Exhibit 10.3
SUBORDINATED TERM NOTE
THIS SUBORDINATED TERM NOTE 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, EFFECTIVE 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).
$2,698,131.00 As of June 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
TWO MILLION SIX HUNDRED NINETY EIGHT THOUSAND ONE HUNDRED THIRTY ONE DOLLARS
($2,698,131.00) (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 October 1, 2005 and continuing on the first day of each
October, January, April and July thereafter. Unless otherwise prepaid as a
Mandatory Prepayments 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
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 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 is being issued in full and complete
satisfaction of all obligations of the Maker to pay to the Creditor the
Additional Cash Consideration (as defined in and to be paid pursuant to that
certain Agreement and Plan of Merger among the Maker, the Creditor, Vitarich
Laboratories, Inc., a Florida corporation and Vitarich Laboratories, Inc., a
Delaware corporation (formerly known as AGAX/VLI Acquisition Corporation)
("Vitarich") dated as of August 31, 2004); provided, however, that
notwithstanding the forgoing, the Maker and the Creditor agree and acknowledge,
that the obligation of Argan to pay the Reduced Earn-back Amount (as defined in
that certain Letter Agreement among the Maker, the Creditor and Vitarich
effective as of June 30, 2005 (the "Letter Agreement")) and the Additional
Earn-back Amount (as defined in the Letter Agreement), as applicable, shall be
evidenced by and paid in accordance with the terms of said Letter Agreement and
related Subordinated Term Note (Earn-back Obligations).
ARGAN, INC.
By: /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
Title: EVP
