Exhibit 4.2
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Escrow Agreement") is dated as of the 4th day
of May, 2006, by and among Argan, Inc., a Delaware corporation (the "Company"),
the purchasers identified on Schedule A attached hereto (each a "Buyer", and
collectively the "Buyers") and Xxxxxxxx & Xxxx LLP (the "Escrow Agent").
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Purchase Agreement (defined below)
P R E M I S E S:
WHEREAS, the Company and the Buyers are parties to that certain Stock
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),
pursuant to which the Company is offering, and the Buyers are purchasing (the
"Transaction"), an aggregate of 760,000 shares (the "Shares") of the Company's
common stock, $.15 par value, at a purchase price of $2.50 per share (the "Share
Consideration"); and
WHEREAS, pursuant to the terms of the Purchase Agreement, the Company and
the Buyers shall deliver to the Escrow Agent the Shares and the Share
Consideration, respectively (collectively, the "Escrow Amount"), to provide for
certain contingencies as set forth herein.
A G R E E M E N T S:
NOW, THEREFORE, in consideration of the above premises and of the
covenants and agreements contained herein, the Company, the Buyers and the
Escrow Agent agree as follows:
Section 1
Escrow Fund
1.1 Delivery. Simultaneously with the execution and delivery of this
Agreement, (i) the Company shall deliver to the Escrow Agent written
instructions to its transfer agent instructing it to issue a stock certificate
in the name of each Buyer for the respective number of Shares issued to such
Buyer as set forth on Schedule A attached hereto (collectively, "Certificates"),
pursuant to the Purchase Agreement, and (ii) each Buyer shall deliver to the
Escrow Agent such Buyer's respective portion of the Share Consideration for the
number of Shares purchased by such Buyer as set forth on Schedule A attached
hereto, pursuant to the Purchase Agreement. Upon receipt of the Escrow Amount by
the Escrow Agent, the Escrow Amount held by the Escrow Agent pursuant to this
Escrow Agreement shall be deemed to comprise the "Escrow Fund". The Escrow Agent
agrees to hold the Escrow Amount as provided hereunder until the Escrow Amount
is released from escrow in accordance with the provisions of Section 2 hereof.
Section 2
Disbursement of Escrow Fund
The Escrow Agent agrees to hold the Escrow Amount as provided hereunder
until the Escrow Amount is released as follows:
2.1 Disbursement of Escrow Amount. The Escrow Agent shall release the
Escrow Amount in accordance with this Paragraph 2.1 upon the happening of
following events (collectively, "Release Conditions"):
A. Xxxxx Xxxxxx shall have executed and delivered to the Company a
subordination agreement in form and substance reasonably
satisfactory to the Company; and
B. Xxxxx Xxxxxx shall have executed and delivered to the Company a
letter of representation with respect to the audit of the Company
for the Company's fiscal year ended January 31, 2006.
The Escrow Agent shall release the Escrow Amount within two (2) business days of
Escrow Agent's receipt of a written notice executed by the Company stating that
the Release Conditions have been fulfilled and that the Escrow Amount should be
disbursed from the Escrow Fund to the Company and the Buyers pursuant to this
Paragraph 2.1. Upon the Escrow Agent's receipt of a Release Notice, the Escrow
Agent shall disburse the Escrow Amount as follows:
1. The Escrow Agent shall disburse to each Buyer the Certificate issued
to such Buyer; and
2. The Escrow Agent shall disburse to the Company the Share
Consideration.
2.2 Expiration of Escrow Period. In the event that the Release Conditions
are not fulfilled by June 1, 2006, unless otherwise agreed in writing by the
parties, the Transaction shall terminate and the Escrow Agent, within two
business (2) days of such termination date, shall return (i) the Certificates to
the Company, and (ii) the Share Consideration (without interest thereon) to the
Buyers in their respective amounts.
2.3 Dispute Resolution. In the event that any dispute arises with respect
to this Agreement or in the event that any claim is made with respect to the
Escrow Fund, then the Escrow Agent, upon receipt of written notice of such
dispute, is authorized and directed to retain in its possession without
liability to any person or party, all of the Escrow Amount until such dispute
shall have been settled either by the mutual agreement of the parties involved
or by a final, unappealable order, decree or judgment of a court of competent
jurisdiction.
Section 3
Escrow Agent
3.1 Appointment and Duties. The Company and each Buyer hereby appoints the
Escrow Agent to serve hereunder, and the Escrow Agent hereby agrees to perform
all duties which are expressly set forth in this Escrow Agreement.
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3.2 Acknowledgement. The Company and each Buyer acknowledges that the
Escrow Agent acts as counsel to the Company and is likely to continue to act in
such capacity in any matter not in conflict with its duties as the Escrow Agent
hereunder.
3.3 Indemnification. Each Buyer severally but not jointly, and the
Company, jointly and severally with each Buyer, will indemnify and defend the
Escrow Agent, and hold it harmless from any and all claims, regardless of
nature, arising out of or because of this Escrow Agreement, and exonerate the
Escrow Agent from any liability in connection with its discharge of obligations
pursuant to this Escrow Agreement in the absence of fraud or gross negligence.
3.4 Resignation. The Escrow Agent may resign at any time upon giving the
other parties hereto ten (10) days prior written notice of resignation. In such
event, the successor shall be such person, firm or corporation as shall be
mutually selected by the Company and the Buyers. It is understood and agreed
that such resignation shall not be effective until a successor agrees to act
hereunder; provided, however, if no successor is appointed and acting hereunder
within ten (10) days after such notice is given, the Escrow Agent may pay and
deliver the Escrow Fund to a court as part of an interpleader or like action.
3.5 Payment of Fees. The Company shall pay all of the Escrow Agent's fees
and expenses arising out of or relating to this Escrow Agreement.
Section 4
Liabilities of Escrow Agent
4.1 Limitations. The Escrow Agent shall be liable only to accept, hold and
deliver the Escrow Fund in accordance with the provisions of this Escrow
Agreement and amendments hereto; provided, however, that the Escrow Agent shall
not incur any liability with respect to any action taken or omitted (a) in good
faith upon the advice of its counsel given with respect to any questions
relating to its duties and responsibilities as the Escrow Agent under this
Escrow Agreement, or (b) in reliance upon any instrument which the Escrow Agent
shall in good faith believe to be genuine (including the execution, identity, or
authority of any person executing such instrument, its validity and
effectiveness, and the truth and accuracy of any information contained therein),
to have been signed by a proper person or persons, and to conform to the
provisions of this Escrow Agreement.
4.2 Collateral Agreements. The Escrow Agent shall not be bound in any way
by any contract or agreement between the parties hereto, whether or not it has
knowledge of any such contract or agreement or of the terms or conditions of any
such contract or agreement, including without limitation, the Purchase
Agreement.
Section 5
Termination
This Escrow Agreement, other than Paragraph 3.4, Paragraph 3.5 and Section
4, shall be terminated upon the earliest to occur of: (i) the full disbursement
of the Escrow Fund by the Escrow Agent; (ii) written mutual consent signed by
the Company and Buyers; or (iii) the transfer of the Escrow Fund to a court in
accordance with Paragraph 3.4 hereof. This Escrow Agreement shall not otherwise
be terminated.
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Section 6
Other Provisions
6.1 Notices. Any notices required or permitted to be given to any party
hereto shall be given to all of the parties hereto. Any notices required or
permitted hereunder shall be sufficiently given pursuant to the notice
provisions in the Purchase Agreement.
6.2 Benefit. This Escrow Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
6.3 Entire Agreement; Amendment. This Escrow Agreement contains all the
terms agreed upon by the parties with respect to the subject matter hereof. This
Escrow Agreement may be amended only by a written instrument signed by all of
the parties hereto.
6.4 Headings. The headings of the sections and sub-sections of this Escrow
Agreement are for ease of reference only and do not evidence the intentions of
the parties.
6.5 Governing Law. This Escrow Agreement shall be governed by, and
construed according to, the laws of the State of Connecticut, without regard to
the principles thereof relating to conflicts of laws. The parties hereto consent
to the jurisdiction of the courts of the State of Connecticut in Fairfield
County and the United States District Court for the District of Connecticut.
6.6 Counterparts. This Escrow Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. This Agreement may be
executed by telecopied signatures with the same effect as original signatures.
[signatures to follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
as of the date first written above.
THE COMPANY:
ARGAN, INC.
/s/ Xxxxxx Xxxxxxxxxx
---------------------
By: Xxxxxx Xxxxxxxxxx
Its: President
THE BUYERS:
MSR I SBIC, L.P.
By: MSR I SBIC Partners, LLC, its General Partner
By: MSR Advisors, Inc., its Manager
/s/ Xxxxxx X. Xxxxxxxx
----------------------
By: Xxxxxx X. Xxxxxxxx
Its: President
/s/ Xxxxxxx Xxxxxx
------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxx
-----------------
Xxxxxxx Xxxxx
PRAIRIE FIRE CAPITAL LLC
/s/ Xxxxx X. Xxxxxx
-------------------
By: Xxxxx X. Xxxxxx
Its: Attorney-in-Fact
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XXXXX SBH LLC
/s/ Xxxxxxx Xxxxx
-----------------
By: Xxxxxxx Xxxxx
/s/ Xxxx Xxxxx
--------------
Xxxx Xxxxx
/s/ Xxxxx Xxxxx
---------------
Xxxxx Xxxxx
ESCROW AGENT:
XXXXXXXX & XXXX LLP
/s/ Xxxxxxx X. Xxxxxx
---------------------
By: Xxxxxxx X. Xxxxxx
Its: Partner
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Schedule A
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Buyer Number of Shares Share Consideration
----- ---------------- -------------------
MSR SBIC I, L.P. 240,000 $600,000
Xxxxxxx Xxxxxx 40,000 $100,000
Xxxxxxx Xxxxx 120,000 $300,000
Prairie Fire Capital LLC 120,000 $300,000
Xxxxx SBH LLC 120,000 $300,000
Xxxx Xxxxx 80,000 $200,000
Xxxxx Xxxxx 40,000 $100,000
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