ESCROW AGREEMENT
This
ESCROW AGREEMENT (this “Escrow Agreement”), is made and entered into as of the
8th
day of
December, 2006, by and among (i) ARGAN, INC., a Delaware corporation
(“Purchaser”), (ii) XXXXXXX X. XXXXXXX, XX. (“Xxxxxxx”), and XXXX X. XXXXXX
(“Xxxxxx,” and together with Xxxxxxx sometimes hereinafter referred to together
as, the “Sellers”); (iii) XXXXXXX XXXXX (“Price”); and (iv) XXXXXX LAW XXXXXXXX
XXXXXXX & SALANS, P.C., a District of Columbia professional corporation
(“Escrow Agent”).
WHEREAS,
Purchaser, the Sellers, and Gemma Power Systems, LLC, a Connecticut limited
liability company (“GPS”), Gemma Power, Inc., a Connecticut corporation
(“GPS-Connecticut”), and Gemma Power Systems California, Inc., a California
corporation (“GPS-California”), entered into that certain Membership Interest
Purchase Agreement dated December 8, 2006 (the “MIPA”), pursuant to which
Purchaser acquired, on the date hereof, all of the membership interests of
GPS;
and
WHEREAS,
Purchaser, the Sellers and GPS-Connecticut and GPS-California entered into
that
certain Stock Purchase Agreement dated December 8, 2006 (the “SPA”), pursuant to
which Purchaser acquired, on the date hereof, all of the issued and outstanding
shares of capital stock of GPS-Connecticut and GPS-California (the acquisition
of all of said membership interests of GPS under the MIPA and of all of said
shares of capital stock of GPS-Connecticut and GPS-California under the SPA
sometimes hereinafter referred to together as, the “Acquisition”);
and
WHEREAS,
all definitions of terms used in the MIPA shall have the same meaning when
those
terms are used in this Escrow Agreement; and
WHEREAS,
as a result of the Acquisition, the Sellers are entitled to, among other things,
the Stock Consideration; provided, however, that, in accordance with the terms
and conditions of the MIPA, Purchaser has retained from the Stock Consideration
the Escrowed Stock Consideration and is depositing same in escrow with the
Escrow Agent to be held subject to the terms and conditions of this Escrow
Agreement.
NOW,
THEREFORE, in consideration of the mutual promises herein contained, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
covenant and agree as follows:
1.
Establishment
of Escrow.
1.1 Pursuant
to Section 2.2(b) of the MIPA, Purchaser hereby deposits with Escrow Agent
the
Escrowed Stock Consideration, consisting of three (3) stock certificates
evidencing the issuance to each of the Sellers of 325,000 shares of Argan Common
Stock, and, at the direction of Sellers, the issuance to Price of 16,667 shares
of Argan Common Stock, together having an aggregate value (valued at the Argan
Per Share Value) of Two Million Five Hundred Thousand Dollars ($2,500,000),
together with three (3) stock powers attached to each of said stock certificates
executed by each of the Sellers, and by Price, as the case may be, in blank,
which will be held subject to the terms and conditions of this Escrow Agreement.
1.2 Purchaser
and the Sellers and Price hereby acknowledge and agree that the Escrowed Stock
Consideration is to secure the Sellers’ obligation to indemnify, defend,
protect, and hold harmless each Buyer Indemnitee pursuant to Section 10 of
the
MIPA.
1.3
Escrow
Agent hereby acknowledges receipt of the Escrowed Stock Consideration and agrees
to hold the Escrowed Stock Consideration in accordance with the terms and
conditions of this Escrow Agreement.
2. Term;
Claims for Indemnification.
2.1 The
term
of this Escrow Agreement shall commence on the date hereof and shall expire
one
(1) year from the Closing Date (the “Escrow Release Date”), unless a claim for
indemnification under Section 10 of the MIPA is made on or before the Escrow
Release Date, in which event this Escrow Agreement shall continue in effect
in
accordance the following provisions.
2.2 Escrow
Agent shall hold and release the Escrowed Stock Consideration as
follows:
(a) In
the
event that Purchaser makes a claim for indemnification under Section
10 of
the
MIPA (which Purchaser may do on one or more occasions during the term of this
Escrow Agreement), it shall notify the Escrow Agent and the Sellers and Price
of
such claim and the amount thereof in writing (the “Indemnification Claim
Notice”) no later than the Escrow Release Date. Upon the giving of the
Indemnification Claim Notice, the Sellers shall have the right to dispute such
claim by giving notice of dispute to the Escrow Agent and Purchaser and Price
in
writing (the “Dispute Notice”) within five (5) business days of Purchaser’s
giving of the Indemnification Claim Notice. Purchaser and the Sellers thereafter
shall attempt to agree in writing on the dollar amount owed by the Sellers
pursuant to such claim. If the parties are unable to agree in writing to such
dollar amount, the matter shall be resolved in accordance with Paragraph 2.3
below.
(b) Upon
receipt by the Escrow Agent of joint written instructions from Purchaser and
the
Sellers setting forth the agreed amount of any claim for indemnification, or
of
a copy of a final decision by an arbitrator or arbitrators in accordance with
Section 2.3 below, or in the event that the Sellers do not timely dispute
Purchaser’s claim for indemnification, in accordance with Paragraph 2.2(a)
above, then the Escrow Agent shall release to Purchaser the amount claimed
by
Purchaser in the Indemnification Claim Notice (if the Sellers do not timely
dispute such claim) or the amount set forth in the joint written instructions
of
Purchaser and the Sellers or as set forth in a final decision by an arbitrator
or arbitrators (if the Sellers do timely dispute such claim) (such amount as
determined in any of such cases hereinafter referred to as the “Indemnification
Amount”), by completing stock powers indicating thereon the number of shares of
the Escrowed Stock Consideration to be transferred to Purchaser, which number
shall be prorata among the Sellers and Price in accordance with their respective
ownership of the Escrowed Stock Consideration. Thereafter the Escrow Agent
shall
continue to hold the remaining balance of the Escrowed Stock Consideration,
if
any, in accordance with the terms and conditions of this Escrow Agreement;
provided, however, that if pending resolution of any dispute the Escrow Release
Date has passed, then (i) this Escrow Agreement shall continue in effect, but
only with respect to one hundred twenty percent (120%) of the amount of the
Escrowed Stock Consideration sufficient to meet the amount of the then pending
claim(s) and the remainder of the Escrowed Stock Consideration shall be released
to the Sellers and to Price prorata in accordance with their respective
ownership of the Escrowed Stock Consideration, and (ii) upon receipt by the
Escrow Agent of joint written instructions from Purchaser and the Sellers,
or of
a copy of a final decision by an arbitrator or arbitrators, setting forth the
Indemnification Amount with respect to such pending claim(s), the Escrow Agent
shall release to Purchaser the Indemnification
Amount by completing stock powers indicating thereon the number of shares of
the
Escrowed Stock Consideration to be transferred to Purchaser, which number shall
be prorata among the Sellers and Price in accordance with their respective
ownership of the Escrowed Stock Consideration, and shall release to the Sellers
and Price (prorata among them in accordance with their respective ownership
of
the Escrowed Stock Consideration) the balance of
the
Escrowed Stock Consideration.
2
(c) Whenever
the Escrow Agent is required to release less than all of the Escrowed Stock
Consideration to Purchaser or to the Sellers pursuant to the terms of this
Escrow Agreement, then the Escrow Agent shall exchange each of the stock
certificates held by it as part of the Escrowed Stock Consideration hereunder
(each, an “Original Stock Certificate”) for two (2) stock certificates, the
first for the number of shares of Argan Common Stock having a value equal to
the
issuee’s pro rata share of the applicable Indemnification Amount (as set forth
above), and the second for the balance of the shares represented by said
Original Stock Certificate. For purposes of determining the number of shares
of
Argan Common Stock to be released hereunder in payment of an Indemnification
Amount, the value per share shall be equal to the trailing thirty (30) day
average trading price per share of Argan Common Stock (that is, the average
trading price per share of Argan Common Stock occurring during the thirty (30)
day period ending on date of the release), if any trades occurred during such
thirty (30) day period, or halfway between the weighted average bid and ask
prices per share of Argan Common Stock during such thirty (30) day period,
if no
trades occurred during such thirty (30) day period.
2.3 Any
dispute between the parties arising out of this Escrow Agreement shall be
resolved by binding arbitration in accordance with the rules of the American
Arbitration Association in Rockville, Maryland. Any final decision by the
arbitrator(s) in any such proceeding may be entered as a judgment in accordance
with the rules of the Circuit Court of Maryland for Xxxxxxxxxx County or the
rules of the Superior Court of the State of Connecticut for the Judicial
District of Hartford.
3
3. Termination
of Escrow.
3.1 Subject
to the provisions of Paragraph 2.2 above, on the Escrow Release Date, this
Escrow Agreement shall terminate and the Escrow Agent shall deliver the Escrowed
Stock Consideration, or the remaining amount thereof, to the Sellers and to
Price pro rata in accordance with their ownership of the Escrowed Stock
Consideration.
3.2 Notwithstanding
anything contained in this Escrow Agreement to the contrary, this Escrow
Agreement may be terminated by the written agreement of the Purchaser and the
Sellers delivered to the Escrow Agent, which agreement shall include
instructions to the Escrow Agent as to the disposition of the Escrowed Stock
Consideration.
3.3 It
is
understood and agreed that the termination of this Escrow Agreement and the
disbursement of the Escrowed Stock Consideration shall not terminate, limit
or
otherwise affect in any way the Sellers’ continuing obligations to indemnify,
defend, protect and hold harmless each Buyer Indemnitee under Section 10 of
the
MIPA with respect to (i) Income Tax Matters, (ii) title matters, and (iii)
actual fraud or intentional non-disclosure by the Sellers, which obligations
shall expire as set forth in Section 10 of the MIPA.
4. Escrow
Agent.
4.1 Each
of
Purchaser and the Sellers and
Price recognizes
and acknowledges that the Escrow Agent is serving solely as an accommodation
to
the parties hereto, and each of them agrees that the Escrow Agent shall not
be
liable to any of the parties for any error of judgment, mistake, or act or
omission hereunder, or any matter or thing arising out of its conduct hereunder,
except for the Escrow Agent's willful misfeasance or gross negligence. The
Escrow Agent shall be entitled to rely upon the authenticity of any signature
and the genuineness and/or validity of any writing received by the Escrow Agent
pursuant to or otherwise relating to this Escrow Agreement.
4.2 The
Escrow Agent is acting, and may continue to act, as counsel to Purchaser in
connection with the subject transaction, whether or not the Escrowed Stock
Consideration is being held by the Escrow Agent or has been delivered to a
court
of appropriate jurisdiction pursuant to Section 4.5 hereof.
4.3 For
services rendered hereunder, Purchaser and the Sellers shall each pay the Escrow
Agent one-half of the fees and expenses it may xxxx for its services hereunder
at its regular hourly rates, payable within thirty (30) days of invoice
therefor. In no event shall this Section 4.3 apply to any fees, charges, or
disbursements incurred by the Escrow Agent in its capacity as counsel to
Purchaser.
4.4 Each
of
Purchaser and the Sellers jointly and severally agrees to indemnify and hold
harmless the Escrow Agent from and against any and all costs, claims, damages,
or expenses (including, without limitation, reasonable attorneys’ fees and
disbursements), that may be incurred by the Escrow Agent acting under this
Escrow Agreement (including, without limitation, any costs incurred by the
Escrow Agent pursuant to Section 4.5 hereof) or to which the Escrow Agent may
be
put in connection with the Escrow Agent acting under this Escrow Agreement,
except for costs, claims, or damages arising out of the Escrow Agent’s willful
misfeasance or gross negligence.
4
4.5 In
the
event that: (a) the Escrow Agent shall receive contrary instructions from
Purchaser and the Sellers; or (b) any dispute shall arise as to any matter
arising under this Escrow Agreement; or (c) there shall be any uncertainty
as to
the meaning or applicability of any of the provisions hereof, or the Escrow
Agent’s duties, rights or responsibilities hereunder, or any written
instructions received by the Escrow Agent pursuant hereto, the Escrow Agent
shall not itself determine such dispute, controversy or uncertainty, but shall
either (i) continue to hold the Escrowed Stock Consideration until otherwise
directed in writing by joint instruction of Purchaser and the Sellers, or by
a
final non-appealable court order, or (ii) at its option, at any time that such
dispute, controversy or uncertainty continues, deposit the Escrowed Stock
Consideration into any court having appropriate jurisdiction. Upon the Escrow
Agent’s disposition of the Escrowed Stock Consideration in accordance with
clause (i) or clause (ii) of the immediately preceding sentence, the Escrow
Agent shall, thereupon, be relieved of, and discharged and released from, any
and all liability hereunder and with respect to the Escrowed Stock
Consideration.
4.6 Upon
the
delivery of the Escrowed Stock Consideration in accordance with the other
provisions of this Escrow Agreement, the Escrow Agent shall, thereupon, be
relieved of, and discharged and released from, any and all liability hereunder
and with respect to the Escrowed Stock Consideration.
5. Miscellaneous.
5.1 Each
of
the recitals set forth in the introductory paragraphs of this Escrow Agreement
is hereby incorporated into the body hereof.
5.2 Any
consent required by any party hereto, by way of any document or notice requiring
mutual agreement, or otherwise, shall not be unreasonably withheld.
5.3 This
Agreement shall be governed by the laws and construed, interpreted and enforced
in the courts of the State of Maryland.
5.4
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
5
5.5
All
notices, requests, instructions, or other communications required or permitted
hereunder shall be deemed to have been given or made when delivered by (i)
U.S.
registered or certified mail, return receipt requested, postage prepaid, (ii)
messenger, or (iii) overnight delivery service, or when delivery is refused,
to:
|
If
Purchaser then:
|
Argan,
Inc.
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Xxx
Xxxxxx Xxxxxx, Xxxxx 000
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Xxxxxxxxx,
Xxxxxxxx 00000
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Attn:
Xxxxxx X. Xxxxxx
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Fax:
(000) 000-0000
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With
a copy to:
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Xxxxx
X. Law
|
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Xxxxxx
Law Xxxxxxxx Xxxxxxx
|
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&
Salans, PC
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0000
X Xxxxxx, X.X.
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Xxxxx
000
|
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Xxxxxxxxxx,
X.X. 00000
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Fax:
202/000-0000
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If
Xxxxxxx then:
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Xx.
Xxxxxxx X. Xxxxxxx, Xx.
|
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c/o
Gemma Power Systems, LLC
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0000
Xxxx Xxxxxx
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Xxxxxxxxxxx,
Xxxxxxxxxxx 00000
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Fax:
(000) 000-0000
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If
Xxxxxx then:
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Xx.
Xxxx X. Xxxxxx
|
|
|
c/o
Gemma Power Systems, LLC
|
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0000
Xxxx Xxxxxx
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Xxxxxxxxxxx,
Xxxxxxxxxxx 00000
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Fax:
(000) 000-0000
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With
a copy to:
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Xxxx
X. Xxxx
|
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Xxxxxx,
X’Xxxxxx, X’Xxxxxxx & Xxxx, P.C.
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000
Xxxxxxxx Xxxxxx
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Xxxxxxxx,
Xxxxxxxxxxx 00000
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Fax:
(000) 000-0000
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If
Price then:
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Xxxxxxx
Xxxxx
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______________________
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______________________
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______________________
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If
to Escrow Agent then:
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Xxxxxx
Law Xxxxxxxx Xxxxxxx
|
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|
&
Salans, PC
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0000
X Xxxxxx, X.X.
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Xxxxx
000
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Xxxxxxxxxx,
X.X. 00000
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Attention:
Xxxxx X. Law, Esq.
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Any
party
may from time to time give the others written notice of a change in the address
to which notices are to be sent and of any successors in interest.
6
4.6 Nothing
in this Escrow Agreement, expressed or implied, shall give or be construed
to
give any person, firm or corporation, other than the parties hereto and their
successors and assigns, any legal claim under any covenant, condition or
provision hereof, all the covenants, conditions and provisions contained in
this
Escrow Agreement being for the sole benefit of the parties hereto and their
successors and assigns. No party may assign any of its rights or obligations
under this Escrow Agreement without the written consent of all the other
parties, which consent be may withheld in the sole discretion of the party
whose
consent is sought.
4.7 This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original, but all of which together shall constitute one and
the
same instrument.
4.8 This
Agreement constitutes the entire agreement among the parties hereto pertaining
to the subject matter hereof, and supersedes all prior agreements and
understandings pertaining thereto. No covenant, representation, or condition
not
expressed in this Escrow Agreement shall affect or be deemed to interpret,
change or restrict the express provisions hereof and no amendments hereto shall
be valid unless made in writing and signed by all parties hereto.
IN
WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement on
the
day and year first above written.
| PURCHASER: | ||
| ARGAN, INC. | ||
| |
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| By: | /s/ Xxxxxx Xxxxxxxxxx | |
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Title: Chairman and CEO |
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[Signatures
continue on following page]
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| THE SELLERS: | |||
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| /s/ Xxxxxxx X. Xxxxxxx, Xx. | |||
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XXXXXXX X. XXXXXXX, XX. |
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| /s/ Xxxx X. Xxxxxx | |||
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XXXX
X. XXXXXX
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[Signatures
continue on following page]
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| PRICE: | |||
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| /s/ Xxxxxxx Xxxxx | |||
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XXXXXXX XXXXX |
[Signatures
continue on following page]
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| ESCROW AGENT: | ||
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XXXXXX LAW XXXXXXXX XXXXXXX &
SALANS, P.C.
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| By: | /s/ Xxxxx X. Law | |
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Xxxxx X. Law, Vice President |
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