<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1995
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-6354
AMERICAN VANGUARD CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-2588080
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
4695 MacArthur Court, Newport Beach, California 92660
- ----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(714) 260-1200
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of each class:
Common Stock, $.10 par value
----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The number of shares of $.10 par value Common Stock outstanding as of March 22,
1996, was 2,522,079. The aggregate market value of the voting stock of the
registrant held by non-affiliates at March 22, 1996, was $12,191,400. For
purposes of this calculation, shares owned by executive officers, directors, and
5% stockholders known to the registrant have been deemed to be owned by
affiliates.
<PAGE> 2
AMERICAN VANGUARD CORPORATION
ANNUAL REPORT ON FORM 10-K
December 31, 1995
<TABLE>
<CAPTION>
PART I PAGE NO.
<S> <C> <C>
Item 1. Business 1
Item 2. Properties 8
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of
Security Holders 15
PART II
Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters 16
Item 6. Selected Financial Data 17
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operation 18
Item 8. Financial Statements and Supplementary
Data 26
Item 9. Changes in and Disagreements With
Accountants on Accounting and
Financial Disclosure 27
PART III
Item 10. Directors and Executive Officers of the
Registrant 28
Item 11. Executive Compensation 30
Item 12. Security Ownership of Certain
Beneficial Owners and Management 33
Item 13. Certain Relationships and Related
Transactions 34
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K 35
SIGNATURES 37
</TABLE>
<PAGE> 3
PART I
ITEM 1 BUSINESS
American Vanguard Corporation was incorporated under the laws
of the State of Delaware in January 1969 and operates as a holding company.
Unless the context otherwise requires, references to the "Company", the
"Registrant" or "AMVAC" in this Annual Report refer to American Vanguard
Corporation and its consolidated subsidiaries. The Company conducts its business
through its wholly-owned subsidiaries, Amvac Chemical Corporation ("CHEMICAL"),
GemChem, Inc. ("GemChem"), and 2110 Davie Corporation ("DAVIE").
GEMCHEM, INC.
On March 31, 1994, the Company purchased all of the issued and
outstanding stock of GemChem, Inc., a national chemical distributor. The
purchase was effective January 15, 1994. GemChem, in addition to representing
CHEMICAL as its domestic sales force, also sells into the pharmaceutical,
cosmetic and nutritional markets. Prior to the acquisition, GemChem acted in the
capacity as the domestic sales force for the Company (from September 1991).
See also PART III, Item 13 of this Annual Report.
2110 DAVIE CORPORATION
Effective September 30, 1989, the Company sold substantially
all operating assets of DAVIE.
In connection with the sale, DAVIE provided Buyer with a five
year covenant not to compete in the business formerly conducted by DAVIE.
Herbert A. Kraft, the Chairman and Chief Executive Officer of both the Company
and DAVIE, entered into a consulting agreement with the Buyer providing an
aggregate consideration of $6,000 per annum for a five year period ended
September 1994.
DAVIE currently invests in real estate for corporate use only.
See also PART I, Item 2 of this Annual Report.
CHEMICAL
CHEMICAL is a California corporation that traces its history
from 1945. CHEMICAL is a specialty chemical manufacturer that develops and
markets products for agricultural and commercial uses. It manufactures and
formulates chemicals for crops, human and animal health protection. These
chemicals which include insecticides, fungicides, molluscicides, growth
regulators, and soil fumigants, are marketed in liquid, powder,
1
<PAGE> 4
and granular forms. CHEMICAL's business is continually undergoing an
evolutionary change. Years ago CHEMICAL considered itself a
distributor-formulator, but now primarily manufactures, distributes, and
formulates its own labelled products or custom manufactures or formulates for
others.
In November of 1993, CHEMICAL purchased from E.I. du Pont de
Nemours & Company ("Du Pont") the rights, title and interest in Bidrin(R), an
insecticide for cotton crops, including Environmental Protection Agency ("EPA")
registration rights issued under the Federal Insecticide, Fungicide and
Rodenticide Act ("FIFRA"). The Company purchased Du Pont's inventory of
Bidrin(R) at Du Pont's approximate cost, and will pay continuing royalties on
all Bidrin(R) sold by the Company to customers in the United States through
December 1997.
In March of 1992, CHEMICAL concluded a transaction with
Chevron Chemical Company ("Chevron") whereby CHEMICAL purchased the non-United
States distribution and intellectual property rights (excluding, however, sales
to Japan and to the home and residential markets) to Chevron's proprietary
Dibrom(R) (1,2- dibromo-2,2-dichloroethyl dimethyl phosphate) agricultural
chemical product line.
In March of 1991, CHEMICAL acquired from Rhone-Poulenc AG
Company its Naphthalene Acetic Acid ("NAA") plant growth regulator chemical
product line (except for one product), including Rhone-Poulenc's EPA
registration rights issued under FIFRA, for a nominal cash consideration and
continuing royalties through March 1996. Prior to this acquisition, CHEMICAL had
been a major supplier of these chemicals to Rhone-Poulenc. This product line
includes Tre-Hold(R) brand Sprout Inhibitor A112, Tre- Hold(R) brand Sprout
Inhibitor for Citrus, NAA-800(R) Plant Regulator, Amid Thin(R) W brand Plant
Regulator, Fruitone(R) N, Technical Naphthaleneacetic acid Ethyl Ester,
Technical Naphthalene Acetic Acid, and Technical Naphthaleneacetic Sodium Salt.
In January of 1989, CHEMICAL purchased from Du Pont its
Phosdrin(R) (an insecticide) product line and inventory for a price equal to the
inventory at cost plus a royalty on sales through January 1994. In June 1994,
the Company announced that it had proposed the voluntary cancellation of the
registration and all uses of Phosdrin(R). As such, the Company agreed to
immediately stop production of Phosdrin(R) for sale and distribution in the
United States. On January 13, 1995, CHEMICAL and the EPA entered into an
agreement concerning the domestic sale, distribution, use and eventual recall of
Phosdrin(R). Under the terms of the agreement, existing Phosdrin(R) was allowed
to be sold, distributed and used in the United States through November 30, 1995.
Effective December 1, 1995, all United States registrations of Phosdrin(R) were
canceled and could no longer be used. CHEMICAL
2
<PAGE> 5
developed a recall program to remove Phosdrin(R) from the marketplace. The
recall program is being conducted to the end user level and consists of
financial reimbursement to the Company's distributors for returned, unopened
containers. The last day CHEMICAL must, under the recall plan, accept returned
Phosdrin(R) is July 27, 1996. The ultimate costs of the recall based upon the
facts known today, are not expected to have a material adverse effect on the
Company. In 1995, domestic sales of Phosdrin(R) were immaterial. They accounted
for approximately 14% of the Company's total consolidated sales in 1994. The
Company intends to continue to sell Phosdrin(R) for export, a market which
accounted for approximately 2% of the Company's total consolidated sales in 1995
and 1994.
Some of the other principal products produced by CHEMICAL are
PCNB (Pentachloronitrobenzene), Dichlorvos (2,2- Dichlorovinyl dimethyl
phosphate), Metam Sodium (Sodium N- methyldithiocarbamate), and various
molluscicides. Domestically, CHEMICAL sells its products through the Company's
wholly-owned subsidiary, GemChem, Inc., and by one employee marketing
representative to distributors and dealers. These distributors are some of the
largest in the Unites States. Foreign sales are conducted primarily through
foreign distributors. See also PART I, Item 7 of this Annual Report for further
discussions of product sales.
The chemical industry in general is cyclical in nature. The
demand for CHEMICAL's products tends to be slightly seasonal, with the heaviest
usage generally being in the spring and late fall. Seasonal usage, however, does
not necessarily follow calendar dates, but more closely follows varying growing
seasonal patterns, weather conditions and weather related pressure from pests,
and customer marketing programs and requirements.
The Company does not believe that backlog is a significant
factor in its business. The Company primarily sells its products on the basis of
purchase orders, although it has entered into requirements contracts with
certain customers.
United Agri Products, Terra International, Inc., Valent U.S.A.
Corporation and Ciba Geigy Corporation accounted for 24%, 14%, 11% and 10%,
respectively, of the Company's sales in 1995. Sales to United Agri Products
accounted for 27% of the Company's sales in 1994. United Agri Products, Helena
Chemical Company, Terra International, Inc. and Valent U.S.A. Corporation
accounted for 25%, 11%, 10% and 10%, respectively, of the Company's sales in
1993. United Agri Products, Terra International, Inc. and Helena Chemical
Company are a part of the Company's distribution network and are not consumers
of the Company's products.
3
<PAGE> 6
COMPETITION
CHEMICAL faces competition from many domestic and foreign
manufacturers in its marketplaces. Competition in CHEMICAL'S marketplace is
based primarily on efficacy, price, safety and ease of application. Many of such
competitors are larger and have substantially greater financial and technical
resources than CHEMICAL. CHEMICAL's ability to compete depends on its ability to
develop additional applications for its current products and expand its customer
base and product lines. CHEMICAL competes principally on the basis of the
quality of its products and the technical service and support given to its
customers. The inability of CHEMICAL to effectively compete in several of
CHEMICAL's principal products would have a material adverse effect on CHEMICAL's
results of operations.
Generally, the treatment against pests of any kind is broad in
scope, there being more than one way or one product for treatment, eradication,
or suppression. The Company has attempted to position CHEMICAL in small niche
markets in order to reduce the impact of competition. These markets are small by
nature, require significant and intensive management input, ongoing product
research, and are near product maturity. These types of markets tend not to
attract larger chemical companies due to the smaller volume demand, and larger
chemical companies have been divesting themselves of products that fall into
such niches.
CHEMICAL's proprietary product formulations are protected to
the extent possible as trade secrets and, to a lesser extent, by patents and
trademarks. Although CHEMICAL considers that, in the aggregate, its trademarks,
licenses, and patents constitute a valuable asset, it does not regard its
business as being materially dependent upon any single or several trademarks,
licenses, or patents. CHEMICAL's products also receive protection afforded by
the effect of FIFRA legislation that makes it unlawful to sell any pesticide in
the United States unless such pesticide has first been registered by the EPA as
well as under state laws of similar effect. Substantially all of CHEMICAL's
products are subject to EPA registration and re- registration requirements and
are conditionally registered in accordance with FIFRA. This licensing by EPA is
based, among other things, on data demonstrating that the product will not cause
unreasonable adverse effects on human health or the environment when it is used
according to approved label directions. All states where any of CHEMICAL's
products are used require a registration by that specific state before it can be
marketed or used. State registrations are renewed annually, as appropriate. The
EPA and state agencies have required, and may require in the future, that
certain scientific data requirements be performed on registered products sold by
CHEMICAL. CHEMICAL, on its own behalf and in joint efforts with other suppliers,
has,
4
<PAGE> 7
and is currently furnishing, certain required data relative to specific
products.
After repeated public pressure on federal and state
governments to require FIFRA product registrants to supply new scientific data
(such as toxicological and environmental fate tests), the government is
requiring additional studies and the submission of more data. This has
significantly increased CHEMICAL's operating expenses in such areas as testing
and the production of new products. This regulation makes certain CHEMICAL
products less vulnerable to direct competition but more vulnerable to inelastic
demand because of significant cost increases. CHEMICAL expensed $3,717,400,
$5,544,000 and $4,715,400 during 1995, 1994 and 1993, respectively, related to
gathering this information. Based on facts known today, CHEMICAL estimates it
will spend approximately $3,900,000 in 1996. Because scientific analyses are
constantly improving, it cannot be determined with certainty whether or not
material new or additional tests may be required by the regulatory authorities.
Additionally, while FIFRA Good Laboratory Practice standards specify the minimum
practices and procedures which must be followed in order to ensure the quality
and integrity of data related to these tests submitted to the EPA, there can be
no assurance the EPA will not request certain tests/studies be repeated.
CHEMICAL expenses these costs on an incurred basis except for costs that
pertained to PCNB (a new product the Company began producing in October 1990).
Total PCNB study costs incurred and capitalized through September 1995
approximated $5,813,000. During 1995 and 1994, the Company capitalized $185,000
and $509,000, respectively, in costs relating to the PCNB study costs.
Amortization of the PCNB study costs began in October 1990, and was provided by
the units of production method over a period of five years through September
1995. See also PART I, Item 7 of this Annual Report for discussions pertaining
to Research and Development Expenses.
RAW MATERIALS
The Company utilizes numerous firms as well as internal
sources to supply the various raw materials and components used by CHEMICAL in
manufacturing its products. Many of these materials are readily available from
domestic sources. In those instances where there is a single source of supply or
where the source is not domestic, the Company seeks to secure its supply by
either long-term arrangements or advance purchases from its suppliers. The
Company believes that it is considered to be a valued customer to such
sole-source suppliers.
ENVIRONMENTAL
The Company is subject to numerous federal and state
laws and governmental regulations concerning environmental
5
<PAGE> 8
matters and employee health and safety. The Company continually adapts its
manufacturing process to the environmental control standards of various
regulatory agencies. CHEMICAL expends substantial funds to minimize the
discharge of materials into the environment and to comply with the governmental
regulations relating to protection of the environment. Wherever feasible,
CHEMICAL recovers raw materials and increases product yield by recycling in
order to partially offset increasing pollution abatement costs.
The Company is committed to a long-term environmental
protection program that reduces emissions of hazardous materials into the
environment, as well as to the remediation of identified existing environmental
concerns. Federal and state authorities may seek fines and penalties for
violation of the various laws and governmental regulations. As part of its
continuing environmental program, except as disclosed in PART I, Item 3, Legal
Proceedings, of this Annual Report, the Company has been able to comply with
such proceedings and orders without any materially adverse effect on its
business.
The Company continues to make compliance with environmental
requirements an important company policy. As environmental quality requirements
and standards become stricter, the Company may have to incur additional
substantial costs to maintain regulatory compliance.
See also PART I, Item 3, Legal Proceedings, of this Annual
Report.
EMPLOYEES
As of March 22, 1996, the Company employed approximately 180
persons. This figure includes approximately 20 temporary (full-time) individuals
hired as contract personnel. CHEMICAL, on an ongoing basis, due to the
seasonality of its business, uses temporary contract personnel to perform
certain duties primarily related to packaging of its products. The Company
believes it is cost beneficial to employ temporary contract personnel. None of
the Company's employees are subject to a collective bargaining agreement.
The Company believes it maintains positive relations with its
employees.
EXPORT OPERATIONS
The Company opened an office in August 1994, in the United
Kingdom to conduct business in the European chemical market. The new office,
operating under the name AMVAC Chemical UK Ltd., focuses on developing product
registration and distributor networks for CHEMICAL's product lines throughout
6
<PAGE> 9
Europe. The office it located in Surrey, England, a city southwest of London.
The operating results of this operation were not material to the Company's total
operating results for the year ended December 31, 1995.
The Company arranges most of its foreign sales through
export/import brokers. The Company classifies as export sales all products
bearing foreign labeling shipped to a foreign destination.
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Export Sales $3,374,700 $3,812,500 $4,714,400
</TABLE>
INSURANCE
Management believes its facilities and equipment are
adequately insured against loss from usual business risks. The Company has
purchased claims made products liability insurance. There can be no assurance,
however, that such products liability coverage insurance will continue to be
available to the Company, or if available, that it will be provided at an
economical cost to the Company.
7
<PAGE> 10
ITEM 2 PROPERTIES
The Company's corporate headquarters are located in Newport
Beach, California. This facility is leased. See PART IV, Item 14, Note 12 of
this report for further information.
CHEMICAL owns in fee approximately 148,000 square feet of
improved land in Commerce, California, on which substantially all of its offices
and plant and some of its warehouse facilities are located.
DAVIE owns in fee approximately 72,000 square feet of
warehouse and office space on approximately 118,000 square feet of land in
Commerce, California, which is leased to CHEMICAL. The Company occupies offices
located with CHEMICAL's office and plant facilities in Commerce, California.
CHEMICAL's manufacturing facilities are divided into five
cost-centers; granular products, small packaging, Metam Sodium manufacturing,
PCNB manufacturing, and the production and formulation of all other products.
All production areas are designed to run on a continuous twenty-four hour per
day basis.
CHEMICAL regularly adds chemical processing equipment to
enhance its production capabilities. CHEMICAL believes its facilities are in
good operating condition and are suitable and adequate for CHEMICAL's
foreseeable needs, have flexibility to change products, and can produce at
greater rates as required. Facilities and equipment are insured against losses
from fire and other usual business risks. The Company knows of no material
defects in title to, or encumbrances on, any of its properties except that
substantially all of the Company's assets are pledged as collateral under the
Company's loan agreements with its primary lender. For further information,
refer to Note 4 of the Notes to the Consolidated Financial Statements in PART
IV, Item 14 of this Annual Report.
CHEMICAL purchased unimproved land in Texas for possible
future expansion.
GemChem's facilities consist of administration and sales
offices which are leased.
The Company believes its properties to be suitable and
adequate for its current purposes.
8
<PAGE> 11
ITEM 3 LEGAL PROCEEDINGS
DBCP LAWSUITS
A. California Matters
i) 1995 Settlement of Claims.
In 1995 CHEMICAL has brought its participation in twenty-three
similar lawsuits filed between January 1990 and December 1994 to an end. The
Plaintiffs in each matter were primarily water districts and municipalities that
alleged property damage resulting from, among other things, the fact that each
plaintiff's water supply had been contaminated by DBCP. The settlement covered
all the plaintiff's current and future 1,2 Dibromo-3-Chloropropane (hereinafter
referred to as "DBCP") a pesticide, ethylene dibromide (hereinafter referred to
as "EDB") a fumigant, and related claims. On February 15, 1995, the Superior
Court of California in San Francisco County approved this settlement as having
been made in "good faith". The effect of the Superior Court's approval is to bar
claims, arising from these pleadings, against CHEMICAL by other defendants (and
other tortfeasors) for equitable comparative contribution and/or partial or
comparative indemnity. CHEMICAL's portion of the settlement was $905,000. As to
matters independent of indemnity issues, the Company recovered $675,000 from two
of its insurers.
ii) Post Settlement Actions.
Subsequent to the settlements discussed above, two additional
suits alleging property damage resulting from DBCP contamination of water supply
were filed in the San Francisco Superior Court and served on CHEMICAL: City of
Madera v. Shell Oil Co., et. al., and Malaga County Water District v. Shell Oil
Co., et. al. The City of Madera action also alleges contamination of the water
supply with EDB. CHEMICAL has never marketed EDB. These suits name as defendants
Shell Oil Company, the Dow Chemical Company, Occidental Chemical Company,
Chevron Chemical Company, Velsicol Chemical Company and in the Madera action
Great Lakes Chemical Corporation. Malaga has made a settlement demand of
$1,344,000 for one of five wells at issue. As discovery is at the early stages
no other settlement demands have been received. Defendants are operating under
an open extension of time to file responsive pleadings. CHEMICAL has tendered
the defense of these two cases to Columbia Casualty/CNA. That insurer has thus
far accepted the defense under a reservation of rights in the Malaga action, but
has yet to respond to the tender of defense for the Madera action.
9
<PAGE> 12
B. Texas Matters
i) The Carcamo Case.
The Company was served with a third-party first amended
complaint by Dow Chemical Company which sought indemnity and contribution from
CHEMICAL, Del Monte tropical Fruit Company, Del Monte Fresh Produce, N.A., Dead
Sea Bromine Co. Ltd., Ameribrom Inc., Saint Lucia Banana Growers Association,
Saint Vincent Banana Growers Association, Dominica Banana Growers Association,
and Program Nacional de Banano, for any liability Dow may have under a complaint
filed by Jorge Colindres Carcamo, et al. vs. Shell, Dow, et al. (the "Carcamo
Case"). The Carcamo Case was tried in the United States District Court for the
Southern District of Texas, Houston Division, and is an action originally filed
in a Texas state court by a purported class of citizens from Honduras, Costa
Rica, Guatemala, Nicaragua, Panama, Philippines, Dominica, and the Ivory Coast.
These plaintiffs were banana workers and allege that they were exposed to DBCP
while applying the product in their native countries. Approximately 15,000
plaintiffs have been named in this and the other suits hereinafter mentioned.
In an October 27, 1996 Court Order the third party action
against CHEMICAL was dismissed without prejudice. The Order also dismissed the
Plaintiff's consolidated cases concluding that these claims should be litigated
in the foreign countries where the alleged injuries occurred subject to a number
of conditions. One of the more significant conditions requires the Defendants
and third party Defendants consent to the jurisdiction of the courts of each of
the foreign countries. Under the Order the Defendants may proceed against
CHEMICAL, in a court in the United States, for contribution and indemnity should
plaintiffs in the underlying actions obtain a judgement against Defendants in
any foreign forum. As of the filing of this report, no actions against CHEMICAL
have been filed.
ii) The Rodriguez Case.
The Company was served with a third-party complaint on March
15, 1996 by Defendant Standard Fruit Company and Standard Steamship Company
seeking indemnity and contribution from any liability it may have under a
complaint entitled Ramon Rodriguez et. al. v. Shell Oil Company, et. al. (the
"Rodriguez Case") filed in the District Court of Jim Hogg County, Texas. Also
named as Third Party Defendants are Dead Sea Bromine Co., Ltd. and Bromine
Compounds Ltd. The underlying case alleges injuries caused by Plaintiffs'
exposure to DBCP when they applied that pesticide at farms located in Central
America, Ecuador and the Philippines. The Company has made a demand upon certain
insurers for indemnity from and a defense of the Rodriguez Case. No answer has
yet been received from said insurers.
10
<PAGE> 13
PHOSDRIN(R) LAWSUIT
On September 21, 1995, CHEMICAL was served with a complaint
filed in the Superior Court of King County, Washington on September 12, 1995
entitled Ricardo Ruiz Guzman, et. al. v. AMVAC Chemical Corporation, et. al.(the
"Guzman Case"). The Complaint is for unspecified monetary damages based on
Plaintiff farm worker's alleged injuries from their exposure to the pesticide
Phosdrin(R) while working in several orchards in Central Washington State in
1993. Other Defendants named in the Guzman case include: Wilbur-Ellis Company,
Alan Hilliker, and Ellis D. Wilker. The matter is currently pending in the
United States District Court for the Eastern District of Washington and
Defendant's Hilliker and Wilker have been dismissed from the action. CHEMICAL
has made a demand against its insurers for indemnity and defense of the Guzman
Case. The insurer Lexington Insurance Company has thus far accepted the defense
under a reservations of rights letter. CHEMICAL has a self insured retention
limit of $300,000 under its insurance policy.
TRAIN DERAILMENTS
A. July 14, 1991; Dunsmuir, California:
In August 1992, the Company settled all personal and economic
injury claims asserted in a class action lawsuit arising from the July 14, 1991
derailment of a rail tank car leased by CHEMICAL. The derailment, occurring
about six miles north of Dunsmuir, California, involved the spill into the Upper
Sacramento River of approximately 19,000 gallons of Metam Sodium, a soil
fumigant manufactured by CHEMICAL which was being transported by Southern
Pacific Transportation Company ("SP") along SP's tracks. The court, when finding
that such settlement by CHEMICAL was in "good faith", also ordered that no other
person or entity falling within the definition of the settlement class could
proceed with claims against the Company.
On March 14, 1995, the federal court approved the Consent
Decree which the Company and the federal and state governments entered which
settled litigation seeking to hold potentially responsible parties under various
federal and state statutes responsible for the costs of studying and remediating
the environmental consequences caused by the Sacramento Spill, and for damages
to the Natural Resources. On January 5, 1996, the Court dismissed the California
Sportfishing Protection Alliance's ("Alliance") appeal of a court's order
dismissing their intervention. This Order finally resolves the action brought by
the Alliance which was the only remaining issue arising from this incident.
11
<PAGE> 14
B. February 1, 1996; Devore, California:
On March 7, 1996, CHEMICAL was served with a Complaint in an
action entitled Alvin Williams, Administrator of the Estate of Kevin Lewis
Williams v. Burlington Northern Santa Fe Railway Company, et. al. (the "Williams
Estate Case"). This case was filed on February 26, 1996 in the Superior Court of
Los Angeles County and arose from Kevin Lewis Williams' death in a train
derailment which occurred on Burlington Northern Santa Fe Railway Company tracks
involving a tank car leased by GATX to Albright & Wilson Americas Corporation
("A&WA") which was transporting 158,000 pounds of Trimethyl Phosphite ("TMP")
from A&WA's Charleston, South Carolina Facility to CHEMICAL's manufacturing
facility in Los Angeles, California. The derailment, occurred on February 1,
1996 at approximately 4:14 a.m. about 6 miles north of Devore, California,
adjacent to the intersection of Interstate 15 and State Highway 138. The
derailment involved the engine and most of the railcars on the train resulting
in a chemical fire that consumed all of the TMP in addition to the contents of
railcars transporting an assortment of hazardous chemicals and other goods. The
Estate alleges pecuniary loss to family members in the amount of $ 20,000,000
and prays for other unspecified monetary relief. Other Defendants presently
named in the suit are: Burlington Northern Santa Fe Railway Company, The
Atchison, Topeka & Santa Fe Railway Company, UNOCAL, Rohm & Haas, and
Westinghouse Corporation. CHEMICAL is named in only one of the Estate's seven
causes of action. The Company has made demand upon its insurers for indemnity
from and defense of the Williams Estate Case. No answer has yet been received
from the Company's insurers.
RAILROAD SIDING:
As a result of inspections and sampling conducted by the
California Department of Toxic Substances Control ("DTSC") of the railroad
located, in part, immediately adjacent to CHEMICAL's Commerce, California
facility, CHEMICAL was directed to, and did, conduct sampling during 1993 to
evaluate the nature and extent of pesticide contamination detected by DTSC on
the railroad siding. Following its review of the sampling report prepared by
CHEMICAL's independent consultant, DTSC directed that additional sampling be
undertaken and CHEMICAL's independent consultant prepared a sampling plan for
submittal to DTSC for prior approval as required. However, before additional
sampling could be conducted, the Los Angeles county District Attorney's Office
("LADA"), at the request of DTSC, commenced an enforcement action in April 1994,
against CHEMICAL, one of its officers, and two employees alleging felony illegal
disposal of hazardous waste on the railroad siding. At the same time, DTSC
demanded sums of money for alleged violations of certain compliance requirements
related to CHEMICAL's management of hazardous waste at its
12
<PAGE> 15
Commerce, California facility. Joint settlement negotiations were conducted with
the DTSC and the LADA and were concluded with a settlement agreement which was
entered with the Los Angeles Municipal Court in a Stipulated Sentencing
Memorandum which provided as follows: (i) all felony charges against CHEMICAL
and the three individuals were dismissed; (ii) CHEMICAL entered a plea of nolo
contendere to one misdemeanor; (iii) CHEMICAL was placed on probation for
approximately six (6) months commencing on or about September 23, 1994; (iv)
CHEMICAL was ordered to pay, by March 22, 1995, the sum of $135,000 in fines and
penalties, and civil restitution in the amount of $325,000; (v) CHEMICAL agreed
to enter into a Consent Agreement and Order (the "First CAO") with DTSC to
correct the alleged hazardous waste management compliance violations and to
submit a new plan for closure of ten (10) underground storage tanks ("USTs") at
the Commerce, California facility and (vi) CHEMICAL agreed to enter into a
Consent Agreement and Order (the "Second CAO") with DTSC providing for CHEMICAL
to further investigate and remediate the railroad siding.
Pursuant to the settlement agreement, CHEMICAL entered into
the First CAO effective on January 26, 1995, and on March 22, 1995, with the
concurrence of the LADA, CHEMICAL withdrew its plea of nolo contendere to the
one misdemeanor, entered a plea of not guilty which was accepted, and the court
dismissed the complaint against CHEMICAL. CHEMICAL has substantially fulfilled
the requirements of the First CAO and, in accordance therewith, submitted new
plans for closure of ten (10) USTs located at the facility. During 1995, in
accordance with the UST closure plan, CHEMICAL arranged for the removal and
cleaning of residues within the tanks and completed the initial investigation of
soils in the area of the tanks and their associated piping. CHEMICAL anticipates
that additional UST related soil investigations will be completed by late 1996
and that remedial activities, if any, will commence by late 1996 or early 1997.
CHEMICAL is currently in discussions with DTSC regarding the
specific terms of the Second CAO which will address investigation and
remediation of the railroad siding. CHEMICAL is in the process of completing all
requirements for addressing investigation and remediation of the railroad siding
under a new DTSC program created by California Senate Bill 923 known as the
Expedited Remedial Action Program (ERAP). CHEMICAL anticipates that addressing
the railroad siding under ERAP will result in a more rapid and cost-effective
resolution of environmental conditions in the railroad siding area than could
otherwise be expected if the area were addressed under other available DTSC site
investigation and remediation programs. The potential future costs associated
with the railroad siding investigation and remediation are currently unknown and
cannot be reasonably determined until soil investigations will be completed by
late 1996 or early 1997.
13
<PAGE> 16
The Company has made claims against its insurance carriers and
has expensed all costs incurred which now exceed its $100,000 self-insured
retention. There can be no assurance the Company will prevail in its position.
Various other legal actions, governmental proceedings, and
claims are pending against the Company and its subsidiaries incidental to their
businesses.
14
<PAGE> 17
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 1995 to a vote
of security holders, through the solicitation of proxies or otherwise.
15
<PAGE> 18
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's $0.10 par value common stock ("Common Stock") trades on
The NASDAQ Stock Market under the symbol AMGD. The following table sets forth
the range of high and low sales prices as reported on NASDAQ's National Market
System for the Company's Common Stock for the calendar quarters indicated.
<TABLE>
<CAPTION>
Calendar 1995 HIGH LOW
------------- ---- ---
<S> <C> <C>
First Quarter 9 6 5/8
Second Quarter 8 6 3/4
Third Quarter 7 3/4 4 1/2
Fourth Quarter 6 3/4 4 1/2
Calendar 1994
-------------
First Quarter 16 1/2 14 1/2
Second Quarter 16 8
Third Quarter 10 7 1/2
Fourth Quarter 8 1/2 5 3/4
</TABLE>
The Company's share activity is reported in the Wall Street
Journal and is listed as "Am Vngrd". The Los Angeles Times reports the share
activity as "A Vang".
As of March 22, 1996, the number of shareholders of the
Company's Common Stock was approximately 600, which includes beneficial owners
with shares held in brokerage accounts under street name and nominees.
On February 5, 1996, the Company announced that the Board of
Directors declared a cash dividend of $.06 per share as well as a 10% stock
dividend. Both dividends were distributed on March 15, 1996 to shareholders of
record at the close of business on February 29, 1996. The cash dividend was paid
on the number of shares outstanding prior to the 10% stock dividend.
Shareholders entitled to fractional shares resulting from the 10% stock dividend
received cash in lieu of such fractional share based on $9.50 per share, the
closing price of the Company's stock on February 29, 1996. Prior to the
declaration of these dividends, the Company had not declared any dividends since
1989. The resumption of dividends can only be considered if profitable
operations continue. Certain loan covenants described in Note 4 to the Notes to
Consolidated Financial Statements, limit payments of cash dividends to a maximum
of 25% of net income.
16
<PAGE> 19
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
ITEM 6 SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT FOR WEIGHTED AVERAGE
NUMBER OF SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating revenues $ 55,402 $ 45,098 $ 45,478 $ 38,664 $ 29,334
========= ========= ========= ========= =========
Operating income $ 5,971 $ 3,346 $ 4,160 $ 3,824 $ 1,866
========= ========= ========= ========= =========
Income from operations
before income tax
expense $ 5,043 $ 1,465 $ 3,333 $ 2,965 $ 570
========= ========= ========= ========= =========
Net income $ 3,124 $ 1,203 $ 2,225 $ 1,861 $ 340
========= ========= ========= ========= =========
Net income
per share(1) $ 1.23 $ .47 $ .89 $ .74 $ .14
========= ========= ========= ========= =========
Total assets $ 39,341 $ 40,929 $ 36,025 $ 32,916 $ 31,784
========= ========= ========= ========= =========
Long-term obligations $ 5,540 $ 3,695 $ 4,316 $ 5,348 $ 6,634
========= ========= ========= ========= =========
Stockholders' equity $ 18,005 $ 15,143 $ 13,503 $ 11,278 $ 9,417
========= ========= ========= ========= =========
Weighted average number
of shares(2) 2,546,471 2,562,398 2,509,536 2,509,536 2,509,536
========= ========= ========= ========= =========
Dividends declared per
share of common stock(2) $ - $ - $ - $ - $ -
========= ========= ========= ========= =======
</TABLE>
The selected consolidated financial data set forth above with respect to each of
the calendar years in the five-year period ended December 31, 1995, have been
derived from the Company's consolidated financial statements and are qualified
in their entirety by reference to the more detailed consolidated financial
statements and the independent certified public accountants' reports thereon
which are included elsewhere in this Report on Form 10-K for the three years
ended December 31, 1995. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
- ---------------------
(1) All per share amounts have been restated to reflect a 10% stock dividend
(see footnote 2 below).
(2) On February 5, 1996, the Company announced that the Board of Directors
declared a cash dividend of $.06 per share as well as a 10% stock dividend. Both
dividends were distributed on March 15, 1996 to shareholders of record at the
close of business on February 29, 1996. The cash dividend was paid on the number
of shares outstanding prior to the 10% stock dividend. Weighted average number
of shares have been restated to reflect the 10% stock dividend.
17
<PAGE> 20
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS
1995 COMPARED WITH 1994:
The Company reported net income of $3,124,000 or $1.23 per
share in 1995 as compared to net income of $1,202,700 or $.47 per share in 1994.
(All per share amounts have been restated to give effect to a 10% stock dividend
paid on March 15, 1996 to stockholders of record as of February 29, 1996.) The
increase in net income in 1995 is attributable to a 22.8% increase in net sales
which is primarily related to increases in volume of products sold and not to
increases in prices, while operating expenses increased only 15.7%. Another
significant factor is that there were no legal settlement costs incurred during
1995. The positive factors are mitigated to an extent by an increase in the
effective income tax rate to 38% in 1995 from 17% in 1994.
Net sales increased by $10,304,000 to $55,402,100 in 1995 as
compared to $45,098,100 in 1994. CHEMICAL's sales increased by approximately
$10,632,000 in 1995 as compared to 1994. $8,945,200 of this increase was due to
an increase in the sales of Bidrin(R). In December 1994 the appropriate
permitting was finally obtained and the Company began manufacturing Bidrin(R).
The late start in manufacturing resulted in reduced sales of Bidrin(R) in 1994,
however the latent demand was satisfied in the first half of 1995 resulting in
strong Bidrin(R) sales in the first and second quarters of 1995. Sales of
Bidrin(R) in the fourth quarter 1995 were significantly higher than the fourth
quarter 1994. During 1995 CHEMICAL was also able to generate significant sales
increases in its PCNB products of $4,187,900 to $12,002,100 as compared to
$7,814,200 in 1994 and Naled products of $3,541,600 to $6,393,900 from
$2,852,300 in 1994. However, these increases were substantially offset by a
decrease in the sales of Phosdrin(R) in the amount of $6,755,900 to $413,000 in
1995 from $7,169,000 in 1994. As a result of agreements reached with the
Environmental Protection Agency ("EPA") during 1994, the Company agreed to
phaseout the domestic distribution, sale and use of Phosdrin(R). Although the
effective date of the cessation of Phosdrin(R) use domestically was November 30,
1995, domestic sales of Phosdrin(R) began to drop off significantly beginning in
July 1994. Essentially all of the Phosdrin(R) sales in 1995 were export sales.
The remaining change in CHEMICAL's sales was attributable to less significant
changes in the sales mix of CHEMICAL's products. GemChem's sales (after
elimination of intercompany sales) declined from approximately $4,700,000 in
1994 to approximately $4,200,000 in 1995 reflecting competition in GemChem's
non-ag markets.
18
<PAGE> 21
Gross profits increased by $4,928,600 to $24,660,400 in 1995
as compared to $19,731,800. The increase in 1995 is a result of the higher
volume of sales in 1995. The gross profit percentage increased to 44.5% in 1995
from 43.8% in 1994. While the phaseout of Phosdrin(R), a very profitable
product, had a negative impact on gross profit in 1995, the overall gross profit
percentage increased as the sales volume increased proportionately higher than
cost of sales.
Operating expenses increased by $2,533,800 to $18,689,400 in
1995 from $16,155,600 in 1994. The following is a discussion of operating
expenses:
Selling and Regulatory:
Selling and regulatory expenses increased by $2,190,200 to $6,772,900
in 1995 from $4,582,700 in 1994. The increase in selling and regulatory
expenses is primarily attributable to an increase in variable selling
costs. Due to the significant increase in Bidrin(R) sales in 1995,
related Bidrin(R) rebates and royalties increased by approximately
$1,360,000. Rebates and royalties on NAA products increased
approximately $943,500 in 1995 primarily as a result of agreements with
distributors to promote the Company's products in the market. Expenses
of GemChem increased approximately $334,000 in 1995. Product liability
insurance, which varies directly with sales levels, also increased
approximately $160,000 in 1995 as a result of the increased sales
volume. The only significant decrease in selling and regulatory costs
was attributable to a $647,000 decline in Phosdrin(R) related rebates
which was a result of the phase out of Phosdrin(R).
Research and Development:
Research and development costs, which include costs incurred to
generate scientific data and other activities performed in the
department, decreased by $1,365,100 to $4,846,400 in 1995 from
$6,211,500 in 1994. Costs incurred to generate scientific data
decreased by $1,826,600 to $3,717,400 in 1995 as compared to $5,544,000
in 1994. The largest reduction in scientific data generation was in
connection with Phosdrin(R). Due to the phase out of Phosdrin(R) as
discussed above, data generation costs with respect to Phosdrin(R)
decreased approximately $1,236,000 in 1995 to approximately $54,000.
The NAA, DDVP and PCNB product groups also experienced significant
declines in scientific data generation of approximately $301,000,
$239,000 and $196,000, respectively, in 1995 due to the maturation of
the products and of the related research studies being conducted.
Bidrin(R), which is a relatively recent addition to CHEMICAL's product
line, was the only major product group
19
<PAGE> 22
to experience an increase in scientific data generation in 1995.
Bidrin(R) scientific data generation costs increased approximately
$212,000 in 1995. In 1994 the Company received a benefit of $350,000 as
a result of an unrelated chemical company paying the Company for the
right to cite and rely upon data developed by the Company. The Company
did not receive any benefits of this kind in 1995.
Freight, Delivery and Warehousing:
Freight, delivery and warehousing costs increased by $447,600 to
$3,008,300 in 1995 from $2,560,700 in 1994. The increase in costs is
primarily due to increased freight costs as a result of the higher
sales at CHEMICAL and additions to shipping department personnel to
handle the additional demand.
General, Administrative and Corporate:
General, administrative and corporate costs increased by $1,261,100 to
$4,061,800 in 1995 from $2,800,700 in 1994. The increase was primarily
attributable to environmental consulting projects and legal fees which
accounted for approximately $913,700. Additionally, the Company elected
to provide for the remaining expected costs in connection with the
phase out of Phosdrin(R) in the amount of $175,000.
Interest costs were $935,400 in 1995 as compared to $978,200
in 1994. The average level of short-term borrowing decreased by $313,900 to
$6,526,200 in 1995 from $6,840,100 in 1994. The average level of long-term debt
declined by $1,552,400 to $3,816,600 in 1995 from $5,369,000 in 1994. The
reduction in the average debt and the change in effective interest rates
accounted for the decrease in interest costs in 1995.
Income tax expense increased by $1,657,200 to $1,919,000 in
1995 as compared to $261,800 in 1994. Higher pre-tax income combined with lower
tax credits are the reason for the increased income tax expense. See Note 5 to
the Consolidated Financial Statements for additional analysis of the changes in
income tax expense.
Weather patterns can have an impact on the Company's
operations. Weather conditions influence pest population by impacting gestation
cycles for particular pests and the effectiveness of some of the Company's
products, among other factors. The Company manufactures and formulates chemicals
for crops, human and animal health protection. The end user of some of the
Company's products may, because of weather patterns, delay or intermittently
disrupt field work during the planting season which may result in a reduction of
the use of some of the Company's products.
20
<PAGE> 23
Because of elements inherent to the Company's business, such
as differing and unpredictable weather patterns, crop growing cycles, changes in
product mix of sales and ordering patterns that may vary in timing, measuring
the Company's performance on a quarterly basis, (gross profit margins on a
quarterly basis may vary significantly) even when such comparisons are
favorable, is not as good an indicator as full-year comparisons.
1994 COMPARED WITH 1993:
The Company reported net income of $1,202,700 or $.47 per
share in 1994 as compared to net income of $2,225,100 or $.89 per share in 1993.
Significant factors adversely affecting net income in 1994 include provisions
for settlements of legal matters in the amount of $1,140,000 (Refer to PART I,
Item 3 of this Annual Report), a reduction in gross profits from 1993 of
approximately $1,407,000 and an increase in interest expense of approximately
$144,000. Partially offsetting these negative factors were a decrease in
operating expenses of approximately $823,000 as well as a decrease in income tax
expense of approximately $847,000.
Net sales declined by $379,400 to $45,098,100 in 1994 as
compared to $45,477,500. CHEMICAL's sales declined by approximately $5,122,000
in 1994 as compared to 1993. This decline was primarily due to a reduction in
the sales of Bidrin(R). In November 1993, CHEMICAL purchased from Du Pont, the
rights, title and interest in Bidrin(R), an insecticide for cotton crops.
Concurrently with the purchase of the rights to Bidrin(R), CHEMICAL purchased Du
Pont's existing inventory at Du Pont's approximate cost and sold that inventory
in 1993. CHEMICAL did not begin manufacturing Bidrin(R) until December 1994,
when the required permitting was granted. As a result, product delivered in 1994
was significantly less than in 1993. The decline in CHEMICAL's sales was
essentially offset by an increase in sales as a result of the Company's
acquisition of GemChem in mid January 1994. GemChem's sales (in 1994, after it
was acquired by the Company) were approximately $4,700,000. The remaining change
in sales was attributable to changes in the sales mix of the Company's products.
Gross profits declined by $1,406,700 to $19,731,800 in 1994 as
compared to $21,138,500 in 1993. This represents a decline in the gross profit
margin of approximately 2.7%. This decline was primarily due to the impact of
GemChem sales on consolidated gross profit. GemChem, in addition to being the
exclusive sales agent for the Company, is also a distributor of various
pharmaceutical and nutritional supplement products. The gross profit margin for
the distribution of GemChem's products was approximately 15% compared to the
gross profit margin of approximately 47% for the Company's manufactured
products.
21
<PAGE> 24
Operating expenses declined by $822,900 to $16,155,600 in 1994
from the $16,978,500 reported in 1993. The following is a discussion of
operating expenses:
Selling and Regulatory:
Selling and Regulatory expenses decreased by $1,666,000 to $4,582,700
in 1994 from $6,248,700 in 1993. The decrease in selling and regulatory
expenses is primarily attributable to a decrease in variable selling
costs. Significant reductions in Bidrin(R) rebates and royalties of
approximately $724,000 occurred as a result of the lower sales of
Bidrin(R) in 1994. Additionally, a royalty contract related to sales of
Phosdrin(R) expired at the end of 1993 eliminating royalties of
approximately $499,000 incurred in 1993. Other reductions in rebates as
a result of changes in the sales mix amounted to approximately
$283,000.
Research and Development:
Research and development costs, which include costs incurred to
generate scientific data and other activities performed in the
department, increased by $527,800 to $6,211,500 in 1994 from $5,683,700
in 1993. Costs incurred to generate scientific data increased by
$826,600 to $5,544,000 in 1994 as compared to $4,715,400 in 1993. The
most significant increases in scientific data generation related to the
Bidrin(R) and Napthalene Acetic Acid product groups which accounted for
an increase in costs of approximately $1,500,000 while a gradual
curtailment of costs related to the DDVP product group resulted in a
reduction in costs in 1994 of approximately $778,000. The Company did
receive a benefit of $350,000 in 1994 as a result of an unrelated
chemical company paying the Company for the right to cite and rely upon
data developed by the Company.
Freight, Delivery and Warehousing:
Freight, delivery and warehousing costs decreased by $132,800 to
$2,560,700 in 1994 from $2,693,500 in 1993. These costs decreased
primarily as a result of decreased freight costs due to lower sales at
CHEMICAL.
General, Administrative and Corporate:
General, administrative and corporate costs increased by $464,700 to
$2,800,700 in 1994 from $2,336,000 in 1993. The increase was primarily
attributable to an increase in legal costs. (Refer to PART I, Item 3
for a discussion of legal proceedings.)
22
<PAGE> 25
Interest costs were $978,200 in 1994 as compared to $833,900
in 1993. The average level of short-term borrowing increased by $429,800 to
$6,840,100 in 1994 from $6,410,300 in 1993. The average level of long-term debt
declined by $819,800 to $5,369,000 in 1994 from $6,188,800 in 1993. The lower
average debt for 1994 as compared to 1993, was not sufficient to offset higher
effective interest rates which accounted for the increase in interest costs.
Income tax expense decreased by $846,500 to $261,800 in 1994
as compared to $1,108,300 in 1993. See Note 5 to the Consolidated Financial
Statements for an analysis of the changes in income tax expense.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $15,694,500 as of December 31, 1995
reflecting an $11,021,800 improvement over working capital of $4,672,700 as of
December 31, 1994.
Current assets were $722,300 higher at December 31, 1995 than
at December 31, 1994. While trade receivables were $2,505,900 higher at December
31, 1995 due to the greater sales volume at CHEMICAL, the increase was
substantially offset by the payment in 1995 of a $2,075,000 legal settlement
receivable recorded at December 31, 1994 related to the DBCP settlement (Refer
to PART I, Item 3, Legal Proceedings and Note 7 of the Notes to the Consolidated
Financial Statements of this annual report for additional information). Also
offsetting the increase in trade receivables was a decrease in other receivables
of $425,500 which was primarily attributable to the receipt of $350,000 related
to the sale of rights to the use of scientific data generated by the Company.
Inventories increased $1,051,700 in 1995 over 1994. The higher inventory level
is attributable to a planned build-up of certain of the Company's finished
products in anticipation of meeting future sales demands. Prepaid expenses
decreased $348,700 in 1995 which was primarily due to the expense recognition of
royalties paid in advance.
Current liabilities decreased $10,299,500 in 1995 over 1994.
The Company paid down the Company's fully-secured line of credit from $8,000,000
at December 31, 1994 to $3,900,000 at December 31, 1995. Additionally, in
September 1995, the Company renewed and amended its line of credit agreement
with its bank, one of the terms of which was the extension of the expiration
date to July 31, 1997. As such, the balance of $3,900,000 under the line of
credit agreement at December 31, 1995 has been classified as a long-term
liability. The line of credit agreement, which has a borrowing limit of
$10,500,000, had $6,600,000 of available credit at December 31, 1995. Another
significant reduction in current liabilities as of December 31, 1994 was the
payment during 1995 of a legal settlement in the
23
<PAGE> 26
amount of $3,366,900 related to the DBCP lawsuits (Refer to PART I, Item 3,
Legal Proceedings and Note 7 of the Notes to the Consolidated Financial
Statements of this annual report for additional information). The effects of the
above noted decreases were offset by an increase in income taxes payable of
$693,300 and a net increase in accounts payable and other accrued expenses of
$313,200.
The Company invested $755,000 in capital expenditures in 1995.
These expenditures improve and/or maintain the existing capacity of the
Company's manufacturing facility, and address the Company's continual effort to
adapt its manufacturing processes to the environmental control standards of its
various controlling agencies. The Company also invested $226,500 in deferred
charges in 1995, most of which relate to EPA study costs. The capitalized
balance of deferred charges as of December 31, 1995 are not material. The
Company recognized $3,415,300 of depreciation and amortization expense in 1995.
As of December 31, 1995, the Company does not have any material commitments
for future capital expenditures.
As part of the renewal and amendment of the Company's credit
facility, as discussed above, the Company increased its term loan availability
to a maximum of $5,250,000 to be paid in monthly installments through December
1, 2000. The Company borrowed an additional $3,702,300 in December 1995 which
increased the existing term loan to the maximum amount allowed as of December
31, 1995. The Company made principal payments on its long-term debt of
$1,797,800 during 1995.
There has been constant public pressure upon the federal and
state governments to require FIFRA product registrants to supply new scientific
data (such as toxicological and environmental fate tests), which has resulted in
government action requiring additional studies and the submission of more data.
Based on facts known today, the Company estimates it will spend approximately
$3,900,000 in 1996 on these studies. Because scientific analyses are constantly
improving, it cannot be determined with certainty whether or not material new or
additional tests may be required. Additionally, while FIFRA Good Laboratory
Practice standards specify the minimum practices and procedures which must be
followed in order to ensure the quality and integrity of data related to these
tests submitted to the EPA, there can be no assurance the EPA will not request
certain tests/studies be repeated. For further information, refer to PART I,
Item 1, Business, Competition of this Annual Report.
CHEMICAL is a manufacturer and formulator of chemicals for
crops, human and animal health protection. For discussions pertaining to the
Company's litigation refer to PART I, Item 3, Legal Proceedings of this Annual
Report.
24
<PAGE> 27
Management believes current financial resources (working
capital and borrowing arrangements) and anticipated funds from operations will
be adequate to meet total financial needs in 1996. Management also continues to
believe, to improve its working capital position and maintain flexibility in
financing interim needs, it is prudent to explore alternate sources of
financing.
The Company, as previously disclosed, is required to supply
studies and the submission of data to federal and state governmental agencies.
Because scientific analyses are constantly improving, it cannot be determined
with certainty whether or not additional tests that may be material will be
required. Although management does not currently foresee any critical liquidity
problems, should material new or additional tests be required during 1996,
anticipated funds from operations may not be adequate to meet total financial
needs in 1996.
Management believes that inflation has not had a significant
impact on the Company's costs and prices during the past three years.
New Accounting Standards
Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets
to be Disposed of" ("SFAS No. 121") issued by the Financial Accounting Standards
Board ("FASB") is effective for financial statements for fiscal years beginning
after December 15, 1995. The new standard establishes guidelines regarding when
impairment losses on long-lived assets, which include plant and equipment, and
certain identifiable intangible assets, should be recognized and how impairment
losses should be measured. The Company does not expect adoption to have a
material effect on its financial position or results of operations.
Statements of Financial Accounting Standards No. 123,
"Accounting for the Stock-Based Compensation" ("SFAS No. 123") issued by the
FASB is effective for specific transactions entered into after December 15,
1995, while the disclosure requirements of SFAS No. 123 are effective for
financial statements for fiscal years beginning no later than December 15, 1995.
The new standard establishes a fair value method of accounting for stock- based
compensation plans and for transactions in which an entity acquires goods or
services from non-employees in exchange for equity instruments. The Company does
not expect adoption to have a material effect on its financial position or
results of operations. At the present time, the Company has not determined if it
will change its accounting policy for stock based compensation or only provide
the required financial statement disclosures. As such, the impact on the
Company's financial position and results of operations is currently unknown.
25
<PAGE> 28
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------ -------------------------------------------
The Financial Statements and Supplementary Data are listed at
PART IV, Item 14, Exhibits, Financial Statement Schedules, and Reports on Form
8-K in this report.
26
<PAGE> 29
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
27
<PAGE> 30
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
The following persons are the current Directors and Executive
Officers of Registrant:
<TABLE>
<CAPTION>
Name of
Director/Officer Age Capacity
<S> <C> <C>
Herbert A. Kraft 72 Co-Chairman
Glenn A. Wintemute 71 Co-Chairman
Eric G. Wintemute 40 Director, President and
Chief Executive Officer
James A. Barry 45 Director, Vice President,
Chief Financial Officer,
Treasurer and Assistant
Secretary
Glenn E. Mallory 86 Director and Corporate
Secretary
Henry L. Scott 77 Director
Jesse E. Stephenson 72 Director
</TABLE>
Herbert A. Kraft has served as Co-Chairman of the Board
since July 1994. Mr. Kraft served as Chairman of the Board and
Chief Executive Officer from 1969 to July 1994.
Glenn A. Wintemute has served as Co-Chairman of the
Board since July 1994. Mr. Wintemute served as President of the
Company and all operating subsidiaries since 1984 and was elected
a director in 1971. He served as President of CHEMICAL from 1963
to July 1994.
Eric G. Wintemute has served as a director since June
1994. Mr. Wintemute has also served as President and Chief
Executive Officer since July 1994. He was appointed Executive
Vice President and Chief Operating Officer of the Company in
January 1994, upon the Company's acquisition of GemChem, Inc. He
co-founded GemChem, Inc., a national chemical distributor, in
1991 and served as its President. Mr. Wintemute was previously
employed by CHEMICAL from 1977 to 1982. From 1982 to 1991, Mr.
Wintemute worked with R. W. Greeff & Co., Inc., a former
distributor of certain of CHEMICAL's products. During his tenure
with R. W. Greeff & Co., Inc., he served as Vice President and
28
<PAGE> 31
Director. He is the son of the Company's Co-Chairman, Glenn A. Wintemute.
James A. Barry has served as a director since June 1994. Mr.
Barry was appointed Treasurer in July 1994. He has served as Chief Financial
Officer of the Company since 1987, and as Vice President and Assistant Secretary
since 1990. From 1990 to July 1994, he also served as Assistant Treasurer.
Glenn E. Mallory has served as a director of the Company since
1971 and its Secretary since 1976. Mr. Mallory served as Treasurer from 1976 to
July 1994. He also served as Vice President of CHEMICAL from 1970 to September
1993.
Henry L. Scott has served as a director of the Company since
1983. He has been a practicing certified public accountant since 1951. Mr. Scott
serves on the board of directors of Royal American Printing Machine Company,
Beverly Hills Medical Group and several privately held companies.
Jesse E. Stephenson has served as director of the
Company since 1977 (except for a 10-month period following March
1992). He was the General Manager of a wholly-owned subsidiary
of the Company, from 1968 to 1978. Mr. Stephenson is retired and
is a private investor.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's executive officers, directors, and persons who own more than ten
percent of a registered class of the Company's equity securities to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission.
The Company believes that during 1995 all reports required to
be filed under Section 16(a) by its executive officers, directors, and greater
than ten percent beneficial owners were timely filed.
29
<PAGE> 32
ITEM 11 EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash and other
compensation for services rendered for the years ended December 31, 1995, 1994,
and 1993 paid or awarded by the Corporation and its subsidiaries to the
Corporation's Chief Executive Officer and each of the four most highly
compensated executive officers of the Corporation, whose aggregate remuneration
exceeded $100,000 (the "named executive officers").
30
<PAGE> 33
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------ -------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER RE- SECURITIES ALL
NAME ANNUAL STRICTED UNDERLYING OTHER
AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION
POSITION YEAR ($) ($) ($)1 ($) (#) ($) ($)
-------- ---- ------- ------- -------- --------- ---------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eric G. Wintemute(2) 1995 172,000 - - - - - 4,993(6)
President and 1994 140,771 - (-) - 30,000(4) - 4,990(6)
Chief Executive Officer
James A. Barry(3) 1995 122,751 - - - 5,000(5) - 4,070(6)
Vice President, CFO 1994 103,009 - - - - - 3,245(6)
and Treasurer
Herbert A. Kraft(7) 1995 - - - - - - 254,086(7)
Co-Chairman 1994 142,008 - - - - - 131,857(7)
1993 265,976 - - - - - 4,827(4)
Glenn A. Wintemute(7) 1995 - - - - - - 254,086(7)
Co-Chairman 1994 141,171 - - - - - 131,857(7)
1993 264,476 - - - - - 4,827(4)
</TABLE>
- --------
(1) No executive officer enjoys perquisites that exceed the lesser of $50,000,
or 10% of such officer's salary.
(2) Mr. Eric G. Wintemute joined the Company in January 1994.
(3) Amounts prior to 1994 were not required to be reported.
(4) Represents options to purchase Common Stock of the Company issued to Eric
Wintemute in connection with the acquisition of GemChem, Inc., by the
Company during 1994. The options issued to Mr. Wintemute represent
approximately 43% of the total options issued by the Company in 1994. The
exercise price of the options is $10.00 per share and the options vest
one-fourth on January 15, 1995, 1996, 1997 and 1998 and all options expire
on April 15, 1998.
(5) Represents options to purchase Common Stock of the Company. The options
issued to Mr. Barry represent approximately 13% of the total options
issued by the Company in 1995.
(6) These amounts represent the Company's contribution to the Company's
Retirement Savings Plan, a qualified plan under Internal Revenue Code
Section 401 (k).
(7) Messrs. Kraft and Wintemute retired from the Company as active employees in
July 1994 and subsequently entered into consulting agreements with the
Company to provide specified services through July 1999. All other
compensation (column (I)) includes $127,164 paid to each individual under
his consulting agreement and $4,693 on behalf of each individual as a
retirement savings plan contribution as described in (6) above for 1994.
Amounts for 1995 represent payments paid to each individual under his
consulting agreement.
31
<PAGE> 34
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board consists of Messrs. Herbert A.
Kraft, Jesse E. Stephenson and James A. Barry. The executive compensation
philosophy of the Company is aimed at (i) attracting and retaining qualified
executives; (ii) motivating performance to achieve specific strategic objectives
of the Company; and (iii) aligning the interest of senior management with the
long-term interest of the Company's shareholders.
32
<PAGE> 35
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- ------- -----------------------------------------------
AND MANAGEMENT
--------------
To the knowledge of Registrant, the ownership of Registrant's
outstanding Common Stock as of March 22, 1996, by persons who are directors,
beneficial owners of 5% or more of the outstanding Common Stock and by all
directors and officers as a group is set forth below. Unless otherwise indicated
Registrant believes that each of the persons set forth below has the sole power
to vote and to dispose of the shares listed opposite his name.
<TABLE>
<CAPTION>
Amount and
Nature
Office Name and Address of Beneficial Percent
(if any) Beneficial Owner Ownership(1) of Class
- -------- ---------------- ----------- --------
<S> <C> <C> <C>
Co-Chairman Glenn A. Wintemute 769,985(2) 30.5%
4695 MacArthur Court
Newport Beach, CA 92660
Co-Chairman Herbert A. Kraft 639,883(3) 25.4%
4695 MacArthur Court
Newport Beach, CA 92660
Goldsmith & Harris et al. 153,560(4) 6.1%
80 Pine Street
New York, NY 10005
Director Jesse E. Stephenson 53,350(5) 2.1%
4695 MacArthur Court
Newport Beach, CA 92660
Director, Eric G. Wintemute 53,303(6) 2.1%
President 4695 MacArthur Court
& CEO Newport Beach, CA 92660
Director Henry L. Scott 4,070 --(8)
4695 MacArthur Court
Newport Beach, CA 92660
Director, James A. Barry 1,833(7) --(8)
Vice President, 4695 MacArthur Court
CFO & Treasurer Newport Beach, CA 92660
Directors and Officers 1,522,424 59.9%
as a group(7)
</TABLE>
- ---------------------
(1) Record and Beneficial.
(2) This figure includes 22,220 common shares owned by Mr. Wintemute's children
for which Mr. Wintemute is a trustee and disclaims beneficial ownership.
(3) Mr. Kraft owns all of his shares with his spouse in a family trust, except
as to 1,430 shares held in an Individual Retirement Account.
(4) The Company has relied on information reported on a Statement on
Schedule 13D dated August 21, 1992, filed by Goldsmith & Harris et al.
with the Securities and Exchange Commission, and has adjusted for the 10%
stock dividend issued March 15, 1996.
(5) Mr. Stephenson holds all of his shares in a family trust.
(6) This figure includes 16,500 shares Common Stock Mr. Wintemute is entitled
to acquire pursuant to stock options exercisable within sixty days of
March 22, 1996.
(7) This figure represents shares Common Stock Mr. Barry is entitled to acquire
pursuant to stock options exercisable within sixty days of March 22, 1996.
(8) Under 1% of class.
33
<PAGE> 36
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
In September 1991, the Company entered into an agreement with
GemChem to represent the Company as its sales representative. No director,
officer or significant shareholder of the Company had any direct or indirect
relationship with or interest in GemChem; however, Eric G. Wintemute, the son of
the Company's then President Glenn A. Wintemute, owned an approximate one-third
equity interest in GemChem. The Company purchased approximately $3,600,000 and
$3,200,000 in 1993 and 1992, respectively, of raw materials from GemChem. During
the years ended December 31, 1993, and 1992, the Company expensed $1,586,400 and
$1,386,400, respectively, in commissions earned by GemChem. No commissions were
owed GemChem as of December 31, 1993. The Company believes that the commissions
paid to GemChem for sales of products were no less favorable to the Company than
would have been available from unrelated parties.
In March 1994, the Company concluded the purchase of all the
issued and outstanding stock of GemChem. The purchase was effective January 15,
1994. The aggregate purchase price consisted of 50,000 unregistered shares of
the Company's common stock and approximately $592,000 in two year notes with
interest at prime plus .75%. The total purchase price was valued at $1,029,500.
See also Note 11 of the Notes to the Consolidated Financial Statements in PART
IV, Item 14 of this Annual Report.
In connection with their retirement from the Company as active
employees in July 1994, Messrs. Herbert A. Kraft and Glenn A. Wintemute entered
into written consulting agreements with the Company effective July 14, 1994.
Pursuant to the consulting agreements, Messrs. Kraft and Wintemute will perform
management and financial consulting services for the Company as assigned by the
Board of Directors or the Chief Executive Officer for the five year term of the
agreement, ending on July 14, 1999. The agreement provides that neither Messrs.
Kraft or Wintemute will be required to expend more than 400 hours in any twelve
month period or forty hours in any one month period. Under the agreement,
Messrs. Kraft and Wintemute each received $287,500 for the year ended July 14,
1995. They will also, under the agreement, each receive $243,750 for the year
ending July 14, 1996, $200,000 for the year ending July 14, 1997, $156,250 for
the year ending July 14, 1998 and $112,500 for the year ending July 14, 1999. In
the event of death or disability prior to July 14, 1999, such payments will
continue to be paid to the individual or his estate, as applicable. The
agreements also provide for continuation of medical and dental insurance
benefits until the expiration of the term of the agreements.
34
<PAGE> 37
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) The following documents are filed as part of this
report:
(1) Index to Consolidated Financial
Statements and Supplementary Data:
DESCRIPTION
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Report of Independent Certified Public Accountants 38
Financial Statements:
Consolidated Balance Sheets as of
December 31, 1995 and 1994 39
Consolidated Statements of Income for
the Years Ended December 31, 1995, 1994,
and 1993 41
Consolidated Statements of Changes in
Stockholders' Equity for the Years Ended
December 31, 1995, 1994, and 1993 42
Consolidated Statements of Cash Flows for
the Years Ended December 31, 1995, 1994,
and 1993 43
Summary of Significant Accounting Policies
and Notes to Consolidated Financial
Statements 45
(2) Financial Statement Schedules:
</TABLE>
All schedules are omitted because they are not
applicable, or not required, or because the required information is included in
the consolidated financial statements or notes thereto.
35
<PAGE> 38
(3) Exhibits:
The exhibits listed on the accompanying Index To Exhibits, page
59, are filed as part of this annual report.
(b) Reports on Form 8-K were filed during the quarter
ended December 31, 1995.
None.
36
<PAGE> 39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, American Vanguard Corporation has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized on the 28th
day of March, 1996.
AMERICAN VANGUARD CORPORATION (Registrant)
/s/ Eric G. Wintemute /s/ James A. Barry
- -------------------------------- --------------------------------
By: ERIC G. WINTEMUTE By: JAMES A. BARRY
President, Vice President,
Chief Executive Officer Chief Financial Officer,
and Director Treasurer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated.
/s/ Herbert A. Kraft /s/ Glenn A. Wintemute
- -------------------------------- ---------------------------
HERBERT A. KRAFT GLENN A. WINTEMUTE
Co-Chairman Co-Chairman
March 28, 1996 March 28, 1996
/s/ Glenn E. Mallory /s/ Henry L. Scott
- -------------------------------- ---------------------------
GLENN E. MALLORY HENRY L. SCOTT
Corporate Secretary and Director
Director March 28, 1996
March 28, 1996
/s/ Jesse E. Stephenson
- --------------------------------
JESSE E. STEPHENSON
Director
March 28, 1996
37
<PAGE> 40
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
American Vanguard Corporation
We have audited the accompanying consolidated balance sheets of American
Vanguard Corporation and subsidiaries as of December 31, 1995 and 1994 and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Vanguard
Corporation and their subsidiaries at December 31, 1995 and 1994 and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
BDO SEIDMAN, LLP
Los Angeles, California
March 4, 1996
38
<PAGE> 41
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS (NOTE 4) 1995 1994
---- ----
Current assets:
<S> <C> <C>
Cash $ 331,600 $ 317,700
Receivables:
Trade 15,228,300 12,722,400
Legal settlements (note 7) 195,000 2,270,000
Other 62,700 488,200
---------- ----------
15,486,000 15,480,600
---------- ----------
Inventories:
Finished products 6,001,600 5,544,100
Raw materials 2,268,000 1,673,800
---------- ----------
8,269,600 7,217,900
---------- ----------
Prepaid expenses 581,000 929,700
---------- ----------
Total current assets 24,668,200 23,945,900
Property, plant and equipment, at cost,
less accumulated depreciation of
$14,079,900 in 1995 and $11,968,900
in 1994 (notes 1,3,4, and 6) 13,680,400 15,024,100
Land held for development 210,800 210,800
Costs in excess of net assets acquired, net of
accumulated amortization of $165,900 in
1995 and $132,500 in 1994 (note 11) 442,100 475,500
Deferred charges, net of accumulated
amortization of $6,035,600 in 1995 and
$4,866,700 in 1994 (note 2) 57,900 1,001,100
Other assets 281,600 271,300
---------- ----------
$39,341,000 $40,928,700
========== ==========
</TABLE>
(CONTINUED)
39
<PAGE> 42
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
---- ----
<S> <C> <C>
Current liabilities:
Note payable to bank (note 4) $ - $ 8,000,000
Current installments of long-term debt (note 3) 1,265,600 1,205,300
Accounts payable 2,810,800 2,891,600
Accrued expenses 3,486,200 3,092,200
Income taxes payable 1,366,300 672,500
Legal settlements payable (note 7) 44,700 3,411,600
---------- ----------
Total current liabilities 8,973,600 19,273,200
Note payable to bank (note 4) 3,900,000 -
Long-term debt, excluding current
installments (note 3) 5,539,500 3,695,300
Deferred income taxes (note 5) 2,922,500 2,817,300
---------- ----------
Total liabilities 21,335,600 25,785,800
---------- ----------
Commitments and contingent liabilities
(notes 3, 4, 6, 7, 10 and 12)
Stockholders' equity: (note 13)
Preferred stock, $.10 par value per
share; authorized 400,000 shares;
none issued - -
Common stock, $.10 par value per share;
authorized 10,000,000 shares; issued
2,331,371 shares 233,100 233,100
Additional paid-in capital 1,688,200 1,688,200
Retained earnings 16,345,600 13,221,600
---------- ----------
18,266,900 15,142,900
Less treasury stock, 38,500 shares at cost 261,500 -
---------- --------
Total stockholders' equity 18,005,400 15,142,900
---------- ----------
$39,341,000 $40,928,700
========== ==========
</TABLE>
See summary of significant accounting policies and notes to
consolidated financial statements.
40
<PAGE> 43
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net sales (note 9) $ 55,402,100 $ 45,098,100 $ 45,477,500
Cost of sales 30,741,700 25,366,300 24,339,000
------------ ------------ ------------
Gross profit 24,660,400 19,731,800 21,138,500
Operating expenses 18,689,400 16,155,600 16,978,500
Legal settlement expenses (note 7) -- 230,000 --
------------ ------------ ------------
Operating income 5,971,000 3,346,200 4,160,000
Interest expense (935,400) (978,200) (833,900)
Interest income 7,400 6,500 7,300
Other settlement expenses (note 7) -- (910,000) --
------------ ------------ ------------
Income from
operations before
income tax expense 5,043,000 1,464,500 3,333,400
Income tax expense (note 5) 1,919,000 261,800 1,108,300
------------ ------------ ------------
Net income $ 3,124,000 $ 1,202,700 $ 2,225,100
============ ============ ============
Per share information:
Net income $ 1.23 $ .47 $ .89
============ ============ ============
Weighted average number
of shares 2,546,471 2,562,398 2,509,536
============ ============ ============
</TABLE>
See summary of significant accounting policies and notes to
consolidated financial statements.
41
<PAGE> 44
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993 $228,100 $1,255,700 $ 9,793,800 $ -- $ 11,277,600
Net income -- -- 2,225,100 -- 2,225,100
-------- ---------- ----------- --------- ------------
Balance, December 31, 1993 228,100 1,255,700 12,018,900 -- 13,502,700
Common stock issued in
connection with
acquisition of
GemChem, Inc. 5,000 432,500 -- -- 437,500
(note 11)
Net income -- -- 1,202,700 -- 1,202,700
-------- ---------- ----------- --------- ------------
Balance, December 31, 1994 233,100 1,688,200 13,221,600 -- 15,142,900
Net income -- -- 3,124,000 -- 3,124,000
Treasury stock acquired -- -- -- (261,500) (261,500)
-------- ---------- ----------- --------- ------------
Balance, December 31, 1995 $233,100 $1,688,200 $16,345,600 $(261,500) $ 18,005,400
======== ========== =========== ========= ============
</TABLE>
See summary of significant accounting policies and notes to
consolidated financial statements.
42
<PAGE> 45
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,124,000 $ 1,202,700 $ 2,225,100
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization
of property, plant and equipment 2,098,700 2,012,000 1,983,800
Amortization of intangible assets
and deferred charges 1,316,600 1,485,800 1,504,200
Increase in allowance for
related party receivable -- -- 115,000
Changes in assets and liabilities
associated with operations:
Increase in receivables (5,400) (4,621,500) (4,208,700)
Increase in inventories (1,051,700) (1,785,100) (124,700)
Decrease (increase)
in prepaid expenses 348,700 (66,400) (462,400)
Increase (decrease) in
accounts payable (80,800) 833,100 (247,000)
Increase (decrease) in other
payables and accrued expenses (2,279,100) 2,896,800 351,900
Increase (decrease) in
deferred income taxes 105,200 (221,500) (115,800)
----------- ----------- -----------
Net cash provided by
operating activities 3,576,200 1,735,900 1,021,400
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures (755,000) (939,200) (1,053,200)
Decrease in marketable securities -- -- 49,700
Additions to deferred charges (226,500) (520,900) (414,400)
Net increase in other
noncurrent assets (123,800) (4,100) (87,000)
----------- ----------- -----------
Net cash used in
investing activities (1,105,300) (1,464,200) (1,504,900)
----------- ----------- -----------
</TABLE>
(Continued)
43
<PAGE> 46
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Net borrowings under line
of credit agreement $(4,100,000) $ 400,000 $ 2,200,000
Proceeds from issuance of
long-term debt 3,702,300 592,000 --
Principal payments on long-term debt (1,797,800) (1,236,800) (1,521,700)
Acquisition of treasury stock (261,500) -- --
----------- ----------- -----------
Net cash provided by
(used in) financing activities (2,457,000) (244,800) 678,300
----------- ----------- -----------
Net increase in cash 13,900 26,900 194,800
Cash at beginning of year 317,700 290,800 96,000
----------- ----------- -----------
Cash at end of year $ 331,600 $ 317,700 $ 290,800
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 1,011,100 $ 993,100 $ 795,200
Income taxes 1,119,800 940,800 818,000
=========== =========== ===========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During 1993, capital lease obligations of $216,200 were incurred when the
Company entered into leases for new property, plant, and equipment.
During 1994, in connection with the acquisition of GemChem, Inc. (see note 11),
as part of the purchase price, the Company issued 50,000 shares of its common
stock with a fair value of $437,500.
See summary of significant accounting policies and notes to
consolidated financial statements.
44
<PAGE> 47
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DECEMBER 31, 1995 AND 1994
Description of Business and Basis of Consolidation
The Company is primarily a specialty chemical manufacturer that develops and
markets safe and effective products for agricultural and commercial uses. The
Company manufacturers and formulates chemicals for crops, human and animal
protection. One of the Company's subsidiaries, GemChem, Inc. (see note 11), is
the Company's exclusive sales agent and is also a distributor of various
pharmaceutical and nutritional supplement products. The consolidated financial
statements include the accounts of American Vanguard Corporation ("Company") and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Because of elements inherent to the Company's business, such as differing and
unpredictable weather patterns, crop growing cycles, changes in product mix of
sales and ordering patterns that may vary in timing, measuring the Company's
performance on a quarterly basis, (gross profit margins on a quarterly basis may
vary significantly) even when such comparisons are favorable, is not as good an
indicator as full-year comparisons.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method.
Intangible Assets
Intangible assets resulting from the business acquisition (see Note 11),
consists of cost in excess of net assets (goodwill) acquired. Goodwill is being
amortized on a straight-line basis over the period of an expected benefit of 15
years. Management has a policy to review goodwill and other productive assets at
each quarterly balance sheet date for possible impairment. This policy includes
recognizing write-downs if it is probable that measurable undiscounted future
cash flows and/or the aggregate net cash flows of an asset, as measured by
current revenues and costs (exclusive of depreciation) over the asset's
remaining depreciable life, are not sufficient to recover the net book value of
an asset.
Revenue Recognition
Sales are recognized upon shipment of products or transfer of title to the
customer.
Depreciation
Depreciation of property, plant and equipment is calculated on the straight-line
method over the estimated useful lives of the assets.
Fair Value of Long-term Debt
The fair value of the Company's long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
the Company for debt of the same remaining maturities.
45
<PAGE> 48
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
Income Taxes
Income taxes have been provided using the asset and liability method in
accordance with Financial Accounting Standard No. 109, "Accounting for
Income Taxes" ("SFAS 109").
SFAS 109 employs an asset and liability approach in accounting for income taxes,
the objective of which, is to recognize the amount of current and deferred taxes
at the date of the financial statements using the provisions of the tax laws
then in effect.
Per Share Information
Earnings per share amounts are computed based on the weighted average number of
shares of common stock. Common stock equivalents, which consisted of options to
purchase the Company's common stock, were anti-dilutive in 1995 and 1994. There
were no common stock equivalents outstanding during 1993. Earnings per share
have been restated to reflect a 10% common stock dividend payable March 15, 1996
to common stockholders of record as of February 29, 1996.
Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues, and expenses at
the date that the financial statements are prepared. Actual results could differ
from those estimates.
New Accounting Pronouncements
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS No. 121") issued by the Financial Accounting Standards Board ("FASB") is
effective for financial statements for fiscal years beginning after December 15,
1995. The new standard establishes guidelines regarding when impairment losses
on long-lived assets, which include plant and equipment, and certain
identifiable intangible assets, should be recognized and how impairment losses
should be measured. The Company does not expect adoption to have a material
effect on its financial position or results of operations.
Statements of Financial Accounting Standards No. 123, "Accounting for the
Stock-Based Compensation" ("SFAS No. 123") issued by the FASB is effective for
specific transactions entered into after December 15, 1995, while the disclosure
requirements of SFAS No. 123 are effective for financial statements for fiscal
years beginning no later than December 15, 1995. The new standard establishes a
fair value method of accounting for stock-based compensation plans and for
transactions in which an entity acquires goods or services from non-employees in
exchange for equity instruments. The Company does not expect adoption to have a
material effect on its financial position or results of operations. At the
present time, the Company has not determined if it will change its accounting
policy for stock based compensation or only provide the required financial
statement disclosures. As such, the impact on the Company's financial position
and results of operations is currently unknown.
Reclassifications
Certain prior years' amounts have been reclassified to conform to the current
year's presentation.
46
<PAGE> 49
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(1) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1995 and 1994 consists of
the following:
<TABLE>
<CAPTION>
ESTIMATED
1995 1994 USEFUL LIVES
---- ---- ------------
<S> <C> <C> <C>
Land $ 2,319,800 $ 2,319,800
Buildings and improvements 3,539,900 3,450,500 10 to 30 years
Machinery and equipment 19,998,800 19,911,200 3 to 10 years
Office furniture and fixtures 971,800 819,200 3 to 10 years
Automotive equipment 105,000 103,600 3 to 6 years
Construction in progress 825,000 388,700
---------- ----------
27,760,300 26,993,000
Less accumulated depreciation 14,079,900 11,968,900
---------- ----------
$13,680,400 $15,024,100
=========== ===========
</TABLE>
(2) DEFERRED CHARGES
During 1995 and 1994, the Company capitalized $185,000 and $509,000,
respectively, in deferred charges relating to certain Environmental Protection
Agency study costs for a new product the Company began producing in October
1990. Amortization of these costs began in October 1990, and was provided by the
units of production method over a period of five years through September 1995.
Total study costs incurred and capitalized through September 1995 for this
product approximated $5,812,500.
47
<PAGE> 50
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(3) LONG-TERM DEBT
Long-term debt of the Company at December 31, 1995 and 1994 is summarized as
follows (fair values approximate reported carrying amounts):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Note payable, secured by certain real
property, renewed and amended in
September 1995, principal increased to
$5,250,000, payable in 60 fixed monthly
installments of $87,500 commencing January 1, 1996,
plus interest at prime plus .5%
(prime was 8.5% at December 31, 1995), with
remaining unpaid principal
due December 1, 2000 $ 5,250,000 $ 2,476,300
Note payable, secured by certain
real property, amended in December 1995,
payable in 85 fixed monthly
installments of $13,335, plus interest at
prime plus 1% with remaining unpaid
principal due
February 1, 1997 1,439,900 1,599,900
Note payable, secured by certain
real property, payable in 60 fixed
monthly installments of $1,700,
principal and interest - 10,900
Notes payable to three individuals
in connection with the acquisition of the
common stock of GemChem, Inc.,
collateralized by the common stock of GemChem,
Inc., interest payable monthly
at prime plus .75% with principal due by
March 31, 1996. - 592,000
Obligations under capitalized
leases (see note 6) 115,200 221,500
---------- ----------
6,805,100 4,900,600
Less current installments 1,265,600 1,205,300
---------- ----------
$ 5,539,500 $ 3,695,300
========== ==========
</TABLE>
Approximate principal payments on long-term debt mature as follows:
<TABLE>
<C> <C>
1996 $1,265,600
1997 2,377,800
1998 1,061,700
1999 1,050,000
2000 1,050,000
----------
$6,805,100
==========
</TABLE>
(4) NOTE PAYABLE TO BANK
Under a credit agreement with a bank, the Company may borrow up to $10,500,000.
The note bears interest at a rate of prime plus .25% (prime was 8.5% at December
31, 1995 and 1994). Additionally, the Company, at its option, may pay a fixed
rate offered by the bank for terms not less than 30 nor more than 180 days and
provided that any such period of time does not extend beyond the expiration date
of the credit agreement. Substantially all of the Company's assets not otherwise
48
<PAGE> 51
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
specifically pledged as collateral on existing loans and capital leases are
pledged as collateral under the credit agreement. The note payable expires on
July 31, 1997. The Company had $6,600,000 available under this credit agreement
as of December 31, 1995. The credit agreement, among other financial covenants,
limits payments of cash dividends to a maximum of 25% of net income. The Company
was in compliance with the financial covenants as of December 31, 1995. The
balance outstanding at December 31, 1995 and 1994 was $3,900,000 and $8,000,000.
The average amount outstanding during the years ended December 31, 1995 and 1994
was $6,526,200 and $6,840,100. The weighted average interest rate during the
years ended December 31, 1995 and 1994 was 9.1% and 7.25%.
(5) INCOME TAXES
The components of income tax expense are:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 1,255,400 $ 490,000 $ 931,700
State 539,800 (16,800) 373,500
Other, primarily foreign 18,600 10,100 --
Deferred:
Federal 242,300 (138,500) (145,300)
State (137,100) (83,000) (51,600)
----------- ----------- -----------
$ 1,919,000 $ 261,800 $ 1,108,300
=========== =========== ===========
</TABLE>
Total income tax expense differed from the amounts computed by applying the U.S.
Federal income tax rate of 34% to income before income tax expense as a result
of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Computed tax provision at
statutory Federal rates $ 1,714,600 $ 497,900 $ 1,133,200
Increase (decrease) in
taxes resulting from:
State taxes, net of
Federal income tax
benefit 300,600 30,400 204,600
Refund of prior year
State income taxes from
utilization of net
operating loss
carryforward -- (145,900) --
Nondeductible expenses 33,000 68,600 --
Other 18,600 10,100 13,300
Benefit of research and
development and
alternative minimum
tax credits (147,800) (199,300) (242,800)
----------- ----------- -----------
$ 1,919,000 $ 261,800 $ 1,108,300
=========== =========== ===========
</TABLE>
49
<PAGE> 52
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Temporary differences between the financial statement carrying amounts and tax
bases of assets and liabilities that give rise to significant portions of the
deferred tax liability at December 31, 1995 and 1994 relate to the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Plant and equipment, principally due
to differences in depreciation and
capitalized interest $ 3,405,300 $ 2,750,400
Deferred charges capitalized -- 380,600
Inventories, principally due to
additional costs inventoried for
tax purposes pursuant to the Tax
Reform Act of 1986 (150,300) (147,300)
State income taxes (153,600) (15,700)
Vacation pay accrual (92,400) (86,900)
Accrual for product recall costs (70,200) --
Tax credits benefit
(primarily research and
development) -- (56,900)
Other (16,300) (6,900)
----------- -----------
Net deferred income tax liability $ 2,922,500 $ 2,817,300
=========== ===========
</TABLE>
The Company believes it is more likely than not that the deferred tax assets
above will be realized in the normal course of business.
(6) LEASES
The Company leases certain manufacturing equipment, and office furniture,
fixtures and equipment under long-term capital lease agreements.
Property, plant and equipment include the following leased property under
capital leases by major classes:
<TABLE>
<S> <C>
Machinery and equipment $241,800
Office furniture and fixtures 204,300
--------
446,100
Less accumulated depreciation 146,200
$299,900
========
</TABLE>
50
<PAGE> 53
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The following is a schedule of future minimum lease payments for capital leases
as of December 31, 1995:
Year ending December 31:
<TABLE>
<S> <C>
1996 $ 63,800
1997 51,300
1998 11,900
--------
Total minimum lease payments 127,000
Less amount representing interest 11,800
Present value of net minimum lease payments $115,200
========
</TABLE>
(7) LITIGATION AND ENVIRONMENTAL
DBCP LAWSUITS
A. California Matters
i) 1995 Settlement of Claims.
In 1995 CHEMICAL has brought its participation in twenty-three
similar lawsuits filed between January 1990 and December 1994 to an end. The
Plaintiffs in each matter were primarily water districts and municipalities that
alleged property damage resulting from, among other things, the fact that each
plaintiff's water supply had been contaminated by DBCP. The settlement covered
all the plaintiff's current and future 1,2 Dibromo-3-Chloropropane (hereinafter
referred to as "DBCP") a pesticide, ethylene dibromide (hereinafter referred to
as "EDB") a fumigant, and related claims. On February 15, 1995, the Superior
Court of California in San Francisco County approved this settlement as having
been made in "good faith". The effect of the Superior Court's approval is to bar
claims, arising from these pleadings, against CHEMICAL by other defendants (and
other tortfeasors) for equitable comparative contribution and/or partial or
comparative indemnity. CHEMICAL's portion of the settlement was $905,000. As to
matters independent of indemnity issues, the Company recovered $675,000 from two
of its insurers.
ii) Post Settlement Actions.
Subsequent to the settlements discussed above, two additional
suits alleging property damage resulting from DBCP contamination of water supply
were filed in the San Francisco Superior Court and served on CHEMICAL: City of
Madera v. Shell Oil Co., et. al., and Malaga County Water District v. Shell Oil
Co., et. al. The City of Madera action also alleges contamination of the water
supply with EDB. CHEMICAL has never marketed EDB. These suits name as defendants
Shell Oil Company, the Dow Chemical Company, Occidental Chemical Company,
Chevron Chemical Company, Velsicol Chemical Company and in the Madera action
Great Lakes Chemical Corporation. Malaga has made a settlement
51
<PAGE> 54
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
demand of $1,344,000 for one of five wells at issue. As discovery is at the
early stages no other settlement demands have been received. Defendants are
operating under an open extension of time to file responsive pleadings. CHEMICAL
has tendered the defense of these two cases to Columbia Casualty/CNA. That
insurer has thus far accepted the defense under a reservation of rights in the
Malaga action, but has yet to respond to the tender of defense for the Madera
action.
B. Texas Matters
i) The Carcamo Case.
The Company was served with a third-party first amended
complaint by Dow Chemical Company which sought indemnity and contribution from
CHEMICAL, Del Monte tropical Fruit Company, Del Monte Fresh Produce, N.A., Dead
Sea Bromine Co. Ltd., Ameribrom Inc., Saint Lucia Banana Growers Association,
Saint Vincent Banana Growers Association, Dominica Banana Growers Association,
and Program Nacional de Banano, for any liability Dow may have under a complaint
filed by Jorge Colindres Carcamo, et al. vs. Shell, Dow, et al. (the "Carcamo
Case"). The Carcamo Case was tried in the United States District Court for the
Southern District of Texas, Houston Division, and is an action originally filed
in a Texas state court by a purported class of citizens from Honduras, Costa
Rica, Guatemala, Nicaragua, Panama, Philippines, Dominica, and the Ivory Coast.
These plaintiffs were banana workers and allege that they were exposed to DBCP
while applying the product in their native countries. Approximately 15,000
plaintiffs have been named in this and the other suits hereinafter mentioned.
In an October 27, 1996 Court Order the third party action
against CHEMICAL was dismissed without prejudice. The Order also dismissed the
Plaintiff's consolidated cases concluding that these claims should be litigated
in the foreign countries where the alleged injuries occurred subject to a number
of conditions. One of the more significant conditions requires the Defendants
and third party Defendants consent to the jurisdiction of the courts of each of
the foreign countries. Under the Order the Defendants may proceed against
CHEMICAL, in a court in the United States, for contribution and indemnity should
plaintiffs in the underlying actions obtain a judgement against Defendants in
any foreign forum. As of the filing of this report, no actions against CHEMICAL
have been filed.
ii) The Rodriguez Case.
The Company was served with a third-party complaint on March
15, 1996 by Defendant Standard Fruit Company and Standard Steamship
Company seeking indemnity and contribution from any liability it may
have under a complaint entitled Ramon Rodriguez et. al. v. Shell Oil
Company, et. al. (the "Rodriguez Case") filed in the District Court of
Jim Hogg County, Texas. Also named as Third Party Defendants are Dead
Sea Bromine Co., Ltd. and Bromine Compounds Ltd. The underlying case
alleges injuries caused by Plaintiffs' exposure to DBCP when they
applied that pesticide at farms located in Central America, Ecuador and
the Philippines. The Company has made a demand upon certain insurers
52
<PAGE> 55
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
for indemnity from and a defense of the Rodriguez Case. No answer has
yet been received from said insurers.
PHOSDRIN(R) LAWSUIT
On September 21, 1995, CHEMICAL was served with a complaint
filed in the Superior Court of King County, Washington on September 12, 1995
entitled Ricardo Ruiz Guzman, et. al. v. AMVAC Chemical Corporation, et. al.(the
"Guzman Case"). The Complaint is for unspecified monetary damages based on
Plaintiff farm worker's alleged injuries from their exposure to the pesticide
Phosdrin(R) while working in several orchards in Central Washington State in
1993. Other Defendants named in the Guzman case include: Wilbur-Ellis Company,
Alan Hilliker, and Ellis D. Wilker. The matter is currently pending in the
United States District Court for the Eastern District of Washington and
Defendant's Hilliker and Wilker have been dismissed from the action. CHEMICAL
has made a demand against its insurers for indemnity and defense of the Guzman
Case. The insurer Lexington Insurance Company has thus far accepted the defense
under a reservations of rights letter. CHEMICAL has a self insured retention
limit of $300,000 under its insurance policy.
TRAIN DERAILMENTS
A. July 14, 1991; Dunsmuir, California:
In August 1992, the Company settled all personal and economic
injury claims asserted in a class action lawsuit arising from the July 14, 1991
derailment of a rail tank car leased by CHEMICAL. The derailment, occurring
about six miles north of Dunsmuir, California, involved the spill into the Upper
Sacramento River of approximately 19,000 gallons of Metam Sodium, a soil
fumigant manufactured by CHEMICAL which was being transported by Southern
Pacific Transportation Company ("SP") along SP's tracks. The court, when finding
that such settlement by CHEMICAL was in "good faith", also ordered that no other
person or entity falling within the definition of the settlement class could
proceed with claims against the Company.
On March 14, 1995, the federal court approved the Consent
Decree which the Company and the federal and state governments entered which
settled litigation seeking to hold potentially responsible parties under various
federal and state statutes responsible for the costs of studying and remediating
the environmental consequences caused by the Sacramento Spill, and for damages
to the Natural Resources. On January 5, 1996, the Court dismissed the California
Sportfishing Protection Alliance's ("Alliance") appeal of a court's order
dismissing their intervention. This Order finally resolves the action brought by
the Alliance which was the only remaining issue arising from this incident.
B. February 1, 1996; Devore, California:
On March 7, 1996, CHEMICAL was served with a Complaint in an
action entitled Alvin Williams, Administrator of the Estate of Kevin
Lewis Williams v. Burlington Northern Santa Fe Railway Company, et. al.
53
<PAGE> 56
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(the "Williams Estate Case"). This case was filed on February 26, 1996 in the
Superior Court of Los Angeles County and arose from Kevin Lewis Williams' death
in a train derailment which occurred on Burlington Northern Santa Fe Railway
Company tracks involving a tank car leased by GATX to Albright & Wilson Americas
Corporation ("A&WA") which was transporting 158,000 pounds of Trimethyl
Phosphite ("TMP") from A&WA's Charleston, South Carolina Facility to CHEMICAL's
manufacturing facility in Los Angeles, California. The derailment, occurred on
February 1, 1996 at approximately 4:14 a.m. about 6 miles north of Devore,
California, adjacent to the intersection of Interstate 15 and State Highway 138.
The derailment involved the engine and most of the railcars on the train
resulting in a chemical fire that consumed all of the TMP in addition to the
contents of railcars transporting an assortment of hazardous chemicals and other
goods. The Estate alleges pecuniary loss to family members in the amount of $
20,000,000 and prays for other unspecified monetary relief. Other Defendants
presently named in the suit are: Burlington Northern Santa Fe Railway Company,
The Atchison, Topeka & Santa Fe Railway Company, UNOCAL, Rohm & Haas, and
Westinghouse Corporation. CHEMICAL is named in only one of the Estate's seven
causes of action. The Company has made demand upon its insurers for indemnity
from and defense of the Williams Estate Case. No answer has yet been received
from the Company's insurers.
RAILROAD SIDING:
As a result of inspections and sampling conducted by the
California Department of Toxic Substances Control ("DTSC") of the railroad
located, in part, immediately adjacent to CHEMICAL's Commerce, California
facility, CHEMICAL was directed to, and did, conduct sampling during 1993 to
evaluate the nature and extent of pesticide contamination detected by DTSC on
the railroad siding. Following its review of the sampling report prepared by
CHEMICAL's independent consultant, DTSC directed that additional sampling be
undertaken and CHEMICAL's independent consultant prepared a sampling plan for
submittal to DTSC for prior approval as required. However, before additional
sampling could be conducted, the Los Angeles county District Attorney's Office
("LADA"), at the request of DTSC, commenced an enforcement action in April 1994,
against CHEMICAL, one of its officers, and two employees alleging felony illegal
disposal of hazardous waste on the railroad siding. At the same time, DTSC
demanded sums of money for alleged violations of certain compliance requirements
related to CHEMICAL's management of hazardous waste at its Commerce, California
facility. Joint settlement negotiations were conducted with the DTSC and the
LADA and were concluded with a settlement agreement which was entered with the
Los Angeles Municipal Court in a Stipulated Sentencing Memorandum which provided
as follows: (i) all felony charges against CHEMICAL and the three individuals
were dismissed; (ii) CHEMICAL entered a plea of nolo contendere to one
misdemeanor; (iii) CHEMICAL was placed on probation for approximately six (6)
months commencing on or about September 23, 1994; (iv) CHEMICAL was ordered to
pay, by March 22, 1995, the sum of $135,000 in fines and penalties, and civil
restitution in the amount of $325,000; (v) CHEMICAL agreed to enter into a
Consent Agreement and Order (the "First CAO") with DTSC to correct the alleged
hazardous waste management compliance violations and to submit a new plan for
closure of ten (10) underground storage tanks ("USTs") at the
54
<PAGE> 57
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Commerce, California facility and (vi) CHEMICAL agreed to enter into a Consent
Agreement and Order (the "Second CAO") with DTSC providing for CHEMICAL to
further investigate and remediate the railroad siding.
Pursuant to the settlement agreement, CHEMICAL entered into
the First CAO effective on January 26, 1995, and on March 22, 1995, with the
concurrence of the LADA, CHEMICAL withdrew its plea of nolo contendere to the
one misdemeanor, entered a plea of not guilty which was accepted, and the court
dismissed the complaint against CHEMICAL. CHEMICAL has substantially fulfilled
the requirements of the First CAO and, in accordance therewith, submitted new
plans for closure of ten (10) USTs located at the facility. During 1995, in
accordance with the UST closure plan, CHEMICAL arranged for the removal and
cleaning of residues within the tanks and completed the initial investigation of
soils in the area of the tanks and their associated piping. CHEMICAL anticipates
that additional UST related soil investigations will be completed by late 1996
and that remedial activities, if any, will commence by late 1996 or early 1997.
CHEMICAL is currently in discussions with DTSC regarding the
specific terms of the Second CAO which will address investigation and
remediation of the railroad siding. CHEMICAL is in the process of completing all
requirements for addressing investigation and remediation of the railroad siding
under a new DTSC program created by California Senate Bill 923 known as the
Expedited Remedial Action Program (ERAP). CHEMICAL anticipates that addressing
the railroad siding under ERAP will result in a more rapid and cost-effective
resolution of environmental conditions in the railroad siding area than could
otherwise be expected if the area were addressed under other available DTSC site
investigation and remediation programs. The potential future costs associated
with the railroad siding investigation and remediation are currently unknown and
cannot be reasonably determined until soil investigations will be completed by
late 1996 or early 1997.
The Company has made claims against its insurance carriers and
has expensed all costs incurred which now exceed its $100,000 self-insured
retention. There can be no assurance the Company will prevail in its position.
Various other legal actions, governmental proceedings, and
claims are pending against the Company and its subsidiaries incidental to their
businesses.
While the ultimate results of the pending matters described
above cannot be determined, management does not expect, based upon the facts
known today, that they will have a material adverse effect on the Company's
results of operations or financial condition.
55
<PAGE> 58
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(8) EMPLOYEE DEFERRED COMPENSATION PLAN
The Company maintains a deferred compensation plan (Plan) for all eligible
employees. The Plan calls for each eligible employee, at the employee's
election, to participate in an income deferral arrangement under Internal
Revenue Code Section 401(k) whereby the Company will match the first $5.00 of
weekly employee contributions. The Plan also permits employees to contribute an
additional 15% of their salaries of which the Company will match 50% of the
first 6% of the additional contribution. The Company's contributions to the Plan
amounted to approximately $175,100, $154,000 and $118,200 in 1995, 1994 and
1993, respectively.
(9) MAJOR CUSTOMERS AND EXPORT SALES
The Company had sales to four major customers that accounted for 24%, 14%, 11%,
and 10% of the Company's sales in 1995. In 1994 there were sales to one major
customer that accounted for 27% of the Company's sales. In 1993, there were
sales to four major customers that accounted for 25%, 11%, 10%, and 10% of the
Company's sales.
Export sales were $3,374,700, $3,812,500 and $4,714,400 for 1995, 1994, and
1993.
(10) ROYALTIES
The Company has various royalty agreements in place extending through June 2001,
some of which relate to the Company's acquisition of certain products. Royalty
expenses were $786,800, $91,600 and $1,129,900 for 1995, 1994, and 1993.
(11) ACQUISITION OF GEMCHEM, INC.
In September 1991, the Company entered into an agreement with GemChem, Inc.
("GemChem"), a related party, to represent the Company as its sales
representative. Eric G. Wintemute, the son of the Company's former President,
Glenn A. Wintemute, owned an approximate one-third equity interest in GemChem.
The Company purchased approximately $3,600,000 in 1993 of raw materials from
GemChem. During the year ended December 31, 1993 the Company expensed $1,586,400
in commissions earned by GemChem. The Company believes that the commissions paid
to GemChem for sales of products were no less favorable to the Company than
would have been available from unrelated parties.
Effective January 15, 1994, the Company purchased all of the issued and
outstanding stock of GemChem. The results of operations of GemChem have been
included in the consolidated results of operations since the effective date of
the purchase. The aggregate purchase price consisted of 50,000 unregistered
shares of the Company's common stock and approximately $592,000 in two year
notes with interest at prime plus .75%. The Company has valued the 50,000 shares
at $437,500. All assets acquired were valued at book value, which approximated
fair market value, resulting in an allocation to cost in excess of net assets
acquired of $437,500 which is being amortized over 15 years. The
56
<PAGE> 59
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
results of operations of GemChem are not material in relation to the
Company.
(12) Commitments
In July 1994, the Company entered into consulting agreements with two former
employees who are the current Co-Chairmen of the Company's Board of Directors.
The agreements expire in July 1999 and provide for total remuneration of
$1,000,000 over the five year period to be paid to each former employee. As part
of the acquisition of GemChem, the Company entered into employment agreements
with GemChem's former three officers and shareholders. The employment agreements
commenced January 15, 1994 and expire January 14, 1998. The agreements provide
for aggregate salaries of $390,000 per year. Annual increases shall be
determined by the Board of Directors or its designee but shall not be less than
the increase in an agreed upon cost of living index. The employment agreements
with the former officers and shareholders of GemChem also provide for the
issuance of stock options to purchase an aggregate of 70,000 shares of the
Company's common stock. The options are exercisable at the rate of 25% per year
commencing January 15, 1995. The exercise price is $10.00 per share. Unexercised
options expire on April 15, 1998. All options were anti-dilutive in 1995.
Amounts to be paid under the aforementioned consulting and employment agreements
are summarized as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
<C> <C>
1996 $ 837,400
1997 749,900
1998 288,600
1999 121,900
----------
$1,997,800
==========
</TABLE>
In July 1995, the Company entered into a noncancellable operating sublease for
its corporate headquarters expiring in October 1999. The lease contains a
provision to pass through to the Company the Company's pro rata share of the
building's operating expenses commencing July 1, 1996 in excess of the amount
passed through to the sublandlord during the first year of the sublease. Rent
expense for the year ended December 31, 1995 was $49,400. There was no rent
expense in 1994 and 1993. Future minimum lease payments under the terms of the
sublease are as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
<C> <C>
1996 $149,400
1997 149,400
1998 149,400
1999 124,500
--------
$572,700
========
</TABLE>
57
<PAGE> 60
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(13) Research and Development
Research and development expenses were $3,717,400, $5,544,000 and $4,715,400 for
the years ended December 31, 1995, 1994 and 1993, respectively.
(14) Subsequent Event
On February 5, 1996, the Company announced that the Board of Directors declared
a cash dividend of $.06 per share as well as a 10% stock dividend. Both
dividends were distributed on March 15, 1996 to shareholders of record at the
close of business on February 29, 1996. The cash dividend was paid on the number
of shares outstanding prior to the 10% stock dividend. Weighted average number
of shares have been restated to reflect the 10% stock dividend.
58
<PAGE> 61
INDEX TO EXHIBITS
ITEM 14(a)3
<TABLE>
<CAPTION>
Page
Sequentially
Numbered
------------
<S> <C> <C>
2.1 Purchase and Sales Agreement dated November
15, 1993, between Amvac Chemical Corporation
and E.I. du Pont de Nemours and Company.(4) --
3.1 Certificate of Incorporation of
Registrant.(1) --
3.2 Bylaws of Registrant (as amended as of
January 14, 1993).(3) --
4.1 Specimen Certificate of Common Stock.(2) --
10.1 Indemnification Agreement dated January 6,
1993 between Registrant and each of its
officers and directors.(3) --
10.2 Line of Credit Agreement dated June 18, 1991, related
amendments one through eight between the Registrant and
Sanwa Bank California and related Security
Agreement.(3) --
10.3 Line of Credit Agreement dated April 30,
1993, and related amendments, between the
Registrant and Sanwa Bank California and
related Security Agreement.(5) --
10.4 Line of Credit Agreement dated April 14,
1994, and related amendments, between the
Registrant and Sanwa Bank California and
related Security Agreement.(6) --
10.5 Employment Agreement between American
Vanguard Corporation and Eric G.
Wintemute.(6) --
10.6 Employment Agreement between American
Vanguard Corporation and Alfred J.
Moskal.(6) --
</TABLE>
59
<PAGE> 62
<TABLE>
<S> <C> <C>
10.7 Employment Agreement between American
Vanguard Corporation and Robert F.
Gilbane.(6) --
10.8 Agreement and General Release between
American Vanguard Corporation and Herbert
A. Kraft.(6) --
10.9 Agreement and General Release between
American Vanguard Corporation and Glenn A.
Wintemute.(6) --
10.10 American Vanguard Corporation
1994 Stock Incentive Plan (7) --
10.11 Amended and Restated Credit Agreement
dated September 12, 1995, and related
documents between the Registrant and
Sanwa Bank California. --
21. List of Subsidiaries of Registrant. --
27. Financial Data Schedule --
</TABLE>
- ----------------------
(1) Incorporated by reference as an Exhibit to Registrant's Form 10
Registration Statement No. 2-85599 filed June 13, 1972.
(2) Incorporated by reference as an Exhibit to Registrant's Form 10-K filed
June 13, 1972.
(3) Incorporated by reference as an Exhibit to Registrant's Form 10-K filed
March 30, 1993.
(4) Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report
on Form 8-K dated November 23, 1993.
(5) Incorporated by reference as an Exhibit to Registrant's Form 10-K filed
March 30, 1994.
(6) Incorporated by reference as an Exhibit to Registrant's Form 10-K filed
March 30, 1995.
(7) Incorporated by reference as Appendix A to Registrant's Proxy Material
filed June 3, 1995.
60
<PAGE> 1
Exhibit 10.11
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (the "Agreement") is made
and dated as of the 12 day of September, 1995, by and between SANWA BANK
CALIFORNIA, a California banking corporation (the "Lender"), and AMVAC CHEMICAL
CORPORATION, a California corporation (the "Borrower").
RECITALS
A. The Borrower and the Lender are party to that certain Line of
Credit Agreement dated April 14, 1994 (as amended, the "Existing Revolving
Credit Agreement").
B. The Borrower and the Lender are party to that certain
Construction Loan Agreement (Commercial/Industrial Development) dated January
29, 1990 (as amended, the "Existing Term Loan Agreement"). The outstanding
principal balance under the Existing Term Loan Agreement is approximately
$1,857,200.00.
C. The obligations of the Borrower under the Existing Revolving
Credit Agreement and the Existing Term Loan Agreement are secured by (i)
certain real property located at 4100 Washington Boulevard, City of Commerce,
California, pursuant to that certain Deed of Trust (Construction)/Assignment of
Leases and Rents dated January 29, 1990 by and among the Borrower, as Trustor,
First Bancorp, a California corporation, as Trustee, and the Lender, as
Beneficiary, which Deed of Trust was recorded in the official records in Los
Angeles County, California as Instrument No. 90-190419 at 4:21 p.m. on February
2, 1990, and (ii) certain personal property pursuant to various security
agreements.
D. The obligations of the Borrower under the Existing Revolving
Credit Agreement and under the Existing Term Loan Agreement are guaranteed by
American Vanguard and GemChem (as such terms and other capitalized terms not
otherwise defined herein are defined in Paragraph 10 below) and the obligations
of such Guarantors are secured by certain personal property of each such
Guarantor pursuant to various security agreements.
E. The Borrower has requested an increase in the term loan to an
amount not to exceed $5,250,000.00 and has requested an increase in its
revolving line of credit.
F. On the terms and subject to the conditions set forth below,
the Borrower and the Lender have agreed to consolidate the Existing Revolving
Credit Agreement and the Existing Term Loan Agreement into this Agreement, and
have agreed the Lender will provide additional term loans to Borrower for
capital expenditures.
NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. Loan Facilities.
1(a) Revolving Loans. On the terms and subject to the conditions
set forth herein, the Lender agrees that any Revolving Loan outstanding under
the Existing Revolving Credit Agreement on the Closing Date shall be deemed to
be a Revolving Loan hereunder. In addition,
<PAGE> 2
the Lender agrees that it shall from time to time up to and including the
Revolving Loan Maturity Date, make loans (each, a "Revolving Loan" and
collectively, the "Revolving Loans") to the Borrower in aggregate amounts not
to exceed at any one time outstanding the Revolving Credit Limit minus the
aggregate amount of all Outstanding Letters of Credit and all unpaid L/C
Drawings. Any revolving loan outstanding under the Existing Revolving Credit
Agreement on the Closing Date together with revolving loans made pursuant to
the preceding sentence are herein referred to individually as a "Revolving
Loan" and collectively as the "Revolving Loans". Amounts borrowed hereunder
and repaid may be reborrowed as provided herein, it being agreed and understood
that the credit facility evidenced by this Paragraph I (a) is a revolving
credit facility.
1(b) Term Loan. On the terms and subject to the conditions set
forth herein, the Lender agrees that any term loan outstanding under the
Existing Term Loan Agreement on the Closing Date shall be deemed to be a term
loan hereunder. In addition, the Lender agrees that it shall from time to time
from the Closing Date to December 31, 1995 make term loans to the Borrower in
amounts which, together with the outstanding balance of the Term Loan from time
to time, do not exceed $5,250,000.00. Any term loan outstanding under the
Existing Term Loan Agreement on the Closing Date together with term loans made
pursuant to the preceding sentence are herein collectively referred to as the
"Term Loan".
1(c) Calculation of Interest. The Borrower shall pay interest on
Loans outstanding hereunder from the date disbursed to but not including the
date of payment at a rate per annum equal to: (1) with respect to Revolving
Loans, at the option of the Borrower, either (x) the Reference Rate as in
effect from time to time during the applicable calculation period plus 0.25%,
or (y) the Fixed Rate quoted by the Lender for an Interest Period plus 2.25%,
and (2) with respect to the Term Loan, at the option of the Borrower, either
(x) the Reference Rate as in effect from time to time during the applicable
calculation period plus 0.5%, or (y) the Fixed Rate quoted by the Lender for an
Interest Period plus 2.50%.
1(d) Payment of Interest. Interest accruing on Reference Rate
Loans outstanding hereunder shall be payable monthly, in arrears, for each
month on or before the first Business Day of the next succeeding month and on
the maturity date of such Loan in the amount of interest then accrued but
unpaid. Interest accruing on each Fixed Rate Loan outstanding hereunder shall
be payable on the last day of the Interest Period relating thereto; provided,
that with respect to each Fixed Rate Loan with an Interest Period longer than 3
months, interest shall be payable on the last day of each 3-month period after
the commencement of such Interest Period and on the last day of such Interest
Period.
1(e) Payment of Principal. The Borrower shall pay the principal
amount of each Revolving Loan advanced hereunder on the Revolving Loan Maturity
Date. From the Closing Date through December 31, 1995, the Borrower shall pay
principal on the Term Loan in monthly installments of $77,380.00 on or before
the first Business Day of each month, commencing September 1, 1995. On the
first Business Day of January, 1996 and on or before the first Business Day of
each month thereafter through the Term Loan Maturity Date, the Borrower shall
pay principal on the Term Loan in monthly installments in an amount equal to
(i) the outstanding principal balance of the Term Loan at the close of business
on December 31, 1995 divided by (ii) sixty (60). The Lender shall notify the
Borrower of the amount of the principal payments to be made by the Borrower on
the Term Loan beginning on the first Business Day of January, 1996 by sending
the Borrower a Notice Regarding Term Loan Principal Payments substantially in
the form of Exhibit C attached hereto. The outstanding principal balance of
the Term Loan shall be repaid in full on the Term Loan Maturity Date.
1(f) Mandatory Prepayment of Principal. On the effective date of
any public offering of securities of American Vanguard or the Borrower, the
Borrower shall prepay the Loans in an
2
<PAGE> 3
amount equal to the proceeds of such public offering, net of underwriting
discounts and commissions and other reasonable costs associated therewith. Any
such prepayment shall be applied to the Term Loan in payment of the required
monthly installments of principal in the inverse order of maturity, and after
the Term Loan has been repaid in full, shall next be applied to the Revolving
Loan.
1(g) Prepayments. The Borrower may prepay Revolving Loans which
are Reference Rate Loans hereunder in whole or in part at any time. The
Borrower may, from time to time with one (1) day prior notice (by telephone,
confirmed in writing promptly thereafter, telex or telecopier) received by the
Lender, voluntarily prepay the Term Loan. Any such prepayment shall be in
integral multiples of $100,000.00 and in a minimum amount of $100,000.00. Any
such prepayment shall be accompanied by accrued interest on the principal
amount being prepaid to the date of prepayment and any additional amounts as
may be required to be paid under the provisions of Paragraph 1(h) hereof.
Once prepaid, the Term Loan may not be reborrowed.
1(h) Special Provisions Regarding Fixed Rate Loans.
(1) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, NO PREPAYMENT SHALL BE MADE ON ANY FIXED RATE LOAN EXCEPT ON A DAY
WHICH IS THE LAST DAY OF THE INTEREST PERIOD RELATING THERETO. IF THE WHOLE OR
ANY PART OF ANY FIXED RATE LOAN IS PREPAID BY REASON OF ACCELERATION OR
OTHERWISE, THE BORROWER SHALL, UPON THE LENDER'S REQUEST, PROMPTLY PAY TO AND
INDEMNIFY THE LENDER FOR ALL COSTS AND ANY LOSS (INCLUDING INTEREST) ACTUALLY
INCURRED BY THE LENDER AND ANY LOSS (INCLUDING LOSS OF PROFIT RESULTING FROM
THE RE-EMPLOYMENT OF FUNDS) SUSTAINED BY THE LENDER AS A CONSEQUENCE OF SUCH
PREPAYMENT.
(2) During any period of time in which any Fixed Rate
Loan is outstanding, the Borrower shall, upon the Lender's request, promptly
pay to and reimburse the Lender for all costs incurred and payments made by the
Lender by reason of any future assessment, reserve, deposit or similar
requirements or any surcharge, tax or fee imposed upon the Lender or as a
result of the Lender's compliance with any directive or requirement of any
regulatory authority pertaining or relating to funds used by the Lender in
quoting and determining the Fixed Rate.
(3) In the event that the Lender shall at any time
determine that the accrual of interest on the basis of the Fixed Rate (a) is
infeasible because the Lender is unable to determine the Fixed Rate due to the
unavailability of U.S. dollar deposits, contracts or certificates of deposit in
an amount approximately equal to the amount of the relevant Loan and for a
period of time approximately equal to the relevant Interest Period; or (b) is
or has become unlawful or infeasible by reason of the Lender's compliance with
any new law, rule, regulation, guideline or order, or any new interpretation of
any present law, rule, regulation, guideline or order, then the Lender shall
give telephonic notice thereof (confirmed in writing) to the Borrower, in which
event any Fixed Rate Loan shall be deemed to be a Reference Rate Loan and
interest shall thereupon immediately accrue at the Reference Rate plus the
applicable percentage.
1(i) Requirements of Law; Increased Costs. In the event that any
applicable law, order, regulation, treaty or directive issued by any central
bank or other governmental authority, agency or instrumentality or any
governmental or judicial interpretation or application thereof, or compliance
by the Lender with any request or directive (whether or not having the force of
law) issued by any central bank or other governmental authority, agency or
instrumentality:
(1) Does or shall subject the Lender to any tax of any
kind whatsoever with respect to this Agreement or any Loans made hereunder, or
change the basis of taxation of
3
<PAGE> 4
payments to the Lender of principal, fee, interest or any other amount payable
hereunder (except for change in the rate of tax on the overall net income of
the Lender);
(2) Does or shall impose, modify or hold applicable any
reserve, capital requirement, special deposit, compulsory loan or similar
requirements against assets held by, or deposits or other liabilities in or for
the account of, advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of the Lender which are not otherwise
included in the determination of interest payable on the Obligations; or
(3) Does or shall impose on the Lender any other
condition;
and the result of any of the foregoing is to increase the cost to the Lender of
making, renewing or maintaining any Loan or to reduce any amount receivable in
respect thereof or the rate of return on the capital of the Lender or any
corporation controlling the Lender, then, in any such case, the Borrower shall
promptly pay to the Lender, upon its written demand, any additional amounts
necessary to compensate the Lender for such additional cost or reduced amounts
receivable or rate of return as determined by the Lender with respect to this
Agreement or Loans made hereunder. If the Lender becomes entitled to claim any
additional amounts pursuant to this Paragraph 1(i), it shall promptly notify
the Borrower of the event by reason of which it has become so entitled. A
certificate as to any additional amounts payable pursuant to the foregoing
sentence containing the calculation thereof in reasonable detail submitted by
the Lender to the Borrower shall be conclusive in the absence of manifest
error. The provisions hereof shall survive the termination of this Agreement
and payment of the outstanding Loans and all other amounts payable hereunder.
2. Letter of Credit Facility.
2(a) Pre-Existing Letters of Credit. On the terms and subject to
the conditions set forth in the Existing Revolving Credit Agreement, the Lender
has issued certain letters of credit for the account of the Borrower which
letters of credit are Outstanding at the date of this Agreement and which
letters of credit are described more particularly on Exhibit J attached hereto
(the "Pre-Existing Letters of Credit"). On the Closing Date, such Pre-Existing
Letters of Credit shall constitute "Letters of Credit" under, and for all
purposes of, the Loan Documents.
2(b) Issuance of New Letters of Credit. On the terms and subject
to the conditions set forth herein, the Lender shall from time to time from and
after the Closing Date, issue its letters of credit (a "New Letter of Credit"
and, collectively, the "New Letters of Credit") for the account of the Borrower
in an amount which when added to:
(1) The aggregate amount of other Outstanding Letters of
Credit at the proposed issuance date will not exceed the Letter of Credit
Sublimit; and
(2) The aggregate amount of Revolving Loans outstanding
hereunder and the aggregate amount of other Outstanding Letters of Credit and
unpaid L/C Drawings will not exceed the Revolving Credit Limit.
Each New Letter of Credit shall be requested by the Borrower at least three
Business Days prior to the proposed issuance date by delivery to the Lender of
a duly executed Letter of Credit Application accompanied by all other
documents, instruments and agreements as the Lender may require. In no event
may the term of any Letter of Credit (including the right of any beneficiary to
require renewals) extend beyond the Revolving Loan Maturity Date.
2(c) Repayment of L/C Drawings. Any drawing under any Letter of
Credit (a "L/C Drawing") shall be payable in full by the Borrower, without
demand upon or notice to the
4
<PAGE> 5
Borrower, on the date of such L/C Drawing and, if not paid on such date, shall
be deemed to be a Revolving Loan hereunder and shall accrue interest as
provided herein.
2(d) Absolute Obligation to Repay. The Borrower's obligation to
repay L/C Drawings shall be absolute, irrevocable and unconditional under any
and all circumstances whatsoever and irrespective of any set-off, counterclaim
or defense to payment which the Borrower may have or have had, against the
Lender or any other Person, including, without limitation, any set-off,
counterclaim or defense based upon or arising out of:
(1) Any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(2) Any amendment or waiver of or any consent to
departure from the terms of any Letter of Credit;
(3) The existence of any claim, setoff, defense or other
right which the Borrower or any other Person may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any Person for whom
any such beneficiary or any such transferee may be acting);
(4) Any allegation that any demand, statement or any
other document presented under any Letter of Credit is forged, fraudulent,
invalid or insufficient in any respect, or that any statement therein is untrue
or inaccurate in any respect whatsoever or that variations in punctuation,
capitalization, spelling or format were contained in the drafts or any
statements presented in connection with any L/C Drawing;
(5) Any payment by the Lender under any Letter of Credit
against presentation of a draft or certificate that does not strictly comply
with the terms of such Letter of Credit, or any payment made by the Lender
under any Letter of Credit to any Person purporting to be a trustee in
Bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any beneficiary
or any transferee of any Letter of Credit, including any arising in connection
with any insolvency proceeding;
(6) Any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations of the Borrower in respect
of any Letter of Credit; or
(7) Any other circumstance of happening whatsoever,
whether or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrower or any Guarantor.
Nothing contained herein shall constitute a waiver of any rights of the
Borrower against the Lender arising out of the gross negligence or willful
misconduct of the Lender in connection with any Letter of Credit.
2(e) Uniform Customs and Practice. The Uniform Customs and
Practice for Documentary Credits as published by the International Chamber of
Commerce most recently at the time of issuance of any Letter of Credit shall
(unless otherwise expressly provided in a Letter of Credit) apply to the
Letters of Credit.
3. Miscellaneous Provisions.
3(a) Use of Proceeds. The proceeds of all Loans shall be utilized
to retire all outstanding indebtedness under the Existing Revolving Credit
Agreement and under the Existing
5
<PAGE> 6
Term Loan Agreement and by the Borrower for capital expenditures and working
capital purposes.
3(b) Request For Loans; Making of Loans. If the Borrower desires
to borrow a Reference Rate Loan hereunder, the Borrower shall deliver a Loan
Request no later than 2:00 p.m. (Los Angeles time), on the proposed funding
date. If the Borrower desires to borrower a Fixed Rate Loan hereunder, the
Borrower shall deliver a Loan Request no later than 2:00 p.m. (Los Angeles
time) two Business Days prior to the proposed funding date. Any Loan advanced
by the Lender hereunder shall be conclusively presumed to have been made to and
for the Borrower's benefit if advanced in accordance with the Borrower's
instructions or deposited into a checking account of the Borrower maintained
with the Lender.
3(c) Roll-overs. The Borrower may, by giving notice in accordance
with the provisions of Paragraph 3(b) above, roll-over all or any part of any
Fixed Rate Loan so that such Fixed Rate Loan continues to be outstanding as a
Fixed Rate Loan. If the Borrower shall not have repaid a Fixed Rate Loan or
effected a roll-over in accordance with this Paragraph 3(c), it shall be
deemed to have elected to roll-over such Fixed Rate Loan into a Reference Rate
Loan to be made on the last day of the Interest Period of the Fixed Rate Loan
so rolled-over.
3(d) Notes. The obligation of the Borrower to repay the Revolving
Loans shall be evidenced by a note payable to the order of the Lender in the
form of that attached hereto as Exhibit A (the "Revolving Note"). The
obligation of the Borrower to repay the Term Loan shall be evidenced by a note
payable to the order of the Lender in the form of that attached hereto as
Exhibit B (the "Term Note", and together with the Revolving Note, the "Notes").
The Lender is hereby authorized to record the date and amount of each advance
made by the Lender and each payment of principal made by the Borrower, on the
schedules annexed to and constituting a part of the applicable Note (or by any
analogous method the Lender may elect consistent with its customary practices)
and any such recordation shall constitute prima facie evidence of the accuracy
of the information so recorded absent manifest error. The failure of the
Lender to make any such notation shall not affect in any manner or to any
extent the Borrower's Obligations hereunder.
3(e) Nature and Place of Payments. All payments made on account of
the Obligations shall be made by the Borrower, without setoff or counterclaim,
in lawful money of the United States of America in immediately available funds,
free and clear of and without deduction for any taxes, fees or other charges of
any nature whatsoever imposed by any taxing authority and must be received by
the Lender by 2:00 p.m. (Los Angeles time) on the day of payment, it being
expressly agreed and understood that if a payment is received after 2:00 p.m.
(Los Angeles time) by the Lender, such payment will be considered to have been
made by the Borrower on the next succeeding Business Day and interest thereon
shall be payable by the Borrower at the then applicable rate. All payments on
account of the Obligations shall be made to the Lender through its office
located at 601 South Figueroa Street, W8-12, Los Angeles, California 90017. If
any payment required to be made by the Borrower hereunder becomes due and
payable on a day other than a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and interest thereon shall be
payable at the then applicable rate during such extension.
3(f) Post-Default Interest. Notwithstanding anything to the
contrary contained herein, on any date that there shall have occurred and be
continuing an Event of Default, any and all Obligations outstanding may, at the
option of the Lender, bear interest at a per annum rate equal to three percent
(3%) above the Reference Rate.
3(g) Late Fee. If any payment of principal or interest, or any
portion thereof, under this Agreement is not paid within ten (10) calendar days
after it is due, a late payment charge
6
<PAGE> 7
equal to five percent (5%) of such past due payment may be assessed and shall
be paid immediately.
3(h) Computations. All computations of interest and fees payable
hereunder shall be based upon a year of 360 days for the actual number of days
elapsed.
3(i) Fees. On the date of the execution of this Agreement, the
Borrower shall pay to the Lender a non-refundable commitment fee in the amount
of $100,000.00.
3(j) Amendment and Restatement of Existing Revolving Credit
Agreement and Existing Term Loan Agreement. On the Closing Date, (1) each of
the Existing Revolving Credit Agreement and the Existing Term Loan Agreement
shall be deemed to have been amended and restated in its entirety by this
Agreement, and (2) the Advances (as defined in the Existing Revolving Credit
Agreement) and the term loans under the Existing Term Loan Agreement shall be
restated as Loans hereunder. To the extent such Advances and such loans do not
include all costs, expenses and fees owing under the Existing Revolving Credit
Agreement and the Existing Term Loan Agreement and the related documentation
(including, without limitation, attorneys' fees), Borrower promises to pay all
such costs, expenses and fees on or before the Closing Date.
3(k) Collateral Documents; Additional Documents. As collateral
security for the Obligations, the Borrower shall execute and deliver to the
Lender: (1) a Deed of Trust and Assignment of Leases and Rents substantially in
the form of that attached hereto as Exhibit F hereto (the "Deed of Trust"),
pursuant to which the Borrower shall grant to the Lender a first priority
security interest in and lien upon the Real Property, (2) an amended and
restated security agreement in the form of that attached hereto as Exhibit E
(the "Security Agreement"), pursuant to which the Borrower shall pledge, assign
and grant to the Lender a first priority security interest in and lien upon the
personal property Collateral, and (3) such UCC-1 financing statements as the
Lender may require. The Borrower further agrees to execute and deliver and to
cause to be executed and delivered to the Lender from time to time such
confirmatory and supplementary security agreements, financing statements,
consents of and notices to third parties and such other documents, instruments,
title endorsements and agreements as the Lender may reasonably request which
are in the Lender's judgment necessary or desirable to obtain for the Lender
the benefit of the Guaranties (including any collateral pledged in connection
therewith), the Deed of Trust, the Security Agreement and the Collateral (the
Deed of Trust, the Security Agreement, the UCC-1 financing statements referred
to in subparagraph (3) above, and such additional documents, instruments and
agreements being referred to herein as the "Security Documents").
3(l) Guaranties. As additional credit support for the Obligations,
the Borrower shall cause each of American Vanguard, GemChem and 2110 Davie to
execute and deliver to the Lender: (1) a credit guaranty in the form of that
attached hereto as Exhibit G (a "Guaranty" and, collectively, the
"Guaranties"), (2) a security agreement in the form of that attached hereto as
Exhibit H (a "Subsidiary Security Agreement" and, collectively, the "Subsidiary
Security Agreements"), pursuant to which such Subsidiary shall pledge, assign
and grant to the Lender a first priority perfected security interest in and
Lien upon such Subsidiary's personal property, and (3) such UCC-1 financing
statements as the Lender may request.
4. Conditions to Making Loans.
4(a) First Loan. As conditions precedent to the obligation of the
Lender to make the first Loan hereunder (including restatements of loans
outstanding under the Existing Revolving Credit Agreement and the Existing Term
Loan Agreement):
7
<PAGE> 8
(1) The Borrower shall have delivered or shall have had
delivered to the Lender, in form and substance satisfactory to the Lender and
its counsel, each of the following:
(i) A duly executed copy of this Agreement;
(ii) A duly executed copy of the other Loan
Documents;
(iii) A duly executed copy of the Deed of Trust in
recordable form;
(iv) A title insurance policy with respect to the
Real Property, including such affirmative coverages as the Lender may request;
(v) Such credit applications, financial
statements, authorizations and such information concerning the Borrower and its
business, operations and condition (financial and otherwise) as the Lender may
reasonably request;
(vi) Certified copies of resolutions of the Boards
of Directors of the Borrower and each Guarantor, approving the execution and
delivery of the Loan Documents to which such entity is a party;
(vii) A certificate of the Secretary or an
Assistant Secretary of the Borrower and each Guarantor, certifying the names and
true signatures of the officers of the Borrower and such Guarantor, as
applicable, authorized to sign the Loan Documents to which such entity is a
party; and
(viii) Acknowledgment copies of all UCC-1 financing
statements filed with respect to the Collateral and the collateral for the
Guaranties accompanied by a search report showing such financing statements as
duly filed and evidencing that the security interest of the Lender in the
Collateral and the collateral for the Guaranties is prior to all other security
interests of record.
(2) Borrower shall pay the $100,000.00 fee referred to in
Paragraph 3(i) above.
(3) All acts and conditions (including, without
limitation, the obtaining of any necessary regulatory approvals and the making
of any required filings, recordings or registrations) required to be done and
performed and to have happened precedent to the execution, delivery and
performance of the Loan Documents and to constitute the same legal, valid and
binding obligations, enforceable in accordance with their respective terms,
shall have been done and performed and shall have happened in due and strict
compliance with all applicable laws.
(4) All documentation, including, without limitation,
documentation for corporate and legal proceedings in connection with the
transactions contemplated by the Loan Documents shall be satisfactory in form
and substance to the Lender and its counsel.
4(b) Ongoing Loans. As conditions precedent to the Lender's
obligation to make any Loan or issue any Letter of Credit hereunder, including
the first Loan, at and as of the proposed funding date thereof:
(1) There shall have been delivered to the Lender a Loan
Request therefor;
(2) The representations and warranties contained in the
Loan Documents shall be accurate and complete in all respects as if made on and
as of such date;
8
<PAGE> 9
(3) There shall not have occurred an Event of Default or Potential
Default; and
(4) Following the making of such Loan or the issuance of such
Letter of Credit, the aggregate principal amount of the Revolving Loans
outstanding, the aggregate principal amount of the Term Loan outstanding and
the Outstanding Letters of Credit will not exceed the limitations of Paragraphs
1(a), 1(b) or 2(b) above, respectively.
By delivering a Loan Request or a request for the issuance of a New
Letter of Credit to the Lender hereunder, the Borrower shall be deemed to have
represented and warranted the accuracy and completeness of the statements set
forth in subparagraphs (b)(2) through (b)(4) above.
5. Representations and Warranties of the Borrower.
As an inducement to the Lender to enter into this Agreement and to
make Loans and issue Letters of Credit as provided herein, the Borrower
represents and warrants to the Lender that:
5(a) Financial Condition. The financial statements, dated the
Statement Date and the Interim Date, copies of which have heretofore been
furnished to the Lender, are complete and correct and present fairly in
accordance with GAAP the financial condition of American Vanguard and its
consolidated Subsidiaries at such dates and the consolidated and consolidating
results of their operations and cash flows for the fiscal periods then ended.
5(b) No Change. Since the Statement Date there has been no
material adverse change in the business, operations, assets or financial or
other condition of American Vanguard, the Borrower or American Vanguard and its
consolidated Subsidiaries taken as a whole. Since the Statement Date, neither
American Vanguard nor the Borrower has entered into, incurred or assumed any
long-term debt, mortgages, material leases or oral or written commitments, nor
commenced any significant project, nor made any purchase or acquisition of any
significant property.
5(c) Corporate Existence; Compliance with Law. The Borrower: (1)
is duly organized, validly existing and in good standing as a corporation under
the laws of the State of California and is qualified to do business in each
jurisdiction where its ownership of property or conduct of business requires
such qualification and where failure to qualify would have a material adverse
effect on the Borrower or its property and/or business or on the ability of the
Borrower to pay and perform the Obligations, (2) has the corporate power and
authority and the legal right to own and operate its property and to conduct
business in the manner in which it does and proposes so to do, and (3) is in
compliance with all Requirements of Law and Contractual Obligations.
5(d) Corporate Power; Authorization; Enforceable Obligations. The
Borrower has the corporate power and authority and the legal right to execute,
deliver and perform the Loan Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Loan Documents. The Loan Documents have been duly executed and
delivered on behalf of the Borrower and constitute legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance with
their respective terms, subject to the effect of applicable bankruptcy and
other similar laws affecting the rights of creditors generally and the effect
of equitable principles whether applied in an action at law or a suit in
equity.
5(e) No Legal Bar. The execution, delivery and performance of the
Loan Documents, the borrowings hereunder and the use of the proceeds thereof,
will not violate any Requirement
9
<PAGE> 10
of Law or any Contractual Obligation of the Borrower or create or result in the
creation of any Lien on any assets of the Borrower other than in favor of the
Lender pursuant to the Security Documents.
5(f) No Material Litigation. Except as disclosed in the most
recent Form 10-K or Form 10-Q filed by American Vanguard, there is no material
litigation, investigation or proceeding (including, without limitation,
Environmental Claims) of or before any arbitrator or Governmental Authority
pending or, to the knowledge of the Borrower, threatened by or against the
Borrower or any of its Subsidiaries or against any of such parties' properties
or revenues.
5(g) Taxes. The Borrower and each of its Subsidiaries have filed
or caused to be filed all tax returns that are required to be filed and have
paid all taxes shown to be due and payable on said returns or on any
assessments made against them or any of their property other than taxes which
are being contested in good faith by appropriate proceedings and as to which
the Borrower or the applicable Subsidiary has established adequate reserves in
conformity with GAAP.
5(h) Investment Company Act. The Borrower is not an "investment
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
5(i) Subsidiaries. Attached hereto as Exhibit I is an accurate and
complete list of all presently existing active Subsidiaries of American
Vanguard, their respective jurisdictions of incorporation and qualification and
the percentage of their capital stock owned by American Vanguard, the Borrower
or other Subsidiaries of American Vanguard. All of the issued and outstanding
shares of capital stock of the Borrower and each such Subsidiary have been duly
authorized and issued and are fully paid and non-assessable.
5(j) Federal Reserve Board Regulations. Neither the Borrower nor
any of its Subsidiaries is engaged or will engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
such terms under Regulation U. No part of the proceeds of any Loan issued
hereunder will be used for "purchasing" or "carrying" "margin stock" as so
defined or for any purpose which violates, or which would be inconsistent with,
the provisions of the Regulations of the Board of Governors of the Federal
Reserve System.
5(k) ERISA. (1) No Prohibited Transactions, Accumulated Funding
Deficiencies, withdrawals from Multiemployer Plans or Reportable Events have
occurred with respect to any Plans or Multiemployer Plans that, in the
aggregate, could subject the Borrower to any tax, penalty or other liability
where such tax, penalty or liability is not covered in full, for the benefit of
the Borrower, by insurance; (2) no notice of intent to terminate a Plan has
been filed, nor has any Plan been terminated under Section 4041 of ERISA, nor
has the PBGC instituted proceedings to terminate, or appoint a trustee to
administer, a Plan, and no event has occurred or condition exists which might
constitute grounds under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan; (3) the present value of all
benefit liabilities (as defined in section 4001(a)(16) of ERISA) under all
Plans (based on the actuarial assumptions used to fund the Plans) does not
exceed the assets of the Plans; and (4) the execution, delivery and performance
by the Borrower of this Agreement and the other Loan Documents and the use of
the proceeds of the Loans will not involve any Prohibited Transactions.
5(l) Assets. Each of American Vanguard and the Borrower has good
and marketable title to all property and assets reflected in the financial
statements referred to in Paragraph 5(a) above, except property and assets sold
or otherwise disposed of in the ordinary course of business subsequent to the
respective dates thereof and except for property and assets specifically
10
<PAGE> 11
pledged as collateral for capitalized lease obligations. Neither the Borrower
nor any of its Subsidiaries has outstanding Liens on any of its properties or
assets nor are there any security agreements to which the Borrower or any of
its Subsidiaries is a party, or title retention agreements, whether in the form
of leases or otherwise, of any personal property except as reflected in the
financial statements referred to in Paragraph 5(a) above or as permitted under
Paragraph 7(a) below.
5(m) Securities Acts. The Borrower has not issued any unregistered
securities in violation of the registration requirements of Section 5 of the
Securities Act of 1933, as amended, or any other law, and is not violating any
rule, regulation or requirement under the Securities Act of 1933, as amended,
or the Securities and Exchange Act of 1934, as amended. The Borrower is not
required to qualify an indenture under the Trust Indenture Act of 1939, as
amended, in connection with its execution and delivery of the Notes.
5(n) Consents, etc. No consent, approval, authorization of, or
registration, declaration or filing with any governmental authority is required
on the part of the Borrower in connection with the execution and delivery of
the Loan Documents or the performance of or compliance with the terms,
provisions and conditions hereof or thereof.
5(o) Environmental Compliance. The operations of the Borrower
comply, and during the term of this Agreement will at all times comply, in all
respects with all Environmental Laws; the Borrower has obtained licenses,
permits, authorizations and registrations required under any Environmental Law
("Environmental Permits") and necessary for its ordinary operations, all such
Environmental Permits are in good standing, and the Borrower is in compliance
with all material terms and conditions of such Environmental Permits; neither
the Borrower nor any of its present properties or operations are subject to any
outstanding written order from or agreement with any governmental authority nor
subject to any judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material; there are no
Hazardous Materials or other conditions or circumstances existing, or arising
from operations prior to the date of this Agreement, with respect to any
property of the Borrower that would reasonably be expected to give rise to
Environmental Claims; provided, however, that with respect to property leased
from an unrelated third party, the foregoing representation is made to the best
knowledge of the Borrower. In addition (i) the Borrower does not have or
maintain any underground storage tanks which are not properly registered or
permitted under applicable Environmental Laws or which are leaking or disposing
of Hazardous Materials offsite, and (ii) the Borrower has notified all of its
employees of the existence, if any, of any health hazard arising from the
conditions of their employment and have met all notification requirements under
Title III of CERCLA and all other Environmental Laws.
6. Affirmative Covenants. The Borrower hereby covenants and agrees with
the Lender that, as long as any Obligations remain unpaid or the Lender has any
obligation to make Loans and issue Letters of Credit hereunder, the Borrower
shall:
6(a) Financial Statements. Furnish or cause to be furnished to the
Lender:
(1) Within ninety (90) days after the last day of each
fiscal year of American Vanguard, the Form 10-K of American Vanguard as filed
with the SEC, together with consolidated and consolidating statements of income
and statements of cash flows for such year and balance sheets as of the end of
such year presented fairly in accordance with GAAP and accompanied by an
unqualified report of a firm of independent certified public accountants
acceptable to the Lender and including therewith a copy of the management
letter from such certified public accountants;
11
<PAGE> 12
(2) Within sixty (60) days after the last day of each
fiscal quarter of American Vanguard except for fiscal quarters ending in
December, the Form 10-Q of American Vanguard as filed with the SEC, together
with consolidated and consolidating statements of income and cash flows for
such fiscal quarter and balance sheets as of the end of such fiscal quarter of
American Vanguard, accompanied in each case by a certificate of the chief
financial officer of American Vanguard stating that such financial statements
are presented fairly in accordance with GAAP; and
(3) Not later than the last day of the following calendar
month except the months of January, February, March, June, September and
December, consolidated and consolidating statements of income and cash flows of
American Vanguard for such month and balance sheets of American Vanguard as of
the end of such month accompanied by a certificate of the chief financial
officer of American Vanguard stating that such financial statements are
presented fairly in accordance with GAAP; and
(4) Concurrently with the delivery of the financial
statements referred to in subparagraphs (1), (2) and (3) above, a compliance
certificate in the form of that attached hereto as Exhibit D (a "Compliance
Certificate") of the chief financial officer of the Borrower, demonstrating in
detail satisfactory to the Lender the Borrower's compliance with the financial
covenants set forth in Paragraphs 7(j) and 7(k) below at and as of the date of
such financial statements.
6(b) Certificates; Reports; Other Information. Furnish or cause
to be furnished to the Lender:
(1) Not later than the last day of the following calendar
month, an accounts receivable and accounts payable aging report for the
immediately preceding month, in form and substance satisfactory to the Lender;
and
(2) Promptly, such additional financial and other
information, including, without limitation, financial statements of the
Borrower, any Guarantor or any other Affiliate, as the Lender may from time to
time reasonably request, including, without limitation, such information as is
necessary for the Lender to sell, assign or otherwise transfer all or portions
of, and participations in, the Lender's interest in the Loans hereunder.
6(c) Payment of Indebtedness. Pay, discharge or otherwise satisfy
at or before maturity or before it becomes delinquent, defaulted or
accelerated, as the case may be, all its Indebtedness (including taxes), except
Indebtedness being contested in good faith and for which provision is made to
the satisfaction of the Lender for the payment thereof in the event the
Borrower is found to be obligated to pay such Indebtedness and which
Indebtedness is thereupon promptly paid by the Borrower.
6(d) Maintenance of Existence and Properties; Compliance. Maintain
its corporate existence and maintain all rights, privileges, licenses,
approvals, franchises, properties and assets necessary or desirable in the
normal conduct of its business, and comply with all Contractual Obligations and
Requirements of Law. Any violation of a Requirement of Law shall be corrected
within thirty days of the earlier of receipt of a citation or knowledge of such
violation by the Borrower.
6(e) Inspection of Property; Books and Records: Discussions. Keep
proper books of record and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities, and permit
representatives of the Lender (at no cost or expense to the Borrower unless
there shall have occurred and be continuing an Event of Default) to visit and
inspect any of its
12
<PAGE> 13
properties and examine, audit and make abstracts from and copies of any of its
books and records at any reasonable time and as often as may reasonably be
desired by the Lender, and to discuss the business, operations, properties and
financial and other condition of the Borrower and any of its Subsidiaries with
officers and employees of such parties, and with their independent certified
public accountants.
6(f) Notices. Give prompt written notice to the Lender of:
(1) The occurrence of any Potential Default or Event of
Default;
(2) The use of any fictitious trade style, indicating the
trade style and state(s) of its use;
(3) Any litigation or proceeding affecting American
Vanguard or any of its Subsidiaries which could have a material adverse effect
on the business, operations, property, or financial or other condition of
American Vanguard, the Borrower or the Borrower and its Subsidiaries taken as a
whole; and
(4) A material adverse change in the business,
operations, property or financial or other condition of American Vanguard, the
Borrower or the Borrower and its Subsidiaries take as a whole.
6(g) Expenses. Pay all reasonable out-of-pocket expenses of the
Lender (including fees and disbursements of counsel) incident to: (1) the
preparation and negotiation of the Loan Documents and the closing of the credit
facility evidenced thereby in any amount in excess of $10,000.00, (2) the
administration of the credit facility evidenced by the Loan Documents,
including, without limitation, expenses incurred by the Lender in connection
with periodic inspections and audits conducted on behalf of the Lender pursuant
to Paragraph 6(e) above, (3) the protection of the rights of the Lender under
the Loan Documents, including obtaining and maintaining a security interest in
any collateral for the Obligations, and (4) the enforcement of payment of the
Obligations, whether by judicial proceedings or otherwise, and before as well
as after judgment including, without limitation, in connection with bankruptcy,
insolvency, liquidation, reorganization, moratorium or other similar
proceedings involving the Borrower or a "workout" of the Obligations. The
obligations of the Borrower under this Paragraph 6(g) shall be effective and
enforceable whether or not any Loan is made hereunder and shall survive payment
of all other Obligations.
6(h) Loan Documents. Comply with and observe all terms and
conditions of the Loan Documents.
6(i) Insurance. Obtain and maintain insurance with responsible
companies in such amounts and against such risks as are usually carried by
corporations engaged in similar businesses similarly situated, including,
without limitation, product liability insurance with a coverage amount of not
less than $10,000,000.00, and furnish the Lender on request full information
as to all such insurance. The Lender shall be named as loss payee and an
additional insured on all policies of insurance maintained as required
hereunder.
6(j) Environmental Compliance.
(1) Conduct its operations and keep and maintain the
Property in compliance with all Environmental Laws.
(2) Give prompt written notice to the Lender, but in no
event later than 10 days after becoming aware, of the following: (i) any
enforcement, cleanup, removal or other
13
<PAGE> 14
governmental or regulatory actions instituted, completed or threatened against
the Borrower or any of its affiliates or any of their respective properties
pursuant to any applicable Environmental Laws, (ii) all other Environmental
Claims, and (iii) any environmental or similar condition on any real property
adjoining or in the vicinity of the property of the Borrower or its affiliates
that could reasonably be anticipated to cause such property or any part thereof
to be subject to any restrictions on the ownership, occupancy, transferability
or use of such property under any Environmental Laws.
(3) Upon the written request of the Lender, the Borrower
shall submit to the Lender, at the Borrower's sole cost and expense, at
reasonable intervals, a report providing an update of the status of any
environmental, health or safety compliance, hazard or liability issue
identified in any notice required pursuant to this Section.
(4) At all times indemnify and hold harmless the Lender
from and against any and all liability arising out of any Environmental Claims.
6(k) ERISA. Furnish to the Lender:
(1) Promptly and in any event within ten (10) days after
the Borrower knows or has reason to know of the occurrence of a Reportable
Event with respect to a Plan with regard to which notice must be provided to
the PBGC, a copy of such materials required to be filed with the PBGC with
respect to such Reportable Event and in each such case a statement of the chief
financial officer of the Borrower setting forth details as to such Reportable
Event and the action which the Borrower proposes to take with respect thereto;
(2) Promptly and in any event within ten (10) days after
the Borrower knows or has reason to know of any condition existing with respect
to a Plan which presents a material risk of termination of the Plan, imposition
of an excise tax, requirement to provide security to the Plan or incurrence of
other liability by the Borrower or any ERISA Affiliate, a statement of the
chief financial officer of the Borrower describing such condition;
(3) At least ten (10) days prior to the filing by any
plan administrator of a Plan of a notice of intent to terminate such Plan, a
copy of such notice;
(4) Promptly and in no event more than ten (10) days
after the filing thereof with the Secretary of the Treasury, a copy of any
application by the Borrower or an ERISA Affiliate for a waiver of the minimum
funding standard under section 412 of the Code;
(5) Promptly and in any event within ten (10) days after
the Borrower knows or has reason to know of any event or condition which might
constitute grounds under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, a statement of the chief
financial officer of the Borrower describing such event or condition;
(6) Promptly and in no event more than ten (10) days
after receipt thereof by the Borrower or any ERISA Affiliate, a copy of each
notice received by the Borrower or an ERISA Affiliate concerning the imposition
of any withdrawal liability under section 4202 of ERISA; and
(7) Promptly after receipt thereof a copy of any notice
the Borrower or any ERISA Affiliate may receive from the PBGC or the Internal
Revenue Service with respect to any Plan or Multiemployer Plan; provided,
however, that this subparagraph shall not apply to notices of general
application promulgated by the PGBC or the Internal Revenue Service.
14
<PAGE> 15
7. Negative Covenants. The Borrower hereby agrees that, as long as any
Obligations remain unpaid or the Lender has any obligation to make Loans or
issue Letters of Credit hereunder, the Borrower shall not, directly or
indirectly:
7(a) Liens. Create, incur, assume or suffer to exist, any Lien
upon the Collateral except Liens in favor of the Lender or create, incur,
assume or suffer to exist any Lien upon any of its other property and assets
except:
(1) Liens or charges for current taxes, assessments or
other governmental charges which are not delinquent or which remain payable
without penalty, or the validity of which are contested in good faith by
appropriate proceedings upon stay of execution of the enforcement thereof,
provided the Borrower shall have set aside on its books and shall maintain
adequate reserves for the payment of same in conformity with GAAP;
(2) Liens, deposits or pledges made to secure statutory
obligations, surety or appeal bonds, or bonds for the release of attachments or
for stay of execution, or to secure the performance of bids, tenders, contracts
(other than for the payment of borrowed money), leases or for purposes of like
general nature in the ordinary course of the Borrower's business; and
(3) Purchase money security interests for property,
conditional sale agreements, or other title retention agreements; provided,
however, that no such security interest or agreement shall extend to any
property other than the property acquired in connection with the grant of such
security interest; and
(4) Other Liens securing Indebtedness permitted under
Paragraph 7(b)(5) below.
7(b) Indebtedness. Create, incur, assume or suffer to exist, or
otherwise become or be liable, or cause any Subsidiary to create, incur, assume
or suffer to exist, or otherwise become or be liable, in respect of any
indebtedness except:
(1) The Obligations;
(2) Indebtedness reflected in the financial statements
referred to in Paragraph 5(a) above;
(3) Trade debt incurred in the ordinary course of
business;
(4) Indebtedness secured by Liens permitted under
Paragraph 7(a)(1), (2) and (3) above; and
(5) Other Indebtedness in an aggregate amount of not
more than $250,000.00 at any time outstanding.
7(c) Consolidation and Merger. Liquidate or dissolve or enter into
any consolidation, merger, partnership, joint venture, syndicate or other
combination.
7(d) Acquisitions. Purchase or acquire or incur liability for the
purchase or acquisition of any or all of the assets or business of any person,
firm or corporation, other than in the normal course of business as presently
conducted and other than purchases and acquisitions permitted pursuant to
Paragraph 7(k) below.
7(e) Payment of Dividends. Declare or pay any dividends upon its
shares of stock now or hereafter outstanding or make any distribution of assets
to its stockholders as such, whether in
15
<PAGE> 16
cash, property or securities, except (1) in any fiscal year dividends of up to
twenty-five percent (25%) of American Vanguard's Net Profit After Tax for the
preceding fiscal year, and (2) dividends payable in shares of capital stock and
cash in lieu of fractional shares or in options, warrants or other rights to
purchase shares of capital stock.
7(f) Purchase or Retirement of Stock. Acquire, purchase, redeem or
retire any shares of its capital stock now or hereafter outstanding.
7(g) Investments; Advances. Make or commit to make any advance,
loan or extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of, or make any other investment
in, any Person, except (1) advances, loans and extensions of credit made in the
ordinary course of business of the Borrower as conducted on the date of this
Agreement, and (2) loans up to an aggregate amount not exceeding $35,000.00 in
any fiscal year.
7(h) Sale of Assets. Sell, lease, assign, transfer or otherwise
dispose of any of its assets (other than obsolete or worn out property),
whether now owned or hereafter acquired, other than in the ordinary course of
business as presently conducted and at fair market value.
7(i) ERISA.
(1) Terminate or withdraw from any Plan so as to result
in any material liability to the PBGC;
(2) Engage in or permit any person to engage in any
Prohibited Transaction involving any Plan which would subject the Borrower to
any Material tax, penalty or other liability;
(3) Incur or suffer to exist any material Accumulated
Funding Deficiency, whether or not waived, involving any Plan;
(4) Allow or suffer to exist any event or condition which
presents a risk of incurring a material liability to the PBGC;
(5) Amend any Plan so as to require the posting of
security under section 401(a)(29) of the Code; or
(6) Fail to make payments required under section 412(m)
of the Code and section 302(e) of ERISA which would subject the Borrower to any
material tax, penalty or other liability.
70(j) Financial Covenants. Permit:
(1) At any time:
(i) The Effective Tangible Net Worth of American
Vanguard to be less than $12,000,000.00 plus seventy-five percent (75%) of the
net income of American Vanguard and its consolidated Subsidiaries for each
fiscal quarter beginning with the fiscal quarter ended in June 1995 (with no
reduction for any net loss in any fiscal quarter); or
(ii) The Debt to Effective Tangible Net Worth
ratio of American Vanguard to be greater than 2.25:1.00.
(2) At the last day of any fiscal quarter:
16
<PAGE> 17
(i) The Cash Flow Coverage Ratio of American
Vanguard to be less than 2.50:1.00; or
(ii) The Interest Coverage Ratio of American
Vanguard to be less than 2.50:1.00.
7(k) Capital Expenditures. Make any fixed capital expenditure
(including any capital expenditure of American Vanguard and any subsidiary
thereof) or any commitment therefor, including, without limitation, incurring
liability for uses which, in accordance with GAAP, would be reported as capital
leases, or purchase any real or personal property in an aggregate amount
exceeding $2,000,000.00 in any one fiscal year; provided, that in addition to
the $2,000,000.00 allowance per fiscal year, capital expenditures in an amount
up to an aggregate amount equal to Term Loans made pursuant to Paragraph 1(b)
above, excluding the amounts outstanding under the Existing Term Loan Agreement
deemed to be a Term Loan hereunder, may be made from the date of this Agreement
through December 31, 1995.
8. Events of Default. Upon the occurrence of any of the following events
(an "Event of Default"):
8(a) The Borrower shall fail to pay any principal or interest on
the Loans on the date when due or fail to pay within five days of the date when
due any other Obligation under the Loan Documents; or
8(b) Any representation or warranty made by the Borrower in any
Loan Document or in connection with any Loan Document shall be inaccurate or
incomplete in any respect on or as of the date made; or
8(c) The Borrower shall fail to maintain its corporate existence or
shall default in the observance or performance of any covenant or agreement
contained in Paragraph 6(d) or Paragraph 7 above or in the Security Agreement,
or
8(d) The Borrower shall fail to observe or perform any other term or
provision contained in the Loan Documents and such failure shall continue for
thirty (30) days following notice thereof given by the Lender; or
8(e) The Borrower shall default in any payment of principal or
interest on any Indebtedness (other than the Obligations) or any other event
shall occur, the effect of which is to permit such Indebtedness to be declared
or otherwise to become due prior to its stated maturity; or
8(f) (1) The Borrower or any of its Subsidiaries or any Guarantor,
shall commence any case, proceeding or other action (i) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (ii) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets, or
the Borrower or any of its Subsidiaries or any Guarantor shall make a general
assignment for the benefit of its creditors; or (2) there shall be commenced
against the Borrower or any of its Subsidiaries or any Guarantor, any case,
proceeding or other action of a nature referred to in clause (1) above which
(i) results in the entry of an order for relief or any such adjudication or
appointment, or (ii) remains undismissed, undischarged or unbonded for a period
of thirty (30) days; or (3) there shall be commenced against the Borrower or
any of its
17
<PAGE> 18
Subsidiaries or any Guarantor, any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or substantially all of its assets which results in the entry of an
order for any such relief which shall not have been vacated, discharged,
stayed, satisfied or bonded pending appeal within thirty (30) days from the
entry thereof; or (4) the Borrower or any of its Subsidiaries or any Guarantor
shall take any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in (other than in connection with a final settlement), any
of the acts set forth in clause (1), (2) or (3) above; or (5) the Borrower or
any of its Subsidiaries or any Guarantor shall generally not, or shall be
unable to, or shall admit in writing its inability to pay its debts as they
become due; or
8(g) (1) Any Reportable Event or a Prohibited Transaction shall
occur with respect to any Plan; or (2) a notice of intent to terminate a Plan
under section 4041 of ERISA shall be filed; or (3) a notice shall be received
by the plan administrator of a Plan that the PBGC has instituted proceedings to
terminate a Plan or appoint a trustee to administer a Plan; or (4) any other
event or condition shall exist which might, in the opinion of the Lender,
constitute grounds under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan; or (5) the Borrower or any
ERISA Affiliate shall withdraw from a Multiemployer Plan under circumstances
which the Lender determines could have a material adverse effect on the
financial condition of the Borrower; or
8(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries or any Guarantor and all such judgments or
decrees shall not have been vacated, discharged, stayed, satisfied or bonded
pending appeal within fifteen (I 5) days from the entry thereof or in any event
later than five days prior to the date of any proposed sale thereunder; or
8(i) The Borrower shall voluntarily suspend the transaction of
business for more than five days in any calendar year; or
8(j) Any Guarantor shall fail to observe or comply with any term or
condition of its Guaranty or shall attempt to rescind or revoke its Guaranty,
with respect to future transactions or otherwise;
THEN, automatically upon the occurrence of an Event of Default under
Paragraph 8(f) above, and at the option of the Lender upon the occurrence of
any other Event of Default, the Lender's obligation to make Loans and issue
Letters of Credit shall terminate and the Obligations shall be and become due
and payable, without demand upon or presentment to the Borrower, which are
expressly waived by the Borrower, and the Lender may immediately exercise all
rights, powers and remedies available to it at law, in equity or otherwise,
including, without limitation, under the Security Documents and the Guaranties.
9. Miscellaneous Provisions.
9(a) No Assignment. The Borrower may not assign its rights or
obligations under this Agreement without the prior written consent of the
Lender. Subject to the foregoing, all provisions contained in this Agreement
and the other Loan Documents shall inure to the benefit of the Lender, its
successors and assigns, and shall be binding upon the Borrower, its successors
and assigns.
9(b) Amendment; No Waiver. Neither this Agreement nor any of the
other Loan Documents may be amended or terms or provisions hereof or thereof
waived unless such amendment or waiver is in writing and signed by the Lender
and the Borrower. It is expressly agreed and understood that the failure by
the Lender to elect to accelerate amounts outstanding hereunder and/or to
terminate the obligation of the Lender to make Loans hereunder shall not
constitute an amendment or waiver of any term or provision of the Loan
Documents. No delay
18
<PAGE> 19
or failure by the Lender to exercise any right, power or remedy shall
constitute a waiver thereof by the Lender, and no single or partial exercise by
the Lender of any right, power or remedy shall preclude other or further
exercise thereof or any exercise of any other rights, powers or remedies.
9(c) Cumulative Rights. The rights, powers and remedies of the
Lender hereunder and under the other Loan Documents are cumulative and in
addition to all rights, power and remedies provided under any and all
agreements between the Borrower and the Lender relating hereto, at law, in
equity or otherwise.
9(d) Entire Agreement. This Agreement and the other Loan Documents
embody the entire agreement and understanding between the parties hereto and
supersede all prior agreements and understandings relating to the subject
matter hereof and thereof.
9(e) Survival. All representations, warranties, covenants and
agreements contained on the part of the Borrower contained in the Loan
Documents shall survive the termination of this Agreement and shall be
effective until the Obligations are paid and performed in full or longer as
expressly provided herein.
9(f) Notices. All notices, consents, requests and demands to or
upon the respective parties under the Loan Documents shall be in writing, and
shall be deemed to have been given or made when delivered in person to those
Persons listed on the signature pages hereof or when deposited in the United
States mail, postage prepaid, or, in the case of telegraphic notice or the
overnight courier service, when delivered to the telegraph company or overnight
courier service, or in the case of telex or telecopy notice, when sent,
verification received, in each case addressed as set forth on the signature
pages hereof, or to such other address as either party may designate by notice
to the other in accordance with the terms of this Paragraph 9(f).
9(g) Governing Law. This Agreement and the other Loan Documents
shall be governed by and construed in accordance with the laws of the State of
California, without giving effect to choice of law rules.
9(h) Transfers. The Borrower acknowledges that the Lender may
elect to sell, assign and otherwise transfer to other Persons (each, a
"Transferee") all or portions of, and participations in, the Lender's interest
in Loans and Letters of Credit outstanding (and its commitment to make Loans
and issue Letters of Credit) hereunder from time to time and expressly agrees
that the holder of any Loans or Letters of Credit or interest therein (or
commitment to make Loans or issue or participate in Letters of Credit
hereunder) shall be a "Lender" hereunder, including, without limitation, with
respect to the provisions of Paragraph 1(i) above; provided, however, that in
no event shall the Borrower have any obligation to communicate or otherwise
deal with any Transferee, it being expressly agreed and understood that no such
transfer shall relieve the Lender of any of its agreements and obligations
hereunder. For purposes of this Paragraph 9(h), the Lender may disclose to a
potential or actual Transferee any and all information supplied to Lender by or
on behalf of the Borrower. The Borrower agrees to execute and deliver to the
Lender such documents, instruments and agreements, including, without
limitation, amendments to the Loan Documents, deemed necessary or desirable by
the Lender to effect such transfers.
9(i) Counterparts. This Agreement and the other Loan Documents may
be executed in any number of counterparts, all of which together shall
constitute one agreement.
9(j) Accounting Terms and Financial Reporting. All accounting
terms not otherwise defined herein are used with the meanings given such terms
under GAAP. All financial requirements to be maintained by the Borrower and
all financial reporting required to be made by the Borrower pursuant to this
Agreement shall be based on the consolidated financial statements
19
<PAGE> 20
of the Borrower's parent corporation, American Vanguard Corporation, and all
such financial requirements are to be measured at the end of each month.
9(k) Authorization to Disclose. The Borrower hereby authorizes the
Lender to disclose to the Guarantors any and all information concerning the
Borrower, its business, properties and condition (financial or otherwise) now
or hereafter in the Lender's possession or within its control to the extent
deemed necessary or desirable by the Lender.
9(l) Disputed Claims Arbitration. In the event a claim or
controversy arises concerning the interpretation or enforcement of any of the
terms of the Loan Documents, the Lender and the Borrower agree that such claim
or controversy shall be settled by final, binding arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association, which
rules are hereby incorporated by reference. Judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof.
Depositions may be taken and other discovery may be obtained during such
arbitration proceedings to the same extent as authorized in civil judicial
proceedings. The unsuccessful party shall pay the costs of conducting the
arbitration. The arbitrator shall not have the power or authority to award
punitive damages for or against either party to this Agreement. No provision
of, or the exercise of any rights under, this subparagraph (l), shall limit the
right of any party to exercise self help remedies such as setoff, to foreclose
against any real or personal property Collateral, or to obtain provisional or
ancillary remedies such as injunctive relief or the appointment of a receiver
from a court having jurisdiction before, during or after the pendency of any
arbitration. At the Lender's option, foreclosure under a deed of trust or
mortgage may be accomplished either by exercise of power or sale under the deed
of trust or mortgage, or by judicial foreclosure. The institution and
maintenance of an action for judicial relief or pursuit of provisional or
ancillary remedies or exercise of self help remedies shall not constitute a
waiver of the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration.
9(m) Set Off. The Lender may exercise its right of set-off against
the Obligations to the same extent as if the Obligations were unsecured.
10. Definitions. For purposes of this Agreement, the terms set forth
below shall have the following meanings:
"Accumulated Funding Deficiency" shall mean a funding deficiency
described in section 302 of ERISA.
"Affiliate" shall mean, as to any corporation, any other corporation
directly or indirectly controlling, controlled by or under direct or indirect
common control with, such corporation. "Control" as used herein means the
power to direct the management and policies of such corporation.
"Agreement" shall mean this Agreement, as the same may be amended,
extended or replaced from time to time.
"American Vanguard" shall mean American Vanguard Corporation, a
Delaware corporation, the sole shareholder of the Borrower.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banks in Los Angeles, California are authorized or obligated to
close their regular banking business.
20
<PAGE> 21
"Cash Flow Coverage Ratio" shall mean the ratio of Cash Flow for the
four-quarter period ending on the last day of the applicable fiscal quarter to
the Current Portion of Long-Tenn Debt as of the last day of such fiscal
quarter.
"Cash Flow" shall mean the sum of net income plus any non-cash
expenses (such as depreciation and amortization) deducted in arriving at net
income and minus any non-cash revenues included in the determination of net
income.
"Closing Date" shall mean the date as of which all conditions set
forth in Paragraph 4 above shall have been fully satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations issued thereunder as from time to time in effect.
"Collateral" shall mean the personal property (tangible and intangible)
and fixtures which are covered by the Security Agreement and the Real Property.
"Commonly Controlled Entity" of a Person shall mean a Person, whether
or not incorporated, which is under common control with such Person within the
meaning of Section 414(c) of the Internal Revenue Code.
"Compliance Certificate" shall have the meaning given such term in
Paragraph 6(a)(4) above.
"Contractual Obligation" as to any Person shall mean any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Current Liability" shall have the meaning given such term in
accordance with GAAP.
"Current Portion of Long-Term Debt" shall mean that portion of
long-term debt which is required to be shown as a Current Liability on the
balance sheet in accordance with generally accepted accounting principles.
"Debt" shall mean, for any Person, all Indebtedness minus Subordinated
Debt.
"Deed of Trust" shall have the meaning given such term in
Paragraph 3(k) above.
"EBITDA" shall mean net income before interest, taxes, depreciation
and amortization, each determined in accordance with GAAP.
"Effective Tangible Net Worth" shall mean, for any Person, stated net
worth plus Subordinated Debt minus all intangible assets (i.e., goodwill,
trademarks, patents, copyrights, organization expenses and similar intangible
items) and amounts due from stockholders and Affiliates.
"Environmental Claims" shall mean all claims, however asserted, by any
governmental authority or other person alleging potential liability or
responsibility for violation of any Environmental Law or for release or injury
to the environmental or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon (i) the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent, sudden
21
<PAGE> 22
or non-sudden, accidental or non-accidental placement, spills, leaks,
discharges, emissions or releases) of any Hazardous Materials at, in, or from
property owned, operated or controlled by the Borrower, or (ii) any other
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law.
"Environmental Laws" shall mean all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requested, licenses,
authorizations and permits of, and agreements with, any governmental
authorities, in each case relating to environmental, health, safety and land
use matters; including the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA"), the Clean Air Act, the Federal Water
Pollution Control Act of 1972, the Solid Waste Disposal Act, the Federal
Resource Conservation and Recovery Act, the Toxic Substances Control Act, the
Emergency Planning and Community Right-to-Know Act, the California Waste
Control Law, the California Solid Waste Management, Resource, Recovery and
Recycling Act, the California Water Code and the California Health and Safety
Code.
"Environmental Permits" shall have the meaning given such term in
Paragraph 5(o) above.
"ERISA"shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations issued thereunder as from time to
time in effect.
"ERISA Affiliate" shall mean each trade or business, including the
Borrower, whether or not incorporated, which together with the Borrower would
be treated as a single employer under section 4001 of ERISA.
"Event of Default" shall have the meaning given such term in Paragraph
8 above.
"Existing Revolving Credit Agreement" shall have the meaning given
such term in the Recitals hereto.
"Existing Term Loan Agreement" shall have the meaning given such term
in the Recitals hereto.
"Fixed Rate" shall mean the rate which the Lender determines, in its
sole and absolute discretion, to be equal to the Lender's cost of acquiring
funds in an amount approximately equal to the amount of the relevant Loan, and
for a period of time approximately equal to the relevant Interest Period. Such
cost of funds shall be adjusted for any and all assessments, surcharges and
reserve requirements pertaining to the borrowing or purchase of such funds by
the Lender.
"Fixed Rate Loan" shall mean any Loan bearing interest with reference
to a Fixed Rate.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"GemChem" shall mean GemChem, Inc., a California corporation and a
wholly-owned Subsidiary of American Vanguard.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantors" shall mean, severally, each of American Vanguard, GemChem,
and 2110 Davie.
22
<PAGE> 23
"Guaranty" shall have the meaning given such term in Paragraph 3(1)
above.
"Hazardous Materials" shall mean all those substances which are
regulated by, or which may form the basis of liability under any Environmental
Law, including all substances identified under any Environmental Law as a
pollutant, contaminant, hazardous waste, hazardous constituent, special waste,
hazardous substance, hazardous material, or toxic substance, or petroleum or
petroleum derived substance or waste.
"Indebtedness"of any Person shall mean all items of indebtedness
which, in accordance with GAAP, would be included in determining liabilities as
shown on the liability side of a statement of condition of such Person as of
the date as of which indebtedness is to be determined, including, without
limitation, all obligations for money borrowed and capitalized lease
obligations, and shall also include the face amount of all outstanding letters
of credit and all indebtedness and liabilities of others assumed or guarantied
by such Person or in respect of which such Person is secondarily or
contingently liable (other than by endorsement of instruments in the course of
collection) whether by reason of any agreement to acquire such indebtedness or
to supply or advance sums or otherwise.
"Interest Period" shall mean such period of time as the Lender may
quote and offer, provided that the Interest Period shall be for a minimum of at
least 30 days and not exceed a maximum of 180 days, and provided further that
any Interest Period with respect to a Revolving Loan shall not extend beyond
the Revolving Loan Maturity Date and any Interest Period with respect to a Term
Loan shall not extend beyond the Term Loan Maturity Date.
"Interim Date" shall mean June 30, 1995.
"Interest Coverage Ratio" shall mean the ratio of EBITDA to interest
expense, in each case for the applicable fiscal quarter.
"L/C Drawing" shall have the meaning given such term in Paragraph 2(c)
above.
"Letter of Credit" shall mean a New Letter of Credit or a Pre-Existing
Letter of Credit.
"Letter of Credit Application" shall mean an application for the
issuance of a New Letter of Credit in form satisfactory to the Lender.
"Letter of Credit Sublimit" shall mean $450,000.00, as such amount may
be increased or decreased by written agreement of the Lender and the Borrower.
"Lien" shall mean any security interest, mortgage, pledge, lien, claim
on property, charge or encumbrance (including any conditional sale or other
title retention agreement), any lease in the nature thereof, and the filing of
or agreement to give any financial statement under the Uniform Commercial Code
of any jurisdiction.
"Loan Documents" shall mean this Agreement, the Notes, the Guaranties,
the Security Documents and each other document, instrument and agreement
executed by the Borrower or any Guarantor in connection herewith or therewith,
as any of the same may be amended, extended or replaced from time to time.
"Loan Request" shall mean a request for a Loan in form satisfactory to
the Lender.
"Loans" shall mean the Revolving Loans and the Term Loan.
23
<PAGE> 24
"Multiemployer Plan" shall mean a Plan described in section 4001(a)(3)
of ERISA to which the Borrower or any ERISA Affiliate is required to contribute
on behalf of any of its employees.
"Net Profit After Tax" shall mean for any period, determined in
accordance with GAAP, the sum of net income (or net loss) for such period less
all accrued taxes on or measured by income to the extent included in the
determination of such net income (or loss); provided, however, that net income
(or loss) shall be computed for these purposes without giving effect to
extraordinary losses or extraordinary gains.
"New Letter of Credit" shall have the meaning given such term in
Paragraph 2(b) above.
"Notes" shall have the meaning given such term in Paragraph 3(d)
above.
"Obligations" shall mean any and all debts, obligations and
liabilities of the Borrower to the Lender arising out of or related to the Loan
Documents, whether principal, interest, fees or otherwise, whether now existing
or hereafter arising, whether voluntary or involuntary, whether or not jointly
owed with others, whether direct or indirect, absolute or contingent,
contractual or tortious, liquidated or unliquidated, arising by operation of
law or otherwise, whether or not from time to time decreased or extinguished
and later increased, created or incurred and whether or not extended, modified,
rearranged, restructured, refinanced or replaced, including without limitation,
modifications to interest rates or other payment terms of such debts,
obligations or liabilities.
"Outstanding" shall mean with respect to Letters of Credit, any Letter
of Credit which has not been cancelled, expired unutilized or fully drawn upon.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA and any successor thereto.
"Person" shall mean any corporation, natural person, firm, joint
venture, partnership, trust, unincorporated organization, government or any
department or agency of any government.
"Plan" shall mean any plan (other than a Multiemployer Plan) subject
to Title IV of ERISA maintained for employees of the Borrower or any ERISA
Affiliate (and any such plan no longer maintained by the Borrower or any of its
ERISA Affiliates to which the Borrower or any of its ERISA Affiliates has made
or was required to make any contributions during the five years preceding the
date on which such plan ceased to be maintained).
"Potential Default" shall mean an event which but for the lapse of
time or the giving of notice, or both, would constitute an Event of Default.
"Pre-Existing Letters of Credit" shall have the meaning given such
term in Paragraph 2(a) above.
"Prohibited Transaction" shall mean any transaction described in
section 406 of ERISA which is not exempt by reason of section 408 of ERISA or
the transitional rules set forth in section 414(c) of ERISA and any transaction
described in section 4975(c)(1) of the Code which is not exempt by reason of
section 4975(c)(2) or section 4975(d) of the Code, or the transitional rules of
section 2003(c) of ERISA.
"Property" shall mean, collectively and severally, any and all real
property, including all improvements and fixtures thereon, owned or occupied by
the Borrower.
24
<PAGE> 25
"Real Property" shall mean the real property described in the Deed of
Trust.
"Reference Rate" shall mean the fluctuating per annum rate which is
quoted, published or announced from time to time by the Lender in Los Angeles,
California as its "Reference Rate" and as to which loans may be made by the
Lender at, below or above such "Reference Rate," with such rate to be
adjusted concurrently with any change in the "Reference Rate".
"Reference Rate Loans" shall mean any Loan bearing interest with
reference to the Reference Rate.
"Reportable Event" shall mean any of the events set forth in section
4043(b) of ERISA or the regulations thereunder, a withdrawal from a Plan
described in section 4063 of ERISA, a cessation of operations described in
section 4068(f) of ERISA, an amendment to a Plan necessitating the posting of
security under section 401(a)(29) of the Code, or a failure to make a payment
required by section 412(m) of the Code and section 302(e) of ERISA when due.
"Requirements of Law" shall mean as to any Person the Certificate of
Incorporation and ByLaws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation, or a final and binding
determination of an arbitrator or a determination of a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Revolving Credit Limit" shall mean $10,500,000.00.
"Revolving Loan" shall have the meaning given such term in Paragraph
1(a) above.
"Revolving Loan Maturity Date" shall mean the earlier of: (a) July 31,
1997, and (b) the date the Lender terminates its obligation to make further
Loans hereunder pursuant to Paragraph 8 above.
"Revolving Note" shall have the meaning given such term in Paragraph
3(d) above.
"Security Agreement" shall have the meaning given such term in
Paragraph 3(k) above.
"Security Documents" shall have the meaning given such term in
Paragraph 3(k) above.
"Statement Date" shall mean December 31, 1994.
"Subordinated Debt" shall mean, for any Person, Indebtedness of such
Person and its Subsidiaries subordinated to the Obligations pursuant to written
subordination agreements satisfactory in form and substance to the Lender.
"Subsidiary" shall mean any corporation more than fifty percent (50%)
of the stock of which having by the terms thereof ordinary voting power to
elect the board of directors, managers or trustees of the corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) shall, at the time as of which any determination
is being made, be owned, either directly or through Subsidiaries.
"Term Loan" shall have the meaning given such term in Paragraph 1(b)
above.
"Term Loan Maturity Date" shall mean the earlier of: (a) January 1,
2001 and (b) the date the Lender terminates its obligations to make further
Loans hereunder pursuant to Paragraph 8 above.
25
<PAGE> 26
"Term Note" shall have the meaning given such term in Paragraph 3(d)
above.
"Transferee" shall have the meaning given such term in Paragraph 9(h)
above.
"2110 Davie" shall mean 2110 Davie Corporation, a California
corporation and a wholly-owned subsidiary of American Vanguard.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
AMVAC CHEMICAL CORPORATION,
a California corporation,
as the Borrower
By: /s/ JAMES A. BARRY
---------------------------------
Name: James A. Barry
---------------------------------
Title: Vice President, CFO
---------------------------------
Address: 4100 East Washington Boulevard
Los Angeles, California 90023
SANWA BANK CALIFORNIA,
as the Lender
By: /s/ JOSEPH C. ARCO
---------------------------------
Name: Joseph C. Arco
---------------------------------
Title: V.P.
---------------------------------
Address: 601 South Figueroa St.
W8-12
Los Angeles, California 90017
26
<PAGE> 27
REVOLVING NOTE
$10,500,000.00 September 12, 1995
FOR VALUE RECEIVED, the undersigned, AMVAC CHEMICAL CORPORATION, a
California corporation (the "Borrower"), hereby promises to pay to the order of
SANWA BANK CALIFORNIA (the "Lender"), at its office at 601 South Figueroa
Street, W8-12, Los Angeles, California 90017 (or such other place as the Lender
may direct from time to time), in lawful money of the United States and in
immediately available funds, the principal amount of Revolving Loans advanced
to the Borrower under that certain Amended and Restated Revolving Credit
Agreement dated as of September 12, 1995 by and between the Borrower and the
Lender (as such Agreement may be amended from time to time, the "Credit
Agreement") together with interest thereon computed in accordance with the
Credit Agreement, on the dates required pursuant to the Credit Agreement.
Capitalized terms used herein without definition have the meanings assigned
thereto in the Credit Agreement.
This Revolving Note is the "Revolving Note" referred to in the Credit
Agreement. Reference is hereby made to the Credit Agreement and the other Loan
Documents, including, without limitation, the Security Agreement, the Deed of
Trust and the Guaranties, for rights and obligations of payment and prepayment,
events of default and the right of the Lender to accelerate the maturity hereof
upon the occurrence of such events.
The Borrower, for itself, its successors and assigns, hereby waives
diligence, presentment, protest and demand and notice of protest, demand,
dishonor and non-payment of this Revolving Note.
The Borrower agrees to pay all collection expenses, court costs and
reasonable attorneys' fees and disbursements (whether or not litigation is
commenced) which may be incurred in connection with the collection or
enforcement of this Revolving Note.
This Revolving Note shall be governed by and construed in accordance
with the laws of the State of California, without giving effect to choice of
law rules,
AMVAC CHEMICAL CORPORATION,
a California corporation
By: /s/ JAMES A. BARRY
---------------------------------
Name: James A. Barry
---------------------------------
Title: Vice President, CFO
---------------------------------
<PAGE> 28
AMENDED AND RESTATED
SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (the "Security
Agreement") is made and dated this 12 day of September, 1995 by and between
SANWA BANK CALIFORNIA, a California corporation with a state banking license
("Secured Party"), and AMVAC CHEMICAL CORPORATION, a California corporation
("Debtor").
RECITALS
A. Secured Party has agreed to extend credit to Debtor from time
to time on the terms and subject to the conditions set forth in that certain
Amended and Restated Credit Agreement dated as of September 12, 1995 (the
"Credit Agreement," and with capitalized terms not otherwise defined herein
used with the meanings given such terms in the Credit Agreement) and the other
Loan Documents.
B. This Security Agreement amends and restates all security
agreements executed by Debtor granting a security interest in personal property
of the Debtor to secure the obligations of the Debtor under the Existing
Revolving Credit Agreement and/or under the Existing Term Loan Agreement.
C. To induce Secured Party to enter into the Loan Documents and
to extend such credit, Debtor has agreed to pledge and to grant to Secured
Party a security interest in and lien upon certain property of Debtor described
more particularly herein.
NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor hereby agrees as follows:
AGREEMENT
1 . Grant of Security Interest. Debtor hereby pledges and grants
to Secured Party a security interest in the property described in Paragraph 2
below (collectively and severally, the "Collateral") to secure payment and
performance of the obligations described in Paragraph 3 below (collectively and
severally, the "Obligations").
2. Collateral. The Collateral shall consist of all right, title
and interest of Debtor, now existing or hereafter arising, in under and to:
(a) Equipment. All goods and equipment ("Equipment") now
owned or hereafter acquired by the Debtor or in which the Debtor now has or may
hereafter acquire any interest including, but not limited to, all machinery,
furniture, furnishings, fixtures, tools, supplies and motor vehicles of every
kind and description and all additions, accessions, improvements, replacements
and substitutions thereto and thereof.
1
<PAGE> 29
(b) Inventory. All inventory ("Inventory") now owned or
hereafter acquired by the Debtor including, but not limited to, all raw
materials, work in process, finished goods, merchandise, parts and supplies of
every kind and description, including inventory temporarily out of the Debtor's
custody or possession, together with all returns on accounts.
(c) Accounts and Contract Rights. All accounts and
contract rights now owned or hereafter created or acquired by the Debtor,
including but not limited to, all receivables and all rights and benefits due
to the Debtor under any contract or agreement.
(d) General Intangibles. All general intangibles now
owned or hereafter created or acquired by the Debtor, including but not limited
to, goodwill, trademarks, trade styles, trade names, patents, patent
applications, software, customer lists and business records.
(e) Chattel Paper and Documents. All documents,
instruments and chattel paper now owned or hereafter acquired by the Debtor.
(f) Monies and Other Property in Possession. All monies,
and property of the Debtor now or hereafter in the possession of the Secured
Party or the Secured Party's agents, or any one of them, including, but not
limited to, all deposit accounts, certificates of deposit, stocks, bonds,
indentures, warrants, options and other negotiable and non-negotiable
securities and instruments, together with all stock rights, rights to
subscribe, liquidating dividends, cash dividends, payments, dividends paid in
stock, new securities or other property to which the Debtor may become entitled
to receive on account of such property.
The Secured Party's security interest in the Collateral shall be a continuing
lien and shall include all proceeds and products of the Collateral including
but not limited to, the proceeds of any insurance thereon.
3. Obligations. The Obligations secured by this Security
Agreement shall consist of any and all debts, obligations and liabilities of
Debtor to Secured Party arising out of or related to the Loan Documents,
whether principal, interest, fees or otherwise, whether now existing or
hereafter arising, whether voluntary or involuntary, whether or not jointly
owed with others, whether direct or indirect, absolute or contingent,
contractual or tortious, liquidated or unliquidated, arising by operation of
law or otherwise, whether or not from time to time decreased or extinguished
and later increased, created or incurred and whether or not extended, modified,
rearranged, restructured, refinanced or replaced, including without limitation,
modifications to interest rates or other payment terms of such debts,
obligations or liabilities.
4. Representations and Warranties. In addition to any
representations and warranties of Debtor set forth in the Loan Documents, which
are incorporated herein by this reference, Debtor hereby represents and
warrants that:
(a) Debtor is the sole owner of and has good and
marketable title to the Collateral (or, in the case of after-acquired
Collateral, at the time the Debtor acquires rights in the Collateral, will be
the sole owner thereof and have good and marketable title thereto).
2
<PAGE> 30
(b) Except for security interests in favor of Secured
Party, no person has (or, in the case of after-acquired Collateral, at the time
Debtor acquires rights therein, will have) any right, title, claim or interest
(by way of security interest or other lien or charge) in, against or to the
Collateral.
(c) All information heretofore, herein or hereafter
supplied to Secured Party by or on behalf of Debtor with respect to the
Collateral is accurate and complete.
(d) Debtor has delivered to Secured Party all
instruments, documents, chattel paper and other items of Collateral in which a
security interest is or may be perfected by possession, the certificate of
title with respect to each motor vehicle, if any, included in the Collateral,
together with such other writings with respect thereto as Secured Party shall
request.
(e) Each account, contract right, item of chattel paper,
instrument or any other right to the payment of money constituting Collateral
is genuine and enforceable in accordance with its terms against the party
obligated to pay the same (an "Account Debtor"), which terms have not been
modified or waived in any respect or to any extent.
(f) Any amount represented by Debtor to Secured Party as
owing by any Account Debtor is the correct amount actually and unconditionally
owing by such Account Debtor.
(g) No Account Debtor has any defense, set off, claim or
counterclaim against Debtor which can be asserted against Secured Party,
whether in any proceeding to enforce Secured Party's rights in the Collateral,
or otherwise.
5. Covenants and Agreements of Debtor. In addition to all
covenants and agreements of Debtor set forth in the Loan Documents, which are
incorporated herein by this reference, Debtor hereby agrees:
(a) To do all acts that may be necessary to maintain,
preserve and protect the Collateral;
(b) Not to use or permit any Collateral to be used
unlawfully or in violation of any provision of this Security Agreement, any
other agreement with Secured Party related hereto or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
(c) To pay promptly when due all taxes, assessments,
charges, encumbrances and liens now or hereafter imposed upon or affecting any
Collateral;
(d) To appear in and defend any action or proceeding
which may affect its title to or Secured Party's interest in the Collateral;
(e) Not to surrender or lose possession of (other than to
Secured Party), sell, encumber, lease, rent, or otherwise dispose of or
transfer any Collateral or right or interest
3
<PAGE> 31
therein except as hereinafter provided, and to keep the Collateral free of all
levies and security interests or other liens or charges except those approved
in writing by Secured Party (provided that, unless an Event of Default shall
occur, Debtor may, in the ordinary course of business, sell or lease any
Collateral consisting of inventory);
(f) To comply with all laws, regulations and ordinances
relating to the possession, operation, maintenance and control of the
Collateral;
(g) That such care as Secured Party gives to the
safekeeping of its own property of like kind shall constitute reasonable care
of the Collateral when in Secured Party's possession;
(h) To account fully for and promptly deliver to Secured
Party, in the form received, all documents, chattel paper, instruments and
agreements constituting Collateral hereunder and all proceeds of the Collateral
received, all endorsed to Secured Party or in blank, as requested by Secured
Party, and accompanied by such stock powers as appropriate and until so
delivered all such documents, instruments, agreements and proceeds shall be
held by Debtor in trust for Secured Party, separate from all other property of
Debtor and identified as the property of Secured Party;
(i) To keep separate, accurate and complete records of
the Collateral and to provide Secured Party with such records and such other
reports and information relating to the Collateral as Secured Party may request
from time to time;
(j) To procure, execute and deliver from time to time any
endorsements, notifications, registrations, assignments, financing statements,
certificates of title, ship mortgages, aircraft mortgages, copyright mortgages,
assignments or mortgages of patents, mortgages of mask works, mortgages for
filing pursuant to the Interstate Commerce Act, and other writings deemed
necessary or appropriate by Secured Party to perfect, maintain and protect its
security interest in the Collateral hereunder and the priority thereof;
(k) To take such other actions as Secured Party may
request to protect the value of the Collateral and of Secured Party's security
interest in the Collateral, including, without limitation, provision of
assurances from third parties regarding Secured Party's access to, right to
foreclose on or sell, Collateral and right to realize the practical benefits of
such foreclosure or sale;
(l) To reimburse Secured Party upon demand for any costs
and expenses, including, without limitation, attorneys' fees and disbursements,
Secured Party may incur while exercising any right, power or remedy provided by
this Security Agreement or by law, all of which costs and expenses are included
in the Obligations;
(m) To give Secured Party thirty (30) days prior written
notice of any change in Debtor's residence or chief place of business or legal
name or trade name(s) or style(s) set forth in the penultimate paragraph of
this Security Agreement;
4
<PAGE> 32
(n) To keep the records concerning the Collateral and to
keep the Collateral at the location(s) referred to in Paragraph 16 below and
not to remove such records from such locations) without the prior written
consent of the Secured Party;
(o) If Secured Party gives value to enable Debtor to
acquire rights in or the use of any Collateral, to use such value for such
purpose;
(p) To keep the Collateral in good condition and repair
and not to cause or permit any waste or unusual or unreasonable depreciation of
the Collateral;
(q) At any reasonable time, upon demand by Secured
Party, to exhibit to and allow inspection by Secured Party (or persons
designated by Secured Party) of the Collateral; and
(r) To insure the Collateral, with Secured Party named as
loss payee, in form and amounts, with companies, and against risks and
liabilities satisfactory to Secured Party, and Debtor hereby assigns the
policies to Secured Party, agrees to deliver them to Secured Party at its
request, and agrees that Secured Party may make any claim thereunder, cancel
the insurance on default by Debtor, collect and receive payment of and endorse
any instrument in payment of loss or return premium or other refund or return,
and apply such amounts received, at Secured Party's election, to replacement of
Collateral or to the Obligations.
6. Authorized Action by Secured Party. Debtor hereby agrees that
from time to time, without presentment, notice or demand, and without affecting
or impairing in any way the rights of Secured Party with respect to the
Collateral, the obligations of the Debtor hereunder or the Obligations, Secured
Party may, but shall not be obligated to and shall incur no liability to Debtor
or any third party for failure to take any action which Debtor is obligated by
this Security Agreement to do and to exercise such rights and powers as Debtor
might exercise with respect to the Collateral, and Debtor hereby irrevocably
appoints Secured Party as its attorney-in-fact to exercise such rights and
powers, including without limitation, to: (a) collect by legal proceedings or
otherwise and endorse, receive and receipt for all dividends, interest,
payments, proceeds and other sums and property now or hereafter payable on or
on account of the Collateral; (b) enter into any extension, reorganization,
deposit, merger, consolidation or other agreement pertaining to, or deposit,
surrender, accept, hold or apply other property in exchange for the Collateral;
(c) insure, process and preserve the Collateral; (d) transfer the Collateral to
its own or its nominee's name; (e) make any compromise or settlement, and take
any action it deems advisable, with respect to the Collateral; and (f) notify
any Account Debtor on any Collateral to make payment directly to Secured Party.
7. Default and Remedies. Upon the occurrence of an Event of
Default, Secured Party may, at its option, and without notice to or demand on
Debtor and in addition to all rights and remedies available to Secured Party
under the Loan Documents, at law, in equity or otherwise, do any one or more of
the following:
(a) Foreclose or otherwise enforce Secured Party's
security interest in any manner permitted by law, or provided for in this
Security Agreement.
5
<PAGE> 33
(b) Sell, lease or otherwise dispose of any Collateral at
one or more public or private sales at Secured Party's place of business or any
other place or places, including, without limitation, any broker's board or
securities exchange, whether or not such Collateral is present at the place of
sale, for cash or credit or future delivery, on such terms and in such manner
as Secured Party may determine.
(c) Recover from Debtor all costs and expenses,
including, without limitation, reasonable attorneys' fees, incurred or paid by
Secured Party in exercising any right, power or remedy provided by this
Security Agreement.
(d) Require Debtor to assemble the Collateral and make it
available to Secured Party at a place to be designated by Secured Party.
(e) Enter onto property where any Collateral is located
and take possession thereof with or without judicial process.
(f) Prior to the disposition of the Collateral, store,
process, repair or recondition it or otherwise prepare it for disposition in
any manner and to the extent Secured Party deems appropriate and in connection
with such preparation and disposition, without charge, use any trademark,
tradename, copyright, patent or technical process used by Debtor.
(g) Debtor shall be given five (5) business days' prior
notice of the time and place of any public sale or of the time after which any
private sale or other intended disposition of Collateral is to be made, which
notice Debtor hereby agrees shall be deemed reasonable notice thereof.
(h) Upon any sale or other disposition pursuant to this
Security Agreement, Secured Party shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral or portion thereof so sold or
disposed of. Each purchaser at any such sale or other disposition (including
Secured Party) shall hold the Collateral free from any claim or right of
whatever kind, including any equity or right of redemption of Debtor and Debtor
specifically waives (to the extent permitted by law) all rights of redemption,
stay or appraisal which it has or may have under any rule of law or statute now
existing or hereafter adopted.
8. Cumulative Rights. The rights, powers and remedies of Secured
Party under this Security Agreement shall be in addition to all rights, powers
and remedies given to Secured Party by virtue of any statute or rule of law,
the Loan Documents or any other agreement, all of which rights, powers and
remedies shall be cumulative and may be exercised successively or concurrently
without impairing Secured Party's security interest in the Collateral.
9. Waiver. Any waiver, forbearance or failure or delay by
Secured Party in exercising any right, power or remedy shall not preclude the
further exercise thereof, and every right, power or remedy of Secured Party
shall continue in full force and effect until such right, power or remedy is
specifically waived in a writing executed by Secured Party. Debtor waives any
right to require Secured Party to proceed against any person or to exhaust any
Collateral or to pursue any remedy in Secured Party's power.
6
<PAGE> 34
10. Setoff, Debtor agrees that Secured Party may exercise its
rights of setoff with respect to the Obligations in the same manner as if the
Obligations were unsecured.
11. Binding Upon Successors. All rights of Secured Party under
this Security Agreement shall inure to the benefit of its successors and
assigns, and all obligations of Debtor shall bind its heirs, executors,
administrators, successors and assigns.
12. Entire Agreement; Severability. This Security Agreement
contains the entire security agreement between Secured Party and Debtor. If
any of the provisions of this Security Agreement shall be held invalid
or unenforceable, this Security Agreement shall be construed as if not
containing those provisions and the rights and obligations of the parties
hereto shall be construed and enforced accordingly.
13. References. The singular includes the plural. If more than
one executes this Security Agreement, the term Debtor shall be deemed to refer
to each of the undersigned Debtors as well as to all of them, and their
obligations and agreements hereunder shall be joint and several. If any of the
undersigned is a married person, recourse may be had against his or her
separate property for the Obligations.
14. Choice of Law. This Security Agreement shall be construed in
accordance with and governed by the laws of the State of California, without
giving effect to choice of law rules, and, where applicable and except as
otherwise defined herein, terms used herein shall have the meanings given them
in the Uniform Commercial Code of such state.
15. Amendment. This Security Agreement may not be amended or
modified except by a writing signed by each of the parties hereto.
16. Place of Business; Location of Records and Collateral. Debtor
represents that Schedule A attached hereto accurately and completely sets
forth: (a) its chief place of business; (b) all trade name(s) or style(s) used
by Debtor; and (c) all locations where Debtor's records concerning the
Collateral are located; and (d) all locations where Collateral is located.
17. Addresses for Notices. All demands, notices and other
communications to Debtor or Secured Party provided for hereunder shall be given
as provided in the Credit Agreement.
7
<PAGE> 35
EXECUTED this 12 day of September, 1995.
DEBTOR:
AMVAC CHEMICAL CORPORATION, a California
corporation
By: /s/ JAMES A. BARRY
------------------------------------------
Name: James A. Barry
---------------------------------------
Title: Vice President CFO
---------------------------------------
SECURED PARTY:
SANWA BANK CALIFORNIA, a California corporation
with a state banking license
By: /s/ JOSEPH C. ARCO
------------------------------------------
Name: Joseph C. Arco
---------------------------------------
Title: V.P.
---------------------------------------
8
<PAGE> 36
AMENDED AND RESTATED
SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (the "Security
Agreement") is made and dated this 12 day of September, 1995 by and between
SANWA BANK CALIFORNIA, a California corporation with a state banking license
("Secured Party"), and AMERICAN VANGUARD CORPORATION, a Delaware corporation
("Debtor").
RECITALS
A. Pursuant to that certain Amended and Restated Credit
Agreement, dated as of even date herewith (as the same may be amended, modified
or supplemented from time to time, the "Credit Agreement" and with capitalized
terms not otherwise defined herein used with the same meaning as in the Credit
Agreement), SANWA BANK CALIFORNIA agreed to extend credit to AMVAC CHEMICAL
CORPORATION ("Borrower") in the aggregate principal amount of $15,750,000.00.
B. Debtor is a wholly-owned subsidiary of Borrower and will
benefit from the credit extended to Borrower by Secured Party. As a condition
precedent to Secured Party's obligation to extend such credit to Borrower,
Debtor was required to execute and deliver that certain Credit Guaranty dated
as of even date herewith (as amended, modified or supplemented from time to
time, the "Guaranty") pursuant to which Debtor has guaranteed all indebtedness
of Borrower to Secured Party under the Credit Agreement and the other Loan
Documents. As a condition precedent to Secured Party's obligation to extend
credit to Borrower pursuant to the Credit Agreement, Debtor also is required to
execute and deliver and this Security Agreement.
C. This Security Agreement amends and restates all security
agreements executed by Debtor in favor of Secured Party granting a security
interest in personal property of the Debtor to secure the obligations of Debtor
under the Guaranty or any other guaranty of indebtedness owed by Borrower to
Secured Party under the Existing Revolving Credit Agreement and/or under the
Existing Term Loan Agreement.
NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor hereby agrees as follows:
AGREEMENT
1. Grant of Security Interest. Debtor hereby pledges and grants
to Secured Party a security interest in the property described in Paragraph 2
below (collectively and severally, the "Collateral") to secure payment and
performance of the obligations described in Paragraph 3 below (collectively and
severally, the "Obligations").
1
<PAGE> 37
2. Collateral. The Collateral shall consist of all right, title
and interest of Debtor, now existing or hereafter arising, in under and to:
(a) Equipment. All goods and equipment ("Equipment") now
owned or hereafter acquired by the Debtor or in which the Debtor now has or may
hereafter acquire any interest including, but not limited to, all machinery,
furniture, furnishings, fixtures, tools, supplies and motor vehicles of every
kind and description and all additions, accessions, improvements, replacements
and substitutions thereto and thereof.
(b) Inventory. All inventory ("Inventory") now owned or
hereafter acquired by the Debtor including, but not limited to, all raw
materials, work in process, finished goods, merchandise, parts and supplies of
every kind and description, including inventory temporarily out of the Debtor's
custody or possession, together with all returns on accounts.
(c) Accounts and Contract Rights. All accounts and
contract rights now owned or hereafter created or acquired by the Debtor,
including but not limited to, all receivables and all rights and benefits due
to the Debtor under any contract or agreement.
(d) General Intangibles. All general intangibles now
owned or hereafter created or acquired by the Debtor, including but not limited
to, goodwill, trademarks, trade styles, trade names, patents, patent
applications, software, customer lists and business records.
(e) Chattel Paper and Documents. All documents,
instruments and chattel paper now owned or hereafter acquired by the Debtor.
(f) Monies and Other Property in Possession. All monies
and property of the Debtor now or hereafter in the possession of the Secured
Party or the Secured Party's agents, or any one of them, including, but not
limited to, all deposit accounts, certificates of deposit, stocks, bonds,
indentures, warrants, options and other negotiable and non-negotiable
securities and instruments, together with all stock rights, rights to
subscribe, liquidating dividends, cash dividends, payments, dividends paid in
stock, new securities or other property to which the Debtor may become entitled
to receive on account of such property.
The Secured Party's security interest in the Collateral shall be a continuing
lien and shall include all proceeds and products of the Collateral including
but not limited to, the proceeds of any insurance thereon.
3. Obligations. The Obligations secured by this Security
Agreement shall consist of any and all debts, obligations and liabilities of
Debtor to Secured Party arising out of or related to the Guaranty, whether
principal, interest, fees or otherwise, whether now existing or hereafter
arising, whether voluntary or involuntary, whether or not jointly owed with
others, whether direct or indirect, absolute or contingent, contractual or
tortious, liquidated or unliquidated, arising by operation of law or otherwise,
whether or not from time to time decreased or extinguished and later increased,
created or incurred and whether or not extended, modified, rearranged,
restructured, refinanced or replaced, including without limitation,
modifications to interest rates or other payment terms of such debts,
obligations or liabilities.
2
<PAGE> 38
4. Representations and Warranties. In addition to any
representations and warranties of Debtor set forth in the Guaranty, which are
incorporated herein by this reference, Debtor hereby represents and warrants
that:
(a) Debtor is the sole owner of and has good and
marketable title to the Collateral (or, in the case of after-acquired
Collateral, at the time the Debtor acquires rights in the Collateral, will be
the sole owner thereof and have good and marketable title thereto).
(b) Except for security interests in favor of Secured
Party, no person has (or, in the case of after-acquired Collateral, at the time
Debtor acquires rights therein, will have) any right, title, claim or interest
(by way of security interest or other lien or charge) in, against or to the
Collateral.
(c) All information heretofore, herein or hereafter
supplied to Secured Party by or on behalf of Debtor with respect to the
Collateral is accurate and complete.
(d) Debtor has delivered to Secured Party all
instruments, documents, chattel paper and other items of Collateral in which a
security interest is or may be perfected by possession, the certificate of
title with respect to each motor vehicle, if any, included in the Collateral,
together with such other writings with respect thereto as Secured Party shall
request.
(e) Each account, contract right, item of chattel paper,
instrument or any other right to the payment of money constituting Collateral
is genuine and enforceable in accordance with its terms against the party
obligated to pay the same (an "Account Debtor"), which terms have not been
modified or waived in any respect or to any extent.
(f) Any amount represented by Debtor to Secured Party as
owing by any Account Debtor is the correct amount actually and unconditionally
owing by such Account Debtor.
(g) No Account Debtor has any defense, set off, claim or
counterclaim against Debtor which can be asserted against Secured Party,
whether in any proceeding to enforce Secured Party's rights in the Collateral,
or otherwise.
5. Covenants and Agreements of Debtor. In addition to all
covenants and agreements of Debtor set forth in the Guaranty, which are
incorporated herein by this reference, Debtor hereby agrees:
(a) To do all acts that may be necessary to maintain,
preserve and protect the Collateral;
(b) Not to use or permit any Collateral to be used
unlawfully or in violation of any provision of this Security Agreement, any
other agreement with Secured Party related hereto or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
3
<PAGE> 39
(c) To pay promptly when due all taxes, assessments,
charges, encumbrances and liens now or hereafter imposed upon or affecting any
Collateral;
(d) To appear in and defend any action or proceeding
which may affect its title to or Secured Party's interest in the Collateral;
(e) Not to surrender or lose possession of (other than to
Secured Party), sell, encumber, lease, rent, or otherwise dispose of or
transfer any Collateral or right or interest therein except as hereinafter
provided, and to keep the Collateral free of all levies and security interests
or other liens or charges except those approved in writing by Secured Party
(provided that, unless an Event of Default shall occur, Debtor may, in the
ordinary course of business, sell or lease any Collateral consisting of
inventory);
(f) To comply with all laws, regulations and ordinances
relating to the possession, operation, maintenance and control of the
Collateral;
(g) That such care as Secured Party gives to the
safekeeping of its own property of like kind shall constitute reasonable care
of the Collateral when in Secured Party's possession;
(h) To account fully for and promptly deliver to Secured
Party, in the form received, all documents, chattel paper, instruments and
agreements constituting Collateral hereunder and all proceeds of the Collateral
received, all endorsed to Secured Party or in blank, as requested by Secured
Party, and accompanied by such stock powers as appropriate and until so
delivered all such documents, instruments, agreements and proceeds shall be
held by Debtor in trust for Secured Party, separate from all other property of
Debtor and identified as the property of Secured Party;
(i) To keep separate, accurate and complete records of
the Collateral and to provide Secured Party with such records and such other
reports and information relating to the Collateral as Secured Party may request
from time to time;
(j) To procure, execute and deliver from time to time any
endorsements, notifications, registrations, assignments, financing statements,
certificates of title, ship mortgages, aircraft mortgages, copyright mortgages,
assignments or mortgages of patents, mortgages of mask works, mortgages for
filing pursuant to the Interstate Commerce Act, and other writings deemed
necessary or appropriate by Secured Party to perfect, maintain and protect its
security interest in the Collateral hereunder and the priority thereof;
(k) To take such other actions as Secured Party may
request to protect the value of the Collateral and of Secured Party's security
interest in the Collateral, including, without limitation, provision of
assurances from third parties regarding Secured Party's access to, right to
foreclose on or sell, Collateral and right to realize the practical benefits of
such foreclosure or sale;
4
<PAGE> 40
(l) To reimburse Secured Party upon demand for any costs
and expenses, including, without limitation, attorneys' fees and disbursements,
Secured Party may incur while exercising any right, power or remedy provided by
this Security Agreement or by law, all of which costs and expenses are included
in the Obligations;
(m) To give Secured Party thirty (30) days prior written
notice of any change in Debtor's residence or chief place of business or legal
name or trade name(s) or style(s) set forth in Paragraph 16 below;
(n) To keep the records concerning the Collateral and to
keep the Collateral at the location(s) referred to in Paragraph 16 below and
not to remove such records from such location(s) without the prior written
consent of Secured Party;
(o) If Secured Party gives value to enable Debtor to
acquire rights in or the use of any Collateral, to use such value for such
purpose;
(p) To keep the Collateral in good condition and repair
and not to cause or permit any waste or unusual or unreasonable depreciation of
the Collateral;
(q) At any reasonable time, upon demand by Secured Party,
to exhibit to and allow inspection by Secured Party (or persons designated by
Secured Party) of the Collateral; and
(r) To insure the Collateral, with Secured Party named as
loss payee, in form and amounts, with companies, and against risks and
liabilities satisfactory to Secured Party, and Debtor hereby assigns the
policies to Secured Party, agrees to deliver them to Secured Party at its
request, and agrees that Secured Party may make any claim thereunder, cancel
the insurance on default by Debtor, collect and receive payment of and endorse
any instrument in payment of loss or return premium or other refund or return,
and apply such amounts received, at Secured Party's election, to replacement of
Collateral or to the Obligations.
6. Authorized Action by Secured Party. Debtor hereby agrees that
from time to time, without presentment, notice or demand, and without affecting
or impairing in any way the rights of Secured Party with respect to the
Collateral, the obligations of the Debtor hereunder or the Obligations, Secured
Party may, but shall not be obligated to and shall incur no liability to Debtor
or any third party for failure to take any action which Debtor is obligated by
this Security Agreement to do and to exercise such rights and powers as Debtor
might exercise with respect to the Collateral, and Debtor hereby irrevocably
appoints Secured Party as its attorney-in-fact to exercise such rights and
powers, including without limitation, to: (a) collect by legal proceedings or
otherwise and endorse, receive and receipt for all dividends, interest,
payments, proceeds and other sums and property now or hereafter payable on or
on account of the Collateral; (b) enter into any extension, reorganization,
deposit, merger, consolidation or other agreement pertaining to, or deposit,
surrender, accept, hold or apply other property in exchange for the Collateral;
(c) insure, process and preserve the Collateral; (d) transfer the Collateral to
its own or its nominee's name; (e) make any compromise or settlement, and take
any action it deems advisable, with respect to the Collateral; and (f) notify
any Account Debtor on any Collateral to make payment directly to Secured Party.
5
<PAGE> 41
7. Default and Remedies. Upon the occurrence of an Event of
Default, Secured Party may, at its option, and without notice to or demand on
Debtor and in addition to all rights and remedies available to Secured Party
under the Guaranty and the other Loan Documents, at law, in equity or
otherwise, do any one or more of the following:
(a) Foreclose or otherwise enforce Secured Party's
security interest in any manner permitted by law, or provided for in this
Security Agreement.
(b) Sell, lease or otherwise dispose of any Collateral at
one or more public or private sales at Secured Party's place of business or any
other place or places, including, without limitation, any broker's board or
securities exchange, whether or not such Collateral is present at the place of
sale, for cash or credit or future delivery, on such terms and in such manner
as Secured Party may determine.
(c) Recover from Debtor all costs and expenses,
including, without limitation, reasonable attorneys' fees, incurred or paid by
Secured Party in exercising any right, power or remedy provided by this
Security Agreement.
(d) Require Debtor to assemble the Collateral and make it
available to Secured Party at a place to be designated by Secured Party.
(e) Enter onto property where any Collateral is located
and take possession thereof with or without judicial process.
(f) Prior to the disposition of the Collateral, store,
process, repair or recondition it or otherwise prepare it for disposition in
any manner and to the extent Secured Party deems appropriate and in connection
with such preparation and disposition, without charge, use any trademark,
tradename, copyright, patent or technical process used by Debtor.
(g) Debtor shall be given five (5) business days' prior
notice of the time and place of any public sale or of the time after which any
private sale or other intended disposition of Collateral is to be made, which
notice Debtor hereby agrees shall be deemed reasonable notice thereof.
(h) Upon any sale or other disposition pursuant to this
Security Agreement, Secured Party shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral or portion thereof so sold or
disposed of. Each purchaser at any such sale or other disposition (including
Secured Party) shall hold the Collateral free from any claim or right of
whatever kind, including any equity or right of redemption of Debtor and Debtor
specifically waives (to the extent permitted by law) all rights of redemption,
stay or appraisal which it has or may have under any rule of law or statute now
existing or hereafter adopted.
8. Cumulative Rights. The rights, powers and remedies of Secured
Party under this Security Agreement shall be in addition to all rights, powers
and remedies given to Secured Party by virtue of any statute or rule of law,
the Guaranty, the other Loan Documents or any other agreement, all of which
rights, powers and remedies shall be cumulative and may be
6
<PAGE> 42
exercised successively or concurrently without impairing Secured Party's
security interest in the Collateral.
9. Waiver. Any waiver, forbearance, failure or delay by Secured
Party in exercising any right, power or remedy shall not preclude the further
exercise thereof, and every right, power or remedy of Secured Party shall
continue in full force and effect until such right, power or remedy is
specifically waived in a writing executed by Secured Party. Debtor waives any
right to require Secured Party to proceed against any person or to exhaust any
Collateral or to pursue any remedy in Secured Party's power.
10. Setoff, Debtor agrees that Secured Party may exercise its
rights of setoff with respect to the Obligations in the same manner as if the
Obligations were unsecured.
11. Binding Upon Successors. All rights of Secured Party under
this Security Agreement shall inure to the benefit of its successors and
assigns, and all obligations of Debtor shall bind its heirs, executors,
administrators, successors and assigns.
12. Entire Agreement; Severability. This Security Agreement
contains the entire security agreement between Secured Party and Debtor. If
any of the provisions of this Security Agreement shall be held invalid or
unenforceable, this Security Agreement shall be construed as if not containing
those provisions and the rights and obligations of the parties hereto shall be
construed and enforced accordingly.
13. References. The singular includes the plural. If more than
one executes this Security Agreement, the term Debtor shall be deemed to refer
to each of the undersigned Debtors as well as to all of them, and their
obligations and agreements hereunder shall be joint and several. If any of the
undersigned is a married person, recourse may be had against his or her
separate property for the Obligations.
14. Choice of Law. This Security Agreement shall be construed in
accordance with and governed by the laws of the State of California, without
giving effect to choice of law rules, and, where applicable and except as
otherwise defined herein, terms used herein shall have the meanings given them
in the Uniform Commercial Code of such state.
15. Amendment. This Security Agreement may not be amended or
modified except by a writing signed by each of the parties hereto.
16. Place of Business; Location of Records and Collateral. Debtor
represents that Schedule A attached hereto accurately and completely sets
forth: (a) its chief place of business; (b) all trade name(s) or style(s) used
by Debtor; and (c) all locations where Debtor's records concerning the
Collateral are located; and (d) all locations where Collateral is located.
17. Notices. All notices, consents, requests and demands to or
upon the respective parties under this Security Agreement shall be in writing
and shall be deemed to have been given or made when delivered in person to
those Persons listed on the signature pages hereof or when deposited in the
United States mail, postage prepaid, or, in the case of telegraphic notice or
7
<PAGE> 43
overnight courier service, when delivered to the telegraph company or overnight
courier service, or in the case of telex or telecopy notice, when sent,
verification received, in each case addressed as set forth on the signature
pages hereof, or to such other address as either party may designate by notice
to the other given in accordance with this Paragraph 17.
EXECUTED this 12 day of September, 1995.
DEBTOR:
AMERICAN VANGUARD CORPORATION, a
Delaware corporation
By: /s/ JAMES A. BARRY
---------------------------------------
Name: James A. Barry
---------------------------------------
Title: Vice President, CFO
---------------------------------------
Address: 2110 Davie Avenue
City of Commerce, California 90040
SECURED PARTY:
SANWA BANK CALIFORNIA, a California corporation
with a state banking license
By: /s/ JOSEPH C. ARCO
---------------------------------------
Name: Joseph C. Arco
---------------------------------------
Title: V.P.
---------------------------------------
Address: 601 South Figueroa Street
Los Angeles, California 90017
8
<PAGE> 44
AMENDED AND RESTATED
SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (the "Security
Agreement") is made and dated this 12 day of September, 1995 by and between
SANWA BANK CALIFORNIA, a California corporation with a state banking license
("Secured Party"), and 2110 DAVIE CORPORATION, a California corporation
("Debtor").
RECITALS
A. Pursuant to that certain Amended and Restated Credit
Agreement, dated as of even date herewith (as the same may be amended, modified
or supplemented from time to time, the "Credit Agreement" and with capitalized
terms not otherwise defined herein used with the same meaning as in the Credit
Agreement), SANWA BANK CALIFORNIA agreed to extend credit to AMVAC CHEMICAL
CORPORATION ("Borrower") in the aggregate principal amount of $15,750,000.00.
B. Borrower is an affiliate of Debtor and will benefit from the
credit extended to Borrower by Secured Party. As a condition precedent to
Secured Party's obligation to extend such credit to Borrower, Debtor was
required to execute and deliver that certain Credit Guaranty dated as of even
date herewith (as amended, modified or supplemented from time to time, the
"Guaranty") pursuant to which Debtor has guaranteed all indebtedness of
Borrower to Secured Party under the Credit Agreement and the other Loan
Documents. As a condition precedent to Secured Party's obligation to extend
credit to Borrower pursuant to the Credit Agreement, Debtor also is required to
execute and deliver and this Security Agreement.
C. This Security Agreement amends and restates all security
agreements executed by Debtor in favor of Secured Party granting a security
interest in personal property of the Debtor to secure the obligations of Debtor
under the Guaranty or any other guaranty of indebtedness owed by Borrower to
Secured Party under the Existing Revolving Credit Agreement and/or under the
Existing Term Loan Agreement.
NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor hereby agrees as follows:
AGREEMENT
1. Grant of Security Interest. Debtor hereby pledges and grants
to Secured Party a security interest in the property described in Paragraph 2
below (collectively and severally, the "Collateral") to secure payment and
performance of the obligations described in Paragraph 3 below (collectively and
severally, the "Obligations").
1
<PAGE> 45
2. Collateral. The Collateral shall consist of all right, title
and interest of Debtor, now existing or hereafter arising, in under and to:
(a) Equipment. All goods and equipment ("Equipment") now
owned or hereafter acquired by the Debtor or in which the Debtor now has or may
hereafter acquire any interest including, but not limited to, all machinery,
furniture, furnishings, fixtures, tools, supplies and motor vehicles of every
kind and description and all additions, accessions, improvements, replacements
and substitutions thereto and thereof.
(b) Inventory. All inventory ("Inventory") now owned or
hereafter acquired by the Debtor including, but not limited to, all raw
materials, work in process, finished goods, merchandise, parts and supplies of
every kind and description, including inventory temporarily out of the Debtor's
custody or possession, together with all returns on accounts.
(c) Accounts and Contract Rights. All accounts and
contract rights now owned or hereafter created or acquired by the Debtor,
including but not limited to, all receivables and all rights and benefits due
to the Debtor under any contract or agreement.
(d) General Intangibles. All general intangibles now
owned or hereafter created or acquired by the Debtor, including but not limited
to, goodwill, trademarks, trade styles, trade names, patents, patent
applications, software, customer lists and business records.
(e) Chattel Paper and Documents. All documents,
instruments and chattel paper now owned or hereafter acquired by the Debtor.
(f) Monies and Other Property in Possession. All monies
and property of the Debtor now or hereafter in the possession of the Secured
Party or the Secured Party's agents, or any one of them, including, but not
limited to, all deposit accounts, certificates of deposit, stocks, bonds,
indentures, warrants, options and other negotiable and non-negotiable
securities and instruments, together with all stock rights, rights to
subscribe, liquidating dividends, cash dividends, payments, dividends paid in
stock, new securities or other property to which the Debtor may become entitled
to receive on account of such property.
The Secured Party's security interest in the Collateral shall be a continuing
lien and shall include all proceeds and products of the Collateral including
but not limited to, the proceeds of any insurance thereon.
3. Obligations. The Obligations secured by this Security
Agreement shall consist of any and all debts, obligations and liabilities of
Debtor to Secured Party arising out of or related to the Guaranty, whether
principal, interest, fees or otherwise, whether now existing or hereafter
arising, whether voluntary or involuntary, whether or not jointly owed with
others, whether direct or indirect, absolute or contingent, contractual or
tortious, liquidated or unliquidated, arising by operation of law or otherwise,
whether or not from time to time decreased or extinguished and later increased,
created or incurred and whether or not extended, modified, rearranged,
restructured, refinanced or replaced, including without limitation,
modifications to interest rates or other payment terms of such debts,
obligations or liabilities.
2
<PAGE> 46
4. Representations and Warranties. In addition to any
representations and warranties of Debtor set forth in the Guaranty, which are
incorporated herein by this reference, Debtor hereby represents and warrants
that:
(a) Debtor is the sole owner of and has good and marketable title
to the Collateral (or, in the case of after-acquired Collateral, at the time
the Debtor acquires rights in the Collateral, will be the sole owner thereof
and have good and marketable title thereto).
(b) Except for security interests in favor of Secured Party, no
person has (or, in the case of after-acquired Collateral, at the time Debtor
acquires rights therein, will have) any right, title, claim or interest (by way
of security interest or other lien or charge) in, against or to the Collateral.
(c) All information heretofore, herein or hereafter supplied to
Secured Party by or on behalf of Debtor with respect to the Collateral is
accurate and complete.
(d) Debtor has delivered to Secured Party all instruments,
documents, chattel paper and other items of Collateral in which a security
interest is or may be perfected by possession, the certificate of title with
respect to each motor vehicle, if any, included in the Collateral, together
with such other writings with respect thereto as Secured Party shall request.
(e) Each account, contract right, item of chattel paper,
instrument or any other right to the payment of money constituting Collateral
is genuine and enforceable in accordance with its terms against the party
obligated to pay the same (an "Account Debtor"), which terms have not been
modified or waived in any respect or to any extent.
(f) Any amount represented by Debtor to Secured Party as owing by
any Account Debtor is the correct amount actually and unconditionally owing by
such Account Debtor.
(g) No Account Debtor has any defense, set off, claim or
counterclaim against Debtor which can be asserted against Secured Party,
whether in any proceeding to enforce Secured Party's rights in the Collateral,
or otherwise.
5. Covenants and Agreements of Debtor. In addition to all
covenants and agreements of Debtor set forth in the Guaranty, which are
incorporated herein by this reference, Debtor hereby agrees:
(a) To do all acts that may be necessary to maintain,
preserve and protect the Collateral;
(b) Not to use or permit any Collateral to be used
unlawfully or in violation of any provision of this Security Agreement, any
other agreement with Secured Party related hereto or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
3
<PAGE> 47
(c) To pay promptly when due all taxes, assessments,
charges, encumbrances and liens now or hereafter imposed upon or affecting any
Collateral;
(d) To appear in and defend any action or proceeding
which may affect its title to or Secured Party's interest in the Collateral;
(e) Not to surrender or lose possession of (other than to
Secured Party), sell, encumber, lease, rent, or otherwise dispose of or
transfer any Collateral or right or interest therein except as hereinafter
provided, and to keep the Collateral free of all levies and security interests
or other liens or charges except those approved in writing by Secured Party
(provided that, unless an Event of Default shall occur, Debtor may, in the
ordinary course of business, sell or lease any Collateral consisting of
inventory);
(f) To comply with all laws, regulations and ordinances
relating to the possession, operation, maintenance and control of the
Collateral;
(g) That such care as Secured Party gives to the
safekeeping of its own property of like kind shall constitute reasonable care
of the Collateral when in Secured Party's possession;
(h) To account fully for and promptly deliver to Secured
Party, in the form received, all documents, chattel paper, instruments and
agreements constituting Collateral hereunder and all proceeds of the Collateral
received, all endorsed to Secured Party or in blank, as requested by Secured
Party, and accompanied by such stock powers as appropriate and until so
delivered all such documents, instruments, agreements and proceeds shall be
held by Debtor in trust for Secured Party, separate from all other property of
Debtor and identified as the property of Secured Party;
(i) To keep separate, accurate and complete records of
the Collateral and to provide Secured Party with such records and such other
reports and information relating to the Collateral as Secured Party may request
from time to time;
(j) To procure, execute and deliver from time to time any
endorsements, notifications, registrations, assignments, financing statements,
certificates of title, ship mortgages, aircraft mortgages, copyright mortgages,
assignments or mortgages of patents, mortgages of mask works, mortgages for
filing pursuant to the Interstate Commerce Act, and other writings deemed
necessary or appropriate by Secured Party to perfect, maintain and protect its
security interest in the Collateral hereunder and the priority thereof;
(k) To take such other actions as Secured Party may
request to protect the value of the Collateral and of Secured Party's security
interest in the Collateral, including, without limitation, provision of
assurances from third parties regarding Secured Party's access to, right to
foreclose on or sell, Collateral and right to realize the practical benefits of
such foreclosure or sale;
4
<PAGE> 48
(l) To reimburse Secured Party upon demand for any costs
and expenses, including, without limitation, attorneys' fees and disbursements,
Secured Party may incur while exercising any right, power or remedy provided by
this Security Agreement or by law, all of which costs and expenses are included
in the Obligations;
(m) To give Secured Party thirty (30) days prior written
notice of any change in Debtor's residence or chief place of business or legal
name or trade name(s) or style(s) set forth in Paragraph 16 below;
(n) To keep the records concerning the Collateral and to
keep the Collateral at the location(s) referred to in Paragraph 16 below and
not to remove such records from such location(s) without the prior written
consent of Secured Party;
(o) If Secured Party gives value to enable Debtor to
acquire rights in or the use of any Collateral, to use such value for such
purpose;
(p) To keep the Collateral in good condition and repair
and not to cause or permit any waste or unusual or unreasonable depreciation of
the Collateral;
(q) At any reasonable time, upon demand by Secured Party,
to exhibit to and allow inspection by Secured Party (or persons designated by
Secured Party) of the Collateral; and
(r) To insure the Collateral, with Secured Party named as
loss payee, in form and amounts, with companies, and against risks and
liabilities satisfactory to Secured Party, and Debtor hereby assigns the
policies to Secured Party, agrees to deliver them to Secured Party at its
request, and agrees that Secured Party may make any claim thereunder, cancel
the insurance on default by Debtor, collect and receive payment of and endorse
any instrument in payment of loss or return premium or other refund or return,
and apply such amounts received, at Secured Party's election, to replacement of
Collateral or to the Obligations.
6. Authorized Action by Secured Party. Debtor hereby agrees that
from time to time, without presentment, notice or demand, and without affecting
or impairing in any way the rights of Secured Party with respect to the
Collateral, the obligations of the Debtor hereunder or the Obligations, Secured
Party may, but shall not be obligated to and shall incur no liability to Debtor
or any third party for failure to take any action which Debtor is obligated by
this Security Agreement to do and to exercise such rights and powers as Debtor
might exercise with respect to the Collateral, and Debtor hereby irrevocably
appoints Secured Party as its attorney-in-fact to exercise such rights and
powers, including without limitation, to: (a) collect by legal proceedings or
otherwise and endorse, receive and receipt for all dividends, interest,
payments, proceeds and other sums and property now or hereafter payable on or
on account of the Collateral; (b) enter into any extension, reorganization,
deposit, merger, consolidation or other agreement pertaining to, or deposit,
surrender, accept, hold or apply other property in exchange for the Collateral;
(c) insure, process and preserve the Collateral; (d) transfer the Collateral to
its own or its nominee's name; (e) make any compromise or settlement, and take
any action it deems advisable, with respect to the Collateral; and (f) notify
any Account Debtor on any Collateral to make payment directly to Secured Party.
5
<PAGE> 49
7. Default and Remedies. Upon the occurrence of an Event of
Default, Secured Party may, at its option, and without notice to or demand on
Debtor and in addition to all rights and remedies available to Secured Party
under the Guaranty and the other Loan Documents, at law, in equity or
otherwise, do any one or more of the following:
(a) Foreclose or otherwise enforce Secured Party's
security interest in any manner permitted by law, or provided for in this
Security Agreement.
(b) Sell, lease or otherwise dispose of any Collateral at
one or more public or private sales at Secured Party's place of business or any
other place or places, including, without limitation, any broker's board or
securities exchange, whether or not such Collateral is present at the place of
sale, for cash or credit or future delivery, on such terms and in such manner
as Secured Party may determine.
(c) Recover from Debtor all costs and expenses,
including, without limitation, reasonable attorneys' fees, incurred or paid by
Secured Party in exercising any right, power or remedy provided by this
Security Agreement.
(d) Require Debtor to assemble the Collateral and make it
available to Secured Party at a place to be designated by Secured Party.
(e) Enter onto property where any Collateral is located
and take possession thereof with or without judicial process.
(f) Prior to the disposition of the Collateral, store,
process, repair or recondition it or otherwise prepare it for disposition in
any manner and to the extent Secured Party deems appropriate and in connection
with such preparation and disposition, without charge, use any trademark,
tradename, copyright, patent or technical process used by Debtor.
(g) Debtor shall be given five (5) business days' prior
notice of the time and place of any public sale or of the time after which any
private sale or other intended disposition of Collateral is to be made, which
notice Debtor hereby agrees shall be deemed reasonable notice thereof.
(h) Upon any sale or other disposition pursuant to this
Security Agreement, Secured Party shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral or portion thereof so sold or
disposed of. Each purchaser at any such sale or other disposition (including
Secured Party) shall hold the Collateral free from any claim or right of
whatever kind, including any equity or right of redemption of Debtor and Debtor
specifically waives (to the extent permitted by law) all rights of redemption,
stay or appraisal which it has or may have under any rule of law or statute now
existing or hereafter adopted.
8. Cumulative Rights. The rights, powers and remedies of Secured
Party under this Security Agreement shall be in addition to all rights, powers
and remedies given to Secured Party by virtue of any statute or rule of law,
the Guaranty, the other Loan Documents or any other agreement, all of which
rights, powers and remedies shall be cumulative and may be
6
<PAGE> 50
exercised successively or concurrently without impairing Secured Party's
security interest in the Collateral.
9. Waiver. Any waiver, forbearance, failure or delay by Secured
Party in exercising any right, power or remedy shall not preclude the further
exercise thereof, and every right, power or remedy of Secured Party shall
continue in full force and effect until such right, power or remedy is
specifically waived in a writing executed by Secured Party. Debtor waives any
right to require Secured Party to proceed against any person or to exhaust any
Collateral or to pursue any remedy in Secured Party's power.
10. Setoff. Debtor agrees that Secured Party may exercise its
rights of setoff with respect to the Obligations in the same manner as if the
Obligations were unsecured.
11. Binding Upon Successors. All rights of Secured Party under this
Security Agreement shall inure to the benefit of its successors and assigns,
and all obligations of Debtor shall bind its heirs, executors, administrators,
successors and assigns.
12. Entire Agreement; Severability. This Security Agreement
contains the entire security agreement between Secured Party and Debtor. If
any of the provisions of this Security Agreement shall be held invalid or
unenforceable, this Security Agreement shall be construed as if not containing
those provisions and the rights and obligations of the parties hereto shall be
construed and enforced accordingly.
13. References. The singular includes the plural. If more than
one executes this Security Agreement, the term Debtor shall be deemed to refer
to each of the undersigned Debtors as well as to all of them, and their
obligations and agreements hereunder shall be joint and several. If any of the
undersigned is a married person, recourse may be had against his or her
separate property for the Obligations.
14. Choice of Law. This Security Agreement shall be construed in
accordance with and governed by the laws of the State of California, without
giving effect to choice of law rules, and, where applicable and except as
otherwise defined herein, terms used herein shall have the meanings given them
in the Uniform Commercial Code of such state.
15. Amendment. This Security Agreement may not be amended or
modified except by a writing signed by each of the parties hereto.
16. Place of Business; Location of Records and Collateral. Debtor
represents that Schedule A attached hereto accurately and completely sets
forth: (a) its chief place of business; (b) all trade name(s) or style(s), used
by Debtor; and (c) all locations where Debtor's records concerning the
Collateral are located; and (d) all locations where Collateral is located.
17. Notices. All notices, consents, requests and demands to or
upon the respective parties under this Security Agreement shall be in writing
and shall be deemed to have been given or made when delivered in person to
those Persons listed on the signature pages hereof or when deposited in the
United States mail, postage prepaid, or, in the case of telegraphic notice or
7
<PAGE> 51
overnight courier service, when delivered to the telegraph company or overnight
courier service, or in the case of telex or telecopy notice, when sent,
verification received, in each case addressed as set forth on the signature
pages hereof, or to such other address as either party may designate by notice
to the other given in accordance with this Paragraph 17.
EXECUTED this 12 day of September, 1995.
DEBTOR:
2110 DAVIE CORPORATION, a California corporation
By: /s/ JAMES A. BARRY
------------------------------
Name: James A. Barry
-----------------------------
Title: Vice President/CFO
----------------------------
Address: 2110 Davie Street
City of Commerce, California 90040
SECURED PARTY:
SANWA BANK CALIFORNIA, a California corporation
with a state banking license
By: /s/ JOSEPH C. ARCO
------------------------------
Name: Joseph C. Arco
-----------------------------
Title: V.P.
----------------------------
Address: 601 South Figueroa Street
Los Angeles, California 90017
8
<PAGE> 52
AMENDED AND RESTATED
SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (the "Security
Agreement") is made and dated this 12 day of September, 1995 by and between
SANWA BANK CALIFORNIA, a California corporation with a state banking license
("Secured Party"), and GEMCHEM, INC., a California corporation ("Debtor").
RECITALS
A. Pursuant to that certain Amended and Restated Credit
Agreement, dated as of even date herewith (as the same may be amended, modified
or supplemented from time to time, the "Credit Agreement" and with capitalized
terms not otherwise defined herein used with the same meaning as in the Credit
Agreement), SANWA BANK CALIFORNIA agreed to extend credit to AMVAC CHEMICAL
CORPORATION ("Borrower") in the aggregate principal amount of $15,750,000.00.
B. Borrower is an affiliate of Debtor and will benefit from the
credit extended to Borrower by Secured Party. As a condition precedent to
Secured Party's obligation to extend such credit to Borrower, Debtor was
required to execute and deliver that certain Credit Guaranty dated as of even
date herewith (as amended, modified or supplemented from time to time, the
"Guaranty") pursuant to which Debtor has guaranteed all indebtedness of
Borrower to Secured Party under the Credit Agreement and the other Loan
Documents. As a condition precedent to Secured Party's obligation to extend
credit to Borrower pursuant to the Credit Agreement, Debtor also is required to
execute and deliver and this Security Agreement.
C. This Security Agreement amends and restates all security
agreements executed by Debtor in favor of Secured Party granting a security
interest in personal property of the Debtor to secure the obligations of Debtor
under the Guaranty or any other guaranty of indebtedness owed by Borrower to
Secured Party under the Existing Revolving Credit Agreement and/or under the
Existing Tenn Loan Agreement.
NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor hereby agrees as follows:
AGREEMENT
1. Grant of Security Interest. Debtor hereby pledges and grants
to Secured Party a security interest in the property described in Paragraph 2
below (collectively and severally, the "Collateral") to secure payment and
performance of the obligations described in Paragraph 3 below (collectively and
severally, the "Obligations").
1
<PAGE> 53
2. Collateral. The Collateral shall consist of all right, title
and interest of Debtor, now existing or hereafter arising, in under and to:
(a) Equipment. All goods and equipment ("Equipment") now
owned or hereafter acquired by the Debtor or in which the Debtor now has or may
hereafter acquire any interest including, but not limited to, all machinery,
furniture, furnishings, fixtures, tools, supplies and motor vehicles of every
kind and description and all additions, accessions, improvements, replacements
and substitutions thereto and thereof
(b) Inventory. All inventory ("Inventory") now owned or
hereafter acquired by the Debtor including, but not limited to, all raw
materials, work in process, finished goods, merchandise, parts and supplies of
every kind and description, including inventory temporarily out of the Debtor's
custody or possession, together with all returns on accounts.
(c) Accounts and Contract Rights. All accounts and
contract rights now owned or hereafter created or acquired by the Debtor,
including but not limited to, all receivables and all rights and benefits due
to the Debtor under any contract or agreement.
(d) General Intangibles. All general intangibles now
owned or hereafter created or acquired by the Debtor, including but not limited
to, goodwill, trademarks, trade styles, trade names, patents, patent
applications, software, customer lists and business records.
(e) Chattel Paper and Documents. All documents,
instruments and chattel paper now owned or hereafter acquired by the Debtor.
(f) Monies and Other Property in Possession. All monies
and property of the Debtor now or hereafter in the possession of the Secured
Party or the Secured Party's agents, or any one of them, including, but not
limited to, all deposit accounts, certificates of deposit, stocks, bonds,
indentures, warrants, options and other negotiable and non-negotiable
securities and instruments, together with all stock rights, rights to
subscribe, liquidating dividends, cash dividends, payments, dividends paid in
stock, new securities or other property to which the Debtor may become entitled
to receive on account of such property.
The Secured Party's security interest in the Collateral shall be a continuing
lien and shall include all proceeds and products of the Collateral including
but not limited to, the proceeds of any insurance thereon.
3. Obligations. The Obligations secured by this Security
Agreement shall consist of any and all debts, obligations and liabilities of
Debtor to Secured Party arising out of or related to the Guaranty, whether
principal, interest, fees or otherwise, whether now existing or hereafter
arising, whether voluntary or involuntary, whether or not jointly owed with
others, whether direct or indirect, absolute or contingent, contractual or
tortious, liquidated or unliquidated, arising by operation of law or otherwise,
whether or not from time to time decreased or extinguished and later increased,
created or incurred and whether or not extended, modified, rearranged,
restructured, refinanced or replaced, including without limitation,
modifications to interest rates or other payment terms of such debts,
obligations or liabilities.
2
<PAGE> 54
4. Representations and Warranties. In addition to any
representations and warranties of Debtor set forth in the Guaranty, which are
incorporated herein by this reference, Debtor hereby represents and warrants
that:
(a) Debtor is the sole owner of and has good and
marketable title to the Collateral (or, in the case of after-acquired
Collateral, at the time the Debtor acquires rights in the Collateral, will be
the sole owner thereof and have good and marketable title thereto).
(b) Except for security interests in favor of Secured
Party, no person has (or, in the case of after-acquired Collateral, at the time
Debtor acquires rights therein, will have) any right, title, claim or interest
(by way of security interest or other lien or charge) in, against or to the
Collateral.
(c) All information heretofore, herein or hereafter
supplied to Secured Party by or on behalf of Debtor with respect to the
Collateral is accurate and complete.
(d) Debtor has delivered to Secured Party all
instruments, documents, chattel paper and other items of Collateral in which a
security interest is or may be perfected by possession, the certificate of
title with respect to each motor vehicle, if any, included in the Collateral,
together with such other writings with respect thereto as Secured Party shall
request.
(e) Each account, contract right, item of chattel paper,
instrument or any other right to the payment of money constituting Collateral
is genuine and enforceable in accordance with its terms against the party
obligated to pay the same (an "Account Debtor"), which terms have not been
modified or waived in any respect or to any extent.
(f) Any amount represented by Debtor to Secured Party as
owing by any Account Debtor is the correct amount actually and unconditionally
owing by such Account Debtor.
(g) No Account Debtor has any defense, set off, claim or
counterclaim against Debtor which can be asserted against Secured Party,
whether in any proceeding to enforce Secured Party's rights in the Collateral,
or otherwise.
5. Covenants and Agreements of Debtor. In addition to all
covenants and agreements of Debtor set forth in the Guaranty, which are
incorporated herein by this reference, Debtor hereby agrees:
(a) To do all acts that may be necessary to maintain,
preserve and protect the Collateral;
(b) Not to use or permit any Collateral to be used
unlawfully or in violation of any provision of this Security Agreement, any
other agreement with Secured Party related hereto or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral;
3
<PAGE> 55
(c) To pay promptly when due all taxes, assessments,
charges, encumbrances and liens now or hereafter imposed upon or affecting any
Collateral;
(d) To appear in and defend any action or proceeding
which may affect its title to or Secured Party's interest in the Collateral;
(e) Not to surrender or lose possession of (other than to
Secured Party), sell, encumber, lease, rent, or otherwise dispose of or
transfer any Collateral or right or interest therein except as hereinafter
provided, and to keep the Collateral free of all levies and security interests
or other liens or charges except those approved in writing by Secured Party
(provided that, unless an Event of Default shall occur, Debtor may, in the
ordinary course of business, sell or lease any Collateral consisting of
inventory);
(f) To comply with all laws, regulations and ordinances
relating to the possession, operation, maintenance and control of the
Collateral;
(g) That such care as Secured Party gives to the
safekeeping of its own property of like kind shall constitute reasonable care
of the Collateral when in Secured Party's possession;
(h) To account fully for and promptly deliver to Secured
Party, in the form received, all documents, chattel paper, instruments and
agreements constituting Collateral hereunder and all proceeds of the Collateral
received, all endorsed to Secured Party or in blank, as requested by Secured
Party, and accompanied by such stock powers as appropriate and until so
delivered all such documents, instruments, agreements and proceeds shall be
held by Debtor in trust for Secured Party, separate from all other property of
Debtor and identified as the property of Secured Party;
(i) To keep separate, accurate and complete records of
the Collateral and to provide Secured Party with such records and such other
reports and information relating to the Collateral as Secured Party may request
from time to time;
(j) To procure, execute and deliver from time to time any
endorsements, notifications, registrations, assignments, financing statements,
certificates of title, ship mortgages, aircraft mortgages, copyright mortgages,
assignments or mortgages of patents, mortgages of mask works, mortgages for
filing pursuant to the Interstate Commerce Act, and other writings deemed
necessary or appropriate by Secured Party to perfect, maintain and protect its
security interest in the Collateral hereunder and the priority thereof;
(k) To take such other actions as Secured Party may
request to protect the value of the Collateral and of Secured Party's security
interest in the Collateral, including, without limitation, provision of
assurances from third parties regarding Secured Party's access to, right to
foreclose on or sell, Collateral and right to realize the practical benefits of
such foreclosure or sale;
(l) To reimburse Secured Party upon demand for any costs
and expenses, including, without limitation, attorneys' fees and disbursements,
Secured Party may incur while
4
<PAGE> 56
exercising any right, power or remedy provided by this Security Agreement or by
law, all of which costs and expenses are included in the Obligations;
(m) To give Secured Party thirty (30) days prior written
notice of any change in Debtor's residence or chief place of business or legal
name or trade name(s) or style(s) set forth in Paragraph 16 below;
(n) To keep the records concerning the Collateral and to
keep the Collateral at the location(s) referred to in Paragraph 16 below and not
to remove such records from such location(s) without the prior written consent
of Secured Party;
(o) If Secured Party gives value to enable Debtor to
acquire rights in or the use of any Collateral, to use such value for such
purpose;
(p) To keep the Collateral in good condition and repair
and not to cause or permit any waste or unusual or unreasonable depreciation of
the Collateral;
(q) At any reasonable time, upon demand by Secured Party,
to exhibit to and allow inspection by Secured Party (or persons designated by
Secured Party) of the Collateral; and
(r) To insure the Collateral, with Secured Party named as
loss payee, in form and amounts, with companies, and against risks and
liabilities satisfactory to Secured Party, and Debtor hereby assigns the
policies to Secured Party, agrees to deliver them to Secured Party at its
request, and agrees that Secured Party may make any claim thereunder, cancel
the insurance on default by Debtor, collect and receive payment of and endorse
any instrument in payment of loss or return premium or other refund or return,
and apply such amounts received, at Secured Party's election, to replacement of
Collateral or to the Obligations.
6. Authorized Action by Secured Party. Debtor hereby agrees that
from time to time, without presentment, notice or demand, and without affecting
or impairing in any way the rights of Secured Party with respect to the
Collateral, the obligations of the Debtor hereunder or the Obligations, Secured
Party may, but shall not be obligated to and shall incur no liability to Debtor
or any third party for failure to take any action which Debtor is obligated by
this Security Agreement to do and to exercise such rights and powers as Debtor
might exercise with respect to the Collateral, and Debtor hereby irrevocably
appoints Secured Party as its attorney-in-fact to exercise such rights and
powers, including without limitation, to: (a) collect by legal proceedings or
otherwise and endorse, receive and receipt for all dividends, interest,
payments, proceeds and other sums and property now or hereafter payable on or
on account of the Collateral; (b) enter into any extension, reorganization,
deposit, merger, consolidation or other agreement pertaining to, or deposit,
surrender, accept, hold or apply other property in exchange for the Collateral;
(c) insure, process and preserve the Collateral; (d) transfer the Collateral to
its own or its nominee's name; (e) make any compromise or settlement, and take
any action it deems advisable, with respect to the Collateral; and (f) notify
any Account Debtor on any Collateral to make payment directly to Secured Party.
5
<PAGE> 57
7. Default and Remedies. Upon the occurrence of an Event of
Default, Secured Party may, at its option, and without notice to or demand on
Debtor and in addition to all rights and remedies available to Secured Party
under the Guaranty and the other Loan Documents, at law, in equity or
otherwise, do any one or more of the following:
(a) Foreclose or otherwise enforce Secured Party's
security interest in any manner permitted by law, or provided for in this
Security Agreement.
(b) Sell, lease or otherwise dispose of any Collateral at
one or more public or private sales at Secured Party's place of business or any
other place or places, including, without limitation, any broker's board or
securities exchange, whether or not such Collateral is present at the place of
sale, for cash or credit or future delivery, on such terms and in such manner
as Secured Party may determine.
(c) Recover from Debtor all costs and expenses,
including, without limitation, reasonable attorneys' fees, incurred or paid by
Secured Party in exercising any right, power or remedy provided by this
Security Agreement.
(d) Require Debtor to assemble the Collateral and make it
available to Secured Party at a place to be designated by Secured Party.
(e) Enter onto property where any Collateral is located
and take possession thereof with or without judicial process.
(f) Prior to the disposition of the Collateral, store,
process, repair or recondition it or otherwise prepare it for disposition in
any manner and to the extent Secured Party deems appropriate and in connection
with such preparation and disposition, without charge, use any trademark,
tradename, copyright, patent or technical process used by Debtor.
(g) Debtor shall be given five (5) business days' prior
notice of the time and place of any public sale or of the time after which any
private sale or other intended disposition of Collateral is to be made, which
notice Debtor hereby agrees shall be deemed reasonable notice thereof.
(h) Upon any sale or other disposition pursuant to this
Security Agreement, Secured Party shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral or portion thereof so sold or
disposed of. Each purchaser at any such sale or other disposition (including
Secured Party) shall hold the Collateral free from any claim or right of
whatever kind, including any equity or right of redemption of Debtor and Debtor
specifically waives (to the extent permitted by law) all rights of redemption,
stay or appraisal which it has or may have under any rule of law or statute now
existing or hereafter adopted.
8. Cumulative Rights. The rights, powers and remedies of Secured
Party under this Security Agreement shall be in addition to all rights, powers
and remedies given to Secured Party by virtue of any statute or rule of law,
the Guaranty, the other Loan Documents or any other agreement, all of which
rights, powers and remedies shall be cumulative and may be
6
<PAGE> 58
exercised successively or concurrently without impairing Secured Party's
security interest in the Collateral.
9. Waiver. Any waiver, forbearance, failure or delay by Secured
Party in exercising any right, power or remedy shall not preclude the further
exercise thereof, and every right, power or remedy of Secured Party shall
continue in full force and effect until such right, power or remedy is
specifically waived in a writing executed by Secured Party. Debtor waives any
right to require Secured Party to proceed against any person or to exhaust any
Collateral or to pursue any remedy in Secured Party's power.
10. Setoff. Debtor agrees that Secured Party may exercise its
rights of setoff with respect to the Obligations in the same manner as if the
Obligations were unsecured.
11. Binding Upon Successors. All rights of Secured Party under
this Security Agreement shall inure to the benefit of its successors and
assigns, and all obligations of Debtor shall bind its heirs, executors,
administrators, successors and assigns.
12. Entire Agreement; Severability. This Security Agreement
contains the entire security agreement between Secured Party and Debtor. If
any of the provisions of this Security Agreement shall be held invalid or
unenforceable, this Security Agreement shall be construed as if not containing
those provisions and the rights and obligations of the parties hereto shall be
construed and enforced accordingly.
13. References. The singular includes the plural. If more than
one executes this Security Agreement, the term Debtor shall be deemed to refer
to each of the undersigned Debtors as well as to all of them, and their
obligations and agreements hereunder shall be joint and several. If any of the
undersigned is a married person, recourse may be had against his or her
separate property for the Obligations.
14. Choice of Law. This Security Agreement shall be construed in
accordance with and governed by the laws of the State of California, without
giving effect to choice of law rules, and, where applicable and except as
otherwise defined herein, terms used herein shall have the meanings given them
in the Uniform Commercial Code of such state.
15. Amendment. This Security Agreement may not be amended or
modified except by a writing signed by each of the parties hereto.
16. Place of Business; Location of Records and Collateral. Debtor
represents that Schedule A attached hereto accurately and completely sets
forth: (a) its chief place of business; (b) all trade name(s) or style(s) used
by Debtor; and (c) all locations where Debtor's records concerning the
Collateral are located; and (d) all locations where Collateral is located.
17. Notices. All notices, consents, requests and demands to or
upon the respective parties under this Security Agreement shall be in writing
and shall be deemed to have been given or made when delivered in person to
those Persons listed on the signature pages hereof or when deposited in the
United States mail, postage prepaid, or, in the case of telegraphic notice or
7
<PAGE> 59
overnight courier service, when delivered to the telegraph company or overnight
courier service, or in the case of telex or telecopy notice, when sent,
verification received, in each case addressed as set forth on the signature
pages hereof, or to such other address as either party may designate by notice
to the other given in accordance with this Paragraph 17.
EXECUTED this 12 day of September, 1995.
DEBTOR:
GEMCHEM, INC., a California corporation
By: /s/ JAMES A. BARRY
------------------------------------
Name: James A. Barry
------------------------------------
Title: Vice President, CFO
------------------------------------
Address: 1151 Dove Street, Suite 115
Newport Beach, California 92660
SECURED PARTY:
SANWA BANK CALIFORNIA, a California corporation
with a state banking license
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
Address: 601 South Figueroa Street
Los Angeles, California 90017
8
<PAGE> 60
TERM NOTE
Up to $5,250,000.00 September 12, 1995
FOR VALUE RECEIVED, the undersigned, AMVAC CHEMICAL CORPORATION, a
California corporation (the "Borrower"), hereby promises to pay to the order of
SANWA BANK CALIFORNIA (the "Lender"), at its office at 601 South Figueroa
Street, W8-12, Los Angeles, California 90017 (or such other place as the Lender
may direct from time to time), in lawful money of the United States and in
immediately available funds, the principal amount advanced to the Borrower
under that certain Amended and Restated Credit Agreement dated as of September
12, 1995 by and between the Borrower and the Lender (as such agreement may be
amended from time to time, the "Credit Agreement"), together with interest
thereon computed in accordance with the Credit Agreement, on the dates required
pursuant to the Credit Agreement. Capitalized terms used herein without
definition have the meanings assigned thereto in the Credit Agreement.
This Term Note is the "Term Note" referred to in the Credit Agreement.
Reference is hereby made to the Credit Agreement and the other Loan Documents,
including, without limitation, the Security Agreement, the Deed of Trust and
the Guaranties, for rights and obligations of payment and prepayment, events of
default and the right of the Lender to accelerate the maturity hereof upon the
occurrence of such events.
The Borrower, for itself, its successors and assigns, hereby waives
diligence, presentment, protest and demand and notice of protest, demand,
dishonor and non-payment of this Term Note.
The Borrower agrees to pay all collection expenses, court costs and
reasonable attorneys' fees and disbursements (whether or not litigation is
commenced) which may be incurred in connection with the collection or
enforcement of this Term Note.
This Term Note shall be governed by and construed in accordance with
the laws of the State of California, without giving effect to choice of law
rules.
AMVAC CHEMICAL CORPORATION,
a California corporation
By: /s/ JAMES A. BARRY
-----------------------------------
Name: James A. Barry
-----------------------------------
Title: Vice President, CFO
-----------------------------------
<PAGE> 1
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
EXHIBIT 21
LISTING OF SUBSIDIARIES
Subsidiaries of the Company and the jurisdiction in which each company was
incorporated are listed below. Unless otherwise indicated parenthetically, 100%
of the voting securities of each subsidiary are owned by the Company. All
companies indicated with an asterisk (*) are subsidiaries of CHEMICAL. All of
the following subsidiaries are included in the Company's consolidated financial
statements:
AMVAC Chemical Corporation California
GemChem, Inc. California
2110 Davie Corporation California
(formerly ABSCO Distributing)
Environmental Mediation, Inc. (51%) California
Calhart Corporation California
Manufacturers Mirror & Glass
Co., Inc. California
Todagco (80%)* California
American Vanguard Corporation
of Imperial Valley (90%)* California
AMVAC Ag-Chem* California
AMVAC Chemical Corporation-Nevada* Nevada
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 331600
<SECURITIES> 0
<RECEIVABLES> 15486000
<ALLOWANCES> 0
<INVENTORY> 8269600
<CURRENT-ASSETS> 24668200
<PP&E> 27760300
<DEPRECIATION> 14079900
<TOTAL-ASSETS> 39341000
<CURRENT-LIABILITIES> 8973600
<BONDS> 10705100
0
0
<COMMON> 233100
<OTHER-SE> 17772300
<TOTAL-LIABILITY-AND-EQUITY> 39341000
<SALES> 55402100
<TOTAL-REVENUES> 55402100
<CGS> 30741100
<TOTAL-COSTS> 30741100
<OTHER-EXPENSES> 18689400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 928000
<INCOME-PRETAX> 5043000
<INCOME-TAX> 1919000
<INCOME-CONTINUING> 3124000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3124000
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
</TABLE>
