UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of January 2016
Commission File Number: 001-33655
PARAGON SHIPPING INC.
(Name of Registrant)
15 Karamanli Ave., GR 166 73, Voula,
Greece
(Address of principal
executive office)
Indicate
by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form
20-F x
Form 40-F ¨
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
Special Meeting of Shareholders
Paragon Shipping Inc.
(the “Company”) has announced that its special meeting of shareholders, originally scheduled to be held on January
26, 2016 has been adjourned to February 12, 2016 (the “Special Meeting”). In that regard, attached hereto as Exhibits
99.1, 99.2 and 99.3 are copies of (i) the Amended and Restated Notice of Special Meeting, (ii) Amended and Restated Proxy Statement,
and (iii) Form of Proxy Card, respectively.
The Company’s
Annual Report on Form 20-F (the “Annual Report”), which contains the Company’s audited financial statements for
the year ended December 31, 2014, as well as copies of the Proxy Statement and form of Proxy Card for the Special Meeting, are
being posted on the Company’s website at http://www.paragonship.com/agm-materials.php. Please note that the form of Proxy
Card on the website is for information purposes only and cannot be used to vote.
SUBMITTED HEREWITH:
Exhibit Number |
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Description
of Exhibit |
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99.1 |
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Amended and Restated Notice of Special Meeting of Stockholders |
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99.2 |
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Amended and Restated Proxy Statement |
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99.3 |
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Form of Proxy Card, incorporated by reference to Exhibit 99.3 of the Company’s Report on Form 6-K, filed with the Securities and Exchange Commission on December 24, 2015 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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PARAGON SHIPPING INC. |
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Date: January 14, 2016 |
By: |
/s/ NIKOLAOS ARACHOVAS |
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Nikolaos Arachovas |
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Chief Financial Officer |
Exhibit 99.1
PARAGON SHIPPING INC.
15 Karamanli Ave.
166 73, Voula, Greece
AMENDED AND RESTATED
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 12, 2016
To the Shareholders of Paragon Shipping
Inc.:
A Special Meeting
of Shareholders (the “Special Meeting”) of Paragon Shipping Inc., a corporation organized under the laws of the Republic
of the Marshall Islands (the “Company” or “Paragon”) will be held on February 12, 2016 at the principal
executive offices of Paragon Shipping Inc. at 15 Karamanli Ave., 166 73, Voula, Greece, at 12:00 pm Greek time/5:00 am Eastern
Standard Time. The purpose of the Special Meeting is as follows:
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To grant discretionary authority to the Company’s board of directors to (A) amend the Amended and Restated Articles of Incorporation of the Company to effect one or more consolidations of the issued and outstanding shares of common stock, pursuant to which the shares of common stock would be combined and reclassified into one share of common stock ratios within the range from 1-for-2 up to 1-for-50 (the “Reverse Stock Split”) and (B) determine whether to arrange for the disposition of fractional interests by shareholder entitled thereto, to pay in cash the fair value of fractions of a share of common stock as of the time when those entitled to receive such fractions are determined, or to entitle shareholder to receive from the Company’s transfer agent, in lieu of any fractional share, the number of shares of common stock rounded up to the next whole number, provided that, (X) the Company shall not effect Reverse Stock Splits that, in the aggregate, exceeds 1-for-50, and (Y) any Reverse Stock Split is completed no later than the first anniversary of the date of the Special Meeting. |
Our Board of Directors
has fixed the close of business on December 14, 2015 as the record date for determining those shareholders entitled to notice of,
and to vote at, the Special Meeting and any adjournments or postponements thereof.
Whether or not you
expect to be present, please sign, date and return the enclosed proxy card in the pre-addressed envelope provided for that purpose
as promptly as possible. No postage is required if mailed in the United States.
Please note that
this notice of the Special Meeting amends and restates the notice dated December 24, 2015, which stated that the Special Meeting
will be held on January 26, 2016. The Company has adjourned the meeting to February 12, 2016.
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By Order of the Board of Directors, |
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Aikaterini Stoupa |
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Secretary |
Voula, Greece
January 14, 2016
All shareholders are invited to attend
the Special Meeting in person. Those shareholders who are unable to attend are respectfully urged to execute and return the proxy
card enclosed with this Proxy Statement as promptly as possible. Shareholders who execute a proxy card may nevertheless attend
the Special Meeting, revoke their proxy and vote their shares in person. “Street name” shareholders who wish to vote
their shares in person will need to obtain a voting instruction form from the brokers or nominees in whose name their shares are
registered.
Exhibit 99.2
PARAGON SHIPPING INC.
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 12, 2016
AMENDED AND RESTATED
PROXY STATEMENT
TIME, DATE AND PLACE OF SPECIAL MEETING
This Proxy Statement
is furnished in connection with the solicitation by the Board of Directors of Paragon Shipping Inc., a corporation organized under
the laws of the Republic of the Marshall Islands (the “Company” or “Paragon”), of proxies from the holders
of our common stock, par value $0.001 per share, for use at a Special Meeting of Shareholders (the “Special Meeting”)
to be held at the principal executive offices of Paragon Shipping Inc. at 15 Karamanli Ave., 166 73 Voula, Greece, at 12:00 pm
Greek time/5:00 am Eastern Standard Time, on February 12, 2016, and at any adjournments or postponements thereof, pursuant to the
enclosed Notice of Special Meeting.
Please note that
this proxy statement for the Special Meeting amends and restates the proxy statement dated December 24, 2015, which stated that
the Special Meeting will be held on January 26, 2016. The Company has adjourned the meeting to February 12, 2016 and is providing
this amended and restated proxy statement to provide additional disclosure to the Company’s shareholders.
The approximate date
this Proxy Statement is being sent to shareholders is January 21, 2015. Shareholders should review the information provided herein
or made available in conjunction with our Special Meeting. The Notice of Special Meeting of Shareholders and related materials,
including the Company's 2014 annual report containing the Company's audited financial statements for the fiscal year ended December
31, 2014 (the "2014 Annual Report"), which accompany this proxy statement, are also available on the Company's website
at http://www.paragonship.com/agm-materials.php.
INFORMATION CONCERNING PROXY
The enclosed proxy
is solicited on behalf of our Board of Directors. The giving of a proxy does not preclude the right to vote in person should any
shareholder giving the proxy so desire. Shareholders have an unconditional right to revoke their proxy at any time prior to the
exercise thereof, either in person at the Special Meeting or by filing with our Secretary at our headquarters a written revocation
or duly executed proxy bearing a later date; no such revocation will be effective, however, until written notice of the revocation
is received by us at or prior to the Special Meeting.
The cost of preparing,
assembling and mailing this Proxy Statement, the Notice of Special Meeting and the enclosed proxy is to be borne by us. In addition
to the use of mail, our employees may solicit proxies personally and by telephone. Our employees will receive no compensation for
soliciting proxies other than their regular salaries. We may request banks, brokers and other custodians, nominees and fiduciaries
to forward copies of the proxy materials to their principals and to request authority for the execution of proxies. We will reimburse
such persons for their expenses in doing so. In addition, we have engaged Alliance Advisors, LLC, 200 Broadacres Drive, 3rd
Floor, Bloomfield, New Jersey 07003 as our proxy solicitor to help us solicit proxies from brokers, banks or other nominees. We
will pay Alliance Advisors, LLC a fee of approximately $5,000, plus $2,000 in costs and expenses, relating to the solicitation
of proxies for the Special Meeting.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, our shareholders
will consider and vote upon the following matter:
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To consider and vote upon a proposal to grant discretionary authority to the Company’s Board of Directors to (A) amend the Amended and Restated Articles of Incorporation of the Company to effect one or more consolidations of the issued and outstanding shares of common stock, pursuant to which the shares of common stock would be combined and reclassified into one share of common stock at ratios within the range from 1-for-2 up to 1-for-50 (the “Reverse Stock Split”) and (B) determine whether to arrange for the disposition of fractional interests by shareholder entitled thereto, to pay in cash the fair value of fractions of a share of common stock as of the time when those entitled to receive such fractions are determined, or to entitle shareholder to receive from the Company’s transfer agent, in lieu of any fractional share, the number of shares of common stock rounded up to the next whole number, provided that, (X) the Company shall not effect Reverse Stock Splits that, in the aggregate, exceeds 1-for-50, and (Y) any Reverse Stock Split is completed no later than the first anniversary of the date of the Special Meeting. |
Unless contrary instructions
are indicated on your proxy, all shares of common stock represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth herein) will be voted in favor of the proposal described
in the Notice of Special Meeting. The Board of Directors knows of no other business that may properly come before the Special Meeting;
however, if other matters properly come before the Special Meeting, it is intended that the persons named in the proxy will vote
thereon in accordance with their best judgment. In the event a shareholder specifies a different choice by means of the shareholder's
proxy, the shareholder’s shares will be voted in accordance with the specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING
RIGHTS
Our Board of Directors
previously set the close of business on December 14, 2015 as the record date for determining which of our shareholders are entitled
to notice of and to vote at the Special Meeting (“Record Date”). As of the Record Date, there were 25,144,685 shares
of our common stock that are entitled to be voted at the Special Meeting. Each share of common stock is entitled to one vote on
each matter submitted to shareholders for approval at the Special Meeting.
The attendance, in
person or by proxy, of the holders of a majority of the outstanding shares of our common stock entitled to vote at the Special
Meeting is necessary to constitute a quorum.
The affirmative vote
of the holders of a majority of the shares of common stock present in person or by proxy at the Special Meeting will be required
to approve the granting of discretionary authority to the Company’s Board of Directors to (A) amend the Amended and Restated
Articles of Incorporation of the Company to effect one or more consolidations of the issued and outstanding shares of common stock,
pursuant to which the shares of common stock would be combined and reclassified into one share of common stock at ratios within
the range from 1-for-2 up to 1-for-50 (the “Reverse Stock Split”) and (B) determine whether to arrange for the disposition
of fractional interests by shareholder entitled thereto, to pay in cash the fair value of fractions of a share of common stock
as of the time when those entitled to receive such fractions are determined, or to entitle shareholder to receive from the Company’s
transfer agent, in lieu of any fractional share, the number of shares of common stock rounded up to the next whole number, provided
that, (X) the Company shall not effect Reverse Stock Splits that, in the aggregate, exceeds 1-for-50, and (Y) any Reverse Stock
Split is completed no later than the first anniversary of the date of the Special Meeting, and for any other proposals that may
come before the Special Meeting. If less than a majority of the outstanding shares entitled to vote is represented at the Special
Meeting, a majority of the shares so represented may adjourn the Special Meeting to another date, time or place, and notice need
not be given of the new date, time or place if the new date, time or place is announced at the meeting before an adjournment is
taken.
Prior to the Special
Meeting, we will select one or more inspectors of election for the meeting. Such inspector(s) shall determine the number of shares
of common stock represented at the meeting, the existence of a quorum and the validity and effect of proxies, and shall receive,
count and tabulate ballots and votes and determine the results thereof. Abstentions will be considered as shares present and entitled
to vote at the Special Meeting and will be counted as votes cast at the Special Meeting, but will not be counted as votes cast
for or against any given matter.
PROPOSAL 1: REVERSE SPLIT OF THE COMMON
STOCK OF THE COMPANY
Our Board of Directors
has adopted resolutions (1) declaring that submitting an amendment to the Company’s Amended and Restated Articles of
Incorporation to effect the Reverse Stock Split of our issued and outstanding Common Stock, as described below, was advisable and
(2) directing that a proposal to approve the Reverse Stock Split be submitted to the holders of our Common Stock for their
approval.
The form of the proposed
amendment to the Company’s Amended and Restated Articles of Incorporation to effect reverse stock splits of our issued and
outstanding Common Stock will be substantial as set forth on Appendix A (subject to any changes required by applicable law). Approval
of the proposal would permit (but not require) our Board of Directors to effect one or more reverse stock splits of our issued
and outstanding common stock by a ratio of not less than one-for-two and not more than one-for-fifty, with the exact ratio to be
set at a number within this range as determined by our Board of Directors in its sole discretion, provided that the Board of Directors
determines to effect the Reverse Stock Split and such amendment is filed with the appropriate authorities in the Marshall Islands
no later than one year after the date of our Special Meeting. The Company shall not effect Reverse Stock Splits that, in the
aggregate, exceeds one-for-fifty. We believe that enabling our Board of Directors to set the ratio within the stated range will
provide us with the flexibility to implement the Reverse Stock Split in a manner designed to maximize the anticipated benefits
for our shareholders. In determining a ratio, if any, following the receipt of shareholder approval, our Board of Directors
may consider, among other things, factors such as:
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the continuing listing requirements of various stock exchanges; |
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the historical trading price and trading volume of our Common Stock; |
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the number of shares of our Common Stock outstanding; |
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the then-prevailing trading price and trading volume of our Common Stock and the anticipated impact of the Reverse Stock Split on the trading market for our Common Stock; |
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the anticipated impact of a particular ratio on our ability to reduce administrative and transactional costs; and |
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prevailing general market and economic conditions. |
Our Board of Directors
reserves the right to elect to abandon the Reverse Stock Split, including any or all proposed reverse stock split ratios, if it
determines, in its sole discretion, that the Reverse Stock Split is no longer in the best interests of the Company and its stockholders.
Depending on the ratio
for the Reverse Stock Split determined by our Board of Directors, no less than two and no more than fifty shares of existing Common
Stock, as determined by our Board of Directors, will be combined into one share of Common Stock. The Company shall not effect
Reverse Stock Splits that, in the aggregate, exceed one-for-fifty. Our Board of Directors will have the discretionary authority
to determine whether to arrange for the disposition of fractional interests by holder entitled thereto, to pay in cash the fair
value of fractions of a share as of the time when those entitled to receive such fractions are determined, or to entitle holders
to receive from the Company transfer agent, in lieu of any fractional share, the number of shares rounded up to the next whole
number. The amendment to our Articles of Incorporation to effect a Reverse Stock Split, if any, will include only the reverse
split ratio determined by our Board of Directors to be in the best interests of our shareholders and all of the other proposed
amendments at different ratios will be abandoned.
Background and Reasons for the Reverse
Stock Split; Potential Consequences of the Reverse Stock Split
Our Board of Directors
is submitting multiple Reverse Stock Splits to our stockholders for approval with the primary intent of increasing the market price
of our Common Stock to enhance our ability to meet the continuing listing requirements of the NASDAQ Capital Market and to make
our Common Stock more attractive to a broader range of institutional and other investors. The Company currently does not have
any plans, arrangements or understandings, written or oral, to issue any of the authorized but unissued shares that would become
available as a result of the Reverse Stock Split. In addition to increasing the market price of our Common Stock, the Reverse
Stock Split would also reduce certain of our costs, as discussed below. Accordingly, for these and other reasons discussed
below, we believe that effecting the Reverse Stock Splits is in the Company’s and our stockholders’ best interests.
We believe that the
Reverse Stock Split will enhance our ability to maintain the necessary price for continued listing on the NASDAQ Capital Market. The
NASDAQ Capital Market requires, among other items, an initial bid price of least $4.00 per share and following initial listing,
maintenance of a continued price of at least $1.00 per share. Reducing the number of outstanding shares of our Common
Stock should, absent other factors, increase the per share market price of our Common Stock, although we cannot provide
any assurance that our minimum bid price would remain following the Reverse Stock Split over the minimum bid price requirement
of any such stock exchange.
On May 14, 2015, we
received a letter from The NASDAQ Stock Market LLC stating that, for the previous 30 consecutive business days, the bid price of
our common stock closed below the minimum $1.00 per share, the minimum closing bid price required by the continued listing requirements
of NASDAQ set forth in Listing Rule 5550(a)(2). We had an initial 180 calendar days, which expired on November 10, 2015
(the “Initial Compliance Period”), to regain compliance with the “Minimum Bid Price Rule”, by maintaining
a closing bid price of at least $1.00 per share for a minimum of ten consecutive business days during the Compliance Period.
We did not regain compliance by November 10, 2015, however, we were eligible for an additional grace period of 180 calendar days,
as we satisfied the continued listing requirement for market value of publicly held shares and all other initial listing standards
(with the exception of the Minimum Bid Price Rule) for listing on The NASDAQ Capital Market, and submitted a timely notification
to NASDAQ of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split of our
common stock, if necessary. This Reverse Stock Split will satisfy our commitment to NASDAQ to meet the continued listing criteria.
In addition, to the extent necessary under any agreements with third parties, we will effectuate a Reverse Stock Split to ensure
compliance with our obligations thereunder.
Additionally, we believe
that the Reverse Stock Split will make our Common Stock more attractive to a broader range of institutional and other investors,
as we have been advised that the current market price of our Common Stock may affect its acceptability to certain institutional
investors, professional investors and other members of the investing public. Many brokerage houses and institutional
investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage
individual brokers from recommending low-priced stocks to their customers. In addition, some of those policies and practices
may function to make the processing of trades in low-priced stocks economically unattractive to brokers. Moreover, because
brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on
higher-priced stocks, the current average price per share of common stock can result in individual stockholders paying transaction
costs representing a higher percentage of their total share value than would be the case if the share price were substantially
higher. We believe that the Reverse Stock Split will make our Common Stock a more attractive and cost effective investment
for many investors, which will enhance the liquidity of the holders of our Common Stock.
Reducing the number
of outstanding shares of our Common Stock through the Reverse Stock Split is intended, absent other factors, to increase the per
share market price of our Common Stock. However, other factors, such as our financial results, market conditions and
the market perception of our business may adversely affect the market price of our Common Stock. As a result, there
can be no assurance that the Reverse Stock Splits, if completed, will result in the intended benefits described above, that the
market price of our Common Stock will increase following the Reverse Stock Splits or that the market price of our Common Stock
will not decrease in the future. Additionally, we cannot assure you that the market price per share of our Common Stock
after the Reverse Stock Split will increase in proportion to the reduction in the number of shares of our Common Stock outstanding
before the Reverse Stock Split. Accordingly, the total market capitalization of our Common Stock after the Reverse Stock
Split may be lower than the total market capitalization before the Reverse Stock Split.
Procedure for Implementing the Reverse
Stock Split
The Reverse Stock Split,
if approved by our stockholders, would become effective upon the filing or such later time as specified in the filing (the “Effective
Time”) of a certificate of amendment to our Amended and Restated Articles of Incorporation with the Registrar of Corporation
of the Marshall Islands. The exact timing of the filing of the certificate of amendment that will effect the Reverse
Stock Split will be determined by our Board of Directors based on its evaluation as to when such action will be the most advantageous
to the Company and our stockholders. In addition, our Board of Directors reserves the right, notwithstanding stockholder
approval and without further action by the stockholders, to elect not to proceed with the Reverse Stock Split if, at any time prior
to filing the amendment to the Company’s Amended and Restated Articles of Incorporation, our Board of Directors, in its sole
discretion, determines that it is no longer in our best interest and the best interests of our stockholders to proceed with the
Reverse Stock Split. If a certificate of amendment effecting the Reverse Stock Split has not been filed with the Registrar
of Corporations of the Marshall Islands within one year from the Special Meeting, our Board of Directors will abandon the Reverse
Stock Split.
Effect of the Reverse
Stock Split on Holders of Outstanding Common Stock
Depending on the ratio
for the Reverse Stock Split determined by our Board of Directors, a minimum of two and a maximum of fifty shares in aggregate of
existing common stock will be combined into one new share of common stock. Based on 25,144,685 shares of common stock
issued and outstanding as of the Record Date, immediately following the reverse split the Company would have approximately 12,572,343
shares of common stock issued and outstanding (without giving effect to rounding for fractional shares) if the ratio for the reverse
split is 1-for-2, approximately 1,005,788 shares of common stock issued and outstanding (without giving effect to rounding for
fractional shares) if the ratio for the reverse split is 1-for-25, and approximately 502,894 shares of common stock issued and
outstanding (without giving effect to rounding for fractional shares) if the ratio for the reverse split is 1-for-50, which is
the aggregate ratio allowed under this proposal. Any other ratios selected within such range would result in a number of shares
of common stock issued and outstanding following the transaction between 502,894 and 12,572,343 shares.
The actual number of
shares issued after giving effect to the Reverse Stock Split, if implemented, will depend on the reverse stock split ratio and
the number of reverse stock splits, if any, that are ultimately determined by our Board of Directors.
The Reverse Stock Split
will affect all holders of our Common Stock uniformly and will not affect any stockholder’s percentage ownership interest
in the Company, except that as described below in “— Fractional Shares,” record holders of Common Stock otherwise
entitled to a fractional share as a result of the Reverse Stock Split will be rounded up to the next whole number. In
addition, the Reverse Stock Split will not affect any stockholder’s proportionate voting power (subject to the treatment
of fractional shares).
The Reverse Stock Split
may result in some stockholders owning “odd lots” of less than 100 shares of Common Stock. Odd lot shares
may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher
than the costs of transactions in “round lots” of even multiples of 100 shares.
After the Effective
Time, our Common Stock will have new Committee on Uniform Securities Identification Procedures (CUSIP) numbers, which is a number
used to identify our equity securities, and stock certificates with the older CUSIP numbers will need to be exchanged for stock
certificates with the new CUSIP numbers by following the procedures described below. After the Reverse Stock Split,
we will continue to be subject to the periodic reporting and other requirements of the Securities Exchange Act of 1934, as amended. Our
Common Stock will continue to be listed on the NASDAQ Capital Market under the symbol “PRGN”, subject to any decision
of our Board of Directors to list our securities on another stock exchange. The Reverse Stock Split is not intended as, and will
not have the effect of, a “going private transaction” as described by Rule 13e-3 under the Exchange Act.
After the effective
time of the Reverse Stock Split, the post-split market price of our common stock may be less than the pre-split price multiplied
by the Reverse Stock Split ratio. In addition, a reduction in number of shares outstanding may impair the liquidity for our common
stock, which may reduce the value of our common stock.
Authorized Shares of Common Stock
The Reverse Stock Split
will not change the number of authorized shares of the Company’s common stock under the Company’s Articles of Incorporation.
Because the number of issued and outstanding shares of common stock will decrease, the number of shares of common stock remaining
available for issuance will increase. Under our Articles of Incorporation, as amended, our authorized capital stock consists of
780,000,000 shares of common stock, par value $0.001 per share, divided into 750,000,000 shares of Class A common stock and 5,000,000
shares of Class B common stock (none of which are issued and outstanding) and 25,000,000 shares of preferred stock (none of which
are issued and outstanding). The Company does not currently have any plans, proposal or arrangement to issue any of its authorized
but unissued shares of common stock, other than any shares to be issued in connection with the prospectus supplement dated September
4, 2015 and the Company’s equity incentive plan.
By increasing the number
of authorized but unissued shares of common stock, the Reverse Stock Split could, under certain circumstances, have an anti-takeover
effect, although this is not the intent of the Board of Directors. For example, it may be possible for the Board of Directors to
delay or impede a takeover or transfer of control of the Company by causing such additional authorized but unissued shares to be
issued to holders who might side with the Board of Directors in opposing a takeover bid that the Board of Directors determines
is not in the best interests of the Company or its shareholders. The Reverse Stock Split therefore may have the effect of discouraging
unsolicited takeover attempts. By potentially discouraging initiation of any such unsolicited takeover attempts the reverse split
may limit the opportunity for the Company’s shareholders to dispose of their shares at the higher price generally available
in takeover attempts or that may be available under a merger proposal. The Reverse Stock Split may have the effect of permitting
the Company’s current management, including the current Board of Directors, to retain its position, and place it in a better
position to resist changes that shareholders may wish to make if they are dissatisfied with the conduct of the Company’s
business. However, the Board of Directors is not aware of any attempt to take control of the Company and the Board of Directors
has not approved the Reverse Stock Split with the intent that it be utilized as a type of anti-takeover device.
Beneficial Holders of Common Stock (i.e.
stockholders who hold in street name)
Upon the implementation
of the Reverse Stock Split, we intend to treat shares held by stockholders through a bank, broker, custodian or other nominee in
the same manner as registered stockholders whose shares are registered in their names. Banks, brokers, custodians or
other nominees will be instructed to effect the Reverse Stock Split for their beneficial holders holding our Common Stock in street
name. However, these banks, brokers, custodians or other nominees may have different procedures than registered stockholders
for processing the Reverse Stock Split. Stockholders who hold shares of our Common Stock with a bank, broker, custodian
or other nominee and who have any questions in this regard are encouraged to contact their banks, brokers, custodians or other
nominees.
Registered “Book-Entry”
Holders of Common Stock (i.e. stockholders that are registered on the transfer agent’s books and records but do not hold
stock certificates)
Certain of our registered
holders of Common Stock may hold some or all of their shares electronically in book-entry form with the transfer agent. These
stockholders do not have stock certificates evidencing their ownership of the Common Stock. They are, however, provided
with a statement reflecting the number of shares registered in their accounts.
Stockholders who hold
shares electronically in book-entry form with the transfer agent will not need to take action (the exchange will be automatic)
to receive whole shares of post-Reverse Stock Split Common Stock, subject to adjustment for treatment of fractional shares.
Holders of Certificated Shares of Common
Stock
Stockholders holding
shares of our Common Stock in certificated form will be sent a transmittal letter by our transfer agent after the Effective Time. The
letter of transmittal will contain instructions on how a stockholder should surrender his, her or its certificate(s) representing
shares of our Common Stock (the “Old Certificates”) to the transfer agent in exchange for certificates representing
the appropriate number of whole shares of post-Reverse Stock Split Common Stock (the “New Certificates”). No
New Certificates will be issued to a stockholder until such stockholder has surrendered all Old Certificates, together with a properly
completed and executed letter of transmittal, to the transfer agent. No stockholder will be required to pay a transfer
or other fee to exchange his, her or its Old Certificates. Stockholders will then receive a New Certificate(s) representing
the number of whole shares of Common Stock that they are entitled as a result of the Reverse Stock Split, subject to the treatment
of fractional shares described below. Until surrendered, we will deem outstanding Old Certificates held by stockholders
to be cancelled and only to represent the number of whole shares of post-Reverse Stock Split Common Stock to which these stockholders
are entitled, subject to the treatment of fractional shares. Any Old Certificates submitted for exchange, whether because
of a sale, transfer or other disposition of stock, will automatically be exchanged for New Certificates. If an Old Certificate
has a restrictive legend on the back of the Old Certificate(s), the New Certificate will be issued with the same restrictive legends
that are on the back of the Old Certificate(s).
The Company expects
that our transfer agent will act as exchange agent for purposes of implementing the exchange of stock certificates. No service
charges will be payable by holders of shares of Common Stock in connection with the exchange of certificates. All of such
expenses will be borne by the Company.
STOCKHOLDERS SHOULD NOT DESTROY ANY
STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Fractional Shares
The Company does not
currently intend to issue fractional shares in connection with the Reverse Stock Split. Therefore, the Company does not expect
to issue certificates representing fractional shares. The Board of Directors will have the discretionary authority to determine
whether to arrange for the disposition of fractional interests by shareholders entitled thereto, to pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such fractions are determined, or to entitle shareholders
to receive from the Company’s transfer agent, in lieu of any fractional share, the number of shares rounded up to the next
whole number.
If the Board of Directors
determines to arrange for the disposition of fractional interests by shareholders entitled thereto or to pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such fractions are determined, shareholders who would otherwise
hold fractional shares because the number of shares of common stock they hold before the Reverse Stock Split is not evenly divisible
by the ratio ultimately selected by the Board of Directors will be entitled to receive cash (without interest or deduction) in
lieu of such fractional shares from either: (i) the Company, upon receipt by the transfer agent of a properly completed and duly
executed transmittal letter and, where shares are held in certificated form, upon due surrender of any certificate previously representing
a fractional share, in an amount equal to such holder's fractional share based upon the volume weighted average price of the common
stock as reported on The NASDAQ Capital Market, or other principal market of the common stock, as applicable, as of the date the
Reverse Stock Split is effected; or (ii) the transfer agent, upon receipt by the transfer agent of a properly completed and duly
executed transmittal letter and, where shares are held in certificated form, the surrender of all old certificate(s), in an amount
equal to the proceeds attributable to the sale of such fractional shares following the aggregation and sale by the transfer agent
of all fractional shares otherwise issuable. If the Board of Directors determines to dispose of fractional interests pursuant to
clause (ii) above, the Company expects that the transfer agent would conduct the sale in an orderly fashion at a reasonable pace
and that it may take several days to sell all of the aggregated fractional shares of common stock. In this event, such holders
would be entitled to an amount equal to their pro rata share of the proceeds of such sale. The Company will be responsible for
any brokerage fees or commissions related to the transfer agent's open market sales of shares that would otherwise be fractional
shares.
The ownership of a
fractional share interest following the Reverse Stock Split will not give the holder any voting, dividend or other rights, except
to receive the cash payment, or, if the Board of Directors so determines, to receive the number of shares rounded up to the next
whole number, as described above.
Shareholders should
be aware that, under the escheat laws of various jurisdictions, sums due for fractional interests that are not timely claimed after
the effective time of the Reverse Stock Split may be required to be paid to the designated agent for each such jurisdiction, unless
correspondence has been received by the Company or the transfer agent concerning ownership of such funds within the time permitted
in such jurisdiction. Thereafter, if applicable, shareholders otherwise entitled to receive such funds, but who do not receive
them due to, for example, their failure to timely comply with the transfer agent's instructions, will have to seek to obtain such
funds directly from the state to which they were paid.
Effect of the Reverse Stock Split on
Employee Plans, Options, Restricted Stock Awards and Units, Warrants, and Convertible or Exchangeable Securities
Based upon the reverse
stock split ratio determined by the Board of Directors, proportionate adjustments are generally required to be made to the per
share exercise price and the number of shares issuable upon the exercise or conversion of all outstanding options, warrants, convertible
or exchangeable securities entitling the holders to purchase, exchange for, or convert into, shares of Common Stock. This
would result in approximately the same aggregate price being required to be paid under such options, warrants, convertible or exchangeable
securities upon exercise, and approximately the same value of shares of Common Stock being delivered upon such exercise, exchange
or conversion, immediately following the Reverse Stock Split as was the case immediately preceding the Reverse Stock Split. The
number of shares deliverable upon settlement or vesting of restricted stock awards will be similarly adjusted, subject to our treatment
of fractional shares. The number of shares reserved for issuance pursuant to these securities will be proportionately
based upon the reverse stock split ratio determined by the Board of Directors, subject to our treatment of fractional shares.
Accounting Matters
The proposed amendment
to the Company’s Amended and Restated Articles of Incorporation will not affect the par value of our Common Stock per share,
which will remain $0.001 par value per share. As a result, as of the Effective Time, the stated capital attributable
to Common Stock and the additional paid-in capital account on our balance sheet, on aggregate, will not change due to the Reverse
Stock Split. Reported per share net income or loss will be higher because there will be fewer shares of Common Stock
outstanding.
Certain Federal Income Tax Consequences
of the Reverse Stock Split
The following summary
describes certain material U.S. federal income tax consequences of the Reverse Stock Split to holders of our Common Stock
Unless otherwise specifically
indicated herein, this summary addresses the tax consequences only to a beneficial owner of our Common Stock that is a citizen
or individual resident of the United States, a corporation organized in or under the laws of the United States or any state thereof
or the District of Columbia or otherwise subject to U.S. federal income taxation on a net income basis in respect of our Common
Stock (a “U.S. holder”). A trust may also be a U.S. holder if (1) a U.S. court is able to exercise
primary supervision over administration of such trust and one or more U.S. persons have the authority to control all substantial
decisions of the trust or (2) it has a valid election in place to be treated as a U.S. person. An estate whose
income is subject to U.S. federal income taxation regardless of its source may also be a U.S. holder. This summary does
not address all of the tax consequences that may be relevant to any particular investor, including tax considerations that arise
from rules of general application to all taxpayers or to certain classes of taxpayers or that are generally assumed to be
known by investors. This summary also does not address the tax consequences to (i) persons that may be subject
to special treatment under U.S. federal income tax law, such as banks, insurance companies, thrift institutions, regulated investment
companies, real estate investment trusts, tax-exempt organizations, U.S. expatriates, persons subject to the alternative minimum
tax, traders in securities that elect to mark to market and dealers in securities or currencies, (ii) persons that hold our
Common Stock as part of a position in a “straddle” or as part of a “hedging,” “conversion”
or other integrated investment transaction for federal income tax purposes, or (iii) persons that do not hold our Common Stock
as “capital assets” (generally, property held for investment).
If a partnership (or
other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our Common Stock, the
U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities
of the partnership. Partnerships that hold our Common Stock, and partners in such partnerships, should consult their
own tax advisors regarding the U.S. federal income tax consequences of the Reverse Stock Split.
This summary is based
on the provisions of the Internal Revenue Code of 1986, as amended, U.S. Treasury regulations, administrative rulings and judicial
authority, all as in effect as of the date of this proxy statement. Subsequent developments in U.S. federal income tax
law, including changes in law or differing interpretations, which may be applied retroactively, could have a material effect
on the U.S. federal income tax consequences of the Reverse Stock Split.
PLEASE CONSULT YOUR OWN TAX ADVISOR REGARDING
THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT IN YOUR PARTICULAR CIRCUMSTANCES
UNDER THE INTERNAL REVENUE CODE AND THE LAWS OF ANY OTHER TAXING JURISDICTION.
U.S. Holders
The Reverse Stock Split
should be treated as a recapitalization for U.S. federal income tax purposes. Therefore, a stockholder generally will
not recognize gain or loss on the Reverse Stock Split, except to the extent of cash, if any, received in lieu of a fractional share
interest in the post-Reverse Stock Split shares. The aggregate tax basis of the post-split shares received will be equal to the
aggregate tax basis of the pre-split shares exchanged therefore (excluding any portion of the holder’s basis allocated to
fractional shares), and the holding period of the post-split shares received will include the holding period of the pre-split shares
exchanged. A holder of the pre-split shares who receives cash will generally recognize gain or loss equal to the difference between
the portion of the tax basis of the pre-split shares allocated to the fractional share interest and the cash received. Such gain
or loss will be a capital gain or loss and will be short term if the pre-split shares were held for one year or less and long term
if held more than one year. No gain or loss will be recognized by us as a result of the Reverse Stock Split.
No Appraisal Rights
Under Marshall Islands
law and our charter documents, holders of our Common Stock will not be entitled to dissenter’s rights or appraisal rights
with respect to the Reverse Stock Split.
Board Recommendation
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE “FOR” APPROVAL OF AN AMENDMENT TO THE COMPANY’S ARTICLES OF INCORPORATION TO AUTHORIZE A REVERSE
STOCK SPLIT OF OUR ISSUED AND OUTSTANDING COMMON STOCK.
MANAGEMENT
Set forth below is certain information
concerning our directors and our executive officers as of January 11, 2016:
|
|
|
|
|
|
Term |
Name |
|
Age |
|
Position |
|
Expires |
Michael Bodouroglou |
|
61 |
|
Chairman, President, Chief Executive Officer and Class C Director |
|
2018 |
Nikolas Arachovas |
|
41 |
|
Chief Financial Officer |
|
— |
George Skrimizeas |
|
50 |
|
Chief Operating Officer |
|
— |
Nigel D. Cleave |
|
57 |
|
Class B Director |
|
2017 |
Dimitrios Sigalas |
|
71 |
|
Class A Director |
|
2016 |
Bruce Ogilvy |
|
73 |
|
Class B Director |
|
2017 |
George Xiradakis |
|
51 |
|
Class A Director |
|
2016 |
Lambros Theodorou |
|
69 |
|
Class C Director |
|
2018 |
Michael
Bodouroglou, our founder and Chief Executive Officer, has been involved in the shipping industry in various capacities
for more than 35 years. He has served as our Chairman, President, Chief Executive Officer and director since our formation in April
2006. Mr. Bodouroglou also serves as the Chairman, President and Chief Executive Officer of Box Ships Inc., an affiliated company.
Mr. Bodouroglou has owned and operated tanker and drybulk vessels since 1993. He is the founder of Allseas Marine S.A. (“Allseas”),
which serves as the technical and commercial managing company to our fleet. Prior to 1993, Mr. Bodouroglou was employed as a technical
superintendent supervising both tanker and drybulk vessels for various shipping companies. In 1977, Mr. Bodouroglou graduated with
honors from the University of Newcastle-upon-Tyne in the United Kingdom with a Bachelor of Science in Marine Engineering and in
1978 he was awarded a Master of Science in Naval Architecture. Mr. Bodouroglou is a member of the Cayman Islands Shipowners' Advisory
Council, the DNV GL Greek Committee and the Lloyd's Register Hellenic Advisory Committee. He is also a member of China Classification
Society Mediterranean Committee (CCS), the RINA Hellenic Advisory Committee (Registro Italiano Navale) and the Greek Committee
of Nippon Kaiji Kyokai (ClassNK). He is also member of the Board of the Swedish P&I Club and the Union of Greek Shipowners.
Mr. Bodouroglou is the Honorary Consul for the Slovak Republic in Piraeus, the President of the Hellenic-Australian Business Council
(HABC) and an Honorary Fellow of the Institute of Chartered Shipbrokers.
Nikolas
Arachovas has been our Chief Financial Officer since December 2015. Mr. Arachovas has been the financial advisor of
Allseas since February 2015. From 2009 to 2014, Mr. Arachovas held the position of Vice President of Finance at Excel Maritime
Carriers Ltd., while before that he was the Chief Financial Officer of IMS S.A. since 2007. Mr. Arachovas has also served
in various finance-related roles with international companies such as Coca-Cola HBC, Deloitte and S&B Industrial Minerals.
He graduated from the University of Piraeus in 1996 with a Bachelor’s degree in Maritime Economics, and earned a Master of
Business Administration (MBA) from the Athens Laboratory of Business Administration (ALBA) in 1999. Mr. Arachovas is a member of
the Business Advisory Committee of the ICMA Center Henley Business School in the U.K. (Master of Science in International Shipping
and Finance).
George
Skrimizeas has been our Chief Operating Officer since November 2006. Mr. Skrimizeas has been general manager of Allseas
since May 2006. From 1996 to 2006, Mr. Skrimizeas has held various positions in Allseas, Eurocarriers and their affiliates, including
general manager, accounts and human resources manager, and finance and administration manager. Mr. Skrimizeas worked as accounts
manager for ChartWorld Shipping from 1995 to 1996 and as accounts and administration manager for Arktos Investments Inc. from 1994
to 1995. From 1988 to 1994, Mr. Skrimizeas was accounts and administration manager for Candia Shipping Co. S.A. and accountant
and chief accounting officer—deputy human resources manager in their Athens, Romania, Hong Kong and London offices. Mr. Skrimizeas
received his Bachelor of Science degree in Business Administration from the University of Piraeus, Greece in 1988 and completed
the coursework necessary to obtain his Master of Science in Finance from the University of Leicester, in the United Kingdom, in
2002. Mr. Skrimizeas is a member of the Hellenic Chamber of Economics, the Hellenic Management Association and the Hellenic Association
of Chief Executive Officers.
Nigel
D. Cleave has served as a non-executive director of the Company since November 2006. In January 2011, Mr. Cleave was
appointed to his current position of chief executive officer of Videotel, the leading provider of e-learning maritime blended training
systems. Prior to this, Mr. Cleave held the position of chief executive officer of Elias Marine Consultants Limited, providing
a broad range of professional services. In 2006, Mr. Cleave was appointed chief executive officer of PB Maritime Services Limited,
a ship management and marine services company, having previously served as group managing director of Dobson Fleet Management Limited
from 1993 to 2006, a ship management company based in Cyprus. From 1991 to 1993, Mr. Cleave held the position of deputy general
manager at Cyprus based ship management company Hanseatic Shipping Co. Ltd. and from 1988 to 1991, held various fleet operation
roles based in London. From 1975 to 1986, Mr. Cleave held various positions at The Cunard Steamship Company plc, including serving
in the ranks of navigating cadet officer to second officer, as well as financial and planning assistant, assistant to the group
company secretary and assistant operations manager. Mr. Cleave graduated from the Riversdale College of Technology in the United
Kingdom with an O.N.C. in Nautical Science and today is a Fellow of the Chartered Institute of Shipbrokers and the Chairman of
the Cayman Islands Shipowners' Advisory Council.
Bruce
Ogilvy has served as a non-executive director of the Company since July 2007. From 2003 to 2005 Mr. Ogilvy served
as a consultant to Stelmar Tankers (Management) Ltd. and from 1992 to 2002, he was managing director of Stelmar Tankers (U.K.)
Ltd., a subsidiary of Stelmar Tankers (Management) Ltd., through which the group's commercial business, including chartering and
sale and purchase activities, were carried out. In 1992, Mr. Ogilvy joined Stelios Haj-Ioannou to form Stelmar Tankers (Management)
Ltd., and served on its Board of Directors from its inception to 2003. During his ten years with Stelmar Tankers (Management) Ltd.,
Stelmar Shipping Ltd. completed an initial public offering on the New York Stock Exchange in 2001 and a secondary listing in 2002.
Prior to his association with Stelmar Tankers (Management) Ltd., Mr. Ogilvy served in various capacities, including chartering
and sale and purchase activities with Shell International. Mr. Ogilvy graduated from Liverpool University, in the United Kingdom,
in 1963 with a degree as Ship Master. Mr. Ogilvy served on the Council of Intertanko, an industry body that represents the interests
of Independent tanker owners, since 1994 and on its Executive Board from 2003 until 2005. Mr. Ogilvy has been an active member
of the Institute of Chartered Shipbrokers for over 30 years and has served as the Chairman of the Trust Fund of the Institute of
Chartered Shipbrokers since September 2010, the Vice President of the Institute of Chartered Shipbrokers from October 2012 until
November 2014 and since November 2014 the President of the Institute of Chartered Shipbrokers.
Dimitrios
Sigalas has served as a non-executive director of the Company since March 2008. Mr. Sigalas served as a maritime journalist
for the Greek daily newspaper "Kathimerini" from 1985 to 2008. Mr. Sigalas also served within the chartering department
of Glafki (Hellas) Maritime Corporation, an Athens based shipowning company, from 1972 to 2006. In 1980 Mr. Sigalas was appointed
to Head of the Dry and Tanker Chartering Department within Glafki (Hellas) Maritime Corporation. Mr. Sigalas graduated from Cardiff
University, Wales, with a diploma in Shipping. Mr. Sigalas is also a member of the Institute of Freight Forwarders UK, and has
served in the Merchant Navy after his graduation from the Navigation Academy of Hydra.
George
Xiradakis has served as a non-executive director of the Company since July 2008. In his banking career (1991-1998)
he served as Vice President of Credit Lyonnais Shipping Group and Head of European Shipping finance activities and as Head of Greek,
Indian and Middle East Shipping. Since 1999, Mr. Xiradakis has been the Managing Director of XRTC Business Consultants Ltd., a
consulting firm providing financial advice to the maritime industry. Mr. Xiradakis also provides financial advice to international
shipping banks, shipping companies, as well as international and state organizations. Mr. Xiradakis has a certificate as a Deck
Officer from the Hellenic Merchant Marine and he is a graduate of the Nautical Marine Academy of Aspropyrgos, Greece. He also holds
a postgraduate Diploma in Commercial Operation of Shipping from London Metropolitan University, formerly known as City of London
Polytechnic, and a Master of Science in Maritime Studies from the University of Wales College of Cardiff. Mr. Xiradakis is a member
of the Board of Directors of DryShips Inc. (NASDAQ: DRYS) and from 2008 to 2009, Mr. Xiradakis was a member of the Board of Directors
of Aries Maritime Transport, which has since changed its name to NewLead Holdings Ltd (NASDAQ: NEWL). Mr. Xiradakis is the President
of the International Propeller Club of the United States – International Port of Piraeus Board, General Secretary of the
Association of Banking and Shipping Executives of Hellenic Shipping, Board member of the Greek-China Friendship Association, and
also a member of the Mediterranean Committee of China Classification Society, HELMEPA, the Marine Club of Piraeus, and the Sino-Greek
Chamber of Commerce. In the past, Mr. Xiradakis also served as the Chairman and President of the National Center of Port Development
in Greece and as the Chairman and President of Hellenic Public Real Estate Corporation.
Lambros
Theodorou has served as a non-executive director of the Company since May 2015. Mr. Theodorou has over 35 years
of experience in the banking sector. He has held executive positions at various banks in Athens, Greece. From 1994 to 2013, Mr.
Theodorou served as the Deputy General Manager and head of the Shipping Unit of EFG Eurobank S.A. Prior to this, Mr.
Theodorou held the position of Vice-President and Piraeus Shipping Manager of the Shipping Department of The Chase Manhattan
Bank N.A, and before that, held various managerial positions in the corporate departments of the bank in Frankfurt, London and
Athens. In 1971, Mr. Theodorou graduated from the University of Piraeus in Greece with a Bachelor in Business Administration and,
in 1973, was granted a diploma in Management from the Graduate School of Commerce and Business Studies of Athens in Greece. In
1975, Mr. Theodorou was awarded a Master of Science in Business Operations from the University of Arkansas in the United States
of America.
CORPORATE GOVERNANCE
Board Responsibilities, Structure and Requirements
Our Board of Directors
oversees, counsels and directs management in our long-term interests and those of our shareholders. The Board’s responsibilities
include:
|
· |
Evaluating the performance of, and selecting, our President and Chief Executive Officer and our other executive officers; |
|
· |
Reviewing and approving our major financial objectives and strategic and operating plans, business risks and actions; |
|
· |
Overseeing the conduct of our business to evaluate whether the business is being effectively managed; and |
|
· |
Overseeing the processes for maintaining the integrity of our financial statements and other publicly disclosed information in compliance with law. |
Michael Bodouroglou
serves as both Chairman of the Board and as our President and Chief Executive Officer. The Board believes that the combined role
of Chairman of the Board and President and Chief Executive Officer is the appropriate leadership structure for us at this time.
This leadership model provides efficient and effective leadership of our business, and the Board believes Mr. Bodouroglou is the
appropriate person to lead both our Board and the management of our business.
We encourage our directors
to attend formal training programs in areas relevant to the discharge of their duties as directors. We reimburse directors for
all expenses they incur in attending such programs.
All of our directors
are expected to comply with our Code of Business Conduct and Ethics and our Insider Trading Policy.
Meetings and Committees of the Board
of Directors
The Board and its
committees meet throughout the year generally on a quarterly schedule, and hold special meetings and act by written consent from
time to time as appropriate. During the fiscal year ended December 31, 2015, our Board of Directors held fifteen (15) meetings
and also approved certain actions by unanimous written consent. All of our directors attended at least 75% of the meetings of the
Board of Directors and applicable committees on which they served. We strongly encourage all directors to attend our annual meeting
of Shareholders, but we have no specific policy requiring attendance by directors at such meetings.
The Board delegates
various responsibilities and authority to different Board committees. Committees regularly report on their activities and actions
to the full Board. The committees of the Board of Directors are the audit committee, the compensation committee, the corporate
governance committee, and the nominating committee. The Board has determined that each member of the audit committee, compensation
committee, corporate governance committee and nominating committee is an independent director in accordance with the standards
adopted by the NASDAQ Stock Market. Our Board or the applicable committee has adopted written charters for the audit, compensation,
nominating and corporate governance committees and has adopted corporate governance guidelines that address the composition and
duties of the Board and its committees. The charters for the audit, compensation, and nominating and corporate governance committees
are posted in the “Profile – Charters of Committees” section of our website at www.paragonshipping.com,
and each is available in print, without charge, to any shareholder. Each of the committees has the authority to retain independent
advisors and consultants, with all fees and expenses to be paid by us.
Audit Committee
Our
audit committee consists of Messrs. Cleave, Ogilvy, Xiradakis and Theodorou, each of whom is an independent director. Mr. Xiradakis
has been designated the “Audit Committee Financial Expert” under the SEC rules and the current listing standards of
the NASDAQ Marketplace Rules.
The
audit committee has powers and performs the functions customarily performed by such a committee (including those required of such
a committee under the NASDAQ Marketplace Rules and the SEC). The audit committee is responsible for selecting and meeting with
our independent registered public accounting firm regarding, among other matters, audits and the adequacy of our accounting and
control systems.
Compensation Committee
Our compensation committee
consists of Messrs. Cleave, Ogilvy, Sigalas and Theodorou, each of whom is an independent director. The compensation committee
reviews and approves the equity compensation of our executive officers. Currently, we do not pay cash compensation to our executive
officers. We have entered into a services agreement with Allseas, which is an entity controlled by Mr. Bodouroglou, pursuant to
which Allseas provides us services related to accounting, financial reporting, implementation of Sarbanes-Oxley internal control
over financial reporting procedures and general administrative and management services.
Nominating and Corporate Governance
Committee
Our nominating and
corporate governance committee consists of Messrs. Cleave, Sigalas, Xiradakis and Theodorou, each of whom is an independent
director. The nominating and corporate governance committee is responsible for overseeing the selection of persons to be nominated
to serve on our Board of Directors and to ensure that we have and follow appropriate corporate governance standards.
In connection with
the selection and nomination process, the nominating committee, along with the full Board of Directors, shall consider and determine
the desired experience, mix of skills and other qualities necessary to assure appropriate Board composition, taking into account
the current Board members and the specific needs of the Company and the Board. The criteria for selecting directors includes such
factors as (i) the candidate’s ability to comprehend the Company’s strategic goals and to help guide the Company towards
the accomplishment of those goals; (ii) the history of the candidate in conducting his/her personal and professional affairs with
the utmost integrity and observing the highest standards of values, character and ethics; (iii) the candidate's time availability
for in-person participation at Board and committee meetings; (iv) the candidate’s judgment and business experience with related
businesses or other organizations of comparable size; (v) the knowledge and skills the candidate would add to the Board and its
committees, including the candidate's knowledge of the rules and regulations of the SEC and the NASDAQ Stock Market, and accounting
and financial reporting requirements; (vi) the candidate's ability to satisfy the criteria for independence established by the
SEC and the NASDAQ Stock Market; and (vii) the interplay of the candidate's experience with the experience of other Board members.
Although the Company
does not have a formal procedure, the nominating committee will consider all candidates recommended by the Company’s shareholders.
The Company is relatively small and our shares of common stock are not widely held. As a result, the Company does not believe the
adoption of a formal policy for consideration of shareholder nominees is appropriate at this time.
Compensation Committee Interlocks and
Insider Participation
None of the members
of our compensation committee (i) has ever been an officer or employee of us, (ii) had any relationship requiring disclosure by
us under SEC rules, or (iii) is an executive officer of another entity where one of our executive officers serves on the Board
of Directors.
Director Independence
Our securities are
listed on the NASDAQ Stock Market and we are exempt from certain NASDAQ listing requirements including the requirement that our
board be composed of a majority of independent directors. The Board of Directors has evaluated whether each of Messrs. Cleave,
Ogilvy, Xiradakis, Sigalas and Theodorou is an “independent director” within the meaning of the listing requirements
of NASDAQ. The NASDAQ independence definition includes a series of objective tests, such as that the director is not our employee
and has not engaged in various types of business dealings with us. In addition, as further required by the NASDAQ requirements,
the Board of Directors made a subjective determination as to each of Messrs. Cleave, Ogilvy, Xiradakis, Sigalas and Theodorou that
no relationships exist which, in the opinion of the Board of Directors, would interfere with the exercise of his independent judgment
in carrying out the responsibilities of a director. In making this determination, the Board of Directors reviewed and discussed
information provided by each of Messrs. Cleave, Ogilvy, Xiradakis, Sigalas and Theodorou with regard to his business and personal
activities as they may relate to us and our management. After reviewing the information presented to it, our Board of Directors
has determined that each of Messrs. Cleave, Ogilvy, Xiradakis, Sigalas and Theodorou is “independent” within the meaning
of such rules. Our independent directors will meet in executive session as often as necessary to fulfill their duties, but no less
frequently than annually.
Shareholder Communication with the Board
of Directors
Although our Board
of Directors has not adopted a formal procedure for shareholders to communicate in writing with members of the Board of Directors,
any such communications received by the Company will be forwarded to our Board of Directors. Because our Board of Directors is
relatively small, and our shares of common stock are not widely held, the Company has not deemed it necessary to adopt a formal
communication procedure at this time.
Corporate Governance Guidelines
The Board has adopted
Corporate Governance Guidelines. The corporate governance committee is responsible for overseeing these guidelines and making recommendations
to the Board concerning corporate governance matters. Among other matters, the guidelines address the following items concerning
the Board and its committees:
|
· |
Director qualifications generally and guidelines on the composition of the Board and its committees; |
|
· |
Director responsibilities and the standards for carrying out such responsibilities; |
|
· |
Board committee requirements; |
|
· |
Director access to management and independent advisors; |
|
· |
Director orientation and continuing education requirements; and |
|
· |
CEO evaluation, management succession and CEO compensation. |
Role of Board in Risk Oversight
We have a risk management
process in which management is responsible for managing our risks and the Board and its committees provide review and oversight
in connection with these efforts. Risks are identified, assessed and managed on an ongoing basis by management and addressed during
periodic senior management meetings, resulting in both Board and committee discussions and public disclosure, as appropriate. The
Board is responsible for overseeing management in the execution of its risk management responsibilities and for reviewing our approach
to risk management. The Board administers this risk oversight function either through the full Board or through one of its standing
committees, each of which examines various components of our enterprise risks as part of its responsibilities. An overall review
of risk is inherent in the Board’s consideration of our long and short term strategies, acquisitions and significant financial
matters. The audit committee oversees financial risks (including risks associated with accounting, financial reporting, enterprise
resource planning, and collectability of receivables), legal and compliance risks and other risk management functions. The other
Board committees are involved in the risk assessment process as needed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our Board of Directors
is responsible for the review and approval of “related party transactions” between us and our executive officers, directors
or other related persons. Under SEC rules, a related person is a director, officer, nominee for director or 5% or greater shareholder
of us since the beginning of our last fiscal year and their immediate family members. Our policies require that each of our directors
and executive officers bring any related party transactions to our attention before we enter into the transaction. Upon full disclosure
of the details of the proposed transaction to the full Board, the full Board, with the interested director abstaining, considers
and votes on the proposed transaction.
Agreements
with Our Managers
Management
Agreements
Management
Agreement with Allseas
We
have entered into separate management agreements with Allseas for each of the vessels in our operating fleet, pursuant to which
Allseas is responsible for the commercial and technical management functions of our fleet.
Our
management agreements with Allseas were amended and restated effective January 2, 2015. Effective from January 2, 2015, we and
Allseas mutually agreed to cease a portion of the services that were provided by Allseas under the terms of the original management
agreements, which were taken over by Seacommercial Shipping Services S.A. (“Seacommercial”) on substantially similar
terms, as discussed further below. Allseas will be still responsible for the technical management and certain aspects of commercial
management including, among other things, operations and freight collection services, obtaining insurance for our vessels and finance
and accounting functions. Technical management services provided by Allseas includes, among other things, arranging for and managing
crews, vessel maintenance, dry-docking, repairs, insurance, maintaining regulatory and classification society compliance and providing
technical support. Our Chairman, President and Chief Executive Officer, Mr. Michael Bodouroglou, is the sole shareholder of Allseas.
Under
the terms of the amended and restated management agreements, Allseas has agreed to use its best efforts to provide management services
upon our request in a commercially reasonable manner and may provide these services directly to us or subcontract for certain of
these services with other entities. Allseas has in-house technical management capabilities, which it continues to expand. Allseas
remains responsible for any subcontracted services under the management agreements. We have agreed to indemnify Allseas for losses
it incurs in connection with the provision of these services, excluding losses caused by the gross negligence or willful misconduct
of Allseas, its employees, subcontractors or agents. Under the agreements, Allseas' liability for losses caused solely by its gross
negligence or willful default, or that of its employees, agents or subcontractors, is limited to ten times the annual management
fee payable under the management agreements, except where such loss resulted from Allseas' intentional or reckless act or omission.
Each
amended and restated management agreement has an initial term of five years and automatically renews for additional five-year periods,
unless in each case, at least 30 days' advance written notice of termination is given by either party.
Under
the amended and restated management agreements, Allseas is entitled to a technical management fee of €666.45 per vessel, per
day (or $725.56 based on the Euro/U.S. dollar exchange rate of €1.0000:$1.0887 as of December 31, 2015), for the twelve months
commencing June 1, 2015, payable on a monthly basis in advance, pro rata either for the calendar days these vessels are owned by
us if the vessels are second-hand purchases, or from the date of the memorandum of agreement if the vessels are purchased directly
from a shipyard. The technical management fee is adjusted annually based on the Eurozone inflation rate. Allseas is also entitled
to (i) a superintendent fee of €500.00 per day (or $544.35 based on the Euro/U.S. dollar exchange rate of €1.0000:$1.0887
as of December 31, 2015), for each day in excess of five days per calendar year for which a superintendent performed on site inspection;
and (ii) a lump sum fee of $15,000 for pre-delivery services, including legal fees, crewing and manning fees, manual preparation
costs and other expenses related to preparing the vessel for delivery, rendered during the period from the date a memorandum of
agreement is signed for the purchase of any such vessel until the delivery date. We have also entered into management agreements
with Allseas relating to the supervision of each our contracted newbuilding vessels, pursuant to which Allseas is entitled to:
(i) a flat fee of $375,000 per vessel for the first 12 month period commencing from the respective steel cutting date of each vessel
and thereafter the flat fee will be paid on a pro rata basis until the vessels' delivery to us; (ii) a daily fee of €115.00 (or
$125.20 based on the Euro/U.S. dollar exchange rate of €1.0000:$1.0887 as of December 31, 2015) per vessel commencing
from the date of the vessel's shipbuilding contract until we accept delivery of the respective vessel; and (iii) €500.00
(or $544.35 based on the Euro/U.S. dollar exchange rate of €1.0000:$1.0887 as of December 31, 2015) per day for each
day in excess of five days per calendar year for which a superintendent performed on site inspection. The term of the management
agreements expires on the completion of the construction and delivery of the vessels to us and the agreements may be terminated
by either party upon 30 days' advance written notice.
Additional
vessels that we may acquire in the future may be managed by Allseas or unaffiliated management companies.
Brokerage Agreement
with Seacommercial
On
January 2, 2015, we entered into a Sale & Purchase ("S&P") and Charter Brokerage Services Agreement with Seacommercial,
a Liberian company, pursuant to agreements with each vessel owning subsidiary. Mr. Michael Bodouroglou, the Company's Chairman,
President and Chief Executive Officer, is the sole shareholder and Managing Director of Seacommercial. The services provided under
these agreements include, among other things, negotiating charters for our vessels, monitoring various types of charters, monitoring
the performance of our vessels under charter, locating, purchasing, financing and negotiating the purchase and sale of our vessels.
These agreements have an initial term of five years and automatically extend for successive five year term, unless, in each case,
at least 30 days' advance written notice of termination is given by either party. In addition, the agreements may be terminated
by either party for cause, as set forth in the agreements, on at least 30 days' advance written notice. The agreements provide
for (i) a fee equal to 1.25% of the gross freight, demurrage and charter hire collected from the employment of our vessels; and
(ii) a fee equal to 1.00% calculated on the price as stated in the relevant memorandum of agreement for any vessel bought or sold
on our behalf.
Compensation
Agreements
Compensation
Agreement with Allseas
We
have entered into a compensation agreement with Allseas, which was amended and restated effective January 2, 2015, whereby in the
event that Allseas is involuntarily terminated as the manager of our fleet, we shall compensate Allseas with a sum equal to (i)
three years of management fees and commissions, based on the fleet at the time of termination; and (ii) €3.0 million (or $3.3
million based on the Euro/U.S. dollar exchange rate of €1.0000:$1.0887 as of December 31, 2015), provided that Allseas
will not receive this termination fee in the event that we terminate the agreements with Allseas for cause. The agreement shall
continue for so long as Allseas serves as a manager of our fleet and may be terminated at any time by the mutual agreement of the
parties or by either party in the event of a material breach of the terms and provisions by the other party.
Compensation
Agreement with Seacommercial
On
January 2, 2015, we entered into a Compensation Agreement with Seacommercial, whereby in the event that Seacommercial is involuntarily
terminated as the broker of our fleet (including the termination by Seacommercial of the agreements for cause), we shall compensate
Seacommercial with an amount equal to the sum of three years of charter brokerage commissions, based on the fleet at the time of
termination, provided that Seacommercial will not receive this termination fee in the event that we terminate the agreements with
Seacommercial for cause.
Administrative
Services Agreement
We
have entered into an administrative service agreement with Allseas, pursuant to which Allseas provides telecommunication services,
secretarial and reception personnel and equipment, security facilities, office cleaning services and information technology services.
Allseas is entitled to reimbursement on a quarterly basis of all costs and expenses incurred in connection with the provisions
of its services under the agreement.
Accounting
Agreement
We
have entered into an accounting agreement with Allseas pursuant to which Allseas is entitled to a fee of €250,000 (or $272,175
based on the Euro/U.S. dollar exchange rate of €1.0000:$1.0887 as of December 31, 2015) per annum, payable quarterly,
for the provision of financial accounting services, and a fee of $30,000 per vessel per annum, payable quarterly, for the provision
of financial reporting services.
On
May 18, 2015, we entered into an amended and restated accounting agreement with Allseas, pursuant to which the duration of the
agreement was converted from the fixed term of one year to indefinite unless terminated in accordance with the provisions of the
agreement. The fees under the amended and restated accounting agreement remained unchanged. If the respective agreement is terminated
by Allseas either for “good reason” or as a result of “change in control”, as such terms are defined in
the agreement, or terminated by us without “cause”, as defined in the agreement, Allseas will be entitled to receive
(i) its fee payable through the “termination date”, as defined in the agreement, and (ii) compensation equal to three
years’ annual financial accounting services fee and financial reporting fee then applicable.
Agreement
with Loretto Finance Inc.
We,
Allseas, and Loretto Finance Inc. (“Loretto”), a wholly-owned subsidiary of Allseas, have entered into a tripartite
agreement, pursuant to which in the event of a capital increase, an equity offering or the issuance of common shares to a third
party or third parties in the future, other than common shares issued pursuant to our equity incentive plan (as the same may be
further amended, amended and restated, supplemented or otherwise modified) or any future equity incentive plans we may adopt, we
have agreed to issue, at no cost to Loretto, additional common shares in an amount equal to 2% of the total number of common shares
issued pursuant to such capital increase, equity offering or third party issuance, as applicable. In accordance with the terms
of the agreement, any common shares to be issued to Loretto under the agreement may only be issued once the capital increase, equity
offering or third party issuance giving rise to the obligation to issue shares to Loretto under the agreement has closed and any
applicable contingencies, forfeiture rights or conditions precedent relating to such capital increase, equity offering or third
party issuance have lapsed or expired or have been cancelled or terminated, unless otherwise agreed by the mutual agreement of
the parties.
Executive
Services Agreement
We
have entered into an executive services agreement with Allseas, pursuant to which Allseas provides the services of our executive
officers, which include strategy, business development, marketing, finance and other services, who report directly to our Board
of Directors. Allseas is entitled to an executive services fee of €2.9 million (or $3.2 million based on the Euro/U.S. dollar
exchange rate of €1.0000:$1.0887 as of December 31, 2015) per annum.
On
May 18, 2015, we entered into an amended and restated executive services agreement with Allseas, pursuant to which the duration
of the agreement was converted from the fixed term of five years to indefinite unless terminated in accordance with the provisions
of the agreement. The fees under the amended and restated executive services agreement remained unchanged. If the respective agreement
is terminated by Allseas either for “good reason” or as a result of “change in control”, as such terms
are defined in the agreement, or terminated by us without “cause”, as defined in the agreement, Allseas will be entitled
to receive (i) its fee payable through the “termination date”, as defined in the agreement, (ii) compensation equal
to three years’ annual executive services fee then applicable, and (iii) 3,000,000 of our common shares, issued for no consideration
on the date of termination.
Manning Agreements
Allseas
subcontracts crewing services relating to our vessels to Crewcare Inc. (“Crewcare”), a Philippines company beneficially
owned by our Chairman, President and Chief Executive Officer, Mr. Michael Bodouroglou. Each of our vessel-owning subsidiaries has
entered into a manning agreement with Crewcare. Manning services are provided under the agreements in exchange for a monthly fee
of $95 per seaman for all officers and crew who served on board each vessel, plus a recruitment fee of $120 per seaman, payable
on a one-off basis. In addition, the agreements also provide for a fee of $30 per seaman for in-house training and a fee of $50
per seaman for extra in-house training. The fees under the manning agreements are subject to amendment on an annual basis.
Cadetship Program
Agreement
On
October 5, 2013, each of our ship-owning subsidiaries entered into a cadetship program agreement with Crewcare, pursuant to which
Crewcare, at its own cost, is responsible for recruiting and training cadets to be assigned to the vessels. These services are
being provided in exchange for a lump sum fee of $5,000 per cadet employed on board the vessel for one-year on board training.
The agreement has an initial term of one year with the option to renew for one more year by mutual agreement.
Right of First
Refusal
Our
Chairman, President and Chief Executive Officer, Mr. Michael Bodouroglou, has entered into a letter agreement with us which includes
a provision requiring Mr. Bodouroglou to use commercially reasonable efforts to cause each company controlled by Mr. Bodouroglou
to allow us to exercise a right of first refusal to acquire any drybulk carrier, after Mr. Bodouroglou or an affiliated entity
of his enters into an agreement that sets forth terms upon which he or it would acquire a drybulk carrier. Pursuant to this letter
agreement, Mr. Bodouroglou will notify a committee of our independent directors of any agreement that he or an affiliated entity
has entered into to purchase a drybulk carrier and will provide the committee of our independent directors a 7 calendar day period
in respect of a single vessel transaction, or a 14 calendar day period in respect of a multi-vessel transaction, from the date
that he delivers such notice to our audit committee, within which to decide whether or not to accept the opportunity and nominate
a subsidiary of ours to purchase the vessel or vessels, before Mr. Bodouroglou will accept the opportunity or offer it to any of
his other affiliates. The opportunity offered to us will be on no less favorable terms than those offered to Mr. Bodouroglou and
his affiliates. A committee of our independent directors will require a simple majority vote to accept or reject this offer.
Loan agreement
with Box Ships Inc.
On
May 27, 2011, we agreed to make available to Box Ships Inc. (“Box Ships”) an unsecured loan of up to $30.0 million
for the purpose of partly financing the acquisition of Box Ships' initial fleet and general corporate purposes, including meeting
working capital needs, which Box Ships drew in full in May 2011. On March 11, 2013, we agreed to amend the terms of the loan
agreement. Pursuant to the amended agreement, we agreed to extend the maturity of the loan for one year, from April 19, 2013 to
April 19, 2014. During the remaining term of the loan, Box Ships was required to make quarterly principal installment payments
in the amount of $1.0 million each, commencing on April 19, 2013, with a final balloon payment due on the maturity date. In consideration
for the amendment of the loan agreement, Box Ships agreed to pay an amendment fee of $65,000 and to increase the margin from 4.0%
to 5.0%. On October 18, 2013, Box Ships proceeded with the full repayment of the outstanding
balance of the respective loan.
Non-Competition
Agreement with Box Ships and Our Chairman, President and Chief Executive Officer
We
have entered into an agreement with Box Ships and our Chairman, President and Chief Executive Officer, Mr. Michael Bodouroglou,
reflecting, among others, for so long as (i) Mr. Bodouroglou is a director or executive officer of both our Company and Box Ships
and (ii) we own at least 5% of the total issued and outstanding common shares of Box Ships, the provisions described below:
Box
Ships will not, directly or indirectly, acquire or charter any drybulk carrier without our prior written consent, and we will not,
directly or indirectly, acquire or charter any containership without the prior written consent of Box Ships. In addition, under
the terms of the agreement, we agreed to grant Box Ships a right of first offer on any proposed sale, transfer or other disposition
of any containership owned by us. Furthermore, we will also grant Box Ships a right of first refusal over any employment opportunity
for a containership presented or available to us with respect to any vessel owned by us, other than our 4,800 TEU containership
newbuilding, the C/V Box King, subject to the option agreement with Box Ships described below.
Notwithstanding
this agreement, Box Ships may claim business opportunities that would benefit us, such as the hiring of employees, the acquisition
of other businesses, or the entry into joint ventures, and in each case other than business opportunities in the drybulk shipping
industry, and this could have a material adverse effect on our business, results of operations, cash flows, financial condition
and ability to pay dividends.
If
we no longer beneficially own shares representing at least 5% of the total issued and outstanding common shares of Box Ships or
Mr. Michael Bodouroglou is no longer a director or executive officer of both our Company and Box Ships, then our obligations under
this agreement will terminate.
In
the second quarter of 2015, we proceeded with the sale of the total 3,437,500 shares of Box Ships at an average sale price of $0.8542
per share. As a result of the sale, we no longer own any shares of Box Ships and the agreement has been terminated.
Vessel Option
Agreement with Box Ships
We
entered into an agreement with Box Ships, pursuant to which we granted Box Ships the option to acquire our initial two 4,800 TEU
containerships under construction, both of which were scheduled to be delivered to us during the second quarter of 2014, by way
of a novation of the relevant construction contract from us at any time prior to the applicable vessel's delivery to us, or purchase
of such vessel at any time after its delivery to us, so long as the vessel is owned by us at such time. In December 2013, with
the consent of Box Ships, we entered into an agreement with Ouhua to cancel one of our two 4,800 TEU containership newbuilding
contracts at no cost to us, to transfer the deposit to the remaining vessel and to reduce the contract price from the original
$57.5 million to $55.0 million. In addition, following Box Ships' consent, on April 25, 2014, we entered into a memorandum of agreement
for the sale of the remaining 4,800 TEU containership newbuilding to an unrelated third party for $42.5 million, less 3% commission.
The sale of the vessel and its transfer to the new owners was concluded on May 23, 2014. Following such sale, the vessel option
agreement with Box Ships was terminated.
On
April 25, 2014, we entered into a memorandum of agreement for the sale of the remaining 4,800 TEU containership newbuilding to
an unrelated third party for $42.5 million, less 3% commission. In May 2014, we also agreed with the shipyard to reduce the contract
price of the respective vessel by $0.8 million. The sale of the vessel and its transfer to the new owners was concluded on May
23, 2014.
Lease of Office
Space
We
have entered into a rental agreement to lease office space in Athens, Greece, with Granitis Glyfada Real Estate Ltd., a company
beneficially owned by our Chairman, President and Chief Executive Officer. The term of the lease is for five years, expiring on
September 30, 2017. Effective October 1, 2012, the monthly rental was €3,000.00 (or $3,266.10 based on the Euro/U.S. dollar
exchange rate of €1.0000:$1.0887 as of December 31, 2015), plus 3.6% tax, and thereafter would be adjusted annually for
inflation increases in accordance with the official Greek inflation rate.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table
sets forth certain information regarding the beneficial ownership of our common stock as of the Record Date by each of our executive
officers and directors, all of our executive officers and directors as a group, and each person or group of affiliated persons
who was known to us to be the beneficial owner of 5% or more of the shares of our common stock as of the Record Date.
Unless otherwise
indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of beneficially
owned by them. As beneficial owners of shares of common stock, the persons named in the table do not have different voting rights
than any other holder of common stock.
Name and Address of Beneficial Owner (1) | |
Number of Shares of Common Stock Beneficially Owned | | |
Percentage of Shares of Common Stock Beneficially Owned (2) | |
Michael Bodouroglou (3) | |
| 7,056,064 | | |
| 28.06 | % |
Nikolas Arachovas | |
| - | | |
| * | |
George Skrimizeas (4) | |
| 43,400 | | |
| * | |
Nigel D. Cleave (5) | |
| 15,900 | | |
| * | |
Bruce Ogilvy (5) | |
| 15,900 | | |
| * | |
Dimitrios Sigalas | |
| 14,400 | | |
| * | |
George Xiradakis | |
| 14,000 | | |
| * | |
Lambros Theodorou | |
| - | | |
| * | |
| |
| | | |
| | |
All directors and executive officers as a group (eight persons) (6) | |
| 7,159,664 | | |
| 28.47 | % |
| |
| | | |
| | |
Lloyd I. Miller, III (7) | |
| 1,468,514 | | |
| 5.84 | % |
* Less than 1%.
(1) |
Except as otherwise indicated, the address of each beneficial owner is c/o Paragon Shipping Inc., 15 Karamanli Avenue, GR 16673, Voula, Greece. |
(2) |
For purposes of computing the percentage of outstanding shares of common stock held by each person named above, any shares that the named person has the right to acquire within 60 days under options are deemed to be outstanding for that person, but are not deemed to be outstanding when computing the percentage ownership of any other person. Percentages shown are based on 25,144,685 shares of common stock outstanding as of the Record Date. |
(3) |
Mr. Bodouroglou beneficially owns 6,586,106 of these shares through Innovation Holdings, a company beneficially owned and controlled by Mr. Bodouroglou and members of his family, and 469,958 of these shares through Loretto, a wholly owned subsidiary of Allseas that is controlled by Mr. Bodouroglou and members of his family. |
(4) |
Includes 1,500 shares underlying options. |
(5) |
Includes 500 shares underlying options. |
(6) |
Includes 2,500 shares underlying options. |
(7) |
Based upon a Schedule 13G/A filed with the Securities and Exchange Commission on February 5, 2015. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
As a foreign private
issuer, Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), does not apply to our
executive officers, directors or holders of 10% or more of our common stock.
COMPENSATION OF MANAGEMENT AND DIRECTORS
Director Compensation
Each of our non-employee
directors receives annual compensation in the aggregate amount of €45,000.00 per annum (or $48,991.50 based on the Euro/U.S.
dollar exchange rate of €1.0000:$1.0887 as of December 31, 2015), plus reimbursements for actual expenses incurred while acting
in their capacity as a director. During 2015, we granted non-vested share awards to entities affiliated with our Chairman, President
and Chief Executive Officer and to other directors and officers as described below under the section entitled "Compensation
Discussion and Analysis" We do not have a retirement plan for our officers or directors. In addition, each of our non-employee
directors is also entitled to incentive compensation, at the discretion of our Board of Directors.
Management Compensation
Effective January 1,
2011, we entered into an executive services agreement with Allseas, pursuant to which Allseas provides the services of our executive
officers, which include strategy, business development, marketing, finance and other services, who report directly to our Board
of Directors. Under the amended agreement, after January 1, 2013, Allseas was entitled to an executive services fee of €2.7
million (or $2.9 million based on the Euro/U.S. dollar exchange rate of €1.0000:$1.0887 as of December 31, 2015) per annum,
payable in equal monthly installments, plus incentive compensation. Effective January 1, 2014, the executive services fee was adjusted
to €2.9 million (or $3.2 million based on the Euro/U.S. dollar exchange rate of €1.0000:$1.0887 as of December 31, 2015).
On May 18, 2015, we
entered into an amended and restated executive services agreement with Allseas, pursuant to which the duration of the agreement
was converted from the fixed term of five years to indefinite unless terminated in accordance with the provisions of the agreement.
The fees under the amended and restated executive services agreement remained unchanged. If the respective agreement is terminated
by Allseas either for “good reason” or as a result of “change in control”, as such terms are defined in
the agreement, or terminated by us without “cause”, as defined in the agreement, Allseas will be entitled to receive
(i) its fee payable through the “termination date”, as defined in the agreement, (ii) compensation equal to three years’
annual executive services fee then applicable, and (iii) 3,000,000 of our common shares, issued for no consideration on the date
of termination.
In order to incentivize
Allseas' continued services to us, on November 10, 2009, we entered into a tripartite agreement with Allseas and Loretto Finance
Inc., a wholly-owned subsidiary of Allseas (“Loretto”), pursuant to which in the event of a capital increase, an equity
offering or the issuance of common shares to a third party or third parties in the future, other than common shares issued pursuant
to our equity incentive plan, we have agreed to issue, at no cost to Loretto, additional common shares to Loretto in an amount
equal to 2% of the total number of common shares issued pursuant to such capital increase, equity offering or third party issuance,
as applicable.
Option/SAR Grants in Fiscal Year Ended December 31, 2015
None.
Outstanding Equity Awards at Fiscal Year-End Table
Name | |
Number of Securities underlying Unexercised Options (#) Exercisable | | |
Number of Securities underlying Unexercised Options (#) Unexercisable | | |
Option Exercise Price ($/Sh) | | |
Option Expiration Date |
| |
| | | |
| | | |
| | | |
|
George Skrimizeas | |
| 1,500 | | |
| - | | |
$ | 120,00 | | |
11/21/2016 |
Equity Compensation Plan Information
Plan category | |
Number of securities to be issued upon exercise of
outstanding options (a) | | |
Weighted-average exercise price of outstanding options (b) | | |
Securities remaining available
for future issuance under equity
compensation plans (excluding securities reflected in column (a)) (c) | |
Equity compensation plans approved by security holders | |
| - | | |
| - | | |
| - | |
Equity compensation plans not approved by security holders | |
| 2,800 | | |
$ | 120.00 | | |
| 1,702,000 | |
Total | |
| 2,800 | | |
$ | 120.00 | | |
| 1,702,000 | |
Compensation Discussion and Analysis
As described above,
we do not directly retain the services of our executive officers. Instead, their services are provided pursuant to the terms of
services agreements with Allseas. Pursuant to the terms of these services agreements, we pay Allseas an annual fee of €2.9
million (or $3.2 million based on the Euro/U.S. dollar exchange rate of €1.0000:$1.0887 as of December 31, 2015) as compensation
for services related to accounting, financial reporting, implementation of Sarbanes-Oxley internal controls procedures, and general
administrative and management services, plus expenses. Allseas also entitled to a termination fee if the agreements are terminated
upon a “change of control” as defined in the services agreements.
In determining the
amount to be paid to Allseas under the services agreements, our Board of Directors considers the costs incurred and expected to
be incurred by Allseas in providing the services within industry standards.
From time to time,
the compensation committee also considers the appropriateness of granting to our directors, executive officers and
certain key employees of Allseas restricted shares of our common stock, subject to vesting requirements, in order to align the
interest of our directors, executive officers and such key employees with those of our shareholders. In determining the amount
of these grants, the compensation committee considers the then-current market price of our common stock, the aggregate share holdings
of our directors, management and key employees of Allseas, the results of the Company’s operations for the year, and the
contribution of the Board, management and Allseas to the Company’s results.
On February 26, 2015,
we granted an aggregate of 70,000 non-vested share awards to employees of Allseas, with a grant date fair value of $1.865 per share,
which will vest ratably over a two-year period commencing on December 31, 2015.
On March 17, 2015,
we granted an aggregate of 30,000 non-vested share awards to executive officers of Allseas, with a grant date fair value of $1.310
per share, which will vest ratably over a two-year period commencing on December 31, 2015.
COMPENSATION COMMITTEE REPORT
Our compensation
committee has reviewed the Compensation Discussion and Analysis and approved its inclusion in this Proxy Statement.
|
THE COMPENSATION COMMITTEE |
|
/s/ Nigel D. Cleave |
|
/s/ Dimitrios Sigalas |
|
/s/ Bruce Ogilvy |
|
/s/ Lambros Theodorou |
REPORT OF THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
The audit
committee hereby reports as follows:
|
1. |
The audit committee has reviewed and discussed the audited financial statements with our management for the year ended December 31, 2014. |
|
2. |
The audit committee has discussed with Ernst & Young (Hellas) Certified Auditors-Accountants S.A., our independent registered public accounting firm, the matters required to be discussed by Statement on Auditing Standards No. 114 (The Auditor’s Communication With Those Charged With Governance), as may be amended or modified. |
|
3. |
The audit committee has received the written disclosures and the letter from Ernst & Young (Hellas) Certified Auditors-Accountants S.A., required by PCAOB Ethics and Independence Rule 3526 (Communication with Audit Committees Concerning Independence), as may be modified or supplemented, and has discussed with Ernst & Young (Hellas) Certified Auditors-Accountants S.A. their independence. |
|
4. |
Based on the review and discussions referred to in paragraphs (1) through (3) above, the audit committee recommended to our Board of Directors that the audited financial statements be included in our Annual Report on Form 20-F for the year ended December 31, 2014, for filing with the SEC. |
|
THE AUDIT COMMITTEE |
|
/s/ Nigel D. Cleave |
|
/s/ George Xiradakis |
|
/s/ Bruce Ogilvy |
|
/s/ Lambros Theodorou |
HOUSEHOLDING OF ANNUAL DISCLOSURE DOCUMENTS
Shareholders sharing
an address who are receiving multiple copies of our proxy materials, including this Proxy Statement, proxy card and Annual Report,
may contact their broker, bank or other nominee if in the future they would like only a single copy of each document be mailed
to all shareholders at the shared address. In addition, if you are the beneficial owner, but not the record holder, of shares of
common stock, your broker, bank or other nominee may deliver only one copy of the proxy materials to multiple shareholders who
share an address unless that nominee has received contrary instructions from one or more of the shareholders. We will deliver promptly,
upon written or oral request, separate copies of the proxy materials to a shareholder at a shared address to which a single copy
of the document was delivered. Shareholders who wish to receive separate copies of the proxy materials, now or in the future, should
submit their request to us by phone at 011-30-210-891-4600 or by mail at 15 Karamanli Ave., 166 73, Voula, Greece.
OTHER BUSINESS
The Board of Directors
knows of no other business to be brought before the Special Meeting. If, however, any other business should properly come before
the Special Meeting, the persons named in the accompanying proxy will vote proxies as in their discretion they may deem appropriate,
unless they are directed by a proxy to do otherwise.
|
By Order of the Board of Directors, |
|
|
|
|
|
|
|
Aikaterini Stoupa, Secretary |
Voula, Greece
January 14, 2016
APPENDIX A
ARTICLES OF AMENDMENT OF
ARTICLES OF INCORPORATION OF
PARAGON SHIPPING INC.
UNDER SECTION 90 OF THE BUSINESS CORPORATION
ACT
The undersigned, Michael
Bodouroglou, Chief Executive Officer of Paragon Shipping Inc., a corporation incorporated under the laws of the Republic of
the Marshall Islands (the “Corporation”), for the purpose of amending the Articles of Incorporation of said Corporation,
hereby certify:
|
1. |
The name of the Corporation is: PARAGON SHIPPING INC. |
|
2. |
The Articles of Incorporation were filed with the Registrar of Corporations as of April 26, 2006, and were subsequently amended on October 26, 2006. |
|
3. |
The Articles of Incorporation, as amended, were amended and restated on November 20, 2006 and April 7, 2010 and were subsequently amended on November 2, 2012. |
|
4. |
The following shall be inserted immediately following the last sub-paragraph of Paragraph D of the Amended and Restated Articles of Incorporation, effecting a combination of the outstanding shares of Common Stock: |
“Effective as of 5:01
p.m., Marshall Islands time on ________ __, 201_ (12:01 a.m., New York time on _______ __, 201_), every ________ (__) shares of
common stock of the Corporation then issued and outstanding shall, automatically and without any action on the part of the respective
holders thereof, be combined, converted and changed into one (1) share of common stock of the Corporation (the “Reverse Stock
Split”); provided, however, that the number and par value of shares of common stock and the number and par value of shares
of preferred stock authorized pursuant to this Paragraph D shall not be altered. No fractional shares shall be issued upon the
Reverse Stock Split. All shares of common stock (including fractions thereof) issuable upon the Reverse Stock Split to a given
holder shall be aggregated for purposes of determining whether the Reverse Stock Split would result in the issuance of any fractional
share. [If, after the aforementioned aggregation, the Reverse Stock Split would result in the issuance of a fraction of a share
of common stock, the Corporation shall, in lieu of issuing any such fractional share, round such fractional share up to the nearest
whole share.]”
|
5. |
All of the other provisions of the Amended and Restated Articles of Incorporation shall remain unchanged. |
|
6. |
This Amendment to the Amended and Restated Articles of Incorporation was authorized by actions of the Board of Directors and Shareholders of the Corporation. |
IN WITNESS WHEREOF,
I have executed these Articles of Amendment on this ___ day of __________, 201_.
|
|
|
Michael Bodouroglou |
|
Chief Executive Officer |
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