REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT
(this
“Agreement”)
is
made as of December 8, 2006, by and among ARGAN,
INC.,
a
Delaware corporation (the “Company”);
and
XXXXXXX
X. XXXXXXX, Xx. and XXXX X. XXXXXX (each,
a
“Holder”
and
together, the “Holders”).
RECITALS:
WHEREAS,
on the
date hereof, the Company is acquiring, among other things, all of the membership
interests in Gemma Power Systems, LLC, a Connecticut limited liability company
(“GPS”),
and
all of the issued and outstanding shares of capital stock of Gemma Power, Inc.,
a Connecticut corporation (“GPS-Connecticut”),
and
Gemma Power Systems, Inc., a California corporation (“GPS-California”)
pursuant to the Acquisition Agreements (the “Acquisition”),
and
pursuant thereto the Holders will receive shares of common stock of the Company
(the “Common
Stock”);
and
WHEREAS,
in
connection with the issuance by the Company of the shares of Common Stock,
and
as an inducement to consummate the transactions contemplated by the Acquisition
Agreements, the Company has agreed to file a registration statement with the
Commission in compliance with the Securities Act in respect to the Common Stock
issued in connection with the Acquisition.
NOW,
THEREFORE,
in
consideration of the foregoing and the agreements set forth below, the parties
hereby agree with each other as follows:
1. Certain
Definitions.
As used
in this Agreement, the following terms shall have the following respective
meanings:
“Acquisition
Agreements”
shall
mean the Membership Interest Purchase Agreement and that certain a Stock
Purchase Agreement dated as of December 8, 2006, by and among the Company and
GPS-Connecticut, GPS-California, and the Holders.
“Acquisition
Shares”
shall
mean shares of: (a) Common Stock issued in connection with the Acquisition
in
accordance with the terms of the Acquisition Agreements; and (b) any securities
of the Company issued as (or issuable upon the conversion or exercise of any
warrant, right, or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities.
“Closing”
shall
have the meaning as set forth in the Acquisition Agreements.
“Commission”
shall
mean the Securities and Exchange Commission, or any other federal agency at
the
time administering the Securities Act.
“Common
Stock”
shall
mean the Company’s Common Stock, $0.15 par value, as constituted as of the date
of this Agreement.
“Exchange
Act”
shall
mean the Securities Exchange Act of 1934, as amended, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as
the
same shall be in effect at the time.
“Membership
Interest Purchase Agreement”
shall
mean that certain Membership Interest Purchase Agreement dated as of December
8,
2006, by and among the Company, and GPS, GPS-Connecticut, GPS-California, and
the Holders.
“Registration
Expenses”
shall
mean the expenses so described in Section 5.
“Restricted
Stock”
shall
mean the Acquisition Shares, excluding Acquisition Shares which have been:
(a)
registered under the Securities Act pursuant to an effective registration
statement filed thereunder and disposed of in accordance with the registration
statement covering them; or (b) publicly sold pursuant to Rule 144 under the
Securities Act.
“Securities
Act”
shall
mean the Securities Act of 1933, as amended, or any similar federal statute,
and
the rules and regulations of the Commission thereunder, all as the same shall
be
in effect at the time.
“Selling
Expenses”
shall
mean the expenses so described in Section 5.
2. Restrictive
Legend. Each certificate representing Acquisition Shares shall, except as
otherwise provided in this Section 2, be stamped or otherwise imprinted with
a
legend substantially in the following form:
“THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
IT
HAS BEEN REGISTERED UNDER SUCH ACT AND ALL SUCH APPLICABLE LAWS OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.”
A
certificate shall not bear such legend if: (a) the Acquisition Shares
represented by such certificate have been registered under the Securities Act;
or (b) in the opinion of counsel satisfactory to the Company the securities
represented thereby may be publicly sold without registration under the
Securities Act and any applicable state securities laws.
3. Required
Registration.
The
Company shall use its best efforts to effect the registration under the
Securities Act of all of the shares of Restricted Stock held by the Holder,
or
his assigns, pursuant to the terms of this Agreement.
4. Registration
Procedures.
Whenever the Company is required by the provisions of Section 3 to use its
best
efforts to effect the registration of any shares of Restricted Stock under
the
Securities Act, the Company will, as expeditiously as possible:
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(a) prepare
and file with the Commission, as soon as practicable following Holders delivery
of the Closing Date Balance Sheet (as defined in the Membership Interest
Purchase Agreement), a registration statement with respect to such securities
and use its best efforts to cause such registration statement to become and
remain effective for the period of the distribution contemplated thereby
(determined as hereinafter provided) or until the Restricted Stock held by
the
Holder can be publicly sold pursuant to Rule 144 under the Securities
Act;
(b) prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be
necessary to keep such registration statement effective for the period specified
in subsection (a) above and comply with the provisions of the Securities Act
with respect to the disposition of all Restricted Stock covered by such
registration statement in accordance with the sellers’ intended method of
disposition set forth in such registration statement for such period;
(c) furnish
to each seller of Restricted Stock, and to each underwriter if applicable,
such
number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably
may
request in order to facilitate the public sale or other disposition of the
Restricted Stock covered by such registration statement;
(d) use
its
best efforts to register or qualify the Restricted Stock covered by such
registration statement under the securities or “blue sky” laws of such
jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten offering, the managing underwriter reasonably shall request;
provided,
however,
that
the Company shall not for any such purpose be required to qualify generally
to
transact business as a foreign corporation in any jurisdiction where it is
not
so qualified or to consent to general service of process in any such
jurisdiction;
(e) use
its
best efforts to list the Restricted Stock covered by such registration statement
with any securities exchange or stock market on which the Common Stock of the
Company is then listed;
(f) immediately
notify each seller of Restricted Stock and each underwriter, if applicable,
at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event of which the Company has
knowledge as a result of which the prospectus contained in such registration
statement, as then in effect, includes an untrue statement of a material fact
or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing;
(g) if
the
offering is underwritten and at the request of any seller of Restricted Stock,
use its best efforts to furnish on the date that Restricted Stock is delivered
to the underwriters for sale pursuant to such registration: (i) an opinion
dated
such date of counsel representing the Company for the purposes of such
registration, addressed to the underwriters and to such seller, stating that
such registration statement has become effective under the Securities Act and
that (A) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Securities Act; (B)
the
registration statement, the related prospectus and each amendment or supplement
thereof comply as to form in all material respects with the requirements of
the
Securities Act (except that such counsel need not express any opinion as to
financial statements contained therein); and (C) to such other effects as
reasonably may be requested by counsel for the underwriters or by such seller
or
its counsel; and (ii) a letter dated such date from the independent public
accountants retained by the Company, addressed to the underwriters and to such
seller, stating that they are independent public accountants within the meaning
of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration statement
or
the prospectus, or any amendment or supplement thereof, comply as to form in
all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters
(including information as to the period ending no more than five business days
prior to the date of such letter) with respect to such registration as such
underwriters reasonably may request;
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(h) make
available for inspection by each seller of Restricted Stock, any underwriter
participating in any distribution pursuant to such registration statement,
and
any attorney, accountant or other agent retained by such seller or underwriter,
all financial and other records, pertinent corporate documents and properties
of
the Company, and cause the Company’s officers, directors and employees to supply
all information reasonably requested by any such seller, underwriter, attorney,
accountant or representative or agent in connection with such registration
statement; and
(i) if
at
such time as the Company files a registration statement pursuant to the
requirements of Section 3 it is a registrant entitled to use Form S-3 or any
successor thereto to register the Restricted Stock, use its best efforts to
register the Restricted Stock under the Securities Act on Form S-3 or any
successor thereto, for public sale in the manner specified by the holders
thereof.
In
connection with any registration pursuant to Section 3 that is underwritten,
the
Company and each seller agree to enter into a written agreement with the
managing underwriter selected by the sellers in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such underwriter and companies of the Company’s size and investment
stature.
For
purposes of Sections 4(a) and 4(b), the period of distribution of Restricted
Stock in any registration statement shall be deemed to extend until the earlier
of the sale of all Restricted Stock covered thereby and 180 days after the
effective date of such registration statement.
In
connection with each registration hereunder, the sellers of Restricted Stock
will furnish to the Company in writing such information with respect to
themselves and the proposed distribution by them as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
5. Expenses.
(a) All
expenses incurred by the Company in complying with Sections 3 and 4, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel and independent public accountants for the Company,
fees and expenses (including counsel fees) incurred in connection with complying
with state securities or “blue sky” laws, fees of the National Association of
Securities Dealers, Inc., transfer taxes, fees of transfer agents and
registrars, and costs of insurance, but excluding any Selling Expenses, are
called “Registration
Expenses.”
All
underwriting discounts and selling commissions applicable to the sale of
Restricted Stock are called “Selling
Expenses.”
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(b) The
Company will pay all Registration Expenses in connection with each registration
statement under Section 3. All Selling Expenses in connection with each
registration statement under Section 3 shall be borne by the participating
sellers in proportion to the number of shares sold by each, or by such
participating sellers other than the Company (except to the extent the Company
shall be a seller) as they may agree.
6. Indemnification
and Contribution.
(a) Upon
the
registration of any of the Restricted Stock under the Securities Act pursuant
to
Section 3, the Company will indemnify and hold harmless each seller of such
Restricted Stock thereunder, each underwriter, if applicable, of such Restricted
Stock thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, along with the partners,
members, directors, and officers of each such seller, underwriter or controlling
person, against any losses, claims, damages or liabilities, joint or several,
to
which such seller, underwriter or controlling person may become subject under
the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Section 3, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission
to
state therein a material fact required to be stated therein or necessary to
make
the statements therein not misleading, and will reimburse each such seller,
each
such underwriter and each such controlling person, along with the partners,
members, directors, and officers of each such seller, underwriter or controlling
person, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided,
however,
that
the Company will not be liable in any such case if and to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made
in
conformity with information furnished by any such seller, any such underwriter
or any such controlling person in writing specifically for use in such
registration statement or prospectus or supplement thereof.
(b) In
the
event of a registration of any of the Restricted Stock under the Securities
Act
pursuant to Section 3, each seller of such Restricted Stock thereunder,
severally and not jointly, will indemnify and hold harmless the Company, each
person, if any, who controls the Company within the meaning of the Securities
Act, each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls any
underwriter within the meaning of the Securities Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer, director, underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any
untrue statement or alleged untrue statement of any material fact contained
in
the registration statement under which such Restricted Stock was registered
under the Securities Act pursuant to Section 3, any preliminary prospectus
or
final prospectus contained therein, or any amendment or supplement thereof,
or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each
such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however,
that
such seller will be liable hereunder in any such case if and only to the extent
that any such loss, claim, damage or liability arises out of or is based upon
an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information pertaining to such
seller, as such, furnished in writing to the Company by such seller specifically
for use in such registration statement or prospectus or supplement thereof,
and;
provided,
further,
however,
that
the liability of each seller hereunder shall be limited to the proportion of
any
such loss, claim, damage, liability or expense that is equal to the proportion
that the public offering price of the shares sold by such seller under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the net proceeds
received by such seller from the sale of Restricted Stock covered by such
registration statement.
5
(c) The
Company hereby agrees to indemnify and hold harmless each holder of Restricted
Stock against and in respect of: (i) any loss, claim, liability, obligation,
or
damage which such holder may suffer or incur resulting from or arising in
connection with any misrepresentation, breach of warranty or non-fulfillment
of
any covenant or agreement on the part of the Company contained in Section 9;
and
(ii) all actions, suits, proceedings, demands, assessments, judgments,
reasonable attorneys’ fees, costs and expenses incident to the
forgoing.
(d) Promptly
after receipt by an indemnified party hereunder of notice of the commencement
of
any action, such indemnified party shall, if a claim in respect thereof is
to be
made against the indemnifying party hereunder, notify the indemnifying party
in
writing thereof. The omission so to notify the indemnifying party shall not
relieve it from any liability that it may have to such indemnified party other
than under this Section 6 and shall only relieve it from any liability that
it
may have to such indemnified party under this Section 6 if and to the extent
the
indemnifying party is prejudiced by such omission. In case any such action
shall
be brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled
to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel satisfactory to such indemnified party, and, after
notice from the indemnifying party to such indemnified party of its election
so
to assume and undertake the defense thereof, the indemnifying party shall not
be
liable to such indemnified party under this Section 6 for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected; provided,
however,
that,
if the defendants in any such action include both the indemnified party and
the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified party shall have the right to select
a separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
6
(e) In
order
to provide for just and equitable contribution to joint liability under the
Securities Act in any case in which either: (i) any holder of Restricted Stock
exercising rights under this Agreement, or any controlling person of any such
holder, makes a claim for indemnification pursuant to this Section 6 but it
is
judicially determined (by the entry of a final judgment or decree by a court
of
competent jurisdiction and the expiration of time to appeal or the denial of
the
last right of appeal) that such indemnification may not be enforced in such
case
notwithstanding the fact that this Section 6 provides for indemnification in
such case; or (ii) contribution under the Securities Act may be required on
the
part of any such selling holder or any such controlling person in circumstances
for which indemnification is provided under this Section 6; then, and in each
such case, the Company and such holder will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that such holder is responsible for the
portion represented by the percentage that the public offering price of its
Restricted Stock offered by the registration statement bears to the public
offering price of all securities offered by such registration statement, and
the
Company shall be responsible for the remaining portion; provided,
however,
that,
in any such case: (A) no such holder will be required to contribute any amount
in excess of the net proceeds received by such seller from the sale of
Restricted Stock covered by such registration statement; and (B) no person
or
entity guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be entitled to contribution from any person
or
entity who was not guilty of such fraudulent misrepresentation.
7. Changes
in Common Stock.
If, and
as often as, there is any change in the Common Stock by way of a stock split,
stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted hereby shall continue with respect to the Common Stock
as
so changed.
8. Rule
144 Reporting.
With a
view to making available the benefits of certain rules and regulations of the
Commission, which may at any time permit the sale of the Restricted Stock to
the
public without registration, at all times after 180 days after any registration
statement covering a public offering of securities of the Company under the
Securities Act shall have become effective, the Company agrees to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144 under the Securities Act;
(b) use
its
best efforts to file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish
to each holder of Restricted Stock forthwith upon request a written statement
by
the Company as to its compliance with the reporting requirements of Rule 144
and
of the Securities Act and the Exchange Act, a copy of the most recent annual
or
quarterly report of the Company, and such other reports and documents so filed
by the Company as such holder may reasonably request in availing itself of
any
rule or regulation of the Commission allowing such holder to sell any Restricted
Stock without registration.
7
9. Representations
and Warranties of the Company.
The
Company represents, warrants and covenants to the Holders and any other holder
of Restricted Stock as follows:
(a) the
execution, delivery and performance of this Agreement by the Company have been
duly authorized by all requisite corporate action and will not violate any
provision of law, any order of any court or other agency of government, the
Charter or By-laws of the Company;
(b) this
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company, enforceable in
accordance with its terms;
(c) that
it
will not file with the Commission a registration statement with respect to
any
shares of its capital stock other than the Restricted Stock prior to ninety
(90)
days after the effective date of the registration statement registering the
shares of Restricted Stock to be issued at Closing; and
(d) that
it
will not include any shares of its capital stock other than Restricted Stock
in
any registration statement filed with the Commission with respect to any
Restricted Stock, without the prior written consent of the holders of Restricted
Stock.
10. Miscellaneous.
(a) An
original copy of this Agreement shall be kept by the Secretary of the
Company.
(b) All
covenants and agreements contained in this Agreement by or on behalf of any
of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto (including without limitation
transferees of any Restricted Stock), whether so expressed or not.
(c) All
notices, requests, consents and other communications hereunder shall be in
writing and shall be delivered in person, mailed by certified or registered
mail, return receipt requested, or sent by telecopier or telex, addressed as
follows:
(i)
if to
the Company or any other party hereto, at the address of such party set forth
in
the Acquisition Agreements;
(ii)
if
to any subsequent holder of Restricted Stock, to it at such address as may
have
been furnished to the Company in writing by such holder;
or,
in
any case, at such other address or addresses as shall have been furnished in
writing to the Company (in the case of a holder of Restricted Stock) or to
the
holders of Restricted Stock (in the case of the Company) in accordance with
the
provisions of this paragraph.
8
(d) This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Delaware without regard to principles of conflicts of law.
(e) This
Agreement may not be amended or modified, and no provision hereof may be waived,
without the written consent of the Company and the holders of at least a
majority of the Restricted Stock.
(f) This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
(g) The
Company shall not grant to any third party any registration rights more
favorable than or inconsistent with any of those contained herein, so long
as
any of the registration rights under this Agreement remain in effect.
(h) If
any
provision of this Agreement shall be held to be illegal, invalid or
unenforceable, such illegality, invalidity or unenforceability shall attach
only
to such provision and shall not in any manner affect or render illegal, invalid
or unenforceable any other provision of this Agreement, and this Agreement
shall
be carried out as if any such illegal, invalid or unenforceable provision were
not contained herein.
(i) This
Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof.
[Signatures
on following page]
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IN
WITNESS WHEREOF,
the
parties hereto have executed this Registration Rights Agreement as of the day
and year first written above.
| COMPANY: ARGAN, INC. |
||
| |
|
|
| By: /s/ Xxxxxx Xxxxxxxxxx | ||
|
Title:
Chairman and CEO
|
||
| HOLDERS: | ||
| /s/ Xxxxxxx X. Xxxxxxx, Xx. | ||
|
XXXXXXX
X. XXXXXXX, XX.
|
||
| /s/ Xxxx X. Xxxxxx | ||
|
XXXX
X. XXXXXX
|
||
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