AGREEMENT AND PLAN OF MERGER
Table of Contents
Page
INTRODUCTORY STATEMENT............................................................................................1
DEFINITIONS ......................................................................................................2
SECTION 1 - THE MERGER............................................................................................8
1.1 Effective Time..................................................................................8
1.2 Certificate of Merger...........................................................................8
1.3 Effect of the Merger............................................................................9
1.4 Certificate of Incorporation, By-Laws...........................................................9
1.5 Officers........................................................................................9
SECTION 2 - MERGER CONSIDERATION.................................................................................10
2.1 Conversion of Stock of Company.................................................................10
2.2 Merger Consideration...........................................................................10
2.3 Initial Consideration..........................................................................10
2.4 Additional Consideration.......................................................................12
2.5 Registration...................................................................................12
2.6 Stock Certificates.............................................................................12
2.7. Shareholder Loans..............................................................................12
2.8 Adjustment to Initial Stock Consideration......................................................13
SECTION 3 - CLOSING..............................................................................................13
3.1 Cancellation...................................................................................13
3.2 Delivery of Cash and Certificates..............................................................14
i
3.3 Supply Agreement...............................................................................15
3.4 Circulation of Documents.......................................................................15
SECTION 4 - REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF ▇▇▇▇▇▇ AND THE COMPANY..........................15
4.1 Organization, Qualifications and Corporate Power...............................................15
4.2 Authorization of Agreement.....................................................................16
4.3 Capital Stock..................................................................................17
4.4 Financial Statements...........................................................................17
4.5 Absence of Changes.............................................................................18
4.6 Legal Actions..................................................................................20
4.7 Business Property Rights.......................................................................21
4.8 Liabilities....................................................................................21
4.9 Ownership of Assets and Leases.................................................................21
4.10 Taxes..........................................................................................24
4.11 Contracts, Other Agreements....................................................................26
4.12 Governmental Approvals.........................................................................26
4.13 Lack of Defaults; Compliance with Law..........................................................26
4.14 Employees and Employee Benefit Plans...........................................................27
4.15 Insurance; Bonds...............................................................................28
4.16 Labor and Employment Matters...................................................................28
4.17 Brokers and Finders............................................................................29
4.18 Accounts Receivable............................................................................29
4.19 Conflicts of Interests.........................................................................29
ii
4.20 Environmental Compliance.......................................................................30
4.21 Ownership of the Stock.........................................................................30
4.22 [Intentionally omitted.].......................................................................31
4.23 Approval of Merger; Related Matters............................................................31
4.24 Withholding....................................................................................31
SECTION 5 - REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF PARENT AND SUBSIDIARY...........................31
5.1 Organization, Qualifications and Corporate Power...............................................32
5.2 Authorization, etc.............................................................................32
5.3 Absence of Changes.............................................................................33
5.4 Governmental Approvals.........................................................................35
5.5 Brokers Fees...................................................................................35
5.6 Authorized Shares of Stock.....................................................................35
5.7 Survival of Company............................................................................35
5.8 No Section 338 Election........................................................................35
5.9 Taxes..........................................................................................36
5.10 Employees and Employee Benefit Plans...........................................................37
5.11 Releasing ▇▇▇▇▇▇ From Personal Guaranties......................................................37
SECTION 6 - CONDITIONS TO CLOSING FOR PARENT.....................................................................38
6.1 Performance of Agreements......................................................................38
6.2 Lack of Material Liabilities...................................................................38
6.3 Financial Statements...........................................................................38
6.4 [Intentionally omitted]........................................................................39
iii
6.5 [Intentionally omitted]........................................................................39
6.6 Employment Agreements..........................................................................39
6.7 Opinion of Counsel.............................................................................39
6.8 Compliance Certificate.........................................................................39
6.9 [Intentionally omitted.].......................................................................39
6.10 [Intentionally omitted]........................................................................39
6.11 [Intentionally omitted]........................................................................39
6.12 Release from ▇▇▇▇▇▇; Payment of Amounts Owed by ▇▇▇▇▇▇.........................................39
6.13 Corporate Documents............................................................................40
6.14 Corporate Filings..............................................................................40
6.15 Trustee of Plans...............................................................................40
6.16 Assignment and Assumption of Real Property Leases..............................................41
6.17 Assignment and Assumption of Equipment Leases..................................................41
6.18 Supply Agreement...............................................................................41
6.19 Registration Rights Agreement..................................................................41
6.20 Cancellation of ▇▇▇▇▇ Agreement................................................................42
SECTION 7 CONDITIONS TO CLOSING FOR THE COMPANY AND ▇▇▇▇▇▇...............................................42
7.1 Performance of Agreements......................................................................42
7.2 Lack of Material Liabilities...................................................................42
7.3 Employment Agreements..........................................................................42
7.4 Opinion of Counsel.............................................................................42
7.5 Compliance Certificate.........................................................................43
7.6 Employee Stock Options.........................................................................43
vi
7.7 Corporate Documents............................................................................43
7.8 Corporate Filings..............................................................................44
7.9 Assignment and Assumption of Real Property Leases..............................................44
7.10 Assignment and Assumption of Equipment Leases..................................................44
7.11 Supply Agreement...............................................................................44
7.12 Registration Rights Agreement..................................................................44
SECTION 8 - RESTRICTIVE COVENANTS................................................................................44
8.1 Covenant Not to Compete........................................................................45
8.2 Confidentiality................................................................................45
8.3 Non-Solicitation...............................................................................46
8.4 Acknowledgment by ▇▇▇▇▇▇.......................................................................47
8.5 Reformation by Court...........................................................................47
8.6 Extension of Time..............................................................................48
8.7 Injunction.....................................................................................48
8.8 Survival.......................................................................................48
SECTION 9 - INDEMNIFICATION BY ▇▇▇▇▇▇............................................................................48
9.1 Indemnification by ▇▇▇▇▇▇......................................................................49
9.2 No Circular Recovery...........................................................................52
9.3 ▇▇▇▇▇▇'▇ Indemnification Threshold Cap.........................................................53
SECTION 10 INDEMNIFICATION BY PARENT......................................................................54
10.1 Indemnification by Parent......................................................................54
10.2 Broker Fee.....................................................................................54
10.3 Costs and Expenses.............................................................................54
v
10.4 Termination of Parent's Obligations............................................................55
10.5 Parent's Indemnification Threshold; Cap........................................................55
10.6 Indemnification for Personal Guaranties by ▇▇▇▇▇▇..............................................55
SECTION 11 - DEFAULT.............................................................................................56
[Intentionally omitted].................................................................................56
SECTION 12 - MISCELLANEOUS.......................................................................................56
12.1 Costs..........................................................................................56
12.2 Attorneys Fees.................................................................................56
12.3 Relationships to Other Agreements..............................................................56
12.4 Titles and Captions............................................................................56
12.5 Exhibits.......................................................................................56
12.6 Applicable Law.................................................................................57
12.7 Binding Effect and Assignment..................................................................57
12.8 Notices........................................................................................57
12.9 Severability...................................................................................58
12.10 Acceptance or Approval.........................................................................58
12.11 Survival.......................................................................................58
12.12 Entire Agreement...............................................................................59
12.13 Counterparts...................................................................................59
12.14 Securities Matters.............................................................................59
12.15 Preparation and Filing of SEC Documents........................................................60
12.16 Further Assurances.............................................................................60
vi
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, made as of this 31st day of August,
2004, by and between ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), VITARICH LABORATORIES, INC., a
Florida corporation (the "Company"), ARGAN, INC., a Delaware corporation
("Parent"), and AGAX/VLI ACQUISITION CORPORATION ("Subsidiary"), a Delaware
corporation and a 100% subsidiary of Parent.
INTRODUCTORY STATEMENT
▇. ▇▇▇▇▇▇ collectively owns one hundred (100) shares of capital stock of
the Company, which shares constitute all of the issued and outstanding capital
stock (the "Stock") of the Company.
B. The Company is in the business of formulating, packaging and
distributing whole food dietary, herbal and nutritional supplements and related
products, which are marketed globally to retail, wholesale and private label
customers, including network marketing companies, health food stores, mass
merchandisers, drug stores, food stores, and Internet and mail-order companies.
C. Parent has agreed with ▇▇▇▇▇▇ for Parent to acquire the Company by
means of a merger of the Company with and into Subsidiary, upon the terms and
subject to the conditions set forth herein.
D. In furtherance of such acquisition, the Boards of Directors of Parent,
Subsidiary and the Company have each approved the plan of merger to merge the
Company with and into Subsidiary (the "Merger") in accordance with the
applicable provisions of the Delaware General Corporation Law (the "DGCL") and
the Florida General Corporation Law ("FGCL"), and upon the terms and subject to
the conditions set forth here in.
1
E. Pursuant to the Merger, the record holders of each outstanding share of
the Company's common stock shall be entitled to receive the Merger Consideration
(as defined in Section 2) so that upon receipt of the Merger Consideration, such
share of the Stock shall be cancelled, all 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 AND PLAN OF MERGER shall
have the following meanings:
"Accounts Receivable" means accounts receivable, notes 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.
"Additional Capital Subscription Price" shall have the meaning set forth
in Section 2.8 hereof.
"Additional Cash Consideration" shall have the meaning set forth in
Section 2.4 hereof.
"Additional Consideration" shall have the meaning set forth in Section 2.4
hereof.
"Additional Consideration Payment Date" shall have the meaning set forth
in Section 2.4 hereof.
2
"Additional Stock Consideration" shall have the meaning set forth in
Section 2.4 hereof.
"Adjusted EBITDA of the Company" means earnings of the Company for the
designated period determined in accordance with GAAP, adjusted by (i) adding
back all deductions taken in determining such number, if any, for (A) interest
expense, (B) income taxes, (C) depreciation, (D) amortization, (E) total
compensation payable to ▇▇▇▇▇▇, and (F) certain non-recurring expenses that are
presented by the Company and approved by Parent, as confirmed by audited
financials statements, and by (ii) subtracting the annual base salary agreed to
by ▇▇▇▇▇▇ for the three year term of the ▇▇▇▇▇▇ Employment Agreement (as defined
below).
"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.
"Agreement" means this AGREEMENT AND PLAN OF MERGER.
"Ancillary Facilities" and "Ancillary Facilities Leases" shall have the
meanings set forth in Section 4.9 hereof.
"Argan" shall mean Parent, Argan, Inc., a Delaware corporation, with its
principal offices located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, and its successors and assigns.
3
"Argan January 2005 Audit" shall mean the audited financial statements of
Argan for the twelve (12) month period ending January 31, 2005, prepared in
accordance with GAAP by the accounting firm of Ernst & Young, or such other
accounting firm designated by Parent.
"Argan Stock" shall mean the authorized capital stock of Argan.
"Certificate of Merger" has the meaning set forth in Section 1.2 below.
"Closing" means the transfer of the Stock to Subsidiary and the payment of
the Initial Consideration to ▇▇▇▇▇▇ pursuant to this Agreement.
"Closing Balance Sheet" shall mean the audited balance sheet and profit
and loss statement of the Company for the period ending as of the Closing Date,
presented on an accrual basis for a C corporation, prepared in accordance with
GAAP by the Company's Regular CPA, and accepted by the accounting firm of Ernst
& Young.
"Closing Date" means the date of Closing, established under Section 3 of
this Agreement.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Company" means Vitarich Laboratories, Inc., and all of its subsidiaries
(unless the context clearly indicates otherwise), for all references prior to
the Merger, and the Subsidiary, which will conduct the business of Vitarich
Laboratories, Inc., after the Merger.
"Company's Regular CPA" means the accounting firm of Davidson & Nick,
Certified Public Accountants, the Company's regular independent certified public
accountant
"DGCL" has the meaning set forth in the introductory statement.
"December 2003 Audit" shall mean the audited financial statements of the
Company for the twelve (12) month period ending December 31, 2003, presented on
an accrual basis for a C corporation, prepared in accordance with GAAP by the
Company's Regular CPA, and acceptable to the accounting firm of Ernst & Young.
4
"Environmental, Health, and Safety Laws" means the United States Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
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.
"Equipment Lease Assignments" shall have the meaning set forth in Section
6.17 hereof.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"FGCL" has the meaning set forth in the introductory statement above.
"Filing Date" shall have the meaning set forth in Section 1.2 hereof.
"Financial Statements" means collectively (i) the December 2003 Audit,
(ii) the audited consolidated financial statements of the Company for the
Company's fiscal year ending December 31, 2002, (iii) the internally generated
consolidated financial statements of the Company for the three (3) month period
ending as of March 31, 2004 and the six (6) month period ending as of June 30,
2004, including appropriate adjustments of balance sheet reserves for accounts
receivable and tax accruals, and to properly value inventory, to appropriate
operating levels, as reviewed by the Company's Regular CPA, and accepted by the
accounting firm of Ernst & Young, or such other accounting firm designated by
Parent, and (iv) the Closing Balance Sheet, including in all cases the notes
thereto, prepared by the Company's Regular CPA, and accepted by the accounting
firm of Ernst & Young, or such other accounting firm designated by Parent. The
Financial Statements shall be prepared in accordance with GAAP and shall be
presented on an accrual basis for a C corporation.
5
"February 28, 2005 Financial Statements" shall mean the consolidated
financial statements of the Company for the twelve (12) month period ending
February 28, 2005, prepared no later than May 1, 2005 in accordance with GAAP by
the Company's Regular CPA and accepted by the accounting firm of Ernst & Young,
or other accounting firm designated by Parent, and presented on an accrual basis
for a C corporation, which financial statements shall be audited (the cost of
which shall be borne one-half by ▇▇▇▇▇▇ and one-half by Parent) unless ▇▇▇▇▇▇
and Parent otherwise agree.
"GAAP" shall mean generally accepted accounting principles, consistently
applied.
"Guaranteed Equipment Leases" shall have the meaning set forth in Section
5.11 hereof.
"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 1980, as amended (42
U.S.C. Sections 9601, et seq.), the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Section 1801, 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.
6
"Initial Consideration" shall have the meaning set forth in Section 2.3
hereof.
"Initial Cash Consideration" shall have the meaning set forth in Section
2.3(a) hereof.
"Initial Stock Consideration" shall have the meaning set forth in Section
2.3(a) hereof.
"Main Facility" and "Main Facility Lease" shall have the meanings set
forth in Section 4.9(b) hereof.
"Main Facility Lease Assignment" shall have the meaning set forth in
Section 6.16 hereof.
"▇▇▇▇▇▇ Stock Purchase Agreement" shall have the meaning set forth in
Section 4.5(h).
"Merger" means the merger of the Company into Subsidiary.
"Merger Consideration" means the aggregate consideration set forth in
Section 2 hereof.
"Net Worth" shall mean the total assets of the Company, reduced by any
value placed on the intangible assets of the Company, including, but not limited
to, goodwill, less the total liabilities of the Company as those terms are shown
on the Closing Balance Sheet.
"Parent's Indemnification Threshold" shall have the meaning set forth in
Section 10.5.
"Restrictive Period" shall have the meaning set forth in Section 8.1.
"SEC" shall have the meaning set forth in Section 2.5.
"Stock" shall mean all of the authorized issued and outstanding capital
stock of the Company, including all warrants, options, convertible securities or
rights (contingent or otherwise) to purchase or acquire stock of the Company.
"Surviving Corporation" has the meaning set forth in Section 1.1 below.
7
"Subsidiary" has the meaning set forth in the preface above.
"Supply Agreement" shall have the meaning set forth in Section 3.3 hereof.
"▇▇▇▇▇▇" shall mean ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, a stockholder, officer and director of the
Company and a signatory to this Agreement.
"▇▇▇▇▇▇ Employment Agreement" shall mean the employment agreement to be
entered into by ▇▇▇▇▇▇ and the Company pursuant to Section 6.6 below.
"▇▇▇▇▇▇'▇ Indemnification Threshold" shall have the meaning set forth in
Section 9.3.
SECTION 1
THE MERGER
1.1 Effective Time. 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, the DGCL and the FGCL, Parent shall acquire the Company by means
of the Company being merged with and into Subsidiary, whereby the separate
corporate existence of the Company shall cease, and Subsidiary shall continue as
the surviving corporation. Subsidiary as the surviving corporation after the
Merger is hereinafter sometimes referred to as the "Surviving Corporation."
1.2 Certificate of Merger. On the Closing Date, assuming satisfaction or
waiver of the conditions set forth in Section 6, the parties hereto shall cause
the Merger to be consummated by filing Certificates of Merger as contemplated by
the DGCL and the FGCL (the "Certificates of Merger"), together with any required
related certificates, with the Secretary of State of the State of Delaware and
the Secretary of State of the State of Florida, respectively, in such form as
required by, and executed in accordance with the relevant provisions of, the
DGCL and the FGCL. The date of filing of the respective Certificates of Merger
shall be deemed the "Filing Date."
8
1.3 Effect of the Merger. Upon the consummation of the Merger, the effect
of the Merger shall be as provided in this Agreement, the Certificates of Merger
and the applicable provisions of the DGCL and the FGCL. Without limiting the
generality of the foregoing, and subject thereto, upon the consummation of the
Merger all the property, rights, privileges, powers and franchises of the
Company and Subsidiary shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Subsidiary shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation, By-Laws.
(i) Certificate of Incorporation. Unless otherwise determined by
Parent prior to the Closing Date, upon the consummation of the Merger, the
Certificate of Incorporation of Subsidiary, as in effect immediately prior to
the consummation of the Merger, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended in accordance with the DGCL and
such Certificate of Incorporation.
(ii) By-Laws. Unless otherwise determined by Parent prior to the
consummation of the Merger, the By-Laws of Subsidiary, as in effect immediately
prior to the Closing Date, shall be the By-Laws of the Surviving Corporation
until thereafter amended in accordance with the DGCL, the Certificate of
Incorporation of the Surviving Corporation and such By-Laws.
9
1.5 Officers. The officers of the Surviving Corporation shall be:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Chairman of the Board
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Senior Operating Executive
▇▇▇▇▇ ▇▇▇▇▇ President
▇▇▇▇▇ Woldinger Executive Vice President
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Vice President and Secretary
▇▇▇▇▇▇ ▇▇▇▇▇▇ Vice President, Treasurer and Chief Financial
Officer, and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Vice President--Finance,
in each case until their respective successors are duly elected or appointed and
qualified.
SECTION 2
MERGER CONSIDERATION
2.1 Conversion of Stock of Company. As of the Filing Date, each share of
Stock issued and outstanding as of the Closing Date, shall by virtue of the
merger and without any action on the part of the holder thereof, be converted
into the right to receive an amount per share in Argan Stock and in cash,
without interest, determined in accordance with the following provisions of this
Section 2.
2.2 Merger Consideration. The total merger consideration to be paid by
Parent to ▇▇▇▇▇▇ (the "Merger Consideration") shall be an amount equal to the
sum of the Initial Consideration, determined and paid in accordance with Section
2.3, and the Additional Consideration, determined and paid in accordance with
Section 2.4; and each share of Stock shall be entitled to receive a sum equal to
the Merger Consideration divided by the total number of shares of the Stock.
2.3 Initial Consideration.
(a) The Initial Consideration shall be an amount equal to $12,443,750,
which shall be paid at Closing (i) $6,050,000 in cash, wire transfer or
certified funds (the "Initial Cash Consideration"); and (ii) through the
issuance of 825,000 shares of Argan Stock (the "Initial Stock Consideration"),
subject to adjustment in accordance with Section 2.3(b). The parties acknowledge
and agree that the closing price of Argan Stock on August 30, 2004 was $6.00 per
share. Notwithstanding that fact, for purposes of this Section 2.3(a), the value
of each share of Argan Stock shall be Seven and 75/100 Dollars ($7.75), subject
to adjustment as set forth in Section 2.8 below.
10
(b) Notwithstanding anything to the contrary contained in Section 2.3(a),
in the event the Net Worth of the Company as of the Closing Date, as set forth
on the Closing Balance Sheet, is less than $1,200,000, then such deficiency
shall reduce, dollar for dollar, the Initial Consideration paid to Stockholders
pursuant to Section 2.3(a) hereof, which reduction, if any, shall be allocated
proportionately to the Initial Cash Consideration and the Initial Stock
Consideration. To enable all parties to determine the Net Worth of the Company
as of the Closing Date, ▇▇▇▇▇▇ shall cause a preliminary unaudited version of
the Closing Balance Sheet to be delivered to Parent within ten (10) business
days of Closing and the Closing Balance Sheet to be delivered to Parent within
sixty (60) calendar days of Closing. Upon the determination of the adjustment to
the Initial Consideration pursuant to this Section 2.3(b), the amount by which
the Initial Consideration has been reduced, if any, shall be repaid by ▇▇▇▇▇▇ to
Parent in proportionate amounts of cash and Argan Stock, with the value of the
Argan Stock as set forth in Section 2.3(a) within ten (10) days of Parent's
written notice to ▇▇▇▇▇▇ of such determination. In addition, Parent shall have
the right to charge any such unpaid amounts against the Additional Consideration
otherwise payable to ▇▇▇▇▇▇ pursuant to Section 2.4 in equal amounts of cash and
Argan Stock, with the value of the Argan Stock as set forth in Section 2.3(a).
11
2.4 Additional Consideration. In addition to the Initial Consideration,
▇▇▇▇▇▇ shall have the right to receive additional consideration (the "Additional
Consideration") equal to (a) 5.5 times the Adjusted EBITDA of the Company based
on the February 28, 2005 Financial Statements, (b) less the Initial
Consideration (provided, however, that in no event shall the Additional
Consideration be less than zero or require repayment by ▇▇▇▇▇▇ to Parent of any
portion of the Initial Consideration), which Additional Consideration, if any,
shall be paid by Parent on or before the date that is thirty (30) days following
the completion of (i) the Argan January 2005 Audit, and (ii) the February 28,
2005 Financial Statements (the "Additional Consideration Payment Date"), such
amount to be paid fifty percent (50%) in cash, wire transfer or certified funds
(the "Additional Cash Consideration"), and fifty percent (50%) through issuance
of Argan Stock (the "Additional Stock Consideration"). For purposes of
determining the number of shares of Argan Stock to be issued to ▇▇▇▇▇▇ pursuant
to this Section 2.4, the value of each share of Argan Stock shall be Seven and
75/100 Dollars ($7.75).
2.5 Registration. Parent and ▇▇▇▇▇▇ shall enter into a registration rights
agreement in substantially similar form as attached hereto as Exhibit 2.5, with
respect to (i) Argan Stock issued as a part of the Initial Consideration, and
(ii) Argan Stock issued as a part of the Additional Consideration (the
"Registration Rights Agreement").
2.6 Stock Certificates. Stock certificates issued as part of the Initial
Stock Consideration or as part of the Additional Stock Consideration shall be
accompanied by any documents necessary to permit the transfer agent to transfer
shares of Argan Stock as directed by the selling Stockholder.
2.7. Shareholder Loans. Parent shall pay to ▇▇▇▇▇▇ in cash at Closing, in
full satisfaction of all loans made by ▇▇▇▇▇▇ to the Company, the then full
outstanding balance of all such loans, which amount shall be not greater than
$507,514 as of the Closing Date. Such loans are evidenced by a promissory note,
a full and complete copy of which is attached hereto as a part of Schedule
4.19(a).
12
2.8 Adjustment to Initial Stock Consideration. Notwithstanding anything to
the contrary contained in Section 2.3(a), in the event that, between the Closing
Date and the Additional Cash Consideration Payment Date, Parent raises
additional capital by issuance of Argan Stock pursuant to a public or private
offering for a price less than Seven and 75/100 Dollars ($7.75) per share (the
"Additional Capital Subscription Price"), then the number of shares of Argan
Stock issued to ▇▇▇▇▇▇ as the Initial Stock Consideration pursuant to the
Section 2.3(a) above shall be adjusted to the number of shares of Argan Stock
that would have been issued at Closing had the value of each share of Argan
Stock been the Additional Capital Subscription Price, and Parent shall issue to
▇▇▇▇▇▇ on the Additional Consideration Payment Date the number of additional
shares of Argan Stock that would have been issued as a part of the Initial Stock
Consideration at Closing had the value of Argan Stock been the Additional
Capital Subscription Price.
SECTION 3
CLOSING
The Closing of the Merger shall occur at the offices of Parent, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 2:00 p.m. on the 31st day of
August, 2004, or at such other time, date and place as Parent and Stockholders
may agree (the "Closing Date"). At the Closing:
3.1 Cancellation.
13
(a) Upon filing of the Certificates of Merger, each share of the
Stock shall be canceled and shall thereafter evidence only the right to receive
a pro rata share of the Merger Consideration.
(b) Upon filing of the Certificates of Merger, each share of the
Stock held in the treasury of the Company and each share of Stock owned directly
or indirectly by any wholly owned subsidiary of the Company immediately prior to
the consummation of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding, be canceled
and retired without payment of any consideration therefor and cease to exist.
3.2 Delivery of Cash and Certificates.
(a) Exchange Procedures. As of the Filing Date, upon surrender of
the certificates representing shares of the Stock (the "Certificates") for
cancellation to Parent together with such other customary documents as may be
required to transfer the Stock, subject to the provisions of Section 2.3 above,
the holders of such Certificates shall be entitled to receive in exchange
therefor their pro rata share of the Merger Consideration, and the Certificates
so surrendered shall forthwith be canceled. Each outstanding Certificate that,
prior to the Closing Date, represented shares of the Stock will be deemed from
and after the Closing Date, for all corporate purposes, to evidence the right to
receive a pro rata share of the Merger Consideration into which such shares of
the Stock shall have been so converted.
(b) No Liability. Neither Parent, Subsidiary, nor the Company shall
be liable to any holder of the Stock for any Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
14
3.3 Supply Agreement. In addition, at the Closing, Subsidiary shall enter
into a product supply agreement with Vitarich Farms, Inc., a Florida corporation
("Vitarich Farms"), which harvests and processes powdered vegetable grains, such
supply agreement to contain mutually agreeable terms and conditions (the "Supply
Agreement").
3.4 Circulation of Documents. Notwithstanding anything to the contrary
herein contained, the parties anticipate that they will conduct the Closing by
circulation of faxed copies of executed documents with hard copies to follow.
SECTION 4
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF ▇▇▇▇▇▇ AND THE COMPANY
As a material inducement to induce Parent and Subsidiary to consummate the
Merger under this Agreement, ▇▇▇▇▇▇ and Company represent and warrant that each
of the matters set forth in this Section 4 are true and correct as of the date
hereof (or, in the case of Financial Statements and the February 28, 2005
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 date said
Financial Statements and the February 28, 2005 Financial Statements are
provided), and acknowledge that Parent and Subsidiary's entry into this
Agreement and the performance of their obligations hereunder are made in
reliance upon the completeness and accuracy of each of the matters set forth
herein. The representations and warranties being made by ▇▇▇▇▇▇ shall survive as
set forth in Section 12.11, herein.
4.1 Organization, Qualifications and Corporate Power.
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Florida. The Company is duly
qualified as a foreign corporation in each other jurisdiction in which
qualification is required. The Company 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 and all other agreements and instruments related hereto or
contemplated hereby to which the Company is a signatory.
15
(b) The Company does not own 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.
(c) The Company is a C corporation pursuant to applicable provisions
of the Code.
4.2 Authorization of Agreement. The execution, delivery and performance by
the Company of this Agreement and any other instruments or documents required to
be executed and delivered hereby, have been duly authorized by all requisite
corporate action 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 Incorporation or Bylaws of the Company, or
violate any provision of any indenture, agreement, insurance policy, bond or
other instrument by which the Company, or any of its properties or assets is
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 Company is a party, or by which
Company, or any of its 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 the Company.
16
4.3 Capital Stock. The authorized capital stock of the Company and
the holders of the issued and outstanding shares of such capital stock are set
forth in Schedule 4.3 hereto. There is no (i) subscription, warrant, option,
convertible security or other right (contingent or otherwise) to purchase or
acquire any shares of any class of capital stock of the Company, which is
authorized or outstanding, (ii) the Company has no commitments to issue any
shares, warrants, options or other such rights or to distribute to holders of
any class of its capital stock any evidence of indebtedness or assets, (iii) the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest therein or to
pay any dividend or make any other distribution in respect thereof, and (iv) the
Company has no obligation or commitment to register under the Act any securities
issued or to be issued by it. All of the issued and outstanding shares of the
capital stock of the Company 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 Company has delivered the Financial
Statements to Parent, or will timely deliver the Financial Statements and the
February 28, 2005 Financial Statements to Parent in accordance with the terms of
this Agreement. The Financial Statements and the February 28, 2005 Financial
Statements are, or will be, as the case may be, complete and correct, and do or
will fairly present in all material respects the consolidated financial position
of the Company as of such respective dates, and the results of operations for
the respective periods then ended. Except as or as will be set forth in such
Financial Statements and the February 28, 2005 Financial Statements, or as
incurred in the ordinary course of business, to the knowledge of ▇▇▇▇▇▇ and the
Company, the Company has or will have, as the case may be, no material
obligation or liability, absolute, accrued or contingent, including without
limitation any liability which might result from an audit of its tax returns by
any appropriate authority.
17
4.5 Absence of Changes. Except as listed in Schedule 4.5 and since the
time period covered by the Financial Statements, the Company has not:
(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 change that is materially adverse to the business,
operations, or financial condition of the Company, taken as a whole, or become
aware of any event which may result in any such 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;
(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;
18
(h) Declared, promised or made any distribution from its assets or
other payment from the assets to its shareholders (other than reasonable
compensation for services actually rendered) or issued any additional shares or
rights, options or calls with respect to its shares of capital stock, or
redeemed, purchased or otherwise acquired any of its shares, or made any change
whatsoever in its capital structure, other than the purchase of the shares of
stock in the Company previously owned by ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇., pursuant to that
certain Stock Purchase Agreement dated August 26, 2004, a full and complete copy
of which without exhibits, is attached hereto as a part of Schedule 4.5 (the
"▇▇▇▇▇▇ Stock Purchase Agreement");
(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 directors or executive officers other than in the
ordinary course of business;
(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.
19
4.6 Legal Actions. Except as listed on Schedule 4.6, there is no action,
suit, investigation, or proceeding:
(a) pending against or affecting (i) the Company, (ii) ▇▇▇▇▇▇, which
would have a material adverse effect on ▇▇▇▇▇▇' ability to perform or satisfy
his obligations under this Agreement and under any of the documents executed
contemporaneously herewith (including without limitation the ▇▇▇▇▇▇ Employment
Agreement), (iii) any of the Company's properties or rights, or, (iv) to the
knowledge of the Company or ▇▇▇▇▇▇, any of the customers of the Company involved
in the distribution of the Company's products to end-users, before any court or
by or before any governmental body or arbitration board or tribunal;
(b) to the knowledge of the Company or ▇▇▇▇▇▇, threatened against
(i) the Company, (ii) ▇▇▇▇▇▇, which would have a material adverse effect on
▇▇▇▇▇▇' ability to perform or satisfy his obligations under this Agreement and
under any of the documents executed contemporaneously herewith (including
without limitation the ▇▇▇▇▇▇ Employment Agreement), (iii) any of the Company's
properties or rights, or (iv) any of the customers of the Company involved in
the distribution of the Company's products to end-users, before any court or by
or before any governmental body or arbitration board or tribunal; and
(c) to the knowledge of the Company or ▇▇▇▇▇▇, 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 the
Company or ▇▇▇▇▇▇. The foregoing includes, without limiting its generality,
actions pending or, to the knowledge of the Company or ▇▇▇▇▇▇, threatened (or
any basis therefor known to the Company or ▇▇▇▇▇▇) involving the prior
employment of any employees or prospective employees of the Company, or the
Company's use, in connection with its businesses, of any information or
techniques which might be alleged to be proprietary to former employer(s) of any
employees or prospective employees of the Company.
4.7 Business Property Rights. To the best of the Company's or ▇▇▇▇▇▇'▇
knowledge, no person or entity has made or threatened to make (or has any valid
reason to threaten) any claims that the operation of the businesses of the
Company is in violation of or infringe upon 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") of a non-affiliated third party. To the best of the
Company's or ▇▇▇▇▇▇'▇ knowledge, no third party is infringing upon or violating
any of the Company's Business Property Rights and the Company has the exclusive
right to use the same. To the best of the Company's or ▇▇▇▇▇▇'▇ knowledge, none
of the employees, directors, or stockholders of the Company has any valid claim
whatsoever (whether direct, indirect or contingent) of right, title or interest
in or to any of the Company's Business Property Rights.
4.8 Liabilities. Except as disclosed or to be disclosed in the Financial
Statements and the February 28, 2005 Financial Statements, to the knowledge of
▇▇▇▇▇▇ and the Company, (a) the Company is not or will not be, as the case may
be, in default with respect to any liabilities or obligations and (b) all such
liabilities or obligations shown and reflected in the Financial Statements and
the February 28, 2005 Financial Statements have been, or will be, as the case
may be, paid or discharged as they become due.
20
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 Company and all of
the leases and other agreements relating to any real, personal or intangible
property owned, used, licensed or leased by the Company. The Company 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 and the February 28, 2005 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 leases and agreements of the Company
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. There is not under any of such
leases or agreements existing any default of the Company or, to the best of the
Company's or ▇▇▇▇▇▇'▇ knowledge, of any other parties thereto (or event or
condition which, with notice or lapse of time, or both, would constitute a
default). The Company has not 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 Company's or ▇▇▇▇▇▇'▇ knowledge, there is not any such
violation or grounds therefor which could materially adversely affect its assets
or the conduct of its business. The Company is not 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 material asset of the Company.
21
(b) The Company's main facility, located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ (the "Main Facility"), is leased by the Company pursuant to that
certain Lease Agreement dated April 25, 2000, as amended by First Amendment to
Lease Agreement dated August 2003, by and between Naples Hawaii, LLC (successor
in interest to ▇▇▇▇▇ Manor Partnership, Ltd.), as landlord, and the Company, as
tenant, a true, correct and complete copy of which lease, and all amendments and
modifications thereof, is attached hereto as a part of Schedule 4.9(b) (the
"Main Facility Lease"). The Company also leases property located at (i) ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, pursuant to that certain Lease Agreement dated
January 1, 2003, by and between ▇▇▇▇▇▇, as landlord, and the Company, as tenant
(the "4327 Lease"); (ii) ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, pursuant to that
certain Lease dated August 28, 2003, by and between ▇▇▇▇ ▇▇▇▇▇, as landlord, and
the Company, as tenant (the "4344 Lease"); (iii) ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, pursuant to a verbal lease by and between Gulfside Construction and
Equipment, Inc., as landlord, and the Company, as tenant, as evidenced by
letters from the Company to Gulfside Construction and Equipment, Inc. dated
October 10, 2001, and from Gulfside Construction and Equipment, Inc. to the
Company dated December 1, 2003 (the "4405 Lease"); and (iv) ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, pursuant to that certain Lease Agreement dated August 18, 2004,
by and between ▇▇▇▇▇▇, as landlord, and the Company, as tenant (the "4206
Lease," and, together with the 4327 Lease, the 4344 Lease and the 4405 Lease,
the "Ancillary Facilities Leases"), true, correct and complete copies of which
Ancillary Facilities Leases, and all amendments and modifications thereof, are
attached hereto as a part of Schedule 4.9(b). ▇▇▇▇▇▇ hereby represents and
warrants that the rent payable under the 4206 Lease is at or below local market
rates.
22
(c) To the knowledge of ▇▇▇▇▇▇ and the Company, the Main Facility
and the properties covered by the Ancillary Facilities Leases (the "Ancillary
Facilities"), and the use thereof, is in compliance with all applicable zoning
laws, rules, regulations and ordinances in all material respects, and all
structures thereon are in compliance with applicable building codes, rules and
regulations in all material respects, except that, notwithstanding the above, no
certificates of occupancy have been issued to the Company for the Main Facility
or for any of the Ancillary Facilities. ▇▇▇▇▇▇ hereby covenants and agrees, at
the Surviving Corporation's cost and expense, to use commercially reasonable
efforts to obtain, as soon as commercially practicable but in no event later
than two (2) years from the Closing Date, issuance to the Surviving Corporation
of permanent certificates of occupancy for the Main Facility and all of the
Ancillary Facilities by the applicable governmental authority, including
undertaking and completing any improvements or modifications required to the
Main Facility or to any of the Ancillary Facilities to the extent necessary to
so obtain a permanent certificate of occupancy. ▇▇▇▇▇▇ hereby represents and
warrants that the cost of obtaining all such certificates of occupancy
(including without limitation the costs of any improvements or modifications
required to the Main Facility or to any of the Ancillary Facilities to the
extent necessary to so obtain same) shall not exceed $100,000 in the aggregate.
23
4.10 Taxes. The Company has paid all taxes due, assessed and owed by it as
reflected on its consolidated tax returns and has 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), which taxes have been properly accrued and reflected on the December
2003 Audit and will be reflected on the Closing Balance Sheet. All federal,
state, local, and other taxes of the Company accruable since the filing of such
returns have been properly accrued. No federal income tax returns for the
Company have ever been audited by the Internal Revenue Service or any state or
local taxing authority. 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 the Company for any period for which returns have been
filed, and to the Company's knowledge, no other examination by the Internal
Revenue Service or any other taxing authority affecting the Company is now
pending or threatened. Except for those taxes set forth on Schedule 4.10(a),
taxes which the Company was required by law to withhold or collect subsequent to
the incorporation of the Company have been withheld or collected and have been
paid over to the proper governmental authorities or are properly held by the
Company 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 the Company, nor extensions of time for the assessment of any tax,
have been given by any current employees of the Company. 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 the
assets or the conduct of the business of the Company through the close of
business on the Closing Date, or attributable to the conduct of the operations
of the Company at any time for which Parent or the Surviving Corporation may
have any liability for payment or otherwise, except for those taxes set forth on
Schedule 4.10(a) and except for taxes applicable to the period January 1, 2004
through the Closing Date, which taxes have been properly accrued and will be
reflected on the Closing Balance Sheet. After the Closing, there does not and
will not exist by virtue of the transactions contemplated by this Agreement any
liability for taxes which may be asserted by any taxing authority against the
assets of the Company, or the operation of any of its businesses, and no lien or
other encumbrance for taxes will attach to such assets or the operation of its
businesses.
24
4.11 Contracts, Other Agreements. Attached hereto as Schedule 4.11 is a
true and complete list of each material contract, agreement and other instrument
to which the Company is a party, including, but not limited to, all bank and
financing documents. At Parent's request, the Company shall deliver to Parent a
true and complete copy of any such contract, agreement or instrument. All of the
contracts, agreements, and instruments described in Schedule 4.11 hereto are
valid and binding upon the Company and the other parties thereto and are in full
force and effect, and neither the Company, nor to the best of the Company's or
▇▇▇▇▇▇' knowledge, any other party to any such contract, commitment or
arrangement has breached any provision of, or is in default in any respect
under, the material terms thereof.
4.12 Governmental Approvals. 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 by the Company.
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 the Company or ▇▇▇▇▇▇ 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 the
Company or ▇▇▇▇▇▇ is a party. The Company and ▇▇▇▇▇▇ know of no violation of any
law, ordinance, governmental rule or regulation to which the Company or ▇▇▇▇▇▇
is subject, nor has the Company or ▇▇▇▇▇▇ 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. The Company has conducted and will conduct its
businesses 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 (i) the Federal
Trade Commission (including all such rules, regulations and requirements
relating to truth in advertising), (ii) the U.S. Food and Drug Administration,
(iii) the U.S. Department of Agriculture, and (iv) the U.S. Occupational Safety
and Health Administration.
25
4.14 Employees and Employee Benefit Plans.
(a) Attached hereto as Schedule 4.14(a) is a list of each pension,
retirement, profit-sharing, deferred compensation, bonus or other incentive
plan, or program, arrangement, agreement or other understanding, or medical,
vision, dental or other health plan, or life insurance or disability plan, or
any other employee benefit plan, including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), to which the Company contributes or
is a party or is bound, or under which it may have liability, and under which
employees or former employees of the Company (or their beneficiaries) are
eligible to participate or derive a benefit (the foregoing herein referred to as
the "Employee Benefit Plans"). The Company has delivered to Parent true, correct
and complete copies of all Employee Benefit Plans, and the Company has complied
in all material aspects with any and all obligations required of it under the
terms of any plan listed on Schedule 4.14(a).
(b) Attached hereto as Schedule 4.14(b) are the names, citizenship,
immigration status (with respect to any non-U.S. citizen), and current rate of
compensation of all salaried and hourly paid employees employed by the Company
as of the date hereof, with all key employees being so designated.
26
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
Company for the benefit of or in connection with its 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 Company has not
received any notice of cancellation or termination of any of said policies or
bonds. Neither ▇▇▇▇▇▇ nor the Company 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. ▇▇▇▇▇▇ hereby represents and warrants that
the failure to have duly issued certificates of occupancy for the Main Facility
and the Ancillary Facilities shall not adversely affect any property or
liability insurance coverages applicable to the Main Facility or any of the
Ancillary Facilities.
4.16 Labor and Employment Matters. None of the employees of the Company
are covered by a collective bargaining agreement, and no collective bargaining
efforts with respect to any of the employees of the Company are pending or, to
the knowledge of the Company or ▇▇▇▇▇▇, threatened. No labor dispute, strike,
work stoppage, employee collective action or labor relations problem of any kind
is pending or, to the knowledge of the Company or ▇▇▇▇▇▇, is threatened. The
Company has 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.
27
4.17 Brokers and Finders. Except as set forth on Schedule 4.17, neither
▇▇▇▇▇▇ nor the Company has 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 the
consummation of the transactions contemplated hereby. ▇▇▇▇▇▇ agrees to be
responsible for paying all broker fees, commissions or other compensation
incurred by the Company as a result of this transaction.
4.18 Accounts Receivable.
(a) All accounts receivable of the Company shown on the Financial
Statements and the February 28, 2005 Financial Statements reflect or will
reflect, as the case may be, actual transactions, have or will have, as the case
may be, arisen in the ordinary course of business, and have been collected or
are now or will be, as the case may be, 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 and the February 28, 2005 Financial Statements.
(b) The Company has no knowledge as to any of the accounts
receivable of the Company being subject to any lien or claim of offset, set off
or counterclaim not provided for by the Company's allowance for doubtful
accounts as of the Closing Date.
4.19 Conflicts of Interests. Except as set forth on Schedule 4.19(a), no
officer, director or stockholder of the Company 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, the Company and the Company has
no commitments or obligations as a result of any such transactions prior to the
date hereof. Except as set forth on Schedule 4.19(b), 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,
stockholders, or directors own or have owned, 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) the
Company.
28
4.20 Environmental Compliance. Schedule 4.20 sets forth all government
agencies which substantially regulate the business of the Company under
Environmental, Health and Safety laws. The Company has complied in all material
respects with all applicable federal, state and local Environmental Health and
Safety Laws with respect to its premises and its operations and have kept its
premises free and clear of any liens and charges imposed pursuant to such laws.
The Company has not received any notice that any facts or conditions exist which
would give rise to any violation, claim, charge, penalty or liability relating
to any applicable Environmental Health and Safety Laws of any governmental body
or agency having jurisdiction over the premises. Attached hereto as a part of
Schedule 4.20 are true and complete copies of all environmental reports prepared
by third parties with respect to the Main Facility or any of the Ancillary
Facilities within the five (5) years preceding the date of this Agreement, and
neither the Company nor ▇▇▇▇▇▇ has any knowledge of any facts, circumstances or
occurrences materially different from those disclosed in or the findings of such
reports.
4.21 Ownership of the Stock. ▇▇▇▇▇▇ represents and warrants that he owns
all of the Stock beneficially and of record, free and clear of all liens,
restrictions, encumbrances, charges, and adverse claims and the Stock to be
purchased hereunder constitutes one hundred percent (100%) of issued and
outstanding stock of the Company. ▇▇▇▇▇▇ further represents and warrants that
there is no stockholders agreement or other agreement between or among him, the
Company or any other former stockholder, which would in any way affect, or give
any stockholder or former stockholder of the Company any rights with respect to,
the Stock or which would in any way affect the transaction contemplated by this
Agreement.
29
4.22 [Intentionally omitted.]
4.23 Approval of Merger; Related Matters. ▇▇▇▇▇▇ represents and warrants
that he, in his capacity as a shareholder of the Company, (a) approves of and
consents to the Merger as set forth in this Agreement, (b) waives any notice of
a shareholder's meeting or similar corporate formality in connection with the
approval of the transactions described herein, including, without limitation,
the Merger, (c) waives any rights to protest or object to the Merger or to the
exercise of any statutory remedy of appraisal as to the Stock owned by him as
provided in the FGCL, and (d) has received a copy of resolutions approving the
Merger in accordance with the FGCL. ▇▇▇▇▇▇ represents and warrants that he owes
no amounts to the Company pursuant to any promissory note issued by him or
otherwise.
4.24 Withholding. Each of ▇▇▇▇▇▇ and the Company represents and warrants
that neither the Company nor ▇▇▇▇▇▇ is a foreign person or entity, nor does the
Company or ▇▇▇▇▇▇ have other status, such that Parent would be required to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Agreement to any holder of the Stock any amounts under the Code, or any
provision of state, local or foreign tax law.
SECTION 5
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF PARENT AND SUBSIDIARY
As a material inducement to induce ▇▇▇▇▇▇ to consummate the Merger under
this Agreement, Parent and Subsidiary represent and warrant that each of the
matters set forth in this Section 5 are true and correct as of the date hereof,
and acknowledge that ▇▇▇▇▇▇' entry into this Agreement and the performance of
his obligations hereunder are made in reliance upon the completeness and
accuracy of each of the matters set forth herein. The representations and
warranties being made by Parent and Subsidiary shall survive as set forth in
Section 12.11 herein.
30
5.1 Organization, Qualifications and Corporate Power. Each of Parent
and Subsidiary is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization. Each of Parent and Subsidiary
is duly qualified as a foreign corporation in each jurisdiction in which
qualification is required. Each of Parent and Subsidiary 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 and all other agreements and instruments related hereto
or contemplated hereby to which Parent and Subsidiary, respectively, is a
signatory.
5.2 Authorization, etc. The execution, delivery and performance of this
Agreement and any other instruments or documents required to be executed and
delivered hereby, and the purchase of the Stock contemplated hereby, have been
authorized by all requisite corporate action 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 Incorporation
or Bylaws of Parent or Subsidiary, or violate any provision of any indenture,
agreement, insurance policy, bond or other instrument by which Parent or
Subsidiary, or any of their 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 Parent or Subsidiary is a party, or by which Parent or
Subsidiary, or any of their 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 Parent or Subsidiary.
31
5.3 Absence of Changes. Except as listed in Schedule 5.3, since the time
period covered by Form 10Q SB dated as of April 30, 2004 as filed with the U.S.
Securities Exchange Commission, Parent has not:
(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 change that is materially adverse to the business,
operations, or financial condition of Parent, taken as a whole, or become aware
of any event which may result in any such 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 Parent;
(f) Made or agreed to any change in the terms of any contract or
instrument to which it is a party;
(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;
32
(h) Declared, promised or made any distribution from its assets or
other payment from the assets to its shareholders (other than reasonable
compensation for services actually rendered) or issued any additional shares or
rights, options or calls with respect to its shares of capital stock, or
redeemed, purchased or otherwise acquired any of its 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 directors or executive officers other than in the
ordinary course of business;
(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 Parent as a going concern.
5.4 Governmental Approvals. 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 Parent or Subsidiary, is or will be necessary for
the valid execution, delivery, and performance of this Agreement by Parent and
Subsidiary.
33
5.5 Brokers Fees. Parent and Subsidiary represent that there are no
brokers, other than those set forth on Schedule 5.5, involved in this
transaction on their behalf. Parent and Subsidiary shall pay all broker fees
contractually obligated to be paid to those brokers set forth on Schedule 5.5.
5.6 Authorized Shares of Stock. There exists sufficient authorized, but
unissued, shares of Argan Stock necessary to enable Parent to satisfy any
obligation of it to issue shares of Argan Stock pursuant to this Merger
Agreement.
5.7 Survival of Company. The operations of the Company on the Closing Date
shall be accounted for separately from the other operations and businesses of
Parent after the Closing, until the expiration of the period for which the
February 28, 2005 Financial Statements will be prepared.
5.8 No Section 338 Election. Neither Parent nor Subsidiary shall make any
election under Section 338 of the Code with respect to any part of the
transaction contemplated hereunder without the express written consent of
▇▇▇▇▇▇.
34
5.9 Taxes. Parent has paid all taxes due, assessed and owed by it as
reflected on its consolidated tax returns, and has timely filed all federal,
state, local and other tax returns which were required to be filed by it, and
which were due since the Management Assumption Date (as hereinafter defined) and
prior to the Closing Date. The Current Management Team (as hereinafter defined)
has no knowledge that Parent failed to pay any taxes due, assessed and owed by
it, or failed to timely file any federal, state, local or other tax returns
which were required to be filed by it, and which were due prior to the
Management Assumption Date. No federal income tax returns for Parent have been
audited by the Internal Revenue Service or any state or local taxing authority
since the Management Assumption Date, and the Current Management Team has no
knowledge that any federal income tax returns for Parent were audited by the
Internal Revenue Service or any state or local taxing authority prior to the
Management Assumption Date. 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 Parent for any period for which returns have
been filed, and to the Current Management Team's knowledge, no other examination
by the Internal Revenue Service or any other taxing authority affecting Parent
is now pending or threatened. Taxes which Parent was required by law to withhold
or collect subsequent to the Management Assumption Date have been withheld or
collected and have been paid over to the proper governmental authorities or are
properly held by Parent for such payment and are so withheld, collected and paid
over as of the date hereof. No waivers of statutes of limitation with respect to
any tax returns of Parent, nor extensions of time for the assessment of any tax,
have been given by any current employees of Parent. For purposes of this Section
5.9, the "Management Assumption Date" shall mean April 29, 2003, being the date
that the Current Management Team assumed management responsibilities of Parent;
and the "Current Management Team" shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
35
5.10 Employees and Employee Benefit Plans. Attached hereto as Schedule
5.10 is a list of each pension, retirement, profit-sharing, deferred
compensation, bonus or other incentive plan, or program, arrangement, agreement
or other understanding, or medical, vision, dental or other health plan, or life
insurance or disability plan, or any other employee benefit plan, including,
without limitation, any "employee benefit plan" as defined in Section 3(3) of
ERISA, to which Parent contributes or is a party or is bound, or under which it
may have liability, and under which employees or former employees of Parent (or
their beneficiaries) are eligible to participate or derive a benefit (the
foregoing herein referred to as the "Parent Employee Benefit Plans"). Parent has
delivered to ▇▇▇▇▇▇ true, correct and complete copies of all Parent Employee
Benefit Plans, or summaries thereof, and Parent has complied in all material
aspects with any and all obligations required of it under the terms of any plan
listed on Schedule 5.10.
5.11 Releasing ▇▇▇▇▇▇ From Personal Guaranties. Parent hereby covenants
and agrees to use commercially reasonable efforts to obtain releases of personal
guaranties made by ▇▇▇▇▇▇ with respect to (i) the Master Lease Agreement dated
November 26, 2003 by and between the Company, as lessee, and Key Equipment
Finance, as lessor, as personally guaranteed by ▇▇▇▇▇▇ on schedules thereto
dated December 2, 2003 and March 22, 2004, respectively, (ii) the Master Lease
Agreement dated April 10, 2001 by and between the Company, as lessee, and First
Union Commercial Corporation, as lessor, as personally guaranteed by ▇▇▇▇▇▇ on
schedules thereto dated April 10, 2001, and (iii) the Master Lease Agreement
dated March 27, 2002 by and between the Company, as lessee, and First Union
Commercial Corporation, as lessor, as personally guaranteed by ▇▇▇▇▇▇ on a
schedule thereto dated March 27, 2002 (together, the "Guaranteed Equipment
Leases"). Parent and Surviving Corporation hereby agree that they will not,
without ▇▇▇▇▇▇' prior written consent, modify or amend any of the Guaranteed
Equipment Leases in any manner that would increase or extend ▇▇▇▇▇▇' guarantee
obligations thereunder.
36
SECTION 6
CONDITIONS TO CLOSING FOR PARENT
Parent's obligation to consummate the Merger under this Agreement 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 Parent.
6.1 Performance of Agreements. The Company shall have performed all
agreements contained herein and required to be performed by it prior to or at
the Closing and all of the representations and warranties made by it and ▇▇▇▇▇▇
in this Agreement shall be true and correct as of the Closing Date.
6.2 Lack of Material Liabilities. The Company shall not have incurred any
material liability, direct or contingent (as that term is ordinarily used),
other than in the ordinary course of its business, not reflected on the most
recent internally generated financial statements of the Company for the six (6)
month period ending as of June 30, 2004.
6.3 Financial Statements. Parent shall have received the Financial
Statements other than the Closing Balance Sheet. Parent also shall have received
the internally generated consolidated financial statements of the Company for
the three (3) month periods ending as of March 31, 2003, June 30, 2003,
September 30, 2003, December 30, 2003, and June 30, 2004, including appropriate
adjustments of balance sheet reserves for accounts receivable and tax accruals,
and to properly value inventory, to appropriate operating levels, as reviewed by
the Company's Regular CPA, and accepted by the accounting firm of Ernst & Young,
or such other accounting firm designated by Parent.
37
6.4 [Intentionally omitted.]
6.5 [Intentionally omitted.]
6.6 Employment Agreement. ▇▇▇▇▇▇ and the Company shall have executed that
certain Employment Agreement, a copy of which is attached hereto as Exhibit 6.6
(the "▇▇▇▇▇▇ Employment Agreement").
6.7 Opinion of Counsel. Parent shall have received an opinion of counsel
from the attorneys for the Company, dated as of the Closing Date, in form and
substance acceptable to Parent and its counsel.
6.8 Compliance Certificate. The Company shall have delivered to Parent a
certificate executed by its Chief Executive Officer, 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, in form and substance acceptable to Parent and its counsel..
6.9 [Intentionally omitted.]
6.10 [Intentionally omitted.]
6.11 [Intentionally omitted.]
6.12 Release from ▇▇▇▇▇▇; Payment of Amounts Owed by ▇▇▇▇▇▇. ▇▇▇▇▇▇ shall
execute and deliver to Parent, in a form satisfactory to Parent's counsel, a
release of any claim that he may have against the Company for the repayment of
any loan, claim for unpaid compensation, claim for indemnification, claim for
management fee, or otherwise. It is understood and agreed that the full amount
of all outstanding loans from ▇▇▇▇▇▇ to the Company, the full outstanding
balance of which be not greater than $507,514 as of the Closing Date, shall be
paid by Parent in full at Closing. All amounts due to the Company from ▇▇▇▇▇▇ or
any other former stockholder of the Company shall have been paid in full.
38
6.13 Corporate Documents. Parent shall have received copies of the
following documents:
(a) a certificate of the Chief Executive Officer of the Company
dated the Closing Date and certifying (i) that attached thereto is a true and
complete copy of the Articles of Incorporation and Bylaws 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 Board of Directors of the
Company authorizing the execution, delivery and performance of this 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
(b) such additional supporting documents and other information with
respect to the operations and affairs of the Company as Parent may reasonably
request.
All such documents described in (a) and (b) shall be satisfactory in form
and substance to Parent and its counsel. 6.14 Corporate Filings. The
Certificates of Merger shall be filed with the appropriate governmental
agencies.
6.15 Trustee of Plans. The Surviving Corporation shall at Closing cause a
successor trustee to be appointed, if necessary, for the Company's 401(k),
pension, profit-sharing or other retirement or employee benefit plans.
39
6.16 Assignment and Assumption of Real Property Leases. Naples Hawaii,
LLC, as landlord, the Company, as tenant, and Subsidiary, as assignee, shall
enter into an Assignment and Assumption of Lease, in form and substance
acceptable to Parent and its counsel, pursuant to which all of the Company's
right, title and interest in and to the Main Facility Lease shall be assigned to
and assumed by Subsidiary (the "Main Facility Lease Assignment"). In addition,
each of the landlords under the Ancillary Facilities Leases (other than the
landlord under the 4344 Lease), the Company, as tenant, and Subsidiary, as
assignee, shall enter into assignments and assumptions of leases, in form and
substance acceptable to Parent and its counsel, pursuant to which all of the
Company's right, title and interest in and to each of the Ancillary Facilities
Leases (other than the 4344 Lease, which is on a month to month basis and which
the Company intends to vacate) shall be assigned to and assumed by Subsidiary.
6.17 Assignment and Assumption of Equipment Leases. The Company, as
lessee/assignor, and Subsidiary, as assignee, shall enter into those Assignments
and Assumptions of Equipment Leases, in form and substance acceptable to Parent
and its counsel, pursuant to which all of the Company's right, title and
interest in and to said equipment leases listed on Schedule 4.9(a) shall be
assigned to and assumed by Subsidiary (the "Equipment Lease Assignments").
▇▇▇▇▇▇ shall reasonably cooperate with Parent and Subsidiary to obtain consents
to the Equipment Lease Assignments from the respective equipment lessors
identified therein.
6.18 Supply Agreement. Subsidiary and Vitarich Farms shall enter into the
Supply Agreement.
6.19 Registration Rights Agreement. Parent and ▇▇▇▇▇▇ shall enter into the
Registration Rights Agreement.
40
6.20 Cancellation of ▇▇▇▇▇ Agreement. The Understanding of Marketing
Agreement with ▇▇▇▇▇ ▇▇▇▇▇ dated January 22, 2003 referenced in Schedule 4.11
hereto shall be cancelled as of the Closing Date.
SECTION 7
CONDITIONS TO CLOSING FOR THE COMPANY AND ▇▇▇▇▇▇
The Company's and ▇▇▇▇▇▇' obligation to consummate the Merger under this
Agreement 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 the Company
and ▇▇▇▇▇▇.
7.1 Performance of Agreements. Parent and Subsidiary shall have performed
all agreements contained herein and required to be performed by them prior to or
at the Closing and all of the representations and warranties made by them in
this Agreement shall be true and correct as of the Closing Date.
7.2 Lack of Material Liabilities. Except as listed in Schedule 5.3, Parent
shall not have incurred any material liability, direct or contingent (as that
term is ordinarily used), other than in the ordinary course of its business, not
reflected on Form 10Q SB dated as of April 30, 2004 as filed with the U.S.
Securities Exchange Commission.
7.3 Employment Agreement. ▇▇▇▇▇▇ and the Company shall have executed the
▇▇▇▇▇▇ Employment Agreement.
7.4 Opinion of Counsel. ▇▇▇▇▇▇ shall have received an opinion of counsel
from the attorneys for Parent, dated as of the Closing Date, in form and
substance acceptable to ▇▇▇▇▇▇ and his counsel.
41
7.5 Compliance Certificate. Parent shall have delivered to ▇▇▇▇▇▇ a
certificate executed by its Executive Vice President, 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, in form and substance acceptable to ▇▇▇▇▇▇ and his counsel..
7.6 Employee Stock Options. Parent resolves to take any and all actions
necessary to grant up to 25,000 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 at the first regularly scheduled meeting of the board
of directors of Parent after Closing, with the strike price of such options
being the market price of the Argan Stock as of the date of the grant, but not
less than $7.75 per share.
7.7 Corporate Documents. ▇▇▇▇▇▇ shall have received copies of the
following documents:
(a) a certificate of the Executive Vice President of Parent dated
the Closing Date and certifying that attached thereto are true and complete
copies of (i) the Articles of Incorporation and Bylaws of Parent and Subsidiary
as in effect on the date of such certification; and (ii) resolutions adopted by
the Board of Directors of Parent and Subsidiary authorizing the execution,
delivery and performance of this 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
(b) such additional supporting documents and other information with
respect to the operations and affairs of Parent as ▇▇▇▇▇▇ may reasonably
request.
42
All such documents described in (a) and (b) shall be satisfactory in form
and substance to Parent and its counsel.
7.8 Corporate Filings. The Certificates of Merger shall be filed with the
appropriate governmental agencies.
7.9 Assignment and Assumption of Real Property Leases. Naples Hawaii, LLC,
as landlord, the Company, as tenant, and Subsidiary, as assignee, shall enter
into the Main Facility Lease Assignment. In addition, each of the landlords
under the Ancillary Facilities Leases (other than the landlord under the 4344
Lease), the Company, as tenant, and Subsidiary, as assignee, shall enter into
assignments and assumptions of leases substantially similar to the Main Facility
Lease Assignment, pursuant to which all of the Company's right, title and
interest in and to each of the Ancillary Facilities Leases (other than the 4344
Lease, which is on a month to month basis and which the Company intends to
vacate) shall be assigned to and assumed by Subsidiary.
7.10 Assignment and Assumption of Equipment Leases. The Company, as
lessee/assignor, and Subsidiary, as assignee, shall enter into the Equipment
Lease Assignments. ▇▇▇▇▇▇ shall reasonably cooperate with Parent and Subsidiary
to obtain consents to the Equipment Lease Assignments from the respective
equipment lessors identified therein.
7.11 Supply Agreement. Subsidiary and Vitarich Farms shall enter into the
Supply Agreement.
7.12 Registration Rights Agreement. Parent and ▇▇▇▇▇▇ shall enter into the
Registration Rights Agreement.
SECTION 8
RESTRICTIVE COVENANTS
43
8.1 Covenant Not to Compete. Except as authorized by Subsidiary and Parent
or by the terms of this Agreement, at all times during the period of five (5)
years from the date of Closing (the "Restrictive Period"), ▇▇▇▇▇▇ shall not,
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 Company or the Surviving Corporation; provided that such provision shall not
apply to ▇▇▇▇▇▇' ownership of Argan Stock or the acquisition by ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇ does not control, acquire a controlling interest in or become a
member of a group which exercises direct or indirect control of, more than 2% of
any class of capital stock or other indicia of ownership of such issuer.
44
8.2 Confidentiality. ▇▇▇▇▇▇ shall not divulge, communicate, use to the
detriment of the Company, the Surviving Corporation or Parent, 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 Company,
the Surviving Corporation or Parent. Any Confidential Information or data now or
hereafter acquired by ▇▇▇▇▇▇ with respect to the business of the Company, the
Surviving Corporation or Parent (which shall include, but not be limited to,
information concerning the Company's, the Surviving Corporation's or Parent'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
Company, the Surviving Corporation or Parent, as the case may be, that is
received by ▇▇▇▇▇▇ in confidence and as a fiduciary, and ▇▇▇▇▇▇ shall remain a
fiduciary to the Surviving Corporation and Parent with respect to all of such
information. For purposes of this Agreement, "Confidential Information" means
all trade secrets and information disclosed to ▇▇▇▇▇▇ or known by ▇▇▇▇▇▇ as a
consequence of or through the unique position of his employment with the Company
or the Surviving Corporation (including information conceived, originated,
discovered or developed by ▇▇▇▇▇▇ and information acquired by the Company or the
Surviving Corporation from others) prior to or after the date hereof, and not
generally or publicly known (other than as a result of unauthorized disclosure
by ▇▇▇▇▇▇), about the Company, the Surviving Corporation, Parent or their
respective businesses. Notwithstanding the foregoing, nothing herein shall be
deemed to restrict ▇▇▇▇▇▇ from disclosing Confidential Information as required
to perform his duties under the ▇▇▇▇▇▇ Employment Agreement or to the extent
required by law.
45
8.3 Non-Solicitation. At all times during the Restrictive Period, ▇▇▇▇▇▇
shall not, directly or indirectly, for himself 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
the Company, the Surviving Corporation or Parent; and/or (b) call on or solicit
any of the actual or targeted prospective customers or clients, or any actual
distributors or suppliers, of the Company, the Surviving Corporation or Parent
on behalf of himself or on behalf of any person or entity in connection with any
business that competes with the business of the Company or the Surviving
Corporation, nor shall ▇▇▇▇▇▇ make known the names or addresses or other contact
information of such actual or prospective customers or clients, or any such
actual distributors or suppliers, or any information relating in any manner to
the Company's or the Surviving Corporation's trade or business relationships
with such actual or prospective customers or clients, or any such actual
distributors or suppliers, other than in connection with the performance of
▇▇▇▇▇▇'▇ duties under the ▇▇▇▇▇▇ Employment Agreement.
46
8.4 Acknowledgment by ▇▇▇▇▇▇. ▇▇▇▇▇▇ acknowledges and confirms that the
restrictive covenants contained in this Article 8 (including without limitation
the length of the term of the provisions of this Article 8) are reasonably
necessary to protect the legitimate business interests of the Company, the
Surviving Corporation and Parent and are not overbroad, overlong, or unfair and
are not the result of overreaching, duress or coercion of any kind. ▇▇▇▇▇▇
further acknowledges that the restrictions contained in this Article 8 are
intended to be, and shall be, for the benefit of and shall be enforceable by,
the Surviving Corporation, Parent and their respective successors and assigns.
▇▇▇▇▇▇ expressly agrees that upon any breach or violation of the provisions of
this Article 8, the Company 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
8.7 hereof; and (b) such damages as are provided at law or in equity. The
existence of any claim or cause of action against the Company, the Surviving
Corporation or Parent or their respective affiliates, whether predicated upon
this Agreement or otherwise, shall not constitute a defense to the enforcement
of the restrictions contained in this Article 8.
8.5 Reformation by Court. In the event that a court of competent
jurisdiction shall determine that any provision of this Article 8 is invalid or
more restrictive than permitted under the governing law of such jurisdiction,
then only as to enforcement of this Article 8 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.
47
8.6 Extension of Time. If ▇▇▇▇▇▇ shall be in violation of any provision of
this Article 8, then each time limitation set forth in this Article 8 shall be
extended for a period of time equal to the period of time during which such
violation or violations occur. If the Surviving Corporation or Parent seeks
injunctive relief from such violation in any court, then the covenants set forth
in this Article 8 shall be extended for a period of time equal to the pendency
of such proceeding including all appeals by ▇▇▇▇▇▇.
8.7 Injunction. It is recognized and hereby acknowledged by the parties
hereto that a breach by ▇▇▇▇▇▇ of any of the covenants contained in Article 8 of
this Agreement will cause irreparable harm and damage to the Company, the
Surviving Corporation or Parent, as the case may be, the monetary amount of
which may be virtually impossible to ascertain. As a result, ▇▇▇▇▇▇ recognizes
and hereby acknowledges that the Company, the Surviving Corporation or Parent
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 8 of this Agreement by ▇▇▇▇▇▇ 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
Company, the Surviving Corporation or Parent may possess.
8.8 Survival. The provisions of this Article 8 shall survive the Closing.
SECTION 9
INDEMNIFICATION BY ▇▇▇▇▇▇
48
▇▇▇▇▇▇ shall indemnify, defend (with counsel acceptable to the indemnified
party) and hold harmless Parent, Subsidiary, the Surviving Corporation and each
of their respective subsidiaries and affiliates, and their respective directors,
officers, shareholders, members, 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):
9.1 Indemnification by ▇▇▇▇▇▇.
(a) Breach. Subject to the provisions of this Section 9 and except
as otherwise more specifically set forth herein, ▇▇▇▇▇▇ 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 incurred by such Buyer Indemnitee (i) as a result of or incident to
any material breach of any representation or warranty of the Company or ▇▇▇▇▇▇
set forth in Section 4 of this Agreement, (ii) as a result of or incident to any
material breach or nonfulfillment by the Company or ▇▇▇▇▇▇ of, or any
noncompliance by the Company or ▇▇▇▇▇▇ with, any covenant, agreement, or
obligation contained herein or in any certificate delivered in connection
herewith, (iii) resulting directly from the material inaccuracy of any list,
certificate or other instrument delivered by or on behalf of ▇▇▇▇▇▇ or the
Company in connection herewith, or (iv) for any liability of the Company, or of
Parent or Subsidiary, under the ▇▇▇▇▇▇ Stock Purchase Agreement.
(b) Environmental Indemnification. ▇▇▇▇▇▇ 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
49
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 Company's business as of the Closing Date: (i) which
(x) is imposed upon, or incurred by, a Buyer Indemnitee by reason of, relating
to or arising out of the violation by the Company prior to the Closing of any
Environmental, Health, and Safety Laws, (y) arises out of the discharge,
dispersal, release, storage, treatment, generation, disposal or escape of any
Hazardous Materials, on or from the Main Facility, the Ancillary Facilities or
any other facilities used by the Company as of the Closing Date, or (z) 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.
(c) Tax Matters. ▇▇▇▇▇▇ 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 or other 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 or resulting in any way from this
transaction.
(i) The Company shall furnish to Parent copies of the federal,
state, and local tax returns of the Company for the period ending on the Closing
Date and shall obtain the consent of Parent before filing such returns, which
consent shall not be unreasonably withheld.
(ii) Except as otherwise provided in this Agreement, Parent
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, including without limitation taxable periods ending on or before the
Closing Date, and to compromise, settle, or contest any tax claims in connection
therewith in its sole discretion, provided that Parent shall provide ▇▇▇▇▇▇ with
written notice of its intent to exercise its rights hereunder. ▇▇▇▇▇▇ shall have
the right, at his expense, to join Parent in any such defense.
(d) Broker Fee. ▇▇▇▇▇▇ hereby covenants and agrees to indemnify each
Buyer Indemnitee from any claim made by a broker, finder, agent or other
intermediary against any Buyer Indemnitee or the Company after Closing in
connection with the negotiation or execution of this Agreement or the
consummation of the transactions contemplated hereby, except for those claims
made against Parent or Subsidiary pursuant to Section 5.5 hereof.
(e) Set-Off. Except as otherwise provided in this Agreement, Parent
shall be entitled to set-off ▇▇▇▇▇▇' liability to Parent for indemnification
under this Section 9, or ▇▇▇▇▇▇' liability under any other paragraph of this
Agreement, after any dispute regarding such liability has been resolved in
writing and executed by all parties or a final judgment by a court of competent
jurisdiction or order of an appropriate arbitration panel, by crediting the
amount of liability against any Additional Consideration payable pursuant to
Section 2.4 of this Agreement; any such offset to be applied first against cash
and then against stock. Notwithstanding anything to the contrary contained in
this Agreement, in the event that Parent claims a right to set-off pursuant to
50
this Section 9.1(e), and notifies ▇▇▇▇▇▇ of such claim in writing prior to the
date that any Additional Consideration otherwise would be payable pursuant to
Section 2.4, then Parent's obligation to pay ▇▇▇▇▇▇ any Additional
Consideration, up to the amount of set-off claimed by Parent, shall be tolled
pending resolution of the dispute as set forth in this Section 9.1(e).
(f) Costs and Expenses. Except as otherwise provided in this
Agreement, all amounts indemnified pursuant to this Section 9 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 to enforce the rights granted hereunder.
(g) Termination of ▇▇▇▇▇▇'▇ Obligations. ▇▇▇▇▇▇'▇ obligations to
indemnify any Buyer Indemnitee, or to contribute to any party indemnifying any
Buyer Indemnitee, pursuant to this Section 9, shall expire two (2) years from
the Closing Date, except as to those involving (i) environmental matters, which
obligations shall expire three (3) years from the Closing Date, (ii) tax
matters, which obligations shall expire sixty (60) days after the expiration
date of the applicable statute of limitations for any such tax claim, and (iii)
actual fraud or intentional non-disclosure, which shall not expire; 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.
9.2 No Circular Recovery. ▇▇▇▇▇▇ hereby agrees that he will not make any
claim for indemnification against either Parent or Subsidiary by reason of the
fact that ▇▇▇▇▇▇ was a director, officer, employee, agent or other
representative of the Company or any of its subsidiaries (whether such claim is
for Adverse Consequences of any kind or otherwise and whether such claim is
51
pursuant to any statute, charter, by-law, contractual obligation or otherwise)
with respect to any claim for indemnification brought by Parent, the Surviving
Corporation, or their respective subsidiaries and affiliates, against ▇▇▇▇▇▇.
9.3 ▇▇▇▇▇▇'▇ Indemnification Threshold; Cap. Notwithstanding anything in
this Agreement to the contrary, (a) ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ Indemnification Threshold (as defined
hereinafter), at which point all amounts to be paid hereunder (including amounts
under the threshold) shall be due and owing; and (b) the maximum aggregate
liability of ▇▇▇▇▇▇ to the Buyer Indemnitees under this Agreement shall be an
amount equal to the Merger Consideration. For purposes of this Section 9.3,
"▇▇▇▇▇▇'▇ Indemnification Threshold" shall mean One Hundred Thousand Dollars
($100,000) in the aggregate, less the amount of any costs incurred by the
Surviving Corporation to obtain permanent certificates of occupancy for the Main
Facility and all of the Ancillary Facilities (including without limitation the
costs of any improvements or modifications required to the extent necessary to
so obtain same) pursuant to Section 4.9(c) above. The foregoing limitations
shall not apply to indemnification obligations arising from (i) fraudulent or
willful misrepresentations or intentional non-disclosure, (ii) any liability of
the Company, or of Parent or Subsidiary, under the ▇▇▇▇▇▇ Stock Purchase
Agreement.
SECTION 10
52
INDEMNIFICATION BY PARENT
Parent shall indemnify, defend (with counsel acceptable to ▇▇▇▇▇▇) and
hold harmless ▇▇▇▇▇▇ 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 Parent. Subject to the provisions of this Section
10 and except as otherwise more specifically set forth herein, Parent hereby
covenants and agrees to indemnify, defend, protect, and hold harmless ▇▇▇▇▇▇ at
all times from and after the date of this Agreement from and against all Adverse
Consequences incurred by ▇▇▇▇▇▇ (a) as a result of or incident to any material
breach of any representation or warranty of Parent set forth in Section 5 of
this Agreement, (b) as a result of or incident to any material breach or
nonfulfillment by Parent, or any noncompliance by Parent with, any covenant,
agreement, or obligation contained herein or in any certificate delivered in
connection herewith, or (c) resulting directly from the material inaccuracy of
any list, certificate or other instrument delivered by or on behalf of Parent in
connection herewith.
10.2 Broker Fee. Parent hereby covenants and agrees to indemnify ▇▇▇▇▇▇
from any claim made by a broker, finder, agent or other intermediary against
▇▇▇▇▇▇ after Closing in connection with the negotiation or execution of this
Agreement or the consummation of the transactions contemplated hereby, except
for those claims made against ▇▇▇▇▇▇, the Company or the Surviving Corporation
pursuant to Section 4.17 hereof.
10.3 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 ▇▇▇▇▇▇, including, but not limited to, the reasonable
costs of any actions, reasonable attorneys' fees, and other reasonable expenses
necessary to enforce the rights granted hereunder.
53
10.4 Termination of Parent's Obligations. Except with respect to the
indemnification obligations set forth in Section 10.6 below, Parent's
obligations to indemnify ▇▇▇▇▇▇ pursuant to this Section 10 shall expire two (2)
years from the Closing Date, except as to those involving actual fraud or
intentional non-disclosure, which shall not expire; provided, however, that if a
claim is asserted prior to the expiration of any of such indemnification period,
then the obligation to indemnify or to contribute shall be extended until the
final disposition or termination of such claim.
10.5 Parent's Indemnification Threshold; Cap. Notwithstanding anything in
this Agreement to the contrary, except with respect to the indemnification
obligations set forth in Section 10.6 below, (a) Parent shall not have any
indemnification payment obligations hereunder unless and until all Adverse
Consequences suffered or incurred by ▇▇▇▇▇▇ resulting from any untrue
representation, breach of warranty, nonfulfillment of any covenants, or other
indemnified matter exceed One Hundred Thousand Dollars ($100,000) in the
aggregate ("Parent's Indemnification Threshold"), at which point all amounts to
be paid hereunder (including amounts under the $100,000 threshold) shall be due
and owing; and (b) the maximum aggregate liability of Parent to ▇▇▇▇▇▇ under
this Agreement shall be an amount equal to the Merger Consideration. The
foregoing limitations shall not apply to indemnification obligations arising
from fraudulent or willful misrepresentations or intentional non-disclosure.
10.6 Indemnification for Personal Guaranties by ▇▇▇▇▇▇. Parent hereby
covenants and agrees to indemnify, defend and hold harmless ▇▇▇▇▇▇ from and
against any loss, liability, claim, damage or expense suffered or incurred by or
made against ▇▇▇▇▇▇ after Closing as a result of Parent's and/or the Surviving
Corporation's failure to perform its obligations with respect to any of the
Guaranteed Equipment Leases.
54
SECTION 11
[Intentionally omitted.]
SECTION 12
MISCELLANEOUS
12.1 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 provisions hereof.
12.2 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.
12.3 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 Company and Parent, the provisions of this
Agreement shall control.
12.4 Titles and Captions. All articles or section titles or captions in
this Agreement are for convenience of reference and are not part of this
Agreement and shall in no way define, limit, extend or describe the scope or
intent of provisions herein.
12.5 Exhibits. The Exhibits and Schedules referred to herein are hereby
made a part hereof.
55
12.6 Applicable Law. This Agreement is to be governed by, and construed,
interpreted, and enforced in accordance with, the laws of the State of Delaware.
12.7 Binding Effect and Assignment. This Agreement shall be binding to the
benefit of the successors and assigns of the parties. Notwithstanding the
foregoing, neither the Company nor Parent shall have any right to assign any of
its rights or obligations under this Agreement without the prior written consent
of the other parties hereto.
12.8 Notices. All notices, requests, instructions, or other documents
required hereunder shall be deemed to have been given or made when delivered by
registered or certified mail, return receipt requested, postage prepaid or by
messenger or overnight delivery service to:
If the Company then: Vitarich Laboratories, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If ▇▇▇▇▇▇ then: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
c/o Vitarich Laboratories, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy of any such notice
to the Company or to ▇▇▇▇▇▇ to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If Parent then: Argan, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
If Subsidiary then: AGAX/VLI Acquisition Corporation
c/o Argan, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
With a copy of any such notice to
Parent or Subsidiary to: ▇▇▇▇▇ ▇. Law
▇▇▇▇▇▇ Law ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
& Salans, PC
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
56
Any party may from time to time give the others written notice of a change
in the address to which notices are to be sent and of any successors in
interest.
12.9 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.
12.10 Acceptance or Approval. By accepting all or approving anything
required to be observed, performed, or fulfilled, or to be given to Parent
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, Parent 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.
12.11 Survival.
(a) All covenants, representations, and warranties made by ▇▇▇▇▇▇ in
this Agreement shall survive the Closing Date hereunder for the periods of
indemnification applicable thereto as set forth in Section 9.1(g).
(b) All covenants, representations, and warranties made by Parent in
this Agreement shall survive the Closing Date hereunder for the periods of
indemnification applicable thereto as set forth in Section 10.4.
57
12.12 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.
12.13 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one instrument.
12.14 Securities Matters. By executing this Agreement, Parent acknowledges
that: (a) Parent has been advised that the Stock has not been and will not have
been registered under the Act or the applicable securities laws of any state,
that ▇▇▇▇▇▇ in transferring such shares to Parent 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 as
issuer, underwriter or dealer and the applicable state exemption; (b) the Stock
may be "restricted" as that term is used in Rule 144 under the Act as a
consequence of which Parent may not be able to sell the shares unless such
shares 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; (c) the Stock will be acquired by Parent for purposes other
than a "distribution" as that term is used in Section 2(11) of the Act; and (d)
Parent will execute, if Stockholders so request, an appropriate letter affirming
that its intention with respect to the proposed acquisition of the Stock is that
such acquisition be for investment purposes only and not with a view toward
resale or distribution thereof.
58
12.15 Preparation and Filing of SEC Documents. If and whenever, as a
result of the transaction contemplated hereunder, Parent is under an obligation
to provide financial information to, or prepare a filing of any kind with, the
SEC, ▇▇▇▇▇▇ shall assist Parent 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 Parent.
12.16 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, including the execution and
delivery of such instruments and agreements as may be reasonably necessary or
advisable to fully effect the merger of the Company into the Subsidiary. In
addition, ▇▇▇▇▇▇ and the Company agree to timely execute and deliver any
documentation, and to take such other actions and satisfy such other conditions,
as may be required or imposed by Parent's banks or other third-party lenders in
connection with any existing or future debt of Parent necessary to carry-on the
regular business operations of Parent and its affiliates and subsidiaries,
including the Surviving Corporation.
[Signatures on following page]
59
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger on the day and year first above written.
ARGAN, INC.
By:
-----------------------------------------
Name: _________________________
Title: __________________________
VITARICH LABORATORIES, INC.
By:
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
--------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
AGAX/VLI ACQUISITION
CORPORATION
By:
-----------------------------------------
Name: _________________________
Title: __________________________
60