Table of Contents
- Audit Committee Charter
- Compensation Committee Charter
- Nominating and Corporate Governance Committee Charter
- Criteria for Nomination as Director
Audit Committee Charter
I. Statement of Purpose
The Audit Committee is a standing committee of the Board of Directors. The purpose of the Committee is to assist the Board of Directors in fulfilling its oversight responsibility relating to (i) the integrity of the Company’s financial statements and financial reporting process and the Company’s systems of internal accounting and financial controls; (ii) the performance of the internal auditors; (iii) the annual independent audit of the Company’s financial statements, the engagement of the independent auditors and the evaluation of the independent auditors’ qualifications, independence and performance; (iv) the compliance by the Company with legal and regulatory requirements, including the Company’s disclosure controls and procedures; (v) the evaluation of management's process to assess and manage the Company's enterprise risk issues; and (vi) the fulfillment of the other responsibilities set out herein. In discharging its responsibilities, the Committee is not itself responsible for the planning or conduct of audits or for any determination that the Company’s financial statements are complete and accurate or in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditors.
1. Charter. At least annually, this charter shall be reviewed and reassessed by the Committee and any proposed changes shall be submitted to the Board of Directors for approval.
2. Members. The members of the Committee shall be appointed by the Board of Directors and shall meet the independence and experience requirements of applicable law, the listing standards of the New York Stock Exchange and applicable policies of the Board of Directors. The Committee shall be comprised of at least three members, at least one of whom shall meet the expertise requirements of the listing standards of the New York Stock Exchange. Committee members may be removed by the Board of Directors. The Board of Directors shall also designate a Committee Chairperson.
3. Meetings. In order to discharge its responsibilities, the Committee shall each year establish a schedule of meetings; additional meetings may be scheduled as required. In planning the annual schedule of meetings, the Committee shall ensure that sufficient opportunities exist for its members to interact with the independent auditors, the head of internal audit function and management.
4. Agenda, Minutes and Reports. An agenda, together with materials relating to the subject matter of each meeting, shall be sent to members of the Committee prior to each meeting. Minutes for all meetings of the Committee shall be prepared to document the Committee’s discharge of its responsibilities. The minutes shall be circulated in draft form to all Committee members to ensure an accurate final record, shall be approved at a subsequent meeting of the Committee. The Committee shall make regular reports to the Board of Directors.
5. Performance Evaluation. The Committee shall evaluate its performance on an annual basis.
1. Engagement of Independent Auditors. The Committee shall directly appoint, retain, compensate, evaluate and terminate the Company’s independent auditors. The Committee shall have the sole authority to approve all engagement fees to be paid to the independent auditors. The independent auditor shall report directly to the Committee.
2. Determination as to Independence and Performance of Independent Auditors. The Committee shall receive periodic reports from the independent auditors as required under generally accepted auditing standards, applicable law or listing standards regarding the auditors’ independence, which shall be not less frequently than annually. The Committee shall discuss such reports with the auditors, and if so determined by the Committee, take appropriate action to satisfy itself of the independence of the auditors. The Committee shall review the performance of the Company’s independent auditors annually. In doing so, the Committee shall consult with management and the Company’s internal auditor service provider and shall obtain and review a report by the independent auditors describing their internal control procedures, material issues raised by their most recent internal quality control review. Any selection of the auditors by the Committee may be subject to shareholders’ approval, as determined by the Board of Directors.
3. Audits by Independent Auditors. The Committee shall discuss with the independent auditors the overall scope, plans and budget for the audit, including the adequacy of staffing and other factors that may affect the effectiveness of the audit. In this connection, the Committee shall discuss with financial management, the internal auditor service provider and the independent auditors the Company’s major risk exposures (whether financial, operating or otherwise), the adequacy and effectiveness of the accounting and financial controls, and the steps management has taken to monitor and control such exposures and manage legal compliance programs, among other considerations that may be relevant to the audit. The Committee shall review with financial management and the independent auditor’s management’s annual internal control report.
4. Review of the Internal Audit Plan and Performance and Communications with Internal Auditor Service Provider. The Committee shall annually review the structure, resources and performance of the Company’s internal audit function. In that regard, the Committee shall discuss with the internal auditor service provider the overall scope, plans and budget for the annual internal audit plan, including the adequacy of staffing and other factors that may affect the effectiveness and timeliness of the internal audits. In addition, the internal auditor service provider shall report periodically to the Committee regarding any significant deficiencies in the design or operation of the Company’s internal controls, material weaknesses in internal controls and any fraud (regardless of materiality) involving persons having a significant role in the internal controls, as well as any significant changes in internal controls implemented by management during the most recent reporting period of the Company.
5. Pre-Approval of Audit and Non-Audit Services. The Committee shall establish and maintain guidelines for the retention of the independent auditors for any non-audit service and the fee for such service and shall determine procedures for the approval of audit and non-audit services in advance. The Committee shall, in accordance with such procedures, approve in advance any audit or non-audit service provided to the Company by the independent auditors, all as required by applicable law or listing standards.
6. Review of Annual SEC Filings. The Committee shall review with management and the independent auditors the Company’s Annual Report on Form 10-K, including the disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” their judgment about the quality, not just acceptability, of accounting principles, the reasonableness of significant judgments, the clarity of the disclosures in the financial statements and the adequacy of internal controls. The Committee shall also discuss the results of the annual audit and any other matters required to be communicated to the Committee by the independent auditors under generally accepted auditing standards, applicable law or listing standards, including matters required to be discussed by Statement on Auditing Standards No. 61, as amended.
7. Review of Quarterly SEC Filings and Other Communications. The Committee shall meet to review and discuss with management and the independent auditors the quarterly financial information to be included in the Company’s Quarterly Reports on Form 10-Q, including the disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and shall discuss any other matters required to be communicated to the Committee by the independent auditors under generally accepted auditing standards, applicable law or listing standards. Management shall review and discuss with the Committee Chairperson other material public disclosures relating to the results of operations and financial condition of the Company. The Committee shall also discuss with Management the results of the independent auditors’ review of the Company’s quarterly financial information.
8. Review of Disclosure Controls and Procedures. The Committee shall review with the Chief Financial Officer the Company’s disclosure controls and procedures and shall review periodically, but in no event less frequently than quarterly, management’s conclusions about the effectiveness of such disclosure controls and procedures, including any significant deficiencies in, or material non-compliance with, such controls and procedures.
9. Oversight of Financial Risk. The Committee shall oversee the Company's financial risk assessment and financial risk management. In addition, while management has the responsibility to assess and manage the Company's exposure to risk, the Committee shall periodically discuss with management guidelines and policies for identification and to govern the process by which this is handled.
10. Review of Certain Matters with Internal and Independent Auditors. The Committee shall review periodically with financial management, the internal auditors and independent auditors the effect of new or proposed regulatory and accounting initiatives on the Company’s financial statements and other public disclosures.
11. Consultation with Independent Auditors. The Committee shall review with the independent auditors any problems or difficulties the auditors may have encountered in connection with the annual audit or otherwise, any management letters provided to the Committee and the Company’s responses. Such review shall address any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information, any disagreements with management regarding generally accepted accounting principles and other matters, material adjustments to the financial statements recommended by the independent auditors and adjustments that were proposed but “passed”, regardless of materiality.
12. "Whistleblowing" Procedures. The Committee shall establish and maintain procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and for the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
13. Access to Records, Consultants and Others. The Committee shall have the full resources and authority (i) to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company; (ii) to engage outside legal, accounting or other consultants to advise the Committee and to approve the terms of any such engagement and the fees of any such legal, accounting or other consultant; and (iii) to request any officer or employee of the Company, the Company’s outside counsel, internal audit service providers or independent auditors to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
14. Delegation. The Committee may delegate any of its responsibilities to a subcommittee comprised of one or more members of the Committee. The Committee shall also carry out such other duties as may be delegated to it by the Board of Directors from time to time.
15. Controls and Procedures. The Committee shall review with the Nominating and Corporate Governance Committee its conclusion with regard to the Company’s effectiveness of disclosure controls and procedures including any significant deficiencies in or material non-compliance with such controls and procedures.
16. Performance Evaluation. The Committee shall produce and provide to the Board an annual performance evaluation of the Committee, which evaluation shall compare the performance of the Committee with the requirements of this charter. The performance evaluation shall also recommend to the board any improvements to the Committee’s charter deemed necessary or desirable by the Committee. The performance evaluation by the Committee shall be conducted in such a manner as the Committee deems appropriate. The report to the Board may take the form of an oral report by the chairperson of the Committee or any other member of the Committee designated by the Committee to make this report.
Compensation Committee Charter
The Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Argan, Inc. (the “Company”) is responsible for implementing and reviewing executive compensation plans, policies and programs in an effort to ensure the attraction and retention of executive officers in a reasonable and cost-effective manner, to motivate their performance in the achievement of the Company’s business objectives and to align the interest of executive officers with the long-term interests of the Company’s shareholders.
The Committee shall consist of not less than three independent members of the Board. The Committee members shall be appointed for one-year terms at the annual meeting of the Board. In selecting members of the Committee, the Board will determine that each member has the appropriate experience, independence and interest to carry out his/her duties and responsibilities. Each member of the Committee shall meet the standards to qualify as an independent director within the meaning of Section 803A of the NYSE AMEX LLC Company Guide.
The Committee shall:
Approve periodically a compensation policy and salary structure for executive officers of the Company which considers business and financial objectives, industry and market pay practices and/or such other information as may be deemed appropriate.
Review and approve the compensation (salary, bonus, incentive and other compensation) of the executive officers of the Company, excluding the Chief Executive Officer.
Review and recommend the annual compensation, including base salary and short and long-term incentives, of the CEO to the outside directors of the BOD for approval.
Review and approve perquisites offered to executive officers of the Company.
Review the compensation of executive officers of the Company and evaluate their compensation in light of their performance.
Review and approve all employment, retention and severance agreements for any executive officer of the Company.
Act on behalf of the Board in administering compensation plans, approved by the Board and/or the shareholders of the Company, in a manner consistent with the terms of such plans, including, the granting of stock options, restricted stock, stock units and other awards.
Review and make recommendations to the Board with respect to new compensation incentive plans and equity-based plans.
Review and make recommendations to the Board on changes in major benefit programs of executive officers of the Company.
Prepare a Compensation Committee Report for inclusion in the Company’s annual meeting proxy statement as required by the Securities and Exchange Commission regulations.
Review and obtain confirmation that compensation and perquisites are administered in compliance with applicable law and are appropriately disclosed in the Company’s annual meeting proxy statement.
Perform such other functions as may be assigned to the Committee, from time to time, by the Board.
The Committee shall meet regularly, with such additional meetings, as the Chair of the Committee deems necessary, and shall report to the Board following regular meetings.
The Chief Executive Officer of the Company shall not be present during voting or deliberations of the Committee regarding the compensation of the Chief Executive Officer.
The Committee shall have the authority to retain, establish the compensation for and terminate outside counsel and other experts and advisors, including compensation consultants, as it determines appropriate to assist in the full performance of its functions.
The Committee shall review the adequacy of this Charter on an annual basis and recommend changes to the Board for approval.
The Committee shall undertake an annual evaluation of the Committee.
Nominating and Corporate Governance Committee Charter
The purposes of the Nominating and Corporate Governance Committee (the “Committee”) of the Board of Directors (the “Board”) of Argan, Inc. (the “Company”) are to (1) assist the Board by identifying individuals qualified to become Board members; (2) recommend individuals to the Board for nomination as members of the Board and its committees, (3) lead the Board in its annual review of the Board’s performance and (4) provide oversight of the corporate governance affairs of the Board and the Company, including consideration of the risk oversight responsibilities of the full Board and its committees. The Committee shall report to the Board on its activities on a regular basis and not less than once a year.
The Committee shall consist solely of three members of the Board, each of whom meets the independence requirements of the New York Stock Exchange, Inc.
The initial members of the Committee shall be appointed by the Board. Candidates to fill subsequent vacancies on the Committee shall be nominated by the Committee as set forth below and appointed by the Board. Members shall serve at the pleasure of the Board and for such term or terms as the Board may determine.
Committee Structure and Operations
The Board shall designate one member of the Committee as its chairperson. In the event of a tie vote on any issue, the chairperson’s vote shall decide the issue. The Committee shall meet at least once per year at a time determined by the Committee chairperson, with further meetings to occur, or actions to be taken by unanimous written consent, when deemed necessary or desirable by the Committee or its chairperson.
Committee Duties and Responsibilities
The following are the duties and responsibilities of the Committee:
1. To make recommendations to the Board from time to time as to changes that the Committee believes to be desirable to the size of the Board or any committee thereof.
2. To identify individuals believed to be qualified to become Board members, and to recommend to the Board the nominees to stand for election as directors at the annual meeting of stockholders or, if applicable, at a special meeting of stockholders. In the case of a vacancy in the office of a director (including a vacancy created by an increase in the size of the Board), the Committee shall recommend to the Board an individual to fill such vacancy either through appointment by the Board or through election by stockholders. In nominating candidates, the Committee shall take into consideration the qualifications for directors set forth below and such other factors as it deems appropriate. These factors may include judgment, skill, diversity, experience with businesses and other organizations of comparable size, the interplay of the candidate’s experience with the experience of other Board members, and the extent to which the candidate would be a desirable addition to the Board and any committees of the Board.
The Committee may consider candidates proposed by management, but is not required to do so.
3. To develop and recommend to the Board standards to be applied in making determinations as to the absence of material relationships between the Company and a director.
4. To review the Company’s exposure to potential related party transactions, including receiving and reviewing reports on potential related person transactions, approving or disapproving such transactions, and reporting any approved transactions to the Board of Directors.
5. To identify Board members qualified to serve on any committee of the Board (including the Committee) and to recommend that the Board appoint the identified member or members to the respective committee. In nominating a candidate for committee membership, the Committee shall take into consideration the factors set forth in the charter of the committee, if any, as well as any other factors it deems appropriate, including, without limitation, (i) applicable law and stock exchange rules and (ii) the consistency of the candidate’s experience with the goals of the committee and (iii) the interplay of the candidate’s experience with the experience of other committee members.
6. To establish procedures for the Committee to exercise oversight of the evaluation of the Board and management.
7. To report annually to the Board with an assessment of the Board’s performance, to be discussed with the full Board following the Annual Shareholders’ Meeting.
8. To oversee and report annually to the Board its assessment of each Board Committee’s performance evaluation process.
9. To develop and recommend to the Board a set of corporate governance principles applicable to the Company, and to review those principles and, if the Committee deems appropriate, to recommend any changes to the Board for approval.
10. To consider whether any amendments to the Certificate of Incorporation and Bylaws of the Company are desirable, review any proposed amendments to the Certificate of Incorporation and Bylaws and recommend appropriate action to the Board.
11. To review with the Audit Committee their conclusion with regard to the Company’s effectiveness of disclosure controls and procedures including significant deficiencies in or material non-compliance with such controls and procedures.
12. To review and make recommendations about the structure and functions of Board committees, after consultation with the respective committee chairs.
13. To review and advise the Board, in consultation with other Board committees as appropriate, with respect to any shareowner proposal received in connection with the Company’s annual meeting of shareowners.
14. To report regularly to the Board, as the Committee deems appropriate.
15. To recommend to the Board such additional actions related to corporate governance matters as the Committee may deem necessary or advisable from time to time.
16. To exercise any other duties or responsibilities expressly delegated to the Committee by the Board from time to time, including the following duties and responsibilities assigned to the Committee:
Review of the Board of Directors’ Independence Standards
Review of the skills and characteristics of Board members and the Board as a whole
Review any nominees for Director submitted by shareowners
Review membership of a Board member upon a change in responsibility
The Committee shall produce and provide to the Board an annual performance evaluation of the Committee, which evaluation shall compare the performance of the Committee with the requirements of this charter. The performance evaluation shall also recommend to the Board any improvements to the Committee’s charter deemed necessary or desirable by the Committee. The performance evaluation by the Committee shall be conducted in such manner as the Committee deems appropriate. The report to the Board may take the form of an oral report by the chairperson of the Committee or any other member of the Committee designated by the Committee to make this report.
Resources and Authority of the Committee
The Committee shall have the resources and authority appropriate to discharge its duties and responsibilities, including the authority to select, retain, terminate and approve the fees and other retention terms of independent legal advisors, experts or consultants, as it deems appropriate, without seeking approval of the Board or management. With respect to consultants or search firms used to identify director candidates, this authority shall be vested solely in the Committee. The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to any such advisors, experts or consultants retained by the Committee.
Criteria for Nomination as Director
1. Nominees should have a reputation for integrity, honesty and adherence to high ethical standards.
2. Nominees should have demonstrated business acumen, experience and ability to exercise sound judgment in matters that relate to the current and long-term objectives of the Company and should be willing and able to contribute positively to the decision-making process of the Company.
3. Nominees should have a commitment to understand the Company and its industry and to regularly attend and participate in meetings of the Board of Directors and its committees.
4. Nominees should have the interest and ability to understand the sometimes conflicting interests of the various constituencies of the Company, which include stockholders, employees, customers, governmental units, creditors and the general public, and to act in the interests of all stockholders.
5. Nominees should not have, or appear to have, a conflict of interest that would impair the nominee’s ability to represent the interests of all the Company’s stockholders and to fulfill the responsibilities of a director.
6. Nominees shall not be discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability or any other basis proscribed by law. The value of diversity on the Board of Directors should be considered.
Application of Criteria to Existing Directors
The renomination of existing directors should not be viewed as automatic, but should be based on continuing qualification under the criteria set forth above. In addition, the Nominating Committee shall consider the existing directors’ performance on the Board and any committee, which shall include consideration of the extent to which the directors undertook continuing director education.
Criteria for Composition of the Board
The backgrounds and qualifications of the directors considered as a group should provide a significant breadth of experience, knowledge and abilities that shall assist the Board of Directors in fulfilling its responsibilities.