Registration Rights Agreement between Argan, Inc. and MSR I SBIC, L.P. (January 28, 2005)

Summary

This agreement is between Argan, Inc. and MSR I SBIC, L.P. It grants the investor (MSR I SBIC, L.P.) the right to have shares of Argan's common stock, purchased under a separate subscription agreement, registered for resale with the SEC. Argan, Inc. must use its best efforts to file a registration statement within 180 days and keep the investor informed throughout the process. The agreement is effective for two years and includes certain conditions and exceptions, such as blackout periods when registration may be delayed.

EX-4.2 3 v012046_ex4-2.txt REGISTRATION RIGHTS AGREEMENT ARGAN, INC. EXHIBIT 4.2 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement") is made and entered into as of the 28th day of January, 2005 (the "Effective Date"), between Argan, Inc., a Delaware corporation (the "Company"), and MSR I SBIC, L.P., a Delaware limited partnership (the "Investor"). RECITALS: A. The Investor has purchased shares of the Company's common stock, par value $0.15 per share, pursuant to a Subscription Agreement of even date by and between the Company and the Investor (the "Subscription Agreement"). B. The Company and the Investor desire to set forth the registration rights to be granted by the Company to the Investor. NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants, and conditions set forth herein and in the Subscription Agreement, the parties mutually agree as follows: AGREEMENT: 1. Certain Definitions: As used in this Agreement, the following terms have the following respective meanings: "Blackout Period" means, with respect to a registration, a period not in excess of 90 calendar days in any calendar year during which the Company, in the good faith judgment of its Board of Directors, determines (because of the existence of, or in anticipation of, any acquisition, financing activity or other transaction involving the Company, or the unavailability for reasons beyond the Company's control of any required financial statements, disclosure of information which is in its best interest not to publicly disclose, or any other event or condition of similar significance to the Company) that the registration and distribution of the Registrable Securities to be covered by such registration statement, if any, would be seriously detrimental to the Company and its shareholders. "Certificate of Incorporation" means the Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Delaware, as the same may be amended from time to time. "Commission" means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Common Stock" means the common stock, par value $0.15 per share, of the Company and any and all shares of capital stock or other equity securities of: (i) the Company which are added to or exchanged or substituted for the Common Stock by reason of the declaration of any stock dividend or stock split, the issuance of any distribution or the reclassification, readjustment, recapitalization or other such modification of the capital structure of the Company; and (ii) any other corporation, now or hereafter organized under the laws of any state or other governmental authority, with which the Company is merged, which results from any consolidation or reorganization to which the Company is a party, or to which is sold all or substantially all of the shares or assets of the Company, if immediately after such merger, consolidation, reorganization or sale, the Company or the stockholders of the Company own equity securities having in the aggregate more than 50% of the total voting power of such other corporation. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Family Member" means (a) with respect to any individual, such individual's spouse, any descendants (whether natural, adopted or in the process of adoption), any trust all of the beneficial interests of which are owned by any of such individuals or by any of such individuals together with any organization described in Section 501 (c)(3) of the Internal Revenue Code of 1986, as amended, the estate of any such individual, and any corporation, association, partnership or limited liability company all of the equity interests of which are owned by those above described individuals, trusts or organizations and (b) with respect to any trust, the owners of the beneficial interests of such trust. "Holder" means the Investor or any of the Investor's respective successors and Permitted Assigns who acquire rights in accordance with this Agreement with respect to the Registrable Securities directly or indirectly from the Investor, including from a Permitted Assignee. "Permitted Assignee" means (a) with respect to a partnership, its partners or former partners in accordance with their partnership interests, (b) with respect to a corporation, its shareholders in accordance with their interest in the corporation, (c) with respect to a limited liability company, its members or former members in accordance with their interest in the limited liability company, (d) with respect to an individual party, any Family Member of such party, (e) an entity that is controlled by, controls, or is under common control with a Holder, or (f) a party to this Agreement. The terms "register", "registered" and "registration" refers to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. "Registrable Securities" means shares of Common Stock issued to the Investor pursuant to the Subscription Agreement, excluding (i) any Registrable Securities that have been publicly sold or may be sold immediately without registration under the Securities Act either pursuant to Rule 144 of the Securities Act or otherwise; (ii) any Registrable Securities sold by a person in a transaction pursuant to a registration statement filed under the Securities Act or (iii) any Registrable Securities which are at the time subject to an effective registration statement under the Securities Act. "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute promulgated in replacement thereof, and the rules and regulations of the Commission thereunder, all as the same are in effect at the time. 2. Term. This Agreement is in full force and effect for a period of two years from the Effective Date. 2 3. Registration. Not later that 180 days after the date hereof (the "Registration Filing Date"), the Company must use its commercially reasonable best efforts to file a registration statement relating to the resale by the Holders of all of the Registrable Securities; provided, however, that the Company is not obligated to effect any such registration, qualification or compliance pursuant to this Section 3, or keep such registration effective pursuant to Section 4: (i) in any particular jurisdiction in which the Company would be required to qualify to do business as a foreign corporation or as a dealer in securities under the securities or "blue sky" laws of such jurisdiction or to execute a general consent to service of process in effecting such registration, qualification or compliance, in each case where it has not already done so, or (ii) during any Blackout Period. 4. Registration Procedures. (a) In the case of each registration, qualification or compliance effected by the Company pursuant to Section 3 hereof, the Company will keep each Holder reasonably advised in writing as to the initiation of each registration, qualification and compliance and as to the completion thereof. With respect to any registration statement filed pursuant to Section 3, the Company will use its commercially reasonable best efforts to: (i) prepare and file with the Commission with respect to such Registrable Securities, a registration statement on any form which (a) the Company then qualifies for, (b) counsel for the Company deems appropriate, and (c) is available for the resale of the Registrable Securities in accordance with the intended method(s) of distribution thereof; provided that no later than five business days before filing with the Commission a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of any registration statement, the Company must (a) furnish to the underwriters, if any, and to one counsel ("Holders Counsel") selected by the Holders of a majority of the Registrable Securities covered by such registration statement copies of all such documents proposed to be filed (excluding any exhibits other than applicable underwriting documents), in substantially the form proposed to be filed, which documents are subject to the review of the underwriters and such counsel, and (b) notify each Holder of Registrable Securities covered by such registration statement of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered; (ii) cause such registration statement to become and remain effective at least for a period ending with the first to occur of (i) the sale of all Registrable Securities covered by the registration statement, and (ii) the availability under Rule 144 for the Holder to immediately, freely resell without restriction all Registrable Securities covered by the registration statement (the "Effectiveness Period"); (iii) if a registration statement is subject to review by the Commission, promptly respond to all comments and diligently pursue resolution of any comments to the satisfaction of the Commission; (iv) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective during the Effectiveness Period 3 (but in any event at least until expiration of the 90-day period referred to in Section 4(3) of the Securities Act and Rule 174, or any successor thereto, thereunder, if applicable), and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended method(s) of disposition by the sellers thereof set forth in such registration statement; (v) furnish, without charge, to each Holder one (1) signed copy of such registration statement (excluding any exhibits thereto other than applicable underwriting documents), each amendment and supplement thereto (including one (1) conformed copy to each Holder and one (1) signed copy to each managing underwriter and in each case including all exhibits thereto), and such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and any other prospectus filed under Rule 424 under the Securities Act) as such Holders may request, in conformity with the requirements of the Securities Act, and such other documents as such Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holder, but only during the Effectiveness Period; (vi) use its commercially reasonable best efforts to register or qualify such Registrable Securities under such other applicable securities or blue sky laws of such jurisdictions as any Holder, and underwriter, if any, of Registrable Securities covered by such registration statement reasonably requests as may be necessary for the marketability of the Registrable Securities (such request to be made by the time the applicable registration statement is deemed effective by the Commission) and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder and each underwriter, if any; provided that the Company is not required to (a) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 4(a)(vi), (b) register as a securities dealer, or (c) subject itself to taxation in any such jurisdiction; (vii) immediately notify each Holder of any event which causes the prospectus included in such registration statement to contain an untrue statement of a material fact or omit any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly prepare and furnish to such Holder a supplement or amendment to such prospectus (or prepare and file appropriate reports under the Exchange Act) so that, as thereafter delivered to the Holder of such Registrable Securities, such prospectus does not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, unless suspension of the use of such prospectus otherwise is authorized herein or in the event of an Blackout Period, in which case no supplement or amendment need be furnished (or Exchange Act filing made) until the termination of such suspension or Blackout Period; and (viii) comply, and continue to comply during the period that such registration statement is effective under the Securities Act, in all material respects with the Securities Act and the Exchange Act and with all applicable rules and regulations of the Commission with respect to the disposition of all securities covered by such registration statement. 4 (b) Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(a)(vii) or of the commencement of a Blackout Period, such Holder must discontinue disposition of Registrable Securities pursuant to the registration statement until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 4(a)(vii) hereof or notice of the end of the Blackout Period, and, if so directed by the Company, such Holder must deliver to the Company all copies (including, without limitation, any and all drafts), other than permanent file copies, then in such Holder's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event the Company gives any such notice, the period mentioned in Section 4(a)(i) hereof is extended by the greater of (i) ten business days or (ii) the number of days during the period from and including the date of the giving of such notice pursuant to Section 4(a)(vii) hereof to and including the date when such Holder of Registrable Securities covered by such registration statement has received the copies of the supplemented or amended prospectus contemplated by Section 4(a)(vii) hereof. 5. Registration Expenses. The Company must pay all expenses in connection with any registration, including, without limitation, all registration, filing, stock exchange and NASD fees, printing expenses, all fees and expenses of complying with securities or "blue sky" laws, and the fees and disbursements of counsel for the Company and of its independent accountants and the reasonable fees and disbursements of Holder's counsel; provided that, in any underwritten registration, each party must pay for its own underwriting discounts and commissions and transfer taxes. Except as provided in this Section 5 and in Section 8, the Company is not responsible for the expenses of any attorney or other advisor employed by a Holder of Registrable Securities. 6. Assignment of Rights. No Holder may assign its rights under this Agreement to any party without the prior written consent of the Company; provided, however, that a Holder may assign its rights under this Agreement to a Permitted Assignee upon notice to the Company. 7. Information by Holder. The Holder or Holders of Registrable Securities included in any registration must furnish to the Company such information regarding such Holder or Holders and the distribution proposed by such Holder or Holders as the Company may request in writing. 5 8. Indemnification. (a) In the event of the offer and sale of Registrable Securities held by Holders under the Securities Act, the Company must, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, each Holder, its directors, officers, partners, consultants, each other person who participates as an underwriter in the offering or sale of such securities, and each other person, if any, who controls or is under common control with such Holder or any such underwriter within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, and expenses to which the Holder or any such director, officer, partner, consultant or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such shares were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they were made not misleading, and the Company must reimburse the Holder, and each such director, officer, partner, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating, defending or settling any such loss, claim, damage, liability, action or proceeding; provided that the Company is not liable in any such case (i) to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or omission from such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder or (ii) if the person asserting any such loss, claim, damage, liability (or action or proceeding in respect thereof) who purchased the Registrable Securities that are the subject thereof did not receive a copy of an amended preliminary prospectus or the final prospectus (or the final prospectus as amended or supplemented) at or prior to the written confirmation of the sale of such Registrable Securities to such person because of the failure of such Holder or underwriter to so provide such amended preliminary or final prospectus and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact made in such preliminary prospectus was corrected in the amended preliminary or final prospectus (or the final prospectus as amended or supplemented). Such indemnity remains in full force and effect regardless of any investigation made by or on behalf of the Holders, or any such director, officer, partner, underwriter or controlling person and survives the transfer of such shares by the Holder. (b) As a condition to including Registrable Securities in a registration statement, each such Holder agrees to be bound by the terms of this Section 8 and to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors and officers, its consultants, underwriters and each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which the Company or any such director, officer, consultant or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged 6 untrue statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Holder, and such Holder must reimburse the Company, and each such director, officer, and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating, defending, or settling any such loss, claim, damage, liability, action, or proceeding. Such indemnity remains in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer by any Holder of such shares. (c) Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in Section 8(a) or (b) hereof (including any governmental action), such indemnified party must, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the indemnifying party of the commencement of such action; provided that the failure of any indemnified party to give notice as provided herein does not relieve the indemnifying party of its obligations under Section 8(a) or (b) hereof, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in the reasonable judgment of counsel to such indemnified party a conflict of interest between such indemnified and indemnifying parties may exist or the indemnified party may have defenses not available to the indemnifying party in respect of such claim, the indemnifying party is entitled to participate in and to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party is not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties arises in respect of such claim after the assumption of the defenses thereof or the indemnifying party fails to defend such claim in a diligent manner. Neither an indemnified nor an indemnifying party is liable for any settlement of any action or proceeding effected without its consent. No indemnifying party may, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement, which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. Notwithstanding anything to the contrary set forth herein, and without limiting any of the rights set forth above, in any event any party has the right to retain, at its own expense, counsel with respect to the defense of a claim. (d) In the event that an indemnifying party does or is not permitted to assume the defense of an action pursuant to Section 8(c) or in the case of the expense reimbursement obligation set forth in Section 8(a) and (b), the indemnification required by Section 8(a) and (b) hereof must be made by periodic payments of the amount thereof during the course of the investigation or defense, as, and when bills received or expenses, losses, damages, or liabilities are incurred. (e) If the indemnification provided for in this Section 8 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, 7 liability, claim, damage or expense referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, must (i) contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense as is appropriate to reflect the proportionate relative fault of the indemnifying party on the one hand and the indemnified party on the other (determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission relates to information supplied by the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission), or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or provides a lesser sum to the indemnified party than the amount hereinafter calculated, not only the proportionate relative fault of the indemnifying party and the indemnified party, but also the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other, as well as any other relevant equitable considerations. No indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) is entitled to contribution from any indemnifying party who was not guilty of such fraudulent misrepresentation. 9. Miscellaneous (a) Governing Law. This Agreement is governed by and construed in accordance with the laws of the State of New York and the United States of America, both substantive and remedial. Any judicial proceeding brought against either of the parties to this agreement or any dispute arising out of this Agreement or any matter related hereto may be brought in the courts of the State of New York or in the United States District Court for the Southern District of New York and, by its execution and delivery of this agreement, each party to this Agreement accepts the jurisdiction of such courts. The foregoing consent to jurisdiction does not confer rights on any person other than the parties to this Agreement. (b) Successors and Assigns. Except as otherwise provided herein, the provisions hereof inure to the benefit of, and be binding upon, the successors, Permitted Assigns, executors and administrators of the parties hereto. In the event the Company merges with, or is otherwise acquired by, a direct or indirect subsidiary of a publicly traded company, the Company shall condition the merger or acquisition to require such parent company to assume the Company's obligations under this Agreement. (c) Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof. (d) Notices, etc. All notices or other communications which are required or permitted under this Agreement must be in writing and sufficient if delivered by hand, by facsimile transmission, by registered or certified mail, postage pre-paid, or by courier or overnight carrier, to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall be deemed to have been delivered as of the date so delivered: 8 If to the Company: Argan, Inc. Attention: Rainer Bosselmann One Church Street; Suite 302 Rockville, Maryland 20850 If to the Investor: MSR I SBIC, L.P. 8 Wright Street Westport, Connecticut 06880 Attn: General Partner or at such other address as any party furnishes to the other parties in writing. (e) Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any Holder of any Registrable Securities, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy of such Holder and shall not be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring. Any waiver of any single breach or default is not a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Holder of any breach or default under this Agreement, or any waiver on the part of any Holder of any provisions or conditions of this Agreement, must be in writing and is effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, or by law or otherwise afforded to any Holder, are cumulative and not alternative. (f) Counterparts. This Agreement may be executed in any number of counterparts, each of which is enforceable against the parties actually executing such counterparts, and all of which together constitute one instrument. (g) Severability. In the case any provision of this Agreement is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions are not in any way be affected or impaired thereby. (h) Amendments. The provisions of this Agreement may be amended at any time and from time to time, and particular provisions of this Agreement may be waived, with and only with an agreement or consent in writing signed by the Company and by the Holders. 9 This Agreement is hereby executed as of the date first above written. COMPANY: ARGAN, INC. By: /s/ Rainer Bosselmann --------------------------------- Name: Rainer Bosselmann --------------------------------- Its: Chairman of the Board and Chief Executive Officer --------------------------------- INVESTOR: MSR I SBIC, L.P. By: MSR I SBIC PARTNERS, LLC Its General Partner By: MSR ADVISORS, INC. Its Manager By: /s/ Daniel A. Levinson -------------------------------- Name: Daniel A. Levinson Its: President