10-K

UNITED STATES

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, 2005

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 001-13795

AMERICAN VANGUARD CORPORATION

Delaware	95-2588080
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification Number)
4695 MacArthur Court, Newport Beach, California	92660
(Address of principal executive offices)	(Zip Code)

(949) 260-1200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Name of each exchange on which registered:
Common Stock, $.10 par value	American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act .    Yes  ¨    No  x

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act.    Yes  ¨    No  x

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.    x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨                 Accelerated filer  x                Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes  ¨    No  x

The aggregate market value of the voting stock of the registrant held by non-affiliates is $135.4 million. This figure is estimated as of June 30, 2005 at which date the closing price of the registrant’s Common Stock on the American Stock Exchange was $20.91 per share. 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. The number of shares of $.10 par value Common Stock outstanding as of June 30, 2005, was 18,244,172. The number of shares of $.10 par value Common Stock outstanding as of March 10, 2006, was 19,473,675.

AMERICAN VANGUARD CORPORATION

ANNUAL REPORT ON FORM 10-K

December 31, 2005

		Page No.
	PART I
Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	7
Item 2.	Properties	7
Item 3.	Legal Proceedings	8
Item 4.	Submission of Matters to a Vote of Security Holders	13
	PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities	14
Item 6.	Selected Financial Data	15
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	16
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 8.	Financial Statements and Supplementary Data	28
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	28
Item 9A.	Controls and Procedures	28
Item 9B.	Other Information	31
	PART III
Item 10.	Directors and Executive Officers of the Registrant	32
Item 11.	Executive Compensation	34
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	39
Item 13.	Certain Relationships and Related Transactions	41
Item 14.	Principal Accounting Fees and Services	42
	PART IV
Item 15.	Exhibits, Financial Statement Schedules	43
SIGNATURES AND CERTIFICATIONS		44

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PART I

Unless otherwise indicated or in the context otherwise requires, the terms “Company,” “we,” “us,” and “our” refer to American Vanguard Corporation and its consolidated subsidiaries.

Forward-looking statements in this report, including without limitation, statements relating to the Company’s plans, strategies, objectives, expectations, intentions, and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties. (Refer to PART II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation, Risk Factors, of this Annual Report.)

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”, or the “Registrant” in this Annual Report refer to American Vanguard Corporation and its consolidated subsidiaries. The Company conducts its business through its subsidiaries, AMVAC Chemical Corporation (“AMVAC”), GemChem, Inc. (“GemChem”), 2110 Davie Corporation (“DAVIE”), AMVAC Chemical UK Ltd. (“Chemical UK”), Quimica Amvac de Mexico S.A. de C.V. (“Quimica Amvac”) AMVAC Switzerland GmbH (Refer to Export Operations), and Environmental Mediation, Inc.

Based on similar economic and operational characteristics, the Company’s business is aggregated into one reportable segment. Refer to Part I, Item 7 for selective enterprise information.

AMVAC

AMVAC is a California corporation that traces its history from 1945. AMVAC 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, and granular forms. AMVAC’s business is continually undergoing an evolutionary change. Years ago AMVAC considered itself a distributor-formulator, but now AMVAC primarily manufactures, distributes, and formulates its own proprietary products or custom manufactures or formulates for others.

In December 2005, AMVAC acquired the cereal herbicide product line, Difenzoquat from BASF Aktiengesellschaft (“BASF”). The product line consists of the active ingredient Difenzoquat, the trademark Avenge^™, the manufacturing and formulation know-how, and registration rights and intellectual property rights in the United States and Canada. Avenge is a post-emergent herbicide primarily to control wild oats in barley and wheat. Avenge has a unique mode of action, it can be tank mixed with many popular broad leaf herbicides to provide broadleaf weed control as well as for effectively managing herbicide resistance problems in wild oats.

In November 2005, AMVAC acquired the global Phorate insecticide product line from BASF. The product line consisted of the active ingredient Phorate, the trademarks Thimet^®, Granutox^® and Geomet^®, the manufacturing and formulation know-how, registration rights, intellectual property rights and inventories as well as an exclusive license to use BASF’s patented, closed delivery system, Lock ‘N Load^®, in the United States, Canada and Australia for Phorate. Phorate is registered in more than fifteen countries, with the main markets in Asia Pacific and the Americas. It is used on agricultural crops, mainly potatoes, corn, cotton, rice and sugarcane, to protect against chewing and piercing-sucking insects.

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In March 2005, AMVAC entered into an exclusive multi-year agreement with BASF to develop, register and commercialize Topramezone, a new herbicide for post-emergent use in corn in North America. Under the terms of a licensing and supply agreement BASF would supply the product to AMVAC. In August 2005, AMVAC received a registration from the U.S. Environmental Protection Agency for Impact^™ (active ingredient: Topramezone), a new herbicide for the use in field corn, seed corn, sweet corn and popcorn.

In December 2004, AMVAC entered into an agreement with Bayer CropScience LP, an affiliate of Bayer AG, to market, sell and distribute Bolster 15G, a soybean pesticide used to control nematodes, through AMVAC’s SmartBox system in key Midwest soybean growing states beginning in the 2005 season. Additionally, in December 2004, AMVAC licensed the trade name Nuvan^® to Syngenta India Limited, a business unit of Syngenta Crop Protection AG. The agreement provides a two-year license to Syngenta India to sell products under the Nuvan name in the animal and public health market, as well as the crop protection market in India. AMVAC will continue to sell products under the Nuvan name in the animal and public health market in over thirty other countries.

In January 2004, AMVAC entered into an agreement with Syngenta Crop Protection (“Syngenta”) to supply Force 3G for use through AMVAC’s SmartBox system beginning in the 2004 season. Force 3G is a corn soil insecticide manufactured and marketed by Syngenta for the control of corn rootworm, wireworm, cutworm and white grub in cotton.

In December 2003, AMVAC acquired certain assets related to the active ingredient dichlorvos (“DDVP”) used in the animal health business and marketed primarily under the trade name Nuvan^® from Novartis Animal Health, Inc. a business unit of Novartis AG. Since 1975, AMVAC has manufactured a technical form of DDVP, used primarily in specialty markets as a broad-spectrum household and specialty insecticide. Nuvan, which is used primarily for animal health to control flies and ecto-parasites, will expand the AMVAC’s animal health business as well as its international sales of DDVP. DDVP products are highly effective in controlling in enclosed spaces, a wide variety of pests including mosquitoes, flies, and cockroaches. AMVAC has been the primary generator of data to support the registration of DDVP products worldwide.

In February 2003, AMVAC acquired certain assets associated with the global Pre-Harvest Protection business from Pace International, L.L.C. (“Pace”). Pace’s global Pre-Harvest Protection business encompassed five product lines:

• Deadline^®—a line of snail and slug control products used in agriculture and by commercial landscapers;

• Hivol^®44—a plant growth regulator used primarily in citrus;

• Hinder^™—a deer and rabbit repellant;

• Bac-Master^™—streptomycin antibiotic used primarily to control Fire Blight (a bacterial disease of apples and pears that kills blossoms, shoots, limbs, and sometimes, entire trees; and

• Leffingwell^® Supreme 415 Oil^™—a horticultural oil insecticide for aphids, mites and scale.

Pace will continue to manufacture Deadline and Hinder under a multi-year supply agreement with AMVAC. Additionally, AMVAC has an option to acquire Pace’s Deadline manufacturing facility in Yakima County, Washington.

In January 2003, AMVAC acquired certain assets associated with the Evital 5G cranberry herbicide business conducted in the United States from Syngenta.

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In July 2002, AMVAC acquired from Flowserve U.S. Inc. (“Flowserve”), all or substantially all of its assets associated with the SmartBox closed delivery system. The SmartBox system electronically dispenses granular crop protection products, replacing older technology that utilizes mechanically driven sprockets and chains. The state-of-the-art SmartBox technology allows farmers to apply crop protection products accurately and efficiently while avoiding contact with the product. The computer controller enables farmers to monitor and change application rates while planting and provides the farmers with a permanent record of application. Initially the SmartBox system was developed by Flowserve in partnership with E.I. DuPont de Nemours and Company (“DuPont”) and Zeneca, Inc. which partnership commenced in 1995. At the same time it acquired certain assets associated with the Fortress^® corn soil insecticide business from DuPont in 2000, AMVAC assumed DuPont’s SmartBox partnership interest. Thereafter, Zeneca, Inc. abandoned its SmartBox partnership interest. In 2000, AMVAC sold its Fortress 5G (5% active ingredient—chlorethoxyfoxs) corn soil insecticide to the American farmer in the SmartBox system. Later that year, AMVAC secured exclusive marketing rights in the U.S. Bayer CropScience’s Aztec^® 4.67G corn soil insecticide which also can be applied through the SmartBox system. By offering both products, AMVAC provides farmers a choice of two different chemistries to apply through the SmartBox system. This allows farmers to rotate products from year to year, thereby preventing insects from building resistance to any one specific product. AMVAC is currently looking at utilizing this system for other crops where the safety features of the system would provide an important benefit.

In July 2002, AMVAC acquired from Syngenta all U.S. Environmental Protection Agency (“EPA”) end-use product registrations and data support as well as a license to the Ambush 25WP trademark (wettable powder formulation) in the United States. Syngenta will continue to own the rights and assets of the liquid formulation (Ambush 2EC) in the United States.

In June 2002, AMVAC acquired certain assets associated with the Folex^® cotton defoliant business conducted in the United States by Aventis CropScience USA prior to Bayer AG’s acquisition of Aventis CropScience S.A. The purchase included the EPA end-use product registration for Folex as well as the Folex trademark and product inventories. In addition, an existing supply agreement with Bayer Corporation providing for the supply of active ingredient and access to data in support of the end-use product registration has been assigned to AMVAC, allowing AMVAC to purchase the active ingredient in Folex from Bayer. Bayer markets a product under its trademark Def^® which is similar to Folex, and continues to sell Def following its acquisition of Aventis.

Seasonality

The agricultural chemical industry in general is cyclical in nature. The demand for AMVAC’s products tends to be slightly seasonal. 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.

Backlog

AMVAC does not believe that backlog is a significant factor in its business. AMVAC primarily sells its products on the basis of purchase orders, although it has entered into requirements contracts with certain customers.

Customers

United Agri Products, Agriliance and Helena Chemical Company accounted for 15%, 13% and 11%, respectively of the Company’s sales in 2005. United Agri Products, Helena Chemical Company and Agriliance

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accounted for 18%, 12% and 11%, respectively of the Company’s sales in 2004. Helena Chemical Company and United Agri Products accounted for 11% each of the Company’s sales in 2003.

Competition

AMVAC faces competition from many domestic and foreign manufacturers in its marketplaces. Competition in AMVAC’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 AMVAC. AMVAC’s ability to compete depends on its ability to develop additional applications for its current products and expand its product lines and customer base. AMVAC competes principally on the basis of the quality of its products price and the technical service and support given to its customers. The inability of AMVAC to effectively compete in several of AMVAC’s principal products would have a material adverse effect on AMVAC’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. AMVAC has attempted to position itself in smaller niche markets which are no longer of strong focus to larger companies. 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 as is evidenced by AMVAC’s successful acquisitions of certain product lines.

Intellectual Property

AMVAC’s proprietary product formulations are protected, to the extent possible, as trade secrets and, to a lesser extent, by patents and trademarks. Although AMVAC 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.

EPA Registrations

AMVAC’s products also receive protection afforded by the effect of the 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 similar state laws. Substantially all of AMVAC’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 AMVAC’s products are used require a registration by that specific state before it can be marketed or used in that state. 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 AMVAC. AMVAC, on its own behalf and in joint efforts with other registrants, has furnished, and is currently furnishing, certain required data relative to specific products.

Under FIFRA, the federal government requires registrants to submit a wide range of scientific data to support U.S. registrations. This requirement results in operating expenses in such areas as testing and the production of new products. AMVAC expensed $2,853,000, $3,081,000 and $4,669,000 during 2005, 2004 and 2003 respectively, related to gathering this information. Based on facts known today, AMVAC estimates it will spend approximately $3,870,000 in 2006. Because scientific analyses are constantly improving, it cannot be determined with certainty whether or not new or additional tests may be required by the regulatory authorities.

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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. AMVAC expenses these costs on an as incurred basis. See also PART II, Item 7 of this Annual Report for discussions pertaining to research and development expenses.

Raw Materials

AMVAC utilizes numerous firms as well as internal sources to supply the various raw materials and components used by AMVAC 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, AMVAC seeks to secure its supply by either long-term arrangements or advance purchases from its suppliers. AMVAC believes that it is considered to be a valued customer to such sole-source suppliers. Recent increases in energy costs are expected to have an adverse impact on the Company, although the ultimate impact cannot be measured at this time.

Environmental

During 2005, AMVAC continued activities to address environmental issues associated with its facility (the “Facility”) in Commerce, California.

In March 1997, the California Environmental Protection Agency Department of Toxic Substances Control (“DTSC”) accepted the Facility into its Expedited Remedial Action Program (“ERAP”). Under this program, the Facility must prepare and implement an environmental investigation plan. Depending on the findings of the investigation, the Facility may also be required to develop and implement remedial measures to address any historical environmental impairment. The environmental investigation and any remediation activities related to ten underground storage tanks at the Facility, which had been closed in 1995, will also be addressed by AMVAC under ERAP.

Soil and groundwater characterization activities began in December 2002 in accordance with the Site Investigation Plan that was approved by the DTSC. Additional activities were conducted from 2003 to 2005 with oversight provided by the DTSC. Additional investigation is planned over the next year under the oversight of the DTSC. Potential remediation activities may be initiated in 2006 or 2007. These investigation and potential remediation activities are required at all facilities that currently have, or in the past had, hazardous waste storage permits. Because AMVAC previously held a hazardous waste management permit, AMVAC is subject to these requirements. The cost associated with the potential remediation activities is not expected to have a material impact on the Company’s financial statements.

AMVAC is subject to numerous federal and state laws and governmental regulations concerning environmental matters and employee health and safety at the Commerce, California and Axis, Alabama facilities. AMVAC continually adapts its manufacturing process to the environmental control standards of the various regulatory agencies. The U.S. EPA and other federal and state agencies have the authority to promulgate regulations that could have an impact on AMVAC’s operations.

AMVAC expends substantial funds to minimize the discharge of materials in the environment and to comply with the governmental regulations relating to protection of the environment. Wherever feasible, AMVAC recovers raw materials and increases product yield 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

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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.

Employees

As of March 10, 2006, the Company employed approximately 300 persons. AMVAC, 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 Basel, Switzerland in January 2006. The office operates under the name AMVAC Switzerland GmbH and is located in Basel, Switzerland. The Company formed the new subsidiary to expand its resources dedicated to non-U.S. opportunities, primarily in the EU.

The Company opened an office in 1998 in Mexico to conduct business in Mexico and related areas. The office operates under the name Quimica AMVAC De Mexico S.A. de C.V. and markets chemical products for agricultural and commercial uses.

The Company opened an office in August 1994, in the United Kingdom to conduct business in the European chemical market. The office, operating under the name AMVAC Chemical UK Ltd., focuses on developing product registration and distributor networks for AMVAC’s product lines throughout Europe. The office is 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 years ended December 31, 2005, 2004 and 2003.

The Company classifies as export sales all products bearing foreign labeling shipped to a foreign destination.

	2005			2004			2003
Export Sales	$	13,856,000		$	10,265,000		$	8,943,000
Percentage of Net Sales		7.3	%		6.8	%		7.2	%

Risk Management

The Company continually evaluates insurance levels for product liability, property damage and other potential areas of risk. 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.

GEMCHEM, INC.

GemChem is a California corporation incorporated in 1991 and purchased by the Company in 1994. GemChem is a national chemical distributor. GemChem, in addition to purchasing key raw materials for the

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Company, 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).

2110 DAVIE CORPORATION

DAVIE currently owns real estate for corporate use only. See also PART I, Item 2 of this Annual Report.

ENVIRONMENTAL MEDIATION, INC.

EMI is an environmental consulting firm.

* * *

Available Information

The Company makes available free of charge (through its website, www.american-vanguard.com), its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (“SEC”). Such reports are also available free of charge on the SEC’s website, www.sec.gov. Also available free of charge on the Company’s website are our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee Charters, our Corporate Governance Guidelines, our Code of Conduct and Ethics, our Employee Complaint Procedures for Accounting and Auditing Matters and our policy on Stockholder Nomination and Communication. The Company’s Internet website and the information contained therein or incorporated therein are not intended to be incorporated into this Annual Report on Form 10-K.

* * *

ITEM 1A. RISK FACTORS

Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation for Risk Factors.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2 PROPERTIES

The Company’s corporate headquarters are located in Newport Beach, California. This facility is leased. See PART IV, Item 15 of this report for further information.

AMVAC owns in fee the Facility constituting approximately 152,000 square feet of improved land in Commerce, California (“Commerce”) on which its West-Coast manufacturing and some of its warehouse facilities and offices are located.

DAVIE owns in fee approximately 72,000 square feet of warehouse, office and laboratory space on approximately 118,000 square feet of land in Commerce, California, which is leased to AMVAC.

In 2001, AMVAC completed the acquisition of a manufacturing facility from DuPont. The facility is one of three such units located on DuPont’s 510 acre complex in Axis, Alabama. The acquisition consisted of a long-

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term ground lease of 25 acres and the purchase of all improvements thereon. The facility is a multi-purpose plant designed primarily to manufacture pyrethroids and organophosphates. The acquisition increased AMVAC’s capacity while also providing flexibility and geographic diversity. (Refer to PART II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation of this Annual Report.)

The Facility’s production areas are designed to run on a continuous twenty-four hour per day basis. AMVAC regularly adds chemical processing equipment to enhance its production capabilities. AMVAC believes its facilities are in good operating condition and are suitable and adequate for AMVAC’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 as well as 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 3 of the Notes to the Consolidated Financial Statements in PART IV, Item 15 of this Annual Report.

AMVAC owns approximately 42 acres of unimproved land in Texas for possible future expansion.

GemChem’s, Chemical UK’s and Quimica AMVAC’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. 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 2 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report.

ITEM 3 LEGAL PROCEEDINGS

DBCP LAWSUITS

I. DBCP Litigation

AMVAC and/or the Company have been named or otherwise implicated in a number of lawsuits concerning injuries allegedly arising from either contamination (of water supplies) or personal exposure to 1,2-dibromo-3-chloropropane (“DBCP”). A summary of these actions follows:

A. Hawaii Matters

AMVAC and the Company were served with complaints in February 1997. The actions were filed in the Circuit Court of the Second Circuit, State of Hawaii entitled Board of Water Supply of the County of Maui v. Shell Oil Co., et. al. The suit named as defendants the Company, AMVAC, Shell Oil Company, The Dow Chemical Company, Occidental Chemical Company, Occidental Petroleum Corporation, Occidental Chemical Corporation, and Brewer Environmental Industry, Inc. Maui Pineapple Company was joined as a cross-defendant. The Complaint alleged that between two and four of the Board’s wells had been contaminated with DBCP in excess of the maximum contaminant level (“MCL”). In addition, the Board of Water Supply contended that future wells may exceed the MCL level and would need remediation. On August 2, 1999, a global settlement was reached, which included the remediation of the existing contaminated wells in addition to the installation of filtration devices on other wells for the next forty years on the island of Maui. The cash settlement was three million dollars ($3,000,000) of which AMVAC’s (and the Company’s) portion was five hundred thousand dollars ($500,000). The settlement agreement obligates the defendants to pay for the installation of filtration devices on other wells that become contaminated later and for the ongoing operation and maintenance of the filtration devices for up to forty years. The annual costs of operation and maintenance per well is estimated to be

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approximately sixty-nine thousand dollars ($69,000), to be adjusted annually by the consumer price index. The obligations of the defendants under this agreement are secured by a twenty million-dollar letter of credit obtained by Dow Chemical. In connection with the settlement, in October 2005, AMVAC paid for a share of a permanent filtration system in the amount of $222,198.

In October 1997, AMVAC was served with a Complaint(s) in which it was named as a defendant, filed in the Circuit Court, First Circuit, State of Hawaii and in the Circuit Court of the Second Circuit, State of Hawaii (two identical suits) entitled Patrickson, et. al. v. Dole Food Co., et. al (“Patrickson Case”) alleging damages sustained from injuries caused by plaintiffs’ exposure to DBCP while applying the product in their native countries. Other named defendants are: Dole Food Co., Dole Fresh Fruit, Dole Fresh Fruit International, Pineapple Growers Association of Hawaii, Shell Oil Company, Dow Chemical Company, Occidental Chemical Corporation, Standard Fruit Company, Standard Fruit & Steamship, Standard Fruit Company De Costa Rica, Standard Fruit Company De Honduras, Chiquita Brands, Chiquita Brands International, Martrop Trading Corporation, and Del Monte Fresh Produce. (American Vanguard Corporation has not been sued in these actions.) The ten named plaintiffs are citizens of four countries—Guatemala, Costa Rica, Panama, and Ecuador. Punitive damages are sought against each defendant. The plaintiffs were banana workers and allege that they were exposed to DBCP in applying the product in their native countries. The case was also filed as a class action on behalf of other workers so exposed in these four countries. The plaintiffs” allege sterility and other injuries. (The plaintiffs’ attorneys (from South Carolina) have also represented foreign banana workers in the Texas and Mississippi matters discussed below.) For the last several years, the focus of the case has been on procedural issues. On April 22, 2003, the United States Supreme Court issued a decision on the procedural posture of the case, holding there was no jurisdiction in federal court. Once the case reaches state court, the defendants may seek to effect dismissal under forum non conveniens pursuant to state court procedures. No activity has taken place in the US court system on this case since early 2004 as apparently, the suit has not been officially received in the state court upon remand. However, the plaintiffs’ attorneys reported that the ten plaintiffs filed suit in their home countries in 1998, alleging in excess of two million United States dollars ($2,000,000) per plaintiff. The suit in Guatemala was served on AMVAC in March 2001, but no defendant has been required to answer. Suits in the other countries have not been served. AMVAC has engaged local attorneys in the countries to defend these foreign suits. No discovery has taken place on the individual claims of the plaintiffs. It is too early to provide any evaluation of the likelihood of an unfavorable outcome at this time. Without such discovery, it is unknown whether any of the plaintiffs was exposed to AMVAC brand DBCP or what statute of limitation defenses may apply. AMVAC intends to contest the cases vigorously.

On or about October 1, 2003, the Company was indirectly advised of a possible claim for groundwater contamination on the Island of Maui. (This is separate and distinct from Item 1 (A) above.) The Company was provided with communications between Maui Land & Pineapple Company, Inc. (“Maui Pine”) and Hawaii Water Service Company (“HWSC”). HWSC is a non-municipally owned public water utility owning three water wells allegedly contaminated with DBCP and 1,2,3-tri-chloropropane (“TCP”). HWSC further alleges that the wells were contaminated by the above mentioned chemicals manufactured, marketed, distributed and/or sold by Maui Pine, Maui Pineapple Company, The Dow Chemical Company, Dow AgroSciences, LLC, Occidental Petroleum Corporation, Occidental Chemical Corporation, Shell Oil Company, Shell Chemical Company, American Vanguard Corporation, AMVAC Chemical Company (collectively, “AMVAC”), BEI Hawaii and Brewer Environmental Industries Holdings, Inc. The Company has been advised that the total claim could approximate four million dollars ($4,000,000). Through mediation, on January 15, 2004, the Company reached a settlement with HWSC for fifty-five thousand dollars ($55,000.00), contingent upon obtaining a court order approving the settlement as one made in good faith. The motion for approval of the good faith settlement was granted in 2005 and the suit against AMVAC has been dismissed, pursuant to the settlement.

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B. Mississippi Matters

In May 1996, AMVAC was served with five complaints in which it is named as a defendant. (These complaints were filed by the same attorneys representing the Patrickson plaintiffs in Hawaii.) The complaints are brought by plaintiffs Edgar Arroyo-Gonzalez, Eulogio Garzon-Larreategui, ValentinValdez, Amilcar Belteton-Rivera, and Carlos Nicanor Espinola-E against one or more of the following named defendants: Coahoma Chemical Co. Inc., Shell Oil Company, Dow Chemical Co., Occidental Chemical Co., Standard Fruit Co., Standard Fruit and Steamship Co., Dole Food Co., Inc., Dole Fresh Fruit Co., Chiquita Brands, Inc., Chiquita Brands International, Inc. and Del Monte Fresh Produce, N.A. The cases were filed in the Circuit Court of Harrison County, First Judicial District of Mississippi. Each case alleged damages sustained from injuries caused by plaintiffs’ (who are former banana workers and citizens of a Central American country) exposure to DBCP while applying the product in their native countries. These cases were removed to U.S. District Court for the Southern District of Mississippi, Southern Division. The federal court granted defense motions to dismiss in each case pursuant to the doctrine of forum non conveniens. On January 19, 2001, the court issued an unpublished decision, finding that there was jurisdiction in federal court, but remanded just one case (Espinola) back to the trial court to determine if a stipulation which limited the plaintiff’s recovery to fifty thousand dollars ($50,000) was binding. If the stipulation is binding, that case will be remanded to state court. If the stipulation is not binding, that case will be dismissed along with the others, requiring the plaintiffs to litigate in their native countries. The federal court then ordered remand to state court. No activity has taken place on this matter since 2001. Without discovery, it is unknown whether any of the plaintiffs were exposed to the Company’s product or what defenses may apply. AMVAC intends to contest the cases vigorously. It is too early to provide an evaluation of the likelihood of an unfavorable outcome in this case.

C. Louisiana Matters

In November 1999, AMVAC was served with three complaints filed in the 29^th Judicial District Court for the Parish of St. Charles, State of Louisiana entitled Pedro Rodrigues et. al v. AMVAC Chemical Corporation et. al, Andres Puerto, et. al v. Amvac Chemical Corporation, et. al and Eduardo Soriano, et al v. Amvac Chemical Corporation et. al. Other named defendants are: Dow Chemical Company, Occidental Chemical Corporation, Shell Oil Company, Standard Fruit, Dole Food, Chiquita Brands, Tela Railroad Company, Compania Palma Tica, and Del Monte Fresh Produce. American Vanguard Corporation is not named as a defendant. These suits were filed in 1996, but they were not served until November 1999. (These complaints were filed in association with the same attorneys who have handled the Delgado and Carcamo matters listed below.) Following a dismissal of most of the plaintiffs from the action (in light of the fact that they had previously settled their claims in other actions), the complaints, with Soriano as the lead case, allege personal injuries to about 314 persons (167 from Ecuador, 102 from Costa Rica, and 45 from Guatemala) from alleged exposure to DBCP (punitive damages are also sought). With the United States Supreme Court holding there was no federal court jurisdiction in the Patrickson case, the federal court judge remanded the cases to Louisiana state court in June 2003. In state court, the three cases were assigned to two different judges. The state court has not yet scheduled any case management or status conferences. It is likely that the three cases will be reconsolidated in state court. No activity has taken place on this matter since late 2003. As in many of the other banana worker’s cases, no discovery has taken place on the individual claims of the plaintiffs. Thus, it is unknown as to how many of the plaintiffs claim exposure to AMVAC’s product and whether their claims are barred by applicable statutes of limitation. AMVAC intends to vigorously contest these cases. It is too early to provide any evaluation of the likelihood of an unfavorable outcome at this time.

D. Texas Matters

These matters involve an earlier round of litigation by foreign banana workers. These actions, entitled Franklin Rodriquez Delgado, et al., Jorge Colindres Carcamo, individually and on behalf of all other similarly

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situated, et al., Juan Ramon Valdez, et al., and Isae Carcamo v. Shell Oil Company, et al. were originally filed in various state courts in Texas, subsequently removed to the United States Court of Appeals, Fifth Circuit, and were ordered to be remanded back to state court under forum non conveniens. The complaints are for personal injuries from alleged exposure to DBCP. AMVAC was not sued by the plaintiffs but was sued on a third party complaint by Dow Chemical Company. In 1995, Dow Chemical Company dismissed its third party complaint against AMVAC without prejudice. Subsequently, Dow Chemical Company and Shell Oil Company settled with these plaintiffs as well as with about fifteen thousand other banana workers represented by the plaintiffs’ law firm (not the firm representing the Patrickson and Mississippi plaintiffs). Dow Chemical Company was then dismissed by the plaintiffs with prejudice in September 1997. While AMVAC is not presently a party in this lawsuit having been dismissed without prejudice, the case is still pending, with the focus now shifted to the grower defendants. The remaining claims are pending in the Texas state court.

E. Nicaragua Matters

Tellez et al v. Dole Food Company, Inc. et al

(a) On March 26, 2004, 25 plaintiffs, all residents of Nicaragua, filed suit in state court in Los Angeles County, California, claiming personal injuries from alleged exposure to DBCP while working on banana plantations in their home country. The named defendants are Dole Food Company, Inc., Dole Fresh Fruit Company, Standard Fruit Company, Standard Fruit and Steamship Company, Dow Chemical Company, and AMVAC Chemical Corporation. American Vanguard is not named as a defendant. Punitive damages are also sought against all defendants.

(b) The plaintiffs claim personal injuries for sterility, reduced sperm counts, and other reproductive injuries. They claim exposure from working on banana plantations in Nicaragua from dermal contact with DBCP and inhalation of vapors. The plaintiffs also claimed exposure to DBCP in groundwater that they ingested, but testing of wells in October 2005 did not reveal the presence of any DBCP contamination and this claim of exposure through groundwater is being dropped.

AMVAC was served with the complaint on April 12, 2004 and filed an answer on May 5, 2004. On May 6, 2004, Dow Chemical removed the case from state court to the United States District Court for the Central District of California. The case was subsequently remanded to state court.

On September 2, 2004, the plaintiffs were permitted to file an amended complaint that dropped seven plaintiffs and added 18 others, so that there were a total of 36 plaintiffs. Since that time, six plaintiffs have been dismissed and four others who have not yet obtained U.S. visas to come to the United States for their depositions, have been transferred to the Mejia case listed below, reducing the total to 26.

Through the end of 2005 and to the date of this response, the defendants have been taking depositions of the plaintiffs in Los Angeles and having the plaintiffs examined by an urologist. At a status conference on February 9, 2005, a trial date for July 17, 2006 was scheduled.

(c) AMVAC contends that very few of these plaintiffs worked at a banana farm when its product could have been used. AMVAC also disputes the nature and extent of the claimed injuries. AMVAC intends to continue to vigorously contest this case.

(d) It is too early to provide any evaluation of the likelihood of an unfavorable outcome at this time. Medical examinations and testing of plaintiffs and their spouses are ongoing and expert depositions will not begin until April 2006. However, this case, like the other pending banana workers suits, presents difficult issues of law and

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fact to all parties and has a potentially large exposure. If plaintiffs are successful, it is likely that other banana workers from Nicaragua will file suit in California.

Rodolfo Mejia et al v. Dole Food Company, Inc. et al

On September 20, 2005, the attorneys who also represent plaintiffs in Tellez et al v. Dole Food Company et al filed an action on behalf of 16 Nicaraguan plaintiffs in the Los Angeles County Superior Court against Dole Food Company, Inc., Dole Fresh Fruit Company, Standard Fruit Company, Standard Fruit and Steamship Company, the Dow Chemical Company, and AMVAC Chemical Corporation. The complaint alleges that the 16 plaintiffs worked at various banana farms in Nicaragua and were exposed to DBCP from 1970 to 1984, suffering irreversible sterility or infertility. The complaint seeks unspecified compensatory and punitive damages against each defendant. The suit has been assigned to the same judge for case management as in the Tellez matter. Discovery has not yet begun in this case. It is too early to provide any evaluation of the likelihood of an unfavorable outcome at this time.

Suits filed in Nicaragua

The Los Angeles attorneys representing these workers in California have recently stated that they have as many as 10,000 clients in Nicaragua. Twenty-six of them are plaintiffs in the Tellez suit and 20 are now plaintiffs in the Mejia suit pending in the Los Angeles County Superior Court.

In prior descriptions of pending litigation and other matters, several suits filed in Nicaragua in January 2003 on behalf of banana workers claiming exposure to DBCP were mentioned. It was reported that AMVAC had been named in these suits, but was not served with the complaints.

In May 2005, two suits filed in Nicaragua in 2004 were received that name AMVAC, The Dow Chemical Company, Dole Food Co., Dole Fresh Fruit, and Standard Fruit Company. The two suits for personal injuries for sterility and reduced sperm counts have been filed on behalf of a total of 15 banana workers: Flavio Apolinar Castillo et al. v. AMVAC Chemical Corporation et al., No. 535/04 and Luis Cristobal Martinez Suazo et al. v. AMVAC Chemical Corporation et al., No. 679/04. In December 2005, AMVAC received six additional, similar lawsuits filed on behalf of a total of 30 plaintiffs. These plaintiffs each claim $1 million in special and general damages and $5 million in punitive damages.

AMVAC has retained an attorney in Nicaragua and understands that the receipt of these eight suits constitutes first notice and an invitation to attend mediation. All but one of these suits is based on Nicaraguan Public Law 364 issued in October 2000 that is directed solely at DBCP and requires the posting of a $100,000 bond, sets forth a lessened standard of proof to show that the claimed injuries are due to DBCP, and establishes an unreasonable amount of minimum compensation for injuries. This law also provides that there is no statute of limitations.

On January 25, 2006, AMVAC was served with the Flavio Apolinar Castillo and Luis Cristobal Martinez Suazo suits listed above. Counsel in Nicaragua is in the process of preparing objections to jurisdiction over AMVAC in these two cases.

A review of court filings in Chinandega, Nicaragua, by local counsel has found 66 suits filed pursuant to Public Law 364 that name AMVAC and include approximately 2,261 plaintiffs. None of these other additional suits has been served. Each of these plaintiffs claims $1 million in special and general damages and $5 million in punitive damages. It is anticipated that the plaintiffs’ attorneys will continue to file additional actions on a monthly basis in Nicaragua.

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In an earlier round of suits brought in Nicaragua against Dow, Shell, and Standard Fruit only, the Nicaragua court issued judgments for $490 million in December 2002 based on claims of 583 banana workers, despite defenses of lack of personal jurisdiction and the unconstitutionality of Public Law 364. It has been reported that in 2003, the United States District Court in Los Angeles refused to enforce these judgments on the basis that the judgments did not properly name the defendants. The U.S. District Court did not reach the issue of due process under Public Law 364. An appeal to the Ninth Circuit Court of Appeal is pending.

AMVAC contends that the Nicaragua courts do not have jurisdiction over it and that Public Law 364 violates international due process of law. AMVAC intends to contest personal jurisdiction and demand under Law 364 that the claims be litigated in the United States. Thus far, it appears that the Nicaraguan courts have denied all requests of other defendants under Law 364 that allow the defendants the option of consenting to jurisdiction in the United States. It is presently unknown as to how many of these plaintiffs actually claim exposure to DBCP at the time AMVAC’s product was allegedly used nor is there any verification of the claimed injuries. Based on the precedent of the earlier suits in Nicaragua, it would appear likely that the Nicaragua courts will, over the defendants’ objections, enter multi-million dollar judgments for the plaintiffs and against all defendants in these cases. One such judgment was entered in August 2005 for $97 million for 150 plaintiffs against Dole Food and other entities.

F. Other Matters

Other attorneys filed suits in the Los Angeles County Superior Court in April 2005 on behalf of hundreds of banana workers in other countries, including Costa Rica and Honduras. AMVAC has not been named in these suits.

II. Other Litigation.

On March 1, 2006, AMVAC and AVD accepted tender of defense and indemnity from Valent U.S.A. Corporation (“Valent’) with respect to an action entitled Victoria Espinoza, et al. v. Does 1, et al., including Valent U.S.A. Corporation filed in the Los Angeles Superior Court No. BC322590 in March 2005, in which plaintiff, who worked as a temporary employee intermittently in the packaging department at one of AMVAC’s facilities between August 1994 and August 2000, seeks damages for injuries, specifically acute myelogenous leukemia, allegedly arising from exposure to chemical products at that AMVAC facility. The defense and indemnity obligations arise from a toll manufacturing and supply agreement dated in September 1991 between AMVAC and Valent’s predecessor, and an asset purchase agreement dated in June 1998 between AMVAC and Valent by which the former purchased the Dibrom product line from the latter. To date, only limited discovery has been done, and it is too early in the process to provide any evaluation of the probability of an unfavorable outcome.

OTHER

The Company may be, from time to time, involved in other legal proceedings arising in the ordinary course of its business. The results of litigation cannot be predicted with certainty. The Company has and will continue to expend resources and incur expenses in connection with these proceedings. There can be no assurance that the Company will be successful in these proceedings. While the Company continually evaluates insurance levels for product liability, property damage and other potential areas of risk, an adverse determination in one or more of these proceedings could subject the Company to significant liabilities, which could have a material adverse effect on its financial condition and operating results.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted during the fourth quarter of 2005 to a vote of security holders, through the solicitation of proxies or otherwise.

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PART II

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Effective March 7, 2006, the Company’s $0.10 par value common stock (“Common Stock”) is listed on the New York Stock Exchange under the ticker symbol AVD. From January 1998 through March 6, 2006, the Common Stock was listed on the American Stock Exchange under the ticker symbol AVD. The Company’s Common Stock traded on The NASDAQ Stock Market under the symbol AMGD from March 1987 through January 1998.

The following table sets forth the range of high, low and closing sales prices as reported for the Company’s Common Stock for the calendar quarters indicated (as adjusted for stock splits and stock dividends).

	High		Low		Close
Calendar 2005
First Quarter	$	22.88	$	16.00	$	22.44
Second Quarter		22.55		16.90		20.91
Third Quarter		24.65		18.04		18.31
Fourth Quarter		26.98		18.22		23.50
Calendar 2004
First Quarter	$	16.07	$	11.17	$	15.67
Second Quarter		20.75		13.95		16.84
Third Quarter		18.00		13.63		17.87
Fourth Quarter		20.48		15.65		18.39

As of March 10, 2006 the number of stockholders of the Company’s Common Stock was approximately 3,400, which includes beneficial owners with shares held in brokerage accounts under street name and nominees.

On September 14, 2005, the Company announced that the Board of Directors declared a cash dividend of $0.03 per share which was distributed on October 14, 2005, to stockholders of record at the close of business on September 30, 2005.

On March 21, 2005, the Company announced that the Board of Directors declared a 2 for 1 stock split (100% stock dividend) and a cash dividend of $0.11 per share ($0.055 as adjusted for the stock split). Both dividends were distributed on April 15, 2005 to stockholders of record at the close of business on March 29, 2005. The cash dividend was paid on the number of shares outstanding prior to the 2 for 1 stock split. Stockholders entitled to fractional shares resulting from the stock split received cash in lieu of such fractional share based on the closing price of the Company’s stock on March 29, 2005.

On September 14, 2004, the Company announced that the Board of Directors declared a cash dividend of $.05 per share ($0.025 as adjusted for stock splits) which was distributed on October 15, 2004 to stockholders of record at the close of business on October 1, 2004.

On March 16, 2004, the Company announced that the Board of Directors declared a 3 for 2 stock split and a cash dividend of $.12 per share ($0.040 as adjusted for stock splits). Both dividends were distributed on April 16, 2004 to stockholders of record at the close of business on March 26, 2004. The cash dividend was paid on the number of shares outstanding prior to the 3 for 2 stock split. Stockholders entitled to fractional shares resulting from the stock split received cash in lieu of such fractional share based on the closing price of the Company’s common stock on March 26, 2004.

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On September 12, 2003, the Company announced that the Board of Directors declared a cash dividend of $.05 per share ($0.017 as adjusted for stock splits) which was distributed on October 17, 2003 to stockholders of record as of October 3, 2003.

On March 19, 2003, the Company announced that the Board of Directors declared a 3 for 2 stock split and a cash dividend of $.13 per share ($.029 as adjusted for stock splits). Both dividends were distributed on April 11, 2003 to stockholders of record at the close of business on March 28, 2003.

The Company has issued a cash dividend in each of the last ten years dating back to 1996.

ITEM 6 SELECTED FINANCIAL DATA (in thousands, except for weighted average number of shares and per share data)

	2005		2004		2003		2002		2001
Operating revenues	$	189,796	$	150,855	$	124,863	$	100,671	$	83,127
Operating income	$	32,267	$	24,958	$	16,542	$	11,879	$	10,367
Income before income tax expense	$	30,939	$	23,733	$	16,182	$	11,278	$	9,023
Net income	$	19,002	$	14,477	$	10,263	$	7,049	$	5,639
Earnings per common share(1)	$	1.04	$	.81	$	.58	$	.41	$	.33
Earnings per common share—assuming dilution(1)	$	.98	$	.76	$	.55	$	.39	$	.32
Total assets	$	183,227	$	122,346	$	106,734	$	75,448	$	68,565
Long-term debt and capital lease obligations, less current portion	$	34,367	$	19,474	$	22,142	$	17,765	$	14,164
Stockholders’ equity	$	82,448	$	63,972	$	50,334	$	40,243	$	33,958
Weighted average shares outstanding—basic(1)		18,258,134		17,963,396		17,622,606		17,340,602		17,210,628
Weighted average shares outstanding—assuming dilution(1)		19,319,055		19,167,450		18,628,506		18,183,570		17,741,700
Dividends per share of common stock(1)	$	.085	$	.065	$	.046	$	.035	$	.027

The selected consolidated financial data set forth above with respect to each of the calendar years in the five-year period ended December 31, 2005 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 registered public accounting firm’s reports thereon which are included elsewhere in this Report on Form 10-K for the three years ended December 31, 2005. See ITEM 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

(1) The basic and diluted weighted average number of shares outstanding, net income per share and dividend information for all periods presented have been restated to reflect the effects of stock splits and dividends.

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ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Results of Operations

2005 Compared with 2004:

	2005		2004		Change
Net sales:
Crop	$	157,327,000	$	122,498,000	$	34,829,000
Non-crop		32,469,000		28,357,000		4,112,000
	$	189,796,000	$	150,855,000	$	38,941,000
Gross profit:
Crop	$	69,895,000	$	58,465,000	$	11,430,000
Non-crop		15,784,000		13,793,000		1,991,000
	$	85,679,000	$	72,258,000	$	13,421,000

The Company reported net income of $19,002,000 or $ .98 per diluted share in 2005 as compared to net income of $14,477,000 or $ .76 per diluted share in 2004. (Net income per share data has been restated to reflect the effect of a 2 for 1 stock split that was distributed on April 15, 2005.)

Net sales in 2005 increased by 26% to $189,796,000 from $150,855,000 in 2004. The record sales levels were achieved through growth (primarily attributable to higher sales volume) across the vast majority of the Company’s product lines coupled with the selling of a new insecticide product line (Phorate) we acquired from BASF in November which represents the Company’s largest acquisition to date, the fourth quarter sales, of which, exceeded the Company sales expectations. There were no unusual or infrequent events or transactions outside of the ordinary course of business, which materially impacted net sales.

Gross profits increased $13,421,000 to $85,679,000 in 2005 from $72,258,000 in 2004. Gross profit margins declined to 45% in 2005 from 48% in 2004. The reduction in gross profit margins was due to the changes in the sales mix of the Company’s products.

Gross profit margins may not be comparable to those of other companies, since some companies include their distribution network in cost of goods sold and the Company, as well as others, include distribution costs in operating expenses (or other line items other than cost of goods sold).

Operating expenses, which are net of other income and expenses, increased by $6,112,000 to $53,412,000 in 2005 from $47,300,000 in 2004. Operating expenses as a percentage of sales were 28% in 2005 as compared to 31% in 2004. The differences in operating expenses by specific departmental costs are as follows:

• Selling expenses increased by $2,200,000 to $20,140,000 in 2005 from $17,940,000 in 2004. Increases in payroll and payroll related costs, programs and related costs and advertising and promotion costs accounted for 22%, 19% and 15% of the increase respectively, with the balance of the increase resulting from increases in other variable selling expenses related to both increased sales levels and the product mix of sales.

• General and administrative expenses increased by $1,654,000 to $14,382,000 in 2005 as compared to $12,728,000 in 2004. The increase was due to increased legal expenses (which accounted for approximately 47%), payroll, payroll related costs and other compensation costs.

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• Research and product development costs and regulatory registration expenses increased by $219,000 to $7,175,000 in 2005 from $6,956,000 in 2004. The increase was a result of higher licenses and registration fees and payroll and payroll related costs.

• Freight, delivery and warehousing costs increased $2,039,000 to $11,715,000 in 2005 as compared to $9,676,000 in 2004 due to the increased sales levels.

Interest costs before capitalized interest and interest income were $1,720,000 in 2005 as compared to $1,310,000 in 2004. The Company’s average overall debt in 2005 was $30,137,000 as compared to $37,822,000 in 2004. Higher effective interest rates accounted for the higher gross interest costs. The Company capitalized $363,000 of interest costs related to construction in progress in 2005 as compared to $72,000 in 2004. The Company recognized $29,000 in interest income in 2005 as compared to $13,000 in 2004.

Income tax expense increased by $2,681,000 to $11,937,000 in 2005 as compared to $9,256,000 in 2004. The Company’s effective tax rate was 38.6% in 2005 as compared to 39% in 2004. (See note 4 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 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. During 2005, weather patterns did not have a material adverse effect on the Company’s results of operations.

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, ordering patterns that may vary in timing, and promotional programs, 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 meaningful an indicator as full-year comparisons. The primary reason is that the use cycles do not necessarily coincide with financial reporting cycles. Because of the Company’s cost structure, the combination of variable revenue streams, and the changing product mixes, results in varying quarterly levels of profitability.

Results of Operations

2004 Compared with 2003:

	2004		2003		Change
Net sales:
Crop	$	122,498,000	$	104,895,000	$	17,603,000
Non-crop		28,357,000		19,968,000		8,389,000
	$	150,855,000	$	124,863,000	$	25,992,000
Gross profit:
Crop	$	58,465,000	$	47,932,000	$	10,534,000
Non-crop		13,793,000		10,942,000		2,851,000
	$	72,258,000	$	58,874,000	$	13,385,000

The Company reported net income of $14,477,000 or $.76 per diluted share in 2004 as compared to net income of $10,263,000 or $.55 per diluted share in 2003. (Net income per share data has been restated to reflect the effect of a 3 for 2 stock split that was distributed on April 16, 2004.)

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Net sales in 2004 increased by 21% to $150,855,000 from $124,863,000 in 2003. The record sales levels were as a result of increased sales (primarily attributable to higher sales volume) of the Company’s product lines used for crop protection (primarily on cotton) as well as sales of Bifenthrin, the generic pyrethroid product the Company launched during the first quarter of 2004. Also contributing to the increased sales were sales increases of the Company’s mosquito adulticide which was heavily used as a result of the hurricanes in 2004. There were no unusual or infrequent events or transactions outside of the ordinary course of business, which materially impacted net sales.

Gross profits increased $13,384,000 to $72,258,000 in 2004 from $58,874,000 in 2003. Gross profit margins increased to 48% in 2004 from 47% in 2003. The improvement in gross profit margins was due to the changes in the sales mix of the Company’s products.

Gross profit margins may not be comparable to those of other companies, since some companies include their distribution network in cost of goods sold and the Company, as well as others, include distribution costs in operating expenses (or other line items other than cost of goods sold).

Operating expenses, which are net of other income and expenses, increased by $4,968,000 to $47,300,000 in 2004 from $42,332,000 in 2003. Operating expenses as a percentage of sales were 31% in 2004 as compared to 34% in 2003. The differences in operating expenses by specific departmental costs are as follows:

• Selling expenses increased by $1,662,000 to $17,940,000 in 2004 from $16,278,000 in 2003. The increase was due primarily to increased variable selling expenses that relate to both increased sales levels and the product mix of sales.

• General and administrative expenses increased by $3,301,000 to $12,728,000 in 2004 as compared to $9,427,000 in 2003. The increase was due to increases in outside professional expenses, payroll and payroll related costs, and costs related to the amortization of intangible assets in connection with new asset acquisitions. The increase in outside professional expenses include compliance costs of approximately $575,000 in 2004, related to Section 404 of the Sarbanes-Oxley Act.

• Research and product development costs and regulatory registration expenses declined by $769,000 to $6,956,000 in 2004 from $7,725,000 in 2003. The decline was a result of lower costs incurred to generate scientific data related to the registration.

• Freight, delivery and warehousing costs increased $774,000 to $9,676,000 in 2004 as compared to $8,902,000 in 2003 due to the increased sales levels.

Interest costs before capitalized interest and interest income were $1,310,000 in 2004 as compared to $986,000 in 2003. The Company’s average overall debt in 2004 was $37,822,000 as compared to $24,526,000 in 2003. The higher overall debt levels accounted for the higher gross interest costs. The Company recorded $303,000 in interest income in 2003, which primarily relates to income taxes receivable from the state of California as a result of filing amended tax returns for the years ended December 31, 1995 through 1998. (The overall after tax effect of recording the tax benefit due from California (franchise tax) generated $.03 per diluted share in 2003. The refund was received in July 2003.) The Company capitalized $72,000 of interest costs related to construction in progress during 2004 as compared to $323,000 in 2003.

Income tax expense increased by $3,337,000 to $9,256,000 in 2004 as compared to $5,919,000 in 2003. The Company’s effective tax rate was 39.0% in 2004 as compared to 36.5% in 2003. (See note 4 to the Consolidated Financial Statements for additional analysis of the changes in income tax expense.)

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Liquidity and Capital Resources

Operating activities provided $18,749,000 of cash during the year ended December 31, 2005. Net income of $19,002,000, non-cash depreciation and amortization of $7,016,000, an increase in accounts payable, accrued expenses and other payables of $24,409,000, a decrease in other current assets of $767,000 and a change in deferred income taxes of $243,000 provided $51,437,000 of cash for operations. Increases in receivables of $31,964,000 and inventories of $724,000 used $32,688,000 in cash for operating activities.

The Company used $35,231,000 in investing activities in 2005. It invested $13,186,000 in capital expenditures, $22,112,000 in intangible assets while other non-current assets declined by $67,000.

Financing activities provided $17,358,000 in 2005. The Company received proceeds from new long-term debt of $20,000,000. Net borrowings under the Company’s fully-secured revolving line of credit increased by $3,000,000 while $1,015,000 was received related to the issuance of common stock. The Company made payments on its debt of $5,107,000 and paid cash dividends of $1,550,000.

On October 31, 2005, AMVAC completed the acquisition of assets constituting the global Phorate insecticide product line from BASF Aktiengesellschaft (“BASF”), for approximately $26.1 million in purchase price consideration, subject to a post-closing adjustment to reflect the value of inventories as of the time of closing. The assets purchased by AMVAC included the active ingredient Phorate, the trademarks Thimet^®, Granutox^®, Granutox 5^®, and Geomet^®, the manufacturing and formulation know-how, registration rights, intellectual property rights and inventories, as well as an exclusive license to use BASF’s patent, closed delivery system, Lock ‘N Load^®, in the United States, Canada and Australia for Phorate.

In order to finance the acquisition of the global Phorate insecticide product line, AMVAC borrowed under its revolving line of credit on October 31, 2005.

In February 2006, the Company completed a $23,400,000 million private placement, consisting of 1,040,000 shares of its common stock with a group of institutional investors. Net proceeds of the financing were approximately $22,500,000. The Company filed a shelf registration statement on Form S-3 under the Securities Act of 1933, as amended (Registration No. 333-122981) covering the offering and sale of its common stock. (Refer to the Company’s Current Report on Form 8-K filed February 13, 2006 and incorporated herein by reference.)

Management continues to believe, that to continue to improve its working capital position and maintain flexibility in financing interim needs, it is prudent to explore all available sources of financing. Accordingly, the Company filed the aforementioned universal shelf registration statement on Form S-3 with the SEC on February 25, 2005 pursuant to which the Company may issue common and preferred stock, warrants and debt securities from time to time, up to an aggregate offering price of $50,000,000. The terms of any future offering would be established at the time of the offering.

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Contractual Obligations and Off-Balance Sheet Arrangements

The following summarizes our contractual obligations at December 31, 2005 and the effects such obligations are expected to have on liquidity and cash flow in future periods:

	Payments Due by Period
	Total		Less than 1 Year		1–3 Years		4–5 Years		After 5 Years
Long-term debt	$	—	$	—	$	—	$	—	$	—
Note payable to bank		42,474		8,107		32,321		2,046		—
Accrued royalty obligations		1,801		1,801		—		—		—
Employment agreement(s)		914		468		446		—		—
Operating leases		439		279		30		20		110
	$	45,628	$	10,655	$	32,797	$	2,066	$	110

There were no off-balance sheet arrangements as of December 31, 2005.

Recently Issued Accounting Guidance

In December 2004, the Financial accounting Standards Board (“FASB”) issued SFAS No. 123R, “Share-Based Payment,” that establishes standards for accounting for transactions in which a company exchanges its equity instruments for goods and services or incurs a liability in exchange for goods and services that is based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. The primary focus of this pronouncement is on issuing share-based payments for services provided by employees. This pronouncement also requires recognition of compensation expense for new equity instruments awarded or for modifications, cancellations or repurchases of existing awards starting January 1, 2006. Compensation expense for new equity awards, in most cases, will be based on the fair value of the stock on the date of grant and will be recognized over the vesting service period. An award of liability instrument, as defined by this pronouncement, will initially be recorded at fair value and will be adjusted each reporting period to the new fair value through the date of settlement. Under the terms of this pronouncement, we and other issuers will begin to expense equity awards using a modified version of prospective application. Under that transition method, compensation cost is recognized on or after the required effective date for the portion of outstanding awards for which the requisite service has not yet been rendered, based on the fair value of those awards on their respective grant dates. For periods before the required effective date for which financial statements have not yet been issued, we had the option to elect to apply a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required by Statement No. 123.

We adopted SFAS No. 123R effective January 1, 2006 and began to expense previously issued equity awards for which service has not been rendered on that date. As of December 31, 2005, we estimate our maximum expense for existing stock options to be approximately $1.2 million which would be recognized $500,000 for 2006, $400,000 for 2007 and $300,000 for 2008 This projected expense will change if any stock options are granted or cancelled prior to the respective reporting periods or if there are any changes required to be made for estimated forfeitures as of January 1, 2006.

In December 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4,” which requires that abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) be recognized as current-period charges. In addition, the statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production

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facilities. SFAS No. 151 is effective for fiscal years beginning after June 15, 2005. The Company will adopt this statement as required, and the Company does not believe the adoption will have a material effect on the Company’s results of operations or financial condition.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29,” which eliminates the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The statement defines a nonmonetary exchange with commercial substance as one in which the future cash flows of an entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for fiscal periods beginning after June 15, 2005. The Company has adopted this statement as required, and it does not believe the adoption has had a material effect on the Company’s results of operation or financial condition.

In May 2005, the Financial Accounting Standards Board issued Statement No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and Statement No. 3, Reporting Accounting Changes in Interim Financial Statements,” or SFAS No. 154. SFAS No. 154 changes the requirements for the accounting for, and reporting of, a change in accounting principle. Previously, most voluntary changes in accounting principles were required to be recognized by way of a cumulative effect adjustment within net income during the period of the change. SFAS No. 154 generally requires retrospective application to prior periods’ financial statements of voluntary changes in accounting principles. SFAS No. 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, SFAS No. 154 does not change the transition provisions of any existing accounting pronouncements. The Company does not believe the adoption of SFAS No. 154 will have a material effect on its results of operations or financial condition.

Foreign Exchange

Management does not believe that the fluctuation in the value of the dollar in relation to the currencies of its customers in the last three fiscal years has adversely affected the Company’s ability to sell products at agreed upon prices denominated in U.S. dollars. No assurance can be given, however, that adverse currency exchange rate fluctuations will not occur in the future. Should adverse currency exchange rate fluctuations occur in geographies where the Company sells/exports its products, management is not certain such fluctuations will materially impact the Company’s operating results.

Inflation

Management believes inflation has not had a significant impact on the Company’s operations during the past three years.

CRITICAL ACCOUNTING POLICIES

Certain of the Company’s policies require the application of judgment by management in selecting the appropriate assumptions for calculating financial estimates. These judgments are based on historical experience, terms of existing contracts, commonly accepted industry practices and other assumptions that the Company believes are reasonable under the circumstances. These estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Actual results may differ from these estimates under different assumptions or conditions. The Company’s critical accounting polices and estimates include:

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Revenue Recognition

Revenue from sales is recognized at the time title and the risks of ownership passes. This is when the customer has made the fixed commitment to purchase the goods, the products are shipped per the customers’ instructions, the sales price is determinable, and collection is reasonably assured.

Long-lived Assets

The carrying value of long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Measurement of the impairment loss is based on the fair value of the asset. Generally, fair value will be determined using valuation techniques such as the present value of expected future cash flows.

Property, Plant and Equipment and Depreciation

Property, plant and equipment includes the cost of land, buildings, machinery and equipment, office furniture and fixtures, automobiles, and construction projects and significant improvements to existing plant and equipment. Interest costs related to significant construction projects may be capitalized at the Company’s weighted average cost of capital. Expenditures for maintenance and minor repairs are expensed as incurred. When property or equipment is sold or otherwise disposed of, the related cost and accumulated depreciation is removed from the respective accounts and the gain or loss realized on disposition is reflected in earnings. All plant and equipment is depreciated using the straight-line method, utilizing estimated useful property lives. Building lives range from 10 to 30 years; machinery and equipment lives range from 3 to 15 years; office furniture and fixture lives range from 3 to 10 years, automobile lives range from 3 to 6 years; construction projects and significant improvements to existing plant and equipment lives range from 3 to 15 years when placed in service.

Foreign Currency Translation

Assets and liabilities of foreign subsidiaries, where the local currency is the functional currency, have been translated at year end exchange rates and profit and loss accounts have been translated using weighted average yearly exchange rates. Adjustments resulting from translation have been recorded in the equity section of the balance sheet as cumulative translation adjustments in other comprehensive income.

The effect of foreign currency exchange gains and losses on transactions that are denominated in currencies other than the entity’s functional currency are remeasured into the functional currency using the end of the period exchange rates. The effects of remeasurement related to foreign currency transactions are included in current profit and loss accounts.

Goodwill and Other Intangible Assets

The primary identifiable intangible assets of the Company relate to product rights associated with its product acquisitions. The Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets. Under the provisions of SFAS No. 142, identifiable intangibles with finite lives are amortized and those with indefinite lives are not amortized. The estimated useful life of an identifiable intangible asset to the Company is based upon a number of factors including the effects of demand, competition, and expected changes in the marketability of the Company’s products. The Company tests identifiable intangible assets for impairment at least annually, relying on a number of factors including operating results, business plans and future cash flows. Identifiable intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate elements of property. The impairment

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test for identifiable intangible assets not subject to amortization consists of a comparison of the fair value of the intangible asset with its carrying amount. An impairment loss, if any, is recognized for the amount by which the carrying value exceeds the fair value of the asset. Fair value is typically estimated using a discounted cash flow analysis, which requires the Company to estimate the future cash flows anticipated to be generated by the particular asset(s) being tested for impairment as well as select a discount rate to measure the present value of the anticipated cash flows. When determining future cash flow estimates, the Company considers historical results adjusted to reflect current and anticipated operating conditions. Estimating future cash flows requires significant judgment by the Company in such areas as future economic conditions, industry-specific conditions, product pricing and necessary capital expenditures. The use of different assumptions or estimates for future cash flows could produce different impairment amounts (or none at all) for long-lived assets, goodwill and identifiable intangible assets. As of January 1, 2002, the Company had an immaterial amount of goodwill and amortization related to the goodwill. As such, the adoption of SFAS 142 did not have a material impact on the Company’s financial statements.

Risk Factors

The Company’s business may be adversely affected by cyclical and seasonal effects.

The chemical industry in general is cyclical and demands for its products tend to be slightly seasonal. Seasonal usage follows varying agricultural seasonal patterns, weather conditions and weather related pressure from pests, and customer marketing programs and requirements. Weather patterns can have an impact on the Company’s operations. The end user of some of its 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 products and therefore may reduce our revenues and profitability. There can be no assurance that the Company will adequately address any adverse seasonal effects.

The industry in which the Company does business is extremely competitive and its business may suffer if the Company is unable to compete effectively.

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 faces competition from many domestic and foreign manufacturers, marketers and distributors participating in its marketplace. Competition in the marketplace is based primarily on efficacy, price, safety and ease of application. Many of the Company’s competitors are larger and have substantially greater financial and technical resources. The Company’s ability to compete depends on its ability to develop additional applications for its current products, and to expand its product lines and customer base. The Company competes principally on the basis of the quality of its products, and the technical service and support given to its customers. There can be no assurance that the Company will compete successfully with existing competitors or with any new competitors.

If the Company is unable to successfully position itself in smaller niche markets, its business may be materially adversely affected.

The Company has attempted to position itself in smaller niche markets that have been or are being abandoned by larger chemical companies. These types of markets tend not to attract larger chemical companies due to the smaller volume demand. As a result, larger chemical companies have been divesting themselves of products that fall into such smaller niche markets. These smaller niche markets require significant and intensive management input and ongoing product research and are near product maturity. There can be no assurance that the Company will be successful in these smaller niche markets or, if it is successful in one or more niche markets, that it will continue to be successful in such niche markets.

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The Company faces competition in certain markets from manufacturers of genetically modified seeds.

The Company faces competition from larger chemical companies that market genetically modified (“GMO”) seeds in certain of the crop protection sectors in which the Company competes, particularly that of corn. To the extent that growers in these markets embrace the use of GMO seeds, such growers may reduce their use of pesticides sold by the Company. There is no guarantee that the Company will maintain its market share or pricing levels in sectors that are subject to competition from GMO seed marketers.

The manufacturing of the Company’s products is subject to governmental regulations.

The Company operates two manufacturing facilities—one in Los Angeles, California and the other in Axis, Alabama (the “Facilities”). The Facilities operate under the terms and conditions imposed by required licenses and permits by state and local authorities. The manufacturing of key ingredients for the Company’s products occurs at the Facilities. An inability to renew or maintain a license or permit or a significant increase in the fees for such licenses or permits could impede the Company’s access to key ingredients and increase the cost of production, which, in turn, would materially and adversely affect the Company’s ability to provide its products in a timely and affordable manner.

The distribution and sale of the Company’s products are subject to prior governmental approvals and thereafter ongoing governmental regulation.

The Company’s products are subject to laws administered by federal, state and foreign governments, including regulations requiring registration, approval and labeling of its products. The labeling requirements restrict the use of and type of application for our products. More stringent restrictions could make our products less desirable, which would adversely affect our revenues and profitability. Substantially all of the Company’s products are subject to the EPA registration and re-registration requirements, and are conditionally registered in accordance with the FIFRA. Such registration requirements are based, among other things, on data demonstrating that the product will not cause unreasonable adverse effects on human health or the environment when used according to approved label directions. All states where any of the Company’s products are used also require registration before they can be marketed or used in that state. Governmental regulatory authorities have required, and may require in the future, that certain scientific data requirements be performed on the Company’s products. The Company, on its behalf and in joint efforts with other registrants, have and are currently furnishing certain required data relative to its products. Under FIFRA, the federal government requires registrants to submit a wide range of scientific data to support U.S. registrations. This requirement has significantly increased the Company’s operating expenses in such areas as testing and the production of new products. The Company expects such increases to continue in the future. Because scientific analyses are constantly improving, it cannot be determined with certainty whether or not new or additional tests may be required by regulatory authorities. Responding to such requirements may cause delays in the sales of our products which delays would adversely affect our profitability. 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 U.S. EPA, there can be no assurance the EPA will not request certain tests or studies be repeated. In addition, more stringent legislation or requirements may be imposed in the future. The Company can provide no assurance that any testing approvals or registrations will be granted on a timely basis, if at all, or that its resources will be adequate to meet the costs of regulatory compliance.

The Company may be subject to environmental liabilities.

The Company, its facilities and its products are subject to numerous federal and state laws and governmental regulations concerning environmental matters and employee health and safety. The Company continually adapts its manufacturing process to the environmental control standards of the various regulatory

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agencies. The U.S. EPA and other federal and state agencies have the authority to promulgate regulations that could have a significant impact on the Company’s operations. The Company expends substantial funds to minimize the discharge of materials in the environment and to comply with governmental regulations relating to protection of the environment. Federal and state authorities may seek fines and penalties for violation of the various laws and governmental regulations, and could, among other things, impose liability on the Company for cleaning up the damage resulting from release of pesticides and other agents into the environment.

The Company’s use of hazardous materials exposes it to potential liabilities.

The Company’s development and manufacturing of chemical products involve the controlled use of hazardous materials. While the Company continually adapts its manufacturing process to the environmental control standards of regulatory authorities, it cannot completely eliminate the risk of accidental contamination or injury from hazardous or regulated materials. In the event of such contamination or injury, the Company may be held liable for significant damages or fines. In the event that such damages or fines are assessed, it could have a material adverse effect on the Company’s financial and operating results.

The Company’s business may give rise to product liability claims not covered by insurance or indemnity agreements.

The manufacturing, marketing, distribution and use of chemical products involve substantial risk of product liability claims. A successful product liability claim which is not insured may require the Company to pay substantial amounts of damages. In the event that such damages are paid, it could have a material adverse effect on the Company’s financial and operating results.

Adverse results in pending legal and regulatory proceedings could have adverse effects on the Company’s business.

The Company is currently, and may from time to time be, involved in legal and regulatory proceedings. The results of litigation and such proceedings cannot be predicted with certainty. The Company has and will continue to expend resources and incur expenses in connection with these proceedings. There can be no assurance that the Company will be successful in these proceedings. While the Company continually evaluates insurance levels for product liability, property damage and other potential areas of risk, an adverse determination in one or more of these proceedings could subject the Company to significant liabilities, which could have a material adverse effect on its financial condition and operating results.

The Company’s future success will depend on its ability to develop additional applications for its products, and to expand its product lines and customer base.

The Company has grown primarily by a strategy of acquiring mature product lines from larger competitors and expanding sales of these products based on new applications and new users. The Company’s success will depend, in part, on its ability to develop additional applications for its products, and to expand its product lines and customer base in a highly competitive market. There can be no assurance that the Company will be successful in adequately addressing these development needs on a timely basis or that, if these developments are addressed, the Company will be successful in the marketplace. In addition, there can be no assurance that products or technologies (e.g., genetic engineering) developed by others will not render the Company’s products noncompetitive or obsolete, which would have a material adverse effect on its financial and operating results. Many of the mature product lines the Company has acquired from larger competitors were divested as a result of a mergers involving such large competitors.

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The Company faces risks related to acquisitions of product lines.

The Company has expanded and intends to continue to expand its operations through the acquisition of additional product lines from these larger competitors. There can be no assurance that the Company will be able to identify, acquire or profitably manage additional product lines, or successfully integrate any acquired product lines without substantial expenses, delays or other operational or financial problems. There is an increasing trend in selling mature product lines through a competitive bid process. As a result, we may not be the successful bidder for a desirable product, or, if successful, we may pay a higher price for such product than if there was no competitive bid process. Further, acquisitions may involve a number of special risks or effects, including diversion of management’s attention, failure to retain key acquired personnel, unanticipated events or circumstances, minimum purchase quantities, legal liabilities and amortization of acquired intangible assets and other one-time or ongoing acquisition related expenses. Some or all of these special risks or effects could have a material adverse effect on the Company’s financial and operating results. Client satisfaction or performance problems associated with a business or product line could have a material adverse impact on the Company’s reputation. In addition, there can be no assurance that acquired product lines, if any, will achieve anticipated revenues and earnings.

The Company relies on intellectual property which it may be unable to protect, or may be found to infringe the rights of others.

The Company’s proprietary product formulations are protected, to the extent possible, as trade secrets and, to a lesser extent, by patents and trademarks. Most of the mature products that the Company has acquired which were patented are currently “off patent” because the patent has expired. The Company can provide no assurance that the way it protects its proprietary rights will be adequate or that its competitors will not independently develop similar or competing products.

Further, the Company can provide no assurance that its is not infringing other parties’ rights. Any claims could require the Company to spend significant sums in litigation, pay damages, develop non-infringing intellectual property, or acquire licenses to the intellectual property which is the subject of asserted infringement.

The Company relies on key executives in large part for its success.

The Company’s success is highly dependent upon the efforts and abilities of its executive officers, particularly Eric G. Wintemute, its President and Chief Executive Officer. Although Mr. Wintemute has entered into an employment agreement with the Company, this does not guarantee that he will continue his employment. The loss of the services of Mr. Wintemute or other executive officers could have a material adverse effect upon its financial and operating results.

Concentration of ownership among the Company’s Co-Chairmen of the Board of Directors may prevent new investors from influencing significant corporate decisions.

As of March 10, 2006, Herbert A. Kraft and Glenn A. Wintemute, the Company’s Co-Chairmen of the Board of Directors, beneficially owned approximately 14% and 8%, respectively, of the Company’s common stock. These stockholders as a group will be able to influence substantially the Company’s Board of Directors and thus its management and affairs. If acting together, they would be able to influence most matters requiring the approval by the Company’s stockholders, including the election of directors, any merger, consolidation or sale of all or substantially all of the Company’s assets and any other significant corporate transaction. The concentration of ownership may also delay or prevent a change in control if opposed by these stockholders irrespective of whether the proposed transaction is at a premium price or otherwise beneficial to the Company’s stockholders as a whole.

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The Company’s stock price may be volatile, and an investment in the Company’s stock could decline in value.

The market prices for securities of companies in the Company’s industry have been highly volatile and may continue to be highly volatile in the future. Often this volatility is unrelated to operating performance of a company.

The Company’s business may be adversely affected by terrorist activities.

The Company’s business depends on the free flow of products and services through the channels of commerce. Recently, in response to terrorists’ activities and threats aimed at the United States, transportation, mail, financial and other services have been slowed or stopped altogether. Further delays or stoppages in transportation, mail, financial or other services could have a material adverse effect on the business, results of operations and financial condition. Furthermore, the Company may experience an increase in operating costs, such as costs for transportation, insurance and security as a result of the activities and potential activities. The Company may also experience delays in receiving payments from counterparties that have been affected by the terrorist activities and potential activities. The U.S. economy in general is being adversely affected by the terrorist activities and potential activities and any economic downturn could adversely impact results of operations, impair the ability to raise capital or otherwise adversely affect the ability to grow the business.

Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.

Complying with changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and changes to the New York Stock Exchange rules, will require the Company to expend significant resources. The Company is committed to maintaining the highest standards of corporate governance and public disclosure. As a result, the Company will continue to invest necessary resources to comply with evolving laws, regulations and standards, and this investment may result in increased expenses and a diversion of management time and attention from revenue-generating activities.

The impact of FAS 123(R) may require recognition of significant financial expense for stock options.

FAS 123(R), as published by the Financial Accounting Standards Board, will require the Company, as a public company, to recognize in its financial statements an expense for stock options that are unvested and become exercisable after December 31, 2005.

Note On Forward-Looking Statements

This report contains forward-looking statements. Forward-looking statements relate to future periods and include descriptions of our plans, objectives, and underlying assumptions for future operations, our market opportunities, our acquisition opportunities, and our ability to compete. Generally, “may,” “could,” “will,” “would,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue” and similar words identify forward- looking statements. Forward-looking statements are based on our current expectations and are subject to risks and uncertainties that can cause actual results to differ materially. For information on these risks and uncertainties, see the “Risk Factors” in this report. We urge you to consider these factors carefully in evaluating the forward-looking statements contained in this report. Forward-looking statements are made only as of the date of this report.

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ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk related to changes in interest rates, primarily from its borrowing activities. The Company’s indebtedness to its primary lender is evidenced by a line of credit with a variable rate of interest, which fluctuates with changes in the lender’s reference rate. At December 31, 2005, the Company’s outstanding indebtedness on the line of credit was $5,000,000. A 1% change in the reference rate during 2005 would have increased or decreased the Company’s interest expense, based on the weighted outstanding balance, by approximately $301,000. The Company does not use derivative financial instruments for speculative or trading purposes.

The Company conducts business in various foreign currencies, primarily in Europe and Mexico. Therefore changes in the value of the currencies of such countries or regions affect the Company’s financial position and cash flows when translated into U.S. Dollars. As of December 31, 2005. The Company had not established a formal foreign currency hedging program. The Company has mitigated and will continue to mitigate a portion of its currency exchange exposure through operation of decentralized foreign operating companies in which the majority of all costs are local-currency based. A 10% change in the value of all foreign currencies would have an immaterial effect on the Company’s financial position and cash flows.

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements and Supplementary Data are listed at PART IV, Item 15, Exhibits, Financial Statement Schedules.

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of December 31, 2005, management, under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that these disclosure controls and procedures are effective, in all material respects, in ensuring that the information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported on a timely basis.

There have been no significant changes in the Company’s internal controls or in other factors subsequent to the date of the evaluation that could significantly affect these controls.

Management’s Report on Internal Control over Financial Reporting

Management of the Company is responsible for the establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) of the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance to management and the Board of Directors as to the fair, reliable and timely preparation and presentation of consolidated financial statements filed with the SEC.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even processes determined to be effective can provide only reasonable assurance with respect to the financial statement preparation and presentation.

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Management conducted an evaluation of the Company’s internal controls over financial reporting based on a framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the effectiveness of controls and a conclusion on the evaluation. Based on this evaluation, management believes that as of December 31, 2005, the Company’s internal control over financial reporting is effective.

The Company’s independent registered public accounting firm, BDO Seidman, LLP, has issued an attestation report on management’s assessment of internal control over financial reporting as of December 31, 2005 and that report is included herein.

Changes in Internal Controls over Financial Reporting

There were no changes in internal controls over financial reporting during the quarter ended December 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

To the Board of Directors and Stockholders of American Vanguard Corporation

Newport Beach, California

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that American Vanguard Corporation (the Company) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of American Vanguard Corporation, as of December 31, 2005 and 2004 and the related consolidated statements of income, stockholders’ equity and comprehensive income and cash flows for each of the three years in the period ended December 31, 2005 of Company and our report dated March 10, 2006 expressed an unqualified opinion thereon.

/s/    BDO Seidman, LLP

Los Angeles, California

March 10, 2006

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ITEM 9B OTHER INFORMATION

None.

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PART III

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following persons are the current Directors and Executive Officers of Registrant:

Name of Director/Officer	Age	Capacity
Herbert A. Kraft	82	Co-Chairman
Glenn A. Wintemute	81	Co-Chairman
Eric G. Wintemute	50	Director, President and Chief Executive Officer
Lawrence S. Clark (1)(2)	47	Director
John B. Miles (2)(3)	62	Director
Carl R. Soderlind (1)(2)(3)	72	Director
Irving J. Thau (1)(3)	66	Director
James A. Barry	55	Senior Vice President, Chief Financial Officer & Secretary/Treasurer
Glen Johnson	51	Senior Vice President of AMVAC Chemical Corporation (4)
Christopher K. Hildreth	54	Senior Vice President of AMVAC
Robert F. Gilbane	55	President of GemChem, Inc. (5)

(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

(3) Member of the Nominating and Corporate Governance Committee.

(4) AMVAC Chemical Corporation (“AMVAC”) is a wholly-owned subsidiary of American Vanguard Corporation

(5) GemChem, Inc. (“GemChem”) is a wholly-owned subsidiary of American Vanguard Corporation

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 AMVAC 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. He is the son of the Company’s Co-Chairman, Glenn A. Wintemute.

Lawrence S. Clark was appointed a director in February 2006. Mr. Clark is the Chief Operating Officer and CFO for Legendary Pictures, a motion picture production company that develops, co-produces and co-finances major motion pictures in partnership with Warner Bros. From 2000 to 2003, Mr. Clark was the Chief Financial Officer of Creative Artists Agency, a leading entertainment talent, literary and marketing agency. From 1997 to 2000, he served as Senior Vice President, Corporate Development for Sony Pictures Entertainment. Mr. Clark was Director—International for The Carlyle Group, a private equity firm, from 1995 to 1997. In 1992, he co-founded Global Film Equity Corp., which provided strategic, business advisory and capital raising services to

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media companies. From 1989 to 1992, Mr. Clark was Vice President, Corporate Finance at Salomon Brothers, Inc. Prior to that, he was a Corporate Finance Associate at Goldman Sachs & Co. from 1987 to 1989.

John B. Miles has served as a director since March 1999. Mr. Miles is a Partner with the law firm McDermott Will & Emery and has held the position of Partner since 1987. Prior to 1987, Mr. Miles was a partner with Kadison Pfaelzer Woodward Quinn & Rossi. Mr. Miles has previously served on boards of directors for public and private corporations.

Carl R. Soderlind has served as a director since June 2000. Mr. Soderlind served as Chairman and Chief Executive Officer of Golden Bear Oil Specialties, a producer of niche specialty oil and chemical products used in a variety of industrial applications from 1997 to 2001. From 1961 to 1996 he served in various capacities of Witco Corporation, with his most recent position being Senior Executive Vice President and member of the Management Committee.

Irving J. Thau has served as a director since September 2003. From 1962 to 1995, he held various positions with Ernst & Young LLP, where his primary responsibilities were directing and providing accounting, auditing, and business advisory services to publicly held and privately owned organizations. He was admitted to partnership in 1974, and most recently served as Ernst & Young’s West Region Director of Financial Advisory Services. In 1995, Mr. Thau founded Thau and Associates, Inc., a financial consulting company of which he currently serves as President. Mr. Thau is also a director and Chairman of the Audit Committee of American Home Mortgage Investment Corp. The Company’s Board of Directors has determined that Mr. Thau is independent under applicable rules and regulations currently prescribed by the SEC and applicable rules and listing standards of the New York Stock Exchange. The Company’s Board of Directors has also determined the Mr. Thau is the Audit Committee financial expert within the meaning of applicable SEC rules and regulations.

James A. Barry has served as Senior Vice President and Secretary since 1998. He has served as Treasurer since 1994 and as Chief Financial Officer of the Company and all operating subsidiaries since 1987. He also served as Vice President from 1990 through 1997 and as Assistant Secretary from 1990 to 1997. From 1990 to 1993, he also served as Assistant Treasurer. Mr. Barry also served as a director of the Company from 1994 through June 2004.

Glen D. Johnson has served as Senior Vice President and Director of Business Development of AMVAC since February 1999. Mr. Johnson was previously the North American Senior Marketing Manager for Contract Sales at Zeneca Ag Products. Prior to joining AMVAC, Mr. Johnson had over 20 years of experience in sales and marketing, acquisition and licensing, market development, and field research and development with three multinational agrochemical companies.

Christopher K. Hildreth has served as Senior Vice President and Director of Sales of AMVAC since February 2003. From 1980 to 1988, Mr. Hildreth held sales management positions at Pfizer Crop Protection. From 1988 to 1993, when United Agri Product (“UAP”) acquired Pfizer Crop Protection, Mr. Hildreth held sales management positions. From 1993 to 2001, he served as General Manager of UAP Canada. From 2001 to 2002, Mr. Hildreth held various executive positions at UAP, including Executive Vice President—International, President & General Manager—Distribution, and President—Products Company.

Robert F. Gilbane has served as President of GemChem since June 1999. He served as Executive Vice President from January 1994 (when the Company acquired GemChem) to June 1999. He co-founded GemChem in 1991 with Eric G. Wintemute.

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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.

Based solely on the Company’s review of the copies of such forms received by the Company, or representations obtained from certain reporting persons, the Company believes that during the year ended December 31, 2005 all filing requirements applicable to its officers, directors, and greater than ten percent beneficial stockholders were complied with.

Code of Ethics

The Company has adopted a code of ethics, the American Vanguard Corporation Code of Conduct and Ethics (the “Code of Ethics”), that applies to all employees, including the Company’s principal executive officer, principal financial officer and principal accounting officer. The Code of Ethics is posted on the Company’s Internet website, www.american-vanguard.com. Any amendment to, or waiver from, the Code of Ethics will be posted on the Company’s website within five business days following the date of the amendment or waiver.

ITEM 11 COMPENSATION

DIRECTOR COMPENSATION

The Company has the following compensatory arrangements with the non-employee members of its Board of Directors:

Cash Compensation:

Effective as of January 1, 2005, each non-employee director of the Board of Directors is entitled to receive cash compensation for his or her services on the Board of Directors as follows:

• Quarterly retainer fee of $5,000 for services on the Board of Directors.

• Quarterly retainer fee of $2,500 for service as chairperson of the Audit Committee.

• Quarterly retainer fee of $1,250 for service as chairperson of the Compensation Committee or the Nominating and Corporate Governance Committee.

• Attendance fee of $2,500 per meeting of the Board of Directors.

• Attendance fee of $1,000 per meeting of the committees of the Board of Directors, except that the Audit Committee chairperson will receive an attendance fee of $1,500 per Audit Committee meeting.

• Per diem fee of $2,000 for special assignments as determined from time to time by the Board of Directors.

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Stock Awards:

In accordance with the terms and conditions of the Company’s Amended and Restated 1994 Stock Incentive Plan, as amended through May 12, 2005 (the “Plan”), each non-employee director of the Board of Directors is entitled to receive awards of Restricted Stock or Restricted Stock Units (as each term is defined in the Plan) of the Company’s Common Stock, par value $.10 (“Common Stock”), as follows:

• In connection with each non-employee director’s election or re-election to the Board of Directors, such director is entitled to receive an award that equals $50,000 (the “Stock Award”).

• If a person is appointed to the Board of Directors for any partial year (for example, due to a vacancy on the Board of Directors), such director will receive a pro rata portion of the Stock Award as determined by the Compensation Committee or the Board of Directors.

• Each Stock Award will be calculated based on the closing price of the Common Stock, as reported on the American Stock Exchange or other national exchange on which the Common Stock is traded. No fractional share of any Stock Award will be issued; the value of such fractional share will be paid in cash.

• Each Stock Award will vest immediately in full upon grant.

The Company has entered into written indemnification agreements with each of its directors. The agreement is effective as of the first day of such person’s service as a director. The agreement provides for contractual indemnification obligations by the Company to the extent permitted by applicable law and the advancement of expenses in connection therewith. The agreement also provides that any legal action against a director must be brought within two years from the date of the accrual of such action or such shorter period as provided by law.

See “Description of Compensatory Arrangements Applicable to Non-Employee Directors for 2005” which was filed as Exhibit 10.1 to the Company’s Form 8-K which was filed with the Securities and Exchange Commission on June 15, 2005.

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EXECUTIVE COMPENSATION

The following table sets forth the aggregate cash and other compensation for services rendered for the years ended December 31, 2005, 2004 and 2003 paid or awarded by the Company and its subsidiaries to the its Chief Executive Officer and certain highly compensated executive officers of the Corporation, whose aggregate remuneration exceeded $100,000 (the “named executive officers”).

Summary Compensation Table

						Long-Term Compensation
		Annual Compensation(1)				Awards			Payouts
(a)	(b)	(c)	(d)	(e)		(f)	(g)	(h)	(i)
Name and Principal Position	Year	Salary ($)	Bonus ($)	Other Annual Compensation ($)		Restricted Stock Award(s) ($)	Securities Underlying Options/SARs (#) (2)	LTIP Payouts ($)	All Other Compensation ($) (3)
Eric G. Wintemute President and Chief Executive Officer	2005 2004 2003	461,735 446,649 451,293	300,000 206,000 169,000	—   —   —		—   —   —	—   —   75,000	—   —   —	10,500 6,880 6,140
James A. Barry Sr. V.P., CFO & Secretary/Treasurer	2005 2004 2003	205,122 190,159 176,242	110,000 65,000 50,000	—   —   —		—   —   —	—   —   22,000	—   —   —	10,500 6,880 5,563
Glen D. Johnson Sr. Vice President of AMVAC	2005 2004 2003	227,775 219,109 210,966	125,000 100,000 75,000	—   —   —		—   —   —	140 —   15,000	—   —   —	10,500 4,013 2,515
Christopher K. Hildreth Sr. Vice President of AMVAC (4)	2005 2004 2003	238,069 229,150 199,778	100,000 60,000 —	—   —   23,100	(5)	—   —   —	—   —   30,000	—   —   —	10,500 6,348 3,434
Robert F. Gilbane President of GemChem	2005 2004 2003	214,322 205,242 197,242	75,000 50,000 40,000	—   —   —		—   —   —	350 —   10,000	—   —   —	10,500 8,167 6,140

(1) No executive officer enjoys perquisites that exceed the lesser of $50,000 or 10% of the aggregate of such officer’s salary and bonus.

(2) Represents options to purchase the Company’s Common Stock granted pursuant to the Company’s 1994 Stock Incentive Plan. These numbers represent original figures, which have not been adjusted for stock splits and stock dividends.

(3) These amounts represent the Company’s contribution to the Company’s Retirement Savings Plan, a qualified plan under Internal Revenue Code Section 401(k).

(4) Mr. Hildreth joined AMVAC as Senior Vice President in February, 2003.

(5) This figure represents the aggregate one-time relocation expenses reimbursed to Mr. Hildreth pursuant to the terms of his employment agreement with AMVAC.

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OPTION GRANTS IN 2005

	Number of Securities Underlying Options/SARs Granted(1)(3)		% of Total Options/SARs Granted to Employees in Fiscal Year		Exercise or Base Price ($/Share)(1)	Expiration Date	Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation For Option Term (4)
Name							5%($)	10%($)
Glen D. Johnson	140	(2)	—	(5)	19.65	09/12/12	1,120	2,610
Robert F. Gilbane	350	(2)	—	(5)	19.65	09/12/12	2,800	6,525

(1) Original figures; not adjusted for stock dividends and splits.

(2) Exercisable in full on the date of grant.

(3) Options were granted pursuant to the terms and condition of the American Vanguard Corporation 1994 Stock Incentive Plan (as amended and restated).

(4) Represents the calculations at assumed 5% and 10% appreciation rates as prescribed by the rules and regulations of the SEC. Such calculations are not intended to forecast future appreciation, if any, and do not necessarily reflect the actual value, if any, that may be realized. The actual value of such options, if any, would be realized only upon the exercise of such options and depends upon the future performance of the Common Stock. No assurance can be made that the amounts reflected in these columns will be achieved. The potential realizable value was computed as the difference between the appreciated value (at the end of the term of the options) of the Common Stock into which the listed options are exercisable and the aggregate exercise price of such options. The calculations assume annual compounding and continued retention of the options and the underlying Common Stock by the optionee for the full option term.

(5) Less than 1%.

OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE

The following table shows, with respect to the named executive officers, the number of shares covered by both exercisable and non-exercisable stock options as of December 31, 2005, with respect to options to purchase Common Stock of American Vanguard Corporation. Also reported are the values for “in-the-money” options which represent the positive spread between the exercise price of any such existing stock options and the year-end closing price of the Common Stock. The closing price of the Common Stock on December 31, 2005, the last trading day of American Vanguard’s fiscal year, was $23.50 per share.

AGGREGATED OPTION/SAR EXERCISES IN 2005

AND FY-END OPTION/SAR VALUES

(a)	(b)	(c)	(d)	(e)
	Shares Acquired on Exercise (#)	Value Realized ($)	Number of Securities Underlying Unexercised Options/SARs at Fy-End (#) Exercisable/ Unexercisable	Value of Unexercised In-the-Money Options/SARs at Fy-End ($) Exercisable/ Unexercisable
Eric G. Wintemute	—	—	202,500/135,000	3,766,500/2,511,000
James A. Barry	—	—	87,000/57,000	1,660,350/ 975,150
Glen D. Johnson	—	—	18,140/27,000	229,139/342,900
Christopher K. Hildreth	—	—	90,000/45,000	1,688,850/844,425
Robert F. Gilbane	—	—	60,350/30,000	1,168,948/482,400

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Employee Contracts, Termination of Employment and Change of Control Arrangements

The Company and Eric G. Wintemute entered into a written employment agreement, dated as of January 15, 2003, pursuant to which Mr. Wintemute serves as the Company’s President and Chief Executive Officer. Mr. Wintemute’s annual base compensation is $435,000, with annual increases based on a percentage increase in the Consumer Price Index. Mr. Wintemute may receive a bonus in an amount as determined by the Board based on his performance against reasonable qualitative and quantitative benchmarks as determined by the Board. The agreement also provides Mr. Wintemute with certain additional benefits which are customary for executives at this level in the industry, including a car allowance of $1,500 per month and reimbursement of up to $25,000 for certain expenses. Mr. Wintemute’s agreement expires on December 31, 2007, provided that his employment may be earlier terminated for cause, disability or death. If the Company terminates Mr. Wintemute’s employment without cause and not due to disability or death, the Company shall pay to Mr. Wintemute an amount equal to his current annual base salary or his base salary due for the remainder of the term of the agreement, whichever is higher. If Mr. Wintemute dies during the term of the agreement, the Company will pay his designated beneficiary any amounts (including salary) and continue any benefits due to Mr. Wintemute under the agreement for 12 months after his death.

AMVAC and Christopher K. Hildreth entered into a written employment agreement, dated as of February 3, 2003, pursuant to which Mr. Hildreth serves as a Senior Vice President, Director of Sales for AMVAC. Mr. Hildreth’s beginning annual base salary is $220,000, with such increases as may be approved by the Board in its sole discretion. Mr. Hildreth may also receive a bonus as may be approved by the Board in its sole discretion. Subject to the terms of the Company’s 1994 Stock Incentive Plan (as amended) and a stock option agreement, the Company granted Mr. Hildreth options to acquire 30,000 shares of the Company’s Common Stock. The agreement also provides Mr. Hildreth with certain additional benefits which are customary for executives at this level in the industry, including a car allowance of $1,150 per month. Mr. Hildreth’s agreement expires on February 3, 2006, provided that his employment may be earlier terminated for cause, disability or death. If the Company terminates Mr. Hildreth’s employment without cause or for any or no reason, the Company shall pay to Mr. Hildreth an amount equal to his current annual base salary if such termination occurs during the first year of employment or $50,000 if such termination occurs during the second or the third year of employment. In addition, the Company agreed to reimburse Mr. Hildreth for certain reasonable expenses actually incurred by him in connection with his relocation to Southern California, including (i) brokerage commissions up to 7% related to the sale of his home and (ii) moving costs up to $25,000.

The Company entered into a written change of control severance agreement with each of its named executive officers. If the executive’s employment is terminated under specified conditions, the agreement provides the executive with certain benefits, namely (i) lump-sum payment of two times the executive’s base salary, (ii) medical benefits for a period of two years after termination, (iii) outplacement service, and (iv) accelerated vesting of options or other rights to acquire the Company’s securities. The benefits provided under the agreement are in addition to other benefits that the executive has or may have in the future as provided by the Company. The agreement has a term of five years.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee of the Board for the year ended December 31, 2005 consisted of Messrs. Carl R. Soderlind, Jay R. Harris and John B. Miles. 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.

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ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

To the knowledge of the Company, the ownership of the Company’s outstanding Common Stock as of March 10, 2006, by persons who are directors and nominees for directors, beneficial owners of 5% or more of the outstanding Common Stock, the executive officers of the Company named in the Summary Compensation Table and by all directors and officers as a group is set forth below. Unless otherwise indicated the Company 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.

Office (if any)	Name and Address Beneficial Owner	Amount and Nature of Beneficial Ownership(*)		Percent of Class
Co-Chairman	Herbert A. Kraft 4695 MacArthur Court Newport Beach, CA 92660	2,549,327	(1)	13.8	%
Co-Chairman	Glenn A. Wintemute 4695 MacArthur Court Newport Beach, CA 92660	1,599,307	(2)	8.2	%
	St. Denis J. Villere & Company 210 Baronne Street New Orleans, LA 70112 (**)	2,028,661		10.4	%
	T. Rowe Price Associates, Inc. 100 E. Pratt Street Baltimore, MD 21202 (**)	1,671,450		8.6	%
Director, President & CEO	Eric G. Wintemute 4695 MacArthur Court Newport Beach, CA 92660	1,078,160	(3)	5.5	%
Director	Jay R. Harris 80 Pine Street New York, NY 10005	960,005	(4)	4.9	%
	Goldsmith & Harris et. al. 80 Pine Street New York, NY 10005	704,644	(5)	3.6	%
President (GEMCHEM)	Bob Gilbane 4695 MacArthur Court Newport Beach, CA 92660	306,798	(6)	1.6	%
Senior Vice President (AMVAC)	Glen D. Johnson 4695 MacArthur Court Newport Beach, CA 92660	76,289	(7)	—	(14)
Senior Vice President (AMVAC)	Christopher K. Hildreth 4695 MacArthur Court Newport Beach, CA 92660	137,653	(8)	—	(14)
Sr.V.P.,CFO & Secretary/Treasurer	James A. Barry 4695 MacArthur Court Newport Beach, CA 92660	91,499	(9)	—	(14)

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AND SUBSIDIARIES

Office (if any)	Name and Address Beneficial Owner	Amount and Nature of Beneficial Ownership(*)		Percent of Class
Director	Carl R. Soderlind 4695 MacArthur Court Newport Beach, CA 92660	70,529	(10)	—	(14)
Director	John B. Miles 4695 MacArthur Court Newport Beach, CA 92660	57,893	(11)	—	(14)
Director	Irving J. Thau 4695 MacArthur Court Newport Beach, CA 92660	27,941	(12)	—	(14)
Director	Lawrence S. Clark 4695 MacArthur Court Newport Beach, CA 92660	3,333	(13)	—	(14)
Directors and Officers as a Group (15)		6,213,368		30.8	%

(*) Beneficial ownership figures are adjusted for stock splits and stock dividends distributed to date, including the 2 for 1 stock split distributed April 15, 2005.

(**) Based on information reported to the SEC by or on behalf of such beneficial owner.

(1) Mr. Kraft owns all of his shares with his spouse in a family trust where he and his spouse are co-trustees, except as to 10,376 shares held in an Individual Retirement Account. This figure includes 21,780 shares of Common Stock Mr. Kraft is entitled to acquire pursuant to stock options exercisable within sixty days of the filing of this Annual Report.

(2) Mr. Wintemute owns all of his shares with his spouse in a family trust where he and his spouse are co-trustees. This figure includes 21,780 shares of Common Stock Mr. Glenn Wintemute is entitled to acquire pursuant to stock options exercisable within sixty days of the filing of this Annual Report.

(3) This figure includes 270,000 shares of Common Stock Mr. Eric Wintemute is entitled to acquire pursuant to stock options exercisable within sixty days of the filing of this Annual Report. Mr. Wintemute shares voting and investment power with his spouse with respect to certain shares, including 104,520 shares of Common Stock owned by Mr. Wintemute’s minor children for whom Mr. Wintemute and his spouse are trustees or custodians and for which he disclaims beneficial ownership.

(4) This figure includes 14,520 shares of Common Stock Mr. Harris is entitled to acquire pursuant to stock options exercisable within sixty days of the filing of this Annual Report.

(5) This figure does not include shares beneficially owned by Jay Harris.

(6) This figure includes 350 shares of Common Stock Mr. Gilbane is entitled to acquire pursuant to stock options exercisable within sixty days of the filing of this Annual Report.

(7) This figure represents 18,140 shares of Common Stock Mr. Johnson is entitled to acquire pursuant to stock options exercisable within sixty days of the filing of this Annual Report.

(8) This figure represents 135,000 shares of Common Stock Mr. Hildreth is entitled to acquire pursuant to stock options exercisable within sixty days of the filing of this Annual Report.

(9) This figure includes 87,000 shares of Common Stock Mr. Barry is entitled to acquire pursuant to stock options exercisable within sixty days of the filing of this Annual Report.

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(10) This figure represents 7,260 shares of Common Stock Mr. Soderlind is entitled to acquire pursuant to stock options exercisable within sixty days of the filing of this Annual Report. Certain shares are held in a family trust where Mr. Soderlind and his spouse are co-trustees.

(11) This figure includes 29,040 shares of Common Stock Mr. Miles is entitled to acquire pursuant to stock options exercisable within sixty days of the filing of this Annual Report. Certain shares are held in a family trust where Mr. Miles and his spouse are co-trustees and certain shares are held by Mr. Miles or his spouse in individual retirement accounts.

(12) This figure represents 25,410 shares of Common Stock Mr. Thau is entitled to acquire pursuant to stock options exercisable within sixty days of the filing of this Annual Report.

(13) This figure includes 400 shares of Common Stock owned by Mr. Clark’s minor children for whom Mr. Clark and his spouse are trustees or custodians and for which he disclaims beneficial ownership.

(14) Under 1% of class.

(15) Total of 17.

EQUITY COMPENSATION PLAN INFORMATION(1)

	(a)	(b)		(c)
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	1,680,196	$	7.61	1,550,196
Equity compensation plans not approved by security holders	—			—
Total	1,680,196			1,550,196

(1) As of December 31, 2005. Does not include the American Vanguard Corporation Employee Stock Purchase Plan (approved by security holders in June 2001). Under this plan an aggregate of 1,320,000 shares of Common Stock (as adjusted for stock splits) may be sold to eligible employees pursuant to the plan. The purchase price shall be equal to 85% of the fair market value of the Company’s Common Stock on the first day of the enrollment period or on the last day of the enrollment period, whichever is lower. There were 1,142,250 shares available for issuance under the Plan as of December 31, 2005.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

John B. Miles, a Director of the Company, is also a partner in the law firm of McDermott, Will & Emery which provides legal services to the Company.

41

AMERICAN VANGUARD CORPORATION

AND SUBSIDIARIES

ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES

The Audit Committee of American Vanguard Corporation appointed and the stockholders ratified BDO Seidman, LLP (“BDO”) as the Company’s independent registered public accounting firm for the year ended December 31, 2005.

Aggregate fees for professional services rendered to the Company by BDO for the years ended December 31, 2005 and 2004, were (in thousands):

	2005		2004
Audit	$	474	$	303
Audit related		—		—
Tax		135		94
	$	609	$	397

Audit fees for 2005 and 2004 were for professional services rendered for the audits of the consolidated financial statements of the Company including the audit of management’s assessment of internal controls under Section 404 of the Sarbane’s Oxley Act, timely reviews of quarterly financial statements, consents, income tax provision procedures, and assistance with review of documents filed with the SEC.

Audit Related fees, if any, would primarily relate to assurance services, accounting consultations in connection with acquisitions, and consultations concerning financial accounting and reporting standards.

Tax fees for 2005 and 2004 were for services related to tax compliance, including the preparation of tax returns and claims for refund, and tax planning and tax advice, including assistance with and representation in tax audits, advice related to acquisitions, and requests for technical advice from tax authorities.

42

AMERICAN VANGUARD CORPORATION

AND SUBSIDIARIES

PART IV

ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

Index to Consolidated Financial Statements and Supplementary Data:

Description	Page No.
Financial Statements:
Report of Independent Registered Public Accounting Firm	45
Consolidated Balance Sheets as of December 31, 2005 and 2004	46
Consolidated Statements of Income for the Years Ended December 31, 2005, 2004, and 2003	47
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the Years Ended December 31, 2005, 2004 and 2003	48
Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004, and 2003	49
Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements	51

(b) Exhibits:

The exhibits listed on the accompanying Index To Exhibits, page 72 are filed as part of this annual report.

43

AMERICAN VANGUARD CORPORATION

AND SUBSIDIARIES

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.

AMERICAN VANGUARD CORPORATION

(Registrant)

By:	/s/    ERIC G. WINTEMUTE	By:	/s/    JAMES A. BARRY
	Eric G. Wintemute		James A. Barry
	President, Chief Executive Officer and Director		Senior Vice President, Chief Financial Officer and Secretary/Treasurer
	March 15, 2006		March 15, 2006

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.

By:	/s/    HERBERT A. KRAFT	By:	/s/    GLENN A. WINTEMUTE
	Herbert A. Kraft		Glenn A. Wintemute
	Co-Chairman		Co-Chairman
	March 15, 2006		March 15, 2006
By:	/s/    JOHN B. MILES	By:	/s/    CARL R. SODERLIND
	John B. Miles		Carl R. Soderlind
	Director		Director
	March 15, 2006		March 15, 2006
By:	/s/    LAWRENCE S. CLARK	By:	/s/    IRVING J. THAU
	Lawrence S. Clark		Irving J. Thau
	Director		Director
	March 15, 2006		March 15, 2006

44

AMERICAN VANGUARD CORPORATION

AND SUBSIDIARIES

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

of American Vanguard Corporation

Newport Beach, California

We have audited the accompanying consolidated balance sheets of American Vanguard Corporation as of December 31, 2005 and 2004, the related consolidated statements of income, stockholders’ equity, and comprehensive income and cash flows for each of the three years in the period ended December 31, 2005. 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 the standards of the Public Company Accounting Oversight Board (United States). 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, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 at December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of American Vanguard Corporation’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 10, 2006 expressed an unqualified opinion thereon.

/s/ BDO Seidman, LLP

Los Angeles, California

March 10, 2006

45

AMERICAN VANGUARD CORPORATION

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2005 and 2004

(Dollars in thousands, except share and per share data)

	2005			2004
Assets (note 2)
Current assets:
Cash	$	1,342		$	457
Receivables:
Trade		58,955			27,773
Other		1,314			532
		60,269			28,305
Inventories		44,359			43,635
Prepaid expenses		848			1,479
Deferred tax asset (note 3)		—			140
Total current assets		106,818			74,016
Property, plant and equipment, net (note 1)		34,339			26,118
Land held for development		211			211
Intangible assets		41,222			21,161
Other assets		637			840
	$	183,227		$	122,346
Liabilities and Stockholders’ Equity
Current liabilities:
Current installments of long-term debt (note 2)	$	8,107		$	5,107
Accounts payable		28,392			12,984
Accrued program costs		18,954			10,335
Accrued expenses and other payables		6,067			5,791
Accrued royalty obligations (notes 7 and 8)		1,801			1,837
Income taxes payable		1,829			1,687
Total current liabilities		65,150			37,741
Long-term debt, excluding current installments (note 2)		34,367			19,474
Deferred income taxes (note 3)		1,262			1,159
Total liabilities		100,779			58,374
Commitments and contingent liabilities (notes 2, 5, 7 and 9)
Stockholders’ equity:
Preferred stock, $.10 par value per share; authorized 400,000 shares; none issued		—			—
Common stock, $.10 par value per share; authorized 40,000,000 shares; issued 19,960,955 shares in 2005 and 19,862,288 shares in 2004		1,996			1,986
Additional paid-in capital		10,565			9,560
Accumulated other comprehensive loss		(198	)		(207	)
Retained earnings		72,830			55,378
		85,193			66,717
Less treasury stock, at cost 1,670,098 shares in 2005 and 2004		(2,745	)		(2,745	)
Total stockholders’ equity		82,448			63,972
	$	183,227		$	122,346

See summary of significant accounting policies and notes to consolidated financial statements.

46

AMERICAN VANGUARD CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2005, 2004 and 2003

(Dollars in thousands, except share and per share data)

	2005			2004			2003
Net sales (note 6)	$	189,796		$	150,855		$	124,863
Cost of sales		104,117			78,597			65,989
Gross profit		85,679			72,258			58,874
Operating expenses		53,412			47,300			42,332
Operating income		32,267			24,958			16,542
Interest expense		1,720			1,310			986
Interest income		(29	)		(13	)		(303	)
Interest capitalized		(363	)		(72	)		(323	)
Income before provision for income taxes		30,939			23,733			16,182
Income taxes (note 3)		11,937			9,256			5,919
Net income	$	19,002		$	14,477		$	10,263
Earnings per common share—basic	$	1.04		$	.81		$	.58
Earnings per common share—assuming dilution	$	.98		$	.76		$	.55
Weighted average shares outstanding—basic		18,258,134			17,963,396			17,622,606
Weighted average shares outstanding—assuming dilution		19,319,055			19,167,450			18,628,506

See summary of significant accounting policies and notes to consolidated financial statements.

47

AMERICAN VANGUARD CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

Years ended December 31, 2005, 2004 and 2003

(Dollars in thousands, except per share data)

	Common Stock			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income			Comprehensive Income		Treasury Stock				Total
	Shares	Amount												Shares	Amount
Balance, January 1, 2003	19,071,100	$	1,907	$	8,224	$	32,620		$	(272	)		—	1,619,762	$	(2,236	)	$	40,243
Stocks issued under ESPP	39,912		4		357		—			—			—	—		—			361
Cash dividends on common stock ($0.0455 per share)	—		—		—		(807	)		—			—	—		—			(807	)
Foreign currency translation adjustment, net	—		—		—		—			65			65	—		—			65
Treasury stock acquired	—		—		—		—			—			—	30,000		(208	)		(208	)
Stock options exercised	417,818		42		375		—			—			—	—		—			417
Net income	—		—		—		10,263			—			10,263	—		—			10,263
Total comprehensive income	—		—		—		—			—		$	10,328	—		—			—
Balance, December 31, 2003	19,528,830		1,953		8,956		42,076			(207	)		—	1,649,762		(2,444	)		50,334
Stocks issued under ESPP	16,876		2		186		—			—			—	—		—			188
Cash dividends on common stock ($0.065 per share)	—		—		—		(1,175	)		—			—	—		—			(1,175	)
Foreign currency translation adjustment, net	—		—		—		—			—			—	—		—			—
Treasury stock acquired	—		—		—		—			—			—	20,336		(301	)		(301	)
Stock options exercised	316,582		31		418		—			—			—	—		—			449
Net income	—		—		—		14,477			—			14,477	—		—			14,477
Total comprehensive income	—		—		—		—			—		$	14,477	—		—			—
Balance, December 31, 2004	19,862,288		1,986		9,560		55,378			(207	)		—	1,670,098		(2,745	)		63,972
Stocks issued under ESPP	30,877		4		536		—			—			—	—		—			540
Cash dividends on common stock ($0.085 per share)	—		—		—		(1,550	)		—			—	—		—			(1,550	)
Foreign currency translation adjustment, net	—		—		—		—			9			9	—		—			9
Stock options exercised	67,790		6		469		—			—			—	—		—			475
Net income	—		—		—		19,002			—			19,002	—		—			19,002
Total comprehensive income	—		—		—		—			—		$	19,011	—		—			—
Balance, December 31, 2005	19,960,955	$	1,996	$	10,565	$	72,830		$	(198	)		—	1,670,098	$	(2,745	)	$	82,448

See summary of significant accounting policies and notes to consolidated financial statements.

48

AMERICAN VANGUARD CORPORATION

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2005, 2004 and 2003

(Dollars in thousands)

	2005			2004			2003
Increase (decrease) in cash
Cash flows from operating activities:
Net income	$	19,002		$	14,477		$	10,263
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, plant and equipment		4,965			4,042			2,755
Amortization of other assets		2,051			1,758			1,298
Deferred income taxes		243			(1,053	)		833
Changes in assets and liabilities associated with operations:
Increase in receivables		(31,964	)		(108	)		(11,003	)
Increase in inventories		(724	)		(10,246	)		(12,161	)
(Increase) decrease in prepaid expenses		767			(422	)		(187	)
Increase (decrease) in accounts payable		15,456			(46	)		7,872
Increase (decrease) in other payables and accrued expenses		8,953			7,008			4,754
Net cash provided by operating activities		18,749			15,410			4,424
Cash flows from investing activities:
Capital expenditures		(13,186	)		(8,483	)		(4,448	)
Acquisitions of intangible assets		(22,112	)		(2,612	)		(5,926	)
Net decrease (increase) in other noncurrent assets		67			29			(267	)
Net cash used in investing activities		(35,231	)		(11,066	)		(10,641	)
Cash flows from financing activities:
Net (repayments) borrowings under line of credit agreement		3,000			(12,200	)		6,200
Proceeds from issuance of long-term debt		20,000			12,065			—
Payments on long-term debt and capital lease obligations		(5,107	)		(3,800	)		(2,199	)
Exercise of common stock options and sale of stock under ESSP		1,015			637			778
Purchase of treasury stock		—			(301	)		(208	)
Payment of cash dividends		(1,550	)		(1,175	)		(807	)
Net cash provided by (used in) financing activities		17,358			(4,774	)		3,764
Net increase (decrease) in cash		876			(430	)		(2,453	)
Cash at beginning of year		457			887			3,275
Effect of exchange rate changes on cash		9			—			65
Cash at end of year	$	1,342		$	457		$	887
Supplemental cash flow information:
Cash paid during the year for:
Interest	$	1,580		$	1,090		$	996
Income taxes	$	11,552		$	9,402		$	3,620

See summary of significant accounting policies and notes to consolidated financial statements.

49

Supplemental schedule of non-cash investing and financing activities:

On September 14, 2005, the Company announced that the Board of Director declared a cash dividend of $.03 per share which was distributed on October 14, 2005, to stockholders of record at the close of business on September 30, 2005.

On March 21, 2005, the Company announced that the Board of Directors declared a 2 for 1 stock split (100% stock dividend) and a cash dividend of $.11 per share ($.055 as adjusted for the stock split). Both dividends were distributed on April 15, 2005 to stockholders of record at the close of business on March 29, 2005. The cash dividend was paid on the number of shares outstanding prior to the 2 for 1 split. Stockholders entitled to fractional shares resulting from the stock split received cash in lieu of such fractional share based on the closing price of the Company’s stock on March 29, 2005.

On September 14, 2004, the Company announced that the Board of Directors declared a cash dividend of $.05 per share which was distributed on October 15, 2004 to stockholders of record as of October 1, 2004.

On March 16, 2004, the Company announced that the Board of Directors declared a cash dividend of $.12 per share ($.08) as adjusted for a 3 for 2 stock split) as well as a 3 for 2 stock split. Both the cash dividend and stock split were distributed on April 16, 2004 to stockholders of record at the close of business on March 26, 2004. The cash dividend was paid on the number of shares outstanding prior to the 3 for 2 stock split. Stockholders entitled to fractional shares resulting from the stock split received cash in lieu of such fractional share based on the closing price of the Company’s common stock on March 26, 2004.

On April 11, 2003, the Company distributed 3,183,210 shares of common stock in connection with a 3 for 2 stock split to stockholders of record as of March 28, 2003.

During 2003, The Company completed the acquisition of seven product lines, one used in the animal health business, one related to the herbicide business and five related to a pre-harvest crop protection business. In connection with these acquisitions, the Company recorded intangible assets in the amount of $10,726 of which $5,926 was paid in cash during the period.

See summary of significant accounting policies and notes to consolidated financial statements.

50

AMERICAN VANGUARD CORPORATION

AND SUBSIDIARIES

(Dollars in thousands, except per share data)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2005, 2004 and 2003

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 manufactures and formulates chemicals for crops, human and animal protection. The consolidated financial statements include the accounts of American Vanguard Corporation (“Company”) and its subsidiaries AMVAC Chemical Corporation (“AMVAC”), GemChem, Inc. (“GemChem”), 2110 Davie Corporation (“DAVIE”), AMVAC Chemical UK Ltd., (“Chemical UK”) and Quimica Amvac de Mexico S.A. de C.V. (“Quimica Amvac”), and Environmental Mediation, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company operates within a single operating segment.

Based on similar economic and operational characteristics, the Company’s business is aggregated into one reportable segment. Selective enterprise information is as follows:

	2005		2004		2003
Net sales:
Crop	$	157,327	$	122,498	$	104,895
Non-crop		32,469		28,357		19,968
	$	189,796	$	150,855	$	124,863

The Company’s subsidiary, GemChem, Inc., procures certain raw materials used in the Company’s manufacturing operations and is also a distributor of various pharmaceutical and nutritional supplement products.

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.

Advertising Expense

The Company expenses advertising costs in the period incurred. Advertising expenses, which include promotional costs, is recognized in operating costs (specifically in selling expenses) in the consolidated statements of income and were $1,044 in 2005, $703 in 2004 and $1,207 in 2003.

Cost of Goods Sold

In addition to normal centers (i.e., direct labor, raw materials) of cost of goods sold, the Company includes such cost centers as Health and Safety, Environmental, Maintenance and Quality Control in cost of goods sold.

Other Than Cost of Goods Sold—Operating Expenses

Operating expenses include such cost centers as Selling, General and Administrative, Research and Product Development, Regulatory/Registration, Freight, Delivery and Warehousing in operating expenses.

51

AMERICAN VANGUARD CORPORATION

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Freight, Delivery and Warehousing Expense

Freight, delivery and warehousing costs incurred by the Company are reported as operating expenses. All amounts billed to a customer in a sales transaction related to freight, delivery and warehousing are recorded as a reduction in operating expenses. Freight, delivery and warehousing costs were $11,715 in 2005, $9,676 in 2004 and $8,902 in 2003.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method.

The components of inventories consist of the following:

	2005		2004
Finished products	$	40,166	$	39,244
Raw materials		4,193		4,391
	$	44,359	$	43,635

Long-lived Assets

The carrying values of long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Measurement of the impairment loss is based on the fair value of the asset. Generally, fair value will be determined using valuation techniques such as the present value of expected future cash flows. Substantially all of the Company’s long-lived assets are held domestically. There was no impairment for the years ended December 31, 2005, 2004 and 2003.

Revenue Recognition

Revenue from sales is recognized at the time title and the risks of ownership passes. This is when the customer has made the fixed commitment to purchase the goods, the products are shipped per the customers’ instructions, the sales price is determinable, and collection is reasonably assured.

Programs

Effective January 1, 2002, the Company adopted Emerging Issues Task Force Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor’s Products (“EITF 01-9”). Upon adoption of EITF 01-9, the Company is required to classify certain payments to its customers as a reduction of sales. The Company engages in various customer programs. The Company accounts for these programs as operating expenses or as a reduction in sales in accordance with EITF 01-9.

Property, Plant and Equipment and Depreciation

Property, plant and equipment includes the cost of land, buildings, machinery and equipment, office furniture and fixtures, automobiles, and construction projects and significant improvements to existing plant and equipment. Interest costs related to significant construction projects may be capitalized at the Company’s weighted average cost of capital. Expenditures for maintenance and minor repairs are expensed as incurred. When property or equipment is sold or otherwise disposed of, the related cost and accumulated depreciation is

52

AMERICAN VANGUARD CORPORATION

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

removed from the respective accounts and the gain or loss realized on disposition is reflected in earnings. All plant and equipment is depreciated using the straight-line method, utilizing estimated useful property lives. Building lives range from 10 to 30 years; machinery and equipment lives range from 3 to 15 years; office furniture and fixtures lives range from 3 to 10 years, automobile lives range from 3 to 6 years; construction projects and significant improvements to existing plant and equipment lives range from 3 to 15 years when placed in service.

Foreign Currency Translation

Assets and liabilities of foreign subsidiaries, where the local currency is the functional currency, have been translated at year end exchange rates and profit and loss accounts have been translated using weighted average yearly exchange rates. Adjustments resulting from translation have been recorded in the equity section of the balance sheet as cumulative translation adjustments in other comprehensive loss.

The effect of foreign currency exchange gains and losses on transactions that are denominated in currencies other than the entity’s functional currency are remeasured into the functional currency using the end of the period exchange rates. The effects of foreign currency transactions are included in current profit and loss accounts.

The Company had total comprehensive income of $19,011, $14,477 and $10,328 for the years ended December 31, 2005, 2004 and 2003, respectively, which include foreign currency gain (loss) of $9, $0 and $65 for the years ended December 31, 2005, 2004 and 2003, respectively.

Fair Value of Financial Instruments

The carrying values of cash, receivables and accounts payable approximate their fair values because of the short maturity of these instruments.

The fair value of the Company’s long-term debt and note payable to bank 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. Such fair value approximates the respective carrying values of the Company’s long-term debt and note payable to bank.

Income Taxes

The Company uses the asset and liability method to account for income taxes, including recognition of deferred tax assets for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax bases. Income tax expense is recognized currently for taxes payable. The Company reviews its deferred tax assets for recovery. A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in the Company’s tax provision in the period of change.

Per Share Information

Statement of Financial Accounting Standards (“SFAS”) No. 128, Earnings Per Share (“EPS”) requires dual presentation of basic EPS and diluted EPS on the face of all income statements. Basic EPS is computed as net income divided by the weighted average number of shares of common stock outstanding during the period.

53

AMERICAN VANGUARD CORPORATION

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Diluted EPS reflects potential dilution that could occur if securities or other contracts, which, for the Company, consists of options to purchase shares of the Company’s common stock are exercised.

The components of basic and diluted earnings per share were as follows:

	2005		2004		2003
Numerator:
Net income	$	19,002	$	14,477	$	10,263
Denominator:
Weighted averages shares outstanding		18,258		17,963		17,623
Assumed exercise of stock options		1,061		1,204		1,006
		19,319		19,167		18,629

The effect of options to purchase 34,280 and 151,575 shares for the years ended December 31, 2004 and 2003 were excluded from the computation of earnings per dilutive share. The impact of such common stock equivalents are excluded from the calculation of net income per share on a diluted basis as their effect is anti-dilutive. There were no anti-dilutive common stock equivalents for the year ended December 31, 2005.

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.

Reclassifications

Certain prior years amounts have been reclassified to conform to the current year’s presentation.

Goodwill and Other Intangible Assets

The primary identifiable intangible assets of the Company relate to product rights associated with its product acquisitions. The Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets. Under the provisions of SFAS No. 142, identifiable intangibles with finite lives are amortized and those with indefinite lives are not amortized. The estimated useful life of an identifiable intangible asset to the Company is based upon a number of factors including the effects of demand, competition, and expected changes in the marketability of the Company’s products. The Company tests identifiable intangible assets for impairment at least annually, relying on a number of factors including operating results, business plans and future cash flows. Identifiable intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate elements of property. The impairment test for identifiable intangible assets not subject to amortization consists of a comparison of the fair value of the intangible asset with its carrying amount. An impairment loss, if any, is recognized for the amount by which the carrying value exceeds the fair value of the asset. Fair value is typically estimated using a discounted cash flow analysis, which requires the Company to estimate the future cash flows anticipated to be generated by the particular asset(s) being tested for impairment as well as select a discount rate to measure the present value of the anticipated cash flows. When determining future cash flow estimates, the Company considers historical results

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adjusted to reflect current and anticipated operating conditions. Estimating future cash flows requires significant judgment by the Company in such areas as future economic conditions, industry-specific conditions, product pricing and necessary capital expenditures. The use of different assumptions or estimates for future cash flows could produce different impairment amounts (or none at all) for long-lived assets, goodwill and identifiable intangible assets. As of January 1, 2002, the Company had an immaterial amount of goodwill and amortization related to the goodwill. As such, the adoption of SFAS 142, did not have a material impact on the Company’s financial statements.

Stock-Based Compensation

The Company has adopted the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation.” In accordance with SFAS No. 123, the Company has elected the disclosure-only provisions related to employee stock options and follows the Accounting Principals Board Opinion (APB) No. 25 in accounting for stock options issued to employees. Under APB No. 25, compensation expense, if any, is recognized as the difference between the exercise price and the fair value of the common stock on the measurement date, which is typically the date of grant, and is recognized over the service period, which is typically the vesting period.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure”. SFAS No. 148 amends SFAS No. 123 and provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure requirements of SFAS No. 123 to require more prominent and frequent disclosures in financial statements about the effects of stock-based compensation. The Company adopted the disclosure requirements of SFAS No. 148 in the fourth quarter of 2002.

All stock options issued to employees have an exercise price not less than the fair market value of the Company’s common stock on the date of the grant, and in accordance with accounting for such options utilizing the intrinsic value method there is no related compensation expense recorded in the Company’s consolidated financial statements. Had compensation cost for stock-based compensation been determined based on the fair value of the grant dates consistent with the method of FASB 123, the Company’s net income and income per share for the years ended December 31, 2005, 2004 and 2003 would have been adjusted to the pro forma amounts presented:

	2005			2004			2003
Net income attributable to common stockholders	$	19,002		$	14,477		$	10,263
Stock-based employee compensation expense included in reported net income, net of related tax effects	$	-0-		$	-0-		$	-0-
Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	$	(589	)	$	(600	)	$	(446	)
Pro forma	$	18,413		$	13,877		$	9,817
Earnings per common share	$	1.04		$	.81		$	.58
Pro forma	$	1.02		$	.78		$	.56
Earnings per common share—assuming dilution, as reported	$	.98		$	.76		$	.55
Pro forma	$	.96		$	.73		$	.53

The fair value of option grants is estimated on the date of grant utilizing the Black-Scholes option-pricing model with the weighted average assumptions for grants in 2005, 2004 and 2003; expected life of options was

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one to five years, expected volatility of 38%, 38% and 43%, risk-free interest rate of 4.7%, 3.6% and 3% and a .26% dividend yield. The weighted average fair value on the date of grants for options granted during 2005, 2004 and 2003 was $5.20, $5.81 and $4.66 per option, respectively.

Recently Issued Accounting Guidance

In December 2004, the Financial accounting Standards Board (“FASB”) issued SFAS No. 123R, “Share-Based Payment,” that establishes standards for accounting for transactions in which a company exchanges its equity instruments for goods and services or incurs a liability in exchange for goods and services that is based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. The primary focus of this pronouncement is on issuing share-based payments for services provided by employees. This pronouncement also requires recognition of compensation expense for new equity instruments awarded or for modifications, cancellations or repurchases of existing awards starting January 1, 2006. Compensation expense for new equity awards, in most cases, will be based on the fair value of the stock on the date of grant and will be recognized over the vesting service period. An award of liability instrument, as defined by this pronouncement, will initially be recorded at fair value and will be adjusted each reporting period to the new fair value through the date of settlement. Under the terms of this pronouncement, we and other issuers will begin to expense equity awards using a modified version of prospective application. Under that transition method, compensation cost is recognized on or after the required effective date for the portion of outstanding awards for which the requisite service has not yet been rendered, based on the fair value of those awards on their respective grant dates. For periods before the required effective date for which financial statements have not yet been issued, we had the option to elect to apply a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required by Statement No. 123.

We adopted SFAS No. 123R effective January 1, 2006 and began to expense previously issued equity awards for which service has not been rendered on that date. As of December 31, 2005, we estimate our maximum expense for existing stock options to be approximately $1.2 million which would be recognized $500,000 for 2006, $400,000 for 2007 and $300,000 for 2008 This projected expense will change if any stock options are granted or cancelled prior to the respective reporting periods or if there are any changes required to be made for estimated forfeitures as of January 1, 2006.

In December 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4,” which requires that abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) be recognized as current-period charges. In addition, the statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for fiscal years beginning after June 15, 2005. The Company will adopt this statement as required, and the Company does not believe the adoption will have a material effect on the Company’s results of operations or financial condition.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29,” which eliminates the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The statement defines a nonmonetary exchange with commercial substance as one in which the future cash flows of an entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for fiscal periods beginning after June 15, 2005. The Company has adopted this statement as required, and it does not believe the adoption has had a material effect on the Company’s results of operation or financial condition.

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In May 2005, the Financial Accounting Standards Board issued Statement No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and Statement No. 3, Reporting Accounting Changes in Interim Financial Statements,” or SFAS No. 154. SFAS No. 154 changes the requirements for the accounting for, and reporting of, a change in accounting principle. Previously, most voluntary changes in accounting principles were required to be recognized by way of a cumulative effect adjustment within net income during the period of the change. SFAS No. 154 generally requires retrospective application to prior periods’ financial statements of voluntary changes in accounting principles. SFAS No. 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, SFAS No. 154 does not change the transition provisions of any existing accounting pronouncements. The Company does not believe the adoption of SFAS No. 154 will have a material effect on its results of operations or financial condition.

(1) Property, Plant and Equipment

Property, plant and equipment at December 31, 2005 and 2004 consists of the following:

	2005		2004		Estimated useful lives
Land	$	2,441	$	2,441
Buildings and improvements		5,202		5,105	10 to 30 years
Machinery and equipment		47,814		44,772	3 to 15 years
Office furniture, fixtures and equipment		3,685		3,378	3 to 10 years
Automotive equipment		209		209	3 to 6 years
Construction in progress		13,739		3,999
		73,090		59,904
Less accumulated depreciation		38,751		33,786
	$	34,339	$	26,118

The Company began the re-commissioning phase during the third quarter of 2001 of the Axis, Alabama manufacturing facility it acquired in May 2001 from E.I. Du Pont de Nemours. The Company began the commissioning phase of this facility during the third quarter of 2001 and this facility was placed in service in May 2003. As of December 31, 2003, all costs related to the re-commissioning of the Axis, Alabama manufacturing facility have been placed into service and depreciation over their estimated useful lives has commenced.

(2) Long-Term Debt

Long-term debt of the Company at December 31, 2005 and 2004 is summarized as follows:

	2005		2004
Note payable, secured by certain real property, payable in monthly installments of $9, plus interest at prime (4.75% as of December 31, 2004) plus 2% with remaining unpaid principal due April 30, 2012 (a)	$	2,474	$	2,581
Term loan, secured by personal property, payable in quarterly installments of $2,000 plus interest at prime (4.75% as of December 31, 2004) with remaining unpaid principal due September 30, 2009 (b)		35,000		19,000
Revolving line of credit (b)		5,000		2,000
Obligations under product acquisition agreements		-0-		1,000
		42,474		24,581
Less current installments		8,107		5,107
	$	34,367	$	19,474

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Approximate principal payments on long-term debt, excluding the revolving line of credit, mature as follows:

2006	$	8,107
2007		8,107
2008		8,107
2009		16,107
2010		107
Thereafter		1,939
	$	42,474

(a) This note payable, secured by certain real property, was refinanced effective March 19, 2004 (new financed amount of $2,660). The new loan bears interest at prime, or at the Company’s option, at a fixed rate of interest offered by the bank. The new monthly installments, effective April 2004, are $9, plus interest. The Company will make principal plus interest payments over a seven-year term of the loan (loan matures April 1, 2011), based on a twenty-five-year amortization schedule. The proceeds from the loan were used to payoff a maturing term loan and repay bank debt (fully-secured revolving line).

(b) In October 2004, the Company entered into an Amended and Restated Credit Agreement with a syndicate of commercial lenders led by the Company’s primary bank as the administrative agent and a lender, two other banks as lenders and a fourth as a participant, for an $80,000 fully-secured credit facility. This credit facility replaced the Company’s previous credit facility with its primary bank and one other bank entered into in May 2002 and amended in March 2004. The new credit facility consists of a $45,000 revolving line of credit and a $35,000 term loan. These loans bear interest at the prime rate (“Referenced Loans”), or at the Company’s option, a fixed rate of interest offered by the Bank (such as adjusted LIBOR rate plus certain margins, in each case dependent on certain debt ratios (“Fixed Loans”)). The principal payments of the term loan are payable in equal quarterly installments of $1,000 on or before the last business day of each February, May, August and November, commencing November 30, 2004 and in one final installment in the amount necessary to repay the remaining outstanding principal balance of the term loan in full on the maturity date. Interest accruing on the Referenced Loans are payable quarterly, in arrears, on the last day of each March, June, September and December, and on the maturity date of such loan in the amount of interest then accrued but unpaid. Interest accruing on the Fixed Loans are payable on the last day of the interest period, provided that, with an interest period longer than three months, interest is payable on the last day of each three-month period after the commencement of such interest period. The senior secured revolving line of credit and term loan both mature on October 7, 2009 (five years from the closing date) and contain certain covenants (with which the Company is in compliance) as defined in the agreement. The Company had $40,000,000 of availability under its revolving line of credit as of December 31, 2005.

Substantially all of the Company’s assets not otherwise specifically pledged as collateral on existing loans and capital leases are pledged as collateral under the credit agreement.

The average amount outstanding of the senior secured revolving line of credit during the years ended December 31, 2005 and 2004 was $10,055 and $19,400. The weighted average interest rate during the years ended December 31, 2005 and 2004 was 5.63% and 3.40%.

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(3) Income Taxes

The components of income tax expense are:

	2005			2004			2003
Current:
Federal	$	9,626		$	8,391		$	4,049
State		2,554			1,918			1,185
Deferred:
Federal		(320	)		(959	)		613
State		77			(94	)		72
	$	11,937		$	9,256		$	5,919

Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 35% to income before income tax expense as a result of the following:

	2005			2004			2003
Computed tax provision at statutory Federal rates	$	10,829		$	8,307		$	5,648
Increase (decrease) in taxes resulting from:
State taxes, net of Federal income tax benefit		1,575			1,241			322
Other expenses		(467	)		(292	)		28
Benefit of tax credits		—			—			(79	)
	$	11,937		$	9,256		$	5,919

Temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities that give rise to significant portions of the net deferred tax liability at December 31, 2005 and 2004 relate to the following:

	2005			2004
Current:
Inventories	$	702		$	953
State income taxes		504			410
Vacation pay accrual		182			161
Bonus accrual		107			—
Bad debt reserve		178			—
Other		6			(93	)
Net deferred tax asset		1,679			1,431
Non-Current:
Plant and equipment, principally due to differences in depreciation and capitalized interest		(2,941	)		(2,450	)
Net deferred tax liability		(2,941	)		(2,450	)
Total net deferred tax liability	$	(1,262	)	$	(1,019	)

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The Company believes it is more likely than not that the deferred tax assets above will be realized in the normal course of business.

(4) Litigation and Environmental

DBCP LAWSUITS

I. DBCP Litigation

AMVAC and/or the Company have been named or otherwise implicated in a number of lawsuits concerning injuries allegedly arising from either contamination (of water supplies) or personal exposure to 1,2-dibromo-3-chloropropane (“DBCP”). A summary of these actions follows:

A. Hawaii Matters

AMVAC and the Company were served with complaints in February 1997. The actions were filed in the Circuit Court of the Second Circuit, State of Hawaii entitled Board of Water Supply of the County of Maui v. Shell Oil Co., et. al. The suit named as defendants the Company, AMVAC, Shell Oil Company, The Dow Chemical Company, Occidental Chemical Company, Occidental Petroleum Corporation, Occidental Chemical Corporation, and Brewer Environmental Industry, Inc. Maui Pineapple Company was joined as a cross-defendant. The Complaint alleged that between two and four of the Board’s wells had been contaminated with DBCP in excess of the maximum contaminant level (“MCL”). In addition, the Board of Water Supply contended that future wells may exceed the MCL level and would need remediation. On August 2, 1999, a global settlement was reached, which included the remediation of the existing contaminated wells in addition to the installation of filtration devices on other wells for the next forty years on the island of Maui. The cash settlement was three million dollars ($3,000,000) of which AMVAC’s (and the Company’s) portion was five hundred thousand dollars ($500,000). The settlement agreement obligates the defendants to pay for the installation of filtration devices on other wells that become contaminated later and for the ongoing operation and maintenance of the filtration devices for up to forty years. The annual costs of operation and maintenance per well is estimated to be approximately sixty-nine thousand dollars ($69,000), to be adjusted annually by the consumer price index. The obligations of the defendants under this agreement are secured by a twenty million-dollar letter of credit obtained by Dow Chemical. In connection with the settlement, in October 2005, AMVAC paid for a share of a permanent filtration system in the amount of $222,198.

In October 1997, AMVAC was served with a Complaint(s) in which it was named as a defendant, filed in the Circuit Court, First Circuit, State of Hawaii and in the Circuit Court of the Second Circuit, State of Hawaii (two identical suits) entitled Patrickson, et. al. v. Dole Food Co., et. al (“Patrickson Case”) alleging damages sustained from injuries caused by plaintiffs’ exposure to DBCP while applying the product in their native countries. Other named defendants are: Dole Food Co., Dole Fresh Fruit, Dole Fresh Fruit International, Pineapple Growers Association of Hawaii, Shell Oil Company, Dow Chemical Company, Occidental Chemical Corporation, Standard Fruit Company, Standard Fruit & Steamship, Standard Fruit Company De Costa Rica, Standard Fruit Company De Honduras, Chiquita Brands, Chiquita Brands International, Martrop Trading Corporation, and Del Monte Fresh Produce. (American Vanguard Corporation has not been sued in these actions.) The ten named plaintiffs are citizens of four countries—Guatemala, Costa Rica, Panama, and Ecuador. Punitive damages are sought against each defendant. The plaintiffs were banana workers and allege that they were exposed to DBCP in applying the product in their native countries. The case was also filed as a class action on behalf of other workers so exposed in these four countries. The plaintiffs” allege sterility and other injuries. (The plaintiffs’ attorneys (from South Carolina) have also represented foreign banana workers in the Texas and Mississippi matters discussed below.) For the last several years, the focus of the case has been on procedural issues. On April 22, 2003, the United States Supreme Court issued a decision on the procedural posture of the

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case, holding there was no jurisdiction in federal court. Once the case reaches state court, the defendants may seek to effect dismissal under forum non conveniens pursuant to state court procedures. No activity has taken place in the US court system on this case since early 2004 as apparently, the suit has not been officially received in the state court upon remand. However, the plaintiffs’ attorneys reported that the ten plaintiffs filed suit in their home countries in 1998, alleging in excess of two million United States dollars ($2,000,000) per plaintiff. The suit in Guatemala was served on AMVAC in March 2001, but no defendant has been required to answer. Suits in the other countries have not been served. AMVAC has engaged local attorneys in the countries to defend these foreign suits. No discovery has taken place on the individual claims of the plaintiffs. It is too early to provide any evaluation of the likelihood of an unfavorable outcome at this time. Without such discovery, it is unknown whether any of the plaintiffs was exposed to AMVAC brand DBCP or what statute of limitation defenses may apply. AMVAC intends to contest the cases vigorously.

On or about October 1, 2003, the Company was indirectly advised of a possible claim for groundwater contamination on the Island of Maui. (This is separate and distinct from Item 1 (A) above.) The Company was provided with communications between Maui Land & Pineapple Company, Inc. (“Maui Pine”) and Hawaii Water Service Company (“HWSC”). HWSC is a non-municipally owned public water utility owning three water wells allegedly contaminated with DBCP and 1,2,3-tri-chloropropane (“TCP”). HWSC further alleges that the wells were contaminated by the above mentioned chemicals manufactured, marketed, distributed and/or sold by Maui Pine, Maui Pineapple Company, The Dow Chemical Company, Dow AgroSciences, LLC, Occidental Petroleum Corporation, Occidental Chemical Corporation, Shell Oil Company, Shell Chemical Company, American Vanguard Corporation, AMVAC Chemical Company (collectively, “AMVAC”), BEI Hawaii and Brewer Environmental Industries Holdings, Inc. The Company has been advised that the total claim could approximate four million dollars ($4,000,000). Through mediation, on January 15, 2004, the Company reached a settlement with HWSC for fifty-five thousand dollars ($55,000.00), contingent upon obtaining a court order approving the settlement as one made in good faith. The motion for approval of the good faith settlement was granted in 2005 and the suit against AMVAC has been dismissed, pursuant to the settlement.

B. Mississippi Matters

In May 1996, AMVAC was served with five complaints in which it is named as a defendant. (These complaints were filed by the same attorneys representing the Patrickson plaintiffs in Hawaii.) The complaints are brought by plaintiffs Edgar Arroyo-Gonzalez, Eulogio Garzon-Larreategui, ValentinValdez, Amilcar Belteton-Rivera, and Carlos Nicanor Espinola-E against one or more of the following named defendants: Coahoma Chemical Co. Inc., Shell Oil Company, Dow Chemical Co., Occidental Chemical Co., Standard Fruit Co., Standard Fruit and Steamship Co., Dole Food Co., Inc., Dole Fresh Fruit Co., Chiquita Brands, Inc., Chiquita Brands International, Inc. and Del Monte Fresh Produce, N.A. The cases were filed in the Circuit Court of Harrison County, First Judicial District of Mississippi. Each case alleged damages sustained from injuries caused by plaintiffs’ (who are former banana workers and citizens of a Central American country) exposure to DBCP while applying the product in their native countries. These cases were removed to U.S. District Court for the Southern District of Mississippi, Southern Division. The federal court granted defense motions to dismiss in each case pursuant to the doctrine of forum non conveniens. On January 19, 2001, the court issued an unpublished decision, finding that there was jurisdiction in federal court, but remanded just one case (Espinola) back to the trial court to determine if a stipulation which limited the plaintiff’s recovery to fifty thousand dollars ($50,000) was binding. If the stipulation is binding, that case will be remanded to state court. If the stipulation is not binding, that case will be dismissed along with the others, requiring the plaintiffs to litigate in their native countries. The federal court then ordered remand to state court. No activity has taken place on this matter since 2001. Without discovery, it is unknown whether any of the plaintiffs were exposed to the Company’s product or

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what defenses may apply. AMVAC intends to contest the cases vigorously. It is too early to provide an evaluation of the likelihood of an unfavorable outcome in this case.

C. Louisiana Matters

In November 1999, AMVAC was served with three complaints filed in the 29^th Judicial District Court for the Parish of St. Charles, State of Louisiana entitled Pedro Rodrigues et. al v. AMVAC Chemical Corporation et. al, Andres Puerto, et. al v. Amvac Chemical Corporation, et. al and Eduardo Soriano, et al v. Amvac Chemical Corporation et. al. Other named defendants are: Dow Chemical Company, Occidental Chemical Corporation, Shell Oil Company, Standard Fruit, Dole Food, Chiquita Brands, Tela Railroad Company, Compania Palma Tica, and Del Monte Fresh Produce. American Vanguard Corporation is not named as a defendant. These suits were filed in 1996, but they were not served until November 1999. (These complaints were filed in association with the same attorneys who have handled the Delgado and Carcamo matters listed below.) Following a dismissal of most of the plaintiffs from the action (in light of the fact that they had previously settled their claims in other actions), the complaints, with Soriano as the lead case, allege personal injuries to about 314 persons (167 from Ecuador, 102 from Costa Rica, and 45 from Guatemala) from alleged exposure to DBCP (punitive damages are also sought). With the United States Supreme Court holding there was no federal court jurisdiction in the Patrickson case, the federal court judge remanded the cases to Louisiana state court in June 2003. In state court, the three cases were assigned to two different judges. The state court has not yet scheduled any case management or status conferences. It is likely that the three cases will be reconsolidated in state court. No activity has taken place on this matter since late 2003. As in many of the other banana worker’s cases, no discovery has taken place on the individual claims of the plaintiffs. Thus, it is unknown as to how many of the plaintiffs claim exposure to AMVAC’s product and whether their claims are barred by applicable statutes of limitation. AMVAC intends to vigorously contest these cases. It is too early to provide any evaluation of the likelihood of an unfavorable outcome at this time.

D. Texas Matters

These matters involve an earlier round of litigation by foreign banana workers. These actions, entitled Franklin Rodriquez Delgado, et al., Jorge Colindres Carcamo, individually and on behalf of all other similarly situated, et al., Juan Ramon Valdez, et al., and Isae Carcamo v. Shell Oil Company, et al. were originally filed in various state courts in Texas, subsequently removed to the United States Court of Appeals, Fifth Circuit, and were ordered to be remanded back to state court under forum non conveniens. The complaints are for personal injuries from alleged exposure to DBCP. AMVAC was not sued by the plaintiffs but was sued on a third party complaint by Dow Chemical Company. In 1995, Dow Chemical Company dismissed its third party complaint against AMVAC without prejudice. Subsequently, Dow Chemical Company and Shell Oil Company settled with these plaintiffs as well as with about fifteen thousand other banana workers represented by the plaintiffs’ law firm (not the firm representing the Patrickson and Mississippi plaintiffs). Dow Chemical Company was then dismissed by the plaintiffs with prejudice in September 1997. While AMVAC is not presently a party in this lawsuit having been dismissed without prejudice, the case is still pending, with the focus now shifted to the grower defendants. The remaining claims are pending in the Texas state court.

E. Nicaragua Matters

Tellez et al v. Dole Food Company, Inc. et al

(a) On March 26, 2004, 25 plaintiffs, all residents of Nicaragua, filed suit in state court in Los Angeles County, California, claiming personal injuries from alleged exposure to DBCP while working on banana

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plantations in their home country. The named defendants are Dole Food Company, Inc., Dole Fresh Fruit Company, Standard Fruit Company, Standard Fruit and Steamship Company, Dow Chemical Company, and AMVAC Chemical Corporation. American Vanguard is not named as a defendant. Punitive damages are also sought against all defendants.

(b) The plaintiffs claim personal injuries for sterility, reduced sperm counts, and other reproductive injuries. They claim exposure from working on banana plantations in Nicaragua from dermal contact with DBCP and inhalation of vapors. The plaintiffs also claimed exposure to DBCP in groundwater that they ingested, but testing of wells in October 2005 did not reveal the presence of any DBCP contamination and this claim of exposure through groundwater is being dropped.

AMVAC was served with the complaint on April 12, 2004 and filed an answer on May 5, 2004. On May 6, 2004, Dow Chemical removed the case from state court to the United States District Court for the Central District of California. The case was subsequently remanded to state court.

On September 2, 2004, the plaintiffs were permitted to file an amended complaint that dropped seven plaintiffs and added 18 others, so that there were a total of 36 plaintiffs. Since that time, six plaintiffs have been dismissed and four others who have not yet obtained U.S. visas to come to the United States for their depositions, have been transferred to the Mejia case listed below, reducing the total to 26.

Through the end of 2005 and to the date of this response, the defendants have been taking depositions of the plaintiffs in Los Angeles and having the plaintiffs examined by an urologist. At a status conference on February 9, 2005, a trial date for July 17, 2006 was scheduled.

(c) AMVAC contends that very few of these plaintiffs worked at a banana farm when its product could have been used. AMVAC also disputes the nature and extent of the claimed injuries. AMVAC intends to continue to vigorously contest this case.

(d) It is too early to provide any evaluation of the likelihood of an unfavorable outcome at this time. Medical examinations and testing of plaintiffs and their spouses are ongoing and expert depositions will not begin until April 2006. However, this case, like the other pending banana workers suits, presents difficult issues of law and fact to all parties and has a potentially large exposure. If plaintiffs are successful, it is likely that other banana workers from Nicaragua will file suit in California.

Rodolfo Mejia et al v. Dole Food Company, Inc. et al

On September 20, 2005, the attorneys who also represent plaintiffs in Tellez et al v. Dole Food Company et al filed an action on behalf of 16 Nicaraguan plaintiffs in the Los Angeles County Superior Court against Dole Food Company, Inc., Dole Fresh Fruit Company, Standard Fruit Company, Standard Fruit and Steamship Company, the Dow Chemical Company, and AMVAC Chemical Corporation. The complaint alleges that the 16 plaintiffs worked at various banana farms in Nicaragua and were exposed to DBCP from 1970 to 1984, suffering irreversible sterility or infertility. The complaint seeks unspecified compensatory and punitive damages against each defendant. The suit has been assigned to the same judge for case management as in the Tellez matter. Discovery has not yet begun in this case. It is too early to provide any evaluation of the likelihood of an unfavorable outcome at this time.

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Suits filed in Nicaragua

The Los Angeles attorneys representing these workers in California have recently stated that they have as many as 10,000 clients in Nicaragua. Twenty-six of them are plaintiffs in the Tellez suit and 20 are now plaintiffs in the Mejia suit pending in the Los Angeles County Superior Court.

In prior descriptions of pending litigation and other matters, several suits filed in Nicaragua in January 2003 on behalf of banana workers claiming exposure to DBCP were mentioned. It was reported that AMVAC had been named in these suits, but was not served with the complaints.

In May 2005, two suits filed in Nicaragua in 2004 were received that name AMVAC, The Dow Chemical Company, Dole Food Co., Dole Fresh Fruit, and Standard Fruit Company. The two suits for personal injuries for sterility and reduced sperm counts have been filed on behalf of a total of 15 banana workers: Flavio Apolinar Castillo et al. v. AMVAC Chemical Corporation et al., No. 535/04 and Luis Cristobal Martinez Suazo et al. v. AMVAC Chemical Corporation et al., No. 679/04. In December 2005, AMVAC received six additional, similar lawsuits filed on behalf of a total of 30 plaintiffs. These plaintiffs each claim $1 million in special and general damages and $5 million in punitive damages.

AMVAC has retained an attorney in Nicaragua and understands that the receipt of these eight suits constitutes first notice and an invitation to attend mediation. All but one of these suits is based on Nicaraguan Public Law 364 issued in October 2000 that is directed solely at DBCP and requires the posting of a $100,000 bond, sets forth a lessened standard of proof to show that the claimed injuries are due to DBCP, and establishes an unreasonable amount of minimum compensation for injuries. This law also provides that there is no statute of limitations.

On January 25, 2006, AMVAC was served with the Flavio Apolinar Castillo and Luis Cristobal Martinez Suazo suits listed above. Counsel in Nicaragua is in the process of preparing objections to jurisdiction over AMVAC in these two cases.

A review of court filings in Chinandega, Nicaragua, by local counsel has found 66 suits filed pursuant to Public Law 364 that name AMVAC and include approximately 2,261 plaintiffs. None of these other additional suits has been served. Each of these plaintiffs claims $1 million in special and general damages and $5 million in punitive damages. It is anticipated that the plaintiffs’ attorneys will continue to file additional actions on a monthly basis in Nicaragua.

In an earlier round of suits brought in Nicaragua against Dow, Shell, and Standard Fruit only, the Nicaragua court issued judgments for $490 million in December 2002 based on claims of 583 banana workers, despite defenses of lack of personal jurisdiction and the unconstitutionality of Public Law 364. It has been reported that in 2003, the United States District Court in Los Angeles refused to enforce these judgments on the basis that the judgments did not properly name the defendants. The U.S. District Court did not reach the issue of due process under Public Law 364. An appeal to the Ninth Circuit Court of Appeal is pending.

AMVAC contends that the Nicaragua courts do not have jurisdiction over it and that Public Law 364 violates international due process of law. AMVAC intends to contest personal jurisdiction and demand under Law 364 that the claims be litigated in the United States. Thus far, it appears that the Nicaraguan courts have denied all requests of other defendants under Law 364 that allow the defendants the option of consenting to jurisdiction in the United States. It is presently unknown as to how many of these plaintiffs actually claim exposure to DBCP at the time AMVAC’s product was allegedly used nor is there any verification of the claimed

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

injuries. Based on the precedent of the earlier suits in Nicaragua, it would appear likely that the Nicaragua courts will, over the defendants’ objections, enter multi-million dollar judgments for the plaintiffs and against all defendants in these cases. One such judgment was entered in August 2005 for $97 million for 150 plaintiffs against Dole Food and other entities.

F. Other Matters

Other attorneys filed suits in the Los Angeles County Superior Court in April 2005 on behalf of hundreds of banana workers in other countries, including Costa Rica and Honduras. AMVAC has not been named in these suits.

II. Other Litigation.

On March 1, 2006, AMVAC and AVD accepted tender of defense and indemnity from Valent U.S.A. Corporation (“Valent’) with respect to an action entitled Victoria Espinoza, et al. v. Does 1, et al., including Valent U.S.A. Corporation filed in the Los Angeles Superior Court No. BC322590 in March 2005, in which plaintiff, who worked as a temporary employee intermittently in the packaging department at one of AMVAC’s facilities between August 1994 and August 2000, seeks damages for injuries, specifically acute myelogenous leukemia, allegedly arising from exposure to chemical products at that AMVAC facility. The defense and indemnity obligations arise from a toll manufacturing and supply agreement dated in September 1991 between AMVAC and Valent’s predecessor, and an asset purchase agreement dated in June 1998 between AMVAC and Valent by which the former purchased the Dibrom product line from the latter. To date, only limited discovery has been done, and it is too early in the process to provide any evaluation of the probability of an unfavorable outcome.

Environmental

During 2005, AMVAC continued activities to address environmental issues associated with its facility (the “Facility”) in Commerce, California.

In March 1997, the California Environmental Protection Agency Department of Toxic Substances Control (“DTSC”) accepted the Facility into its Expedited Remedial Action Program (“ERAP”). Under this program, the Facility must prepare and implement an environmental investigation plan. Depending on the findings of the investigation, the Facility may also be required to develop and implement remedial measures to address any historical environmental impairment. The environmental investigation and any remediation activities related to ten underground storage tanks at the Facility, which had been closed in 1995, will also be addressed by AMVAC under ERAP.

Soil and groundwater characterization activities began in December 2002 in accordance with the Site Investigation Plan that was approved by the DTSC. Additional activities were conducted from 2003 to 2005 with oversight provided by the DTSC. Additional investigation is planned over the next year under the oversight of the DTSC. Potential remediation activities may be initiated in 2006 or 2007. These investigation and potential remediation activities are required at all facilities that currently have, or in the past had, hazardous waste storage permits. Because AMVAC previously held a hazardous waste management permit, AMVAC is subject to these requirements. The cost associated with the potential remediation activities is not expected to have a material impact on the Company’s financial statements.

AMVAC is subject to numerous federal and state laws and governmental regulations concerning environmental matters and employee health and safety at the Commerce, California and Axis, Alabama facilities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

AMVAC continually adapts its manufacturing process to the environmental control standards of the various regulatory agencies. The U.S. EPA and other federal and state agencies have the authority to promulgate regulations that could have an impact on AMVAC’s operations.

AMVAC expends substantial funds to minimize the discharge of materials in the environment and to comply with the governmental regulations relating to protection of the environment. Wherever feasible, AMVAC recovers raw materials and increases product yield 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.

(5) Employee Deferred Compensation Plan

The Company maintains a deferred compensation plan (“the 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 up to 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 $585, $385 and $328 in 2005, 2004 and 2003. Effective January 1, 2005, the Company matched 100% of the elective deferrals of all eligible participants up to a maximum of 5% of compensation.

(6) Major Customers and Export Sales

In 2005 there were three companies that accounted for 15%, 13% and 11% of the Company’s consolidated sales. In 2004 there were three companies that accounted for 18%, 12% and 11% of the Company’s consolidated sales. In 2003 there were two companies that accounted for 11% each of the Company’s consolidated sales. These companies are distributors of the Company’s products.

The Company primarily sells its products to large distributors and buying cooperatives and extends credit based on an evaluation of the customer’s financial condition. The Company had three significant customers who each accounted for approximately 19%, 17% and 15% of the Company’s receivables as of December 31, 2005. The Company had three significant customers who each accounted for approximately 15%, 12% and 11% of the Company’s receivables as of December 31, 2004. The Company has long-standing relationships with its customers and the Company considers the credit risk to be low.

Worldwide export sales were $13,856, $10,265 and $8,943 for 2005, 2004 and 2003 respectively. For the year ended December 31, 2005, sales to Mexico and Canada accounted for more than 10% of foreign sales, with sales of $2,229 to Mexico and $2,396 to Canada in 2005. Of total foreign sales, sales to Mexico and Canada accounted for more than 10% individually for the years ended December 31, 2004 and 2003, with foreign sales to Mexico of $1,818 and $2,284 respectively and sales to Canada for the same periods of $1,991 and $1,944.

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(7) Royalties

The Company has various royalty agreements in place extending through December 2007. These agreements relate to the acquisition of certain products as well as licensing arrangements. One agreement, which expired December 31, 2003, contained a minimum aggregate royalty amount, which had previously been met. No other agreement contains a minimum royalty provision. Certain royalty agreements contain confidentiality covenants. Royalty expenses were $1,465, $1,733 and $1,988, respectively, for 2005, 2004 and 2003.

(8) Product Acquisitions

All product acquisitions have been accounted for as asset purchases and not businesses pursuant to FASB 141 and EITF 98-3.

In 2005, the Company completed the acquisition of an insecticide product line. The product line consisted of trademarks, manufacturing and formulation know-how, registration rights, intellectual property rights as well as an exclusive license to use a patented, closed delivery system, in the United States, Canada and Australia. Additionally, in 2005, the Company completed the acquisition of a herbicide product line that consisted of a trademark, manufacturing and formulation know-how, registration rights and intellectual property rights in the United States and Canada. These acquisitions totaled $22,112.

In 2004, the Company purchased the rights to sell a pyrethroid insecticide.

In 2003, the Company completed the acquisition of seven product lines, one used in animal health, one related to its herbicides business and five related to pre-harvest crop protection. The assets purchased included, but may not have been limited to, end-use product registrations and data in support of such registrations, trademarks, as well as other intellectual property. One asset purchase was for $5,786 (which included a number of products) and another was for $4,500. In connection with these asset acquisitions, the Company recorded intangible assets in the amount of $10,726, of which $5,926 was paid in cash during the period.

The primary identifiable intangible assets of the Company relate to product rights associated with its product acquisitions. These rights, for the most part, consist of product registrations and related data filed with the United States Environmental Protection Agency and state regulatory agencies to support such registrations and other supporting data. The amount of goodwill allocated to the product acquisitions has not been material. The following schedule represents intangible assets recognized in connection with product acquisitions (See Summary of Significant Accounting Policies – Goodwill and Other Intangible Assets for the Company’s accounting policy regarding intangible assets):

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following schedule represents intangible assets recognized in connection with product acquisitions (See note 1 for the Company’s accounting policy regarding intangible assets):

	Amount
Intangible assets at December 31, 2002	$	10,878
Acquisitions during fiscal 2003		10,726
Amortization expense		(1,297	)
Intangible assets at December 31, 2003		20,307
Acquisitions during fiscal 2004		2,612
Amortization expense		(1,758	)
Intangible assets at December 31, 2004		21,161
Acquisitions during fiscal 2005		22,112
Amortization expense		(2,051	)
Intangible assets at December 31, 2005	$	41,222

The above amounts represent the total cash consideration paid during the period for product acquisitions and certain related capitalized expenses incurred in connection with such acquisitions.

The following schedule represents the gross carrying amount and accumulated amortization of the intangible assets recognized in connection with product acquisitions. Intangible assets are amortized over their expected useful lives which range from 15 to 25 years.

	2005			2004
Gross carrying amount	$	49,515		$	27,403
Accumulated amortization		(8,293	)		(6,242	)
	$	41,222		$	21,161

The following schedule represents future amortization charges related to intangible assets recognized in connection with product acquisitions:

Year ending December 31,
2006	$	1,821
2007		1,821
2008		1,821
2009		1,821
2010		1,820
Thereafter		32,118
	$	41,222

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following schedule represents the Company’s obligations under product acquisition agreements:

	Amount
Obligations under acquisition agreements at December 31, 2002		250
Additional obligations acquired		10,726
Payments on existing obligations		(6,176	)
Obligations under acquisition agreements at December 31, 2003		4,800
Additional obligations acquired		2,396
Payments on existing obligations		(6,196	)
Obligations under acquisition agreements at December 31, 2004	$	1,000
Additional obligations acquired		-0-
Payments on existing obligations		(1,000	)
Obligations under acquisition agreements at December 31, 2005	$	-0-

As of December 31, 2005, there were no future commitments pertaining to obligations under product acquisitions.

(9) Commitments

The Company entered into long-term employment agreements with certain officers. Amounts to be paid under those agreements are summarized as follows:

Year ending December 31,
2006	$	468
2007		446
	$	914

The Company has various lease agreements for offices as well as a long-term ground lease for its Axis, Alabama facility. The office leases contain provisions to pass through to the Company its pro-rata share of certain of the building’s operating expenses. The long-term ground lease is for twenty years (commencing May 2001) with up to five automatic renewals of three years each for a total of thirty-five years. Rent expense for the years ended December 31, 2005, 2004 and 2003 was $ 306, $352 and $368. Future minimum lease payments under the terms of the leases are as follows:

Year ending December 31,
2006	$	279
2007		10
2008		10
2009		10
2010		10
Thereafter		120
	$	439

(10) Research and Development

Research and development expenses which are included in operating expenses, were $2,853, $3,081 and $4,669 for the years ended December 31, 2005, 2004 and 2003.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(11) Stock Options

Incentive Stock Option Plans (“ISOP”)

Under the terms of the Company’s ISOP, under which options to purchase 3,222,000 shares of common stock can be issued, all key employees are eligible to receive non-assignable and non-transferable options to purchase shares. The exercise price of any option may not be less than the fair market value of the shares on the date of grant; provided, however, that the exercise price of any option granted to an eligible employee owning more than 10% of the outstanding common stock may not be less than 110% of the fair market value of the shares underlying such option on the date of grant. No options granted may be exercisable more than ten years after the date of grant. The options granted generally vest evenly over a three to five year period, beginning from the date of the grant.

During 2005 the Company granted incentive stock option to purchase an aggregate of 207,700 shares of common stock to key employees. These options are fully exercisable on the date of grant. During 2004, the Company granted incentive stock options to purchase an aggregate of 31,000 shares of common stock to key employees. These options are exercisable over a seven-year period from the date of grant and vest in five equal annual installments commencing one year from the date of grant. All options granted are non-assignable and non-transferable.

Nonstatutory Stock Options (“NSSO”)

The Company did not grant any non-statutory stock option in 2005. During 2004, the Company granted non-statutory stock options to purchase an aggregate of 43,560 shares of common stock. These options are non-assignable and non-transferable, are exercisable over a five year period from the date of grant and vested upon grant.

Option activity within each plan is as follows:

Rollforward Table of Option Activity Within Each Plan:

	Incentive Stock Option Plans		Non-Statutory Stock Options Plans		Weighted Average Price Per Share		Exercisable Weighted Average Price Per Share
Balance outstanding, December 31, 2002	1,217,686		55,660		1.90		1.76
Options granted, range from $4.69–$10.80	847,500		52,028		6.81
Options exercised, range from $ .90–$ 6.24	(405,720	)	(12,098	)	(2.08	)
Balance outstanding, December 31, 2003	1,659,466		95,590		4.66		3.19
Options granted, range from $15.06–$19.26	31,000		43,560		18.25
Options exercised, range from $1.11–$10.80	(254,896	)	(12,100	)	(1.57	)
Options expired	(20,520	)	—		(1.54	)
Balance outstanding, December 31, 2004	1,415,050		127,050		5.81		4.35
Options granted, range from $19.65–$19.98	207,700		—		19.66
Options exercised, range from $2.35–$4.26	(46,000	)	(6,604	)	2.45
Options expired	(12,000	)	(656	)	(2.35	)
Balance outstanding, December 31, 2005	1,564,750		119,790		7.61		8.08

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Information relating to stock options at December 31, 2005 summarized by exercise price is as follows:

	Outstanding Weighted Average				Exercisable Weighted Average
Exercise Price Per Share	Shares	Life (Months)	Exercise Price		Shares	Exercise Price
Incentive Stock Option Plan:
$2.35	459,302	48	$	2.35	286,880	$	2.35
$4.26	27,248	39	$	4.26	12,263	$	4.26
$4.69–$10.80	841,500	28	$	8.10	422,100	$	5.70
$15.06–$17.25	31,000	18	$	16.83	3,100	$	16.83
$19.65–$19.98	205,700	4	$	19.66	205,700	$	19.66
	1,564,750		$	7.61	930,043	$	8.08
Nonstatutory Stock Options:
$2.30	7,260	54	$	2.30	7,260	$	2.30
$4.04	21,780	42	$	4.04	21.780	$	4.04
$6.24	29,040	30	$	6.24	29,040	$	6.24
$9.40	18,150	28	$	9.40	18,150	$	9.40
$19.26	43,560	19	$	19.26	43,560	$	19.26
	119,790		$	10.88	119,790	$	10.88

(12) Subsequent Event

On February 8, 2006, the Company entered into Stock Purchase Agreements with several institutional investors for the purchase and sale of, in the aggregate, 1,040,000 shares of the Company’s common stock for a purchase price of $22.50 per share in connection with a private placement of such shares. The shares were registered under the Company’s Registration Statement on Form S-3 (No. 333-122981) which was filed with the Securities Exchange Commission on February 25, 2005.

(13) Quarterly Data—Unaudited

Quarterly Data—2005	March 31		June 30		September 30		December 31
Net sales	$	41,230	$	37,325	$	49,754	$	61,487
Gross profit		17,545		15,796		22,158		30,180
Net income		3,135		2,748		5,268		7,851
Basic net income per share		.17		.15		.29		.43
Diluted net income per share		.16		.14		.27		.40
Quarterly Data—2004
Net sales	$	34,219	$	31,492	$	39,624	$	45,520
Gross profit		15,190		13,748		18,446		24,874
Net income		2,203		2,405		3,988		5,881
Basic net income per share		.13		.14		.22		.33
Diluted net income per share		.12		.13		.21		.31

Note:    Totals may not agree with full year amounts due to rounding and separate calculations each quarter.

71

EXHIBIT INDEX

ITEM 15

Exhibit Number	Description of Exhibit
3.1	Amended and Restated Certificate of Incorporation of American Vanguard Corporation (filed as Exhibit 3.1 to the Company’s Form 10-K for the year ended December 31, 2003 and incorporated herein by reference).
3.2	Certificate of Amendment of Amended and Restated Certificate of Incorporation of American Vanguard Corporation (filed as Exhibit 3.2 to the Company’s Form 10-Q/A for the period ended June 30, 2004 and incorporated herein by reference).
3.3	Amended and Restated Bylaws of American Vanguard Corporation (filed as Exhibit 3.2 to the Company’s Form 10-K for the year ended December 31, 2003 and incorporated herein by reference.)
4	Form of Indenture (filed as Exhibit 4 to the Company’s Registration Statement on Form S-3 (File No. 333-122981) and incorporated herein by reference).
10.1	American Vanguard Corporation Employee Stock Purchase Plan (filed as Appendix B to the Company’s Proxy Statement filed with the Securities and Exchange Commission on May 31, 2001 and incorporated herein by reference).
10.2	American Vanguard Corporation Fourth Amended and Restated Stock Incentive Plan (filed as Appendix A to the Company’s Proxy Statement filed with the Securities and Exchange Commission on May 11, 2004 and incorporated herein by reference).
10.3	Form of Incentive Stock Option Agreement under the American Vanguard Corporation Fourth Amended and Restated Stock Incentive Plan.(1)
10.4	Form of Non-Qualified Stock Option Agreement under the American Vanguard Corporation Fourth Amended and Restated Stock Incentive Plan.(1)
10.5	Employment Agreement between American Vanguard Corporation and Eric G. Wintemute.(1)
10.6	Form of Change of Control Severance Agreement, dated effective as of January 1, 2004, between American Vanguard Corporation and its Executive and Senior Officers (filed as Exhibit 10.2 to the Company’s Form 10-Q for the period ended March 31, 2004 and incorporated herein by reference.)
10.7	Form of Indemnification Agreement between American Vanguard Corporation and its Directors.(1)
10.8	Amended and Restated Credit Agreement, dated as of September 30, 2004, among AMVAC Chemical Corporation, Bank of the West, Harris Trust and Savings and First Bank & Trust.(1)
10.9	Employment Agreement dated February 3, 2003 by and between AMVAC Chemical Corporation and Christopher Hildreth (filed as Exhibit 10.9 to the Company’s Form 10-K filed with the Securities and Exchange Commission on May 2, 2005 and incorporated herein by reference).
10.10	Description of Compensatory Arrangements Applicable to Non-Employee Directors for 2005 (filed as Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on June 15, 2005 and incorporated herein by reference).
21	List of Subsidiaries of the Company.*
23	Consent of BDO Seidman, LLP, Independent Registered Public Accounting Firm.*
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certifications Pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

72

Exhibit Number	Description of Exhibit
99.1	Sale and Purchase Agreement dated October 31, 2005 by and between BASF Aktiengesellschaft and AMVAC Chemical Corporation (portions of which, indicated by an asterisk, the Company has requested be treated confidentially by the SEC).*

* Filed herewith.

⁽¹⁾ Filed with the Company’s Original Annual Report on Form 10-K for the year ended December 31, 2004, which was filed with the Securities and Exchange Commission on March 16, 2005 and incorporated herein by reference.

73

EX-21

EXHIBIT 21

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

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 AMVAC. All of the following subsidiaries are included in the Company’s consolidated financial statements:

AMVAC Chemical Corporation	California
GemChem, Inc.	California
2110 Davie Corporation (formerly ABSCO Distributing)	California
AMVAC Chemical UK Ltd.*	Surrey, England
AMVAC Chemical GmbH	Switzerland
Agroservicios Amvac, SA de CV	Mexico
Quimica Amvac de Mexico SA de CV	Mexico
Environmental Mediation, Inc.	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

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

Board of Directors

American Vanguard Corporation

Newport Beach, CA

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-122981, 333-109320 and 333-62612) and Form S-8 (Nos. 333-102381, 333-76218 and 333-64220) of American Vanguard Corporation of our reports dated March 10, 2006, relating to the consolidated financial statements and the effectiveness of American Vanguard Corporation internal control over financial reporting, which appear in this Form 10-K.

/s/    BDO Seidman, LLP

Los Angeles, California

March 10, 2006

EX-31.1

Exhibit 31.1

AMERICAN VANGUARD CORPORATION

CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Eric G. Wintemute, certify that:

1. I have reviewed this report on Form 10-K of American Vanguard Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosures controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2006	/s/    ERIC G. WINTEMUTE
	Eric G. Wintemute
	Chief Executive Officer

EX-31.2

Exhibit 31.2

AMERICAN VANGUARD CORPORATION

CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James A. Barry, certify that:

1. I have reviewed this report on Form 10-K of American Vanguard Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosures controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2006	/s/    JAMES A. BARRY
	James A. Barry
	Chief Financial Officer

EX-32.1

Exhibit 32.1

AMERICAN VANGUARD CORPORATION

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of American Vanguard Corporation (the “Company”) on Form 10-K for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Executive Officer and Chief Financial Officer of the Company hereby certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002 that based on their knowledge (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.

/s/    ERIC G. WINTEMUTE        

Eric G. Wintemute,

Chief Executive Officer

/s/    JAMES A. BARRY        

James A. Barry

Chief Financial Officer

March 15, 2006

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to American Vanguard Corporation and will be retained by American Vanguard Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Form 10-K and shall not be considered filed as part of the Form 10-K.

EX-99.1

Exhibit 99.1

Execution Version 10/31

Sale and Purchase Agreement

by and between

BASF Aktiengesellschaft

- hereinafter also referred to as “Seller” -

and

AMVAC Chemical Corporation

- hereinafter also referred to as “Purchaser” –

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Preamble

WHEREAS, Seller is a company duly organized and existing under the laws of the Federal Republic of Germany, located at 67056 Ludwigshafen, Germany;

WHEREAS, Purchaser is a company duly organized and existing under the laws of California, located at 4695 McArthur Court, Suite 1250, Newport Beach, CA 92660;

WHEREAS, Seller wishes to sell, and to cause its Affiliates to sell, its Divested Business, each of them consisting of certain assets and rights as set forth in this Agreement, to Purchaser, and Purchaser wishes to purchase these assets and rights from Seller and its Affiliates, upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, notwithstanding use of the term Divested Business, Purchaser is treating this as an acquisition of assets for the purposes of EITF 98-3.

NOW, THEREFORE, the Parties agree as follows:

Article 1

Definitions

Affiliate Affiliate means with respect to any person, a corporation, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares or stock entitled to vote at a general meeting (i.e. a shareholders’ meeting) (without regard to the occurrence of any contingency) is at the time owned or controlled, directly or indirectly, by that person or one or more of the other Affiliates of that person or a combination thereof, or (ii) if a partnership, association or other business entity, a majority of the

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	partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by that person or one or more Affiliates of that person or a combination thereof. For purposes hereof, a person or persons shall be deemed to have a majority interest in a partnership, association or other business entity if such person or persons control the managing board or the general partner of such partnership, association or business entity.
Agreement	means this Sale and Purchase Agreement, including all Exhibits, amendments, schedules and attachments hereto.
Assets	means the tangible and intangible assets sold or licensed as part of and with the Divested Business, as provided in more detail in Article 2.1.
Asset Sale and Purchase Agreements	means the agreements referred to in Article 2.4.
Assumed Liabilities	has the meaning as set forth in Article 4.2.
Banking Day	Those days when banks in New York, New York, USA are open for business.
BASF Group	means Seller and its Affiliates.
Business Day	means any day that is not a Saturday, Sunday or any other day on which banks are required by applicable law to be closed in New York, New York, USA.
Closing	shall have the meaning as set forth in Article 6.1.
Closing Date	means October 31, 2005
Contracts	means (1)    any and all contracts, binding agreements, binding offers and orders of Seller or its Affiliates only to the

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	extent they primarily relate to the Divested Business including licenses, leases, customer contracts, supply agreements, and procurement contracts, entered into, made and/or existing as of the Signing Date and those contracts, binding agreements, binding offers and orders entered into, made and/or existing (i.e. not fully performed) as per the Closing Date, provided, that all account receivables outstanding as of the Closing Date and account payables for services rendered or supplies delivered prior to the Closing Date shall be expressly excluded, and further provided, that all contracts primarily related to the Excluded Assets shall not be included, and
	(2)    the following contracts not primarily related to the Divested Business, but to be assigned or performed pursuant to Article 2.1.9 only to the extent related to the Divested Business:
	a.      [*];
	b.      [*];
	c.      [*]Formulation Contract with [*];
	d.      Formulation Contract with [*].
Customer List	means the list of all customers of the Divested Business, comprising the customers with whom the Divested Business did business during the period from January 1, 2003 through the Closing Date.
Divested Business	means Seller’s worldwide business of manufacturing, formulating, selling, distributing and marketing of (i) the Phorate Active Substance and (ii) the Phorate Formulations, for all uses, as conducted by Seller and its Affiliates prior to the Closing Date, all as further defined in Article 2.
Divested Registration Data Packages	shall have the meaning set forth in Article 2.1.1.

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Divested Transferred Rights	means all Registration Rights, Divested Registration Data Packages, Intellectual Property Rights and Know How, in each case related, either primarily or not, to the Divested Business, transferred or licensed by Seller and/or its Affiliates to Purchaser pursuant to Articles 2.1.1 through 2.1.9 and the Licence Agreements.
Excluded Assets	means the assets as described in Article 2.2.
FIFRA Endangered Species Task Force, L.L.C.	means that Task Force entered into by Joint Data Development and Limited Liability Company Agreement entered into on February 10, 1997.
Formulation	means a Phorate Active Substance, alone or in mixtures with other active substances, in a specific concentration and with auxiliaries.
Intellectual Property Rights	means registered or applied for patents, trademarks, design patents and copyrights, relating to the manufacture, sale, distribution or use of the Phorate Active Substance or the Phorate Formulations, excluding the Lock ‘N Load Intellectual Property Rights.
Inventories	means: (a) all Phorate Active Ingredient finished goods in existence as of Closing held for sale in the ordinary course of the Divested Business; (b) and all technical Phorate Active Substance: (i) in the possession of Seller’s or its Affiliates’ tollers or (ii) en route to said tollers, ; (c) including existing Lock ‘N Load containers listed on Exhibit B, and (d) the raw materials located at [*] facility as set forth on Exhibit A.
Know How	means all of Seller’s and its Affiliate’s (as applicable) embodied (in written, electronic or magnetical form) information and trade secrets, research materials, inventions, test data, product efficacy, safety data, as

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	well as so embodied technical information (including information relating to manufacturing, formulation and application) related to the Divested Business, excluding the Lock ‘N Load Know How, and excluding Registration Data Packages.
Liabilities	means any and all debt, liabilities and other obligations including payment obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including those under applicable law or governmental orders, and those under any contract.
License Agreements	means any and all license agreements to be entered into at Closing between Seller and/or its Affiliates on the one side and Purchaser on the other side according to this Agreement.
Licensed Registration Data Packages	means those Registration Data Packages referred to in Article 2.1.6.
Lock ‘N Load Intellectual Property Rights	means the patents and trademarks as listed in Exhibit 2.1.6(b)(1)
Lock ‘N Load Know How	means the Know How as described in Exhibit 2.1.6(b)(2)
Material Adverse Effect	means any event, circumstance, change or effect that would be materially adverse to the business results, operations, or financial condition of the Divested Business or the Assets (in each case, taken as a whole).
Market Basket Survey Task Force	means that task force established by Memorandum of Agreement entered into by American Cyanamid Company on August 18, 1998.

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Parties/Party	means Seller and Purchaser, or either of them.
Phorate Active Substance	means the Active Substance having the IUPAC name (0,0-diethyl S-[(ethylthio) methyl] phosphorodithioate as specified in more detail in Exhibit C.
Phorate Formulations	means the Formulations which contain the Phorate Active Substance as their sole active ingredient, including but not limited to those sold under the trademarks Thimet®, Granutox®, Granutox 5®, and Geomet® and related end use registrations, as specified in more detail in Exhibit D.

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Products	means all products sold by the Divested Business, i.e. the Phorate Active Substance and the Phorate Formulations as further specified in Exhibits C and D.
Registration Data Package	means all available data existing as of the Closing Date, relating to the Phorate Active Substance and the Phorate Formulations, including but not limited to technical information on the Products’ chemistry, toxicology, eco-toxicology, metabolism, toxic kinetics, residues, efficacy, occupational health and safety and environmental effects.
Registration Rights	means all rights to manufacture, formulate, sell, distribute, and market the Phorate Active Substance and the Phorate Formulations which are derived from their registrations, including any rights under pending registrations and all related labels.
Retained Liabilities	shall have the meaning as set forth in Article 4.1.
Service and Supply Agreements	means any and all service and supply agreements to be entered into at Closing between Seller and/or its Affiliates on the one side and Purchaser on the other side according to this Agreement.
Signing Date	means the day when this Agreement has been duly executed and delivered by the Parties.
Tax/Taxes	means all taxes of any kind (together with any interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by a federal, state or governmental authority, including, but not limited to those taxes on income, franchises, financial operation, windfall or other profits, gross receipts, property, sales, use, capital stock, or net worth, and to those taxes measured by or referred to as excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes.
Transition Service Agreement	means that agreement referred to in Article 15.

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Article 2

Sale and Purchase

2.1 Upon the terms and subject to the conditions of this Agreement Seller shall, and shall cause its Affiliates to, sell or license to Purchaser and Purchaser shall purchase or receive such license from Seller and its respective Affiliates the Assets related to the Divested Business as mentioned in Article 2.1.1 through 2.1.9 below:

2.1.1 Seller shall at Closing sell, and shall cause its Affiliates to sell, to Purchaser, who shall purchase, with economic effect as of the Closing Date (24:00 h) all of Seller’s and of Seller’s Affiliates Registration Rights of the Phorate Active Substance and the Phorate Formulations as listed in Exhibit 2.1.1(a) (including their status and time of expiration) and those Registration Data Packages supporting only the Products and no other active ingredients or products of Seller (hereinafter the “Divested Registration Data Packages”). On the Closing Date Seller and/or Seller’s Affiliates shall provide to Purchaser appropriate registration transfer letters implementing the transfer of ownership of the above mentioned Registration Rights to Purchaser. Furthermore, subject to any necessary approvals required, Seller shall, and shall cause its Affiliates to, in due course on or after the Closing Date transfer ownership to Purchaser the Divested Registration Data Packages for such Registration Rights, such Divested Registration Data Packages including, but not limited to, those listed in Exhibit 2.1.1(b). As of the Closing Date, Purchaser shall assume all of Seller’s, or Seller’s relevant Affiliates’, rights and obligations in respect of the above mentioned Registration Rights.

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2.1.2 In the event that, despite the reasonable efforts of the Parties, a particular country shall not permit the transfer of the Registration Rights as contemplated herein, the Parties shall make a good faith effort to identify and implement alternative actions to achieve the Parties’ objective of providing Purchaser with the full benefit of the Registration Rights as contemplated hereunder, provided, that Purchaser shall reimburse Seller or its respective Affiliates for all reasonable, out-of-pocket costs and expenses incurred in connection with such alternative actions.

2.1.3 RESERVED.

2.1.4 (a) Seller and its Affiliates may retain a copy of the Registration Data Packages listed in Exhibit 2.1.1(b) (including copies of all existing studies and raw data related to these Registration Data Packages). Seller and its Affiliates shall have the right to use (world-wide, royalty-free, perpetual, irrevocable, non-exclusive sub-licensable, transferable [except for the limitations on transferability in 2.1.4(b) immediately below]) all Divested Transferred Rights (including the retained copies), and shall receive irrevocable letters of access from Purchaser (substantially in the form attached hereto as Exhibit 2.1.4) to the Registration Data Packages listed in Exhibit 2.1.1(b) (including all studies and raw data being part of these Registration Data Packages) for the Registration Rights listed in Exhibit 2.1.1(a), all to the extent necessary or useful for Seller’s and its Affiliates’ business other than the Divested Business. Seller and its Affiliates shall also have, upon payment of [*] the same right to use in its and its Affiliates’ business other than the Divested Business all registration data developed by Purchaser in the future for support of Purchaser’s Phorate Active Substance business. Purchaser shall issue new or modified letters of access when reasonably required by Seller in connection with the conduct of Seller’s and its Affiliates’ business. Purchaser shall provide Seller or its

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Affiliates in respect of all studies related to the Registration Data Packages listed in Exhibit 2.1.1(b) confirmations in writing stating that Seller or its Affiliates is entitled to use such studies for its Seller’s and its Affiliates’ business other than the Divested Business.

(b) Purchaser shall grant Seller and its Affiliates unrestricted and unlimited access to all raw data related to the Registration Data Packages as listed in Exhibit 2.1.1(b) to the extent necessary or useful to support and conduct Seller’s and its Affiliates’ business other than the Divested Business. Seller and its Affiliates shall have no right to grant access to data to third parties except in connection with the sale of a business for which such right of access is needed. Should Purchaser decide in its sole discretion to transfer such raw data to a third party, it shall notify such third party of Seller’s and its Affiliates’ rights of access and cause such third party to acknowledge and continue to honor such rights of access. Should Purchaser decide in its sole discretion to destroy or otherwise dispose of any such raw data (excluding third party transfers described above), then Purchaser shall offer to transfer such raw data to Seller at [*] to Seller.

2.1.5 Seller shall at Closing sell and assign, and shall cause its Affiliates to sell and assign, to Purchaser, who hereby purchases and accepts the assignment, with economic effect as of the Closing Date (24:00 h) all Intellectual Property Rights as listed in Exhibits 2.1.5(a), all Customer Lists listed in Exhibit 2.1.5(b) and all Know How, all as exclusively related to the Divested Business.

2.1.6

(a) Seller shall at Closing enter, and cause its Affiliates to enter, into the license agreement with Purchaser attached hereto as Exhibit 2.1.6(a) by

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which Seller or its Affiliates shall grant to Purchaser an [*] license to Seller’s rights and Seller’s Affiliates’ rights to the Intellectual Property Rights, Registration Rights, Registration Data Packages (but not copies of such Packages) and Know How, all as in existence as of the Closing Date, [*] to the Divested Business to make or have made, sell, offer for sale, and use any Product sold by the Divested Business, including but not limited to those set forth at Exhibit 2.1.6(a)(1), and including but not limited to the Registration Rights, Registration Data Packages and Know-How set forth at Exhibit 2.1.6(a)(1).

(b) Seller shall at Closing enter, and cause its Affiliates to enter, into the license agreements with Purchaser attached hereto as Exhibit 2.1.6(b) by which Seller or its Affiliates shall grant to Purchaser [*] license to Seller’s rights and Seller’s Affiliates’ rights to the Lock ‘N Load Intellectual Property Rights and Lock ‘N Load Know How, all as in existence as of the Closing Date. The license includes the right of Purchaser in the territory of [*]: (i) to make or have made Lock ‘N Load containers for the [*] (even as to the Seller) use of the Purchaser’s products containing [*], (ii) to use and to fill or have filled Lock ‘N Load Containers, with Purchaser’s products containing [*], (iii) to use, sell and offer for sale the Lock ‘N Load Containers filled with Purchaser’s products containing [*], and (iv) to use the Lock ‘N Load Trademarks to offer and sell Purchaser’s products containing [*].

2.1.7 Seller shall at Closing sell and assign,, and shall cause its Affiliates to sell and assign, to Purchaser, who shall purchase and accept assignment of, with economic effect as of the Closing Date (24:00 h) the Inventories. All Inventories sold and purchased under this Agreement shall be not more than [*] as of Closing and in accordance with the quality specifications stipulated in Exhibit 2.1.7.

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2.1.8 Seller shall at Closing sell and assign, and shall cause its Affiliates to sell and assign, to Purchaser, who shall purchase and accept assignment of, with economic effect as of the Closing Date (24:00 h) the Contracts, including but not limited to those set forth at Exhibit 2.1.8, subject to the consent of the respective third party to the assignment of the Contracts (where required) to Purchaser or its respective Affiliate.

2.1.9 If and to the extent the consent of the relevant third parties to the assignment of the Contracts (or in case the Contract pertains only partly to the respective Divested Business the partial assignment of the Contracts) has not been obtained by the Closing Date, the following shall apply with respect to the individual Contracts for which such consent has not been obtained unless and until such consent has been obtained:

If with respect to any of the Contracts the contracting party(ies) do(es) not consent (where such consent is necessary) to an assignment to Purchaser or conditions consent upon a material change in the terms of such Contract, Seller or its respective Affiliate shall to the extent not expressly prohibited by terms of the applicable Contract, perform such contract(s) on account and on behalf of Purchaser and in accordance with the reasonable instruction of Purchaser, provided, however, that (i) Purchaser, respectively, shall provide all support reasonably to be expected to perform such Contracts, (ii) Seller’s or Seller’s Affiliate’s liability in connection with the performance of such Contracts shall be limited to wilful misconduct or gross negligence, (iii) Purchaser shall indemnify and hold harmless Seller, or Seller’s Affiliate, respectively, from any Liability or obligation arising out of or in connection with such Contracts and the performance thereof after the Closing Date unless Seller, or its Affiliate, is liable pursuant to (ii), and (iv) Seller or the respective Affiliate of Seller shall not be obligated to agree to any

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extensions of such Contracts, and, further provided, that Seller shall not be obliged to incur any out-of-pocket expenses or to otherwise accept any commercial disadvantage in order to perform such Contract(s) unless (i) such out-of-pocket expenses are fully paid or reimbursed by Purchaser, or (ii) such commercial disadvantages are fully compensated by Purchaser. Seller shall provide, and shall cause its Affiliates to provide, to Purchaser copies of all relevant books, records and other information and documents in relation to such Contracts. In addition, Seller shall deliver, and shall cause its Affiliates to deliver, to Purchaser without undue delay upon receipt a copy of any correspondence, notice or any other document and/or information received by Seller and/or its Affiliate after the Closing Date in relation to such Contracts. The list of such Contracts requiring third party consent to assignment set forth at Exhibit 2.1.9 does not necessarily list all such Contracts.

2.2 For the avoidance of doubt, the Assets transferred under this Agreement shall exclude all assets not expressly mentioned under Article 2.1 above (the “Excluded Assets”). The Excluded Assets shall include without limitation:

• all cash, time deposits, certificates of deposit and other cash equivalents and bank accounts owned by Seller at Closing Date;

• the name “BASF”, all trademarks associated with such name, service marks, logos, trade names, internet domains and applications for any of the foregoing;

• all accounts receivable (including data compensation owed from Aceto Corporation);

• any building or structures;

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• any machinery or equipment (for the avoidance of doubt, Lock ‘N Load equipment is considered packaging not machinery or equipment);

• any land;

• any rights under insurance policies of Seller;

• membership in the Market Basket Survey Task Force; and

• membership in the FIFRA Endangered Species Task Force.

2.3 Purchaser shall, effect, at its own discretion and cost, the assignments of the Intellectual Property Rights sold hereunder from Seller to Purchaser and Seller shall take any action reasonably necessary and/or appropriate to effect valid assignment (e.g. by signing the respective assignments prepared by Purchaser).

2.4 The Parties shall, and shall cause their respective Affiliates to, enter at Closing into Asset Sale and Purchase Agreements with the substantial contents of Exhibit 2.4 and to take any action reasonably necessary and/or appropriate in order to validly transfer to title to the Assets.

Article 3

RESERVED.

Article 4

Assumed and Retained Liabilities

4.1 The Seller and its Affiliates shall retain, and shall be responsible for paying, performing and discharging when due, and the Purchaser shall

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not assume or have any responsibility for and shall be held harmless and indemnified by Seller and its Affiliates with respect to any of the Liabilities of the Seller and/or its Affiliates created or existing on or prior to the Closing Date including, but not limited to the following (the “Retained Liabilities”):

(a) any and all Liabilities arising out of or in connection with the conduct or ownership of the Divested Business on or prior to the Closing Date including but not limited to those matters disclosed in Exhibit 11.2.9(a);

(b) any and all Liabilities relating to Products of the Divested Business delivered and invoiced to third parties (other than Seller and/or its Affiliates) on or prior to the Closing Date;

(c) all payables accrued on or prior to the Closing Date;

(d) any and all Liabilities not explicitly assumed by Purchaser and/or its Affiliates under this Agreement or the Exhibits attached hereto;

(e) any and all Taxes attributable to the conduct or ownership of the Divested Business by Seller and/or its Affiliates on or prior to the Closing Date and related to the time period on or before the Closing Date;

(f) any and all Liabilities arising under any transferred Contract and those Contracts subject to the provision of Article 2.1.9 with respect to a breach or default under such transferred Contract committed on or prior to the Closing Date;

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(g) any and all Liabilities of Seller and/or its Affiliates required by the terms of any transferred Contract to be performed on or prior to the Closing Date;

(h) any and all Liabilities resulting from, or relating to, litigation or proceedings relating to events on or prior to the Closing Date; and

(i) any and all Liabilities related to the employees of Seller and/or its Affiliates.

4.2 The Purchaser shall be responsible for paying, performing and discharging when due, and Seller shall not have any responsibility for and shall be held harmless and indemnified by Purchaser with respect to the following Liabilities (the “Assumed Liabilities”):

(a) Any and all Liabilities arising out of or in connection with the conduct or ownership of the Divested Business following the Closing Date, except as explicitly provided otherwise in this Agreement or the Exhibits thereto;

(b) any and all Taxes owed by Purchaser and/or its Affiliates attributable to the conduct or ownership of the Divested Business after the Closing Date and relating to the time period after the Closing Date;

(c) any and all Liabilities arising under any transferred Contract with respect to a breach or default under such transferred Contract committed after the Closing Date;

(d) any and all Liabilities required by the terms of any transferred Contract to be performed after the Closing Date; and

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(e) any and all other Liabilities expressly assumed by Purchaser pursuant to other provisions in this Agreement. For the avoidance of doubt, the Assumed Liabilities shall exclude any and all liabilities and obligations not expressly assumed by Purchaser under this Agreement.

4.2 Seller shall hold harmless Purchaser from and indemnify Purchaser against any and all Liabilities other than the Assumed Liabilities in particular from and against Liabilities which are assumed by Purchaser by operation of law.

Article 5

Acknowledgement

The Purchaser hereby acknowledges that except as explicitly granted pursuant to this Agreement and the Exhibits thereto no other right, license or any other transfer or conveyance is granted by the Seller to the Purchaser by implication or otherwise.

Article 6

Closing

6.1 On the Closing Date, the Parties shall exchange faxed signatures and execute original documents in counterpart on October 31, 2005 at 9:00 hrs PDT, and 12:00 hrs EDT from the offices of Purchaser and of Seller’s affiliate at Research Triangle Park, North Carolina, USA, or at such other time and place as the Parties may mutually agree upon, to take any actions necessary to finalize the transactions contemplated hereunder, in particular those mentioned in Article 6.2 (herein “Closing”). The

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transactions contemplated by this Agreement shall be performed with effect per the end of the Closing Date (24:00 h).

6.2 At the latest upon Closing, the following closing events shall occur:

• The Parties shall execute, and procure where necessary that their respective Affiliates execute, such deeds or other instruments (including the Asset Sale and Purchase Agreements) and perform, and procure where necessary that their respective Affiliates perform, such other actions as are necessary to transfer title to and possession of, the Divested Business to Purchaser, including, without limitation, the transfer of title and possession to the tangible Assets sold pursuant to this Agreement, the assignment of all Contracts sold to Purchaser to the extent the relevant third-party consents have been obtained, the Inventories, the assignment of Registration Rights, the transfer of title and possession of the Divested Registration Data Packages; the assignment or licensing of Intellectual Property Rights and the Know How, and the assignment of Customer Lists, taking into account local Tax and other filing requirements in respect of the Divested Business and/or specific Assets pursuant to the instruments listed at Exhibit 6.2.

• Purchaser shall pay the Preliminary Purchase Price in accordance with Article 9 and shall make all other payments to be made at Closing under the terms of this Agreement;

• Signing of the License Agreements if and to the extent the conditions and requirements for their execution as set forth explicitly in this Agreement have been fulfilled;

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• Signing of all Service and Supply Agreements if and to the extent the respective conditions and requirements for their execution as explicitly set forth in this Agreement have been fulfilled;

• Purchaser, or Seller, shall procure that their respective Affiliates perform any required action at Closing as provided herein; and

• Transition Services Agreement.

Article 7

7.1 In the event any country requiring post-Closing notification disapproves of the transaction with respect to that country, the Parties shall in such case agree on all appropriate measures, including “unwinding” and “hold separate” arrangements, so that the concerns of the affected countries can be addressed. If the respective concerns are not met within six (6) months after Closing, Seller as well as Purchaser may request a sale of any of the retained assets or rights concerned to a third party, which sale shall be effected for the account of Purchaser and the extent legally permissible in accordance with the instructions reasonably given by Purchaser.

7.2 The Parties agree to a delayed closing in [*] as set forth in Exhibit 7.2.

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Article 8

Covenants

8.1 Third-Party Consents to the Transfer and Assignment of Contracts

Seller and its Affiliates shall make commercially reasonable efforts to obtain as of the Closing Date or at the latest within six (6) months as of the Closing Date (i) consents of the third-party contractors to the transfer and assignment of all Contracts to be assigned to Purchaser pursuant to this Agreement as provided in this Agreement. Purchaser shall not be entitled to any claims against Seller or its Affiliates in case third parties refuse their consent or do not grant such letters of access despite such efforts of Seller or its Affiliates to obtain their consent.

Purchaser shall make commercially reasonable efforts to support Seller and its Affiliates to obtain the aforesaid third-party consents.

8.2 Use of Certain Names

No interest or right to use the name “BASF” or any other corporate name of the BASF Group or any logo, trademark or trade name or any derivation of the Seller, or its Affiliates with respect to, or associated with the foregoing, except names, trademarks, trade names or any derivations thereof explicitly transferred pursuant to this Agreement (collectively referred to as “Seller’s Names and Marks”) is to be transferred to Purchaser pursuant to the transactions contemplated hereby, and the use of any of Seller’s Names and Marks in connection with the Divested Business by Purchaser shall cease as of the Closing Date unless explicitly provided otherwise hereinafter, or in the Transition Services Agreement.

Purchaser shall be entitled to sell the Inventories transferred to them on the Closing Date pursuant to this Agreement which bear Seller’s Names and Marks during a period of the later of [*] following the Closing Date.

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Purchaser agrees that Seller shall have no responsibility for claims by a third party arising out of, or relating to, the use of any of Seller’s Names or Marks by Purchaser, and Purchaser undertakes to indemnify and hold harmless Seller with respect to any such third-party claims, in particular, without limitation, from claims resulting from the sale of, or otherwise related to, Inventories transferred to Purchaser pursuant to this Agreement.

As from the Closing Date Seller shall, and shall cause its Affiliates to, refrain from using names, trademarks, trade names or any derivations thereof transferred pursuant to this Agreement.

Article 9

Purchase Price

9.1 The purchase price for the Divested Business, including Inventories, and subject to adjustment as set forth below, shall amount to

US$ 26,142,561.20

US Dollars twenty six million one hundred forty-two thousand five hundred sixty-one and 20/100

“Preliminary Purchase Price” plus applicable VAT and sales taxes, if any, in the amount statutorily required. Seller, if and to the extent statutorily permitted, shall be entitled to waive any VAT exemptions, i.e. to opt for the applicability of VAT taxation. The Preliminary Purchase Price shall be subject to adjustment in accordance with Article 10, below.

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The Preliminary Purchase Price is allocated to the Assets as set out in Exhibit 9.1.

9.2 The Preliminary Purchase Price and any applicable VAT and sales tax shall become due and payable at Closing upon contemporaneous transfer and assignment of the Divested Business to the following Bank Accounts:

For India only, the amount of [*] (sent October 28, 2005) to:

Deutsche Bank AG

BKTRUS33

for credit to Deutsche Bank Mumbai, India

SWIFT DEUTINBB Account No. 04-411-436

For Brazil only, the amount of [*] (sent October 28, 2005) to:

ABN AMRO Bank – New York

SWIFT: ABNAUS33

ABA: 0958

Fedwire: 026009580

BANCO ABN AMRO Real S/A – Basf S/A and invoice nr.

Sub-Account: 673077480441

For all other countries, the remainder of [*] at Closing to:

JPMorgan Chase Bank N.A., New York

Account No.: 400316404

ABA: 021000021

SWIFT Code: CHASUS33XXX

9.3 The Preliminary Purchase Price and any applicable VAT and sales tax shall be paid at Closing in US Dollars by way of wire transfer free of any costs and fees into the bank accounts set forth under Article 9.2 above.

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9.4 VAT and sales tax, if any, under applicable local laws, shall be settled locally between the selling Affiliate and the purchasing Affiliate upon submission of invoices providing for such VAT or sales tax within five (5) Business Days after the receipt of the invoice. No interest shall apply on such tax payments if and to the extent paid within the five (5) Business Days.

Article 10

Adjustment of Preliminary Purchase Price

10.1 The Preliminary Purchase Price shall be adjusted as follows in order to determine the Final Purchase Price:

10.1.1  The Preliminary Purchase Price is based on the assumption that the value of the Inventories to be transferred on Closing hereunder at Local Book Value (as defined in Article 10.1.3) plus a mark-up of [*] of such Local Book Value amounts to [*] (“Estimated Inventory Value”) plus VAT, sales tax and other transfer taxes and duties, if any. A split of such amount of Estimated Inventory Value by country shall be set forth in Exhibit 9.1.

10.1.2  If, as of the Closing Date, the value of the Inventories which shall be determined in accordance with Article 10.1.3 is higher than the Estimated Inventory Value, then Purchaser shall pay to Seller the difference and, vice versa, (“Purchase Price Adjustment Amount”). The Preliminary Purchase Price plus the Purchase Price Adjustment Amount is the “Final Purchase Price”.

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10.1.3 Seller shall conduct, or shall procure that its respective Affiliates conduct, a physical stock taking of the Inventories and the representatives of the Purchaser and its auditors shall be given the opportunity to observe such physical stock taking. As promptly as possible, but in any event within [*] Business Days following the Closing Date, Seller shall deliver to Purchaser an un-audited statement of the value and quantity per Seller or respective Affiliate of the Inventories based on the respective book value of the Inventories as shown in the records of Seller and/or Seller’s respective Affiliates holding such Inventories as of the Closing Date, except in the case of Technical Phorate Active Substance Inventories in [*] where the protocol in Exhibit 10.1.3 shall apply, using the International Financial Reporting Standards (“IFRS”) (such value being the “Local Book Value”) converted in USD at the European Central Bank (ECB) fixing rates as published on the ECB’s website on the Closing Date. The Local Book Value according to IFRS shall be determined with the accounting and valuation principles as consistently applied by the respective companies maintaining full accounting and valuation consistency with the previous financial statements of the respective companies, in particular providing for sufficient and appropriate depreciation and value adjustments and with respect to the continuity of methods, continuity of valuation and rules and unexchanged election of any valuation and accounting alternatives, unless the accounting and valuation principles as applied in the past were not in compliance with mandatory law or IFRS accounting standards or unless expressly otherwise provided for under this Agreement. Purchaser recognizes that Seller and its Affiliates have adopted IFRS starting [*]. Should ECB Rates not be published for a currency, the exchange rate published on Reuters at 2:30 p.m. CET would be applicable, plus a mark-up of [*] of such Local Book Value (the “Preliminary Inventory Value”) plus VAT, sales tax and other transfer taxes and duties related to the transfer of the Inventory, if

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any based on the aforesaid physical stock taking. If Purchaser does not object to the Preliminary Inventory Value within [*] Business Days after receipt thereof, the Preliminary Inventory Value shall irrevocably be deemed final for the purposes of this Article 10 (the “Final Inventory Value”). If Purchaser has raised such objections and the Parties have not agreed upon the Final Inventory Value within a further period of [*] Business Days, the determination of the Final Inventory Value shall be referred to the arbitration proceedings pursuant to Article 10.2.

10.2 Seller and Purchaser shall forward remaining disputed items to Ernst & Young or, in the event they are not available or unwilling to take on such an assignment, to another international accounting firm reasonably acceptable to both Parties, who shall for purposes of determining the Final Inventory Value act as expert arbitrator.

The Parties shall be given the opportunity to present their case to the expert arbitrator in the English language in writing and orally. The expert arbitrator shall discuss with the Parties, and give reasons with respect to, the various issues that are controversial. Accounting standards as referred to or defined in this Agreement and the Exhibits to this Agreement (IFRS) shall be binding upon the expert arbitrator. The expert arbitrator shall not decide on legal issues.

The Parties shall advance and bear all fees, costs and expenses of the expert arbitrator on first written request in equal parts, and each Party shall bear its own costs and the costs of its advisers and counsel, except where the expert arbitrator decides otherwise on the allocation of the costs and expenses of the proceedings in his equitable discretion, including reasonable expenses of the Parties and reasonable fees and expenses of

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their advisers and counsel, taking into account the difference in his decision to the original positions and motions of the Parties.

10.3 The Purchase Price Adjustment Amount under Article 10.1 shall be due and payable within [*] Business Days after the Final Inventory Value has been agreed or determined. Seller shall prepare, upon agreement or determination of the Purchase Price Adjustment Amount, a list of Final Inventory Value by country which shall be annexed as Exhibit 10.3. The Purchase Price Adjustment Amount due by one or the other Party shall bear interest at a rate of [*] (30/360) from the Closing Date until the actual date of payment.

10.4 Seller shall, and shall cause Seller’s Affiliates to, issue invoices to Purchaser for the Preliminary Purchase Price under Asset Sale and Purchase Agreements. The local Inventories existing on the Closing Date shall be adjusted for the Final Inventory Value in accordance with the procedure shown in Article 10.1.3.

10.5 The local purchase prices (excluding VAT and other transfer taxes or dues) which shall be payable pursuant to the Asset Sale and Purchase Agreements shall be deemed fully settled with the payment by Purchaser of the Final Purchase Price and the Preliminary Purchase Price respectively. The Asset Sale and Purchase Agreements shall provide the local purchase prices in USD and the equivalent in local currency of the selling country converted at the ECB fixing rates as published on the ECB’s website two (2) Business Days before the Closing Date. Should ECB Rates not be published for a currency, the exchange rate published on Reuters at 2:30 p.m. CET would be applicable. The Asset Sale and Purchase Agreement will be adjusted after the determination of the Final Inventory Value. Notwithstanding the above, in countries where required

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due to local legislation the local purchase price as specified in the Asset Sale and Purchase Agreement has to be settled locally, Seller shall pay to its relevant Affiliates the local purchase price (excluding VAT and other transfer taxes and dues) in the name and on behalf of Purchaser. Whenever a payment allocation from Seller to its Affiliate pursuant to the preceding sentence is restricted by local legislation, such corresponding payment shall be made to Seller’s local Affiliate by Purchaser.

Article 11

Guarantees of Seller

Seller grants to Purchaser independent guarantees (selbständige Garantieversprechen) pursuant to Article 311 para. 1 BGB (German Civil Code) within the scope defined in Article 11.1 for the facts and circumstances set out in Article 11.2. Both Parties confirm that they explicitly agree that the guarantees in this Article 11 are not granted, and shall not be qualified as, “Beschaffenheitsgarantien” within the meaning of Articles 276, 444 BGB (German Civil Code).

11.1 Scope of Independent Guarantees

11.1.1 General/Recoverable Losses

In the event of any breach or non-fulfilment by Seller of any of the guarantees pursuant to this Article, Seller shall be liable for putting Purchaser into the same position that it would have been in if the guarantee had been correct or not been breached (Naturalrestitution), or, if and to the extent Seller fails to cure the breach or non-fulfilment within a period of three (3) months after notification by Purchaser, to pay damages for non-conformance (Schadensersatz wegen Pflichtverletzung), provided,

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however, that the guarantees shall only cover actual loss incurred by the Purchaser, and shall not cover internal administration or overhead costs of Purchaser and its Affiliates, consequential damages (Folgeschäden), loss of profits (entgangener Gewinn), punitive damages or loss of goodwill or reputational damage or any argument that the Final Purchase Price was calculated upon incorrect assumption.

11.1.2  Overall Scope of Seller’s Liability pursuant to this Agreement

The Seller’s aggregate liability under this Agreement, including, but not limited to, any and all claims for breach of any of the guarantees pursuant to this Article 11, but excluding Seller’s obligations under Articles 2.1.7, 4.1 and 4.3 and any breach based upon Seller’s fraud (all of which shall have no limitation), shall be limited to [*] of the Final Purchase Price (the “Overall Cap”).

11.1.3  De Minimis and Basket Amount

Except for Seller’s obligations under Article 2.1.7, 4.1 and 4.3 as well as breaches based upon Seller’s fraud, all of which shall have [*], guarantees under this Article 11 shall only cover those cases in which Purchaser due to a breach of a guarantee suffers in the individual case actual damage exceeding [*] (the “De Minimis Amount”), and, in addition, Purchaser shall only be entitled to claims for breach of guarantees pursuant to this Article 11 if the aggregate damage due to breaches of guarantees exceeding the total of [*] have occurred (the “Basket”), in which case Purchaser shall be entitled to claim the amount exceeding the Basket.

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11.1.4  Third-party Claims

If Purchaser is sued or threatened to be sued by a third party, including without limitation any governmental entity, or if Purchaser is subjected to any audit or examination by any Tax authority, which may give rise to a claim of Purchaser pursuant to this Article 11, Purchaser shall give Seller prompt written notice of such third-party claim (but in no event later than ten (10) Business Days after Purchaser became aware of such claim). Purchaser shall ensure that Seller shall be provided with all materials, information and assistance relevant in relation to the third-party claim, be given reasonable opportunity to comment or discuss with Purchaser any measures which Seller proposes to take or omit in connection with a third-party claim. No admission of liability shall be made by Purchaser and the third-party claim shall not be compromised, disposed of, or settled without the prior written consent of Seller. Further, Seller shall be entitled at its own discretion to take such action, or cause Purchaser to take such action as Seller shall deem necessary to avoid, dispute, deny, defend, resist, appeal, compromise, or contest such third-party claim in the name and on behalf of Purchaser. Purchaser shall give, subject to it being paid all reasonable out-of-pocket costs and expenses, all such information and assistance, as described above, including access to premises and personnel and including the right to examine and copy or photograph any assets, accounts, documents, records and electronically stored data, for the purpose of avoiding, disputing, denying, defending, resisting, appealing, compromising or contesting any such claim or liability as Seller or its professional advisers may reasonably request.

To the extent that Seller is in breach of a guarantee, all out-of-pocket expenses reasonably incurred by Purchaser in defending such third-party claim in accordance with instructions from Seller shall be borne by Seller. If it turns out that Seller was not in breach, any out-of-pocket expenses reasonably incurred by Seller in connection with the defence shall be borne by Purchaser. In case of a breach of the aforesaid obligations,

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Purchaser shall only be entitled to claim damages based on the respective breach of guarantee (i) if and to the extent the damage suffered did not result from the Purchaser’s breach of the aforementioned obligations, and (ii) if and to the extent Seller or its Affiliates did not lose claims for indemnification against any third party as a result of Purchaser’s breach of obligation.

11.1.5  Mitigation

Seller shall not be liable for, and Purchaser shall not be entitled to bring, any claim under or in connection with this Agreement if and to the extent that such claims result from Purchaser causing the relevant facts or circumstances underlying the breach of the guarantee or a failure by Purchaser to avoid or to mitigate damages pursuant to Section 254 BGB.

11.1.6  Notification of Claims

Purchaser undertakes to inform Seller in writing of any claims for breach of guarantee immediately after Purchaser becomes aware of, such breach (but in no event later than twenty (20) Business Days thereafter). Such written notice shall specify in reasonable detail the facts upon which an alleged possible claim is based. In case of a breach of the aforesaid obligations, Purchaser shall only be entitled to claims based on the respective breach of guarantee (i) if and to the extent the damage suffered did not result from the Purchaser’s breach of the aforementioned obligations, and (ii) if and to the extent Seller or its Affiliates did not lose claims for indemnification against any third party as a result of Purchaser’s breach of obligation.

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11.1.7

Seller and/or Seller’s Affiliate shall not be liable for, and Purchaser shall not be entitled to bring, any claim under or in connection with this Agreement if and to the extent that the matter to which the claim relates is subject of or a reasonably enforceable and collectible claim for repayment or indemnification against a third party, including in particular, without limitation, insurers. In case of a dispute between the Parties as to whether such a claim is reasonably enforceable or collectible, the terms of BGB 203 shall apply.

11.1.8  Exclusion of Claims Due to Purchaser’s Knowledge

Purchaser shall not be entitled to bring any claim if the underlying facts or circumstances to which the claim relates were actually known by Purchaser as of the Signing Date.

11.1.9  Knowledgeable Persons on Seller’s Side

If guarantees or licenses in Exhibits 2.1.6(a) or (b) refer to the knowledge (or best knowledge, as the case may be) of Seller and/or Seller’s Affiliate, this means the actual knowledge of [*] Seller, the knowledge of [*], and [*] of Seller´s Agricultural Products Division, and the persons directly reporting to the [*].

11.2 Guarantees of Seller

All guarantees following hereinafter, unless explicitly provided otherwise, shall be given as of the Closing Date, provided, however, that all guarantees are granted only with the extent, scope and content as defined

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in Article 11.1 and subject to the limitations pursuant to Article 11.3 through 11.5.

11.2.1  Necessary Corporate Action of Seller

This Agreement has been approved on the part of Seller and its Affiliates by requisite corporate action and the instruments and documents referred to herein and the transactions contemplated hereby have been approved by requisite corporate action of Seller and its Affiliates.

11.2.2  Assets

The Seller is entitled to freely transfer, dispose of or license (as the case may be) the Assets to be transferred or licensed hereunder, (other than the assigned Contracts) without requiring the further consent of any third party and without such transfer or license infringing any rights of a third party. Except as set forth in Exhibit 11.2.2, the Seller, or an Affiliate of the Seller, respectively, holds legal and economic title to all Assets and such Assets are free from any encumbrances or other rights granted to any third party except for statutory liens or retentions of title in the ordinary course of business.

11.2.3  Intellectual Property Rights

(a) Exhibits 2.1.5(a), 2.1.6(a)(1), 2.1.6(b)(1), and 2.1.6(b)(2) contain lists of Intellectual Property Rights and Lock ‘N Load Intellectual Property Rights owned or co-owned (with respect to the patent family with BASF code ACY 31054, which is co-owned by BASF and Deere & Company) by, and in the possession of, Seller and/or its Affiliates and, as indicated in the Exhibits, exclusively or non-exclusively used by the Divested Business. Seller and/or Seller’s

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Affiliates are unrestricted owner or exclusively entitled to use the Intellectual Property Rights, and exclusively entitled to use and license the Lock ‘N Load Intellectual Property Rights except for the patent family with BASF code ACY 31054, and non-exclusively entitled to use and license the Lock ‘N Load Intellectual Property Rights of the patent family with BASF code ACY 31054 for the Divested Business. There are no license agreements entered into by Seller and/or Seller’s Affiliates as licensors related to the Divested Business under the Intellectual Property Rights or Lock ‘N Load Intellectual Property Rights.

(b) To Seller’s and/or Seller’s Affiliates best knowledge third parties have not made any allegations to Seller and/or Seller’s Affiliates as to any infringements with respect to Intellectual Property Rights and Lock ‘N Load Intellectual Property Rights as under (a) above and exclusively or non-exclusively used by the Divested Business by Seller and/or Seller’s Affiliate, and to Seller’s and/or Seller’s Affiliates best knowledge on the date hereof, there exist no circumstances that would give rise to such allegations of third parties.

(c) No litigation is pending and to Seller’s and/or Seller’s Affiliate’s best knowledge no material litigation threatened wherein Seller or its respective Affiliate are accused of infringing or otherwise violating any intellectual property of third parties by use of the Intellectual Property Rights and Lock ‘N Load Intellectual Property Rights used by the Divested Business, nor have Seller or its Affiliates received notice of any such violation nor are there, to Seller’s and/or Seller’s Affiliate’s best knowledge, any facts presently existing that are reasonably likely to give rise to such a claim.

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(d) No guarantee is given with respect to the secrecy or the efficiency to reach the technical results obtained in past practice by the Seller of Know How transferred or licensed to Purchaser pursuant to this Agreement.

11.2.4  Product Registrations

All Registration Rights of the Phorate Active Substance and the Phorate Formulations as listed in Exhibit 2.1.1(a) are validly existing and there are no circumstances justifying any invalidation or restriction of the Registration Rights or the Registration Data Packages.

11.2.5  Organization of the Seller.

Seller is a corporation duly organized, validly existing and in good standing under the laws of the Federal Republic of Germany, with full power and authority, corporate and other, directly, or through its Affiliates to own or lease its property and assets and to carry on the Divested Business as presently conducted.

11.2.6  Financial Information.

The gross revenue of the Divested Business for the Year(s) 2003 and 2004 set forth on Exhibit 11.2.6 was prepared according to IFRS.

11.2.7  The Assets

Except as set forth in Exhibit 11.2.7, the Assets, together with the rights of Purchaser under this Agreement or any other Closing documents, are sufficient to conduct the Divested Business as conducted on or prior to the Closing Date. The documents of transfer to be executed and delivered by Seller and Seller’s Affiliates at the Closing will be sufficient to convey good and marketable title to the Assets to the Purchaser.

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11.2.8 Legal Compliance

Seller and/or Seller’s Affiliates are not in violation of any federal, provincial, state or local statutes, laws or regulations applicable to the Divested Business, and Seller and/or Seller’s Affiliates have not received any notice in writing or orally alleging any such violations or potential violations, except those which would not have a Material Adverse Effect on the Divested Business when taken as a whole.

11.2.9 Contracts

(a) Except as set forth on Exhibit 11.2.9(a), Seller or Seller’s Affiliates has no knowledge of any default under any Contract which default has not been cured or waived, except for such defaults as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. To Seller’s knowledge, there is no event or circumstance which, with the passage of time or the giving of notice or both, would constitute a material default or breach by Seller or Seller’s Affiliates, or would give rise to any right of termination or acceleration thereunder except for such default, breach, termination or acceleration as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. To Sellers’ knowledge, there is no assertion by any third party of any claim of material default or breach under any of the Contracts, except for such claim as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b) With respect to each Contract: (A) it is legal, valid, binding, and in full force and effect; (B) it will continue to be legal, valid, binding,

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and in full force and effect on identical terms following the consummation of the transactions contemplated hereby.

(c) No Contract not listed on Exhibit 11.2.9 has an annual value to or obligation from Seller exceeding [*]

11.2.10 Litigation

Except as set forth in Exhibit 11.2.10, there are no lawsuits, actions, proceedings, claims, orders or investigations by or before any governmental authority pending or to Seller’s and/or Seller’s Affiliates’ best knowledge, threatened against Seller and/or Seller’s Affiliates relating to the Divested Business, the Assets, or any product alleged to have been manufactured or sold by the Divested Business or seeking to enjoin the transactions contemplated hereby.

11.2.11 Conduct of Divested Business

Except as set forth in Exhibit 11.2.9(a), since January 1, 2005 through the Closing Date, Seller and/or Seller’s Affiliates have operated the Divested Business in the ordinary course of the Divested Business consistent with past practices, including but not limited to the level of sales of Products (i.e. no inventory “load up” with customers).

11.2.12 Registration Obligations

To Seller’s knowledge, as of Closing, the obligations of the holder of the Registration Rights is as follows: (a) to respond to any data call ins, requests for information, or other regulatory requirements which would, under applicable law, be a condition of maintaining any such Registration Rights and (b) decide whether to conduct

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additional studies required by CODEX MRL reassessement (JMPR Meetings).

11.3 Limitation

All claims of Purchaser arising under this Article 11 shall be time-barred on the [*] of the Closing Date.

11.4 Sole Remedy

Purchaser agrees that its sole and exclusive remedy with respect to any and all damage or loss incurred by it relating to the subject matter of this Agreement - except for claims based on breach of secondary obligations (including breach of covenants pursuant to Article 8) by Seller, which shall be governed by Section 280 (1) German Civil Code (BGB) - shall exclusively be governed by this Article 11. To the extent legally permissible, all other statutory or contractual claims relating to the subject matter of this Agreement are explicitly excluded, in particular, without limitation, any claims for reduction of the purchase price (Minderung) or improvement (Nacherfüllung) based on faultiness of the object of purchase (Ansprüche wegen Mängeln des Kaufgegenstands), rights or claims based on interference with the inherent basis of the Agreement (Störung der Geschäftsgrundlage, Section 313 BGB), damage claims for breaching an obligation in connection with the preparation or negotiation of this Agreement by the Parties or their representatives prior to the conclusion of this Agreement (culpa in contrahendo), compensation of expenses (Aufwendungsersatz, Sections 437 no. 3, 284 BGB), compensation instead of performance (Schadenersatz statt der Leistung), extraordinary termination (Section 314 BGB), rescission (Rücktritt) or challenge (Anfechtung).

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11.5 Statements Made Outside this Agreement

Purchaser accepts and acknowledges that no guarantee is given with respect to the correctness or completeness of any information received, or provided, outside this Agreement and the Exhibits thereto, in particular, without limitation, with respect to any information included in the data room, provided in response to additional due diligence requests of Purchaser or otherwise by Seller, its representatives, employees or advisors.

Article 12

Guarantees of Purchaser

Purchaser hereby guarantees by way of an independent guarantee (selbständiges Garantieversprechen) pursuant to Article 311 para. 1 BGB (German Civil Code):

12.1 Representations

(a) Purchaser is duly incorporated and validly existing under the laws of California and has all requisite corporate power and authority to own its assets and to carry out its business, and the execution and performance of this Agreement and the transactions contemplated hereby do not conflict with, or result in a breach of, the articles of association or by-laws of Purchaser.

(b) Purchaser is not aware of any facts or circumstances that could give rise to claims against Seller pursuant to Article 11.

(c) As of the date of this Agreement, Purchaser has no written or oral agreements or understandings with any third parties to (a) collaborate in a joint bid for the purchase of the Divested Business or (b) jointly develop or exploit the Divested Business after the closing of the transactions contemplated by this Agreement.

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12.2 Indemnification

In the event that Purchaser is in breach (i) of any guarantee pursuant to Article 12.1, (ii) of any covenant or agreement hereunder, or (iii) Purchaser is in default or non-compliance with any Assumed Liability and/or obligation under this Agreement, Purchaser shall indemnify and hold harmless Seller from any loss or damage incurred by Seller in connection therewith. All claims of Seller arising under Article 12.2 (i) shall become time barred mutates mutandis in accordance with Article 11.3. All other claims of Seller arising under Article 12.2 shall not be time-barred.

Article 13

Taxes

13.1 Registration with Local Tax Authorities

Purchaser shall be solely responsible for taking all actions any carrying out all formalities necessary for the registration (where applicable) of the transfer of local components of the Divested Business with any relevant local Tax authorities, provided, however, that Seller shall execute and deliver all instruments or documents reasonably requested by Purchaser in connection therewith against reimbursement for reasonable out-of-pocket costs and expenses incurred in connection therewith.

The Parties hereby explicitly acknowledge and agree that the terms and conditions of the transfer to Purchaser of any local components of the Divested Business (including payment terms) shall be as provided in this Agreement, and that the provisions of this Agreement shall supersede any contrary provision contained in the afore-mentioned instruments and documents. Moreover, there can be no double recovery for Purchaser under both this Agreement and the afore-mentioned instruments or documents.

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13.2 Taxes incurred by the Contemplated Transactions

All Taxes incurred in connection with the execution and implementation of this Agreement other than income Taxes of Seller resulting from taxation of profit from sale of the Assets shall be borne by Purchaser.

13.3 Miscellaneous

To the fullest extent permitted by law, the Parties agree to treat all payments made under this Article 13 or under any other indemnity provision contained in this Agreement, and for any misrepresentations or breach of guarantees, as adjustments to the Purchase Price for all Tax purposes.

Article 14

Reserved

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Article 15

Transition Services Agreement

Simultaneously herewith, the Parties shall execute and deliver a Transition Services Agreement.

Article 16

Additional Covenants

16.1 Non-compete Covenant

For a period of [*] following the Closing Date Seller shall not, and shall cause its Affiliates not to manufacture, formulate, sell, distribute or otherwise market any agricultural or specialty product containing Phorate as its active ingredient worldwide. Sellers and its Affiliates shall, in particular, neither directly nor indirectly, establish or participate or otherwise engage in any business which manufactures, formulates, distributes or otherwise markets any agricultural or specialty product containing Phorate as its active ingredient. An additional covenant is set forth at Exhibit 16.1.

16.2 Purchaser’s Requests/Seller’s Efforts

If and to the extent the execution of any service, supply or license agreement or of any other agreement referred to in this Agreement is subject to Purchaser’s prior request, such request shall be made by Purchaser in writing in due time and due course, but in no event later than on the fifth (5^th) Business Day before the Closing Date.

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16.3 Access to Books and Records; Post Closing Cooperation

From and after the Closing, each Party will afford the other, its counsel and accountants, during normal business hours and without unreasonable interference with the operation of that Party’s business, access to any books and records in its possession relating to the Divested Business and the right to make copies and extracts there from, to the extent that such access may be reasonably required in connection with (i) determination of Final Inventory Values, (ii) the preparation of financial statements and Tax returns or in connection with any Tax audit, (iii) the determination or enforcement of rights and obligations under this Agreement or the ancillary agreements thereto, (iv) compliance with the requirements of any governmental authority, (v) the determination or enforcement of the rights and obligations of any indemnified party, or (vi) in connection with any actual or threatened action, except to the extent that furnishing any such books or records or portion thereof pursuant to this Article 16.3 would violate any legal requirement or governmental order. Each Party agrees for a period [*] after the Closing Date (and through the expiration of any statutory limitation period with respect to tax matters) not to destroy or otherwise dispose of any such books and records related to the Divested Business unless such Party shall first offer in writing to surrender such books and records to the other Party and such other Party shall agree in writing to take possession thereof during the ninety (90) day period after such offer is made.

Such access made shall be made subject to the assumption by the receiving Party of usual and customary obligations of confidentiality with respect to such material.

16.4 No Solicitation.

From the Signing Date and for a period of [*] following the Closing Date, the Purchaser shall not, directly or indirectly, (i) actively solicit or induce any employee of the Seller or any of its Affiliate to leave such employment

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and become an employee of the Purchaser or any of its Affiliates or (ii) employ or agree to employ any person who was an employee of the Seller or any Affiliate of the Seller on the date of this Agreement; provided, however, that (x) nothing in this Section 16.4 shall prohibit the Purchaser or any of its Affiliates from employing any person who contacts them on his or her own initiative and without any direct or indirect solicitation by the Purchaser or any of its Affiliates, other than a general solicitation to the public.

16.5 Further Assurance and Cooperation.

In the event that at any time after Closing any further action is necessary to carry out the purposes of this Agreement, Seller or Purchaser, as the case may be, shall take all such action without any further consideration therefore.

16.6 Confidentiality of Know How

Seller shall undertake to keep secret and confidential and to withhold from third parties the Know-How transferred to Purchaser under Section 2.1.5 of this Agreement.

Purchaser shall undertake to keep secret and confidential and to withhold from third parties the Know-How licensed to Purchaser under Sections 2.1.6(a) and (b) of this Agreement, except when the disclosure of such Know-How is necessary to conduct the Phorate business, including maintaining and obtaining registrations and including granting sublicenses to third parties according to Exhibit 2.1.6(a), Article 2 and Exhibit 2.1.6(b), Article 2.1. If not required otherwise by governmental or judicial obligations, Purchaser shall disclose such Know-How to third parties under an obligation of confidentiality.

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16.7 Aceto Data Compensation Enforcement

Purchaser acknowledges that, as of Closing, Seller’s Affiliate BASF Corporation is owed [*] by BASF Corporation prior to Closing, which studies are to be transferred to Purchaser at Closing. So as to allow BASF Corporation to enforce its rights to payment of data compensation in the event of [*] Purchaser agrees, upon Seller’s request, to allow BASF Corporation (at BASF’s cost) to petition in Purchaser’s name as the owner of the revelant data at the US Environmental Protection Agency for cancellation of [*] in the event [*] to pay the sums due BASF Corporation. In the event [*], and Seller’s election not to proceed against Seller, Purchaser may proceed at its cost to petition for cancellation [*] but in the event [*] in any event BASF Corporation shall be entitled to the same.

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Article 17

Miscellaneous

17.1 Expenses and Fees

Each Party shall bear its own costs and expenses in connection with the preparation, execution and implementation of this Agreement, including any and all professional fees of its legal, tax and financial advisers.

The following costs and fees in connection with the preparation and implementation of this Agreement shall be borne by Purchaser (who shall reimburse Seller for such costs if and to the extent disbursed by Seller): notarial fees, registration costs (including, without limitation, registration costs for transfer of Registration Rights, Intellectual Property Rights, etc.), as well as fees imposed by any competent cartel authority.

17.2 Notices

17.2.1 All notices in connection with this Agreement and its execution shall be given to the respective Parties by (i) telecopier, (ii) hand delivery or (iii) registered letter with receipt confirmed and shall be considered delivered in all respects when delivered as follows:

(a) as to the Seller: BASF Aktiengesellschaft Carl-Bosch-Strasse 64 Limburgerhof, Rheinland-Pfalz Germany D-67117 Fax no.: +49 – 0621 – 60-27925 Attn: Group VP Global Strategic Marketing Agricultural Products

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(b) as to the Purchaser: American Vanguard Corporation 4695 MacArthur Court, Suite 1250 Newport Beach, California 92660 Attn: Eric G. Wintemute Fax No: (949) 260-1201

17.2.2 The above addresses shall remain valid unless and until the other Party has been notified in writing in German or English by registered mail of any change of address, provided, however, that a change of address and/or the authorised receiving agent shall be valid only if the new address of service is an address within the Federal Republic of Germany or the United States of America.

17.3 Amendments

Amendments and alterations of this Agreement have to be in writing, unless notarisation is required. This shall also apply to a waiver of the written form.

17.4 Default Interest Rate

Unless otherwise specified in this Agreement, if either Party is in default of payment as of any payment date pursuant to this Agreement, the outstanding amount shall bear interest as from the respective payment date until, but not including, the day of actual payment at [*]

17.5 Reserved.

17.6 Entire Agreement

This Agreement constitutes the full understanding of the Parties and the complete and exclusive statement of the terms and conditions of the agreement relating to the subject matter hereof and supersedes any and all prior

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agreements, whether written or oral, that may exist between the Parties with respect to the subject matter of this Agreement.

17.7 Successors

This Agreement shall be binding on any legal successors of the Parties. This Agreement may not be assigned by any Party to any third parties without the prior written consent of the other Party.

17.8 Confidentiality

No public announcement concerning the transactions contemplated by this Agreement shall be made by either Party unless the form and text of such announcement shall first have been approved by the other Party except that if the other Party is required by law or by applicable stock exchange regulations to make an announcement it may do so after first consulting with the other Party, if practicable. The Parties mutually undertake to keep the contents of this Agreement secret and confidential vis-à-vis any third party. This shall not apply to the extent that they are forced to disclose the same by statutory provision or administrative decree. In such case, the Parties shall, however, inform each other prior to such disclosure and shall limit the same to the minimum required by statute or the authorities.

The Confidentiality Agreement between Purchaser and Seller dated 14^th of January, 2005 shall remain in full force and effect.

17.9 Severability

If any provision of this Agreement should be or become invalid or if this Agreement does not address any specific situation, then all other provisions of this Agreement shall not be affected thereby. Instead of such invalid provision or in order to provide a provision to fill the gap, such

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provision shall be deemed to have been agreed upon which, as close as legally possible, complies with the purpose and intent of the Parties with the invalid provision, especially with respect to any measure of performance, time or period provided therein, or which reflects what the Parties would have agreed upon if they had considered such situation.

17.10  Governing Law

This Agreement is subject to, and shall be governed by, the laws of [*] (excluding laws of conflicts and uniform laws or conventions), unless the application of a foreign law is compulsory.

17.11  Arbitration

Any dispute arising out of or in connection with this Agreement, including any dispute regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the Rules of Arbitration of the American Arbitration Association, which Rules shall be deemed to be incorporated by reference into this clause. The tribunal shall consist of three (3) arbitrators, of whom each of Seller and Purchaser shall be entitled to nominate one (1) and the third (3^rd) of whom shall be nominated by the arbitrators nominated by Seller and Purchaser. The place of arbitration shall be [*] and the language of arbitration shall be English.

17.12  Conflicts between this Agreement and related implementation agreements

Seller and Purchaser agree that the provisions of this Agreement shall supersede any and all provisions of the implementation and ancillary agreements and Sales and Purchase Agreements to be entered into in accordance with this Agreement and the Exhibits hereto, notwithstanding

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(i) any provisions to the contrary in these implementation and ancillary agreements, (ii) that these implementation and ancillary agreements will be executed after the Closing Date hereof, and (iii) that the parties to these implementation and ancillary agreements may not be Seller and Purchaser. Seller and Purchaser undertake to procure that their respective Affiliates adhere to the provisions of this Agreement, including this provision.

17.13  Counterparts.

Facimile signatures shall be considered original for all purposes. This Agreement may be executed in one or more counterparts, and by the different Parties hereto in separate counterparts, each of which constitute one and the same agreement.

______________________, this _____________ 2005

BASF Aktiengesellschaft AMVAC Chemical

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List of Exhibits

Exhibit A	Raw Materials Located [*] to be Sold
Exhibit B	Lock ‘N Load Containers and Parts to be Transferred
Exhibit C	Phorate Active Substance
Exhibit D	Phorate Formulations
Exhibit 2.1.1(a)	Phorate Registration Rights primarily related to the Divested Business
Exhibit 2.1.1(b)	Phorate supporting Divested Registration Data Packages
Exhibit 2.1.5(a)	Intellectual Property Rights exclusively related to the Divested Business - Trade Marks
Exhibit 2.1.5(b)	Intellectual Property Rights exclusively related to the Divested Business - Customer List [To be included after Closing]
Exhibit 2.1.6(a)	License Agreement
Exhibit 2.1.6(a)(1)
	Licensed Intellectual Property Rights, Registration Rights and Registration Data Packages]
Exhibit 2.1.6(b)	License Agreement Lock ‘N Load
Exhibit 2.1.6(b)(1)	Lock ‘N Load Intellectual Property Rights
Exhibit 2.1.7	Material Safety Data Sheets and Product Specifications
Exhibit 2.1.8	List of Contracts
Exhibit 2.1.9	List of Contracts to be transferred/ amended to Seller
Exhibit 2.4	Asset Sale and Purchase Agreement (Template)

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Exhibit 6.2	List of Documents to be Executed at Closing
Exhibit 7.2	Delayed Closing [*]
Exhibit 9.1	Preliminary Purchase Price Allocation
Exhibit 10.1.3	[*] of Technical Phorate Active Ingredient
Exhibit 10.3	Final Inventory Value (provided after Closing)
Exhibit 11.2.2	Assets
Exhibit 11.2.6	Financial Information
Exhibit 11.2.9(a)	Contracts
Exhibit 11.2.10	Litigation
Exhibit 15	Transitional Services Agreement
Exhibit 16.1	Additional Covenant (MFC)

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