ACQUISITION TERM NOTE

$8,000,000 
Rockville, Maryland
 
 December 11, 2006

 
FOR VALUE RECEIVED, ARGAN, INC., a corporation organized under the laws of the
State of Delaware (“Argan”), SOUTHERN MARYLAND CABLE, INC., a corporation
organized under the laws of the State of Delaware (“SMC”), VITARICH
LABORATORIES, INC., a corporation organized under the laws of the State of
Delaware (“Vitarich”), GEMMA POWER, INC., a corporation organized under the laws
of the State of Connecticut (“GP”), GEMMA POWER SYSTEMS CALIFORNIA, INC., a
corporation organized under the laws of the State of California (“GPSC”), GEMMA
POWER SYSTEMS, LLC, a limited liability company organized under the laws of the
state of Connecticut (“GPS”), and GEMMA POWER HARTFORD, LLC, a limited liability
company organized under the laws of the State of Connecticut (“GPH”), jointly
and severally (each of Argan, SMC, Vitarich, GP, GPSC, GPS, and GPH, a
“Borrower” and collectively, the “Borrowers”); promise to pay to the order of
BANK OF AMERICA, N.A., a national banking association, its successors and
assigns (the “Lender”), the principal sum of EIGHT MILLION DOLLARS ($8,000,000)
(the “Principal Sum”), or so much thereof as has been or may be advanced to or
for the account of the Borrowers pursuant to the terms and conditions of the
Financing Agreement (as hereinafter defined), together with interest thereon at
the rate or rates hereinafter provided, in accordance with the following:
 
1. Interest.
 
Commencing as of the date hereof and continuing until repayment in full of all
sums due hereunder, the unpaid Principal Sum shall bear interest at the LIBOR
Rate, plus three hundred twenty five (325) basis points per annum. For purposes
hereof, the “LIBOR Rate” shall mean a daily fluctuating rate equal to the one
(1) month rate of interest (rounded upwards, if necessary to the nearest 1/100
of 1%) appearing on Telerate Page 3750 (or any successor page) as the one (1)
month London interbank offered rate for deposits in U.S. Dollars at
approximately 11:00 A.M. (London, time), on the second preceding business day,
as adjusted from time to time in the Lender’s sole discretion for
then-applicable reserve requirements, deposits insurance assessment rates and
other regulatory costs. If for any reason such rate is not available, the term
“LIBOR Rate” shall mean the fluctuating rate of interest equal to the one (1)
month rate of interest (rounded upwards, if necessary to the nearest 1/100 of
1%) appearing on Reuters Screen LIBO Page as the one (1) month London interbank
offered rate for deposits in U.S. Dollars at approximately 11:00 a.m. (London
Time) on the second preceding business day, as adjusted from time to time for
then-applicable reserve requirements, deposit insurance assessment rates and
other regulatory costs; provided, however, if more than one rate is specified on
Reuters Screen LIBO page, the applicable rate shall be the arithmetic mean of
all such rates.
 
The rate of interest charged under this Note shall change immediately and
contemporaneously with any change in the LIBOR Rate. All interest payable under
the terms of this Note shall be calculated on the basis of a 360-day year and
the actual number of days elapsed.
 
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2. Payments and Maturity.
 
The unpaid Principal Sum, together with interest thereon at the rate or rates
provided above, shall be payable as follows:
 
(a) The unpaid Principal Sum together with interest shall be due and payable in
forty-seven (47) monthly installments of principal each in the amount of One
Hundred Sixty-Sixty Thousand Six Hundred Sixty-Six Dollars and Sixty-Seven Cents
($166,666.67) plus accrued and unpaid interest, commencing January 31, 2007, and
on the last day of each month thereafter and one (1) monthly payment at maturity
of One Hundred Sixty-Sixty Thousand Six Hundred Sixty-Six Dollars and Fifty-One
Cents ($166,666.51) plus accrued and unpaid interest;
 
(b) Unless sooner paid, the unpaid Principal Sum, together with interest accrued
and unpaid thereon, shall be due and payable in full on January 31, 2011.
 
Borrower hereby authorizes Lender to automatically deduct from Borrower’s
account numbered 004467062810 the amount of each payment of principal (including
without limitation the principal payment due on the final maturity date) and/or
interest on the dates such payments become due. If the funds in the account are
insufficient to cover any payment, Lender shall not be obligated to advance
funds to cover the payment. At any time and for any reason, Borrower or Lender
may voluntarily terminate automatic payments as provided in this paragraph.
 
3. Default Interest.
 
Upon the occurrence of an Event of Default (as hereinafter defined), the unpaid
Principal Sum shall bear interest thereafter at the LIBOR Rate plus four percent
(4.00%) (the “Post-Default Rate”) per annum until such Event of Default is
cured.
 
4. Late Charges.
 
If the Borrowers shall fail to make any payment under the terms of this Note
within ten (10) days after the date such payment is due, the Borrowers shall pay
to the Lender on demand a late charge equal to five percent (5.00%) of such
payment.
 
5. Application and Place of Payments.
 
All payments, made on account of this Note shall be applied first to the payment
of accrued and unpaid interest then due hereunder, and the remainder, if any,
shall be applied to the unpaid Principal Sum. All payments on account of this
Note shall be paid in lawful money of the United States of America in
immediately available funds during regular business hours of the Lender at its
principal office in Rockville, Maryland or at such other times and places as the
Lender may at any time and from time to time designate in writing to the
Borrowers.
 
6. Prepayment.
 
The Borrowers may prepay the Principal Sum in whole or in part upon five (5)
days prior written notice to the Lender without premium or penalty.
 
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7. Financing Agreement and Other Financing Documents.
 
This Note is the “Acquisition Term Note” described in the Second Amended and
Restated Financing and Security Agreement of even date herewith by and among the
Borrowers and the Lender (as amended, modified, restated, substituted, extended
and renewed at any time and from time to time, the “Financing Agreement”). The
indebtedness evidenced by this Note is included within the meaning of the term
“Obligations” as defined in the Financing Agreement. The term “Financing
Documents” as used in this Note shall mean collectively this Note, the Revolving
Credit Note, the 2006 Term Note, the Financing Agreement and any other
instrument, agreement, or document previously, simultaneously, or hereafter
executed and delivered by any Borrower and/or any other Person, singularly or
jointly with any other Person, evidencing, securing, guaranteeing, or in
connection with the Principal Sum, this Note, the Revolving Credit Note, the
2006 Term Note, and/or the Financing Agreement.
 
8. Security.
 
This Note is secured as provided in the Financing Agreement.
 
9. Events of Default.
 
The occurrence of any one or more of the following events shall constitute an
event of default (individually, an “Event of Default” and collectively, the
“Events of Default”) under the terms of this Note:
 
(a) The failure of any Borrower to pay to the Lender within five (5) days of
when due any and all amounts payable by any Borrower to the Lender under the
terms of this Note; or
 
(b) The occurrence of an Event of Default (as defined therein) under the terms
and conditions of any of the other Financing Documents.
 
10. Remedies.
 
Upon the occurrence of an Event of Default, at the option of the Lender, all
amounts payable by the Borrowers to the Lender under the terms of this Note
shall immediately become due and payable by the Borrowers to the Lender without
notice to the Borrowers or any other Person, and the Lender shall have all of
the rights, powers, and remedies available under the terms of this Note, any of
the other Financing Documents and all applicable laws. The Borrowers and all
endorsers, guarantors, and other parties who may now or in the future be
primarily or secondarily liable for the payment of the indebtedness evidenced by
this Note hereby severally waive presentment, protest and demand, notice of
protest, notice of demand and of dishonor and non-payment of this Note and
expressly agree that this Note or any payment hereunder may be extended from
time to time without in any way affecting the liability of the Borrowers,
guarantors and endorsers.
 
11. Confessed Judgment.
 
Upon the occurrence of an Event of Default, each Borrower hereby authorizes any
attorney designated by the Lender or any clerk of any court of record to appear
for the Borrowers in any court of record and confess judgment without prior
hearing against the Borrowers in favor of the Lender for and in the amount of
the unpaid Principal Sum, all interest accrued and unpaid thereon, all other
amounts payable by any Borrower to the Lender under the terms of this Note or
any of the other Financing Documents, costs of suit, and attorneys’ fees of
fifteen percent (15%) of the unpaid Principal Sum and interest then due
hereunder. By its acceptance of this Note, the Lender agrees that in the event
the Lender exercises at any time its right to confess judgment under this Note,
the Lender shall use its best efforts to obtain legal counsel who will charge
the Lender for its services on an hourly basis, at its customary hourly rates
and only for the time and reasonable expenses incurred. In no event shall the
Lender enforce the legal fees portion of a confessed judgment award for an
amount in excess of the fees and expenses actually charged to the Lender for
services rendered by its counsel in connection with such confession of judgment
and/or the collection of sums owed to the Lender. In the event the Lender
receives, through execution upon a confessed judgment, payments on account of
attorneys’ fees in excess of such actual attorneys’ fees and expenses incurred
by the Lender, then, after full repayment and satisfaction of all of the
obligations under and in connection with this Note, the Financing Agreement and
all of the other Financing Documents, the Lender shall refund such excess amount
to the Borrowers. Each Borrower hereby releases, to the extent permitted by
applicable law, all errors and all rights of exemption, appeal, stay of
execution, inquisition, and other rights to which any Borrower may otherwise be
entitled under the laws of the United States of America or of any state or
possession of the United States of America now in force or which may hereafter
be enacted. The authority and power to appear for and enter judgment against the
Borrowers shall not be exhausted by one or more exercises thereof or by any
imperfect exercise thereof and shall not be extinguished by any judgment entered
pursuant thereto. Such authority may be exercised on one or more occasions or
from time to time in the same or different jurisdictions as often as the Lender
shall deem necessary or desirable, for all of which this Note shall be a
sufficient warrant.
 
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12. Expenses.
 
Each Borrower promises to pay to the Lender on demand by the Lender all costs
and expenses incurred by the Lender in connection with the collection and
enforcement of this Note, including, without limitation, reasonable attorneys’
fees and expenses and all court costs.
 
13. Notices.
 
Any notice, request, or demand to or upon the Borrowers or the Lender shall be
deemed to have been properly given or made when delivered in accordance with
Section 8.1 of the Financing Agreement.
 
14. Miscellaneous.
 
Each right, power, and remedy of the Lender as provided for in this Note or any
of the other Financing Documents, or now or hereafter existing under any
applicable law or otherwise shall be cumulative and concurrent and shall be in
addition to every other right, power, or remedy provided for in this Note or any
of the other Financing Documents or now or hereafter existing under any
applicable law, and the exercise or beginning of the exercise by the Lender of
any one or more of such rights, powers, or remedies shall not preclude the
simultaneous or later exercise by the Lender of any or all such other rights,
powers, or remedies. No failure or delay by the Lender to insist upon the strict
performance of any term, condition, covenant, or agreement of this Note or any
of the other Financing Documents, or to exercise any right, power, or remedy
consequent upon a breach thereof, shall constitute a waiver of any such term,
condition, covenant, or agreement or of any such breach, or preclude the Lender
from exercising any such right, power, or remedy at a later time or times. By
accepting payment after the due date of any amount payable under the terms of
this Note, the Lender shall not be deemed to waive the right either to require
prompt payment when due of all other amounts payable under the terms of this
Note or to declare an Event of Default for the failure to effect such prompt
payment of any such other amount. No course of dealing or conduct shall be
effective to amend, modify, waive, release, or change any provisions of this
Note.
 
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Until such time as the Lender is not committed to extend further credit to the
Borrowers and all Obligations of the Borrowers to the Lender have been
indefeasibly paid in full in cash, and subject to and not in limitation of the
provisions set forth in the next following paragraph below, no Borrower shall
have any right of subrogation (whether contractual, arising under the bankruptcy
code or otherwise), reimbursement or contribution from any Borrower or any
guarantor, nor any right of recourse to its security for any of the debts and
obligations of any Borrower which are the subject of this Note. Except as
otherwise expressly permitted by the Financing Agreement, any and all present
and future debts and obligations of any Borrower to any other Borrower are
hereby subordinated to the full payment and performance of all present and
future debts and obligations to the Lender under this Note and the Financing
Agreement and the Financing Documents, provided, however, notwithstanding
anything set forth in this Note to the contrary, prior to the occurrence of a
payment Default, the Borrowers shall be permitted to make payments on account of
any of such present and future debts and obligations from time to time in
accordance with the terms thereof.
 
Each Borrower further agrees that, if any payment made by any Borrower or any
other person is applied to this Note and is at any time annulled, set aside,
rescinded, invalidated, declared to be fraudulent or preferential or otherwise
required to be refunded or repaid, or the proceeds of any property hereafter
securing this Note is required to be returned by the Lender to any Borrower, its
estate, trustee, receiver or any other party, including, without limitation,
such Borrower, under any bankruptcy law, state or federal law, common law or
equitable cause, then, to the extent of such payment or repayment, such
Borrower's liability hereunder (and any lien, security interest or other
collateral securing such liability) shall be and remain in full force and
effect, as fully as if such payment had never been made, or, if prior thereto
any such lien, security interest or other collateral hereafter securing such
Borrower's liability hereunder shall have been released or terminated by virtue
of such cancellation or surrender, this Note (and such lien, security interest
or other collateral) shall be reinstated in full force and effect, and such
prior cancellation or surrender shall not diminish, release, discharge, impair
or otherwise affect the obligations of such Borrower in respect of the amount of
such payment (or any lien, security interest or other collateral securing such
obligation).
 
The JOINT AND SEVERAL obligations of each Borrower under this Note shall be
absolute, irrevocable and unconditional and shall remain in full force and
effect until the outstanding principal of and interest on this Note and all
other Obligations or amounts due hereunder and under the Financing Agreement and
the Financing Documents shall have been indefeasibly paid in full in cash in
accordance with the terms thereof and this Note shall have been canceled.
 
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The Borrowers each shall be jointly and severally liable on the payment of the
Obligations as and when due and payable in accordance with the provisions of
this Note, the Financing Agreement and the other Financing Documents. The term
"Borrowers" when used in this Note shall include all of the Borrowers,
individually and jointly, and the Lender may (without notice to or consent of
any or all of the Borrowers and with or without consideration) release,
compromise, settle with, proceed against any or all of the Borrowers without
affecting, impairing, lessening or releasing the obligations of the other
Borrower hereunder.
 
15. Partial Invalidity.
 
In the event any provision of this Note (or any part of any provision) is held
by a court of competent jurisdiction to be invalid, illegal, or unenforceable in
any respect, such invalidity, illegality, or unenforceability shall not affect
any other provision (or remaining part of the affected provision) of this Note;
but this Note shall be construed as if such invalid, illegal, or unenforceable
provision (or part thereof) had not been contained in this Note, but only to the
extent it is invalid, illegal, or unenforceable.
 
16. Captions.
 
The captions herein set forth are for convenience only and shall not be deemed
to define, limit, or describe the scope or intent of this Note.
 
17. Applicable Law.
 
Each Borrower acknowledges and agrees that this Note shall be governed by the
laws of the State of Maryland, even though for the convenience and at the
request of the Borrowers, this Note may be executed elsewhere.
 
18. Consent to Jurisdiction.
 
Each Borrower irrevocably submits to the jurisdiction of any state or federal
court sitting in the State of Maryland over any suit, action, or proceeding
arising out of or relating to this Note or any of the other Financing Documents.
Each Borrower irrevocably waives, to the fullest extent permitted by law, any
objection that any Borrower may now or hereafter have to the laying of venue of
any such suit, action, or proceeding brought in any such court and any claim
that any such suit, action, or proceeding brought in any such court has been
brought in an inconvenient forum. Final judgment in any such suit, action, or
proceeding brought in any such court shall be conclusive and binding upon the
Borrowers and may be enforced in any court in which any Borrower is subject to
jurisdiction by a suit upon such judgment, provided that service of process is
effected upon the Borrowers as provided in this Note or as otherwise permitted
by applicable law.
 
19. Service of Process.
 
Each Borrower hereby irrevocably designates and appoints CT Corporation,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, as
each Borrower’s authorized agent to receive on each Borrower’s behalf service of
any and all process that may be served in any suit, action, or proceeding
instituted in connection with this Note in any state or federal court sitting in
the State of Maryland. If such agent shall cease so to act, the Borrowers shall
irrevocably designate and appoint without delay another such agent in the State
of Maryland satisfactory to the Lender and shall promptly deliver to the Lender
evidence in writing of such agent’s acceptance of such appointment and its
agreement that such appointment shall be irrevocable.
 
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Each Borrower hereby consents to process being served in any suit, action, or
proceeding instituted in connection with this Note by (a) the mailing of a copy
thereof by certified mail, postage prepaid, return receipt requested, to each
Borrower and (b) serving a copy thereof upon the agent hereinabove designated
and appointed by each Borrower as each Borrower’s agent for service of process.
Each Borrower irrevocably agrees that such service shall be deemed in every
respect effective service of process upon the Borrowers in any such suit, action
or proceeding, and shall, to the fullest extent permitted by law, be taken and
held to be valid personal service upon the Borrowers. Nothing in this Section
shall affect the right of the Lender to serve process in any manner otherwise
permitted by law or limit the right of the Lender otherwise to bring proceedings
against the Borrowers in the courts of any jurisdiction or jurisdictions.
 
20. WAIVER OF TRIAL BY JURY.
 
EACH BORROWER AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH ANY BORROWER AND THE LENDER MAY BE PARTIES, ARISING OUT OF
OR IN ANY WAY PERTAINING TO (A) THIS NOTE OR (B) THE FINANCING DOCUMENTS. IT IS
AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF
ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS
AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE.
 
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY EACH BORROWER, AND
EACH BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE
BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY
WAY MODIFY OR NULLIFY ITS EFFECT. EACH BORROWER FURTHER REPRESENTS THAT IT HAS
BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT EACH HAS HAD
THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
 
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
 
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IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed under
seal by their duly authorized officers as of the date first written above. 
 

WITNESS/ATTEST:    ARGAN, INC.              /s/ Arthur Trudel   By: /s/ Rainer
Bosselmann               (SEAL)

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Name: Rainer Bosselmann
Title: Chairman and CEO
            WITNESS:   SOUTHERN MARYLAND CABLE, INC.             /s/ Rainer
Bosselmann    By:  /s/ Arthur Trudel                 (Seal)

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Name: Arthur Trudel
Title: CFO
            WITNESS/ATTEST:    VITARICH LABORATORIES, INC.             /s/
Rainer Bosselmann    By:  /s/ Arthur Trudel                  (Seal)

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Name: Arthur Trudel
Title: CFO
            WITNESS/ATTEST:   GEMMA POWER, INC.             /s/ Rainer
Bosselmann    By: /s/ Arthur Trudel                 (Seal)

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Name: Arthur Trudel
Title: CFO
            WITNESS/ATTEST:  
GEMMA POWER SYSTEMS
CALIFORNIA, INC.
            /s/ Rainer Bosselmann    By:  /s/ Arthur Trudel                
(Seal)

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Name: Arthur Trudel
Title: CFO

 
Signature Page to Acquisition Term Note
 
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WITNESS/ATTEST:    GEMMA POWER SYSTEMS, LLC             /s/ Joel M. Canino   By:
/s/ William F. Griffin, Jr.                   (Seal)

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Name: William F. Griffin, Jr.
Title: Manager
            WITNESS/ATTEST:   GEMMA POWER HARTFORD, LLC             /s/ Joel M.
Canino   By: /s/ William F. Griffin, Jr.                   (Seal)

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Name: William F. Griffin, Jr.
Title: Manager

 
Signature Page to Acquisition Term Note
 
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