Stock Purchase Agreement
This
Stock Purchase Agreement (this “Agreement”)
is
made as of this 8th
day of
December, 2006, by and among Argan, Inc., a Delaware corporation (the
“Company”)
and
the purchasers identified on Schedule
A,
attached hereto (each a “Buyer”,
and
collectively the “Buyers”).
WHEREAS,
the Company is offering up to 2,854,933 shares of the Company’s Common Stock,
$.15 par value (the “Common
Stock”)
to a
limited number of sophisticated investors in a non-public offering;
and
WHEREAS,
each Buyer desires to purchase that number of shares of Common Stock as set
forth opposite the name of such Buyer on Schedule
A,
attached hereto (the “Shares”).
NOW
THEREFORE, in consideration of the foregoing and for valuable consideration,
the
receipt and sufficiency of which is acknowledged, the parties hereto agree
as
follows:
1. Issuance
of Shares
Subject
to the terms and conditions contained herein and in a certain Escrow Agreement
by and among the Company and the Buyers of even date herewith (the “Escrow
Agreement”),
the
Company will issue to each Buyer, and each Buyer will purchase from Company,
for
the purchase price of $3.75 per share, that number of shares of Common Stock
as
set forth opposite the name of such Buyer on Schedule
A,
attached hereto. Pursuant to the terms of the Escrow Agreement, the Company
shall deliver to each Buyer a certificate in the name of such Buyer for the
respective number of Shares issued to such Buyer.
2. Restrictive
Legends
All
certificates representing Shares shall have affixed thereto legends in
substantially the following form, in addition to any other legends that may
be
required under federal or state securities laws:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR BLUE
SKY LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE
ASSIGNED EXCEPT PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY
LAWS.
3. Investment
Representations
Each
Buyer represents, warrants and covenants as follows:
(a)
The
Buyer
is an “accredited investor” as such term is defined in Rule 501(a) of Regulation
D promulgated pursuant to the Securities Act of 1933, as amended (the
“Securities
Act”)
and is
purchasing the applicable Shares for its own account for investment only, and
not with a view to, or for sale in connection with, any distribution of such
Shares in violation of the Securities Act or applicable state securities laws,
or any rule or regulation thereunder.
(b)
The
Buyer
has had such opportunity as it has deemed adequate to obtain from
representatives of the Company such information as is necessary to permit it
to
evaluate the merits and risks of its investment in the Company, and has done
so.
(c)
The
Buyer
understands that the Company is required to file periodic reports pursuant
to
the Securities Exchange Act of 1934, as amended. The Buyer acknowledges that
they have had such opportunity to obtain such periodic reports.
(d)
The
Buyer
has sufficient experience in business, financial and investment matters to
be
able to evaluate the risks involved in the purchase of the Shares and to make
an
informed investment decision with respect to such purchase.
(e)
The
Buyer
can afford a complete loss of the value of the Shares and is able to bear the
economic risk of holding such Shares for an indefinite period.
(f)
The
Buyer
understands that: (i) the Shares have not been registered under the Securities
Act and are “restricted securities” within the meaning of Rule 144 under the
Securities Act; (ii) the Shares cannot be sold, transferred or otherwise
disposed of unless they are subsequently registered under the Securities Act
or
an exemption from registration is then available; (iii) in any event, the
exemption from registration under Rule 144 will not be available for at least
one year and even then will not be available unless a public market then exists
for the Common Stock, adequate information concerning the Company is then
available to the public, and other terms and conditions of Rule 144 are complied
with; and (iv) there is now no registration statement on file with the
Securities and Exchange Commission with respect to any stock of the
Buyer.
4. Company
Representations
The
Company represents and warrants as follows:
(a) Organization,
Qualification and Corporate Power.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation. The Company is duly qualified
to conduct business and is in corporate and tax good standing under the laws
of
each jurisdiction in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification, except where the failure
to be so qualified or in good standing would not have a material adverse effect
on the Company’s business. The Company has all requisite corporate power and
authority to carry on the businesses in which it is engaged and to own and
use
the properties owned and used by it.
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(b) Authorization
of Transaction.
The
Company has all requisite power and authority to execute and deliver this
Agreement, the Registration Rights Agreement and the Escrow Agreement and to
perform its obligations hereunder and thereunder. The execution
and delivery by the Company of this Agreement, the Registration Rights Agreement
and the Escrow Agreement and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of the Company.
This Agreement, the Registration Rights Agreement and the Escrow Agreement
have
been duly and validly executed and delivered by the Company and constitute
valid
and binding obligations of the Company, enforceable against it in accordance
with their respective terms.
(c) Noncontravention.
Subject
to compliance with the applicable requirements of the Securities Act, the
Securities Exchange Act of 1934 and any applicable state securities laws,
neither the execution and delivery by the Company of this Agreement, the
Registration Rights Agreement or the Escrow Agreement, nor the consummation
by
the Company of the transactions contemplated hereby or thereby, will
(a) conflict with or violate any provision of the charter or Bylaws of the
Company, (b) require on the part of the Company any filing with, or permit,
authorization, consent or approval of, any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency (“Governmental
Entity”),
(c) conflict with, result in breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the acceleration
of
obligations under, create in any party any right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument
to
which the Company is a party or by which it is bound or to which any of its
assets are subject, or (d) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of its properties
or assets.
(d) Capitalization.
The
authorized capital stock of the Company consists of 12,000,000 shares of Common
Stock. As of the date of this Agreement, there were 4, shares of Common Stock
issued and outstanding. The Company has no outstanding bonds, debentures, notes
or other obligations the holders of which have the right to vote (or which
are
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter, other than outstanding warrants
and options (including out-of-the-money warrants and options) to purchase up
to
458,000 shares of common stock. All issued and outstanding shares of Common
Stock are duly authorized, validly issued, fully paid, nonassessable and free
of
preemptive rights.
(e) SEC
Documents.
The
Company has delivered (incorporated by reference to the Company’s filings as
reported on the SEC’s web site) to Buyers each registration statement, report,
proxy statement or information statement prepared and filed with the Securities
and Exchange Commission by it since July 31, 2004, each in the form (including
exhibits and any amendments thereto) filed with the SEC (collectively, the
“Company Reports”). As of their respective dates, the Company Reports (i)
complied as to form in all material respects with the applicable requirements
of
the Securities Act, the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and the rules and regulations thereunder and (ii) did not
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
Each of the consolidated balance sheets included in or incorporated by reference
into the Company Reports (including the related notes and schedules) fairly
presents, in all material respects, the consolidated financial position of
the
Company as of its date, and each of the consolidated statements of income,
retained earnings and cash flows included in or incorporated by reference into
the Company Reports (together with the related notes and schedules) fairly
presents, in all material respects, the results of operations, retained earnings
or cash flows, as the case may be, of the Company for the periods set forth
therein (subject to the lack of footnote disclosure and normal year-end audit
adjustments which would not be material in amount or effect), in each case
in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein. Except as and
to
the extent set forth in the consolidated balance sheet of the Company at July
31, 2006, including all notes thereto, or as set forth in the Company Reports,
the Company has no material liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a balance sheet of the Company or in
the
notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied, except liabilities arising in the ordinary
course of business since such date.
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(f) Absence
of Certain Changes.
Since
July 31, 2006, the Company has conducted its business only in the ordinary
course of such business, and, other than as set forth in the Company Reports,
there has not been (i) any material adverse effect on the Company’s business;
(ii) any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock; or (iii) any material change
in
its accounting principles, practices or methods.
(g) Litigation.
There is
no action,
suit, proceeding, claim, arbitration or investigation before any Governmental
Entity which is pending or has been threatened against the Company.
There
are no judgments, orders or decrees outstanding against the Company. To the
knowledge of the Company, there is no threatened civil or criminal litigation,
written notice of violation, formal administrative proceeding, or investigation,
inquiry or information request by any governmental entity with respect to the
business of the Company.
(h) Valid
Issuance.
The
Shares, when sold, issued and delivered in accordance with the terms of this
Agreement, will be duly and validly issued, fully paid and nonassessable, and
will be subject to restrictions on transfer under federal and applicable state
securities law until a registration statement covering such shares is declared
effective by the Securities and Exchange Commission (the “SEC”),
and
then may be sold in accordance with the terms provided in the prospectus to
such
registration statement. The Shares will be issued in compliance in all material
respects with an exemption from the registration of the Securities Act, and
the
registration and qualification requirements of the securities laws of the
applicable states.
4
5. Use
of
Proceeds.
The
Company will use substantially all of the proceeds of this offering in
connection with the acquisition of Gemma Power Systems, LLC and its affiliates.
The remaining proceeds will be used by the Company for general corporate
purposes.
6. Deliveries.
(a) Deliveries
by the Company.
At the
Closing, the Company shall deliver or cause to be delivered to Buyers the
following:
1. Irrevocable
instruction letter to the Company’s transfer agent, accompanied by an
appropriate legal opinion, for the issuance of certificates evidencing an
aggregate of 2,933,334 shares of Common Stock, duly authorized, issued, fully
paid and non-assessable, registered in the name of Buyers in the denominations
set forth on Schedule A hereto;
2. A
Registration Rights Agreement between the Company and the Buyers in the form
attached hereto as Schedule B (the “Registration Rights Agreement”), duly
executed by the Company.
3. A
legal
opinion of Xxxxxxxx & Xxxx LLP (“Company Counsel”), counsel to the Company,
in form and substance satisfactory to Buyers.
4. A
certificate of the Secretary of the Company (the “Secretary’s Certificate”), in
form and substance satisfactory to Buyers, certifying as follows:
(i) that
attached to the Secretary’s Certificate is a true and complete copy of the
Certificate of Incorporation of the Company, as amended to date, including
all
certificates of designation and documents or instruments amending or restating
the Certificate of Incorporation of the Company;
(ii) that
a
true copy of the Bylaws of the Company, as amended to the date hereof, is
attached to the Secretary’s Certificate;
(iii) that
attached thereto are true and complete copies of the resolutions of the Board
of
Directors of the Company (A) authorizing the execution, delivery and performance
of this Agreement and the Registration Rights Agreement, instruments and
certificates required to be executed by it in connection herewith and approving
the consummation of the transactions in the manner contemplated hereby
including, but not limited to, the authorization and issuance of the Common
Stock;
(iv) at
the
Closing, that the representations and warranties herein are true and complete
as
of the date thereof, and that there has not occurred any event which has had
a
material adverse effect on the business of the Company,
(v) such
other matters as Buyers may reasonably request.
5. Such
other documents as the Buyers shall reasonably request.
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(b)
Deliveries
by Buyers.
At the
Closing, each Buyer shall deliver or cause to be delivered to the Company
payment for the Common Stock by (x) wire transfer of immediately available
funds
to an account designated in writing by the Company prior to the date hereof,
or
(y) bank or cashier’s check; (ii) an executed copy of this Agreement; and (iii)
an executed copy of the Registration Rights Agreement.
7. Miscellaneous
(a)
Severability.
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
and each other provision of this Agreement shall be severable and enforceable
to
the extent permitted by law.
(b)
Waiver.
Any
provision for the benefit of the Company contained in this Agreement may be
waived, either generally or in any particular instance, by the Board of
Directors of the Company.
(c)
Binding
Effect.
This
Agreement shall be binding upon and inure to the benefit of the Company and
each
Buyer and their respective heirs, executors, administrators, legal
representatives, successors and assigns.
(d)
Notice.
All
notices required or permitted hereunder shall be in writing and deemed
effectively given upon personal delivery or five days after deposit in the
United States Post Office, by registered or certified mail, postage prepaid,
addressed to the other party hereto at the address shown beneath his or its
respective signature to this Agreement, or at such other address or addresses
as
either party shall designate to the other in accordance with this Section
7(d).
(e)
Pronouns.
Whenever the context may require, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns and pronouns shall include the plural, and vice
versa.
(f)
Entire
Agreement.
This
Agreement, together with the Registration Rights Agreement and the Escrow
Agreement, constitutes the entire agreement between the parties with respect
to
the Shares, and supersedes all prior agreements and understandings, relating
to
the subject matter of this Agreement.
(g)
Amendment.
This
Agreement may be amended or modified only by a written instrument executed
by
the Buyers and the Company.
(h)
Governing
Law.
This
Agreement shall be construed, interpreted and enforced in accordance with the
internal laws of the State Delaware without regard to any applicable conflicts
of laws.
(i)
Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original and constitute the same instrument.
[NEXT
PAGE IS SIGNATURE PAGE]
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first written above.
| THE COMPANY: | |||
| ARGAN, INC. | |||
|
|
|||
| /s/ Xxxxxx Xxxxxxxxxx | |||
|
By:
Xxxxxx Xxxxxxxxxx
Its:
President
|
| BUYERS: | |||
| Argan Investments LLC | |||
|
|
|||
| /s/ Xxxxxx Xxxxxxx | |||
|
By:
Xxxxxx Xxxxxxx
Its:
Member
|
7
Schedule
A
Buyers
of Restricted Stock
|
Buyer
|
Number
of Shares
|
Purchase
Price
|
||
|
Argan
Investments LLC
|
1,000,000
|
$3,750,000.00
|
8
