Applied Minerals Corporate Governance
The Governance and Nominating Committee's role is to determine the slate of director nominees for election to the Company's Board of Directors, to identify and recommend candidates to fill vacancies occurring between annual shareholder meetings, to review, evaluate and recommend changes to the Company's Corporate Governance Guidelines, and to establish the process for conducting the review of the Chief Executive Officer’s performance.
The membership of the Committee consists of at least two directors, each of whom shall meet the independence requirements established by the Board and applicable laws, regulations and listing requirements. The Board appoints the members of the Committee and the chairperson. The Board may remove any member from the Committee at any time with or without cause.
The Committee meets at least twice a year. The Committee will meet periodically in executive session without Company management present. Additional meetings may occur as the Committee or its chair deems advisable. The Committee will cause to be kept adequate minutes of its proceedings, and will report on its actions and activities at the next quarterly meeting of the Board. Committee members will be furnished with copies of the minutes of each meeting and any action taken by unanimous consent. The Committee is governed by the same rules regarding meetings (including meetings by conference telephone or similar communications equipment), action without meetings, notice, waiver of notice, and quorum and voting requirements as are applicable to the Board. The Committee is authorized and empowered to adopt its own rules of procedure not inconsistent with (a) any provision of this Charter, (b) any provision of the Bylaws of the Company, or (c) the laws of the state of Delaware.
The Committee will have the resources and authority necessary to discharge its duties and responsibilities. The Committee has sole authority to retain and terminate outside counsel, any search firm used to identify director candidates, or other experts or consultants, as it deems appropriate, including sole authority to approve the firms' fees and other retention terms. Any communications between the Committee and legal counsel in the course of obtaining legal advice will be considered privileged communications of the Company and the Committee will take all necessary steps to preserve the privileged nature of those communications.
The Committee may form and delegate authority to subcommittees and may delegate authority to one or more designated members of the Committee.
Subject to the provisions of the Corporate Governance Guidelines, the principal responsibilities and functions of the Nominating Committee are as follows:
- Annually present to the Board a list of individuals recommended for nomination for election to the Board at the annual meeting of shareholders, and for appointment to the committees of the Board (including this Committee).
- Review and consider shareholder recommended candidates for nomination to the Board.
- Before recommending an incumbent, replacement or additional director, review his or her qualifications, including capability, availability to serve, conflicts of interest, and other relevant factors. In fulfilling the Committee’s responsibilities for recommending individuals for nomination for election to the Board, the Committee will apply the Board Membership Criteria outlined in the Corporate Governance Guidelines.
- Assist in identifying, interviewing and recruiting candidates for the Board.
- Annually review the composition of each committee and present recommendations for committee memberships to the Board as needed.
- Develop and periodically review and recommend to the Board appropriate revisions to the Company's corporate governance framework, including its Certificate of Incorporation, Bylaws, and Corporate Governance Guidelines.
- Monitor compliance with the Corporate Governance Guidelines
- Regularly review and make recommendations about changes to the charter of the Nominating Committee.
- Regularly review and make recommendations about changes to the charters of other Board committees after consultation with the respective committee chairs.
- Annually establish the process for conducting the review of the Chief Executive Officer’s performance.
- Obtain or perform an annual evaluation of the Committee's performance and make applicable recommendations.
CORPORATE GOVERNANCE GUIDELINES
Over the course of the Company's history, the Board of Directors has developed corporate governance policies and practices to help it fulfill its responsibilities to stockholders. These governance policies are memorialized in these guidelines to assure that the Board will have the necessary authority and practices in place to review and evaluate the Company's business operations and to make decisions that are independent of the Company's management.
The guidelines are subject to future refinement or changes as the Board may find necessary or advisable to achieve these objectives.
Role of the Board
Stockholders elect the Board to oversee management and to assure that shareholder long-term interests are served. Through oversight, review, and counsel, the Board establishes and promotes the Company’s business and organizational objectives. The Board oversees business affairs and integrity, works with management to determine the Company’s mission and long-term strategy, oversees CEO succession planning, and oversees internal control over financial reporting and external audit.
The Board is responsible for overseeing risk management at the Company. The Board exercises direct oversight of strategic risks to the Company and other risk areas not delegated to one of its committees. The Audit Committee reviews and assesses the Company’s processes to manage financial reporting risk and to manage investment, tax, and other financial risks. It also reviews the Company’s policies for risk assessment and steps management has taken to control significant risks, except those delegated by the Board to other committees. The Compensation Committee oversees compensation programs and policies and their effect on risk-taking by management. In each case, management periodically reports to the Board or relevant committee, which provides guidance on risk appetite, assessment and mitigation. Each committee charged with risk oversight reports up to the Board on those matters.
The Board recognizes that the long-term interests of stockholders are advanced by responsibly addressing the concerns of other stakeholders including employees, customers, suppliers, government, and the public.
Board Size. The Board believes 5 to 8 members is an appropriate size based on the Company's present circumstances. The Board periodically evaluates whether a larger or smaller number of directors would be preferable.
Selection of Board Members. The Company’s stockholders elect Board members annually. The Governance and Nominating Committee is responsible for recommending to the Board director candidates for nomination and election at the annual shareholder meeting or for appointment to fill vacancies. The Governance and Nominating Committee annually reviews with the Board the applicable skills and characteristics required of Board nominees in the context of current Board composition and Company circumstances. In making its recommendations to the Board, the Governance and Nominating Committee considers, among other things, the qualifications of individual director candidates in light of the Board Membership Criteria described below. The Governance and Nominating Committee may use a variety of sources, including executive search firms and shareholder recommendations, to identify director candidates. The Committee retains any search firms and approves payment of their fees. The Governance and Nominating Committee will consider candidates recommended by stockholders. Stockholders wishing to suggest director candidates should submit their suggestions in writing to the attention of the President of the Company, providing the candidate's name and qualifications for service as a Board member, a document signed by the candidate indicating the candidate's willingness to serve, if elected, and evidence of the shareholder's ownership of Company stock. A shareholder wishing to nominate a candidate must do so formally by following the procedures described in the Company’s Bylaws. The Board nominates director candidates for election by the stockholders and fills any Board vacancies that occur between shareholder elections pursuant to the Company's Bylaws.
Board Membership Criteria. The Governance and Nominating Committee works with the Board on an annual basis to determine the appropriate characteristics, skills, and experience for the Board as a whole and its individual members with the objective of having a Board with diverse backgrounds and experience in business, government, education, and public service. Characteristics expected of all directors include independence, integrity, high personal and professional ethics, sound business judgment, and the ability and willingness to commit sufficient time to the Board. In evaluating the suitability of individual Board members, the Board takes into account many factors, including general understanding of marketing, finance, and other disciplines relevant to the success of a publicly traded company in today's business environment; understanding of the Company's business; educational and professional background; and personal accomplishment. The Board evaluates each individual in the context of the Board as a whole, with the objective of recommending a group that can best promote the success of the Company's business and represent stockholder interests through the exercise of sound judgment, using its diversity of experience. In determining whether to recommend a director for re-election, the Governance and Nominating Committee also considers the director's past attendance at meetings, participation in and contributions to the activities of the Board, and the results of the most recent Board self-evaluation.
Board Composition – Mix of Management and Independent Directors. The Board intends that, except during periods of temporary vacancies, a substantial majority of its directors will be independent. The Governance and Nominating Committee has established director independence guidelines to assist it in determining the independence of a director, which will either meet or be more restrictive than the definition of “independent director” in the listing standards of the Nasdaq Stock Market, and applicable laws and regulations. The Board will also consider all other relevant facts and circumstances bearing on independence.
Election of Directors. In an uncontested election directors will be elected by the vote of the majority of the votes cast. In a contested election, the directors will be elected by the vote of a plurality of the votes cast.
Chairman; CEO. The Board selects the Company’s Chairman and also the Company’s CEO in the manner that it determines to be in the best interests of the Company’s stockholders. The Board has a policy that the Chairman should be an independent director.
Other Boards and Committees. Without specific approval from the Board, no director may serve on more than five public company boards (including the Company's Board) and no member of the Audit Committee may serve on more than three public company audit committees (including the Company's Audit Committee). Any Audit Committee member's service on more than three public company audit committees will be subject to the Board's determination that the member is able to effectively serve on the Company's Audit Committee and the disclosure of that determination in the Company's annual proxy statement. The Governance and Nominating Committee and the Board will take into account the nature of and time involved in a director's service on other boards in evaluating the suitability of individual directors and making its recommendations to Company stockholders. Service on boards and/or committees of other organizations should not pose and conflict of interests with the Company.
Board Meetings – Frequency. The Board will generally hold four regularly scheduled in-person meetings per year and holds additional special meetings as necessary. Directors are expected to attend meetings, except if unusual circumstances make attendance impractical.
Board Meetings – Agenda. The Chairman of the Board coordinates with the CEO and corporate secretary to set the agenda for each Board meeting, taking into account suggestions from other members of the Board.
Advance Distribution of Materials. All information relevant to the Board’s understanding of matters to be discussed at an upcoming Board meeting should be distributed in advance of the meeting to all members whenever feasible and appropriate. Each director is expected to review this information in advance to facilitate the efficient use of meeting time. In preparing this information, management should ensure that the materials distributed are as concise as possible, yet give directors sufficient information to make informed decisions. The Board recognizes that certain items to be discussed at Board meetings are of an extremely sensitive nature and that the distribution of materials on these matters prior to Board meetings may not be appropriate.
Access to Employees. The Board should have access to Company employees to ensure that directors can ask all questions and obtain all information necessary to fulfill their duties. The Board may specify a protocol for making such inquiries. Management is encouraged to invite Company personnel to any part of a Board meeting at which their presence and expertise would help the Board have a full understanding of matters being considered.
Access to Independent Advisors. The Board and its committees have the right at any time to retain independent outside auditors and financial, legal, or other advisors. The Company will provide appropriate funding, as determined by the Board or any committee, to compensate those independent outside auditors or advisors, as well as to cover the ordinary administrative expenses incurred by the Board and its committees in carrying out their duties.
Compensation Consultant Independence. The Compensation Committee has sole authority to retain and terminate compensation consultants that advise the Compensation Committee, as it deems appropriate, including sole authority to approve the consultants’ fees and other retention terms. It is the policy of the Compensation Committee that any compensation consultant retained by the Compensation Committee must be independent of Company management. A consultant satisfying the Company’s Compensation Consultant Independence Standards will be considered independent for purposes of this policy. The Compensation Committee will also evaluate the independence of legal and other advisors it retains in accordance with applicable regulation and listing standards.
Executive Sessions of Independent Directors. At each quarterly Board meeting, time is set aside for the independent directors to meet in executive session without Company management present. Additional executive sessions may be held as needed. Executive sessions of the independent directors will be called and chaired by the Chairman of the Board. These executive session discussions may include such topics as the independent directors determine.
Shareholder Communications to the Board. Stockholders may contact an individual director, the Board as a group, or a specified Board committee or group, including the independent directors as a group, by the mail to:
Applied Minerals, Inc.
110 Greene Street
New York, New York 10012
Each communication should specify the applicable addressee or addressees to be contacted as well as the general topic of the communication. The Company will initially receive and process communications before forwarding them to the addressee.
Communications also may be referred to other departments within the Company. The Company generally will not forward to the directors a communication that it determines to be primarily commercial in nature or related to an improper or irrelevant topic, or that requests general information about the Company.
Concerns about questionable accounting or auditing matters or possible violations of the Company’s Standards of Business Conduct should be reported on the Anonymous Hotline at 877-472-2110 or by mail to the Corporate Secretary.
Development and Succession Planning. A primary responsibility of the Board is planning for CEO succession and overseeing the identification and development of executive talent. The
Board, with the assistance of the Compensation Committee and working with the CEO, oversees executive officer development and corporate succession plans for the CEO and other executive officers to provide for continuity in senior management.
The Board works with the CEO to plan for CEO succession. The succession plan covers identification of internal candidates, development plans for internal candidates, and as
appropriate identification of external candidates. The Board annually reviews the CEO succession plan. The criteria used to assess potential CEO candidates are formulated based on the Company’s business strategies, and include strategic vision, leadership, and operational execution.
The Board should maintain an emergency succession contingency plan should an unforeseen event such as death or disability occur that prevents the CEO from continuing to serve. The plan identifies the individuals who would act in an emergency and their responsibilities. The contingency plan is reviewed by the Board annually and revised as appropriate.
The Board may review development and succession planning more frequently as it deems necessary or desirable.
Board and Committee Self-Evaluation. The Governance and Nominating Committee is responsible for conducting an annual evaluation of the performance of the Board and each of its members. In addition, each committee is responsible for conducting an annual performance evaluation. Evaluation results are reported to the Board. The Governance and Nominating Committee’s report should generally include an assessment of the Board’s compliance with the principles set forth in these guidelines, as well as identification of areas in which the Board could improve its performance. Each committee’s report generally should include an assessment of the committee’s compliance with the principles set forth in these guidelines and the committee’s charter, as well as identification of areas in which the committee could improve its performance.
Board Compensation Review. Generally, the Board believes that the level of director compensation should be based on time spent carrying out Board and committee responsibilities and be competitive with comparable companies. Company management should periodically report to the Board how the Company's director compensation practices compare with those of other public corporations. The Board should make changes in its director compensation practices only upon the recommendation of the Compensation Committee, and following discussion and unanimous concurrence by the Board.
Director Stock Ownership. The Board believes that, in order to align the interests of directors and shareholders, directors should have a significant financial stake in the Company. Each director should beneficially own shares and/or options to acquire stock and the combined value of the stock and the Black-Scholes value of the options is equal to a minimum of two times the base annual retainer payable to a director and this ownership level should be achieved within five years after the director becomes a Board member. Stock deferred under a non-qualified deferred compensation arrangement will count towards the minimum ownership requirement. The Board will evaluate whether exceptions should be made for any director on whom this requirement would impose a financial hardship.
Number and Type of Committees. The Board has three committees – an Audit Committee, a Compensation Committee, and a Governance and Nominating Committee. The Board may add new committees or remove existing committees as it deems advisable in the fulfillment of its responsibilities. Each committee will perform its duties as assigned by the Board in compliance with Company Bylaws and the committee’s charter.
Composition of Committees; Committee Chairpersons. The Board is responsible for the appointment of committee members and committee chairs according to criteria that it determines to be in the best interest of the Company and its stockholders.
Committee Meetings and Agenda The chair of each committee is responsible for developing, together with relevant Company managers, the committee’s general agenda and objectives and for setting the specific agenda for committee meetings. The chair and committee members will determine the frequency and length of committee meetings consistent with the committee’s charter.
Director Orientation and Continuing Education. The Governance and Nominating Committee and management are responsible for director orientation programs and for director continuing education programs to assist directors in maintaining skills necessary or appropriate for the performance of their responsibilities.
Orientation programs are designed to familiarize new directors with the Company's businesses, strategies, and policies and to assist new directors in developing the skills and knowledge required for their service.
Continuing education programs for Board members may include a combination of internally developed materials and presentations, programs presented by third parties at the Company, and financial and administrative support for attendance at qualifying university or other independent programs.
Review of Corporate Governance Guidelines. The Board expects to review these guidelines at least every two years, as appropriate.
Board Policy on Director Compensation
1. Employee director: No compensation for Board service
2. Non-Employee Directors:
2. Non-Employee Directors:
(a) Base Retainer: $50,000 per year, payable quarterly in four installment in advance
(b) Committee Chair: $10,000 per year, payable quarterly in four installment in advance
(c) Board Chair: $10,000 per year, per year, payable quarterly in four installments in advance
(d) Options: Options to purchase 50,000 shares of common stock per year, vesting quarterly, the exercise price for 2014 options to be the closing common stock price on the grant date and for succeeding years the closing price on the trading date immediately prior to the grant date. Grant date for 2014 is March 14. Grant date for succeeding years is January 1 of such year. If a director advises the Secretary in writing that SEC policies prohibit or discourage him from receiving options, he shall receive in cash the Black-Scholes value (as of the grant date) of the options
(e) Other: The Board from time to time may establish special committees and designate one of more directors to serve on such special committees and/or may appoint one of more directors to perform special tasks and establish compensation for such service
(f) Payment dates are on the last day of each calendar quarter.
(g) Each director may elect to receive the following fees -- base retainer, committee chair, and board chair -- in cash, common stock, or any mixture of common stock and cash. Election to receive some or all of the fees in common stock for the March 31, June 30, September 30, and December 31, 2014 to be made on March 20, 2014. Election to receive some or all common stock for the March 31, June 30, September 30, and December 31 in succeeding years to be made by December 31 immediately prior to such year. In order to make an election to receive common stock, a director must deliver to the Secretary of the Company a written notice of such election setting forth the percentage of the fee to be distributed in the form of common stock. The written notice of election must be delivered no later than December 31 prior to commencement of the calendar year to which the election relates, except for 2014, when the date is March 20, 2014. In the absence of a valid election, all fees will be paid in cash. The common stock is to be valued at the closing common stock price on the trading date immediately preceding the payment date.
(h) Payment of the option price may be made in cash or by net-exercise. Net-exerciseis a procedure by which the optionee will be issued a number of shares of common stock determined in accordance with the following formula: N = X(A-B)/B, where “N” = the number of shares of Common stock to be issued upon exercise of the Option; “X” = the total number of shares with respect to which the optionee has elected to exercise the option; “A” = the fair market value of one share of common stock determined on the exercise date; and “B” = the exercise price per share.
(i) Payment amounts accrue through each quarter. A newly elected or appointed director will be paid for the pro rata portion of the quarter that he serves and may make the initial election in paragraph 2(g) within five business days of his election or appointment
The Compensation Committee’s role is to discharge the Board’s responsibilities relating to compensation of the Company’s executive officers, the adoption of policies that govern the Company’s compensation and benefit programs, , and to fulfill the responsibilities set forth in this Charter.
The membership of the Committee consists of at least two directors, each of whom shall (a) meet the independence requirements established by the Board and applicable laws, regulations and listing requirements, (b) be a "non-employee director" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, and (c) be an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code. The Board appoints the members of the Committee and the chairperson. The Board may remove any member from the Committee at any time with or without cause.
The Committee meets at least twice a year. Additional meetings may occur as the Committee or its chair deems advisable. The Committee will meet periodically in executive session without Company management present. The Committee will cause to be kept adequate minutes of its proceedings, and will report on its actions and activities at the next quarterly meeting of the Board. Committee members will be furnished with copies of the minutes of each meeting and any action taken by unanimous consent. The Committee is governed by the same rules regarding meetings (including meetings by conference telephone or similar communications equipment), action without meetings, notice, waiver of notice, and quorum and voting requirements as are applicable to the Board. The Committee is authorized to adopt its own rules of procedure not inconsistent with (a) any provision of this Charter, (b) any provision of the Bylaws of the Company, or (c) the laws of the state of Delaware.
The Committee will have the resources and authority necessary to discharge its duties and responsibilities. The Committee has sole authority to retain and terminate outside counsel, compensation consultants, or other experts or consultants, as it deems appropriate, including sole authority to approve the fees and other retention terms for such persons. Any communications between the Committee and legal counsel in the course of obtaining legal advice will be considered privileged communications of the Company and the Committee will take all necessary steps to preserve the privileged nature of those communications.
Except as otherwise delegated by the Board or the Committee, the Committee will act on behalf of the Board.
The Committee may form and delegate authority to subcommittees and may delegate authority to one or more designated members of the Committee. The Committee may delegate to the chief executive officer the authority to make grants of equity-based compensation in the form of rights or options to eligible officers and employees who are not executive officers, such authority including the power to (i) designate officers and employees of the corporation or of any of its subsidiaries to be recipients of such rights or options created by the corporation, and (ii) determine the number of such rights or options to be received by such officers and employees; provided, however, that the resolution so authorizing the chief executive officer shall specify the total number of rights or options the chief executive officer may so award. If such authority is delegated, the chief executive officer shall regularly report to the Committee grants so made and the Committee may revoke any delegation of authority at any time.
The principal responsibilities of the Compensation Committee are as follows:
Board Compensation. Periodically review the compensation paid to non-employee directors and make recommendations to the Board for any adjustments.
Chief Executive Officer Compensation.
- Conduct an annual CEO evaluation
- Assist the Board in establishing CEO annual goals and objectives, if appropriate.
- Recommend CEO compensation to the other independent members of the Board for approval.
- The CEO may not be present during deliberations or voting concerning the CEO's compensation.
Other Executive Officer Compensation.
- Oversee an evaluation of the performance of the Company's executive officers and approve the annual compensation, including salary and incentive compensation, for the executive officers.
- Review the structure and competitiveness of the Company’s executive officer compensation programs considering the following factors: (i) the attraction and retention of executive officers; (ii) the motivation of executive officers to achieve the Company’s business objectives; and (iii) the alignment of the interests of executive officers with the long-term interests of the Company’s shareholders.
- Review and approve compensation arrangements for new executive officers and termination arrangements for executive officers.
General Compensation Oversight. Monitor and evaluate matters relating to the compensation and benefits structure of the Company as the Committee deems appropriate, including:
- Provide guidance to management on significant issues affecting compensation philosophy or policy.
- Provide input to management on whether compensation arrangements for Company executives incentivize unnecessary and excessive risk taking.
- Review and approve policies regarding CEO and other executive officer compensation.
Equity and Other Benefit Plan Oversight.
- Serve as the "Committee" established to administer the Company’s equity-based and employee benefit plans, and perform the duties of the Committee under those plans. The Compensation Committee may delegate those responsibilities to senior management as it deems appropriate.
- Appoint and remove plan administrators for the Company’s retirement plans for the Company’s employees and perform other duties that the Board may have with respect to the Company’s retirement plans.
Compensation Consultant Oversight.
- Retain and terminate compensation consultants that advise the Committee, as it deems appropriate, including approval of the consultants’ fees and other retention terms.
- Ensure that the compensation consultant retained by the Committee is independent of the Company.
Disclosure. Discuss with management the Company’s Compensation Discussion and Analysis (“CD&A”) for the annual proxy statement; based on the review and discussion, recommend to the Board that the CD&A be included in the Company’s annual report or annual proxy statement; and produce an annual report of the Compensation Committee on executive compensation for the Company’s annual proxy statement in compliance with and to the extent required by applicable Securities and Exchange Commission rules and regulations and relevant listing authority.
- Regularly review and make recommendations to the Board about changes to the charter of the Committee.
- Obtain or perform an annual evaluation of the Committee's performance and make applicable recommendations.
The Audit Committee of the Board of Directors assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing, and reporting practices of the Company, and such other duties as directed by the Board. The Committee's purpose is to oversee the accounting and financial reporting processes of the Company, the audits of the Company's financial statements, the qualifications of the public accounting firm engaged as the Company's independent auditor to prepare or issue an audit report on the financial statements of the Company and internal control over financial reporting, and the performance of the Company's internal audit function and independent auditor. The Committee reviews and assesses the qualitative aspects of the Company’s financial reporting to stockholders, the Company’s financial risk assessment and management, and the Company’s ethics and compliance programs. The Committee is directly responsible for the appointment (subject to stockholder ratification), compensation, retention, and oversight of the independent auditor.
The membership of the Committee consists of at least three directors, all of whom shall meet the independence requirements established by the Board and applicable laws, regulations, and listing requirements. Each member shall, in the judgment of the Board, have the ability to read and understand fundamental financial statements and otherwise meet the financial sophistication standard established by the requirements of the NASDAQ Stock Market, LLC. At least one member of the Committee shall in the judgment of the Board be an "audit committee financial expert" as defined by the rules and regulations of the Securities and Exchange Commission. The Board appoints the members of the Committee and the chairperson. The Board may remove any member from the Committee at any time with or without cause.
Generally, no member of the Committee may serve on more than three audit committees of publicly traded companies (including the Audit Committee of the Company) at the same time. For this purpose, service on the audit committees of a parent and its substantially owned subsidiaries counts as service on a single audit committee.
The Committee meets at least four times a year. Additional meetings may occur as the Committee or its chair deems advisable. The Committee will meet periodically in executive session without Company management present. The Committee will cause to be kept adequate minutes of its proceedings, and will report on its actions and activities at the next quarterly meeting of the Board. Committee members will be furnished with copies of the minutes of each meeting and any action taken by unanimous consent. The Committee is governed by the same rules regarding meetings (including meetings by conference telephone or similar communications equipment), action without meetings, notice, waiver of notice, and quorum and voting requirements as are applicable to the Board. The Committee may adopt its own rules of procedure not inconsistent with (a) this Charter, (b) the Bylaws of the Company, or (c) the laws of the state of Delaware.
The independent auditor reports directly to the Committee. The Committee is expected to maintain free and open communication with the independent auditor, the internal auditors, and management. This communication will include periodic private executive sessions with each of these parties.
The Committee will have the resources and authority necessary to discharge its duties and responsibilities. The Committee has sole authority to retain and terminate outside counsel or other experts or consultants, as it deems appropriate, including sole authority to approve the firm's fees and other retention terms. The Company will provide the Committee with appropriate funding, as the Committee determines, for the payment of compensation to the Company's independent auditor, outside counsel, and other advisors as it deems appropriate, and administrative expenses of the Committee that are necessary or appropriate in carrying out its duties. In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention. The Committee will have access to the Company's books, records, facilities, and personnel. Any communications between the Committee and legal counsel in the course of obtaining legal advice will be considered privileged communications of the Company, and the Committee will take all necessary steps to preserve the privileged nature of those communications.
The Committee may form and delegate authority to subcommittees and may delegate authority to one or more designated members of the Committee.
Responsibilities and Duties
In performing its functions, the Audit Committee shall review the Company's financial reporting process and internal controls, the Company’s compliance with legal and regulatory requirements, and review and appraise the audit efforts of the Company's independent auditor and internal auditors.
To fulfill its responsibilities and duties, the Audit Committee shall:
I. Documents/reports/accounting information review
- Meet with management and the independent auditor to review and discuss the Company’s annual financial statements and quarterly financial statements (prior to the Company’s Form 10K and Form 10-Q filings or release of earnings), as well as all internal control reports (or summaries thereof). Review other relevant reports or financial information submitted by the Company to any governmental body or the public, including management certifications as required by the Sarbanes-Oxley Act of 2002 and relevant reports rendered by the independent auditor (or summaries thereof).
- Recommend to the Board whether the financial statements should be included in the annual report on Form 10-K or in the quarterly reports on Form 10-Q.
- Review the regular internal reports to management (or summaries thereof) prepared by the internal auditors.
II. Financial Reporting Processes, Accounting Policies, and Internal Control Structure
- In consultation with the independent auditor and management, review the acceptability and the quality of the accounting principles applied in the Company's financial reporting process.
- Periodically review the adequacy and effectiveness of the Company’s disclosure controls and procedures.
- Review management’s assessment of the effectiveness of internal control over financial reporting as of the end of the most recent fiscal quarter.
- Understand the scope of the internal and independent auditors’ review of internal control over financial reporting and obtain reports on significant findings and recommendations, together with management responses.
- Receive and review any disclosure from the Company’s CEO or CFO made in connection with the certification of the Company’s quarterly and annual reports filed with the SEC of: a) significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize, and report financial data; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls.
- Review major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles; major issues as to the adequacy of the Company’s internal controls; and any special audit steps adopted in light of material control deficiencies.
- Review the effect of regulatory and accounting initiatives, as well as off-balance-sheet structures, on the financial statements of the Company.
- Review and approve all related-party transactions, defined as those transactions required to be disclosed under Item 404 of Regulation S-K.
- Establish and oversee procedures for the receipt, retention, and treatment of complaints regarding accounting, internal accounting controls, or auditing matters, including procedures for confidential, anonymous submissions by Company employees regarding questionable accounting or auditing matters The established system must be unbiased and prevent retaliation against a reporting employee.
- Complaints will be sent directly to a member of the Audit Committee and complaints will be monitored regularly and summarized for the full Audit Committee.
- Investigate any matter brought to its attention within the scope of its duties, with the power to retain outside counsel for this purpose if, in its judgment, that is appropriate.
III. Relation with the Independent Auditor
- Appoint and recommend that the Board of Directors submit for stockholder ratification, compensate, retain, and oversee the work performed by the independent auditor retained for the purpose of preparing or issuing an audit report or related work. Review the performance and independence of the independent auditor and remove the independent auditor if circumstances warrant. The independent auditor will report directly to the Audit Committee and the Audit Committee will oversee the resolution of disagreements between management and the independent auditor if they arise
- Meet with independent auditor and financial management of the Company to review the scope of the proposed audit for the current year and the audit procedures to be utilized, and at the conclusion thereof review such audit, including any comments or recommendations of the independent auditor.
- Evaluate and approve in advance all audit and non-audit services proposed to be provided by the independent auditor in accordance with the Company policy approved by the Audit Committee.
- Review the independent auditors’ report on the Company’s assessment of internal control over financial reporting
- Hold timely discussions with the independent auditor regarding the following: a) all critical accounting policies and practices; b) all alternative treatments of financial information within generally accepted accounting principles related to material items that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; c) other material written communications between the independent auditor and management, including, but not limited to, the management letter and schedule of unadjusted difference
IV. Relationship with the Internal Auditors
The internal auditors will report to the CFO; however they will have clear lines of communications directly to the Chairman of the Audit Committee and all Audit Committee members. The CFO will review with the Audit Committee the following matters relative to internal audit:
- The dismissal, appointment and replacement of the senior internal auditing executive and the internal audit responsibilities, reporting methodologies, and staffing.
- The proposed scope of internal auditors’ work for the current year. The Audit Committee will monitor and direct changes to the scope of their work during the year and discuss their audit findings and proposed follow up.
- Significant reports prepared by internal audit and management’s responses.
- Changes (if any) to the internal audit charter.
V. Ethical Compliance and Legal Compliance
- Oversee, review, and periodically update the Company’s code of business conduct and ethics and the Company’s system to monitor compliance with and enforce this code.
- Review, with the Company’s counsel, legal compliance and legal matters that could have a significant impact on the Company’s financial statements.
VI. Other Responsibilities
- The Audit Committee shall communicate the matters discussed at each Audit Committee meeting with the Board of Directors.
- Establish hiring policies for employees or former employees of the independent auditor.
- Annually conduct a self-appraisal.
- Perform such other functions as assigned by law, the Company's charter or bylaws, or the Board of Directors.
The Committee relies on the expertise and knowledge of management, the internal auditors, and the independent auditor in carrying out its oversight responsibilities. Management of the Company is responsible for determining the Company's financial statements are complete, accurate, and in accordance with generally accepted accounting principles and establishing satisfactory internal control over financial reporting. The independent auditor is responsible for auditing the Company's financial statements and the effectiveness of the Company's internal control over financial reporting. It is not the duty of the Committee to plan or conduct audits, to determine that the financial statements are complete and accurate and in accordance with generally accepted accounting principles, to conduct investigations, to assure compliance with laws and regulations or the Company's standards of business conduct, codes of ethics, internal policies, procedures, and controls, or to manage and control risks to which the Company may be exposed.
Audit Committee Charter
The Committee will regularly review the adequacy of the Audit Committee Charter and shall have the Board of Directors approve the Charter.
This Policy states the standards adopted by Applied Minerals, Inc. related to trading, tipping, or making recommendations to a person who may trade the Company's Securities or the Securities of certain other publicly-traded companies while in aware of material, non-public information and more generally, the disclosure of material non-public information.
This Policy is divided into two parts:
Part I: Trading, Tipping, and Recommending
A. Definitions, exemptions, and penalties for violations of the Policy.
B. Prohibitions applicable to all directors, officers, employees and consultants of the Company.
C. Additional restrictions applicable to Covered Persons, who are defined as
· directors of the Company,
· officers of the Company at the level of vice president and above; and
· the employees listed on Appendix A as it may be amended from time to time by the Compliance Officer.
Part II: Disclosure of Material, Non-Public Information
Trading, Tipping and Recommending
A. Definitions, exemptions, and penalties for violations of the Policy.
Company: Applied Minerals, its subsidiaries and affiliates in which the Company directly or indirectly owns more than 50 percent of the voting control ("Controlled Affiliates"). All references to the Company include all of the foregoing.
Other Company: Another company about which a Company director, officer, employee or consultant is aware of material non-public information that was obtained in the course of his or her involvement with the Company
- common stock, preferred stock, notes, bonds and convertible securities, and options to acquire the foregoing, issued by the Company or the Other Company, as the case may be, and
- derivative securities relating to any of the Company’s or the Other Company’s Securities issued by a third party (for example, exchange-traded options).
Materiality:Insider trading restrictions come into play only if the information you are aware of is "material." Materiality involves a relatively low threshold. Information is "material" if it is information that a reasonable investor would consider important (not necessarily decisive) in making an investment decision. Generally speaking, this means the information would have market significance; that is, if its public dissemination is reasonably likely to be taken into account by investors, so that it is reasonably possible that the information would affect the market price of Securities. However, experience indicates that it is often difficult to predict in advance what information might affect the market and what will not. For purposes of enforcement proceedings by regulatory authorities the actual effect of the information on the market (judged after-the-fact), not a person’s belief as to what the effect might be, determines whether the information is material.
Given the stage of the Company’s development the following are likely to be material:
- any new contracts, or the cancellation or non-renewal of existing contracts, for the sale of products;
- significant developments that could lead to new contracts or cancellation or non-renewal of existing contracts;
- any joint venture or significant developments that could lead to new a joint venture or strategic arrangements or to the termination of an existing venture or strategic arrangements;
- changes in the focus of our marketing activities;
In addition because the Company owns a mine, the following are likely to be material:
- any increases of decreases in the tonnage, quality, or classification of already reported resources or changes in our drilling program;
- any significant regulatory issues relating to the mine.
In addition, the following are issues applicable to companies generally that could be deemed to be material in particular situations:
- quarterly or annual financial results;
- significant changes in the Company's prospects;
- significant write-downs in assets;
- developments regarding significant litigation or government agency investigations;
- liquidity problems;
- changes in earnings estimates or unusual gains or losses in operations;
- major changes in management;
- extraordinary borrowings;
- proposals, plans or agreements, even if preliminary in nature, involving mergers, acquisitions, divestitures, recapitalizations, licensing arrangements, or purchases or sales of substantial assets; and
- capital raises.
Material information is not limited to historical facts but may also include projections and forecasts. With respect to a future event, such as a joint venture , significant sales contract, merger, acquisition or introduction of a new product, the point at which negotiations or product development are considered material is determined by balancing the probability that the event will occur against the magnitude of the effect the event would have on a company's operations or stock price if it were to occur. Thus, information concerning an event that would have a effect on stock price may be material even if the possibility that the event will occur is relatively small.
Given the Company’s stage of development, positive or negative information that would be insignificant for a mature company may be material to the Company. When in doubt about whether particular non-public information is material, the better course is to presume that the information is material.
If you are unsure whether information is material, you should consult the Compliance Officer before making any decision to disclose such information (other than to persons who need to know it), or to trade in or recommend, Securities to which that information relates.
Non-public Information: Insider trading prohibitions come into play only when you are aware of information that is material and "non-public." The fact that information has been disclosed to customers or to a few members of the public does not make it public for insider trading purposes. For purposes of this Policy, in order to be “public," information must have been disseminated in a manner designed to reach investors generally, and the investors must be given the opportunity to absorb the information. It is the Company’s policy that after public disclosure of information about the Company, information is not “absorbed” until the close of business on the second trading day after the information was publicly disclosed.
As with questions of materiality, if you are not sure whether information is considered public, you should either consult with the Compliance Officer or assume that the information is "non-public" and treat it as such.
Compliance Officer:The Company has appointed the General Counsel as the Compliance Officer for this Policy. The duties of the Compliance Officer include, but are not limited to, the following:
(i) assisting with implementation of this Policy;
(ii) circulating this Policy to all employees and consultants and ensuring that this Policy is amended as necessary to remain up-to-date with insider trading laws and up-to-date with respect to the Covered Persons;
(iii) approving 10b5-1 plans
(iv) pre-clearing all trading in Securities of the Company by Covered Persons in accordance with the procedures set forth in Part II, Section 1 below; and
(iv) providing approval of any transactions under Part II, Section 2 below.
2. Exemptions: (a) The following transactions are exempt from this Policy:
(i) For Persons other that Covered Persons: Purchases and sales of Securities under a pre-existing written plan, contract, instruction, or arrangement under and in compliance with Rule 10b5-1;
(ii) For Covered Persons: Purchases and sales of Securities under a pre-existing written plan, contract, instruction, or arrangement under and in compliance with Rule 10b5-1 that has been approved by the Compliance Officer. Approved plans must be approved at least two week before the initial trade and must provide that the third party effecting transactions on behalf of the Covered Person is instructed to send duplicate confirmations of all such transactions to the Compliance Officer.
(iii) Exercises of options and warrants and conversion of convertible securities acquired from the Company or the Other Company, as the case may be; elections to receive stock under stock appreciation rights or similar arrangements from the Company or the Other Company, as the case may be; as to directors, the election to receive directors’ fees in the form of common stock.
(iv) Bona fide gifts of Securities are not deemed to be transactions for the purposes of this Policy. Whether a gift is truly bona fide will depend on the circumstances surrounding a specific gift. The more unrelated the donee is to the donor, the more likely the gift would be considered “bona fide” and not a “transaction.” For example, gifts to charities, churches or non-profit organizations would not be deemed to be “transactions.” However, gifts to dependent children followed by a sale of the “gifted securities” in close proximity to the time of the gift may imply some economic benefit to the donor and, therefore, may be deemed to be a “transaction” and not a “bona fide gift.” Notwithstanding that bona fide gifts exempt from this Policy, all Covered Persons are required to pre-clear gifts.
3. Penalties for violation of the Policy
Penalties for trading on or communicating material, non-public information can be severe, both for individuals involved in such unlawful conduct and their employers and supervisors, and may include jail terms, criminal fines, civil penalties and civil enforcement injunctions. Given the severity of the potential penalties, compliance with this Policy is absolutely mandatory.
Legal Penalties. A person who violates insider trading laws by engaging in transactions in Securities when he or she has material, non-public information can be sentenced to a substantial jail term and required to pay a penalty of several times the amount of profits gained or losses avoided.
In addition, a person who tips others may also be liable for transactions by the tippees to whom he or she has disclosed material, non-public information. Tippers can be subject to the same penalties and sanctions as the tippees, and the SEC has imposed large penalties even when the tipper did not profit from the transaction. The SEC can also seek substantial penalties from any person who, at the time of an insider trading violation, "directly or indirectly controlled the person who committed such violation," which would apply to the Company and/or management and supervisory personnel. These control persons may be held liable for up to the greater of $1 million or three times the amount of the profits gained or losses avoided. Even for violations that result in a small or no profit, the SEC can seek a minimum of $1 million from a company and/or management and supervisory personnel as control persons.
Company-imposed Penalties. Officers, employees and consultants who violate this Policy may be subject to disciplinary action by the Company, including dismissal for cause. Any exceptions to the Policy (other than the exemptions listed above), if permitted, may only be granted by the Compliance Officer.
B. Prohibitions applicable to all directors, officers, employees and consultants of the Company.
This part of the Policy applies to:
- all directors, officers, employees, and consultants of the Company;
- all trades (unless exempted) in, and tips, and recommendations regarding, transactions in the Company’s Securities, while the director, officer, employee, or consultant is aware of material non-public information about the Company;
- all trades (unless exempted) in, and tips, and recommendations regarding, transactions in an Other Company, while the director, officer, employee, or consultant is aware of material non-public information about that Other Company that was obtained in the course of his or her involvement with the Company;
2. General Policy: No trading, tipping, or recommending, while aware of material, non-public information
Company Securities: No director, officer or employee or consultant may, while aware of material non-public information about the Company,
- purchase or sell any Company Securities, unless exempted;
- directly or indirectly tip (disclosure of material non-public information) or recommending (suggestions or comments that can be used as the basis for or a factor in a trading decision) to any person might trade or tip, or recommend to, a person who might trade.
Other Company Securities: No director, officer, employee or consultant may purchase or sell any Security of any Other Company, while aware of material, non-public information about that Other Company that was obtained in the course of his or her involvement with the Company, unless exempted. No director, officer, employee or consultant who is aware of any material, non-public information about any Other Company that was obtained in the course of his or her involvement with the Company may directly or indirectly tip (disclosure of material non-public information) or recommend (suggestions or comments that can be used as the basis for or a factor in a trading decision) to any person might trade or tip, or recommend to, a person who might trade.
C. Additional restrictions applicable to Covered Persons
The part of the Policy is applicable only to Covered Personswho are defined as
· directors of the Company,
· officers of the Company at the level of vice president and above; and
· the employees listed on Appendix A as it may be amended from time to time by the Compliance Officer.
2. Pre-clearance of Securities Transactions
Because Covered Persons are likely to obtain material, non-public information on a regular basis, the Company requires all such persons to refrain from tradingwithout first pre-clearing all transactions in the Company's Securities.
A Covered Person, persons living in the Covered Person’s household, the Covered Person’s minor children, and entities over which the Covered Person exercises control may not purchase or sell, or make any other transfer, gift, pledge or loan of any Company Security at any time, unless exempted, without first obtaining prior approval from the Compliance Officer.
The Compliance Officer shall record the date each request to trade is received and the date and time each request is approved or disapproved. Unless revoked, a grant of permission will normally remain valid until the close of trading two business days following the day on which it was granted. If the transaction does not occur during the two-day period, pre-clearance of the transaction must be re-requested.
Notwithstanding that bona fide gifts exempt from this Policy, all Covered Persons are required to pre-clear gifts.
3. Prohibited Transactions
A Covered Person, including such person's spouse, other persons living in such person's household and minor children and entities over which such person exercises control, is prohibited from engaging in the following transactions in the Company's Securities unless advance approval is obtained from the Compliance Officer:
(i) Short sales. Covered Persons may not sell the Company's Securities short;
(ii) Options trading. Covered Persons may not buy or sell puts or calls or other derivative Securities on the Company's Securities;
(iii) Trading on margin. Covered Persons may not hold Company Securities in a margin account or pledge Company Securities as collateral for a loan; and
(iv) Hedging. Covered Persons may not enter into hedging or monetization transactions or similar arrangements with respect to Company Securities.
In addition and as a separate prohibition, under law, directors and executive officers of the Company (a subset of Covered Persons) are prohibited from trading in the Company's equity Securities during a blackout period imposed under an "individual account" retirement or pension plan of the Company, during which at least 50% of the plan participants are unable to purchase, sell or otherwise acquire or transfer an interest in equity Securities of the Company, due to a temporary suspension of trading by the Company or the plan fiduciary.
Disclosure of Material, Non-Public Information.
Except as specifically authorized or in the performance of regular corporate duties, under no circumstances may a person subject to this Policy release to others non-public information that might affect the Company’s Securities. Therefore, it is important that an employee not disclose material, non-public information to anyone, including other employees of the Company, unless the other employee needs to know such information in order to fulfill his or her job responsibilities. Under no other circumstances should such information be disclosed to anyone, including family, relatives or business or social acquaintances. In maintaining the confidentiality of the information, the individual in possession of such information shall not affirm or deny statements made by others, either directly or through electronic means, if such affirmation or denial would result in the disclosure of material, non-public information. The foregoing prohibition also applies to nonpublic information about an Other Company if such information is acquitted in the course of employment by the Company.
If a person covered by this Policy has any doubt about whether certain information is non-public or material, such doubt should be resolved in favor of not communicating such information or trading without discussing with the Compliance Officer.
Unauthorized Disclosure of Internal Information. Unauthorized disclosure of nonpublic information about the Company may create serious problems for the Company whether or not the information is used to facilitate improper trading in Securities of the Company. Therefore, it shall be the duty of each director, officer, employee and consultant to maintain the confidentiality of information relating to the Company or obtained through a relationship of confidence. Company personnel should not discuss internal Company matters or developments with anyone outside the Company, except in the performance of regular corporate duties.
This policy covers Applied Minerals, Inc.’s CEO, CFO, CTO, General Counsel, and vice presidents (collectively referred to as “covered officers”).
The Company will seek to recover, at the direction of the Compensation Committee after it has considered the costs and benefits of doing so, incentive compensation awarded or paid to a covered officer for a fiscal period if the result of a performance measure upon which the award was based or paid is subsequently restated or otherwise adjusted in a manner that would reduce the size of the award or payment. Where the result of a performance measure was considered in determining the compensation awarded or paid, but the incentive compensation is not awarded or paid on a formulaic basis, the Compensation Committee will determine in its discretion the amount, if any, by which the payment or award should be reduced. In addition, if a covered officer engaged in intentional misconduct that contributed to award or payment of incentive compensation to him or her that is greater than would have been paid or awarded in the absence of the misconduct, the Company may take other remedial and recovery action, as determined by the Compensation Committee.
Applied Mineral, Inc.’s Chief Executive Officer (CEO), Chief Financial Officer (CFO), and other employees of the finance area hold an important and elevated role in corporate governance in that they are uniquely capable and empowered to ensure that all stakeholders’ interests are appropriately balanced, protected, and preserved. This Finance Code of Professional Conduct embodies principles that we are expected to adhere to and advocate. These principles of ethical business conduct encompass rules regarding both individual and peer responsibilities, as well as responsibilities to Company employees, the public, and other stakeholders. The CEO, CFO, and finance organization employees are expected to abide by this Code as well as all applicable Company business conduct standards and policies or guidelines relating to areas covered by the Code. Any violations of the Company Finance Code of Professional Conduct may result in disciplinary action, up to and including termination of employment.
All employees covered by the Finance Code of Professional Conduct will:
- Act with honesty and integrity, avoiding actual or apparent conflicts of interest in their personal and professional relationships.
- Provide stakeholders with information that is accurate, complete, objective, fair, relevant, timely, and understandable, including information in our filings with and other submissions to the U.S. Securities and Exchange Commission and other public bodies.
- Comply with rules and regulations of federal, state, provincial, and local governments, and of other appropriate private and public regulatory agencies.
- Act in good faith, responsibly, with due care, competence, and diligence, without misrepresenting material facts or allowing one’s independent judgment to be subordinated.
- Respect the confidentiality of information acquired in the course of one’s work except when authorized or otherwise legally obligated to disclose.
- Not use confidential information acquired in the course of one’s work for personal advantage.
- Share knowledge and maintain professional skills important and relevant to stakeholders’ needs.
- Proactively promote and be an example of ethical behavior as a responsible partner among peers, in the work environment and the community.
- Exercise responsible use, control, and stewardship over all Company assets and resources that are employed by or entrusted to us.
- Not coerce, manipulate, mislead, or unduly influence any authorized audit or interfere with any auditor engaged in the performance of an internal or independent audit of Company’s system of internal controls, financial statements, or accounting books and records.
If you are aware of any suspected or known violations of this Code of Professional Conduct or other Company policies or guidelines, you have a duty to promptly report such concerns either to your manager, another responsible member of management, the General Counsel, or the 24-hour Anonymous Hotline at 1-877-472-2110.
If you have a concern about a questionable accounting or auditing matter and wish to submit the concern confidentially or anonymously, you may do so by calling the Anonymous Hotline 24-hour number at 1-877-472-2110. You may also send a letter or fax reporting your concern to Company’s General Counsel.
The Company will handle all inquiries discreetly and make every effort to maintain, within the limits allowed by law, the confidentiality of anyone requesting guidance or reporting questionable behavior and/or a compliance concern.
The Board of Directors of the Company shall have the sole and absolute discretionary authority to approve any deviation or waiver from this Code of Ethics. Any waiver (and the grounds for such waiver) for a principal executive or financial officer of, or an amendment to, this Code of Ethics shall be disclosed as required by applicable Securities and Exchange Commission rules.
It is Company’s intention that this Code of Professional Conduct be its written code of ethics under Section 406 of the Sarbanes-Oxley Act of 2002 complying with the standards set forth in Securities and Exchange Commission Regulation S-K Item 406.