MONARCH CASINO & RESORT INC

Our NEO compensation program utilizes four primary components, which include: 1) annual salary; 2) annual cash bonus awards; 3) one-time cash or equity awards; and 4) 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 asset size and target market, we consider other factors in establishing NEO annual salaries including the executive’s 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 both our strategic direction and our day-to-day operations, the relative performance of our competitors and the NEO’s civic leadership. Salaries are reviewed annually and are adjusted as warranted.

Annual Cash Bonus Awards

To align NEO performance with our short-term operational and financial objectives, we utilize an annual cash bonus program (the “Bonus Program”) with an annual target set by the Compensation Committee as a percentage (the “Target Bonus Percentage”) of the NEO’s annual salary.

The Bonus Program is comprised of quantitative and a discretionary qualitative components. The quantitative component may be awarded based on achieving our annual financial goal, as established by the Board. The qualitative component of the cash bonus program for our NEOs is awarded at the discretion of the Compensation Committee, which considers several factors of the NEO’s performance including, but not limited to, performance against specific tactical objectives as established by the Board, staff development, staff retention, operating process improvement and the implementation of programs resulting in cost reductions and efficiency. The qualitative component of the cash bonus program for the other executive officers is determined by the chief executive officer, subject to the Compensation Committee review and approval, and is based on their overall performance, as well as on completing specific projects and achieving specific goals.

The financial target currently used by our Compensation Committee is “Adjusted EBITDA.” The Board sets the Adjusted EBITDA target at a level it believes is both challenging and achievable. By establishing a target that is challenging, the Board believes that NEOs performance, and, therefore, Company financial performance, is optimized. By setting a target that is also achievable, the Board believes that NEOs remain motivated to perform at the high level required to achieve the Adjusted EBITDA target. Adjusted EBITDA consists of net income plus provision for income taxes, stock based compensation expense, other one-time charges, interest expense, depreciation and amortization less interest income. Further, the Compensation Committee determined that Adjusted EBITDA is an appropriate indicator of the Company’s financial performance and that each NEO could have a direct impact on it.

In 2024, the Target Bonus Percentage was set at 20% of the NEO’s annual salary, the standard Target Bonus Percentage per our Bonus Program. For 2024, the Adjusted EBITDA target was set at $178.0 million, driven by the continued ramp-up of our operation in Monarch Casino Resort Spa Black Hawk, projected increase in market share at both resorts and improvement in operational margins. For 2024, the Adjusted EBITDA achieved was 1.3% above the target, and 5.6% above 2023 Adjusted EBITDA.

The Compensation Committee evaluated the financial results and considered other factors related to the performance of the NEOs in 2024, like the successful ramp-up of the Monarch Black Hawk operation, excellent cash flow management, the completion of the renovation projects at Atlantis, as well as the negative impact of the continued growth of California tribal gaming and an extremely competitive promotional environment in Reno-Sparks market on Atlantis operating results. Based on all the factors effecting Company’s performance, the Board approved a 20% bonus award to the CEO, President and CAO for 2024. This was consistent with the bonus awarded to the senior management.

One-Time Cash or Equity Awards

We may, from time to time, award one-time cash or equity award based on superior financial performance relative to the Board-established annual financial profit target or specific strategic projects or initiatives, when such performance is deemed to be extraordinary or in certain other exceptional circumstances.

Regarding extraordinary performance, 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 or other goals were reached and other operating criteria that indicate that the financial results or strategic goals achievements were abnormally strong given those market and operating conditions. By rewarding such performance with one-time cash or equity awards, we believe we are more accurately promoting sustained, superior performance by more closely linking the reward with the timing of the performance and results.

No one-time cash awards were paid to our NEOs for performance in 2024.

Stock Option Awards

The stock option compensation component is designed with the expectation that 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 through changes in stock prices. 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 interests of our stockholders.

NEOs receive an initial stock option grant (the “Initial Grant”) on their hire date and receive subsequent grants (the “Subsequent Grants”) in amounts equal to, and commensurate with, the portion of the Initial Grant that vests. The Initial Grant vests, assuming continued employment, in three equal tranches beginning on the third anniversary of the grant date and is fully vested on the fifth anniversary of the grant date. The Subsequent Grants vest three years after their respective grant date. Neither Initial Grants nor Subsequent Grants vest earlier than three years and in the case of Initial Grants, do not fully vest earlier than five years.

Stock option awards are granted at exercise prices equal to the closing market price of our stock on the date the stock option award is granted, except for any Incentive Stock Option (“ISO”) that might be granted to Mr. John Farahi, whose exercise price would be 110% of the relevant closing market price, since he is the beneficial owner of more than 10% of our Common Stock. As such, the value of the award increases only 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. To date, the Compensation Committee has not granted ISOs.

In 2024, the following stock option grants were made to our NEO’s, under the 2014 Plan: on December 31, 2024, John Farahi was issued an annual grant of stock options for 66,666 shares, exercisable at $78.90 per share, vesting in 3 years from the date of the grant; on December 31, 2024, Bob Farahi was also issued an annual grant of stock options for 33,334 shares, exercisable at $78.90 per share, vesting in 3 years from the date of the grant; and on June 30, 2024, Mr. Koenig received a stock option grant for 5,000 shares, exercisable at $68.13 per share, vesting in 3 years from the date of the grant.