UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
SCHEDULE
14A
(RULE
14a-101)
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934
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| Filed by a Party other than the Registrant |
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Check
the
appropriate box:
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Preliminary
Proxy Statement
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| ¨ |
Confidential,
for use of the Commission only (as permitted by Rule
14a-6(e)(2))
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| ý |
Definitive
Proxy Statement
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| ¨ |
Definitive
Additional Materials
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| ¨ |
Soliciting
Material pursuant to Rule 14a-12
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ARGAN,
INC.
(Name
of
Registrant as Specified in its Charter)
_________________________________________________
(Name
of
Person(s) Filing Proxy Statement)
Payment
of filing fee (check the appropriate box):
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No
fee required.
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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) |
Title
of each class of securities to which transaction
applies:
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| (2) |
Aggregate
number of securities to which transaction applies:
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(3)
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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) |
Proposed
maximum aggregate value of transaction:
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| (5) |
Total
fee paid:
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Fee
paid previously with preliminary
materials.
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box
if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
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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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Previously Paid:
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Schedule or Registration Statement No.:
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Filing
Party:
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Date
Filed:
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One
Church Street
Suite
401
Rockville,
MD 20850
301-315-0027
fax
301-315-0064
www.arganinc.com
May
12,
2008
Dear
Fellow Argan, Inc. Stockholder:
You
are
cordially invited to attend our 2008 Annual Meeting of Stockholders to be
held
on Wednesday, June 18, 2008, at 11 a.m. local time at the offices of Allen
&
Company LLC located at 711 Fifth Avenue, 9th
Floor,
New York, New York 10022.
Enclosed
herein are the Notice of Annual Meeting, Proxy Statement, Annual Report on
Form
10-K and proxy card from the Board of Directors of Argan, Inc. The matters
to be
acted upon at the meeting are described in detail in the accompanying Notice
of
Annual Stockholders Meeting and Proxy Statement.
Please
use this opportunity to take part in our business by voting on the matters
to
come before this meeting. Please complete, date, sign and promptly return
the
enclosed proxy card in the enclosed postage-paid envelope before the meeting
so
that your shares will be represented at the meeting. Voting by returning
the
proxy card does not deprive you of your right to attend the meeting and to
vote
your shares in person.
As
described in the enclosed materials, the Company’s Board of Directors has
approved the matters included in these proposals, and believes that they
are
fair to, and in the best interests of, the Company’s stockholders. The Board of
Directors recommends a vote “FOR” each of the proposals being presented to the
stockholders.
I
look
forward to meeting you on June 18.
|
Very
truly yours,
|
|
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/s/
Rainer H. Bosselmann
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Rainer
H. Bosselmann
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Chief
Executive Officer
|
If
you plan to attend the 2008 Annual Meeting on June 18, 2008,
as a
courtesy to the building management at 711 Fifth Avenue, we request that
you
call, fax or email your intentions so that we can notify the front desk of
your
attendance. Please notify Sherolyn Nanson by phone at 301-315-0027, by fax
at
301-315-0064, or by email at ssnanson@arganinc.com.
Argan,
Inc.
One
Church Street, Suite 401
Rockville,
Maryland 20850
Notice
of
Annual
Meeting of Stockholders
To
Be Held Wednesday, June 18, 2008
To
Our
Stockholders:
Our
2008
Annual Meeting of Stockholders (the “Annual Meeting”) will be held on June 18,
2008 at 11:00 a.m., local time, at the offices of Allen & Company LLC
located at 711 Fifth Avenue, 9th
Floor,
New York, New York 10022.
At
the
Annual Meeting you will be asked to consider and vote upon the following
matters:
1. The
election of seven directors to our Board of Directors, each to serve until
our
2009 Annual Meeting of Stockholders and until his successor has been elected
and
qualified or until his earlier resignation, death or removal.
2.
The
amendment of the Company’s 2001 Stock Option Plan (the “Option Plan”) in order
to increase the total number of shares of common stock reserved for issuance
under the Option Plan from 650,000 shares to 1,150,000 shares;
3. The
ratification
of the appointment of Grant Thornton LLP as our independent registered public
accountants for the fiscal year ending January 31, 2009.
4. To
transact any other business that may properly come before the 2008 Annual
Meeting of Stockholders or any adjournment or postponement of the
meeting.
These
items of business are more fully described in the attached Proxy Statement.
Only stockholders of
record
at the close of business on May 2, 2008 are entitled to notice of and to
vote at
the Annual Meeting or any adjournment or postponement of the Annual
Meeting.
Whether
or not you plan to attend the Annual Meeting in person, please cast your
vote by
completing, dating, signing and promptly returning the enclosed proxy card
in
the enclosed postage-paid envelope before the Annual Meeting so that your
shares
will be represented at the Annual Meeting.
|
BY
ORDER OF THE BOARD OF DIRECTORS,
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/s/
Arthur F. Trudel
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Arthur
F. Trudel
|
|
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Corporate
Secretary
|
Rockville,
Maryland
May
12,
2008
Argan,
Inc.
One
Church Street, Suite 401
Rockville,
Maryland 20850
Proxy
Statement
May
12, 2008
The
accompanying proxy is solicited on behalf of the Board of Directors of Argan,
Inc., a Delaware corporation (referred to herein as “Argan” or the “Company”),
for use at the 2008 Annual Meeting of Stockholders (the “Annual Meeting”) to be
held on
June
18, 2008, at 11:00 a.m., local time, at the offices of Allen & Company LLC
located at 711 Fifth Avenue, 9th
Floor,
New York, New York 10022.
This
Proxy Statement and the accompanying form of proxy card are being mailed
on or
about May 16, 2008 to
stockholders
of
record on May 2, 2008. Our Annual Report on Form 10-K for the fiscal year
ended
January 31, 2008 is enclosed with this Proxy Statement.
At
the
Annual Meeting, stockholders will be asked to consider and vote upon three
proposals: (1) the election of seven directors to serve until the 2009 Annual
Meeting of Stockholders (the "Election of Directors"); (2) the amendment
of our
2001 Stock Option Plan (the “Option Plan”) to increase shares of common stock
reserved for issuance from 650,000 shares to 1,150,000 shares; and (3) the
ratification of the selection of the Company's independent registered public
accountants (the "Ratification of Accountants").
If
a
proxy in the accompanying form is properly executed and returned to the Company
in time for the Annual Meeting and is not revoked prior to the time it is
exercised, the shares represented by the proxy will be voted in accordance
with
the directions specified therein for the matters listed on the proxy card.
Unless the proxy specifies that it is to be voted against or is an abstention
on
a listed matter, proxies will be voted “FOR” each of the three proposals set
forth above and otherwise in the discretion of the proxy holders as to any
other
matter that may come before the Annual Meeting.
INFORMATION
CONCERNING VOTING AND PROXY SOLICITATION
Voting
Each
stockholder is entitled to one vote for each share of Argan, Inc. common
stock
(“Common Stock”) that the stockholder owns as of May 2, 2008 with respect to all
matters presented at the Annual Meeting. Stockholders do not have the right
to
cumulate their votes in the election of directors.
Record
Date
Only
stockholders of record at the close of business (5:00 p.m. Eastern Daylight
Time) on May 2, 2008 (the “Record Date”) are entitled to notice of and to vote
at the Annual Meeting and at any adjournment or postponement thereof.
Stockholders of record will be entitled to one vote for each share of Common
Stock held. For information regarding holders of more than 5% of the outstanding
Common Stock, see “Principal Stockholders.”
Outstanding
Shares
At
the
close of business on the Record Date, there were 11,120,026
shares
of
Common Stock outstanding. The closing price of our Common Stock on the Record
Date, as reported by the American Stock Exchange, was $12.90 per share.
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1
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Quorum;
Effect of Abstentions and “Broker Non−Votes”
A
majority of the shares of Common Stock outstanding on the Record Date, present
in person or represented by proxy, will constitute a quorum for the transaction
of business at the Annual Meeting.
If
stockholders indicate on their proxy card that they wish to abstain from
voting,
including brokers holding their customers’ shares of record who cause
abstentions to be recorded, these shares are considered present and entitled
to
vote at the Annual Meeting. These shares will count toward determining whether
or not a quorum is present. However, these shares will not be taken into
account
in determining the outcome of any of the proposals.
If
a
stockholder does not give a proxy to his/her broker with instructions as
to how
to vote the shares, the broker has authority under New York Stock Exchange
rules
to vote those shares for or against “routine” matters, such as the election of
directors to our Board and the ratification of Grant Thornton LLP as our
independent registered public accountants. Brokers cannot vote on their
customers’ behalf on “non−routine” proposals. These rules apply to us
notwithstanding the fact that shares of our Common Stock are traded on the
American Stock Exchange market. If a broker votes shares that are unvoted
by its
customers for or against a “routine” proposal, these shares are counted for the
purpose of establishing a quorum and will also be counted for the purpose
of
determining the outcome of such “routine” proposals. If a broker chooses to
leave these shares unvoted, even on “routine” proposals, they will be counted
for the purpose of establishing a quorum, but not for determining the outcome
of
any of the proposals.
Voting
Rights; Required Vote
Holders
of Common Stock are entitled to one vote for each share held as of the Record
Date. The effect of abstentions (i.e. if you or your broker mark “ABSTAIN” on a
proxy card) and broker non−votes on the counting of votes for each proposal is
described below. Broker non−votes occur when shares held by a broker for a
beneficial owner are not voted with respect to a particular proposal because
(1)
the broker holding shares in street name for the beneficial owner thereof
does
not receive voting instructions from the beneficial owner, and (2) the broker
lacks discretionary authority to vote the shares. Banks and brokers cannot
vote
on their clients’ behalf on “non−routine” proposals. For the purpose of
determining whether stockholders have approved a matter, abstentions are
treated
as shares present or represented and voting. Broker non−votes are not counted or
deemed to be present or represented for the purpose of determining whether
stockholders have approved a matter, though they are counted toward the presence
of a quorum as discussed above.
The
votes
required to approve each proposal are as follows:
•
Election of Directors. Directors will be elected by a plurality of the votes
of
the shares present in person or represented by proxy at the Annual Meeting
and
entitled to vote in the election of directors. Abstentions and broker non−votes
are not taken into account in determining the outcome of the election of
directors.
•
Remaining Proposals. Approval of the remaining proposals requires the
affirmative vote by holders of at least a majority of the shares of Common
Stock
who attend the Annual Meeting in person, or are represented at the Annual
Meeting by proxy. Abstentions will have the effect of a vote against this
proposal, while broker non−votes will not be taken into account in determining
the outcome of the vote on these proposals.
Accordingly,
abstentions, broker non-votes or the failure to either return a proxy or
to
attend the Annual Meeting will be deemed not to have voted on the Election
of
Directors, the proposed increase to the Option Plan and the Ratification
of
Accountants.
The
Named
Executive Officers and the Directors of the Company will vote the shares
of
Common Stock beneficially owned or controlled by them (representing
approximately 40% of the shares of Common Stock issued and outstanding) in
favor
of each of the proposals discussed above.
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You
may
revoke your proxy at any time before it is voted. Unless so revoked, the
shares
represented by such proxies will be voted at the Annual Meeting and all
adjournments thereof. You may revoke your proxy at any time before it is
voted
by delivering written notice of revocation to the Corporate Secretary at
Argan,
Inc., One Church Street, Suite 401, Rockville, Maryland 20850, by executing
and
delivering a subsequently dated proxy, or by attending the Annual Meeting
and
voting in person. Proxies solicited by the Board of Directors of the Company
will be voted in accordance with the directions given therein. Where
no instructions are indicated, proxies will be voted in accordance with the
recommendations of the Board of Directors with respect to the proposals
described herein.
A
quorum
of stockholders is necessary to take action at the Annual Meeting. The presence,
in person or by proxy, of the holders of a majority of the shares of Common
Stock of the Company entitled to vote at the meeting will constitute a quorum.
Votes cast by proxy or in person at the meeting will be tabulated by the
inspector of elections appointed for the Annual Meeting and will be counted
as
present for purposes of determining whether a quorum is present. The inspector
of elections will treat broker non-votes as present and entitled to vote
for
purposes of determining whether a quorum is present.
Voting
of Proxies
If
you
complete and properly sign each proxy card you receive and return it in the
prepaid envelope to us, it will be voted in accordance with the specifications
made on the proxy card. If no specification is made on a signed and returned
proxy card, the shares represented by the proxy will be voted “FOR” each
proposal, including “FOR” the election to the Board of each of the nominees
named on the proxy card, and “FOR” any other matter that may be properly brought
before the Annual Meeting. If you attend the Annual Meeting, you may also
vote
in person, and any previously submitted votes will be superseded by the vote
you
cast in person at the Annual Meeting.
Adjournment
of Meeting
If
a
quorum is not present to transact business at the Annual Meeting or if we
do not
receive sufficient votes in favor of the proposals by the date of the Annual
Meeting, the persons named as proxies may propose one or more adjournments
of
the meeting to permit solicitation of proxies. Any adjournment would require
the
affirmative vote of a majority of the shares present in person or represented
by
proxy at the Annual Meeting.
Expenses
of Soliciting Proxies
The
expenses of solicitation, including the cost of printing and mailing, will
be
paid by the Company. After the original mailing of the proxies and other
soliciting materials, we and/or our agents may also solicit proxies by mail,
telephone, telegraph, facsimile, e-mail or in person. After the original
mailing
of the proxy cards and other soliciting materials, we will request that brokers,
custodians, nominees and other record holders of our Common Stock forward
copies
of the proxy cards and other soliciting materials to persons for whom they
hold
shares and request authority for the exercise of proxies. The Company may
reimburse brokers, nominees and other fiduciaries for their reasonable expenses
in forwarding proxy materials to beneficial owners.
Revocability
of Proxies
Any
person signing a proxy card in the form accompanying this Proxy Statement
has
the power to revoke it at any time before it is voted. A proxy may be revoked
by
signing and returning a proxy card with a later date, by delivering a written
notice of revocation to Continental Stock Transfer & Trust Company (our
stock transfer agent) at 17 Battery Place, New York, New York 10004, or by
attending the Annual Meeting and voting in person. The mere presence at the
Annual Meeting of a stockholder who has previously appointed a proxy will
not
revoke the appointment. Please note, however, that if a stockholder’s shares are
held of record by a broker, bank or other nominee and that stockholder wishes
to
vote at the meeting, the
stockholder
must
bring to the Annual Meeting a letter from the broker, bank or other nominee
confirming the
stockholder’s
beneficial ownership of the Common Stock and that the broker, bank or other
nominee is not voting the shares at the Annual Meeting.
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3
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PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
The
directors of the Company are elected annually and hold office until the next
annual meeting of stockholders and until their successors have been elected
and
shall have been qualified. Vacancies and newly-created directorships resulting
from any increase in the number of authorized directors may be filled by
a
majority vote of the directors then in office.
At
the
Annual Meeting, stockholders of the Company are being asked to elect seven
directors, all of whom currently serve in that capacity. Unless a stockholder
withholds authority, the holders of proxies representing shares of Common
Stock
will vote “FOR” the election of each of the nominees listed below.
Proxies
cannot be voted for a greater number of persons than the number of nominees
named. If any nominee for any reason is unable to serve or for good cause
will
not serve, the proxies may be voted for such substitute nominee as the proxy
holder may determine. We are not aware of any nominee who will be unable
to or
for good cause will not serve as a director. However,
if a nominee shall be unavailable for any reason, then the proxies may be
voted
for the election of such person as may be recommended by the Board of
Directors.
Directors/Nominees
The
names
of the nominees, their ages as of April
30,
2008,
and certain information about them are set forth below:
|
Name
|
Age
|
Position
|
||
|
Rainer
H. Bosselmann
|
65
|
Chairman
of the Board
|
||
|
Henry
A. Crumpton
|
51
|
Director
|
||
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DeSoto
S. Jordan
|
63
|
Director
|
||
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William
F. Leimkuhler
|
56
|
Director
|
||
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Daniel
A. Levinson
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47
|
Director
|
||
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W.G.
Champion Mitchell
|
61
|
Director
|
||
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James
W. Quinn
|
50
|
Director
|
Rainer
H. Bosselmann.
Mr.
Bosselmann has been a Director and Chairman of the Board of Directors since
May
2003 and Chief Executive Officer since October 2003. Mr. Bosselmann was a
Director and Vice Chairman of the Board from January 2003 to May 2003. Mr.
Bosselmann was Chairman of the Board, Chief Executive Officer and a Director
of
Arguss Communications, Inc. (“Arguss”), a telecommunications infrastructure
company listed on the New York Stock Exchange, from 1996 through 2002 and
President of Arguss from 1997 through 2002. Since 1996, Mr. Bosselmann has
served as a principal with Holding Capital Group, Inc., a firm engaged in
mid-market acquisitions and investments. From 1991 through 1995, Mr. Bosselmann
served as Vice Chairman of the Board and President of Jupiter National, Inc.
("Jupiter National"), a business development company listed on the American
Stock Exchange.
Henry
A. Crumpton.
Mr.
Crumpton has been a Director of the Company since February 2008. Mr. Crumpton
has been Chairman of the Crumpton Group since February 2007. He was
Ambassador-at-Large for Counterterrorism at the United States Department
of
State from August 2005 to February 2007. Mr. Crumpton was Chief of the National
Resources Division at the Central Intelligence Agency from 2003 to August
2005.
DeSoto
S. Jordan.
Mr.
Jordan has been a Director of the Company since May 2003. Mr. Jordan has
been Chairman of Afton Holdings, LLC, a private equity firm, since 2000.
Mr. Jordan was a co-founder of Perot Systems Corporation and served as an
officer from 1988 to 1999 and as a Director since February 2004. Mr. Jordan
was
a Director of Arguss from 1999 through 2002.
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4
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William
F. Leimkuhler. Mr.
Leimkuhler has been a Director since June 2007. He has been General Counsel
and
Director of Business Development of Paice Corporation, a privately held
developer of hybrid electric powertrains, since 1999. From 1994 through 1999,
he
held various positions with Allen & Company LLC, a New York investment
banking firm, initially serving as the firm’s General Counsel. Prior to that,
Mr. Leimkuhler was a corporate partner with the New York law firm of Werbel
& Carnelutti (now Heller Ehrman White & McAuliffe). Mr. Leimkuhler is a
Director of Speedus Corp. (NASDAQ: SPDE), Integral Systems, Inc. (NASDAQ:
ISYS)
and U.S. Neurosurgical, Inc. (OTCBB: USNU), and also serves on the Board
of a
number of privately held companies.
Daniel
A. Levinson.
Mr.
Levinson has been a Director of the Company since May 2003. In 1997, Mr.
Levinson founded Main Street Resources, a niche sponsor of private equity
transactions, and has been its managing partner. Since 1998, Mr. Levinson
has
been President of MSR Advisors, Inc. From 1988 to 1997, Mr. Levinson was
one of
the principals of Holding Capital Group. Mr. Levinson was also a Director
of
Arguss from 2000 through 2002.
W.G.
Champion Mitchell.
Mr.
Mitchell has been a Director of the Company since October 2003. Since January
2003, Mr. Mitchell has been Chairman of the Board and Chief Executive Officer
of
Network Solutions, Inc. which is engaged in the creation, marketing and
management of digital identity and web presence products. From August 2001
to
2003, Mr. Mitchell was Executive Vice President and General Manager, Mass
Markets Division, of VeriSign Inc. which is a provider of critical Internet
infrastructure services. From May 1999 to March 2000, Mr. Mitchell was Chairman,
President and Chief Executive Officer of Convergence Equipment Company, a
telephony switch manufacturer. From February 1997 until May 1999, Mr. Mitchell
was Chairman and Chief Executive Officer of Global Exchange Carrier Co.,
an
Internet telephone networking company.
James
W. Quinn.
Mr.
Quinn has been a Director of the Company since May 2003. Mr. Quinn is
currently a Managing Director of Allen & Company LLC, an investment banking
firm. Since 1982, Mr. Quinn has served in various capacities at Allen &
Company LLC and its affiliates, including head of the Corporate Syndicate
Department and Chief Financial Officer. Mr. Quinn served as a Director of
Arguss
from 1999 through 2002.
Composition
of Board of Directors
The
number of directors which shall constitute the whole Board of Directors shall
be
not less than four nor more than ten. The seven current directors will stand
for
re-election at the Annual Meeting as described in this Proxy Statement. Mr.
Crumpton joined the Board of Directors in February 2008. In December 2007,
the
Company announced the passing of Peter L. Winslow who had been a member of
our
Board of Directors since June 2003.
Board
of Directors Meetings and Committees
During
the fiscal year ended January 31, 2008, the Board of Directors met four
(4)
times, including telephone conference meetings, and acted by unanimous written
consent
on
six (6)
occasions.
No
director attended fewer than 75% of the total number of meetings of the Board
of
Directors and the total number of meetings held by all committees of the
Board
on which the director served during the fiscal year.
The
Board
has four standing committees: the Executive Committee, the Audit Committee,
the
Compensation Committee, and the Nominating Committee. The functions of each
of
these committees and their members are specified below. The latter three
committees operate under written charters approved by the Board of Directors,
which are available on our website at www.arganinc.com.
The
Board
of Directors has an Executive Committee comprised of Messrs. Bosselmann (who
is
the chairman of this committee), Jordan and Levinson. The Executive Committee,
which held no meetings during fiscal year 2008, is authorized to exercise
the
general
powers
of the Board of Directors managing the business and affairs of the Company
between meetings.
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The
members of the other three committees are identified in the following
table.
|
Director
|
Audit
Committee
|
Compensation
Committee
|
Nominating
Committee
|
|||
|
Henry
A. Crumpton
|
||||||
|
DeSoto
S. Jordan
|
Member
|
Chairman
|
Member
|
|||
|
William
F. Leimkuhler
|
Chairman
|
Member
|
||||
|
Daniel
A. Levinson
|
||||||
|
W.G.
Champion Mitchell
|
Member
|
Member
|
||||
|
James
W. Quinn
|
Member
|
Chairman
|
The
Board
has determined that the
following members of the Board are independent directors, as such term is
defined in Section 121 of the American Stock Exchange Company Guide: Messrs.
Crumpton, Jordan, Leimkuhler, Mitchell and Quinn.
The
independent directors may meet from time to time in executive session without
the other members. It is the Board’s intent to add Mr. Crumpton to the Audit
Committee after the Annual Meeting and to relieve Mr. Mitchell of the Audit
Committee duties which he assumed temporarily after the passing of Mr.
Winslow.
Audit
Committee. During
the fiscal year ended January 31, 2008, the Audit Committee met ten
(10)
times, including telephone conference meetings.
The
written charter of the Audit Committee was adopted in October 2003. The
members of the Audit Committe are all independent directors under applicable
SEC
and stock exchange rules. In addition, the Board of Directors has determined
that at least one of the independent directors serving on the Audit Committee,
Mr. Leimkuhler, is an audit committee financial expert, as that term has
been
defined by SEC rules.
The
Audit
Committee assists the full Board of Directors in its oversight of our financial
accounting, reporting and internal controls by meeting with members of
management and our independent auditors. The Audit Committee has the
responsibility to review our annual audited financial statements, and meets
with
management and the independent auditors at the end of each quarter to review
the
quarterly financial results. In addition, this group considers and approves
the
employment of, and approves the fee arrangements with, independent auditors
for
audit and other functions. The Audit Committee reviews our accounting policies
and internal controls.
Compensation
Committee.
During
the fiscal year ended January 31, 2008, the Compensation Committee
met two
(2)
times,
including telephone conference meetings.
The
members of the Compensation Committe are all independent directors under
applicable stock exchange rules. No member of the Compensation Committee
was an
officer or employee of the Company during the fiscal year ended January 31,
2008. The
written charter for the Compensation Committee was adopted in April
2004.
The
Compensation Committee is responsible for implementing and reviewing executive
compensation plans, policies and programs in an effort to ensure the attraction
and retention of executive officers in a reasonable and cost-effective manner,
to motivate their performance in the achievement of the Company’s business
objectives and to align the interests of executive officers with the long-term
interests of the Company’s stockholders. To that end, it is the responsibility
of the Compensation Committee to develop and approve periodically a general
compensation policy and salary structure for executive officers of the Company
which considers business and financial objectives, industry and market pay
practices and/or such other information as may be deemed appropriate. It
is the
responsibility of the Compensation Committee to review and recommend for
approval by the independent directors of the full Board of Directors the
compensation (salary, bonus and incentive compensation) of the Chief Executive
Officer of the Company, to review and approve the compensation (salary, bonus,
incentive and other compensation) of the other executive officers of the
Company, and to review and approve perquisites offered to executive officers
of
the Company. This group shall also review and approve corporate goals and
objectives relevant to the compensation of executive officers of the Company,
evaluate performance in light of the goals and objectives, and review and
approve all employment, retention and severance agreements for executive
officers of the Company. The Compensation Committee acts on behalf of the
Board
of Directors in administering compensation plans approved by the Board and/or
the stockholders of the Company (including the Company’s 2001 Stock Option Plan)
in a manner consistent with the terms of such plans, reviews and makes
recommendations to the Board of Directors with respect to new compensation
incentive and equity-based plans, and reviews and make recommendations to
the
Board on changes in major benefit programs for executive officers of the
Company. The Compensation Committee also reviews the management succession
program for the Chief Executive Officer and selected executive officers of
the
Company.
-
6
-
Nominating
Committee. The
written charter of the Nominating Committee was adopted in April 2004.
The
Nominating Committee is responsible for identifying individuals qualified
to
become members of the Board of Directors, and recommending to the Board of
Directors the persons to be nominated by the Board for election as directors
at
the annual meeting of stockholders and the persons to be elected by the Board
of
Directors to fill any vacancies on the Board. Each member of the Nominating
Committee participated in the search process which resulted in its
recommendation to the Board of Directors that Mr. Crumpton be added.
Directors
are not required to meet any specific or minimum qualifications. The Nominating
Committee does, however, use certain selection criteria as a guide in its
selection process including the following: (i) nominees should have a reputation
for integrity, honesty and adherence to high ethical standards; (ii) nominees
should have demonstrated business acumen, experience and ability to exercise
sound judgments in matters that relate to the current and long-term objectives
of the Company and should be willing and able to contribute positively to
the
decision-making process of the Company; (iii) nominees should have a commitment
to understand the Company and its industry and to regularly attend and
participate in meetings of the Board of Directors and its committees; (iv)
nominees should have the interest and ability to understand the sometimes
conflicting interests of the various constituencies of the Company, which
include stockholders, employees, customers, governmental units, creditors
and
the general public, and to act in the interests of all stockholders; (v)
nominees should not have, or appear to have, a conflict of interest that
would
impair the nominee’s ability to represent the interests of all the Company’s
stockholders and to fulfill the responsibilities of a director; and (iv)
nominees shall not be discriminated against on the basis of race, religion,
national origin, sex, sexual orientation, disability or any other basis
proscribed by law. The Nominating Committee is also responsible for reviewing
with the Board of Directors, on an annual basis, the requisite skills and
criteria for new Board members as well as the composition of the Board as
a
whole.
The
Nominating Committee will consider nominees for the Board of Directors
recommended by stockholders. Nominations by stockholders must be in writing,
must include the full name of the proposed nominee, a brief description of
the
proposed nominee’s business experience for at least the previous five years, and
a representation that the nominating stockholder is a beneficial or record
owner
of the Company’s common stock. Nominations must be delivered to following
address:
Nominating
Committee
Argan,
Inc.
c/o
Corporate Secretary
One
Church Street, Suite 401
Rockville,
Maryland 20850
Any
such
submission must also be accompanied by the written consent of the proposed
nominee to be named as a nominee and to serve as director if elected. The
Nominating Committee is required to review the qualifications and backgrounds
of
all directors and nominees (without regard to whether a nominee has been
recommended by stockholders), as well as the overall composition of the Board
of
Directors.
Director
Attendance at the Annual Meeting
Although
the Company does not have a formal policy with respect to the attendance
of
members of our Board of Directors at annual meetings, the Company strongly
encourages directors to attend the annual meeting. All but one of our directors
attended last year’s annual meeting, and we expect that all of our directors
will attend this year's Annual Meeting.
-
7
-
Compensation
of Directors
Effective
February 1, 2008, each
non-employee director of the Company receives an annual fee of $20,000, plus
$300 for each formal meeting attended. Members of the Audit Committee receive
an
additional annual fee of $5,000. Directors are also reimbursed for reasonable
expenses actually incurred in connection with attending each formal meeting
of
the Board of Directors or any committee thereof. Directors are also eligible
for
the award of options to purchase shares of our common stock.
The
following table summarizes the fees and other compensation earned by
non-employee members of our Board of Directors during the fiscal years ended
January 31, 2008 and 2007:
|
Name
|
Year
|
Fees
|
Stock
Option
Awards(1)
|
All Other
Compensation
|
Total
Compensation
|
|||||||||||
|
DeSoto
S. Jordan
|
2008
|
$
|
5,800
|
$
|
—
|
$
|
—
|
$
|
5,800
|
|||||||
|
2007
|
7,300
|
14,200
|
—
|
21,500
|
||||||||||||
|
Daniel
A. Levinson
|
2008
|
$
|
2,475
|
$
|
—
|
$
|
—
|
$
|
2,475
|
|||||||
|
2007
|
4,300
|
14,200
|
—
|
18,500
|
||||||||||||
|
William
F. Leimkuhler
|
2008
|
$
|
18,750
|
$
|
42,352
|
$
|
—
|
$
|
61,102
|
|||||||
|
2007
|
—
|
—
|
—
|
—
|
||||||||||||
|
W.G.
Champion Mitchell
|
2008
|
$
|
4,300
|
$
|
—
|
$
|
—
|
$
|
4,300
|
|||||||
|
2007
|
4,300
|
14,200
|
—
|
18,500
|
||||||||||||
|
James
W. Quinn
|
2008
|
$
|
5,200
|
$
|
—
|
$
|
—
|
$
|
5,300
|
|||||||
|
2007
|
7,300
|
14,200
|
—
|
21,500
|
||||||||||||
|
Henry
A. Crumpton(2)
|
2008
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||||
|
2007
|
—
|
—
|
—
|
—
|
||||||||||||
|
T.
Kent Pugmire(3)
|
2008
|
$
|
926
|
$
|
—
|
$
|
—
|
$
|
926
|
|||||||
|
2007
|
4,600
|
14,200
|
—
|
18,800
|
||||||||||||
|
Peter
L. Winslow(4)
|
2008
|
$
|
5,500
|
$
|
—
|
$
|
—
|
$
|
5,500
|
|||||||
|
2007
|
7,300
|
14,200
|
—
|
21,500
|
||||||||||||
|
(1)
|
Amounts
represent the dollar amounts recognized for financial statement
reporting
purposes with respect to the applicable fiscal year in accordance
with
Financial Accounting Standard No. 123R, “Share-Based
Payments.”
|
|
(2)
|
Mr.
Crumpton was appointed to the Board of Directors in February
2008.
|
|
(3)
|
Mr.
Pugmire resigned from the Board of Directors in June
2007.
|
|
(4)
|
In
December 2007, the Company announced the passing of Mr.
Winslow.
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE ELECTION OF EACH NOMINATED DIRECTOR.
-
8
-
PROPOSAL
NO. 2
AMENDMENT
TO THE STOCK OPTION PLAN
Background
On
April
1, 2008, the Board of Directors adopted a resolution, subject to stockholder
approval, to amend the Option Plan to increase the number of shares of Common
Stock issuable thereunder from 650,000 to 1,150,000. On June 19, 2007, the
stockholders approved an amendment to the Option Plan that increased the
number
of shares issuable thereunder from 250,000 to 650,000.
The
Board
of Directors believes that stock options are valuable tools for the recruitment,
retention and motivation of qualified employees, including officers, and
other
persons who can contribute materially to the Company’s success. As of March 31,
2008, only 76,225 shares of Common Stock were currently available for award
under the Option Plan. During the fiscal year ended January 31, 2008, options
to
purchase 212,000 shares of our Common Stock were awarded to new key employees
and a new director. In addition, stock options were granted to key employees
of
Gemma Power Systems LLC and its affiliated companies (“Gemma”) which was
acquired by us in December 2006. This acquisition added management and
non-management employees to the Company’s existing workforce. We may hire
additional management and non-management employees as a result of future
business acquisitions or other growth of the Company. The Board of Directors
believes that it is important to have additional shares available under the
Option Plan to provide adequate incentives to new employees and other key
members of the Company’s workforce. The material features of the Option Plan,
including the proposed amendment, are outlined below. The following summary
is
qualified in its entirety by reference to the full text of the Option Plan,
a
copy of which has been filed with the Securities and Exchange
Commission.
The
2001 Stock Option Plan
Purpose.
The
purpose of the Option Plan is to continue to provide an incentive to employees,
directors, consultants and others who are in a position to contribute materially
to the long term success of the Company, to increase such person’s interest in
the Company’s welfare and to aid in retaining individuals with outstanding
ability. The Plan is administered by the Board of Directors of the
Company.
Eligibility.
The
Option Plan currently provides for the grant to employees, officers, directors
and consultants of options to purchase up to 650,000 shares of Common Stock.
The
proposed amendment would increase the number of shares issuable upon exercise
of
options to 1,150,000. Options may be either “incentive stock options” within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”), or non-qualified options. Incentive stock options may be granted only
to employees of the Company (including directors who are employees), while
non-qualified options may be issued to directors (whether or not an employee),
consultants and other non-employees of the Company. The Board of Directors
of
the Company has the authority to determine those individuals who shall receive
options, the time period during which the options may be partially or fully
exercised, the number of shares of Common Stock that may be purchased under
each
option and the option exercise price.
Terms
of the Options.
The per
share purchase price of the Common Stock subject to an incentive stock option
may not be less than the fair market value of the Common Stock at the time
the
option is granted. The per share exercise price of the Common Stock subject
to a
non-qualified option may be established by the Board of Directors of the
Company. The aggregate fair market value (determined as of the date the option
is granted) of the Common Stock that first becomes exercisable by any employee
in any one calendar year pursuant to the exercise of incentive stock options
may
not exceed $100,000. No person who owns, directly or indirectly, at the time
of
the granting of an incentive stock option to him, 10% or more of the total
combined voting power of all classes of stock of the Company (a “10%
Stockholder”) shall be eligible to receive any incentive stock options under the
Option Plan unless the option price is at least 110% of the fair market value
of
the Common Stock subject to the option, determined on the date of grant.
Options
awarded under the Option Plan must be granted no later than July 19, 2011.
Incentive stock options granted under the Option Plan cannot be exercised
more
than ten years from the date of grant except that incentive stock options
issued
to a 10% Stockholder are limited to five year terms. All options granted
under
the Option Plan provide for the payment of the exercise price in cash or
by
delivery to the Company of shares of Common Stock already owned by the
optionholder having a fair market value equal to the exercise price of the
options being exercised, or by a combination of those methods of payment.
Therefore, an optionee may be able to tender shares of Common Stock to purchase
additional shares of Common Stock and may theoretically exercise all of his
stock options with no additional investment other than his original
shares.
-
9
-
Transferability.
No
stock
option may be transferred by an optionee other than by will or the laws of
descent and distribution and, during the lifetime of an optionee, the option
will be exercisable only by him or her. In
the
event that any options expire or terminate unexercised as to any shares covered
thereby, the shares shall become available once again for the granting of
other
options under the Option Plan.
Federal
Income Tax Information.
Options
granted under the Option Plan may be either incentive stock options or
nonstatutory options (also referred to as non-qualified options). If an option
granted under the Option Plan is an incentive stock option, the optionee
will
recognize no income upon grant of the incentive stock option and incur no
tax
liability due to the exercise unless the optionee is subject to the alterative
minimum tax. The Company will not be allowed a deduction for federal income
tax
purposes as a result of the exercise of an incentive stock option regardless
of
the applicability of the alternative minimum tax. Upon the sale or exchange
of
the shares at least two years after grant of the option and one year after
transfer of the shares to the optionee by the Company, any gain will be treated
as long-term capital gain. If these holding periods are not satisfied, the
optionee will recognize ordinary income equal to the difference between the
exercise price and the lower of the fair market value of the stock at the
date
of the option exercise or the sale of the stock. The Company will be entitled
to
a deduction in the same amount as the ordinary income recognized by the
optionee. Any gain recognized on such a premature disposition of the shares
in
excess of the amount treated as ordinary income will be characterized as
capital
gain. Currently, the tax rate on net capital gain (net long-term capital
gain
minus net short-term capital loss) is capped at 28%. Capital losses are allowed
in full against capital gains plus $3,000 of other income. The Company will
be
entitled to a tax deduction in the same amount as the ordinary income recognized
by the optionee with respect to shares acquired upon the exercise of a
nonstatutory option.
The
foregoing is only a summary of the effects of federal income taxation upon
the
optionee and the Company with respect to the grant and exercise of options
under
the Option Plan, does not purport to be complete and references should be
made
to the applicable provisions of the Code. In addition, this summary does
not
discuss the income tax laws of any municipality, state or foreign country
in
which an optionee may reside.
Equity
Compensation Plan Information
The
following table sets forth certain information, as of January 31, 2008,
concerning securities authorized for issuance under warrants and options
to
purchase Common Stock.
|
|
Number of
Securities
Issuable under
Outstanding
Warrants and
Options
|
Weighted-Average Exercise
Price of
Outstanding
Warrants and
Options
|
Number of
Securities
Remaining
Available for
Future Issuance
|
|||||||
|
|
||||||||||
|
Equity
Compensation Plans Approved by the Stockholders (1)
|
425,275
|
$
|
6.07
|
206,225
|
||||||
|
|
||||||||||
|
Equity
Compensation Plans Not Approved by the Stockholders
|
—
|
—
|
—
|
|||||||
|
|
||||||||||
|
Totals
|
425,275
|
$
|
6.07
|
206,225
|
||||||
|
(1)
|
Approved
Plans include the Company’s 2001 Stock Option Plan. As of January 31,
2008, a total of 650,000 shares of Common Stock had been authorized
for
issuance under the Option Plan by the stockholders.
|
-
10
-
In
connection with the Company’s private placement offering of Common Stock that
occurred in April 2003, the Company also issued warrants to purchase 230,000
shares of Common Stock to various parties. Included were (1) warrants to
purchase an aggregate of 180,000 shares of Common Stock that were issued
to
three individuals (including Messrs. Bosselmann and Trudel) who became executive
officers of the Company upon completion of the offering, and (2) warrants
to
purchase 50,000 shares of Common Stock that were issued to MSR Advisors,
Inc.
Mr. Levinson, a Director of the Company, is the President of MSR Advisors,
Inc.
The purchase price per share of Common Stock under all of these warrants
is
$7.75; the warrants expire in April 2013. As of January 31, 2008, warrants
to
purchase 226,000 shares of Common Stock were outstanding.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE APPROVAL OF THE AMENDMENT TO THE OPTION PLAN TO INCREASE THE NUMBER OF
SHARES ISSUABLE THEREUNDER FROM 650,000 TO
1,150,000.
-
11
-
PROPOSAL
NO. 3
RATIFICATION
OF APPOINTMENT OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS
The
Audit
Committee of our Board of Directors has selected Grant Thornton LLP (“Grant
Thornton”) as the independent registered public accountants to perform the audit
of our financial statements for our fiscal year ending January 31, 2009,
and our
stockholders are being asked to ratify the Audit Committee’s selection. Grant
Thornton has served as our independent auditors since May 2006. Representatives
of the accounting firm are expected to be present at the Annual Meeting,
have
the opportunity to make a statement at the meeting if they desire to do so,
and
will be available to respond to appropriate questions.
Fees
The
following represents fees estimated and billed by Grant Thornton for
professional services provided in connection with the audit of our financial
statements for the fiscal years ended January 31, 2008 and 2007. In addition,
in
accordance with the SEC’s guidelines, we have itemized audit-related, tax and
other fees paid to Grant Thornton during those years.
|
2008
|
2007
|
||||||
|
Audit
Fees
|
$
|
395,000
|
$
|
305,000
|
|||
|
Audit-Related
Fees
|
—
|
28,000
|
|||||
|
Tax
Fees
|
52,000
|
56,000
|
|||||
|
All
Other Fees
|
—
|
5,000
|
|||||
|
Total
Fees
|
$
|
447,000
|
$
|
394,000
|
|||
Audit
Fees.
This
category consists of fees billed for professional services rendered for the
audit of our annual consolidated financial statements, the review of the
quarterly condensed consolidated financial statements and services that are
normally provided by Grant Thornton in connection with the review of SEC
registration statements and other accounting consultation.
Audit-Related
Fees.
This
category includes fees billed for the performance of audits and other due
diligence procedures conducted in connection with the review of potential
acquisitions.
Tax
Fees.
This
category consists of fees billed for professional services provided in the
areas
of tax compliance, tax advice and tax planning.
All
Other Fees.
This
category consists of fees for products and services other than the services
reported above, including assistance
with the documentation of financial policies and processes, and the evaluation
and testing of internal controls over financial reporting.
Audit
Committee Pre−Approval Policies and Procedures
The
Audit
Committee of the Board of Directors has established a policy requiring the
advance approval of any non-audit services to be performed by our independent
registered public accountants or any other accounting or audit firm.
Occasionally, the Audit Committee Chairman pre-approves certain non-audit
related fees and the entire Audit Committee ratifies the Chairman’s pre-approval
in a subsequent Audit Committee meeting in accordance with SEC requirements.
For
the fiscal year ended January 31, 2008, the Audit Committee followed these
guidelines in approving all services rendered by accounting and audit
firms.
THE
BOARD RECOMMENDS A VOTE “FOR”
RATIFICATION
OF THE APPOINTMENT OF GRANT THORNTON LLP
-
12
-
AUDIT
COMMITTEE REPORT
The
Audit
Committee of the Board of Directors of the Company is composed of three
independent directors. The Audit Committee adopted a written charter, a copy
of
which can be found on the Company website at www.arganinc.com.
The
Board of Directors has made a determination that the members of the Audit
Committee satisfy the independence and other requirements of applicable
American
Stock Exchange and
SEC
rules.
The
Board of Directors has also made the determination that at least one member
of
the Audit Committee is a “financial expert” as that term is defined in
applicable SEC rules.
The
responsibilities of the Audit Committee are set forth in the Charter of the
Audit Committee, which was adopted by the Board of Directors of the Company
in
October
2003.
The
Audit Committee is responsible for, among other things, appointing, establishing
the compensation for, supervising and, where appropriate, replacing the
Company’s independent public accountants;
considering the qualifications and independence of the Company’s independent
accountants; approving all audit and non-audit services provided by the
Company’s independent public accountants;
and
reviewing and discussing with Company management and the Company’s independent
public accountants the Company’s financial statements. The Company’s independent
public accountants are required to report directly to the Audit Committee.
The
Audit Committee also reviews the Company’s accounting policies, internal control
procedures and systems and compliance activities and also reviews the Charter
of
the Audit Committee.
The
following is a report on the Audit Committee’s activities
relating to the fiscal year ended January 31, 2008.
Review
of Audited Financial Statements with Management
The
Audit
Committee reviewed and discussed the Company’s audited consolidated financial
statements as of January 31, 2008 and for the year then ended with the
management of the Company.
Review
of Financial Statements and Other Matters with Independent
Accountants
The
Audit
Committee has discussed with Grant Thornton LLP, the Company’s independent
auditors, the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees). The Audit Committee
has
received from Grant Thornton LLP the written disclosures and the letter required
by Independence Standards Board Standard No. 1 (Independence Discussions
with
Audit Committees), and has discussed with Grant Thornton LLP matters relating
to
the firm’s independence from the Company.
Recommendation
That Financial Statements Be Included in the Annual Report
Based
on
the reviews and discussions referred to above, the Audit Committee recommended
to the Board of Directors that the audited consolidated financial statements
described above be included in the Company’s Annual Report on Form 10-K for the
fiscal year ended January 31, 2008 for filing with the Securities and Exchange
Commission.
April
16,
2008
|
William
F. Leimkuhler (Chairman, Audit Committee)
|
|
DeSoto
S. Jordan (Member, Audit Committee)
|
|
W.G.
Champion Mitchell (Member, Audit
Committee)
|
-
13
-
PRINCIPAL
STOCKHOLDERS
The
following
table shows the amount of our Common Stock beneficially owned as of January
31,
2008, by (i) each director, (ii) each executive officer named in the Executive
Compensation table below, (iii) all directors and executive officers as
a group,
and (iv) each person who, to our knowledge, owns beneficially more than
five
percent (5%) of our Common Stock. Unless otherwise indicated, beneficial
ownership is direct and the person indicated has sole voting and investment
power. As of January 31, 2008, we had 11,110,301 shares of Common Stock
outstanding. Unless otherwise noted in the footnotes below, the address
for each
of the individuals listed in the table below is c/o Argan, Inc., One Church
Street, Suite 401, Rockville, Maryland 20850.
|
Shares
|
Beneficial
|
||||||
|
Beneficially
|
Ownership
|
||||||
|
Name
and Address
|
Owned
(1)
|
Percentage (1)
|
|||||
|
William
F. Griffin, Jr.
|
1,500,334
|
13.5
|
%
|
||||
|
MSR
Advisors, Inc. (2)
|
1,370,270
|
12.3 |
%
|
||||
| Daniel A. Levinson (3) |
1,388,270
|
12.4
|
%
|
||||
|
Joel
M. Canino
|
1,283,333
|
11.6
|
%
|
||||
|
Rainer
H. Bosselmann (4)
|
372,560
|
3.3
|
%
|
||||
|
Arthur
F. Trudel (5)
|
120,000
|
1.1
|
%
|
||||
|
James
W. Quinn (6)
|
94,570
|
*
|
|||||
|
DeSoto
S. Jordan (7)
|
15,000
|
*
|
|||||
|
W.G.
Champion Mitchell (7)
|
15,000
|
*
|
|||||
|
William
F. Leimkuhler
|
—
|
—
|
|||||
|
Henry
A. Crumpton
|
—
|
—
|
|||||
|
Officers
and Directors as a Group
(10
Persons) (8)
|
4,789,000
|
41.9
|
%
|
||||
|
Steven
N. Bronson (9)
|
587,500
|
5.3
|
%
|
||||
|
Richard
L. Scott (10)
|
1,550,000
|
14.0
|
% | ||||
|
*
|
Less
than 1%.
|
|
(1)
|
Applicable
percentage of ownership is based on 11,110,301 shares of common
stock
outstanding as of January 31, 2008, together with applicable options
and
warrants for each stockholder. Beneficial ownership is determined
in
accordance with the rules of the Securities and Exchange Commission
and
generally includes voting or investment power with respect to securities.
Shares of Common
Stock
subject to options and warrants that are currently exercisable
or
exercisable within 60 days of January 31, 2008 are deemed to be
beneficially owned by the person holding such options for the purpose
of
computing the percentage of ownership of such person, but are not
treated
as outstanding for the purpose of computing the percentage ownership
of
any other person.
|
-
14
-
|
(2)
|
Based
upon a Schedule 13D/A filed with the Commission by MSR Advisors,
Inc. and
certain affiliates on January 4, 2007. The filing includes 1,320,270
shares of Common Stock and warrants to purchase 50,000 shares of
Common
Stock beneficially owned (in the aggregate) by MSR Advisors, Inc.,
a
Connecticut corporation ("MSRA"); MSR I SBIC Partners, LLC, a Connecticut
limited liability company ("MSRI Partners"); MSR I SBIC, L.P.,
a Delaware
limited partnership ("MSRI LP"); MSR Fund II L.P., a Delaware limited
partnership (“MSRII LP”); and MSR Fund II GP, LLC, a Delaware limited
liability company (“MSRII GP”). Of such shares, MSRA has sole voting and
dispositive power with respect to 50,000 shares subject to the
warrant and
shared voting and dispositive power with respect to 1,320,270 shares;
MSRI
LP has sole voting and dispositive power with respect to 879,730
shares;
MSRI Partners has shared voting and dispositive power with respect
to
879,730 shares; MSRII LP has sole voting and dispositive power
with
respect to 440,540 shares; and MSRII GP has shared voting and dispositive
power with respect to 440,540 shares. MSRA is the manager of MSRI
Partners
and MSRII GP, and investment advisor to MSRI LP and MSRII LP. The
business
address of MSRA, MSRI Partners, MSRI LP, MSRII LP, and MSRII GP
is 8
Wright Street, Westport, Connecticut 06880. Each of MSRA, MSRI
Partners,
MSRI LP, MSRII LP, and MSRII GP (each an “MSRA Person”) disclaims
beneficial ownership of all shares and warrants of the Company
beneficially owned by the other MSRA Persons, except to the extent
such
person has sole voting and dispositive power with respect to such
securities.
|
|
(3)
|
Includes
options to purchase 15,000 shares of Common Stock held by Mr. Levinson,
all of which are fully vested. Includes 1,320,270 shares and warrants
to
purchase 50,000 shares beneficially owned (in the aggregate) by
the MSRA
Persons. Includes 3,000 shares owned directly by Tri-Lev LLC, a
Connecticut limited liability company ("Tri-Lev"). Mr. Levinson,
a
Director of the Company, is the President and sole shareholder
of MSRA,
and is the Managing Member of MSRI Partners, MSRII GP and Tri-Lev.
MSRI
Partners and MSRII GP are the General Partners of MSRI LP and MSRII
LP,
respectively. The business address of Mr. Levinson and Tri-Lev
is 8 Wright
Street, Westport, Connecticut 06880. Mr. Levinson disclaims beneficial
ownership of all shares and warrants of the Company beneficially
owned by
the MSRA Persons.
|
|
(4)
|
Includes
238,710 shares owned by Mr. Bosselmann, 23,850 shares owned by
Mr.
Bosselmann’s wife (of which Mr. Bosselmann disclaims beneficial
ownership), and options to purchase 50,000 shares of Common Stock
and
warrants to purchase 60,000 shares of Common Stock, all of which
are held
by Mr. Bosselmann and are fully vested.
|
|
(5)
|
Includes
10,000 shares of Common Stock owned by Mr. Trudel and options to
purchase
50,000 shares of Common Stock and warrants to purchase 60,000 shares
held
by Mr. Trudel, all which are fully vested.
|
|
(6)
|
Includes
options to purchase 15,000 shares of common stock held by Mr. Quinn,
all
of which are fully vested. Does not include 531,183 shares of common
stock
held by Allen & Company LLC and affiliates. Mr. Quinn disclaims
beneficial ownership of the shares held by Allen & Company LLC and
affiliates.
|
|
(7)
|
In
each case, includes options to purchase 15,000 shares of Common
Stock, all
of which are fully vested.
|
|
(8)
|
Includes
options to purchase 50,000 shares of Common Stock and warrants
to purchase
60,000 shares of Common Stock held by Mr. Bosselmann, options to
purchase
50,000 shares of Common Stock and warrants to purchase 60,000 shares
of
Common Stock held by Mr. Trudel, warrants to purchase 50,000 shares
of
Common Stock held by MSRA (of which Mr. Levinson is President),
and
options to purchase 60,000 shares of Common Stock held by certain
Directors of the Company.
|
|
(9)
|
Based
on a Form 13D filed by Steven N. Bronson of Catalyst Financial
LLC on June
1, 2007. Mr.
Bronson’s business address is 100 Mill Plain Road, Danbury, Connecticut
06811. Mr. Bronson reports sole voting and investment power with
respect
to 581,500 shares and shared voting and investment power with respect
to
the balance.
|
|
(10)
|
Excludes
options to purchase an aggregate of 400,000 shares of Common Stock
from
Messrs. Griffin and Canino. Options to purchase 200,000 shares
are
exercisable at a purchase price of $12.50 per share and expire
in October
2008. Options to purchase an additional 200,000 shares are exercisable
at
a purchase price of $15.00 per share and expire in October 2009.
The
address for Mr. Scott is c/o Jeffrey S. Buschman, Esq., Boult Cummings
Connors & Berry, PLC, 1600 Division Street, Suite 700, Nashville,
Tennessee 37203.
|
-
15
-
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth the total amount of compensation paid to or earned
by
the “Named Executive Officers” for services in all capacities for the fiscal
years ended January 31, 2008 and 2007. The Company’s Named Executive Officers
include the Chief Executive Officer, the Chief Financial Officer and the
Vice
Chairmen of Gemma Power Systems.
|
Name and Principal
Position
|
Year
|
Salary
Earned
|
Bonus
Earned
|
Stock
Option
Awards(1)
|
All Other
Compensation(2)
|
Total
Compensation
|
|||||||||||||
|
Rainer
H. Bosselmann
|
2008
|
$
|
200,000
|
$
|
175,000
|
$
|
—
|
$
|
1,200
|
$
|
376,200
|
||||||||
|
Chief
Executive Officer
|
2007
|
154,167
|
100,000
|
71,000
|
900
|
326,067
|
|||||||||||||
|
Arthur
F. Trudel
|
2008
|
$
|
200,000
|
$
|
150,000
|
$
|
—
|
$
|
1,600
|
$
|
351,600
|
||||||||
|
Senior
Vice President,
|
2007
|
191,670
|
100,000
|
58,500
|
1,100
|
351,270
|
|||||||||||||
|
Chief
Financial Officer
|
|||||||||||||||||||
|
and
Corporate Secretary
|
|||||||||||||||||||
|
Joel
M. Canino
|
2008
|
$
|
560,000
|
$
|
500,000
|
$
|
—
|
$
|
—
|
$
|
1,060,000
|
||||||||
|
Vice
Chairman, Gemma
|
2007
|
79,300
|
—
|
—
|
—
|
79,300
|
|||||||||||||
|
Power
Systems
|
|||||||||||||||||||
|
William
F. Griffin, Jr.
|
2008
|
$
|
680,000
|
$
|
500,000
|
$
|
—
|
$
|
—
|
$
|
1,180,000
|
||||||||
|
Vice
Chairman, Gemma
|
2007
|
96,300
|
—
|
—
|
—
|
96,300
|
|||||||||||||
|
Power
Systems
|
|||||||||||||||||||
|
(1)
|
Amounts
represent the dollar amounts recognized for financial statement
reporting
purposes with respect to the applicable fiscal year in accordance
with
Financial Accounting Standard No. 123R, “Share-Based
Payments.”
|
|
(2)
|
Amounts
represent matching contributions made pursuant to the Company’s 401(k)
plan.
|
Executive
Officers Who Are Not Directors
Mr.
Trudel, age 58, has
been
Secretary of the Company since April 2006, Senior Vice President and Chief
Financial Officer of the Company since May 2003 and a corporate officer of
the
Company since January 2003. From 1997 to 2002, Mr. Trudel served as Chief
Financial Officer of Arguss Communications, Inc. From 1988 to 1997, Mr. Trudel
was Senior Vice President and Chief Financial Officer of JHM Capital
Corporation.
Mr.
Canino, age 69, has been Vice Chairman, Gemma Power Systems (“GPS”, wholly-owned
by Argan, Inc.), since December 2006. From March 1997 to December 2006, he
was a
fifty (50) percent owner and a senior executive officer of GPS.
Mr.
Griffin, age 53, has been Vice Chairman, Gemma Power Systems since November
1,
2007. From December 6, 2006 to November 1, 2007, he was Chief Executive Officer
of GPS. From March 1997 to December 2006, he was a fifty (50) percent owner
and
a senior executive officer of GPS.
Summary
of Employment Arrangements
Rainer
H. Bosselmann and Arthur F. Trudel.
On
January 3, 2005, the Company entered into substantially similar employment
agreements with (i) Rainer H. Bosselmann as its Chief Executive Officer,
and
(ii) Arthur F. Trudel as its Senior Vice President, Chief Financial Officer
and
Corporate Secretary (each, an “Executive”).
-
16
-
Pursuant
to the employment agreements, the Company agreed to employ each Executive
for an
initial term of one year, which term will automatically renew for successive
one
year periods unless the Company or the Executive provides at least 90 days
prior
written notice of its or his election not to renew. Currently, the employment
term anniversary date is January 3 for both Mr. Bosselmann and Mr. Trudel.
The
agreements provide for each Executive to receive during the employment period
an
annual base salary of $150,000, subject to increase (but may not be reduced)
from time to time in such amounts as the Company, in its reasonable discretion,
deems to be appropriate, and an annual bonus in the discretion of the Board
of
Directors of the Company, subject to the satisfaction of reasonable performance
criteria established for the Executive with respect to such year. During
the
fiscal year ended January 31, 2007, the annual base salary for each Executive
was increased to $200,000. The agreements further provide that each Executive
may participate in any stock option, incentive and similar plans established
by
the Company and shall be granted stock options and other benefits similar
to
options and benefits granted to other executives, subject in all cases to
the
satisfaction by the Executive of the terms and conditions of such plans and
to
the reasonable exercise by the Board of any discretion granted to it or them
thereunder.
In
addition, under the employment agreements, in the event that an Executive’s
employment is terminated for any of the reasons specified below or there
occurs
a “change in control”, the Executive will receive as severance pay in a single
lump sum payment, an amount equal to twenty-four (24) months of his base
salary
within thirty (30) days after the Executive’s termination of employment or
change of control, as the case may be, based on twelve (12) times the
Executive’s final full month salary at the date the Executive’s employment
ceases or at the date of the change in control, as the case may be, without
reduction or offset for any other monies which the Executive may thereafter
earn
or be paid. The reasons which cause severance pay to be paid to an Executive
include:
| (i) |
termination
by the Executive because of a material diminution of the Executive’s
duties, authority or responsibility, or a material impairment by
action of
the Company of his ability to perform his duties and responsibilities,
regardless of whether such diminution is accompanied by a change
in the
Executive’s title with the Company;
|
| (ii) |
termination
by the Executive because of a material breach by the Company of
any
provision of the employment agreement, which breach continues for
a period
of thirty (30) days after written notice of such breach is given
by the
Executive to the Company; and
|
| (iii) |
termination
by the Company at any time without cause, including notice of non-renewal
of the employment agreement.
|
Each
Executive shall also be entitled for a period of twenty-four (24) months
from
the termination of his employment or a change in control, as the case may
be, to
the continuation of all benefits provided to the Executive, excluding sick
and
vacation time, subject to any applicable employee co-payments.
If
an
Executive’s employment is terminated by the Company by reason of the Executive’s
death, disability or “for cause” or voluntarily by the Executive for any reason
other than as set forth in the preceding paragraph, the Company will not
be
obligated to make any payments to the Executive by reason of his cessation
of
employment other than such amounts, if any, of his base salary that have
accrued
and remain unpaid and such other amounts which may then otherwise be payable
to
the Executive from the Company’s benefit plans or reimbursement policies, if
any.
Joel
M. Canino and William F. Griffin, Jr.
The
Company entered into substantially similar employment agreements with Messrs
Canino and Griffin (the “Gemma Executives”) in December 2006. These agreements
were amended, effective February 29, 2008.
Pursuant
to the employment agreements as amended, the Company has agreed to employ
each
Gemma Executive until June 7, 2009. The employment terms will automatically
renew for successive one-year periods unless the Company or the Gemma Executive
provides at least three months prior written notice of its or his election
not
to renew. As amended, the agreements provide for Messrs Canino and Griffin
to
receive during the employment periods annual base salaries of $560,000 and
$680,000, respectively. The agreements, as amended, require the payment of
a
bonus to each Gemma Executive related to the fiscal year ended January 31,
2008
in the amount of $500,000 by March 31, 2008. The Gemma Executives shall each
be
entitled to a bonus in the amount of $500,000 for the fiscal year ending
January
31, 2009 if the Adjusted EBITDA (as defined in each original employment
agreement) of GPS exceeds $20 million. If the Adjusted EBITDA of GPS for
the
fiscal year exceeeds, $25 million, the bonus amount for each Gemma Executive
shall be $1 million. In accordance with the employment agreements, as amended,
and effective June 8, 2008, the Gemma Executives shall no longer serve as
senior
executives of GPS, but shall perform all services as may be assigned by the
board of directors of GPS.
The
employment agreements provide that the Company will maintain key-man insurance
policies on the life of each Gemma Executive in an amount not less than
$5
million with Argan, Inc. named as the sole beneficiary.
-
17
-
Under
the
employment agreements, in the event that a Gemma Executive’s employment is
terminated by the Company for its convenience, or by the Gemma Executive
for
Good Reason (as defined in the employment agreements), the Gemma Executive
shall
be entitled to continue to receive his salary for the remainder of the current
employment term. Each Gemma Executive shall also be entitled to the continuation
of all benefits provided to the Gemma Executive, excluding sick and vacation
time, subject to any applicable employee co-payments for the period from
the
termination of his employment to the end of the current employment
term.
If
a
Gemma Executive’s employment is terminated by the Company by reason of death,
disability or “for cause” or voluntarily by the Gemma Executive for any reason
other than as set forth in the paragraph above, the Company will not be
obligated to make any payments to the Gemma Executive by reason of his cessation
of employment other than such amounts, if any, of his base salary that have
accrued and remain unpaid and such other amounts which may then otherwise
be
payable to the Gemma Executive from the Company’s benefit plans or reimbursement
policies, if any.
Outstanding
Equity Awards Table
The
following table sets forth certain information concerning exercisable and
unexercisable warrants and options to purchase shares of Common Stock that
were
held by our Named Executive Officers (identified in the Summary Compensation
table above) as of January 31, 2008. There are no outstanding Common Stock
awards for either Mr. Canino or Mr. Griffin.
|
Number of Securities
Underlying Unexercised
Warrants and Options
|
Exercise
|
Expiration
|
|||||||||||
|
Name
|
Exercisable
|
Unexercisable
|
Price/Share
|
Date
|
|||||||||
|
Rainer
H. Bosselmann
|
60,000
|
—
|
$
|
7.75
|
4/29/2013
|
||||||||
|
|
50,000
|
—
|
2.65
|
6/21/2016
|
|||||||||
|
Arthur
F. Trudel
|
60,000
|
—
|
$
|
7.75
|
4/29/2013
|
||||||||
|
|
50,000
|
—
|
2.15
|
4/20/2016
|
|||||||||
CERTAIN
RELATIONSHIPS AND RELATED PART TRANSACTIONS
On
December 8, 2006, the Company completed a private offering of 2,853,335 shares
of Common Stock at a price of $3.75 per share for aggregate proceeds of $10.7
million. Proceeds of this offering were used for the purchase of Gemma Power
Systems, LLC (“GPS”) and affiliated companies. Two of the investors, MSR I SBIC,
L.P. (“MSRI LP”) and MSR Fund II, L.P. (“MSRII LP”), which acquired 92,793 and
440,540 shares in the offering, respectively, are controlled by Daniel A.
Levinson, a Director of the Company. Two other investors, Allen & Company
LLC and Allen SBH Investments, LLC (Allen SBH) which acquired 80,000 and
266,667
shares of Common Stock in the offering, respectively, are affiliates of James
W.
Quinn, a Director of the Company. In addition, Mr. Quinn acquired 26,667
shares
for his own account.
On
May 4,
2006, the Company completed a private offering of 760,000 shares of Common
Stock
at a price of $2.50 per share for aggregate proceeds of $1.9 million. The
Company used $1.8 million of the proceeds to pay down an equal amount of
the
subordinated note due the former owner of Vitarich Laboratories, Inc., a
wholly-owned subsidiary of the Company. The remainder of the proceeds were
used
for general corporate purposes. Allen SBH and Mr. Quinn acquired 120,000
and
40,000 shares in the offering, respectively. In addition, MSRI acquired 240,000
shares in the offering.
-
18
-
COMPLIANCE
UNDER SECTION 16(a)
OF
THE SECURITIES EXCHANGE ACT OF 1934
Section
16(a) of the Securities Exchange Act of 1934 and related regulations require
the
Company’s directors, certain officers, and any persons holding more than 10% of
the Company’s Common Stock (“Reporting Persons”) to report their initial
ownership of the Company’s Common Stock and any subsequent changes in that
ownership to the SEC. Specific due dates have been established, and the Company
is required to disclose any failure to file by these dates during the fiscal
year ended January 31, 2008 in this Proxy Statement.
In
making
this disclosure, the Company has relied solely on its review of copies of
Section 16(a) reports filed with the SEC and representations received by
the
Company from Reporting Persons, without conducting any independent
investigations of its own.
The
Company believes that the following Reporting Persons failed to timely file
Forms 3, 4 or 5 with the SEC during the fiscal year ended January 31,
2008.
Mr.
Canino sold 117,000 shares of Common Stock on June 28, 2007; this transaction
was reported on Form 4 on July 30, 2007. In addition, included among other
dispositions by Mr. Canino during the fiscal year ended January 31, 2008
were
the sales of an aggregate of 37,500 shares of our Common Stock in two
transactions where the required Fom 4 report was filed within five days of
the
respective due date.
On
October 29, 2007, Mr. Canino and Mr. Griffin each sold 100,000 shares of
Common
Stock to Richard Scott, and reported the dispositions on Form 4 on November
1,
2008, one day late. Mr. Scott reported the acquisition of the shares on November
5, 2008, five days late.
Mr.
Leimkuhler was late in filing his initial Form 3 upon joining the Board of
Directors; the report was filed on September 27, 2007.
STOCKHOLDER
NOMINATIONS AND PROPOSALS; DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
FOR
2009 ANNUAL STOCKHOLDER MEETING
Our
Certificate of Incorporation provides that, for stockholder
nominations to the Board of Directors or other proposals to be considered
at an
annual meeting, the stockholder
must
have given timely notice thereof in writing to the Corporate Secretary of
the
Company. To be timely for the 2009 Annual Meeting, a stockholder’s
notice
must have been delivered to or mailed and received by the Corporate Secretary
of
the Company at the principal executive offices of the Company by January
16, 2009. A stockholder’s
notice
to the Corporate Secretary must set forth as to each matter the stockholder
proposes to bring before the annual meeting the information required by Article
Thirteenth and Fourteenth of our Certificate of Incorporation.
Stockholders
are entitled to present proposals for consideration at forthcoming stockholder
meetings
provided that they comply with the proxy rules promulgated by the Securities
and
Exchange Commission and our bylaws and Certificate of Incorporation.
Stockholders wishing to present a proposal at our 2009 Annual Meeting of
Stockholders must submit such proposal not
less
than 70 days prior to the next scheduled annual meeting or if less than 70
days
prior notice of the next meeting is provided to our stockholders,
within
10 days of the announcement of the next annual meeting.
STOCKHOLDER
COMMUNICATIONS WITH DIRECTORS
Stockholders
may communicate with the Board of Directors, or any of the Company’s individual
directors, by sending their communications to the Board of Directors, or
to any
individual director, at the following address:
Board
of
Directors of Argan, Inc.
c/o
Corporate Secretary
Rockville,
Maryland 20850
All
stockholder communications received by the Company’s Corporate Secretary will be
delivered to one or more members of the Board of Directors, or, in the case
of
communications sent to an individual director, to such director.
-
19
-
OTHER
BUSINESS
We
know
of no other matters to be submitted to the
Annual
Meeting. If any other matters properly come before the Annual Meeting, it
is the
intention of the persons named in the enclosed proxy to vote the shares they
represent as the Board of Directors may recommend.
-
20
-