Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
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 o
Check
the
appropriate box:
x
Preliminary Proxy
Statement
oConfidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
o
Definitive Proxy Statement
o
Definitive Additional
Materials
o Soliciting
Material Pursuant to
240.14a-12
ARGAN,
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.
o
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:
o
Fee paid previously with preliminary
materials:
o
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:
Argan,
Inc.
One
Church Street, Suite 401
Rockville,
Maryland 20850
May
3,
2007
To
Our
Stockholders:
You
are
cordially invited to attend the Annual Meeting of Stockholders of Argan, Inc.
(the "Company"), to be held on June 19, 2007 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. Enclosed are the Secretary's notice of this
meeting, a proxy statement and a form of proxy.
At
the
Annual Meeting, you will be asked to consider and vote upon the following
proposals described in the enclosed proxy statement:
1.
To
elect seven directors to serve for a term ending at the 2008 Annual
Meeting;
2.
To
amend the Company’s Certificate of Incorporation, as amended, to increase the
number of authorized shares of the Company’s Common Stock $0.15 par value per
share (the “Common Stock”), from 12,000,000 to 30,000,000.
3.
To
amend the Company’s 2001 Stock Option Plan to increase the total number of
shares of Common Stock reserved for issuance under the Stock Option Plan to
650,000 shares;
4.
To
ratify the selection of Grant Thornton LLP as the Company’s independent
registered public accountants for the fiscal year ending January 31, 2008;
and
5.
To
transact such other business as may properly come before the Meeting or any
adjournment or postponement thereof.
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 and its stockholders. The Board
of
Directors recommends a vote "FOR" each of the proposals.
Regardless
of whether you plan to attend the Annual Meeting, your vote is important. I
urge
you to participate by promptly completing and returning the enclosed proxy
card
as soon as possible. You may revoke your proxy and vote in person if you decide
to attend the Annual Meeting.
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|
|
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Sincerely,
|
|
Rainer
H. Bosselmann
Chairman
of the Board
|
IF
YOU PLAN TO ATTEND, PLEASE CONTACT US
If
you
plan to attend the Annual Meeting on June 19, 2007, 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 Arthur Trudel by phone at 301-315-0027, by fax at 301-315-0064, or by
email at atrudeljr@arganinc.com.
Argan,
Inc.
One
Church Street, Suite 401
Rockville,
Maryland 20850
NOTICE
OF
ANNUAL MEETING OF STOCKHOLDERS
TO
BE
HELD JUNE 19, 2007
To
the
Stockholders of Argan, Inc:
NOTICE
IS
HEREBY GIVEN that an Annual Meeting of Stockholders (the "Meeting") of Argan,
Inc. (the "Company") will be held on June 19, 2007 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, for the following purposes:
1.
To
elect seven directors to serve for a term ending at the 2008 Annual
Meeting;
2.
To
amend the Company’s Certificate of Incorporation, as amended, to increase the
number of authorized shares of the Company’s Common Stock $0.15 par value per
share (the “Common Stock”), from 12,000,000 to 30,000,000.
3.
To
amend the Company’s 2001 Stock Option Plan to increase the total number of
shares of Common Stock reserved for issuance under the Stock Option Plan to
650,000 shares;
4.
To
ratify the selection Grant Thornton LLP as the Company’s independent registered
public accountants for the fiscal year ending January 31, 2008; and
5.
To
transact such other business as may properly come before the Meeting or any
adjournment or postponement thereof.
Only
holders of record of outstanding shares of Common Stock, $0.15 par value per
share, of the Company at the close of business on May 7, 2007 will be entitled
to notice of, and to vote at, the Meeting or any adjournment or postponement
thereof.
| |
|
|
| |
By
Order of the Board of Directors
|
|
Arthur
F. Trudel, Jr.
Corporate
Secretary
|
Rockville,
Maryland
May
3,
2007
Your
vote is important. To vote your shares, please mark, sign and date the enclosed
proxy card and mail it promptly in the enclosed return envelope, which requires
no postage if mailed in the United States.
Argan,
Inc.
One
Church Street, Suite 401
Rockville,
Maryland 20850
PROXY
STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO
BE
HELD JUNE 19, 2007
Introduction
This
Proxy Statement is being furnished to stockholders of Argan, Inc., a Delaware
corporation (the "Company"), in connection with the solicitation of proxies
by
the Board of Directors of the Company for use at the Annual Meeting of
Stockholders to be held on Tuesday, June 19, 2007 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, and any adjournment or postponement
thereof (the "Meeting").
At
the
Meeting, stockholders will be asked to consider and vote upon four proposals:
(1) the election of seven directors to serve until the 2008 Annual Meeting
(the
"Election of Directors"); (2) the amendment of the Company’s Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
12,000,000 shares to 30,000,000 shares; (3) the amendment of our 2001 Stock
Option Plan to increase shares of Common Stock reserved for issuance from
250,000 shares to 650,000 shares and (4) the ratification of the selection
of
the Company's independent registered public accountants (the "Ratification
of
Accountants").
This
Proxy Statement is dated May 3, 2007 and is first being mailed to stockholders
along with the related form of proxy on or about May 15, 2007.
If
a
proxy in the accompanying form is properly executed and returned to the Company
in time for the 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 four proposals set forth
above and otherwise in the discretion of the proxy holders as to any other
matter that may come before the Meeting.
Revocability
of Proxy
Any
stockholder of the Company who has given a proxy, has the power to revoke such
proxy at any time before it is voted either (i) by filing a written revocation
or a duly executed proxy bearing a later date with Arthur F. Trudel, Jr.,
Corporate Secretary of the Company, at Argan, Inc., One Church Street, Suite
401, Rockville, Maryland 20850, or (ii) by appearing at the Meeting and voting
in person. Attendance at the Meeting will not in and of itself constitute the
revocation of a proxy. Voting by those present during the Meeting will be by
ballot.
Record
Date, Outstanding Securities and Votes Required
The
Board
of Directors of the Company has fixed the close of business on May 7, 2007
as
the record date (the "Record Date") for determining holders of outstanding
shares of Common Stock, $0.15 par value per share (the "Common Stock"), who
are
entitled to notice of and to vote at the Meeting. As of the Record Date, there
were approximately 300 stockholders of record and 11,094,012 shares of Common
Stock issued and outstanding. Each share of Common Stock is entitled to one
vote
on each of the proposals to be voted upon.
Abstentions
and broker non-votes are counted for purposes of determining the number of
shares represented at the Meeting, but are deemed not to have voted on the
proposals. Broker non-votes occur when a broker nominee, holding shares in
street name for the beneficial owner thereof, has not received voting
instructions from the beneficial owner and does not have discretionary authority
to vote. The Election of Directors, the proposed increase to the Stock Option
Plan and the Ratification of Auditors require the affirmative vote of a majority
of the shares of Common Stock present in person or represented by proxy and
voting. The Amendment to the Certificate of Incorporation, which would increase
the authorized number of shares of common stock, requires the affirmative vote
of a majority of the outstanding shares of Common Stock. Accordingly,
abstentions, broker non-votes or the failure to either return a proxy or to
attend the meeting will be deemed (i) not to have voted on the Election of
Directors, the proposed increase to the Stock Option Plan and the Ratification
of Auditors, and (ii) as a vote against the amendment to the Certificate of
Incorporation to increase the authorized number of outstanding
shares.
The
officers and directors of the Company will vote the shares of Common Stock
beneficially owned or controlled by them (representing approximately 15% of
the
shares of Common Stock issued and outstanding) in favor of each of the proposals
discussed above.
PROPOSAL
NUMBER ONE
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
Meeting, stockholders of the Company are being asked to elect seven directors.
Except for William F Leimkuhler, each of the nominees is currently a member
of
the Company’s Board of Directors. Mr. Kent Pugmire has decided not to stand for
reelection to the Board of Directors.
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.
The Board of Directors has no reason to believe that the nominees will decline
or be unable to serve as Directors of the Company. 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.
Nominees
for Election as Director
The
following table sets forth the age and title of each nominee director, as well
as descriptions of such person's additional business experience during the
past
five years.
|
Name
|
|
Age
|
|
Position
|
| |
|
|
|
|
|
Rainer
H. Bosselmann
|
|
64
|
|
Chairman
of the Board, Chief
|
|
|
|
|
|
Executive
Officer and President
|
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|
|
|
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|
DeSoto
S. Jordan
|
|
62
|
|
Director
|
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|
|
|
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William
F. Leimkuhler
|
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55
|
|
Director
|
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|
|
|
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Daniel
A. Levinson
|
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46
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|
Director
|
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|
|
|
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W.G.
Champion Mitchell
|
|
60
|
|
Director
|
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|
|
|
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|
James
W. Quinn
|
|
49
|
|
Director
|
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|
|
|
|
|
Peter
L. Winslow
|
|
76
|
|
Director
|
Rainer
H. Bosselmann.
Mr.
Bosselmann has been a Director and Chairman of the Board since May 2003 and
President 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.
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 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.
William
F. Leimkuhler. Mr.
Leimkuhler 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, 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. Network Solutions 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. VeriSign is a provider of critical Internet
infrastructure services. From May 1999 to March 2000, Mr. Mitchell was Chairman,
President and CEO 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 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.
Peter
L. Winslow.
Mr.
Winslow has been a Director of the Company since June 2003. Since 1992, Mr.
Winslow has served in several executive capacities at Fin-Net LLC and its
predecessor company Fin-Net, Inc., a financial networking company, where he
currently serves as Chairman and Managing Director. Mr. Winslow was the founder
and President of Winslow, Evans & Crocker, Inc., a brokerage and financial
services company, and he served in several executive capacities between 1992
and
2004. Since March 2002, Mr. Winslow has been Managing Director of Family Capital
Trust Company, N.A. Mr. Winslow was also a Director of Jupiter National from
1991 to 1996. Mr. Winslow served as a Director of Arguss from 1996 through
2002.
Directors'
Compensation
Each
non-employee director of the Company receives a $2,500 annual fee, plus $300
for
each formal meeting attended. Directors are also reimbursed for reasonable
expenses actually incurred in connection with attending each formal meeting
of
the Board of Directors or any committee thereof. Directors are also eligible
for
grants of stock options for shares of the Company’s common stock.
The
following table summarizes the fees paid to non-employee directors for their
attendance at each committee meeting:
|
DIRECTOR
COMPENSATION
for
the year ended January 31,
2007
|
|
Name
|
|
Fees
Earned or
Paid
in
Cash
($)
|
|
Option
Awards
($)
|
|
Total
|
|
|
Peter
Winslow
|
|
$
|
7,300
|
|
$
|
14,200
|
|
$
|
21,500
|
|
|
James
Quinn
|
|
$
|
7,300
|
|
$
|
14,200
|
|
$
|
21,500
|
|
|
DeSoto
Jordan
|
|
$
|
7,300
|
|
$
|
14,200
|
|
$
|
21,500
|
|
|
T.
Kent Pugmire
|
|
$
|
4,600
|
|
$
|
14,200
|
|
$
|
18,800
|
|
|
Dan
Levinson
|
|
$
|
4,300
|
|
$
|
14,200
|
|
$
|
18,500
|
|
|
Champion
Mitchell
|
|
$
|
4,300
|
|
$
|
14,200
|
|
$
|
18,500
|
|
Executive
Officers who are Not Directors
The
following table sets forth the age and title of each executive officer of the
Company who is not a nominee director, as well as descriptions of such person's
additional business experience during the past five years.
|
Name
|
|
Age
|
|
Position
|
| |
|
|
|
|
|
Arthur
F. Trudel
|
|
57
|
|
Senior
Vice President and
|
| |
|
|
|
Chief
Financial Officer
|
Arthur
F. Trudel.
Mr.
Trudel 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. From 1988 to 1997, Mr. Trudel was Senior
Vice President and Chief Financial Officer of JHM Capital
Corporation.
Compliance
with Section 16(a) of the Exchange Act
Section
16(a) of the Exchange Act requires the Company's directors and executive
officers and persons who beneficially own more than 10% of the Company's common
stock (collectively, the "Reporting Persons") to file with the Commission (and,
if such security is listed on a national securities exchange, with such
exchange), various reports as to ownership of such common stock. Based solely
upon a review of copies of Section 16(a) reports and representations received
by
the Company from Reporting Persons, and 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 Commission during the
fiscal year ended January 31, 2007. Mr. Kevin Thomas and Mr. Trudel were each
late with one filing, Mr. Levinson was late with two filings.
COMPENSATION
DISCUSSION AND ANALYSIS
This
section provides an overview and analysis of our compensation programs and
policies, including a discussion of the material compensation decisions made
under the programs and policies with respect to our top executive officers,
and
the material factors considered in making those decisions. It is intended to
provide context for the detailed information provided under the heading
“Executive Compensation” regarding compensation earned or paid in fiscal year
2007 to the following individuals, whom we refer to as our named executive
officers:
| · |
Rainer
H. Bosselmann, our Chairman of the Board, Chief Executive Officer
and
President,
|
| · |
Arthur
F. Trudel, our Senior Vice President and Chief Financial
Officer.
|
Principles
Underlying our Compensation Program
Our
goal
in compensating executive officers is to attract, motivate, reward and retain
executives of superior ability who are dedicated to the long-term financial
interests of our stockholders. To achieve this goal, our executive compensation
programs are organized around the following fundamental principles:
A
significant portion of executive officer compensation should be
performance-based and reward a balance of short and long-term stockholder value
creation.
We
seek
to provide our executive officers with incentives for superior performance
over
multiple time-frames using a combination of: annual
incentives
that
measure performance relative to short-term operational and strategic objectives;
and periodic equity grants that align executive officers’ interests with
long-term stockholder value and stock price appreciation.
Pay
at risk should align with an executive officer’s impact on Company
performance.
We
seek
to leverage the performance-based elements of an executive officer’s
compensation proportionally with his or her ability to impact the Company’s
performance over short-and long-term periods. Our chief executive officer has
the largest portion of his total annual compensation delivered through base
salary and cash bonus, however, he has substantial warrants and stock options
to
align him with long-term shareholder interests.
Compensation
opportunities should be competitive with the
marketplace.
We
target total compensation opportunities for our executive officers to be
competitive with opportunities for similar positions at similar size
companies.
Our
compensation should remain flexible enough to allow for the exercise of
discretion where appropriate. Our
total
compensation approach is not intended to be formulaic or rigid in structure.
Each element of annual compensation (other than base salary) is designed to
be
variable based on quantitative and/or qualitative performance criteria. We
regularly review our overall compensation programs and maintain flexibility
to
make changes in the future as appropriate. On an individual basis, we also
reserve discretion to increase individual compensation or to adjust the mix
of
pay elements as appropriate. This flexibility allows us to effectively manage,
over time, the performance of our executive officers, market competitiveness
of
our compensation programs, issues of internal pay equity and retention of key
talent.
Role
of the Compensation Committee
The
Compensation Committee of our Board of Directors carries out the board’s
responsibilities with respect to reviewing and approving the compensation for
our executive officers, overseeing the development of executive succession
plans, and administering our executive compensation programs.
We
seek
an open relationship between the Compensation Committee and management
concerning compensation matters. As a function of this relationship, the
Compensation Committee consults management for analysis, details and
recommendations with respect to compensation program design and compensation
decisions for executives. The Compensation Committee reviews and analyzes
compensation information from management and compares the information to
Companies of similar size. We believe that this collaborative approach produces
a more informed decision-making process and assures an objective perspective
in
this important governance matter.
The
Compensation Committee retains the final authority to approve all of the
programs under which compensation is paid or awarded to our executive officers.
In determining the amount of compensation for individual executive officers,
the
Compensation Committee relies upon its judgment about each individual, factors
surrounding each individual’s role and performance, and upon compensation
recommendations for each of the executive officers. For additional information
regarding the Compensation Committee, see page 14 of this proxy
statement.
Factors
Considered in Making Compensation Decisions
Key
factors affecting compensation decisions for our executive officers include
the
nature and scope of the executive officer’s responsibilities, contribution to
financial results, effectiveness in leading initiatives to increase growth,
shareholder value, profitability, productivity, effective capital deployment
and
competitiveness. Also considered when evaluating performance are the executive
officer’s commitment to corporate responsibility and creating a culture of
integrity.
We
also
consider the compensation and benefit levels by comparison to companies of
similar size that are most likely to compete for the services of executive
officers. This benchmarking is an input into the compensation decision-making
process that helps gauge market competitiveness, but it does not weigh any
greater than other considerations noted above when making compensation
decisions.
Elements
of our Executive Officer Compensation Structure
Periodic
analysis of the design of our compensation programs allows us to maintain
reasonable and competitive total compensation opportunities for each executive
officer. In fiscal year 2007, we conducted a review of all elements of our
executive officer compensation programs. As a result of this program review,
we
adjusted the base salaries of each of our executive officers and additionally,
our executive officers were awarded stock options during fiscal year
2007.
The
following is a description of the various elements of our total executive
officer compensation structure and the purpose of each element.
| · |
Base
Salary.
Base salary compensates executives for day-to-day responsibilities
and
sustained performance; consistently effective individual performance
is a
threshold requirement for any salary
increase.
|
| · |
Bonus.
Bonuses are typically paid based upon the Company’s performance from
operations and/or accomplishing certain strategic goals such as the
acquisition of a strategically significant new
business.
|
| |
The
Compensation Committee retains the final authority to evaluate and
determine performance relative to the individual and corporate financial
goals for annual incentives. In evaluating corporate performance,
the
Compensation Committee may make adjustments for the impact of unusual
or
non-recurring items including, but not limited to accounting
pronouncements and restructuring
charges.
|
| |
This
discretion enables us to establish goals that align our executive
officers
with the Company’s annual operating performance, while at the same time
ensuring that unforeseen factors do not inappropriately impact the
measurement of performance. Actual bonuses paid to executive officers
are
approved by the Compensation Committee and ratified by the Board
of
Directors.
|
Long-Term
Performance: Equity Grants
During
fiscal year 2007, the Compensation Committee approved and the Board of Directors
ratified equity grants to our executive officers. The Compensation Committee
periodically grants stock options to align our executive officers’ personal
financial interest with the long-term interests of our
stockholders.
Fiscal
Year 2007 Compensation for Named Executive Officers.
The
following describes actions taken in fiscal year 2007 as it relates to named
executive officer compensation and the information provided in the summary
compensation table below.
Base
Salary. During
fiscal year 2007, the Compensation Committee approved and the Board of Directors
ratified base salary increases of $50,000 for each of our named executive
officers. These changes were based primarily on sustained individual
performance, market levels of compensation for comparable jobs, changes in
job
scope and responsibilities of our named executive officers over time. The above
factors plus the fact that our named executive officers respective base salaries
were considerably below base salaries paid to comparable executive officers
at
similar sized public companies.
Bonus.
During
the fourth quarter of fiscal year 2007, the Compensation Committee approved
and
the Board ratified the payment of bonuses to our executive officers. Bonuses
were in recognition of the role our executive officers played in the successful
acquisition of Gemma Power Systems LLC (GPS) which is deemed to be a significant
strategic acquisition. Based on the backlog of contract work as of the
acquisition date, the acquisition of GPS is expected to increase the Company’s
revenues by more than four times.
Fiscal
Year 2007 Equity Grants. In
an
effort to align our executive officers personal financial interests with our
shareholders long-term financial interests, the Compensation Committee
recommended and the Board approved the granting of stock options for 50,000
shares of the Company’s common stock to each of our executive officers.
Executive
Compensation
The
following summary compensation table sets forth the aggregate compensation
paid
to or earned by the named Executive Officers, for services, for the year ended
January 31, 2007 (the "Named Executive Officers").
|
Name
And Principal Position
|
|
Fiscal
Year Ended January 31
|
|
Salary
($)
|
|
Bonus
($)
|
|
Option
Awards
($)
|
|
All
Other Total Comp.
($)(1)
|
|
TOTAL
|
|
|
Rainer
H. Bosselmann Chief
Executive Officer
and President
|
|
|
2007
|
|
$
|
154,167
|
|
$
|
100,000
|
|
$
|
71,000
|
|
$
|
900
|
|
$
|
326,067
|
|
|
Arthur
F. Trudel, Jr. Senior
Vice President
and Secretary
|
|
|
2007
|
|
$
|
187,500
|
|
$
|
100,000
|
|
$
|
58,500
|
|
$
|
1,100
|
|
$
|
347,100
|
|
(1)
Represents Company contributions under the Company’s 401(k) Plan.
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
| |
|
|
Name
|
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
|
Option
Exercise Price
|
|
Option
Expiration Date
|
|
|
Rainer
Bosselmann
|
|
|
50,000
|
|
$
|
2.65
|
|
|
6/21/2016
|
|
|
Arthur
Trudel
|
|
|
50,000
|
|
$
|
2.15
|
|
|
4/20/2016
|
|
For
a
description of certain warrants held by Named Executive Officers, see “Security
Ownership of Certain Beneficial Owners and Management” below.
Description
of the 2001 Stock Option Plan
In
August
2001, the Board of Directors adopted and the stockholders of the Company
approved the 2001 Stock Option Plan (the “Stock Option Plan”). As adopted in
2001, the Stock Option Plan authorized the issuance of options to purchase
a
maximum of 33,333 shares of Common Stock. In April 2003, the Board of Directors
adopted and the stockholders of the Company approved an amendment to the Stock
Option Plan increasing the total number of shares of Common Stock reserved
for
issuance under the Stock Option Plan to 250,000. That number of shares may
be
adjusted in certain events, such as a stock split, reorganization or
recapitalization. Officers, directors and employees of the Company or its
subsidiaries are eligible to receive non-qualified stock options under the
Stock
Option Plan. Employees (including officers and directors who are employees)
of
the Company or its subsidiaries are also eligible to receive incentive stock
options under the Stock Option Plan. In the event incentive stock options are
granted, the aggregate fair market value of the Common Stock issuable under
such
options for each optionee during any calendar year cannot exceed $100,000.
To
the extent that an incentive stock option exceeds the $100,000 threshold, the
excess will be treated as a non-qualified stock option.
The
Company receives no monetary consideration for the grant of options under the
Stock Option Plan. In the case of an incentive stock option, the exercise price
cannot be less than the fair market value (as defined in the Stock Option Plan)
of the Common Stock on the date the option is granted. If the optionee is a
stockholder who beneficially owns 10% or more of the outstanding Common Stock,
the exercise price of incentive stock options may not be less than 110% of
the
fair market value of the Common Stock. The term of an incentive stock option
cannot exceed ten years; provided, however, that the term of incentive options
granted to owners of 10% or more of the outstanding shares of Common Stock
cannot exceed five years.
The
Stock
Option Plan will terminate automatically and no options may be granted after
July 19, 2011 (the "Termination Date"); provided, however, that Stock Option
Plan may be terminated by the Board of Directors at any time prior to the
Termination Date. Termination of the Stock Option Plan will not affect options
that have been previously granted.
Pursuant
to the terms of the Stock Option Plan, the vesting with respect to all issued
and outstanding options to purchase Common Stock of the Company may accelerate
and become fully exercisable upon a change in control of the
Company.
As
of
January 31, 2007 there were 244,000 options granted under the 2001 Stock Option
Plan.
Employment
and Severance Agreements
On
January 3, 2005, the Company entered into substantially similar employment
agreements with (i) Rainer H. Bosselmann as its President and Chief Executive
Officer, and (ii) Arthur F. Trudel, Jr. as its Senior Vice President and Chief
Financial Officer (each, an “Executive”).
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. 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. At January 31, 2007, Rainer H.
Bosselmann and Arthur F. Trudel each had an annual base salary of $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 24 months of his base salary within 30
days
after the Executive’s termination of employment or change of control, as the
case may be, based on 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 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 agreement.
|
Each
Executive shall also be entitled for a period of 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.
Committees
and Meetings of the Board of Directors and Related Matters
The
Board
of Directors held six regular meetings and acted by unanimous consent one other
time during the fiscal year ended January 31, 2007. Each director attended
at
least 75% of the meetings of the Board of Directors and Board committees of
which he was a member during the period he served as director.
Independent
Directors
The
Board
of Directors has determined that the following members of the Board are
independent directors, as such term is defined in Nasdaq Rule 4200(a)(15):
Messrs. Quinn, Jordan, Pugmire, Winslow and Mitchell.
The
independent directors may meet from time to time in executive session without
the other members of the Board.
Executive
Committee
The
Board
of Directors has an Executive Committee comprised of Messrs. Bosselmann
(Chairman), Jordan and Levinson. The Executive Committee, which held no meetings
during fiscal year 2007, is authorized to exercise
the
general
powers
of the Board managing the business and affairs of the Company between meetings
of the Board of Directors.
Nominating
Committee
The
Board
of Directors has a Nominating Committee.
During
fiscal year 2007, the committee was
comprised of Messrs. Winslow (Chairman), Jordan and T. Kent Pugmire. The
committee
was
formed in April 2004.
The
committee adopted a written charter, a copy of which can be found on the Company
website at www.arganinc.com.
The
members of the committee are all independent directors under applicable Nasdaq
rules. Members
of the Nominating Committee are appointed by the Board of Directors.
The
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.
Directors
are not required to meet any specific or minimum qualifications. The 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 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
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. 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. Nominations must be delivered to the committee at the
following address:
Nominating
Committee
Argan,
Inc.
c/o
Corporate Secretary
One
Church Street, Suite 401
Rockville,
MD 20850
The
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,
and recommend a slate of directors to be nominated for election at the annual
meeting of stockholders, or, in the case of a vacancy on the Board of Directors,
recommend a director to be elected by the Board to fill such vacancy.
Audit
Committee
The
Board
of
Directors
has an
Audit Committee.
During
fiscal year 2007, the committee was comprised
of
Messrs. Quinn (Chairman), Jordan and Winslow. The committee
held
twelve meetings during fiscal year 2007. The
members of the committee are all independent directors under applicable SEC
and
Nasdaq rules. In addition, the Board of Directors has determined that at least
one of the independent directors serving on the Audit Committee, Mr. Quinn,
is
an audit committee financial expert, as that term has been defined by SEC rules.
Audit
Committee Report
The
Audit
Committee of the Board of Directors of the Company is composed of three
independent directors. The committee adopted a written charter, a copy of which
can be found on the Company website at www.arganinc.com.
The
Board has made a determination that the members of the Audit Committee satisfy
the independence and other requirements of applicable
Nasdaq
and
SEC
rules.
The
Board 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 fiscal
year
2007.
Review
of Audited Financial Statements with Management
The
Audit
Committee reviewed and discussed the audited financial statements 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 Annual Report
Based
on
the reviews and discussions referred to above, the Audit Committee recommended
to the Board of Directors that the audited financial statements be included
in
the Company’s Annual Report on Form 10-KSB for the fiscal year ended January 31,
2007 for filing with the Securities and Exchange Commission.
April
24,
2007
|
|
|
Audit
Committee
|
| |
|
James
W. Quinn (Chairman)
|
|
DeSoto
S. Jordan
|
|
Peter
L. Winslow
|
Compensation
Committee
The
Board
of
Directors
has a
Compensation Committee.
During
fiscal year 2007, the committee was comprised
of
Messrs. Jordan (Chairman), Quinn and Winslow. The
committee adopted a written charter, a copy of which can be found on the Company
website at www.arganinc.com.
The
Committee
held
three meetings during fiscal year 2007. The
members of the committee are all independent directors under applicable Nasdaq
rules. Members
of the Compensation Committee are appointed by the Board of Directors. During
fiscal year 2007, all compensation decisions were ratified by the Board of
Directors as a whole.
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 shareholders. To that end, it is the responsibility
of the 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 also the
responsibility of the committee to review and recommend for approval by the
independent directors of the Board the compensation (salary, bonus and incentive
compensation) of the Chief Executive Officer of the Company and review and
approve the compensation (salary, bonus, incentive and other compensation)
of
the other executive officers of the Company; review and approve perquisites
offered to executive officers of the Company; review and approve corporate
goals
and objectives relevant to the compensation of executive officers of the Company
and 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 committee also acts on behalf of the Board in
administering compensation plans approved by the Board and/or the shareholders
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 with respect to new compensation incentive plans and equity-based
plans; and reviews and make recommendations to the Board on changes in major
benefit programs of executive officers of the Company. The committee also
reviews the management succession program for the Chief Executive Officer and
selected executive officers of the Company.
Stockholder
Communications with Directors
The
Company has established a process by which stockholders can communicate with
the
Company’s Board of 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,
MD 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.
Director
Attendance at the Annual Meeting
Although
the Company does not have a formal policy with respect to director attendance
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.
Compensation
Committee Interlocks and Insider Participation
Decisions
regarding
executive compensation are principally made by the Compensation Committee.
The
Compensation Committee reviews and recommends for approval by the independent
members of the Board
of
Directors the compensation (salary, bonus and other long-term incentives) of
the
Chief Executive Officer of the Company
and
reviews and approves the compensation (salary, bonus and long-term incentives)
of the other executive officers of the Company.
The
Compensation Committee is responsible for the recommendation to the independent
directors of the Company
of
incentive awards to the Chief Executive Officer of the Company
under
the
plans and the approval of incentive awards to the other executive officers
of
the Company
under
the
plans. No
member
of the Compensation Committee was an officer or employee of the Company
during the fiscal year ended January 31, 2007.
Compensation
Committee Report On Executive Compensation
The
Compensation
Committee reviews the Company's
compensation plan on a regular basis. The Compensation Committee regularly
updates its assessment of various long-term incentive tools including stock
options, restricted stock, performance-based equity and other alternatives
that
might be available.
The
Company's
primary objective in developing executive compensation policies is to attract,
motivate and retain highly qualified and effective leaders. The compensation
policy includes various components of compensation that are intended to align
management behaviors and priorities directly with the Company’s
strategic objectives and to encourage management to act in the best long-term
interest of the Company
and
its
shareholders. The Company's
executive officer compensation policy generally consists of three elements:
base
compensation, annual cash bonus and long-term incentive
compensation.
Cash
Compensation
Annual
cash
compensation consists of two elements: base salary and annual cash bonus. Each
officer is offered a base salary that is commensurate for the role that he
or
she is performing. In setting compensation, the Compensation Committee strives
to maintain base compensation for the Company's
executive officers at levels which the Compensation Committee, based on its
experience, believes are competitive with the compensation of comparable
executive officers in similarly situated companies.
Increases
in
base
salary are based on a periodic review and evaluation of the performance of
the
operation or function for which the executive has responsibility, and is
measured against defined performance criteria. The executive is also reviewed
according to his or her competence as an effective leader in the Company,
which
includes an evaluation of the skills and experience required for the job,
coupled with a comparison of these elements with similar elements for other
executives both within and outside of the Company.
Executive
officers
are eligible to participate in a bonus plan. The Compensation Committee
determines awards under the bonus plan. The Compensation Committee considers
input of the Chief Executive Officer with respect to the bonus to be awarded
to
the other executive officers. The executive officers, as well as other key
employees, may receive bonuses based upon meeting the performance objectives
of
the Company
and
their
contributions to the Company.
The
compensation
paid by the Company
to
its
Chief Executive Officer for fiscal year 2007 was
based
upon an agreement negotiated with Mr. Bosselmann. The Compensation Committee
believes, based upon the individual experience of its members, that the
compensation package for Mr. Bosselmann for fiscal year
2007
was reasonable based upon Mr. Bosselmann’s experience, his level of
responsibility and the contributions made and expected to be made by him to
the
Company.
Long-term
Incentive Compensation
Each
of
the
executive officers and all employees are eligible to receive awards under the
2001
Stock Option Plan.
The
2001
Stock Option Plan will
be
used to align a portion of the officers’ compensation with the shareholders'
interest and the long-term success of the Company
by
encouraging the executive officers and other employees to remain with the
Company,
and by
enabling optionees to develop and maintain a significant, long-term stock
ownership position in the Company's
Common
Stock.
The
value realizable from exercisable options is dependent upon the extent to which
the Company's
performance is reflected in the market price of the Company's
Common
Stock at
any
particular point in time.
In
determining
the number of options to be granted to each executive officer, the Compensation
Committee considers input of the Chief Executive Officer with respect to the
executive officers, other than the Chief Executive Officer. These determinations
are based upon compensation surveys conducted during fiscal year 2007 of
executive officers and certain key employees in comparable
companies.
The
members
of the Compensation Committee have submitted this report.
| |
|
Compensation
Committee
|
| |
|
DeSoto
S. Jordan (Chairman)
|
|
James
W. Quinn
|
|
Peter
L. Winslow
|
Certain
Relationships and Related 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. The proceeds of which were used towards the purchase of Gemma Power
Systems, LLC (“GPS”). Two of the investors, MSRI SBIC, L.P. (“MSRI”) and MSR
Fund II, L.P., which acquired 92,793 and 440,540 shares in the offering,
respectively, are controlled by Daniel 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 in the offering, respectively,
are
affiliates of James Quinn, a director of the Company. In addition, James 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 notional amount
of the subordinated note due Kevin Thomas. The remainder of the proceeds were
used for general corporate purposes. Allen SBH and James Quinn acquired 120,000
and 40,000 shares in the offering, respectively. In addition, MSRI acquired
240,000 shares in the offering.
On
January 28, 2005, the Company sold and issued to MSRI 129,032 shares (the
“Shares”) of common stock of the Company pursuant to a Subscription Agreement
between the Company and MSRI (the “Subscription Agreement”). The Shares were
issued at a purchase price of $7.75 per share (“Share Price”), yielding
aggregate proceeds of $999,998. The Shares were issued pursuant to the exemption
provided by Section 4(2) of the Securities Act of 1933, as amended.
Pursuant
to the Subscription Agreement, the Company agreed to issue additional shares
of
Common Stock to MSRI under certain conditions upon the earlier of (i) the
Company’s issuance of additional shares of Common Stock having an aggregate
purchase price of at least $2,500,000 for a consideration per share less than
$7.75, subject to certain exclusions; or (ii) July 31, 2005. The number of
shares to be issued would reduce the average purchase price of the MSRI shares
to be equal to ninety percent of the average bid price of Argan’s common stock
for the thirty days ended July 31, 2005 if the price was less than $7.75. Any
additional shares issued would effectively reduce MSRI’s purchase price per
common share as set forth in the Subscription Agreement.
The
provision in the agreement which allowed MSRI to receive additional shares
under
certain conditions represents a derivative under FAS 133 “Accounting for
Derivative Instruments and Hedging Activities.” Accordingly at January 31, 2005,
$139,000 of the proceeds received upon issuance was accounted for as a liability
for derivative financial instrument. This liability relates to the obligation
to
issue MSRI additional shares under certain conditions. The derivative financial
instrument was subject to adjustment for changes in fair value subsequent to
issuance. The fair value adjustment loss of $343,000 was recorded during the
year ended January 31, 2006 and included in other expense and net loss. The
liability aggregating $482,000 was settled in a non-cash transaction by the
issuance of 95,321 shares of the Company’s common stock on August 13,
2005.
The
Company retained MSRI under a consulting arrangement to assist in identifying
and meeting potential equity investors. Under this consulting arrangement,
the
Company paid MSRI $100,000 during the year ended January 31, 2006.
On
January 31, 2005, the Company entered into a Debt Subordination Agreement with
Kevin Thomas (“Thomas”), the former owner of Vitarich Laboratories, Inc.
(“VLI”), for the cash portion of the additional consideration aggregating
$3,292,000 the Company owed Thomas. The Subordinated debt had an original
maturity of August 1, 2006 and had an interest rate of 10%. On May 5, 2006,
the
Company entered into an extension with Thomas of the maturity date of the
subordinated note to August 1, 2007. On May 8, 2006, the Company utilized $1.8
million of the proceeds from the May 2006 private placement to reduce the amount
of the note. The
remaining principal and interest due on this note was paid on August 31, 2006
utilizing the aforementioned $1.5 million 3 year term note.
The
Company leases administrative, manufacturing and warehouse facilities from
an
individual who is an officer of VLI. SMC’s administrative and maintenance
facilities were rented from a former officer Janet L. Weems through July 2006.
The total expense under these arrangements was $195,000 and $298,000 for the
years ended January 31, 2007 and 2006, respectively. Aggregate future minimum
lease payments due as of January 31, 2007 is $558,000.
The
Company made payments of approximately $122,000 to Kevin Thomas in connection
with leasehold improvements made to the Company’s primary warehouse and
manufacturing facility during the twelve months ended January 31,
2006.
AI
also
entered into a supply agreement with an entity owned by the former shareholder
of VLI whereby the supplier committed to sell to Argan, Inc. (“AI”) and AI
committed to purchase on an as-needed basis, certain organic products. VLI
made
$91,000 and $189,000 in purchases under the supply agreement for the years
ended
January 31, 2007 and 2006.
The
Company also sells its products in the normal course of business to an entity
in
which the former owner of VLI, Kevin Thomas, has an ownership interest. VLI
had
approximately $543,000 and $587,000 in sales with this entity for the years
ended January 31, 2007 and 2006. At January 31, 2007 and 2006, the affiliated
entity owed $155,000 and $157,000, respectively, to VLI.
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth certain information as of January 31, 2007 regarding
the beneficial ownership of common stock by (A) each person known by the Company
to own beneficially more than five percent of the common stock, (B) each
director and director nominee of the Company, (C) each of the "Named Executive
Officers" (as defined in "Executive Compensation - Summary Compensation Table"),
and (D) all directors and nominees, named executive officers and executive
officers of the Company as a group. Unless otherwise indicated, the address
of
each person named in the table below is c/o Argan, Inc., One Church Street,
Suite 401, Rockville, Maryland 20850.
| |
|
Number
of Shares
|
|
Percentage
|
|
|
Name
|
|
Beneficially
Owned(1)
|
|
Beneficially
Owned(1)
(15)
|
|
| |
|
|
|
|
|
|
Joel
M. Canino
|
|
|
1,650,333
|
(2)
|
|
14.4
|
%
|
|
William
F. Griffin, Jr.
|
|
|
1,650,334
|
(3)
|
|
14.4
|
%
|
|
Richard
L. Scott
|
|
|
1,000,000
|
(4)
|
|
8.7
|
%
|
|
Kevin
Thomas
|
|
|
515,829
|
(5)
|
|
4.5
|
%
|
|
MSR
Advisors, Inc.
|
|
|
1,373,270
|
(6)
|
|
12.0
|
%
|
|
Rainer
H. Bosselmann
|
|
|
372,560
|
(7)
|
|
3.3
|
%
|
|
DeSoto
S. Jordan
|
|
|
15,000
|
(8)
|
|
*
|
|
|
William
F. Leimkuhler
|
|
|
—
|
|
|
*
|
|
|
Daniel
A. Levinson
|
|
|
1,388,270
|
(9)
|
|
12.1
|
%
|
|
W.G.
Champion Mitchell
|
|
|
15,000
|
(10)
|
|
*
|
|
|
T.
Kent Pugmire
|
|
|
16,400
|
(11)
|
|
*
|
|
|
James
W. Quinn
|
|
|
94,570
|
(12)
|
|
*
|
|
|
Peter
L. Winslow
|
|
|
53,640
|
(13)
|
|
*
|
|
|
Arthur
F. Trudel
|
|
|
120,000
|
(14)
|
|
1.1
|
%
|
|
All
directors and nominees, named executive officers and executive
officers
as a group (8 persons) (15)
|
|
|
|
|
|
24.9
|
%
|
*
Less
than 1 %
(1)
As used
in this table, a beneficial owner of a security includes any person who,
directly or indirectly, through contract, arrangement, understanding,
relationship or otherwise has or shares (i) the power to vote, or direct the
voting of, such security or (ii) investment power which includes the power
to
dispose, or to direct the disposition of, such security. In addition, a person
is deemed to be the beneficial owner of a security if that person has the right
to acquire beneficial ownership of such security within 60 days of the date
shown above.
(2)
Based
upon a Schedule 13D filed with the Commission by Joel M. Canino on December
19,
2006. Mr. Canino has sole voting and sole dispositive power with respect to
all
of the shares.
(3)
Based
upon a Schedule 13D filed with the Commission by William F. Griffin, Jr. on
December 19, 2006. Mr. Griffin has sole voting and sole dispositive power with
respect to all of the shares.
(4)
Based
upon a Schedule 13D filed with the Commission by Richard L. Scott on December
18, 2006. Mr. Scott has sole voting and dispositive power with respect to all
of
the shares. The shares are being held in an entity wholly-owned by Mr. Scott
named Argan, Investments, LLC.
(5)
Based
upon a Schedule 13D filed with the Commission by Kevin Thomas on January 17,
2007. Mr. Thomas has sole voting and dispositive power with respect to all
of
the shares.
(6) 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 Delaware corporation ("MSRA"),
MSR I SBIC Partners, LLC, a Delaware limited liability company ("MSRI
Partners"), MSR I SBIC, L.P., a Delaware limited partnership ("MSRI"), MSR
Fund
II LP, and Tri-Lev LLC, a Connecticut limited liability company ("Tri-Lev").
Of
such 1,320,270 shares, MSRA has sole voting and dispositive power with respect
to 50,000 warrants and shared voting and dispositive power with respect to
1,320,270 shares; MSRI Partners has sole voting and dispositive power with
respect to 0 shares and shared voting and dispositive power with respect to
879,730 shares; MSRI has sole voting and dispositive power with respect to
879,730 shares and shared voting and dispositive power with respect to 0 shares;
and Tri-Lev has sole voting and dispositive power with respect to 3,000 shares
and shared voting and dispositive power with respect to 3,000 shares. MSR Fund
II LP has sole voting and dispositive power with respect to 440,540 shares
and
shared voting and shared dispositive power with respect to 0 shares. MSR Fund
II
GP, LLC has sole voting and dispositive power with respect to 0 shares and
shared voting and shared dispositive power with respect to 440,540 shares.
Daniel A. Levinson, a director of the Company, is the President of MSRA and
the
Managing Member of MSRI Partners and MSR Fund II GP, LLC. MSRA is the Manager
of
Tri-Lev. MSRI Partners is the General Partner of MSRI. The business address
of
Mr. Levinson, MSRA, MSRI Partners, MSRI, MSR Fund II LP and Tri-Lev is 1 Post
Road, Suite 101, Westport, Connecticut 06880. Each of Mr. Levinson, MSRA, MSRI
Partners, MSRI, MSR Fund II LP and Tri-Lev (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.
(7)
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, all of which are fully vested and
warrants to purchase 60,000 shares held by Mr. Bosselmann.
(8)
Includes
options to purchase 5,000 shares of common stock held by Mr. Jordan, all of
which are fully vested.
(9)
Includes
options to purchase 15,000 shares of common stock held by Mr. Levinson, all
of
which are fully vested. Includes 1,323,270 shares and warrants to purchase
50,000 shares beneficially owned (in the aggregate) by MSRA, MSRI Partners,
MSRI, MSR, Fund II GP and Tri-Lev. Mr. Levinson is the President of MSRA and
the
Managing Member of MSRI Partners. MSRA is the Manager of Tri-Lev. MSRI Partners
is the General Partner of MSRI. The business address of Mr. Levinson is 120
Post
Road West, Suite 101, Westport, Connecticut 06880. Mr. Levinson disclaims
beneficial ownership of all shares and warrants of the Company beneficially
owned by MSRA, MSRI Partners, MSRI and Tri-Lev.
(10)
Includes
options to purchase 15,000 shares of common stock held by Mr. Mitchell, all
of
which are fully vested.
(11)
Includes
options to purchase 15,000 shares of common stock held by Dr. Pugmire, all
of
which are fully vested.
(12)
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, Incorporated and affiliates. Mr. Quinn disclaims beneficial
ownership of the shares held by Allen & Company and affiliates.
(13)
Includes
options to purchase 15,000 shares of common stock held by Mr. Winslow, all
of
which are fully vested. The 43,640 shares held by Mr. Winslow also include:
1,290 shares held by Mr. Winslow; 3,870 shares held by Mr. Winslow as Trustee
for Louise Condit Trust u/d FBO Elinor Winslow; 3,200 shares held by Mr. Winslow
as Trustee for Condit & EC Winslow 41 u/d Trust; 1,900 shares held by Mr.
Winslow as Trustee for Sears B. Condit Trust u/w; 25,800 shares held by Mr.
Winslow as Trustee for Sears B. Condit Trust u/l; and 2,580 shares held by
Mr.
Winslow as Trustee for Andrew N. Winslow Trust u/w.
(14) Includes
10,000 shares owned by Mr. Trudel and options to purchase 50,000 shares of
Common Stock all of which are fully vested and warrants to purchase 60,000
shares held by Mr. Trudel.
(15)
Includes
options to purchase 50,000 shares of Common Stock held by Mr. Bosselmann and
warrants to purchase 60,000 shares of Common Stock held by Mr. Bosselmann,
options to purchase 50,000 shares 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 MSR Advisors, Inc. (of which Mr. Levinson is President), and
options to purchase 90,000 shares of Common Stock held by directors of the
Company.
Securities
Authorized for Issuance Under Equity Compensation Plans
The
following table sets forth information concerning equity compensation plans
of
the Company as of January 31, 2007:
Equity
Compensation Plan Information
| |
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
(a)
|
|
Weighted
average exercise price of outstanding options, warrants and
rights
(b)
|
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders
|
|
|
474,000
|
(1)
|
$
|
5.93
|
|
|
—
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
|
474,000
|
|
$
|
5.93
|
|
|
—
|
|
| (1) |
Represents
244,000 shares issuable upon exercise of options granted under the
2001
Stock Option Plan as of January 31, 2007 and 230,000 shares issuable
upon
exercise of warrants as described below.
|
In
connection with the Company’s private placement in April 2003, the Company
issued warrants to purchase shares of the Company’s common stock at a price of
$7.75 per share with a ten year term. 180,000 of the warrants were granted
to
three individuals who became executive officers of Argan, Inc. upon completion
of the offering. In addition, MSR Advisors, Inc. (MSR) received warrants to
purchase 50,000 shares of the Company’s stock. A director of the Company is the
Chief Executive Officer of MSR. The fair value of the warrants of $849,000
was
recognized as offering costs. All warrants are exercisable.
PROPOSAL
NUMBER TWO
Amendment
to Certificate of Incorporation to Increase the Number of Authorized Shares
of
Common Stock
BACKGROUND
The
Company is currently pursuing a strategic plan involving the diversification
of
its business through business acquisitions and/or other investments. Management
of the company believes that this diversification strategy will provide the
potential for growth and profit. In this connection, on December 8, 2007, the
Company acquired Gemma Power Systems LLC and affiliates which provide a full
range of development, consulting, engineering, procurement, construction,
commissioning, operating and maintenance services to the power energy market
for
a wide range of customers, including public utilities, independent power project
owners, municipalities, public institutions and private industry.
THE
PROPOSAL
The
Certificate of Incorporation of the Company currently authorizes the issuance
of
a total of 12,000,000 shares of Common Stock and 500,000 of preferred stock.
The
Certificate of Incorporation permits the issuance of one or more classes of
Common Stock, subject to the discretion of the Company’s Board of Directors.
As
of May
7, 2007, the record date, 11,094,012 shares of Common Stock were issued and
outstanding, 244,000 shares of Common Stock were reserved for issuance under
stock options granted under the Stock Option Plan (with an additional 24,000
shares reserved for issuance under stock options granted by the Company, but
subject to the proposed amendment to the Stock Option Plan disclosed in Proposal
Number Three). In addition, there were 230,000 shares of Common Stock eligible
for issuance under warrants awarded to executive officers of the Company and
to
an entity controlled by a director of the Company. At May 1, 2007, remaining
authorized shares of Common Stock available for future issuance was 905,988
(which includes the aforementioned 244,000 shares reserved for issuance under
stock options, 24,000 shares awaiting approval for issuance under stock options
and 230,000 warrants eligible for issuance). There are no shares issued and
outstanding for the preferred stock.
The
Board
of Directors considers the proposed increase in the number of authorized shares
desirable because it would give the Board the necessary flexibility to issue
Common Stock in the future in connection with acquisitions and other
transactions which management believes would provide the potential for growth
and profit and for other general corporate purposes. In order to accomplish
these objectives, the Company is seeking to amend the Certificate of
Incorporation to increase the number of authorized shares of the Company’s
Common Stock from 12,000,000 to 30,000,000.
DESCRIPTION
OF PROPOSED AMENDMENT
On
April
18, 2007, the Board of Directors unanimously adopted a resolution proposing
and
declaring the advisability of an amendment to Article 4 of the Certificate
which
would effect an increase in the number of authorized shares of Common Stock
from
12,000,000 to 30,000,000. To become effective, the amendment must also be
adopted by the stockholders of the Company. The resolution amending Section
4 of
the Company’s Certificate to increase the number of authorized shares of the
Company’s Common Stock is set forth on Exhibit A to this Proxy
Statement.
REASONS
FOR PROPOSED AMENDMENT
The
Board
of Directors considers the proposed increase in the number of authorized shares
desirable because it would permit the Board to pursue its diversification plans
on an on-going basis, and would give the Board the necessary flexibility to
issue Common Stock in connection with future acquisitions, investments and
transactions which management believes would provide the potential for growth
and profit. However, no definitive arrangements have been entered into in
connection with any future acquisitions, investments or other transactions
involving the issuance by the Company of shares of its Common Stock.
Notwithstanding the foregoing, with the limited number of shares currently
available, it would be impractical for the Company to evaluate or seek to
consummate business acquisitions or other transactions which, if they could
be
accomplished, might enhance stockholder value. Additional authorized shares
could also be used to raise cash through sales of stock to public and private
investors. If additional shares are available, transactions dependent upon
the
issuance of additional shares would be less likely to be undermined by delays
and uncertainties occasioned by the need to obtain prior stockholder
authorization. The ability to issue shares as deemed in the Company’s best
interests by the Board, will also permit the Company to avoid the expenses
which
are incurred in holding special stockholders’ meetings in the future. The
Company has no current plans for the use of the additional shares which would
be
authorized by this amendment.
CERTAIN
EFFECTS OF THE PROPOSED AMENDMENT
The
issuance of additional shares of Common Stock by the Company may potentially
have an anti-takover effect by making it more difficult to obtain stockholder
approval of various actions, such as a merger or removal of management. The
amendment to the Certificate of Incorporation, if approved, could strengthen
the
position of management and might make the removal of management more difficult,
even if removal would be generally beneficial to the Company’s stockholders. The
authorization to issue the additional shares of Common Stock would provide
management with a capacity to negate the effects of unfriendly tender offerors
through the issuance of securities to others who are friendly or desirable
to
management.
VOTE
REQUIRED
As
discussed above, to become effective, the amendment must be adopted by the
Board
of Directors and the stockholders. The Board already has adopted the amendment.
Under Delaware law and the Company’s Certificate of Incorporation, the amendment
must be approved by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock
The
Officers and Directors of the Company will vote the shares of Common Stock
beneficially owned or controlled by them (representing approximately 15% of
the
shares of Common Stock issued and outstanding) in favor of the proposed
amendment to the Company’s Certificate of Incorporation.
The
Board
of Directors recommends that the stockholders vote “For” the approval of the
amendment to the Company’s Certificate of Incorporation increasing the number of
authorized shares of Common Stock to 30,000,000.
PROPOSAL
NUMBER THREE
Amendment
to Stock Option Plan
BACKGROUND
On
April
18, 2007, the Board of Directors adopted a resolution, subject to stockholder
approval, to amend the Stock Option Plan to increase 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 April 30,
2007, none of the 250,000 shares currently available for issuance under the
Stock Option Plan remained available for issuance pursuant to new option grants
and, in addition, the Company has granted options for an additional 24,000
shares subject to the adoption of the proposed amendment to the Stock Option
Plan.
The
Company has recently acquired Gemma Power Systems LLC and affiliates. This
acquisition has added management and non-management employees to the Company’s
existing workforce. In addition, the Company may add management and
non-management employees as a result of future business acquisitions or
otherwise. The Board of Directors believes that it is important to have
additional shares available under the Stock Option Plan to provide adequate
incentives to the Company’s workforce.
The
material features of the Stock 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 Stock Option Plan, a copy of which has been
filed with the Securities and Exchange Commission.
PURPOSE
The
purpose of the Stock 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.
ADMINISTRATION
The
Plan
is administered by the Board of Directors of the Company.
ELIGIBILITY
The
Stock
Option Plan currently provides for the grant to employees, officers, directors
and consultants of options to purchase up to 250,000 shares of Common Stock.
The
proposed amendment would increase the number of shares issuable upon exercise
of
options to 650,000. 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 practically or fully
exercised, the number of shares of Common Stock that may be purchased under
each
option and the option price.
TERMS
OF
OPTIONS
The
per
share exercise 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
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
under the Plan must be granted no later than July 19, 2011. Incentive stock
options granted under the 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 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 options 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 ender 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.
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 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 Stock Option Plan.
FEDERAL
INCOME TAX INFORMATION
Options
granted under the Stock Option Plan may be either “incentive stock options,” as
defined in Section 422 of the Code, or nonstatutory options.
If
an
option granted under the Stock 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 of 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 exercise
of a nonstatutory option.
The
foregoing is only a summary of the effect of federal income taxation upon the
optionee and the Company with respect to the grant and exercise of options
under
the Stock 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.
VOTE
REQUIRED
To
become
effective, the amendment to the Stock Option Plan must be approved by the
affirmative vote of a majority of the shares of Common Stock present in person
or represented by proxy and voting.
The
officers and directors of the Company will vote the shares of Common Stock
beneficially owned or controlled by them (representing approximately 15% of
the
shares of Common Stock issued and outstanding) in favor of the proposed
amendment to the Company’s Stock Option Plan.
The
Board
of Directors recommends that the stockholders vote “For” the approval of the
amendment to the Stock Option Plan to increase the number of authorized shares
of Common Stock issuable thereunder to 650,000.
PROPOSAL
NUMBER FOUR
Ratification
of Independent Registered Public Accountants
The
persons named in the enclosed proxy will vote to ratify the selection of
Grant
Thornton LLP as the Company's independent registered public accountants for
the
fiscal year ending January 31, 2008 unless otherwise directed by the
stockholders.
Ernst
& Young (E&Y) audited the Company’s financial statements for its fiscal
year ended January 31, 2006. The Company dismissed E&Y as the Company's
independent registered public accountants in May 2006. The decision to dismiss
E&Y was approved by the Audit Committee of the Company on May 18, 2006, and
E&Y was notified of the decision on May 18, 2006. The Company found no fault
with the services rendered by E&Y to the Company.
During
the Company's fiscal years ended January 31, 2006 and January 31, 2005, there
were no disagreements with E&Y on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which,
if not resolved to the satisfaction of E&Y, would have caused it to make
references to the subject matter of the disagreement in connection with its
report. E&Y’s reports on the Company's financial statements for fiscal years
2006 and 2005 did not contain an adverse opinion or a disclaimer of opinion,
nor
were they qualified or modified as to uncertainty, audit scope or accounting
principles. During the Company's fiscal years 2006 and 2005 and the subsequent
interim period preceding the decision to change principal accountants, there
were no reportable events as defined in Regulation S-K Item
304(a)(1)(v).
On
May
19, 2006, Grant Thornton LLP was engaged as the Company's independent registered
public accountants, and Grant Thornton audited the Company’s financial
statements for its fiscal year ended January 31, 2007.
Representatives
of Grant Thornton are expected to be present at the Meeting. If present, the
representatives will have an opportunity to make a statement, and it is expected
that the representatives will be available to respond to appropriate
questions.
VOTE
REQUIRED
To
ratify
the appointment of Grant Thornton, an affirmative vote of a majority of the
shares of Common Stock present in person or represented by proxy and voting
is
required.
The
officers and directors of the Company will vote the shares of Common Stock
beneficially owned or controlled by them (representing approximately 15% of
the
shares of Common Stock issued and outstanding) in favor of the ratification
of
the appointment of Grant Thornton.
The
Board
of Directors recommends that the stockholders vote “For” the ratification of the
appointment of Grant Thornton.
Fees
Paid to Independent Registered Public Accountants
The
following table shows the fees for professional services provided by Grant
Thornton LLP for the fiscal year ended January 31, 2007 and by Ernst & Young
LLP for the fiscal year ended January 31, 2006.
| |
|
2007
|
|
2006
|
|
|
Audit
Fees
|
|
$
|
305,000
|
|
$
|
573,000
|
|
|
Audit-Related
Fees
|
|
|
28,000
|
|
|
5,000
|
|
|
Tax
Fees
|
|
|
56,000
|
|
|
38,500
|
|
|
All
Other Fees
|
|
|
5,000
|
|
|
—
|
|
|
Total
|
|
$
|
394,000
|
|
$
|
616,500
|
|
Audit
Fees.
This
category includes the audit of the Company’s annual financial statements, review
of financial statements included in the Company’s Form 10-QSB quarterly
reports and services that are normally provided by the independent auditors
in
connection with SEC registration statements, assistance with SEC comment letters
and accounting and reporting consultation for those fiscal years.
Audit
Related Fees.
This
category consists of professional services for due diligence in connection
with
proposed acquisitions.
Tax
Fees.
This
category consists of professional services rendered for tax compliance, tax
advice and tax planning.
All
Other Fees. This
category consists of services related to assistance with documenting internal
control policies and procedures over financial reporting.
Stockholder
Proposals
In
order
to be considered for inclusion in the Proxy Statement relating to the 2008
Annual Meeting, any proposal by a record holder of Common Stock must be received
by the Company at its principal offices in Rockville, Maryland on or before
January 2, 2008. A proponent of such a proposal must comply with the proxy
rules
under the Securities Exchange Act of 1934, as amended.
Solicitation
All
costs
and expenses associated with soliciting proxies will be borne by the Company.
In
addition to the use of the mails, proxies may be solicited by the directors,
officers and employees of the Company by personal interview, telephone,
telegram, facsimile or electronic mail. Directors, officers and employees will
not be additionally compensated for such solicitation but may be reimbursed
for
their out-of-pocket expenses. Arrangements will also be made with custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of Common Stock and the Company will reimburse custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses incurred
in
connection therewith.
Other
Matters
As
of the
date of this Proxy Statement, the Board of Directors is not aware of any other
business or matters to be presented for consideration at the Meeting other
than
as set forth in the Notice of Meeting attached to this Proxy Statement. However,
if any other business shall come before the Meeting or any adjournment or
postponement thereof and be voted upon, the enclosed proxy shall be deemed
to
confer discretionary authority on the individuals named to vote the shares
represented by the proxy as to any such matters.
Annual
Report on Form 10-KSB
The
Company will provide without charge to each beneficial holder of its Common
Stock on the Record Date, upon the written request of any such person, copies
of
the Company's Annual Report on Form 10-KSB for the fiscal year ended January
31,
2007, as filed with the Commission. Any such request should be made in writing
to Corporate Secretary, Argan, Inc., One Church Street, Suite 401, Rockville,
Maryland 20850, telephone 301-315-0027.
Exhibit
A
Argan,
Inc.
Board
Resolution
RESOLVED,
that
Board of Directors declares that it is advisable to amend Article Fourth of
the
Certificate of Incorporation of the Company, as follows:
“Fourth.
The total number of shares of common stock this Corporation is authorized to
issue is 30,000,000, par value $0.15 per share; and it is further
RESOLVED,
that
the foregoing amendment to the Certificate of Incorporation is advisable and
that the executive officers of the Company be and they are hereby authorized
to
present the foregoing amendment to the stockholders of the Company for their
approval and if the foregoing amendment is so approved, the executive officers
of the Company be and they hereby are authorized to prepare and file with the
Delaware Secretary of State a Certificate of Amendment to the Certificate of
Incorporation embodying the foregoing amendment and to take such other actions
as they may deem appropriate to effect the purpose and intent of this and the
foregoing resolution and to comply with applicable law with respect thereto.
ARGAN,
INC.
One
Church Street, Suite 401
Rockville,
Maryland 20850
Proxy
for Annual Meeting of Stockholders to be held June 19,
2006
Solicited
on Behalf of the Board of Directors
The
undersigned hereby appoint(s) Rainer H. Bosselmann and Arthur F. Trudel, and
each of them, attorneys with full power of substitution, to vote as directed
below all shares of Common Stock of Argan, Inc. registered in the name of the
undersigned, or which the undersigned may be entitled to vote, at the Annual
Meeting of Stockholders to be held at the offices of Allen & Company LLC
located at 711 Fifth Avenue, 9th Floor, New York, New York 10022, on June 19,
2007 at 11:00 a.m. and at any adjournment or postponement thereof.
1.
Election of Directors.
o
FOR all nominees listed
below (except as marked to the contrary below)
o
WITHHOLD AUTHORITY to vote for all
nominees listed below
Nominees:
Rainer
H.
Bosselmann
DeSoto
S.
Jordan
William
F. Leimkuhler
Daniel
A.
Levinson
W.G.
Champion Mitchell
James
W.
Quinn
Peter
L.
Winslow
(Instruction:
To Withhold Authority to Vote for any Individual Nominee Strike a Line Through
the Nominee's Name in the List Above.)
2.
Amendment to Certificate of Incorporation to increase the number of authorized
shares of Common Stock.
o
FOR o
AGAINST o
ABSTAIN
3.
Amendment of Stock Option Plan.
o
FOR o
AGAINST o
ABSTAIN
4.
Approval of the Ratification of Independent Registered Public
Accountants.
o
FOR o
AGAINST o
ABSTAIN
5.
As Such Proxies May in Their Discretion Determine in Respect of Any Other
Business Properly to Come Before Said Meeting (The Board of Directors Knowing
of
No Such Other Business).
The
directors recommend a vote FOR items 1, 2, 3 and 4.
This
Proxy, when properly executed, will be voted in the manner directed herein.
If
no direction is made, this Proxy will be voted for Items 1, 2, 3 and 4 as
proposed.
DATED____________________,
2007
____________________________________
signature
____________________________________
signature
(if held jointly)
(Please
sign exactly as name appears on this card. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership or limited liability company, please sign in partnership or limited
liability company name by authorized person).
PLEASE
MARK, SIGN, DATE AND RETURN PROXY CARD
PROMPTLY
USING THE ENCLOSED ENVELOPE