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 2,853,335 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 and are familiar
with the information contained in such periodic reports, including without
limitation the risk factors contained therein.
(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.
2
(b) Authorization
of Transaction.
The
Company has all requisite power and authority to execute and deliver this
Agreement and the Escrow Agreement and to perform its obligations hereunder
and
thereunder. The execution
and delivery by the Company of this 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 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 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) 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.
(e) 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 the Registration Statement (as defined in Section 6(a)
below) 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
the
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.
3
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. Registration.
(a) The
Company agrees that it will, as soon as practicable following the closing of
the
transaction contemplated hereby, prepare and file with the SEC a registration
statement on Form S-1 or, if applicable, Form S-3, or any equivalent form for
registration by issuers similar to the Company in accordance with the Securities
Act (“Registration
Statement”),
to
permit a public offering and resale of the Shares on a continuous basis under
Rule 415. The Company agrees that it will use commercially reasonable efforts
to
cause the Registration Statement to be declared effective by the SEC as soon
as
practicable following the filing thereof. The Company will cause the
Registration Statement to remain effective until such time as all of the Shares
are sold or the holders thereof are entitled to rely on Rule 144(k) for sales
of
the Shares without registration under the Securities Act and without compliance
with the public information, sales volume, manner of sale or notice requirements
of Rule 144(c), (e), (f) or (h). The Company will pay all registration expenses
of the registration of the Shares pursuant to this Section 6(a).
(b) In
the
event of the offer and sale of Shares held by Buyers pursuant to the
Registration Statement under the Securities Act, the Company must, and hereby
does, indemnify and hold harmless, to the fullest extent permitted by law,
each
Buyer, its directors, officers, partners, consultants, each other person who
participates as an underwriter in the offering or sale of such securities,
and
each other person, if any, who controls or is under common control with such
Buyer or any such underwriter within the meaning of Section 15 of the Securities
Act, against any losses, claims, damages or liabilities, joint or several,
and
expenses to which the Buyer or any such director, officer, partner, consultant
or underwriter or controlling person may become subject under the Securities
Act
or otherwise, insofar as such losses, claims, damages, liabilities or expenses
(or actions or proceedings, whether commenced or threatened, 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
shares were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment
or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
and the Company must reimburse the Buyer, and each such director, officer,
partner, underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating, defending or
settling any such loss, claim, damage, liability, action or proceeding;
provided
that the
Company is not liable in any such case (i) to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or omission from such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement made in reliance upon and in
conformity with written information furnished to the Company by or on behalf
of
such Buyer or (ii) if the person asserting any such loss, claim, damage,
liability (or action or proceeding in respect thereof) who purchased the Shares
that are the subject thereof did not receive a copy of an amended preliminary
prospectus or the final prospectus (or the final prospectus as amended or
supplemented) at or prior to the written confirmation of the sale of such Shares
to such person because of the failure of such Buyer or underwriter to so provide
such amended preliminary or final prospectus and the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact made in
such
preliminary prospectus was corrected in the amended preliminary or final
prospectus (or the final prospectus as amended or supplemented). Such indemnity
remains in full force and effect regardless of any investigation made by or
on
behalf of the Buyers, or any such director, officer, partner, underwriter or
controlling person and survives the transfer of such shares by the
Buyer.
4
(c) As
a
condition to including Shares in a registration statement, each such Buyer
agrees to be bound by the terms of this Section 6 and to indemnify and hold
harmless, to the fullest extent permitted by law, the Company, its directors
and
officers, its consultants, underwriters and each other person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Company or any such director, officer, consultant or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of
or are based upon any untrue statement or alleged untrue statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by such Buyer, and such Buyer
must
reimburse the Company, and each such director, officer, and controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating, defending, or settling any such loss, claim, damage, liability,
action, or proceeding. Such
indemnity remains in full force and effect regardless of any investigation
made
by or on behalf of the Company or any such director, officer or controlling
person and shall survive the transfer by any Buyer of such shares.
(d) Promptly
after receipt by an indemnified party of notice of the commencement of any
action or proceeding involving a claim referred to in Sections 6(a) or (b)
hereof (including any governmental action), such indemnified party must, if
a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the indemnifying party of the commencement of such action;
provided that the failure of any indemnified party to give notice as provided
herein does not relieve the indemnifying party of its obligations under Section
6(a) or (b) hereof, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in the reasonable judgment of counsel
to
such indemnified party a conflict of interest between such indemnified and
indemnifying parties may exist or the indemnified party may have defenses not
available to the indemnifying party in respect of such claim, the indemnifying
party is entitled to participate in and to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party and, after notice
from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party is not be liable to such indemnified
party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof, unless in such indemnified party’s
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties arises in respect of such claim after the assumption of
the
defenses thereof or the indemnifying party fails to defend such claim in a
diligent manner. Neither an indemnified nor an indemnifying party is liable
for
any settlement of any action or proceeding effected without its consent. No
indemnifying party may, without the consent of the indemnified party, consent
to
entry of any judgment or enter into any settlement, which does not include
as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim
or
litigation. Notwithstanding anything to the contrary set forth herein, and
without limiting any of the rights set forth above, in any event any party
has
the right to retain, at its own expense, counsel with respect to the defense
of
a claim.
5
(e) In
the
event that an indemnifying party does or is not permitted to assume the defense
of an action pursuant to Section 6(c) or in the case of the expense
reimbursement obligation set forth in Sections 6(a) and (b), the indemnification
required by Sections 6(a) and (b) hereof must be made by periodic payments
of
the amount thereof during the course of the investigation or defense, as, and
when bills received or expenses, losses, damages, or liabilities are
incurred.
(f) If
the
indemnification provided for in this Section 6 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any
loss,
liability, claim, damage or expense referred to herein, the indemnifying party,
in lieu of indemnifying such indemnified party hereunder, must (i) contribute
to
the amount paid or payable by such indemnified party as a result of such loss,
liability, claim, damage or expense as is appropriate to reflect the
proportionate relative fault of the indemnifying party on the one hand and
the
indemnified party on the other (determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission
relates to information supplied by the indemnifying party or the indemnified
party and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission), or (ii)
if
the allocation provided by clause (i) above is not permitted by applicable
law
or provides a lesser sum to the indemnified party than the amount hereinafter
calculated, not only the proportionate relative fault of the indemnifying party
and the indemnified party, but also the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other,
as
well as any other relevant equitable considerations. No indemnified party guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) is entitled to contribution from any indemnifying party who
was
not guilty of such fraudulent misrepresentation.
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.
6
(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 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]
7
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:
XXXXX SBH INVESTMENTS, LLC
|
||
| |
|
|
| /s/ Xxx X. Xxxxxxx | ||
|
By:
Xxx X. Xxxxxxx
Its:
CFO
|
||
| XXXXX & COMPANY, LLC | ||
| |
|
|
| /s/ Xxx X. Xxxxxxx | ||
|
By:
Xxx X. Xxxxxxx
Its:
Managing Director and CFO
|
||
| /s/ Xxxxx Xxxxx | ||
|
Xxxxx Xxxxx |
||
| /s/ Xxxxx Xxxxx | ||
|
Xxxxx Xxxxx |
||
| /s/ Xxxx Xxxxx | ||
|
Xxxx Xxxxx |
||
8
| /s/ Xxxx Xxxx | ||
|
Xxxx Xxxx |
||
| /s/ Xxxxxxx X. Xxxxx | ||
|
Xxxxxxx X. Xxxxx |
||
| XXXXXXX XXXXX RIVER MANAGEMENT CO., LLC |
||
| /s/ Xxxx Xxxxxx | ||
|
By: Xxxx Xxxxxx |
||
|
Its:
|
||
| PERENNIAL PARTNERS LP | ||
| /s/ Xxxx Xxxx | ||
|
By: Xxxx Xxxx Its:
Principal
|
||
| WESTWIND EQUITY PARTNERS, LLC | ||
| /s/ Xxxx Xxxxxxx | ||
|
By: Xxxx Xxxxxxx Its:
Executive Director
|
||
| MSR I SBIC, L.P. | ||
| By: MSR I SBIC Partners, LLC (its General Partner) | ||
| By: MSR Advisors, Inc. (its Manager) | ||
| /s/ Xxxxxx X. Xxxxxxxx | ||
|
By:
Xxxxxx X. Xxxxxxxx
Its:
President
|
||
| MSR FUND II, L.P. | ||
| MSR Fund II GP, LLC (its General Partner) | ||
| By: MSR Advisors, Inc. (its Manager) | ||
| /s/ Xxxxxx X. Xxxxxxxx | ||
|
By:
Xxxxxx X. Xxxxxxxx
Its:
President
|
||
9
Schedule
A
Buyers
of Restricted Stock
|
Buyer
|
Number
of Shares
|
Purchase
Xxxxx
|
|||||
|
Xxxxx
SBH Investments, LLC
|
266,667
|
$
|
1,000,000.00
|
||||
|
Perennial
Partners LP
|
266,667
|
$
|
1,000,000.00
|
||||
|
Xxxxxxx
Xxxxx River Management Co., LLC
|
266,667
|
$
|
1,000,000.00
|
||||
|
Westwind
Equity Partners, LLC
|
266,667
|
$
|
1,000,000.00
|
||||
|
MSR
I SBIC, L.P.
|
92,793
|
$
|
347,974.00
|
||||
|
MSR
Fund II, L.P.
|
440,540
|
$
|
1,652,025.00
|
||||
|
Xxxxx
&
Company
LLC
|
80,000
|
$
|
300,000.00
|
||||
|
Xxxxx
Xxxxx
|
53,333
|
$
|
200,000.00
|
||||
|
Xxxx
Xxxxx
|
80,000
|
$
|
300,000.00
|
||||
|
Xxxxx
Xxxxx
|
26,667
|
$
|
100,000.00
|
||||
|
Xxxx
Xxxx
|
6,667
|
$
|
25,000.00
|
||||
|
Xxxxxxx
X. Xxxxx
|
6,667
|
$
|
25,000.00
|
||||
10
