Inc (Nasdaq:GMTC) and serves as a Trustee of the
University of Nevada, Reno Foundation. 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 47, has been Vice President of Sales and Marketing
and Assistant General Manager of Golden Road since June 1993. 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 55, 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
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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 CPA licensed to practice in Nevada.
COMMITTEES OF THE BOARD
The Board has certain standing committees including the Audit Committee,
the Compensation Committee, the 1993 Long Term Incentive Plan Committee (the
"Incentive Plan Committee") and the 1993 Directors' Stock Option Plan
Committee (the "Directors' Plan Committee").
The Audit Committee, comprised of Craig F. Sullivan and Charles W.
Scharer, and chaired by Ronald R. Zideck, met four times during the fiscal
year ended December 31, 2001. 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 which would interfere with
the exercise of independent judgment as a committee member. The Audit
Committee's function is to review reports of certified public accountants 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 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. Each member of the
Audit Committee is an "independent" director, as such term is defined in Rule
4200(a)(15) of the National Association of Securities Dealers' Listings
Standard.
The Compensation Committee, comprised of Ronald R. Zideck and Charles W.
Scharer, and chaired by Craig F. Sullivan, met twice during the fiscal year
ended December 31, 2001. 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 Incentive Plan Committee, comprised of Craig F. Sullivan and Ronald
R. Zideck, did not meet during the fiscal year ended December 31, 2001. 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, to
interpret the Incentive Plan, and to notify 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, 2001. Neither John
Farahi nor Bob Farahi is eligible to participate in the Directors' Plan. The
Directors' Plan Committee's function is to administer the 1993 Directors'
Stock Option Plan (the "Directors' Plan") and consists of not less than two
directors of the Company selected by, and serving at the pleasure of, the
Board. The Directors' Plan Committee has the authority to interpret the
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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.
Craig F. Sullivan and Ronald R. Zideck of the Audit and Compensation
Committees of the Board attended at least 75% of the committee meetings held
during the fiscal year ended December 31, 2001. Charles W. Scharer attended
at 75% of the committee meetings held after he became a Board member in July
2001.
BOARD MEETINGS
The Board held 5 meetings in the fiscal year ended December 31, 2001.
John Farahi, Bob Farahi, Ben Farahi, Craig F. Sullivan and Ronald R. Zideck
each attended at least 75% of the meetings held. Charles W. Scharer attended
at least 75% of the meetings held since replacing Stephen L. Cavallaro as a
Board member in July 2001.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
In 2001, annual fees of $25,000 were paid to directors who were not
employees of the Company. As of March 1, 2002, these annual fees were
increased to $30,000 per director. Each non-employee director serving as the
chairman of a committee of the Board received an additional annual fee of
$5,000 for each committee chaired in 2001. As of March 1, 2002, this annual
fee was increased to $10,000. 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.
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, 2001, 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 2,400 shares of Common Stock
("Initial Director Grant"), plus an additional grant to purchase 650 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 2,400 shares of Common Stock
("Annual Director Grant") plus an additional grant to purchase 650 shares of
Common Stock for each committee chaired. The Directors' Plan Committee may
also recommend discretionary grants of options on terms deemed appropriate by
the 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.
-8-
In 2001, Craig F. Sullivan and Ronald R. Zideck each received an Annual
Director Grant of options to purchase 3,050 shares of Common Stock, and
Charles W. Scharer received an Initial Director Grant of options, in
accordance with the plan, to purchase 3,050 shares of Common Stock.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
Annual Compensation
--------------------------------------
Name and All other
Principal Positions Year Salary($) Bonus($) Compensation($)(1)
------------------- ---- ---------- ----------- ------------------
John Farahi, Co-Chairman 2001 269,230 100,000 995
of the Board and 2000 215,384 11,940
Chief Executive Officer 1999 147,692 11,940
Bob Farahi, Co-Chairman 2001 230,770 100,000 10,028
of the Board and 2000 184,616 10,020
President 1999 115,385 10,030
Ben Farahi, Co-Chairman 2001 230,770 100,000 14,459
of the Board, Chief Financial 2000 170,769 10,045
Officer, Secretary and 1999 138,139 10,050
Treasurer
Richard Cooley 2001 145,770 30,000 1,413
Vice-President - Finance 2000 130,000 20,000 1,500
of Golden Road 1999 126,538 17,500 1,440
Darlyne Sullivan, Vice- 2001 130,000 30,000 363
President - Sales & Marketing 2000 130,000 20,000 375
and Assistant General 1999 119,615 18,500 743
Manager of Golden Road
------------------------
(1) Amounts for John Farahi, Bob Farahi and Ben Farahi represent the lease
value of automobiles paid for by the Company. Amounts for Richard Cooley and
Darlyne Sullivan represent the Company's contribution to 401(k) plans.
OPTION GRANTS IN 2001
No options were granted to the Company's executive officers in the fiscal
year ended December 31, 2001.
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AGGREGATED OPTION EXERCISES IN 2001 AND FISCAL YEAR-END OPTION VALUES
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 - $ - - / - $ - / $ -
Bob Farahi - - - / - - / -
Ben Farahi - - - / - - / -
Richard Cooley - - - / 30,000 - / 56,250
Darlyne Sullivan - 50,000 / - 118,750 / -
(1) Represents the difference between the last reported sale price of the
Common Stock reported on The Nasdaq Stock Market (SM) on December 31, 2001,
and the exercise price of the options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's executive compensation is determined by the Compensation
Committee of the Board. The Compensation Committee is composed of directors
Craig F. Sullivan, Ronald R. Zideck and Charles W. Scharer none of whom has
ever served as an employee or officer of the Company.
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 and Incentive Plan Committee Report on Executive
Compensation and the Stock Performance Chart presented shall not be
incorporated by reference into any such filings.
COMPENSATION COMMITTEE AND INCENTIVE PLAN COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The Compensation Committee and Incentive Plan Committee (collectively,
the "Committees"), which are composed entirely of directors who have never
served as executive officers of the Company, determine and administer the
compensation of the Company's executive officers.
COMPENSATION PHILOSOPHY. The Committees seek 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 Committees believe 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 Committees' actions related to compensation of
the Company's executive officers are submitted to the full Board of Directors
for ratification and approval.
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Although the Committees believe that the Company's overall financial
performance is an important factor in the total compensation of the Company's
executive officers, the Committees do not apply any specific quantitative
formula in making compensation decisions. The Committees also recognize
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 Committees also evaluate 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
Committees' 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; however,
no options were granted to executive officers during 2001.
The Incentive Plan Committee recommends to the Board the persons to whom
awards will be granted and in doing so, the Incentive Plan Committee considers
the quantitative and qualitative factors and industry peer group comparisons
discussed above. The number of options previously awarded to and held by
executive officers is reviewed, but is not an important factor in determining
the size of current option grants.
CHIEF EXECUTIVE OFFICER COMPENSATION. Following the recommendation of
the Compensation Committee, the Board has established the Chief Executive
Officer's salary at $280,000. The Compensation Committee's recommendation was
made on a subjective basis and did not bear a specific relationship to any
particular measure of the Company's performance in 2001 or any prior period.
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 since its inception, (b) the growth of the Company
during the Chief Executive Officer's tenure, (c) the
Chief Executive Officer's pivotal role in overseeing the day to day operations
of the Company, and (d) the Chief Executive Officer's civic leadership in the
Reno area.
COMPENSATION COMMITTEE AND INCENTIVE
PLAN COMMITTEE
By: Craig F. Sullivan, Chairman
Ronald R. Zideck, Member
Charles W. Scharer, Member
-11-
AUDIT COMMITTEE REPORT
April 30, 2002
To the Board of Directors of Monarch Casino & Resort, Inc.:
We have reviewed and discussed with management the Company's audited
financial statements as of and for the year ended December 31, 2001.
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, 2001.
By: Ronald R. Zideck, Chairman
Craig F. Sullivan, Member
Charles W. Scharer, Member
-12-
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, 1997, through December
31, 2001, 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, 1997 - December 31, 2001
Base
Period
12/31/96 12/31/97 12/31/98
-------- -------- --------
Monarch Casino & Resort, Inc. 100 275.00 262.50
S&P 500 Index 100 133.36 171.48
Self Determined Peer Group (1) 100 88.85 60.19
12/31/99 12/31/00 12/31/01
-------- -------- --------
Monarch Casino & Resort, Inc. 262.50 237.50 400.00
S&P 500 Index 207.56 188.66 166.24
Self Determined Peer Group (1) 90.83 97.83 126.81
(1) The companies included in the peer group are as follows: Alliance Gaming
Corp.; Archon Corp. (Formerly Santa Fe Gaming Corp.); Argosy Gaming Corp.;
Aztar Corp.; Bally Entertainment Corp. (Acquired by Hilton Hotels 1/17/97);
Black Hawk Gaming & Development Company, Inc.; Boomtown Inc. (Acquired by
Hollywood Park Corporation 8/18/97); Caesars World, Inc. (Acquired by ITT
Corporation 4/17/95); Casino Magic Corp. (Acquired by Hollywood Park
Corporation 11/16/98); Gaming Corp. of America (Acquired by Grand Casinos,
Inc. 12/18/95); Grand Casinos, Inc. (Merged with Park Place Entertainment,
Inc. 2/19/99); Griffin Gaming & Entertainment, Inc. (Acquired by Sun
International Hotels, Ltd. 1/17/97); Harrah's Entertainment, Inc.; Hollywood
Casino Corporation-Cl. A; International Gaming Management, Inc. (No longer
files with the SEC); Junum, Inc. (Formerly LS Capital Corporation); Lady Luck
Gaming Corporation (Acquired by Isle of Capris Casinos, Inc. 4/17/00);
Mandalay Resort Group (Formerly Circus Circus Enterprise, Inc.); Mirage
Resorts, Inc. (Acquired by MGM Grand, Inc. 7/17/00, now MGM Mirage); President
Casinos, Inc.; Sands Regent; Showboat, Inc. (Acquired by Harrah's
Entertainment, Inc. 7/20/98); and Station Casinos, 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.
For those companies no longer filing with the SEC, the peer line on the
graph includes their performance only until the date they discontinued
filing with the SEC.
-13-
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. For the year ended December 31, 2001,
the Company paid approximately $1.5 million in guarantee fees to these
persons.
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. The Company has obtained and maintains such insurance.
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.
The Company requires that the Audit Committee of the Board review certain
related party transactions.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen, LLP has audited the Company's financial statements for
the fiscal year ended December 31, 2001. The Board of Directors, Audit
Committee and Company management have been monitoring and reviewing, in
detail, the legal developments and press coverage regarding Arthur Andersen,
LLP, in its role as auditors of Enron Corp., including the recent indictment
of Arthur Andersen, LLP in connection with that matter. Arthur Andersen, 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.
-14-
As the Audit Committee has not made its formal recommendation to the
Board, the Company has not yet formally engaged an independent public
accountant to audit the Company's financial statements for the fiscal year
ended December 31, 2002. In the event the Audit Committee and Board of
Directors select a firm other than Arthur Andersen, LLP prior to the 2002
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 Arthur Andersen, LLP for
professional services for the audit of the Company's annual consolidated
financial statements included in the annual report on Form 10-K for the fiscal
year ended December 31, 2001, and review of the Company's unaudited interim
quarterly financial statements included in its quarterly reports on Form 10-Q
were $61,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. There were
no fees billed by Arthur Andersen, LLP to the Company for financial
information systems design and implementation fees for the fiscal year ended
December 31, 2001.
ALL OTHER FEES. The aggregate fees billed to the Company for all other
services rendered by Arthur Andersen, LLP for the fiscal year ended December
31, 2001, were $15,000.
COMPATIBILITY OF FEES WITH INDEPENDENT ACCOUNTANT'S INDEPENDENCE. The
Audit Committee has determined that the provision of services covered under
the subheadings "Financial Information Systems Design and Implementation
Fees" and "All Other Fees" above is compatible with maintaining Arthur
Andersen's Independence.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 2001 all reports as required under Section 16(a)
filing requirements were filed as required, with the exception of one Form 4
for Ben Farahi, which was inadvertently filed late.
-15-
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 matters being voted on at the meeting. 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,
nor 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.
2003 ANNUAL MEETING OF STOCKHOLDERS
The next annual meeting of stockholders will be held on or about June 11,
2003. 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 and such proposal must be received no later than January 9, 2003.
Unless a stockholder proposal for the Company's 2003 Annual Meeting of
Stockholders is submitted to the Company prior to March 25, 2003, 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 in that connection will use their discretion and
vote all proxies in accordance with their judgment.
-16-
The Company's 2001 Annual Report to Stockholders, including financial
statements for the year ended December 31, 2001, accompanies these proxy
materials, which are being mailed on or about May 8, 2002, to all stockholders
of record of the Company as of May 3, 2002.
By order of the Board,
/S/BEN FARAHI
Ben Farahi
Secretary
DATED: April 30, 2002
OUR ANNUAL REPORT ON SEC FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND THE SCHEDULES THERETO, FOR THE 12 MONTHS ENDED
DECEMBER 31, 2001, 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 MAY 3, 2002.
REQUESTS SHOULD BE ADDRESSED TO:
Monarch Casino & Resort, Inc.
Attention: Ben Farahi, Secretary
1175 W. Moana Lane, Suite 200
Reno, Nevada 89509
-17-
MONARCH CASINO & RESORT, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, jUNE 12, 2002
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 12, 2002, 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)
-S1-
x Please mark your votes as in this example.
---
FOR WITHHELD NOMINEES
(1) Election of John farahi
Directors --- --- Craig F. Sullivan
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 FOR WITHHELD ABSTAIN
as may properly come before this meeting
--- --- ---
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)
-----------------------------------------------------------------
NOTE: Please sign proxy exactly as your name appears. If the shares are
held in the name of two or more persons, all must sign. When signing as
attorney, executor, administrator, or guardian, give full title as such.
If signer is a corporation, sign full corporate name by duly authorized
officer.
DATE
--------------
Date the proxy in the space provided.
-S2-