PLEDGE, ASSIGNMENT AND SECURITY AGREEMENT
 
THIS PLEDGE, ASSIGNMENT AND SECURITY AGREEMENT (this “Agreement”) is made this
11th day of December, 2006, by ARGAN, INC., a corporation organized under the
laws of the State of Delaware (the “Pledgor”) for the benefit of BANK OF
AMERICA, N.A., a national banking association, its successors and assigns (the
“Lender”).
 
RECITALS
 
A. The Pledgor, Southern Maryland Cable, Inc., a corporation organized under the
laws of the State of Delaware, Vitarich Laboratories, Inc., a corporation
organized under the laws of the State of Delaware, Gemma Power Systems, LLC, a
Connecticut limited liability company, Gemma Power, Inc., a corporation
organized under the laws of the State of Connecticut, Gemma Power Systems
California, Inc., a corporation organized under the laws of the State of
California, and Gemma Power Hartford, LLC, a limited liability company organized
under the laws of the State of Connecticut (collectively, the “Borrowers”) and
the Lender have entered into a Second Amended and Restated Financing and
Security Agreement dated the same date as this Agreement (as amended, modified,
restated, substituted, extended and renewed at any time and from time to time,
the “Financing Agreement”).
 
B. It is a condition precedent, among others, to the Lender’s agreement to enter
into the Financing Agreement and to make loans and other financial
accommodations thereunder that the Pledgor enter into this Agreement in order to
secure the full and prompt performance of all of the “Obligations” defined in
the Financing Agreement and under all of the other Financing Documents.
 
C. All defined terms used in this Agreement and not defined in this Agreement
shall have the meaning given to such terms in the Financing Agreement.
 
AGREEMENTS
 
NOW, THEREFORE, in consideration of the Lender’s entering into the Financing
Agreement and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the Pledgor hereby agrees as follows:
 
ARTICLE I
SECURITY
 

 
Section 1.1
The Collateral.

 
As security for the prompt and full performance of the Obligations, and as
security for the prompt and full performance of all obligations of the Pledgor
under this Agreement, and all of the Obligations of the Pledgor and/or any other
Person under the Financing Agreement and all of the other Financing Documents,
all of the foregoing, whether now in existence or hereafter created and whether
joint, several, or both, primary, secondary, direct, contingent or otherwise,
the Pledgor hereby pledges, assigns and grants to the Lender a security interest
in the following property of the Pledgor (collectively, the “Collateral”),
whether now existing or hereafter created or arising:
 
(a) all rights, title and interest in and to the membership interests and any
other equity ownership interests (the “LLC Interest”) of Gemma Power Systems,
LLC, a limited liability company organized under the laws of the State of
Connecticut (the “Company”), as its the sole member, under the operating
agreement, as the same may have been or may be amended, supplemented, restated,
or otherwise modified at any time and from time to time (the “Operating
Agreement”);
 

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(b) all rights to receive any and all cash and non-cash distributions
(regardless of how such distributions are classified and including any and all
distributions-in-kind and liquidating distributions), profits, losses, income,
revenue, returns of capital, repayments of any loans made by Pledgor to the
Company (including interest and fees with respect to such loans), and any and
all development, management and similar fees payable by the Company to Pledgor
of any kind or nature whatsoever, together with any and all other rights and
property interests including, but not limited to, accounts, contract rights,
instruments and general intangibles arising out of, under or relating to the
Operating Agreement;
 
(c) all other or additional equity or debt interests, other securities or
property (including cash) paid or distributed in respect of the LLC Interest by
way of any spin-off, merger, consolidation, dissolution, combination,
reclassification or exchange of equity interests, asset sales, or similar
rearrangement or reorganization;
 
(d) all other or additional equity or debt interests, other securities or
property (including cash) which may be paid or distributed in respect of the LLC
Interest by reason of any consolidation, merger, exchange of equity of debt
interests, conveyance of assets, liquidation or similar corporate
reorganization; and
 
(e) all proceeds and products (both cash and non-cash) of the foregoing, whether
now or hereafter arising under any of the foregoing.
 

 
Section 1.2
Rights of the Lender in the Collateral.

 
The Pledgor agrees that with respect to the Collateral the Lender shall have all
the rights and remedies of a secured party under the Uniform Commercial Code, as
well as those provided by law and/or in this Agreement. Notwithstanding the fact
that the proceeds of the Collateral constitute part of the Collateral, the
Pledgor may not dispose of the Collateral or any part thereof.
 

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Section 1.3
Registration of Pledge.

 
If any of the Collateral is or shall become evidenced or represented by an
uncertificated security and if and to the extent requested by the Lender, the
Pledgor agrees, by Notice of Pledge, substantially in the form attached to this
Agreement as Exhibit B, to (i) notify the Company immediately of the pledge,
assignment and security agreement under this Agreement and (ii) issue the
Initial Transaction Statement, substantially in the form attached to this
Agreement as Exhibit C. The Pledgor hereby authorizes and directs the Company to
(i) register the Pledgor’s pledge to the Lender of the Collateral on the
Company’s books (ii) make, following written notice to do so by the Lender,
direct payment to the Lender of any amounts due or to become due to the Pledgor
with respect to the Collateral and (iii) comply with all instructions originated
by the Lender without further consent by the Pledgor. The Pledgor acknowledges
that the Lender has control over the Collateral within the meaning of Section
8-106 of the Uniform Commercial Code.
 

 
Section 1.4
Rights of the Pledgor in the Collateral.

 
Until an Event of Default (as that term is defined in ARTICLE IV (Default and
Rights and Remedies)) occurs, the Pledgor shall be entitled (a) to vote all
ownership or equity interests, (b) to give consents, waivers and ratification to
any and all actions of the Company requiring member approval, and (c) to receive
all cash and non-cash distributions which may be paid on the Collateral and
which are not otherwise prohibited by the Financing Documents. Any cash
distribution payable in respect of the Collateral which represents, in whole or
in part, a return of capital or a violation of this Agreement or the other
Financing Documents shall be received by the Pledgor in trust for the Lender,
shall be paid immediately to the Lender and shall be retained by the Lender as
part of the Collateral.
 
ARTICLE II
REPRESENTATIONS AND WARRANTIES
 
To induce the Lender to advance sums to the Pledgor under the Financing
Agreement, the Pledgor represents and warrants to the Lender and shall be deemed
to represent and warrant at the time of each request for, and the time of each
advance under, the credit facilities described in the Financing Agreement, as
follows:
 

 
Section 2.1
Percentage Ownership.

 
The LLC Interest represents one hundred percent (100%) of the membership
interests of the Company and thereafter the Collateral will continue to
represent the same percentage of the membership interest of the Company, unless
otherwise permitted under the Financing Agreement.
 

 
Section 2.2
Power and Authority.

 
The Pledgor has full corporate power and authority to execute and deliver this
Agreement and the other Financing Documents to which it is a party, to assign
and pledge the Collateral and perform all other obligations required hereunder
with respect to the Collateral and interests, and to incur and perform its
obligations whether under this Agreement, the other Financing Documents or
otherwise, all of which have been duly authorized by all proper and necessary
corporate action. No consent or approval of the shareholders or any creditors of
the Pledgor, the Company, or members of the Company, and no consent, approval,
filing or registration with or notice to any Governmental Authority on the part
of the Pledgor, is required as a condition to the execution, delivery, validity
or enforceability of this Agreement or the other Financing Documents or the
performance of the Obligations, including, without limitation, the right of the
Lender to dispose of the Collateral following an Event of Default. The Pledgor
has full right, power and authority and has all voting rights in any
organizational matters as may be represented by the Collateral.
 

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Section 2.3
Binding Agreements.

 
This Agreement and the other Financing Documents executed and delivered by the
Pledgor have been properly executed and delivered and constitute the valid and
legally binding obligations of the Pledgor and are fully enforceable against the
Pledgor in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties, and general
principles of equity regardless of whether applied in a proceeding in equity or
at law.
 

 
Section 2.4
No Conflicts.

 
Neither the execution, delivery and performance of the terms of this Agreement
or of any of the other Financing Documents executed and delivered by the Pledgor
nor the consummation of the transactions contemplated by this Agreement will
conflict with, violate or be prevented by (a) the Pledgor’s charter or bylaws,
(b) any existing mortgage, indenture, contract or agreement binding on the
Pledgor or affecting its property, or (c) any Laws.
 

 
Section 2.5
Compliance with Laws.

 
The Pledgor is not in violation of any applicable Laws (including, without
limitation, any Laws relating to employment practices, to environmental,
occupational and health standards and controls) or order, writ, injunction,
decree or demand of any court, arbitrator, or any Governmental Authority
affecting the Pledgor or any of its properties, the violation of which could
adversely affect the authority of the Pledgor to enter into, or the ability of
the Pledgor to perform under, this Agreement or any of the other Financing
Documents executed by the Pledgor.
 

 
Section 2.6
Title to Properties.

 
The Pledgor has good and marketable title to the Collateral. The Pledgor has
legal, enforceable and uncontested rights to use freely such property and
assets. The Pledgor is the sole owner of all of the Collateral, free and clear
of all security interests, pledges, voting trusts, agreements, Liens, claims and
encumbrances whatsoever, other than the security interest, assignment and lien
granted under this Agreement.
 

 
Section 2.7
Perfection and Priority of Collateral.

 
The Lender has, or upon execution, delivery and recording of this Agreement and
the Security Documents will have, and will continue to have as security for the
Obligations and the other obligations secured by this Agreement, a valid and
perfected Lien on and security interest in all of the Collateral, free of all
other Liens, claims and rights of third parties whatsoever.
 

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ARTICLE III
COVENANTS
 
Until payment in full and the performance of all of the Obligations and all of
the obligations of the Pledgor hereunder or secured hereby, the Pledgor
covenants and agrees with the Lender as follows:
 

 
Section 3.1
Corporate Existence.

 
The Pledgor shall maintain its corporate existence in good standing in the
jurisdiction in which it is incorporated and in each other jurisdiction where it
is required to register or qualify to do business if the failure to do so in
such other jurisdiction might have a material adverse effect on the ability of
the Pledgor to perform its obligations under this Agreement, on the conduct of
the Pledgor’s operations, on the Pledgor’s financial condition, or on the value
of, or the ability of the Lender to realize upon, the Collateral.
 

 
Section 3.2
Delivery of Certificated Collateral.

 
If any of the Collateral is or shall become evidenced or represented by a
certificated security, the Pledgor shall deliver immediately to the Lender (a)
the certificates representing the LLC Interests, (b) immediately upon its
receipt of any additional (or fewer) LLC Interests in the Company, the
certificates representing such additional LLC Interests, (c) all instruments,
items of payment and other Collateral received by the Pledgor, and (d) executed
irrevocable, undated and blank membership powers, substantially in the form
attached to this Agreement as Exhibit A, for all of the assigned LLC Interests.
All Collateral at any time received or held by the Pledgor shall be received and
held by the Pledgor in trust for the benefit of the Lender, and shall be kept
separate and apart from, and not commingled with, the Pledgor’s other assets.
 

 
Section 3.3
Defense of Title and Further Assurances.

 
The Pledgor will do or cause to be done all things necessary to preserve and to
keep in full force and effect its interests in the Collateral, and shall defend,
at its sole expense, the title to the Collateral and any part thereof. The
Pledgor hereby authorizes the filing of any financing statement or continuation
statement required under the Uniform Commercial Code. Further, the Pledgor shall
promptly, upon request by the Lender, execute, acknowledge and deliver any
financing statement, endorsement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate or other document as the
Lender may require in order to perfect, preserve, maintain, protect, continue,
realize upon, and/or extend the lien and security interest of the Lender under
this Agreement and the priority thereof. The Pledgor shall pay to the Lender
upon demand all taxes, costs and expenses (including but not limited to
reasonable attorney’s fees) incurred by the Lender in connection with the
preparation, execution, recording and filing of any such document or instrument
mentioned aforesaid.
 

 
Section 3.4
Compliance with Laws.

 
The Pledgor shall comply with all applicable Laws and observe the valid
requirements of Governmental Authorities, the noncompliance with or the
nonobservance of which might have a material adverse effect on the ability of
the Pledgor to perform its obligations under this Agreement or any of the
Financing Documents to which the Pledgor is a party or on the conduct of the
Pledgor’s operations, on the Pledgor’s financial condition, or on the value of,
or the ability of the Lender to realize upon, the Collateral.
 

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Section 3.5
Protection of Collateral.

 
The Pledgor agrees that the Lender may at any time take such steps as the Lender
deems reasonably necessary to protect the Lender’s interest in, and to preserve
the Collateral. The Pledgor agrees to cooperate fully with the Lender’s efforts
to preserve the Collateral and will take such actions to preserve the Collateral
as the Lender may in good faith direct. All of the Lender’s expenses of
preserving the Collateral, including, without limitation, reasonable attorneys’
fees, shall be part of the Enforcement Costs.
 

 
Section 3.6
Certain Notices.

 
The Pledgor will promptly notify the Lender in writing of any Event of Default
and of any litigation, regulatory proceeding, or other event which materially
and adversely affects the value of the Collateral, the ability of the Pledgor or
the Lender to dispose of the Collateral, or the rights and remedies of the
Lender in relation thereto.
 

 
Section 3.7
Books and Records; Information.

 
(a) The Pledgor shall maintain proper books of record and account in which full,
true and correct entries are made of all dealings and transactions in relation
to the Collateral and which reflect the Lien of the Lender thereon.
 
(b) The Pledgor agrees that the Lender may from time to time and at its option
(i) require the Pledgor to, and the Pledgor shall, periodically deliver to the
Lender records and schedules, which show the status of the Collateral and such
other matters which affect the Collateral; (ii) verify the Collateral and
inspect the books and records of the Pledgor and make copies thereof or extracts
therefrom; (iii) notify any prospective buyers or transferees of the Collateral
of the Lender’s interest in the Collateral; and (iv) disclose to prospective
buyers or transferees from the Lender any and all information regarding the
Company, the Collateral and/or the Pledgor.
 

 
Section 3.8
Disposition of Collateral.

 
The Pledgor will not sell, assign, convey, transfer or otherwise dispose of the
Collateral or any part thereof.
 

 
Section 3.9
Distributions.

 
The Pledgor shall receive no dividend or distribution or other benefit with
respect to the Company, and shall not vote, consent, waive or ratify any action
taken, which would violate or be inconsistent with any of the terms and
provisions of this Agreement, the Financing Agreement or any of the other
Financing Documents or which would materially impair the position or interest of
the Lender in the Collateral or dilute the percentage of the ownership interests
of the Company pledged to the Lender hereunder, except as expressly permitted by
the Financing Agreement.
 

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Section 3.10
Liens.

 
The Pledgor will not create, incur, assume or suffer to exist any Lien upon any
of the Collateral, other than Liens in favor of the Lender.
 

 
Section 3.11
Survival.

 
All representations and warranties contained in or made under or in connection
with this Agreement and the other Financing Documents shall survive the making
of any advance under the Financing Agreement and the incurring of any other
Obligations and the other obligations secured by this Agreement.
 
ARTICLE IV
DEFAULT AND RIGHTS AND REMEDIES
 
 

 
Section 4.1
Events of Default.

 
The occurrence of any one or more of the following events shall constitute an
“Event of Default” under the provisions of this Agreement:
 

 
4.1.1
Default under Financing Agreement.

 
An Event of Default shall occur under the Financing Agreement.
 

 
4.1.2
Default under this Agreement.

 
If the Pledgor shall fail to duly perform, comply with or observe any of the
terms, conditions or covenants of this Agreement.
 

 
4.1.3
Breach of Representations and Warranties.

 
Any representation or warranty made in this Agreement or in any report,
statement, schedule, certificate, opinion (including any opinion of counsel for
the Pledgor), financial statement or other document furnished by the Pledgor or
its agents or representatives in connection with this Agreement, any of the
other Financing Documents, or the Obligations or the other obligations secured
by this Agreement, shall prove to have been false or misleading when made (or,
if applicable, when reaffirmed) in any material respect.
 

 
Section 4.2
Remedies.

 
Upon the occurrence of any Default or Event of Default, the Lender may at any
time thereafter exercise any one or more of the following rights, powers or
remedies:
 

 
4.2.1
Uniform Commercial Code.

 
The Lender shall have all of the rights and remedies of a secured party under
the applicable Uniform Commercial Code and other applicable Laws.
 

 
4.2.2
Sale or Other Disposition of Collateral.

 
The Lender may sell or redeem the Collateral, or any part thereof, in one or
more sales, at public or private sale, conducted by any officer or agent of, or
auctioneer or attorney for, the Lender, at the Lender’s place of business or
elsewhere, for cash, upon credit or future delivery, and at such price or prices
as the Lender shall, in its sole discretion, determine, and the Lender may be
the purchaser of any or all of the Collateral so sold. Further, any written
notice of the sale, disposition or other intended action by the Lender with
respect to the Collateral which is sent by regular mail, postage prepaid, to the
Pledgor at the address set forth in Section 5.1 (Notices), or such other address
of the Pledgor which may from time to time be shown on the Lender’s records, at
least ten (10) days prior to such sale, disposition or other action, shall
constitute commercially reasonable notice to the Pledgor. The Lender may
alternatively or additionally give such notice in any other commercially
reasonable manner. Nothing in this Agreement shall require the Lender to give
any notice not required by applicable Laws.
 

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If any consent, approval, or authorization of any Governmental Authority or any
Person having any interest therein, should be necessary to effectuate any sale
or other disposition of the Collateral, the Pledgor agrees to execute all such
applications and other instruments, and to take all other action, as may be
required in connection with securing any such consent, approval or
authorization.
 
The Pledgor recognizes that the Lender may be unable to effect a public sale of
all or a part of the Collateral consisting of securities by reason of certain
prohibitions contained in the Securities Act of 1933, as amended, and other
applicable federal and state Laws. The Lender may, therefore, in its discretion,
take such steps as it may deem appropriate to comply with such Laws and may, for
example, at any sale of the Collateral consisting of securities restrict the
prospective bidders or purchasers as to their number, nature of business and
investment intention, including, without limitation, a requirement that the
Persons making such purchases represent and agree to the satisfaction of the
Lender that they are purchasing such securities for their account, for
investment, and not with a view to the distribution or resale of any thereof.
The Pledgor covenants and agrees to do or cause to be done promptly all such
acts and things as the Lender may request from time to time and as may be
necessary to offer and/or sell the securities or any part thereof in a manner
which is valid and binding and in conformance with all applicable Laws.
 

 
4.2.3
Specific Rights With Regard to Collateral.

 
In addition to all other rights and remedies provided hereunder or as shall
exist at law or in equity from time to time, the Lender may (but shall be under
no obligation to), without notice to the Pledgor, and the Pledgor hereby
irrevocably appoints the Lender as its attorney-in-fact, with power of
substitution, in the name of the Lender or in the name of the Pledgor or
otherwise, for the use and benefit of the Lender, but at the cost and expense of
the Pledgor and without notice to the Pledgor:
 
(a) compromise, extend or renew any of the Collateral or deal with the same as
it may deem advisable;
 
(b) make exchanges, substitutions or surrenders of all or any part of the
Collateral;
 
(c) copy, transcribe, or remove from any place of business of the Pledgor all
books, records, ledger sheets, correspondence, invoices and documents, relating
to or evidencing any of the Collateral or without cost or expense to the Lender,
make such use of the Pledgor’s places of business as may be reasonably necessary
to administer, control and collect the Collateral;
 

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(d) institute and prosecute legal and equitable proceedings to enforce
collection of, or realize upon, any of the Collateral;
 
(e) settle, renew, extend, compromise, compound, exchange or adjust claims in
respect of any of the Collateral or any legal proceedings brought in respect
thereof;
 
(f) endorse or sign the name of the Pledgor upon any instruments, securities,
powers, documents, or other writing relating to or part of the Collateral; and
 
(g) take any other action necessary or beneficial to realize upon or dispose of
the Collateral.
 

 
4.2.4
Application of Proceeds.

 
Any proceeds of sale or other disposition of the Collateral will be applied by
the Lender to the payment of the Enforcement Costs, and any balance of such
proceeds will be applied by the Lender to the payment of the balance of the
Obligations and the other obligations secured by this Agreement in such order
and manner of application as the Lender may from time to time in its sole and
absolute discretion determine. If the sale or other disposition of the
Collateral fails to fully satisfy the Obligations and the other obligations
secured by this Agreement, the Pledgor shall remain liable to the Lender for any
deficiency.
 

 
4.2.5
Performance by Lender.

 
If the Pledgor shall fail to perform, observe or comply with any of the
conditions, covenants, terms, stipulations or agreements contained in this
Agreement or any of the other Financing Documents, the Lender without notice to
or demand upon the Pledgor and without waiving or releasing any of the
Obligations or any Default or Event of Default, may (but shall be under no
obligation to) at any time thereafter make such payment or perform such act for
the account and at the expense of the Pledgor, and may enter upon the premises
of the Pledgor for that purpose and take all such action thereon as the Lender
may consider necessary or appropriate for such purpose and the Pledgor hereby
irrevocably appoints the Lender as its attorney-in-fact to do so, with power of
substitution, in the name of the Lender or in the name of the Pledgor or
otherwise, for the use and benefit of the Lender, but at the cost and expense of
the Pledgor and without notice to the Pledgor. All sums so paid or advanced by
the Lender together with interest thereon from the date of payment, advance or
incurring until paid in full at the Post-Default Rate and all costs and
expenses, shall be deemed part of the Enforcement Costs, shall be paid by the
Pledgor to the Lender on demand, and shall constitute and become a part of the
Obligations.
 

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4.2.6
Other Remedies.

 
The Lender may from time to time proceed to protect or enforce its rights by an
action or actions at law or in equity or by any other appropriate proceeding,
whether for the specific performance of any of the covenants contained in this
Agreement or in any of the other Financing Documents, or for an injunction
against the violation of any of the terms of this Agreement or any of the other
Financing Documents, or in aid of the exercise or execution of any right, remedy
or power granted in this Agreement, the Financing Documents, and/or applicable
Laws.
 

 
Section 4.3
Costs and Expenses.

 
The Pledgor shall pay on demand all costs and expenses (including reasonable
attorney’s fees), all of which shall be deemed part of the Obligations, incurred
by and on behalf of the Lender incident to any collection, servicing, sale,
disposition or other action taken by the Lender with respect to the Collateral
or any portion thereof.
 

 
Section 4.4
Receipt Sufficient Discharge to Purchaser.

 
Upon any sale or other disposition of the Collateral or any part thereof, the
receipt of the Lender or other Person making the sale or disposition shall be a
sufficient discharge to the purchaser for the purchase money, and such purchaser
shall not be obligated to see to the application thereof.
 

 
Section 4.5
Remedies, etc. Cumulative.

 
Each right, power and remedy of the Lender as provided for in this Agreement or
in any of the other Financing Documents or in any related instrument or
agreement or now or thereafter existing at law or in equity or by statute or
otherwise shall be cumulative and concurrent and shall be in addition to every
other right, power or remedy provided for in this Agreement or in the other
Financing Documents or in any related document, instrument or agreement or now
or hereafter existing at law or in equity or by statute or otherwise, 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.
 

 
Section 4.6
No Waiver, etc.

 
No failure or delay by the Lender to insist upon the strict performance of any
term, condition, covenant or agreement of this Agreement or of any of the other
Financing Documents or of any related documents, instruments or agreements, 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 any later time or times. By accepting payment after the due date of
any amount payable under this Agreement or under any of the other Financing
Documents or under any related document, instrument or agreement, the Lender
shall not be deemed to waive the right either to require prompt payment when due
of all other amounts payable under this Agreement or under any other of the
Financing Documents, or to declare a default for failure to effect such prompt
payment of any such other amount.
 

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ARTICLE V
MISCELLANEOUS
 

 
Section 5.1
Notices.

 
All notices, requests and demands to or upon the parties to this Agreement shall
be in writing and shall be deemed to have been given or made when delivered by
hand on a Business Day, or two (2) days after the date when deposited in the
mail, postage prepaid by registered or certified mail, return receipt requested,
or when sent by overnight courier, on the Business Day next following the day on
which the notice is delivered to such overnight courier, addressed as follows: 
 
Pledgor:
Argan, Inc.
 
One Church Street, Suite 302
 
Rockville, Maryland 20850
 
Attention: Arthur F. Trudel
 
Chief Financial Officer    
with a copy to:
Robinson & Cole LLP
 
280 Trumbull Street
 
Hartford, Connecticut 06103
 
Attention: Eileen P. Baldwin, Esq.    
Lender:
Bank of America, N.A.
 
1101 Wootton Parkway, 4th Floor
 
Rockville, Maryland 20852
 
Attention: Michael J. Radcliffe
 
Senior Vice President    
with a copy to:
Troutman Sanders LLP
 
1660 International Drive, Suite 600
 
McLean, Virginia 22102
 
Attention: Richard M. Pollak, Esq.

 
By written notice, each party to this Agreement may change the address to which
notice is given to that party, provided that such changed notice shall include a
street address to which notices may be delivered by overnight courier in the
ordinary course on any Business Day.
 

 
Section 5.2
Amendments; Waivers.

 
This Agreement and the other Financing Documents may not be amended, modified,
or changed in any respect except by an agreement in writing signed by the Lender
and the Pledgor. No waiver of any provision of this Agreement or of any of the
other Financing Documents, nor consent to any departure by the Pledgor
therefrom, shall in any event be effective unless the same shall be in writing.
No course of dealing between the Pledgor and the Lender and no act or failure to
act from time to time on the part of the Lender shall constitute a waiver,
amendment or modification of any provision of this Agreement or any of the other
Financing Documents or any right or remedy under this Agreement, under any of
the other Financing Documents or under applicable Laws.
 

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Section 5.3
Cumulative Remedies.

 
The rights, powers and remedies provided in this Agreement and in the other
Financing Documents are cumulative, may be exercised concurrently or separately,
may be exercised from time to time and in such order as the Lender shall
determine and are in addition to, and not exclusive of, rights, powers and
remedies provided by existing or future applicable Laws. In order to entitle the
Lender to exercise any remedy reserved to it in this Agreement, it shall not be
necessary to give any notice, other than such notice as may be expressly
required in this Agreement. Without limiting the generality of the foregoing,
the Lender may:
 
(a) proceed against the Pledgor with or without proceeding against any other
Person who may be liable for all or any part of the Obligations;
 
(b) proceed against the Pledgor with or without proceeding under any of the
other Financing Documents or against any Collateral or other collateral and
security for all or any part of the Obligations;
 
(c) without notice, release or compromise with any guarantor or other Person
liable for all or any part of the Obligations under the Financing Documents or
otherwise; and
 
(d) without reducing or impairing the obligations of the Pledgor and without
notice thereof: (i) fail to perfect the Lien in any or all Collateral or to
release any or all the Collateral or to accept substitute collateral, (ii) waive
any provision of this Agreement or the other Financing Documents, (iii) exercise
or fail to exercise rights of set-off or other rights, or (iv) accept partial
payments or extend from time to time the maturity of all or any part of the
Obligations.
 

 
Section 5.4
Severability.

 
In case one or more provisions, or part thereof, contained in this Agreement or
in the other Financing Documents shall be invalid, illegal or unenforceable in
any respect under any Law, then without need for any further agreement, notice
or action:
 
(a) the validity, legality and enforceability of the remaining provisions shall
remain effective and binding on the parties thereto and shall not be affected or
impaired thereby;
 
(b) the obligation to be fulfilled shall be reduced to the limit of such
validity;
 
(c) if such provision or part thereof pertains to repayment of the Obligations,
then, at the sole and absolute discretion of the Lender, all of the Obligations
of the Pledgor to the Lender shall become immediately due and payable; and
 

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(d) if affected provision or part thereof does not pertain to repayment of the
Obligations, but operates or would prospectively operate to invalidate this
Agreement in whole or in material part, then such provision or part thereof only
shall be void, and the remainder of this Agreement shall remain operative and in
full force and effect.
 

 
Section 5.5
Successors and Assigns.

 
This Agreement and all other Financing Documents shall be binding upon and inure
to the benefit of the Pledgor and the Lender and their respective heirs,
personal representatives, successors and assigns, except that the Pledgor shall
not have the right to assign its rights hereunder or any interest herein without
the prior written consent of the Lender.
 

 
Section 5.6
Applicable Law; Jurisdiction.

 

 
5.6.1
Applicable Law.

 
This Agreement, shall be governed by the Laws of the State, as if each of the
Financing Documents and this Agreement had been executed, delivered,
administered and performed solely within the State.
 

 
5.6.2
Submission to Jurisdiction.

 
The Pledgor irrevocably submits to the jurisdiction of any state or federal
court sitting in the State over any suit, action or proceeding arising out of or
relating to this Agreement or any of the other Financing Documents. The Pledgor
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of the 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 Pledgor and may be enforced in
any court in which the Pledgor is subject to jurisdiction, by a suit upon such
judgment, provided that service of process is effected upon the Pledgor in one
of the manners specified in this Section or as otherwise permitted by applicable
Laws.
 

 
5.6.3
Appointment of Agent for Service of Process.

 
The Pledgor hereby irrevocably designates and appoints CT Corporation System,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 as the
Pledgor’s authorized agent to receive on the Pledgor’s behalf service of any and
all process that may be served in any suit, action or proceeding of the nature
referred to in this Section in any state or federal court sitting in the State.
If such agent shall cease so to act, the Pledgor shall irrevocably designate and
appoint without delay another such agent in the State satisfactory to the Lender
and shall promptly deliver to the Lender evidence in writing of such other
agent’s acceptance of such appointment and its agreement that such appointment
shall be irrevocable.
 

 
5.6.4
Service of Process.

 
The Pledgor hereby consents to process being served in any suit, action or
proceeding of the nature referred to in this Section by (a) the mailing of a
copy thereof by registered or certified mail, postage prepaid, return receipt
requested, to the Pledgor at the Pledgor’s address designated in or pursuant to
Section 5.1 (Notices), and (b) serving a copy thereof upon the agent, if any,
designated and appointed by the Pledgor as the Pledgor’s agent for service of
process by or pursuant to this Section. The Pledgor irrevocably agrees that such
service (y) shall be deemed in every respect effective service of process upon
the Pledgor in any such suit, action or proceeding, and (z) shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon the Pledgor. 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 Pledgor in the courts of
any jurisdiction or jurisdictions.
 

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Section 5.7
Headings.

 
The headings in this Agreement are included herein for convenience only, shall
not constitute a part of this Agreement for any other purpose, and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.
 

 
Section 5.8
Entire Agreement.

 
This Agreement is intended by the Lender and the Pledgor to be a complete,
exclusive and final expression of the agreements contained herein. Neither the
Lender nor the Pledgor shall hereafter have any rights under any prior
agreements but shall look solely to this Agreement for definition and
determination of all of their respective rights, liabilities and
responsibilities under this Agreement.
 

 
Section 5.9
Waiver of Trial by Jury.

 
THE BORROWER AND THE LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES,
ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE
FINANCING DOCUMENTS, OR (C) THE COLLATERAL. 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 AGREEMENT.
 
This waiver is knowingly, willingly and voluntarily made by the Pledgor and the
Lender, and the Pledgor and the Lender hereby represent 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. The Pledgor and the
Lender further represent that they have been represented in the signing of this
Agreement and in the making of this waiver by independent legal counsel,
selected of their own free will, and that they have had the opportunity to
discuss this waiver with counsel.
 

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Section 5.10
Liability of the Lender.

 
The Pledgor hereby agrees that the Lender shall not be chargeable for any
negligence, mistake, act or omission of any accountant, examiner, agency or
attorney employed by the Lender in making examinations, investigations or
collections, the Lender’s failure to preserve or protect any rights of the
Pledgor under the Collateral or the Lender’s failure to perfect, maintain,
protect or realize upon any lien or security interest or any other interest in
the Collateral or other security for the Obligations. By inspecting the
Collateral or any other properties of the Pledgor or by accepting or approving
anything required to be observed, performed or fulfilled by the Pledgor or to be
given to the Lender pursuant to this Agreement or any of the other Financing
Documents, the Lender shall not be deemed to have warranted or represented the
condition, sufficiency, legality, effectiveness or legal effect of the same, and
such acceptance or approval shall not constitute any warranty or representation
with respect thereto by the Lender.
 
[SIGNATURE APPEARS ON THE FOLLOWING PAGE]
 

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IN WITNESS WHEREOF, the Pledgor has caused this Pledge, Assignment and Security
Agreement to be executed, sealed and delivered, as of the day and year first
written above.
 

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

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Name: Rainer Bosselmann
Title: Chairman and CEO

 

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EXHIBIT A
 
LLC POWER
 
FOR VALUE RECEIVED, the undersigned, ARGAN, INC., a Delaware corporation
(“Pledgor”) does hereby sell, assign and transfer to
__________________________________* all of its Equity Interests (as hereinafter
defined) represented by Certificate No(s). _______* in Gemma Power Systems, LLC,
a Connecticut limited liability company (“Issuer”), standing in the name of
Pledgor on the books of said Issuer. Pledgor does hereby irrevocably constitute
and appoint ________________________________*, as attorney, to transfer the
Equity Interest in said Issuer with full power of substitution in the premises.
The term “Equity Interest” means any security, share, unit, partnership
interest, membership interest, ownership interest, equity interest, option,
warrant, participation, “equity security” (as such term is defined in
Rule 3(a)11-1 of the General Rules and Regulations of the Securities Exchange
Act of 1934, as amended, or any similar statute then in effect, promulgated by
the Securities and Exchange Commission and any successor thereto) or analogous
interest (regardless of how designated) of or in a corporation, partnership,
limited partnership, limited liability company, limited liability partnership,
business trust or other entity, of whatever nature, type, series or class,
whether voting or nonvoting, certificated or uncertificated, common or
preferred, and all rights and privileges incident thereto.
 

     
Dated:  ________________* 
PLEDGOR:
     
ARGAN, INC.
 
   
   
  By:      

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Name: 
Title: 

 
*To Remain Blank - Not Completed at Closing. 
 

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EXHIBIT B
 
NOTICE OF PLEDGE
 
Pledge by Argan, Inc.     (the “Pledgor”)
 
To: Gemma Power Systems, LLC  (the “Company”)
 
Notice is hereby given that, pursuant to a Pledge, Assignment and Security
Agreement (a copy of which is attached hereto), dated December __, 2006, (the
“Assignment Agreement”) from the Pledgor to Bank of America, N.A. (the
“Lender”), the Pledgor has pledged, assigned and granted to the Lender a
continuing security interest in, all of its right, title and interest, whether
now existing or hereafter arising our acquired, in, to, and under the following
(the “Collateral”):
 
(a) All rights, title and interest in and to the membership interests and any
other equity ownership interests (the “LLC Interest”) of the Company, as its the
[sole] member, under the operating agreement, as the same may have been or may
be amended, supplemented, restated, or otherwise modified at any time and from
time to time (the “Operating Agreement”);
 
(b) all rights to receive any and all cash and non-cash distributions
(regardless of how such distributions are classified and including any and all
distributions-in-kind and liquidating distributions), profits, losses, income,
revenue, returns of capital, repayments of any loans made by Pledgor to the
Company (including interest and fees with respect to such loans), and any and
all development, management and similar fees payable by the Company to Pledgor
of any kind or nature whatsoever, together with any and all other rights and
property interests including, but not limited to, accounts, contract rights,
instruments and general intangibles arising out of, under or relating to the
Operating Agreement;
 
(c) all other or additional equity or debt interests, other securities or
property (including cash) paid or distributed in respect of the Company by way
of any spin-off, merger, consolidation, dissolution, combination,
reclassification or exchange of equity interests, asset sales, or similar
rearrangement or reorganization; and
 
(d) all proceeds and products (both cash and non-cash) of the foregoing, whether
now or hereafter arising under any of the foregoing..
 
Pursuant to the Assignment Agreement, the Company is hereby authorized and
directed to:
 
(i) register on the Company’s books the Pledgor’s pledge to the Lender of the
Pledgor’s interests in the Company;
 

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(ii) make direct payment to the Lender of any amounts due or to become due to
the Pledgor under the Operating Agreement, if so notified by the Lender; and
 
(iii) comply with all instructions originated by the Lender without further
consent by the Pledgor.
 
The Pledgor hereby requests the Company to indicate the Company’s acceptance of
this Notice of Pledge and consent to and confirm its terms and provisions by
signing a copy hereof where indicated below and returning the same to the Lender
along with an Initial Transaction Statement in the form attached hereto.
 
Dated as of ____________, 200_
 

       
ARGAN, INC.
 
   
   
  By:   /s/ Rainer Bosselmann            (SEAL)  

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Name: Rainer Bosselmann
Title: Chairman and CEO

 

       
GEMMA POWER SYSTEMS, LLC
 
   
   
  By:  
/s/ William F. Griffin, Jr.          (Seal)
 

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

 

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EXHIBIT C
 
INITIAL TRANSACTION STATEMENT
 
(Pledge by Argan, Inc, the “Pledgor”)
 
To: 
 
   Attention: 
 
Re:  Member Interests in Gemma Power Systems, LLC, (the “Company”)
 
1. Registration of Pledge. This is to confirm registration by the Company of the
pledge to the Lender of the entire right, title and interest in and to the
Company (the “Interest”) owned of record by the Pledgor, the holder of one
hundred percent (100%) of the ownership interests in the Company.
 
Such pledge was registered on _________, _____.
 
The address of the registered owner of the Interest is:
 
The registered owner’s Taxpayer I.D. No. is ___________________.
 
2. Liens, Adverse Claims and Restrictions. The Interest is not subject to any
liens or restrictions of the Company or adverse claims.
 
(a) The Interest is subject to all of the terms of the operating agreement of
the Company and of applicable laws.
 
(b) The Interest may not be transferred without compliance with the provisions
of the operating agreement of the Company and compliance with applicable federal
and state securities laws.
 
(c) At the time of registration of the pledge described above, the Interest was
not subject to any liens or restrictions of the Company (except as set forth
above or in the operating agreement), or any adverse claims as to which the
Company has a duty pursuant to applicable state law.
 
This Initial Transaction Statement is a record of the rights of the Lender as of
the time of its issuance, and is neither a negotiable instrument nor a security.
 

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Dated as of ____________, 200_.
 

       
GEMMA POWER SYSTEMS, LLC
 
   
   
    By:   /s/ William F. Griffin, Jr.        (Seal)  

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

 

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