SUBORDINATED TERM NOTE
(EARN-BACK OBLIGATIONS)
THIS SUBORDINATED TERM NOTE (EARN-BACK OBLIGATIONS) AND INDEBTEDNESS
EVIDENCED HEREBY ARE AND SHALL AT ALL TIMES BE AND REMAIN SUBORDINATED IN
RIGHT OF PAYMENT TO THE EXTENT AND IN THE MANNER SET FORTH IN THAT CERTAIN
AMENDED AND RESTATED DEBT SUBORDINATION AGREEMENT, DATED AS OF JUNE 30,
2005, BY AND AMONG BANK OF AMERICA, N.A., ARGAN, INC., A DELAWARE
CORPORATION AND XXXXX X. XXXXXX, AN INDIVIDUAL, TO THE PRIOR PAYMENT IN
FULL OF ALL SUPERIOR DEBT (AS DEFINED THEREIN).
$594,000 As of November 30, 2005
FOR VALUE RECEIVED, the undersigned, ARGAN, INC., a Delaware corporation
(the "Maker"), hereby promises to pay to the order of XXXXX X. XXXXXX (the
"Creditor"), at 0000 Xxxxxxx Xxxx, Xxxxxx, Xxxxxxx 00000, the principal sum of
FIVE HUNDRED NINTY-FOUR THOUSAND DOLLARS ($594,000) (the "Principal Amount"), in
lawful money of the United States of America in immediately available funds,
without deduction, set-off or counterclaim, and to pay interest from the date
hereof on the principal amount hereof from time to time outstanding, in like
funds, at a rate per annum equal to ten percent (10%). Interest hereunder shall
be due and payable on a quarterly basis commencing on January 1, 2006 and
continuing on the first day of each April, July, October and January thereafter.
Unless otherwise prepaid as a Mandatory Prepayment or an Additional Mandatory
Prepayment as provided below, the Principal Amount together with all accrued and
unpaid interest thereon shall be due and payable in one installment on August 1,
2006.
Notwithstanding the forgoing, in the event that the Maker receives gross
cash consideration (prior to the payment of any fees, discounts, costs, expenses
or commissions) in connection with one or more public offerings or private
placements of the Maker's capital stock during the period from the date hereof
to August 1, 2006 which is in excess of $1,000,000 in the aggregate (the
"Aggregate Consideration"), the Maker shall prepay the Principal Amount by an
amount equal to that portion of the Aggregate Consideration which is in excess
of $1,000,000 (a "Mandatory Prepayment") so that all capital raised by the Maker
which is in excess of $1,000,000 shall be paid over to the Holder until such
time as the Principal Amount and all other sums due hereunder have been paid in
full.
In addition, Maker agrees that it shall not close any transaction after
the Earn-back Date (as that term is defined in that certain Letter Agreement
among the Maker, the Creditor and Vitarich Laboratories, Inc., a Delaware
corporation dated as of June 30, 2005 (the "Letter Agreement")) involving the
acquisition by Maker of all or substantially all of the capital stock, equity
interests or assets of any corporation, partnership, limited liability company
or any other organization or entity (an "Acquisition") unless on or before the
closing of any such Acquisition all amounts due hereunder shall have been paid
in full (the "Additional Mandatory Prepayment"); provided, however, that,
notwithstanding the forgoing, the Maker shall not be required to make the
Additional Mandatory Prepayment in connection with any acquisition by the Maker
of any assets, capital stock or other equity interests of any of its
subsidiaries or affiliates whether as a result of a merger or for any other
reason.
Interest on the outstanding Principal Amount shall be computed on the
basis of the actual number of days elapsed over a 365 day year.
The Maker hereby waives diligence, presentment, demand, protest and notice
of any kind whatsoever. The non-exercise by the holder of any of its rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any subsequent instance.
THIS SUBORDINATED TERM NOTE (EARN-BACK OBLIGATIONS) SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CONNECTICUT, WITHOUT
REGARD TO CHOICE OF LAW DOCTRINE, AND ANY APPLICABLE LAWS OF THE UNTED STATES OF
AMERICA.
This Subordinated Term Note (Earn-back Obligations) is being issued in
full and complete satisfaction of all obligations of the Maker to pay to the
Creditor the Reduced Earn-back Amount (as defined in and calculated pursuant to
the Letter Agreement) and the Additional Earn-back Amount (as defined in and
calculated pursuant to the Letter Agreement), as applicable.
ARGAN, INC.
By: /s/ X.X. Xxxxxx III
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Name: H.Xxxxxxx Xxxxxx III
Title: EVP and Secretary
