-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Usz7zSOj+1X9wMwL9AHT1NvFdEayNb5TxUI0Tx/9spdr01hJSA144TtY0hODq767 U1C1KdRc2/7gHz/R2jCRhw== 0000950148-97-000310.txt : 19970221 0000950148-97-000310.hdr.sgml : 19970221 ACCESSION NUMBER: 0000950148-97-000310 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970211 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALNETICS CORP CENTRAL INDEX KEY: 0000277376 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 952303687 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08767 FILM NUMBER: 97524212 BUSINESS ADDRESS: STREET 1: 20401 PRAIRIE ST CITY: CHATSWORTH STATE: CA ZIP: 91311 BUSINESS PHONE: 8188869819 MAIL ADDRESS: STREET 1: 20401 PRAIRIE STREET CITY: CHATSWORTH STATE: CA ZIP: 91311 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended December 31, 1996 or [ ] 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: 0-8767 CALNETICS CORPORATION (Exact name of Registrant as specified in its charter) CALIFORNIA 95-2303687 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 20401 PRAIRIE STREET, CHATSWORTH, CALIFORNIA 91311 (Address of principal executive offices) (zip code) (818) 886-9819 Registrant's telephone number, including area code N/A Former name, former address and former fiscal year, if changed since last report 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 --- --- The number of shares outstanding of the Registrant's Common Stock as of December 31, 1996 was 2,969,799. 2 CALNETICS CORPORATION INDEX Part I. Financial Information Page Number - ------------------------------ ----------- Item 1. Financial Statements Condensed Consolidated Statements of Income (Unaudited) Three Months and Six Months Ended December 31, 1996 and 1995 . . . 3 Condensed Consolidated Balance Sheets (Unaudited) December 31, 1996 and June 30, 1996 . . . . . . . . . . . . . . . 4 Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended December 31, 1996 and 1995 . . . . . . . . . . . 6 Notes to Condensed Consolidated Financial Statements (Unaudited) . . . . . . . . . . . . . . . . . 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . 11 Part II. Other Information - --------------------------- Item 4. Submission of Matters to a Vote of Security Holders . . . . 13 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 13 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Page 2 of 44 3 PART I - FINANCIAL INFORMATION CALNETICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended December 31, December 31, ---------------------------------- ----------------------------------- 1996 1995 1996 1995 ------------ ------------ -------------- ------------- Net Sales $ 8,586,411 $ 7,627,663 $17,032,431 $16,398,938 Cost of Sales 6,461,118 5,829,512 12,789,017 12,637,091 ------------ ------------ -------------- ------------- Gross Profit 2,125,293 1,798,151 4,243,414 3,761,847 ------------ ------------ -------------- ------------- Selling, general and administrative expenses 1,420,870 1,219,614 2,750,511 2,551,887 Other expense, net, including interest 88,218 115,308 176,989 239,827 ------------ ------------ -------------- ------------- Total costs and expenses 1,509,088 1,334,922 2,927,500 2,791,714 Income from operations before income taxes 616,205 463,229 1,315,914 970,133 Provision for income taxes 257,000 192,300 553,000 403,000 ------------ ------------ -------------- ------------- Net income $ 359,205 $ 270,929 $ 762,914 $ 567,133 ============ ============ ============== ============= Earnings per common share and common share equivalent $ 0 .11 $ 0.09 $ 0.24 $ 0.19 Weighted average common shares and common share equivalents outstanding 3,119,688 3,059,416 3,124,347 3,063,260 ============ ============ ============== =============
No dividends were paid during the periods set forth above. See accompanying notes to condensed consolidated financial statements. Page 3 of 44 4 CALNETICS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS December 31, 1996 June 30, 1996 ----------------- ----------------- CURRENT ASSETS: Cash and cash equivalents $ 1,215,305 $ 1,877,633 Accounts receivable, net 4,774,713 4,997,471 Inventories 5,808,606 5,470,710 Prepaid expenses 321,416 254,608 Deferred income taxes 342,000 342,000 ------------ ------------ Total current assets 12,462,040 12,942,422 ------------ ------------ PROPERTY, PLANT AND EQUIPMENT (at cost): Land 466,288 466,288 Buildings and leasehold improvements 2,277,763 2,269,525 Machinery and equipment 5,114,725 4,587,322 Furniture and fixtures 266,283 248,220 ------------ ------------ 8,125,059 7,571,355 Less--accumulated depreciation and amortization 3,745,571 3,399,998 ------------ ------------ Property, plant and equipment, net 4,379,488 4,171,357 ------------ ------------ Deposits and other assets 173,211 171,245 Goodwill 1,364,968 1,401,268 ------------ ------------ Total assets $18,379,707 $18,686,292 ============ ============
See accompanying notes to condensed consolidated financial statements. Page 4 of 44 5 CALNETICS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, 1996 June 30, 1996 ----------------- ------------- CURRENT LIABILITIES: Current portion of long-term debt $ 287,556 $ 247,187 Accounts payable 3,027,940 3,214,786 Accrued liabilities 1,000,993 1,167,707 Income taxes payable 69,021 386,021 ------------ ------------ Total current liabilities 4,385,510 5,015,701 ------------ ------------ LONG-TERM DEBT, net of current portion 4,287,132 4,740,820 ------------ ------------ DEFERRED INCOME TAXES 57,000 57,000 ------------ ------------ SHAREHOLDERS' EQUITY: Preferred stock: authorized- 2,000,000 shares, none issued --- --- Common stock, no par value: authorized - 20,000,000 shares; issued and outstanding -- 2,969,799 at December 31, 1996 and 2,959,799 at June 30, 1996 2,476,725 2,462,345 Retained earnings 7,173,340 6,410,426 ------------ ------------ Total shareholders' equity 9,650,065 8,872,771 ------------ ------------ Total liabilities and shareholders' equity $18,379,707 $18,686,292 ============ ============
See accompanying notes to condensed consolidated financial statements. Page 5 of 44 6 CALNETICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended December 31, ---------------------------------- 1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 762,914 $ 567,133 ------------ ------------ Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 385,866 303,703 Provision for doubtful accounts --- 11,000 Changes in operating assets and liabilities: Accounts receivable 222,758 278,361 Inventories (337,896) (349,454) Prepaid expenses (66,808) 4,551 Deposits and other assets (1,966) (49,213) Accounts payable (186,846) (147,836) Customer deposits --- (103,934) Accrued liabilities (166,714) (178,763) Income taxes payable (317,000) (193,172) ------------ ------------ Total adjustments (468,606) (424,757) ------------ ------------ Net cash provided by operating activities 294,308 142,376 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (557,697) (345,957) ------------ ------------ Net cash used in investing activities (557,697) (345,957) ------------ ------------
See accompanying notes to condensed consolidated financial statements. Page 6 of 44 7 CALNETICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
Six Months Ended December 31, ---------------------------------- 1996 1995 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long-term debt $ (413,319) $ (421,222) Net proceeds from issuance of common stock 14,380 --- ------------ ------------ Net cash used in financing activities (398,939) (421,222) ------------ ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (662,328) (624,803) CASH AND CASH EQUIVALENTS, beginning of period 1,877,633 1,580,974 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period $ 1,215,305 $ 956,171 ============ ============ Supplemental disclosures of cash flow information: Cash paid for interest $ 176,989 $ 243,790 ============ ============ Cash paid for income taxes $ 678,000 $ 597,000 ============ ============
See accompanying notes to condensed consolidated financial statements. Page 7 of 44 8 CALNETICS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) December 31, 1996 1. General. In the opinion of the management of Calnetics Corporation (the "Company"), the accompanying condensed consolidated unaudited financial statements contain all adjustments, consisting of only normal recurring accruals, necessary to present fairly the Company's financial position at December 31, 1996, the results of its operations for the three and six months ended December 31, 1996 and 1995 and the cash flows for the six months ended December 31, 1996 and 1995. Certain information and footnote disclosures normally included in financial statements that would have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures in these financial statements are adequate to make the information presented therein not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's June 30, 1996 Form 10-K filed with the Securities and Exchange Commission. The results of operations for the three and six months ended December 31, 1996 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending June 30, 1997. 2. Receivables. The following tabulation shows the elements of receivables:
December 31, 1996 June 30, 1996 ----------------- ----------------- Trade accounts receivable $5,090,713 $5,313,471 Less allowance for doubtful accounts 316,000 316,000 ------------ ------------ Total $ 4,774,713 $ 4,997,471 ============ ============
Page 8 of 44 9 3. Income Taxes. Income taxes for the six-month period ended December 31, 1996 were computed using the effective tax rate estimated to be applicable for the full fiscal year. This rate is subject to ongoing evaluation and review by management. 4. Long-term debt. At December 31, 1996 and June 30, 1996, long-term debt consisted of the following:
December 31, 1996 June 30, 1996 ----------------- ------------- Term loans payable to banks, unsecured, interest at the banks' reference rate (8.25 percent at December 31, 1996) plus 0.25 percent, due in various monthly install- ments of principal and interest through July 1, 1999, with balloon payments totaling $1,458,462 due on August 1, 1999 $2,483,297 $2,949,948 Industrial revenue bonds payable, principal due in annual sinking fund installments ranging from $15,000 to $130,000 through December 2021, plus interest due monthly based on the Issuer's Weekly Adjustable Interest Rates for Revenue Bonds (3.4 percent at December 31, 1996), secured by a letter of credit issued by a bank with an annual fee of 1.125 percent 1,420,000 1,440,000
Page 9 of 44 10 Long-term debt (cont'd)
December 31, 1996 June 30, 1996 ----------------- ------------- Loans payable to former Agricultural Products, Inc. ("API") shareholders, unsecured, interest payable semi-annually at 7.50 percent, principal payable in three equal annual installments through June 1999 301,532 301,532 Mortgage payable to bank, secured by the related building and land, principal payable in monthly installments of $1,665 plus interest at the bank's prime rate (8.25 percent at December 31, 1996), with a balloon payment of $201,415 due on March 5, 2000 264,697 274,687 Other 105,162 21,840 ------------ ------------ $4,574,688 $4,988,007 Current portion of long-term debt 287,556 247,187 ------------ ------------ Long-term portion $4,287,132 $4,740,820 ============ ============
The term loans and notes payable include certain restrictive financial and non-financial covenants, including certain cash restrictions and limitations on payment of cash dividends and redemption of stock. 5. Earnings per common share and common share equivalent. Earnings per common share and common share equivalent are based on the weighted average number of shares of common stock and common stock equivalents (dilutive stock options) outstanding during the related periods. The weighted average number of common stock equivalent shares includes shares issuable upon the assumed exercise of stock options less the number of shares assumed purchased with the proceeds available from such exercise. Fully diluted net income per share does not differ materially from net income per common share and common share equivalent. Page 10 of 44 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial condition. In general, there were no significant changes in current assets or current liabilities or the overall financial condition of the Company between December 31, 1996, the end of the second quarter, and June 30, 1996. However, cash and cash equivalents decreased by approximately $662,000 due in part to purchases of equipment and the voluntary payment of $150,000, representing three monthly installments, of the Company's long-term bank loan, the payment of which was in addition to the regular scheduled monthly payments. Liquidity and Capital Resources. At December 31, 1996, the Company's working capital was $8,076,530 compared to $7,367,826 at the same time a year ago. The Company has a working capital agreement with a bank under which the Company may borrow up to $2,500,000 on an unsecured basis at the bank's prime rate. As of December 31, 1996, the entire amount of $2,500,000 was available under this credit arrangement, which is scheduled to expire on December 31, 1997. The Company has no immediate plans for any significant capital expenditures and the Company believes that its available funds and internally generated cash from operations will be sufficient to meet its working capital needs in fiscal 1997. Certain loan agreements limit capital expenditures to $1,000,000 in the fiscal year ending June 30, 1997 and also contain limits on subsequent years. The Company was pleased with the operating results for the first half of the fiscal year, but there is concern about the adverse effect the floods are having in northern California and the resulting likelihood, in the next several months, of the deferral of incoming orders and shipments for the Company's agricultural irrigation products. Certain statements made herein that are not related to historical results are forward-looking in nature within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties. Such forward-looking statements are based upon assumptions as to the future events that may not prove to be accurate, and actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, a change in the need to make capital expenditures based on market factors, a decrease in internally generated cash due to a downturn in market conditions, and a different effect than anticipated on orders or shipments of the Company's agricultural irrigation products due to the floods. Page 11 of 44 12 Results of Operations. Three months ended December 31, 1996 compared to three months ended December 31, 1995 Net sales for the three-month period ended December 31, 1995 increased 13% from $7,627,663 in 1995, to $8,586,411 in 1996. The increase is attributed to improved business conditions. Cost of sales as a percentage of sales decreased to 75.2% during the three-month period ended December 31, 1996, as compared to 76.4% for the same period in the prior year. The decrease is attributed to decreases in raw material resin prices. Selling, general and administrative expenses increased to $1,420,870 as compared with $1,219,614 for the same period in the prior year, an increase of 16.5%. The increase due mainly to increased sales volume. Net income for the current three-month period was $359,205 as compared with $270,929 for the same period in the prior year after provisions for income taxes of $257,000 and $192,300, respectively. Earnings per share increased to $0.11 from $0.09 per share for the three months ended December 31, 1996 and 1995, respectively. The increase in net income is attributed to increased sales volume during the three months ended December 31, 1996. Six Months ended December 31, 1996 compared to six months ended December 31, 1995 Net sales for the six-month period ended December 31, 1996 increased 3.9% from $16,398,938 in 1995, to $17,032,431 in 1996. The increase is attributed to improved business conditions. Cost of sales as a percentage of sales decreased to 75.1% during the six-month period ended December 31, 1996, as compared to 77.1% for the same period in the prior year. The decrease is attributed to increases in sales volumes and the resultant lower fixed expenses per unit sold. Selling, general and administrative expenses increased to $2,750,511 as compared with $2,551,887 for the same period in the prior year. The increase was mainly attributed to increased sales volume. Net income for the current six-month period was $762,914 as compared with $567,133 for the same period in the prior year after provisions for income taxes of $553,000 and $403,000, respectively. The improvement in net income is attributed to increased sales volume in the current period. Page 12 of 44 13 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Shareholders of the Company was held on November 8, 1996. At such meeting, the following persons were elected as directors of the Company by the votes indicated:
Abstentions and Broker Name For Against Withheld Non-votes ---- -------------- ------- -------- ---------- Clinton G. Gerlach 2,797,610 0 510 0 Fred E. Edward 2,797,610 0 510 0 Peter H. Griffith 2,797,610 0 510 0 Michael A. Hornak 2,797,610 0 510 0 Steven L. Strawn 2,797,610 0 510 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Number Description 3.1 Amended and Restated Articles of Incorporation of Calnetics (Exhibit 3.1 to Form 10-K filed September 25, 1989). 3.2 Bylaws of Calnetics (Exhibit 1.2 to Form 10-K filed September 21, 1978). 3.3 Amendment to Bylaws of Calnetics (Exhibit 3 to Form 8 filed September 28, 1989). 10.1 Lease dated November 22, 1989 between Manchester and Tom Schneider and Arlene Schneider and Amendment to said lease dated December 5, 1989 (Exhibit 10.12 to Form 10-K dated June 30, 1991). 10.2 Lease dated June 2, 1992 by and between Honey Protas and Ny-Glass (Exhibit 10.19 to Form 10-K dated June 30, 1992). 10.3 Addendum No. 1 to Lease dated June 2, 1992 (Exhibit 10.20
Page 13 of 44 14 to Form 10-K dated June 30, 1992). 10.4 Lease Guaranty Agreement entered into as of June 2, 1992 by Calnetics (Exhibit 10.21 to Form 10-K dated June 30, 1992). 10.5 Memorandum of Lease with Right of First Refusal and Option to Purchase dated May 22, 1992 (Exhibit 10.22 to Form 10-K dated June 30, 1992). 10.6 Side Letter Agreement re Standard Industrial Commercial Single Tenant Lease by and between Honey Protas as lessor and Ny-Glass as lessee dated May 22, 1992 (Exhibit 10.23 to Form 10- K dated June 30, 1992). 10.7 Calnetics Corporation 1988 Employee Stock Option Plan (Exhibit 10.25 to Form 10-K dated June 30, 1993). 10.8 Calnetics Corporation 1993 Nonstatutory Stock Option Plan (Exhibit 10.26 to Form 10-K dated June 30, 1993). 10.9 Business Loan Agreement dated June 28, 1993 among Bank of America National Trust and Savings Association, Calnetics, Manchester and Ny-Glass (Exhibit 10.27 to Form 10-K dated June 30, 1993). 10.10 First Amendment to Business Loan Agreement of June 28, 1993 dated as of June 20, 1994 among Bank of America National Trust and Savings Association, Calnetics, Manchester and Ny-Glass (Exhibit 10.17 to Form 10-K dated June 30, 1994). 10.11 Stock Purchase Agreement among Calnetics and the Selling Shareholders of API effective as of April 30, 1994 (Exhibit 2 to Form 8-K filed June 24, 1994). 10.12 Business Loan Agreement dated June 20, 1994 among The Bank of California, N.A., Calnetics, Manchester, Ny-Glass and API (Exhibit 10.19 to Form 10-K dated June 30, 1994). 10.13 Term Loan Note dated June 20, 1994 among The Bank of California, N.A., Calnetics, Manchester, Ny-Glass and API (Exhibit 10.24 to Form 10-K dated June 30, 1994).
Page 14 of 44 15 10.14 Business Loan Agreement dated June 20, 1994 among Bank of America National Trust and Savings Association, Calnetics, Manchester, Ny-Glass and API (Exhibit 10.25 to Form 10-K dated June 30, 1994). 10.15 Noncompetition and Noninterference Agreement dated June 20, 1994 among Calnetics, API and Lon Schultz, individually and as trustee of the Lon Schultz Charitable Remainder Unitrust (Exhibit 10.31 to Form 10-K dated June 30, 1994). 10.16 Employment Agreement dated June 20, 1994 between API and Lon Schultz, an individual (Exhibit 10.32 to Form 10-K dated June 30, 1994). 10.17 Parts Purchase and Supply Agreement dated June 20, 1994 between API and Story Plastics, Inc., a California corporation (Exhibit 10.33 to Form 10-K dated June 30, 1994). 10.18 Loan Agreement dated December 31, 1991 between California Statewide Communities Development Authority and API (Exhibit 10.34 to Form 10-K dated June 30, 1994). 10.19 Reimbursement Agreement dated December 1, 1991 between API and Union Bank (Exhibit 10.35 to Form 10-K dated June 30, 1994). 10.20 Renewal/Consolidation Promissory Note and Security Agreement dated March 13, 1992 between API as borrower and First Union National Bank of Florida as lender (Exhibit 10.38 to Form 10-K dated June 30, 1994). 10.21 Amendment dated November 30, 1994 to Business Loan Agreement dated June 20, 1994 among Bank of America National Trust and Savings Association, Calnetics, Manchester, Ny-Glass and API (Exhibit 10.31 to Form 10-K dated June 30, 1995). 10.22 Mortgage Modification, Consolidation, Spreader, and Extension Agreement dated March 31, 1995 among First Union National Bank of Florida, API and Calnetics (Exhibit 10.32 to Form 10-K Dated June 30, 1995). 10.23 API Profit Sharing Plan Adoption Agreement dated
Page 15 of 44 16 November 21, 1991 (Exhibit 10.39 to Form 10-K dated June 30, 1994). 10.24 API 401(k) Plan Adoption Agreement effective as of January 1, 1993 (Exhibit 10.40 to Form 10-K dated June 30, 1994). 10.25 Nonstatutory Stock Option Agreement between Calnetics and Michael A. Hornak dated February 28, 1994 (Exhibit 10.41 to Form 10-K dated June 30, 1994). 10.26 Nonstatutory Stock Option Agreement between Calnetics and Steven L. Strawn dated February 28, 1994 (Exhibit 10.42 to Form 10-K dated June 30, 1994). 10.27 Nonstatutory Stock Option Agreement between Calnetics and Lon Schultz dated July 18, 1994 (Exhibit 10.37 to Form 10-K dated June 30, 1995). 10.28 Amendment No.2 dated December 21, 1995 to Business Loan Agreement dated June 20, 1994 among Bank of America National Trust and Savings Association, Calnetics, Manchester, Ny-Glass and API (Exhibit 10.38 to Form 10-K dated June 30, 1996). 10.29 Amendment No.3 dated June 28, 1996 to Business Loan Agreement dated June 20, 1994 among Bank of America National Trust and Savings Association, Calnetics, Manchester, Ny-Glass and API (Exhibit 10.39 to Form 10-K dated June 30, 1996). 10.30 1995 Employee Stock Option Plan Dated September 27, 1995 (Exhibit 10.40 to Form 10-K dated June 30, 1996). 10.31* Amendment No.4 dated December 20, 1996 to Business Loan Agreement dated June 20, 1994 among Bank of America National Trust and Savings Association, Calnetics, Manchester, Ny-Glass and API. 10.32* Amendment No.3 dated December 19, 1996 to Business Loan Agreement dated June 20, 1994 among The Bank of California, a division of Union Bank of California, N.A., Calnetics, Manchester, Ny-Glass and API.
Page 16 of 44 17 10.33* Amendment No.1 dated November 8, 1996 to Reimbursement Agreement dated December 1, 1991 between Union Bank of California, N.A. and API. 10.34* Hazardous Materials and Enviromental Indemnity Agreement between Union Bank of California, N.A. and API. 27.1* Financial Data Schedule (b) Reports on Form 8-K None.
- ------------------------------------------------------------------------------- * Filed herewith Page 17 of 44 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CALNETICS CORPORATION (Registrant) Dated: February 7, 1997 /s/ Clinton G. Gerlach ------------------------------------ Clinton G. Gerlach President Dated: February 7, 1997 /s/ Teresa S. Louie ------------------------------------ Teresa S. Louie Treasurer Page 18 of 44 EX-10.31 2 EXHIBIT 10.31 1 Exhibit 10.31 BANK OF AMERICA AMENDMENT TO DOCUMENTS AMENDMENT NO. 4 TO BUSINESS LOAN AGREEMENT This Amendment No. 4 (the "Amendment") dated as of December 20, 1996 is among Bank of America National Trust and Savings Association (the "Bank") and CALNETICS CORPORATION ("Borrower 1"), MANCHESTER PLASTICS CO., INC. ("Borrower 2"), NY-GLASS PLASTICS, INC. ("Borrower 3") and AGRICULTURAL PRODUCTS, INC. ("Borrower 4") (Borrower 1, Borrower 2, Borrower 3 and Borrower 4 are sometimes referred to collectively as the "Borrowers" and individually as the "Borrowee"). RECITALS A. The Bank and the Borrowers entered into a certain Business Loan Agreement dated as of June 20, 1994, as previously amended (the "Agreement"). B. The Bank and the Borrowers desire to further amend the Agreement. AGREEMENT 1. DEFINITIONS. Capitalized terms used but not defined in this Amendment shall have the meaning given to them in the Agreement. 2. AMENDMENTS. The Agreement is hereby amended as follows: 2.1 Subparagraph (a) of Paragraph 1.3 of the Agreement is amended to read in its entirety as follows: "(a) The interest rate is the Bank's Reference Rate plus one-quarter (.25) of a percentage point." 2.2 In Paragraph IA.2 of the Agreement, the date "DECEMBER 31, 1997" is substituted for the date "DECEMBER 30, 1996". 2.3 The first paragraph in Paragraph 4.7 of the Agreement is amended to read in its entirety as follows: 4.7 INTEREST ON LATE PAYMENTS. At the Bank's sole option in each instance, any amount not paid when due under this Agreement (including interest) shall bear interest from the due date at the Bank's Reference Rate plus one- quarter (.25) of a percentage point." 2.4 The first paragraph in Paragraph 7.4 of the Agreement is amended to read in its entirety as follows: "7.4 TANGIBLE NET WORTH. To maintain on a consolidated basis, tangible net worth equal to at least Six Million Dollars ($6,000,000)." 2.5 The first paragraph in Paragraph 7.5 of the Agreement is amended to read in its entirety as follows: "7.5 TOTAL LIABILITIES TO TANGIBLE NET WORTH. To maintain on a consolidated basis, a ratio of total liabilities to tangible net worth not exceeding 1.50:1.00. This ratio will be calculated on the last day of each fiscal quarter of the Borrowers." 3. CONDITIONS. This Amendment will not be effective until the Bank has received the following: Page 19 of 44 2 (a) A copy of this Amendment, duly executed by each Borrower; and (b) A written consent to the terms of this Amendment, duly executed by Union Bank of California, N.A. successor to The Bank of California, N.A. 4. EFFECT OF AMENDMENT. Except as provided in this Amendment, all of the terms and conditions of the Agreement shall remain in full force and effect. This Amendment is executed as of the date stated at the beginning of this Amendment. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION CALNETICS CORPORATION /s/ Susan C. Howard /s/ Steven L. Strawn ---------------------------------- ---------------------------------- By: Susan C. Howard, Assistant By: Steven L Strawn, Vice President Vice President /s/ Thomas W. Vent /s/ Clinton G. Gerlach ---------------------------------- ---------------------------------- By: Thomas W. Vent, Vice President By: Clinton G. Gerlach, Chairman of the Board and President MANCHESTER PLASTICS CO., INC. /s/ Steven L. Strawn ---------------------------------- By: Steven L. Strawn, President /s/ Clinton G. Gerlach ---------------------------------- By: Clinton G. Gerlach, Chairman of the Board NY-GLASS PLASTICS, INC. /s/ Michael A. Hornak ----------------------------------- By: Michael A. Hornak, President /s/ Clinton G. Gerlach ----------------------------------- By: Clinton G. Gerlach, Chairman of the Board AGRICULTURAL PRODUCTS, INC. /s/ Lon Schultz ----------------------------------- By: Lon Schultz, President /s/ Clinton G. Gerlach ----------------------------------- By: Clinton G. Gerlach, Chairman of the Board Page 20 of 44 EX-10.32 3 EXHIBIT 10.32 1 Exhibit 10.32 UNION BANK OF CALIFORNIA, N.A. AMENDMENT TO BUSINESS LOAN AGREEMENT THIS THIRD AMENDMENT ("Amendment") is made effective as of the 19th day of December, 1996, by and between Calnetics Corporation, a California corporation; Manchester Plastics, Co., Inc., a California corporation, NY-Glass Plastics, Inc., a California corporation and Agricultural Products, Inc., a California corporation ("Borrower") and The Bank of California, a division of Union Bank of California, N.A. ("Bank"). RECITALS A. Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Business Loan agreement dated June 20, 1994 as amended January 2, 1996 and June 24, 1996 (the "Agreement"); B. Borrower and Bank have agreed to amend the Agreement to reflect certain changes in the terms and conditions set forth therein. NOW, THEREFORE, the parties hereto agree as follows: 1. The names The Bank of California, N.A. and/or The Bank of California, a division of Union Bank of California, N.A. as stated throughout the Agreement and Amendments is deleted and the name Union Bank of California, N.A. is substituted therefor. 2. Section 1.3(a) of the Agreement, INTEREST RATE, is hereby amended by deleting Bank's Prime Rate plus three quarters (.75) percentage point and by substituting Bank's Reference Rate plus one quarter (.25) percentage point therefor. 3. Section 7.4 TANGIBLE NET WORTH, the first paragraph of this section is hereby amended in its entirety to read as follows: 7.4 TANGIBLE NET WORTH. To maintain on a consolidated basis tangible net worth equal to at least Six Million Dollars ($6,000,000), as calculated on the last day of each such quarter. 4. Section 7.5 of the Agreement, TOTAL LIABILITIES TO TANGIBLE NET WORTH, is hereby amended by deleting the ratio 2.00:1.00 and substituting the ratio of 1.50:1.00 therefor. Page 21 of 44 2 GENERAL AMENDMENT PROVISIONS A. Except as specifically provided herein, all terms and conditions of the Agreement remain in full force and effect, without waiver or modification. All terms defined in the Agreement shall have the same meaning when used in this Amendment, and this Amendment and the Agreement and previous Amendments shall be read together as one document. Where any provisions of the Agreement amended by this Amendment appear in a promissory note tied to the Agreement, the same provisions in said promissory note shall be deemed likewise amended. B. Borrower hereby confirms all representations and warranties contained in the Agreement and reaffirms all covenants set forth therein. Further, Borrower certifies that, as of the date of this Amendment, there exist no Event of Default as defined in the Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to become effective as of the date and year first written above. UNION BANK OF CALIFORNIA, N.A. By: /s/ Robert Dalton By: /s/ Greg Adamson ------------------------- ------------------------- Robert Dalton, Greg Adamson, Vice President & Portfolio Mgr. Vice President & Sr. Portfolio Mgr. Calnetics Corporation, a California Corporation Date: 12/31/96 ---------------- By: /s/ Clinton G. Gerlach ------------------------- Clinton G. Gerlach, Chairman of the Board and President By: /s/ Steven L. Strawn ------------------------- Steven L. Strawn, Vice President Page 22 of 44 3 Manchester Plastics Co., Inc., a California Corporation By: /s/ Steven L. Strawn ------------------------- Steven L. Strawn, President By: /s/ Clinton G. Gerlach ------------------------- Clinton G. Gerlach, Chairman of the Board NY-Glass Plastics, Inc., a California Corporation By: /s/ Michael A. Hornak ------------------------- Michael A. Hornak, President By: /s/ Clinton G. Gerlach ------------------------- Clinton G. Gerlach, Chairman of the Board Agricultural Products, Inc., a California Corporation By: /s/ Lon Schultz ------------------------- Lon Schultz, President Page 23 of 44 EX-10.33 4 EXHIBIT 10.33 1 Exhibit 10.33 FIRST AMENDMENT TO REIMBURSEMENT AGREEMENT THIS FIRST AMENDMENT TO REIMBURSEMENT AGREEMENT ("First Amendment") is made effective as of November 8, 1996, by and between AGRICULTURAL PRODUCTS, INC., a California corporation ("Borrower"), and UNION BANK OF CALIFORNIA, N.A., a national banking association ("Bank"). RECITALS A. Borrower is currently indebted to Bank pursuant to the terns and conditions of that certain Reimbursement Agreement dated as of December l, 1991 ("Agreement"). Unless otherwise indicated, all capitalized terms contained herein shall have the same meanings as set forth in the Agreement. B. Earlier this year Union Bank ("UB") and The Bank of California, N.A. ("BOC") engaged in a corporate reorganization and Bank is the entity resulting therefrom. C. Pursuant to the Agreement and in connection with the issuance by the California Statewide Communities Development Authority of its Weekly Adjustable/Fixed Rate Revenue Bonds, Series 1991 (Agricultural Products, Inc. Project) in the original principal amount of $1,500,000 (which issuance was part of a composite issuance), on December 12,1991, UB issued its irrevocable direct-pay Letter of Credit No. 276/171394 ("Letter of Credit") for the account of Borrower and other account parties in favor of Trustee, supporting in part the obligations of Borrower under its Loan Agreement with Issuer (pursuant to which Bond proceeds were loaned to Borrower). The Letter of Credit is scheduled to expire on December 12, 1996. D. As a condition precedent to issuing its Letter of Credit, UB required that Borrower cause a financial institution satisfactory to UB to issue in favor of UB a standby letter of credit supporting Borrower's obligations under the Agreement. In order to satisfy this condition, Borrower caused BOC to issue its Irrevocable Standby Letter of Credit No. I-20487 in favor of UB on December 12, 1991 ("Standby Letter of Credit"). In connection with the issuance of the Standby Letter of Credit, Borrower and BOC entered into a Standby Reimbursement Agreement dated December 1, 1991 (as amended from time to time, the "Standby Agreement"). The obligations of Borrower under the Standby Agreement are secured by that certain Deed of Trust (And Assignment of Leases and Rents, Assignment for Security Purposes of Construction Contract and Plans and Specifications, Security Agreement and Fixture Filing) by Borrower, as Trustor, to The Sansome Corporation, as Trustee, for the benefit of BOC, as Beneficiary, dated December 6, 1991 and recorded on December 11, 1991 as Instrument No. 466769 in the Official Records of San Bernardino County, California ("Deed of Trust"), covering the property described therein ("Property"). E. Subject to the satisfaction of the conditions precedent set forth herein, Bank has agreed to extend the expiration date of the Letter of Credit. In addition, because of the corporate reorganization of UB and BOC, the parties have agreed that the Standby Letter of Credit is no Page 24 of 44 2 longer required, that the Deed of Trust shall secure directly Borrower's obligations under the Agreement, as amended hereby, and that the Agreement be amended to include various terms, conditions and covenants previously included in the Standby Agreement. AGREEMENT NOW, THEREFORE, the parties hereto agree as follows: 1. RECITALS. The parties hereby confirm the accuracy of the foregoing Recitals. 2. TERMINATION OF STANDBY LETTER OF CREDIT. Subject to the terms and conditions hereof, the Standby Letter of Credit shall be terminated and all references to the "Standby Letter of Credit" and the "Standby Bank" contained in the Agreement, including without limitation the provisions of Section 4, subsections 7(i), (l) and (m), subsection 8(a)(ix) and the last sentence of subsection 8(b) of the Agreement, are hereby deleted in their entirety. 3. MODIFICATION OF DEED OF TRUST. Borrower hereby agrees that concurrently herewith, Borrower shall deliver to Bank a Modification to Deed of Trust ("D/T Modification") in recordable form and substance satisfactory to Bank, which D/T Modification shall provide, in part, that the Deed of Trust is modified to secure all of Borrower's obligations to Bank under the Agreement, as amended by this First Amendment and as may be further amended, modified, supplemented or restated from time to time. 4. SINKING FUND ACCOUNT AND PAYMENTS. On or before the first day of each calendar month after the date hereof to and including November l, 1999, Borrower shall deposit into an interest-bearing deposit account at the Bank (the "Sinking Fund Account") the sum of $1,667 per month, and, thereafter, on the first day of each calendar month beginning December l, 1999, until the expiration or cancellation of the Letter of Credit, Borrower shall deposit into the Sinking Fund Account the sum of $2,083 per month. All sums deposited in the Sinking Fund Account, together with all interest earned thereon, are hereby pledged and assigned to Bank pursuant to the Deed of Trust as additional security for Borrower's performance of its obligations under the Agreement, as amended by this First Amendment and as may be further amended, modified, supplemented or restated from time to time, and shall not be available to Borrower during the term of the Agreement for any other purpose. Upon Bank's honoring of a "B Drawing" under Annex B to the Letter of Credit with respect to any scheduled Sinking Fund Installment (as defined in and pursuant to Item 9 of Annex A to the Indenture), Bank shall at Borrower's request use funds in the Sinking Fund Account (to the extent sufficient funds are available) to remit to Bank a sum equal to the amount of such Sinking Fund Installment so paid. In addition, funds in the Sinking Fund Account may be applied at Borrower's request to any Bank fees due and payable in accordance herewith. The balance of funds in the Sinking Fund Account shall remain on deposit therein until the termination of the Agreement, subject to the terms and conditions hereof. 5. FEES. In addition to any other fees payable under the Agreement, Borrower agrees that it shall pay to Bank a renewal fee, payable concurrently herewith, in an amount equal to three-eighths of one percent (.375%) of Borrower's share of the Stated Amount of the Letter of 2 Page 25 of 44 3 Credit as of the date hereof. Furthermore, from and after the date that the conditions precedent set forth in subsection 7(e) below have been satisfied, "Borrower's Fee Percentage", as set forth as Item 8 of Schedule A to the Agreement and referenced in subsection 2(b)(i) of the Agreement, shall be equal to one and one-eighth percent (1.125%) rather than one-quarter of one percent (.25%) and Schedule A is hereby amended accordingly. Subsection 2(b)(ii) of the Agreement is hereby deleted. 6. ADDITIONAL PROVISIONS TO AGREEMENT. a. Additional Definitions. The following additional definitions are hereby added to Section 17 of the Agreement: "Affiliate" means any Person which directly or indirectly controls, is controlled by, or is under common control with, Borrower, including, but not limited to, any Subsidiary. "Control" "controlled by" and "under common control with" means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of voting securities, by contract or otherwise); provided that, in any event, any Person or affiliated group which owns directly or indirectly five percent or more of the securities having ordinary voting power for the election of directors of a corporation shall be conclusively presumed to control such corporation "Current Long-Term Debt" means the current portion of any long-term debt and long-term capital lease obligations owing to Bank under this Agreement or to any Person under any other debt incurred by Borrower, including, without limitation, scheduled principal payments becoming due and payable during the next twelve (12) full calendar months. "Debt Coverage Ratio" means the quotient obtained by dividing Net Cash Income by Current Long-Term Debt. "Deed of Trust" and "Property" have the meanings assigned to them in Recital D above. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "GAAP" means generally accepted accounting principles and practices consistently applied. "Governmental Authority" means any governmental or regulatory body having jurisdiction over Borrower, the Project or the Property. "Hazardous Material" means any hazardous or toxic substance, material or waste which is or becomes regulated by any local Governmental Authority, the State of California or the United States Government. The term "Hazardous Material" includes, without limitation, any material or substance which is 3 Page 26 of 44 4 (i) defined as a "hazardous waste" under Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) defined as a "hazardous material," "hazardous substance," or "hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory, (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum or any volatile derivative of petroleum, (vi) asbestos, (vii) listed under Article Nine or defined as hazardous or extremely hazardous pursuant to Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 20, (viii) designated as a "hazardous substance" pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C. Section 1317), (ix) defined as "hazardous waste" pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C. Section 6903), or (x) defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. (42 U.S.C. Section 9601). "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or any agreement to give any financing agreement under the Uniform Commercial Code of any jurisdiction). "Net Cash Income" means Borrower's Net Profit for the four (4) preceding full fiscal quarters of Borrower, plus the amount of any depreciation and other non-cash items deducted to determine such Net Profit in accordance with GAAP, less the amount of any dividends and distributions paid by Borrower to any Person during such period. "Net Profit" means the net income of Borrower after taxes for any financial reporting period determined in accordance with GAAP. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "Plan" means any employee benefit pension plan subject to Title IV of ERISA and maintained by Borrower or any such plan to which Borrower is required to contribute on behalf of any of its employees. "Related Documents" means this Agreement, the Letter of Credit, the Deed of Trust, the Bonds, the Indenture, the Loan Agreement and any other agreements 4 Page 27 of 44 5 or instruments relating to or executed pursuant to or in connection with any of the foregoing instruments and agreements. This definition supersedes the definition of "Related Documents" contained in the Agreement. "Related Person" means any officer, employee, director, shareholder and Affiliate of Borrower and any officer, employee, director and shareholder of any Affiliate, or a relative of any of them. "Reportable Event" means a reportable event as defined in Title IV of ERISA, except actions of general applicability by the Secretary of Labor under Section 110 of ERISA. "Tangible Net Worth" means the net book value of (a) all Borrower's assets, exclusive of intangibles, and loans to and notes receivable from Related Persons, minus (b) all Borrower's liabilities determined in accordance with GAAP. "Termination Event" means (i) a Reportable Event described in Section 4043 of ERISA and the regulations issued thereunder (other than a Reportable Event not subject to the provision for 30-day notice to the PBGC under such regulations), or (ii) the withdrawal of Borrower or any of its Affiliates from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC, or (v) any other 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. b. Additional Representations and Warranties. All representations and warranties contained in the Agreement are continuing and shall be true and correct as of each draw under the Letter of Credit. The following new subsections (l) through (p) are hereby added to Section 6 of the Agreement: "(l) It is the intention of Borrower that the interest on the Bonds be excluded from the gross income of the holders thereof (other than "substantial users," or "Related persons" of substantial users, as such terms are defined in Section 144(a)(3) of the Internal Revenue Code of 1986, as amended from time to time) for Federal income tax purposes. To that end, Borrower represents to the Bank that it has not taken any action, and knows of no action that any other person has taken, which would cause interest on the Bonds to be included in the gross income of the recipients thereof. Borrower warrants that it will not take any action or omit to take any action which, if taken or omitted, would cause interest on the Bonds to be included in the gross income of the holders thereof (other than "substantial users," or "Related persons" of substantial users, as such terms are defined in Section 144(a)(3) of the Internal Revenue Code of 1986, as amended from time to time) for Federal income tax purposes; 5 Page 28 of 44 6 (m) No Reportable Event has occurred and is continuing with respect to any Plan, and no Termination Event has occurred and is continuing with respect to any Plan Schedule B (Actuarial Information) to the 1987 annual report (Form 5500 Series) with respect to each Plan, copies of which have been filed with the Internal Revenue Service and furnished to the Bank, is complete and accurate and fairly presents the funding status of such Plan, and since the date of such Schedule B there has been no material adverse change in such funding status. Neither Borrower nor any of its Affiliates has incurred nor reasonably expects to incur any withdrawal liability under ERISA to any Multiemployer Plan; (n) Borrower has filed or caused to be filed all tax returns which to the knowledge of Borrower are required to be filed, and has paid all taxes shown to be due and payable on said returns or on any assessments made against it, except for returns which have been appropriately extended, and all other taxes, fees or other charges imposed on it by any governmental authority, agency or instrumentality which have become due and payable (other than those the amount or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with generally accepted accounting principles have been provided on the books of Borrower, and no tax liens have been filed; (o) Borrower enjoys peaceful and undisturbed possession under all leases under which it operates, subject to subleases in the ordinary course of business, and all of such leases are valid and subsisting and are in full force and effect. There is no default on the part of Borrower existing under any of such leases, and none of such leases contains any unusually or burdensome provision which materially adversely affects or in the future may (so far as Borrower can now foresee) materially adversely affect Borrower's right of occupancy and to continue its operations under such lease; and (p) No "Event of Default" or "Default" as defined in this Agreement or any Related Document has occurred and is continuing." c. Additional Covenants. Subsections 7(a)(i) and (ii) of the Agreement are hereby deleted and the following new subsections (o) through (dd) are hereby added to Section 7 of the Agreement: "(o) Borrower will deliver to the Bank, in form and detail satisfactory to the Bank, the following information, which Borrower represents will be accurate and complete in all respects: (i) Within 90 days of Borrower's fiscal year-end, the annual financial statements of Calnetics Corporation, a California corporation and the corporate parent of Borrower ("Calnetics") and its subsidiaries. These financial statements must be audited (with an unqualified opinion) by a Certified Public Accountant ("CPA") reasonably acceptable to the Bank. 6 Page 29 of 44 7 The statements shall be prepared on a consolidated basis. Neither Calnetics nor Borrower shall change their current fiscal year-ends without the prior written consent of the Bank, except that Borrower may alter its fiscal year- end to conform with the fiscal year-end of Calnetics. (ii) Within 45 days after the end of each fiscal quarter, the unaudited quarterly financial statements of Calnetics and its subsidiaries prepared by Calnetics and attested to by a responsible officer of Calnetics as being complete and correct and fairly presenting the financial condition and results of operations of such entities. These statements shall be prepared on a consolidated and consolidating basis. (p) Borrower shall: (i) Maintain at all times a ratio of cash and cash equivalents plus trade receivables to current liabilities of not less than 1.0 to 1.0; (ii) Maintain a Debt Coverage Ratio of 1.05, monitored on an annual basis; and (iii) Achieve Net Profits of greater than zero for each financial reporting year. (q) Borrower will pay and discharge all indebtedness, liens, charges, taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any assets and properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, would become a Lien upon any of its properties, including the Project; provided that Borrower shall not be required to pay any such tax, assessment, charge, levy or claim, which is being contested in good faith and by appropriate proceedings, if it makes adequate provision for payment thereof, satisfactory to the Bank, in the event it should lose such contest. (r) Borrower will preserve and maintain its existence, rights, franchises and privileges necessary or desirable in the normal conduct of its business as contemplated and as presently conducted. (s) Borrower will comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority having jurisdiction, the terms of any indenture, contract or other instrument to which it is a party or under which it or its properties may be bound, non-compliance with which could materially adversely affect (a) Borrower's business, properties, condition (financial or otherwise) or operations, (b) Borrower's ability to perform its obligations under this Agreement or any of the Related Documents to which it is or is to be a party, or (c) Borrower's ability to construct, own or operate the Project, unless the same is being contested in good faith and by appropriate proceedings and Borrower 7 Page 30 of 44 8 makes adequate provision for payment thereof, satisfactory to the Bank, in the event it should lose such contest (t) Borrower shall not amend, modify or terminate, or agree to amend, modify or terminate any Bond or any Related Document. (u) Except as otherwise provided herein, Borrower shall not be indebted or suffer for borrowed money, the deferred purchase price of property, or leases which would be capitalized in accordance with GAAP; or become liable as a surety, guarantor, accommodation party or otherwise for or upon the obligation of any other person, except: (i) The acquisition of supplies or inventory on normal trade credit; (ii) The endorsement of negotiable instruments for deposit or collection in the ordinary course of Borrower's business; (iii) The indebtedness of Borrower under this Agreement; (iv) Indebtedness which has been disclosed to Bank in writing prior to the date of the First Amendment to this Agreement and which has not been disapproved by Bank, including without limitation the promissory notes and mortgages in favor of First Union Bank of Florida with respect to that certain real property known as 3855 and 3857 W. Lake Hamilton Drive, Winter Haven, Florida, which, in the aggregate shall not exceed $350,000; and (v) Indebtedness to Bank of America National Trust & Savings Association ("Bank of America") as described in that certain Intercreditor Agreement between the Bank and Bank of America dated June 20, 1994 ("Intercreditor Agreement"), regarding collateral provided to Bank and Bank of America by Borrower and its Affiliates. (v) Borrower shall not create, incur, assume or permit to exist any Lien, or grant any other Person a negative pledge, on any of Borrower's property, except: (i) Involuntary Liens which, in the aggregate, would not have a material adverse effect on Borrower's financial condition or business; (ii) Liens for current taxes or other governmental assessments which are not delinquent, or which are contested in good faith by the appropriate procedures and for which appropriate reserves are maintained; (iii) Liens in favor of Bank; 8 Page 31 of 44 9 (iv) The security interests created by any Related Document; (v) Exceptions referred to in the Title Policy as approved by the Bank; (vi) Liens which have been disclosed to Bank in writing prior to the date of the First Amendment to this Agreement and have not been disapproved by Bank, including without limitation the mortgages referred to in subsection (u)(iv) above; and (vii) Liens in favor of Bank of America as described in the Intercreditor Agreement. (w) Without the prior written consent of Bank: Borrower shall not change its name; liquidate or dissolve, or enter into any consolidation, merger, partnership, joint venture or other combination; issue, redeem, purchase, retire or otherwise acquire any shares of any class of capital stock of Borrower or grant or issue any warrant, right or option pertaining thereto or other security convertible into any of the foregoing; reorganize, reclassify or recapitalize its capital stock. (x) Borrower shall not sell its accounts, contract rights or receivables pertaining to its business, or sell, lease, abandon or otherwise dispose of, directly or indirectly, its assets or properties except in the ordinary course of business. (y) Borrower shall not directly or indirectly: pay any dividends or make any other distributions on account of any ownership interest in Borrower or set apart any sum for such purpose; or redeem, retire, purchase or otherwise acquire beneficially any ownership interest or subordinated Indebtedness of Borrower now or hereafter outstanding, or set apart any sum for any such purpose. (z) Borrower shall not make or suffer to exist any loans, advances or investments, except: (i) Bank accounts in the ordinary course of Borrower's business; (ii) Accounts receivable in the ordinary course of Borrower's business; (iii) Investments in domestic certificates of deposit issued by, and other deposit investments with, financial institutions organized under the laws of the United States or a state thereof, maintaining capital of at least $100 million and a rating of at least Aa by Moody's or any successor rating agency; 9 Page 32 of 44 10 (iv) Investments in short-term marketable obligations of the United States of America and in open market commercial paper given the highest credit rating by a national credit agency and maturing not more than one year from the creation thereof; (v) Securities of the United States Government; and (vi) Temporary advances to cover incidental expenses to be incurred in the ordinary course of business. (aa) Borrower shall net prepay, or permit the prepayment of, any debt subordinated to Borrower's indebtedness to Bank except as expressly provided in any subordination agreements executed by the Bank and Borrower's creditor. (bb) Borrower shall not take any of the following actions without the Bank's prior written consent, which consent the Bank may grant or withhold in its sole and subjective discretion: (i) make any prepayment of amounts due to the Trustee under the Loan Agreement for optional redemption of Bonds pursuant to Sections 4.01(2) or 4.01(6) of the Indenture; provided, that such prepayment shall be permitted so long as Borrower shall not be in violation of any covenants contained in this Agreement after making such prepayment; or (ii) use or allow the use of excess net insurance or condemnation proceeds remaining after the completion of any restoration or repair work to be applied to the payment of principal of or interest on the Bonds pursuant to Section 6.2(a) of the Loan Agreement. (cc) Borrower shall not directly or indirectly enter into any transaction with or for the benefit of a Related Person on terms more favorable to the Related Persons than would have been obtainable in "arms' length" dealings. (dd) Borrower shall not conduct any business other than the business Borrower conducts as of the Date of Issuance." d. Additional Events of Default. The following new subsections (x) through (xvi) are hereby added to subsection 8(a) of the Agreement: "(x) Any governmental or regulatory authority shall take any action, or any other event shall occur, which, in the reasonable judgment of Bank, would have a material adverse effect on the financial condition or business of Borrower; or 10 Page 33 of 44 11 (xi) Any sale, transfer or other disposition of all or a substantial or material part of the assets of Borrower shall occur (including, without limitation, to any trust or similar entity); or (xii) Any final judgment(s) shall be entered against Borrows, or any involuntary Lien(s) of any kind or character shall attach to any assets or property of Borrower, any of which, in the judgment of Bank, will have a material adverse effect on the financial condition or business of Borrower; or (xiii) Without the prior written consent of Bank, which consent shall not be unreasonably withheld, any change shall occur in the corporate or legal structure of Borrower; or (xiv) Any Plan shall be terminated pursuant to ERISA, a trustee shall be appointed by the appropriate United State District Court to administer any Plan, the PBGC shall institute proceedings to terminate any Plan, or any Plan shall fail to satisfy the minimum funding standard for such Plan for a plan year as established by the Internal Revenue Code, as amended from time to time; or. (xv) The Deed of Trust shall cease to be in full force and effect as a first lien upon the Property; or (xvi) The occurrence of any "Event of Default" as defined in any note, credit agreement or other loan document evidencing credit extended by Bank to any Affiliate of Borrower, including without limitation Calnetics." 8. CONDITIONS PRECEDENT. Bank's agreement to the terms and conditions of this First Amendment is subject to the satisfaction of the following conditions precedent: (a) The issuance by Commonwealth Title Insurance Company of CLTA endorsement nos. 110.5, each issued without exception, for attachment to Policy of Title Insurance No. 512352-95, issued December 11,1991, insuring the validity and priority of the Deed of Trust, as modified, subject only to such exceptions as have been approved by the Bank in writing; (b) The recordation of the fully executed and acknowledged Modification of Deed of Trust in the Official Records of San Bernardino County, California; (c) Borrower's execution and delivery to the Bank of a Hazardous Materials and Environmental Indemnity Agreement of or about even date herewith in form and substance satisfactory to the Bank covering the Property; (d) Borrower shall have executed and delivered to Bank an application for amendment of the Letter of Credit in form and substance satisfactory to Bank and Trustee shall have accepted the amendment to the Letter of Credit issued by Bank; 11 Page 34 of 44 12 (e) The Custody, Pledge and Security Agreement dated December l, 1991 originally executed by BOC, Borrower and Bankers Trust Company shall have been modified if and as required by Bank; (f) Borrower's reimbursement to the Bank of all of its costs and expenses in connection with the transactions evidenced hereby, including, without limitation, the costs of appraisals and environmental reports and the Bank's legal fees and expenses; provided that Borrower's reimbursement obligation shall not exceed $8,000; and (g) No event of Default shall have occurred and no event shall have occurred which, with notice or passage of time or both, would constitute an Event of Default. 9. NOTICES. Notices to Bank or Borrower under the Agreement shall be addressed (and the Agreement is hereby amended accordingly): If to Bank: Union Bank of California, N.A. 3880 Lemon Street, Ste. 400 Riverside, CA 92501 Attn: Robert Dalton FAX No. (909) 788-1416 If to Borrower: Agricultural Products, Inc. 5001 E. Philadelphia Ontario, CA 91761 Attn: Lon Schultz FAX No. (909) 790-1889 with a copy to: Calnetics Corporation 20401 Prairie Street Chatsworth, CA 91311 Attn: Clinton G. Gerlach FAX No. (818) 886-9702 10. GENERAL PROVISIONS. Except as specifically provided herein, all terms and conditions of the Agreement remain in full force and effect, without waiver or modification. This First Amendment and the Agreement shall be read together as one document. Borrower hereby confirms all representations and warranties contained in the Agreement and reaffirms all covenants set forth therein (as amended hereby). Further, Borrower certifies that, as of the date of this First Amendment, there exists no Event of Default as defined in the Agreement, as amended hereby, nor, to Borrower's knowledge, any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default. This First Amendment may he executed in counterparts. 12 Page 35 of 44 13 IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to become effective as of the date and year first written above. BORROWER: AGRICULTURAL PRODUCTS, INC. a California corporation By: /s/Lon Schultz ------------------------- Its: President ------------------------- BANK: UNION BANK OF CALIFORNIA, N.A. By: /s/Robert Dalton ------------------------- Its: Vice President ------------------------- 13 Page 36 of 44 EX-10.34 5 EXHIBIT 10.34 1 Exhibit 10.34 HAZARDOUS MATERIALS AND ENVIRONMENTAL INDEMNITY AGREEMENT THIS HAZARDOUS MATERIALS AND ENVIRONMENTAL INDEMNITY AGREEMENT ("Agreement"), dated as of November 8,1996, is entered into by AGRICULTURAL PRODUCTS, INC., a California corporation ("Indemnitor"), and UNION BANK OF CALIFORNIA, N.A., a national banking association ("Bank"). RECITALS A. Indemnitor is executing this Agreement to induce Bank to enter into that certain First Amendment to Reimbursement Agreement of even date herewith ("Amendment"), modifying that certain Reimbursement Agreement between Indemnitor and Bank originally dated December 1, 1991 (the "Reimbursement Agreement"), pursuant to which, among other things, Bank has agreed to extend the expiration date of the Letter of Credit, as defined therein. Indemnitor's obligations under the Reimbursement Agreement currently are secured, in part, by a Deed of Trust (and Assignment of Leases and Rents, Assignment for Security Purposes of Construction Contract and Plans and Specifications, Security Agreement and Fixture Filing) on the property described in attached Exhibit A ("Property"), dated December 6, 1991, and recorded in the Official Records of San Bernardino County, California on December 11, 1991 as Instrument No. 466769, executed by Indemnitor as "Trustor" and naming The California- Sansome Corporation as "Trustee" and Bank as "Beneficiary," as modified from time to time (the "Deed of Trust"). B. Because of the Deed of Trust, Bank may potentially become subject to certain costs, risks and liabilities. Among other things, Bank may become subject to liabilities or alleged liabilities relating to environmental conditions as an "owner or "operator" of the Property under applicable environmental law. Because these costs and liabilities, if they occur, will be the result of Bank's agreement to further extend credit to Indemnitor, and in consideration of that agreement, Bank and Indemnitor have agreed as set forth below. AGREEMENT NOW, THEREFORE, Bank and Indemnitor agree as follows: 1. CERTAIN DEFINITIONS. The following terms shall be applicable to both the singular and plural forms of the defined terms: "APPROVED ENVIRONMENTAL ASSESSOR" means an environmental assessor selected by Indemnitor and acceptable to Bank. "BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on which Bank is closed. Page 37 of 44 2 "ENVIRONMENTAL LAWS" means any law, statute, ordinance, or regulation pertaining to health, industrial hygiene, or the environment, including, without limitation, those identified in the definition of "Hazardous Material" below. The term includes any licenses, permits, orders, plans or approvals generated pursuant to or is a result of such Environmental Law. "GOVERNMENTAL AUTHORITY" means any court or governmental or regulatory body having jurisdiction over Indemnitor or the Property. "HAZARDOUS MATERIAL" means any hazardous or toxic substance, material or waste regulated by any local Governmental Authority, the State where the Property is located or the United States Government. The term "Hazardous Material" includes, without limitation, any substance, material or waste which is: (i) petroleum or any volatile derivative of petroleum; (ii) asbestos; (iii) designated as a "hazardous substance" pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C. Section 1317); (iv) defined as "hazardous waste" pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Sections 6901 et seq. (42 U.S.C. Section 6903); (v) defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), 42 U.S.C. Sections 9601 et seq. and the Superfund Amendments and Reauthorization Act of 1986 ("SARA"); (vi) regulated by the Hazardous Materials Transportation Act, as amended, 49 U.S.C. Sections 1801 et seq.; or (vii) any hazardous or toxic substance, material or waste regulated by any local Governmental Authority, the State where the Property is located or the United States Government; and any material or substance which is: (A) defined as a "hazardous waste" under Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law); (B) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act); (C) defined as a "hazardous material," "hazardous substance," or "hazardous waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory) or Section 13050 of the California Water Code; (D) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances); or (E) listed under Article 9 or defined as hazardous or extremely hazardous pursuant to Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 20. "HAZARDOUS MATERIAL ACTIVITIES" means: the storage, holding, existence, release, emission, discharge, generation, manufacture, treatment, processing, handling, abatement, decontamination, removal, clean-up, disposal, and/or transportation of Hazardous Materials into, on, under, or from the Property. "INDEMNIFIED COSTS" means those so defined in Paragraph 6 of this Agreement. 2 Page 38 of 44 3 "LOAN DOCUMENTS" means all documents executed in connection with the Reimbursement Agreement. "PERSON" means any individual or entity. "PHASE I ENVIRONMENTAL ASSESSMENT" means an environmental assessment acceptable to Bank which includes, without limitation, a review and verification of records of environmental regulatory agencies, an on-site inspection and report by an Approved Environmental Assessor, which report contains conclusions and recommendations. "PHASE II ENVIRONMENTAL ASSESSMENT" means field testing (sampling and analysis) for contamination suspected or identified as a result of Phase I Environmental Assessment, conducted by an Approved Environmental Assessor, and a report acceptable to Bank including, without limitation, a remediation plan. "SECURITY DOCUMENTS" means all documents, if any, creating any security interest in any property, real or personal, as collateral security for Indemnitor's obligations under the Reimbursement Agreement. 2. REPRESENTATIONS AND WARRANTIES. Indemnitor represents and warrants to Bank that: 2.1 COMPLIANCE WITH LAW. As of the date hereof, Indemnitor is in compliance in all material respects with all applicable Environmental Laws and all authorizations, judgments, decrees and other governmental restrictions and requirements relating to Hazardous Materials Activities; 2.2 NO KNOWN RELEASE OF HAZARDOUS MATERIAL EXCEPT AS DISCLOSED. To Indemnitor's knowledge, there are no Hazardous Materials located on, under or adjacent to any of the Property, except those stored or used in compliance with all applicable Environmental Laws, and neither Indemnitor nor any other Person has engaged in Hazardous Materials Activities except in compliance with all applicable Environmental Laws; 2.3 UNDERGROUND STORAGE TANKS. No underground storage tanks are presently located on or under the property; 2.4 NO GOVERNMENT ACTIONS. No investigations, inquiries, orders, hearings, actions or other proceedings by or before any Governmental Authority are pending or, to the knowledge of Indemnitor, threatened in connection with any Hazardous Materials on the Property or Hazardous Materials Activities; 2.5 ADJACENT PROPERTY. Since acquiring the Property, Indemnitor has not received any form of written notice or inquiry from or by any Governmental Authority or any tenant, subtenant, licensee or occupant of the Property or any property adjacent to or within the immediate vicinity of the Property regarding Hazardous Materials Activities in connection with the Property or such other property. 3 Page 39 of 44 4 3. HAZARDOUS MATERIALS DISCLOSURES. Indemnitor has no knowledge of any current or past presence on, under or about the Property since its ownership by Indemnitor, of any Hazardous Materials, or of any Hazardous Materials Activities, other than those that comply with all applicable Environmental Laws, and Indemnitor has made no written or oral disclosures to Bank regarding any of the foregoing. Indemnitor acknowledges that this Agreement constitutes a "written request for information" by Bank under California Code of Civil Procedure Section 726.5(d)(2). 4. USE OF HAZARDOUS MATERIALS; REMEDIAL ACTIONS. Indemnitor shall not cause or permit the violation of any applicable Environmental Law on or with respect to the Property. Indemnitor shall not engage in any Hazardous Materials Activities except in full compliance with law. Indemnitor agrees to give Bank prior written notice before: (i) remediating any Hazardous Materials located on, under or about the Property, or (ii) entering into any settlement agreement, consent decree or other compromise or agreement (collectively, "Hazardous Materials Settlement Agreement") relating to, any such Hazardous Materials. Within Fifteen (15) Business Days after any Hazardous Materials Settlement Agreement has been fully executed, Indemnitor shall deliver a copy to Bank. 5. NOTICE OF HAZARDOUS MATERIALS. Indemnitor shall give written notice to Bank, promptly, and in any event within five (5) days after any officer or director of Indemnitor learns of any of the following: (A) the presence of any Hazardous Materials on, under or about the Property not legally used by Indemnitor in the conduct of its business in compliance with all applicable Environmental Laws, (B) any enforcement, clean-up, removal or other action or requirement of any Governmental Authority relating to any such Hazardous Materials, (C) the existence of any occurrence or condition on any property in the vicinity of the Property that could cause any portion of the Property to be classified as "border-zone property" under the provisions of the California Health and Safety Code or any related regulations, or (D) any other condition that could cause the Property to be otherwise subject to any restrictions relating to Hazardous Materials. 6. ENVIRONMENTAL ASSESSMENTS. From time to time, upon Bank's reasonable belief that there are actual, potential, or threatened Hazardous Materials Activities on the Property not in compliance with all applicable Environmental Laws, and upon Bank's request, unless Indemnitor has no obligations, including contingent obligations, outstanding to Bank and Bank has no credit outstanding or committed to Indemnitor, Indemnitor shall (i) order, at Indemnitor's expense, a Phase I and/or Phase II Environmental Site Assessment of the Property (as specified by Bank) from an Approved Environmental Assessor, and (ii) obtain a remediation plan for any Hazardous Materials then found, and (iii) within ninety (90) days (or such shorter period required by applicable Environmental Law) of receipt of such remediation plan, promptly undertake and 4 Page 40 of 44 5 complete all such remediations, using contractors and appropriate professionals selected by Indemnitor but satisfactory to Bank. 7. INDEMNITY. Indemnitor agrees to indemnify, defend and hold harmless Bank, and any corporation controlling Bank and their respective directors, officers, agents and employees from the following, referred to as "Indemnified Costs": all claims, demands, causes of action, liabilities, losses, costs and expenses (including costs of suit and reasonable attorneys' fees) arising from or incurred in connection with (i) the failure of Indemnitor to comply with all applicable Environmental Laws and authorizations, judgments, decrees and other governmental restrictions and requirements relating to any Hazardous Materials on the Property or Hazardous Materials Activities; (ii) the existence of any Hazardous Materials Activities or the presence on or under the Property of any Hazardous Materials; or (iii) any activity on the Property, whether prior to or during the term of the Reimbursement Agreement, and whether by Indemnitor or any predecessor in title or any employees, agents, contractors or subcontractors of Indemnitor or any predecessor in title, or any third persons at any time occupying or present on the Property, in connection with Hazardous Materials Activities. Notwithstanding the foregoing, Indemnified Costs shall not include claims, demands, causes of action, liabilities, losses, costs or expenses that (A) do not in any manner arise out of the actions or omissions of Indemnitor and (B) solely arise out of actions or omissions occurring after foreclosure under the Deed of Trust or a conveyance of the Property by deed in lieu of foreclosure. 8. INDEMNITOR'S COVENANT TO RESTORE PROPERTY. Promptly, at Indemnitor's sole expense and without limiting the foregoing, Indemnitor shall take all necessary actions to return the Property to the condition existing prior to the introduction of any Hazardous Material on the Property (i) caused or permitted by Indemnitor and not in compliance with all applicable Environmental Laws, or (ii) which Indemnitor is legally obligated to remove and which results in any contamination of the Property. Indemnitor must first obtain Bank's approval of such actions unless Indemnitor has no obligations, including contingent obligations, outstanding to Bank and Bank has no credit outstanding or committed to Indemnitor. Bank shall not unreasonably withhold such approval so long as such actions would not potentially have any material adverse effect on the Property. 9. UNSECURED OBLIGATIONS. Indemnitor acknowledges and agrees that, regardless of any other Loan Document to the contrary, the obligations of Indemnitor under this Agreement shall be personal obligations of Indemnitor and shall not be secured by the Deed of Trust or any other real property now or hereafter assigned to Bank as security for any Loan Document. Indemnitor acknowledges that Bank would not enter into this Agreement with Indemnitor but for the personal liability undertaken by Indemnitor for such obligations. 10. INTEREST; SURVIVAL. All payment obligations of Indemnitor to Bank hereunder shall be payable immediately upon demand and shall bear interest following demand at the rate set forth in subsection 2(a)(iv) of the Reimbursement Agreement. In no event shall Indemnitor be obligated to pay interest at a rate in excess of the highest rate permitted by applicable law from time to time in effect. Indemnitor's obligations hereunder shall survive the foreclosure of the Deed of Trust, the acceptance by Bank of a deed or deeds in lieu of foreclosure of the Deed of 5 Page 41 of 44 6 Trust, the repayment of the Loan and the release and reconveyance of one or more of the Security Documents. 11. NOTICES. Any notice or demand from one party to another shall be given or made in writing (a "Notice") delivered or mailed, in the manner provided in the Reimbursement Agreement. 12. FURTHER ASSURANCES. Each party shall execute, acknowledge and deliver to each other party all documents, and shall take all actions, reasonably required by such other party from time to time to confirm or effect the matters set forth in, or otherwise to carry out the purposes of, this Agreement. 13. ATTORNEYS' FEES. Indemnitor will upon demand pay to Bank the amount of any and all properly documented and reasonable expenses, including the reasonable fees and disbursements of its outside and staff counsel and of any experts and agents (including fees of law clerks, paralegals, investigators and others not admitted to the bar but performing services under the supervision of an attorney), which Bank may incur in connection with (i) the successful exercise or enforcement of any of the rights of Bank under this Agreement or (ii) the failure by the Indemnitor to perform or observe any of the provisions of this Agreement. The term reasonable counsel fees includes such fees incurred in the successful exercise of any remedy (with or without litigation), in any proceeding for the successful enforcement of Indemnitor's obligations under this Agreement, or in any litigation or controversy arising from or connected with such obligations, including any bankruptcy, receivership, injunction or other proceeding, or any appeal from or petition for review of any of the foregoing. Reasonable counsel fees shall include fees incurred not only in successfully enforcing the debt in any bankruptcy or receivership proceeding, but also any fees incurred in participating in the bankruptcy or receivership proceedings generally. If any litigation is commenced by any party concerning this Agreement, the party prevailing in such litigation shall be entitled to recover, in addition to such other relief as may be granted, its reasonable costs and expenses, including without limitation reasonable attorneys' fees and court costs, whether or not taxable, as awarded by a court of competent jurisdiction. 14. DISPUTE RESOLUTION. 14.1 MANDATORY MEDIATION OR ARBITRATION. Any controversy or claim between or among the parties, their agents, employees and Affiliates, including but not limited to those arising out of or relating to this Agreement or any other Loan Document, including without limitation any claim based on or arising from an alleged tort, shall, at the option of any party, and at that party's expense, be submitted to mediation, using either the American Arbitration Association ("AAA") or Judicial Arbitration and Mediation Services, Inc. ("JAMS"). If mediation is not used, or if it is used and it fails to resolve the dispute within 30 days from the date AAA or JAMS is engaged, then the dispute shall be determined by arbitration in accordance with the rules or either JAMS or AAA (at the option of the party initiating the arbitration) and Title 9 of the U.S. Code, notwithstanding any other choice of law provision in the Loan Documents. All statutes of limitations or any waivers contained herein which would otherwise be applicable shall apply to any arbitration proceeding under this subparagraph 14.1. The parties agree that related arbitration proceedings may be consolidated. The arbitrator shall prepare written reasons for the 6 Page 42 of 44 7 award. Judgment upon the award rendered may be entered in any court having jurisdiction. This subparagraph 14.1 shall apply only if, at the time of the proposed submission to AAA or JAMS, (1) none of the obligations to Bank described in or covered by any of the Loan Documents are secured by real property collateral or, (2) if so secured, all parties consent to such submission. 14.2 JURY WAIVER/JUDICIAL REFERENCE. If the controversy or claim is not one required to be submitted to arbitration as provided and limited in subparagraph 14.1, but becomes the subject of a judicial action, each party hereby waives its respective right to trial by jury of the controversy or claim. In addition, any party may elect to have all decisions of fact and law determined by a referee appointed by the court in accordance with applicable state reference procedures. The party requesting the reference procedure shall ask AAA or JAMS to provide a panel of retired judges and the court shall select the referee from the designated panel. The referee shall prepare written findings of fact and conclusions of law. Judgment upon the award rendered shall be entered in the court in which such proceeding was commenced. 14.3 PROVISIONAL REMEDIES, SELF HELP, AND FORECLOSURE. No provision of, or the exercise of any rights under, subparagraph 14.1, (a) 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 any mediation or arbitration. At Bank's option, foreclosure under a deed of trust or mortgage may be accomplished either by exercise of power of 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 mediation or arbitration. 14.4 CONFLICT. To the extent any provision of this dispute resolution clause is different than the terms of any Loan Document, the terms of this dispute resolution clause shall prevail. 15. JOINT AND SEVERAL LIABILITY OF INDEMNITOR. If more than one Person is identified in this Agreement as Indemnitor, their liability shall be joint and several. 16. MISCELLANEOUS. The parties confirm the accuracy of the Recitals set forth above. This Agreement shall bind, and shall inure to the benefit of, the successors and assigns of Bank and Indemnitor; provided, however, that Indemnitor may not assign or otherwise transfer this Agreement or any of its rights or obligations under this Agreement and any attempt and assignment or other transfer without Bank's prior written consent shall be null and void; provided, however, that a merger of Indemnitor or its parent with another entity will not require Bank's prior written consent hereunder so long as the surviving entity assumes, or is legally deemed to have assumed, the obligations of Indemnitor hereunder. No provision of this Agreement that is held to be inoperative, unenforceable or invalid shall affect the remaining provisions. Time is of the essence of this Agreement. This Agreement shall be governed by the laws of the State of California. This Agreement may be executed in counterparts. 7 Page 43 of 44 8 17. TERMINATION OF PRIOR AGREEMENT. The Parties hereto agree that the Environmental Agreement ("Springing") dated December 1, 1991, between Indemnitor and Bank (formerly known as The Bank of California, N.A.) is hereby superseded in its entirety by this Agreement and shall be of no further force or effect after the date hereof. IN WITNESS WHEREOF, Bank and Indemnitor have caused this Agreement to be duly executed as of the date first written above. BANK: UNION BANK OF CALIFORNIA, N.A., a national banking association By: /s/ Lon Schultz --------------------------------- Its: President ------------------------ INDEMNITOR: AGRICULTURAL PRODUCTS, INC., a California corporation By: /s/ Robert Dalton --------------------------------- Its: Vice President ------------------------- 8 Page 44 of 44 EX-27.1 6 EXHIBIT 27.1
5 6-MOS JUN-30-1997 JUL-01-1996 DEC-31-1996 1,215,305 0 5,090,713 316,000 5,808,606 12,462,040 8,125,059 3,745,571 18,379,707 4,385,509 4,344,132 0 0 2,476,725 6,410,427 18,379,707 8,586,411 8,586,411 6,461,118 1,420,870 0 0 88,218 616,205 257,000 0 0 0 0 359,205 .11 .11
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