MEMBERSHIP INTEREST PURCHASE AGREEMENT By and Among ARGAN, INC. and GEMMA POWER SYSTEMS, LLC and GEMMA POWER, INC., and GEMMA POWER SYSTEMS CALIFORNIA, INC. and WILLIAM F. GRIFFIN, JR. and JOEL M. CANINO
By
and
Among
ARGAN,
INC.
and
GEMMA
POWER SYSTEMS, LLC
and
GEMMA
POWER, INC., and
GEMMA
POWER SYSTEMS CALIFORNIA, INC.
and
XXXXXXX
X. XXXXXXX, XX. and XXXX X. XXXXXX
Table
of
Contents
Page
|
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INTRODUCTORY
STATEMENT
|
1
|
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DEFINITIONS
|
1
|
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SECTION
1 - ACQUISITION OF MEMBERSHIP INTERESTS
|
6
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1.1
|
Acquisition
of Membership Interests
|
6
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1.2
|
|
Organizational
Documents, Management
|
7
|
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SECTION
2 - CONSIDERATION
|
7
|
||||||
2.1
|
Consideration
|
7
|
|||||
2.2
|
Payment
of Consideration; Adjustment of Consideration
|
7
|
|||||
2.3
|
Consideration
Allocation
|
9
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|||||
2.4
|
Registration
|
9
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SECTION
3 - CLOSING
|
9
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3.1
|
Closing,
Deliveries into Escrow
|
9
|
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3.2
|
Deliveries
by Escrow Agent
|
10
|
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SECTION
4 - REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF THE SELLERS
AND
THE COMPANIES
|
10
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4.1
|
Organization,
Qualifications and Company or Corporate Power
|
10
|
|||||
4.2
|
Authorization
of Agreement
|
11
|
|||||
4.3
|
Membership
Interests; Capital Stock
|
12
|
|||||
4.4
|
Financial
Statements
|
12
|
|||||
4.5
|
Absence
of Changes
|
13
|
|||||
4.6
|
Legal
Actions
|
14
|
|||||
4.7
|
Business
Property Rights
|
14
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|||||
4.8
|
Liabilities
|
14
|
|||||
4.9
|
Ownership
of Assets and Leases
|
15
|
|||||
4.10
|
Taxes
|
16
|
|||||
4.11
|
Contracts,
Other Agreements
|
16
|
|||||
4.12
|
Governmental
Approvals
|
18
|
|||||
4.13
|
Lack
of Defaults, Compliance with Law
|
18
|
|||||
4.14
|
Employees
and Employee Benefit Plans
|
19
|
|||||
4.15
|
Insurance;
Bonds
|
20
|
|||||
4.16
|
Labor
and Employment Matters
|
20
|
|||||
4.17
|
Brokers
and Finders
|
20
|
|||||
4.18
|
Accounts
Receivable
|
21
|
i
4.19
|
Conflicts
of Interests
|
21
|
|||||
4.20
|
Environmental
Compliance
|
21
|
|||||
4.21
|
Ownership
of the Ownership Interests
|
22
|
|||||
4.22
|
Absence
of Sensitive Payments
|
22
|
|||||
4.23
|
Approval
of Transactions; Related Matters
|
23
|
|||||
4.24
|
Withholding
|
23
|
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4.25
|
Amounts
Due From Sellers
|
23
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|
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SECTION
5 - REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF
PURCHASER
|
23
|
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5.1
|
Organization,
Standing, etc
|
23
|
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5.2
|
Authorization,
etc
|
24
|
|||||
5.3
|
No
Breach or Defaults Caused by Agreement
|
24
|
|||||
5.4
|
Governmental
Approvals
|
24
|
|||||
5.5
|
Brokers
Fees
|
24
|
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5.6
|
Authorized
Shares of Stock
|
24
|
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5.7
|
Capitalization
|
24
|
|||||
5.8
|
Voting
Stock
|
24
|
|||||
5.9
|
No
Audit
|
24
|
|||||
5.10
|
Net
Worth of Purchaser
|
25
|
|||||
5.11
|
Private
Offering
|
25
|
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SECTION
6 - CONDITIONS TO CLOSING FOR PURCHASER
|
25
|
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6.1
|
Performance
of Agreements
|
25
|
|||||
6.2
|
Lack
of Material Liabilities
|
25
|
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6.3
|
Financial
Statements
|
25
|
|||||
6.4
|
Lack
of Defaults
|
25
|
|||||
6.5
|
Material
Adverse Change
|
25
|
|||||
6.6
|
Employment
Agreements
|
26
|
|||||
6.7
|
Opinion
of Counsel
|
26
|
|||||
6.8
|
Compliance
Certificate
|
26
|
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6.9
|
Term
Life Insurance
|
26
|
|||||
6.10
|
Registration
Rights Agreement
|
26
|
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6.11
|
[Intentionally
omitted.
|
|
26
|
||||
6.12
|
Release
from the Sellers; Payment of Amounts Owed by the Seller]
|
26
|
|||||
6.13
|
Certificates;
Organizational Documents
|
27
|
|||||
6.14
|
Corporate
Filings
|
27
|
|||||
6.15
|
[Intentionally
omitted.]
|
|
27
|
||||
6.16
|
Release
of Buy-Sell Rights
|
27
|
|||||
6.17
|
Third-Party
Consents or Approvals
|
28
|
|||||
6.18
|
Escrow
Agreement
|
28
|
|||||
6.19
|
Termination
of Operating Agreement
|
28
|
ii
SECTION
7 - CONDITIONS TO CLOSING FOR THE SELLERS
|
28
|
||||||
7.1
|
Performance
of Agreements
|
28
|
|||||
7.2
|
Compliance
Certificate
|
28
|
|||||
7.3
|
Registration
Rights Agreement
|
28
|
|||||
7.4
|
Employment
Agreements
|
29
|
|||||
7.5
|
Term
Life Insurance
|
29
|
|||||
7.6
|
Employee
Stock Options
|
29
|
|||||
7.7
|
Escrow
Agreement
|
29
|
|||||
SECTION
8 - TRANSACTIONS PRIOR TO CLOSING
|
29
|
||||||
8.1
|
Taxes
|
29
|
|||||
8.2
|
Books
of Record and Account; Inspection
|
29
|
|||||
8.3
|
Insurance
|
29
|
|||||
8.4
|
Entity
Existence
|
29
|
|||||
8.5
|
Maintenance
of Properties
|
30
|
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8.6
|
Organizational
Documents
|
30
|
|||||
8.7
|
Issuances
of Ownership Interests
|
30
|
|||||
8.8
|
Declaration
of Distributions, etc
|
30
|
|||||
8.9
|
|
Material
Contracts
|
30
|
||||
|
|||||||
SECTION
9 - RESTRICTIVE COVENANTS
|
30
|
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9.1
|
Covenant
Not to Compete
|
30
|
|||||
9.2
|
Confidentiality
|
31
|
|||||
9.3
|
Non-Solicitation
|
31
|
|||||
9.4
|
Acknowledgment
by the Sellers
|
32
|
|||||
9.5
|
Reformation
by Court
|
32
|
|||||
9.6
|
Extension
of Time
|
32
|
|||||
9.7
|
Injunction
|
32
|
|||||
9.8
|
Survival
|
33
|
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|
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SECTION
10 - INDEMNIFICATION
|
33
|
||||||
10.1
|
Indemnification
by the Sellers
|
33
|
|||||
10.2
|
No
Circular Recovery
|
35
|
|||||
10.3
|
Sellers’
Indemnification Threshold; Cap
|
35
|
|||||
10.4
|
Release
of Excess Escrowed Stock
|
36
|
|||||
|
|||||||
SECTION
11 - TERMINATION
|
36
|
||||||
11.1
|
Termination
by Purchaser
|
36
|
|||||
11.2
|
Termination
by Sellers
|
36
|
|||||
SECTION
12 - DEFAULT
|
36
|
||||||
12.1
|
Events
of Default
|
36
|
|||||
12.2
|
Termination
by Reason of Event of Default or Failure of a Condition
Precedent
|
37
|
|||||
12.3
|
Waiver
by Purchaser
|
37
|
iii
SECTION
13 - MISCELLANEOUS
|
37
|
||||||
13.1
|
Costs
|
37
|
|||||
13.2
|
Attorneys
Fees
|
37
|
|||||
13.3
|
Relationships
to Other Agreements
|
37
|
|||||
13.4
|
Titles
and Captions
|
37
|
|||||
13.5
|
Exhibits
|
38
|
|||||
13.6
|
Applicable
Law
|
38
|
|||||
13.7
|
Binding
Effect and Assignment
|
38
|
|||||
13.8
|
Notices
|
38
|
|||||
13.9
|
Severability
|
39
|
|||||
13.10
|
Acceptance
or Approval
|
39
|
|||||
13.11
|
Survival
|
39
|
|||||
13.12
|
Entire
Agreement
|
39
|
|||||
13.13
|
Counterparts
|
40
|
|||||
13.14
|
Securities
Matters
|
40
|
|||||
13.15
|
Preparation
and Filing of SEC Documents
|
40
|
|||||
13.16
|
Further
Assurances
|
40
|
|||||
13.17
|
Tag
Along Rights
|
40
|
|||||
13.18
|
Access
to Company Records
|
41
|
|||||
13.19
|
Non-Reliance
|
41
|
|||||
13.20
|
Disclaimer
|
41
|
|||||
SECTION
14 - ESCROW PROVISIONS
|
42
|
iv
THIS
MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”) is made and entered
into as of this 8th
day of
December, 2006, by and among (i) ARGAN, INC., a Delaware corporation
(“Purchaser”), (ii) GEMMA POWER SYSTEMS, LLC, a Connecticut limited liability
company (“GPS”), (iii) GEMMA POWER, INC., a Connecticut corporation
(“GPS-Connecticut”), (iv) GEMMA POWER SYSTEMS CALIFORNIA, INC., a California
corporation (“GPS-California”), and (v) XXXXXXX X. XXXXXXX, XX. (“Xxxxxxx”), and
(vi) XXXX X. XXXXXX (“Xxxxxx,” and together with Xxxxxxx sometimes hereinafter
referred to together as, the “Sellers”).
INTRODUCTORY
STATEMENT
A. The
Sellers own all of the membership interests of GPS (the “GPS Membership
Interests”).
B. GPS
is
engaged in the engineering and construction of power energy systems and also
provides consulting, owner’s representative, operating, and maintenance services
to the energy market.
C. GPS-Connecticut
and GPS-California are affiliates of GPS and are also engaged in the engineering
and construction of power energy systems and also provide consulting, owner’s
representative, operating, and maintenance services to the energy
market.
D. The
Board
of Directors of Purchaser and the managers and members of GPS have approved
the
acquisition of GPS by Purchaser by acquisition from the Sellers of all of the
GPS Membership Interests, upon the terms and subject to the conditions set
forth
herein.
NOW,
THEREFORE, for and in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained and
other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties do agree as follows:
DEFINITIONS
The
following terms when used in this Agreement shall have the following
meanings:
“Accounts
Receivable”
means
accounts receivable, Note due from all sources of the Company, and credits
for
returned or damaged merchandise.
“Act”
shall
mean the Securities Act of 1933, as the same has been and shall be amended
from
time to time.
“Adjusted
EBITDA of the Companies”
shall
have the meaning set forth in Section 2.2(d)(iii) hereof.
“Adverse
Consequences”
means
all material actions, suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders, decrees, rulings,
damages, dues, penalties, fines, costs, liabilities, obligations, taxes, liens,
losses, expenses, and fees, including court costs and attorneys' fees and
expenses, net of all tax savings and insurance proceeds actually received by
an
Indemnitee with respect to any of the foregoing, but not for any punitive,
indirect or consequential damages.
“Argan”
shall
mean Purchaser, Argan, Inc., a Delaware corporation, with its principal offices
located at Xxx Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000, and its
successors and assigns.
“Argan
Per Share Value”
shall
mean Three and 75/100 Dollars ($3.75) per share, being the same price per
share as that paid by investors for Argan Common Stock in connection with the
Private Offering.
“Argan
Common Stock”
shall
mean the authorized voting common stock of Argan.
“Business
Day”
shall
mean shall mean any day of the week other than Saturday, Sunday or a day on
which banking institutions in either New York, New York, or Washington, D.C.,
are obligated or authorized by law to close.
“Xxxxxx”
shall
mean Xxxx X. Xxxxxx, a member and manager of GPS and a stockholder, officer
and director of GPS-Connecticut and of GPS-California, and a signatory to this
Agreement.
“Xxxxxx
Employment Agreement”
shall
mean the employment agreement to be entered into by Xxxxxx and the Company
pursuant to Section 6.6 below.
“Cash
Consideration”
shall
have the meaning set forth in Section 2.2(a) hereof.
“Closing”
means
the transfer of the Ownership Interests to Purchaser and the payment of the
Consideration to the Sellers pursuant to this Agreement.
“Closing
Date”
means
the date of Closing, established under Section 3 of this Agreement.
“Closing
Date Balance Sheet”
means
the audited combining and combined balance sheet of the Companies, as at the
close of business on the Closing Date, presented on an accrual basis, prepared
in accordance with GAAP by the Companies’ Regular CPA.
“Closing
Date Financial Statements”
shall
mean the Closing Date Balance Sheet, together with the related audited combining
and combined statement of operations and changes in financial position of the
Companies for the period from January 1, 2006 through
the close of business on the Closing Date, prepared in accordance with GAAP
by
the Companies’ Regular CPA, after making all appropriate adjustments required to
present same on an accrual basis, using the same accounting methods, historical
policies, practices, principles and procedures with consistent classifications,
judgments and estimation methodologies as were used in the preparation of the
Interim Financial Statements.
2
“Code”
shall
mean the Internal Revenue Code of 1986, as amended.
“Companies”
means
Gemma Power Systems, LLC, Gemma Power, Inc., and Gemma Power Systems California,
Inc. and all of their respective subsidiaries and affiliates (unless the context
clearly indicates otherwise). Each of Gemma Power Systems, LLC, Gemma Power,
Inc., and Gemma Power Systems California, Inc. (and all of their respective
subsidiaries and affiliates, unless the context clearly indicates otherwise)
is
sometimes referred to as “a Company.”
“Companies’
Regular CPA”
means
the accounting firm of Xxxxxx, Ruffkess & Company, LLC, Certified Public
Accountants, the Companies’ regular independent certified public
accountant.
“Confidential
Information” has
the
meaning set forth in Section 9.2 below.
“Consideration”
means
the aggregate consideration set forth in Section 2 hereof.
“Contingent
Cash Consideration”
shall
have the meaning set forth in Section 2.2(d)(iii) hereof.
“Contract”
means
any contract, agreement, obligation, promise or undertaking (whether written
or
oral and whether express or implied) that is legally binding, under which any
Company has or may acquire any rights, or has or may become subject to any
obligation or liability, or by which any Company or any of the assets owned
or
used by it is or may become bound.
“December
31, 2007 Financial Statements”
shall
mean the consolidated balance sheets of the Companies as at December 31, 2007,
and the related consolidated statements of income, changes in equity, and cash
flow for the twelve month period then ended, prepared by the accounting firm
of
Xxxxx Xxxxxxxx (or such other accounting firm as is then regularly engaged
by
Purchaser),
together
with the report thereon of said accounting firm, including the notes thereto,
prepared in accordance with GAAP, using, to the extent discernable by Xxxxx
Xxxxxxxx or such other accounting firm, the same accounting methods, historical
policies, practices, principles and procedures with consistent classifications,
judgments and estimation methodologies as were used in the preparation of the
Interim Financial Statements.
“Delivery
Date” has
the
meaning set forth in Section 3.1 below.
“Environmental,
Health, and Safety Laws”
means
the United States federal Comprehensive Environmental Response, Compensation
and
Liability Act of 1990, the Resource Conservation and Recovery Act of 1976,
and
the Occupational Safety and Health Act of 1970, each as amended, together with
all other laws (including rules, regulations, codes, and judicial decisions
thereunder of federal, state, local, and foreign governments and all agencies
thereof) concerning pollution or protection of the environment, public health
and safety, or employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of Hazardous Materials into ambient
air, surface water, ground water, or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of Hazardous Materials.
3
“Escrow
Agent”
shall
mean Xxxxxx Law Xxxxxxxx Xxxxxxx & Salans, P.C.
“Escrow
Agreement”
shall
mean the escrow agreement in the form of the escrow agreement attached hereto
as
Exhibit
2.2(b).
“Escrowed
Stock Consideration”
shall
have the meaning set forth in Section 2.2(b) hereof.
“Extremely
Hazardous Substance”
has
the
meaning set forth in Section 401 of the Emergency Planning and Community
Right-to-Know Act of 1996, as amended.
“Financial
Statements”
means
collectively (i) the audited balance sheets of the Companies as at December
31
in each of the years 2002 through 2005, and the related audited statements
of
income, changes in equity, and cash flow for each of the fiscal years then
ended, prepared by the Companies’ Regular CPA, together with the report thereon
of the Companies’ Regular CPA, (ii) the Interim Financial Statements, and (iii)
the Closing Date Financial Statements, including in all cases the notes thereto;
all of which have been prepared in accordance with GAAP.
“GAAP”
shall
mean in accordance with generally accepted accounting principles, consistently
applied.
“GDI”
shall
have the meaning set forth in Section 4.1(g).
“GPS-California
Stock”
shall
have the meaning set forth in Section 4.21.
“GPS-Connecticut
Stock”
shall
have the meaning set forth in Section 4.21.
“GPS-Hartford”
shall
mean Gemma Power Hartford, LLC, a Connecticut limited liability company
wholly-owned by GPS.
“GPS
Membership Interests”
has
the
meaning set forth in the introductory statement.
“GPS
Stock Purchase Agreement”
shall
mean that certain Stock Purchase Agreement by and among Purchaser,
GPS-Connecticut, GPS-California, Xxxxxxx and Xxxxxx to be executed
contemporaneously with this Agreement.
4
“Xxxxxxx”
shall
mean Xxxxxxx X. Xxxxxxx, Xx., a member and manager of GPS and a
stockholder, officer
and director of GPS-Connecticut and of GPS-California, and a signatory to this
Agreement.
“Xxxxxxx
Employment Agreement”
shall
mean the employment agreement to be entered into by Xxxxxxx and the Company
pursuant to Section 6.6 below.
“Hazardous
Materials”
shall
include, without limitation, any pollutants or other toxic or hazardous
substances or any solid, liquid, gaseous or thermal irritant or contaminant,
including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste
(including materials to be recycled, reconditioned or reclaimed), oil or
petroleum flammable materials, explosives, radioactive materials, hazardous
waste, hazardous or toxic substances, or related materials, asbestos requiring
treatment as a matter of law, or any other substance or materials defined as
hazardous or harmful, or requiring special treatment or special handling by
any
federal, state or local environmental law, ordinance, rule or regulation
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1990, as amended (42 U.S.C. Sections 9601,
et
seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Section
1901, et seq.), the Resource Conservation and Recovery Act, as amended (42
U.S.C. Sections 6901 et seq.), the Occupational Safety and Health Act of 1970
and the regulations adopted and publications promulgated pursuant
thereto.
“Interim
Financial Statements”
means
the internally generated combining and combined balance sheet of the Companies
as at September 30, 2006, and the related internally generated combining and
combined statements of income, changes in equity, and cash flow for the nine
(9)
month period then ended, prepared in accordance with GAAP, after making all
appropriate adjustments required to present same on an accrual
basis.
“Main
Facility Lease”
shall
have the meaning set forth in Section 4.9(b) hereof.
“Material
Adverse Change”
shall
mean any change that is materially adverse to the current business, operations,
properties, prospects, assets, or financial condition of any of the Companies,
taken as a whole.
“Minimum
Net Worth”
shall
have the meaning set forth in Section 2.2(c) hereof.
“Net
Worth”
shall
mean the total assets of the Companies less the total liabilities of the
Companies as those terms are shown on the Closing Date Balance
Sheet.
“Organizational
Documents”
shall
mean (a) the articles or certificate of incorporation and the bylaws of a
corporation; (b) the articles of organization and the operating agreement of
any
limited liability company; (c) the partnership agreement and any statement
of
partnership of a general partnership; (d) the limited partnership agreement
and
the certificate of limited partnership of a limited partnership; (e) any charter
or similar document adopted or filed in connection with the creation, formation,
or organization of any entity; and (f) any amendment to any of the
foregoing.
5
“Other
Stockholders”
shall
mean the stockholders of GPS-Connecticut other than the Sellers.
“Ownership
Interests”
shall
mean all of the outstanding membership interests of GPS and all of the
authorized issued and outstanding capital stock of GPS-Connecticut and
GPS-California, including all warrants, options, convertible securities or
other
rights (contingent or otherwise) to purchase or acquire membership interests
or
stock of the any of the Companies.
“Private
Offering”
shall
mean the private offering of up to 2,900,000 shares of Argan Common Stock to
a
limited number of sophisticated investors pursuant to Private Offering Stock
Purchase Agreement and the Private Offering Escrow Agreement.
“Private
Offering Stock Purchase Agreement”
shall
have the meaning set forth in Section 5.11 hereof.
“Private
Offering Escrow Agreement”
shall
have the meaning set forth in Section 5.11 hereof.
“Project
Contract”
shall
mean any contract entered into by a Company for the engineering and construction
of a power energy system.
“Project
Site”
shall
mean the physical site of projects under the management or control of any of
the
Companies pursuant to any Project Contract.
“Registration
Rights Agreement”
shall
mean the Registration Rights Agreement executed by the Sellers and Purchaser
pursuant to Section 2.4 hereof.
“SEC”
shall
have the meaning set forth in Section 2.4.
“Sellers”
has
the
meaning set forth in the preface above.
“Sellers’
Indemnification Threshold”
shall
have the meaning set forth in Section 10.3.
“Stock
Consideration”
shall
have the meaning set forth in Section 2.2(a) hereof.
SECTION
1
ACQUISITION
OF MEMBERSHIP INTERESTS
1.1 Acquisition
of Membership Interests.
On the
Closing Date (as defined in Section 3), and subject to and upon the fulfillment
or waiver of the terms and conditions of this Agreement, Purchaser
shall acquire
from the Sellers all of the GPS Membership Interests.
6
1.2 Organizational
Documents, Management.
(a) Organizational
Documents.
At
Closing, the Organizational Documents of GPS, and of its wholly-owned
subsidiary, GPS-Hartford, shall be amended in the manner determined by
Purchaser, as sole member of GPS.
(b) Management.
At
Closing, Purchaser, as sole member of GPS, shall take all appropriate action
to
elect or appoint the person(s) designated on Schedule 1.2(b) as the manager(s)
of GPS, and of its wholly-owned subsidiary, GPS-Hartford, until their respective
successors are duly elected or appointed and qualified.
SECTION
2
CONSIDERATION
2.1 Consideration.
The
total
consideration to be paid by Purchaser to the Sellers (the “Consideration”) shall
be an amount equal to Twenty Million One Hundred Twenty-Five Thousand Dollars
($20,125,000), comprised of Eleven Million Two Hundred Fifty Thousand Dollars
($11,250,000) in cash (the “Cash Consideration”) and Eight Million Eight Hundred
Seventy-Five Thousand Dollars ($8,875,000) in Argan Common Stock (the “Stock
Consideration”), subject to adjustment in accordance with Section 2.2(c). The
Consideration shall be determined and paid in accordance with Section
2.2.
2.2 Payment
of Consideration; Adjustment of Consideration.
(a) Subject
to Section 2.2(c), and except as set forth in Section 2.2(d) below, the
Consideration shall be paid at Closing in cash, wire transfer or certified
funds
in the amount of the Cash Consideration, and through issuance of the number
of
shares of Argan Common Stock equal in value to the Stock Consideration, such
shares valued at the Argan Per Share Value; provided, however, that Purchaser
shall retain from the Stock Consideration and not deliver to the Sellers at
Closing Argan Common Stock having an aggregate value (valued at the Argan Per
Share Value) of Two Million Five Hundred Thousand Dollars ($2,500,000) (the
“Escrowed Stock Consideration”), but instead at Closing deposit the Escrowed
Stock Consideration in escrow with the Escrow Agent to be held pursuant to
the
Escrow Agreement described in Section 2.2(b) below. At Closing, the Sellers
shall receive their respective pro rata shares of the Cash Consideration and
the
Stock Consideration (less the Escrowed Stock Consideration) as set forth in
Schedule 2.2(a).
(b) At
Closing, Purchaser shall deliver the Escrowed Stock Consideration to the Escrow
Agent to be held and/or released pursuant to the terms and conditions of the
Escrow Agreement, substantially in form and substance as set forth in Exhibit
2.2(b).
(c) Notwithstanding
anything to the contrary contained in Section 2.2(a), (i) in the event that
the
Net Worth of the Companies as of the Closing Date, as set forth on the Closing
Date Balance Sheet, is less than Four Million One Hundred Thousand Dollars
($4,100,000) (the “Minimum Net Worth”), then such deficiency shall reduce,
dollar for dollar, the Cash Consideration paid to the Sellers pursuant to
Section 2.2(a) hereof; and (ii) in the event that the Net Worth of the Companies
as of the Closing Date, as set forth on the Closing Date Balance Sheet, is
greater than the Minimum Net Worth, as set forth on the Closing Date Balance
Sheet, then the Cash Consideration paid to Sellers pursuant to Section 2.2(a)
hereof shall be increased by the amount by which the Net Worth of the Companies
as of the Closing Date, as set forth on the Closing Date Balance Sheet, exceeds
the Minimum Net Worth. To enable all parties to determine the Net Worth of
the
Companies as of the Closing Date, the Sellers shall cause the Closing Date
Financial Statements to be delivered to Purchaser on or before January 15,
2007.
The Closing Date Financial Statements shall be subject to the Sellers’ and
Purchaser’s review. In the event that there is any adjustment to the Cash
Consideration pursuant to this Section 2.2(c), the amount by which the Cash
Consideration has been reduced, if any, shall be repaid by Sellers to Purchaser,
and the amount by which the Cash Consideration has been increased, if any,
shall
be paid by Purchaser to the Sellers, in either case within two (2) Business
Days
following the determination of such adjustment.
7
(d) Notwithstanding
anything to the contrary contained in Section 2.2(a), Two Million Nine Hundred
Thousand Dollars ($2,900,000) of the Cash Consideration shall not be paid at
Closing, but rather shall be paid as follows:
(i) Eight
Hundred Ten Thousand Dollars ($810,000) of the Cash Consideration shall be
paid
on or before January 10, 2007;
(ii) Ninety
Thousand Dollars ($90,000) of the Cash Consideration shall be paid on or before
April 10, 2007; and
(iii) Two
Million Dollars ($2,000,000) of the Cash Consideration (the “Contingent Cash
Consideration”) shall be paid if and only if the Adjusted EBITDA of the
Companies, as reflected on the December 31, 2007 Financial Statements, is
greater than Twelve Million Dollars ($12,000,000), any such amount to be paid
at
the earlier of: (i) March 31, 2008, or (ii) Purchaser’s receipt of the Escrow
Funds following satisfaction of the Escrow Release Conditions, as said terms
are
defined in and pursuant to the terms and conditions of that certain Second
Amended and Restated Financing and Security Agreement, dated December ___,
2006,
by and among Purchaser, Bank of America, N.A. and the other parties named
therein. Purchaser will not be obligated to pay, and the Sellers will not be
entitled to payment of, any portion of the Contingent Cash Consideration if
the
Adjusted EBITDA of the Companies, as reflected on the December 31, 2007
Financial Statements, is equal to or less than Twelve Million Dollars
($12,000,000). For purposes of this Section 2.2(d)(iii), the “Adjusted EBITDA of
the Companies” shall mean earnings of the Companies for the designated period
determined in accordance with GAAP, adjusted by adding back all deductions
taken
in determining such number, if any, for (A) interest expense, (B) income taxes,
(C) depreciation, (D) amortization, and (E) corporate overhead of Purchaser
allocated to the Companies by Purchaser in the regular course of business.
It is
understood and agreed that Adjusted EBITDA shall include interest income of
the
Companies for the designated period.
(e) In
the
event that any payment or repayment, as the case may be, of the applicable
portion of the Cash Consideration payable under Sections 2.2(c) and 2.2(d)
above
is not timely made, then the party obligated to pay shall also be liable to
the
party entitled to payment for interest thereon from the date that such payment
was due, in accordance with Section 2.2(c) or Section 2.2(d), as the case may
be, until paid at an annual rate equal to the sum of (i) the Prime Rate as
published in the Money Rates section of The Wall Street Journal on the Business
Day prior to the date such payment was due, and (ii) five percent (5%); and
for
all costs to enforce payments under said Sections 2.2(c) or 2.2(d), as the
case
may be, including reasonable attorneys’ fees.
8
2.3 Consideration
Allocation.
Before
the Closing, Purchaser and the Sellers shall negotiate in good faith to
determine that portion of the Consideration and other relevant amounts allocable
to the Sellers’ covenant not to compete in Section 9.1.
The
parties shall prepare and file their respective tax returns consistent with
the
reporting requirements of Sections 1060. The
parties shall take no positions contrary thereto in any tax return, tax contest
or other tax filing or proceeding.
If any
tax authority challenges such allocation, the party receiving notice of such
challenge shall give the other prompt written notice thereof and the parties
shall cooperate in order to preserve the effectiveness of such allocation.
2.4 Registration.
Purchaser shall prepare and file a registration statement or similar document
in
compliance with the Act with respect to Stock Consideration (and the
GPS-Connecticut Stock Consideration and the GPS-California Stock Consideration,
as said terms are defined in the GPS Stock Purchase Agreement) as soon as
practicable following Sellers’ delivery of the Closing Date Balance Sheet.
Thereafter, Purchaser shall use its commercially reasonable efforts to obtain
from United States Securities and Exchange Commission (the “SEC”) the
declaration or ordering of effectiveness of such registration statement or
document. Such registration will permit the Sellers, as holders of Argan Common
Stock, to sell shares of Argan Common Stock at their discretion, subject to
applicable law. Stock certificates issued as part of the Consideration shall
be
accompanied by any documents necessary to permit the transfer agent to transfer
shares of Argan Common Stock as directed by the Sellers. At the Closing
Purchaser shall execute and deliver to the Sellers a Registration Rights
Agreement in the form attached hereto as Exhibit 2.4.
SECTION
3
CLOSING
3.1 Closing;
Deliveries into Escrow .
The
closing of the acquisition of the GPS Membership Interests (the “Closing”) shall
take place on a date designated by Purchaser in a notice given to the Sellers
that shall be not earlier than one (1) Business Day nor later than five (5)
Business Days following the execution of this Agreement, the Stock Purchase
Agreement, and of all documents contemplated under this Agreement and under
the
Stock Purchase Agreement, and placement thereof, together with all other
documents or items to be delivered by the parties at Closing under this
Agreement and under the Stock Purchase Agreement (including those items
described in Sections 3.2 and 3.3 below) into escrow with the Escrow Agent
(the
“Delivery Date”) (subject to satisfaction or waiver by the parties of their
respective conditions to Closing set forth in Sections 5 and 6, other than
such
conditions that by their nature must be satisfied with the Closing), or at
such
other time, date and place as Purchaser and the Sellers may agree (the “Closing
Date”).
9
3.2 Deliveries
by Escrow Agent.
At or
before 2:00 p.m. on the Closing Date, Purchaser shall initiate a wire transfer
of immediately available funds in an amount equal to the Cash Consideration
(other than the portion thereof to be paid following Closing in accordance
with
Section 2.2(d)) to an account or accounts to be designated by the Sellers,
such
designation to be made no later than the Delivery Date. Upon confirmation from
either of the parties that said wire transfer of funds has been effected, the
Escrow Agent shall be authorized, and hereby agrees, to date as of the Closing
Date all documents held by it in escrow which, in accordance with the terms
of
this Agreement, are to be dated as of the Closing Date and to deliver, and
the
Escrow Agent shall release from escrow and deliver, (i) to the Sellers stock
certificates representing the Stock Consideration described in Section 2, the
Registration Rights Agreement, and all other documents and instruments received
by it which, in accordance with the terms of this Agreement, are to be delivered
by Purchaser to the Sellers at Closing, and (ii) to Purchaser duly
endorsed certificates or other evidences of ownership representing all of
the GPS Membership Interests together with such other customary documents as
may
be required to transfer same, and all other documents and instruments received
by it which, in accordance with the terms of this Agreement, are to be delivered
by Purchaser to Sellers at the Closing.
SECTION
4
REPRESENTATIONS,
WARRANTIES AND CERTAIN
COVENANTS
OF THE SELLERS AND THE COMPANIES
As
a
material inducement to induce Purchaser to consummate the transactions
contemplated under this Agreement and under the GPS Stock Purchase Agreement,
but subject to the limitations set forth in Section 10 below, each of the
Sellers and the Companies represent and warrant that each of the matters set
forth in this Section 4 is true and correct as of the date hereof (or, in the
case of the Closing Date Financial Statements to be provided hereafter in
accordance with the following provisions of this Section 4 below, will be true
and correct as of the Closing Date), and
acknowledge that Purchaser’s entry into this Agreement and the GPS Stock
Purchase Agreement and the performance of its obligations hereunder and
thereunder are made in reliance upon the completeness and accuracy of each
of
the matters set forth herein. The representations and warranties being made
by
the Companies shall survive up and until the Closing Date. The representations
and warranties being made by the Sellers shall survive as set forth in Section
13.11 below.
4.1 Organization,
Qualifications and Company or Corporate Power.
(a) GPS
is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Connecticut. Attached as Schedule 4.1(a) is
a
list of all states in which GPS is qualified to do business. GPS is duly
qualified as a foreign limited liability company in each other jurisdiction
in
which qualification is required.
10
(b) GPS-Connecticut
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Connecticut. Attached as Schedule 4.1(b) is a list
of
all states in which GPS-Connecticut is qualified to do business. GPS-Connecticut
is duly qualified as a foreign corporation in each other jurisdiction in which
qualification is required. On or before the Closing Date GPS-Connecticut will
file IRS Form 2553 “Election by a Small Business Corporation” in which it elects
to be treated as an S corporation pursuant to applicable provisions of the
Code.
(c) Gemma
Power Hartford, LLC (“GPS-Hartford”) is a limited liability company duly
organized, validly existing and in good standing under the laws of the State
of
Connecticut. Attached as Schedule 4.1(c) is a list of all states in which
GPS-Hartford is qualified to do business. GPS-Hartford is duly qualified as
a
foreign limited liability company in each other jurisdiction in which
qualification is required. All of the membership interests of GPS-Hartford
are
owned by GPS.
(d) GPS-California
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of California. Attached as Schedule 4.1(d) is a list
of
all states in which GPS-California is qualified to do business. GPS-California
is duly qualified as a foreign corporation in each other jurisdiction in which
qualification is required. GPS-California has duly elected status, and qualifies
as of the date of this Agreement, as an S corporation pursuant to applicable
provisions of the Code.
(e) Each
of
GPS and GPS-Hartford has the limited liability company power and authority,
and
each of GPS-Connecticut and GPS-California has the corporate power and
authority, to own and hold its properties and to conduct its businesses as
currently conducted and as proposed to be conducted, and to execute, deliver
and
perform this Agreement, the GPS Stock Purchase Agreement, and all other
agreements and instruments related hereto or contemplated hereby to which such
Company is a signatory.
(f) Except
as
set forth on Schedule 4.1(f), none of the Companies owns of record or
beneficially, directly or indirectly, (i) any shares of outstanding capital
stock or securities convertible into capital stock of any other corporation,
or
(ii) any participating interest in any partnership, joint venture, limited
liability company, or other non-corporate business enterprise.
(g) Gemma
Development, Inc. (“GDI”) is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware.
4.2 Authorization
of Agreement. The
execution, delivery and performance by each of the Companies of this Agreement,
the GPS Stock Purchase Agreement, and any other instruments or documents
required to be executed and delivered hereby, have been duly authorized by
all
requisite limited liability company or corporate action, as the case may be,
and
will not (a) violate any applicable provision of law, any order, writ,
injunction, decree, judgment, or ruling of any court or other agency of
government, the Articles of Organization or the Operating Agreement of GPS
or
GPS-Hartford, the Articles of Incorporation or Bylaws of GPS-Connecticut or
GPS-California, or any provision of any indenture, agreement, insurance policy,
bond or other instrument by which any of the Companies, or any of their
respective properties or assets, are bound or affected, (b) conflict with,
result in a material breach of or constitute (with due notice or lapse of time
or both) a default under any such indenture, insurance policy, bond, agreement
or other instrument, (c) result in being declared void, voidable or
without further
binding effect any license, governmental permit or certification, employee
plan,
note, bond, mortgage, indenture, deed of trust, franchise, lease, contract,
agreement, or other instrument or commitment or obligation to which any of
the
Companies is a party, or by which any of the Companies, or any of their
respective assets, may be bound, subject or affected, or (d) except as otherwise
provided in this Agreement, result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever not arising in the ordinary
course of business upon any of the properties or assets of any of the
Companies.
11
4.3 Membership
Interests; Capital Stock.
The
membership interests of GPS and GPS-Hartford and the authorized capital stock
of
GPS-Connecticut and GPS-California and the holders of the issued and outstanding
shares of such capital stock are set forth in Schedule 4.3 hereto. Except as
disclosed in Schedule 4.3, there is no (i) subscription, warrant, option,
convertible security or other right (contingent or otherwise) to purchase or
acquire any membership interests or shares of any class of capital stock of
any
of the Companies, which is authorized or outstanding, (ii) none of the Companies
has any commitment to issue any membership interests, shares, warrants, options
or other such rights or to distribute to holders of any membership interests
or
any class of its capital stock any evidence of indebtedness or assets, (iii)
none of the Companies has any obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any membership interests or shares of its capital
stock or any interest therein or to pay any
dividend or make any other distribution in respect thereof, and (iv) none of
the
Companies has any obligation or commitment to register under the Act any
securities issued or to be issued by it. All of the outstanding membership
interests and all of the issued and outstanding shares of the capital stock
of
the Companies, as the case may be, have been validly issued in compliance with
all federal and state securities laws and are fully paid and non-assessable.
4.4 Financial
Statements.
The
Companies have delivered the Financial Statements to Purchaser (or with respect
to the Closing Date Financial Statements will timely deliver same to Purchaser
in accordance with the terms of this Agreement). Subject to the provisions
of
the Disclaimer set forth in Section 13.20 of this Agreement, the Financial
Statements are, or will
be,
as the case may be, true, complete and correct, have been, or will be, as the
case may be, prepared in accordance with GAAP and fairly present the financial
condition of the Companies as of such respective dates and
the
results of operations for the respective periods then ended after
making, with respect to the Interim Financial Statements and the Closing Date
Financial Statements, all appropriate adjustments required to present such
Financial Statements on an accrual basis. Except as or as will be set forth
in
such Financial Statements, or
as
incurred in the ordinary course of business, to the knowledge of the Sellers
and
the Companies, the Companies have no material obligation or liability, absolute,
accrued or contingent, except contingent liabilities as set forth in the
Contracts disclosed pursuant to Section 4.11 below, and obligations and
liabilities which do not adversely affect the business, property or assets
of
the Companies.
12
4.5 Absence
of Changes.
Except
as listed in Schedule 4.5 and since the time period covered by the Interim
Financial Statements, none of the Companies has:
(a) Transferred,
assigned, conveyed or liquidated any of its assets or entered into any
transaction or incurred any liability or obligation which affects the assets
or
the conduct of its business, other than in the ordinary course of
business;
(b) Incurred
any Material Adverse Change, or become aware of any fact, circumstance,
occurrence or event which could reasonably be expected to result in a Material
Adverse Change;
(c) Suffered
any material destruction, damage or loss relating to its assets or the conduct
of its business whether or not covered by insurance;
(d) Suffered,
permitted or incurred other than in the ordinary course of business the
imposition of any lien, charge, encumbrance (which as used herein includes,
without limitation, any mortgage, deed of trust, conveyance to secure debt
or
security interest) whether or not contingent in nature, or claim upon any of
its
assets, except for any current year lien with respect to personal or real
property taxes not yet due and payable;
(e) Committed,
suffered, permitted or incurred any default in any liability or obligation
of
the Company;
(f) Made
or
agreed to any change in the terms of any contract or instrument to which it
is a
party, other than change orders as occur in the regular course of business
in
connection with any Project Contract;
(g) Knowingly
waived, canceled, sold or otherwise disposed of, other than in the ordinary
course of business, for less than the face amount thereof, any claim or right
relating to its assets or the conduct of its business, which it has against
others;
(h) Declared,
promised or made any distribution from its assets or other payment from the
assets to its members or shareholders, as the case may be (other than reasonable
compensation for services actually rendered and pre-closing distributions of
cash to Xxxxxxx and/or Xxxxxx in their capacity as the sole members of GPS,
provided same does not result in the failure of the Companies to meet the
Minimum Net Worth requirement as set forth in Section 2.2(c)), or issued any
additional membership interests, shares or rights, options or calls with respect
to its membership interests or shares of capital stock, or redeemed, purchased
or otherwise acquired any of its membership interests or shares, or made any
change whatsoever in its capital structure;
(i) Paid,
agreed to pay or incurred any obligation for any payment for, any contribution
or other amount to, or with respect to, any employee benefit plan, or paid
or
agreed to pay any bonus or salary increase to its executive officers or
directors, or made any increase in the pension, retirement or other benefits
of
its managers, directors or executive officers other than in the ordinary course
of business;
13
(j) Committed,
suffered, permitted, incurred or entered into any transaction or event other
than in the normal course of business which would increase its liability for
any
prior taxable year;
(k) Incurred
any other liability or obligation or entered into any transaction other than
in
the ordinary course of business; or
(l) Received
any notices of, or has reason to believe, that any of its customers or clients
have taken or contemplate any steps which could disrupt its business
relationship with said customer or client or could result in the diminution
in
the value of the business of the Company as a going concern.
4.6 Legal
Actions.
Except
as listed on Schedule 4.6, there is no action, suit, investigation, or
proceeding pending or, to the knowledge of the Companies or the Sellers,
threatened against or affecting the Sellers, any of the Companies, or any of
their respective properties or rights, before any court or by or before any
governmental body or arbitration board or tribunal and no basis exists for
any
such action, suit, investigation or proceeding which will result in any material
liability or affirmative or negative injunction being imposed on any of the
Companies or the Sellers. The foregoing includes, without limiting its
generality, actions pending or threatened involving the prior employment of
any
employees or prospective employees of any of the Companies, or their use, in
connection with their respective businesses, of any information or techniques
which might be alleged to be proprietary to its former employer(s). In addition,
no action, suit, investigation or proceeding has been brought against any of
the
Companies or the Sellers relating to any claims relating to the presence or
effect of Hazardous Materials in any design or construction project or other
matter in which any of the Companies or the Sellers have been
involved.
4.7 Business
Property Rights.
To the
best of each of the Companies’ or each of the Seller’s knowledge, no person or
entity has made or threatened to make any claims that the operations of the
businesses of the Companies are or will be in violation of or infringe on any
technology, patents, copyrights, trademarks, trade names, service marks (and
any
application for any of the foregoing), licenses, proprietary information,
know-how, or trade secrets (“Business Property Rights”). To the best of each of
the Companies’ or each of the Seller’s knowledge, no third party is infringing
upon or violating any of the Companies’ Business Property Rights and each of the
Companies has the exclusive right to use the same. None of the employees,
directors, officers, members or shareholders of any of the Companies has any
valid claim whatsoever (whether direct, indirect or contingent) of right, title
or interest in or to any of the Companies’ Business Property
Rights.
4.8 Liabilities.
Except
as listed in Schedule 4.8, to the knowledge of the Sellers and the Companies,
none of the Companies has any liabilities or obligations, whether accrued,
absolute, contingent or otherwise (individually or in the aggregate), which
are
of a nature required to be reflected in financial statements prepared in
accordance with GAAP, including without limitation any liability which might
result from an audit of its tax returns by any appropriate authority, except
(i)
the liabilities and obligations set forth in the Financial Statements delivered
or to be delivered in accordance with Section 4.4, and (ii) liabilities and
obligations incurred for the purpose of enabling the Companies to conduct their
normal business (in each case in normal amounts and incurred only in the
ordinary course of business). Except as disclosed in the Financial Statements
(or to be disclosed in the Closing Date Financial Statements), to the knowledge
of the Sellers and the Companies, none of the Companies is in default with
respect to any liabilities or obligations and all such liabilities or
obligations are shown and reflected in the Financial Statements (or will be
shown and reflected in the Closing Date Financial Statements), and such
liabilities incurred or accrued subsequent to the Companies’ incorporation, have
been, or are being, paid or discharged as they become due, and all such
liabilities and obligations were incurred in the ordinary course of
business.
14
4.9 Ownership
of Assets and Leases.
(a) Attached
hereto as Schedule 4.9(a) is a complete and correct list and brief description,
as of the date of this Agreement, of all real property and material items of
personal property owned by the Companies and all of the long term capital leases
and other agreements relating to any real, personal or intangible property
owned, used, licensed or leased (other than term leases of equipment entered
into in connection with any Project Contract) by the Companies or any of them.
Each of the Companies has good and marketable title to all of its assets,
including those listed on Schedule 4.9(a), and any income or revenue generated
therefrom, in each case free and clear of any liens, claims, charges, options,
rights of tenants or other encumbrances, except (i) as disclosed and reserved
against in the Financial Statements (to the extent and in the amounts so
disclosed and reserved against), (ii) for liens arising from current taxes
not
yet due and payable, and (iii) as separately and specifically set forth on
Schedule 4.9(a). Each of the aforementioned leases and agreements of the
Companies is in full force and effect and constitutes a legal, valid and binding
obligation of the Company and the other respective parties thereto, enforceable
in accordance with its terms, except as enforceability may be limited by
applicable equitable principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws from time to time in effect affecting the
enforcement of creditors’ rights generally, and there is not under any of such
leases or agreements existing any default of any of the Companies or, to the
best of the Companies’ or each Seller’s
knowledge, of any other parties thereto (or event or condition which, with
notice or lapse of time, or both, would constitute a default). None of the
Companies has received any notice of violation of any applicable regulation,
ordinance or other law with respect to its operations or assets and, to the
best
of the Companies’ and the Sellers’ knowledge, there is not any such violation or
grounds therefor which could adversely affect any of the Company’s assets or the
conduct of its business. None of the Companies is a party to any contract or
obligation whereby an absolute or contingent right to purchase, obtain or
acquire any rights in any of the assets has been granted to anyone. There does
not exist and will not exist by virtue of the transactions contemplated by
this
Agreement any claim or right of third persons which may be legally asserted
against any asset of the Companies.
(b) GPS’s
main facility, located at 0000 Xxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxxxx 00000
(the
“Main Facility”), is leased by GPS pursuant to that certain Lease dated October
5, 1999 by and between Glastonbury Bank and Trust Company, as Lessor, and Gemma
Power Systems, LLC, as Lessee, which lease was amended pursuant to an Amendment
to Lease dated as of the ____ day of July, 2000, a Second Amendment to Lease,
effective April 1, 2004, and a Third Amendment to Lease, effective November
1,
2005, a true, correct and complete copy of which lease, and all amendments
and
modifications thereof (the “Main Facility Lease”), has been provided by the
Sellers to Purchaser.
15
4.10 Taxes.
The
Companies have paid, or made provisions for the payment of, all taxes due,
assessed and owed by them, if any, as reflected on their respective tax returns
and have timely filed all federal, state, local and other tax returns which
were
required to be filed and which were due prior to the Closing Date, except for
those taxes set forth on Schedule 4.10(a). All federal, state, local, and other
taxes of the Companies accruable since the filing of such returns have been
properly accrued on the respective books of each of the Companies. No federal
income tax returns for any of the Companies have ever been audited by the
Internal Revenue Service or any state or local taxing authority, except as
described in Schedule 4.10(b). No other proceedings or other actions which
are
still pending or open have been
taken for the assessment or collection of additional taxes of any kind from
any
of the Companies for any period for which returns have been filed, and to the
Companies’ and the Sellers’ knowledge, no other examination by the Internal
Revenue Service or any other taxing authority affecting any of the Companies
is
now pending. Except for those taxes set forth on Schedule 4.10(a), taxes which
any of the Companies were required by law to withhold or collect subsequent
to
the formation or incorporation of the Companies have been withheld or collected
and have been paid over to the proper governmental authorities or are properly
held by the Companies for such payment and are so withheld, collected and paid
over as of the date hereof. No waivers of statutes of limitations with respect
to any tax returns of any of the Companies, nor extensions of time for the
assessment of any tax, have been given by any current employees of any of the
Companies. There are not, and there will not be, any liabilities for federal,
state or local income, sales, use, excise or other taxes arising out of, or
attributable to, or affecting either the assets or the conduct of the business
of any of the Companies through the
close
of business on the Closing Date for which Purchaser will have any liability
for
payment. After the Closing, there does not and will not exist any liability
for
taxes resulting from the conduct of the business of any of the Companies
through the
close
of business on the Closing Date, which may be asserted by any taxing authority
against the assets of any of the Companies, or the operation of any of their
businesses (which liability is not reimbursable pursuant to “pass-throughs”
under the Companies’ existing Project Contracts), including without limitation
any liability arising from disallowance of any S corporation election by any
of
the Companies, and no lien or other encumbrance for taxes will attach to such
assets or the operation of their businesses. The Sellers agree to give Purchaser
immediate notice of any claim or assertion by the Internal Revenue Service,
or
any other taxing authority, of any such disallowance.
4.11 Contracts,
Other Agreements.
(a) Attached
hereto as Schedule 4.11(a) is a complete and accurate list, and Sellers have
delivered to Purchaser true and complete copies, of:
(i)
each
Contract that involves performance of services or delivery of goods or materials
by or to one or more of the Companies of an amount or value in excess of
$5,000,000, including without limitation Project Contracts and other contracts,
subcontracts and agreements for the provision or prospective provision by any
Company of engineering, design, procurement, construction, consulting,
operation, maintenance or other services;
16
(ii)
each
Contract that was not entered into in the ordinary course of business and that
involves expenditures or receipts of one or more Companies in excess of
$500,000;
(iii)
each
employment agreement, consulting agreement, or agreement providing for severance
payments that obligates or could obligate one or more Companies to make payments
in excess of $100,000 per annum;
(iv)
each
joint venture, partnership, and other Contract (however named) involving a
sharing of profits, losses, costs, or liabilities by any Company with any other
person or entity;
(v) each
Contract containing covenants that in any way purport to restrict the business
activity of any Company or any affiliate of a Company or limit the freedom
of
any Company or any affiliate of a Company to engage in any line of business
or
to compete with any person or entity; and
(vi)
each
Contract providing for payments to or by any person or entity based on sales,
purchases, or profits, other than direct payments for goods.
(b) Except
as
set forth in Schedule 4.11(a), each Contract identified or required to be
identified in Schedule 4.11(a) is in full force and effect and is valid and
enforceable in accordance with its terms.
(c) Except
as
set forth in Schedule 4.11(a), no Contract identified or required to be
identified in Schedule 4.11(a), including without limitation the Main Facility
Lease, will be materially breached or violated as a result of the sale of
membership interests or stock contemplated hereunder and under the GPS Stock
Purchase Agreement, nor will consummation of such transactions result in a
default thereunder or give any party thereto the right to terminate such
Contract or any provision thereof, nor will consummation of such transactions
require the consent or approval of any other party to such Contract or any
other
person or entity.
(d) Except
as
set forth in Schedule 4.11(a),
(i) each
Company is in full compliance with all applicable terms and requirements of
each
Contract, including without limitation the maintenance of all insurance required
to be maintained by such Company thereunder;
(ii)
to
the
best of the Companies’ or each Seller’s knowledge, each other party to any
Contract is in full compliance with all applicable terms and requirements of
such Contract;
17
(iii)
no event
has occurred or circumstance exists that (with or without notice or lapse of
time) may contravene, conflict with, or result in a violation or breach of,
or
give any Company or other person or entity the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or
to cancel, terminate, or modify, any Contract;
(iv)
no
Company has given to or received from any other person or entity any notice
or
other communication regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Contract identified or required
to
be identified in Schedule 4.11(a); and
(e) To
the
extent applicable to any Contract identified or required to be identified in
Schedule 4.11(a), the Company has satisfied any performance criteria that it
has
been required to satisfy through the date of this Agreement, and does not know
of any fact or circumstance that would prevent the Company from satisfying
any
performance criteria that it may be required to satisfy after the date of this
Agreement.
(f) There
are
no renegotiations of, attempts to renegotiate, or outstanding rights to
renegotiate any material amounts paid or payable to any Company under current
or
completed Contracts and no other party to any Contract has made written demand
for such renegotiation. For purposes of this Section 4.11(f), “material amounts”
shall mean any amounts in excess of $2,000,000.
(g) Attached
hereto as Schedule 4.11(g) is a complete and accurate list of (i) each Contract
under which any Company has a current warranty obligation, (ii) the remaining
period of each such warranty obligation, and (iii) any claim that has been
made
and remains outstanding under such warranty obligation. Except as set forth
on
Schedule 4.11(g), no Company has received notice of any warranty claim and,
to
the knowledge of the Sellers and the Companies, no warranty claim is threatened
and no event has occurred or circumstance exists that (with or without notice
or
lapse of time) could reasonably be anticipated to result in a warranty
claim.
4.12 Governmental
Approvals.
Except
as set forth on Schedule 4.12, no registration or filing with, or consent or
approval of, or other action by, any federal, state or other governmental agency
or instrumentality is or will be necessary for the valid execution, delivery
and
performance of this Agreement or the GPS Stock Purchase Agreement by any of
the
Companies, or the continuation of the business of the Companies following the
transactions contemplated by this Agreement and the GPS Stock Purchase
Agreement.
4.13 Lack
of Defaults; Compliance with Law.
No
default has occurred or exists in performance of any obligation, covenant or
condition contained in any note, debenture, mortgage or other contract or
agreement of any nature or kind to which any of the Companies or any of the
Sellers is a party, nor has any default occurred, nor does any default exist,
with respect to any order, writ, injunction or decree of any court, governmental
authority or arbitration board or tribunal to which any of the Companies or
any
of the Sellers is a party. The Companies and the Sellers know of no violation
of
any law, ordinance, governmental rule or regulation to which any of the
Companies or any of the Sellers is subject, nor has any of the Companies or
any
of the Sellers failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary for the ownership of their properties,
or
to the conduct of their business, or for the legal sale of their products.
Each
of the Companies has conducted and will conduct its business and operations
in
substantial compliance with all federal, state, county and municipal laws,
statutes, ordinances and regulations, including without limitation the rules,
regulations and requirements of the Federal Trade Commission (including all
such
rules, regulations and requirements relating to truth in advertising), and
is in
substantial compliance with all applicable requirements of all federal, state,
county and municipal regulatory authorities.
18
4.14 Employees
and Employee Benefit Plans.
(a) Schedule
4.14
annexed
hereto lists all of the Companies’ Plans. For the purposes of this Agreement,
“Plan” means any “employee benefit plan” (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 or any successor law, and rules
and regulations issued pursuant to such Act or any successor law (“ERISA”)) and
each other plan, arrangement or policy (other than employment agreements with
individuals employed by any of the Companies) relating to stock options, stock
purchases, compensation, deferred compensation, severance, fringe benefits
or
other employee benefits, in each case maintained or contributed to, or required
to be maintained or contributed to, by any of the Companies for the benefit
of
any present or former employees of any of the Companies. All of the Plans listed
on Schedule 4.14 which are employee benefit plans within the meaning of
Section 3(3) of ERISA are in material compliance with the applicable provisions
of ERISA, the Code, and the rules and regulations thereunder, except where
the
failure to do so would not, individually or in the aggregate, reasonably be
expected to result in a material adverse effect on any of the Companies. There
are no claims (except claims for benefits payable in the normal operation of
the
Plans), suits, proceedings, and, to the Sellers’ or the Companies’ knowledge,
investigations by any governmental agency against or involving any Plan or
asserting any rights to or claims for benefits or reimbursements under any
Plan.
All contributions to the Plans required to be made by any of the Companies
in
accordance with the terms of the Plans have been timely made and all such
contributions have been adequate to ensure that such Plans are fully funded.
No
event has occurred and, to the Sellers’ and the Companies’ knowledge, no
circumstances exist that could adversely affect the tax-qualification of any
Plan that is intended to be a tax-qualified plan. To the Sellers’ and the
Companies’ knowledge, no event has occurred and no circumstances exist that
could adversely affect the tax-qualification of each Plan that is intended
to be
a tax-qualified plan. None of the Companies has, nor have any of their ERISA
Affiliates, ever maintained, contributed to or otherwise had any liability
with
respect to an employee benefit plan subject to Title IV of ERISA, Section 401
of
ERISA or Section 412 of the Code. For purposes of this Section, “ERISA
Affiliate” shall mean any person (as defined in Section 3(9) of ERISA) that is
or has been a member of any group of persons described in Section 414(b), (c),
(m), or (o) of the Code including any of the Companies. The transactions
contemplated by this Agreement and by the GPS Stock Purchase Agreement will
not
alone entitle any such employee to any additional payments or benefits or any
acceleration of the time of payment or vesting of any benefits under any
employee benefit or executive compensation plan, arrangement or agreement
maintained by or entered into with any of the Companies. Any amount to be
received (whether in cash or property or the vesting of property) as a result
of
any of the transactions contemplated by this Agreement and by the GPS Stock
Purchase Agreement by any employee of any of the Companies under any employment,
severance or termination agreement, other compensation arrangement or benefit
plan would not be characterized as an “excess parachute payment” (as such term
is defined in Section 280G(b)(1) of the Code). To the Sellers’ and the
Companies’ knowledge, each of the Companies and its Plans has materially
complied with all required tax filings.
19
(b) Attached
hereto as Schedule 4.14(b) are the names, citizenship and immigration status
(with respect to any non-U.S. citizen), of all salaried employees employed
by
any of the Companies as of the date hereof, and at Closing the Companies will
provide an updated list of all such employees as of the Closing Date, such
updated list to be initialed by both parties at Closing. To the best of the
Companies’ and the Sellers’ knowledge, no employee of any of the Companies is a
party to or bound by any contract, or subject to any restrictions (including,
without limitation, any non-competition restriction), that would restrict the
right of such person to be employed by or to participate in the affairs of
the
Companies following the transactions contemplated under this Agreement and
under
the GPS Stock Purchase Agreement.
4.15 Insurance;
Bonds.
Attached hereto as Schedule 4.15 is a complete and correct list and description
of all of the policies of liability, property, workers’ compensation and other
forms of insurance or bonds carried by the Companies for the benefit of or
in
connection with their assets and businesses. All of such policies or bonds
are
in full force and effect and there are no overdue premiums or other payments
due
on such policies or bonds and the Companies have not received any notice of
cancellation or termination of any of said policies or bonds. Neither the
Sellers nor the Companies have knowledge of any change or proposed change to
any
of the rates set forth in the policies or bonds listed on Schedule 4.15 other
than as set out therein. No insurance policy, bond or other instrument to which
any of the Companies is a party or which has been issued to or for the benefit
of any of the Companies, will be materially breached or violated as a result
of
the transaction contemplated hereunder and under the GPS Stock Purchase
Agreement, nor will consummation of such transactions result in a default
thereunder or give any party thereto the right to terminate such policy, bond,
commitment or arrangement or any provision thereof, or if any consent to or
approval of the transaction contemplated hereunder and under the GPS Stock
Purchase Agreement is required thereunder, such consent or approval has been
obtained.
4.16 Labor
and Employment Matters.
No
labor dispute, strike, work stoppage, employee collective action or labor
relations problem of any kind which has materially adversely affected or may
so
affect any of the Companies or any of their businesses or operations, is pending
or, to the best knowledge of the Companies or the Sellers, is threatened. The
Companies have complied in all material respects with the reporting and
withholding provisions of the Code and the Federal Insurance Contribution Act
and all similar state and local laws, and with the federal, state, and local
laws, ordinances, rules and regulations with respect to employment and
employment practices, terms and conditions of employment and of the workplace,
wages and hours and equal employment opportunity.
4.17 Brokers
and Finders.
Except
as listed on Schedule 4.17, neither the Sellers nor any of the Companies have
incurred or become liable for any commission, fee or other similar payment
to
any broker, finder, agent or other intermediary in connection with the
negotiation or execution of this Agreement or of the GPS Stock Purchase
Agreement or the consummation of the transactions contemplated hereby and
thereby. Each of the Sellers agrees to be responsible for paying all broker
fees, commissions or other compensation incurred by the Sellers or any of the
Companies as a result of the transactions contemplated by this Agreement and
by
the GPS Stock Purchase Agreement.
20
4.18 Accounts
Receivable.
(a) All
accounts receivable of the Companies shown on the Financial Statements reflect
(and, in the case of the Closing Date Balance Sheet, will reflect) actual
transactions, have (or will have as of the Closing Date) arisen in the ordinary
course of business and have been collected or are now (or will be as of the
Closing Date) in the process of collection without recourse to any judicial
proceedings in the ordinary course of business in the aggregate recorded amounts
thereof, less the applicable allowances reflected on the Financial
Statements.
(b) Except
as
set forth on Schedule 4.18(b), the Sellers and the Companies have no knowledge
as to any of the accounts receivable of any of the Companies being subject
to
any lien or claim
of
offset, set
off
or counterclaim not provided for by the Companies’ allowance for doubtful
accounts as of the date of execution hereof.
4.19
Conflicts
of Interests.
Except
as described in Schedule 4.19, no officer, director, stockholder, manager of
member of any of the Companies was or is, directly or indirectly, a joint
investor or co-venturer with, or owner, lessor, lessee, licensor or licensee
of
any real or personal property, tangible or intangible, owned or used by, or
a
lender to or debtor of, any of the Companies and none of the Companies has
any
commitment or obligation as a result of any such transactions prior to the
date
hereof. Except as described in Schedule 4.19, and except for directly or
indirectly holding less than five percent (5%) of the outstanding shares of
stock in a company which is publicly traded, none of such officers, directors,
stockholders, managers or members currently own, directly or indirectly,
individually or collectively, an interest in any entity which is a competitor,
customer or supplier of (or has any existing contractual relationship with)
any
of the Companies.
4.20 Environmental
Compliance.
(a) No
Environmental Claims.
Except
as set forth on Schedule 4.20(a) attached hereto, (i) there are no claims,
liabilities, judgments or orders, or investigations, litigation or
administrative proceedings relating to any Hazardous Materials (collectively
called “Environmental
Claims”), now pending or, to the knowledge of the Sellers and the Companies,
threatened against any of the Companies or relating to any Project Site, and,
to
the knowledge of the Sellers and the Companies, there are no Environmental
Claims now pending or threatened relating to any former Project Site; (ii)
neither the Sellers nor any of the Companies have caused or permitted any
Hazardous Material to be used, generated, reclaimed, transported, released,
treated, stored or disposed of in a manner which could reasonably be expected
to
result in liability under Environmental Laws (as hereinafter defined) against
any of the Companies or any subsequent owner or operator of a Project Site;
and
(iii) neither the Sellers nor any of the Companies have assumed (by contract
or
by operation of law) any liability of any person for cleanup, remediation,
compliance or required capital expenditures in connection with any Environmental
Claim.
21
(b) [Intentionally
omitted.]
(c) Compliance
with Environmental Laws.
Each of
the Companies has been and is currently in compliance in all material respects
with and has received no notice or other communication concerning a claim
related to disposal of Hazardous Materials or an alleged violation of any and
all applicable Environmental Laws, including obtaining and maintaining in effect
all permits, licenses and other authorizations required by applicable
Environmental Laws.
As used
herein, the term “Environmental Laws” shall mean any federal, state or local
law, rule, regulation or order relating to pollution, waste disposal, industrial
hygiene, land use or the protection of human health or safety, plant life or
animal life, natural resources or the environment.
4.21 Ownership
of the Ownership Interests.
The
Sellers (together with the Other Stockholders with respect to ownership of
the
GPS-Connecticut Stock) own all of the Ownership Interests beneficially and
of
record, free and clear of all liens, restrictions, encumbrances, charges, and
adverse claims and the Ownership Interests to be purchased hereunder constitute
one hundred percent (100%) of issued and outstanding membership interests and
capital stock, as the case may be, of the Companies. The names, addresses and
percentages of GPS Membership Interests, the issued and outstanding shares
of
capital stock of GPS-Connecticut (the “GPS-Connecticut Stock”), and the issued
and outstanding shares
of
capital stock of GPS-California (the “GPS-Connecticut Stock”), held by each of
the Sellers and each of the Other Stockholders, as the case may be, is set
forth
on Schedule 4.21.
4.22 Absence
of Sensitive Payments.
Neither
the Sellers nor, to the knowledge of the Sellers and the Companies, any of
the
directors, officers, stockholders, managers or members of any of the
Companies:
(a) has
made
or has agreed to make any contributions, payments or gifts of funds or property
to any governmental official, employee or agent where either the payment or
the
purpose of such contribution, payment or gift was or is illegal under the laws
of the United States, any state thereof, or any other jurisdiction (foreign
or
domestic);
(b) has
established or maintained any unrecorded fund or asset for any purpose, or
has
made any false or artificial entries on any of its books or records for any
reason; or
(c)
has
made
or has agreed to make any contribution or expenditure, or has reimbursed any
political gift or contribution or expenditure made by any other person, to
candidates for public office, whether federal, state or local foreign or
domestic, where such contributions were or would be a violation of applicable
law.
22
4.23 Approval
of Transactions; Related Matters.
Each of
the Sellers represents and warrants that such Seller, in his capacity as a
member or shareholder of the Companies, and each of the Other Stockholders,
in
his or her capacity as a stockholder of GPS-Connecticut, (i) approves of and
consents to the transactions contemplated under this Agreement and under the
GPS
Stock Purchase Agreement as set forth herein and therein, (ii) waives any notice
of a member or shareholder meeting or similar company or corporate formality
in
connection with the approval of the transactions described herein and therein,
(iii) waives any rights to protest or object to the transactions contemplated
under this Agreement or under the GPS Stock Purchase Agreement or to the
exercise of any statutory remedy of appraisal as to the Ownership Interests
owned by such Seller, or by such Other Stockholder, as the case may be, as
provided by applicable law, (iv) has received a copy of resolutions approving
the transactions contemplated under this Agreement and under the GPS Stock
Purchase Agreement in accordance with applicable law, and (v) to the extent
such
Seller or Other Stockholder owes any amounts to any of the Companies pursuant
to
any promissory note issued by such Seller or such Other Stockholder to the
Company, consents to the use of a portion of the Consideration payable to such
Seller or such Other Stockholder, as the case may be, to pay off each such
promissory note at Closing.
4.24 Withholding.
Neither
Companies nor either of the Sellers, nor any of the Other Stockholders, is
a
foreign person or entity, or has other status, such that Purchaser would be
required to deduct and withhold from the Consideration otherwise payable
pursuant to this Agreement or pursuant to the GPS Stock Purchase Agreement
to
any holder of the Ownership Interests any amounts under the Code, or any
provision of state, local or foreign tax law.
4.25 Amounts
Due From Sellers.
All
amounts due from the Sellers, or either of them, or from the Other Stockholders,
or any of them, to any of the Companies have been paid in full.
SECTION
5
REPRESENTATIONS,
WARRANTIES AND CERTAIN
COVENANTS
OF PURCHASER
As
a
material inducement to induce the Sellers to consummate the transactions
contemplated by this Agreement and by the GPS Stock Purchase Agreement,
Purchaser represents and warrants that each of the matters set forth in this
Section 5 is true and correct as of the date hereof, and acknowledges that
the
Sellers’ entry into this Agreement and the GPS Stock Purchase Agreement and the
performance of their obligations hereunder and thereunder are made in reliance
upon the completeness and accuracy of each of the matters set forth herein.
The
representations and warranties being made by Purchaser shall survive as set
forth in Section 13.11 herein.
5.1 Organization,
Standing, etc.
Purchaser is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization.
23
5.2 Authorization,
etc.
The
execution and delivery of this Agreement, the GPS Stock Purchase Agreement
and
any other instruments or documents required to be executed and delivered hereby
and thereby, and the purchase of the Ownership Interests contemplated hereby
and
thereby, have been authorized by such authorities or by such court of competent
jurisdiction, if any, as may be required by applicable law and constitute valid
and binding obligations of Purchaser, enforceable against it in accordance
with
the terms of this Agreement and the GPS Stock Purchase Agreement,
respectively.
5.3 No
Breach or Defaults Caused by Agreement.
The
making and execution, delivery, and performance by Purchaser of this Agreement
and the GPS Stock Purchase Agreement does and will not breach or constitute
(with due notice or lapse of time or both) any default in any articles, by-laws,
agreements, or instruments of any kind or character to which Purchaser is a
signatory or a party, or by which it may be bound, subject to, or affected,
now
or in the future.
5.4 Governmental
Approvals.
Except
as set forth on Schedule 4.12, with respect to which Purchaser is relying on
the
representations and warranties of the Sellers, no registration or filing with,
or consent or approval of, or other action by, any federal, state, or other
governmental agency or instrumentality, which has not been made or obtained
prior to the execution of this Agreement by Purchaser, is or will be necessary
for the valid execution, delivery and performance of this Agreement and the
GPS
Stock Purchase Agreement by Purchaser, and the continuation of the business
of
the Companies following the acquisition of the Ownership Interests.
5.5 Brokers
Fees.
Purchaser represents that there are no brokers involved in this transaction
on
its behalf.
5.6 Authorized
Shares of Stock.
There
exists sufficient authorized, but unissued, shares of Argan Common Stock
necessary to enable Purchaser to satisfy any obligation of it to issue shares
of
Argan Common Stock pursuant to the transactions contemplated under this
Agreement and under the GPS Stock Purchase Agreement.
5.7 Capitalization.
Purchaser’s authorized and issued and outstanding shares of stock as of the date
hereof and as of the Closing are set forth in Schedule 5.7(a) hereof. Said
list
will include, as of the date of Closing, the shares sold pursuant to the Private
Offering. Purchaser has no intention of issuing any additional shares of its
stock in anticipation of Closing hereunder. Attached hereto as Schedule 5.7(b)
is a list of stock options which the Company has outstanding, the recipients
of
said options, and the exercise price for each of said stock options. Neither
Purchaser nor any subsidiary thereof has any unfunded pension plan or retirement
plan liability.
5.8 Voting
Stock.
The
Stock Consideration to be paid to the Sellers under this Agreement and under
the
GPS Stock Purchase Agreement shall constitute stock of the Purchaser which
qualifies as voting stock pursuant to IRC §368(a)(1)(B).
5.9 No
Audit.
Neither
Purchaser nor any subsidiary thereof is under audit by any state or federal
taxing authority, and to the knowledge of Purchaser, no such audit is
threatened.
24
5.10 Net
Worth of Purchaser.
To the
knowledge of Purchaser, no facts or circumstances exist, which are not reflected
or referenced on Purchaser’s most recent Form 10-QSB, that would cause
Purchaser’s liabilities to exceed its assets.
5.11
Private
Offering.
True
and complete copies of that certain Stock
Purchase Agreement dated as of December 7, 2006, by and among Argan and the
Buyers identified therein (the “Private Offering Stock Purchase Agreement”), and
of that certain Escrow Agreement dated as of December 7, 2006, by and among
Argan, the Buyers identified therein and the escrow agent identified therein
(the “Private Offering Escrow Agreement”), entered into in connection with the
Private Offering have been provided to Sellers by Purchaser. The Private
Offering Stock Purchase Agreement and the Private Offering Escrow Agreement
constitute the only material documents entered into by Purchaser in connection
with the Private Offering.
SECTION
6
CONDITIONS
TO CLOSING FOR PURCHASER
Purchaser’s
obligation to consummate the transactions contemplated under this Agreement
and
under the
GPS
Stock Purchase Agreement (notwithstanding anything to the contrary contained
therein) shall
be
subject to fulfillment of all of the following conditions on or prior to the
Closing, any of which may be waived in writing by Purchaser:
6.1 Performance
of Agreements.
The
Sellers and the Companies shall have performed all agreements contained herein
and in the
GPS
Stock Purchase Agreement
and
required to be performed by them prior to or at Closing and all of the
representations and warranties made by them in this Agreement shall be true
and
correct as of the Closing Date.
6.2 Lack
of Material Liabilities.
None of
the Companies shall have incurred any material liability, direct or contingent
(as that term is ordinarily used), other than in the ordinary course of
business, not reflected on the Interim Financial Statements; including, but
not
limited to, any tax liability resulting from the transactions contemplated
hereby, or by the Companies’ compliance with any of the terms and conditions
hereof.
6.3 Financial
Statements.
Purchaser shall have received the Financial Statements other than the Closing
Date Financial Statements and Purchaser shall have accepted the Interim
Financial Statements.
6.4 Lack
of Defaults.
No
Event of Default (as defined in Section 12 hereof) and no event or condition
which, with notice or the lapse of time, or both, would constitute an Event
of
Default, shall exist.
6.5 Material
Adverse Change.
No
Material Adverse Change, and no event or circumstance that may result in a
Material Adverse Change shall have occurred between the date hereof and the
Closing Date or exist as of the Closing Date.
25
6.6 Employment
Agreements.
Xxxxxxx
and Xxxxxx and the Companies shall have executed those certain Employment
Agreements, copies of which are attached hereto as Exhibits 6.6(a) and 6.6(b).
6.7 Opinion
of Counsel.
Purchaser shall have received an opinion of counsel from the attorneys for
the
Companies, dated as of the Closing Date, in form and substance substantially
similar to that attached hereto as Exhibit 6.7.
6.8 Compliance
Certificate.
The
Sellers and the Companies shall have delivered to Purchaser the certificates,
attached hereto as Exhibit 6.8, executed by the Sellers and the respective
managers or Presidents, as the case may be, of the Companies dated as of the
Closing Date, certifying the fulfillment of the conditions specified in this
Section 6 and the accuracy of the representations and warranties contained
in
Section 4 hereof.
6.9 Term
Life Insurance.
The
Companies shall continue to have in place term life insurance policies on the
lives of each of Xxxxxxx and Xxxxxx, each of such policies (a) to name Purchaser
as sole beneficiary (or, to the extent either of such policies do not name
Purchaser as owner and as sole beneficiary at the Closing Date, Sellers or
the
Companies shall produce at Closing completed Transfer of Ownership and Change
of
Beneficiary forms, on the insurer’s standard form, signed by the owners of said
policies, and ready to be delivered to the insurer), (b) to be in form and
substance satisfactory to Purchaser, including having terms that expire in
2010,
and (c) to be in the amount of not less than Five Million Dollars ($5,000,000).
The existing policy on the life of Xxxxxx shall remain in full force and effect
for the duration of employment by the Companies, or any of them, of Xxxxxx,
or
until the expiration of the term of said policy, if sooner. The existing policy
on the life of Xxxxxxx shall remain in full force and effect for the duration
of
employment by the Companies, or any of them, of Xxxxxxx, or until the expiration
of the term of said policy, if sooner. Each of Xxxxxxx and Xxxxxx agrees to
take
whatever action is reasonably required by the insurer to maintain the policy
on
his life in full force and effect for such time. During the term of employment
of Xxxxxx the Companies shall pay the premium on policy insuring Canino’s life;
and during the term of employment of Xxxxxxx the Companies shall pay the premium
on the policy insuring Xxxxxxx’x life. Upon the termination of Canino’s
employment, each of the Companies shall assign to Xxxxxx any and all rights
which it may have in and to policy insuring his life for the value of the
prepaid unearned premium thereof. Upon the termination of Xxxxxxx’x employment,
each of the Companies shall assign to Xxxxxxx any and all rights which it may
have in and to policy insuring his life for the value of the prepaid unearned
premium thereof.
6.10 Registration
Rights Agreement.
The
Sellers and Purchaser shall have executed the Registration Rights Agreement,
a
copy of which is attached hereto as Exhibit 2.3.
6.11 [Intentionally
omitted.]
6.12 Release
from the Sellers; Payment of Amounts Owed by the Sellers.
The
Sellers shall execute and deliver to Purchaser, in a form satisfactory to
Purchaser’s counsel, a release of any claim that they, or either of them, may
have against any of the Companies for the repayment of any loan, claim for
unpaid compensation (except for accrued and unpaid compensation due to the
Sellers in the regular course of business in the event Closing occurs before
the
close of any regular pay period), claim for indemnification, claim for
management fee (except for any accrued and unpaid fee for management services,
or portion thereof, due to GDI under the Operating Agreement referenced in
Section 6.19 below relating to the period prior to Closing and payable in the
regular course of business), or otherwise. All amounts due to any of the
Companies from the Sellers, or either of them, shall have been paid in full.
26
6.13 Certificates;
Organizational Documents.
Purchaser shall have received copies of the following documents:
(a) a
certificate of the Manager or the President of each of the Companies, as the
case may be, dated the Closing Date and certifying (i) that attached thereto
is
a true and complete copy of the Organizational Documents of the Company as
in
effect on the date of such certification; and (ii) that attached thereto are
true and complete copies of resolutions adopted by the members or the Board
of
Directors of the Company, as the case may be, authorizing the execution,
delivery and performance of this Agreement and of the
GPS
Stock Purchase Agreement,
and
that all such resolutions are still in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by this
Agreement and by the
GPS
Stock Purchase Agreement;
(b) a
certificate of the President of GDI dated the Closing Date and certifying (i)
that attached thereto is a true and complete copy of the Organizational
Documents of GDI as in effect on the date of such certification and (ii)
certifying to the incumbent officers of GDI; and
(c)
such
additional supporting documents and other information with respect to the
operations and affairs of the Companies as Purchaser may reasonably
request.
All
such
documents described in (a), (b) and (c) shall be satisfactory in form and
substance to Purchaser and its counsel.
6.14 Corporate
Filings.
All
relevant documents required be filed with the appropriate governmental agencies
in connection with the transactions contemplated under this Agreement and under
the
GPS
Stock Purchase Agreement
shall be
filed and copies thereof shall be attached hereto as Exhibit 6.14.
6.15 [Intentionally
omitted.]
6.16 Release
of Buy-Sell Rights.
The
Sellers shall deliver to Purchaser a waiver and/or release of any rights that
they may have under any and all operating, stockholder or other agreements
by
and among the Sellers and/or any of the Companies which would in any way affect
the transactions contemplated by this Agreement and by the
GPS
Stock Purchase Agreement.
True
and complete copies of all such agreements are attached hereto as Exhibit
6.16.
27
6.17 Third-Party
Consents or Approvals.
Except
for any necessary third-party consents or approvals not obtained as of the
Closing Date, as disclosed on Schedule 6.17, the Sellers shall deliver to
Purchaser copies of all consents or approvals of, and evidence reasonably
satisfactory to Purchaser of all actions by, any third-party necessary for
the
valid execution, delivery and performance of this Agreement and of the
GPS
Stock Purchase Agreement
by any
of the Companies, including without limitation the consent of any party required
under any of the
Contracts listed or required to be listed on Schedule 4.11(a).
6.18 Escrow
Agreement.
The
Sellers, the Companies, Purchaser and all other parties thereto shall have
executed the Escrow Agreement, a copy of which is attached hereto as Exhibit
2.2(b).
6.19 Termination
of Operating Agreement.
That
certain Operating Agreement dated as of January 1, 2001, by and between GPS
and
GDI, providing for, among other things, the payment to GDI of a fee for
management services as described therein, will be terminated effective as of
Closing; any and all amounts payable thereunder, including without limitation
the fee for management services, will be paid and satisfied in full; and GDI
will release any claims it may have against GPS, including without limitation
any claims for indemnification under said Operating Agreement, all pursuant
to a
Termination Agreement in the form attached hereto as Exhibit 6.19.
SECTION
7
CONDITIONS
TO CLOSING FOR THE SELLERS
The
Sellers’ obligations to consummate the transactions contemplated under this
Agreement and under the
GPS
Stock Purchase Agreement (notwithstanding
anything to the contrary contained therein) shall
be
subject to fulfillment of all of the following conditions on or prior to
Closing, any of which may be waived in writing by Sellers:
7.1 Performance
of Agreements.
Purchaser shall have performed all agreements contained herein and in
the
GPS
Stock Purchase Agreement
and
required to be performed by it prior to or at Closing, and all of the
representations and warranties made by Purchaser in this Agreement shall be
true
and correct as of the Closing Date.
7.2 Compliance
Certificate.
Purchaser shall have delivered to the Sellers the certificate, attached hereto
as Exhibit 7.2, executed by its duly authorized officer, dated as of the Closing
Date, certifying the fulfillment of the conditions specified in this Section
7
and the accuracy of the representations and warranties contained in Section
5
hereof.
7.3 Registration
Rights Agreement.
The
Sellers and Purchaser shall have executed the Registration Rights Agreement,
a
copy of which is attached hereto as Exhibit 2.4.
28
7.4 Employment
Agreements.
The
Companies, Xxxxxxx and Xxxxxx shall have executed the Employment Agreements,
copies of which are attached hereto as Exhibits 6.6(a) and 6.6(b).
7.5 Term
Life Insurance.
Purchaser shall have assumed responsibility for payment of premiums of each
of
the life insurance policies described in Section 6.9 above up to the face value
of $5,000,000.
7.6 Employee
Stock Options.
Purchaser shall have resolved to take any and all actions necessary to grant
up
to 40,000 qualified or unqualified stock options to the employees listed, and
in
the amounts designated, in Schedule 7.6. All such stock options shall be granted
no later than at the first regularly scheduled meeting of the board of directors
of Purchaser after Closing, with the strike price of such options being Argan’s
stock price at the time of grant, but no lower than $4.50 per
share.
7.7 Escrow
Agreement.
Purchaser, the Sellers, the Companies, and all other parties thereto shall
have
executed the Escrow Agreement, a copy of which is attached hereto as Exhibit
2.2(b).
SECTION
8
TRANSACTIONS
PRIOR TO CLOSING
Between
the date of this Agreement and Closing, the managers, executive officers and
Board of Directors, as the case may be, of the Companies shall retain full
control of the management and business of the Companies. To enable Purchaser
to
prepare for settlement at Closing, Purchaser, the Sellers and the Companies
agree that between the date hereof and Closing:
8.1 Taxes.
The
Companies will promptly pay and discharge, or cause to be paid and discharged,
all federal, state and other governmental taxes, assessments, fees and charges
imposed upon it or on any of its property or assets and timely file any returns
and reports in connection with the foregoing.
8.2 Books
of Record and Account; Inspection.
Each of
the Companies will maintain at all times proper books of record and account
in
accordance with GAAP.
8.3 Insurance.
The
Companies will maintain in effect liability insurance, property insurance,
workers’ compensation insurance, and extended coverage insurance on their
personal property referenced in Section 4.15 above, and will cause the term
life
insurance policies on the lives of Xxxxxxx and Xxxxxx referenced in Section
6.9
above to remain in effect.
8.4 Entity
Existence.
Each of
the Companies shall at all times cause to be done every act necessary to
maintain and preserve its existence, rights, franchises, and certifications
in
the jurisdictions of its organization or incorporation and to remain qualified
as foreign limited liability company or corporation, as the case may be, in
every jurisdiction in which qualification is required.
29
8.5 Maintenance
of Properties.
Each of
the Companies shall maintain or cause to be maintained in good repair, working
order and condition all tangible properties required for its
business.
8.6 Organizational
Documents.
None of
the Companies will amend its Organizational Documents.
8.7 Issuances
of Ownership Interests.
Except
for the issuance of shares of common stock of GPS-Connecticut to the Other
Stockholders, none of the Companies will issue any of its Ownership Interests
to
any person or entity or grant any person or entity an option, warrant,
convertible security or any other right or agreement to acquire any membership
interests or shares of its capital stock, as the case may be, without the prior
written consent of Purchaser.
8.8 Declaration
of Distributions, etc.
None of
the Companies will (i) make, pay or declare any distributions or dividends
of
cash or property with respect to its issued Ownership Interests (except for
pre-closing distributions of cash to Xxxxxxx and Xxxxxx in their capacity as
the
sole members of GPS, provided same does not result in the failure of the
Companies to meet the Minimum Net Worth requirement as set forth in Section
2.2(c)); (ii) directly or indirectly redeem, repurchase or otherwise reacquire
any of its Ownership Interests; (iii) increase the salary or pay any bonuses
to
any management employees, officers, directors, managers or members of the
Company, if such action decreases the Net Worth of the Companies below the
Minimum Net Worth set forth in Section 2.2(c).
8.9 Material
Contracts.
None of
the Companies shall enter into, assume, renew or permit to be renewed (including
by not giving a permitted notice of termination) any contract, lease or
obligation outside the ordinary course of business. Except as expressly set
forth therein, none of the Companies shall modify, amend, terminate, waive
or
release any benefit or right under any employment agreement, or any other
material agreement to which any of the Companies is a party, without the prior
written consent of Purchaser, other than amendments or modifications to
agreements made in the regular course of business (e.g., change orders in
connection with any Project Contract).
SECTION
9
RESTRICTIVE
COVENANTS
9.1 Covenant
Not to Compete.
Except
as
authorized by Purchaser or by the terms of this Agreement, at all times during
the period of five (5) years from the Closing Date (the “Restrictive
Period”),
neither Xxxxxxx nor Xxxxxx shall, directly or indirectly, alone or with others,
engage in any competition with, or have any financial or ownership interest
in
any sole proprietorship, corporation, company, partnership, association, venture
or business or any other person or entity (whether as an employee, officer,
director, partner, manager, member, agent, security holder, creditor, consultant
or otherwise) that directly or indirectly (or through any affiliated entity)
competes with the business of the Companies; provided that such provision shall
not apply to (i) Xxxxxxx’x or Canino’s ownership of Argan Common Stock, (ii)
Xxxxxxx’x or Canino’s ownership of interests in entities which may develop, own
and operate (but not design or build) power plants, or (iii) or the acquisition
by Xxxxxxx or Xxxxxx, solely as an investment, of securities of any issuer
that
is registered under Section 12(b) or 12(g) of the Securities Exchange Act of
1934, as amended, and that are listed or admitted for trading on any United
States national securities exchange or that are quoted on the Nasdaq Stock
Market, or any similar system or automated dissemination of quotations of
securities prices in common use, so long as neither Xxxxxxx nor Xxxxxx controls,
acquires a controlling interest in or becomes a member of a group which
exercises direct or indirect control of, more than five percent (5%) of any
class of capital stock or other indicia of ownership of such issuer. For
purposes of clause (ii) of this Section 9.1 above, and for clause (b) of Section
9.3 below, “develop” or “development of” power plants shall mean the usual and
customary actions taken by an owner or potential owner of a power plant to
obtain licenses, permits or other governmental approvals required in order
to
own and operate a power plant, but not the designing or constructing of a
power plant.
30
9.2 Confidentiality.
The
Sellers shall not divulge, communicate, use to the detriment of the Companies
or
Purchaser, or for the benefit of any other person or persons, or misuse in
any
way, any Confidential Information (as hereinafter defined) pertaining to the
business of the Companies or Purchaser. Any Confidential Information or data
now
or hereafter acquired by the Sellers with respect to the business of the
Companies or Purchaser (which shall include, but not be limited to, information
concerning the Companies’ or Purchaser’s financial condition, prospects,
technology (including Business Property Rights), personnel information,
customers, suppliers, sources of leads and methods of doing business) shall
be
deemed a valuable, special and unique asset of the Companies or Purchaser,
as
the case may be, that is received by each of the Sellers in confidence and
as a
fiduciary, and each of the Sellers shall remain a fiduciary to Purchaser with
respect to all of such information. For purposes of this Agreement,
“Confidential
Information”
means
all trade secrets and information disclosed to the Sellers or known by the
Sellers as a consequence of or through the unique position of their employment
with any of the Companies or otherwise (including information conceived,
originated, discovered or developed by either of the Sellers and information
acquired by any of the Companies from others) prior to or after the date hereof,
and not generally or publicly known (other than as a result of unauthorized
disclosure by the Sellers), about any of the Companies, Purchaser or their
respective businesses. Notwithstanding the foregoing, nothing herein shall be
deemed to restrict Xxxxxxx from disclosing Confidential Information as required
to perform his duties under the Xxxxxxx Employment Agreement, or to restrict
Xxxxxx from disclosing Confidential Information as required to perform his
duties under the Xxxxxx Employment Agreement, or to the extent required by
law.
9.3 Non-Solicitation.
At all
times during the Restrictive Period, the Sellers shall not, directly or
indirectly, for themselves or for any other person, firm, corporation, company,
partnership, association, venture or business or any other person or entity:
(a) solicit for employment, employ or attempt to employ or enter into any
contractual arrangement with any employee or former employee of any of the
Companies or Purchaser (other than Xxxxxxx X. Xxxxxxx and Xxxx Xxxxxx); and/or
(b) call on or solicit any of the actual or targeted prospective customers
or clients, or any actual independent contractors, subcontractors, distributors
or suppliers, of any of the Companies (except in connection with the Sellers’
development, ownership and operation (but not the designing or building) of
power plants) or Purchaser on behalf of themselves or on behalf of any person
or
entity in connection with any business that competes with the business of the
Companies, nor shall either of the Sellers make known the names or addresses
or
other contact information of such actual or prospective customers or clients,
or
any such actual independent contractors, subcontractors, distributors or
suppliers, or any information relating in any manner to the Companies’ trade or
business relationships with such actual or prospective customers or clients,
or
any such actual independent contractors, subcontractors, distributors or
suppliers, other than in connection with the performance by Xxxxxxx of his
duties under the Xxxxxxx Employment Agreement and the performance by Xxxxxx
of
his duties under the Xxxxxx Employment Agreement.
31
9.4 Acknowledgment
by the Sellers.
Each of
the Sellers acknowledges and confirms that the restrictive covenants contained
in this Article 9 (including without limitation the length of the term of the
provisions of this Article 9) are required by Purchaser as an inducement in
enter into this Agreement and the
GPS
Stock Purchase Agreement
and to
complete the transactions contemplated hereby and thereby, are reasonably
necessary to protect the value of the Ownership Interests Purchaser is to
acquire under this Agreement and under the
GPS
Stock Purchase Agreement
and the
legitimate business interests of the Companies and Purchaser, and are not
overbroad, overlong, or unfair and are not the result of overreaching, duress
or
coercion of any kind. Each of the Sellers further acknowledges that the
restrictions contained in this Article 9 are intended to be, and shall be,
for
the benefit of and shall be enforceable by, Purchaser and its successors and
assigns. Each of the Sellers expressly agrees that upon any breach or violation
of the provisions of this Article 9, Purchaser shall be entitled, as a matter
of
right, in addition to any other rights or remedies it may have, to: (a)
temporary and/or permanent injunctive relief in any court of competent
jurisdiction as described in Section 9.7 hereof; and (b) such damages as are
provided at law or in equity. The existence of any claim or cause of action
against any of the Companies or Purchaser or their respective affiliates,
whether predicated upon this Agreement, the
GPS
Stock Purchase Agreement
or
otherwise, shall not constitute a defense to the enforcement of the restrictions
contained in this Article 9.
9.5 Reformation
by Court.
In the
event that a court of competent jurisdiction shall determine that any provision
of this Article 9 is invalid or more restrictive than permitted under the
governing law of such jurisdiction, then only as to enforcement of this Article
9 within the jurisdiction of such court, such provision shall be interpreted
or
reformed and enforced as if it provided for the maximum restriction permitted
under such governing law.
9.6 Extension
of Time.
If
either of the Sellers shall be in violation of any provision of this Article
9,
then each time limitation set forth in this Article 9 shall be extended for
a
period of time equal to the period of time during which such violation or
violations occur. If Purchaser seeks injunctive relief from such violation
in
any court, then the covenants set forth in this Article 9 shall be extended
for
a period of time equal to the pendency of such proceeding including all appeals
by either of the Sellers.
9.7 Injunction.
It is
recognized and hereby acknowledged by the parties hereto that a breach by either
of the Sellers of any of the covenants contained in Article 9 of this Agreement
will cause irreparable harm and damage to the Companies or Purchaser, as the
case may be, the monetary amount of which may be virtually impossible to
ascertain. As a result, each of the Sellers recognizes and hereby acknowledges
that the Companies or Purchaser shall be entitled to an injunction from any
court of competent jurisdiction enjoining and restraining any violation of
any
or all of the covenants contained in Article 9 of this Agreement by either
of
the Sellers or any of his affiliates, associates, partners or agents, either
directly or indirectly, and that such right to injunction shall be cumulative
and in addition to whatever other remedies the Companies or Purchaser may
possess.
32
9.8 Survival.
The
provisions of this Article 9 shall survive the Closing.
SECTION
10
INDEMNIFICATION
Subject
to the conditions, limitations and terms as set forth in this Section 10
(including without limitation the Sellers’ Indemnification Threshold, the
Sellers’ Indemnification Cap, and the time limitations hereinafter set forth),
each of the
Sellers shall indemnify, defend (with counsel acceptable to the indemnified
party) and hold harmless Purchaser and its subsidiaries and affiliates, and
their respective directors, officers, shareholders, members, managers, agents,
employees, representatives, successors and assigns (each in its capacity as
an
indemnified party, a “Buyer
Indemnitee”)
from
and against and in respect to the following (in addition to any losses otherwise
specifically indemnified against in this Agreement):
10.1 Indemnification
by the Sellers.
(a) Breach.
Subject
to the provisions of this Section 10 and except as otherwise more specifically
set forth herein, each of the Sellers hereby covenants and agrees to indemnify,
defend, protect, and hold harmless each Buyer Indemnitee at all times from
and
after the date of this Agreement from and against all Adverse Consequences
suffered or incurred by such Buyer Indemnitee (i) as a result of or incident
to
any material breach of any representation or warranty of the Companies or the
Sellers set forth in Section 4 of this Agreement (including without limitation
representations or warranties with respect to income and other tax matters
as
set forth in Section 4.10), (ii) as a result of or incident to any material
breach or nonfulfillment by the Companies or the Sellers of, or any
noncompliance by any of the Companies or either of the Sellers with, any
covenant, agreement, or obligation contained herein or in any certificate
delivered in connection herewith, or (iii) resulting directly from the material
inaccuracy of any list, certificate or other instrument delivered by or on
behalf of the Sellers or the Companies in connection herewith.
(b) Environmental
Indemnification.
The
Sellers hereby covenants and agrees to indemnify and defend each Buyer
Indemnitee and hold each Buyer Indemnitee harmless from and against any and
all
damages, losses, liabilities, costs and expenses of removal, relocation,
elimination, remediation or encapsulation of any Hazardous Materials,
obligations, penalties, fines, impositions, fees, levies, lien removal or
bonding costs, claims, actions, causes of action, injuries, administrative
orders, consent agreements and orders, litigation, demands, defenses, judgments,
suits, proceedings, disbursements or expenses (including without limitation,
attorney’s and experts’ reasonable fees and disbursements) of any kind and
nature whatsoever resulting from the operation of the Companies business as
of
the Closing Date: (i) which (A) is imposed upon, or incurred by, a Buyer
Indemnitee by reason of, relating to or arising out of the violation by any
of
the Companies prior to the Closing of any Environmental, Health, and Safety
Laws, (B) arises out of the discharge, dispersal, release, storage, treatment,
generation, disposal or escape of any Hazardous Materials, on or from any
Project Site as of the Closing Date, or (C) arises out of the use,
specification, or inclusion of any product, material or process containing
Hazardous Materials, or the failure to detect the existence or proportion of
Hazardous Materials in the soil, air, surface water or groundwater, or the
performance or failure to perform the abatement of any Hazardous Materials
source as of the Closing Date or the replacement or removal of any soil, water,
surface water, or groundwater containing Hazardous Materials; and/or (ii) is
imposed upon, or incurred by, a Buyer Indemnitee by reason of or relating to
any
material breach, act, omission or misrepresentation contained in Section 4.20.
33
(c) Income
Tax Matters.
Xxxxxx
and Xxxxxxx severally, but not jointly, shall indemnify, defend and hold
harmless each Buyer Indemnitee from and against all Adverse Consequences
incurred by any Buyer Indemnitee as a result of or incident to any income taxes
imposed on any Buyer Indemnitee or for which any Buyer Indemnitee may otherwise
be liable by law or regulation (including, without limitation, the provisions
of
Treasury Regulation Section 1.1502-6) or contract, for any taxable year or
period that ends on or before the Closing Date. The Sellers and the Companies
agree that the Companies will take all actions, including making appropriate
elections under the Code, to terminate the Companies’ tax years as of the
Closing Date and to report and make all allocations of tax items based upon
such
short tax years.
(i) The
Sellers shall furnish to Purchaser copies of the federal, state, and local
tax
returns of each of the Companies for the period ending on the Closing Date
not
later than ten (10) Business Days prior to the due date(s) of the filing of
such
returns, and shall obtain the consent of Purchaser before filing such returns,
which consent shall not be unreasonably withheld or delayed beyond the earlier
of (i) ten (10) Business Days after Purchaser’s receipt of said copies, or (ii)
said due date(s).
(ii) The
Sellers shall have the sole right to represent the interests of any Buyer
Indemnitee in any tax audit or administrative or court proceeding relating
to
any taxable period ending on or before the Closing Date, and to compromise,
settle, or contest any tax claims in connection therewith in their sole
discretion, provided that the Sellers shall provide Purchaser with written
notice of their intent to exercise their rights hereunder. Purchaser shall
have
the right, at its expense, to join the Sellers in any such defense.
(iii) The
Sellers shall provide Purchaser with written notice of any claim or assertion
by
the Internal Revenue Service, or any other taxing authority, of any disallowance
of any S corporation election by any of the Companies relating to any period
prior to the Closing Date immediately upon learning of any such claim or
assertion.
34
(d) Broker
Fee.
The
Sellers hereby covenant and agree to indemnify each Buyer Indemnitee from any
claim made by a broker, finder, agent or other intermediary against any Buyer
Indemnitee or any of the Companies after Closing in connection with the
negotiation or execution of this Agreement or of the
GPS
Stock Purchase Agreement
or the
consummation of the transactions contemplated hereby or thereby.
(e) Costs
and Expenses.
Except
as otherwise provided in this Agreement, all amounts indemnified pursuant to
this Section 10 shall include all reasonable costs and expenses of the Buyer
Indemnitee, including, but not limited to, the reasonable costs of any actions,
reasonable attorneys’ fees, and other reasonable expenses necessary for Buyer
Indemnitees to enforce their rights to indemnification granted hereunder,
provided they are the prevailing party in any such enforcement
actions.
(f) Termination
of the Sellers’ Obligations.
The
Sellers’ obligations to indemnify any Buyer Indemnitee, or to contribute to any
party indemnifying any Buyer Indemnitee, pursuant to this Section 10, shall
expire one
(1)
year from the Closing Date, except as to those involving (i) income tax matters,
but only with respect to federal, state and local income tax (“Income Tax
Matters”), which obligations shall expire sixty (60) days after the expiration
date of the applicable statute of limitations for any such income tax claim,
(ii) any claim for breach of the Sellers’ representations in Sections 4.3 and
4.21 (“title matters”), which obligations shall expire sixty (60) days after the
expiration date of the applicable statute of limitations for any such claim,
and
(iii) actual fraud or intentional non-disclosure by the Sellers, which
obligations shall expire sixty (60) days after the expiration date of the
applicable statute of limitations for any such claim under Delaware law;
provided, however, that if a claim is asserted prior to the expiration of any
of
such indemnification periods, then the obligation to indemnify or to contribute
shall be extended until the final disposition or termination of such claim.
10.2 No
Circular Recovery.
Each of
the Sellers hereby agrees that he will not make any claim for indemnification
against Purchaser by reason of the fact that said Seller was a director,
officer, employee, agent or other representative of any of the Companies or
any
of its subsidiaries (whether such claim is for Adverse Consequences of any
kind
or otherwise and whether such claim is pursuant to any statute, charter, by-law,
contractual obligation or otherwise) with respect to any claim for
indemnification brought by Purchaser, or its subsidiaries and affiliates,
against said Seller.
10.3 Sellers’
Indemnification Threshold; Cap.
Notwithstanding anything in this Agreement to the contrary, (a) the Sellers
shall not have any indemnification payment obligations hereunder unless and
until all Adverse Consequences suffered or incurred by any or all of the Buyer
Indemnities resulting from any untrue representation, breach of warranty,
nonfulfillment of any covenants, or other indemnified matter exceed the Sellers’
Indemnification Threshold (as defined hereinafter), at which point all amounts
to be paid hereunder (including amounts under the Sellers’ Indemnification
Threshold) shall be due and owing; and (b) the maximum aggregate liability
of
the Sellers to the Buyer Indemnitees under this Agreement (the “Sellers’
Indemnification Cap”) shall be the Escrowed Stock Consideration. For purposes of
this Section 10.3, the “Sellers’ Indemnification Threshold” shall mean One
Hundred Fifty Thousand Dollars ($150,000) in the aggregate. The foregoing
limitations shall not apply to indemnification obligations arising from (i)
claims relating to Income Tax Matters; (ii) claims relating to title matters;
or
(iv) subject to the Disclaimer set forth in Section 13.20 of this Agreement,
actual fraud or intentional non-disclosure by the Sellers.
35
10.4 Release
of Excess Escrowed Stock.
In the
event that, as of the expiration of the period during which the Escrowed Stock
Consideration is to be held in escrow pursuant to the Escrow Agreement, there
is
a dispute as to a matter for which the Buyer Indemnities seek indemnification,
and the amount in dispute is more than the Sellers’ Indemnification Threshold,
but less than the maximum aggregate liability of the Sellers as set forth in
Section 10.3 hereof, then, in accordance with the terms of the Escrow Agreement,
the Escrow Agent shall release from escrow and deliver to the Sellers that
amount of the Escrowed Stock Consideration which is in excess of one hundred
twenty percent (120%) of the Buyer Indemnities’ indemnification
claim.
SECTION
11
TERMINATION
11.1 Termination
by Purchaser.
This
Agreement and the GPS Stock Purchase Agreement (notwithstanding anything to
the
contrary contained therein) may be terminated by Purchaser, on or before the
Closing Date, upon the occurrence of the following:
(a) If
any of
the material conditions specified in Section 6 shall not have been met prior
to
the Closing Date.
(b) If
an
Event of Default, as defined in Section 12, has occurred, and has not been
cured
during any applicable cure period.
11.2 Termination
by Sellers.
This
Agreement and the GPS Stock Purchase Agreement (notwithstanding anything to
the
contrary contained therein) may be terminated by the Sellers, on or before
the
Closing Date, if any of the conditions specified in Section 5 shall not have
been met prior to Closing.
SECTION
12
DEFAULT
12.1 Events
of Default.
It
shall be considered an Event of Default if any one or more of the following
events shall occur:
(a) If
any
statement, certificate, report, representation or warranty of a material nature
made or furnished by the Sellers or any of the Companies under this Agreement
or
under the
GPS
Stock Purchase Agreement
shall
prove to have been false or erroneous in any material respect.
36
(b) The
occurrence of any event of default under any contract, financing agreement,
note, lease, mortgage, security agreement, factoring agreement or any other
obligation of any of the Companies the result of which will have a material
adverse effect on the Company, unless any such event of default shall be timely
cured under any applicable cure provision or waived by the person to whom or
to
which the Company is obligated or indebted.
12.2 Termination
by Reason of Event of Default or Failure of a Condition
Precedent.
In the
event that prior to Closing an Event of Default shall occur by the Sellers
or
Purchaser, or if any of the representations or warranties of the parties, as
set
forth in Sections 4 or 5 above, are breached, and such breach is not waived
by
the appropriate party, or if any of the conditions precedent to Closing as
set
forth in Sections 6 or 7 above, are not met and the same are not waived by
the
appropriate party, then the non-breaching party’s sole remedy shall be to
terminate this Agreement and the
GPS
Stock Purchase Agreement,
in
which case no party shall be liable to any other party for any claims or
damages.
12.3 Waiver
by Purchaser.
Any
failure by Purchaser to insist upon strict performance by the Sellers or any
of
the Companies of any of the terms and provisions of this Agreement or of
the
GPS
Stock Purchase Agreement
shall
not be deemed to be a waiver of any of the terms and conditions hereof or
thereof and Purchaser shall have the right thereafter to insist upon strict
performance thereof by the Sellers or the Companies.
SECTION
13
MISCELLANEOUS
13.1 Costs.
Each
party shall pay its own expenses incident to the transaction contemplated
hereby, including fees and expenses of their attorneys, accountants, appraisers
or consultants, whether or not those transactions are consummated at Closing,
subject to the indemnification and termination provisions hereof.
13.2 Attorneys
Fees.
If any
party initiates any litigation against any other party involving this Agreement,
the prevailing party in such action shall be entitled to receive reimbursement
from the other party for all reasonable attorneys’ fees and other costs and
expenses incurred by the prevailing party in respect of that litigation,
including any appeal, and such reimbursement may be included in the judgment
or
final order issued in that proceeding.
13.3 Relationships
to Other Agreements.
In the
event of a conflict between any of the provisions of this Agreement and any
other agreement relating to this transaction between the Sellers, the Companies
and Purchaser, including without limitation the GPS Stock Purchase Agreement,
the provisions of this Agreement shall control.
13.4 Titles
and Captions.
All
articles or section titles or captions in this Agreement are for convenience
of
reference and shall in no way define, limit, extend or describe the scope or
intent of provisions herein.
37
13.5 Exhibits.
The
Exhibits and Schedules referred to herein are hereby made a part
hereof.
13.6 Applicable
Law.
This
Agreement is to be governed by, and construed, interpreted, and enforced in
accordance with, the laws of the State of Delaware.
13.7 Binding
Effect and Assignment.
This
Agreement shall be binding on and inure to the benefit of the parties hereto
and
their respective heirs, personal representative, affiliates, successors and
assigns. Notwithstanding the foregoing, neither the Companies nor Purchaser
shall have any right to assign any of its or their rights or obligations under
this Agreement without the prior written consent of the other parties hereto;
provided, however, that Purchaser shall be permitted to assign to Bank of
America, N.A. (together with its successors and assigns, the "Bank"), all of
Purchaser's rights, title and interest in, to and under this Agreement,
including all rights of Purchaser to indemnification from the Sellers, as
collateral security for the obligations of Purchaser to the Bank.
13.8 Notices.
All
notices, consents, waivers, and other communications under this Agreement must
be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by facsimile (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if
sent by a nationally recognized overnight delivery service (receipt requested),
in each case to the appropriate addresses and facsimile numbers set forth below
(or to such other addresses and facsimile numbers as a party may designate
by
notice to the other parties):
If
the Companies then:
|
Gemma
Power Systems, LLC
|
0000
Xxxx Xxxxxx
|
|
Xxxxxxxxxxx,
Xxxxxxxxxxx 00000
|
|
Attention:
Xx. Xxxxxxx X. Xxxxxxx, Xx. and
|
|
Xxxx
X. Xxxxxx
|
|
Fax:
(000) 000-0000
|
|
If
Xxxxxxx then:
|
Xx.
Xxxxxxx X. Xxxxxxx, Xx.
|
c/o
Gemma Power Systems, LLC
|
|
0000
Xxxx Xxxxxx
|
|
Xxxxxxxxxxx,
Xxxxxxxxxxx 00000
|
|
Fax:
(000) 000-0000
|
|
If
Xxxxxx then:
|
Xx.
Xxxx X. Xxxxxx
|
c/o
Gemma Power Systems, LLC
|
|
0000
Xxxx Xxxxxx
|
|
Xxxxxxxxxxx,
Xxxxxxxxxxx 00000
|
|
Fax:
(000) 000-0000
|
38
Counsel
for the Companies, Xxxxxxx and
|
|
Xxxxxx:
|
Xxxx
X. Xxxx
|
Xxxxxx,
X’Xxxxxx, X’Xxxxxxx & Xxxx, P.C.
|
|
000
Xxxxxxxx Xxxxxx
|
|
Xxxxxxxx,
Xxxxxxxxxxx 00000
|
|
Fax:
(000) 000-0000
|
|
If
Purchaser then:
|
Argan,
Inc.
|
Xxx
Xxxxxx Xxxxxx, Xxxxx 000
|
|
Xxxxxxxxx,
Xxxxxxxx 00000
|
|
Attn:
Xxxxxx Xxxxxx
|
|
Fax:
(000) 000-0000
|
|
Counsel
for Purchaser:
|
Xxxxx
X. Law
|
Xxxxxx
Law Xxxxxxxx Xxxxxxx
|
|
&
Salans, PC
|
|
0000
X Xxxxxx, X.X.
|
|
Xxxxx
000
|
|
Xxxxxxxxxx,
X.X. 00000
|
|
Fax:
202/000-0000
|
13.9 Severability.
Inapplicability or unenforceability of any provision of this Agreement shall
not
impair the operation or validity of any other provision hereof. If any provision
shall be declared inapplicable or unenforceable, there shall be added
automatically as part of this Agreement a provision as similar in terms to
such
inapplicable or unenforceable provision as may be possible and be legal, valid
and enforceable.
13.10 Acceptance
or Approval.
By
accepting all or approving anything required to be observed, performed, or
fulfilled, or to be given to Purchaser pursuant to this Agreement, including,
but not limited to, any certificate, balance sheet, statement of profit or
loss
or other financial statement, or insurance policy, Purchaser shall not be deemed
to have accepted or approved the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision, or condition thereof as to third
parties.
13.11 Survival.
All
covenants, representations, and warranties made by the Sellers and Purchaser
in
this Agreement shall survive the Closing hereunder for a period of one (1)
year,
except as otherwise specifically provided in this Agreement.
13.12 Entire
Agreement.
This
Agreement, including all Exhibits and Schedules, constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof,
and
supersedes all prior agreements and understandings pertaining thereto. No
covenant, representation, or condition not expressed in this Agreement shall
affect or be deemed to interpret, change or restrict the express provisions
hereof and no amendments hereto shall be valid unless made in writing and signed
by all parties hereto.
39
13.13 Counterparts.
This
Agreement may be executed in any number of counterparts, all of which together
shall constitute one instrument.
13.14 Securities
Matters.
By
executing this Agreement, Purchaser acknowledges that: (i) Purchaser has been
advised that the GPS Membership Interests have not been and will not have been
registered under the Act or the applicable securities laws of any state, that
the Sellers in transferring such interests to Purchaser will be relying, if
applicable, upon the exemption from such registration requirements contained
in
Section 4(1) or 4(2) of the Act as a transaction by a person other than an
issuer, underwriter or dealer and the applicable state exemption; (ii) the
GPS
Membership Interests may be “restricted” as that term is used in Rule 144 under
the Act as a consequence of which Purchaser may not be able to sell the
interests unless such interests are first registered under the Act and any
applicable state securities laws or unless an exemption from such registration
is, in the opinion of counsel, available; (iii) the GPS Membership Interests
will be acquired by Purchaser for purposes other than “distribution” as that
term is used in Section 2(11) of the Act, and (iv) Purchaser will execute,
if
Sellers so request, an appropriate letter affirming that its intention with
respect to the proposed acquisition of the GPS Membership Interests is that
such
acquisition be for investment purposes only and not with a view toward resale
or
distribution thereof.
13.15 Preparation
and Filing of SEC Documents.
If and
whenever, as a result of the transaction contemplated hereunder, Purchaser
is
under an obligation to provide financial information to, or prepare a filing
of
any kind with, the SEC, the Sellers shall assist Purchaser in preparing any
audited financial statements required by the SEC for this purpose. The cost
of
preparing any such financial statements shall be borne by
Purchaser.
13.16 Further
Assurances.
From
time to time at or after the Closing, upon request, the parties each will
execute and deliver such other instruments of conveyance, assignment, transfer
and delivery and take such actions as the other party reasonably may request
in
order to consummate, complete and carry out the purposes of the transactions
contemplated hereby.
13.17 Tag
Along Rights.
13.17.1
In the event that one or more holders (the "Tag Along Holders") of common stock
of Purchaser (including any successor thereof) shall transfer (or agree to
transfer) more than fifty percent (50%) of the outstanding common stock of
Purchaser, then Purchaser shall use commercially reasonable efforts to include
the Sellers (including any assignees or successors thereof), to the extent
that
they then hold shares of common stock of Purchaser, in said sale upon the same
terms and subject to the same conditions as apply to the Tag Along Holders.
13.17.2
In addition, in the event Purchaser proposes any underwritten secondary offering
of its common stock, Purchaser will give prior written notice thereof to each
Seller offering them the opportunity to include in any such offering such number
of shares as they may request in writing not later than ten (10) days before
such filing. Upon receipt by Purchaser of any such request, Purchaser shall
use
reasonable efforts to cause the managing underwriter to include such shares
in
such secondary offering.
40
13.18 Access
to Company Records.
From
and after the Closing, Purchaser shall allow Griffin, Canino, and their
respective authorized agents, access to the Companies’ books and records in the
event that the same is necessary in connection with any tax audits or other
indemnifiable claims, which audit or indemnifiable claim arose with respect
to
the Sellers’ period of ownership of the GPS Membership Interests prior to the
Closing Date.
13.19
Non-Reliance.
Purchaser warrants and represents that it has consulted with its attorneys
regarding the effect of the Indemnification limitations and the Disclaimer
set
forth in Article X and Section 13.20, respectively, and that Purchaser has
executed this Agreement fully aware of their content, purpose and effect, based
upon its sole judgment, belief and knowledge, and after consulting with its
own
attorneys, and that Purchaser is not relying on any representations or
statements made by any other party to this Agreement, or by anyone representing
any other party to this Agreement. Purchaser acknowledges that neither the
Sellers, nor any agent or attorney of the Sellers, has made any promise,
representation or warranty whatsoever, express or implied, not contained herein
concerning the subject matters hereof to induce Purchaser to execute this
Agreement, and acknowledges that Purchaser has not executed this Agreement
in
reliance upon any such promise, representation or warranty. Purchaser further
acknowledges and agrees that it has been represented by independent counsel
of
its own choice throughout all negotiations which have preceded this Agreement,
and that it has entered into and executed this Agreement after consultation
with
said independent counsel. This Agreement is executed voluntarily by Purchaser
without any duress or undue influence.
13.20
Disclaimer.
In
connection with Purchaser’s investigation of the Companies, Purchaser may have
received from or on behalf of the Sellers certain projections, including
projected statements of operating revenues, income and estimates of percentage
of completion from operations of the Companies, which projections are included
in the Interim Financial Statements and will be included in the Closing Date
Financial Statements. These statements include the costs incurred to the date
(as set forth in said statements), the total costs estimated by management
as
necessary to complete each of said construction jobs, management’s estimate of
the contract value and the profit margin based upon those assumptions. Purchaser
acknowledges that there are uncertainties inherent in attempting to make such
estimates, projections and other forecasts and plans, that Purchaser is familiar
with such uncertainties, that Purchaser is taking full responsibility for making
its own evaluation of the adequacy and accuracy of all estimates, projections
and other forecasts and plans so furnished to it (including the reasonableness
of the assumptions underlying them), and that Purchaser has received no
representation or warranty from any of the Sellers with respect to such
estimates, projections and other forecasts and plans (including the
reasonableness of the assumptions underlying them). All projections of financial
or operating results are based on estimates made by the Sellers and there can
be
no assurance that such results will be realized. Each of the Sellers expressly
disclaims any and all liability that may be based upon errors in management’s
judgment, and Purchaser agrees not to pursue any action, claim or cause of
action against Sellers (including any claim for indemnification or claim based
upon fraud) which is based wholly or partially upon the inaccuracy or inadequacy
of said estimates, projections and/or forecasts (including the reasonableness
of
management’s assumptions underlying them).
41
SECTION
14
ESCROW
PROVISIONS
14.1 Each
of
the parties to this Agreement recognizes and acknowledges that the Escrow Agent
is serving solely as an accommodation to the parties, and each of them agrees
that the Escrow Agent shall not be liable to any of the parties for any error
of
judgment, mistake, or act or omission hereunder, or any matter or thing arising
out of its conduct hereunder, except for the Escrow Agent's willful misfeasance
or gross negligence. The Escrow Agent shall be entitled to rely upon the
authenticity of any signature, and the genuineness and/or validity of any
writing received by the Escrow Agent pursuant to or otherwise relating to this
Agreement.
14.2 The
Escrow Agent is acting, and may continue to act, as counsel to Purchaser in
connection with the transactions contemplated by this Agreement.
14.3 Each
of
the parties jointly and severally agrees to indemnify and hold harmless the
Escrow Agent from and against any and all costs, claims, damages, or expenses
(including, without limitation, reasonable attorneys’ fees and disbursements,
whether paid to retained attorneys or representing the fair value of legal
services rendered to itself) that may be incurred by the Escrow Agent acting
under this Agreement (including, without limitation, any costs incurred by
the
Escrow Agent pursuant to Section 14.4 hereof) or to which the Escrow Agent
may
be put in connection with the Escrow Agent acting under this Agreement, except
for costs, claims, or damages arising out of the Escrow Agent’s willful
misfeasance or gross negligence.
14.4 In
the
event that: (a) the Escrow Agent shall receive contrary instructions from the
parties; or (b) any dispute shall arise as to any matter arising under this
Agreement; or (c) there shall be any uncertainty as to the meaning or
applicability of any of the provisions hereof, or the Escrow Agent’s duties,
rights or responsibilities hereunder, or any written instructions received
by
the Escrow Agent pursuant hereto, the Escrow Agent shall not itself determine
such dispute, controversy or uncertainty, but shall either (i) continue to
hold
the documents and other items placed with it pursuant to the terms of this
Agreement until otherwise directed in writing by joint instruction of the
parties, or by a final non-appealable court order, or (ii) at its option, at
any
time that such dispute, controversy or uncertainty continues, deposit said
documents and other items into any court having appropriate jurisdiction.
14.5 Upon
the
delivery or disposition of the documents and other items placed with it in
accordance with the provisions of this Agreement, the Escrow Agent shall
thereupon be relieved of, and discharged and released from, any and all
liability hereunder and with respect to said documents and other items and
Escrow Agent’s obligations under this Agreement shall be deemed to have been
completed.
[Signatures
on following pages]
42
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and
year first above written.
ATTEST: |
ARGAN, INC.
|
||
/s/ Xxxxxxxx Xxxxxx |
By:
|
/s/ Xxxxxx Xxxxxx | |
|
Name:
Xxxxxx Xxxxxx
Title:
CFO
|
||
|
|||
ATTEST: | GEMMA POWER SYSTEMS, LLC | ||
By:
|
/s/ Xxxxxxx X. Xxxxxxx, Xx. | ||
|
Xxxxxxx X. Xxxxxxx, Xx., Manager |
||
ATTEST: | GEMMA POWER, INC. | ||
By: | /s/ Xxxxxxx X. Xxxxxxx, Xx. | ||
|
Xxxxxxx
X. Xxxxxxx, Xx., President
|
||
ATTEST: | GEMMA
POWER SYSTEMS
CALIFORNIA, INC.
|
||
By: | /s/ Xxxxxxx X. Xxxxxxx, Xx. | ||
|
Xxxxxxx
X. Xxxxxxx, Xx., President
|
[Signatures
continue on following page]
43
WITNESS:
|
|||||||
By:
|
/s/ Xxxxxxx X. Xxxxxxx, Xx. | ||||||
|
XXXXXXX X. XXXXXXX, XX. |
||||||
WITNESS: | |||||||
/s/ Xxxx X. Xxxxxx | |||||||
|
XXXX X. XXXXXX |
44
Escrow
Agent hereby executes the foregoing Agreement for the sole purpose of agreeing
to the provisions of Section 3.2 thereof, subject to the provisions of Section
14 thereof.
ESCROW
AGENT:
XXXXXX
LAW XXXXXXXX XXXXXXX & SALANS, P.C.
By: | /s/ Xxxxx X. Law |
Xxxxx X. Law, Vice President |
45