NOTE 9 – STOCK-BASED COMPENSATION

The Company’s board of directors may make awards under the 2011 Stock Plan (the “2011 Plan”) to officers, directors and key employees. Awards may include nonqualified stock options (“NSOs”), incentive stock options (“ISOs”), and restricted or unrestricted stock. The specific provisions for each award made pursuant to the terms of the 2011 Plan are documented in a written agreement between the Company and the awardee.

All stock options awarded under the 2011 Plan shall have an exercise price per share at least equal to the common stock’s market value on the date of grant. Stock options shall have terms no longer than ten years. Typically, stock options are awarded with one-third of each stock option vesting on each of the first three anniversaries of the corresponding award date. As of April 30, 2020, there were approximately 1.7 million shares of the Company’s common stock reserved for issuance under the 2011 Plan; this number includes 166,999 shares of common stock available for future awards.

In April 2020, the Company's board of directors approved the Argan, Inc. 2020 Stock Plan (the "2020 Plan"). The activation of the 2020 Plan, and the allocation of 500,000 shares of the Company's common stock for issuance thereunder, also requires the approval of the Company's stockholders which is expected to occur at the Company's 2020 Annual Meeting of Stockholders on June 23, 2020. The features of the 2020 Plan are similar to those included in the 2011 Plan which will expire in July 2021.

Summaries of stock option activity under the Company’s approved stock option plans for the three months ended April 30, 2020 and 2019, along with corresponding weighted average per share amounts, are presented below (shares in thousands):


		Exercise		Remaining
	Shares	Price		Term (years)	Fair Value
Outstanding, February 1, 2020	1,271	$	44.83	7.18	$	11.06
Granted	172	$	33.81
Exercised	(10)	$	17.67
Forfeited	(2)	$	46.35
Outstanding, April 30, 2020	1,431	$	43.69	7.33	$	10.45
Exercisable, April 30, 2020	874	$	45.78	6.17	$	11.74


		Exercise		Remaining
	Shares	Price		Term (years)	Fair Value
Outstanding, February 1, 2019	1,140	$	44.01	7.54	$	11.22
Granted	92	$	50.30
Exercised	(59)	$	26.36
Forfeited	(14)	$	51.13
Outstanding, April 30, 2019	1,159	$	45.34	7.64	$	11.42
Exercisable, April 30, 2019	729	$	45.90	6.67	$	11.97

The changes in the number of non-vested options to purchase shares of common stock for the three months ended April 30, 2020 and 2019, and the weighted average fair value per share for each number, are presented below (shares in thousands):


	Shares	Fair Value
Non-vested, February 1, 2020	448	$	9.74
Granted	172	$	5.68
Vested	(61)	$	10.21
Forfeited	(2)	$	11.68
Non-vested, April 30, 2020	557	$	8.42


	Shares	Fair Value
Non-vested, February 1, 2019	375	$	10.05
Granted	92	$	11.68
Vested	(33)	$	8.74
Forfeited	(4)	$	11.68
Non-vested, April 30, 2019	430	$	10.48

Pursuant to the terms of the 2011 Plan and as described in the corresponding written agreements with the executives, the Company awarded performance-based restricted stock units to two senior executives in April 2020, 2019 and 2018 covering 45,000, 36,000 and 36,000 maximum numbers of shares of common stock , respectively, plus a number of shares to be determined based on the amount of cash dividends deemed paid on shares earned pursuant to the awards. The release of the stock restrictions depends on the total return performance of the Company’s common stock measured against the performance of a peer-group of common stocks over three-year periods.The award-date fair value amounts for restricted stock units were determined by using the per share market price of the Company’s common stock on the dates of award and the target number of shares for the awards (50% of the maximum number), by assigning equal probabilities to the thirteen possible payout outcomes at the ends of the three-year vesting periods, and by computing the weighted average of the outcome amounts. For each case, the estimated fair value amount was calculated to be 88.5% of the aggregate market value of the target number of shares on the award date.

The fair values of stock options and restricted stock units are recorded as stock compensation expense over the vesting periods of the corresponding awards. Expense amounts related to stock awards were $0.6 million and $0.4 million for the three months ended April 30, 2020 and 2019, respectively. At April 30, 2020, there was $3.6 million in unrecognized compensation cost related to outstanding stock awards that the Company expects to expense over the next three years.

The total intrinsic value amounts of the stock options exercised during the three months ended April 30, 2020 and 2019 were $0.3 million and $1.4 million, respectively. At April 30, 2020, the aggregate market value amounts of the shares of common stock subject to outstanding and exercisable stock options that were "in-the-money" exceeded the aggregate exercise prices of such options by $3.4 million and $2.7 million, respectively.

The Company estimates the weighted average fair value of stock options on the date of award using a Black-Scholes option pricing model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The Company believes that its past stock option exercise activity is sufficient to provide it with a reasonable basis upon which to estimate the expected life of newly awarded stock options. Risk-free interest rates are determined by blending the rates for three to five year US Treasury notes. The dividend yield is based on the Company's current annual dividend amount. The calculations of the expected volatility factors are based on the monthly closing prices of the Company's common stock for the five-year periods preceding the dates of the corresponding awards.

The fair value amounts of stock options granted during the three months ended April 30, 2020 and 2019 were estimated on the corresponding dates of the awards using the Black-Scholes option-pricing model reflecting the following weighted average assumptions:


	Three Months Ended April 30,
	2020		2019
Dividend yield	3.0	%	2.0	%
Expected volatility	30.0	%	34.0	%
Risk-free interest rate	0.5	%	2.4	%
Expected life (in years)	3.4		3.3