ARGAN INC

Based on the feedback we received during our outreach efforts over the years, the Compensation Committee took action. We have enhanced the disclosures included in our proxy statements by providing discussion of our executive compensation program with greater clarity while attempting to identify for stockholders the specific factors that influence the annual decisions of the Compensation Committee on executive compensation.

We changed our standard stock option vesting period to three years from the one-year period used historically. The longer vesting period has been included in all stock option awards since January 2018. The Compensation Committee also reduced the number of shares of our Common Stock covered by annual stock option awards typically made to our CEO and CFO. The lower stock option awards are now complemented with the awards of restricted stock units which are intended to introduce a stronger performance-based equity component to our long-term incentive awards. Performance-based restricted stock units (“PRSUs”) have typically been awarded to our CEO and CFO annually, usually each April, since 2018. These awards vest over three-year periods based on our total stockholder return relative to the return of each award’s designated peer group of companies. We believe that this type of incentive award is more consistent with market practice. We also believe that the measurement of total stockholder return is an appropriate performance metric as the Holding Company NEOs are considered to have greater direct influence on these results. The investors expressed support for our use of restricted stock units as an element of our executive compensation program and the use of this specific performance metric. Additionally, in April 2021, we further reduced the number of shares covered by stock option awards and added time-based restricted stock units (“TRSUs”) as a component of the overall executive compensation program.

Additionally, in April 2021, the Company began to award renewable energy performance-based restricted stock units (“RRSUs”) in response to stockholder feedback and to incentivize the CEO of Gemma to add new business that grows the number and value of renewable energy projects awarded to Gemma. More recently, in April 2023, we added earnings per share performance-based restricted stock units (“EPRSUs”) to augment the overall executive compensation program, again reducing the number of stock option shares. EPRSU awards focus on the growth of the Company’s diluted EPS, a metric that we believe is a meaningful measurement of value provided to stockholders. These changes were made, in part, to address the negative impacts of stock options on dividend distributions, to encourage increased holdings of our stock, and to retain talent over the long term.