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<SEC-DOCUMENT>/in/edgar/work/0001005477-00-006759/0001005477-00-006759.txt : 20000929
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ACCESSION NUMBER:		0001005477-00-006759
CONFORMED SUBMISSION TYPE:	10-K405
PUBLIC DOCUMENT COUNT:		11
CONFORMED PERIOD OF REPORT:	20000630
FILED AS OF DATE:		20000927

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PHILIPP BROTHERS CHEMICALS INC
		CENTRAL INDEX KEY:			0001069899
		STANDARD INDUSTRIAL CLASSIFICATION:	 [2810
]		IRS NUMBER:				131840497
		FISCAL YEAR END:			1231
</COMPANY-DATA>

		FILING VALUES:
			FORM TYPE:		10-K405
			SEC ACT:		
			SEC FILE NUMBER:	333-64641
			FILM NUMBER:		730037
</FILING-VALUES>

			BUSINESS ADDRESS:	
				STREET 1:		ONE PARKER PLZ
				CITY:			FORT LEE
				STATE:			NJ
				ZIP:			07024
				BUSINESS PHONE:		2019446020
</BUSINESS-ADDRESS>

				MAIL ADDRESS:	
					STREET 1:		ONE PARKET PLZ
					CITY:			FORT LEE
					STATE:			NJ
					ZIP:			07024
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<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>FORM 10-K405
<TEXT>


================================================================================

                                  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 fiscal year ended June 30, 2000

                                       OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                        Commission File Number 333-64641

                                   ----------

                        Philipp Brothers Chemicals, Inc.
             (Exact name of registrant as specified in its charter)

           New York                                              13-1840497
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

                  One Parker Plaza, Fort Lee, New Jersey 07024
               (Address of principal executive offices) (Zip Code)

                                 (201) 944-6020
              (Registrant's telephone number, including area code)

                                   ----------

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

                                (Title of Class)

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 other information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K |X|

The aggregate market value of the voting stock held by non-affiliates of the
Registrant computed by reference to the price at which such voting stock was
sold was $0 as of June 30, 2000.

The number of shares outstanding of the Registrant's Common Stock as of June 30,
2000: 24,488.50

                 Class A Common Stock, $.10 par value: 12,600.00
                 Class B Common Stock, $.10 par value: 11,888.50

================================================================================
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

PART I ....................................................................    4

       Item 1.  Business ..................................................    4
       Item 2.  Properties ................................................   22
       Item 3.  Legal Proceedings                                             23
       Item 4.  Submission of Matters to a Vote of Security Holders .......   24

PART II ...................................................................   25

       Item 5.  Market for Registrant's Common Equity and Related
                  Stockholder Matters .....................................   25
       Item 6.  Selected Financial Data ...................................   25
       Item 7.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations .....................   26
       Item 7A. Quantitative and Qualitative Disclosures about Market
                  Risk ....................................................   34
       Item 8.  Financial Statements and Supplementary Data ...............   34
       Item 9.  Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosure ................................   34

PART III ..................................................................   35

       Item 10. Directors and Executive Officers of the Registrant ........   35
       Item 11. Executive Compensation ....................................   36
       Item 12. Security Ownership of Certain Beneficial Owners and
                  Management ..............................................   40
       Item 13. Certain Relationships and Related Transactions ............   40
       Item 14. Exhibits, Financial Statement Schedules and Reports on
                  Form 8-K ................................................   42
Index to Financial Statements .............................................  F-1
Report of Independent Accountants .........................................  F-2

Consolidated Financial Statements
       Consolidated Balance Sheets as of June 30, 2000 and 1999 ...........  F-3
       Consolidated Statements of Operations and Comprehensive Income for
         the years ended June 30, 2000, 1999 and 1998 ...................... F-4
       Consolidated Statements of Changes in Stockholders' Equity for the
         years ended June 30, 1998, 1999 and 2000 ........................   F-5
       Consolidated Statements of Cash Flows for the years ended June 30,
         2000, 1999 and 1998 .............................................   F-6

Notes to Consolidated Financial Statements ...............................   F-7

Consolidating Financial Statements
       Consolidating Balance Sheet as of June 30, 2000 ...................  F-29
       Consolidating Income Statement for the year ended June 30, 2000 ...  F-30
       Consolidating Statement of Cash Flows for the year ended June 30,
         2000 ............................................................  F-31
       Consolidating Balance Sheet as of June 30, 1999 ...................  F-32
       Consolidating Income Statement for the year ended June 30, 1999 ...  F-33
       Consolidating Statement of Cash Flows for the year ended June
         30, 1999 ........................................................  F-34
       Consolidating Income Statement for the year ended June 30, 1998 ...  F-35
       Consolidating Statement of Cash Flows for the year ended June
         30, 1998 ........................................................  F-36

SIGNATURES ...............................................................  II-1


                                       3
<PAGE>

                                     PART I

Item 1. Business.

General

      Philipp Brothers Chemicals, Inc. ("Philipp Brothers" or the "Company") is
a leading diversified global manufacturer and marketer of a broad range of
specialty agricultural and industrial chemicals, which are sold world-wide for
use in numerous markets including animal nutrition and health, agricultural,
pharmaceutical, electronics, wood treatment, glass, construction and concrete.
The Company also provides recycling and hazardous waste services primarily to
the electronics and metal treatment industries. The Company believes it has
leading positions in certain of its end markets, and has global marketing and
manufacturing capabilities. Approximately 36% of the Company's fiscal 2000 net
sales consisted of sales made by the Company outside the United States. During
fiscal 2000, the Company's products were manufactured at ten facilities in the
United States, four facilities in Europe, two facilities in Israel, and one
facility in South America. Unless the context otherwise requires, references in
this Report to the "Company" refer to the Company and/or one or more of its
subsidiaries, as applicable.

      The Company manufactures and markets more than 400 specialty agricultural
and industrial chemicals, of which 50 products accounted for approximately 83%
of fiscal 2000 net sales. The Company focuses on specialty agricultural and
industrial chemicals for which it has a strong market position or an advantage
in product development, manufacturing or distribution. Many of the Company's
products provide critical performance attributes to its customers' products,
while representing a relatively small percentage of total end-product costs.

      The Company has two operating segments--AgChem and Industrial Chemicals.
The Company's AgChem segment manufactures and markets trace minerals, trace
mineral premixes and animal feed ingredients, as well as vitamins, vitamin
premixes and other animal health products to the animal feed, poultry and pet
food industries. These products include nicarbazin and amprolium, which the
Company distributes to the world-wide poultry industry through major
multinational pharmaceutical and animal health companies, and copper sulfate, a
key ingredient in animal nutrition, which the Company markets to the animal feed
industries in the United States and France. The Company also manufactures and
markets copper-based fungicides and other agricultural products for the United
States, French and other international markets. The Company's Industrial
Chemicals segment manufactures and markets a number of specialty and fine
organic chemicals and intermediates, as well as industrial pigments and other
mineral products for use in the chemical, catalyst, pharmaceutical,
construction, concrete, wood treatment, automotive, aerospace, glass and coal
mining industries. Certain of these products are produced from the Company's
recycling operations, including copper oxide, which is used in the production of
water-borne wood preservatives. In addition to copper oxide, the Company
supplies other mineral oxides, such as iron and manganese compounds, which are
used as colorants and for other purposes in the brick, masonry, glass and other
industries. The Company also manufactures and recycles alkaline etchants in the
United States and sells fresh etchant to printed circuit board manufacturers.


                                       4
<PAGE>

Products

      The Company manufactures and markets more than 400 specialty agricultural
and industrial chemicals.

      The table below sets forth the Company's fiscal 2000 net sales by
operating segment, principal products, principal end markets or users, and
selected well-known customers.

<TABLE>
<CAPTION>
Business Segments                                Principal End           Selected Well-Known
(2000 Net Sales)*      Principal Products        Markets or Users        Customers
- -----------------      ------------------        ----------------        -------------------
<S>                    <C>                       <C>                     <C>
AGCHEM                 Agri-Tin                  Animal Feed             Agway
($180 million sales)   Amprolium                 Citrus                  BASF
                       Animal Feed Ingredients   Coccidiostats**         Cargill
                       Copper Fungicides         Feed Mills              Eli Lilly
                       Copper Sulfate F.G.       Grapes                  Farmland/LandOLakes
                       Fungicides                Nutritional             Helena (Marubeni)
                       Growth Regulators         Nuts                    Meriel (Merck/Rhone-Poulenc)
                       Nicarbazin                Poultry and Pet Food    Perdue
                       Trace Mineral Premixes    Supplements             Purina Mills
                       Trace Minerals            Vegetables              (Koch Industries)
                       Ultra-Flourish            Vines                   Sivam
                                                                         Sumitomo
                                                                         Tyson Foods
                                                                         United Agri Products (Conagra)

INDUSTRIAL             Alkaline Etchant          Acetylene               Ashland
CHEMICALS              Calcium Carbide           Brick and Tile          Automata
($138 million sales)   Copper Oxide              Catalysts               BOC
                       Dicyandiamide             Cement Coatings         Colgate Palmolive
                       Ferric Chloride           Chemical Milling        Elementis
                       Fly Ash                   Concrete                Engelhard
                       Iron Oxide                Flame Retardation       Fiberglass
                       Manganese Dioxide         Frits***                Hadco
                       Metal Treatment           Glass                   Hoffman La Roche
                       Recycling Activities      Intermediates           Hutchinson
                       Selenium Disulfide        Metal Finishers         Laporte
                       Sodium Fluoride           Pharmaceutical          MacDermid
                                                 Printed Circuit Board   Morton International
                                                 Wood Treatment          Osmose
                                                                         Owens Corning
                                                                         PPG Industries
                                                                         Procter & Gamble
                                                                         Sanmina
                                                                         Shipley
                                                                         SmithKline Beecham
                                                                         Tyco International Unilever
                                                                          Van Waters & Rogers
</TABLE>

- ----------
*     Net sales excludes intersegment sales.
**    Coccidiostats are a pharmaceutical product used for the prevention of
      coccidiosis (a parasitic infection) in chickens.
***   A frit is a smelted chemical composition rapidly quenched to produce
      glasses that are used to coat ceramics or metal substrates.

      Reference is made to Note 14 of the Company's Consolidated Financial
Statements for certain segment information.

Champ Flowable(R), Champion(R), GibGro(R), MRT(R), Nicarb(R), Nicarmix(R),
Ac-Cu-Guard(TM), Agri-tin(TM), Chromax(TM), Chromox(TM), Brickox(TM),
Macclesfield(TM), Magna Float(TM), MRT Cement(TM), Ultra Flourish(TM) and Phibro
and design(TM) are trademarks of the Company.


                                       5
<PAGE>

      No single customer accounted for more than 4% of the Company's 2000 net
sales.

      The Company manufactures and markets a broad range of specialty
agricultural and industrial chemicals, comprising two operating segments: AgChem
and Industrial Chemicals.

AgChem

      The Company manufactures and markets trace minerals, trace mineral
premixes, as well as vitamins, vitamin premixes and animal health care products,
to the animal feed, poultry and pet food industries, and manufactures and
distributes fungicides and other agricultural products in the United States,
France and other international markets.

Animal Nutrition and Health Products

      Through its subsidiary, Prince Agriproducts, Inc. ("Prince Agri"), the
Company manufactures and markets trace minerals, trace mineral and selenium
premixes and other ingredients to the animal and poultry feed and pet food
industries predominantly in the United States. These products generally fortify,
enhance or make more nutritious or palatable the animal and poultry feeds and
pet foods with which they are mixed. The Company has a line of trace mineral
additives used by the U.S. animal feed industry. The majority of the other
ingredients the Company sells are nutrients which are used as supplement for
animal feed. The Company serves customers in major feed segments, including
swine, dairy, poultry and beef as well as pet food and aquaculture. The
Company's foundation and strength in the animal feed industry have come from its
basic position in several trace minerals. The Company also manufactures and
markets copper sulfate as an animal feed supplement. Copper is a nutritional
requirement for the production of hemoglobin and for the normal growth and well
being of animals.

      The Company customizes trace mineral and selenium premixes at its blending
facilities in Marion, Iowa, Quincy, Illinois and Bowmanstown, Pennsylvania, and
makes a diverse line of other trace minerals and macro-minerals. The Company's
major customers for these products are medium to large companies, co-ops,
blenders, integrated poultry operations and pet food companies. Typical
customers include Purina Mills, Continental Grain, ADM, Agway,
Farmland/LandOLakes, Perdue and Tyson Foods. The Company sells other
ingredients, such as buffers, vitamin K and amino acids, including lysine,
tryptophan and threonine.

      The Company's Israeli subsidiary, Koffolk (1949) Ltd. ("Koffolk Israel"),
is a producer and distributor of vitamins and premixes for the animal feed and
poultry industries in Israel, and also sells such products worldwide. Koffolk
Israel also provides a wide range of services to the animal feed industry in
Israel including: mobile computer units for on-the-spot feed information,
comprehensive feed laboratory services for both chemical and microbiological
assay, and an experimental farm for field testing of feed additives and animal
health products. Koffolk Israel's nutritionists, field specialists and
veterinary experts provide technical assistance to ensure effective product use.

      Koffolk Israel also produces other intermediates used in the manufacture
of certain pharmaceuticals. Koffolk Israel's plant in Ramat Hovav, Israel
operates under the FDA's GMP regulations, and has received FDA approval for some
of its processes and production operations.

      Through Koffolk Israel and its Brazilian subsidiary, Planalquimica
Industrial Ltda. ("Planalquimica"), the Company produces nicarbazin, and through
Koffolk Israel the Company also produces amprolium for distribution to the
world-wide poultry industry through major multinational pharmaceutical and
veterinary companies. The Company believes it is the sole world-wide producer of
amprolium, and the largest volume world-wide producer of nicarbazin through its
facilities in Israel and Brazil. The Company is the sole Latin American producer
of nicarbazin. Modern, large scale poultry production is based on intensive
animal management practices. This type of animal production requires routine
prophylactic medications in order to prevent health problems. Coccidiosis is one
of the critical disease challenges which poultry producers face, globally.
Coccidiosis is an infection of coccidia, a microscopic parasite which routinely
infects chickens. Nicarbazin and amprolium are among the most effective
medications for the prevention of coccidiosis in chickens when used in rotation
with other coccidiostats. In 1996, Koffolk Inc. ("Koffolk USA") purchased from
the Animal Feed Division of Merck & Co. Inc. ("Merck"), the right to sell
nicarbazin, which Koffolk Israel had been manufacturing in Israel. Koffolk USA
became the registered transferee and owner of the New Animal Drug Application
("NADA") for nicarbazin approved by the U.S. Food and Drug Administration
("FDA"). Koffolk USA became a subsidiary of the Company in June 1998.
Separately, Merck appointed Koffolk USA as its exclusive U.S. distributor of
amprolium for poultry markets. In 1999, Koffolk Israel purchased from Merial
Limited, the successor to Merck, its European rights for nicarbazin-based
products.


                                       6
<PAGE>

Crop Protection

      Through its division, Agtrol International, the Company focuses on
developing, registering, manufacturing and marketing crop protection chemicals.
The Company has a large and diversified portfolio of many products registered
under the Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA") for use
in crop protection in the United States, and holds product registrations for its
crop protection chemicals in many foreign countries. The principal markets are
in the Northern Hemisphere, particularly in North America and Europe. The
business is seasonal, with approximately 70% of sales occurring between March
and June.

      The Company's current product line consists of a variety of copper
fungicides and gibberellins, a plant growth regulator used in table grapes and
citrus production. The Company also seeks to increase its product lines through
identification and registration of generic fungicides under FIFRA either
directly or through joint ventures or strategic alliances. In 1998, the Company
obtained the U.S. registration under FIFRA required to sell a triphenyltin
hydroxide ("TPTH") based product, under the name Agri-tin, a fungicide used
primarily in the sugar beet, pecan and potato industry. In 1998, the Company
also launched a mefenoxam-based product, under the name Ultra Flourish, for use
in a variety of end use formulations. Mefenoxam is a systemic fungicide used in
the tobacco, citrus and vegetable industries.

      Copper Fungicides. The Company sells copper fungicides for the citrus,
vegetable, nut and vine industries. These copper fungicides generally have
greater efficacy than traditional copper sulfate and copper oxychloride
preparations. The Company sells its copper hydroxide fungicides under the names
Champion and Champ Flowable and, in France, Macclesfield 50. The Company also
sells its proprietary Bordeaux mixtures under the name Macclesfield 80.

      Gibberellins. The Company sells gibberellic acid, a plant growth
regulator, under the name GibGro, for use primarily in the table grape and
citrus industries.

Industrial Chemicals

      The Company manufactures and markets a number of inorganic and organic
specialty chemicals for use in the chemical catalyst, pharmaceutical,
construction, concrete, wood treatment, printed circuit board, automotive,
aerospace, glass and coal mining industries. Some of these products are produced
from raw materials derived from the Company's recycling operations. The Company
also purchases crude inorganic minerals in the form of ores and processes these
in various grades to produce chemicals for sale to manufacturers which
incorporate the resultant products into their finished products in various
industrial markets, including construction, with end-use applications in clay
brick, ceramic, masonry colorant, coatings, heavy media, foundry, glass,
electrodes, abrasives, dust control, and as an intermediate to various chemical
applications.

Inorganic

      Copper Chemicals. The Company manufacturers and sells various copper
chemicals. The Company's major copper chemicals are described below:

      Copper Oxide. Copper oxide is used as an ingredient in the production of
water-borne wood preservatives ("CCA"). Due to its recycling capabilities, the
Company believes that it is a low cost supplier of copper oxide to the CCA
market. The Company also sells copper oxide to the catalyst, dye, ceramic and
feed industries.

      Copper Sulfate. The Company sells a high purity copper sulfate to
worldwide producers of electroless copper. Industrial uses of copper sulfate
include the manufacturing of pigments, electroplating, catalysts and chemical
intermediates, and water treatment. The Company markets copper sulfate solution
to the mining and wood treatment industries.

      Mineral Oxides. The Company manufactures and sells various mineral oxides.
The Company's major mineral oxide products include iron compounds and manganese
compounds. The Company's iron compounds include red iron oxide (Hematite) (sold
to the brick, masonry, glass, foundry, electrode, abrasive, feed, and


                                       7
<PAGE>

various other chemical industries); black iron oxide (Magnetite) (sold under the
Magna Float brand name to the heavy media, coal, steel foundry, electrode,
abrasive, colorant, fertilizer, and various other chemical industries); iron
chromite (sold under the Chromox brand as a colorant or additive to the glass
industry). The Company's manganese compounds include manganese dioxide (sold
under the Brickox brand name, which is considered a standard color in many
applications, to the brick, masonry, glass, and various other chemical
industries); and manganous oxide (sold to customers requiring an acid soluble
form of manganese, such as animal feed, fertilizer and chemical manufacturers).

      Alkaline Etchants. Through its U.S. subsidiary, Phibro-Tech, Inc.
("Phibro-Tech"), the Company manufactures and recycles alkaline etchants in the
United States. Of the Company's five facilities involved with these products,
four have final RCRA Part B hazardous waste treatment and storage permits and
one is in an interim permit status. See "--Environmental Matters." The Company's
etchants are used to remove excess copper from printed circuit boards, leaving
the desired circuit pattern. The Company sells fresh etchant to printed circuit
board manufacturers and recycles spent etchants. Phibro-Tech generates revenue
from the sale of fresh etchants as well as the recovery of the dissolved copper
contained in the spent etchants, which are processed into saleable copper-based
products. The Company believes that it is the only national recycler of spent
etchants generated principally from the printed circuit board industry, with an
etchant plant in every major geographic area except New England. These plants
generally allow the Company to distribute product and transport spent etchant, a
freight intensive product which is classified as hazardous waste, over
relatively short distances.

      Recycling Activities. The Company is a leading recycler in the United
States of hazardous chemical waste streams that contain copper or nickel. These
waste streams are generated principally by printed circuit board manufacturers
and metal finishers. The metal finishing and printed circuit board industries
also generate other spent chemicals, which are raw material sources of acid,
copper and nickel, and the Company charges fees for processing such materials
based on metal content. The Company also recycles a variety of other
metal-containing chemical waste, including spent catalysts, pickling solutions
and metal strippers containing brass, cobalt, copper, nickel, iron, tin and
zinc, in liquid, solid or slurry form. The Company also uses these recovered
materials to produce copper and nickel chemicals for use as raw materials in
certain of its products.

      Metal-containing waste is either collected by the Company or delivered
directly to one of its facilities by the waste generator. The Company collects
and transports chemical waste in its specially-constructed tankers and
semi-trailers and drum transporting trailers. In some locations, rail
transportation by tank cars or piggyback trailers is also utilized. Upon arrival
at one of the Company's recycling and processing facilities, and prior to
unloading, a representative sample of the delivered waste is tested and analyzed
to assure that it conforms to the customer's contracted waste profile
specifications. The Company recycles and processes metal-containing hazardous
chemical waste streams using hydrometallurgical technology. This technology
involves the reclamation of various metals and the production of finished
chemical products using chemical reactions such as leaching, extraction and
precipitation. The Company determines the precise chemical process required to
treat each batch of hazardous waste based on the type and amount of the waste as
well as the proportion of useful raw materials it contains.

      Fly Ash Related Products. Through Mineral Resource Technologies, L.L.C.
("MRT"), a subsidiary started by the Company in 1995, the Company manages
combustion and mineral by-products. MRT provides management and recycling of
coal combustion residues, including fly ash and bottom ash, and also mineral
processing residues. MRT typically provides these products to its customers
directly from a utility's site or through its own terminals. Through the MRT
Technology Center in Atlanta, MRT seeks to develop end-use markets for certain
of these by-products. MRT's research and development program resulted, in March
1998, in two issued U.S. patents and a proprietary value-added product, called
MRT Cement, made primarily from fly ash. (Fly ash is the fine residue and bottom
ash is the heavier particles that result from the combustion of coal. Fly ash is
a pozzolan; i.e., a mixture that, in the presence of water, combines with an
activator, such as portland cement, to produce a cement-like material. This
allows fly ash to be used as a less expensive substitute for other cementitious
materials.) There is no assurance that MRT Cement will be, or the Company's
research and development efforts will result in the development of, a
commercially successful product.

      In connection with its fly ash management operations, MRT has entered into
and will seek to enter long-term sales and distribution agreements with
utilities providing for minimum payments and/or purchase


                                       8
<PAGE>

obligations by MRT of varying durations. Certain of these contracts also require
MRT to construct (at its expense) facilities to store and/or process ash. MRT's
ability to achieve long-term revenue growth and profitability is dependent upon
securing additional long-term ash management contracts with utilities,
developing fly ash beneficiation facilities and successfully commercializing MRT
Cement. The Company is in the process of evaluating methods to exploit the MRT
Cement and fly ash beneficiation technologies, including constructing cement
manufacturing and fly ash beneficiation plants. However, there can be no
assurance that the Company will be successful in developing commercially viable
means of exploiting any such product or technology. Consistent with industry
practice, in connection with its long-term contracts, the Company has furnished
and expects to furnish performance bonds or guarantees to such utilities.

Organic

      The Company sells its organic chemical intermediates to multi-national
pharmaceutical companies, including Pfizer, Merck, Johnson & Johnson and Hoffman
La Roche. Often the Company's intermediate products are used as building blocks
in multi-stage pharmaceutical production.

      The Company also manufactures and markets specialty chemicals to
manufacturers of health and personal care products. Among the Company's major
products for such applications are sodium fluoride and stannous fluoride, DL
Panthenol and selenium disulfide. Sodium fluoride is the active anti-cavity
ingredient in fluoride toothpaste, powders and mouthwashes. Selenium disulfide
is used as a dandricide in shampoo and hair care preparations.

      Through its English subsidiary, Wychem Limited, the Company markets a wide
range of halogenated organic compounds, mainly brominated and fluorinated. These
chemical intermediates are sold primarily into the pharmaceutical industry as
building blocks for further synthesis. Wychem is able to tailor the quality and
supply characteristics of its chemicals to those desired by its customers by
close coordination with the customer at an early stage in the customer's product
development. In certain cases the product supplied by Wychem is novel and
included in the customer's regulatory submissions.

      Through its Norwegian subsidiary, ODDA Smelteverk AS ("ODDA"), which it
acquired in October 1998 together with certain related distribution business
assets, the Company manufactures and distributes calcium carbide and
dicyandiamide. The principal uses of calcium carbide are in the production of
acetylene for welding and cutting, as a desulphurization agent in the steel and
foundry industry, and in the manufacture of chemicals. Dicyandiamide is used in
several applications, including as a fire retardant for fiber, wood and paint,
for producing epoxy laminates for circuit boards and adhesives, for producing
paper chemicals, and as a dye fixative for textiles. In January 2000, the
Company sold to a Norwegian "state governed" power production company its
approximately 21% holding in Aktieselskabet Tyssefaldene ("Tyssefaldene"), which
operates three power stations within the region of Norway in which ODDA is
located, two of which were leased from the Government of Norway by Tyssefaldene
and one of which is owned by Tyssefaldene. The net sales proceeds were $18.7
million. As a result of the sale, ODDA's long-term concession from the
Government of Norway to buy power at cost was terminated early, and ODDA agreed
to purchase a portion of its power needs through 2010 at rates consistent with
market rates prevailing at the time of the closing. ODDA will purchase the
balance of its power needs at market rates at the time of purchase.

Sales, Marketing And Distribution

      The Company sells specialty chemicals to manufacturers who incorporate the
Company's products into their finished goods. The Company has more than 3,450
customers. Sales to the top ten customers represented approximately 17% of the
Company's 2000 net sales and no single customer represented more than 4% of the
Company's 2000 net sales.

      The Company's sales and marketing network consists of a direct sales force
in its AgChem and Industrial Chemicals segments of approximately 58 and 49
persons, respectively, as well as more than 130 and 100 independent agents and
distributors, respectively, who specialize in particular markets.

      The Company's products are often critical to the performance of its
customers' products while representing a relatively small percentage of the
total end-product cost. Management believes that the three key factors to
marketing its products successfully are high quality products, a highly trained
and technical sales


                                       9
<PAGE>

force, and customer service.

Raw Materials

      The raw materials used in the Company's business consist chiefly of copper
metal and a wide variety of organic intermediates and inorganic chemicals which
are purchased from manufacturers in the United States, Europe and Asia. In
fiscal 2000, no single raw material accounted for more than 5% of the Company's
cost of goods sold. Total raw materials cost was approximately $165 million or
52% of net sales in 2000.

      The Company believes that for most of its raw materials alternate sources
of supply are available to the Company at competitive prices. In addition, the
Company's ability to recycle hazardous waste streams allows the Company to
recover certain metals and other raw materials that it substitutes in its
products for virgin materials, thereby reducing the Company's cost of goods and
its reliance on suppliers of certain virgin materials.

Research and Development

      Research, development and technical service efforts are conducted by
approximately 100 chemists and technicians at the various facilities of the
Company. The Company operates a Research and Development Center in Sumter, South
Carolina, relating to inorganic chemicals and crop protection products, and at
Stradishall, England, relating to organic chemical intermediates. In addition,
Koffolk Israel conducts substantial research and development at its Ramat Hovav
facility. Most of the Company's plants have chemists and technicians on staff
involved in product development, quality assurance, quality control and also
providing technical services to customers. Technical assurance is an important
aspect of the Company's overall sales effort.

      Technology is an important component of the Company's competitive
position, providing the Company with a low cost position and enabling the
Company to produce high quality products. Patents protect some of the Company's
technology, but a great deal of the Company's competitive advantage revolves
around know-how built up over many years of commercial operation.

      The Company possesses important formulation and compounding technology for
the animal feed industry. The Company also possesses what it believes to be
unique technology and know-how for the production of copper-containing
fungicides. This technology enables the Company to produce fungicides of
extremely fine particle size, which improves efficacy while reducing the
quantity of active ingredients needed through enhanced bio-availability.
Finally, the Company and its predecessors have over 20 years experience in the
use of hydrometallurgical technology for recycling metal-containing by-products
and a strong technological position in the production of metal-containing
chemicals.

Patents and Trademarks

      The Company owns certain patents, tradenames and trademarks and uses
know-how, trade secrets, formulae and manufacturing techniques which assist in
maintaining the competitive positions of certain of its products. Formulae and
know-how are of particular importance in the manufacture of a number of the
products sold in the Company's specialty chemical business. The Company believes
that no single patent or trademark is of material importance to its business,
and, accordingly, that the expiration or termination thereof would not
materially affect its business. See "--Government Regulation."

Customers

      The Company does not consider its business to be dependent on a single
customer or a few customers, and the loss of any of its customers would not have
a material adverse effect on the Company's results. No single customer accounted
for more than 4% of the Company's 2000 net sales. The Company typically does not
enter into long-term contracts with its customers. However, the Company has
entered into certain long-term contracts with respect to nicarbazin and
amprolium, as well as its ferric chloride recycling and fly ash management
activities. For additional information on the Company's customers, see
"--Products" and "--Sales, Marketing and Distribution."


                                       10
<PAGE>

Competition

      The Company is engaged in highly competitive industries and, with respect
to all of its major products, faces competition from a substantial number of
global and regional competitors. Some of the companies with which the Company
competes have greater financial, research and development, production and other
resources than the Company. The Company's competitive position is based
principally on customer service and support, product quality, manufacturing
technology, facility location and price.

      The Company has competitors in every market in which it participates. Many
of the Company's products face competition from products which may be used as an
alternative or substitute therefor, including amprolium and nicarbazin. The
Company competes with several regional companies of varying sizes and financial
resources in the hazardous metal-containing chemical waste recycling industry.
The Company also competes with large national companies which offer alternative
methods of treatment or disposal of hazardous metal-containing chemical waste
and which have substantially greater financial resources than the Company. While
these national companies do not currently offer recycling services similar to
those offered by the Company, their entry into the recycling business could have
a material adverse effect on the Company. In addition, the Company competes with
several large chemical companies in the chemical production business, none of
which obtains a significant portion of its raw materials from recycling. To the
extent these companies, or new entrants into the market, offer comparable
finished chemical products at lower prices, the Company's business could be
adversely affected.

Employees

      As of June 30, 2000, the Company had approximately 1,130 employees
worldwide, of whom 45% were salaried employees and 55% were hourly employees. Of
these, 294 employees were in management and administration, 107 in sales and
marketing, 103 were chemists or technicians and 627 were in production.
Approximately 9% of the Company's domestic employees were covered by collective
bargaining agreements with three unions. These agreements expire from 2000
through 2005. Certain employees are covered by individual employment agreements.
Koffolk Israel continues to operate under the terms of Israel's national
collective bargaining agreement, portions of which expired in 1994. In Norway,
approximately 75% of ODDA's employees are covered by collective bargaining
agreements.

      The Company considers its relations with both its union and non-union
employees to be good.

Environmental Matters

      Like similar companies, the Company and its subsidiaries are subject to a
wide variety of complex and stringent federal, state, local and foreign
environmental laws and regulations, including those governing the use, storage,
handling, generation, treatment, emission, release, discharge and disposal of
certain materials and wastes, the manufacture, sale and use of pesticides and
the health and safety of employees. Pursuant to environmental laws, subsidiaries
of the Company are required to obtain and retain numerous governmental permits
and approvals to conduct various aspects of their operations, any of which may
be subject to revocation, modification or denial under certain circumstances.
Under certain circumstances, the Company or any of its subsidiaries might be
required to curtail operations until a particular problem is remedied. Known
costs and expenses under environmental laws incidental to ongoing operations are
generally included within operating budgets. Potential costs and expenses may
also be incurred in connection with the repair or upgrade of facilities to meet
existing or new requirements under environmental laws or to investigate or
remediate potential or actual contamination and from time to time the Company
establishes reserves for such contemplated investigation and remediation costs.
In many instances, the ultimate costs under environmental laws and the time
period during which such costs are likely to be incurred are difficult to
predict.

      Subsidiaries of the Company have from time to time implemented procedures
at their facilities designed to respond to obligations to comply with
environmental laws. The Company believes that its operations are currently in
material compliance with such environmental laws, although at various sites the
Company's subsidiaries are engaged in continuing investigation and/or
remediation efforts to address contamination


                                       11
<PAGE>

associated with their historic operations. As many environmental laws impose a
strict liability standard, however, there can be no assurance that future
environmental liability will not arise.

      In addition, the Company cannot predict the extent to which any future
environmental laws may affect any market for the Company's products or services
or its costs of doing business. For instance, if governmental enforcement
efforts should lessen, the market for Phibro-Tech's recycling services could
decline. Alternatively, changes in environmental laws might increase the cost of
the Company's products and services by imposing additional requirements on the
Company. States that have received authorization to administer their own
hazardous waste management programs may also amend their applicable statutes or
regulations, and may impose requirements which are stricter than those imposed
by U.S. Environmental Protection Agency (the "EPA"). No assurance can be
provided that such changes will not adversely affect the Company's ability to
provide products and services at competitive prices and thereby reduce the
market for the Company's products and services.

      As such, the nature of the current and former operations of the Company
and its subsidiaries exposes them to the risk of claims with respect to such
matters and there can be no assurance that material costs and liabilities will
not be incurred in connection with such claims. Based upon its experience to
date, the Company believes that the future cost of compliance with existing
environmental laws, and liability for known environmental claims pursuant to
such environmental laws, will not have a material adverse effect on the Company.
However, future events, such as new information, changes in existing
environmental laws or their interpretation, and more vigorous enforcement
policies of regulatory agencies, may give rise to additional expenditures or
liabilities that could be material. For all purposes of the discussion under
this caption, under "--Litigation," and elsewhere in this Report, it should be
noted that the Company takes and has taken the position that neither the parent
company, Philipp Brothers Chemicals, Inc., nor any of its subsidiaries is liable
for environmental or other claims made against one or more of its other
subsidiaries or for which any of such other subsidiaries may ultimately be
responsible. References to the Company should accordingly not be read or
interpreted as a statement or admission that Philipp Brothers or any of its
subsidiaries is liable for activities of or claims made against any of its other
subsidiaries.

Regulation

      The following summarizes the principal federal environmental laws
affecting the business of the Company:

      Resource Conservation and Recovery Act of 1976, as amended ("RCRA").
Congress enacted RCRA to regulate, among other things, the generation,
transportation, treatment, storage and disposal of solid and hazardous wastes.
RCRA required the EPA to promulgate regulations governing the management of
hazardous wastes, and to allow individual states to administer and enforce their
own hazardous waste management programs as long as such programs were equivalent
to and no less stringent than the federal program.

      The EPA's regulations, and most state regulations in authorized states,
establish categories of regulated entities and set standards and procedures
those entities must follow in their handling of hazardous wastes. The three
general categories of waste handlers governed by the regulations are hazardous
waste generators, hazardous waste transporters, and owners and operators of
hazardous waste treatment, storage and/or disposal facilities. Generators are
required, among other things, to obtain identification numbers and to arrange
for the proper treatment and/or disposal of their wastes by licensed or
permitted operators and all three categories of waste handlers are required to
utilize a document tracking system to maintain records of their activities.
Transporters must obtain permits, transport hazardous waste only to properly
permitted treatment, storage or disposal facilities, and maintain required
records of their activities. Treatment, storage and disposal facilities are
subject to extensive regulations concerning their location, design and
construction, as well as the operating methods, techniques and practices they
may use. Such facilities are also required to demonstrate their financial
responsibility with respect to compliance with RCRA, including closure and
post-closure requirements.

      The Federal Water Pollution Control Act, as amended (the "Clean Water
Act"). The Clean Water Act prohibits the discharge of pollutants to the waters
of the United States without governmental authorization. Like RCRA, the Clean
Water Act provides that states with programs approved by the EPA may administer
and


                                       12
<PAGE>

enforce their own water pollution control programs. Pursuant to the mandate of
the Clean Water Act, the EPA has promulgated "pretreatment" regulations, which
establish standards and limitations for the introduction of pollutants into
publicly owned treatment works.

      Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended ("CERCLA" or "Superfund"). Under CERCLA and similar state laws,
the Company and its subsidiaries may have strict and, under certain
circumstances, joint and several liability for the investigation and remediation
of environmental pollution and natural resource damages associated with real
property currently and formerly owned or operated by the Company or a subsidiary
and at third-party sites at which the Company's subsidiaries disposed of or
treated, or arranged for the disposal of or treatment of, hazardous substances.

      Federal Insecticide, Fungicide and Rodenticide Act, as amended ("FIFRA").
FIFRA governs the manufacture, sale and use of pesticides, including the
copper-based fungicides sold by the Company. FIFRA requires such products and
the facilities at which they are formulated to be registered with the EPA before
they may be sold. If the product in question is generic in nature (i.e.,
chemically identical or substantially similar to a previously registered
product), the new applicant for registration is entitled to cite and rely on the
test data supporting the original registrant's product in lieu of submitting
data of its own. Should the generic applicant choose this citation option, it
must offer monetary compensation to the original registrant and must agree to
binding arbitration if the parties are unable to agree on the terms and amount
of compensation. The Company has elected this citation option in the past and
intends to use the citation option in the future should it conclude it is
economically desirable to do so. While there are cost savings associated with
the opportunity to avoid one's own testing and demonstration to the EPA of test
data, there is, in each instance, a risk that the level of compensation
ultimately required to be paid to the original registrant will be substantial.

      Under FIFRA, the EPA also has the right to "call in" additional data from
existing registrants of a pesticide, should the EPA determine, for example, that
the data already in the file need to be updated or that a specific issue or
concern needs to be addressed. The existing registrants have the option of
submitting data separately or by joint agreement. Alternatively, if one
registrant agrees to generate and submit the data, the other(s) may meet their
obligations under the statute by making a statutory offer to jointly develop or
share in the costs of developing the data. In that event, the offering party
must, again, agree to binding arbitration to resolve any dispute as to the terms
of the data development arrangement.

      The Clean Air Act. The federal Clean Air Act of 1970 ("Clean Air Act") and
Amendments to the Clean Air Act ("Clean Air Act Amendments"), and corresponding
state laws regulate the emissions of materials into the air.

      Such laws affect the coal industry both directly and indirectly. The coal
industry is directly affected by Clean Air Act permitting requirements and/or
emissions control requirements relating to particulate matter (such as "fugitive
dust"), and may also be impacted by future regulation of fine particulate
matter. Every five years, the EPA reviews and revises, if necessary, its
National Ambient Air Quality Standards ("NAAQS"), which is a set of national air
quality standards relating to fine particulate matter and ozone, among other
criteria air pollutants. In July 1997, the EPA adopted stringent new NAAQS, and
the impact of such new standards on the coal industry will depend on the
policies and control strategies associated with the state implementation process
under the Clean Air Act, as well as on pending legislative proposals to delay or
eliminate aspects of the new NAAQS.

      The Clean Air Act indirectly affects operations of the Company and its
subsidiaries by extensively regulating the air emissions of sulfur dioxides and
other compounds emitted by coal-fired utility power plants. Title IV of the
Clean Air Act Amendments places limits on sulfur dioxide emissions from electric
power generation plants, setting baseline emission standards for such
facilities. The effect of the Clean Air Act Amendments on MRT cannot be
completely ascertained at this time.

      The Clean Air Act Amendments also require utilities that currently are
major sources of nitrogen oxides in moderate or higher ozone NAAQS nonattainment
areas to install reasonably available control technology for nitrogen oxides,
which are precursors to the atmospheric formation of ozone. In October 1998, the
EPA released a ruling (the "NOx SIP Call") requiring 22 eastern states to revise
their state implementation plans to substantially reduce emissions of nitrogen
oxide. The EPA expects that states will achieve these reductions by requiring
power plants to make substantial reductions in their nitrogen oxide emissions.
Installation of


                                       13
<PAGE>

reasonably available control technology and additional control measures required
under the NOx SIP Call will make it more costly to operate coal-fired utility
power plants and, depending on the requirements of individual state
implementation plans and the development of revised new source performance
standards, could make coal a less attractive fuel alternative in the planning
and building of utility power plants in the future. Numerous states,
municipalities, industry trade groups, manufacturers and utilities have filed
petitions in federal court challenging the NOx SIP Call. The effect of the NOx
SIP Call and other regulations or requirements that may be imposed in the future
on the coal industry in general and on MRT in particular cannot be predicted
with certainty. No assurance can be given that the implementation of the Clean
Air Act Amendments, state implementation plans or any future regulatory
provisions will not materially adversely affect MRT.

      In addition, the Clean Air Act Amendments require a study of utility power
plant emissions of certain toxic substances, including mercury, and direct the
EPA to regulate these substances, if warranted. Future federal or state
regulatory or legislative activity may seek to reduce mercury emissions and such
requirements, if enacted, could result in reduced use of coal if utilities
switch to other sources of fuel.

      Phibro-Tech has various air quality permits, including a Title V operating
air permit at its Sumter, South Carolina facility.

State and Local Regulation

      In addition to those state programs described above, a number of states
and some local governments have also enacted laws and regulations similar to the
federal laws described above governing hazardous waste generation, handling and
disposal, emissions to the water and air and the design, operation and
maintenance of recycling facilities.

Foreign Regulation

      The Company's foreign subsidiaries are subject to a variety of foreign
environmental laws relating to pollution and protection of the environment,
including the generation, handling, storage, management, transportation,
treatment and disposal of solid and hazardous materials and wastes, the
manufacture and processing of pesticides and animal feed additives, emissions to
the air, discharges to land, surface water and subsurface water, human exposure
to hazardous and toxic materials and the remediation of environmental pollution
relating to their past and present properties and operations.

Regulation of Recycling Activities

      The Company's recycling activities may be broken down into the following
segments for purposes of regulation under RCRA or equivalent state programs: (i)
transport of wastes to the Company's facilities, (ii) storage of wastes prior to
processing, (iii) treatment and/or recycling of wastes, and (iv) corrective
action at its RCRA facilities. Although all aspects of the treatment and
recycling of waste at its recycling facilities are not currently the subject of
federal RCRA regulation, subsidiaries of the Company made decisions to permit
recycling facilities as RCRA regulated facilities and have been issued final
RCRA "Part B" permits to operate as hazardous waste treatment and storage
facilities at its facilities in Santa Fe Springs, California; Garland, Texas;
Joliet, Illinois; Sumter, South Carolina; and Sewaren, New Jersey. Part B
renewal applications have been submitted for the Santa Fe Springs and Sumter
sites. The applications are being reviewed. Phibro-Tech has also obtained an
interim status RCRA permit from the California Department of Health Services and
has filed a Part B permit application with the Department for its Union City,
California facility.

      In connection with RCRA Part B permits for the waste storage and treatment
units of various facilities, the Company's subsidiaries have been required to
perform extensive site investigations at such facilities to identify possible
contamination and to provide regulatory authorities with plans and schedules for
remediation. Soil and groundwater contamination has been identified at several
plant sites and has required and will continue to require corrective action and
monitoring over future years. In order to maintain compliance with RCRA Part B
permits, which are subject to suspension, revocation, modification or denial
under certain circumstances, the Company has been, and in the future may be,
required to undertake additional capital improvements or corrective action.


                                       14
<PAGE>

      Subsidiaries of the Company are required by RCRA and their Part B permits
to develop and incorporate in their Part B permits estimates of the cost of
closure and post-closure monitoring for their operating facilities. In general,
in order to close a facility which has been the subject of a RCRA Part B permit,
a RCRA Part B closure permit is required which approves the investigation,
remediation and monitoring closure plan, and requires post-closure monitoring
and maintenance for up to 30 years. Accordingly, additional costs are incurred
in connection with any such closure. These cost estimates are updated annually
for inflation, developments in available technology and corrective actions
already undertaken. The Company has in most instances chosen to provide the
regulatory guarantees required in connection with these matters by means of its
coverage under an environmental impairment liability insurance policy. There can
be no assurance that such policy will continue to be available in the future at
economically acceptable rates, in which event other methods of financial
assurance will be necessary.

      In addition to certain operating facilities, the Company or its
subsidiaries have been and will be required to investigate and remediate certain
environmental contamination at shutdown plant sites. The Company or its
subsidiaries are also required to monitor such sites and continue to develop
controls to manage these sites within the requirements of RCRA corrective action
programs.

      Based upon available information, accruals for management estimates of the
cost of further environmental investigation and remediation at operating,
curtailed and closed sites are approximately $1.6 million as of June 30, 2000.

Waste Byproducts

      In connection with the Company's subsidiaries' production of finished
chemical products, limited quantities of waste by-products are generated
primarily in the form of sludge. Depending on the contents of the sludge, the
subsidiaries of the Company either send it to smelters for metal recovery or
send it for treatment or disposal to regulated facilities.

Particular Facilities

      The following is a description of certain environmental matters relating
to certain facilities of certain subsidiaries of the Company. References
throughout to the Company are intended to refer only to the applicable
subsidiary unless the context otherwise requires. These matters should be read
in conjunction with the description of litigation matters below under Item 3,
certain of which involve such facilities, and Note 12 to the Company's
Consolidated Financial Statements.

      In 1984, Congress enacted certain amendments to RCRA under which
facilities with RCRA permits were required to have RCRA facility assessments
("RFA") by the EPA or the authorized state agency. Following an RFA, a RCRA
facility investigation, a corrective measures study, and corrective measure
implementation must, if warranted, be developed and implemented. As indicated
below, the Company's subsidiaries are in the process of developing or completing
various actions associated with these regulatory phases at certain of their
facilities.

      Sewaren, New Jersey. In April 1989, the New Jersey Department of
Environmental Protection, Division of Waste Management and Division of Water
Resources (collectively the "DEP"), issued an Administrative Order and Notice of
Civil Administrative Penalty Assessment against C.P. Chemicals, Inc. ("CP"), a
subsidiary of the Company, relating to CP's recycling and manufacturing facility
in Sewaren, New Jersey. This proceeding resulted in an Administrative Consent
Order (the "ACO"), effective March 11, 1991. The ACO mandates the development
and implementation of an environmental remediation plan and requires payment of
a penalty in the amount of $2.2 million plus interest calculated at 8.57% per
annum, to be paid in ten yearly installments. This charge was previously
reflected in the Company's consolidated financial statements. In addition, the
ACO sets forth stipulated penalties for specified violations of the ACO and
requires reimbursement by CP to the DEP for prior costs and future oversight
costs. CP has posted $500,000 in financial assurances which amount may be
modified based on cost reviews which CP is required to submit annually as part
of its investigation and remediation program. CP has substantially completed its
investigation and remediation efforts which include installation of a hydraulic
control system and pre-treatment of ground water on the site and capping to
address soil contamination concerns and satisfy storm water management


                                       15
<PAGE>

requirements. Such efforts remain subject to continuing review by the DEP. In
1998, operations at the Sewaren facility were curtailed.

      In June 2000, CP transferred title to the Sewaren property to the local
township. At the same time, CP entered into a 10-year lease with the township,
providing for lease payments aggregating $2,000,000, and covering certain areas
of the property, in order to allow it to conduct operations relating to its RCRA
Part B Facility Permit. While the township took title to the property and
assumed basic property related obligations, including the operation and
maintenance of the ground water control system called for by the ACO, the
Company retained other environmental obligations under the ACO and also entered
into an indemnification agreement with the township regarding environmental
conditions existing at the time of the transfer.

      Sumter, South Carolina. In 1991, in connection with the RCRA Part B permit
for its Sumter, South Carolina facility, Phibro-Tech undertook the closure of
certain waste water treatment impoundments pursuant to RCRA closure requirements
and installed a waste water treatment system at the plant and is engaged in an
additional phase of facility investigation at the site. Phibro-Tech has
completed remedial action to remove material from an area used by a former owner
of the site. The South Carolina Department of Health and Environmental Control
("SCDHEC") has requested additional sampling in this area. Separately,
Phibro-Tech and certain adjacent land owners have entered into a consent
agreement to conduct an environmental investigation regarding certain property
located next to the Sumter facility, including a small portion of the Sumter
facility property, which has been identified as containing debris. An
engineering firm has been hired to investigate the situation and to make
recommendations.

      Santa Fe Springs, California. In connection with its request for renewal
of its RCRA Part B permit for its Santa Fe Springs, California facility, and the
administrative order noted below for this facility, Phibro-Tech has implemented
various phases of environmental investigation and corrective measure study and
assessments. It is currently in a continuing investigation and corrective
measure phase, which will involve additional sampling to determine the level of
corrective action. At this time it is anticipated that this will involve a pump
and treat system through an existing on-site pre-treatment plant. Phibro-Tech is
also subject to an investigative and enforcement order, the ultimate scope and
disposition of which is currently being discussed with the California Department
of Toxic Substances Control ("DTSC"). The principal outstanding issue under the
order was the requirement of further soil investigation and the development of a
remediation plan, if necessary, beyond that already covered by the facility
investigation originally conducted. The study has been completed and
Phibro-Tech's consulting environmental engineers have recommended to DTSC no
further action in this regard. Separately, Phibro-Tech has received a summons
from Communities for a Better Environment alleging that Phibro-Tech violated
Proposition 65, the Safe Drinking Water and Toxic Enforcement Act of 1985, and
the California Health and Safety Code. Several other companies in Santa Fe
Springs received similar summonses. The parties are engaged in discovery and
trial with respect to this latter proceeding is set for August 2001.

      Phibro-Tech has also received a summary of violations from the DTSC for
its Santa Fe Springs facility alleging certain permit violations as well as
violations of the California Health and Safety Code and corresponding
regulations. Phibro-Tech is in contact with the DTSC with regard to these
claims, in an attempt to determine whether they can be resolved through a
mutually acceptable compliance schedule.

      Union City, California. Phibro-Tech's Union City, California facility is
an interim status facility with an application for a RCRA Part B permit pending.
In lieu of conducting investigation activities under a final Part B permit,
Phibro-Tech entered into a consent order with the California DTSC requiring the
assessment and investigation of soil and ground water quality and remediation,
if required, similar to that which would be required under a Part B permit.
Phibro-Tech completed the first phase of the investigation process and has
submitted reports and assessments to the DTSC which are currently under review.
Further limited characterization has been requested but Phibro-Tech and its
consulting engineers do not currently anticipate any extensive ongoing
corrective measures. This facility is also the subject of a DTSC summary of
violations alleging certain permit violations and violations of the California
Health and Safety Code and corresponding regulations. Phibro-Tech is in contact
with the DTSC with regard to this matter in an attempt to determine whether it
can be resolved through a mutually acceptable compliance schedule.

      Joliet, Illinois. In connection with the RCRA Part B permit for this
facility, Phibro-Tech completed an initial RCRA facility investigation and an
additional sampling and investigative phase. The results of such


                                       16
<PAGE>

sampling and investigation were submitted to the Illinois Environmental
Protection Agency, and, based on the agency's response, Phibro-Tech will develop
a plan for further investigation or monitoring, or, if necessary, corrective
action.

      Garland, Texas. In connection with the RFA for its Garland, Texas
facility, no action was recommended. However, during a subsequent inspection
some discoloration of soil was noted. Accordingly, Phibro-Tech developed a
corrective action plan to address discolored top soil at the site. The project
included the upgrading of pollution control equipment. The next phase will be
additional site characterization, which is scheduled to be undertaken shortly.

      Powder Springs, Georgia. Phibro-Tech's facility in Powder Springs, Georgia
has been operationally closed since 1985. Phibro-Tech retains environmental
compliance responsibility for this facility and has effected a RCRA closure of
the regulated portion of the facility, a surface impoundment. Post-closure
monitoring and the implementation of a corrective measures plan are required.
Phibro-Tech has submitted and received Georgia Department of Environmental
Protection approval for a remedial investigation plan, and has granted
Phibro-Tech's Part B permit renewal application. The permit calls for a Phase II
work plan for corrective action.

      Union, Illinois. Phibro-Tech's facility in Union, Illinois has also been
operationally closed since 1986. Phibro-Tech has performed additional soil
sampling and submitted a closure plan to the Illinois EPA, which is under
review.

      Third Party Sites. The Company has, and certain of the Company's
subsidiaries have, sent products to customers at chemical processing or
manufacturing sites and sent wastes from their operations to various third party
waste disposal sites. In addition to the litigation described below with respect
to the Jericho, South Carolina site and the Casmalia, California site, from time
to time the Company or a subsidiary receives notice from representatives of
governmental agencies and private parties, or is named as a potentially
responsible party in legal proceedings, in which claims are made that it is
potentially liable for a portion of the investigation and remediation costs and
natural resource damages at such third party sites. Such claims are for strict
liability and carry with them the possibility of joint and several liability
under applicable Environmental Laws such as CERCLA, regardless of the relative
fault or level of involvement of the Company and other potentially responsible
parties. Although there can be no assurance, the Company does not believe that
liabilities in connection with such third party sites as to which claims have
been received to date will have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.

      Ramat Hovav, Israel. Koffolk Israel's Ramat Hovav plant produces a wide
range of organic chemical intermediates for the chemical, pharmaceutical,
fragrance and veterinary industries. Israeli legislation enacted in 1997 amended
certain environmental laws by authorizing the relevant administrative and
regulatory agencies to impose certain sanctions, including issuing an order
against any person that violates such environmental laws to remove the
environmental hazard. In addition, such law imposes criminal liability on the
officers and directors of a corporation that violates such environmental related
laws, and increases the monetary sanctions that such officers, directors and
corporations may be ordered to pay as a result of such violations. The Ramat
Hovav plant operates under the supervision of the Ministry of Environment of the
State of Israel. The sewage system of the plant is connected to the Ramat Hovav
Local Industrial Council's central installation, where Koffolk Israel's sewage
is treated together with sewage of other local plants. Owners of the plants in
the area, including Koffolk Israel, have been required by the Israeli Ministry
of Environment to build facilities for pre-treatment of their sewage.

      Odda, Norway. Like other Norwegian companies, ODDA has to ensure that the
activities of the enterprise are planned, organized, performed and maintained in
conformity with requirements laid down in or pursuant to Norwegian health,
environmental and safety legislation. Norwegian law requires the person
responsible for an enterprise to ensure compliance with the requirements of,
among other laws, the Working Environment Act, the Pollution Control Act, the
Products Control Act, the Civil Defense Act and the Electrical Installations and
Electrical Equipment Act.

      The applicable supervisory authority pursuant to such legislation is
responsible for supervising and providing guidance on implementation of and
compliance with such regulations. The supervisory authorities can respond to
violations of health, environmental and safety legislation with various
sanctions, including


                                       17
<PAGE>

orders, fines, pollution charges and/or notification to the police.

      Norwegian legislation requires that ODDA produce its products according to
its discharge permit and implementation system for environmental control and
improvements. Both local and central authorities are now focusing on the
environmental situation in the fjord at Odda and on waste disposal there by the
three primary manufacturers in the area, including ODDA. In ODDA's case, the
focus has been on the discharge of polynucleated aromatic hydrocarbons ("PAH")
from the Venturi scrubber in the calcium carbide plant and the nitrogen content
in the filtercake (1%) discharge from the dicyandiamide plant. In a meeting
between ODDA and SFT (Norwegian Pollution Control Authority) in June 1998, SFT
indicated that ODDA should make a diligent effort to develop a commercial use
for filtercake within three years, and consider the reduction of discharges of
PAH from existing levels (which discharges are in compliance with ODDA's
permits). Projects involving a new filter to reduce emissions of soluble
nitrogen and a facility to dry and bulk ship filtercake are being pursued in
consultation with the SFT.

Government Regulation

      Certain agricultural feed products offered by the Company, namely
nicarbazin and amprolium products, require licensing by a governmental agency
before marketing. In the United States, governmental oversight of animal
nutrition and health products is shared primarily by the United States
Department of Agriculture ("USDA") and the Food and Drug Administration. A third
agency, the Environmental Protection Agency, has jurisdiction over certain
products applied topically to animals or to premises to control external
parasites.

      The FDA is responsible for the safety and wholesomeness of the human food
supply. It regulates foods intended for human consumption and, through The
Center for Veterinary Medicine, regulates the manufacture and distribution of
animal drugs, including feed additives and drugs that will be given to animals
from which human foods are derived, as well as feed additives and drugs for pet
(or companion) animals.

      To protect the food and drug supply for animals, the FDA develops
technical standards for animal drug safety and effectiveness and evaluates data
bases necessary to support approvals of veterinary drugs. The USDA monitors the
food supply for animal drug residues.

      The Office of New Animal Drug Evaluation ("NADE") is responsible for
reviewing information submitted by drug sponsors who wish to obtain approval to
manufacture and sell animal drugs. A new animal drug is deemed unsafe unless
there is an approved new animal drug application ("NADA"). Virtually all animal
drugs are "new animal drugs" within the meaning of the term in the Federal Food,
Drug, and Cosmetic Act. Although the procedure for licensing products by the
USDA are formalized, the acceptance standards of performance for any product are
agreed upon between the manufacturer and the NADE. An NADA in animal health is
analogous to a New Drug Application ("NDA") in human pharmaceuticals. Both are
administered by the FDA. The drug development process for human therapeutics can
be more involved than that for animal drugs. However, for food-producing
animals, food safety residue levels are an issue, making the approval process
longer than for animal drugs for non-food producing animals, such as pets.

      The FDA may deny a NADA if applicable regulatory criteria are not
satisfied, require additional testing or information, or require postmarketing
testing and surveillance to monitor the safety or efficacy of a product. There
can be no assurances that FDA approval of any NADA will be granted on a timely
basis or at all. Moreover, if regulatory approval of a product is granted, such
approval may entail limitations on the indicated uses for which it may be
marketed. Finally, product approvals may be withdrawn if compliance with
regulatory standards is not maintained or if problems occur following initial
marketing. Among the conditions for NADA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
to GMP regulations. In complying with standards set forth in these regulations,
manufacturers must continue to expend time, monies and effort in the area of
production and quality control to ensure compliance.

      For clinical investigation and marketing outside the United States, the
Company is also subject to foreign regulatory requirements governing
investigation, clinical trials and marketing approval for animal drugs. The
foreign regulatory approval process includes all of the risks associated with
FDA approval set forth above. Currently, in the European Union ("EU"), feed
additives which are successfully sponsored by a manufacturer


                                       18
<PAGE>

are assigned to an Annex. Initially, they are assigned to Annex II. During this
period, member states may approve the feed additive for local use. After five
years or earlier, the product passes to Annex I if no adverse reactions or
trends develop over the probationary period.

      The Company currently markets nicarbazin in the EU. Nicarbazin holds an
Annex I registration. This means that the compound must be registered in each of
the member states and can be used legally by customers in the EU. Any
manufacturer, including generic producers, is permitted to sell nicarbazin in
the EU on the basis of a Certificate of Analysis. The distributor selling the
product warrants that it contains what is indicated on the label. The
registration may not be transferred in a manner similar to an FDA registration.
The originator of the registration, however, retains certain rights. For one,
the originator or a successor to the rights of the originator may refer to the
data file of the originator and any predecessors when making a submission.

      The EU is in the process of centralizing the regulatory process for animal
drugs for member states. In 1997, the EU drafted new regulations requiring the
re-registration of feed additives, including coccidiostats. Part of these
regulations include a provision for manufacturers to submit quality data for
their own formulation, in effect adopting a Product License procedure similar to
that of the FDA. The provision is known as Brand Specific Approval ("BSA"), and
provides manufacturers with the opportunity to register their own unique brands,
instead of simply the generic compound. The BSA process is being implemented
over time. The new system is more like the U.S. system, where regulatory
approval is for the formulated product or "brand." The Company has taken the
necessary steps to apply for a BSA for nicarbazin in the EU. However, there is
no assurance that the Company will receive a BSA for nicarbazin in the EU, or if
its does receive such BSA, when it will be granted or whether it will be
unlimited.


                                       19
<PAGE>

                              CONDITIONS IN ISRAEL

      The following information discusses certain conditions in Israel that
could affect the Company's Israeli subsidiary, Koffolk Israel. As of June 30,
2000 and for the year then ended, Israeli operations (excluding Koffolk Israel's
non-Israeli subsidiaries) accounted for approximately 18% of the Company's
consolidated assets and approximately 16% of its consolidated net sales. All
figures and percentages are approximate. A portion of the information with
respect to Israel presented hereunder has been taken from Annual Reports of the
Bank of Israel.

Political Conditions

      Since the establishment of the State of Israel in 1948, a number of armed
conflicts have taken place between Israel and its Arab neighbors and a state of
hostility, varying from time to time in intensity and degree, has led to
security and economic problems for Israel. However, a peace agreement between
Israel and Egypt was signed in 1979, a peace agreement between Israel and Jordan
was signed in 1994 and, since 1993, several agreements between Israel and the
Palestine Liberation Organization ("PLO")--Palestinian Authority representatives
have been signed. In addition, Israel and several other Arab states have
announced their intention to establish trade and other relations and are
discussing certain projects. As of the date hereof, Israel has not entered into
any peace agreement with Syria or Lebanon and there have been delays in the
negotiation and implementation of agreements with the PLO. There can be no
assurance as to whether or how the "peace process" will develop or what effect
it may have upon the Company. Certain countries, companies and organizations
continue to participate in a boycott of Israeli firms and other companies doing
business in Israel or with Israel companies. Despite measures to counteract the
boycott, including anti-boycott legislation in the United States, the boycott
has had an indeterminate negative effect upon trade with and foreign investment
in Israel. The Company does not believe that the boycott has had a material
adverse effect on the Company, but there can be no assurance that restrictive
laws, policies or practices directed toward Israel or Israeli businesses will
not have an adverse impact on the operation or expansion of the Company's
business.

      Generally, all male adult citizens and permanent residents of Israel under
the age of 54 are, unless exempt, obligated to perform certain military duty
annually. Additionally, all such residents are subject to being called to active
duty at any time under emergency circumstances. Some of the employees of the
Company's Israeli subsidiaries currently are obligated to perform annual reserve
duty. While the Company's Israeli subsidiaries have operated effectively under
these and similar requirements in the past, no assessment can be made of the
full impact of such requirements on the Company in the future, particularly if
emergency circumstances occur.

Economic Conditions

      Israel's economy has been subject to numerous destabilizing factors,
including a period of rampant inflation in the early to mid-1980s, low foreign
exchange reserves, fluctuations in world commodity prices, military conflicts
and security incidents. The Israeli government has, for these and other reasons,
intervened in the economy by utilizing, among other means, fiscal and monetary
policies, import duties, foreign currency restrictions and control of wages,
prices and exchange rates. The Israeli government periodically changes its
policies in all these areas.

      Israel has a high balance of payments deficit, primarily as a result of
its defense burden, the absorption of immigrants, especially from the former
Soviet Union, the provision of a minimum standard of living for lower income
segments of the community and the maintenance of a minimum level of net foreign
reserves. In order to finance this deficit, Israel must sustain an adequate
inflow of capital from abroad. The major sources of the country's capital
imports include U.S. military and economic aid, personal remittances from
abroad, sales of Israeli government bonds (primarily in the United States) and
loans from foreign governments, international institutions and the private
sector.

Assistance from the United States

      The State of Israel receives significant amounts of economic and military
assistance from the United States. There is no assurance that foreign aid from
the United States will continue at or near amounts received in the past, and if
its does not, the Israeli economy could suffer material adverse consequences.


                                       20
<PAGE>

Trade Agreements

      Israel is a member of the United Nations, the International Monetary Fund,
the International Bank for Reconstruction and Development and the International
Finance Corporation. Israel is also a signatory to the General Agreement on
Tariffs and Trade, which provides for reciprocal lowering of trade barriers
among its members. In addition, Israel has been granted preferences under the
Generalized System of Preferences from the United States, Australia and Canada.
These preferences allow Israel to export the products covered by such programs
either duty-free or at reduced tariffs. Israel has also entered into
preferential trade agreements with the European Union and the European Free
Trade Association. In recent years, Israel has established commercial and trade
relations with a number of other nations, including Russia, China and nations in
Eastern Europe, with which Israel had not previously had such relations.

Employees

      Most of Koffolk Israel's employees are members of the Histadrut, and are
represented by collective bargaining units. Koffolk Israel is subject to various
Israeli labor laws and collective bargaining agreements between Histadrut and
the federation of industrial employers. Such laws and agreements cover a wide
range of areas, including hiring practices, wages, promotions, employment
conditions (such as working hours, overtime payment, vacations, sick leave and
severance pay), benefits programs (such as pension plans and education funds)
and special issues, such as equal pay for equal work, equal opportunity in
employment and employment of women. The collective bargaining agreements also
cover the relations between management and the employees' representatives,
including Histadrut's involvement in certain aspects of hiring and dismissing
employees and procedures for settling labor disputes. Koffolk Israel continues
to operate under the terms of Israel's national collective bargaining agreement,
portions of which expired in 1994. Israeli employers and employees are required
to pay predetermined sums to the National Insurance Institute, an organization
similar to the United States Social Security Administration. These contributions
entitle the employees to receive a range of medical services and other benefits.
Certain employees of Koffolk Israel are covered by individual employment
agreements.

Investment Incentives

      Certain of the Israeli production facilities of the Company have been
granted Approved Enterprise status pursuant to the Law for the Encouragement of
Capital Investments, 1959, and consequently may enjoy certain tax benefits and
investment grants. Taxable income of Koffolk Israel derived from these
production facilities is subject to a lower rate of company tax than the normal
rate applicable in Israel. Dividends distributed by Koffolk Israel out of the
same income are subject to lower rates of withholding tax than the rate normally
applicable to dividends distributed by an Israeli company to a non-resident
corporate shareholder. The grant available to newly Approved Enterprises was
decreased throughout recent years. Certain of the Israeli production facilities
of the Company further enjoyed accelerated depreciation under regulation
extended from time to time and other deductions. There can be no assurance that
the Company will, in the future, be eligible for or receive such or similar
grants.


                                       21
<PAGE>

Item 2. Properties.

      The Company maintains its principal executive offices and a sales office
in Fort Lee, New Jersey. The Company has 17 manufacturing facilities. The chart
below sets forth the locations and sizes of the principal manufacturing and
other facilities operated by the Company and uses of such facilities, all of
which are owned, except as noted.

                                 Approximate
Location                         Square Footage   Uses
- -------                          --------------   -----
Fort Lee, New Jersey(a)              23,500       Corporate Headquarters
Atlanta, Georgia(a)                   5,000       MRT Administrative and Sales,
                                                  Laboratory
Bowmanstown, Pennsylvania            56,500       Industrial Chemicals; AgChem
Bremen, Indiana                      50,000       AgChem; Warehouse
Garland, Texas                       20,000       Industrial Chemicals
Houston, Texas(a)                    10,300       Administrative and Sales
Joliet, Illinois                     34,500       Industrial Chemicals
Ladora, Iowa                          9,500       Warehouse
Marion, Iowa                         32,500       AgChem
Phoenix City, Alabama                 6,000       Industrial Chemicals
Quincy, Illinois(b)                 187,000       Industrial Chemicals; AgChem;
                                                  Warehouse; Administrative and
                                                  Sales
Santa Fe Springs, California(c)      90,000       Industrial Chemicals
Sumter, South Carolina              123,000       AgChem; Industrial Chemicals
Union City, California               20,600       Industrial Chemicals
Wilmington, Illinois                119,000       Warehouse
Bordeaux, France                    141,000       AgChem; Administrative and
                                                  Sales
Braganca Paulista, Brazil            35,000       Agchem; Administrative and
                                                  Sales
Meerbusch, Germany(a)                   700       Sales
Odda, Norway                        364,000       Industrial Chemicals;
                                                  Warehouse;
                                                  Administrative and Sales
Petach Tikva, Israel                 60,000       AgChem; Administrative and
                                                  Sales
Ramat Hovav, Israel(a)              140,000       AgChem; Industrial Chemicals
Reading, Berks, United Kingdom(a)     3,100       Administrative and Sales
Stradishall, United Kingdom          20,000       Industrial Chemicals;
                                                  Administrative and Sales
Scunthorpe, United Kingdom(a)        93,000       Industrial Chemicals;
                                                  Warehouse

- ----------
(a)   This facility is leased. The Company's leases expire from 2000 to 2027.
      For information concerning the Company's rental obligations, see Note 12
      to the Company's Consolidated Financial Statements included herein.
(b)   Comprises six facilities, including three warehouse, two manufacturing and
      one sales facility.
(c)   The Company leases the land under this facility from a partnership owned
      by Jack Bendheim, Marvin Sussman and James Herlands. See "Certain
      Relationships and Related Transactions."


                                       22
<PAGE>

      The Company's subsidiary, C.P. Chemicals, Inc., leases portions of a
previously owned inactive, former manufacturing facility in Sewaren, New Jersey,
and another subsidiary of the Company owns inactive, former manufacturing
facilities in Powder Springs, Georgia and Union, Illinois. MRT leases property
and operates terminal facilities in Atlanta, Georgia, South Beloit, Illinois,
Pittsburg, California and Corona, California, and operates loading and storage
facilities in Pryor, Oklahoma, Joppa, Illinois, St. John, Arizona, Gentry,
Arkansas, Labadie, Missouri, Rush Island, Missouri and Presque Isle, Michigan.

      The Company believes that its existing and planned facilities are and will
be adequate for the conduct of its business as currently conducted and as
currently contemplated to be conducted.

      The Company and its subsidiaries are subject to extensive regulation by
numerous governmental authorities, including the FDA and corresponding state and
foreign agencies, and to various domestic and foreign safety standards.
Manufacturing facilities of the Company in Ramat Hovav and Brazil manufacture
products that conform to the FDA's GMP regulations. Of the Company's five
domestic facilities involved with recycling, four have final RCRA Part B
hazardous waste storage and treatment permits and one is in an interim permit
status. The Company's regulatory compliance programs include plans to achieve
compliance with international standards known as ISO 9002 standards, which
became mandatory in Europe in 1999. The FDA is in the process of adopting the
ISO 9002 standards as regulatory standards for the United States, and it is
anticipated that these standards will be phased in for U.S. manufacturers over a
period of time. The Company's plants in Bowmanstown, Pennsylvania and Petach
Tikva, Israel have achieved ISO 9002 certification. The Company does not believe
that adoption of the ISO 9002 standards by the FDA will have a material effect
on its financial condition, results of operations or cash flows.

Item 3. Legal Proceedings.

      Reference is made to the discussion above under "Environmental Matters" in
Item 1 for information as to various environmental investigation and remediation
obligations of the Company's subsidiaries associated principally with their
recycling and production facilities and to certain legal proceedings associated
with such facilities.

      In addition to such matters, the Company or certain of its subsidiaries is
subject to certain litigation described below.

      On or about April 17, 1997, CP and the Company were served with a
complaint filed by Chevron USA, Inc. ("Chevron") in the United States District
Court for the District of New Jersey, alleging that operations of CP at its
Sewaren plant affected adjoining property owned by Chevron and that Philipp
Brothers, as the parent of CP, is also responsible to Chevron. The complaint
includes statutory claims under RCRA and common law claims. There are several
other defendants in the action, including the former owner of the Sewaren site
and Chevron's site and a prior tenant of the Chevron site. Additional parties
have been brought into the action. Interrogatories have been exchanged and
depositions are being conducted. The Company is not, at this time, in a position
to assess the extent of any ultimate liability it may have in connection with
this suit or the potential responsibility of other defendants, or the future
cost of remediation of the Chevron site, and is actively defending the action.

      The Company's Phibro-Tech subsidiary was named in 1993 as a potentially
responsible party ("PRP") in connection with an action commenced under CERCLA by
the EPA, involving a former third party fertilizer manufacturing site in
Jericho, South Carolina. Phibro-Tech responded that it had supplied a useful
product to the operator of the site and that it believes this constitutes a
defense to the claims brought against it. The South Carolina Department of
Health and Environmental Control, which had assumed oversight of this site,
filed suit in United States District Court to approve a settlement with certain
steel company PRPs. Other parties intervened and filed administrative actions to
contest the substantive and procedural fairness of that settlement. The Court
permitted other PRPs to intervene and, in August 1999, disapproved the
settlement. Discussions between representatives of the original group of
settling PRPs and of the other PRPs have taken place in an effort to determine
whether a joint settlement proposal is feasible. Under applicable law all
non-settling PRPs could be found to have strict, joint and several liability
under CERCLA. Accordingly, Phibro-Tech will continue to assess how best to
respond to claims raised in this proceeding. While the outcome of ongoing
negotiations is uncertain, the Company has accrued its best estimate of the
amount for which this matter can be settled.


                                       23
<PAGE>

      In February, 2000, the EPA notified numerous parties of potential
liability for waste disposed of at a licensed Casmalia, California disposal
site, including a business, assets of which were originally acquired by a
subsidiary of the Company in 1984. Phibro-Tech has responded, requested further
information and joined a PRP working group which has engaged in discussions with
the EPA. The Company is not, at this time, in a position to assess the extent of
any ultimate liability it may have in connection with this proceeding or the
potential responsibility of other PRPs.

      The Company and its subsidiaries are party to a number of claims and
lawsuits arising out of the normal course of business including product
liabilities and governmental regulation. Certain of these actions seek damages
in various amounts. In most cases, such claims are covered by insurance. The
Company believes that none of the claims or pending lawsuits, either
individually or in the aggregate, will have a material adverse effect on the
Company's financial position, results of operations or cash flows.

Item 4. Submission of Matters to a Vote of Security Holders.

      There were no matters submitted to a vote of security holders of the
Company during the fourth quarter of the fiscal year ended June 30, 2000.


                                       24
<PAGE>

                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

      (a) Market Information. There is no public trading market for the
Company's common equity securities.

      (b) Holders. As of June 30, 2000, there was one holder of the Company's
Class A Common Stock and two holders of the Company's Class B Common Stock.

      (c) Dividends. The Company did not declare dividends on any of its common
stock during the two years ended June 30, 2000.

Item 6. Selected Financial Data.

      The following table sets forth summary consolidated financial data for the
Company for the past five years ended June 30, 2000. The summary consolidated
financial data for the five years are derived from the Company's audited
consolidated financial statements. The consolidated financial data set forth
below should be read in conjunction with the Company's Consolidated Financial
Statements and related Notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained herein.

                     Summary of Consolidated Financial Data

<TABLE>
<CAPTION>
                                                                  Year Ended June 30,
                                               -------------------------------------------------------
                                                 2000      1999(a)      1998        1997      1996(f)
                                               --------   ---------   --------    --------   ---------
<S>                                            <C>        <C>         <C>         <C>        <C>
Income Statement Data:
Net sales ...................................  $318,056   $297,294    $275,577    $266,058   $238,982
Net income (loss) before extraordinary items     10,053       (466)     (7,065)      8,036        (10)
Extraordinary items .........................        --         --      (1,962)         --         --
Net income (loss) (b) (c) (d) ...............    10,053       (466)     (9,027)      8,036        (10)

Balance Sheet Data:
Total assets ................................  $258,451   $238,779    $192,196    $162,700   $158,182
Debt (e) ....................................   150,772    140,103     104,296      67,259     70,269
</TABLE>

Notes to Summary Consolidated Financial Data:

- ----------
(a)   Reflects the acquisition of ODDA effective October 1, 1998.
(b)   In 2000, includes a $13.7 million gain resulting from ODDA's sale of its
      minority equity interest in a local Norway hydroelectric power company and
      related power rights. In 2000, also includes $1.5 million of income
      resulting from the transfer of title to CP's property in Sewaren, New
      Jersey and the lease back of certain portions of the property, which
      transfer gave rise to the reversal of amounts previously reserved for
      ground water monitoring and remediation, net of CP's lease obligations.
(c)   In 2000 and 1999, includes $.9 million and $3.7 million, respectively, of
      property damage insurance gains as a result of a fire at the Bowmanstown,
      Pennsylvania facility.
(d)   In 1999, includes a $1.5 million charge related to the severance of a
      senior executive. In 1998, includes a $10 million nonrecurring plant
      curtailment charge and $5.6 million for the forgiveness of limited
      recourse notes receivable from certain executives of the Company and
      payment for related income taxes resulting from the cancellation. In 1997,
      includes $5.6 million gain related to proceeds from the life insurance
      policy received on the death of the then Chairman of the Board of the
      Company.
(e)   Debt is equal to loans payable to banks, other loans payable, long term
      debt and current portion of long term debt.
(f)   Reflects the acquisition of Planalquimica effective December 7, 1995.


                                       25
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

      This information should be read in conjunction with the Company's
Consolidated Financial Statements, including the notes thereto, contained in
this Report.

General

      The Company is a leading diversified global manufacturer and marketer of a
broad range of specialty agricultural and industrial chemicals, which are sold
world-wide for use in numerous markets, including animal nutrition and health,
agriculture, pharmaceutical, electronics, wood treatment, glass, construction
and concrete. The Company also provides recycling and hazardous waste services
primarily to the electronics and metal treatment industries.

      The Company operates in two industry segments: AgChem and Industrial
Chemicals.

      On October 1, 1998, the Company acquired all of the outstanding capital
stock of ODDA Smelteverk AS, a Norwegian company, and certain assets of the
business of BOC Carbide Industries in the United Kingdom (together "ODDA") from
the BOC Group, for $19 million in cash and the assumption of $18.2 million in
debt. The acquisition was primarily financed by proceeds from the issuance of
$100 million in principal amount of Senior Subordinated Notes in June 1998. The
acquisition was accounted for as a purchase and, accordingly, the acquired
assets and liabilities were recorded at fair values at the acquisition date,
with the excess of purchase price over the fair value allocated to goodwill. The
operating results of ODDA are included in the Company's consolidated statements
of operations, as part of the Industrial Chemical segment, from the date of
acquisition.

Results of Operations
                                                          Sales
                                                        ($000's)
                                                   Year Ended June 30,
                                           -----------------------------------
Operating Segments:                           2000         1999         1998
                                           ---------    ---------    ---------
  AgChem ...............................   $ 184,633    $ 177,411    $ 181,817
  Industrial Chemicals .................     160,076      151,045      127,416
  Elimination of intersegment sales ....     (26,653)     (31,162)     (33,656)
                                           ---------    ---------    ---------
                                           $ 318,056    $ 297,294    $ 275,577
                                           =========    =========    =========

                                                 Operating Income (Loss)
                                                        ($000's)
                                                   Year Ended June 30,
                                           -----------------------------------
Operating Segments:                           2000         1999         1998
                                           ---------    ---------    ---------
  AgChem ...............................   $  15,658    $  11,412    $   9,532
  Industrial Chemicals .................       9,098        9,079       (2,389)
  Other (includes corporate expenses and
    intercompany profit elimination) ...      (9,082)     (10,136)     (11,370)
                                           ---------    ---------    ---------
                                           $  15,674    $  10,355    $  (4,227)
                                           =========    =========    =========


                                       26
<PAGE>

Comparison of Fiscal Year Ended June 30, 2000 to Fiscal Year Ended June 30,
1999.

      Net Sales. Net sales increased by $20.8 million, or 7%, to $318 million in
fiscal 2000, as compared to the prior year. Industrial Chemicals sales were
higher by $9 million primarily due to a full year of dicyandiamide and calcium
carbide sales ($5.6 million) by ODDA (acquired in October 1998), higher volume
sales of coal fly ash ($5.3 million) and higher recycling fees ($1.1 million)
due to increased demand. Lower intersegment sales by the Industrial Chemicals
segment ($2.2 million) were primarily due to production disruptions for certain
mineral oxides as a result of a fire in the Company's Bowmanstown, PA facility
(and as a result purchases by the AgChem segment were supplemented from third
party sources). AgChem sales were higher by $7.2 million primarily due to higher
volume sales of the Company's animal nutrition and health products, primarily
coccidiostats ($1.5 million), feed pre-mixes ($1.9 million) primarily due to the
December 1998 acquisition of a feed pre-mix business and higher volume sales of
the Company's crop protection chemicals ($5.5 million) due to increased market
penetration of generic fungicides and introduction of a new copper based
fungicide. These increases were somewhat offset by discontinued and lower sales
of intermediate chemical products, by Koffolk, the Company's Israeli subsidiary.

      Gross Profit. Gross profit increased by $14.5 million or 19.5% to $88.5
million as compared to the prior year. This increase was primarily attributable
to higher profits ($9.9 million) from increased sales in the Company's
Industrial Chemicals segment due to the ODDA acquisition, higher volume sales of
coal fly ash and higher recycling fees. Gross profit of the Company's AgChem
segment was $3.4 million higher than the prior year, primarily due to higher
volume sales by and lower costs, principally raw materials, at the Company's
Israeli subsidiary (Koffolk) for coccidiostats. Gross profit from other AgChem
product sales remained unchanged mainly due to higher sales of lower margin
products. Overall, these factors (primarily the Industrial Chemicals segment)
also resulted in an increase in gross profit as a percentage of net sales to
27.8% in fiscal 2000 as compared to 24.9% in the prior year.

      Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $10.1 million or 15.8% to $74.3 million in
fiscal 2000 as compared to the prior year. In the Industrial Chemicals segment,
the increase was primarily due to the ODDA acquisition ($2.1 million), higher
distribution expenses associated with increased sales of coal fly ash ($3.9
million) and higher distribution expenses ($1.1 million) associated with
inorganic chemical sales. In fiscal 2000, non-segment operating expenses include
a $1.1 million non-cash charge to reflect the increase in repurchase value of
redeemable common stock of a minority shareholder, as compared to income of $.2
million in the prior year. The prior year included an accrual for compensation
expenses ($1.5 million) associated with the termination of employment of an
executive of a subsidiary of the Company.

      Curtailment of Operations. In June 2000, the Company transferred title to
its property in Sewaren, New Jersey to the Township of Woodbridge.
Simultaneously, the Company entered into a ten year lease agreement with
payments aggregating $2 million for certain areas of the property in order to
allow it to conduct operations related to its RCRA Part B Facility Permit.
Pursuant to the Transfer Agreement, the Township of Woodbridge took title to the
property and assumed obligations with regard to the property including
maintaining the ground water recovery system required by the Administrative
Consent Order between the Company and the New Jersey Department of Environmental
Protection. In connection with the assumption of obligations by the Township,
the Company has reversed $1.5 million to income representing amounts previously
reserved for ground water monitoring and remediation net of the present value of
its lease obligations. In fiscal 1999, the Company reversed $.5 million of the
original $10 million charge to income based upon a reassessment of site
remediation and ongoing cost requirements.

      Operating Income. Operating income increased by $5.3 million or 51.3% to
$15.7 million in fiscal 2000 as compared to the same period of the prior year.
Operating income of the AgChem segment increased by $4.2 million primarily due
to increased profitability of the Company's animal health and nutrition
products. Operating income of the Industrial Chemicals segment remained
essentially unchanged as compared to the prior year. In addition, non-segment
operating expenses decreased by $1 million in the current year as compared to
the prior year.

      Interest Expense. Interest expense increased by $1.6 million or 12.3% to
$14.8 million in fiscal 2000 as compared to the prior year primarily due to an
increased average level of bank borrowings and higher average interest rates.


                                       27
<PAGE>

      Gain from Property Damage Claim. In April 1999, the Company suffered
inventory, real property and equipment loss at its Bowmanstown, Pennsylvania
facility resulting from a fire. In fiscal 2000, the Company settled all claims
with its insurance carriers and recorded a gain of $946 (in addition to the $3.7
million booked in fiscal 1999) based on agreed upon final reimbursements for
damaged property and equipment in excess of its net book value.

      Other Expense, Net. Other expense, net, principally reflects foreign
currency transaction losses of the Company's foreign subsidiaries.

      Gain from Sale of Assets. ODDA had a minority equity investment in a local
hydroelectric power company and also held contracts for the purchase of
hydroelectric power through the years 2006 to 2010. As a result of legislative,
regulatory and market developments occurring in Norway since the 1998
acquisition, the Company was able to sell its investment and related power
rights to a Norwegian "state-owned" power production company in January 2000. As
a result of the sale, the subsidiary's ability to purchase power at cost
terminated and it purchases a majority of its power at prevailing market rates.
The Company realized net sale proceeds of $18.7 million and recorded a pre-tax
gain of $13.7 million. Approximately $1.3 million of additional net gain has
been deferred and will be recognized over the period of a related power purchase
contract with the buyer.

      Income Taxes. The 2000 and 1999 tax provisions differ from the amount
calculated at the U.S. statutory rate, due primarily to the effect of
non-deductible expenses and tax rate differences on foreign operations. The 2000
tax expense includes a provision related to the gain on sale of assets at the
Norwegian statutory rate of 28%. No valuation allowance has been provided on the
Company's net deferred tax assets, as management believes that it is more likely
than not that such amounts will be recovered in future periods.

Comparison of Fiscal Year Ended June 30, 1999 to Fiscal Year Ended June 30, 1998

      Net Sales. Net Sales increased by $21.7 million or 7.9% to $297.3 million
in fiscal 1999 as compared to the prior year. This increase was primarily due to
higher sales of $25.1 million in the Company's Industrial Chemicals group for
dicyandiamide and calcium carbide ($29.8 million) as a result of the ODDA
acquisition and higher volume sales of the Company's coal fly ash ($3.8
million). This increase was partially offset by lower volume sales of inorganic
intermediate products primarily to the wood treating industry ($1.4 million) due
to lower demand, lower sales of copper sulfate feed grade ($1.2 million) due to
lower copper prices and competitive pressures, and lower volume sales of metal
finishing and electronic chemicals and lower recycling revenues due to lower
customer demand ($3.0 million).

      AgChem sales in 1999 were lower by $3.4 million as compared to the prior
year primarily as a result of lower demand for the Company's animal nutrition
and health products ($13.4 million), which was partially offset by higher crop
protection chemical sales ($5.5 million) primarily due to introduction of new
generic fungicides and the acquisition in December 1998 of a feed pre-mix
business ($3.3 million).

      Gross Profit. Gross profit increased by $7.4 million or 11% to $74 million
in 1999. This increase was primarily attributable to higher sales in the
Company's Industrial Chemicals group ($9.8 million), due to the ODDA acquisition
and higher sales of coal fly ash, which were partially offset by lower sales of
inorganic chemical intermediates (primarily to the wood treating industry) and
copper sulfate feed grade. Gross profit of the Company's AgChem segment was
comparable to the prior year as higher crop protection product sales were offset
by lower sales of animal nutrition and health products, principally
coccidiostats. Gross profit as a percentage of net sales also increased to 24.9%
in 1999, as compared to 24.2% in 1998, principally due to the impact of the ODDA
acquisition on the Industrial Chemicals group and higher margins on new generic
fungicides within the AgChem group.

      Selling, General and Administrative Expense. Selling, general and
administrative expense increased $3.2 million or 5.4% to $64.2 million in fiscal
1999 as compared to the prior year. This increase was primarily due to the
Company's acquisition of ODDA ($9.0 million), higher selling expenses associated
with sale of the Company's newly introduced generic fungicides ($1.8 million)
and compensation expenses associated with the separation of employment of an
executive of a subsidiary of the Company ($1.5 million). These increases were
partially offset by $2.5 million in lower expenses due to the 1998 curtailment
of operations at the Company's Sewaren, New Jersey facility. Also included in
1998 are charges of $5.6 million associated with


                                       28
<PAGE>

the forgiveness of executive notes and related income tax reimbursements and
$1.2 million of severance charges.

      Operating Income (Loss). Operating income of the AgChem group increased
$1.9 million in 1999 as compared to the prior year, due primarily to the
introduction of new generic fungicides. Excluding the 1998 charge for
curtailment of operations at the Sewaren, New Jersey facility, operating income
of the Industrial Chemicals group increased by $1.5 million, due primarily to
the ODDA acquisition and the increase in sales of coal fly ash. In addition,
non-segment operating expenses in 1999 included a charge associated with the
separation from employment of an executive and in 1998 included a $5.6 million
charge associated with the forgiveness of certain notes due from executives and
related tax reimbursements.

      Interest Expense. Interest expense increased by $6.3 million or 91.4% to
$13.1 million in fiscal 1999 as compared to the prior year primarily due to
increased principal and interest expense associated with the offering of $100
million of Senior Subordinated Notes in June 1998 and interest expense incurred
by ODDA on its bank borrowings.

      Gain from Property Damage Claim. In April 1999, a fire damaged the
Company's Bowmanstown, Pennsylvania facility, including real property and
machinery and equipment. The gain of $3.7 million represents the excess of
insurance proceeds to be recovered over the net carrying value of the damaged
property.

      Other Expense, Net. Other expense, net, principally reflects foreign
currency transaction gains and losses of the Company's foreign subsidiaries.

      Taxes. The 1999 tax provision differs from the amount calculated at the
U.S. statutory rate due primarily to the effect of non-deductible expenses and
tax rate differences on foreign operations. The fiscal 1998 net benefit for
income taxes includes a deferred benefit at the statutory tax rate of 34% for
the U.S. pre-tax loss and the impact of lower tax rates on foreign pre-tax
income. No valuation allowance has been provided on the Company's net deferred
tax assets, as management believes that it is more likely than not that such
amounts will be recovered in future periods, except with respect to certain
foreign and U.S. state net operating loss carryforwards.

Liquidity and Capital Resources

      Net Cash Used in Operating Activities. Net cash used in operations for
fiscal 2000 was $7.9 million, an increase of $4.8 million from the prior year.
This increase was primarily due to higher levels of AgChem segment accounts
receivable in the U.S., mainly a result of higher crop protection chemical sales
during the quarter ending June 30, 2000 as compared to the comparable period of
the prior year. Crop protection chemical sales are highly seasonal and are
typically highest during the last quarter of the Company's fiscal year. Net cash
used in operations was $3.1 million for fiscal 1999 as compared to $1.3 million
of net cash generated by operations in fiscal 1998. This change was primarily
due to lower earnings before non-cash items, primarily due to higher interest
expenses, and higher levels of accounts receivable and inventories due to the
ODDA and feed pre-mix business acquisitions. Partially offsetting these changes
were fiscal 1999 accruals for payments associated with separation of employment
of a senior executive and accruals for obtaining label registration rights for
certain fungicides which were be paid in fiscal 2000.

      Net Cash Used in Investing Activities. Net cash used in investing
activities for fiscal 2000 was $4.1 million as compared to $33.8 million in
fiscal 1999. In fiscal 2000 the Company had higher capital expenditures
primarily at ODDA for increased production capacities and at MRT for collection
and distribution infrastructure associated with its fly ash management
contracts. Also during fiscal 2000 the Company made investments in two
businesses for a combined $3 million. The Company, in fiscal 2000, received
gross proceeds of $18.7 million from the sale of assets by ODDA and collected
proceeds of $4 million from its insurance carriers for property damage claims
arising from the fire at the Bowmanstown, Pennsylvania facility. Higher capital
expenditures were primarily due to expenditures by ODDA for increased production
capacities. Net cash used in investing activities for fiscal 1999 was $33.8
million, an increase of $25.7 million over the prior year. This increase was
primarily due to the ODDA acquisition, as well as a small acquisition of a
business in the feed pre-mix industry.


                                       29
<PAGE>

      Net Cash Provided by Financing Activities. Net cash provided by financing
activities for fiscal 2000 was $11.3 million, primarily as a result of drawdowns
under the Company's revolving credit facilities, which was partially offset by
repayments of approximately $10 million in bank indebtedness, by the Company's
Norwegian subsidiary from net proceeds generated from the asset sale. Net cash
provided by financing activities for fiscal 1999 was $15.7 million, primarily as
a result of drawdowns under the Company's revolving credit facility. Net cash
provided by financing activities for fiscal 1998 was $26.8 million, primarily as
a result of proceeds from the issuance of the $100 million of Senior
Subordinated Notes, less discounts and fees of $3.8 million and after repayments
of the Company's long-term and short-term indebtedness.

      Liquidity. As of June 30, 2000 and 1999, the Company had $79.9 and $72.6
million of working capital, respectively.

      In June 1998, the Company issued $100 million aggregate principal amount
of 9-7/8% Senior Subordinated Notes due 2008. The Notes are general unsecured
obligations of the Company and are subordinated in right of payment to all
existing and future senior debt (as defined in the indenture agreement of the
Company) and rank pari passu in right of payment with all other existing and
future senior subordinated indebtedness of the Company. The Notes are
unconditionally guaranteed on a senior subordinated basis by the domestic
subsidiaries of the Company.

      In August 1998, the Company and all of its domestic subsidiaries entered
into a credit agreement with PNC Bank, National Association, providing, among
other things, for the extension of a $60 million senior secured facility,
consisting of a $35 million revolving credit facility (subject to the level of
eligible receivables and eligible inventory, with a sub-limit for inventory of
$15 million), including a $7.5 million letter of credit sub-facility, and a $25
million acquisition facility.

      At June 30, 1999, the Company was not in compliance with the domestic net
worth requirements of the credit agreement. The lenders waived the default as of
June 30, 1999 and amended domestic net worth requirements for fiscal 2000. The
Company's Norwegian subsidiary, ODDA, was not in compliance with the debt
service and liabilities to equity ratios in its bank agreement. Subsequently, a
waiver was obtained from ODDA's lenders. As of June 30, 2000, the Company was in
compliance with its domestic and Norwegian credit facility covenants.

      In April 1999, the Company suffered inventory, real property and machinery
and equipment loss at its Bowmanstown, Pennsylvania facility resulting from a
fire. The Company carries insurance coverage for the property damage and
business interruption losses. The Company received reimbursement of $4 million
and $1 million in fiscal 2000 and 1999, respectively. In addition, the Company
recorded a receivable of $4.1 million in other receivables as of June 30, 2000
for the remaining amounts reimbursable from the insurance carrier. The
receivable has been subsequently collected in full settlement with the Company's
insurance carriers.

      The Company realized net sale proceeds of $18.7 million from ODDA's sale
in January 2000 of its investment in a local hydroelectric power company and
related power rights, and recorded a pre-tax gain of $13.7 million.
Approximately $1.3 million of additional net gain has been deferred and will be
recognized over the period of a related power purchase contract with the buyer.
A total of approximately $10 million in bank indebtedness of ODDA was repaid
from the proceeds of the sale. As a result of the sale, the subsidiary's ability
to purchase power at cost terminated and it purchases a majority of its power at
prevailing market rates.

      In the fourth quarter of fiscal 2000, due to competitive market
conditions, the Company extended payment terms on selected AgChem product sales,
representing approximately $6.7 million of revenues. While the impact of the
extended terms on year-to-year June 30 receivables was not significant, these
terms defer cash inflows into the third and fourth quarters of fiscal 2001. As
indicated below, the Company believes it has adequate cash and financing
resources to mitigate this impact.

      The Company anticipates spending approximately $16 million for capital
expenditures for its existing business in fiscal 2001, principally for
improvements and expansion at ODDA and MRT. Depending on actual future operating
results, the Company may, if necessary, postpone certain expenditures that are
considered discretionary.

      At June 30, 2000, the Company had $29.7 million outstanding borrowings
under its credit agreement


                                       30
<PAGE>

with PNC Bank. In addition to amounts outstanding, the Company had $5.3 million
available under the borrowing base formula. Certain of the Company's foreign
subsidiaries also had availability under their respective foreign revolving
credit facilities of approximately $5 million in the aggregate. In addition,
ODDA expects to obtain during fiscal 2001 long-term financing and grants
totaling approximately NOK (Norwegian Kroner) 18 million (U.S. $2,000,000 as of
June 30, 2000) from the Norwegian Industrial and Regional Development Fund (SND)
for recently completed capital projects. The Company believes that cash flows
from operations and available borrowing arrangements should provide sufficient
working capital to operate the Company's existing business, to make budgeted
capital expenditures and to service interest and current principal coming due on
outstanding debt.

Seasonality of Business

      The Company's sales are typically highest in the fourth fiscal quarter.
The Company's sales of copper-based fungicides and other agricultural products
are typically highest in the first and fourth fiscal quarters, and its sales of
gibberellic acid are highest in the fourth quarter, due to the seasonal nature
of the agricultural industry. The Company's sales of finished chemicals to the
wood treatment industry are typically highest in the first and fourth fiscal
quarters due to the increased level of home construction during these periods.
Additionally, sales of these products may be more concentrated in one of these
quarters due to weather conditions.

Effect of Inflation; Foreign Currency Exchange Rates

      Inflation generally affects the Company by increasing the cost of labor,
equipment and raw materials. The Company does not believe that inflation has had
any material effect on the Company's business over the last two years.

      The Company's substantial foreign operations expose it to risk of exchange
rate fluctuations. Balance sheet accounts of the Company's foreign subsidiaries,
with the exception of the Brazilian and Israeli subsidiaries of Koffolk Israel,
are translated at current rates of exchange and income and expense items are
translated at the average exchange rate for the year. The resulting translation
adjustments are reflected as a separate component of stockholders' equity. The
Brazilian and Israeli subsidiaries of Koffolk Israel transact substantially all
of their business in U.S. dollars. Accordingly, the U.S. dollar is designated as
the functional currency of these operations and translation gains and losses are
included in net income.

      Foreign currency transaction gains and losses are included in net income.
Currency translation losses relating to short and long-term debt of the
Company's Israeli and Norwegian subsidiaries that are denominated or linked to
foreign currencies are included in earnings. Such translation losses were
$2,142,000 and $1,829,000 for the 2000 and 1999 fiscal years, respectively. See
Note 1 to the Company's Consolidated Financial Statements.

Impact of Recently Adopted Accounting Pronouncements

      In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). SFAS 133 was originally effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999. In June 1999,
the Financial Accounting Standards Board issued Statements of Financial
Accounting Standard No. 137 "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133" (SFAS
137). SFAS 137 defers the effective date of FASB 133 for all fiscal quarters of
all fiscal years beginning after June 15, 2000 (July 1, 2000 for the Company).
SFAS 133 requires that all derivative intruments be recorded on the balance
sheet at their fair value. Gain or losses resulting from changes in the values
of those derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. In June 2000, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 138 "Accounting for Certain Derivative Instruments and Certain
Hedging Activities an amendment of FASB Statement No. 133" (SFAS 138). SFAS 138
amends the accounting and reporting standards of SFAS 133 for certain derivative
instruments and certain hedging activities.


                                       31
<PAGE>

      The Company's foreign currency contracts are currently marked to market
with corresponding charges or credits to income, therefore there will be no
impact on accounting for these contracts for the adoption of SFAS 133. With
respect to commodity contracts, the difference between fair value and carrying
value at June 30, 2000 is not significant; however, implementation of this
standard may have a material effect on earnings, comprehensive income and
financial position of future annual or interim periods.

      In December 1999, the Securities and Executive Commission issued Staff
Accounting Bulletin (SAB) 101, Revenue Recognition in Financial Statements. The
effective date of SAB 101 is no later than the fourth fiscal quarter of fiscal
years beginning after December 15, 1999. This SAB clarifies proper methods of
revenue recognition given certain circumstances surrounding sales transactions.
The Company continues to evaluate the impact of SAB 101, but believes it is in
compliance with the provisions of the SAB and, accordingly, does not expect SAB
101 to have a material effect on its financial statements.

Quantitative and Qualitative Disclosure About Market Risk

      In the normal course of operations, the Company is exposed to market risks
arising from adverse changes in interest rates, foreign currency exchange rates,
and commodity prices. As a result, future earnings, cash flows and fair values
of assets and liabilities are subject to uncertainty. The Company uses foreign
currency forward contracts as a means of hedging exposure to foreign currency
risks. The Company also utilizes, on a limited basis, certain commodity
derivatives, primarily on copper used in its manufacturing processes, to hedge
the cost of its anticipated purchase requirements. The Company does not utilize
derivative instruments for trading purposes. The Company does not hedge its
exposure to market risks in a manner that completely eliminates the effects of
changing market conditions on earnings, cash flows and fair values. The Company
monitors the financial stability and credit standing of its major
counterparties.

Interest Rate Risk

      The Company uses sensitivity analysis to assess the market risk of its
debt-related financial instruments and derivatives. Market risk is defined for
these purposes as the potential change in the fair value resulting from an
adverse movement in interest rates. The carrying amounts of cash and cash
equivalents, trade receivables, trade payables and short term debt are
considered to be representative of their fair value because of their short
maturities. As of June 30, 2000, the fair value of the Company's senior
subordinated debt is estimated based on quoted market rates at $70.8 million and
the related carrying amount is $100 million. A 100 basis point increase in
interest rates could result in approximately $5.4 million reduction in the fair
value of total debt.

Foreign Currency Exchange Rate Risk

      A significant portion of the financial results of the Company is derived
from activities conducted outside the U.S. and denominated in currencies other
than the U.S. dollar. Because the financial results of the Company are reported
in U.S. dollars, they are affected by changes in the value of the various
foreign currencies in relation to the U.S. Dollar. Exchange rate risks are
reduced, however, by the diversity of the Company's foreign operations and the
fact that international activities are not concentrated in any single non-U.S.
currency. Short-term exposures to changing foreign currency exchange rates are
primarily due to operating cash flows denominated in foreign currencies. The
Company covers known and anticipated operating exposures by using purchased
foreign currency exchange option and forward contracts. The primary currencies
for which the Company has foreign currency exchange rate exposure are the Euro
and Japanese yen.

      The Company uses sensitivity analysis to assess the market risk associated
with its foreign currency transactions. Market risk is defined for these
purposes as the potential change in fair value resulting from an adverse
movement in foreign currency exchange rates. The fair value associated with the
foreign currency contracts has been estimated by valuing the net position of the
contracts using the applicable spot rates and forward rates as of the reporting
date. At June 30, 2000, the fair value did not differ materially from its
carrying amount. Based on the limited amount of foreign currency contracts at
June 30, 2000, the Company does not


                                       32
<PAGE>

believe that an instantaneous 10% adverse movement in foreign currency rates
from their levels at June 30, 2000, with all other variables held constant,
would have a material effect on the Company's results of operations, financial
position or cash flows.

Other

      The Company obtains third party letters of credit and surety bonds in
connection with certain inventory purchases and insurance obligations. At June
30, 2000, the contract values of these letters of credit and surety bonds were
$2.3 million and their fair values did not differ materially from their carrying
amount.

Commodity Price Risk

      The Company purchases certain raw materials, such as copper, under
short-term supply contracts. The purchase prices thereunder are generally
determined based on prevailing market conditions. The Company uses commodity
derivative instruments to modify some of the commodity price risks. Assuming a
10% change in the underlying commodity price, the potential change in the fair
value of commodity derivative contracts held at June 30, 2000 would not be
material when compared to the Company's earnings and financial position.

      The foregoing market risk discussion and the estimated amounts presented
are Forward-Looking Statements that assume certain market conditions. Actual
results in the future may differ materially from these projected results due to
developments in relevant financial markets and commodity markets. The methods
used above to assess risk should not be considered projections of expected
future events or results.

Year 2000 Disclosure

      The statements in the following section include "Year 2000 readiness
disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act.

      The term "Year 2000 ("Y2K") Issue" is a general term used to describe the
various problems that may result from the improper processing of dates and
date-sensitive calculations by computers and other machinery as the year 2000 is
approached and reached. These problems generally arise from the fact that most
of the world's computer hardware and software have historically used only two
digits to identify the year in a date, often meaning that the computer will fail
to distinguish dates in the "2000's" from the dates in the "1900's." These
problems may also arise from other sources as well, such as the use of special
codes and conventions in software that make use of the date field. The Y2K
computer software compliance issues affect the Company and most companies in the
world.

      Prior to December 31, 1999, the Company conducted a review of its core
management information systems and equipment with embedded chips or processors
("Management Systems") used in the Company's operations, and also its internal
manufacturing systems at its plants, including computer-based manufacturing,
logistical and related systems ("Manufacturing Systems").

      Prior to December 31, 1999, the Company replaced or upgraded most of its
Management Systems and Manufacturing Systems. The Company substantially upgraded
its desktop computers, networks and servers and software applications and
packages. The Company expended approximately $587,000, $920,000 and $245,000 in
the fiscal years ended June 30, 1997, 1998 and 1999, respectively, towards
compliance with Y2K Issues. Such amounts during such periods were allocated as
follows: for 1997, $72,700 for hardware, $9,000 for software, $300,800 for
outside consultants and $205,000 for internal costs; for 1998, $229,700 for
hardware, $35,600 for software, $235,000 for outside consultants and $420,000
for internal costs; for 1999, $168,000 for hardware, $53,000 for software,
$24,000 for outside consultants and nominal internal costs. The Company expended
approximately $150,000 during the second half of calendar 1999, of which
approximately $30,000 was spent on hardware, $70,000 on software modifications
and systems testing by outside consultants and $50,000 was allocated to internal
costs and contingencies.

      The Company believes that its Management Systems and Manufacturing Systems
are currently in Y2K compliance. Subsequent to January 1, 2000, the Company has
experienced no interruption in, or failure of, normal business activities or
operations due to a Y2K Issue. The Company believes that the implementation


                                       33
<PAGE>

of new business systems and the completion of the Company's Y2K modifications
successfully mitigated the possibility of significant interruptions of normal
operations.

Certain Factors Affecting Future Operating Results

      This Form 10-K contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's actual results could
differ materially from those set forth in the forward- looking statements.
Certain factors that might cause such a difference include, among other factors
noted herein, the following: the Company's substantial leverage and potential
inability to service its debt; the Company's dependence on distributions from
its subsidiaries; risks associated with the Company's international operations;
the Company's dependence on its Israeli operations; competition in each of the
Company's markets; potential environmental liability; extensive regulation by
numerous government authorities in the United States and other countries;
significant cyclical price fluctuation for the principal raw materials used by
the Company in the manufacture of its products; the Company's reliance on the
continued operation and sufficiency of its manufacturing facilities; the
Company's dependence upon unpatented trade secrets; the risks of legal
proceedings and general litigation expenses; potential operating hazards and
uninsured risks; the risk of work stoppages; the Company's dependence on key
personnel; the uncertain impact of the Company's acquisition plans; and the
seasonality of the Company's business.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

      Information regarding quantitative and qualitative disclosures about
market risk is set forth in Item 7 of this Form 10-K.

Item 8. Financial Statements and Supplementary Data.

      The financial statements are set forth commencing on page F-1 hereto.

Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure.

      No response required.


                                       34
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

      The following sets forth, as of June 30, 2000, the name, age, and position
of the Company's directors and executive officers:

Name                     Age                       Position
- -----                    ---                       --------

Jack C. Bendheim         53    Director, President and Chief Executive Officer
Marvin S. Sussman        53    Director; Chief Operating Officer and Executive
                                 Vice President; President, Prince Group
James O. Herlands        58    Director and Executive Vice President; President,
                                 CP/PhibroChem Group
Nathan Z. Bistricer      49    Vice President and Chief Financial Officer
Joseph M. Katzenstein    58    Treasurer and Secretary

      JACK C. BENDHEIM -- Director, President and Chief Executive Officer. Mr.
Bendheim has been President since 1988. He was Chief Operating Officer from 1988
to 1998, and was appointed Chief Executive Officer in 1998. He has been a
director since 1984. Mr. Bendheim joined the Company in 1969 and served as
Executive Vice President and Treasurer from 1983 to 1988 and as Vice President
and Treasurer from 1975 to 1983. Mr. Bendheim is also a director of The
Berkshire Bank in New York, New York, and Empire Resources, Inc., a metals
trading company in Fort Lee, New Jersey.

      MARVIN S. SUSSMAN -- Director, Chief Operating Officer and Executive Vice
President, and President of the Company's Prince Group. He has been a director
since 1988 and was appointed Chief Operating Officer in 1998. Mr. Sussman joined
the Company in 1971. Since then, he has served in various executive positions at
the Company and at the Prince Group. Since 1988, Mr. Sussman has been President
of the Company's Prince Group and Executive Vice-President of the Company. Mr.
Sussman is the brother-in-law of Jack Bendheim.

      JAMES O. HERLANDS -- Director and Executive Vice President, and President
of CP/PhibroChem. Mr. Herlands joined the Company in 1964. Since then, he has
served in various capabilities in sales/marketing and purchasing. He has been a
director since 1988. Since 1992, Mr. Herlands has been President of the
Company's CP/PhibroChem Group. From 1988 to 1992, Mr. Herlands was Senior Vice
President of the Company. Mr. Herlands is the first cousin of Jack Bendheim.

      NATHAN Z. BISTRICER -- Vice President and Chief Financial Officer. Mr.
Bistricer has served as Vice President and Chief Financial Officer since he
joined the Company in 1985. From 1981 to 1985, Mr. Bistricer served as Vice
President--Administrator and Treasurer of Belco Petroleum Corporation, an oil
and gas exploration company.

      JOSEPH KATZENSTEIN -- Treasurer and Secretary. Mr. Katzenstein joined the
Company in 1962. Since 1982, he has been Secretary and Treasurer of the Company.
Mr. Katzenstein served as corporate controller from 1966 to 1985.


                                       35
<PAGE>

Item 11. Executive Compensation.

      The following table sets forth the cash compensation paid by the Company
and its subsidiaries for services during fiscal 2000, 1999 and 1998 to each of
the Company's five most highly compensated executive officers:

<TABLE>
<CAPTION>
                                                                                       Long Term Compensation
                                                                                 ---------------------------------
                                                                                           Awards          Payouts
                                                   Annual Compensation           -----------------------   -------
                                           ----------------------------------    Restricted   Securities
        Name and                                                 Other Annual      Stock      Underlying    LTIP        All Other
   Principal Position             Year     Salary       Bonus    Compensation**    Awards    Options/SARs  Payouts   Compensation***
     ---------------              ----     ------       -----    --------------  ----------  ------------  -------  ----------------
<S>                               <C>    <C>          <C>          <C>             <C>       <C>           <C>          <C>
Jack C. Bendheim ..............   2000   $1,500,000         $ --         $ --      $ --      $ --          $ --         $5,362
President & CEO                   1999   $1,207,000           --           --        --        --            --         $5,200
                                  1998   $1,725,000           --           --        --        --            --         $5,200

Marvin S. Sussman* ............   2000   $  467,000   $  667,600           --      $ --      $ --          $ --         $5,362
Executive Vice President & COO;   1999   $  467,000   $  597,200           --        --        --            --         $5,200
President of Prince Group         1998   $  479,500   $  423,700           --        --        --            --         $5,200

James O. Herlands .............   2000   $  382,500   $  252,500           --      $ --      $ --          $ --         $5,362
Executive Vice President;         1999   $  365,000   $  250,000   $   24,015        --        --            --         $5,200
President of CP/Phibrochem        1998   $  350,000   $  250,000   $1,030,100        --        --            --         $5,200

Nathan Z. Bistricer ...........   2000   $  245,000   $   75,000           --      $ --      $ --          $ --         $5,362
Vice President & CFO              1999   $  233,700   $  180,000   $   24,015        --        --            --         $5,200
                                  1998   $  233,700   $   60,000   $1,030,100        --        --            --         $5,200

Joseph M. Katzenstein .........   2000   $  115,250         $ --         $ --      $ --      $ --          $ --         $3,746
Treasurer and Secretary           1999   $  111,250           --           --        --        --            --         $3,616
                                  1998   $  108,750           --           --        --        --            --         $3,534
</TABLE>

- ----------
*     Pursuant to a Stockholders Agreement between Mr. Sussman and the Company,
      the Company is required to purchase at book value all shares of the
      Company's Class B Common Stock owned by Mr. Sussman in the event of his
      retirement, death, permanent disability or the termination of his
      employment by the Company. See "Certain Relationships and Related
      Transactions." As a result, the Company is required to record as
      compensation to Mr. Sussman each year the change in the book value of the
      Company attributable to Mr. Sussman's shares. For 2000, 1999 and 1998 the
      amount attributable to Mr. Sussman's shares was $1,137,000, $(187,000) and
      $(1,250,000), respectively. Such amounts have not been distributed to Mr.
      Sussman.
**    In fiscal 1998, Phibro-Tech, a subsidiary of the Company, canceled the
      limited recourse notes issued by executives related to acquiring 4% of the
      stock of Phibro-Tech, and forgave all amounts due the Company, resulting
      in compensation expense. The Company also paid the executives an
      additional amount as reimbursement for their income tax liability related
      to the forgiveness, which was also recorded as compensation expense. See
      "Certain Relationships and Related Transactions."
***   Represents contributions by the Company under its 401(k) Retirement and
      Savings Plan. See "--Compensation Pursuant to Plans."


                                       36
<PAGE>

      In fiscal 2000, the Company granted no options or long-term incentive plan
awards to the named executive officers and no options were held or exercised by
any of the named executive officers.

Employment and Severance Agreements

      The Company entered into an employment agreement with Marvin S. Sussman in
December 1987. Mr. Sussman, as President of the Company's Prince Group, is
responsible for the day-to-day operations of that group. The term of employment
is from year to year, unless terminated by the Company at any time or by his
death or permanent disability. In the event of the termination of Mr. Sussman's
employment, the Company was obligated to make a severance payment to Mr. Sussman
in an amount equal to the principal balance of and all accrued interest on
certain promissory notes dated June 30, 1993 made by Mr. Sussman and his wife to
Jack Bendheim and his wife. On December 31, 1999, the aggregate balance of such
notes, $40,000, plus accrued interest at 6% per annum, was paid in full, thereby
terminating such severance obligation.

      In 1995, Nathan Bistricer and James O. Herlands purchased stock in
Phibro-Tech. In connection therewith, the Company entered into severance
agreements with them. The agreements provide that, upon the Actual or
Constructive Termination of such executive or a Change in Control Event (as such
terms are defined), the executive is entitled to receive a cash Severance Amount
(as defined therein), based upon a multiple of Phibro-Tech's pretax earnings (as
defined therein). In addition, if an Extraordinary Event (as defined) occurs
within 12 months after the occurrence of an Actual or Constructive Termination,
the executive is entitled to receive an additional Catch-up Payment (as
defined). At June 30, 2000, severance payments equal to an aggregate of
approximately $412,000 would have been due to Messrs. Bistricer and Herlands if
they were terminated. See "Certain Relationships and Related Transactions."

Compensation Pursuant to Plans

      401(k) Plan. The Company maintains for the benefit of its employees a
401(k) Retirement and Savings Plan (the "Plan"), which is a defined
contribution, profit sharing plan qualified under Section 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"). Employees of the Company are
eligible for participation in the Plan once they have attained age 21 and
completed a year of service (in which the employee completed 1,000 hours of
service). Up to $150,000 (indexed for inflation) of an employee's base salary
may be taken into account for Plan purposes. Under the Plan, employees may make
pre-tax contributions of up to 6.0% of such employee's base salary, and the
Company will make non-matching contributions equal to 1% of an employee's base
salary and matching contribution equal to 50.0% of an employee's pre-tax
contribution up to 3.0% of such employee's base salary and 25.0% of such
employee's pre-tax contribution over 3.0% of base salary. Participants are
vested in Employer contributions in 20% increments beginning after completion of
the second year of service and become fully vested after five years of service.
Distributions are generally payable in a lump sum after termination of
employment, retirement, death, disability, plan termination, attainment of age
59 1/2, disposition of substantially all of the Company's assets or upon
financial hardship. The Plan also provides for Plan loans to participants.

      The accounts of Messrs. Bendheim, Sussman, Herlands, Bistricer and
Katzenstein were credited with employer contributions of $5,362, $5,362, $5,362,
$5,362 and $3,746, respectively, for fiscal 2000.

      Retirement Plan. The Company has adopted The Retirement Plan of Philipp
Brothers Chemicals Inc. and Subsidiaries and Affiliates which is a defined
benefit pension plan (the "Retirement Plan"). Employees of the Company are
eligible for participation in the Retirement Plan once they have attained age 21
and completed a year of service (which is a Plan Year in which the employee
completes 1,000 hours of service). The Retirement Plan provides benefits equal
to the sum of (a) 1.0% of an employee's "average salary" plus 0.5% of the
employee's "average salary" in excess of the average of the employee's social
security taxable wage base, times years of service after July 1, 1989, plus (b)
the employee's frozen accrued benefit, if any, as of June 30, 1989 calculated
under the Retirement Plan formula in effect at that time. For purposes of
calculating the portion of the benefit based on "average salary" in excess of
the average wage base, years of service shall not exceed 35. "Average salary"
for these purposes means the employee's salary over the consecutive five year
period in the last ten years preceding retirement or other termination of
employment which produces the highest average; or, if an employee has fewer than
five years of service, all such years of service. An employee becomes vested in
his plan benefit once he completes five years of service with the Company. In
general,


                                       37
<PAGE>

benefits are payable after retirement or disability in the form of a 50%, 75% or
100% joint or survivor annuity, life annuity or life annuity with a five or ten
year term certain. In some cases benefits may also be payable under the
Retirement Plan in the event of an employee's death.

      The following table shows estimated annual benefits payable upon
retirement in specified compensation and years of service classifications,
assuming a life annuity with a ten year term certain.

                                            Years of Service
                         -------------------------------------------------------
Average Compensation        15          20          25          30          35
- --------------------     -------     -------     -------     -------     -------
$25,000.............     $ 3,750     $ 5,000     $ 6,250     $ 7,500     $ 8,750
$50,000.............     $ 7,500     $10,000     $12,500     $15,000     $17,500
$75,000.............     $12,320     $15,890-    $19,320     $22,910     $26,670
$100,000............     $17,950     $23,390     $28,700     $34,160     $39,800
$150,000............     $29,200     $38,390     $47,450     $56,660     $66,050
$200,000............     $31,450     $41,390     $51,200     $61,160     $71,300

      As of June 30, 2000, Messrs. Bendheim, Sussman, Herlands, Bistricer and
Katzenstein had 31, 29, 36, 15 and 38 estimated credited years of service,
respectively, under the Retirement Plan. The compensation covered by the
Retirement Plan for each of these officers as of June 30, 2000 is $160,000. Such
individuals, at age 65, will have 43, 41, 43, 31 and 45 credited years of
service, respectively. The annual expected benefit after normal retirement at
age 65 for each of these individuals, based on the compensation taken into
account as of June 30, 2000, is $106,600, $122,030, $120,340, $65,020 and
$47,820, respectively.

      Most of the Company's foreign subsidiaries have retirement plans covering
substantially all employees. Contributions to these plans are generally
deposited under fiduciary-type arrangements. Benefits under these plans are
primarily based on levels of compensation. Funding policies are based on
applicable legal requirements and local practices.

      Deferred Compensation Plan. In 1994, the Company adopted a non-qualified
Deferred Compensation Plan and Trust, as an incentive for certain executives.
The plan provides for (i) a Retirement Income Benefit (as defined), (ii) a
Survivor's Income Benefit (as defined), and (iii) Deferred Compensation Benefit
(as defined). Five employees currently participate in this plan. A trust has
been established to provide the benefits described above.

      The following table shows the estimated benefits from this plan as of June
30, 2000.

                                      Annual        Survivor's      Deferred
                                    Retirement        Income      Compensation
                                   Income Benefit     Benefit        Benefit
                                   --------------   -----------   ------------
Jack C. Bendheim ................     $16,451        $1,500,000      $177,544

Nathan Z. Bistricer .............     $12,275        $  480,000      $ 72,366

James O. Herlands ...............     $16,451        $  750,000      $154,764

Marvin S. Sussman ...............     $16,451        $  933,984      $ 63,241

      The Retirement Income Benefit is determined by the Company based upon the
employee's salary, years of service and age at retirement. At present, it is
contemplated that a benefit of 1% of each participant's eligible compensation
will be accrued each year. The benefit is payable upon retirement (after age 65
with at least 10 years of service) in monthly installments over a 15 year period
to the participant or his named beneficiary. The Survivor's Income Benefit for
the current participants is two times annualized compensation at the time of
death, capped at $1,500,000, payable in 24 equal monthly installments. The
Deferred Compensation Benefit is substantially funded by compensation deferred
by the participants. Such benefit is based upon a participant making an election
to defer no less than $3,000 and no more than $20,000 of his compensation in
excess of $150,000, payable in a lump sum or in monthly installments for up to
15 years. The Company makes a matching contribution of $3,000. The plan is
substantially funded. Participants have no claim against the Company other than
as unsecured creditors. To assist in providing benefits, the Company has
obtained a life insurance policy on each participant.

      Executive Income Program. On March 1, 1990, the Company entered into an
Executive Income Program to provide a pre-retirement death benefit and a
retirement benefit to certain of its executives. The Program consists of a Split
Dollar Agreement and a Deferred Compensation Agreement with Jack Bendheim,
Marvin


                                       38
<PAGE>

S. Sussman and James O. Herlands (the "Executives"). The Split Dollar Agreement
provides for the Company to own a whole life insurance policy in the amount of
$1,000,000 (plus additions) on the life of each Executive.

      Each policy also contains additional paid-up insurance and extended term
insurance. On the death of the Executive prior to his 60th birthday or his
actual retirement date, whichever is later: (i) the first $1,000,000 of the
death benefit is payable to the Executive's spouse, or issue; (ii) the excess is
payable to the Company up to the aggregate amount of premiums paid by the
Company; and (iii) any balance is payable to the Executive's spouse or issue.
The Split Dollar Agreement terminates and no benefit is payable if the Executive
dies after his retirement from the Company. The Deferred Compensation Agreement
provides that upon the Executive's retirement, at or after attaining age 65, the
Company will make a monthly retirement payment to the Executive during his life
for 10 years or until he or his beneficiaries have received a total of 120
monthly payments. The Company intends to fund the payments using the cash value
or the death benefit from the life insurance policy insuring each Executive's
life. The monthly retirement benefits are as follows: Jack Bendheim $2,500;
Marvin S. Sussman $2,500; and James O. Herlands $1,666.

Meetings and Compensation of Directors

      During fiscal 2000, the Board of Directors took certain action by written
consent. There were no formal meetings of the Board. Directors are elected
annually and serve until the next annual meeting of Shareholders or until their
successors are elected and qualified. The Company's directors do not receive any
cash compensation for service on the Board of Directors, but directors may be
reimbursed for certain expenses in connection with attendance at board meetings.
The Company has entered into certain transactions with certain of the directors.
See "Certain Relationships and Related Transactions."

Committees of the Board of Directors

      The Company's Board of Directors has not created any committees.

Report of Board of Directors as to Compensation

      The Company does not have a compensation committee or other Board
committee performing equivalent functions. Executive compensation is determined
by Jack Bendheim, the President and Chief Executive Officer of the Company.
During fiscal 2000, Messrs. Bendheim, Sussman and Herlands participated in
deliberations regarding compensation of the Company's other officers.

Compensation Committee Interlocks and Insider Participation

      Jack Bendheim, Marvin S. Sussman and James O. Herlands are Members of the
Board of Directors and executive officers of the Company. No executive officer
of the Company serves as a member of the Board of Directors of any other
non-Company entity which has one or more members serving as a member of the
Company's Board of Directors. Messrs. Bendheim, Sussman and Herlands have
participated in certain transactions with the Company and its subsidiaries and
affiliates. See "Certain Relationships and Related Transactions."


                                       39
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management.

      The table sets forth certain information as of June 30, 2000 regarding
beneficial ownership of the Company's capital stock by each director and named
executive officer of the Company, each beneficial owner of 5% or more of the
outstanding shares of capital stock and all directors and officers as a group.

                                        Number of Shares (Percentage of Class)
                                      -----------------------------------------
Name                                  Class A Voting(1)       Class B Voting(2)
- -----                                 ----------------       ------------------
Jack Bendheim(3) ...................    12,600 (100%)        10,699.65 (90%)(4)

Marvin S. Sussman ..................         --               1,188.85 (10%)

All other officers and directors ...         --                      --

All officers and directors as a
  group ............................    12,600 (100%)        11,888.50 (100%)

- ----------
(1)   The entire voting power of the Company is exercised by the holders of
      Class A Common Stock, except that the holders of Class B Common Stock
      elect one director but do not vote on any other matters.
(2)   Class B shareholders will receive the entire equity of the Company upon
      its liquidation, after payment of preferences to holders of all classes of
      preferred stock and Class A Common Stock.
(3)   Jack Bendheim also owns 5,207 (100%) shares of Series A Preferred Stock.
(4)   Includes 4,414.886 shares owned by trusts for the benefit of Jack
      Bendheim, his spouse, his children and their spouses and his
      grandchildren.

Item 13. Certain Relationships and Related Transactions.

      Phibro-Tech leases the property underlying its Santa Fe Springs,
California facility from First Dice Road Company, a California limited
partnership ("First Dice"), in which Jack Bendheim, the Company's President and
principal stockholder, Marvin S. Sussman and James O. Herlands, directors of the
Company, own 39.0%, 40.0% and 20.0% limited partnership interests, respectively.
The general partner, having a 1% interest in the partnership, is Western
Magnesium Corp., a wholly-owned subsidiary of the Company, of which Jack
Bendheim is the president. The lease expires on June 30, 2008. The annual rent
is $250,000. Phibro-Tech is also required to pay all real property taxes,
personal property taxes and liability and property insurance premiums. On June
30, 1995, Jack Bendheim borrowed $1,500,000 from NatWest Bank N.A. (now Fleet
Bank) which he reloaned to First Dice. On September 29, 1999, Jack Bendheim
refinanced the loan from Fleet Bank to provide for self-amortizing payments.
Similarly, Jack Bendheim's loan to First Dice was restructured to reflect the
same terms as his borrowing from Fleet Bank. The repayment to Jack Bendheim of
such loan by First Dice is personally guaranteed by each of the limited partners
of First Dice in proportion to their respective limited partnership interests.
The Company believes that the terms of such lease and loan are on terms no less
favorable to Phibro-Tech than those that reasonably could be obtained at such
time in a comparable arm's-length transaction from an unrelated third-party.

      Pursuant to a Shareholders Agreement dated December 29, 1987 between
Marvin S. Sussman and the Company, the Company is required to purchase at book
value all shares of the Company's Class B Common Stock owned by Mr. Sussman, in
the event of his retirement, death, permanent disability or the termination of
his employment by the Company.

      In connection with the consummation of the offering by the Company of its
Senior Subordinated Notes in June 1998, Phibro-Tech canceled certain limited
recourse promissory notes from I. David Paley (the former President of
Phibro-Tech) ($1,392,461), Nathan Z. Bistricer ($415,685) and James O. Herlands
($415,685) (the "Executives"), related to acquiring 10.7% of the stock of
Phibro-Tech in 1995 and forgave all amounts due thereunder (including an
aggregate of $628,000 in accrued interest), and paid the Executives an
additional aggregate amount of $2,740,000 as reimbursement for their resulting
income tax liability. As a result of the repayment of certain notes of the
Company with proceeds of the offering of the Company's Senior Subordinated
Notes, the Class B common stock of the Executives converted into an equal number
of Class A common stock of Phibro-Tech. Pursuant to an amendment to the
Certificate of Incorporation of Phibro-Tech adopted in January 1999, the shares
of Phibro-Tech owned by the Executives were exchanged for an equal number of
newly authorized shares of non-voting Class B Common Stock of Phibro-Tech, and
the shares of MMC owned by Phibro-Tech were transferred to and became directly
owned by Philipp Brothers. A


                                       40
<PAGE>

Shareholders Agreement among the Executives and Phibro-Tech provides, among
other things, for restrictions on such shares as to voting, dividends,
liquidation and transfer rights. The Shareholders Agreement also provides that
upon the death of an Executive or termination of an Executive's employment,
Phibro-Tech must purchase the Executive's shares at their fair market value, as
determined by a qualified appraiser. In the event of a Change of Control (as
defined), the Executive has the option to sell his shares to Phibro-Tech at such
value. The Shareholders Agreement provides, that, upon the consent of
Phibro-Tech, the Executives and the Company, the Executives' shares of
Phibro-Tech Common Stock may be exchanged for a number of shares of the
Company's Common Stock, which may be non-voting Common Stock, having an
equivalent value, and upon any such exchange such shares of the Company's Common
Stock will become subject to the Shareholders Agreement. The Company and
Phibro-Tech also entered into Severance Agreements with the Executives which
provide, among other things, for certain severance payments. See "Executive
Compensation--Employment and Severance Agreements."

      In connection with the retirement of I. David Paley from Phibro-Tech in
March 1999, pursuant to the Shareholders Agreement among the Executives and
Phibro-Tech, the Company paid $2,862,660 in connection with the repurchase of
the 240.03 shares of his Class B Common Stock of Phibro-Tech and in satisfaction
of Phibro-Tech's severance obligation under a Severance Agreement between
Phibro-Tech and Mr. Paley. In addition, the Company has retained Mr. Paley,
pursuant to a Consulting Agreement, through March 15, 2002, to render consulting
and advisory services to the Company on a part-time basis. The consulting fee
payable to Mr. Paley is $200,000 for the first year and $150,000 for each of the
second and third years of the term. Mr. Paley is also entitled under such
Consulting Agreement to life insurance equal to the unpaid consulting fee, and
certain other benefits.

      The Company periodically advances funds to Jack Bendheim on a short-term,
non-interest-bearing basis.

      The Company has advanced $200,000 to Marvin Sussman and his wife pursuant
to a secured promissory note that is payable on demand and bears interest at the
annual rate of 9%.

      On January 5, 2000, the United States Bankruptcy Court for the Eastern
District of New York confirmed a Plan of Reorganization for Penick Corporation
and Penick Pharmaceutical, Inc. (collectively, "Penick") which prior to such
confirmation were debtors in proceedings in such Court for reorganization under
Chapter 11 of the Bankruptcy Code, and awarded Penick to Penick Holding Company
("PHC"). PHC is a corporation formed to effect such acquisition by the Company,
PBCI LLC, a limited liability company controlled by Mr. Bendheim, and several
other investors. Pursuant a Shareholders' Agreement among the shareholders of
PHC, Mr. Bendheim has been designated as one of three directors of PHC, and Mr.
Katzenstein, the Secretary and Treasurer of the Company, has been designated as
Secretary and Treasurer of PHC. The Company has invested $1,980,000 for shares
of Series A Preferred Stock of PHC bearing an 8.5 percent annual cumulative
dividend, and PBCI LLC invested approximately $20,000 for 20 percent of the
Common Stock of PHC.

      The Company's policy with respect to the sale, lease or purchase of assets
or property of any related party is that such transaction should be on terms
that are no less favorable to the Company or its subsidiary, as the case may be,
than those that could reasonably be obtainable at such time in a comparable
arm's length transaction from an unrelated third party, on the same basis as the
Indenture for the Senior Subordinated Notes and the Company's secured domestic
credit agreement. The Indenture and the credit agreement both include a similar
restriction on the Company and its domestic subsidiaries with respect to the
sale, purchase, exchange or lease of assets, property or services, subject to
certain limitations as to the applicability thereof.


                                       41
<PAGE>

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

      (a) Exhibits

Exhibit No.                        Description of Exhibit
- -----------                        ----------------------

3.1     --    Restated Certificate of Incorporation of Philipp Brothers
              Chemicals, Inc.*

3.2     --    By-laws of Philipp Brothers Chemicals, Inc.*

3.3     --    Composite Certificate of Incorporation of Phibro-Tech, Inc.****

3.4     --    By-Laws of Phibro-Tech, Inc.*

3.5     --    Certificate of Incorporation of C.P. Chemicals, Inc.*

3.6     --    By-Laws of C.P. Chemicals, Inc.*

3.7     --    Certificate of Incorporation of Prince Agriproducts, Inc.*

3.8     --    By-Laws of Prince Agriproducts, Inc.*

3.9     --    Certificate of Incorporation of The Prince Manufacturing Company,
              an Illinois corporation*

3.10    --    By-Laws of The Prince Manufacturing Company, an Illinois
              corporation*

3.11    --    Certificate of Incorporation of The Prince Manufacturing Company,
              a Pennsylvania corporation*

3.12    --    By-Laws of The Prince Manufacturing Company, a Pennsylvania
              corporation*

3.13    --    Certificate of Formation of Mineral Resource Technologies, L.L.C.*

3.14    --    Amended and Restated Combined Limited Liability Company Agreement
              of Mineral Resource Technologies, L.L.C., and Stockholders
              Agreement of MRT Management Corp., dated as of June 30, 1999****

3.15    --    Certificate of Incorporation of MRT Management Corp.*

3.15.1  --    Amendment to Certificate of Incorporation of MRT Management
              Corp.****

3.15.2  --    Composite Certificate of Incorporation of MRT Management Corp.****

3.16    --    By-Laws of MRT Management Corp.*

3.17    --    Certificate of Incorporation of Koffolk, Inc.*

3.18    --    By-Laws of Koffolk, Inc.*

3.19    --    Certificate of Incorporation of Phibrochem, Inc.*

3.20    --    By-Laws of Phibrochem, Inc.*

3.21    --    Certificate of Incorporation of Phibro Chemicals, Inc.*

3.22    --    By-Laws of Phibro Chemicals, Inc.*

3.23    --    Certificate of Incorporation of Western Magnesium Corp.*

3.24    --    By-Laws of Western Magnesium Corp.*

4.1     --    Indenture, dated as of June 11, 1998, among the Company, the
              Guarantors named therein and The Chase Manhattan Bank, as trustee,
              relating to the 9 7/8% Senior Subordinated Notes due 2008 of the
              Company, and exhibits thereto, including Form of 9 7/8% Senior
              Subordinated Note due 2008 of Company*


                                       42
<PAGE>

              Certain instruments which define the rights of holders of
              long-term debt of the Company and its consolidated subsidiaries
              have not been filed as Exhibits to this Report since the total
              amount of securities authorized under any such instrument does not
              exceed 10% of the total assets of the Company and its subsidiaries
              on a consolidated basis, as of June 30, 2000. For a description of
              such indebtedness, see Note 7 of Notes to Consolidated Financial
              Statements. The Company hereby agrees to furnish copies of such
              instruments to the Securities and Exchange Commission upon its
              request.

10.1    --    Registration Rights Agreement, dated June 11, 1998, among Philipp
              Brothers Chemicals, Inc., the Guarantors named therein and
              Schroder & Co. Inc.*

10.2    --    Revolving Credit, Acquisition Term Loan and Security Agreement,
              dated August 19, 1998, among Philipp Brothers Chemicals, Inc., as
              Borrower, the Guarantors named therein, PNC Bank, N.A. as Agent
              and Lender, and the other institutions from time to time party
              thereto as Lenders*

10.3    --    Manufacturing Agreement, dated May 15, 1994, by and between Merck
              & Co., Inc., Koffolk, Ltd., and Philipp Brothers Chemicals, Inc.+*

10.4    --    [Intentionally Omitted.]

10.5    --    Asset Purchase and Trademark Assignment Agreement, dated August 5,
              1996, between Koffolk, Inc. and Merck & Co., Inc.; assigned by
              Merck & Co., Inc. to Merial Limited.*

10.6    --    Distributorship Agreement, dated August 5, 1996, by and between
              Merck & Co., Inc. and Koffolk, Inc.; assigned by Merck & Co., Inc.
              to Merial Limited.+*

10.7    --    License Agreement, dated May 30, 1996, by and between Michigan
              Technological University and Mineral Resource Technologies,
              L.L.C.+*

10.8    --    Lease, dated July 25, 1986, between Philipp Brothers Chemicals,
              Inc. and 400 Kelby Associates, as amended December 1, 1986 and
              December 30, 1994*

10.9    --    Lease, dated June 30, 1995, between First Dice Road Co. and
              Phibro-Tech, Inc., as amended May 1998*

10.10   --    Lease, dated December 24, 1981, between Koffolk (1949) Ltd. and
              Israel Land Administration*

10.11   --    Master Lease Agreement, dated February 27, 1998, between General
              Electric Capital Corp., Philipp Brothers Chemicals, Inc. and
              Phibro-Tech, Inc.*

10.12   --    Stockholders Agreement, dated December 29, 1987, by and between
              Philipp Brothers Chemicals, Inc., Charles H. Bendheim, Jack C.
              Bendheim and Marvin S. Sussman*

10.13   --    Employment Agreement, dated December 29, 1987, by and between
              Philipp Brothers Chemicals, Inc. and Marvin S. Sussman* ++

10.14   --    Stockholders Agreement, dated February 21, 1995, between I. David
              Paley, Nathan Z. Bistricer, James O. Herlands and Phibro-Tech,
              Inc., as amended as of June 11, 1998*

10.15   --    Severance Agreement, dated as of February 21, 1995, between I.
              David Paley and Phibro-Tech, Inc.* ++

10.16   --    Form of Severance Agreement, each dated as of February 21, 1995,
              between Philipp Brothers Chemicals, Inc. and each of Nathan Z.
              Bistricer and James O. Herlands* ++

10.17   --    Agreement of Limited Partnership of First Dice Road Company, dated
              June 1, 1985, by and among Western Magnesium Corp., Jack Bendheim,
              Marvin S. Sussman and James O. Herlands, as amended November 1985*

10.18   --    Philipp Brothers Chemicals, Inc. Retirement Income and Deferred
              Compensation Plan Trust, dated as of January 1, 1994, by and
              between Philipp Brothers Chemicals, Inc. on its own behalf and on
              behalf of C.P. Chemicals, Inc., Phibro-Tech, Inc. and the Trustee
              thereunder; Philipp Brothers Chemicals, Inc. Retirement Income and
              Deferred Compensation Plan, dated March 18, 1994 ("Retirement
              Income and Deferred Compensation Plan")* ++


                                       43
<PAGE>

10.18.1 --    First, Second and Third Amendments to Retirement Income and
              Deferred Compensation Plan.**** ++

10.19   --    Form of Executive Income Deferred Compensation Agreement, each
              dated March 11, 1990, by and between Philipp Brothers Chemicals,
              Inc. and each of Jack Bendheim, James Herlands and Marvin Sussman*
              ++

10.20   --    Form of Executive Income Split Dollar Agreement, each dated March
              1, 1990, by and between Philipp Brothers Chemicals, Inc. and each
              of Jack Bendheim, James Herlands and Marvin Sussman* ++

10.21   --    Agreement for the Sale and Purchase of the Shares of ODDA
              Smelteverk A/S and of the Business and Certain Assets of BOC
              Carbide Industries, a division of BOC Ltd., dated June 26, 1998,
              between The BOC Group plc and Philipp Brothers Chemicals, Inc.*

10.22   --    Supply Agreement, dated as of September 28, 1998, between BOC
              Limited and Phillip Brothers Chemicals, Inc.*

10.23   --    Administrative Consent Order, dated March 11, 1991, issued by the
              State of New Jersey Department of Environmental Protection,
              Division of Hazardous Waste Management, to C.P. Chemicals, Inc.*

10.24   --    Agreement for Transfer of Ownership, dated as of June 8, 2000,
              between C. P. Chemicals, Inc. ("CP") and the Township of
              Woodbridge ("Township"), and related Environmental Indemnification
              Agreement, between CP and Township, and Lease, between Township
              and CP****

10.25   --    Stockholders' Agreement, dated as of January 5,2000, among
              shareholders of Penick Holding Company ("PHC"), and Certificate of
              Incorporation of PHC and Certificate of Designation, Preferences
              and Rights of Series A Redeemable Cumulative Preferred Stock of
              PHC****

10.26   --    Licensing Agreement, dated January 28, 1980, between Gunness Wharf
              Limited and BOC Limited+*

10.27   --    Agreement, dated January 28, 1980, between BOC Limited and Gunness
              Wharf Limited+*

10.28   --    Subscription and Exchange Agreement, dated as of January 29, 1999
              among I. David Paley, Nathan Z. Bistricer, James O. Herlands and
              Phibro Tech, Inc.**

10.29   --    General Release between Phibro-Tech, Inc. and I. David Paley dated
              as of September 1, 1999***

10.30   --    Separation Agreement between Phibro-Tech, Inc. and I. David Paley
              dated as of September 1, 1999*** ++

10.31   --    Stock Purchase Agreement between Phibro-Tech, Inc. and I. David
              Paley dated as of September 1, 1999***

10.32   --    Consulting Agreement between Phibro-Tech, Inc. and I. David Paley
              dated as of September 1, 1999***

21.1    --    List of Subsidiaries****

27.1    --    Financial Data Schedules****

- ----------
*     Filed as an Exhibit to the Registrant's Registration Statement on Form
      S-4, No. 333-64641.
**    Filed as an Exhibit to the Registrant's Report on Form 10-Q for the
      quarter ended December 31, 1998.
***   Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
      fiscal year ended June 30, 1999.
****  Filed herewith.
+     A request for confidential treatment has been granted for portions of such
      document. Confidential portions have been omitted and filed separately
      with the SEC as required by Rule 406(b).
++    This Exhibit is a management compensatory plan or arrangement.


                                       44
<PAGE>

      (b) Financial Statement Schedules

      All supplemental schedules are omitted because of the absence of
conditions under which they are required or because the information is shown in
the financial statements or notes thereto or in other supplemental schedules.

      (c) Reports on Form 8-K.

      No reports on Form 8-K have been filed during the last quarter of the
fiscal year ended June 30, 2000.


                                       45
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

                                                                            Page
                                                                            ----
Report of Independent Accountants ........................................   F-2
Consolidated Balance Sheets--June 30, 2000 and 1999 ......................   F-3
Consolidated Statements of Operations and Comprehensive
    Income--for the years ended June 30, 2000, 1999 and 1998 .............   F-4
Consolidated Statements of Changes in Stockholders'
    Equity--for the years ended June 30, 1998, 1999 and 2000 .............   F-5
Consolidated Statements of Cash Flows--for the years ended
    June 30, 2000, 1999 and 1998 .........................................   F-6
Notes to Consolidated Financial Statements ...............................   F-7


                                      F-1
<PAGE>

                        Report of Independent Accountants

To the Stockholders of
Philipp Brothers Chemicals, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and comprehensive income, changes in
stockholders' equity and cash flows present fairly, in all material respects,
the financial position of Philipp Brothers Chemicals, Inc. and Subsidiaries at
June 30, 2000 and June 30, 1999, and the results of their operations and their
cash flows for each of the three years in the period ended June 30, 2000 in
conformity with accounting principles generally accepted in the United States of
America. 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 of these statements in
accordance with auditing standards generally accepted in the United States of
America, which 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, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.


PricewaterhouseCoopers LLP

Florham Park, New Jersey
September 26, 2000

                                      F-2
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                          As of June 30, 2000 and 1999
               (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                     ASSETS
                                                                       2000         1999
                                                                     ---------    ---------
<S>                                                                  <C>          <C>
CURRENT ASSETS:
   Cash and cash equivalents .....................................   $   2,403    $   3,022
   Trade receivables, less allowance for doubtful accounts of $756
      at June 30, 2000 and $886 at June 30, 1999 .................      79,376       70,177
   Other receivables .............................................       8,479       10,596
   Inventories ...................................................      50,405       51,430
   Prepaid expenses and other current assets .....................       9,098        6,133
                                                                     ---------    ---------
        TOTAL CURRENT ASSETS .....................................     149,761      141,358

PROPERTY, PLANT AND EQUIPMENT, net ...............................      76,180       64,294

INTANGIBLES ......................................................       6,297        6,959

OTHER ASSETS .....................................................      26,213       26,168
                                                                     ---------    ---------
                                                                     $ 258,451    $ 238,779
                                                                     =========    =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Cash overdraft ................................................   $   2,120    $   1,438
   Loans payable to banks ........................................       8,650        3,734
   Current portions of long-term debt ............................       2,296        1,450
   Accounts payable ..............................................      32,642       36,410
   Accrued expenses and other current liabilities ................      24,157       25,740
                                                                     ---------    ---------

        TOTAL CURRENT LIABILITIES ................................      69,865       68,772

LONG-TERM DEBT ...................................................     139,722      134,088
OTHER LIABILITIES ................................................      13,282       11,514
                                                                     ---------    ---------
        TOTAL LIABILITIES ........................................     222,869      214,374
                                                                     ---------    ---------
COMMITMENTS AND CONTINGENCIES

REDEEMABLE SECURITIES:
   Common stock ..................................................       3,513        2,376
   Common stock of subsidiary ....................................         451          581
                                                                     ---------    ---------

        TOTAL REDEEMABLE SECURITIES ..............................       3,964        2,957
                                                                     ---------    ---------

STOCKHOLDERS' EQUITY:
   Preferred stock-$100 par value, 150,543 shares
      authorized; none issued at June 30, 2000 and
      1999; Series A Preferred Stock--$100 par value,
      6% noncumulative, 5,207 shares authorized and
      issued at June 30, 2000 and 1999 ...........................         521          521
   Common stock-$0.10 par value, 30,300 shares authorized
      and 24,488 shares issued at June 30, 2000 and 1999 .........           2            2
   Paid-in capital ...............................................         878          816
   Retained earnings .............................................      32,808       22,755
   Accumulated other comprehensive loss--
      cumulative currency translation adjustment .................      (2,591)      (2,646)
                                                                     ---------    ---------

        TOTAL STOCKHOLDERS' EQUITY ...............................      31,618       21,448
                                                                     ---------    ---------
                                                                     $ 258,451    $ 238,779
                                                                     =========    =========
</TABLE>

                  The accompanying notes are an integral part
                   of the consolidated financial statements.


                                      F-3
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                For the Years Ended June 30, 2000, 1999 and 1998
                                 (In thousands)

<TABLE>
<CAPTION>
                                                          2000         1999         1998
                                                       ---------    ---------    ---------
<S>                                                    <C>          <C>          <C>
NET SALES ..........................................   $ 318,056    $ 297,294    $ 275,577
COST OF GOODS SOLD .................................     229,553      223,247      208,913
                                                       ---------    ---------    ---------
   GROSS PROFIT ....................................      88,503       74,047       66,664

SELLING, GENERAL AND ADMINISTRATIVE
   EXPENSES ........................................      74,310       64,192       60,891
CURTAILMENT OF OPERATIONS AT
   MANUFACTURING FACILITY ..........................      (1,481)        (500)      10,000
                                                       ---------    ---------    ---------

   OPERATING INCOME (LOSS) .........................      15,674       10,355       (4,227)
OTHER:
   Interest expense ................................      14,754       13,142        6,865
   Interest income .................................        (600)        (628)        (383)
   Gain from property damage claim .................        (946)      (3,701)          --
   Gain on sale of assets ..........................     (13,763)          --           --
   Other expense, net ..............................       2,230        1,829        1,045
                                                       ---------    ---------    ---------

   INCOME (LOSS) BEFORE INCOME TAXES
      AND EXTRAORDINARY ITEM .......................      13,999         (287)     (11,754)

PROVISION (BENEFIT) FOR INCOME TAXES ...............       3,946          179       (4,689)
                                                       ---------    ---------    ---------
   INCOME (LOSS) BEFORE EXTRAORDINARY ITEM .........      10,053         (466)      (7,065)

EXTRAORDINARY LOSS ON EXTINGUISHMENT
   OF DEBT (NET OF APPLICABLE INCOME TAXES
   OF $ 1,011) .....................................          --           --       (1,962)
                                                       ---------    ---------    ---------
   NET INCOME (LOSS) ...............................      10,053         (466)      (9,027)

OTHER COMPREHENSIVE INCOME
   Change in foreign currency translation adjustment          55       (2,043)        (125)
                                                       ---------    ---------    ---------
   COMPREHENSIVE INCOME (LOSS) .....................   $  10,108    $  (2,509)   $  (9,152)
                                                       =========    =========    =========
</TABLE>

                   The accompanying notes are an integral part
                   of the consolidated financial statements.


                                      F-4
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                For the Years Ended June 30, 1998, 1999 and 2000
                                 (In thousands)

<TABLE>
<CAPTION>
                                          Preferred Stock       Common Stock
                                         ------------------  -------------------                      Accumulated Other
                                                             Class  Class  Class  Paid-in   Retained    Comprehensive
                                         Second  Series "A"   "A"    "B"    "C"   Capital   Earnings    Income (loss)      Total
                                         ------- ----------  -----  -----  -----  -------   --------  -----------------  ---------
<S>                                      <C>        <C>      <C>    <C>    <C>    <C>       <C>           <C>            <C>
BALANCE, July 1,1997 ...............     $ 680      $521     $  1   $  1   $  1   $2,364    $32,314         $(478)       $35,404

    Redemption of
      preferred stock ..............      (680)                                                                             (680)

    Foreign currency translation
      adjustment ...................                                                                         (125)          (125)

    Receivable from principal
      shareholder ..................                                                (429)                                   (429)

    Distribution to principal
      shareholder for
      acquisition of business ......                                              (1,500)       (66)                      (1,566)

    Net income (loss) ..............                                                         (9,027)                      (9,027)
                                         -----      ----     ----   ----   ----     ----    -------       -------        -------

BALANCE, June 30, 1998 .............        --       521        1      1      1      435     23,221          (603)        23,577

    Foreign currency translation
      adjustment ...................                                                                       (2,043)        (2,043)

    Elimination of Class "C" shares
      to Class "A" common stock ....                                         (1)       1                                      --

    Receivable from principal
      shareholder ..................                                                 380                                     380

    Net income (loss) ..............                                                           (466)                        (466)
                                         -----      ----     ----   ----   ----     ----    -------       -------        -------

BALANCE, June 30, 1999 .............        --       521        1      1     --      816     22,755        (2,646)        21,448

    Foreign currency translation
      adjustment ...................                                                                           55             55

    Receivable from principal
      shareholder ..................                                                  62                                      62

    Net income (loss) ..............                                                         10,053                       10,053
                                         -----      ----     ----   ----   ----     ----    -------       -------        -------

BALANCE, June 30, 2000 .............     $  --      $521     $  1   $  1   $ --     $878    $32,808       $(2,591)       $31,618
                                         =====      ====     ====   ====   ====     ====    =======       =======        =======
</TABLE>

                   The accompanying notes are an integral part
                   of the consolidated financial statements.


                                      F-5
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                For the Years Ended June 30, 2000, 1999 and 1998
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                         2000         1999         1998
                                                                      ---------    ---------    ---------
<S>                                                                   <C>          <C>          <C>
OPERATING ACTIVITIES:
Net income (loss) .................................................   $  10,053    $    (466)   $  (9,027)
Adjustments to reconcile net income (loss) to net
   cash (used in) provided by operating activities:
   Depreciation and amortization ..................................      11,866       11,245        9,253
   Deferred income taxes ..........................................       1,438         (773)      (5,229)
   Forgiveness of promissory notes ................................          --           --        2,591
   Provision for curtailment of operations at manufacuring facility      (1,481)        (500)      10,000
   Change in redemption amount of redeemable securities ...........       1,007         (860)      (1,250)
   Extraordinary loss on extinguishment of debt, net of tax .......          --           --        1,962
   Gain from sale of assets .......................................     (13,763)          --           --
   Gain from property damage claims ...............................      (1,053)      (3,701)          --
   Other ..........................................................         727        1,644        1,391
   Changes in operating assets and liabilities, net of
      businesses acquired:
      Accounts receivable .........................................      (8,281)      (5,922)      (5,487)
      Inventories .................................................         584       (3,550)       1,605
      Prepaid expenses and other current assets ...................      (2,282)          35       (3,279)
      Other assets ................................................      (1,545)      (7,443)      (1,349)
      Accounts payable ............................................      (3,768)          43         (879)
      Accrued expenses and other current liabilities ..............      (1,411)       7,147        1,037
                                                                      ---------    ---------    ---------
      NET CASH (USED IN) PROVIDED BY
        OPERATING ACTIVITIES ......................................      (7,909)      (3,101)       1,339
                                                                      ---------    ---------    ---------
INVESTING ACTIVITIES:
   Capital expenditures ...........................................     (22,604)     (12,262)      (8,031)
   Proceeds from property damage claim ............................       3,999           --           --
   Proceeds from sale of assets ...................................      18,750           --           --
   Acquisition of businesses, net of cash acquired ................          --      (21,505)          --
   Other investments ..............................................      (3,000)          --           --
   Other ..........................................................      (1,203)          --           --
                                                                      ---------    ---------    ---------
   NET CASH USED IN INVESTING ACTIVITIES ..........................      (4,058)     (33,767)      (8,031)
                                                                      ---------    ---------    ---------
FINANCING ACTIVITIES:
   Cash overdraft .................................................         682         (477)       1,915
   Net increase in short-term debt ................................       4,189        2,227      (13,533)
   Proceeds from long-term debt ...................................      18,286       15,214      100,380
   Payments of long-term debt .....................................     (11,871)      (1,675)     (52,922)
   Payments of deferred financing costs ...........................          --           --       (3,724)
   Extinguishment of debt .........................................          --           --       (2,600)
   Proceeds from life insurance ...................................          --           --        6,045
   Distribution to principal shareholder for
     acquisition of business ......................................          --           --       (1,500)
   Receivable from principal shareholder ..........................          62          380         (429)
   Redemption of preferred stock ..................................          --           --       (6,812)
                                                                      ---------    ---------    ---------
      NET CASH PROVIDED BY FINANCING ACTIVITIES ...................      11,348       15,669       26,820
                                                                      ---------    ---------    ---------
      NET (DECREASE) INCREASE IN CASH
        AND CASH EQUIVALENTS ......................................        (619)     (21,199)      20,128
      CASH AND CASH EQUIVALENTS at beginning of period ............       3,022       24,221        4,093
                                                                      ---------    ---------    ---------
      CASH AND CASH EQUIVALENTS at end of period ..................   $   2,403    $   3,022    $  24,221
                                                                      =========    =========    =========
Supplementary cash flow information:
   Interest paid ..................................................   $  13,694    $  12,125    $   6,060
                                                                      =========    =========    =========
   Income taxes paid ..............................................   $   1,355    $   1,284    $   1,930
                                                                      =========    =========    =========
Summary of significant noncash investing and
   financing activities:
   Capital lease additions ........................................   $   1,536    $      --    $     403
                                                                      =========    =========    =========
   Debt assumed through acquisition ...............................   $      --    $  18,195    $      --
                                                                      =========    =========    =========
</TABLE>

                   The accompanying notes are an integral part
                   of the consolidated financial statements.

                                      F-6
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (In thousands)

1. Organization and Summary of Significant Accounting Policies

Description of Business:

      Philipp Brothers Chemicals, Inc., is a diversified global manufacturer and
marketer of a broad range of specialty and industrial chemicals, which are sold
worldwide for use in numerous markets. Many of the Company's products provide
critical performance attributes to its customers' products, while representing a
relatively small percentage of total end-product costs. The Company has two
business segments: (i) AgChem and (ii) Industrial Chemicals. During fiscal 2000,
the Company's products were manufactured at ten facilities in the United States,
four facilities in Europe, two facilities in Israel and one facility in South
America.

Principles of Consolidation and Basis of Presentation:

      The consolidated financial statements include the accounts of Philipp
Brothers Chemicals, Inc. and its subsidiaries, all of which are either wholly
owned or controlled (collectively, referred to as the "Company"). All
significant intercompany accounts and transactions have been eliminated in the
consolidated financial statements.

      The fiscal years of the Company's Israeli and Brazilian subsidiaries end
on March 31. Accordingly, the accounts of these subsidiaries are included in the
consolidated financial statements on a three month lag. The consolidated balance
sheets include a receivable from the subsidiaries in the amount of $711 at June
30, 2000 and $1,499 at June 30, 1999, included in other receivables, which
represent net transactions (merchandise purchases and cash payments) with the
subsidiaries during the three months ended June 30.

Risks and Uncertainties:

      As a chemical company, the Company is subject to a variety of United
States and foreign laws and regulations relating to pollution and protection of
the environment. In addition, the testing, manufacturing and marketing of
certain products are subject to extensive regulation by several government
authorities in the United States and other countries. The Company is also
required to obtain and retain governmental permits and approvals to conduct
various aspects of its operations. The Company has significant assets located
outside of the United States, and a significant portion of the Company's sales
and earnings are attributable to operations conducted abroad. International
manufacturing, sales and raw materials sourcing are subject to certain inherent
risks, including political instability, price and exchange controls, unexpected
changes in regulatory environments, and potentially adverse tax consequences. In
addition, the Company is affected by social, political and economic conditions
affecting Israel, and any major hostilities involving Israel or curtailment of
trade between Israel and its current trading partners, either as a result of
hostilities or otherwise, could have a material adverse effect on the Company.

Use of 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,
expenses and related disclosures at the date of the financial statements and
during the periods reported. Actual results could differ from those estimates.
Significant estimates include reserves for bad debts, inventory obsolescence,
environmental matters, depreciation and amortization periods of long-lived
assets and realizability of deferred tax assets.

Revenue Recognition:

      Revenue is recognized upon transfer of title and risk of loss to the
customer, generally at time of shipment. Net sales are comprised of total sales
billed, net of goods returned, trade discounts and customer allowances.


                                      F-7
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

1. Organization and Summary of Significant Accounting Policies--(Continued)

Cash and Cash Equivalents:

      The Company considers all highly liquid instruments with original
maturities of three months or less to be cash equivalents. The effect of foreign
currency changes on cash and cash equivalents is not material for each of the
fiscal years presented.

Inventories:

      Inventories are valued at the lower of cost or market. Cost is determined
principally under the first-in, first-out (FIFO) and average methods; however,
certain subsidiaries of the Company use the last-in, first-out (LIFO) method for
valuing inventories. Obsolete or unsaleable inventory is reflected at its
estimated net realizable value. Inventory costs include materials, direct labor
and manufacturing overhead.

      If the LIFO method of valuing certain inventories had not been used, total
inventories at June 30, 2000 and 1999 would have been higher by $850 and $735,
respectively. Inventories valued at LIFO amounted to $4,809 at June 30, 2000 and
$5,802 at June 30, 1999.

      Inventories consist of the following at June 30, 2000 and 1999:

                                                        2000               1999
                                                      -------            -------
Raw materials ............................            $21,457            $24,499
Work in process ..........................              5,340              5,409
Finished goods ...........................             23,608             21,522
                                                      -------            -------
                                                      $50,405            $51,430
                                                      =======            =======

Property, Plant and Equipment:

      Property, plant and equipment are carried at cost less accumulated
depreciation. Major renewals and improvements are capitalized, while maintenance
and repairs are expensed when incurred. Upon retirement or other disposition,
the cost and related accumulated depreciation are removed from the accounts and
any gain or loss is included in the results of operations. Depreciation is
calculated using the straight-line method based upon estimated useful lives as
follows:

            Building and improvements ..................... 8-20 years
            Machinery and equipment ....................... 3-10 years

Deferred Financing Costs:

      In connection with the issuance of notes described in Note 2, the Company
has recorded deferred financing costs which are being amortized using the
interest method over the ten year life of the notes.


                                      F-8
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

1. Organization and Summary of Significant Accounting Policies--(Continued)

Intangibles:

      The excess of cost over fair value of net assets of purchased subsidiaries
is being amortized over 10 to 20 years. Identifiable intangible assets are being
amortized on a straight-line basis over their estimated useful lives ranging
from 5 to 10 years. Accumulated amortization amounted to $12,448 and $10,925 at
June 30, 2000 and 1999, respectively.

Licensing and Permit Fees:

      Licensing and permit fees incurred to obtain the required federal, state
and local hazardous waste treatment, storage and disposal permits and the cost
of label registration rights are included in other assets and are amortized over
the lives of the licenses, permits and rights of 5 to 10 years.

Foreign Currency Translation:

      Balance sheet accounts of the Company's foreign subsidiaries, with the
exception of the Brazilian and Israeli subsidiaries of Koffolk (1949) Ltd.
("Koffolk Israel") are translated at current rates of exchange, and income and
expense items are translated at the average exchange rate for the year. The
resulting translation adjustments are reflected as a separate component of
stockholders' equity. The Brazilian and Israeli subsidiaries of Koffolk Israel
transact substantially all of their business in U.S. dollars. Accordingly, the
U.S. dollar is designated as the functional currency for these operations and
translation gains and losses are included in determining net income or loss.

      Translation (gains) and losses relating to short and long-term debt of the
Company's Israeli and Norwegian subsidiaries that are denominated or linked to
foreign currencies are included in other expense, net in the amounts of $2,142,
$1,829, and $979 in the accompanying consolidated statements of operations for
the years ended June 30, 2000, 1999 and 1998, respectively. Other foreign
currency transaction gains and losses are not material.

Derivative Financial Instruments:

      The Company uses derivative financial instruments, primarily foreign
currency forward contracts as a means of hedging exposure to foreign currency
risks. Gains or losses on foreign currency forward contracts are included in
income when currency fluctuations occur. The Company also utilizes, on a limited
basis, certain commodity derivatives, primarily on copper used in its
manufacturing process, to hedge the cost of its anticipated production
requirements. The gains or losses on these instruments are included in income
when the related inventory is sold. The Company and its subsidiaries do not
utilize these instruments for speculative purposes. The Company monitors the
financial stability and credit standing of its major counterparties.

Advertising Costs:

      Advertising expenditures, expensed when incurred, were $953, $1,077 and
$826 for the years ended June 30, 2000, 1999 and 1998, respectively.

Impairment of Long-Lived Assets:

      The Company evaluates the recoverability of long-lived assets, including
intangible assets and goodwill, at each balance sheet date, using certain
financial indicators such as historical and future ability to generate cash
flows from operations. The Company's policy is to record an impairment loss in
the period when it is determined that the carrying amount of the asset may not
be recoverable. This determination is based on an evaluation of such factors as
the occurrence of a significant event, a significant change in the


                                      F-9
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

1. Organization and Summary of Significant Accounting Policies--(Continued)

environment in which the business operates, or if the expected future net cash
flows (undiscounted and without interest) are less than the carrying amount of
the assets.

Environmental Liabilities:

      Expenditures for ongoing compliance with environmental regulations that
relate to current operations are expensed or capitalized as appropriate.
Expenditures related to improving the condition of property compared with the
condition of that property when constructed or acquired are capitalized. The
Company also capitalizes expenditures that prevent future environmental
contamination, when appropriate. Other expenditures are expensed as incurred.
Liabilities are recorded when environmental assessments indicate that remedial
efforts are probable and the costs can be reasonably estimated. Estimates of the
liability are based upon currently available facts, existing technology, and
presently enacted laws and regulations taking into consideration the likely
effects of inflation and other societal and economic factors. All available
evidence is considered, including prior experience in remediation of
contaminated sites, other companies' clean-up experience, and data released by
the Environmental Protection Agency or other organizations. When such costs are
incurred over a long-term period and can be reliably estimated as to timing, the
liabilities are included in the consolidated balance sheets at their discounted
amounts.

Income Taxes:

      Income tax expense includes U.S. and foreign income taxes. The tax effect
of certain temporary differences between amounts recognized for financial
reporting purposes and amounts recognized for tax purposes are reported as
deferred income taxes. Deferred tax balances are adjusted to reflect tax rates,
based on current tax laws, that will be in effect in the years in which the
temporary differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to amounts more likely
than not to be realized.

Research and Development Expenditures:

      Research and development expenditures were $1,564, $1,536 and $774 for the
years ended June 30, 2000, 1999 and 1998, respectively.

New Accounting Pronouncements:

      In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). SFAS 133 was originally effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999. In June 1999,
the Financial Accounting Standards Board issued Statements of Financial
Accounting Standard No. 137 "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the effective Date of FASB Statement No. 133" (SFAS
137). SFAS 137 defers the effective date of FASB 133 for all fiscal quarters of
all fiscal years beginning after June 15, 2000 (July 1, 2000 for the Company).
SFAS 133 requires that all derivative intruments be recorded on the balance
sheet at their fair value. Gain or losses resulting from changes in the values
of those derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. In June 2000, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 138 "Accounting for Certain Derivative Instruments and


                                      F-10
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

1. Organization and Summary of Significant Accounting Policies--(Continued)

      Certain Hedging Activities an amendment of FASB Statement No. 133" (SFAS
138). SFAS 138 amends the accounting and reporting standards of SFAS 133 for
certain derivative instruments and certain hedging activities.

      The Company's foreign currency contracts are currently marked to market
with corresponding charges or credits to income, therefore there will be no
impact on accounting for these contracts for the adoption of SFAS 133. With
respect to commodity contracts, the difference between fair value and carrying
value at June 30, 2000 is not significant; however, implementation of this
standard may have a material effect on earnings, comprehensive income and
financial position of future annual or interim periods.

      In December 1999, the Securities and Executive Commission issued Staff
Accounting Bulletin (SAB) 101, Revenue Recognition in Financial Statements. The
effective date of SAB 101 is no later than the fourth fiscal quarter of fiscal
years beginning after December 15, 1999. This SAB clarifies proper methods of
revenue recognition given certain circumstances surrounding sales transactions.
The Company continues to evaluate the impact of SAB 101, but believes it is in
compliance with the provisions of the SAB and accordingly, does not expect SAB
101 to have a material effect on its financial statements.

Reclassification:

      Certain prior year amounts in the accompanying consolidated financial
statements and related notes have been reclassified to conform to the 2000
presentation. Such reclassifications include a reclassification of customer
rebates of $6,202, $5,030 and $2,406 from selling, general and administrative
expenses to net sales on the consolidated statements of operations and
comprehensive income, as a result of the adoption of the Emerging Issues Task
Force Issue No. 00-14 "Accounting for Certain Sales Incentives."

2. Issuance of Senior Subordinated Notes and Related Transactions

      On June 11, 1998, the Company issued $100 million aggregate principal
amount of 9-7/8% Senior Subordinated Notes due June 1, 2008. Proceeds from the
note offering were used to repay indebtedness of the Company.

      In connection with the issuance of the Senior Subordinated Notes, the
Company (i) acquired Koffolk, Inc. ("Koffolk USA") from its principal
shareholder, (ii) acquired the interest in Mineral Resource Technologies, L.L.C.
("MRT") owned by its principal shareholder and (iii) forgave certain
indebtedness of executives related to stock ownership of a subsidiary.

      Koffolk USA was acquired from the principal shareholder of the Company for
$1.5 million in cancellation of advances due from the principal shareholder,
representing the fair value of the assets acquired based upon a valuation
performed on behalf of the principal shareholder of the Company. As a result of
common ownership, Koffolk USA has been included in the financial statements in a
manner similar to a pooling of interests. Consequently, the net assets of
Koffolk USA have been recorded at the carryover basis of the principal
shareholder (a net deficit of $66) and the $1.5 million consideration has been
reflected as a distribution of paid-in capital. The results of operations for
fiscal 1998 include the results of Koffolk USA from the beginning of the year.
Prior year financial statements have not been restated due to the immateriality
of Koffolk USA to the consolidated results of operations and financial position
of the Company.

      Prior to issuance of the Notes, the Company owned 58% of MRT. As part of
the transaction, the Company acquired the principal shareholder's interest in
MRT of 29.2% for $25.

      Additionally, in June 1998, a subsidiary of the Company canceled the
limited recourse notes issued by executives related to acquiring 10.7% of the
stock of the subsidiary and forgave all amounts owed the Company thereunder. The
Company also paid the executives an additional aggregate amount of $2,740 as
reimbursement for their income tax liability related to the forgiveness. The
forgiveness of the notes and the


                                      F-11
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

3. Acquisition

income tax reimbursement totaling $5,604 is reflected as compensation expense in
selling, general and administrative expenses in the accompanying 1998
consolidated statement of operations.

      On October 1, 1998, the Company acquired all of the outstanding capital
stock of ODDA Smelteverk, AS, a Norwegian company, and certain assets of the
business of BOC Carbide Industries in the United Kingdom (together "ODDA") from
the BOC Group Plc for $19 million in cash and $18.2 million in debt. The
acquisition was accounted for as a purchase and, accordingly, the acquired
assets and liabilities were recorded at their fair values at the acquisition
date. The operating results of ODDA are included in the Company's consolidated
statements of operations from the date of acquisition. The fair value of assets
acquired, including goodwill, was $40,811, and liabilities assumed totaled
$18,195. Goodwill related to this acquisition of $3,916 is being amortized over
20 years on a straight-line basis.

      The unaudited consolidated results of operations on a pro-forma basis, as
if such acquisition had occurred at the beginning of fiscal 1999 and 1998 are as
follows:

                                                         1999            1998
                                                      ---------       ---------
Net sales ......................................      $ 306,653       $ 316,752
Income (loss) before extraordinary item ........      $  (2,246)      $  (7,408)
Net (loss) .....................................      $  (2,246)      $  (9,370)

      The Company's subsidiary, ODDA Smelteverk, AS, had a minority equity
investment in a local hydroelectric power company and also held contracts for
the purchase of hydroelectric power through the years 2006 to 2010. As a result
of legislative, regulatory and market developments occurring in Norway since the
1998 acquisition, the Company was able to sell its investment and related power
rights to a Norwegian "state-governed" power production company in January 2000.
The Company realized net sales proceeds of $18,750 and recorded a pre-tax gain
of $13,763. Approximately $1,300 of additional net gain has been deferred and
will be recognized over the period of a related power purchase contract with the
buyer.

4. Property, Plant and Equipment

      Property, plant and equipment consists of the following at June 30:

                                                         2000             1999
                                                       --------         --------
Land .........................................         $  3,875         $  4,053
Buildings and improvements ...................           25,814           25,408
Machinery and equipment ......................          117,011           97,429
                                                       --------         --------
                                                        146,700          126,890
Less: Accumulated depreciation ...............           70,520           62,596
                                                       --------         --------
                                                       $ 76,180         $ 64,294
                                                       ========         ========

      Certain of the buildings of the Company's Israeli subsidiary are situated
on land leased for a nominal amount from the Israel Land Authority. The lease
expires on July 9, 2027.

      Depreciation expense amounted to $10,343, $9,963 and $8,023 for the years
ended June 30, 2000, 1999 and 1998, respectively.

5. Related Party Transactions

      In January 2000, the owners of the Company invested $20 in a
pharmaceutical company in exchange for a 20% voting common stock interest.
Additionally, the Company invested $1,980 in preferred stock of the
pharmaceutical company. The preferred stock investment, included in other
assets, is being carried at


                                      F-12
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

5. Related Party Transactions--(Continued)

cost, adjusted, if necessary, for the Company's share of investee losses based
on the seniority of its investment relative to other investors. No adjustment to
carrying value was required in fiscal 2000.

      In June 1998, the Company acquired the stock of Koffolk USA from the
principal shareholder of the Company (refer to Note 2). Koffolk USA was formed
on February 6, 1996 to purchase from Merck & Co., Inc. ("Merck") the United
States distribution rights for Nicarb and Amprol, together with certain labels
and trademarks relating to Nicarb. These drugs are used in the poultry
production industry to prevent and treat a parasitic disease.

      In November 1995, the Company formed MRT Management Corp. ("MMC"), to
manage MRT. Before giving effect to the acquisition by MMC of membership units
in MRT from the principal shareholder of the Company, MMC owned 57.6% of the
membership interests in MRT, and the principal shareholder and certain employees
owned 29.2% and 13.2% interests in MRT, respectively. The principal shareholder
has from time to time made loans and advances to MRT when and as needed, in
response to MRT's working capital requirements. In June 1998, the Company
acquired the principal shareholder's interest in MRT for $25 and repaid $995 of
loans made by him to MRT.

      A subsidiary of the Company leases the property underlying its Santa Fe
Springs, California plant from an affiliate which is controlled by shareholders
of the Company. The lease requires annual base rent of $250. The Company is
responsible under the lease agreement to pay all real property taxes. In
connection with the sale by the Company of its Senior Subordinated Notes due
2008, (refer to Note 2) the term of such lease was extended to June 30, 2008.

      The Company periodically advances funds to the principal shareholder on a
short-term, non-interest-bearing basis. Amounts outstanding at June 30, 1999 and
at June 30, 1998 have been reflected as a reduction of stockholders' equity.
There were no amounts outstanding at June 30, 2000.

6. Accrued Expenses and Other Current Liabilities

      The components of accrued expenses and other current liabilities at June
30, 2000 and 1999 are as follows:

                                                             2000          1999
                                                           -------       -------
      Product registration rights .....................    $ 2,016       $ 3,704
      Commissions and rebates .........................      5,952         4,628
      Employee related expense ........................      4,512         3,729
      Other accrued liabilities .......................     11,677        13,679
                                                           -------       -------
                                                           $24,157       $25,740
                                                           =======       =======



                                      F-13
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

7. Debt

      Long-term debt consists of the following at June 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                             2000       1999
                                                                           --------   --------
<S>                                                                        <C>        <C>
Domestic:
    Senior Subordinated Notes due June 1, 2008 (a) .....................   $100,000   $100,000
    Bank borrowings under revolving credit loan agreements (b) .........     29,700     13,400
    Environmental litigation settlement, with interest at 8.57%,
       payable in annual installments through March 2001, interest
       imputed at 10% (c) ..............................................        351        605
    Obligation, payable without interest, less unamortized discount of
       $59 in 1999, based on an effective interest rate of 8.5% (d) ....        200        941
    Capitalized lease obligations and other ............................      1,913        656
Foreign:
    Bank loans with interest at NIBOR plus .75% payable in Norwegian
       Krone (NOK) maturing through 2004 (e) ...........................      5,838     11,215
    Revolving credit bank loan with interest at NIBOR plus 2% payable in
       Norwegian Krone (NOK) maturing through 2003 (e) .................      2,919      8,254
    Capitalized lease obligations and other ............................      1,097        467
                                                                           --------   --------
                                                                            142,018    135,538
    Less: Current maturities ...........................................      2,296      1,450
                                                                           --------   --------
                                                                           $139,722   $134,088
                                                                           ========   ========
</TABLE>

      (a) In June 1998, the Company issued $100 million aggregate principal
amount of 9-7/8% Senior Subordinated Notes due 2008. The Notes are general
unsecured obligations of the Company and are subordinated in right of payment to
all existing and future senior debt (as defined in the indenture agreement of
the Company) and rank pari passu in right of payment with all other existing and
future senior subordinated indebtedness of the Company. The Notes are
unconditionally guaranteed on a senior subordinated basis by the current
domestic subsidiaries of the Company (the "Guarantors"). Additional future
domestic subsidiaries may become Guarantors under certain circumstances.

      The Indenture contains certain covenants with respect to the Company and
the Guarantors, which restrict, among other things, (a) the incurrence of
additional indebtedness, (b) the payment of dividends and other restricted
payments, (c) the creation of certain liens, (d) the sale of assets, (e) certain
payment restrictions affecting subsidiaries, and (f) transactions with
affiliates. The Indenture restricts the Company's ability to consolidate, or
merge with or into, or to transfer all or substantially all of its assets to,
another person.

      (b) On August 31, 1998, the Company entered into a $60 million senior
credit facility with PNC Bank, National Association, as agent and on behalf of
the lenders thereunder ("Credit Facility"). The Credit Facility is structured as
a five year, $35 million revolving credit facility and a two year, $25 million
acquisition line of credit. The $35 million revolving credit facility is subject
to availability under a borrowing base formula for domestic accounts receivable
and inventories, which also serve as collateral on the borrowing. In addition to
amounts outstanding under the revolving credit facility, the Company had $5.3
and $21.6 million available under the borrowing base formula as of June 30, 2000
and 1999, respectively. Drawdowns under the acquisition line of credit shall
amortize on a five-year basis with the balances due at maturity. No amounts have
been drawn down under the acquisition line of credit. The acquisition line of
credit expired in August 2000. The Company, under terms of the Credit Facility,
may choose between two interest rate options: (i) base rate, as defined, or (ii)
Euro rate, as defined, plus 11/4%-2% depending on the Company's operating
performance.


                                      F-14
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

7. Debt--(Continued)

      The Credit Facility requires, among other things, the maintenance of
certain fixed charge coverage ratios and a certain level of net worth for the
domestic operations of the Company, each calculated quarterly, and contains an
acceleration clause should a material adverse event occur (as defined). In
addition, there are certain restrictions on additional borrowings, additional
liens on the Company's assets, guarantees, dividend payments, redemption or
purchase of the Company's stock, sale of subsidiaries stock, disposition of
assets, investments, and mergers and acquisitions.

      At June 30, 1999, the Company was not in compliance with the domestic net
worth requirements of the Credit Facility. The lenders have waived the default
as of June 30, 1999 and amended domestic net worth requirements for fiscal 2000.
The Company was in compliance with the financial covenants of the Credit
Facility during fiscal 2000.

      (c) The New Jersey Department of Environmental Protection Division of
Hazardous Waste Management and the Division of Water Resources and a subsidiary
of the Company entered into an Administrative Consent Order ("ACO") effective
March 11, 1991, which resolved all previous enforcement actions against the
Company's subsidiary. The ACO required payment of a penalty, which was provided
for in prior years, in the amount of $2,200 with interest calculated at 8.57%
per annum, in 10 equal annual installments.

      (d) This obligation is in connection with the acquisition of certain
intangible assets acquired by Koffolk USA (see Note 2).

      (e) The Company's Norwegian subsidiary has entered into two separate
multi-currency revolving facilities as follows: In August 1998, the subsidiary
entered into a five-year multi-currency credit facility, for NOK (Norwegian
Kroner) 90,000 (approximately $11,335 as of June 30, 1999), in agreed
Euro-currencies. Borrowings under such facility bear interest at the LIBOR or
NIBOR rate as defined plus 0.475%, the subsidiary has agreed to pay a commitment
fee of 1/4% on the unused portion of such facility. In August 1998, the
subsidiary entered into a five-year multi-currency revolving credit facility,
for NOK 65,000 (approximately $8,120 as of June 30, 1999), in agreed
Euro-currencies. Borrowings under such facility bear interest at the LIBOR or
NIBOR rate as defined plus the applicable margin. Such LIBOR or NIBOR margin
shall be subject to adjustment based on the subsidiary's debt service coverage
and equity ratios (which margins could be 3/4% or 1%). The subsidiary has agreed
to pay a commitment fee equal to 50% of the applicable margin. In connection
with both such facilities, the subsidiary may choose the duration (one, three or
six months) for which the interest rate may apply. Indebtedness under both such
currency facilities is collateralized by a lien on the subsidiary's receivables,
inventory and property and production facilities. Philipp Brothers Chemicals,
Inc. guarantees both credit facilities.

      In connection with the subsidiary's sale of its minority interest in the
local hydroelectric power Company and related contract rights, (see Note 3) and
the simultaneous release of collateral in those shares pledged under the
facilities, the subsidiary repaid NOK 80,000 in total under both of the credit
facilities in January 2000 (approximately $9,970 at January 2000) as a permanent
reduction in the maximum borrowings allowed. As of June 30, 2000, the subsidiary
has borrowed the maximum amount available under the facilities.

      At June 30, 1999, the subsidiary was not in compliance with the debt
service and liabilities to equity ratios. Subsequently a waiver was obtained
from the lenders. The subsidiary was in compliance with the financial covenants
of the credit facilities during fiscal 2000


                                      F-15
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

7. Debt--(Continued)

      The aggregate maturities of long-term debt after June 30, 2000 are as
follows:

            Year Ended June 30,
            -------------------
            2001 ............................................     $  2,296
            2002 ............................................        1,874
            2003 ............................................          982
            2004 ............................................       36,077
            2005 ............................................          296
            Thereafter ......................................      100,493
                                                                  --------
                Total .......................................     $142,018
                                                                  ========

8. Redeemable Common Stock of Subsidiary

      In fiscal 1995, a subsidiary of the Company sold restricted shares of
Class B common stock to certain key executives at fair market value, which
resulted in the executives having a 10.7% ownership in the subsidiary. The
Company received, as consideration for the shares, limited recourse notes in the
amount of $2,225 which were forgiven in connection with the issuance of the
Senior Subordinated Notes, referred to in Note 2. The subsidiary's shares are
redeemable at fair market value, based on independent appraisal, upon death,
disability or termination of the key executive. Adjustments to record the shares
at their redeemable value have been charged to compensation expense.

      In addition, the Company and its subsidiary entered into severance
agreements with the executives for payments based on a multiple of pretax
earnings, as defined, and which are subject to certain restrictions pursuant to
terms of the PNC Bank Credit Facility. At June 30, 2000 and 1999 aggregate
severance payments of approximately $412 and $588 respectively, would have been
due the executives if they were terminated.

      In connection with the separation of employment of a senior executive, in
the 1999 fiscal year and pursuant to the stock buyback and severance provisions
of the aforementioned agreements, the Company recorded a charge of $1.5 million
in selling, general and administrative expenses and reclassified $1.3 million
from redeemable securities to accrued expenses and other current liabilities.
The stock buyback resulted in a reduction of senior executive ownership in the
subsidiary to 4%.

      Effective June 30, 1999, the limited liability company interests in MRT
owned by the employees of MRT were exchanged for non-voting common stock of MMC,
and the employees' right to contingent member units of MRT was converted into
the right to "phantom shares" of MMC. The shareholders agreement of MMC provides
for the vesting of shares to the employees over certain periods of employment
and granting of "phantom shares" to the employees based on certain performance
goals. No phantom shares have been earned and no compensation expense has been
recorded. The agreement also provides for the purchase of the minority shares
for fair value in connection with termination of employment.

9. Preferred Stock, Common Stock and Paid-in Capital

Preferred Stock:

      In connection with the death of the Chairman of the Board of the Company
in May 1997, pursuant to terms of an agreement with shareholders, the Company
redeemed 59,573 shares of special and second preferred stock and reduced this
number of shares from the amount outstanding. An insurance policy with a face
value of $6,000 on the life of the Chairman funded such redemption. The
redemption obligation of $6,131 was paid in fiscal 1998.


                                      F-16
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

9. Preferred Stock, Common Stock and Paid-in Capital--(Continued)

Common Stock:

      Common stock consisted of the following at June 30, 2000 and 1999.

                                  Authorized
                                    Shares      Issued Shares    Amount at Par
                                  ----------    -------------    -------------
Class A common stock ...........     16,200         12,600            $.10
Class B common stock ...........     14,100         11,888             .10
                                     ------         ------
                                     30,300         24,488
                                     ======         ======

      Holders of Class A common stock have full voting power, except the holders
of class A shall be entitled to elect all but one of the directors and the
holders of Class B shall be entitled to elect one director. No dividends may be
paid to common stockholders until all dividends have been paid to holders of
preferred stock. Thereafter, holders of Class A common stock shall receive
dividends, when and as declared by the directors, at the rate of 5-1/2% of the
par value of such stock (non-cumulative). After all declared dividends have been
paid to Class A common stockholders, dividends may be declared and paid to the
holders of Class B common stock. In the event of any complete liquidation,
dissolution, winding up of the business, or sale of all the assets of the
Company, and after the redemption of the preferred stock, the Class A common
stockholders are entitled to a distribution equal to the par value of the stock
plus declared and unpaid dividends. Thereafter, the remaining assets of the
Company shall be distributed to the holders of Class B common stock.

      Issued shares include redeemable shares of a minority shareholder (see
below).

Redeemable Common Stock:

      Pursuant to terms of an agreement with a minority shareholder, who is also
an officer of the Company, the Company is required to purchase the Class B
shares of such shareholder upon his death, disability, termination of employment
or upon his exercise of the right to sell such shares at any time at a price
based on the book value of the Company's common shares. Adjustments to record
the shares at redeemable value have been charged or credited to compensation
expense.


                                      F-17
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

10. Employee Benefit Plans

      The Company and its domestic subsidiaries maintain noncontributory defined
benefit pension plans for all eligible nonunion employees who meet certain
requirements of age, length of service and hours worked per year. The benefits
provided by the plans are based upon years of service and the employees' average
compensation, as defined. The Company's policy is to fund the pension plans in
amounts which comply with contribution limits imposed by law.

      The Company's Norwegian subsidiary also maintains a funded noncontributory
defined benefit pension plan for all eligible employees, with benefits based on
employee compensation and service.

      The following provides a reconciliation of benefit obligations, plan
assets, and funded status of the plans.

<TABLE>
<CAPTION>
                                                         Domestic               Norwegian
                                                  ---------------------   ---------------------
                                                  June 2000   June 1999   June 2000   June 1999(1)
                                                  ---------   ---------   ---------   ---------
<S>                                               <C>         <C>         <C>         <C>
Change in benefit obligation
Benefit obligation at beginning of year .......   $  7,279    $  6,240    $ 10,030    $ 11,193
Service cost ..................................        905         826         250         228
Interest cost .................................        548         452         635         523
Benefits paid .................................        (81)        (69)       (743)       (526)
Actuarial (gain) or loss ......................         81        (171)       (210)       (188)
                                                  --------    --------    --------    --------

Benefit obligation at end of year .............   $  8,732    $  7,278    $  9,962    $ 11,230
                                                  ========    ========    ========    ========


Change in Plan Assets
Fair value of plan assets at beginning of year    $  5,626    $  4,834    $  9,736    $ 10,710
Actual return on plan assets ..................      1,095          (3)        768         434
Employer contributions ........................        790         863         262         284
Benefits paid .................................        (81)        (69)       (743)       (527)
                                                  --------    --------    --------    --------

Fair value of plan assets at end of year ......   $  7,430    $  5,625    $ 10,023    $ 10,901
                                                  ========    ========    ========    ========


Funded Status
Funded status of the plan .....................   $ (1,303)   $ (1,653)   $     61    $   (329)
Unrecognized net actuarial (gain) or loss .....       (630)       (105)       (294)          7
Unrecognized prior service cost ...............     (1,082)     (1,247)         --          --
Unrecognized transition obligation/asset ......        (21)        (24)         94          --
                                                  --------    --------    --------    --------

(Accrued) prepaid pension cost ................   $ (3,036)   $ (3,029)   $   (139)   $   (322)
                                                  ========    ========    ========    ========
</TABLE>

- ----------
(1)   For the period October 1, 1998 - June 30, 1999.


                                      F-18
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

10. Employee Benefit Plans--(Continued)

<TABLE>
<CAPTION>
                                                                       June 2000   June 1999   June 1998
                                                                       ---------   ---------   ---------
<S>                                                                       <C>         <C>         <C>
Assumptions (Domestic)
Discount rate ........................................................    7.50%       7.50%       7.50%
Expected rate of return on plan assets ...............................    7.50%       7.50%       7.50%
Rate of compensation increase ........................................    5.00%       5.00%       5.00%
Components of net periodic pension costs (Domestic)
Service cost - benefits earned during the year .......................   $ 905       $ 826       $ 899
Interest cost on benefit obligation ..................................     549         452         374
Expected return on plan assets .......................................    (487)       (393)       (288)
Amortization of initial unrecognized net transition obligation (asset)      (3)         (3)         (3)
Amortization of prior service costs ..................................    (165)       (164)       (164)
Amortization of (gain) or loss .......................................      (2)         (6)         --
                                                                         -----       -----       -----

Net periodic pension cost ............................................   $ 797       $ 712       $ 818
                                                                         =====       =====       =====

<CAPTION>
                                                                       June 2000   June 1999(2)
                                                                       ---------   ---------
<S>                                                                       <C>         <C>
Assumptions (Norwegian)
Discount rate ........................................................    6.50%       6.50%
Expected rate of return on plan assets ...............................    8.00%       8.00%
Rate of compensation increase ........................................    3.30%       3.30%
Components of net periodic pension costs (Norwegian)
Service cost - benefits earned during the period .....................   $ 250       $ 228
Interest cost on benefit obligation ..................................     635         523
Expected return on plan assets .......................................    (759)       (628)
Amortization of initial unrecognized net transition obligation (asset)     (18)         --
Amortization of (gain) or loss .......................................       5          --
                                                                         -----       -----

Net periodic pension cost ............................................   $ 113       $ 123
                                                                         =====       =====
</TABLE>

- ----------
(2)   For the period October 1, 1998 - June 30, 1999.

      The Company and its domestic subsidiaries have a 401(k) plan, under which
an employee may make a pretax contribution of up to 6% of base compensation, and
the Company makes a non-matching contribution equal to 1% of the employee's base
compensation and a matching contribution equal to 50% of the contribution up to
the first 3% of an employee's base compensation and 25% of any contribution in
excess of 3% of base compensation. All contributions are subject to the maximum
amount deductible for federal income tax purposes. The Company's contribution
amounted to $575, $547 and $529 in 2000, 1999 and 1998, respectively.

      The Company has a deferred compensation and supplemental retirement plan
for certain senior executives of the Company. The benefits provided by the plan
are based upon years of service and the employees' average compensation subject
to certain limits. The plan also provides for death benefits before retirement.
Deferred compensation expense was $97, $92 and $89 in 2000, 1999 and 1998,
respectively. At June 30, 2000 and 1999, the aggregate liability under this plan
amounted to $637 and $482, respectively. To assist in funding the retirement and
death benefits of the plan, the Company invested in corporate-owned life
insurance policies, through a trust, which at June 30, 2000 and 1999 had cash
surrender values of $1,098 and $941, respectively, and are included in other
asssets


                                      F-19
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

10. Employee Benefit Plans--(Continued)

      In addition to Norway, most of the Company's foreign subsidiaries have
retirement plans covering substantially all employees. Contributions to these
plans are generally deposited under fiduciary-type arrangements. Benefits under
these plans are primarily based on levels of compensation. Funding policies are
based on legal requirements and local practices. Expenses under these plans
amounted to $349, $509 and $441 for 2000, 1999 and 1998, respectively. The
Norwegian plan used the following assumptions as of October 1, 1998, 6.0%
discount rate, 8.0% expected rate of return on plan assets and 3.3% rate of
compensation increase.

11. Income Taxes

      Income (loss) from operations before provision for income taxes and
extraordinary item consisted of:

<TABLE>
<CAPTION>
                                                                   2000         1999         1998
                                                                 --------     --------     --------
<S>                                                              <C>          <C>          <C>
Domestic .....................................................   $ (2,332)    $   (755)    $(15,750)
Foreign ......................................................     16,331          468        3,996
                                                                 --------     --------     --------
                                                                 $ 13,999     $   (287)    $(11,754)
                                                                 ========     ========     ========
</TABLE>

Components of income tax expense (benefit) are as follows:

<TABLE>
<CAPTION>
                                                                   2000         1999         1998
                                                                 --------     --------     --------
<S>                                                              <C>          <C>          <C>
Current tax provision (benefit):
    U.S. Federal .............................................   $     --     $     --     $   (306)
    State and local ..........................................        245          160           64
    Foreign ..................................................      2,264          792          782
                                                                 --------     --------     --------

    Total current tax provision ..............................      2,509          952          540
                                                                 --------     --------     --------

Deferred tax provision (benefit):
    U.S. Federal .............................................       (287)         220       (5,121)
    State and local ..........................................          5         (125)        (115)
    Foreign ..................................................      2,047         (868)           7
    Change in valuation allowance ............................       (327)          --           --
                                                                 --------     --------     --------

    Total deferred tax provision (benefit) ...................      1,438         (773)      (5,229)
                                                                 --------     --------     --------

Provision (benefit) for income taxes before extraordinary item      3,947          179       (4,689)
Benefit for extraordinary item ...............................         --           --       (1,011)
                                                                 --------     --------     --------
Provision (benefit) for income taxes .........................   $  3,947     $    179     $ (5,700)
                                                                 ========     ========     ========
</TABLE>

      A reconciliation of the Federal statutory rate and the Company's effective
tax rate follows:

<TABLE>
<CAPTION>
                                                                   2000         1999         1998
                                                                 --------     --------     --------
<S>                                                                 <C>          <C>          <C>
U.S. Federal income tax rate .................................       34.0%       (34.0)%      (34.0)%
State and local taxes, net of federal income tax effect ......        0.9          8.0         (0.2)
Tax rate differences on foreign operations ...................      (13.1)       (81.9)        (3.5)
Expenses with no tax benefit .................................        3.9        104.9           --
U.S. losses with no state tax benefit ........................        1.4         79.1           --
Change in valuation allowance ................................       (2.3)          --           --
Other ........................................................        3.4        (13.7)        (1.0)
                                                                 --------     --------     --------
                                                                     28.2%        62.4%       (38.7)%
                                                                 ========     ========     ========
</TABLE>


                                      F-20
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

11. Income Taxes--(Continued)

      Most of the investments of the Company's Israeli subsidiary in fixed
assets have been granted "approved enterprise" status under Israeli law. The
subsidiary is also a "foreign investors' company" as defined by Israeli law.
This status entitles the subsidiary to reduced tax rates which results in a
substantial portion of the tax rate differences on foreign operations. The
entitlement of the reduced tax rates is conditional upon the subsidiary
fulfilling the conditions stipulated by Israeli law, regulations published
thereunder and the instruments of approval for the specific investments in
approved enterprises. In the event of failure to comply with these conditions,
the benefits may be canceled and the subsidiary may be required to refund the
amount of the benefits, in whole or in part, with the addition of interest. The
periods of benefits expire in various years through 2009.

      Provision has not been made for United States or additional foreign taxes
on undistributed earnings of foreign subsidiaries of approximately $33,000,
whose earnings have been or are primarily intended to be reinvested. It is not
practicable at this time to determine the amount of income tax liability that
would result should such earnings be repatriated.

      The tax effects of significant temporary differences which comprise the
deferred tax assets and liabilities at June 30, 2000 and 1999 are as follows:

                                                             2000        1999
                                                           --------    --------
Deferred tax assets:
    Employee benefits ..................................   $  2,264    $  2,302
    Depreciation .......................................        780       1,347
    Insurance ..........................................        316         262
    Receivables allowances .............................        615         578
    Inventory ..........................................        869       1,140
    Plant curtailment and environmental remediation ....      2,402       3,140
    Alternative minimum tax ............................        144         572
    Net operating loss carryforward -- domestic ........      4,523       3,104
                                    -- foreign .........      2,420       1,756
    Other ..............................................        389         470
                                                           --------    --------
                                                             14,722      14,671
    Valuation allowance ................................       (425)       (758)
                                                           --------    --------
                                                             14,297      13,913
Deferred tax liabilities
    Property, plant and equipment ......................     (4,136)     (2,179)
    Gain on property damage ............................     (1,858)     (1,480)
    Other ..............................................       (662)       (763)
                                                           --------    --------
                                                             (6,656)     (4,422)
                                                           --------    --------
Net deferred tax asset .................................   $  7,641    $  9,491
                                                           ========    ========


                                      F-21
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

11. Income Taxes--(Continued)

      Deferred taxes are included in the following line items in the
consolidated balance sheets:

                                                               2000       1999
                                                             -------    -------
Prepaid expenses and other current assets ................   $ 5,075    $ 3,088
Accrued expenses, taxes and other current liabilities ....       (88)       (68)
Other assets .............................................     7,128      8,379
Other liabilities ........................................    (4,474)    (1,908)
                                                             -------    -------
                                                             $ 7,641    $ 9,491
                                                             =======    =======

      The Company has domestic net operating loss carryforwards of approximately
$12,000 that expire in 2019 through 2020 and foreign net operating loss
carryforwards of approximately $7,000 that begin to expire in 2009. Valuation
allowances have been provided against the tax benefit of domestic state net
operating loss carryforwards, which are considered not likely to be realized.
The valuation allowance provides for certain foreign operating loss
carryforwards for 1999 which were reversed in 2000 and the benefit of the losses
were realized. A portion of such tax benefits were allocated to reduce goodwill
of the Company's Brazilian subsidiary. Realized preacquisition deferred taxes
amounted to $110 and $184 for the years ended June 30, 2000 and 1999,
respectively.

12. Commitments and Contingencies

(a) Leases:

      The Company leases equipment and office, warehouse and manufacturing
facilities through fiscal 2007 for minimum annual rentals (plus certain cost
escalations) as follows:

                                                             Capital   Operating
Year Ended June 30                                           Leases     Leases
- -----------------                                            -------   ---------
2001 .................................................       $  516     $1,478
2002 .................................................          504      1,436
2003 .................................................          495      1,371
2004 .................................................          398      1,242
2005 .................................................          133        848
Thereafter ...........................................           --      1,245
                                                             ------     ------
Total minimum lease payments .........................       $2,046     $7,620
                                                             ======     ======
Amounts representing interest ........................          458
                                                             ------
Present value of minimum lease payments ..............       $1,588
                                                             ======

      Equipment under capitalized leases included in the consolidated balance
sheets at June 30, 2000 and 1999 amounted to $224 and $126, net of accumulated
depreciation of $1,092 and $1,202, respectively.

      The commitment for facilities includes $2,000 with an affiliate controlled
by shareholders of the Company. (Refer to Note 5.)

      Rent expense under operating leases for the years ended June 30, 2000,
1999 and 1998 amounted to $1,734, $1,619 and $2,126, respectively.


                                      F-22
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

12. Commitments and Contingencies--(Continued)

(b) Purchase Commitments:

      The Company's subsidiary, MRT, has entered into minimum purchase
commitments to purchase fly-ash at fixed prices over periods of up to 15 years.
Fly-ash purchased under minimum purchase agreements for the years ended June 30,
2000, 1999 and 1998 were $3,630, $2,014 and $407, respectively. The Company's
subsidiary, Odda Smelteverk, AS, has entered into a minimum purchase commitment
to purchase power at fixed prices over periods of up to 10 years. Power
purchased under this minimum purchase agreement for the year ended June 30, 2000
was $574.

      At June 30, 2000, the Company had minimum purchase commitments, as
follows:

                                                  Fly Ash            Power
            Year Ended June 30,              Minimum Purchase   Minimum Purchase
            -------------------              ----------------   ----------------
            2001 .............................   $ 6,006            $ 1,060
            2002 .............................     6,669              1,084
            2003 .............................     7,343              1,107
            2004 .............................     7,025              1,130
            2005 .............................     6,192              1,154
            Thereafter .......................    41,552              5,384
                                                 -------            -------
            Total minimum purchase commitments   $74,787            $10,919
                                                 =======            =======

(c) Litigation:

      The Company's subsidiary, Phibro-Tech, Inc., has been named as a
potentially responsible party ("PRP") in connection with an action commenced by
the EPA, involving a third party fertilizer manufacturing site in South
Carolina. While the outcome of ongoing negotiation is uncertain, the Company has
accrued its best estimate of the amount for which this matter can be settled.
Phibro-Tech, Inc. was also named as a PRP involving a third party site in
California. The Company is not, at this time, in a position to assess the extent
of any liability.

      The Company and its subisidiary, C.P. Chemicals, Inc., are involved in
litigation alleging that operations at the Sewaren, New Jersey site have
affected the adjoining owner's property. The Company is not, at this time, in a
position to assess the extent of any liability.

      The Company and its subsidiaries are a party to a number of claims and
lawsuits arising in the normal course of business, including patent
infringement, product liabilities and governmental regulation concerning
environmental and other matters. Certain of these actions seek damages in
various amounts.

      All such claims are being contested, and management believes the
resolution of these matters will not materially affect the consolidated
financial position, results of operations or cash flows of the Company.

(d) Environmental Remediation:

      The Company's domestic subsidiaries are subject to various federal, state
and local environmental laws and regulations which govern the management of
chemical wastes. The most significant regulation governing the Company's
recycling activities is the Resource Conservation and Recovery Act of 1976
("RCRA"). The Company has been issued final RCRA "Part B" permits to operate as
hazardous waste treatment and storage facilities at its facilities in Santa Fe
Springs, California; Garland, Texas; Joliet, Illinois; Sumter, South Carolina;
and Sewaren, New Jersey. The Company has also obtained an interim status RCRA
permit for its Union City, California facility.


                                      F-23
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

12. Commitments and Contingencies--(Continued)

      In connection with applying for RCRA "Part B" permits, the Company has
been required to perform extensive site investigations at certain of its
operating facilities and inactive sites to identify possible contamination and
to provide the regulatory authorities with plans and schedules for remediation.
Some soil and groundwater contamination has been identified at several plant
sites and will require corrective action over the next several years.

      Based upon information available, management estimates the cost of further
investigation and remediation of identified soil and groundwater problems at
operating sites, closed sites and third party sites to be approximately $1,558,
which is included in current and long-term liabilities in the June 30, 2000
consolidated balance sheet (approximately $1,706 in 1999). Such amounts
represent primarily the cost of feasibility studies and remediation activities
and are expected to be substantially incurred over a three year period. No
amounts have been discounted. Environmental provisions are $252, $167 and $925
for the fiscal years ended June 30, 2000, 1999 and 1998, respectively, and are
included in selling, general and administrative expenses in the consolidated
statements of operations. In addition, such amounts exclude the fiscal 1998
accrual related to the Sewaren facility described in Note 12(e).

(e) Plant Curtailment:

      During the fourth quarter of fiscal 1998, the Company decided to curtail
major manufacturing operations of its Sewaren, New Jersey facility and recorded
nonrecurring charges of $10.0 million related to this curtailment. Of these
charges, $5.6 million represented non-cash asset write downs during fiscal 1998
related to the manufacturing facility, $1.1 million represented associated site
restoration and $3.3 million represented the cost of long-term groundwater and
remediation activities.

      The accrual for groundwater monitoring represented personnel, utility and
related costs aggregating an estimated $4.2 million over 10 years and discounted
at a 7% rate. During fiscal 1999, the Company expended $480 related to site
restoration and groundwater and remediation activities and reversed $500 to
income based upon a reassessment of site restoration and ongoing cost
requirements. During fiscal 2000, the Company expended $377 related to site
restoration and groundwater and remediation activities.

      In June 2000, the Company entered an agreement ("Transfer Agreement") with
the Township of Woodbridge ("Township") to transfer title to its property in
Sewaren, New Jersey to the Township. Simultaneously the Company entered into a
10 year lease agreement with the Township, with payments aggregating $2 million,
for certain areas of the property in order to allow the Company to conduct
operations related to its RCRA Part B Facility Permit. The Company retained its
environmental obligations pursuant to an Administrative Consent Order (ACO)
between the Company and the New Jersey Department of Environmental Protection
and has $351 recorded in long-term debt for the remaining payments under the
ACO. Pursuant to the Transfer Agreement, the Township took title to the property
and assumed obligations with regard to the property, including maintaining the
ground water recovery system required by the ACO. In connection with the
assumption of obligations by the Township, the Company reversed $1,481 to
income, representing amounts previously reserved for ground water monitoring and
remediation, net of the present value of its lease obligations.

(f) Employee Terminations:

      In connection with the plant curtailment noted above and certain other
personnel changes, the Company implemented a plan to reduce its workforce
resulting in a non-recurring charge for severance and other employee benefits of
$1,173 in fiscal 1998 (reflected in selling, general and administrative expenses
in the accompanying consolidated statement of operations). Included in the
charge were 21 employees associated with the curtailed Sewaren facility, of
which 19 were terminated in fiscal 1999 and 2 in the first quarter of fiscal
2000. All severance aggregating $129 has been paid.


                                      F-24
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

13. Financial Instruments--(Continued)

13. Financial Instruments

      Financial instruments that potentially subject the Company to credit risk
consist principally of cash and cash equivalents, and trade receivables. The
Company places its cash and cash equivalents with high quality financial
institutions in various countries. The Company sells to customers in a variety
of industries, markets and countries. Concentrations of credit risk with respect
to receivables arising from these sales are limited due to the large number of
customers comprising the Company's customer base. Ongoing credit evaluations of
customers' financial conditions are performed and, generally, no collateral is
required. The Company maintains appropriate reserves for uncollectible
receivables.

      The carrying amounts of cash and cash equivalents, trade receivables,
trade payables and short-term debt is considered to be representative of their
fair value because of their short maturities. The fair value of the Company's
Senior Subordinated Notes is estimated based on quoted market prices. At June
30, 2000 and 1999, the fair value of the Company's Senior Subordinated Notes was
$70,800 and $94,650, respectively and the related carrying amount is $100,000.
At June 30, 1999 and 1998, the fair value of the Company's other long-term debt
does not differ materially from its carrying amount based on the variable
interest rate structure and frequent repricing of these obligations.

      The Company obtains third-party letters of credit and surety bonds in
connection with certain inventory purchases and insurance obligations. The
contract values of the letters of credit and surety bonds at June 30, 2000 and
1999 were $2,250, and $2,000, respectively. The carrying values and fair values
of these letters of credit and surety bonds were not material.

      The fair value associated with foreign currency contracts has been
estimated by valuing the net position of the contracts using the applicable spot
rates and forward rates as of the reporting date. At June 30, 2000 and 1999,
unrealized gains and losses on these contracts were immaterial.

      The fair value of commodity contracts is estimated based on quotes from
the market makers of these instruments and represents the estimated amounts that
the Company would expect to receive or pay to terminate the agreements as of the
reporting date. At June 30, 2000 and 1999, the Company has $5,152 and $1,760,
respectively, in carrying amounts of commodity contracts with a fair value of
$5,182 and $1,945, respectively.

14. Business Segments

      The Company operates in two business segments: AgChem and Industrial
Chemicals. The AgChem segment manufactures and markets a variety of animal
nutrition and health products, copper based fungicides and growth regulators.
The Industrial Chemicals segment manufactures and markets a number of specialty
organic and inorganic intermediate chemicals for use in a broad variety of
industrial chemical applications.

      The Company aggregates certain operating segments into its reportable
segments. Management evaluates the performance of its operating segments and
allocates resources based on operating income. Transfers between segments are
priced at amounts that include a manufacturing profit except that certain
domestic transfers of $9,606, $11,422 and $10,512 from the Industrial Chemicals
group to the AgChem group for fiscal 2000, 1999 and 1998, respectively, are
recorded at the cost of product transferred. Other includes corporate expenses
and elimination of intersegment revenues. Expenditures for property plant and
equipment includes assets acquired in business combinations.


                                      F-25
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

14. Business Segments--(Continued)

<TABLE>
<CAPTION>
                                                             Industrial
                                                   Agchem    Chemicals
                                                   Group       Group           Other           Total
                                                 ---------   ---------       ---------       ---------
<S>                                              <C>         <C>             <C>             <C>
2000 Segment Detail
Revenues -- external customers ...............   $ 179,911   $ 138,145       $      --       $ 318,056
         -- intersegment .....................       4,722      21,931         (26,653)             --
                                                 ---------   ---------       ---------       ---------
Total revenues ...............................   $ 184,633   $ 160,076       $ (26,653)      $ 318,056
                                                 =========   =========       =========       =========
Operating income (loss) ......................   $  15,658   $   9,098       $  (9,082)(1)   $  15,674
Depreciation and amortization ................       4,689       6,641             536          11,866
Total assets .................................     115,621     119,990          22,840         258,451
Expenditures for property, plant and equipment       2,418      20,067             119          22,604

<CAPTION>
                                                             Industrial
                                                   Agchem    Chemicals
                                                   Group       Group           Other           Total
                                                 ---------   ---------       ---------       ---------
<S>                                              <C>         <C>             <C>             <C>
1999 Segment Detail
Revenues -- external customers ...............   $ 172,084   $ 125,210       $      --       $ 297,294
         -- intersegment .....................       5,327      25,835         (31,162)             --
                                                 ---------   ---------       ---------       ---------
Total revenues ...............................   $ 177,411   $ 151,045       $ (31,162)      $ 297,294
                                                 =========   =========       =========       =========
Operating income (loss) ......................   $  11,412   $   9,079       $ (10,136)(2)   $  10,355
Depreciation and amortization ................       4,429       6,285             531          11,245
Total assets .................................     104,361     118,481          15,937         238,779
Expenditures for property, plant and equipment       3,776      32,286             219          36,281

<CAPTION>
                                                             Industrial
                                                   Agchem    Chemicals
                                                   Group       Group           Other           Total
                                                 ---------   ---------       ---------       ---------
<S>                                              <C>         <C>             <C>             <C>
1998 Segment Detail
Revenues -- external customers ...............   $ 175,455   $ 100,122       $      --       $ 275,577
         -- intersegment .....................       6,362      27,294         (33,656)             --
                                                 ---------   ---------       ---------       ---------
Total revenues ...............................   $ 181,817   $ 127,416       $ (33,656)      $ 275,577
                                                 =========   =========       =========       =========
Operating income (loss) ......................   $   9,532   $  (2,389)(3)   $ (11,370)(4)   $  (4,227)
Depreciation and amortization ................       3,937       4,780             536           9,253
Total assets .................................     100,014      60,432          31,750         192,196
Expenditures for property, plant and equipment       1,981       5,483             567           8,031
</TABLE>

- ----------
(1)   Includes corporate expenses of $9,442 and inventory profit elimination of
      $(350).
(2)   Includes corporate expenses of $7,461, intercompany inventory profit
      elimination of $1,150 and $1,525 related to the severance of a key
      executive.
(3)   Operating income was reduced $10,000 related to a nonrecurring plant
      curtailment charge.
(4)   Includes corporate expenses of $5,518, intercompany inventory profit
      elimination of $248 and $5,604 for the forgiveness of limited recourse
      notes receivable from certain executives of the Company and payment for
      related income taxes resulting from the cancellation.


                                      F-26
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

15. Geographic Information

      The following is information about the Company's operations in different
geographic areas. Revenues to external customers and property, plant and
equipment are attributed to the geographic areas based on the location of the
Company's subsidiaries.

                                               2000         1999         1998
                                            ---------    ---------    ---------
Revenues:
  United States .........................   $ 204,374    $ 182,959    $ 179,242
  Western Europe ........................      59,120       57,723       30,152
  Israel ................................      49,917       51,889       62,399
  South America .........................       4,645        4,723        3,784
                                            ---------    ---------    ---------
     Total revenues .....................   $ 318,056    $ 297,294    $ 275,577
                                            =========    =========    =========

                                               2000         1999         1998
                                            ---------    ---------    ---------
Operating income (loss):
  United States .........................   $  13,715    $  10,872    $    (599)
  Western Europe ........................       3,182        3,989        2,980
  Israel ................................       7,119        5,059        4,711
  South America .........................         740          571           51
  Other .................................      (9,082)     (10,136)     (11,370)
                                            ---------    ---------    ---------
     Total operating income (loss) ......   $  15,674    $  10,355    $  (4,227)
                                            =========    =========    =========

                                               2000         1999         1998
                                            ---------    ---------    ---------
Property, plant and equipment
  United States .........................   $  25,032    $  17,377    $  12,590
  Western Europe ........................      32,465       27,362        5,642
  Israel ................................      15,899       16,276       18,292
  South America .........................       2,082        2,315        2,823
  Other .................................         702          964        1,163
                                            ---------    ---------    ---------
     Total property, plant and equipment    $  76,180    $  64,294    $  40,510
                                            =========    =========    =========

16. Valuation and Qualifying Accounts:

      Activity in the allowance for doubtful accounts consisted of the following
for the fiscal years ended June 30:

                                               2000         1999         1998
                                            ---------    ---------    ---------
Balance at beginning of period ..........   $     886    $     751    $     656
Provision for bad debts .................          --          153          144
Bad debt write-offs .....................        (130)         (18)         (49)
                                            ---------    ---------    ---------
Balance at end of period ................   $     756    $     886    $     751
                                            =========    =========    =========


                                      F-27
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                 (In thousands)

17. Insurance Recoveries:

      In April 1999, the Company suffered inventory, real property and equipment
loss at its Bowmanstown, Pennsylvania facility resulting from a fire. The
Company carries insurance coverage for the property damage and business
interruption losses and recorded a receivable of $4,259 in other receivables at
June 30, 1999 for amounts reimbursable from the insurance carrier. The
receivable was net of the Company's deductible and $1,000 advanced by the
insurance carrier prior to June 30, 1999. A reduction of cost of sales of $396
was recorded for insurance recoveries in excess of the net book value of damaged
inventory and a gain of $3,701 was recorded in other income for the excess of
amounts reimbursable over the net book value of property and equipment. As of
June 30, 2000, the Company finalized its claims with its insurance carriers and
recorded additional gains in fiscal 2000 for property damage of $946 in other
income and reimbursement for business interruption losses of $1,161 as a
reduction of cost of sales. The receivable of $4,097 in other receivables as of
its June 30, 2000 balance sheet date has been subsequently collected.

18. Extraordinary Loss:

      On August 31, 1994, the Company issued a 10-year $20,000 senior unsecured
note ("Note") with interest at 11%, payable semi-annually. On that same date,
the Company entered into a three-year renewable revolving credit facility
("Revolving Facility") with a bank for up to $20,000 in revolving credit
advances. In connection with the issuance of the Company's Senior Subordinated
Notes, the Company terminated the Note and Revolving Facility agreements and
repaid all amounts outstanding under the Note and Revolving Facility agreement
in June 1998 and paid a prepayment fee of $2,600, terminated certain interest
rate caps on floating rate debt that was repaid for a charge of $163 and wrote
off unamortized financing costs of $210. These charges of $1,962 (net of $1,011
in taxes) are reflected as an extraordinary item in the accompanying
consolidated statements of operations.

19. Condensed Consolidating Financial Statements

      In June 1998 the Company issued $100 million in Senior Subordinated Notes
as described in Note 2. In connection with the issuance of these Notes, the
Company's U.S. Subsidiaries fully and unconditionally guaranteed such Notes on a
joint and several basis. Foreign subsidiaries do not presently guarantee the
Notes.

      The following condensed consolidating financial data summarizes the
assets, liabilities, and results of operations and cash flows of the Parent,
Guarantors and Non-Guarantor subsidiaries. The Parent is Philipp Brothers
Chemicals, Inc. ("PBC"). The U.S. Guarantor Subsidiaries include all domestic
subsidiaries of PBC including the following: C.P. Chemicals, Inc., Koffolk,
Inc., Phibro-Tech, Inc., MRT Management Corp., Mineral Resource Technologies,
L.L.C., Prince Agriproducts, Inc., The Prince Manufacturing Company (PA), The
Prince Manufacturing Company (IL) Phibrochem, Inc., Phibro Chemicals, Inc.,
Western Magnesium Corp. The Non-Guarantor Subsidiaries include the following:
Koffolk (1949) Ltd., Agtrol International, Ferro Metal and Chemical Corporation
and ODDA Smelteverk, AS. The U.S. and foreign Guarantor and Non-Guarantor
Subsidiaries are wholly owned as to voting common stock, directly or indirectly,
by the Parent.

      Investments in subsidiaries are accounted for by the Parent using the
equity method. Income tax expense (benefit) is allocated among the consolidating
entities based upon taxable income (loss) by jurisdiction within each group.

      The principal consolidation adjustments are to eliminate investments in
subsidiaries and intercompany balances and transactions. Separate financial
statements of the U.S. Guarantor Subsidiaries and the Non-Guarantor Subsidiaries
are not presented because management has determined that such financial
statements would not be material to investors.


                                      F-28
<PAGE>

                         Philipp Brothers Chemicals Inc.
                           Consolidating Balance Sheet
                               As of June 30, 2000
                                 (In thousands)

<TABLE>
<CAPTION>
                                                            U.S. Guarantor  Foreign Subsidiaries   Consolidation   Consolidated
                                                 Parent      Subsidiaries      Non-Guarantors       Adjustments       Balance
                                               ---------    --------------  --------------------   -------------   ------------
<S>                                            <C>             <C>                <C>                                <C>
                    Assets
Current Assets:
Cash and cash equivalents ...............      $      11       $      99          $   2,293                          $   2,403
Trade receivables .......................          6,172          45,378             27,826                             79,376

Other receivables .......................          4,855             550              3,074                              8,479
Inventory ...............................          3,267          25,072             22,066                             50,405
Prepaid expenses and other ..............          3,065           2,443              3,590                              9,098
                                               ---------       ---------          ---------          ---------       ---------
       Total current assets .............         17,370          73,542             58,849                 --         149,761
                                               ---------       ---------          ---------          ---------       ---------
Property, plant & equipment, net ........            702          25,032             50,446                             76,180

Intangibles .............................             87           2,292              3,918                              6,297
Investment in subsidiaries ..............         78,028           1,533             (6,129)           (73,432)             --
Intercompany ............................         63,874         (32,463)             3,197            (34,608)             --
Other assets ............................         15,236           8,542              2,435                             26,213
                                               ---------       ---------          ---------          ---------       ---------
       Total assets .....................      $ 175,297       $  78,478          $ 112,716          $(108,040)      $ 258,451
                                               =========       =========          =========          =========       =========

      Liabilities and Stockholders Equity
Current Liabilites:
Cash overdraft ..........................      $     158       $   1,302          $     660                          $   2,120
Loans payable to banks ..................             --              --              8,650                              8,650
Current portion of long term debt .......             31             893              1,372                              2,296
Accounts payable ........................          2,140          14,999             15,503                             32,642
Accrued expenses and other ..............          3,892          13,118              7,147                             24,157
                                               ---------       ---------          ---------          ---------       ---------
Total current liabilites ................          6,221          30,312             33,332                 --          69,865
                                               ---------       ---------          ---------          ---------       ---------
Long term debt ..........................        130,600           1,435             42,295            (34,608)        139,722
Other liabilities .......................          2,022           4,431              6,829                 --          13,282

Redeemable securities
Common stock ............................          2,389              --              1,124                              3,513
Common stock of subsidiary ..............             --             451                 --                                451
                                               ---------       ---------          ---------          ---------       ---------
                                                   2,389             451              1,124                 --           3,964

             Stockholders' equity
Series "A" preferred stock ..............            521              --                 --                                521
Common stock ............................              2              32                 --                (32)              2
Paid in capital .........................            878          34,040                 --            (34,040)            878
Retained earnings .......................         32,808           7,747             31,613            (39,360)         32,808
Accumulated other comprehensive
    (loss) income--cumulative currency
    translation adjustment ..............           (144)             30             (2,477)                            (2,591)
                                               ---------       ---------          ---------          ---------       ---------
       Total Stockholders' equity .......         34,065          41,849             29,136            (73,432)         31,618
                                               ---------       ---------          ---------          ---------       ---------
       Total liabilities and equity .....      $ 175,297       $  78,478          $ 112,716          $(108,040)      $ 258,451
                                               =========       =========          =========          =========       =========
</TABLE>


                                      F-29
<PAGE>

                         Philipp Brothers Chemicals Inc.
                         Consolidating Income Statement
                        For the Year Ended June 30, 2000
                                 (In thousands)

<TABLE>
<CAPTION>
                                                             U.S. Guarantor   Foreign Subsidiaries    Consolidation  Consolidated
                                                   Parent     Subsidiaries       Non-Guarantors        Adjustments      Balance
                                                  --------   --------------   --------------------    -------------  ------------
<S>                                                <C>           <C>                 <C>                <C>             <C>
Net sales .....................................    $ 35,927      $184,828            $132,918           $ (35,617)      $318,056

Cost of goods sold ............................      29,091       136,975              99,104             (35,617)       229,553
                                                   --------      --------            --------            --------       --------
       Gross profit ...........................       6,836        47,853              33,814                  --         88,503
Selling, general, and administrative
    expenses ..................................      12,537        38,203              23,570                             74,310
Curtailment of operations at
    manufacturing facility ....................          --        (1,481)                 --                             (1,481)
                                                   --------      --------            --------            --------       --------
Operating (loss) income .......................      (5,701)       11,131              10,244                  --         15,674
Interest expense ..............................       8,519           198               6,037                             14,754
Interest income ...............................         (19)           (2)               (579)                              (600)
Gain from property damage claim ...............          --          (946)                 --                               (946)
Gain on sale of assets ........................          --            --             (13,763)                           (13,763)
Other expense .................................        (912)           --               3,142                              2,230

Intercompany allocation .......................     (10,925)       10,860                  65                                 --

(Profit) loss relating to subsidiaries ........     (10,967)           --                  --              10,967             --
                                                   --------      --------            --------            --------       --------
Income (loss) before income taxes .............       8,603         1,021              15,342             (10,967)        13,999

(Benefit) provision for income taxes ..........      (1,450)        1,020               4,376                  --          3,946
                                                   --------      --------            --------            --------       --------
Net income (loss) .............................    $ 10,053      $      1            $ 10,966           $ (10,967)      $ 10,053
                                                   ========      ========            ========            ========       ========
</TABLE>


                                      F-30
<PAGE>

                         Philipp Brothers Chemicals Inc.
                      Consolidating Statement of Cash Flows
                        For the Year Ended June 30, 2000
                                 (In thousands)

<TABLE>
<CAPTION>
                                                             U.S. Guarantor   Foreign Subsidiaries    Consolidation  Consolidated
                                                   Parent     Subsidiaries       Non-Guarantors        Adjustments      Balance
                                                  --------   --------------   --------------------    -------------  ------------
<S>                                                <C>           <C>                 <C>                 <C>            <C>
Operating activities:
Net income (loss) ..............................   $ 10,053      $      1            $ 10,966            $(10,967)      $ 10,053
Adjustments to reconcile net income (loss)
    Cash provided by operating activities:
    Depreciation and amortization ..............        536         4,224               7,106                             11,866
    Deferred income taxes ......................       (337)         (272)              2,047                              1,438
    Excess provision for curtailment of
      manufacturing operations .................         --        (1,481)                 --                             (1,481)
    Gain from sale of assets ...................         --            --             (13,763)                           (13,763)
    Change in redemption of
      redeemable securities ....................         13          (130)              1,124                              1,007
    Gain on property damage claim ..............         --          (946)               (107)                            (1,053)
    Other ......................................      1,360           350                (983)                               727
Changes in operating assets and liabilities
    net of effect of business acquired:
Accounts receivable ............................        (77)      (13,499)              5,295                             (8,281)
Inventory ......................................        945         1,471              (1,832)                               584
Prepaid expenses and other .....................     (3,884)          258               1,344                             (2,282)
Other assets ...................................     (1,316)          917              (1,146)                            (1,545)
Intercompany ...................................    (21,658)       18,526              (7,835)             10,967             --
Accounts payable ...............................        173           687              (4,628)                            (3,768)
Accrued expenses and other .....................        927        (4,280)              1,942                             (1,411)
                                                   --------      --------            --------            --------       --------
Net cash (used in) provided by
    operating activities .......................    (13,265)        5,826                (470)                 --         (7,909)
                                                   --------      --------            --------            --------       --------
Investing activities:
Proceeds from property damage claim ............         --         3,999                  --                              3,999
Capital expenditures ...........................       (119)      (11,276)            (11,209)                           (22,604)
Proceeds from sale of investment in utility ....         --            --              18,750                             18,750
Other investments ..............................     (3,000)           --                  --                             (3,000)
Other investing ................................       (157)           --              (1,046)                            (1,203)
                                                   --------      --------            --------            --------       --------
Net cash used in investing activities ..........     (3,276)       (7,277)              6,495                  --         (4,058)
                                                   --------      --------            --------            --------       --------
Financing activities:
Cash overdraft .................................       (119)        1,089                (288)                               682
Net (decrease) increase in short term debt .....         72            --               4,117                              4,189
Proceeds from long term debt ...................     16,300         1,595                 391                             18,286
Payments of long term debt .....................        (94)       (1,300)            (10,477)                           (11,871)
Proceeds from principal shareholder ............         --            --                  62                                 62
                                                   --------      --------            --------            --------       --------
Net cash provided by (used in)
    financing activities .......................     16,159         1,384              (6,195)                 --         11,348
                                                   --------      --------            --------            --------       --------
Net increase (decrease) in cash
    and cash equivalents .......................       (382)          (67)               (170)                 --           (619)
Cash and cash equivalents at
    beginning of year ..........................        393           166               2,463                              3,022
                                                   --------      --------            --------            --------       --------
Cash and cash equivalents at end of year .......   $     11      $     99            $  2,293            $     --       $  2,403
                                                   ========      ========            ========            ========       ========
</TABLE>


                                      F-31
<PAGE>

                         Philipp Brothers Chemicals Inc.
                           Consolidating Balance Sheet
                               As of June 30, 1999
                                 (In thousands)

<TABLE>
<CAPTION>
                                                             U.S. Guarantor   Foreign Subsidiaries    Consolidation  Consolidated
                                                   Parent     Subsidiaries       Non-Guarantors        Adjustments      Balance
                                                  --------   --------------   --------------------    -------------  ------------
<S>                                                <C>           <C>                 <C>                <C>             <C>
                    Assets
Current Assets:
Cash and cash equivalents ......................   $    393      $    166            $  2,463                           $  3,022
Trade receivables ..............................      6,091        31,838              32,248                             70,177

Other receivables ..............................        993         5,684               3,919                             10,596
Inventory ......................................      4,212        26,543              20,675                             51,430
Prepaid expenses and other .....................      1,963         1,580               2,590                              6,133
                                                   --------      --------            --------           ---------       --------
       Total current assets ....................     13,652        65,811              61,895                  --        141,358
                                                   --------      --------            --------           ---------       --------
Property, plant & equipment, net ...............        964        17,377              45,953                             64,294

Intangibles ....................................        268         2,668               4,023                              6,959
Investment in subsidiaries .....................     66,881         1,386              (5,838)            (62,429)            --
Intercompany ...................................     52,393       (13,790)                364             (38,967)            --
Other assets ...................................     11,604         8,833               5,731                             26,168
                                                   --------      --------            --------           ---------       --------
       Total assets ............................   $145,762      $ 82,285            $112,128           $(101,396)      $238,779
                                                   ========      ========            ========           =========       ========

      Liabilities and Stockholders Equity
Current Liabilites:
Cash overdraft .................................   $    277      $    213            $    948                           $  1,438
Loan payable to banks ..........................         --            --               3,734                              3,734
Current portion of long term debt ..............         94         1,345                  11                              1,450
Accounts payable ...............................      1,967        14,312              20,131                             36,410
Accrued expenses and other .....................      2,692        17,385               5,663                             25,740
                                                   --------      --------            --------           ---------       --------
Total current liabilites .......................      5,030        33,255              30,487                  --         68,772
                                                   --------      --------            --------           ---------       --------
Long term debt .................................    113,541           620              58,894             (38,967)       134,088
Other liabilities ..............................      1,876         5,981               3,657                             11,514

Redeemable securities
Common stock ...................................      2,376            --                  --                              2,376
Common stock of subsidiary .....................         --           581                  --                                581
                                                   --------      --------            --------           ---------       --------
                                                      2,376           581                  --                  --          2,957

             Stockholders' equity
Series "A" preferred stock .....................        521            --                   1                  (1)           521
Common stock ...................................          2            32                   2                 (34)             2
Paid in capital ................................        816        34,040                 (39)            (34,001)           816
Retained earnings ..............................     22,755         7,745              20,648             (28,393)        22,755
Accumulated other comprehensive
    (loss) income--cumulative currency
    translation adjustment .....................     (1,155)           31              (1,522)                            (2,646)
                                                   --------      --------            --------           ---------       --------
       Total Stockholders' equity ..............     22,939        41,848              19,090             (62,429)        21,448
                                                   --------      --------            --------           ---------       --------
       Total liabilities and equity ............   $145,762      $ 82,285            $112,128           $(101,396)      $238,779
                                                   ========      ========            ========           =========       ========
</TABLE>


                                      F-32
<PAGE>

                         Philipp Brothers Chemicals Inc.
                         Consolidating Income Statement
                        For the Year Ended June 30, 1999
                                 (In thousands)

<TABLE>
<CAPTION>
                                                             U.S. Guarantor   Foreign Subsidiaries    Consolidation  Consolidated
                                                   Parent     Subsidiaries       Non-Guarantors        Adjustments      Balance
                                                  --------   --------------   --------------------    -------------  ------------
<S>                                                <C>           <C>                 <C>                <C>             <C>
Net sales ......................................   $ 35,339      $166,766            $129,243           $ (34,054)      $297,294

Cost of goods sold .............................     28,545       126,834             101,922             (34,054)       223,247
                                                   --------      --------            --------           ---------       --------

       Gross profit ............................      6,794        39,932              27,321                  --         74,047

Selling, general, and
    administrative expenses ....................     11,575        33,343              19,274                             64,192

Curtailment of operations at
    manufacturing facility .....................         --          (500)                 --                               (500)
                                                   --------      --------            --------           ---------       --------
Operating (loss) income ........................     (4,781)        7,089               8,047                  --         10,355

Interest expense ...............................      6,907           289               5,946                             13,142
Interest income ................................       (357)           --                (271)                              (628)
Gain from property damage claim ................         --        (3,701)                 --                             (3,701)
Other expense ..................................         --          (371)              2,200                              1,829

Intercompany allocation ........................     (9,668)        9,528                 140                                 --

(Profit) loss relating to subsidiaries .........       (342)           --                  --                 342             --
                                                   --------      --------            --------           ---------       --------

(Loss) income before income taxes ..............     (1,321)        1,344                  32                (342)          (287)


(Benefit) provision for income taxes ...........       (855)        1,285                (251)                 --            179
                                                   --------      --------            --------           ---------       --------
Net (loss) income ..............................   $   (466)     $     59            $    283           $    (342)      $   (466)
                                                   ========      ========            ========           =========       ========
</TABLE>


                                      F-33
<PAGE>

                         Philipp Brothers Chemicals Inc.
                      Consolidating Statement of Cash Flows
                        For the Year Ended June 30, 1999
                                 (In thousands)

<TABLE>
<CAPTION>
                                                             U.S. Guarantor   Foreign Subsidiaries    Consolidation  Consolidated
                                                   Parent     Subsidiaries       Non-Guarantors        Adjustments      Balance
                                                  --------    -------------    ------------------     ------------    -----------
<S>                                                <C>           <C>                 <C>                 <C>            <C>
Operating activities:
Net (loss) income ..............................   $   (466)     $     59            $    283            $   (342)      $   (466)
Adjustments to reconcile net (loss) income
    Cash provided by operating activities:
    Depreciation and amortization ..............        531         3,953               6,761                             11,245
    Deferred income taxes ......................     (2,771)        2,866                (868)                              (773)
    Provision for curtailment of operations
      at manufacturing facility ................         --          (500)                 --                               (500)
    Change in redemption amount of
      redeemable securities ....................       (187)         (673)                 --                               (860)
    Gain from property damage claim ............         --        (3,701)                 --                             (3,701)
    Other ......................................       (912)         (523)              3,079                              1,644
Changes in operating assets and liabilites
  net of effect of business acquired:
Accounts receivable ............................       (405)       (3,275)             (2,242)                            (5,922)
Inventory ......................................       (616)       (7,181)              4,247                             (3,550)
Prepaid expenses and other .....................      1,783        (2,184)                436                                 35
Other assets ...................................     (1,018)       (4,113)             (2,312)                            (7,443)
Intercompany ...................................    (23,227)       14,998               7,887                 342             --
Accounts payable ...............................       (401)        2,513              (2,069)                                43
Accrued expenses and other .....................     (1,725)        8,165                 707                              7,147
                                                   --------      --------            --------            --------       --------
Net cash (used in) provided by
    operating activities .......................    (29,414)       10,404              15,909                  --         (3,101)
                                                   --------      --------            --------            --------       --------
Investing activities:
Capital expenditures ...........................       (219)       (6,431)             (5,612)                           (12,262)
Acquisition of businesses,
    net of cash acquired .......................         --        (2,505)            (19,000)                           (21,505)
                                                   --------      --------            --------            --------       --------
Net cash used in investing activities ..........       (219)       (8,936)            (24,612)                 --        (33,767)
                                                   --------      --------            --------            --------       --------
Financing activities:
Cash overdraft .................................       (636)         (789)                948                               (477)
Net (decrease) increase in
    short term debt ............................       (942)           --               3,169                              2,227
Proceeds from long term debt ...................     13,432            82               1,700                             15,214
Payments of long term debt .....................       (140)       (1,523)                (12)                            (1,675)
Receivable from principal shareholder ..........         --            --                 380                                380
                                                   --------      --------            --------            --------       --------
Net cash provided by (used in)
    financing activities .......................     11,714        (2,230)              6,185                  --         15,669
                                                   --------      --------            --------            --------       --------
Net (decrease) increase in cash and
    cash equivalents ...........................    (17,919)         (762)             (2,518)                 --        (21,199)
Cash and cash equivalents at
    beginning of year ..........................     18,312           928               4,981                             24,221
                                                   --------      --------            --------            --------       --------
Cash and cash equivalents at end of year .......   $    393      $    166            $  2,463            $     --       $  3,022
                                                   ========      ========            ========            ========       ========
</TABLE>


                                      F-34
<PAGE>

                         Philipp Brothers Chemicals Inc.
                         Consolidating Income Statement
                        For the Year Ended June 30, 1998
                                 (In thousands)

<TABLE>
<CAPTION>
                                                             U.S. Guarantor   Foreign Subsidiaries    Consolidation  Consolidated
                                                    Parent    Subsidiaries       Non-Guarantors        Adjustments      Balance
                                                   --------  --------------   --------------------    -------------  ------------
<S>                                                <C>           <C>                 <C>                 <C>            <C>
Net sales ......................................   $ 36,318      $164,410            $104,555            $(29,706)      $275,577

Cost of goods sold .............................     29,914       123,828              84,877             (29,706)       208,913
                                                   --------      --------            --------            --------       --------

       Gross profit ............................      6,404        40,582              19,678                  --         66,664

Selling, general, and administrative
    expenses ...................................      9,878        39,077              11,936                             60,891

Curtailment of operations at
    manufacturing facility .....................         --        10,000                  --                             10,000
                                                   --------      --------            --------            --------       --------

Operating (loss) income ........................     (3,474)       (8,495)              7,742                  --         (4,227)

Interest expense ...............................      3,798           287               2,780                              6,865

Interest income ................................       (253)          (97)                (33)                              (383)

Other expense ..................................         74            --                 971                              1,045

Intercompany allocation ........................     (5,903)        5,863                  40                                 --

(Profit) loss relating to subsidiaries .........      6,430            --                  --              (6,430)            --
                                                   --------      --------            --------            --------       --------

(Loss) income before income taxes
    and extraordinary item .....................     (7,620)      (14,548)              3,984               6,430        (11,754)

(Benefit) provision for income taxes ...........       (448)       (5,080)                839                  --         (4,689)
                                                   --------      --------            --------            --------       --------

Net (loss) income before
    extraordinary item .........................     (7,172)       (9,468)              3,145               6,430         (7,065)

Extraordinary loss (net of $1,011 of tax) ......     (1,855)           --                (107)                            (1,962)
                                                   --------      --------            --------            --------       --------

Net (loss) income ..............................   $ (9,027)     $ (9,468)           $  3,038            $  6,430       $ (9,027)
                                                   ========      ========            ========            ========       ========
</TABLE>


                                      F-35
<PAGE>

                         Philipp Brothers Chemicals Inc.
                      Consolidating Statement of Cash Flows
                        For the Year Ended June 30, 1998
                                 (In thousands)

<TABLE>
<CAPTION>
                                                             U.S. Guarantor   Foreign Subsidiaries    Consolidation  Consolidated
                                                   Parent     Subsidiaries       Non-Guarantors        Adjustments      Balance
                                                  --------    -------------    ------------------     ------------    -----------
<S>                                                <C>           <C>                 <C>                 <C>            <C>
Operating activities:
Net (loss) income ..............................   $ (9,027)     $ (9,468)           $  3,038            $  6,430       $ (9,027)
Adjustments to reconcile net (loss) income
    Cash provided by operating activities:
    Depreciation and amortization ..............        536         5,047               3,670                              9,253
    Deferred income taxes ......................     (1,146)       (4,138)                 55                             (5,229)
    Foregiveness of promissory notes ...........         --         2,591                  --                              2,591
    Provision for curtailment of operations
      at manufacturing facility ................         --        10,000                  --                             10,000
    Change in redemption amount of
      redeemable securities ....................     (1,250)           --                  --                             (1,250)
    Extraordinary loss on extinguishment
      of debt, net of tax ......................      1,855            --                 107                              1,962
    Other ......................................       (902)          729               1,564                              1,391
Changes in operating assets and liabilites
    net of effect of business acquired:
Accounts receivable ............................       (566)       (5,994)              1,073                             (5,487)
Inventory ......................................       (143)        1,842                 (94)                             1,605
Prepaid expenses and other .....................     (1,985)        1,569              (2,863)                            (3,279)
Other assets ...................................       (956)         (397)                  4                             (1,349)
Intercompany ...................................    (27,945)          742              33,633              (6,430)            --
Accounts payable ...............................     (1,276)          425                 (28)                              (879)
Accrued expenses and other .....................      1,117           942              (1,022)                             1,037
                                                   --------      --------            --------            --------       --------
Net cash (used in) provided by
    operating activities .......................    (41,688)        3,890              39,137                  --          1,339
                                                   --------      --------            --------            --------       --------
Investing activities:
Capital expenditures ...........................       (567)       (4,230)             (3,234)                            (8,031)
                                                   --------      --------            --------            --------       --------
Net cash used in investing activities ..........       (567)       (4,230)             (3,234)                 --         (8,031)
                                                   --------      --------            --------            --------       --------
Financing activities:
Cash overdraft .................................        913         1,002                  --                              1,915
Net (decrease) increase in
    short term debt ............................        149          (350)            (13,332)                           (13,533)
Proceeds from long term debt ...................    100,000           380                  --                            100,380
Payments of long term debt .....................    (31,517)       (1,570)            (19,835)                           (52,922)
Payments of deferred financing costs ...........     (3,724)           --                  --                             (3,724)
Extinguishment of debt .........................     (2,493)           --                (107)                            (2,600)
Proceeds from life insurance ...................      6,045            --                  --                              6,045
Distribution to principal shareholder for
    purchase of subsidiary .....................     (1,500)           --                  --                             (1,500)
Receivable from principal shareholder ..........         --            --                (429)                              (429)
Redemption of preferred stock ..................     (7,569)          757                  --                             (6,812)
                                                   --------      --------            --------            --------       --------
Net cash provided by (used in)
    financing activities .......................     60,304           219             (33,703)                 --         26,820
                                                   --------      --------            --------            --------       --------
Net increase (decrease) in cash
    and cash equivalents .......................     18,049          (121)              2,200                  --         20,128
Cash and cash equivalents at
    beginning of year ..........................        263         1,049               2,781                              4,093
                                                   --------      --------            --------            --------       --------
Cash and cash equivalents at end of year .......   $ 18,312      $    928            $  4,981            $     --       $ 24,221
                                                   ========      ========            ========            ========       ========
</TABLE>


                                      F-36
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                           PHILIPP BROTHERS CHEMICALS, INC.


                                       By:        /s/ Jack C. Bendheim
                                           -------------------------------------
                                                     Jack C. Bendheim
                                           President and Chief Executive Officer

                                       Date: September 26, 2000

      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 and on the dates indicated.

              Signature and Title                               Date
              -------------------                               ----


             /s/ Jack C. Bendheim                       September 26, 2000
- -----------------------------------------------
               Jack C. Bendheim
Director, President and Chief Executive Officer
         (Principal Executive Officer)


            /s/ Nathan Z. Bistricer                     September 26, 2000
- -----------------------------------------------
              Nathan Z. Bistricer
  Vice President and Chief Financial Officer
       (Principal Financial Officer and
         Principal Accounting Officer)


             /s/ Marvin S. Sussman                      September 26, 2000
- -----------------------------------------------
               Marvin S. Sussman
       Director, Chief Operating Officer
          and Executive Vice President


             /s/ James O. Herlands                      September 26, 2000
- -----------------------------------------------
               James O. Herlands
     Director and Executive Vice President


                                      II-1
<PAGE>

Exhibit Index to Report on Form 10-K

Exhibit
No.        Description of Exhibit
- -------    ----------------------

3.1      Restated Certificate of Incorporation of Philipp Brothers Chemicals,
         Inc.*
3.2      By-laws of Philipp Brothers Chemicals, Inc.*
3.3      Composite Certificate of Incorporation of Phibro-Tech, Inc.****
3.4      By-Laws of Phibro-Tech, Inc.*
3.5      Certificate of Incorporation of C.P. Chemicals, Inc.*
3.6      By-Laws of C.P. Chemicals, Inc.*
3.7      Certificate of Incorporation of Prince Agriproducts, Inc.*
3.8      By-Laws of Prince Agriproducts, Inc.*
3.9      Certificate of Incorporation of The Prince Manufacturing Company, an
         Illinois corporation*
3.10     By-Laws of The Prince Manufacturing Company, an Illinois corporation*
3.11     Certificate of Incorporation of The Prince Manufacturing Company, a
         Pennsylvania corporation*
3.12     By-Laws of The Prince Manufacturing Company, a Pennsylvania
         corporation*
3.13     Certificate of Formation of Mineral Resource Technologies, L.L.C.*
3.14     Amended and Restated Combined Limited Liability Company Agreement of
         Mineral Resource Technologies, L.L.C., and Stockholders Agreement of
         MRT Management Corp., dated as of June 30, 1999****
3.15     Certificate of Incorporation of MRT Management Corp.*
3.15.1   Amendment to Certificate of Incorporation of MRT Management Corp.****
3.15.2   Composite Certificate of Incorporation of MRT Management Corp.****
3.16     By-Laws of MRT Management Corp.*
3.17     Certificate of Incorporation of Koffolk, Inc.*
3.18     By-Laws of Koffolk, Inc.*
3.19     Certificate of Incorporation of Phibrochem, Inc.*
3.20     By-Laws of Phibrochem, Inc.*
3.21     Certificate of Incorporation of Phibro Chemicals, Inc.*
3.22     By-Laws of Phibro Chemicals, Inc.*
3.23     Certificate of Incorporation of Western Magnesium Corp.*
3.24     By-Laws of Western Magnesium Corp.*
4.1      Indenture, dated as of June 11, 1998, among the Company, the Guarantors
         named therein and The Chase Manhattan Bank, as trustee, relating to the
         9 7/8% Senior Subordinated Notes due 2008 of the Company, and exhibits
         thereto, including Form of 9 7/8% Senior Subordinated Note due 2008 of
         Company*
         Certain instruments which define the rights of holders of long-term
         debt of the Company and its consolidated subsidiaries have not been
         filed as Exhibits to this Report since the total amount of securities
         authorized under any such instrument does not exceed 10% of the total
         assets of the Company and its subsidiaries on a consolidated basis, as
         of June 30, 2000. For a description of such indebtedness, see Note 7 of
         Notes to
<PAGE>

         Consolidated Financial Statements. The Company hereby agrees to furnish
         copies of such instruments to the Securities and Exchange Commission
         upon its request.
10.1     Registration Rights Agreement, dated June 11, 1998, among Philipp
         Brothers Chemicals, Inc., the Guarantors named therein and Schroder &
         Co. Inc.*
10.2     Revolving Credit, Acquisition Term Loan and Security Agreement, dated
         August 19, 1998, among Philipp Brothers Chemicals, Inc., as Borrower,
         the Guarantors named therein, PNC Bank, N.A. as Agent and Lender, and
         the other institutions from time to time party thereto as Lenders*
10.3     Manufacturing Agreement, dated May 15, 1994, by and between Merck &
         Co., Inc., Koffolk, Ltd., and Philipp Brothers Chemicals, Inc.+*
10.4     [Intentionally Omitted.]
10.5     Asset Purchase and Trademark Assignment Agreement, dated August 5,
         1996, between Koffolk, Inc. and Merck & Co., Inc.; assigned by Merck &
         Co., Inc. to Merial Limited.*
10.6     Distributorship Agreement, dated August 5, 1996, by and between Merck &
         Co., Inc. and Koffolk, Inc.; assigned by Merck & Co., Inc. to Merial
         Limited.+*
10.7     License Agreement, dated May 30, 1996, by and between Michigan
         Technological University and Mineral Resource Technologies, L.L.C.+*
10.8     Lease, dated July 25, 1986, between Philipp Brothers Chemicals, Inc.
         and 400 Kelby Associates, as amended December 1, 1986 and December 30,
         1994*
10.9     Lease, dated June 30, 1995, between First Dice Road Co. and
         Phibro-Tech, Inc., as amended May 1998*
10.10    Lease, dated December 24, 1981, between Koffolk (1949) Ltd. and Israel
         Land Administration*
10.11    Master Lease Agreement, dated February 27, 1998, between General
         Electric Capital Corp., Philipp Brothers Chemicals, Inc. and
         Phibro-Tech, Inc.*
10.12    Stockholders Agreement, dated December 29, 1987, by and between Philipp
         Brothers Chemicals, Inc., Charles H. Bendheim, Jack C. Bendheim and
         Marvin S. Sussman*
10.13    Employment Agreement, dated December 29, 1987, by and between Philipp
         Brothers Chemicals, Inc. and Marvin S. Sussman* ++
10.14    Stockholders Agreement, dated February 21, 1995, between I. David
         Paley, Nathan Z. Bistricer, James O. Herlands and Phibro-Tech, Inc., as
         amended as of June 11, 1998*
10.15    Severance Agreement, dated as of February 21, 1995, between I. David
         Paley and Phibro-Tech, Inc.* ++
10.16    Form of Severance Agreement, each dated as of February 21, 1995,
         between Philipp Brothers Chemicals, Inc. and each of Nathan Z.
         Bistricer and James O. Herlands* ++
<PAGE>

10.17    Agreement of Limited Partnership of First Dice Road Company, dated June
         1, 1985, by and among Western Magnesium Corp., Jack Bendheim, Marvin S.
         Sussman and James O. Herlands, as amended November 1985*
10.18    Philipp Brothers Chemicals, Inc. Retirement Income and Deferred
         Compensation Plan Trust, dated as of January 1, 1994, by and between
         Philipp Brothers Chemicals, Inc. on its own behalf and on behalf of
         C.P. Chemicals, Inc., Phibro-Tech, Inc. and the Trustee thereunder;
         Philipp Brothers Chemicals, Inc. Retirement Income and Deferred
         Compensation Plan, dated March 18, 1994 ("Retirement Income and
         Deferred Compensation Plan")* ++
10.18.1  First, Second and Third Amendments to Retirement Income and Deferred
         Compensation Plan.**** ++
10.19    Form of Executive Income Deferred Compensation Agreement, each dated
         March 11, 1990, by and between Philipp Brothers Chemicals, Inc. and
         each of Jack Bendheim, James Herlands and Marvin Sussman* ++
10.20    Form of Executive Income Split Dollar Agreement, each dated March 1,
         1990, by and between Philipp Brothers Chemicals, Inc. and each of Jack
         Bendheim, James Herlands and Marvin Sussman* ++
10.21    Agreement for the Sale and Purchase of the Shares of ODDA Smelteverk
         A/S and of the Business and Certain Assets of BOC Carbide Industries, a
         division of BOC Ltd., dated June 26, 1998, between The BOC Group plc
         and Philipp Brothers Chemicals, Inc.*
10.22    Supply Agreement, dated as of September 28, 1998, between BOC Limited
         and Phillip Brothers Chemicals, Inc.*
10.23    Administrative Consent Order, dated March 11, 1991, issued by the State
         of New Jersey Department of Environmental Protection, Division of
         Hazardous Waste Management, to C.P. Chemicals, Inc.*
10.24    Agreement for Transfer of Ownership, dated as of June 8, 2000, between
         C. P. Chemicals, Inc. ("CP") and the Township of Woodbridge
         ("Township"), and related Environmental Indemnification Agreement,
         between CP and Township, and Lease, between Township and CP****
10.25    Stockholders' Agreement, dated as of January 5,2000, among shareholders
         of Penick Holding Company ("PHC"), and Certificate of Incorporation of
         PHC and Certificate of Designation, Preferences and Rights of Series A
         Redeemable Cumulative Preferred Stock of PHC****
10.26    Licensing Agreement, dated January 28, 1980, between Gunness Wharf
         Limited and BOC Limited+*
10.27    Agreement, dated January 28, 1980, between BOC Limited and Gunness
         Wharf Limited+*
10.28    Subscription and Exchange Agreement, dated as of January 29, 1999 among
         I. David Paley, Nathan Z. Bistricer, James O. Herlands and Phibro Tech,
         Inc.**
10.29    General Release between Phibro-Tech, Inc. and I. David Paley dated as
         of September 1, 1999***
10.30    Separation Agreement between Phibro-Tech, Inc. and I. David Paley dated
         as of September 1, 1999*** ++
<PAGE>

10.31    Stock Purchase Agreement between Phibro-Tech, Inc. and I. David Paley
         dated as of September 1, 1999***
10.32    Consulting Agreement between Phibro-Tech, Inc. and I. David Paley dated
         as of September 1, 1999***
21.1     List of Subsidiaries****
27.1     Financial Data Schedules****

- ----------
*     Filed as an Exhibit to the Registrant's Registration Statement on Form
      S-4, No. 333-64641.
**    Filed as an Exhibit to the Registrant's Report on Form 10-Q for the
      quarter ended December 31, 1998.
***   Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
      fiscal year ended June 30, 1999.
****  Filed herewith.
+     A request for confidential treatment has been granted for portions of
      suchdocument. Confidential portions have been omitted and filed separately
      with the SEC as required by Rule 406(b).
++    This Exhibit is a management compensatory plan or arrangement.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.3
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>COMPOSITE CERTIFICATE OF INCORPORATION
<TEXT>


                                                                     Exhibit 3.3

                                    COMPOSITE
                          CERTIFICATE OF INCORPORATION
                              OF PHIBRO-TECH, INC.

      The undersigned, a natural person for the purpose of organizing a
corporation for the conduct of the business and promotion of the purposes
hereinafter stated, under the provisions of and subject to the requirements of
the laws of the State of Delaware (particularly Chapter 1, Title 8 of the
Delaware Code, identified and referred to as the General Corporation Law of
Delaware), hereby certifies that:

      FIRST: The name of the Corporation is:

                                Phibro-Tech, Inc.

      SECOND: The address of the Corporation's registered office in the State of
Delaware is 9 East Loockerman Street, Dover, County of Kent, Delaware 19901. The
name of the registered agent of the Corporation at such address is National
Corporate Research, Ltd.

      THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.

      FOURTH:

      1. Classes of Stock. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is five thousand seven
hundred and sixty (5,760), (a) divided into two classes of common stock,
consisting of (i) four thousand (4,000) shares of Class A Common Stock, par
value of one cent ($0.01) per share ("Class A Common Stock"), and (ii) seven
hundred and sixty (760) shares of Class B Common Stock, par value of one cent
($0.01) per share ("Class B Common Stock") (together, the "Common Stock") and
(b) one thousand (1,000) shares of Preferred Stock having a par value of one
cent ($0.01) per share (the "Preferred Stock").

      2. Series of Preferred Stock. The Preferred Stock may be issued from time
to time in one or more series. The Board of Directors is hereby expressly vested
with the authority to designate by resolution or resolutions the powers,
preferences and relative, participating, optional


                                       1
<PAGE>

or other rights, if any, and the qualifications, limitation or restrictions
thereof, including, without limitation, the voting powers, if any, the dividend
rate, conversion rights, redemption price or liquidation preference, or any
series of Preferred Stock, and to fix the number of shares constituting any such
series and to increase or decrease the number of shares of any such series (but
not below the number of shares thereof then outstanding).

      3. Identical Rights. Except as otherwise set forth in this article FOURTH,
all shares of Common Stock shall be identical and shall entitle the holders
thereof to the same powers, preferences and rights, and the same qualifications,
limitations and restrictions thereof.

      4. Voting Rights. Each issued and outstanding share of Class A Common
Stock shall entitle the holder of record thereof to full voting power. Except as
any provision of law may otherwise require, no share of Class B Common Stock
shall entitle the holder thereof to any voting power whatsoever, to any right to
participate in any meeting of stockholders, or to have any notice of any meeting
of stockholders.

      5. Subdivision and Combination. If the Corporation shall in any manner
subdivide (by stock split, stock dividend or otherwise) or combine (by reverse
stock split or otherwise) the outstanding shares of one class of Common Stock,
the outstanding shares of the other class of Common Stock shall be
proportionately subdivided and combined.

      6. Increase or Decrease in Number of Shares. The number of authorized
shares of any class or series of capital stock of the Corporation may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the capital
stock of the Corporation entitled to vote thereon and the holders of such class
or series, or of any other class or series of capital stock of the Corporation
shall not be entitled to vote on such amendment separately as a class or
series."


                                       2
<PAGE>

      FIFTH: The name and mailing address of the sole incorporator is:

      NAME                      MAILING ADDRESS
      ----                      ---------------
      Jill A.G. Rosenbluth      c/o Weil, Gotshal & Manges
                                767 Fifth Avenue
                                New York, New York 10153

      SIXTH: The Corporation is to have perpetual existence.

      SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholders thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.

      EIGHTH: In furtherance and not in limitation of the powers conferred by
Section 109 (a) of the General Corporation Law of Delaware, the board of
directors is expressly authorized to adopt, amend to repeal the by-laws of the
Corporation.

      NINTH: The Corporation shall indemnify, to the full extent permitted by
Section 145 of the General Corporation


                                       3
<PAGE>

Law of Delaware, as amended form [sic] time to time, all persons whom it may
indemnify pursuant thereto.

      TENTH: No Director shall be personally liable to the Corporation or any
such holder for monetary damages for breach of fiduciary duty as a director,
except for any matter in respect of which such director shall be liable under
Section 174 of Title 8 of the General Corporation Law of Delaware or any
amendment thereto or successor provision thereto or shall be liable by reason
that, in addition to any and all other requirements for such liability, he (i)
shall have breached his duty of loyalty to the Corporation or its stockholders,
(ii) shall not have acted in good faith or in failing to act, shall not have
acted in good faith, (iii) shall have acted in a manner involving intentional
misconduct or knowing violation of law or in failing to act, shall have acted in
a manner involving intentional misconduct or a knowing violation of law or (iv)
shall have derived an improper personal benefit. Neither the amendment nor
repeal of this Article TENTH nor the adoption of any provision of the
Certificate of Incorporation inconsistent with this Article TENTH, shall
eliminate or reduce the effect of this Article TENTH in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article
TENTH, would accrue or arise, prior to such amendment repeal or adoption of an
inconsistent provision. This Article TENTH shall neither eliminate nor limit the
liability of a director for any act or omission occurring prior to the adoption
of this Article TENTH.

      ELEVENTH: Election of directors need not be by written ballot.

      TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereinafter prescribed by statute, and all rights conferred by the
stockholders herein are granted subject to this reservation.

      IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of
Incorporation this 9th day of August 1990.


                                    /s/ Jill A. G. Rosenbluth
                                    -------------------------
                                    Jill A. G. Rosenbluth
                                    Sole Incorporator


                                       4

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.14
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>LIMITED LIABILITY COMPANY AGREEMENT
<TEXT>


                                                                    Exhibit 3.14

                          AMENDED AND RESTATED COMBINED

                       LIMITED LIABILITY COMPANY AGREEMENT

                                       of

                      MINERAL RESOURCE TECHNOLOGIES, L.L.C.

                                       and

                             STOCKHOLDERS AGREEMENT

                                       of

                              MRT MANAGEMENT CORP.

            This Agreement (this "Agreement"), dated as of June 30, 1999, by and
among Philipp Brothers Chemicals, Inc., a New York corporation ("PBC"), MRT
Management Corporation, a Delaware corporation (the "Company"), and the other
parties whose names are set forth on Schedule A attached hereto, and each other
person who shall become party to this Agreement (whether by counterpart,
separate signature page or otherwise) as a "Member" of Mineral Resource
Technologies, L.L.C. or as a "Stockholder" of the Company.

                              W I T N E S S E T H:

            WHEREAS, this Agreement constitutes for all purposes an amendment
and restatement of the Limited Liability Company Agreement, dated as of November
21, 1995, among the original members of Mineral Resource Technologies, L.L.C., a
Delaware limited liability company ("MRT"), as heretofore amended (the "Original
LLC Agreement"), and is being executed and delivered in connection with and as
part of the exchange by the Executive Stockholders (as hereinafter defined) of
their Membership Interests (as hereinafter defined) in MRT for shares of capital
stock of the Company, with MRT, as a result of such exchange, becoming a wholly
owned subsidiary of the Company;

            WHEREAS, consistent with the foregoing, the Stockholders (as
hereinafter defined) desire to reflect their amended and restated combined
agreement with respect to the organization of and membership interests in MRT,
and their Shares of and interests in or with respect to the Company, and their
respective rights and obligations with respect thereto;

<PAGE>

            NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:

                                    ARTICLE I

                               GENERAL PROVISIONS

      1.1 Certain Basic Definitions. For purposes of this Agreement:

            The term "Act" means the Delaware Limited Liability Company Act, as
the same may be amended from time to time.

            The term "GCL" means the General Corporation Law of the State of
Delaware, as the same may be amended from time to time.

            The term "affiliate" means with reference to any person, any
partner, officer, director, shareholder, trustee, employee or agent of such
person or any person directly or indirectly controlling, controlled by or under
common control with such person, or any person who is a member of the family of
any such partner, officer, director, shareholder, trustee, employee or agent, or
a trustee or beneficiary of any trust for the benefit of any such person or any
such partner, officer, director, shareholder, employee or agent or any such
family member.

            The term "Certificate of Formation" means the Certificate of
Formation of MRT filed under the Act, as the same may be amended or restated
from time to time.

            The term "Certificate of Incorporation" means the Certificate of
Incorporation of the Company filed under the GCL, as the same may be amended or
restated from time to time.

            The term "Executive Stockholder" shall mean each individual who
shall be or become a stockholder of the Company with the designation of, and
become a party hereto as, an "Executive Stockholder", and who in each case
continues to be a Stockholder hereunder.

            The term "Employment Agreements" shall mean the respective
Employment Agreements between MRT (or any successor thereto) and each of the
respective Executive Stockholders, as the same may be amended or restated from
time to time.


                                       2
<PAGE>

            The term "Member" means the Company, those other persons, if any,
whose names are set forth on Schedule B hereto, as the same may be amended from
time to time, and each other person, if any, who is admitted as a member of MRT
and a party hereto, and acquires a Membership Interest in MRT, with the rights,
obligations, preferences and limitations specified herein.

            The term "Membership Interest" means a Member's aggregate rights in
MRT, including, without limitation, the Member's right to shares of various
categories of Net Income and Net Loss (as such terms are hereinafter defined),
the right to receive distributions from MRT and the right to vote, grant
consents and participate in the management of MRT.

            The term "Stockholder" means each of PBC, those persons whose names
are set forth on Schedule A hereto, as the same may be amended from time to
time, and each other person, if any, who becomes a stockholder of the Company
and a party hereto.

            The term "PBC" means Philipp Brothers Chemicals, Inc., a New York
corporation.

            The term "person" means any association, corporation, estate,
general partnership, limited partnership, limited liability company, joint
venture, natural person, real estate investment trust, business or other trust,
custodian, or nominee, or any individual or other entity in its own or any
representative capacity.

            The term "Shannonhouse" means Hugh P. Shannonhouse, an individual.

      1.2 Continuation of MRT; Effect.

            With respect to MRT:

            (a) The Company hereby continues MRT as a limited liability company
under the provisions of the Act.

            (b) Except to the extent a provision of this Agreement is expressly
prohibited or ineffective under the Act, this Agreement shall govern, even when
inconsistent with, or different than, the provisions of the Act. To the extent
any provision of this Agreement is prohibited or ineffective under the Act, this
Agreement shall be considered amended to the smallest degree possible in order
to make it effective under the Act. In the event the Act is subsequently amended
or interpreted in such a way to make any provision of this Agreement that was
formerly


                                       3
<PAGE>

invalid valid, such provision shall be considered to be valid from the effective
date of such interpretation or amendment.

      1.3 Name. The name of MRT shall be "Mineral Resource Technologies,
L.L.C.". The business of MRT may be conducted upon compliance with all
applicable laws under any other name designated by the Managing Member(s) (as
hereinafter defined).

      1.4 Principal Office; Registered Agent and Office.

            (a) The principal office of MRT shall be located in such place as
shall be determined by the Managing Member(s).

            (b) The registered agent of MRT for the service of process and the
registered office of MRT shall be that person and location reflected in the
Certificate of Formation. The Managing Member(s), may, from time to time, change
the registered agent or registered office through appropriate filings with the
Secretary of State of Delaware. In the event the registered agent ceases to act
as such for any reason or the registered office shall change, the Managing
Member(s) shall promptly designate a replacement registered agent or file a
notice of change of address as the case may be.

            (c) The Managing Member(s) are authorized to cause MRT to be
qualified, formed or registered under assumed or fictitious name statutes or
similar laws in any jurisdiction in which MRT transacts business in which such
qualification, formation or registration is required or desirable. The Managing
Member(s), as authorized persons within the meaning of the Act, are authorized
to execute, deliver and file any certificates (and any amendments and/or
restatements thereof) necessary for MRT to qualify to do business in a
jurisdiction in which MRT may wish to conduct business.

      1.5 Purposes. The purposes of MRT are: (a) the providing of management,
removal and recycling services for coal fly ash and municipal solid waste ash
and related by-products and residues for and/or generated by public utilities
and other combustion and mineral by-product producers; (b) to engage in any
other lawful act or activity for which limited liability companies may be formed
under the Act; and (c) to do any and all other acts and things which may be
necessary, appropriate or incidental to the carrying out of such purposes.

      1.6 Powers of MRT. MRT shall have the power and authority to take any and
all actions necessary, appropriate, proper, advisable, convenient or incidental
to or for the furtherance of the purposes set forth in Section 1.5 hereof,
including, but not limited to the power:


                                       4
<PAGE>

            (a) to conduct its business, carry on its operations and have and
exercise the powers granted to a limited liability company by the Act in any
jurisdiction that may be necessary, convenient or incidental to the
accomplishment of the purpose of MRT;

            (b) to acquire by purchase, lease, contribution of property or
otherwise, own, hold, operate, maintain, finance, improve, lease, sell, convey,
mortgage, transfer, demolish or dispose of any real or personal property that
may be necessary, convenient or incidental to the accomplishment of the purpose
of MRT;

            (c) to enter into, perform and carry out contracts of any kind,
including, without limitation, contracts with any Member or any affiliate
thereof, or any agent of MRT necessary to, in connection with, convenient to, or
incidental to the accomplishment of the purpose of MRT;

            (d) to purchase, take, receive, subscribe for or otherwise acquire,
own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose
of, and otherwise use and deal in and with, shares or other interests in or
obligations of domestic or foreign corporations, associations, general or
limited partnerships; (including, without limitation, the power to be admitted
as a partner thereof and to exercise the rights and perform the duties created
thereby), trusts, limited liability companies (including, without limitation,
the power to be admitted as a member or appointed as a manager thereof and to
exercise the rights and perform the duties created thereby), or individuals or
direct or indirect obligations of the United States or of any government, state,
territory, governmental district or municipality or of any instrumentality of
any of them;

            (e) to lend money for any proper purpose, to invest and reinvest its
funds, and to take and hold real and personal property for the payment of funds
so loaned or invested;

            (f) to sue and be sued, complain and defend, and participate in
administrative or other proceedings, in its name;

            (g) to appoint employees and agents of MRT, and define their duties
and fix their compensation;

            (h) to indemnify any Person in accordance with the Act and to obtain
any and all types of insurance;


                                       5
<PAGE>

            (i) to cease its activities and cancel its Certificate of Formation;

            (j) to negotiate, enter into, renegotiate, extend, renew, terminate,
modify, amend, waive, execute, acknowledge or take any other action with respect
to any lease, contract or other agreement in respect of any assets and/or
operations of MRT;

            (k) to borrow money and issue evidence of indebtedness, and to
secure the same by one or more mortgages, pledges or other liens on or of the
assets of MRT;

            (l) to pay, collect, compromise, litigate, arbitrate or otherwise
adjust or settle any and all other claims or demands of or against MRT or to
hold any proceeds and/or other sums or assets against the payment of contingent
liabilities; and

            (m) to make, execute, acknowledge and file any and all documents or
instruments necessary, convenient or incidental to the accomplishment of the
purpose of MRT.

      1.7 Consolidations and Mergers. MRT may merge with, or consolidate into,
another Delaware limited liability company or other business entity (as defined
in Section 18-209(a) of the Act) upon the approval of the Managing Member(s).

      1.8 Member's Interest. A Member's Membership Interest shall for all
purposes be personal property. A Member has no interest in specific property of
MRT.

                                   ARTICLE II

                                MANAGEMENT OF MRT

      The following provisions of this Article 2 relate solely to MRT:

      2.1 Meetings of Members.

            (a) There shall be no requirement that MRT hold annual or other
meetings of Members, provided, however, that meetings of Members shall be held
to approve all acts which, pursuant to the Act, expressly require the approval
of the Members (in their capacities as Members, as opposed to their respective
capacities as manager(s) or Managing Member(s)).

            (b) Except as expressly required by the Act or by this Agreement, no
vote, consent or authorization of the Members


                                       6
<PAGE>

(acting in their respective capacities as Members as opposed to acting in their
respective capacities as managers or as Managing Member(s)) shall be required
for the taking of any action on behalf of or with respect to MRT.

            (c) Meetings of the Members may be called by the Managing Member(s)
and shall be held at such place as shall be designated from time to time by the
Managing Member(s).

            (d) Written notice (which need not state the purpose or purposes for
which the meeting is called) of any meeting of the Members, stating the place,
date and hour of the meeting, shall be mailed or given by or at the direction of
the Managing Member(s) to each Member entitled to vote at the meeting at least
two days prior to the meeting.

            (e) At any meeting of the Members, every Member entitled to vote may
vote or attend in person or by proxy.

            (f) For each one percentage point (or fraction thereof) of a
Member's MRT Percentage Interest from time to time, such Member shall be
entitled to one vote (or a corresponding fractional vote).

            (g) Except as otherwise provided in this Agreement, all limited
liability company action required to be approved by vote of the Members (acting
in their respective capacities as Members as opposed to their respective
capacities as managers or Managing Member(s)) shall be authorized if Members
whose then MRT Percentage Interests constitute, singly or in the aggregate, a
majority of the aggregate MRT Percentage Interests of all the Members at such
time (a "Majority in Interest" of all Members) affirmatively vote in favor of or
consent to said authorization. Except as provided in Section 4.1 hereof, in
every instance where this Agreement requires the consent or authorization of a
Majority in Interest of Members or of any particular group of Members, such
consent or authorization need not be in writing.

      2.2 Managing Member(s).

            (a) The business and affairs of MRT shall be managed by the Company
so long as the Company's MRT Percentage Interest shall constitute a Majority in
Interest of all Members, or in the absence thereof, by the Member or the Members
acting together whose MRT Percentage Interest(s) constitute a Majority in
Interest of all Members, and such Member(s) when so acting shall be deemed to be
the manager(s) of MRT (individually or collectively a "Manager") and shall be
referred to herein as the "Managing Member" or the "Managing Members", as the
case may be. It is expressly acknowledged that the Company, so long as its MRT


                                       7
<PAGE>

Percentage Interest constitutes a Majority in Interest of all Members, is the
sole Managing Member. The Managing Member(s) shall, except as expressly provided
in this Agreement, have the exclusive power and authority to authorize and cause
to be taken any action, in the name of and/or by or on behalf of MRT, of any
kind and to authorize and cause to be done anything and everything, in the name
of and/or by or on behalf of MRT, which the Managing Member(s) shall deem
necessary or appropriate to carry on the business and affairs of MRT.

            (b) Except as otherwise provided in this Agreement, the Managing
Member(s) shall have all of the rights, powers and obligations of a class of
managers as provided in the Act and as otherwise provided by law.

            (c) No Member shall enter into any agreement or transaction or take
any action in the name and/or by or on behalf of MRT or otherwise carry on the
business or affairs of MRT without the consent or authorization of the Managing
Member(s) or unless such Member is itself the Managing Member.

            (d) Each Managing Member shall be an authorized agent of MRT for the
purpose of MRT's business, and all authorized actions of the Managing Member(s)
shall bind MRT.

            (e) The Managing Member(s) shall be entitled to designate one or
more persons from time to time to act as authorized officers or agents of MRT,
and to execute, deliver and perform agreements, instruments and documents in the
name and on behalf of MRT (each an "Authorized Agent"), consistent with the
powers and authority of the Managing Member(s). In furtherance of the foregoing,
the Managing Member shall be entitled to appoint a Chief Executive Officer, a
President and one or more Vice Presidents (including Executive, Senior and/or
Assistant Vice Presidents), and such other officers and agents as are desired.
The Chief Executive Officer, President and each Vice President shall be an
Authorized Agent of MRT and shall have the following powers and authority:

                  (i) The Chief Executive Officer shall be the chief executive
officer of MRT.

                  (ii) The President shall be the chief operating officer of
MRT.

                  (iii) Each Vice President shall have such powers and perform
such duties as the Managing Member(s) may prescribe. Unless the Managing
Member(s) shall otherwise determine, in the absence or inability of the
President to act, the Vice Presidents (in the order determined by the Managing


                                       8
<PAGE>

Member(s), or if there be no such determination, in the order of appointment of
Executive Vice Presidents, then of Senior Vice Presidents, then of Vice
Presidents, and finally of Assistant Vice Presidents) may perform all the duties
and may exercise any of the powers of the President.

            (f) The Managing Member(s) may remove any Authorized Agent at any
time for cause or without cause.

            (g) Persons dealing with MRT are entitled to rely conclusively upon
the power and authority of the Managing Member(s) and/or any Authorized
Agent(s), and upon the certificate of the Managing Member(s) and/or any
Authorized Agent(s), to the effect that such Managing Member(s) is (are) then
acting as manager(s) of MRT or that such Authorized Agent(s) is (are) acting as
Authorized Agent(s), as the case may be, with authority to act by and/or in the
name or on behalf of MRT.

            (h) During the continuance of MRT, the Managing Member(s) shall
devote such time and effort to MRT as the Managing Member(s) may determine in
their sole discretion. Nothing contained in this Section 2.2 or elsewhere in
this Agreement shall preclude the Managing Member(s), or any affiliate thereof,
from acting as a director, officer or employee of any corporation, member of any
limited liability company, a trustee of any trust, an executor or administrator
of any estate, a partner of any partnership, or an administrative official of
any other entity, or from receiving any compensation or participating in any
profits in connection with any of the foregoing.

      2.3 Limitations on Personal Liability.

            (a) The Members shall not have any liability for any obligations or
liabilities of MRT whatsoever except if and then only to the extent expressly
provided in the Act.

            (b) No Managing Member, nor any affiliate of any Managing Member,
shall have any personal liability to MRT or any of the Members for damages for
any breach of duty as a manager of MRT or as a Managing Member or as an
Authorized Agent, as the case may be, and/or when acting with the consent of the
Managing Member(s); provided that the foregoing provision shall not eliminate or
limit the liability of any Managing Member if a judgment or other final
adjudication adverse thereto establishes that acts or omissions thereto were in
bad faith or involved intentional misconduct or a knowing violation of law or
that such person personally gained in fact a financial profit or other advantage
to which such person was not legally entitled thereto.


                                       9
<PAGE>

            (c) No Member or Managing Member shall be personally liable for the
return or payment of all or any portion of the capital of or profits allocable
to or loans to MRT by any Member (or any successor, assignee or transferee
thereof), it being expressly agreed that any such return of capital or payment
of profits made pursuant to this Agreement, or any payment or repayment in
respect of any such loan, shall be made solely from the assets of MRT (which
shall not include any right of contribution from any Member or Managing Member).

      2.4 Expenses. The Managing Member(s) shall have the right to incur, or
cause MRT to incur, costs, fees and expenses for MRT (including fees and
expenses of attorneys and accountants) in connection with the formation,
organization, management, financing, administration and operation of MRT, and
MRT shall reimburse the Managing Member(s) or the provider of such services
therefor in accordance with the provisions of Section 6.4 hereof.

      2.5 Tax Matters Member. The Managing Member(s) shall be, or may designate
from time to time one Member to be, the tax matters partner of MRT for purposes
of Subchapter C of Chapter 63 of Subtitle F of the Code.

      2.6 Inclusion. Except as otherwise stated, references in this Agreement to
one or more Members shall be deemed to include Managing Member(s).

                                   ARTICLE III

                                     SHARES

      The following provisions of this Article 3 relate solely to the Company:

      3.1 Introductory Provisions.

            (a) "Basic Shares" shall mean those Shares of capital stock of the
Company designated as "Basic Shares" held by or issued to Stockholders whether
or not vested at the time. Basic Shares shall include, without limitation, any
shares of the Company's voting Class A Common Stock, par value $.001 ("Class A
Common Stock"), and non-voting Class B Common Stock, par value $.001 ("Class B
Common Stock" and together with the Class A Common Stock, "Common Shares" or
"Common Stock"), and any class or series of the Company's Preferred Stock, par
value $.001 ("Preferred Stock"). The rights, preferences and entitlements of the
Basic Shares shall be set forth from time to time in the Certificate of
Incorporation.


                                       10
<PAGE>

            (b) The "Equity Investments" of a Stockholder shall be the sum of
the amounts which such Stockholder invests or is deemed to have invested in the
equity of the Company in respect of Shares as provided in Section 3.3 hereof.

            (c) The "Code" shall mean the Internal Revenue Code of 1986, as
amended and as the same may be amended or restated from time to time.

            (d) A "Company Year" shall mean the fiscal year of the Company for
federal income tax purposes.

            (e) "Phantom Shares" shall mean those "phantom share" units
allocated to Stockholders pursuant to this Agreement and governed by Article 3
and Section 6.1 hereof.

            (f) [intentionally omitted]

            (g) The term "Initial Public Offering" shall mean the initial
underwritten public offering, pursuant to an effective registration statement
under the Securities Act of 1933, as amended, of equity securities of the
Company or, if PBC then owns at least a majority of the capital stock of the
Company (the "Controlling Stockholder"), PBC or a Parent Entity of PBC, as the
case may be.

            (h) "Stockholder Compensation" shall mean the amount paid or accrued
by the Company and/or any of its subsidiaries (including MRT), to or for any of
the Stockholders in connection with their employment with or services to or for
the Company and/or any of its subsidiaries (including MRT), whether pursuant to
any of their respective Employment Agreements, Section 6.4 hereof, or otherwise,
and whether in the nature of severance or termination of employment compensation
or otherwise, which is not treated for income tax purposes as deductible
compensation expense or as guaranteed payments.

            (i) [intentionally omitted]

            (j) "NIBT" for any fiscal period shall mean the consolidated net
income of the Company and its subsidiaries (including MRT), for such fiscal
period as determined in accordance with generally accepted accounting principles
("GAAP"), less, on a consolidated basis, all Stockholder Compensation paid or
accrued for such fiscal period (to the extent not otherwise deducted in
computing net income under GAAP), plus , to the extent included in the
calculation of such net income for such fiscal period, the sum of the income and


                                       11
<PAGE>

franchise taxes, if any, of the Company and its subsidiaries for such fiscal
period plus unusual and non-recurring losses (as determined in accordance with
GAAP) of the Company and it subsidiaries for such fiscal period, minus unusual
and non- recurring gains (as determined in accordance with GAAP) of the Company
and its subsidiaries for such fiscal period, in each case under this clause (ii)
net of tax effect, if any.

            (k) A "Parent Entity" of PBC shall mean any corporation owning,
directly or through intermediate subsidiaries thereof, at least 50% of the then
issued and outstanding shares of capital stock of PBC.

            (l) The "Percentage Interest" of any Stockholder shall mean from
time to time the percentage which the sum of the number of Vested Basic Common
Shares, plus the number of Vested Phantom Shares, plus the number of Unvested
Basic Common Shares, then held by or allocated to such Stockholder represents of
the aggregate number of Vested Basic Common Shares, Vested Phantom Shares and
Unvested Basic Common Shares then held by or allocated to all Stockholders.

            (m) "Proportionate Share" of a Stockholder shall mean that
proportion which the number of Common Shares and Phantom Shares then held by or
allocated to such Stockholder, as the case may be, bears to the aggregate number
of Common Shares and Phantom Shares then held by or allocated to all
Stockholders.

            (n) [intentionally omitted]

            (o) "Shares" shall mean all of the shares of each class of capital
stock of the Company that may be held of record and/or beneficially by any of
the Stockholders from time to time, including any share of capital stock
acquired pursuant to a stock split, stock dividend, combination or shares,
recapitalization, merger, consolidation or sale or exchange of shares or assets
of or by the Company, including any Basic Shares, and in all events excluding
Phantom Shares.

            (p) "Unrecovered Equity Investment" shall mean, as to a particular
Stockholder at a particular time, the excess, if any, of the aggregate Equity
Investments of such Stockholder made or deemed made pursuant to this Article 3
(including amounts deemed invested pursuant to Section 3.3(a)) up to such time
over all amounts theretofore distributed or paid by the Company in respect of
such Stockholder's Basic Shares, in all cases other than in respect of accrued
dividends on any shares of Preferred Stock. .

            (q) The "Unvested Basic Common Shares" of any Stockholder from time
to time shall mean those Common Shares then


                                       12
<PAGE>

held by such Stockholder which are not and have not become designated Vested
Basic Shares of such Stockholder pursuant to this Agreement.

            (r) The "Unvested Phantom Shares" of any Stockholder from time to
time shall mean those Phantom Shares then allocated to such Stockholder which
are not and have not become designated as Vested Phantom Shares of such
Stockholder pursuant to this Agreement.

            (s) The "Vested Basic Common Shares" of any Stockholder from time to
time shall mean Basic Shares, which are not shares of any class or series of
preferred stock issued by the Company, held by such Stockholder which are or
shall become designated as Vested Basic Shares pursuant to this Agreement.

            (t) The "Vested Basic Shares" of any Stockholder from time to time
shall mean Basic Shares held by such Stockholder which are or shall become
designated as Vested Basic Shares pursuant to this Agreement.

            (u) The "Vested Phantom Shares" of any Stockholder from time to time
shall mean those Phantom Shares allocated to such Stockholder which are or shall
become Vested Phantom Shares of such Stockholder pursuant to this Agreement.

            (v) The "Vested Shares" of any Stockholder from time to time shall
mean those Basic Shares then held by such Stockholder which are or have become
designated as Vested Basic Shares pursuant to this Agreement plus those Phantom
Shares allocated to such Stockholder which have become Vested Phantom Shares of
such Stockholder pursuant to this Agreement.

      3.2 Issuance, Allocation and Vesting of Shares

            (a) Each Stockholder shall be deemed to have issued or to have
allocated to it or him the respective numbers of shares of Preferred Stock,
Vested Basic Common Shares, Unvested Basic Common Shares, Vested Phantom Shares
and Unvested Phantom Shares set forth on Schedule A hereto, as the same may be
amended from time to time; provided that no Shares shall be issued to any of the
Executive Stockholders until such time as each of the Executive Stockholders
commences full-time employment with the Company or MRT pursuant to his
respective Employment Agreement. All shares of Preferred Stock issued by the
Company shall be deemed to be Vested Basic Shares. Unless otherwise determined
by the Company's Board of Directors (the "Board of Directors"), no Executive
Member nor any other person, other than PBC or any transferee of PBC, shall be
issued any shares of Common Stock other than Class B Common Stock.


                                       13
<PAGE>

            (b) All Basic Shares issued to PBC shall be deemed Vested Basic
Shares for all purposes.

            (c) A portion of the Basic Common Shares issued to a particular
Executive Stockholder (other than in respect of an Equity Investment by such
Executive Stockholder after November 21, 1995) shall become Vested Basic Common
Shares if and only at such time, and only from and after the time, that the
Executive Stockholder shall have completed the applicable number of full years
of continuous employment service with the Company or MRT as indicated below:

                                          Portion of Basic Common
                                          Shares which shall become
Years of Employment Service               Vested Basic Common Shares
- ---------------------------               --------------------------

      One (1)                                         33-1/3%
      Two (2)                                         70%
      Three (3)                                       100%

In other words, and by way of example, if an Executive Stockholder completes one
(1) year, two (2) years or three (3) years of continuous employment service with
the Company, then 33-1/3%, 70% or 100%, respectively, of the Basic Common Shares
then issued to him shall be considered Vested Basic Common Shares, and 66-2/3%,
30% and 0%, respectively, of the Basic Common Shares then issued to him shall be
henceforth considered Unvested Basic Common Shares.

            (d) If an Executive Stockholder's employment with the Company or MRT
shall terminate, and such termination shall be a termination for "Cause" (as
such term is defined in his Employment Agreement), then all of his Shares and
Phantom Shares other than Vested Shares shall be and be deemed for all purposes
canceled, relinquished and terminated and shall be surrendered to the Company.

            (e) If an Executive Stockholder's employment with the Company or MRT
shall terminate and such termination shall be a termination due to the
Executive's Stockholder's death or "Disability" (as such term is defined in his
Employment Agreement), or a termination in the context of "Inadequate Company
Performance" (as such term is then defined in his Employment Agreement), then
all of his Shares and Phantom Shares other than Vested Shares shall be and be
deemed for all purposes canceled, relinquished and terminated and shall be
surrendered to the Company.


                                       14
<PAGE>

            (f) If an Executive Stockholder shall elect to terminate his
employment with the Company or MRT (a "Voluntary Termination") prior to the end
of the then scheduled expiration date of the "Initial Term" (as such term is
then defined under his Employment Agreement), or any then current "Additional
Term" (as such term is then defined in his Employment Agreement), then all of
his Shares and Phantom Shares other than Vested Shares shall be and be deemed
for all purposes canceled, relinquished and terminated and shall be surrendered
to the Company.

            (g) If an Executive Stockholder's employment with the Company shall
be terminated by the Company or MRT under any circumstance other than one
referred to in paragraph (d), (e) or (f) above, all of his then Unvested Basic
Shares shall become Vested Basic Shares, and all of his Unvested Phantom Shares
which have not previously become Vested Phantom Shares shall be deemed canceled,
relinquished and terminated.

            (h) In the event any of the Unvested Basic Shares or any of the
Unvested Phantom Shares of an Executive Stockholder (other than any of the
Shares or Phantom Shares issued or allocated originally to Shannonhouse) shall
be canceled, relinquished and terminated under any of the circumstances set
forth in clauses (d) through (g) above (the "Terminated Shares" or "Terminated
Phantom Shares", as the case may be), then a number of Unvested Basic Shares
equal to 50% of the number of said Terminated Shares which were Unvested Basic
Shares, and a number of said Unvested Phantom Shares equal to 50% of the number
of Terminated Phantom Shares which were Unvested Phantom Shares, shall be issued
or allocated among the then remaining Executive Stockholders who are then in the
full-time employ of the Company or MRT, in proportion to the respective numbers
of Common Shares held by and the respective numbers of Vested and Unvested
Phantom Shares then allocated to such remaining Executive Stockholders. It is
expressly understood that no such issuance or allocation of Shares or Phantom
Shares corresponding to Terminated Shares or Terminated Phantom Shares shall be
made in the event of the termination of employment of Shannonhouse. Without
limiting any rights which MMC or the Company may have whether under Section 3.4
hereof, or otherwise, the Company may elect to reserve for issuance or grant to
other or future executives of the Company or any of its subsidiaries (including
MRT) a number of Shares and Phantom Shares equal to 50% of the aggregate number
of Terminated Shares and Terminated Phantom Shares (the "Reserved Shares" and
"Reserved Phantom Shares", respectively); it being further understood that, by
virtue of a termination of employment prior to the date hereof of a former
employee of MRT, the number of


                                       15
<PAGE>

Reserved Shares and Reserved Phantom Shares as of the date hereof are deemed to
be 1.5 shares of Class B Common Stock and 0.9476 Phantom Shares, respectively.

                  (i) If NIBT for a particular Company Year shall be such that
it meets any of the NIBT Performance Targets set forth below (and as the same
shall be increased as hereinafter provided), the portion of the Unvested Phantom
Shares which are originally allocated to any particular Executive Stockholder
who is then in the full-time employ of the Company or MRT (and which are not
canceled, relinquished or terminated under any of the circumstances set forth
above), corresponding to the applicable NIBT Performance Target achieved, shall
become Vested Phantom Shares of such Executive Stockholder in accordance with
the following cumulative vesting percentages set forth below, so that once a
portion of an Executive Stockholder's Unvested Phantom Shares become Vested
Phantom Shares, no additional portion of his remaining Unvested Phantom Shares
will become Vested Phantom Shares unless and until a higher NIBT Performance
Target is achieved for a subsequent Company Year, and then only to extent of the
additional percentage portion to which such Performance Target shall apply:

                                          Cumulative Portion of Unvested
      NIBT                                Phantom Shares Which Shall
Performance Target                        Become Vested Phantom Shares
- ------------------                        ----------------------------

At least $3,000,000,but
      less than $4,000,000                            50%

At least $4,000,000, but
      less than $5,000,000                            62.5%

At least $5,000,000, but
      less than $6,000,000                            75%

At least $6,000,000, but
      less than $7,000,000                            87.5%

At least $7,000,000, or more                          100%

            For each Company Year ending on or after June 30, 2001, the NIBT
Performance Targets set forth above shall be increased by five percent (5%) of
the corresponding NIBT Performance Targets then in effect. By way of example, if
NIBT for a Company Year (ending before June 30, 2001) shall equal $5,100,000,
then 75% of the Unvested Phantom Shares originally allocated to a particular
Executive Stockholder who is then in


                                       16
<PAGE>

the full-time employ of the Company or MRT (and which are not canceled,
relinquished or terminated) shall be considered Vested Phantom Shares, and no
additional portion of such Unvested Phantom Shares shall become Vested Phantom
Shares until NIBT for any subsequent Company Year (ending before June 30, 2001)
equals or exceeds $6,000,000 (in which event an additional 12.5% of such
original Unvested Phantom Shares shall become Vested Phantom Shares); and if, in
this example, the subsequent Company Year in question were the Company Year
ending June 30, 2002, then no additional portion of such Unvested Phantom Shares
(in excess of said 75%) shall become Vested Phantom Shares unless for said year
NIBT were to equal or exceed $6,615,000.

            (j) If the Company, or, if PBC is then the Controlling Stockholder,
PBC or a Parent Entity of PBC, shall consummate an Initial Public Offering prior
to November 21, 1999 and none of the Unvested Phantom Shares shall then have
become Vested Phantom Shares, then 50% of such Unvested Phantom Shares then
allocated to each of the then Executive Stockholders who shall then be in the
full-time employ of the Company (and which were not theretofore canceled,
relinquished or terminated) shall become Vested Phantom Shares, and the
remaining balance of all Unvested Phantom Shares shall be deemed canceled,
relinquished and terminated. If the Company, or, if PBC is then the Controlling
Stockholder, PBC or a Parent Entity of PBC, shall consummate an Initial Public
Offering at any other time, or after any of the Unvested Phantom Shares shall
have become Vested Shares, then all Unvested Phantom Shares which shall not have
theretofore become Vested Phantom Shares shall be deemed canceled, relinquished
and terminated.

      3.3 Equity Investments; Stockholder Loans.

            (a) Each of the parties hereto acknowledges that, prior to the date
hereof, PBC and/or its affiliates have loaned to the Company in excess of
$3,000,000, and that all loans by PBC and/or any of its affiliates remain
outstanding, have not been repaid and represent bonafide indebtedness of the
Company senior in all respects to any interest in or rights in respect of shares
of capital stock of the Company.

            (b) If, (i) at any time PBC and/or any of its affiliates shall (in
its sole discretion) have previously loaned to the Company or MRT, on an
interest-free basis or made Equity Investments in the Company or MRT of not less
than $3,000,000 in the aggregate (the "Threshold Investment"), and (ii) the
aggregate amount of Unrecovered Equity Investment, plus the remaining balance of
all interest-free loans to the Company or


                                       17
<PAGE>

MRT by PBC and/or any of its affiliates, shall then equal or exceed $3,000,000,
and PBC shall reasonably determine that funds (in addition to the Threshold
Investment), are required by the Company or MRT after taking into account such
institutional credit facilities as the Company shall be able to obtain without
any requirement of personal guarantees by any of the Stockholders or any of
their affiliates, PBC shall be entitled to give notice from time to time to the
Stockholders setting forth the amount so required (the "Additional Equity
Investments") and each such Stockholder shall have within 60 days after the
giving of such notice to make Additional Equity Investments in the Company of
its or his Percentage Interest of such amount. In consideration for such Equity
Investments, each Stockholder so investing shall be entitled to receive shares
of Preferred Stock having an aggregate liquidation preference equal to the
aggregate amount to be so invested by such Stockholder (and having such other
terms as PBC and the Board of Directors of the Company shall mutually agree
upon), plus a number of Vested Basic Common Shares reasonably established by PBC
and the Company based on the relationship of the aggregate amount to be so
invested in relation to the then fair market value of the Company and the
aggregate number of Common Shares then held by all stockholders of the Company
(any such new Shares to be so issued in respect of such Additional Equity
Investments being referred to herein as "Additional Vested Shares"). For
purposes hereof, it is hereby acknowledged that the conditions specified in
clauses (i) and (ii) have been met as of the date hereof.

            (c) If a Stockholder fails to contribute his or its Percentage
Interest of any Additional Equity Investments (the "Uninvested Amount") when
required under clause (b) above, the other Stockholders (the "Investing
Stockholders") may (but shall not be required to) invest such Uninvested Amount
and shall be issued the Additional Vested Shares corresponding to such
Uninvested Amount. The fraction of the Uninvested Amount which may be
contributed by any particular Investing Stockholder shall be determined on the
basis of the then Percentage Interest of each Investing Stockholder in relation
to the aggregate Percentage Interests of all such Investing Stockholders, all as
established by notices of election to make such applicable portions of the
contributions, followed by the making of the applicable portions of the
Additional Equity Investment within sixty (60) days after the expiration of the
original sixty (60) days period.

            (d) Anything to the contrary contained herein notwithstanding, in
lieu of making any Equity Investment, PBC shall be entitled to determine, if it
deems appropriate, to


                                       18
<PAGE>

advance, or to cause one or more of its affiliates to advance, as loan(s) to the
Company such funds, in addition to or in lieu of any Threshold Investment, as it
shall reasonably determine the Company or MRT to require and as it shall be
willing in its discretion to so advance or to have so advanced, each such loan
to be on such terms as to repayment and otherwise, and to bear interest at such
rate, as PBC shall reasonably establish from time to time, each such loan being
herein called a "Stockholder Loan." Notwithstanding the foregoing, the amount of
first Stockholder Loans of PBC or any of its affiliates (whether prior to or
after the date hereof) which in the aggregate, when added to Equity Investments
of PBC or any of its affiliates, do not exceed $1,000,000 shall bear no
interest, and thereafter, the interest rate charged by PBC or any of its
affiliates to the Company or MRT for any Stockholder Loans shall not exceed the
highest rate of interest from time to time charged to PBC or any Parent Entity
of PBC by any of its then institutional lender(s).

            (e) Anything to the contrary contained in this Agreement
notwithstanding, any and all Equity Investments which may be made by PBC, Jack
C. Bendheim, or any person, trust or entity affiliated with or related to PBC or
Mr. Bendheim or any member(s) of his family (each a "Bendheim Party"), shall be
governed by this Section 3.3 and not by Section 5.3 of this Agreement.

            (f) The Company, shall be entitled, without the consent or approval
of any Stockholder, to amend Schedule A hereto from time to time to reflect any
issuance of Shares and/or other matters contemplated by this Section 3.3.

      3.4 New Stockholders. The Company, may, without the consent of any
Stockholder, issue or permit the transfer of Shares of its capital stock to any
other Person(s). The terms and conditions, including the Equity Investment, of
each such issuance shall be fixed by the Board of Directors at the time of such
admission; provided, however, that if any Shares are issued to any Person not
theretofore a Stockholder, the terms and conditions of such issuance shall not
materially reduce the rights and entitlements of any then Stockholder without
such Stockholder's consent thereto, unless such reduction is a reduction
affecting all the Stockholders on a pro rata basis. The Company shall be
entitled, without the consent or approval of any Stockholder, to amend Schedule
A hereto from time to time to reflect the issuance or transfer of Shares and/or
any person becoming a party to this Agreement (if such issuance or transfer is
permitted under the provisions of this Agreement) and to reflect any
corresponding changes to the Shares or Phantom Shares owned by or allocated
among the Stockholders.


                                       19
<PAGE>

                                   ARTICLE IV

                    MRT CAPITAL; UNITS; PERCENTAGE INTERESTS;
                        INCOME AND LOSSES; DISTRIBUTIONS;
                      DISSOLUTIONS; LIQUIDATIONS; TRANSFERS

      4.1 Introductory Provisions.

            (a) "Units" shall mean those Units allocated to Members pursuant to
this Article 4.

            (b) The "Capital Contributions" of a Member shall be the sum of the
amounts which such Member contributes to the capital of the Company as provided
in Section 4.3 hereof.

            (c) The "Code" shall mean the Internal Revenue Code of 1986, as
amended, and as the same may be amended or restated from time to time.

            (d) A "MRT Year" shall mean the fiscal year of the Company for
federal income tax purposes.

            (e) The term "guaranteed payments" shall mean guaranteed payments
within the meaning of Code Section 707(c).

            (f) "Member Compensation" shall mean the amount paid or accrued by
MRT to or for any of the Members in connection with their employment with or
services to or for MRT, and whether in the nature of severance or termination of
employment compensation or otherwise, which is not treated for income tax
purposes as deductible compensation expense or as guaranteed payments.

            (g) "Net Income" or "Net Loss" for any MRT Year shall mean the net
income or loss of MRT for such year, determined in accordance with Code Section
703(a), increased by any income exempt from federal income tax and decreased by
any expenditure of MRT described in Code Section 705(a)(2)(B), or treated as
such pursuant to Regulations Section 1.704-1(b)(2)(iv)(i). Without limiting the
generality of the foregoing, Net Income and Net Loss shall reflect any gains or
losses realized by MRT on the sale, exchange or other disposition of MRT assets
and all deductible MRT expenses, including, without limitation, (i) any
deduction or amortization of expenses incurred in connection with the formation
and organization of MRT, (ii) any guaranteed payments, (iii) any taxes imposed
on MRT, (iv) interest payable by MRT, and (v) general operating expenses of MRT.
Net Income and Net Loss


                                       20
<PAGE>

shall be determined net of items of MRT gross income, gain, loss, or deduction
specially allocated pursuant to Sections 4.6(a) and 4.10.

            (h) The "MRT Percentage Interest" of any Member shall mean from time
to time the percentage which the number of Units (other than Unvested Contingent
Units) then allocated to such Member bears to the aggregate number of Units
(other than Unvested Contingent Units) then allocated to all Members.

            (i) "MRT Proportionate Share" of a Member shall mean that proportion
which the number of Units then allocated to such Member bears to the aggregate
number of Units then allocated to all Members.

            (j) "Regulations" shall mean the income tax regulations promulgated
under the Code, as such regulations may be amended from time to time.

            (k) "Unrecovered Capital" shall mean, as to a particular Member at a
particular time, the excess, if any, of the aggregate Capital Contributions of
such Member pursuant to this Article 4 up to such time over all amounts
theretofore distributed in respect of such Member's interest in the Company
pursuant to Section 4.9(b)(iii) hereof.

            (l) The "Unvested Contingent Units" of a Member from time to time
shall mean those Units then allocated to such Member which are then, or then
similar in form and substance to, "Unvested Contingent Units" under the terms of
the Original LLC Agreement, or are designated as such by the Managing Member(s)
upon the original issuance or allocation thereof.

      4.2 Issuance, Allocation and Vesting of Units

            Each Member shall be allocated the respective number of Units set
forth on Schedule B hereto, as the same may be amended from time to time. As of
the date hereof, MMC is the sole Member and accordingly the sole Managing
Member.

      4.3 Contributions; Member Loans.

            (a) The Company has contributed to the capital of MRT and/or lent to
MRT (on an interest-free basis) a minimum of $1,000,000 (the "Threshold MRT
Investment").

            (b) Anything to the contrary contained herein notwithstanding, in
lieu of making any contribution of capital,


                                       21
<PAGE>

the Company shall be entitled to determine, if it deems appropriate, to advance,
or to cause one or more of its affiliates to advance, as loan(s) to MRT such
funds, in addition to or in lieu of any Threshold MRT Investment, as it shall
reasonably determine MRT to require and as it shall be willing in its discretion
to so advance or to have so advanced, each such loan to be on such terms as to
repayment and otherwise, and to bear interest at such rate, as the Company shall
reasonably establish from time to time, each such loan being herein called a
"Member Loan." Notwithstanding the foregoing, the amount of the Company's first
Member Loans which in the aggregate, when added to the Company's capital
contributions, do not exceed $1,000,000 shall bear no interest, and thereafter,
the interest rate charged by the Company to MRT for any Member Loans shall not
exceed the highest rate of interest from time to time charged to the Company or
PBC or any Parent Entity of PBC by any of its then institutional lender(s).

            (c) The Managing Member(s) shall be entitled, without the consent or
approval of any other Member, to amend Schedule B hereto from time to time to
reflect any allocations of Units and/or other matters contemplated by this
Section 4.3.

      4.4 New Members. The Managing Member(s), acting on behalf of MRT, may
admit one or more additional Members at any time into MRT. The terms and
conditions, including the capital contribution, of each such admission shall be
fixed by the Managing Member(s) at the time of such admission. The Managing
Member(s) shall be entitled, without the consent or approval of any other
Member, to amend Schedule B hereto from time to time to reflect the admission of
any additional Members and to reflect any corresponding changes to the Units
allocated among the Members.

      4.5 Capital Accounts.

            The provisions of Sections 4.5 through 4.8 and 4.10 shall apply to
the extent MRT is treated as a separate entity taxable as a partnership for
federal, state or local income tax purposes.

            (a) A separate capital account ("Capital Account") shall be
established and maintained for each Member in accordance with the substantial
economic effect and special rule provisions of Regulations Sections
1.704-1(b)(2) and 1.704-2. The Members' respective Capital Accounts shall be
kept separate and apart from the books in which MRT maintains records of MRT's
adjusted tax basis in its assets and the Members' adjusted tax bases in their


                                       22
<PAGE>

MRT interests. Each Member's Capital Account shall be (i) increased by the
amount of such Member's Capital Contributions and any Net Income and items of
gross MRT income and gain allocated to such Member pursuant to this Article 4
and (ii) reduced by the amount of all distributions made to such Member in
respect of its interest in MRT, whether pursuant to this Article 4 or otherwise,
and any Net Loss and items of gross MRT deduction and loss allocated to such
Member pursuant to this Article 4. In addition, the Members' Capital Accounts
are to be adjusted in accordance with Section 4.5(b) hereof, if applicable.
Allocations under Section 4.5(d) hereof shall affect the Members' Capital
Accounts only to the extent provided in such Section. Distributions and/or
payments to Members constituting guaranteed payments shall not be considered a
distribution in respect of such Member's interest in MRT, and will not affect
such Member's Capital Account other than by reason of the effect of such
guaranteed payments on the Net Income of MRT allocated to such Member.

            (b) The assets of MRT shall be revalued on the books of MRT to equal
their fair market values in accordance with Regulations Section
1.704-1(b)(2)(iv)(f) at the following times: (i) the acquisition of an
additional interest in MRT by any new or existing Member in exchange for more
than a de minimis contribution to the capital of MRT; (ii) the distribution by
MRT to a Member of more than a de minimis amount of Company assets (other than
money) as consideration for an interest in MRT; and (iii) the liquidation of MRT
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided,
however, that adjustments pursuant to clauses (i) and (ii) above shall be made
only if required by and in the sole discretion of the Managing Member(s). Upon a
revaluation of MRT's assets pursuant to this Section 4.5(b), and before giving
effect to any of the then applicable events discussed in any of clauses (i)
through (iii) above, the fair market values of such assets shall be determined
in accordance with Section 4.14 hereof and each Member's Capital Account shall
be increased or decreased in accordance with Regulations Section
1.704-1(b)(2)(iv)(f).

            (c) When property is reflected in the Capital Accounts at a book
basis different from the basis of such property for federal income tax purposes,
all Net Income, Net Loss and items of gross MRT income, gain, deduction and loss
with respect to such property shall be determined for purposes of adjusting
Capital Accounts based on the book basis of such property in accordance with
Regulations Section 1.704-1(b)(2)(iv)(g).


                                       23
<PAGE>

            (d) For federal income tax purposes, all gain, loss, depreciation or
amortization with respect to property which is reflected in the Capital Accounts
at a basis different from the tax basis of such property shall be allocated
among the Members in a manner that takes into account such difference in
accordance with the principles of Code Section 704(c) and Regulations Section
1.704-3. Allocations pursuant to the previous sentence are solely for federal,
state, and local income tax purposes and shall not affect or in any way be taken
into account in computing a Member's Capital Account or share of distributions
pursuant to any provision of this Agreement. Similarly, items of tax credit and
tax credit recapture shall be allocated to the Members in accordance with
Regulations Section 1.704-1(b)(4)(ii), but shall not be credited or charged to
their respective Capital Accounts except to the extent required under
Regulations Section 1.704-1(b)(2)(iv)(j).

      4.6 Allocations of Net Income. Items of MRT gross income (but not gain)
and Net Income for each MRT Year shall be allocated as follows:

            (a) First, items of MRT gross income (but not gain) shall be
allocated to each Member to the extent that the aggregate amount of Member
Compensation paid or accrued to such Member for such MRT Year and all prior MRT
Years exceeds the items of MRT gross income previously allocated to such Member
pursuant to this Section 4.6(a).

            (b) Second, any Net Income (after giving effect to the allocations
under Section 4.6(a) above) shall be allocated to the Members in the ratio of
their respective, MRT Percentage Interests.

      4.7 Allocations of Net Loss. Net Loss for each MRT Year shall be allocated
as follows:

            (a) First, to the Members in the ratio of their respective MRT
Percentage Interests to the extent of their respective positive Capital Account
balances.

            (b) Second, to the Members in the ratio and to the extent of their
respective then outstanding Member Loans (if any).

            (c) Thereafter, to the Members in the ratio of their respective MRT
Percentage Interests.


                                       24
<PAGE>

      4.8 Limitation on Net Loss Allocations. Notwithstanding any provisions of
this Article 4 to the contrary, and in accordance with Section
1.704-1(b)(2)(ii)(d) of the Regulations, no Member shall be allocated Net Loss
to the extent such allocation would cause or increase a deficit balance in such
Member's Capital Account in excess of such Member's then Permissible Capital
Account Deficit (as defined in Section 4.10(a)(iii) below). Solely for purposes
of the limitation in the previous sentence, the Members' Capital Accounts shall
be deemed reduced by the reasonably expected adjustments, allocations and
distributions described in paragraphs (4), (5), and (6) of Regulations Section
1.704-1(b)(2)(ii)(d). Allocations of Net Loss that would be made to a Member but
for such limitation shall be made to the other Members to the extent not
inconsistent with such limitation.

      4.9 Distributions.

            (a) Except as provided in clause (b)(i) and clause (b)(ii) of this
Section 4.9 or in Section 4.17 hereof, no distributions, whether in respect of
the Net Income of MRT or otherwise, shall be made to the Members, except if, as
and then only to the extent, determined from time to time by the Managing
Member(s)in the sole and absolute discretion of the Managing Member(s).

            (b) Distributions, other than distributions upon the liquidation of
MRT, and guaranteed payments, if and when made, shall be made as follows and in
the following order of priority:

                  (i) After the end of each calendar year, to the extent
permissible pursuant to financing agreements to which MRT is now or hereafter
may become a party, MRT shall distribute to each Member the aggregate amount by
which federal income taxes that would be payable by an individual in the highest
tax bracket applicable from time to time to an individual (and taking into
account the character of such income), with respect to the taxable income and
gains of MRT allocated to such Member for the MRT Year ending in such calendar
year and for all prior MRT Years, and after giving effect to all deductions and
losses of MRT allocated to such Member for such MRT Year and prior MRT Years, if
applicable (and in each case applying such highest applicable tax brackets
thereto), exceeds all amounts previously distributed (or deemed distributed) to
such Member pursuant to clause (i) above or this clause (ii). Subject to the
limitations set forth above, the Company will, where reasonably practicable,
make distributions required by this clause (ii) (and not made or deemed made
under clause (i) above), to the extent of the greater


                                       25
<PAGE>

of (x) 75% thereof, and (y), if for any calendar year Net Income is reasonably
expected to exceed by more than 10% the Net Income for the immediately preceding
calendar year, and if tax rates are not reduced, 110% of the amount distributed
to such Member in respect of such preceding calendar year pursuant to this
clause (ii), on a quarterly basis to facilitate the payment of quarterly
estimated income taxes by the Members, subject to adjustment at or following the
end of such calendar year, as MRT may deem appropriate (including the right of
MRT to require prompt repayment of amounts distributed under this sentence in
excess of that ultimately determined to be required to be distributed for such
calendar year).

                  (ii) Thereafter, distributions to the Members will be made in
the ratio of their respective amounts of Unrecovered Capital, up to the amount
of each such Member's Unrecovered Capital.

                  (iii) Thereafter, if all Member Loans are repaid in full,
distributions to the Members will be made in the ratio of their respective
positive Capital Account balances.

            (c) Distributions in connection with the liquidation of the Company
shall be made as provided in Section 4.17 hereof.

      4.10 Regulatory Allocations and Related Matters.

            (a) The following allocations shall be made in accordance with and
to the extent required by Regulations Sections 1.704-2(f), 1.704-2(i), and
1.704-1(b)(2)(ii)(d). References in this Section 4.10 to "partner" and
"partnership" are intended to relate to the characterization of the Members and
MRT, respectively, for income tax purposes.

                  (i) If there is a net decrease in partnership minimum gain
during a MRT Year (determined in accordance with Regulations Section
1.704-2(d)), items of MRT gross income and gain shall be allocated to the
Members as quickly as possible in the amounts and manner described in Section
1.704-2(f) of the Regulations. This clause (i) is intended to comply with the
minimum gain chargeback requirement relating to any nonrecourse liability of MRT
set forth in Regulation Section 1.704-2(f) and shall be interpreted consistently
therewith.

                  (ii) If there is a net decrease in partner nonrecourse debt
minimum gain during a MRT Year (determined in accordance with Regulation Section
1.704-2(i)(3)), items of MRT gross income and gain shall be allocated as quickly
as possible


                                       26
<PAGE>

to those Members who had a share of such partner nonrecourse debt minimum gain
at the end of the preceding MRT Year (determined in accordance with Regulation
Section 1.704-2(i)(5)) in the amounts and manner described in Regulation Section
1.704-2(i)(4). This clause (ii) is intended to comply with the minimum gain
chargeback requirement relating to nonrecourse debt set forth in Regulation
Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

                  (iii) If a Member unexpectedly receives an adjustment,
allocation or distribution described in Section 1.704- 1(b)(2)(ii)(d) of the
Regulations which creates or increases a deficit balance in his or its Capital
Account in excess of the sum (with respect to each Member, such Member's
"Permissible Capital Account Deficit") of such Member's share of the partnership
minimum gain (as determined at the end of such MRT Year in accordance with
Regulation Section 1.704-2(g)), such Member's share of the partner nonrecourse
debt minimum gain (as determined at the end of such MRT Year in accordance with
Regulation Section 1.704-2(i)(3)), and such Member's deficit Capital Account
restoration obligation under this Agreement, if any, then items of MRT gross
income and gain shall be allocated to such Member as quickly as possible to
eliminate such excess, as required by Regulation Section 1.704-1(b)(2)(ii)(d),
provided that an allocation pursuant to this clause (iii) shall be made only if
and to the extent such excess would exist after all other allocations provided
for in this Section 4.10 have been tentatively made for such Company Year as if
this clause (iii) were not in this Section 4.10. This clause (iii) is intended
to comply with the qualified income offset requirement set forth in Regulation
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

                  (iv) Notwithstanding anything in this Agreement to the
contrary, all items of MRT gross deduction and loss attributable to a partner
nonrecourse debt (as defined in Regulations Section 1.704-2(b)(4)) shall be
allocated to the Member or Members that bear the economic risk of loss for such
partner nonrecourse debt in accordance with Regulations Section 1.704-2(i)(1).

            (b) The allocations required by Section 4.8 hereof and in clause
(a)(iii) of this Section 4.10 (the "QIO Allocations") are intended to comply
with certain requirements of the Regulations. It is the intent of the Members
that, to the extent permissible under the Regulations, all QIO Allocations shall
be offset either with other QIO Allocations or with special allocations of other
items of MRT gross income, gain, loss or


                                       27
<PAGE>

deduction pursuant to this clause (b). Therefore, notwithstanding any other
provision of this Article 4 (other than clause (a) of this Section 4.10), the
Managing Member(s) shall make such offsetting special allocations of MRT gross
income, gain, loss or deduction in whatever manner the Managing Member(s) shall
reasonably determine appropriate so that, after such offsetting allocations are
made, each Member's Capital Account balance is, to the extent possible, equal to
the Capital Account balance such Member would have had if the QIO Allocations
were not part of the Agreement and all MRT items were allocated pursuant to
Sections 4.6 and 4.7 of this Agreement.

            (c) The provisions of this Agreement shall be amended and the manner
in which tax items are allocated shall be modified to the extent necessary to
comply with Regulations Sections 1.704-1(b) and 1.704-2; provided, however, that
any such amendment shall be made only if it is not likely to have a material
effect on the amounts distributable to any Member pursuant to Section 4.17 of
the Agreement upon the liquidation of MRT.

      4.11 Determination by Managing Member(s) of Certain Matters.

            (a) All matters concerning the determination and allocation among
the Members of the amounts to be determined and allocated pursuant to Article 4
hereof, including the taxes thereon and accounting procedures applicable
thereto, shall be determined by the Managing Member(s) in all cases unless
expressly otherwise provided for by the provisions of this Agreement.

            (b) The Managing Member(s) may, without the consent of any other
Member, amend the provisions of this Agreement relating to the manner in which
tax items are allocated to the extent necessary to comply with Regulations
Sections 1.704-1(b) and 1.704-2; provided, however, that any such amendment may
be made only if it is not likely to have a material effect on the amounts
distributable to any Member pursuant to Section 4.17 hereof upon the liquidation
of MRT.

      4.12 No Interest on Capital. Except as provided in this Agreement, no
Member shall be entitled to receive any interest on or in respect of any amount
allocated to such Member's Capital Account or on or in respect of any
distribution or withdrawal therefrom or thereof permitted under this Agreement.


                                       28
<PAGE>

      4.13 Withdrawals by Members. Except as provided in this Agreement, no
Member shall have the right to withdraw any funds or other assets from MRT or
such Member's Capital Account without the prior written consent of the Managing
Member(s).

      4.14 Fair Market Value Determinations. For purposes of determining the
fair market value of securities and other assets pursuant to this Article 4,
such securities or assets shall be valued as of the then most recent practicable
date prior to the event for which such valuation is made by the Managing
Member(s) or by an appraiser selected by the Managing Member(s).

      4.15 Grounds for Dissolution. MRT shall be dissolved and its affairs shall
be wound up upon the earliest to occur of the following: (a) December 31, 2045,
(b) upon the election of the Managing Member(s), (c) except as otherwise
provided in this Agreement, the death, insanity, bankruptcy, dissolution or
withdrawal of a Managing Member or the occurrence of any other event which
terminates the continued membership of a Managing Member in the Company, and (d)
subject to the terms of this Agreement, any other event causing the dissolution
of MRT under the Act, unless in the case of clauses (c) and (d) immediately
above, only, within 90 days after such event, a Majority in Interest of the
remaining Members agree in writing to continue the business of MRT.

      4.16 No Right to Cause Dissolution. Notwithstanding the provisions of
Section 4.15 hereof, no Member shall have the right to retire, resign or
withdraw (as such terms are used in the Act) as a Member or otherwise cause,
voluntarily or involuntarily, a dissolution of MRT other than as expressly
permitted pursuant to clause (b) of said Section 4.15, or in connection with a
transfer permitted pursuant to this Article 4, and any such action or any such
dissolution caused by a Member, other than as so permitted, shall constitute a
breach by such Member of its obligations under this Agreement.

      4.17 Liquidation. Upon dissolution of MRT, the Managing Member(s) shall
within a reasonable time cause MRT's assets to be liquidated in an orderly and
business-like manner so as not to involve undue sacrifice, and take the
following actions and make the following distributions out of the assets of MRT
in the following manner and order:

            (a) first, pay or establish adequate reserves for all debts and
liabilities of MRT to persons other than Members and expenses of liquidation in
the order of priority provided by law;


                                       29
<PAGE>

            (b) then, establish any reserves which the Managing Member(s)
reasonably deems necessary to provide for contingent liabilities or obligations
of MRT; provided, however, that, at the expiration of such period of time as the
Managing Member(s) may reasonably deem advisable, the balance of any reserves
shall be paid or distributed as provided in clauses (c) through (e) of this
Section 4.17 (in the order of priority thereof), it being agreed that such
reserves may, at the election of the Managing Member(s), be paid over to an
independent escrow agent to be held by it as escrowee for the purpose of
disbursing such reserves in payment of any of the aforesaid contingencies;

            (c) then, pay out of the balance of such assets, if any, the
outstanding balance of all remaining debts and liabilities of MRT to the Members
to whom the same are owed, pro rata;

            (d) then pay the Members who have Unrecovered Capital, pro rata, to
the extent of their respective amounts of Unrecovered Capital, the balance, if
any, of such assets;

            (e) then, pay the Members, pro rata, to the extent of their
respective positive Capital Account balances (determined after giving effect to
all allocations called for by this Article 4), the balance, if any, of such
assets; and

            (f) then pay the balance, if any, of such assets to the Members in
the ratio of their respective MRT Percentage Interests.

Except as otherwise expressly provided herein, upon such distribution, no Member
shall have any rights or claims against MRT or any other Member with respect to,
and notwithstanding any imbalance in, the respective Capital Accounts of the
Members.

      4.18 Deferral of Distribution. Notwithstanding the provisions of Section
4.17(c) immediately above, if, upon dissolution of MRT, the Managing Member(s)
shall reasonably determine that sale of part or all of MRT's assets would cause
undue loss to the Members, the Managing Member(s) may, in order to avoid such
losses, defer the liquidation of, and withhold from distribution for a
reasonable time, any assets of MRT.

      4.19 No Restoration Obligations. No Member shall have any obligation to
restore any deficit balance in its capital account following the "liquidation"
(as such term is defined in Regulations Section 1.704-1(b)(2)(ii)(g)) of its
interest in MRT.


                                       30
<PAGE>

      4.20 No Right to Partition. The Members, on behalf of themselves and their
heirs, personal representatives, successors and assigns, hereby specifically
renounce, waive and forfeit all rights, whether arising under contract or
statute or by operation of law, to seek, bring or maintain any action in any
court of law or equity for partition of MRT, or any interest which is considered
to be MRT assets, regardless of the manner in which title to any such assets may
be held.

      4.21 Restrictions on Transfer. A Member shall not have the right to sell,
assign, pledge, transfer or otherwise dispose of all or any part of its
Membership Interest (each, a "Transfer"), and no Member shall have any right to
substitute a transferee in its place as a Member, except as expressly consented
to by the Managing Member(s) and then only upon such terms and conditions as the
Managing Member(s) shall specify, subject, however to the provisions of this
Article 4. Any such unpermitted purported Transfer shall be null and void ab
initio and of no force or effect. Notwithstanding the foregoing, the Company and
any transferees or successors in interest thereto designated by it shall be
expressly permitted to Transfer its (their) Membership Interests and to cause
any such transferee or successor to be admitted as a Member and as a party
hereto.

                                    ARTICLE V

                       RESTRICTIONS ON TRANSFER OF SHARES

      5.1 Restrictions on Transfer. A Stockholder shall not have the right to
sell, assign, pledge, transfer or otherwise dispose of all or any part of its
Shares or its Phantom Shares (each, a "Transfer"), and no Stockholder shall have
any right to substitute a transferee in its place as a Stockholder, except as
expressly consented to by the Board of Directors and then only upon such terms
and conditions as the Board of Directors shall specify, subject, however to the
provisions of this Article 5. Any such unpermitted purported Transfer shall be
null and void ab initio and of no force or effect. PBC and any transferees or
successors in interest thereto designated by it shall be expressly permitted to
Transfer its (their) Shares and any such transferee or successor shall be
entitled to become a party to this Agreement and to be a Stockholder so long as
it complies with the provisions of Section 5.2 below.


                                       31
<PAGE>

      5.2 Tag-Along Right and Drag-Along Right in Certain Third Party Sales.

            (a) If PBC desires to Transfer, in a transaction which shall be a
bona fide transaction on arm's length terms, any Minimum Portion (as hereinafter
defined) of the Shares held by it, or all of the Shares held by it if such
Shares are a Minimum Interest (as hereinafter defined), to a Person other than
any of its affiliates (a "Third Party") (such a Transfer being referred to as a
"Third Party Sale"), the Executive Stockholders shall have, under the
circumstances described below, the right or obligation to participate in such
Third Party Sale by selling all or a portion (as applicable) of the Shares and
Phantom Shares held by or allocated to such Executive Stockholders, in each case
on the terms and conditions provided herein. A "Minimum Portion" of PBC's
Shares, or a "Minimum Interest," as the case may be, means a portion of, or all
of, such Shares corresponding to a number of Vested Shares equal to at least 35%
of the aggregate number of Vested Basic Common Shares and Unvested Basic Common
Shares then held by or allocated to all Stockholders.

            (b) PBC shall notify the Executive Stockholders as soon as
practicable of the intent to engage in a Third Party Sale and shall provide the
Executive Stockholders with written notice (a "Sale Notice") at least 15
business days prior to the proposed closing of any Third Party Sale. Such Sale
Notice shall set forth: (i) the name and address of the Third Party, (ii) the
portion of the Shares of each class proposed (based on the number of Vested
Basic Shares of each class represented by each such portion of PBC's Shares) to
be sold (such portion being referred to herein as a the "Sale Interest") to the
Third Party and the applicable percentage (the applicable "Percentage") that
such Sale Interest represents (based on the number of such Vested Basic Shares
of each class) of each class of Vested Basic Shares held by PBC, (iii) whether
PBC is exercising its right under this Agreement to require the other Executive
Stockholders to sell all or a portion of their Shares in accordance with Section
5.2(d) below, (iv) the proposed amount and form of consideration to be paid for
such Sale Interest by the transferee and the terms and conditions of payment,
and (v) the proposed closing date for the Third Party Sale.

            (c) (i) If any Executive Stockholder wishes to sell all or a portion
of such Executive Stockholder's Shares and Vested Phantom Shares (excluding for
this purpose any Unvested Phantom Shares) in the Third Party Sale (a "Tag-Along
Participant"), the Tag-Along Participant shall provide written notice to PBC
within 10 business days of the date the Sale Notice


                                       32
<PAGE>

is given (the "Tag-Along Acceptance Notice"). The Tag-Along Acceptance Notice
shall indicate that the Tag-Along Participant wishes to participate in the Third
Party Sale and the portion of the Shares and Vested Phantom Shares thereof which
the Tag-Along Participant proposes to sell in the Third Party Sale. If the Sale
Interest represents less than 50% of the aggregate Shares issued to all of the
Stockholders, a Tag-Along Participant shall be entitled to sell in the Third
Party Sale the portion of his Shares and Vested Phantom Shares (excluding for
this purpose any Unvested Phantom Shares) not to exceed (x) the number of each
class of Vested Basic Shares and Vested Phantom Shares then issued or allocated
to the Tag-Along Participant (treating Vested Phantom Shares for this purpose
only as if they were Class B Stock Common Shares), multiplied by (y) the
applicable Percentage. If the Sale Interest represents 50% or more of the
aggregate Shares allocated to all of the Stockholders (a "Change of Control
Transaction"), a Tag-Along Participant shall be entitled to sell in the Third
Party Sale the portion of his Shares and Vested Phantom Shares equal to 100% of
the number of Vested Shares and Unvested Basic Shares and Vested Phantom Shares
(but not the Unvested Phantom Shares) then held by or allocated to the Tag-Along
Participant. Any sale of the Shares and Vested Phantom Shares of a Tag-Along
Participant in a Third Party Sale shall be first out of such Participant's
Vested Basic Shares, and, to the extent that the applicable Percentage reflected
in the Shares of any class sold by such Tag-Along Participant in such Third
Party Sale is of more than the aggregate number of Vested Basic Shares of such
class of such Tag-Along Participant, shall next be out of such Tag-Along
Participant's Unvested Basic Shares, and next out of such Tag-Along
Participant's Vested Phantom Shares. The sale of Shares and Vested Phantom
Shares by any Tag-Along Participant in a Third Party Sale shall be for the same
consideration per Share for the applicable class of Shares to be sold (and
treating Vested Phantom Shares as if they were shares of Class B Common Stock),
as the case may be, and on the same other terms and conditions, as the sale of
the Sale Interest by PBC to such Third Party; provided, however, that, if such
Sale is pursuant to a Change of Control Transaction and the consideration
payable includes an installment note obligation of the purchaser, then, the Tag
Along Participant shall be entitled to elect in the Tag Along Notice to receive,
in lieu thereof, payment in two equal installments, the first at the closing and
the second on the first anniversary thereof, in an amount such that the present
value of such two payments equals the present value of such installment note
obligation, all as reasonably determined by PBC For purposes of computing
present value, the discount factor shall be the then prevailing yield for
corporate bonds with a remaining term to maturity similar to the


                                       33
<PAGE>

installment note obligation term and a rating similar to that which could
reasonably be expected for such installment note obligation if a rating therefor
were obtained, as published by The Wall Street Journal or, if not available
therein, another recognized source for such information, all as reasonably
determined by PBC

                  (ii) If no Tag-Along Acceptance Notice is received by PBC
within the 10 business day period specified above, PBC shall have the right,
during the period of 180 days following expiration of such 10 business day
period, to Transfer the Sale Interest without any participation by the Executive
Stockholders, to the Person(s) identified in the Sale Notice for the Specified
Price (as hereafter defined) or any lower price and on the same terms and
conditions as set forth in the Sale Notice or any terms which are not
economically superior thereto. For purposes of this Section 5.2, the term
"Specified Price" shall mean the sum of (i) the amount of cash consideration per
Share for the applicable class or series of Shares to be sold (and treating
Vested Phantom Shares as if they were shares of Class B Common Stock), as the
case may be, included in the price set forth in the Sale Notice and (ii) the
then present market value of any non-cash consideration per Share of such class
or series included in the price set forth in the Sale Notice (as determined by a
nationally recognized accounting or investment banking firm selected by PBC.

                  (iii) If one or more Tag-Along Acceptance Notices are received
by PBC within the 10 business day period specified above, then the portion of
the Shares which PBC and each Tag-Along Participant shall be entitled to sell at
the closing of the Third Party Sale shall be (A) the aggregate Shares of each
class (and treating Phantom Shares as if they were shares of Class B Common
Stock) the Third Party is willing to purchase, multiplied by (B) a fraction, the
numerator of which is equal to the applicable Percentage reflected in the
portion of the Shares of such class proposed to be sold by PBC or such Tag-Along
Participant, as the case may be, and the denominator of which is equal to the
aggregate Percentages reflected in the portion of the Shares of such class
proposed to be sold by PBC and all Tag-Along Participants, in each case subject
to the fifth sentence of Section 5.2(c)(i) above.

            (d) PBC, at its option, may require that the Executive Stockholders
sell the applicable Percentage(s) of their respective Shares and Phantom Shares
to the Third Party as part of the Third Party Sale (including, for purposes of
this paragraph (d), the Executive Stockholders' Unvested Phantom


                                       34
<PAGE>

Shares). If PBC so requires the Executive Stockholders to sell the applicable
Percentage(s) of their respective Shares and Phantom Shares to the Third Party
as part of the Third Party Sale, then such Executive Stockholders shall sell the
applicable Percentage(s) of their respective Shares and Phantom Shares to the
Third Party on the same terms and conditions as the sale by PBC of the Sale
Interest to such Third Party and as if the fifth sentence of Section 5.2(c)(i)
above applied thereto.

            (e) The closing of a Third Party Sale involving Tag-Along
Participants shall take place on such date and at such time as PBC specifies to
the Tag-Along Participants on not less than three (3) business days prior
notice.

            (f) At any closing of the Transfer of Shares and/or Phantom Shares
pursuant to this Agreement by an Executive Stockholder to a Third Party in
connection with a Third Party Sale, each party Transferring all or any portion
of such party's Shares and/or Phantom Shares (each, a "Transferor") shall
Transfer, convey and deliver all right, title and interest in and to such Shares
being Transferred by such party, which shall constitute (and, at the closing,
the Transferor shall certify the same in writing) good and unencumbered title to
such Shares and/or Phantom Shares, free and clear of all Liens, subject to the
restrictions of this Agreement. In addition, each Transferor shall deliver to
the party to which such Shares and/or Phantom Shares are being Transferred (the
"Transferee") at such closing any opinions of counsel (relating to
transferability) and certificates that the Transferee may reasonably request.

            (g) If any Executive Stockholder Transfers all or any portion of
such Executive Stockholder's Shares and/or Phantom Shares in a Third Party Sale,
such Executive Stockholder shall be responsible for his Proportionate Share of
the liabilities and obligations (including, for example, liabilities and
obligations for indemnification amounts and post-closing purchase price
adjustments) of the Executive Stockholders who participate in the Third Party
Sale (and which are not paid by the Company), in each case, other than any such
liability or obligation which is particular to PBC and from which such Executive
Stockholder derives no benefit. In addition, in the event any such Transfer by
an Executive Stockholder gives rise (in the opinion of counsel to the Company
chosen by the Board of Directors) to an obligation on the part of the Company or
MRT to deduct and withhold income taxes for which the Executive Stockholder is
liable as a result of such Transfer, the Company and MRT shall have a lien
against the proceeds of such Transfer for the amount of such withholding
obligations. To the extent the cash proceeds of such Transfer


                                       35
<PAGE>

immediately due on such Transfer are insufficient for this purpose, the Company
and MRT shall be entitled to deduct and withhold the necessary amount from any
amounts then and in the future owing to the Executive Stockholder by the Company
or MRT.

      5.3 Participation Right.

            (a) Subject to the limitations and exceptions set forth herein, if
the Board of Directors shall determine to allow a Third Party to make an Equity
Investment in the Company and become a Stockholder thereof (a "Third Party
Investment"), at least ten (10) days prior to any such proposed Third Party
Investment to which a participation right applies as aforesaid, the Company
shall give to each then Executive Stockholder a written notice of such proposed
Third Party Investment, together with particulars thereof, including the
proposed amount and form of consideration to be paid by, and the numbers and
class of Shares to be issued to, the Third Party and the terms and conditions of
payment, and, in such notice, the Company shall offer to each then Executive
Stockholder, subject to consummation of such proposed investment, for twenty
(20) days commencing on the giving of such notice, at the same price per Share
and on the same terms and conditions, the opportunity to purchase from the
Company all or a portion of such Shares as would, if such participation right
were exercised, preserve the Percentage Interest of such Executive Stockholder.
Anything contained herein to the contrary notwithstanding, the written notice of
the proposed Third Party Investment to which a participation right applies as
aforesaid need not be given prior to such proposed Third Party Investment so
long as such offer is sent within five (5) days thereafter and remains open for
a twenty (20) day period from receipt thereof.

            (b) If an Executive Stockholder elects to accept such offer, such
Executive Stockholder shall so signify by written notice to the Company given
within such ten-day period, indicating the portion of the Shares offered in
consideration for the proposed Third Party Investment which such Executive
Stockholder elects to purchase, and deliver the purchase price to the Company
upon or within ten (10) days after the proposed closing date of the Third Party
Investment. If the amount of the proposed Third Party Investment or any of the
price or the material terms or conditions thereof is changed, the Company shall
notify each then Executive Stockholder of any such change and such Executive
Stockholder shall have the later to expire of five (5) days after such Executive
Stockholder's receipt of such notice of change or twenty (20) days after receipt
of the initial offer within which to accept the initial offer as so changed or


                                       36
<PAGE>

to rescind or modify such Executive Stockholder's prior acceptance.

            (c) The provisions of this Section 5.3 shall not be applicable to
the sale or issuance by the Company of Shares and other securities of the
Company issued or issuable upon conversion or exercise of any interests,
securities, options or rights theretofore sold, issued or granted by the
Company, Shares or other securities issued pursuant to a merger, consolidation
or reorganization of the Company, Shares or other securities of the Company
issued for consideration other than cash, Shares or options, warrants or like
securities, granted or issued to employees of or consultants to the Company (or
any subsidiary thereof) reflecting the allocation of a number of Shares not
exceeding 10% of the total number of Shares then held by all stockholders of the
Company, Shares or other securities issued in connection with any split or
combination or reclassification of the Shares or other securities of the Company
not affecting relative equity interests, or securities issued in connection with
an Initial Public Offering.

      5.4 Purchase and Sale of Shares upon Termination of Employment. The
following provisions shall be applicable in the event that an Executive
Stockholder's employment with the Company or MRT is terminated (such terminated
Executive Stockholder being referred to herein as a "Terminated Stockholder",
with all references in this Section 5.4 to a "Terminated Stockholder" being
deemed to include such Terminated Stockholder's guardian or other legal
representatives, if any, and transferees under the laws of descent and
distribution, if any, unless the context otherwise requires).

            (a) Right to Purchase. If an Executive Stockholder's employment with
the Company and MRT shall terminate for any reason whatsoever, the Company shall
have the right, but not the obligation, to purchase all, but not less than all,
of the Shares of the Terminated Stockholder (such Shares being referred to
herein as the "Call Shares") at a price equal to the Appraised Value (as
hereinafter defined) thereof as of the date such Terminated Stockholder's
employment with the Company and MRT is terminated (such date being referred to
herein as the "Termination Date"). The rights of the Company set forth in this
subsection may be exercised by a written notice from the Company to the
Terminated Stockholder at any time no later than ninety (90) days following the
Termination Date (the "Call Notice"). The Call Notice shall specify the time
(which shall not be more than twenty-one (21) days following the determination
of the Appraised Value) and place for closing the purchase of the Call


                                       37
<PAGE>

Shares. The purchase of such Call Shares shall take place in accordance with,
and at the time and place specified in, the Call Notice.

            (b) Obligation to Purchase. If an Executive Stockholder's employment
with the Company and MRT shall terminate for any reason other than Cause (as
then defined in such Stockholder's Employment Agreement) or a voluntary
termination by such Executive Stockholder, the Terminated Stockholder shall have
the right, but not the obligation, to cause the Company to purchase all, but not
less than all, of the Shares of the Terminated Stockholder (the same being
referred to herein as the "Put Shares") and at a price equal to the Appraised
Value thereof as of the Termination Date. The rights of the Terminated
Stockholder set forth in this subsection may be exercised by a written notice
from the Terminated Stockholder to the Company at any time no later than ninety
(90) days following the Termination Date (the "Put Notice"). The Put Notice
shall specify the time (which shall not be more than twenty-one (21) days
following the determination of the Appraised Value) and place for closing the
purchase of the Put Shares. The purchase of such Put Shares shall take place in
accordance with, and at the time and place specified in, the Put Notice.

            (c) Determination of Appraised Value; Terms of Payment; Other
Provisions.

                  (i) For purposes hereof, the "Appraised Value" of any Call
Shares or Put Shares to be purchased and sold pursuant to the provisions of this
Section 5.4 shall be equal to the fair value thereof, taking into account only
the Vested Shares held by and the Vested Phantom Shares allocated to the
Terminated Stockholder, and not attributing any value to any Unvested Basic
Shares or any Unvested Phantom Shares theretofore held by or allocated to such
Terminated Stockholder, such value to be determined by an independent appraiser
mutually agreeable to the Company and the Terminated Stockholder, which
appraiser shall be appointed within fifteen (15) days following the date of the
Call Notice or Put Notice, as the case may be. The Company and the Terminated
Stockholder shall use their best efforts to cause the appraiser to determine the
Appraised Value within thirty (30) days from the date of such appointment. If
the Company and the Terminated Stockholder are unable to agree upon an
independent appraiser, then the Company and the Terminated Stockholder shall
each promptly select a recognized independent appraiser, and each of the
appraisers so appointed shall be instructed to jointly select, within seven (7)
days of their appointment, a third independent appraiser, who shall then be
instructed to determine


                                       38
<PAGE>

such fair value within fifteen (15) days after his appointment. The
determination of Appraised Value in accordance with this Section 5.4 shall be
final and binding upon the Company and the Terminated Stockholder. The cost of
determining the Appraised Value in the case of the purchase and sale of Call
Shares the purchase and sale of Put Shares shall be borne 50% by the Company and
50% by the Terminated Stockholder.

                  (ii) The purchase price for the purchase and sale of the Call
Shares or the Put Shares, as the case may be, pursuant to the provisions of this
Section 5.4 shall be paid out of the net cash flow of the Company and MRT to the
extent that such purchase price balance plus the purchase price balance
resulting from any other purchase by the Company of Shares, plus all amounts
payable in respect of Phantom Shares by reason of the occurrence of any Payment
Event(s) (as hereinafter defined), does not exceed 50% of such net cash flow. In
the event the Company shall have any such purchase price payment obligations
and/or Phantom Share payment obligations to two or more Stockholders, the amount
payable out of such net cash flow for any given Company Year shall be allocated
pro rata among such Stockholders. The remaining purchase price balance for any
such purchase and sale shall be due and payable on the fifth (5th) anniversary
of the closing date of the purchase, and shall bear interest at a rate equal to
the rate announced from time to time by the principal lending bank to the
Company, PBC or PBC's Parent Entities, as its prime rate, or in the absence
thereof at the prime rate published in The Wall Street Journal or an analogous
publication selected by the Board of Directors.

                  (iii) On the closing date of the purchase, such Terminated
Stockholder shall pay to the Company any and all liabilities and monetary
obligations of the Terminated Stockholder to the Company, and the Company shall
be entitled to deduct from the purchase price payable hereunder the full amount
of such liabilities and obligations, as well as any income tax which the Company
is obligated (in the opinion of counsel chosen by the Board of Directors) to
deduct and withhold as a result of the subject purchase and sale. At the
closing, the Terminated Stockholder shall transfer, convey and deliver all
right, title and interest in and to such Call Shares or Put Shares being
transferred by such party, which shall constitute (and, at the closing, the
Terminated Stockholder shall certify the same in writing) good and unencumbered
title to such Call Shares or Put Shares, free and clear of all Liens. In
addition, the Terminated Stockholder shall deliver to the Company at such
closing any opinions of counsel (relating to transferability) and certificates
that the Company may reasonably request.


                                       39
<PAGE>

                  (iv) In each case where the Company is entitled or required to
exercise an option to purchase Call Shares or Put Shares pursuant to this
Section 5.4, each Stockholder (including the Terminated Stockholder) shall, at
the request of the Company, take such action as is necessary and lawful to
permit the Company's exercise of such option and such purchase, including, but
not limited to, the incurrence of indebtedness and, if applicable, the creation
of legally available surplus (whether by reduction of capital, revaluation of
assets or otherwise).

                                   ARTICLE VI

                            CERTAIN OTHER AGREEMENTS

      6.1 Phantom Shares.

            (a) The grant by the Company of Phantom Shares to the Executive
Stockholders is governed by this Section 6.1. The number of Phantom Shares
allocated to each Executive Stockholder are as set forth on Exhibit A hereto
opposite the name of such Executive Stockholder. Such Phantom Shares shall be
Unvested Phantom Shares until they have become Vested Phantom Shares pursuant to
Article 3 hereof. Each Phantom Share constitutes a "phantom share unit"
corresponding to one share of Class B Common Stock and shall, upon and only upon
such Phantom Share becoming a Vested Phantom Share, entitle the grantee thereof
to a non-transferable right to receive from the Company the following:

                  (i) If, as and when a cash dividend or distribution shall be
made to the holders of the Company's Common Stock, but only if no Payment Event
shall have occurred, cash in an amount equal to the per share amount of such
dividend or distribution.

                  (ii) Upon the termination of the grantee's employment with the
Company and MRT, or any other event which would entitle the grantee to have his
Shares purchased by the Company pursuant to this Agreement (other than pursuant
to Section 6.2 hereof)(a "Payment Event"), an amount (the "Redemption Amount")
equal to the sum of (i) the fair market value per share of Common Stock on the
date of issuance thereof (the "Base Value"), plus (ii) the applicable Phantom
Share Percentage (as hereinafter defined), multiplied by the amount, if any, by
which the fair market value per share of Common Stock on the date of the Payment
Event (the "Payment Event Value"), exceeds the Base Value; provided, however,
that if the Base Value


                                       40
<PAGE>

exceeds the Payment Event Value, then the Redemption Amount shall be equal to
the Payment Event Value; in all cases as appropriately adjusted for stock
splits, stock dividends and stock combinations affecting the Common Stock
between the date of such issuance and the date of the Payment Event. The fair
market value per share of Common Stock on the date in question shall be
determined, on a fully diluted basis, treating as if they were issued and
outstanding shares of Common Stock all share equivalents of each Unvested
Phantom Share and each other phantom share or stock appreciation right that may
be granted by the Company (that is, reflecting the aggregate number of shares of
Common Stock to or upon which each phantom share or stock appreciation right is
equivalent or based). Such fair market value shall be determined in a manner
consistent with the determination of Appraised Value in Section 5.4(c) hereof,
unless the Common Stock is then publicly traded, in which event fair market
value will be determined as the most recent closing market price per share of
the Common Stock. The "Phantom Share Percentage" applicable to a particular
grantee shall be 108% (or 111% if such grantee is at the time of such payment a
full time resident of the State of Georgia). Upon the occurrence of the first
Payment Event to occur after the date hereof with respect to a particular
grantee of Phantom Shares, the entitlement of the grantee to payment in respect
thereof pursuant to this Section 6.1(a)(ii) shall be deemed the constitute the
sole right of payment in respect of such Phantom Shares and such Phantom Shares
shall thenceforth be deemed canceled and terminated. No Phantom Share, whether
or not a Vested Phantom Share, shall constitute or entitle the grantee to any
share of capital stock of the Company or any right as a stockholder of the
Company in respect thereof. If the Company shall so require, Phantom Shares
shall be evidenced by separate written agreements between the Company and the
grantee thereof consistent with the provisions of this Section 6.1(a) and
otherwise in form and substance reasonably required by the Company.

            (b) Any payment required to be made by the Company in respect of
Phantom Shares by reason of the occurrence of a Payment Event shall be made in a
manner consistent with the provisions of clauses (ii) and (iii) of Section
5.4(c) hereof as if in respect of the purchase price for Call Shares or Put
Shares thereunder.

            (c) At any time after the date hereof, the Company shall have the
right to issue in cancellation thereof for all or any portion of any Vested or
Unvested Phantom Shares granted by it, shares of Class B Common Stock equal in
number to the number of such Phantom Shares to be so canceled. Upon any such
issuance


                                       41
<PAGE>

and cancellation, Shares issued in respect of Vested Phantom Shares shall be
deemed Vested Basic Shares and Shares issued in respect of Unvested Phantom
Shares shall be deemed Unvested Basic Shares and shall only become Vested Basis
Shares at such time as the corresponding Unvested Phantom Shares so cancelled
would have become Vested Phantom Shares pursuant to this Agreement. In the event
that the issuance of Shares pursuant to this paragraph (c) results in income tax
liability to such Executive Stockholder to whom such shares shall be issued, the
Company will offer to such Executive Stockholder a loan in a principal amount
equal to 50% of such tax liability, with the amount of such tax liability being
mutually determined by the accountants for the Company and the accountants for
such Executive Stockholder. Any such loan pursuant to this paragraph (c) shall
bear interest at the lowest rate permitted by the Code and the Regulations to
avoid the imputation of interest, with all principal thereon being repayable on
the earlier of (i) the third anniversary of its issuance and (ii) the
termination of such Executive Stockholder's employment with the Company, and
with accrued interest to be payable quarterly. The terms of such loan and of the
notes and instruments evidencing the same shall provide for the grant to the
Company of a first priority security interest in and pledge of the shares of
capital stock of the Company issued to the holder of the shares in question as
security for the loan, and shall otherwise be in form and substance reasonably
required by the Company.

            (d) Any purchase or sale of Phantom Shares contemplated by Article 5
of this Agreement shall be deemed to include the purchase and sale of all
entitlements of the grantee to payment in respect thereof, and upon such
purchase or sale, the selling grantee shall cease to have any right to payment
in respect thereof.

      6.2 Exchange for Equity of Public Entity. In the event that PBC is then
the Controlling Stockholder, and in the event that the Board of Directors of PBC
or any Parent Entity of PBC determines to sell to the public equity securities
of PBC or a Parent Entity of PBC (the entity whose equity securities are to be
sold being referred to herein as the "Public Entity") pursuant to an Initial
Public Offering, then, if the Initial Public Offering shall be consummated, the
Executive Stockholders shall have the right and the obligation to exchange their
Shares and Phantom Shares for common share equity in the Public Entity (the
"Exchange") in accordance with the following:

            (a) In order for the Exchange to be effected at the option of the
Executive Stockholders, Executive Stockholders


                                       42
<PAGE>

holding at least a majority of the Common Shares and Vested Phantom Shares owned
by or allocated to all Executive Stockholders (the "Majority Executive
Stockholders") must give PBC written notice of their intention to effect the
Exchange (an "Exchange Notice") within fifteen (15) days following the date that
the Executive Stockholders are given written notice from PBC of the expected
occurrence of such an Initial Public Offering (an "IPO Notice"). In the Event
that the Majority Executive Stockholders elect to effect the Exchange, all of
the Executive Stockholders will be required to effect the Exchange.

            (b) PBC shall have the right to cause the Exchange to occur and to
require the Executive Stockholders to effect the Exchange in accordance with
this Section 6.2 by setting forth in the IPO Notice its demand that the
Executive Stockholders effect the Exchange.

            (c) Pursuant to the Exchange, each Executive Stockholder shall be
entitled to receive in exchange for his Shares and Phantom Shares that number of
shares of common stock of the Public Entity ("Public Entity Stock") that have a
fair value which is equivalent to the fair value of the Shares and Phantom
Shares of such Stockholder as of the date of the Exchange (the "Exchange Date"),
based upon the fair value per share of the Public Entity Stock and the fair
value of such Shares and Phantom Shares as of the Exchange Date (after giving
effect to the provisions of Section 3.2 hereof and to the remaining provisions
of this paragraph (c)), as determined by a recognized investment banking firm
appointed by PBC and reasonably acceptable to the Majority Executive
Stockholders (which may be the lead underwriter retained in connection with the
Initial Public Offering). In determining the fair value of an Executive
Stockholder's Shares and Phantom Shares, the fair value of the Company as an
entity (net of indebtedness) shall be determined as of the Exchange Date (the
"Company Value") and the fair value of the Executive Stockholder's Shares and
Phantom Shares shall be deemed to be the portion of the Company Value which
would be allocable and distributable to such Executive Stockholder upon the
liquidation of the Company in accordance with the GCL (after giving effect to
the provisions of Section 3.2(j) hereof as if the Initial Public Offering had
occurred).

            (d) The closing of the Exchange shall take place on such date and at
such time as PBC specifies to the Executive Stockholders on not less than three
(3) business days prior notice, and shall only be deemed to be effective if and
when the Initial Public Offering giving rise thereto is consummated.


                                       43
<PAGE>

            (e) Upon the closing of the Exchange, all of the Executive
Stockholders' rights under this Agreement shall terminate, and the Executive
Stockholders shall no longer be Stockholders of, or have any Shares or any
Phantom Shares or any other equity or other interest in, the Company.

      6.3 Outside Businesses of PBC. PBC and/or any affiliate thereof may engage
in and/or possess interests in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the business
of the Company or any of its subsidiaries (provided, that, for so long as PBC is
the Controlling Stockholder, such business venture is not directly competitive
with a substantial portion of the principal operations of the Company and its
subsidiaries and the Company and the Stockholders shall have no rights, by
virtue of this Agreement or otherwise, in or to such ventures or interests, or
the income or profits derived therefrom, and the pursuit or acquisition of any
such venture or interest, shall not be deemed wrongful or improper in any
manner. Neither PBC nor any affiliate thereof shall be obligated to present any
particular investment or business opportunity to the Company or any of its
subsidiaries even if such opportunity is of a character that, if presented to
the Company and any of its subsidiaries, could be taken by or considered a
business opportunity of the Company or any of its subsidiaries, and PBC or any
affiliate thereof shall have the right to take for its own account and benefit
(individually or as a partner, shareholder, fiduciary or otherwise) or to
recommend to others any such particular venture, investment or business
opportunity.

      6.4 Relationship with Affiliates.

            (a) Each of the Stockholders hereby acknowledges and agrees that
certain affiliates of PBC may elect to provide various management and support
services to the Company (including for purposes of this Section 6.4, as included
within the definition of the Company, the Company's subsidiaries, including
MRT), including, without limitation, accounting and financial services,
insurance, personnel and human resources services, benefit plan administration,
purchasing services, computer support services, shipping and receiving services
and safety and health training services (collectively, the "Services"). The
Company shall pay the provider(s) of those Services for which costs can
reasonably be established a fair allocable portion of such costs, as determined
based upon relevant factors, including, without limitation, actual costs
attributed to the Company and, where appropriate, the number of employees of the
Company or its consolidated gross sales in relation to the number of employees


                                       44
<PAGE>

or gross sales of those entities sharing such Services with the Company. In
addition to and without limiting the foregoing, PBC (or its affiliates) shall be
entitled to be paid a continuing fee by the Company, for general management and
overhead services for which allocation of costs is not possible, equal to 1.5%
of the consolidated gross revenues of the Company, such fee to be payable
monthly. All determinations as to actual costs, allocations of costs and the
amount to be paid by the Company in respect of the Services shall be made in
good faith by PBC.

            (b) Each of the Stockholders hereby acknowledge and agree that the
Company and its subsidiaries ( including MRT) shall be entitled to enter into
such reasonable commercial relationships with PBC and its affiliates, on such
terms and conditions as PBC shall determine.

      6.5 Termination of Certain Rights. The rights granted to the Executive
Stockholders pursuant to Sections 5.2, 5.3, 5.4 and 6.2 hereof shall not be
applicable to, and shall terminate and be of no further force and effect upon
the closing of, an Initial Public Offering.

      6.6 Individual Obligations. Each of the respective obligations of the
Members, the Stockholders or the Executive Stockholders under this Agreement
shall be the respective obligations individually of each Member, Stockholder or
Executive Stockholder and shall be and remain binding on each such Member,
Stockholder or Executive Stockholder notwithstanding the failure of any other
Member, Stockholder or Executive Stockholder to comply with such obligation as
its applies to him or it.

      6.7 Legend on Certificates. So long as this Agreement shall remain in
effect, the following statement shall be inscribed on all certificates
representing Shares held by any of the parties hereto (and their successors and
assigns) and upon all certificates issued in lieu or in substitution therefor:

            "The shares represented by this certificate are subject to a certain
            Agreement dated as of January ___, 1999, as the same may be amended
            or supplemented from time to time, a copy of which is on file at the
            principal office of the Corporation. Any attempted transfer of the
            shares represented by this certificate, or any interest therein, in
            violation of said agreement shall be invalid."

      6.8 Failure to Transfer. In the event that a Stockholder or any heir,
personal representative, successor or assign of


                                       45
<PAGE>

such Stockholder (the "Seller"), having become obligated to Transfer Shares
pursuant to this Agreement, shall fail to deliver such Shares in accordance with
the terms of this Agreement, the person entitled to acquire such Shares pursuant
to such Transfer (the "Purchaser") may, at its option (and if applicable), in
addition to all other remedies it may have, send to the Seller by registered or
certified mail, return receipt requested, the purchase price for such Shares as
determined pursuant to this Agreement. In the event of such failure, and if
applicable the Purchaser's compliance with the preceding sentence, the Company,
upon written notice to the Seller, (i) shall cancel on its books the certificate
or certificates representing the Shares to be Transferred, (ii) shall issue, in
lieu thereof, a new certificate in the name of the Purchaser representing such
Shares and (iii) shall deliver such new certificate or certificates to the
Purchaser and thereupon all of the Seller's rights in and to said Shares shall
terminate.

                                   ARTICLE VII

                                BOOKS AND RECORDS

      7.1 Books, Records and Financial Statements of the Company.

            (a) At all times during the existence of the Company, the Company
shall maintain, at its principal place of business, separate books of account
for its operations in accordance with generally accepted accounting principles
and in accordance with applicable tax accounting principles.

            (b) The following financial information shall be transmitted by the
Company to each Stockholder within four (4) months after the close of each
Company Year:

                  (i) consolidated balance sheet of the Company and its
subsidiaries as of the beginning and close of such Company Year;

                  (ii) consolidated income statement of the Company and its
subsidiaries as of the close of such Company Year.

            (c) As and when available, the Company shall furnish to each
Stockholder on a quarterly basis, unaudited consolidated quarterly financial
statements of the Company and its subsidiaries for such quarter.


                                       46
<PAGE>

      7.2 Books, Records and Financial Statements of MRT.

            (a) At all times during the continuance of MRT, MRT shall maintain,
at its principal place of business, separate books of account for its operations
in accordance with generally accepted accounting principles and in accordance
with applicable tax accounting principles.

            (b) The following financial information shall be transmitted by MRT
to each Member within four (4) months after the close of each MRT Year:

                  (i) balance sheet of MRT as of the beginning and close of such
MRT Year;

                  (ii) statement of MRT profits and losses for such MRT Year;

                  (iii) statement of the Members' Capital Accounts as of the
close of such MRT Year, and changes therein during such MRT Year; and

                  (iv) a statement indicating such Member's share of each item
of MRT income, gain, loss, deduction or credit for such MRT Year for income tax
purposes.

            (c) As and when available, MRT shall furnish to each Member on a
quarterly basis, unaudited consolidated quarterly financial statements of MRT
for such quarter.

      7.3 Accounting Method. For both financial and tax reporting purposes and
for purposes of determining profits and losses, the books and records of the
Company and MRT shall be kept on the accrual method of accounting.

      7.4 Audit. At any time at the sole discretion of the Managing Member(s)
and/or the Board of Directors, as the case may be, the financial statements of
MRT and/or the Company may be audited by an independent certified public
accountant, selected by the Managing Member(s) or Board of Directors, as the
case may be (which may be the accountant for PBC), with such audit to be
accompanied by a report of such accountant containing its opinion. The cost of
such audits will be an expense of MRT or the Company, as the case may be. A copy
of any such audited financial statements and accountant's report will be made
available for inspection by the Members or the Stockholders, as the case may be.


                                       47
<PAGE>

      7.5 Fiscal Year. The fiscal year of MRT or of the Company shall in either
case be the calendar year or in either case such other period as shall be
determined by the Managing Member(s)or the Board of Directors, as the case may
be.

                                  ARTICLE VIII

                                  MISCELLANEOUS

      8.1 Amendments.

            (a) Except as otherwise provided in this Section 8.1, this Agreement
may not be amended except by a writing executed by PBC, the Company and by
Executive Stockholders constituting the Majority Executive Stockholders.

            (b) PBC and the Company may amend this Agreement without the consent
of any Stockholder to reflect changes validly made in the membership of MRT or
the identity of the Stockholders and corresponding changes in the terms and
provisions of this Agreement necessary to reflect or conform with any such
change, to reflect changes permitted in accordance with this Agreement in the
Capital Accounts and/or MRT Percentage Interests of the Members or the number,
class or series of Shares owned by any Stockholder, to clarify any ambiguities
herein or to appropriately adjust any mechanics or procedures set forth herein
so long as the rights of the Executive Stockholders are not prejudiced thereby,
or if such amendment is of an inconsequential nature (as reasonably determined
by the Board of Directors) and does not affect the rights of the Executive
Stockholders in any adverse respect.

            (c) Anything in the foregoing provisions of this Section 8.1 to the
contrary notwithstanding, this Agreement shall be amended from time to time
(without any required consent of the Stockholders) in each and every manner
deemed necessary or appropriate by the Board of Directors to comply with the
then existing requirements of the Code and the Regulations and the Rulings of
the Treasury Department or Internal Revenue Service affecting MRT or the
Company.

      8.2 Specific Performance. The parties hereto agree that money damages or
other remedy at law would not be sufficient or adequate remedy for any breach or
violation of, or a default under, this Agreement by them and that, in addition
to all other remedies available to them, each of them shall be entitled to an
injunction restraining such breach, violation or default or


                                       48
<PAGE>

threatened breach, violation or default and to any other equitable relief,
including without limitation specific performance, without bond or other
security being required.

      8.3 Entire Agreement. This Agreement sets forth the entire and only
agreement or understanding among the parties hereto relating to the subject
matter hereof and supersedes and cancels all previous agreements, letters,
negotiations, commitments and representations in respect thereof among them, and
no party shall be bound by any conditions, definitions, warranties or
representations with respect to the subject matter of this Agreement.

      8.4 Notices. Any and all notices, demands or requests required or
permitted to be given under this Agreement shall be given in writing and
addressed to the parties hereto at their addresses as reflected in the records
of the Company from time to time and to such other addresses as they may
respectively from time to time designate by written notice, given in accordance
with the terms of this Section. Notices given as provided in this Section shall
be deemed effective: on the date hand delivered; on the first business day
following the sending thereof by recognized overnight courier; and on the fifth
calendar day (or, if it is not a business day, then the next succeeding business
day thereafter) after the depositing thereof into the exclusive custody of the
U.S. Postal Service.

      8.5 Gender and Number. Wherever from the context it appears appropriate,
each term stated in either the singular or plural shall include the singular and
plural, and pronouns stated in either the masculine, the feminine or the neuter
gender shall include the masculine, the feminine and the neuter.

      8.6 Benefits of Agreement. This Agreement shall be binding upon and inure
to the benefit of the respective heirs, personal representatives, successors and
permitted assigns of the parties hereto; provided that nothing contained herein
shall permit any assignment of any Shares or Phantom Shares or any rights or
obligations under this Agreement except as elsewhere expressly permitted in this
Agreement. This Agreement shall not inure to the benefit of or be enforceable by
any creditor of MRT or the Company or of any Member or Stockholder or be deemed
to create or be for the benefit of any person not a party hereto.

      8.7 Waivers. No waiver by any party hereto of any failure by any other
party hereto to comply with any obligation under this Agreement shall be
effective unless in writing and signed by the party granting such waiver, and no
such waiver shall be


                                       49
<PAGE>

deemed a waiver of any subsequent failure of the same or similar nature.

      8.8 Severability. If any provision of this Agreement would be held to be
invalid, prohibited or unenforceable in any jurisdiction for any reason, such
provision, as to such jurisdiction only, shall be ineffective to the extent of
such invalidity, prohibition, unenforceability, without invalidating the
remaining provisions of this Agreement, and the validity, legality and
enforceability of such remaining provisions shall not be affected in any way
thereby.

      8.9 Effective of Certain Changes. All of the provisions of this Agreement
shall apply to all of the Shares presently owned by any of the Stockholders as
well as to all other shares of the Company which may be issued or transferred to
any of them in consequence of any additional issuance, purchase, exchange or
reclassification of shares, corporate reorganization, or any other form of
recapitalization, or consolidation, or merger, or share split, or share
dividend, or which are acquired by any of them in any other manner. The number
of Shares subject to the provisions of this Agreement and all references herein
to numbers of Shares and purchase prices per Share shall be appropriately
adjusted in the case of any subdivision or combination of the outstanding Shares
into a greater or smaller number of shares, recapitalization, reorganization,
reclassification of shares, stock dividend, or like event.

      8.10 Headings. The headings and subheadings of Sections of this Agreement
and/or any Schedule hereto are for convenience of reference only and shall not
constitute part of or define or limit any of the provisions of this Agreement or
such Schedule.

      8.11 Counterparts. This Agreement may be executed by the parties hereto in
counterparts, or by separate signature page or instrument, each of which shall
be considered an original, and all of which shall together constitute but one
and the same agreement.

      8.12 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to
contrary choice of law principles of such State.


                                       50
<PAGE>

            IN WITNESS WHEREOF, each of the undersigned has duly executed this
Agreement as of the date first above written.


                                    PHILIPP BROTHERS CHEMICALS, INC.

                                    By: /s/ Nathan Bistricer
                                        ----------------------------------------
                                           Nathan Z. Bistricer
                                            Vice President


                                    MRT MANAGEMENT CORP.

                                    By: /s/ Nathan Bistricer
                                        ----------------------------------------
                                           Nathan Z. Bistricer
                                            Vice President


                                    EXECUTIVE STOCKHOLDERS:

                                    /s/ Hugh Shannonhouse
                                    --------------------------------------------
                                    Hugh P. Shannonhouse

                                    /s/ Richard Basaraba
                                    --------------------------------------------
                                    Richard Basaraba

                                    /s/ Robert Styron
                                    --------------------------------------------
                                    Robert Styron


                                       51
<PAGE>

                                   Schedule A

<TABLE>
<CAPTION>
                            Shares of    Shares of      Vested      Vested      Unvested
                            Series A      Series B      Class A     Class B      Class B        Unvested       Vested
                            Preferred    Preferred      Common      Common       Common         Phantom       Phantom
Stockholders:                 Stock        Stock        Shares      Shares       Shares         Shares         Shares
- -------------                 -----        -----        ------      ------       ------         ------         ------
<S>                           <C>          <C>          <C>         <C>            <C>          <C>            <C>
Philipp Brothers                                        64.035      64.035         -0-            -0-           -0-
Chemicals, Inc.

Executive Stockholders
- ----------------------

Hugh P. Shannonhouse                                                9.8336         -0-          5.6849          -0-

Richard Basaraba                                                    4.9168         -0-          2.8424          -0-

Robert Styron                                                        3.25          -0-          2.8424          -0-
</TABLE>

<PAGE>

                                   Schedule B

Members:

                                             Units
                                             -----

Managing Member:

   MRT Management Corp.                     128.07

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.15.1
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>CERTIFICATE OF INCORPORATION
<TEXT>


                                                                  Exhibit 3.15.1

                            CERTIFICATE OF AMENDMENT
                                       of
                          CERTIFICATE OF INCORPORATION
                                       of
                              MRT MANAGEMENT CORP.

                            (Under Section 242 of the
                General Corporation Law of the State of Delaware)

      The undersigned, the Vice President of MRT Management Corp., a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), does hereby certify as follows:

      1. The name of the Corporation is MRT Management Corp.

      2. The date of filing of the original Certificate of Incorporation of the
Corporation was November 17, 1995.

      3. The Certificate of Incorporation of the Corporation is hereby amended
to effect a recapitalization of the shares of the Corporation's Common Stock,
par value $.01 ("Old Common Stock"), pursuant to which each issued and
outstanding share of Old Common Stock on the date this Certificate of Amendment
is filed with the Secretary of State of the State of Delaware shall be converted
into and shall become issued shares of (i) Class A Common Stock, $.001 par value
per share ("Class A Common"), and (ii) Class B Common Stock, $.001 par value per
share ("Class B Common"), at the rate of 0.21345 shares of Class A Common and
0.21345 shares of Class B Common, for each share of Old Common Stock,
respectively. The Corporation shall be entitled to issue fractional shares of
Class A Common and Class B Common as a result of such recapitalization.

      4. The Certificate of Incorporation of the Corporation is hereby amended
as follows:

            A. Article FOURTH of the Certificate of Incorporation of the
Corporation, relating to the number of authorized shares of capital stock of the
Corporation, is hereby amended by deleting said Article FOURTH and replacing it
with the following new Article FOURTH, reading in its entirety as follows:

            "FOURTH:

                  1. The total number of shares of all classes of stock that
this corporation shall have authority to issue is thirty thousand (30,000),
consisting of (a) 10,000 shares of Class A Common Stock, par value $.001 per
share (the "Class A Common"), (b) 10,000 shares of Class B Common Stock, par
value $.001 per share (the "Class B Common" and together with the Class A
Common, the

<PAGE>

"Common Stock"), and (c) ten thousand (10,000) shares of Preferred Stock, $.001
par value per share (the "Preferred Stock").

                  2. Except as provided in Section 2.1 below, the Class A Common
and the Class B Common shall be identical in all respects.

                        2.1 Voting Rights. Each issued and outstanding share of
Class A Common Stock shall entitle the holder of record thereof to full voting
power. Except as any provision of law may otherwise require, no share of Class B
Common Stock shall entitle the holder thereof to any voting power whatsoever, to
any right to participate in any meeting of stockholders, or to have any notice
of any meeting of stockholders.

                        2.2 Dividends. Subject to the rights of the Preferred
Stock, the holders of Common Stock shall be entitled to participate in dividends
, whether in cash, property or securities of the corporation, ratably on a per
share basis, as and when dividends are declared or paid.

                        2.3 Liquidation. Subject to the rights of the Preferred
Stock, the holders of Common Stock shall be entitled to participate ratably on a
per share basis in all distributions to the holders of the Common Stock, upon
any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the corporation.

                  3. The Board of Directors is hereby expressly granted
authority to authorize, from time to time in accordance with applicable law, the
issue of one or more series of Preferred Stock and with respect to any such
series to fix by resolution or resolutions the numbers, powers, designations,
preferences and relative, participating, optional or other special rights of
such series and the qualifications, limitations or restrictions thereof,
including, but without limiting the generality of the foregoing, the following:

                  (i) The number of shares to constitute such series and the
            distinctive designations thereof;

                  (ii) The dividend rate to which such shares shall be entitled
            and the restrictions, limitations and conditions upon the payment of
            such dividends, whether dividends shall be cumulative, the date or
            dates from which dividends (if cumulative) shall accumulate and the
            dates on which dividends (if declared) shall be payable;

                  (iii) Whether or not the shares of such series shall be
            redeemable and, if so, the terms, limitations and restrictions with
            respect to such redemption, including without limitation the manner
            of selecting shares for


                                       2
<PAGE>

            redemption if less than all shares are to be redeemed, and the
            amount, if any, in addition to any accrued dividends thereon, which
            the holders of shares of such series shall be entitled to receive
            upon the redemption thereof, which amount may vary at different
            redemption dates and may be different with respect to shares
            redeemed through the operation of any purchase, retirement or
            sinking fund and with respect to shares otherwise redeemed;

                  (iv) The amount in addition to any accrued dividends thereon
            which the holders of shares of such series shall be entitled to
            receive upon the voluntary or involuntary liquidation, dissolution
            or winding up of the corporation, which amount may vary at different
            dates and may vary depending on whether such liquidation,
            dissolution or winding up is voluntary or involuntary.

                  (v) Whether or not the shares of such series shall be subject
            to the operation of a purchase, retirement or sinking fund and, if
            so, the terms, limitations and restrictions with respect thereto,
            including without limitation whether such purchase, retirement or
            sinking fund shall be cumulative or non-cumulative, the extent to
            and the manner in which such fund shall be applied to the purchase,
            retirement or redemption of the shares of such series for retirement
            or to other corporate purposes and the terms and provisions relative
            to the operation thereof;

                  (vi) Whether or not the shares of such series shall have
            conversion privileges and, if so, prices or rates of conversion and
            the method, if any, of adjusting the same;

                  (vii) The voting powers, if any, of such series; and

                  (viii) Any other relative rights, preferences and limitations
            pertaining to such series.

                  4. The number of authorized shares of any class or series of
capital stock of the corporation may be increased or decreased (but not below
the number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the capital stock of the corporation entitled to vote
thereon and the holders of such class or series, or of any other class or series
of capital stock of the corporation shall not be entitled to vote on such
amendment separately as a class or series."

            B. The Certificate of Incorporation of the Corporation is hereby
amended by adding an Article EIGHTH thereto as follows:

            "EIGHTH: The corporation elects out of and shall not be


                                       3
<PAGE>

governed by Section 203 of the General Corporation Law of the State of
Delaware."

      5. The amendments to the Certificate of Incorporation set forth above have
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware (the "DGCL"). The amendment was
thereafter approved by written consent in lieu of a meeting of the stockholders
pursuant to Section 228 and 242 of the DGCL, and written notice of such approval
has been or will be provided as and to the extent required by such Section 228.

      6. The capital of the Corporation will not be reduced under or by reason
of any amendment herein certified.

      7. This instrument and the amendments referred to herein shall, in
accordance with Section 103(d) of the DGCL, become effective upon the filing
hereof.

      SIGNED and attested to on behalf of the Corporation on January 27, 1999.


                                        /s/ Nathan S. Bistricer
                                        ----------------------------------------
                                        Nathan S. Bistricer
                                        Vice-President


/s/ Joseph M. Katzenstein
- -----------------------------------
Joseph M. Katzenstein,
Secretary


                                       4

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.15.2
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>COMPOSITE CERTIFICATE OF INCORPORATION
<TEXT>


                                                                  Exhibit 3.15.2

                                    COMPOSITE
                          CERTIFICATE OF INCORPORATION
                                       of
                              MRT MANAGEMENT CORP.

                            (Under Section 242 of the
                General Corporation Law of the State of Delaware)

      The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:

      FIRST: The name of the corporation (hereinafter called the "corporation")
is:

                              MRT Management Corp.

      SECOND: The address, including street number, city and county, of the
registered office of the corporation in the State of Delaware is 32 Loockerman
Square, Suite L-100, in the City of Dover, County of Kent; and the name of the
registered agent of the corporation in the State of Delaware at such address is
The Prentice-Hall Corporation System, Inc.

      THIRD: The nature of the business and of the purposes to be conducted and
promoted by the corporation is:

      to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.

            "FOURTH:

                  1. The total number of shares of all classes of stock that
this corporation shall have authority to issue is thirty thousand (30,000),
consisting of (a) 10,000 shares of Class A Common Stock, par value $.001 per
share (the "Class A Common"), (b) 10,000 shares of Class B Common Stock, par
value $.001 per share (the "Class B Common" and together with the


                                       1
<PAGE>

Class A Common, the "Common Stock"), and (c) ten thousand (10,000) shares of
Preferred Stock, $.001 par value per share (the "Preferred Stock").

                  2. Except as provided in Section 2.1 below, the Class A Common
and the Class B Common shall be identical in all respects.

                        2.1 Voting Rights. Each issued and outstanding share of
Class A Common Stock shall entitle the holder of record thereof to full voting
power. Except as any provision of law may otherwise require, no share of Class B
Common Stock shall entitle the holder thereof to any voting power whatsoever, to
any right to participate in any meeting of stockholders, or to have any notice
of any meeting of stockholders.

                        2.2 Dividends. Subject to the rights of the Preferred
Stock, the holders of Common Stock shall be entitled to participate in dividends
, whether in cash, property or securities of the corporation, ratably on a per
share basis, as and when dividends are declared or paid.

                        2.3 Liquidation. Subject to the rights of the Preferred
Stock, the holders of Common Stock shall be entitled to participate ratably on a
per share basis in all distributions to the holders of the Common Stock, upon
any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the corporation.

                  3. The Board of Directors is hereby expressly granted
authority to authorize, from time to time in accordance with applicable law, the
issue of one or more series of Preferred Stock and with respect to any such
series to fix by resolution or resolutions the numbers, powers, designations,
preferences and relative, participating, optional or other special rights of
such series and the qualifications, limitations or restrictions thereof,
including, but without limiting the generality of the foregoing, the following:

                  (i) The number of shares to constitute such series and the
            distinctive designations thereof;

                  (ii) The dividend rate to which such shares shall be entitled
            and the restrictions, limitations and conditions upon the payment of
            such dividends, whether dividends shall be cumulative, the date or
            dates from


                                       2
<PAGE>

            which dividends (if cumulative) shall accumulate and the dates on
            which dividends (if declared) shall be payable;

                  (iii) Whether or not the shares of such series shall be
            redeemable and, if so, the terms, limitations and restrictions with
            respect to such redemption, including without limitation the manner
            of selecting shares for redemption if less than all shares are to be
            redeemed, and the amount, if any, in addition to any accrued
            dividends thereon, which the holders of shares of such series shall
            be entitled to receive upon the redemption thereof, which amount may
            vary at different redemption dates and may be different with respect
            to shares redeemed through the operation of any purchase, retirement
            or sinking fund and with respect to shares otherwise redeemed;

                  (iv) The amount in addition to any accrued dividends thereon
            which the holders of shares of such series shall be entitled to
            receive upon the voluntary or involuntary liquidation, dissolution
            or winding up of the corporation, which amount may vary at different
            dates and may vary depending on whether such liquidation,
            dissolution or winding up is voluntary or involuntary.

                  (v) Whether or not the shares of such series shall be subject
            to the operation of a purchase, retirement or sinking fund and, if
            so, the terms, limitations and restrictions with respect thereto,
            including without limitation whether such purchase, retirement or
            sinking fund shall be cumulative or non-cumulative, the extent to
            and the manner in which such fund shall be applied to the purchase,
            retirement or redemption of the shares of such series for retirement
            or to other corporate purposes and the terms and provisions relative
            to the operation thereof;

                  (vi) Whether or not the shares of such series shall have
            conversion privileges and, if so, prices or rates of conversion and
            the method, if any, of adjusting the same;

                  (vii) The voting powers, if any, of such series; and


                                       3
<PAGE>

                  (viii) Any other relative rights, preferences and limitations
            pertaining to such series.

                  4. The number of authorized shares of any class or series of
capital stock of the corporation may be increased or decreased (but not below
the number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the capital stock of the corporation entitled to vote
thereon and the holders of such class or series, or of any other class or series
of capital stock of the corporation shall not be entitled to vote on such
amendment separately as a class or series."

      FIFTH: The name and the mailing address of the incorporator are as
follows:

                     Andrew M. Singer, Esq.
                     Golenbock, Eiseman, Assor & Bell
                     437 Madison Avenue
                     New York, New York 10022-7302

      SIXTH: The corporation is to have perpetual existence.

      SEVENTH: In furtherance and not in limitation of the powers conferred upon
the stockholders by statute the board of directors of the corporation is
expressly authorized to make, alter or repeal the by-laws of the corporation
subject to the power of the stockholders to alter or repeal the by-laws made or
altered by the board of directors.

      EIGHTH: Except as otherwise required in the by-laws of the corporation,
election of directors need not be by written ballot.

      EIGHTH: The corporation elects out of and shall not be governed by Section
203 of the General Corporation Law of the State of Delaware.

      Signed at New York. New York on November 17, 1995.


                                       /s/ Andrew M. Singer
                                       ------------------------------
                                       Andrew M. Singer, Esq.,
                                       Incorporator

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18.1
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>DEFERRED COMPENSATION PLAN
<TEXT>


                                                                 Exhibit 10.18.1

                               First Amendment to
                        Philipp Brothers Chemicals, Inc.
                              Retirement Income and
                           Deferred Compensation Plan

            Section 3.03 of the Philipp Brothers Chemicals, Inc. Retirement
Income and Deferred Compensation Plan is replaced in its entirety by the
following:

                                  Section 3.03

"Survivor's Income Benefit." If a Participant shall die during his employment
prior to having begun to receive any Retirement Income Benefits hereunder, his
Beneficiary shall be entitled to receive, in said Beneficiary's discretion, a
monthly death benefit in an amount equal to the greater of (i) the then value of
said Participant's Retirement Income Benefit (hereinafter "Survivor's Retirement
Benefit"), or (ii) an amount determined under Section 3.03.1 or Section 3.03.2,
as the case may be. Notwithstanding anything to the contrary contained herein,
the Survivor's Income Benefit under this Section 3.03 shall in no event be
greater than $1,500,000.

      Section 3.03.1. If said Participant died prior to attaining the age of
forty (40) years, an amount equal to three (3) times the Participant's Annual
Compensation at the time of death (annualized) but, for the sole purpose of
calculations under this Section 3.03.1, in no event shall the Participant's
Annual Compensation be considered to be more than $500,000.

      Section 3.03.2. If said Participant died after attaining the age of forty
(40) years, an amount equal to two (2) times the Participant's Annual
Compensation at the time of death (annualized) but, for the sole purpose of
calculations under this Section 3.03.2, in no event shall the Participant's
Annual Compensation be considered to be more than $750,000.

      Section 3.03.3. The benefit determined under Section 3.03.1 or Section
3.03.2, as the case may be, is hereinafter referred to as the "Annualized
Benefit".

      The foregoing amendment shall be effective for the calendar year
commencing January 1, 1999.
<PAGE>

                               Second Amendment to
                        Philipp Brothers Chemicals, Inc.
                              Retirement Income and
                           Deferred Compensation Plan

            Article VII of the Philipp Brothers Chemicals, Inc. Retirement
Income and Deferred Compensation Plan is amended to include the following
additional section:

                                  Section 7.02

A Participant may elect, at any time up to thirty (30) days prior to attaining
his Normal Retirement Date or Early Retirement Date, to defer the distribution
of his Deferred Compensation Account, whether in a lump sum or in monthly
installments, for a maximum period of five (5) years following the date of
termination of his service with the Company. If a Participant's service with the
company terminates prior to his attaining his Early Retirement Date as a result
of what the Committee deems in its sole discretion to be a company-wide
reduction in force, then such Participant shall similarly be eligible to defer
the distribution of his Deferred Compensation Account for a maximum period of
five (5) years following the date of termination of his service with the
Company.

If the Participant elects to defer the distribution of his Deferred Compensation
Account under this Section 7.02 and have it distributed subsequent to the date
of termination of his service with the Company, no such additional interest as
specified in Section 6.03 shall be credited during the deferral period.

            The foregoing amendment shall be effective for the calendar year
commencing January 1, 1999.
<PAGE>

                               Third Amendment to
                        Philipp Brothers Chemicals, Inc.
                              Retirement Income and
                           Deferred Compensation Plan

      1. Section 2.01 of the Philipp Brothers Chemicals, Inc. Retirement Income
and Deferred Compensation Plan (the "Plan") is replaced in its entirely by the
following:

                                  Section 2.01

During the first Plan Year, each Participant shall notify Company within thirty
(30) days of the Effective Date, on a form provided by Company, of the portion,
if any, of said Participants' Base Salary Amount in excess of $150,000 payable
to said Participant for the period in 1994 subsequent to the date of such
election, that said Participant elects to defer (the "1994 Deferral Amount").
Thereafter, on or before the fifteenth (15th) day of the month preceding the
first month of each twelve (12) month period commencing January 1, 1995 during
his employment, each Participant shall notify Company, on a form provided by
Company, of the portion, if any, of said Participant's Base Salary Amount in
excess of $150,000 payable to said Participant in the next calendar year that
said Participant elects to defer (hereinafter "Annual Deferral"). The election,
once made, shall be irrevocable. However, a Participant who has received a
Hardship Distribution of an amount greater than fifty percent (50%) of his
Deferred Compensation Account at the time of such withdrawal as provided for in
Section 8.01, shall not be eligible to elect an Annual Deferral until after the
close of the calendar year following the date of such Hardship Distribution.

      2. Section 8.01 of the Plan is replaced in its entirety by the following:

                                  Section 8.01

In the event a Participant has an unexpected need for cash arising from an
illness, casualty loss, sudden financial reversal or other unforseen occurrence
which constitutes an unforeseeable emergency in the affairs of the Participant
creating a hardship upon him, he may apply to the Committee for permission to
withdraw up to the entire amount in his Deferred Compensation Account. Upon
receipt of such request, the Committee will promptly act upon such request and
will determine, in its sole discretion, whether to approve the distribution of
the requested amount, or any portion thereof. The requested amount, to the
extent it is approved by the Committee, will be distributed to said Participant
within thirty (30) days of said approval.

      3. The foregoing amendments shall be effective for the calendar year
commencing January 1, 1999.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.24
<SEQUENCE>7
<FILENAME>0007.txt
<DESCRIPTION>AGREEMENT FOR TRANSFER OF OWNERSHIP
<TEXT>


                                                                   Exhibit 10.24

                       AGREEMENT FOR TRANSFER OF OWNERSHIP

      AGREEMENT dated this 8th day of June, 2000 between CP CHEMICALS, INC., a
New Jersey Corporation located at 7 Arbor Street, Sewaren, New Jersey, with a
corporate office at One Parker Plaza, Fort Lee, New Jersey (hereinafter referred
to as "Seller"), and The Township of Woodbridge, a municipal corporation of the
New Jersey, with offices at One Main Street, Woodbridge, New Jersey 07095
(hereinafter referred to as "Buyer").

      The "Buyer" and "Seller" may be collectively referred to as the Parties.

      1. PURCHASE AGREEMENT. The Seller agrees to transfer ownership to the
Buyer and the Buyer agrees to accept ownership from the Seller, in accordance
with the terms of this Agreement, the real property described in paragraph 3.A.
below, together with the buildings and all other structures and improvements
constructed thereon (hereinafter, the "Property") and including the Equipment
described in paragraph 3.B. below (hereinafter, the "Equipment"). All buildings
are transferred "as is."

      2. PURCHASE PRICE. The purchase price for the Property, Equipment and all
other rights and interests to be transferred in accordance with this Agreement
shall be One (1) ($1.00) Dollar.

      3. PROPERTY SOLD.

            A. The Property is known and designated as Block 729, Lot 3; Block
729A, Lot 1; Block 730, Lots 1 and 1B; and Block 731, Lot 1B on the tax map of
the Township of Woodbridge, County of Middlesex, State of New Jersey and
commonly known as 7 Arbor Street, Sewaren, Woodbridge Township, New Jersey (the
"Property") is shown on Exhibit A. A legal description of the Property is
annexed hereto as Exhibit B.

            B. The Equipment sold consists of all boilers presently located on
the Property, one (1) scale located in the driveway near the office building;
the guard trailer and all Equipment located in the wastewater treatment plant.
All such Equipment presently exists on the Property and is included in this
sale. Seller agrees to provide Buyer with clear title to the Equipment. All
Equipment is sold "as is".

      4. PAYMENT OF PURCHASE PRICE. The Buyer will pay the purchase price at
Closing.

      5. CASH CLOSING; NO FINANCING CONTINGENCY. The Buyer represents and
warrants to Seller that it has or will have sufficient cash at Closing to close
the within purchase on the date set forth herein for closing.

      6. TIME AND PLACE OF CLOSING. The Buyer and Seller agree to make a date no
later than June 29, 2000 as the date for Closing ("Closing Date"). The Closing
will be held at the offices of the Buyer or of the attorney for the Buyer in New
Jersey.
<PAGE>

      7. TRANSFER OF OWNERSHIP. At the Closing, the Seller will transfer
ownership of the Property and Equipment to the Buyer. The Seller will deliver to
Buyer at Closing:

            A.    A properly executed Deed;

            B.    A standard Affidavit of Title, as further defined below, and
                  insuring, inter alia, against mechanic's and materialman's
                  liens and stating that, to the best of Seller's knowledge,
                  there are no unrecorded interests in the Property or Equipment
                  of any kind, other than as set forth in the Agreement;

            C.    A Corporate Resolution authorizing the sale of the Property
                  and Equipment;

            D.    If requested, a FIRPTA Affidavit stating that Seller is not a
                  foreign person;

            E.    The most recent tax, water and sewer bills for the Property;

            F.    A payoff letter or release with respect to any mortgages or
                  liens encumbering the Property or the Equipment;

            G.    Any and all documents reasonably required by the Buyer's
                  attorney or title company in order to insure title;

            H.    A copy of any other document which Seller is required to
                  deliver by this Agreement and which has not been delivered;

            I.    Evidence of compliance with the Industrial Site Recovery Act,
                  N.J.S.A. 13:1K-6 et seq. in accordance with paragraph 29 of
                  this Agreement.

            J.    The Indemnification Agreement, properly executed, in the form
                  attached hereto as Exhibit C, to take effect as of the Closing
                  Date.

            K.    The Lease, properly executed, referred to in Paragraph 10 and
                  attached as Exhibit D in this Agreement, to take effect as of
                  the Closing Date.

            L.    A bill of sale for all equipment.

      8. TYPE OF DEED.

            A. Seller agrees to provide and the Buyer agrees to accept a deed
known as bargain and sale with covenants against grantor's acts, subject to
paragraph 14 and including the limitation set forth at Paragraph 44, of this
Agreement.

            B. The title to be conveyed must be marketable and insurable, by a
title insurance company authorized to do business in New Jersey. If Seller has a
copy of a previous


                                       2
<PAGE>

title search on the Property, Seller shall provide same to Buyer within ten days
of execution of this Agreement. Seller shall, at the same time, provide Buyer
with a copy of any searches, as well as the title/registration for any Equipment
that are in Seller's possession.

      9. EXPENSES. Seller shall pay the realty transfer fee in connection with
the conveyance of the Property. Buyer shall pay for all title, survey and
inspection fees (including, without limitation, title insurance premiums, search
charges and environmental inspections, if any) incurred by it. Each Party shall
bear all other fees, charges and expenses incurred by it, including legal fees
of its counsel, without contribution from the other, except as expressly set
forth herein.

      10. CONTINGENCIES.

            A. Execution of Lease. Buyer and Seller acknowledge that the
execution of the Lease attached hereto as Exhibit D is a material inducement to
both Parties for entry into this Agreement. The execution of the Lease attached
as Exhibit D by the Township shall occur at the Closing and shall be a
contingency to the transfer of title pursuant to this Agreement. Said Lease
shall not take effect until the Closing Date.

            B. Inspections. For a period of fifteen (15) days after the date a
fully executed copy of this Agreement is delivered to all Parties (the
"Inspection Period"), the Buyer may perform a due diligence investigation of the
Property, including, but not limited to the structural integrity of the
buildings on the Property, past uses of the Property, and the environmental
conditions of the Property.

            C. Notwithstanding anything herein to the contrary, if Buyer
determines for any or no reason that it will not accept the Property in its "as
is" condition, Buyer may terminate this Agreement by providing written notice to
Seller on or before fifteen (15) days following the date this Agreement is fully
signed and delivered to all Parties.

            D. Seller shall file all applications necessary, at its sole cost
and expenses, to obtain from the New Jersey Department of Environmental
Protection (the "DEP"), "Innocent Purchaser" status for the Buyer.

            E. This Article 10 shall survive the Closing.

            F. The Parties shall use best efforts to avoid interfering with each
others use of the Property when exercising these access rights, and shall follow
the reasonable rules and regulations promulgated by the other as to areas under
their control. All such rules and regulations should be provided to the other
Party in writing.

      11. BUILDING AND ZONING LAWS. The Seller, to the best of its knowledge,
states that the Property is in an industrial zone. If the Property cannot be
used as an auto impound yard and as a testing laboratory, the Buyer shall have
the right to terminate this Agreement during the Inspection Period described
above at Paragraph 10.B.


                                       3
<PAGE>

      12. FLOOD AREA. The federal and state governments have designated certain
areas as "flood areas." Seller and Buyer acknowledge that the Property is
located in a flood area. See Exhibit A. Buyer shall secure its own flood
insurance at its option.

      13. ACCESS.

            A. Seller's Post Closing Access. The Buyer agrees that Seller shall
have a post Closing right of access as more specifically described in the Lease,
Exhibit D, to this Agreement, subject to the reasonable rules and regulations
established by the Seller from time to time. Buyer also agrees that Seller shall
have a right of access to the Property for the purpose of conducting remedial
investigation and/or remedial action consistent with Seller's obligation under
this Agreement and consistent with Seller's Environmental Obligations as defined
in the Lease, Exhibit D. Seller and Buyer agree that Seller's post Closing
access rights shall also be memorialized in a form of easement, the terms which
shall be agreeable to both Parties. This right shall extend to Seller's agents,
representatives and consultants. Before entering the Property, the Seller shall
deliver to the Buyer certificates of insurance.

            B. Buyer's Post Closing Access. Seller and Buyer agree that Buyer
shall have access to the area leased by Seller pursuant to the terms of the
Lease attached as Exhibit D. This right shall extend to Seller's agents,
representatives and consultants.

            C. This Article 13 shall survive the Closing.

            D. The Parties shall use best efforts to avoid interfering with each
others use of the Property when exercising these access rights, and shall follow
the reasonable rules and regulations promulgated by the other as to areas under
their control. All such rules and regulations shall be provided to the other
Party in writing.

      14. OWNERSHIP. The Seller agrees to transfer and the Buyer agrees to
accept title to the Property free of all claims and rights of others, except for
the following, provided that such exceptions would not render title unmarketable
nor uninsurable as provided herein:

            A. Deed Notice contained in Deed Book 04643P, Pages 236 through 258.

            B. Administrative Consent Order contained in Deed Book 390, Pages 30
through 130.

            C. Possible title claim or riparian rights in State of New Jersey if
Property were ever flowed by tidewaters.

            D. The rights of utility companies to maintain pipes, poles, cables
and wires over, on and under the Property.

            E. Any other restrictions of record provided: (a) restrictions are
not now violated; and (b) violation of such restrictions will not cause a
forfeiture or reversion of title.

            F. Such facts as an accurate survey may disclose, provided that
title to the Property is insurable as provided herein.


                                       4
<PAGE>

      15. RISK OF LOSS. Prior to Closing if there is any damage, Seller shall,
at its discretion, have three options: (a) request that Buyer accept the
Property in its damaged condition with an agreed upon adjustment at Closing; (b)
repair the damage within a reasonable period of time after the date of the
casualty but prior to Closing; or (c) terminate the Agreement. If Seller elects
option (a), Buyer may terminate the Agreement or, if Buyer accepts Seller's
election, the Parties will mutually agree on an adjustment at Closing.

      16. ASSESSMENTS FOR MUNICIPAL IMPROVEMENTS. Certain municipal improvements
such as sidewalks may result in the municipality charging property owners to pay
for the improvements. Seller represents that to the best of its knowledge there
are no pending or forthcoming governmental improvements. All unpaid charges
(assessments) against the Property for work completed before the closing will be
paid by the Seller at or before the closing. If the improvement is not completed
before the closing, then only the Buyer will be responsible. If the improvement
is completed but the amount of the charge (assessment) is not determined, the
Seller will pay an estimated amount at the closing. When the amount of the
charge is finally determined, the Seller will pay any deficiency to the Buyer
(if the estimate proves to have been too low), or the Buyer will return any
excess to the Seller (if the estimate proves to have been too high).

      17. ADJUSTMENTS AT CLOSING.

            A. At Closing, the Buyer and the Seller shall adjust for sewer
charges and water charges and any other adjustments provided for in this
Agreement on the Property as of the Closing Date.

            B. At Closing, the Buyer and the Seller shall adjust for real estate
taxes as of the day of Closing.

            C. The present insurance coverage and public utility service on the
Property shall be terminated as of the Closing Date, and there shall be no
proration of insurance premiums or public utility bills. Seller shall fully pay
for its insurance and utilities. Seller shall be entitled to receive any rebates
related to the present insurance coverage and any utility deposit held by or for
the benefit of Seller in connection with any such utility service, if any.

            D. Seller shall remain responsible for all remaining installments of
payment due under the March 1991 Administrative Consent Order. This obligation
shall survive closing of title.

      18. POSSESSION AND OCCUPANCY.

            A. At the closing the Buyer shall be entitled to possession and no
other individual or entity shall have any occupancy rights, except as may
otherwise be provided for in the Lease between Buyer and Seller attached as
Exhibit D or as set forth herein. Except as provided herein, the Property shall
be in broom-clean condition.

            B. Buyer grants the Seller the right to leave equipment listed on
Exhibit E (the "Seller's Equipment") in place. The Seller's Equipment shall
remain the property of Seller. Buyer shall grant the Seller reasonable access to
the Seller's Equipment for the purposes of


                                       5
<PAGE>

showing the Seller's Equipment for sale, and for removing the Seller's
Equipment. The Seller shall relocate the Seller's Equipment after reasonable
notice from the Buyer, if the Buyer needs the space. Seller shall repair any
damage caused by the removal of the Seller's Equipment. All Seller's Equipment,
except the spray dryer, will be removed from the Property within three (3)
years. The Seller shall use commercially reasonable efforts to remove the spray
dryer as soon as possible. The Buyer shall not be responsible for any loss or
damage to the Seller's Equipment. This Paragraph shall survive closing of title.

      19. RIGHT OF WAYS. Seller has not granted any right of ways or easements,
except as disclosed in this Agreement, to any party.

      20. PARTIES LIABLE. This Agreement is binding upon all Parties who sign it
and all who succeed to their rights and responsibilities.

      21. RECORDING AND NO SURVIVAL.

            A. Neither this Agreement, nor a memorandum thereof, shall be
recorded in any place of public record by Seller or Buyer. Buyer may file a
Notice of Settlement.

            B. Except as otherwise provided, none of the provisions of this
Agreement shall survive the delivery of the Deed.

      22. NOTICES. All notices under this Agreement must be in writing. The
notices must be delivered by nationally recognized overnight carrier; one day
U.S. Post Office delivery; mailed by certified mail, return receipt requested;
or receipted personal delivery to the Seller at the address written in this
Agreement, Attention: Thomas L. Moran, with a copy to Margaret B. Carmeli, Esq.,
Giordano, Halleran & Ciesla, 125 Half Mile Road, P.O. Box 190, Middletown, New
Jersey 07748 (fax: 732-224-6599) and to Buyer at the address written in this
Agreement, Attention: Business Administrator, with a copy to Director of Law at
the address written in this Agreement. This provision shall survive the Closing.

      23. DEFECTS IN TITLE. If the Seller shall be unable, at the time fixed for
closing of title, to convey good and marketable title subject to and in
accordance with this Agreement, the Seller is obligated to initiate steps to
remove forthwith any defects. If, for any reason, such defects cannot be
removed, or should Seller elect not to remove any such defects within forty-five
(45) days from its receipt of notice of the existence of such defects, then the
sole obligation of Seller shall be to notify Buyer in writing that the Agreement
is terminated. Upon the making of such notice, this Agreement shall wholly cease
and terminate and neither Party shall have any further claim against the other
by reason of this Agreement. The Buyer may nevertheless, accept such title as
the Seller may be able to convey without reduction of the purchase price or any
credit or allowance against the same and without any other liability on the part
of Seller, or may extend the date to remove any defects.

      24. ASSIGNMENT. This Agreement may not be assigned by either Party without
the written consent of the other Party.


                                       6
<PAGE>

      25. BROKER. Each Party represents and warrants to the other Party that
such Party has not dealt with a broker or brokers in respect of the transaction
contemplated by this Agreement. This provision shall survive Closing or
termination of the Agreement.

      26. SELLER'S COVENANTS. In addition to the covenants and representations
of this Agreement, Seller covenants that it will do the following:

      Seller will maintain the physical condition of the Equipment and Property,
including the grounds and all other elements of the Property and operate the
Property, in the same condition in which it presently exists through the Closing
Date, reasonable wear and tear excepted. Seller will make all ordinary and
normal repairs and maintenance of the Property from the date hereof until
Closing.

      27. EMINENT DOMAIN. Seller shall give Buyer prompt notice of any actual or
threatened taking or condemnation of all or any portion of the Property. In the
event that, prior to Closing, all or any portion of the Property, or the loss of
use of which would impair the overall use of the Property is taken by eminent
domain or notice of such taking is received by Seller, this Agreement may be
canceled at Buyer's option, upon which neither party shall have any rights or
obligations to the other. Should Buyer elect to proceed to Closing, then Seller
shall assign any interest in any sums payable or credit any sums paid as an
adjustment. Seller shall not adjust or settle any condemnation award without
prior written approval of Buyer which approval shall not be unreasonably
withheld or delayed. The provision shall survive the Closing.

      28. SELLER'S REPRESENTATIONS. Seller hereby represents to Buyer, each of
which representations shall be true at and shall survive Closing, as follows:

            A. Existence. Seller is a New Jersey corporation duly organized and
validly existing in good standing under the laws of the State of New Jersey and
has all requisite power and authority to consummate the transactions
contemplated hereunder and has made proper corporate proceedings, duly
authorized the execution and delivery of this Agreement and the consummation of
all transactions contemplated hereunder.

            B. Execution and Performance. The execution and performance of this
Agreement shall not be a breach or violation of any Agreement to which the
Seller is a party.

            C. Joinder. All persons or entities having a legal or equitable
title or interest in the Property (or whose joinder in the Deed would be
necessary to convey to Buyer title to the Property as provided in Section 15
hereof) have been identified herein and have executed this Agreement as
"Seller."

            D. No Rights to Acquire. No person or entity other than Buyer, or
its assignee, has any right or option to acquire the Property or any portion
thereof.

            E. Fire and Casualty Damage. As of the date of this Agreement, no
portion of the Property or any improvements thereof have been damaged or
destroyed by fire or other casualty which have not been fully restored.


                                       7
<PAGE>

            F. Condemnation. Seller has not heretofore received any notice or
communications from any governmental unit or other body having the power of
eminent domain of any pending or threatened condemnation proceeding or other
proceedings in the nature of eminent domain in connection with the Property or
any part thereof, nor are any such proceedings pending to the best of Seller's
knowledge.

            G. F.I.R.P.T.A. Representations. Pursuant to Section 1445 of the
United States Internal Revenue Code, the Seller represents that it is not a
foreign corporation, foreign partnership, foreign trust, or foreign estate (as
those terms are defined in the U.S. Internal Revenue Code and Income Tax
Regulations). Seller further represents that its U.S. employer identification
number is 22-154-8721 and that its office address is 7 Arbor Street, Sewaren,
New Jersey. Seller agrees to provide to Buyer at closing an affidavit containing
all information required by Section 1445 of the U.S. Internal Revenue Code and
regulations pursuant thereto if requested by Buyer two (2) weeks before closing.

            H. Ownership. Based on the title policy issued at the time of
acquisition of the Property, the Seller is the owner of good and marketable
title to the Property.

            I. Adverse Possession. Seller has not acquired title to the Property
by adverse possession.

            J. Taxes and Utilities. Seller has paid real property taxes, sewer
charges, water bills and utilities on the Property.

            K. Leases. Seller represents that there are no leases, tenants or
other occupants respecting the Property, except as set forth in Paragraph 10.

            L. The Private Road. The private road which is on the property of
Shell Oil Company, ends at the boundary line of the Property. Shell Oil Company
is responsible for maintenance of the road, including repairs and snow plowing.
There are no restrictions governing the use of the road.

      29. ENVIRONMENTAL CONDITIONS.

            A. Buyer and Seller acknowledge that the sale of the Property may be
subject to compliance with the Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et
seq., the regulations promulgated thereunder and any amending or successive
legislation and regulations ("ISRA"). No later than five (5) days from the
execution of this Agreement by the last Party to sign, Seller shall submit to
the New Jersey Department of Environmental Protection ("DEP") a General
Information Notice form, Amended General Information Notice form, Applicability
Determination or the equivalent. Seller shall provide Buyer with evidence of
compliance with ISRA at Closing which may include, at Seller's election, a
Remediation Agreement, Amended Administrative Consent Order or the equivalent; a
Non-Applicability Determination; a No Further Action Determination or any
combination thereof. Buyer agrees to waive its right, if any, to vacate this
transaction under ISRA, as a result of any violation of ISRA by Seller, provided
Seller complies with this section A. This section shall survive the closing of
title.


                                       8
<PAGE>

            B. Buyer acknowledges that the Property is currently the subject of
a Deed Notice that contains in Deed Book 04643P, Page 236 to 258 and agrees to
take title subject to all restrictions imposed therein. Buyer also agrees to
allow Seller to record any modifications to that Deed Notice approved by DEP.
Buyer further agrees to comply with all requirements set forth in the recorded
Deed Notice. This section shall survive the closing of title.

            C. The Buyer shall accept responsibility for any
investigation/remediation required as a result of Buyer's activities on the
Property subsequent to closing. This section shall survive the closing of title.

            D. Buyer further advises that it has been provided with a copy of
the Administrative Consent Order (the "ACO") between CP Chemicals and the DEP
and is aware of the obligations imposed thereunder. The Seller shall be
responsible for complying with all obligations under the ACO except as provided
herein.

            E. Post Closing, Buyer shall maintain the Groundwater Recovery
System and the treatment plant on the Property. Seller shall make its Operations
Personnel available to Buyer without cost to the Buyer for a period of sixty
(60) days after closing of title to train Buyer's personnel in the operations of
all equipment at the Property.

            F. Buyer agrees that it will obtain all necessary permits and
approvals for its use of the Property. Buyer agrees that, commencing on the
Closing Date, it will operate and maintain the Groundwater Recovery System as
defined in Exhibit F. This section shall survive the closing of title.

            G. Both Parties agree to provide the other with a copy of all
documents sent to or received from the DEP within ten (10) business days of
receipt or mailing. This section shall survive the closing of title.

            H. Buyer agrees to provide security to prevent unauthorized entry
onto the Property for the term of the Lease and thereafter until Seller advises
Buyer that such measures are no longer required, in accordance with the
requirement of Seller's facility permit issued pursuant to the Resource
Conservation and Recovery Act.

            I. Seller shall maintain all financial assurances which may be
required by the DEP and which may be adjusted from time to time by the DEP, at
anytime, as a result of Seller's responsibilities pursuant to this Agreement.
This paragraph shall survive the closing of title.

      30. OBLIGATIONS OF BUYER TO REPORT TRANSACTION-1986 TAX REFORM ACT. Buyer
hereby acknowledges and agrees that it shall assume all responsibility for
compliance with the transaction reporting requirements of the 1986 Federal Tax
Reform Act.

      31. BUYER REPRESENTATIONS. Buyer hereby represents to Seller, each of
which representations shall be true at Closing, as follows:

            A. Buyer has all requisite power and authority to consummate the
transaction contemplated hereunder and has undertaken proper proceedings to duly
authorized the execution


                                       9
<PAGE>

and delivery of this Agreement and the consummation of all transactions
contemplated hereunder.

            B. The execution and performance of this Agreement shall not be a
breach or violation of any agreement to which the Buyer is a Party.

      32. BREACH OF CONTRACT. Seller's damages in the event of a breach by Buyer
shall be limited to termination of the Agreement. Buyer's damages in the event
of a breach by Seller shall be limited to termination of the Agreement.

      33. ENTIRE AGREEMENT. This Agreement and its Exhibits contains the entire
agreement between the Parties, and no agent, representative, or officer of the
Parties hereto has authority to make or has made any statement, agreement or
representation, either oral or written in connection herewith modifying, adding
to or changing the terms set forth herein. No modification of this Agreement
shall be binding unless such modification shall be in writing and signed by both
Parties.

      34. CONSTRUCTION. The Buyer and the Seller agree that each Party and its
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments, exhibits or schedules hereto.

      35. EXECUTION. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered, shall be deemed an
original, but such counterparts together shall constitute but one and the same
instrument.

      36. HEADINGS. The section headings herein are for convenience only and
shall not be construed to limit or affect any provisions of this Agreement.

      37. SEVERABILITY. In the event that any one or more of the provisions of
this Agreement shall be determined to be devoid or unenforceable by a court of
competent jurisdiction, or by law, such determination will not render this
Agreement invalid or unenforceable and the remaining provisions hereof shall
remain in full force and effect.

      38. CONTRACT DATE/EFFECTIVE DATE. "Contract Date" and "Effective Date"
shall be defined as the day on which a fully executed Agreement for Transfer of
Real Estate is received by the Buyer or Buyer's attorney.

      39. GOVERNING LAW. This Agreement and all other documents shall be
governed by and construed in accordance with the laws of the State of New Jersey
and without reference to conflicts of law. In the event that the Seller or Buyer
brings any action hereunder in any state or federal court in New Jersey, the
Seller or Buyer consents to and confers jurisdiction by such court or courts.

      40. INDEMNIFICATION.

            A. Buyer hereby releases, holds harmless and agrees to defend and
indemnify Seller with respect to all actions, causes of action, obligations,
expenses, liabilities, losses,


                                       10
<PAGE>

penalties, fines, fees (including counsel fees and reasonable costs of
investigation and defense) and costs, claims, suits and damages for personal
injury, property damage and violation of any federal, state, county or local
law, statute, regulation, rule or ordinance which Seller may incur, pay out, be
exposed to and/or otherwise be responsible for which arises from or is related
to the Property including without limitation as a result of the presence of any
Hazardous Materials (as defined hereinafter) and/or violation of any
Environmental Law (as defined hereinafter), any conduct, inaction, condition or
discharge that: (1) occurs after the Closing Date, except as a result of the
presence of any Hazardous Materials (as defined hereafter) and/or the violation
of any Environmental Law, as hereinafter defined, which condition or event
occurred prior to the Closing Date; or (2) arises or is related to the operation
and maintenance or failure to operate and maintain the Groundwater Recovery
System on or after the Closing Date.

            B. Seller hereby releases, holds harmless and agrees to defend and
indemnify Buyer with respect to all actions, causes of action, obligations,
expenses, liabilities, losses, penalties, fines, fees (including counsel fees
and reasonable costs of investigation and defense) and costs, claims, suits and
damages for personal injury, property damage and violation of any federal,
state, county or local law, statute, regulation, rule or ordinance which may
incur, pay out, be exposed to and/or otherwise be responsible for which arises
from or is related to the Property including without limitation as a result of
the presence of any Hazardous Materials (as defined hereinafter) and/or
violation of any Environmental Law (as defined hereinafter), any conduct,
inaction, condition or discharge that: (1) occurred prior to the conveyance of
the Property pursuant to this Agreement, (2) is a result of the presence of any
Hazardous Materials (as defined hereafter) and/or violation of any Environmental
Law (as defined hereafter) on or before the Closing Date, or (3) occurs as a
result of Seller's post Closing activities on the Property.

            C. As used in this Agreement, "Hazardous Material" if any hazardous
waste or hazardous substance as defined in any Environmental Law. As used in
this Agreement, "Environmental Law" means any and all laws relating to the
protection of the environment, human health and safety of any environmental
activity including federal, state, county, city and municipal environmental
clean up statute, law, rule, regulation or ordinance, decree or interpretation.

            D. This Paragraph shall survive the Agreement.

            E. The indemnification provided for herein shall not be assigned by
either Party.

      41. CONFIDENTIAL INFORMATION. Except as precluded by applicable law, any
Party may designate any data, information, reports, or documents provided to the
other as "Confidential Information." The provisions of this Agreement constitute
Confidential Information. Except as required by applicable law or action of
governmental agent acting under color of authority, neither Party shall, without
the prior written consent of the other Party, disclose any Confidential
Information to any third party.

      42. COOPERATION. The Parties agree to cooperate with respect to the
execution of documents and/or applications as may be necessary. The Party from
whom signature is sought shall be provided a reasonable opportunity to review
and comment upon any documents.


                                       11
<PAGE>

      43. SUCCESSORS AND/OR ASSIGNS. The covenants, conditions and agreements in
this Agreement shall bind and inure to the benefit of Seller and Buyer and,
except as provided in this Agreement, their respective permitted successors and
assigns.

      44. LIMITATION ON FURTHER CONVEYANCE. Buyer acknowledges that a mutual
inducement for Seller's entry into this Agreement is Buyer's agreement not to
convey, either by instrument or operation of law, the to Property subject to
this Agreement, except to another public entity of the State of New Jersey.
Buyer agrees that the deed of conveyance and if requested by Seller, a separate
recordable instrument, shall contain a provision restricting Seller from
conveying the Property, in whole or in part, except to another public entity of
the State of New Jersey, until such time as Seller has received a site-wide No
Further Action Determination without conditions and has no affirmative
obligation of any kind with respect to the Property by reason of environmental
conditions.


                                       12
<PAGE>

SIGNED AND AGREED TO BY:

Attest:                 Date Signed:   TOWNSHIP OF WOODBRIDGE

/s/                     6/8/00         By /s/
- ---------------------   -----------       --------------------------------------
John M. Mitch                             James E. McGreevey, Mayor
Municipal Clerk


                                       CP CHEMICALS, INC.

                                       Seller

ATTEST:

/s/                     4/18/00        By /s/
- ----------------------  -----------       --------------------------------------
Secretary                                 Senior Vice President &
                                          Chief Regulatory Officer
<PAGE>

                                    Exhibits*

Exhibit A - Property Location
Exhibit B - Legal Description
Exhibit C - Indemnification Agreement
Exhibit D - Lease
Exhibit E - Equipment List
Exhibit F - Description of Groundwater Recovery System
            Appendix 1 - As-Built Site Plan - 1 of 3 and Details - 2 of 6
            prepared by Sadat Associates, Inc.
            Appendix 2 - Wastewater Treatment Plant Layout - 2 of 3 and
            Wastewater
            Treatment Plant P& I - 3 of 3 prepared by Sadat Associates, Inc.
            Appendix 3 - Indirect Discharge Permit
            Appendix 4 - Deed Notice
            Appendix 5 - Easement

* Exhibits omitted


                                       14
<PAGE>

                     ENVIRONMENTAL INDEMNIFICATION AGREEMENT

      CP Chemicals, Inc. a corporation organized under the laws of the State of
NewJersey ("Indemnitor"), in consideration of the agreement for Transfer of
Ownership (the "Agreement") by the Township of Woodbridge (the "Township" or
"Indemnitee"), and for other good and valuable consideration, receipt of which
is hereby acknowledged, represents, agrees and covenants, as follows:

      1. Except as otherwise provided, defined terms shall have the same meaning
as in the Agreement for Transfer of Ownership to which this document is an
Exhibit and the Lease between CP Chemicals, Inc. and the Township of Woodbridge.

      2. This Indemnification Agreement shall supplement, but not supercede
Paragraph 40 of the Agreement.

      3. Indemnitor hereby releases, holds harmless and agrees to defend and
indemnify the Township with respect to all actions, causes of action,
obligations, expenses, liabilities, losses, penalties, fines, fees (including
counsel fees and reasonable costs of investigation and defense) and costs,
claims, suits and damages for personal injury, property damage and violation of
any federal, state, county, or local law, stature, regulation, rule or ordinance
which may incur, pay out, be exposed to and/or otherwise be responsible
("claim") for which arises from or is related to the Property including without
limitation as a result of the presence of any Hazardous Materials and/or
violation of any Environmental Law, any conduct, inaction, condition or
discharge that: (i) occurred prior tot he conveyance eof the Property pursuant
to the Agreement, (ii) is a result of the presence of any Hazardous Materials
and/or violation of any Environmental Law on or before the Closing Date
notwithstanding the date of the damage, injury or loss, (iii)
<PAGE>

occurs as a result of Indemnitor's post Closing activities in the Property, (iv)
or is a breach of Indemnitor's representations, warranties or covenants
respecting the environmental condition of the Property made herein (collectively
"Environmental Losses"). The Township agrees to provide Indemnitor with
reasonable notice of its intent to seek indemnification pursuant to thus
Paragraph 3. Indemnitor may elect to defense any claim with counsel of its
choosing provided said counsel is reasonably acceptable to the Township.

      4. Indemnitor hereby agrees to defend, hold harmless and indemnify the
Township against all Environmental Losses, including, but not limited to, all
Environmental Losses arising or resulting from actions that: (i) occurred prior
to the conveyance of the Property pursuant to the Agreement, (ii) is a result of
the presence of any Hazardous Materials and /or violation of any Environmental
Law on or before the Closing Date notwithstanding the date of the damage, injury
or loss, (iii) occurs as a result of Indemnitor's post Closing activities on the
Property, (iv) Indemnitor or any prior owner, tenant or occupant of the Property
caused or suffered including a spill, leak, pumping, pouring, emission,
emptying, discharge, injection, escape, leaching, dumping or disposal in the
environment of any Hazardous Substance, oil or petroleum (any of the foregoing
being a "Release") at, upon, under or within the Property in connection with
their operations on the Property or any contiguous real estate; (v) involved
Indemnitor or any prior owner, tenant or occupant with respect to operations at
the Property which lead or could lead to the creation of a lien on such Property
under the Environmental Law; or (vi) permitted by Indemnitor or any prior owner,
tenant or occupant of the Property with respect to any tenant or occupant of the
Property to engage in any activity that could lead to the creation of a Lien on
the Property, under the Environmental Law. The Township agrees to provide
Indemnitor with reasonable notice of its intent to seek indemnification pursuant
to this Paragraph 4. Indemnitor


                                       2
<PAGE>

may elect to defend any claim with counsel of its choosing provided said counsel
is reasonably acceptable to the Township.

      5. This indemnity encompasses all Environmental Losses, whether
foreseeable or unforeseeable, direct or consequential, actual or threatened,
including, without limitation, the cost of any required or necessary in section,
audit, cleanup, detoxification or similar action, and the preparation of any
closure or other required plans, consent orders, license applications or similar
processes.

      6. Indemnitor agrees the environmental Losses shall include, without
limitation: (I) any loss or damage suffered by the Township, even if the claim
or suit resulting in such loss is ultimately determined to be false, or (ii) any
liability of Township for damages resulting from the personal injury or death of
any Person, and notwithstanding the fact that Indemnitor has paid, or is
obligated to pay, such Person (or his/her survivors) under the worker's
compensation laws of the State of New Jersey, or any other similar law for the
protection of employees.

      7. This indemnity is an original obligation of Indemnitor and is an
absolute, unconditional, unlimited, continuing and irrevocable indemnity for
Environmental Losses and shall remain in full force and effect without respect
to the future changes and conditions, including changes of law or any invalidity
or irregularity with respect to this Indemnification Agreement.

      8. This Indemnification Agreement shall continue in full force and effect
and shall not expire. This Indemnification Agreement shall not be discharged or
affected by the dissolution, amalgamation, any change in the name, business,
membership, directorate, powers, partnership, corporate or other business form,
winding -up proceedings, proceedings under the Bankruptcy


                                       3
<PAGE>

Code, liquidation, receivership proceedings, the appointment of a receiver or
other insolvency proceedings occurring in respect of Indemnitor.

      9. Indemnitor further agreements that the Township shall not be obligated
to resort to or exhaust any recourse which Township may have against any other
source in respect of any Environmental Losses (such surety and Persons being
hereinafter "Third Party Obligor") or against any security therefor before being
entitled to claim against Indemnitor. The liability of Indemnitor shall be
continuing and enforceable by the Township against Indemnitor with respect to
each and every occurrence of Environmental Loss, and nothing shall prevent the
ownership, in its sole discretion, from resorting to recourse from other sources
first should it so elect.

      10. No delay on the part of Township in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
Township of any right or remedy shall preclude any further exercise thereof; nor
shall any modification or waiver of any of the provisions of this
Indemnification Agreement be binding upon township, except as expressly set
forth in writing duly signed and delivered on behalf of Township by an
authorized officer or agent. Any failure on the part of Township at any time or
times hereafter to require strict performance by Indemnitor or any Third Party
Obligor in respect of any Environmental Loss, shall not waive, affect or
diminish any right township may have at anytime or times hereafter to demand
strict performance thereof, and such right shall not be deemed to have been
waived by any act, failure to act or knowledge on the part of any of its agents,
officers or employees of Township, unless such waiver is contained in an
instrument in writing signed by such officer or agent or employee and directed
to Indemnitor or any third Party Obligor, as may be required, specifying such
waiver. No waiver by Township of any default shall operate as a waiver of any


                                       4
<PAGE>

other default or the same default on a future occasion, and no action on the
part of Township permitted hereunder shall in any way affect or impair the
rights of Township or the obligations of Indemnitor under this Indemnification
Agreement.

      11. This Indemnification Agreement is independent of, and in addition to,
any and all rights of Township against any other Person.

      12. This Indemnification Agreement shall be construed in accordance with
the laws of the State of New Jersey. Indemnitor hereby agrees that all actions
or proceedings arising directly or indirectly hereunder may, at Township's
option, be litigated in Courts having situs within the State of New Jersey, and
Indemnitor hereby expressly consents to the jurisdiction of any local, state or
federal court located within such State, and consents that any service of
process in such action or proceeding may be made by personal service or process
upon Indemnitor where Indemnitor may be then located or by certified or
registered mail directed to Indemnitor at the address set forth below its
signature on the last page of this Indemnification Agreement or such other
address as Indemnitor has notified Township of in writing.

      13. In the event that any provision or any part of any provision of this
Indemnification Agreement is deemed to be invalid by reason of the operation of
any law or by reasoning of the interpretation placed thereon by a court, this
Indemnification Agreement shall be construed as not containing such provision or
the remainder of such provision, and all of the provision and remainders of
provisions hereof which are otherwise lawful and valid shall remain in full
force and effect.


                                       5
<PAGE>

      14. Without limiting the generality of any other provision of this
Indemnification Agreement, each and every right, remedy and power hereby granted
to Township or allowed Township by law or other agreement in respect of
Indemnitor shall be cumulative and not exclusive of any other and may be
exercised by Township at any time and from time to time.

      15. This Indemnification Agreement shall be binding upon Indemnitor and
successors and assigns.

      16. Indemnitor hereby certifies that it has all necessary authority to
grant and execute this Indemnification Agreement.

      17. This Indemnification Agreement is not assignable.

      18. The parties agree that there are no third party beneficiaries to this
Indemnification Agreement.

      19. This Indemnification Agreement may be signed in counterparts.

      20. This Indemnification Agreement shall be executed by the Township on
the Closing Date, shall not take effect until the Closing date and shall be
considered null, void and of no effect in the event that Closing and transfer of
title does not occur pursuant to the Agreement.


                                       6
<PAGE>

      IN WITNESS WHEREOF, Indemnitor has executed this Indemnity Agreement this
______________ day of ______, 2000.

Attest:                 Date Signed:    TOWNSHIP OF WOODBRIDGE

/s/                     6-8-00          By /s/
- ----------------------  -----------        -------------------------------------
John M. Mitch                              James E. McGreevey, Mayor
Municipal Clerk


                                        CP CHEMICALS, INC.

Attest:

/s/                     4/18/00         By /s/
- ----------------------  -----------        -------------------------------------
Secretary                                  Senior Vice President &
                                           Chief Regulatory Officer
<PAGE>

                                       LEASE

LANDLORD                               TOWNSHIP OF WOODBRIDGE


TENANT                                 CP CHEMICALS, INC.
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE 1 DEMISED PREMISES - TITLE - TERM OF LEASE.............................1
   Section 1.01. Demised Premises..............................................1
   Section 1.02. Title.........................................................2
   Section 1.03. Term of Lease.................................................2
   Section 1.04. Option to Modify or Extend....................................2
   Section 1.05. Recordable Instruments........................................3

ARTICLE 2 USE OF PREMISES......................................................3
   Section 2.01. Use...........................................................3
   Section 2.02. Parking.......................................................3
   Section 2.03. Scale.........................................................4
   Section 2.04. Office........................................................4

ARTICLE 3 RENT AND OTHER CHARGES...............................................4
   Section 3.01. Rent..........................................................4
   Section 3.02. Additional Rent...............................................5

ARTICLE 4 INTENTIONALLY LEFT BLANK.............................................5

ARTICLE 5 UTILITY EXPENSE......................................................5
   Section 5.01. Utility Expense...............................................5
   Section 5.02. Taxes.........................................................6

ARTICLE 6 RIGHT OF ENTRY.......................................................7
   Section 6.01. Landlord's Right of Entry.....................................7
   Section 6.02. Tenant's Right of Entry.......................................7
   Section 6.03. Noninterference...............................................8
   Section 6.04. Easement......................................................8

ARTICLE 7 CHANGES, ALTERATIONS AND ADDITIONS...................................8
   Section 7.01. Tenant's Right to Make Alterations............................8
   Section 7.02. Compliance with Governmental Requirements.....................9
   Section 7.03. Landlord's Cooperation........................................9

ARTICLE 8 AFFIRMATIVE OBLIGATIONS AND COVENANTS OF TENANT.....................10
   Section 8.01. Affirmative Obligations......................................10

ARTICLE 9 WORK AT THE PREMISES................................................10
   Section 9.01. Work at the Premises.........................................10

ARTICLE 10 ENVIRONMENTAL CONDITIONS...........................................11
   Section 10.01. Deed Notice.................................................11
   Section 10.02. Permits and Approvals.......................................11


                                       -i-
<PAGE>

ARTICLE 11 LANDLORD'S WORK....................................................12
   Section 11.01. Landlord's Work.............................................12

ARTICLE 12 INSURANCE, CASUALTY, CONDEMNATION..................................12
   Section 12.01. Coverages...................................................12
   Section 12.02. Evidence of Insurance.......................................13
   Section 12.03. Fire or Other Casualty......................................13
   Section 12.04. Condemnation................................................14

ARTICLE 13 INDEMNIFICATION....................................................16
   Section 13.01. Tenant's Indemnification of Landlord Against Liability......16
   Section 13.02. Landlord's Indemnification of Tenant Against Liability......16

ARTICLE 14 LANDLORD'S REMEDIES IN EVENT OF TENANT'S DEFAULT OR BANKRUPTCY.....17
   Section 14.01. Events of Default...........................................17
   Section 14.02. Termination of Lease........................................18
   Section 14.03. Landlord's Damages..........................................18
   Section 14.04. No Waiver...................................................18

ARTICLE 15 ASSIGNMENT AND SUBLETTING..........................................18
   Section 15.01. Right of Assignment.........................................18
   Section 15.02. Landlord's Right to Collect Rent............................19

ARTICLE 16 EFFECTIVE DATE.....................................................19
   Section 16.01. Effective Date..............................................19

ARTICLE 17 EXONERATION OF INDIVIDUALS.........................................20
   Section 17.01. Exoneration.................................................20

ARTICLE 18 NOTICES............................................................20
   Section 18.01. Notices.....................................................20

ARTICLE 19 SECURITY...........................................................21
   Section 19.01. Security....................................................21

ARTICLE 20 QUIET ENJOYMENT - CONVEYANCE BY LANDLORD-REPRESENTATIONS BY THE
LANDLORD .....................................................................21
   Section 20.01. Quiet Enjoyment.............................................21
   Section 20.02. Conveyance by Landlord......................................21
   Section 20.03. Representations and Warranties of Landlord..................22

ARTICLE 21 ESTOPPEL CERTIFICATE...............................................23

ARTICLE 22 [INTENTIONALLY LEFT BLANK].........................................23

ARTICLE 23 SURRENDER..........................................................23
   Section 23.01. Conditions of Surrender.....................................23


                                      -ii-
<PAGE>

   Section 23.02. Tenant's Property...........................................23

ARTICLE 24 LEASEHOLD MORTGAGE.................................................24
   Section 24.01. Leasehold Mortgage..........................................24

ARTICLE 25 MISCELLANEOUS......................................................31
   Section 25.01. Submission of Lease.........................................31
   Section 25.02. Governing Law...............................................31
   Section 25.03. Broker......................................................31
   Section 25.04. Savings Clause..............................................32
   Section 25.05. Signs.......................................................32
   Section 25.06. Non-Merger; No Fee Estate Subordination.....................32
   Section 25.07. Parties Bound...............................................33
   Section 25.08. Number and Gender...........................................33
   Section 25.09. Captions....................................................33
   Section 25.10. Counterparts................................................33
   Section 25.11. No Surrender................................................33

ARTICLE 26 CONFIDENTIAL INFORMATION...........................................33
   Section 26.01. Confidential Information....................................33


                                     -iii-
<PAGE>

                                    L E A S E

      THIS INDENTURE OF LEASE (hereinafter called "Lease") dated the day of
_______ 2000 by and between, THE TOWNSHIP OF WOODBRIDGE with an address at
________________ (hereinafter referred to as "Landlord"), and CP CHEMICALS, INC.
having an address at One Parker Plaza, Fort Lee, New Jersey 07024 (hereinafter
referred to as "Tenant"). This Lease shall take effect on the Closing Date, as
defined in the Agreement for Transfer of Ownership to which this Lease is an
Exhibit. The Landlord and Tenant may be collectively referred to as the Parties.

                              W I T N E S S E T H :

                                    ARTICLE 1

                    DEMISED PREMISES - TITLE - TERM OF LEASE

      Section 1.01. Demised Premises

      In consideration of the rents, covenants and agreements hereinafter
reserved and contained on the part of the Tenant to be observed and performed,
Landlord does hereby lease and demise to the Tenant and the Tenant does hereby
hire, lease and take from Landlord, for the Term subject to and upon the
covenants, terms, agreements and conditions hereinafter set forth, that portion
of a certain tract or parcel of land as described and depicted in Exhibit 1 (the
"Premises" or "Demised Premises") which is part of a larger tract or parcel of
land consisting of approximately fourteen (14) acres lying and being located on
Arbor Street, Sewaren, Woodbridge Township, know as Block 729, Lot 3; Block
729A, Lot 1; Block 730, Lots 1 and 1B; and Block 731, Lot 1B on the tax map of
the Township of Woodbridge, County of Middlesex, State of New Jersey (the
"Property"). The Premises is also commonly known as Areas 1, 5 and 7, the
loading pad at Building 19, the loading dock at Building 44, and Building 44.
The square footage of the Demised Premises is as follows: Area 1: 2,520 sq. ft.;
Area 5: 652 sq. ft.; Area 7: 856 sq. ft.; the loading pad at Building 19: 560
sq. ft.; the loading dock at Building 44: 4,200 sq. ft.; and Building 44: 9,052
sq. ft..


                                      -1-
<PAGE>

      Together with any and all improvements presently on the Premises.

      Together with all the appurtenances, rights, interests, easements and
privileges pertaining to the Premises.

      Section 1.02. Title

      At the commencement of the Term of the Lease, Landlord shall own the fee
title to the Demised Premises, subject to restrictions and encumbrances of
record, zoning regulations affecting such Premises and any state of facts shown
on an accurate survey or as a visual inspection of the Premises would disclose.

      Section 1.03. Term of Lease

      The Term of the Lease shall be ten (10) years commencing on the Closing
Date, as defined in the Agreement for Transfer of Ownership to which this Lease
is an Exhibit ("Commencement Date") and shall expire ten (10) years thereafter,
except to the extent that Tenant continues to require access to satisfy Tenant's
Environmental Obligations, as defined herein. As to Tenant's Environmental
Obligations, this Lease shall expire when Tenant receives written notice from
the applicable governmental agency that its Environmental Obligations are
satisfied. Environmental Obligations shall be defined as any obligation imposed
on Tenant by a governmental authority under Environmental Laws. Environmental
Laws shall be defined as any state, federal, local or county, statute, law, rule
or regulation concerning the environment including any permit, order, consent
order or other document issued thereunder ("Expiration Date"). The aforesaid
period shall be referred to as the "Term" or "Lease Term".

      Section 1.04. Option to Modify or Extend

      Tenant shall have the option to expand or modify the Premises subject to
its use by providing Landlord with sixty (60) days advance written notice of a
request to modify its leasehold interest. Said notice shall include a
description of the property to be included in or excluded from the leasehold,
the effective date, and proposed terms and conditions associated with the
request. Landlord agrees to review any such request and respond to Tenant, in
writing, within thirty (30) days of receipt of Tenant's request.


                                      -2-
<PAGE>

Landlord's consent to Tenant's request shall not be unreasonably withheld,
delayed or conditioned.

      Section 1.05. Recordable Instruments

      Upon the commencement of the Term, Landlord and Tenant shall execute and
exchange the following recordable instruments: 1. a form of memorandum of lease;
2. easement documents; and 3. any other recordable instruments required by this
Lease. All recordable instruments shall be in a form acceptable to both Parties
and shall be approved by both Parties prior to recordation. All costs associated
with the preparation, execution and recordation of any recordable instrument
shall be paid in full by the Party making the request for the recordable
instrument. All recordable instruments shall include a termination date and
shall automatically expire no later than the Expiration Date, as defined herein.

                                   ARTICLE 2

                                USE OF PREMISES

      Section 2.01. Use

      The Tenant shall use and occupy the Premises for the uses permitted by
Tenant's Hazardous Waste Facility Permit, EPA I.D. No. NJD002141950, N.J.
Facility No. 1225H1, attached as Exhibit 2 and storage, preparation and/or
transfer of material for market or further development ("Tenant's Use").

      Section 2.02. Parking

      Subject to the following conditions, Tenant shall have access to and use
the parking area, at no Additional Rent or other charge, as designated on
Exhibit 3 for the Term of the Lease. Tenant will be allowed a minimum of two (2)
parking spaces throughout the Term. Landlord shall have the right to assign
parking spaces and limit the number of parking spaces available to Tenant, based
on Landlord's use of the Property. Tenant's use of the parking area shall be
subject to the reasonable


                                      -3-
<PAGE>

rules and regulations that may be established by Landlord and that shall be
provided to Tenant in writing.

      Section 2.03. Scale

      Tenant shall have the right to access and use the scale, at no Additional
Rent or other charge, as depicted on Exhibit 3 for the Term of the Lease.
Tenant's use of the scale shall be subject to the reasonable rules and
regulations that may be established by Landlord and that shall be provided to
Tenant in writing. Landlord reserves a right to designate hours during which
Tenant may have access to the scale. Landlord shall have no obligation to
maintain and/or repair the scale and shall have no liability to Tenant if the
scale fails to operate.

      Section 2.04. Office

      Tenant shall have access to and use of an office in the building currently
used for offices, at no Additional Rent or other charge, as designated on
Exhibit 3, for the Term of the Lease. Landlord shall designate the area in the
office available to Tenant. Tenant's use of the office shall be subject to the
reasonable rules and regulations that may be established by Landlord and shall
be provided to Tenant in writing.

                                   ARTICLE 3

                             RENT AND OTHER CHARGES

      Section 3.01. Rent

      A. The Annual Rent to be paid by Tenant to Landlord shall be as follows:

      Calendar Year or Portion Thereof          Annual Amount
      --------------------------------          -------------
             1                                  $300,000.00
             2                                  $300,000.00
             3                                  $300,000.00
             4                                  $200,000.00
             5                                  $200,000.00
             6                                  $200,000.00
             7                                  $125,000.00
             8                                  $125,000.00


                                      -4-
<PAGE>

             9                                  $125,000.00
             10                                 $125,000.00

      B. Said Annual Rent shall be paid in advance on a calendar year basis,
without notice or invoice from Landlord. The Annual Amount for year 1 shall be
paid in two payments. The first payment shall be in the amount of $150,000 and
shall be made upon execution of this Lease by Woodbridge Township on the Closing
Date. The second payment shall be made on December 1, 2000 and shall be in the
amount of $150,000. Thereafter, the Annual Rent shall be paid yearly on January
1 or the first business day thereafter. Said Annual Rent and all other payments
due under this Lease (sometimes herein collectively referred to as "Rent") shall
be paid to the Landlord at its address hereinabove first specified, or, to such
other payee or address as the Landlord may otherwise direct in writing.

      C. In the event that the Annual Rent is not received by Landlord within
fifteen (15) days after the due date, there will be late charge in the amount of
eight percent (8%) of the annual amount.

      Section 3.02. Additional Rent

      All payments Tenant is required to make pursuant to this Lease, other than
Annual Rent payments shall constitute "Additional Rent" and, if Tenant defaults
in any such payment so as to create an Event of Default (as hereinafter
defined), Landlord shall have (in addition to any rights and remedies granted
hereby) all rights and remedies provided by law for the nonpayment of rent.

                                   ARTICLE 4

                            INTENTIONALLY LEFT BLANK

                                   ARTICLE 5

                                 UTILITY EXPENSE

      Section 5.01. Utility Expense


                                      -5-
<PAGE>

      Tenant shall bear its own utility costs. Tenant shall, at its election,
either arrange for separate electric, water, and gas service at its sole cost
or, if Tenant uses the existing electric, water or gas service, Tenant shall
reimburse Landlord for Tenant's electric, water, or gas use. Tenant does not
intend to use water or natural gas at the Premises. Tenant agrees to reimburse
Landlord for any incremental increase in the costs of operating the wastewater
treatment plant arising from Tenant's operations.

      Section 5.02. Taxes

      Tenant shall pay, as Additional Rent, the percent of all Real Estate Taxes
(as defined below) attributable to the land included in Demised Premises and one
hundred 100% percent of the Real Estate Taxes attributable to the buildings in
the Demised Premises and to any Improvements constructed on the Demised Premises
by the Tenant which may be levied or assessed or which accrue on or after the
Commencement Date. For purposes of this Lease, the percent of Real Estate Taxes
attributed to the Demised Premises shall be calculated by dividing the amount of
Real Estate Taxes by the square footage of the Property and multiplying the
result by the square footage of the Demised Premises. Any Real Estate Taxes
attributed to Improvements constructed by Tenant shall not be included in this
calculation. Tenant acknowledges that the Premises do not constitute a separate
independent tax lot but are part of a larger combined tax lot owned by Landlord.

      As used in this Paragraph, the words and terms which follow mean and
include the following:

      (i) "Real Estate Taxes shall mean the property taxes which shall or may be
levied, assessed imposed, become due and payable, or become liens upon the
property of which the Premises forms a part, or arise in connection with the
specific use, occupancy or possession of, or become due or payable out of, or
for the Premises, or for the Premises or any part thereof, or any buildings or
other improvements actually on the Premises, or levied, assigned or imposed upon
the rent, as such, payable the Landlord. If due to a future change in the method
of taxation prevailing at the date of this Lease, any franchise, income or
profit tax or a license fee measured by or based in


                                      -6-
<PAGE>

whole or in part upon the Premises or any portion thereof, shall be levied,
assessed or imposed against Landlord in substitution for, or in lieu of, the
whole or any part of any tax now levied, assessed or imposed which would
otherwise constitute Real Estate Taxes, such franchise, income or profit tax or
license fee shall be deemed to be Real Estate Taxed for the purposes hereof;
conversely, any additional real estate tax hereafter imposed in substitution
for, or in lieu of, any franchise, income or profit tax (which is not in
substitution for, or in lieu of, or in addition to, a Real Estate Tax as
hereinbefore provided) shall not be deemed Real Estate Taxes for the purposes
hereof. Real Estate Taxes shall also include all fees and expenses, including
legal fees, to context and/or challenge any tax assessment.

                                   ARTICLE 6

                                 RIGHT OF ENTRY

      Section 6.01. Landlord's Right of Entry

      For the duration of this Lease, Landlord shall have the right to enter
upon the Demised Premises for the purpose of: (1) fulfilling its obligations
under the Agreement For Transfer of Ownership to which this Lease is an exhibit
including, without limitation, Landlord's obligations under Paragraphs 29 and
40; (2) inspecting Tenant's operations to ensure compliance with this Lease; (3)
inspect the Demised Premises; and (4) to carry out any actions ordered by the
state, federal or local governments. This access shall include, but not be
limited to access the interiors of buildings, the ability to drill wells,
collect soil borings, and collect other samples as directed by local, state or
federal court or governmental agency.

      Section 6.02. Tenant's Right of Entry

      For the duration of this Lease, Tenant shall have the right to enter upon
the Property not included in the Premises for the purpose of: (1) fulfilling its
obligations under the Agreement For Transfer of Ownership to which this Lease is
an Exhibit; (2) for access post closing as described in


                                      -7-
<PAGE>

Paragraph 13 of the Agreement For Transfer of Ownership to which this Lease is
an Exhibit; (3) to carry out any actions ordered by the state, federal or local
governments; and (4) as may otherwise be necessary under this Lease including
without limitation, to access the Premises. This access shall include, but not
be limited to access the interiors of buildings, the ability to drill wells,
collect soil borings, and collect other samples as directed by any local, state
or federal court or governmental agency.

      Section 6.03. Noninterference

      The Parties shall use best efforts to avoid interfering with each other's
use of the Property and the Premises when exercising these access rights.

      Section 6.04. Easement

      The Parties agree that Tenant's post closing access rights shall also be
memorialized in a form of an easement, the terms of which shall be agreeable to
both Parties, that will be executed simultaneous with and as a condition to the
execution of this Lease.

                                   ARTICLE 7

                       CHANGES, ALTERATIONS AND ADDITIONS

      Section 7.01. Tenant's Right to Make Alterations

      A. Subject to the prior approval of the Landlord, which approval shall not
be unreasonably withheld, delayed, or conditioned, Tenant shall be entitled to
build, make any alterations, rebuildings, replacements, changes, improvements or
additions to the Premises (hereinafter referred to collectively as the
"Alterations" or "Improvements").

      B. Subject to the provisions herein, Tenant has the right to make any
Alterations as long as Tenant complies with the requirements set forth below:

            (i) that the same shall be performed in a first class workmanlike
manner;


                                      -8-
<PAGE>

            (ii) that before the commencement of any such work, Tenant's plans
and specifications shall be filed with and approved by necessary government
authorities and any public utility company and such work shall be done subject
to and in accordance with all applicable law;

            (iii) all Improvements shall be and remain the property of the
Tenant until the Term expires. Upon that date, Landlord shall, at its option,
direct the Tenant to either deliver the Improvements to the Landlord or remove
the Improvements from the Property. Tenant shall repair any damages caused by
the removal of an Improvement at Tenant's cost.

            (iv) Tenant agrees to pay any increase in taxes or make payment in
lieu of taxes for any increase in taxes over the base year 2000 that are
assessed as a result of an Improvement or Alteration made by Tenant.

            (v) Tenant agrees that it shall provide a bond to insure the
completion of any Alteration in excess of $25,000.00.

            (vi) All work shall be subject to inspection and approval by the
Landlord, consistent with Landlord's approval under SubParagraph A hereof and
Section 7.02. Landlord's approval shall not be unreasonably withheld, delayed or
conditioned.

      Section 7.02. Compliance with Governmental Requirements

      Any Alteration shall be made in compliance with all applicable laws, rules
and governmental regulations.

      Section 7.03. Landlord's Cooperation

      Landlord shall promptly sign all permits and applications which may be
required to secure any necessary approvals for the construction and/or
alteration of the Improvements constructed by Tenant, in accordance with the
terms of this Lease. Any request made hereunder shall be at the sole cost and
expense of Tenant.


                                      -9-
<PAGE>

                                   ARTICLE 8

                 AFFIRMATIVE OBLIGATIONS AND COVENANTS OF TENANT

      Section 8.01. Affirmative Obligations

      Tenant covenants and agrees, at its own cost and expense, at all times
during the Term, to:

      A. Comply with Laws. Comply with applicable laws, ordinances, rules and
regulations of governmental authorities or obtain an exception or exemption
therefrom.

      B. Garbage. Handle and dispose of all rubbish, garbage and waste from
Tenant's operation in accordance with laws and ordinances. Tenant's actions
under this provision shall be subject to the reasonable rules and regulations
that may be established by Landlord and that shall be provided to Tenant in
writing.

      C. Tenant shall have the right to contest by appropriate legal proceedings
which shall be conducted diligently and in good faith in the name of Landlord or
Tenant or both and without cost or expense to Landlord, the validity or
applicability of any law, ordinance, order, rule, or regulation of the nature
hereinabove referred to and Tenant shall have the right to delay observance
thereof and compliance therewith until such contest is finally determined and is
no longer subject to appeal, provided that observance and compliance therewith
pending the prosecution of such proceeding may be legally delayed without
subjecting Landlord to any criminal liability or fine. Tenant shall indemnify,
defend and hold Landlord harmless for any damages, cost or expense incurred by
Landlord as a result of Tenant's actions under this SubParagraph C.

                                   ARTICLE 9

                              WORK AT THE PREMISES

      Section 9.01. Work at the Premises

      A. Notice is hereby given that Landlord shall not be liable for any work
performed or to be performed at the Premises for Tenant, or for any materials
furnished or to be furnished at the Premises for Tenant, and that no mechanic's
or other lien for such work or materials shall attach to or


                                      -10-
<PAGE>

affect the interest of Landlord in and to the Premises. Any mechanic's lien
filed against the Premises as a result of the Tenant's acts shall be bonded or
removed by the Tenant within thirty (30) days after Tenant receives written
notice of any such liens having been filed. Tenant is permitted to finance
equipment, furnishings, and fixtures installed by Tenant. Landlord shall sign a
waiver form acknowledging the financing and in which any such lender rights
shall be acknowledged and recognized. Such waiver must provide that any
lienholder will repair any damage caused in connection with the removal of any
property and that any property shall be removed within sixty (60) days after the
end of the Term so long as monthly payments of Annual Rent and Additional Rent
are paid to the Landlord for such additional period needed to remove the
property.

                                   ARTICLE 10

                            ENVIRONMENTAL CONDITIONS

      Section 10.01. Deed Notice

      Landlord and Tenant acknowledge that the Property, including the Premises,
is currently the subject of a Deed Notice recorded in Deed Book 04643P, Pages
236 to 258. Landlord agrees to allow Tenant to record any modification(s) to
that Deed Notice approved by the New Jersey Department of Environmental
Protection ("DEP"). Landlord agrees to comply with all requirements set forth in
the recorded Deed Notice and any modifications. Tenant shall implement the
requirements pursuant to Article 13 and Section 10.02. Tenant shall provide
notice to Landlord of any modification to the Deed Notice. Landlord shall have
the opportunity to review any Deed Notice in advance of recordation; however,
Landlord agrees that its review and comment on a modification to the Deed Notice
shall not be inconsistent with the requirements imposed by the New Jersey
Department of Environmental Protection or other federal, state, local or county
agency and shall not cause Tenant to be in violation of any such requirement.
Tenant further agrees to provide Landlord with a copy of any documents sent to
or received from the DEP pursuant to this Section 10.01.

      Section 10.02. Permits and Approvals


                                      -11-
<PAGE>

      Tenant agrees that it will obtain all necessary permits and approvals for
its use of the Premises. Tenant agrees that, except as provided below, Tenant
will not rely on any of Landlord's permits and approvals without the express
written consent of Landlord. Landlord agrees that it will not rely on any of
Tenant's permits and approvals without the express written consent of Tenant.
Landlord and Tenant agree that Tenant shall have a right, during the Term of the
Lease, to utilize Landlord's Indirect User Permit authorizing discharge to the
Middlesex County Utilities Authority and, to request that Landlord seek
modification of that permit, at no cost to Landlord. Tenant further agrees that
it will reimburse Landlord for any incremental increases in the cost of
operating the wastewater treatment plant or Groundwater Recovery System as a
result of any such request by Tenant. Landlord agrees that it will operate and
maintain the Groundwater Recovery System as defined in Exhibit 4.

                                   ARTICLE 11

                                 LANDLORD'S WORK

      Section 11.01. Landlord's Work

      Landlord shall not, except as specifically provided for herein, be
required to do any work to make the Demised Premises ready for Tenant's use and
occupancy.

                                   ARTICLE 12

                        INSURANCE, CASUALTY, CONDEMNATION

      Section 12.01. Coverages

      A. Tenant shall, at its own cost and expense, maintain comprehensive
public liability insurance against claims for personal injury, death and
property damage occurring in or about the Premises; such insurance shall afford
minimum protection of one million dollars ($1,000,000) with respect to the
personal injury or death of any one person; one million dollars ($1,000,000)
with respect to personal injury or death occurring or resulting from one
occurrence naming Landlord as an additional insured.


                                      -12-
<PAGE>

      B. Tenant shall obtain at its own cost and expense, maintain all risk
property, fire and casualty insurance in the amount of one million dollars
($1,000,000). Landlord shall be named as an additional insured.

      C. Landlord acknowledges that, except as specifically provided for in this
Lease, Landlord shall have no right to any of the proceeds of said insurance and
that Landlord has no insurance coverage under any policies obtained where Tenant
is named as the sole loss payee.

      D. Except as provided herein, Landlord shall have the right to receive
insurance proceeds for damage or destruction to the Improvements. Landlord shall
have no right to any insurance proceeds covering Tenant's contents, including
without limitation equipment, machinery, raw materials and product.

      E. Tenant shall advise its insurers to notify Landlord at least thirty
(30) days prior to the termination or cancellation of any insurance maintained
pursuant to this Section 12.01.

      Section 12.02. Evidence of Insurance

      All insurance required to be maintained by Tenant by this Article 12 may
be effected by policies of blanket insurance, covering property other than the
Premises. Tenant shall furnish Landlord with reasonable proof of compliance with
the requirements of this Article.

      Section 12.03. Fire or Other Casualty.

      A. In the event of a fire or other casualty affecting the Premises, Tenant
shall, within one hundred twenty (120) days after the date it receives its final
casualty insurance proceeds, advise Landlord in writing whether it shall: 1.
commence rebuilding its Improvements; or 2. abandon the Premises; or 3. modify
its use of the Premises. Tenant agrees to diligently pursue final casualty
insurance proceeds.

      B. Notwithstanding anything to the contrary contained in the preceding
Paragraph A of this Section or elsewhere in this Lease, during the Term, Tenant
may terminate this Lease on fifteen (15) days notice to Landlord, given within
one hundred twenty (120) days after Tenant's receipt of its


                                      -13-
<PAGE>

final casualty proceeds if Tenant's Improvements shall be damaged or destroyed
where the cost to repair the Improvements shall amount to ten (10%) percent or
more of the cost of replacement thereof. In the event Tenant does not elect to
terminate this Lease, Tenant shall, subject to receipt of any necessary
municipal approvals, commence restoration one hundred and twenty (120) days from
receipt of the casualty insurance proceeds and shall have the right to use said
proceeds to rebuild with the remainder of the proceeds to be paid to Landlord.
In the event Tenant elects to terminate the Lease, the casualty insurance
proceeds shall be used, first to level the building and remove all debris caused
by the casualty and the demolition of the building, then to payoff any Leasehold
Mortgagee and the remaining balance to the Landlord. Notwithstanding the above,
Landlord shall have no right to insurance proceeds paid as a result of loss of
contents including without limitation Tenant's equipment, machinery, raw
materials, product or other contents.

      C. This provisions of this Section 12.03 shall have no effect on Tenant's
obligation to pay Rent pursuant to Article 3 of this Lease.

      Section 12.04. Condemnation

      A. Total or Partial Condemnation. If the whole of the Premises shall be
taken for any public or any quasi-public use under any statute or by right of
eminent domain, or by private purchase in lieu thereof, then this Lease shall
automatically terminate as of the date that title shall be taken. If a
substantial part of the Premises shall be taken, including a portion of Tenant's
building or the property, so as to interfere with the operation of Tenant's
business, then Tenant shall have the right to terminate this Lease, effective as
of the actual taking, on thirty (30) days notice to the Landlord given within
ninety (90) days after receipt of the Notice of Taking. In the event only a
portion of the Premises (not affecting the building) shall be taken and, in
Tenant's judgment reasonably exercised, the balance of the Premises after
reconstruction is suitable for Tenant's business, this Lease shall not terminate
and Tenant shall be entitled to use the condemnation proceeds applicable to the
Improvements on the Premises to rebuild. Except as provided herein, in


                                      -14-
<PAGE>

the event that Tenant elects not to rebuild, Landlord shall have the right to
all condemnation proceeds. In the event Tenant elects to rebuild, and Landlord
consents to use of the proceeds applicable to the Improvements on the Premises,
Landlord shall have the right to any remaining proceeds. In the event that
Tenant elects to rebuild and Landlord does not consent to the use of the
proceeds applicable to the Improvements on the Premises, Tenant shall have no
obligation to rebuild. This subparagraph shall have no effect on Tenant's
obligation to pay Rent pursuant to Article 3 of this Lease.

      B. Disposition of Proceeds. Except as provided herein, all compensation
awarded or paid upon such total or partial taking of the land comprising the
Premises shall belong to and be the property of the Landlord unless Tenant is
permitted by law (at the same time as Landlord is permitted to assert its claim)
to assert a claim against the condemning authority enforcing the condemnation
for losses sustained by the Tenant as a result of the condemnation in which case
Tenant shall have a right to those proceeds. In the event Tenant is not entitled
to assert a separate claim, Landlord and Tenant shall jointly file a claim
asking for separate awards with respect to their respective interests. If the
condemning authority will not establish separate awards, and Landlord and Tenant
cannot agree upon the distribution and use of a unified award, the dispute shall
be submitted to arbitration in accordance with the rules of the American
Arbitration Association.

      C. Commencement of Condemnation. Landlord agrees that it will not commence
a condemnation proceeding during the Term of the Lease without Tenant's consent.
Landlord further agrees that it will not solicit, direct or support a
condemnation by another authority during the Term of the Lease without Tenant's
consent.

      D. Condemnation Process. Landlord and Tenant acknowledge that Tenant has
been issued a facility permit, Exhibit 2, for Tenant's operations at the Demised
Premises. In the event Tenant determines that the value offered by the
condemning authority does not, in Tenant's discretion, reflect the value of this
permit, Tenant reserves the right, at Tenant's cost and expense, to


                                      -15-
<PAGE>

challenge the valuation of the Property. If Tenant pursues a challenge, Tenant
shall make best efforts to prevent a delay in Landlord's receipt of proceedings
and, if necessary, shall advance Landlord's proceeds in which case, Landlord
shall assign its rights in the condemnation to Tenant.

                                   ARTICLE 13

                                 INDEMNIFICATION

      Section 13.01. Tenant's Indemnification of Landlord Against Liability

      Tenant hereby releases, holds harmless and agrees to defend and indemnify
Landlord with respect to all actions, causes of action, obligations, expenses,
liabilities, losses, penalties, fines, fees (including counsel fees and
reasonable costs of investigation and defense) and costs, claims, suits and
damages for personal injury, property damage and violation of any federal,
state, county, or local law, statute, regulation, rule or ordinance which
Landlord may incur, pay out, be exposed to and/or other be responsible for which
arises from, or is related to the Premises, that is caused by Tenant's conduct,
inaction, condition or discharge that: (1) occurs during the Term of the Lease
and is a result of Tenant's activities on the Premises or use, non-use or
maintenance of the Premises; or (2) any use, non-use or maintenance of the
Premises in violation of the terms of the Lease; or (3) any negligence, willful
misconduct of Tenant, or intentional acts by Tenant, its agents, employees,
invitees, congregates, contractors, officers or directors; or (4) any breach or
default by Tenant of this Lease or failure by Tenant to perform any of its
obligations under the Lease. This indemnification is not assignable.

      Section 13.02. Landlord's Indemnification of Tenant Against Liability

      Landlord hereby releases, holds harmless and agrees to defend and
indemnify Tenant with respect to all actions, causes of actions, obligations,
expenses, liabilities, losses, penalties, fines, fees (including counsel fees
and reasonable costs of investigation and defense) and costs, claims, suits and
damages for personal injury, property damage and violation of any federal,
state, county or local law, statue, regulation, rule or ordinance which Tenant
may incur, pay out, be exposed to and/or otherwise


                                      -16-
<PAGE>

be responsible for which arises from, or is related to the Property, that occurs
as: (1) a result of Landlord's activities on the Property, including the
Premises, or (2) arises or is related to the operation and maintenance or
failure to operate or maintain the Groundwater Recovery System; or (3) a result
of any negligence, willful misconduct of Landlord, or intentional acts by
Landlord, its agents, employees, invitees, congregates, contractors, officers or
directors; or (4) any breach or default by Landlord of this Lease or failure by
Landlord to perform any of its obligations under the Lease. This indemnification
is not assignable except as provided at Article 15.

                                   ARTICLE 14

         LANDLORD'S REMEDIES IN EVENT OF TENANT'S DEFAULT OR BANKRUPTCY

      Section 14.01. Events of Default

      Tenant shall be in default of this Lease if any one or more of the
following events (referred to herein as "Events of Default") occurs:

      A. Tenant defaults in the payment of Annual Rent and/or Additional Rent
and such defaults continues for thirty (30) days after notice.

      B. Except as set forth in Subparagraph A above, Tenant defaults in the
observance or performance of any covenant or provision of this Lease and such
default continues for sixty (60) days after notice of such default from Landlord
provided, however, if such default cannot by its nature be cured within such
sixty (60) day period, no event of default shall be deemed to exist as long as
Tenant has commenced curing the same within such sixty (60) day period and
diligently prosecutes the cure.

      C. Tenant shall make an assignment for the benefit of creditors or shall
assign or sublet, except as permitted hereunder.

      D. A voluntary petition is filed by Tenant under any laws for the purpose
of adjudication of Tenant as a bankrupt or the extension of the time of payment,
composition, arrangement, adjustment, modification, settlement or satisfaction
of the liabilities of Tenant, or the


                                      -17-
<PAGE>

reorganization of Tenant under the Bankruptcy Act of the United States or any
future laws of the United States having the same general purpose, or receivers
appointed for Tenant by reason of insolvency or alleged insolvency of Tenant; an
involuntary petition shall be filed against Tenant for such relief and shall not
be dismissed within sixty (60) days.

      Section 14.02. Termination of Lease

      Landlord, notwithstanding any other right or remedy it may have under the
Lease, at law or in equity, may, in an event of Default and Tenant's failure to
cure as set forth above, terminate the Lease, by written notice to Tenant
setting forth the basis therefor and effective not less than ninety (90) days
thereafter, whereupon, upon such effective date, this Lease shall terminate
(with the same effect as if such date were the date fixed herein for the natural
expiration of the Term), Tenant shall surrender the Premises to Landlord. In
such event, Landlord may, without further notice, enter the Premises, repossess
the same and dispossess Tenant and all other persons and property therefrom.

      Section 14.03. Landlord's Damages

      If Landlord so terminates the Lease, Tenant shall pay Landlord, as damages
in a sum equal to the Annual Rent, when the same would have been payable over
the remaining Term if not for such termination.

      Section 14.04. No Waiver

      The failure of either Party to seek redress for violation of, or to insist
upon the strict performance of any covenant or condition of this Lease, shall
not prevent a subsequent act which would have originally constituted a violation
from having all the force and effect of an original violation. No provision of
this Lease shall be deemed to have been waived by either Party unless such
waiver be in writing signed by the Party against whom waiver is sought.

                                   ARTICLE 15

                            ASSIGNMENT AND SUBLETTING

      Section 15.01. Right of Assignment


                                      -18-
<PAGE>

      At any time during the Term Tenant may, upon not less than ten (10) days
written notice to Landlord, sublet or assign this Lease to an Affiliate of the
Tenant without consent of the Landlord. Affiliate shall be defined as a parent
or wholly owned subsidiary of the Tenant. As to Landlord, Tenant shall retain
responsibility for Tenant's obligations hereunder, notwithstanding any
assignment or subletting. All other assignments or sublettings require
Landlord's approval in Landlord's sole discretion.

      A. In the event of any sublease or assignment, Tenant shall remain fully
and primarily liable for all terms and conditions of the Lease as a principal
and not as a surety. In the event of an assignment, the assignee, other than a
Leasehold Mortgagee, shall assume all of the Tenant's obligations under the
Lease.

      Section 15.02. Landlord's Right to Collect Rent

      If this Lease is assigned, or if the Premises or any part thereof be
sublet or occupied by anyone other than Tenant, Landlord may upon prior notice
to Tenant at any time and from time to time, collect Annual Rent and Additional
Rent and all the charges from the assignee, sublessee or occupant and apply the
net amount collected to such sums reserved herein.

                                   ARTICLE 16

                                 EFFECTIVE DATE

      Section 16.01. Effective Date

      This Lease shall be executed on the Closing Date by the Landlord and shall
take effect on the Closing Date as defined in the Agreement for Transfer of
Ownership to which this Lease is an Exhibit.


                                      -19-
<PAGE>

                                   ARTICLE 17

                           EXONERATION OF INDIVIDUALS

      Section 17.01. Exoneration

      If the Landlord or any successor in interest shall be an individual, joint
venture, trust, tenancy in common, limited liability company, firm or
partnership, general or limited there shall be no personal liability on such
individual or on any member of such joint venture, limited liability company,
trust, tenancy in common, firm or partnership in respect to any of the covenants
or conditions of this Lease. The Tenant shall look solely to the equity of the
Landlord in the Property and not its directors, shareholders, officers, members,
employees or agents in the event of a breach by the Tenant of any of the
covenants or conditions of this Lease or any liability arising out of the
Tenant's use or occupancy of the Premises.

                                   ARTICLE 18

                                     NOTICES

      Section 18.01. Notices

      All notices, demands and requests which may or are required to be given by
either party to the other shall be in writing. All notices, demands and requests
by the Landlord to the Tenant shall be sent by either (i) United States
Certified Mail, return receipt requested, postage prepaid; (ii) nationally
recognized overnight carrier; (iii) one day U.S. Post Office delivery; or (iv)
personal receipted delivery addressed to the Tenant, at the address set forth
above Attention: Thomas L. Moran or at such other place as the Tenant may from
time to time designate in a written notice to the Landlord. Additionally, copies
of all notices to Tenant shall be sent to: Margaret B. Carmeli, Esq., c/o
Giordano, Halleran & Ciesla, P.C., 125 Half Mile Road, Middletown, New Jersey
07748. All notices, demands and requests by the Tenant to the Landlord shall be
sent by (i) United States Certified Mail, postage prepaid, return receipt
requested, (ii) nationally recognized overnight carrier;


                                      -20-
<PAGE>

(iii) one day U.S. Post Office delivery; or (iv) personal receipted delivery
addressed to the Landlord as follows: Business Administrator, Township of
Woodbridge, One Main Street, Woodbridge, NJ 07095. Additionally, copies of all
notices to Landlord shall be sent to Director of Law, Township of Woodbridge,
One Main Street, Woodbridge, NJ 07095. Notices, demands and requests which shall
be served upon the Landlord or the Tenant in the manner aforesaid shall be
deemed sufficiently served or given for all purposes hereunder five (5) days
after such notice, demand or request shall be mailed or on the date of personal
delivery, whichever is applicable.

                                   ARTICLE 19

                                    SECURITY

      Section 19.01. Security

      Landlord agrees to provide security for the Term of the Lease and
thereafter, until Tenant advises Landlord that such measures are no longer
required, in accordance with the requirement of Tenant's facility permit issued
pursuant to the Resource Conservation and Recovery Act. Not withstanding any
other provision herein, this Section shall survive the breach, termination or
end of the Term of this Lease.

                                   ARTICLE 20

                         QUIET ENJOYMENT - CONVEYANCE BY
                    LANDLORD-REPRESENTATIONS BY THE LANDLORD

      Section 20.01. Quiet Enjoyment

      Tenant, upon paying the Annual Rent and all Additional Rent and other
charges herein provided for and performing all covenants and conditions of this
Lease, on its part to be performed, shall quietly have and enjoy the Premises
during the term, without hindrance or molestation by Landlord or any other
person claiming through Landlord.

      Section 20.02. Conveyance by Landlord


                                      -21-
<PAGE>

      Landlord shall not convey the Premises during the Term in accordance with
the Agreement For Transfer of Ownership to which this Lease is an Exhibit.

      Section 20.03. Representations and Warranties of Landlord

      Landlord represents and warrants that to the best of its knowledge:

      A. Landlord has good and marketable title in fee simple to the Premises,
free of all liens, mortgages, pledges, encumbrances, security interest, leases,
conditional sales agreements or charges of any kind or character.

      B. The execution and delivery of this Lease and the consummation of the
transaction contemplated hereby will not result in a violation of any
requirement or a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, permit, franchise,
agreement or other instrument to which Landlord is a party, or by which Landlord
or the Premises may be bound.

      C. There are no condemnation, zoning or other land use proceedings
(including, without limitation, abatement proceedings), either instituted or
planned to be instituted, which would affect in any way the use and operation of
the Premises or the value of the Premises.

      D. There are no contemplated special assessments affecting the Premises.

      E. As shown on Exhibit 3 annexed hereto, there is an unfettered and
unimpeded means of ingress and egress to the Premises across the Property and
such ingress and egress shall remain unimpeded during the entire Term. Landlord
agrees to execute in recordable form for the benefit of the Premises a
non-exclusive ingress and egress easement over the area shown on Exhibit 3 and
labeled ingress and egress easement thereon. The easement shall include a
requirement that Landlord or its successors or assigns maintain the easement
area. Landlord shall retain a right to reconfigure the easement so long as any
reconfiguration provides Tenant with an equivalent means of ingress and egress.


                                      -22-
<PAGE>

                                   ARTICLE 21

                              ESTOPPEL CERTIFICATE

      Either party hereto shall, within twenty (20) days after notice by the
other party, execute, acknowledge and deliver to such other party or any other
party specified by such other party, a statement in writing certifying (i) that
this Lease is unmodified and in full force and effect (or if there are
modifications, that this Lease, is in full force and effect as modified, and
stating the modifications) and (ii) the date to which the Annual Rent and
Additional Rent payable by Tenant hereunder has been paid, and (b) whether or
not to the best knowledge of the signer of the certificate, the other party is
in default in performance of any covenant, agreement or condition contained in
this Lease and, if so, specifying in detail each such default.

                                   ARTICLE 22

                           [INTENTIONALLY LEFT BLANK]

                                   ARTICLE 23

                                    SURRENDER

      Section 23.01. Conditions of Surrender

      Except as set forth in this Lease, on the last day or sooner termination
of the Lease, Tenant shall quit and surrender the Premises broom-clean without
damage, except reasonable wear and tear, together with all additions and
Improvements which may have been made in, on, or to the Premises consistent with
Article 7 herein In the event Tenant remains in possession of the Premises after
the expiration of the Term created hereunder, and without the execution of a new
lease, Tenant shall be deemed to be holding over and the rate of use and
occupation shall be equal to the twice monthly payment of Annual Rent payable
for the last month of the Term, or any renewal thereof, plus any Additional Rent
as calculated on a month by month basis.

      Section 23.02. Tenant's Property


                                      -23-
<PAGE>

      Any property left at the Premises by the Tenant at the expiration of the
Term or, when Tenant vacates the Premises, shall be deemed abandoned. Landlord
may sell or dispose of said property in any manner it deems appropriate.

                                   ARTICLE 24

                               LEASEHOLD MORTGAGE

      Section 24.01. Leasehold Mortgage

      In the event Tenant gives a leasehold mortgage or collaterally assigns the
Lease to a lender ("Leasehold Mortgagee") so long as there is a Leasehold
Mortgage outstanding or the Lease is collaterally assigned, the Parties agree as
follows:

      A. If the holder of a Leasehold Mortgage shall have registered with
Landlord by notice specifying the name and address of such Leasehold Mortgagee,
Landlord thereafter shall give to such Leasehold Mortgagee a copy of each notice
of default for which provision is made under this Lease at the same time as and
whenever such notice shall be given by Landlord to Tenant, such copy to be
addressed to such Leasehold Mortgagee at the address last furnished to Landlord
as provided hereinabove. In the event of any such registration, Landlord shall
not be entitled to serve a notice of cancellation and termination upon Tenant
unless a copy of any prior notice of default shall have been given to such
Leasehold Mortgagee as hereinabove provided and the time as hereinafter
specified for the curing of such default shall have expired without the same
having been cured. The performance by any such Leasehold Mortgagee of any
condition or agreement on the part of Tenant to be performed hereunder will be
deemed to have been performed with the same force and effect as though performed
by Tenant.

      B. Landlord will accept performance by the Leasehold Mortgagee, within the
following periods (time being of the essence) of any term, covenant and
condition on Tenant's part to be performed hereunder, with the same force and
effect as though timely performed by Tenant (provided that under no
circumstances shall the Leasehold Mortgage be required to so perform):


                                      -24-
<PAGE>

            (i)   As to any Annual Rent, Additional Rent and all other charges
                  payable hereunder within 30 days after notice of such default;
                  and

            (ii)  As to all other defaults hereunder, before the later of (a) 60
                  days after such notice, or (b) the time needed to effect such
                  cure if such default cannot be cured within such period and
                  Leasehold Mortgagee commences to so cure within such period
                  and diligently and continuously proceeds therewith.

      Landlord acknowledges that Leasehold Mortgagee may not be able to effect
any cures until such time as Leasehold Mortgagee acquires title and possession
of the Premises through exercise of the remedies available to it under the
Leasehold Mortgage and agrees that the time periods described in (ii) above
shall be automatically extended so as not to commence running until the
Leasehold Mortgagee so acquires title and possession. The foregoing shall not
limit Tenant's right to cure under the Lease. Landlord further acknowledges that
Leasehold Mortgagee cannot be expected to cure and will not be required to cure
defaults which are personal to Tenant and not susceptible of cure by Leasehold
Mortgagee as a precondition to the rights of Leasehold Mortgagee hereunder.

      C. Landlord shall not exercise its right to terminate this Lease, as
hereinbefore provided, during the time that the Leasehold Mortgagee, having
registered with Landlord pursuant to Section 24.01(A) above, shall require to
complete its remedies under the Leasehold Mortgage, provided, however,

            (i)   That the Leasehold Mortgagee proceeds, promptly and with due
                  diligence, with the remedies under its mortgage on the
                  leasehold estate and thereafter prosecutes and completes the
                  same with all due diligence; and

            (ii)  That the Leasehold Mortgagee shall pay to Landlord the Annual
                  Rent, Additional Rent, and all other charges required to be
                  paid by Tenant hereunder which have accrued and which shall
                  become due and payable during said period of time.


                                      -25-
<PAGE>

      D. Landlord shall also be obligated to give any notice of cancellation and
termination to the Leasehold Mortgagee, who shall have registered with Landlord
pursuant to Section 24.01(A) above, simultaneously with such notice being given
to Tenant. No such notice to Tenant shall be effective to terminate this Lease
if the Leasehold Mortgagee notifies Landlord in writing, within thirty (30) days
after receipt by the Leasehold Mortgagee of such notice of cancellation and
termination, that (i) the Leasehold Mortgagee, or any designee or nominee which
the Leasehold Mortgagee may designate or name in such notice, elects to lease
the Premises from the date of termination of this Lease (as specified in the
notice of cancellation and termination) for the remainder of the term of this
Lease, at the Rent, Additional Rent above, and other charges herein reserved,
and otherwise upon the same terms, covenants and conditions as are herein set
forth, with the same relative priority in time and in right as this Lease and
having the benefit of and vesting in the Leaschold Mortgagee, its designee or
nominee, of all of the rights, title, interest, powers and privileges of the
Tenant hereunder, and (ii) the Leasehold Mortgagee or such designee or nominee
further obligates itself to comply within sixty (60) days after delivery to
Landlord of such election: (a) to cure the default upon which such termination
was based (or in the case of a monetary default any delinquent payments are made
within thirty (30) days after the Tenant's time period to make the payment has
expired) and any other then existing defaults under this Lease, or in respect to
any default not capable of curing within such sixty (60) days, or which cannot
be cured without entry into possession, to proceed and effect cure with due
diligence following delivery of possession, (b) to pay to Landlord at the time
of execution and delivery of such new lease all Rent and Additional Rent and
other charges due under this Lease up to and including the date of commencement
of the term of such new lease, and (c) to pay to Landlord all expenses and
reasonable attorneys' fees incurred by Landlord in connection with any such
default and with the preparation, execution and delivery of such new lease.


                                      -26-
<PAGE>

      Upon compliance by the Leasehold Mortgagee, its designee or nominee,
within such time, Landlord shall thereupon execute and deliver such new lease
(the "New Lease") to the Leasehold Mortgagee, its designee or nominee, having
the same relative priority in time and in right as this Lease and having the
benefit of all of the right, title, interest, powers and privileges of the
Tenant hereunder in and to the Premises, including specifically an assignment of
Landlord's interest in and to any then existing sublease where the subtenant may
have attorney to Landlord and may have been recognized by Landlord and which, at
the time of cancellation or termination of this Lease, was prior in right to the
Leasehold Mortgage or which by separate agreement or by its terms had been
granted non-disturbance privileges. Landlord agrees that it will not modify or
amend any of the terms or provisions of any such sublease so assigned during the
period between the expiration or termination of this Lease and the execution and
delivery of the new lease.

      Landlord shall not be obligated to deliver physical possession of the
Premises or the buildings and improvements on, under or above the Premises to
either the Leasehold Mortgagee or its designee or nominee. In the event,
however, that at the time the new lease is executed Tenant hereunder shall be in
possession of the Premises and of said buildings and improvements, Landlord, at
the request and expense of the Leasehold Mortgagee, its designee or nominee, as
the new tenant, will take all appropriate steps to remove Tenant from the
Premises and from said buildings and improvements, but shall not be liable to
such new tenant for any damages resulting from any delay of Tenant in vacating
the Premises, or from any failure to vacate them and there shall be no abatement
of rent by reason thereof.

      E. A Leasehold Mortgagee may enforce its rights under its mortgage and
acquire title to the leasehold estate in any lawful way, and pending foreclosure
of such Leasehold Mortgage take up possession of the Premises; subject, however,
to the terms and conditions of this Lease and the rights of the holder of any
Leasehold Mortgage that is senior in lien to the Leasehold Mortgage in question.
During such time as a Leasehold Mortgagee is the owner and holder of the
leasehold estate and


                                      -27-
<PAGE>

Tenant's interest hereunder, whether by foreclosure or otherwise, such interest
acquired hereunder shall be subject to all of the terms, conditions and
provisions of this Lease.

      F. Landlord shall upon Tenant's reasonable request execute, acknowledge
and deliver to Tenant and/or each Leasehold Mortgagee an agreement prepared at
the cost and expense of Tenant and in form satisfactory to such Leasehold
Mortgagee, confirming all or any of the provisions of this Section.

      G. The granting of a Leasehold Mortgage by Tenant shall not be deemed to
constitute an assignment or transfer of this Lease or of the leasehold estate
hereby created, nor shall any Leasehold Mortgagee, as such, be deemed to be an
assignee or transferee of this Lease or of the Leasehold Estate hereby created
so as to require such Leasehold Mortgagee, as such, to assume the performance of
any of the terms, covenants, or conditions on the part of the Tenant to be
performed hereunder, but the purchaser at any sale of this Lease and of the
leasehold estate hereby created in any proceedings for the foreclosure of any
Leasehold Mortgage, or the assignee or transferee of this Lease and of the
leasehold estate hereby created under any instrument of assignment or transfer
in lieu of the foreclosure of any Leasehold Mortgage, shall be deemed to be an
assignee or transferee, and shall be deemed to have agreed to perform all of the
ten-ns, covenants, and conditions on the part of the Tenant to be performed
hereunder from and after the date of such purchase and assignment, but only for
so long as such purchaser or assignee is the owner of the leasehold estate.

      H. Any Leasehold Mortgagee or other acquirer of the leasehold estate of
Tenant pursuant to foreclosure, assignment in lieu of foreclosure of a tenant or
other proceedings may, upon acquiring Tenant's leasehold estate, without further
consent of Landlord, sell and assign the leasehold estate on such terms and to
such persons and organizations as are acceptable to such Leasehold Mortgagee or
acquirer and thereafter be relieved of all obligations under this Lease.

      I. Notwithstanding any other provision of this Lease, any sale of this
Lease and of the leasehold estate hereby created in any proceedings for the
foreclosure of any Leasehold Mortgage, or


                                      -28-
<PAGE>

the assigmuent or transfer of this Lease and of the leasehold estate hereby
created in lieu of the foreclosure of any Leasehold Mortgage, shall be deemed to
be a permitted sale, transfer, or assignment of this Lease and of the leasehold
estate hereby created.

      J. Nothing herein contained shall require any Leasehold Mortgagee or its
designee as a condition to its exercise of its rights hereunder to cure any
default of Tenant not reasonably susceptible of being cured by such Leasehold
Mortgagee or its designee in order to comply with the provisions of this
Article. The financial condition of any Leasehold Mortgagee or successor to
Tenant's interest under this Lease or a new lease shall not be a consideration
in the determination of the reasonable susceptibility of cure of any default
hereunder. No default, the cure of which and no obligation of Tenant, the
performance of which, requires possession of the Premises shall be deemed
reasonably susceptible of cure or performance by any Leasehold Mortgagee or
successor to Tenant's interest under this Lease or a new lease not in possession
of the Premises, nor shall any Leasehold Mortgagee be required to cure the
bankruptcy, insolvency, or any related or similar condition of Tenant.

      K. No payments made to Landlord by a Leasehold Mortgagee shall constitute
an acknowledgement that such payment was, in fact, due under the terms of this
Lease.

      L. In the event of any proceeding by either Landlord or Tenant under the
United States Bankruptcy Code as now or hereafter in effect:

            (i)   if the Lease is rejected in connection with a bankruptcy
                  proceeding by the Tenant or a trustee in bankruptcy for the
                  Tenant, such rejection shall be deemed an assignment by Tenant
                  to the Leasehold Mortgagee (or if there is more than one
                  Leasehold Mortgagee, to the one highest in priority) of the
                  Leasehold Estate and all of Tenant's interest under this
                  Lease, in the nature of an assignment in lieu of foreclosure,
                  and this Lease shall not terminate and the Leasehold Mortgagee
                  shall have all the rights of the Leasehold Mortgagee


                                      -29-
<PAGE>

                  under this Lease, as if such bankruptcy proceeding had not
                  occurred, unless such Leasehold Mortgagee shall reject such
                  deemed assignment by notice in writing to Landlord within
                  thirty (30) days following rejection of the Lease by Tenant or
                  Tenant's trustee in bankruptcy. If any court of competent
                  jurisdiction shall determine that this Lease shall have been
                  terminated notwithstanding the terms of the preceding sentence
                  as a result of rejection by Tenant or the Trustee in
                  connection with any such proceeding, the rights of any
                  Leasehold Mortgagee to a new lease from Landlord pursuant to
                  this Section 24.01 hereof shall not be affected thereby.

            (ii)  If the Lease is rejected by Landlord or by Landlord's trustee
                  in bankruptcy;

                  (a) Tenant shall not have the right to treat this Lease as
                  terminated except with the prior written consent of all
                  Leasehold Mortgagees; and the right to treat this Lease as
                  terminated in such event shall be deemed assigned to each and
                  every Leasehold Mortgagee, whether or not specifically set
                  forth in any such Leasehold Mortgage, so that the concurrence
                  in writing of Tenant and each Leasehold Mortgagee shall be
                  required as a condition to treating this Lease as terminated
                  in connection with such proceeding.

                  (b) If this Lease is treated as not having been terminated in
                  accordance with subsection (i) above, then this Lease shall
                  continue in effect upon all the terms and conditions set forth
                  herein, including Annual Rent, Additional Rent, and all
                  options to renew, but excluding requirements that are not then
                  applicable or pertinent to the remainder of the term hereof.
                  Thereafter, Tenant or its successors shall be entitled to
                  offset against Annual Rent and Additional Rent payable
                  hereunder any damages arising from such rejection and any such
                  offset properly made shall not be deemed a default under this


                                      -30-
<PAGE>

                  Lease. The lien of any Leasehold Mortgage then in effect shall
                  extend to the continuing possessor rights of Tenant following
                  such rejection with the same priority with respect to each
                  such Leasehold Mortgage as it would have enjoyed had such
                  rejection not taken place.

      M. Notwithstanding anything to the contrary set forth in this Lease, in
the event the Leasehold Mortgagee takes possession of the Premises, forecloses
on its leasehold mortgage, or takes an assignment of the Lease from the Tenant,
the Leasehold Mortgagee shall be entitled to surrender the Premises to the
Landlord. In the event on the date of the surrender of the Premises all of the
Rent and Additional Rent have been paid up through and including the date of
surrender, and the Premises are delivered vacant, then the Leasehold Mortgagee
shall have no further liability under this Lease. Nothing set forth herein shall
be deemed to release the Tenant from any default under this Lease.

      N. The Leasehold Mortgagee shall have no right to assign the Lease unless
Landlord consents and shall not assign the Lease without Landlord's written
consent.

      O. The Leasehold Mortgagee shall have no right to delay payment.

                                   ARTICLE 25

                                  MISCELLANEOUS

      Section 25.01. Submission of Lease

      Submission of this instrument for examination or signature by Tenant does
not constitute a reservation of or option to Lease, and it is not effective as a
Lease or otherwise until execution and delivery by both Landlord and Tenant.

      Section 25.02. Governing Law

      This Lease shall be governed by and construed in accordance with the laws
of the State of New Jersey ("State") and shall be deemed to have been created by
both Parties.

      Section 25.03. Broker


                                      -31-
<PAGE>

      Tenant and Landlord warrants and represents that they have dealt with no
realtors, brokers or agents in connection with the negotiation of this Lease and
the renting of the Premises. Should any claims be made for brokerage commissions
through or on account of dealings of one Party or its agents or representatives,
that Party shall indemnify, defend and hold the other Party harmless against any
liability in connection therewith.

      Section 25.04. Savings Clause

      It is the desire and intent of the Parties that the provisions of this
Lease shall be enforced to the fullest extent permitted by law. Accordingly, the
invalidity or unenforceability of any provision of this Lease shall not affect
the validity or enforceability of any other provision of this Lease, which shall
remain in full force and effect, nor shall the invalidity or unenforceability of
any portion of any provision of this Lease affect the validity or enforceability
of the balance of such provisions.

      Section 25.05. Signs

      Upon receipt of written approval from Landlord, which shall not be
unreasonably delayed, conditioned or withheld, Tenant shall have the right to
install exterior signs (including pylon signs) on the Premises which conform to
all applicable laws and ordinances. Tenant shall maintain all signs on the
Premises in a good state of repair and save the Landlord harmless from any loss,
cost or damage as a result of the erection, maintenance, existence of the same,
and shall repair any damage which shall have been caused by the erection,
existence or maintenance of such signs.

      Section 25.06. Non-Merger; No Fee Estate Subordination

      There shall be no merger of this Lease, or of the leasehold estate created
by this Lease, with the fee estate in the Premises by reason of the fact that
this Lease, the leasehold estate created by this Lease, or any interest in this
Lease or in any such leasehold estate, may be held, directly or indirectly, by
or for the account of any person who shall own the fee estate, and no such
merger shall occur unless and until all persons at the time having an interest
in the fee estate in the Premises and all persons (including the Leasehold
Mortgagee) having an interest in this Lease, or in the leasehold


                                      -32-
<PAGE>

estate created by this Lease, shall join in a written instrument effecting such
merger and shall duly record the same.

      Section 25.07. Parties Bound

      The covenants, conditions and agreements contained in this Lease shall
bind and inure to the benefit of the Landlord and Tenant and their respective
legal representatives, heirs, successors and, except as specifically provided in
this Lease, their assigns.

      Section 25.08. Number and Gender

      For purposes of this Lease, the singular shall include the plural and the
plural shall include the singular, and the masculine shall include the feminine
and the neuter, as the context may require.

      Section 25.09. Captions

      The captions contained herein are for the convenience of the parties only.
They do not in any way modify, amplify, alter or give full notice of the
provisions hereof.

      Section 25.10. Counterparts

      This Lease may be executed in several counterparts, each of which shall be
deemed an original, and such counterparts shall constitute but one and the same
instrument.

      Section 25.11. No Surrender

      Except as provided in this Lease, no surrender to Landlord of this Lease
or of the Premises, or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted in writing by Landlord and
consented to in writing by any and all Mortgagees, and no act or omission by
Landlord or any representative or agent of Landlord, other than such a written
acceptance by Landlord, consented to as aforesaid, shall constitute an
acceptance of any such surrender.

                                   ARTICLE 26

                            CONFIDENTIAL INFORMATION

      Section 26.01. Confidential Information


                                      -33-
<PAGE>

      To the extent permitted by law, any Party may designate any data,
information, reports or documents provided to the other as "Confidential
Information". Except as required by applicable law or action of governmental
agents acting under color of authority, neither Party shall, without the written
consent of the other Party, disclose any Confidential Information to any third
party.

                           (INTENTIONALLY LEFT BLANK)


                                      -34-
<PAGE>

      IN WITNESS WHEREOF the Landlord and Tenant have caused these presents to
be signed by their duly authorized agent on the day and year above written.

SIGNED AND AGREED TO BY:

                                 Date Signed:   WOODBRIDGE TOWNSHIP

/s/                              6/8/00         By: /s/
- ------------------------------   ------------       ----------------------------
John M. Mitch, Municipal Clerk                      James E. McGreevey, Mayor


                                                CP CHEMICALS, INC.

Attest:                                         Seller

/s/                              4/18/00        By /s/
- ------------------------------   ------------       ----------------------------
Secretary                                          Senior Vice President &
                                                   Chief Regulatory Officer

<PAGE>

                                  EXHIBIT LIST*

Exhibit 1   Description of Premises

Exhibit 2   RCRA Permit

Exhibit 3   Site Map

Exhibit 4   Description of Groundwater Recovery System
            Appendix 1 - As-Built Site Plan - 1 of 3 and Details - 2 of 6
            prepared by Sadat Associates, Inc.
            Appendix 2 - Wastewater Treatment Plant Layout - 2 of 3 and
            Wastewater Treatment Plant P& I - 3 of 3 prepared by Sadat
            Associates, Inc.
            Appendix 3 - Indirect Discharge Permit
            Appendix 4 - Deed Notice
            Appendix 5 - Easement

* Exhibits omitted

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.25
<SEQUENCE>8
<FILENAME>0008.txt
<DESCRIPTION>STOCKHOLDERS' AGREEMENT
<TEXT>


                                                                   Exhibit 10.25

                             STOCKHOLDERS' AGREEMENT

            AGREEMENT dated as of the 5th day of January, 2000, by and among the
persons, firms and other entities set forth on Schedule A hereto (hereinafter
sometimes called collectively the "Shareholders" and individually a
"Shareholder").

                              W I T N E S S E T H:

            WHEREAS, each of Penick Corporation and Penick Pharmaceutical, Inc.
(collectively, "Penick") is a debtor in proceedings for a reorganization under
Chapter 11 of the Bankruptcy Code currently pending in the United States
Bankruptcy Court for the Eastern District of New York (the "Bankruptcy Court"),
Case Nos. 94 B 42808 and 94 B 42809 (collectively, the "Case"); and

            WHEREAS, Philipp Brothers Chemicals, Inc. ("PBC"), together with
Drew McManigle (the "Trustee"), the chapter 11 trustee of Penick, and Penick,
are joint proponents of the Plan of Reorganization dated September 30, 1999 (as
amended and resubmitted to the Bankruptcy Court from time to time, the "Plan")
and have submitted a related Disclosure Statement pursuant to ss.1125 of Title
11 of the United States Code to all holders of claims in order to solicit
acceptances or rejections of the Plan; and

            WHEREAS, in connection with the Plan, PBC has entered into an Escrow
Agreement (the "Escrow Agreement") dated September 7, 1999 with the Trustee,
pursuant to which PBC deposited with the escrow agent thereunder the sum of
$500,000 as earnest money (the "Deposit"); and

            WHEREAS, at a hearing on January 5, 2000, the Bankruptcy Court
confirmed the Plan, awarding Penick to PBC or a designee; and

            WHEREAS, the Shareholders have agreed to capitalize Penick Holding
Company, a Delaware corporation (the "Corporation"), in order to be the
purchaser under, and fulfill the purchaser's funding obligations in accordance
with, the Plan, and in connection therewith, the Shareholders have agreed to
purchase from the Corporation the number of shares of each class and series of
capital stock of the Corporation set forth on Schedule A hereto; and

            WHEREAS, the Shareholders desire to maintain ownership and control
of the Corporation between themselves for the purpose of insuring the continuity
of the management and policies of the Corporation and, in furtherance thereof,
to provide for the orderly disposition of the shares of the Corporation now
owned or hereafter acquired by each of them under certain circumstances;

            NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto, intending to be legally bound
hereby, agree as follows:

      1. Effective Date. This Agreement shall not become effective unless and
until a counterpart is executed and delivered by Shareholders investing in the
Corporation at least
<PAGE>

$4,500,000 (including the Deposit). In the event the acquisition (the
"Acquisition") by the Corporation contemplated by the Plan is not consummated by
March 7, 2000, and this Agreement shall theretofore have become effective by
reason of the acceptance by the Corporation of a stock subscription and
counterpart of this Agreement on behalf of Shareholders investing the requisite
amount, the Corporation, at the request of any Shareholder, shall take such
actions as shall effect as soon as practicable the return to each contributing
Shareholder of all amounts contributed by such Shareholder to the capital of the
Corporation or held by the Corporation as a contribution by such Shareholder to
such capital, with any interest earned thereon. Since the Plan is subject to
numerous terms and conditions, no representation or warranty is made that (a)
the transactions contemplated by the Plan will actually be consummated or (b) if
such transactions are consummated, that there will be no changes in, or waivers
of, any of the terms or conditions of the Plan.

      2. Subscription for and Purchase of Shares. (a) Each Shareholder hereby
agrees, solely as between the Shareholders (and not for the benefit of the
Corporation, Penick, the Trustee, the official committee (the "Creditors'
Committee") of unsecured creditors appointed by the Bankruptcy Court in the
Case, or any other third party), to invest in the Corporation (to the extent it
has not already done so), whether as initial share purchase price, additional
capital contributions or, if and upon such terms as the Corporation and the
Shareholders holding, in the aggregate, a majority interest in the Corporation
shall mutually determine, equipment or subordinated loans, in the amounts
specified therefor in Schedule A as its "Basic Commitment" plus PBC's rights as
a proponent of the Plan.

            (b) Upon signing this Agreement, each Shareholder shall deliver to
counsel to the Corporation to be held, until disbursed under the Plan or until
the closing under the Plan, in an escrow account for the benefit of the
Shareholders (the "Account") such Shareholder's Basic Commitment in full, as
specified in Schedule A, of which $500,000 of PBC's Basic Commitment has been
used as the earnest money deposit required to be made by the Corporation
pursuant to the Plan, and other funds have been used to conduct diligence and to
fund certain pre-closing disbursements under the Plan.

            (c) In furtherance thereof, the Shareholders have subscribed for the
number of shares of the Corporation, and agreed to pay $1,000.00 per share of
Preferred Stock and $9.84 per share of Common Stock or the aggregate amount
therefor, set forth on Schedule A in respect of their respective Basic
Commitments; provided, however, Aris Christodoulous has agreed to pay $1.00 per
share of Common Stock and to enter into a certain Consulting Agreement with the
Corporation in consideration thereof. In the event a Shareholder shall fail to
satisfy in full its Basic Commitment, without limiting any other right or remedy
of any other Shareholder, such non-contributing Shareholder shall not be
entitled to ownership of any securities of the Corporation, and the Corporation
shall have the right, for a period of ninety days, to repurchase such
Shareholder's shares of Preferred Stock and Common Stock at cost, without any
increase due to a dividend or for any other reason.

            (d) The Corporation shall not have any rights or remedies with
respect to the failure of a Shareholder to fulfill its Basic Commitment, such
obligations and all provisions of


                                       2
<PAGE>

this Agreement with respect thereto being solely an agreement among the
Shareholders, enforceable solely by them against the others and not otherwise.

            (e) The Corporation will pay or reimburse a Shareholder or affiliate
of a Shareholder for pre-incorporation expenses incurred by it in connection
with the organization of the Corporation, due diligence with respect to and the
acquisition of Penick, and related expenses, including such expenses of PBC
included in the Plan or Disclosure Statement and other such expenses upon
submission of vouchers or expense statements reasonably evidencing such
expenses. If, in connection with the initial funding of the Company required to
consummate the Plan, a Shareholder shall advance to the Company more than his or
its allocation specified in Schedule A, such Shareholder shall be entitled to
reimbursement of such over-advance, without interest.

      3. Management of the Corporation.

            (a) Each of the Shareholders agrees, from and after the date hereof,
so long as they shall own (or be deemed to own) shares of the Corporation, to
vote all of the shares of the Corporation now or hereafter owned and/or held of
record by such Shareholder so as to use their best efforts to elect and
thereafter for the term of this Agreement to continue in office a Board of
Directors of the Corporation, consisting of three (3) persons, designated as
follows (so long as such designating party shall own (or be deemed to own) at
least one-half of the aggregate shares of Common Stock heretofore and hereafter
from time to time issued to them, respectively):

            One person to be designated by PBC and Jack C. Bendheim (by the
decision of the holder or holders of a majority of the shares of Common Stock
owned by them); and

            One person to be designated by Peter Joseph; and

            One person to be designated by Daniel Strauss.

            The initial Board of Directors shall be comprised of the following
persons:

                        Jack C. Bendheim
                        Peter Joseph
                        Daniel Strauss

                  Jack C. Bendheim shall be Chairman of the Board of Directors,
as long as he and PBC shall own (or be deemed to own) at least one-half of the
aggregate shares of Common Stock heretofore or hereafter issued to them. Each of
the Shareholders agrees that the following persons shall be officers of the
Corporation, and that the other officers of the Corporation shall be determined
by the Board of Directors, each to hold such office or offices and to serve
until their respective successors shall have been elected and qualified, and
subject to removal at any time in accordance with the By-laws of the
Corporation:

                  Stuart Rose             President
                  Joseph M. Katzenstein   Treasurer and Secretary


                                       3
<PAGE>

The President , if not also a director, shall also be entitled to observe
meetings of the Board of Directors as the Board shall deem advisable.

            The Corporation's By-laws shall provide that any director may be
removed for cause by the Shareholders and that directors, other than the initial
directors specified above, may be removed without cause by the Shareholders. A
quorum for meetings of the Board of Directors shall consist of a majority of the
directors then in office.

            The obligations of the Shareholders to vote in accordance with the
terms of this paragraph 3(a) shall continue after a distribution of equity
securities of the Corporation unless and until there shall have been completed a
Qualified Distribution. For purposes of this Agreement, a "Qualified
Distribution" means an underwritten public offering by the Corporation of shares
of its equity securities in which the aggregate gross proceeds received by the
Corporation shall equal or exceed $10,000,000.

            (b) If there is a vacancy in the Board of Directors of the
Corporation during the period of time a Shareholder shall own (or be deemed to
own) at least one-half of the aggregate number of shares of Common Stock
heretofore and hereafter from time to time issued to such Shareholder, and such
vacancy shall be due to the death, removal or resignation of a director
designated by such Shareholder, such Shareholder shall be entitled to designate
a person to fill such vacancy in the Board of Directors, and each Shareholder
agrees to vote all of the shares of the Corporation owned and/or held of record
by such Shareholder in favor of the person designated by the Shareholder
entitled to designate the person whose directorship has been terminated.

            (c) Each of the Shareholders agrees to cause the persons designated
as directors by such Shareholder to resign as a director of the Corporation and
of the Corporation's subsidiaries, if any, in the event and at the time that
such Shareholder ceases to own (or be deemed to own) at least one-half of the
aggregate number of shares of Common Stock heretofore and hereafter from time to
time issued to such Shareholder, and, if necessary, to cause the shares of the
Corporation owned (and deemed owned) by such Shareholder to be voted for the
removal of any such director who refuses to resign.

            (d) In order to effectuate the foregoing voting agreements of the
parties hereto with respect to the election of directors of the Corporation, the
Shareholders grant to, and are deemed to have executed in favor of, each other
(and their respective permitted successors and assigns), an irrevocable proxy,
coupled with an interest, to vote all of the shares of the Corporation owned by
the grantor of the proxy in accordance with the voting agreements contained in
this paragraph, by a written consent of stockholders without a meeting or at a
meeting of the stockholders of the Corporation held to vote upon and elect such
directors.

            (e) Without the approval of Shareholders owning or holding of record
at least sixty percent (60%) of the then outstanding shares of Common Stock of
the Corporation, the Corporation shall not be permitted to take any of the
following actions:


                                       4
<PAGE>

            (i) sell substantially all of the assets of the Corporation for a
      purchase price which would yield, after accounting for outstanding
      indebtedness of the Corporation, total consideration, the proportionate
      share of which for a Shareholder would be less than the aggregate amount
      paid by such Shareholder for each share of the Corporation owned by him at
      the time of such proposed sale; provided however, that no such approval by
      a Shareholder shall be necessary if such proposed sale is to occur after
      the fifth anniversary of the date of the closing of the Acquisition;

            (ii) enter into business or businesses not related or incidental to
      the ownership or operation of a business that manufactures or imports
      opium or derivatives, or other narcotics or controlled substances, or
      crude amphotericin slurry ("CAS");

            (iii) enter into any agreement for the sale or purchase of assets
      by, or the provision of services by or to, the Corporation with any of the
      Shareholders or any entity controlled by, controlling or under common
      control with any of the Shareholders upon terms less favorable than those
      then generally available from or with unrelated third parties;

            (iv) by reclassification or recapitalization of its capital stock,
      including combination of the outstanding shares of its Preferred Stock or
      Common Stock into a smaller number of shares, or by merger of the
      Corporation with or into an entity controlled by, under common ownership
      or control with or controlling one or more of the then-shareholders of the
      Corporation, reduce or increase the relative interest of any one
      Shareholder disproportionately to that of the other Shareholders;

            (v) remove any director, or fill any vacancy on the Board of
      Directors, or elect or remove any officer of the Corporation;

            (vi) purchase or redeem any outstanding shares of the Corporation
      (other than pursuant to the provisions of this Agreement);

            (vii) merge, consolidate, liquidate or dissolve the Corporation; or

            (viii) amend the certificate of incorporation or by-laws of the
      Corporation.

      4. Restrictions on Transfer of Shares.

            (a) During the term of this Agreement and so long as there shall not
have been consummated a Qualified Distribution, no Shareholder, either directly
or indirectly, shall (whether by operation of law or otherwise) sell, assign,
mortgage, hypothecate, transfer, pledge, create a security interest in or lien
upon, encumber, give, place in trust, or otherwise voluntarily or involuntarily
dispose of (hereinafter collectively called "transfer") any or all of the shares
of the Corporation (or any right or interest therein) now owned or hereafter
acquired or owned by such Shareholder, except as hereinafter provided.


                                       5
<PAGE>

            (b) Notwithstanding the provisions of subparagraph 4(a) above, but
in each case subject to the provisions of paragraph 6 hereof,

                  (i) Each member of a Family Group (as set forth on Schedule B
      hereto) shall be under no restrictions (other than restrictions imposed by
      federal and state securities laws) as to the transfer by them of their
      shares of the Corporation to one or more other members of the same Family
      Group or to their respective permitted transferees specified in clause
      (ii) below; and

                  (ii) a Shareholder (including a shareholder who shall become a
      Shareholder after having been a permitted transferee of a Shareholder)
      shall have the right (subject to compliance with the provisions of
      subparagraph 4(c) below) at any time during the term of this Agreement to
      make the following transfers:

                        (A) if such Shareholder shall be a corporation or other
      non-individual, to individuals and entities which are and thereafter
      continue to be, controlled by, controlling or under common ownership and
      control with, such Shareholder or in the event of the liquidation or
      dissolution of such Shareholder, to its shareholders or other owners of
      the equity interests in such Shareholder;

                        (B) if such Shareholder shall be an individual, (1) to
      entities controlled by such individual Shareholder, (2) to the
      then-current spouse, parents or lineal descendants of such individual
      Shareholder or to trusts or custodianships established for or entities
      controlled by any of such persons, (3) by operation of law, (4) by
      disposition pursuant to the terms of such individual Shareholder's will,
      or (5) to such individual Shareholder's estate;

                        (C) in accordance with the provisions of paragraph 5
      hereof; or

                        (D) any shares effectively registered under the
      Securities Act of 1933, as amended (the "Securities Act"), in accordance
      with the intended method of disposition by the seller or sellers thereof
      set forth in the registration statement, or of any Shares previously
      effectively registered under the Securities Act and sold or otherwise
      disposed of in accordance with the intended method of disposition by the
      seller or sellers thereof set forth in such applicable registration
      statement.

            (c) Any transfer by a Shareholder to such a permitted transferee
referred to in clause (ii) (A) or (B) of subparagraph 4(b) of all or any part of
such Shareholder's shares of the Corporation (or in the event of any subsequent
permitted transfer by any such permitted transferee to another permitted
transferee) may be made provided that at the time of any such transfer, each
such transferee agrees in writing to be bound by all of the provisions of this
Agreement applicable to the transferor, and provides a copy thereof to each
Shareholder. In such event, such permitted transferees (including subsequent
permitted transferees hereunder) shall receive, hold and vote such shares
subject to the terms of this Agreement and the rights and obligations hereunder
of the Shareholder from whom such shares were originally transferred as though
such shares were still owned (and for purposes of this Agreement such shares
shall still


                                       6
<PAGE>

be deemed owned) by such Shareholder, and such Shareholder (together with all of
his permitted transferees) shall continue to be deemed a single Shareholder for
purposes of paragraphs 2 and 3 hereof (the rights of which under this Agreement
shall be exercised by a majority in interest thereof) and in the case of such a
transfer by a Shareholder prior to the death of such Shareholder, the permitted
transferees thereof shall not be deemed Shareholders for the purpose of this
Agreement, except as otherwise expressly provided in this Agreement. Upon a
transfer of such Shareholder's shares of the Corporation by will, or by the laws
of descent and distribution, as permitted by this Agreement, such recipients
shall be deemed for all further purposes hereof to be Shareholders hereunder and
parties hereto provided that each such permitted transferee complies with the
provisions of this subparagraph. There may be further transfers of such shares
by a permitted transferee to permitted transferees of such permitted transferee.

            (d) As used in this Agreement, the term "Permitted Transferee" shall
mean any transferee pursuant to clause (i) or, subject to subparagraph (c)
above, clause (ii)A or (B) of subparagraph 4(b), and the term "shares" shall
have reference to and also include Preferred Stock, Common Stock, certificates
therefor, script representing fractional shares thereof, options and warrants
for Preferred Stock, Common Stock or any other shares, as well as shares
received by way of dividend, additional issuance or upon an increase, reduction,
substitution or reclassification of shares or upon any merger or reorganization
of the Corporation.

      5. Sale of Shares.

            (a) If any Shareholder (the "Selling Shareholder") desires to
dispose (other than a transfer to a Permitted Transferee, or pursuant to a
merger or reorganization transaction to which the Corporation is a party), in a
bona fide arm's-length third-party transaction, of any or all of his shares of
the Corporation (the "Offered Shares"), pursuant to a written offer (the
"Offer") received from a proposed third-party purchaser, at any time after to
the earlier of (i) the fifth anniversary of the date of the closing of the
Acquisition and (ii) the consummation of a Qualified Distribution, the Selling
Shareholder shall promptly furnish written notice (the "Notice") to the
Corporation and to each other Shareholder (provided that such other Shareholder
then owns or is deemed to own shares of the Corporation). Each such notice shall
be accompanied by a photocopy of the original or most recent third-party offer,
setting forth in reasonable detail the terms and conditions of the Offer and the
name, address and telephone number of the party or parties marking the Offer.
The Notice shall constitute both:

                  (i) an offer to sell, at the same price per share and upon the
            same terms and conditions as set forth in the Offer (except as
            otherwise provided in subparagraph (5(j) below), all, but not less
            than all, of the Offered Shares to (A) the other Shareholders, pro
            rata based on the relative number of shares of Common Stock owned of
            record or which would be owned of record upon conversion of
            preferred shares by each of them on the date of the Offer or in such
            other proportions as the other Shareholders may agree, and (B) the
            Corporation, to the extent only of any shares of Common Stock that
            the other Shareholders do not agree to purchase; and


                                       7
<PAGE>

                  (ii) in the alternative, an offer for the other Shareholders
            to participate in the Offer on the same term as, and pro rata with,
            the Selling Stockholder.

Any determination of the number of shares of Common Stock to be offered to each
other Shareholder on the pro rata basis described above shall be made by the
Corporation and any such determination shall be binding on all of the
Stockholders. To be deemed to be a "bona fide offer" within the meaning of this
paragraph, an offer must be signed by the maker of such offer, who must be
financially capable of carrying out the terms of the offer and who must not be
an offeror prohibited from becoming a transferee by reason of paragraph 6 below
(a "Qualified Offeror").

            (b) Each of the other Shareholders shall have a period of 60 days
form the date of the Notice to notify the Selling Shareholder, the remaining
other Shareholders and the Corporation that such Shareholder agrees either to
(i) purchase all or a portion of the Offered Shares offered to such Stockholder
on the terms set forth in the Offer or (ii) to participate in the Offer on the
same terms as, and pro rata with, the Selling Shareholder. If one, but not all,
of the other Shareholder elects to participate in the Offer with the Selling
Shareholder, the election of the remaining other Shareholders to purchase the
Offered Shares shall take precedence and the provisions of paragraph 4(c) shall
govern.

            (c) Any Offered Shares which any of the other Shareholders do not
agree in writing within such 60-day period to purchase shall be deemed to be
re-offered for sale to the remaining other Shareholders who had agreed to them,
on the terms set forth in the Offer, pro rata based on the relative number of
Offered Shares that each of them had previously agreed to purchase or in such
other proportions as they may agree, and such remaining other Shareholders shall
have an additional five days to agree in writing to purchase such Offered
Shares. Any such Offered Shares which the remaining other Shareholders do not
agree in writing within such five-day period to purchase shall be deemed to be
re-offered for sale to the Corporation on the terms set forth in the Offer, and
the Corporation shall have an additional five days to agree in writing to
purchase such Offered Shares. If the other Shareholders and the Corporation have
agreed within such total 20-day period to purchase all of the Offered Shares
among them, the parties shall proceed to consummate such purchases not later
than the 90th day following the date of the Notice.

            (d) If all of the other Shareholders timely agree in writing to
participate in the Offer with the Selling Shareholder, the parties shall proceed
together to consummate such transaction with the third party identified in the
Notice. The total number of Shares to be sold in the transaction shall be
divided among the participating Shareholders in proportion to their then
respective percentage shareholdings in the Corporation, notwithstanding that the
Offer was originally made only to the Selling Shareholder. The Shareholders
shall share all costs in connection with the transaction equally. The
Shareholders shall consummate the transaction simultaneously and no
participating Shareholder shall consummate such transaction without the other.

            (e) If the other Shareholders and the Corporation do not agree in
writing within 70 days after the date of the Notice either to purchase all of
the Offered Shares among


                                       8
<PAGE>

them or, in the case only of the other Shareholders, to participate in the
Offer, the Selling Shareholder shall have the right to sell to the Qualified
Offeror identified in the Offer all of the Offered Shares for a period of 60
days following such 60th day, such sale to be at no less favorable price and
upon terms and conditions no less favorable to the Selling Shareholder than as
set forth in the Offer. All shares so sold to such Qualified Offeror shall
thereupon become subject to the restrictions of this Agreement, except that no
such Qualified Offeror shall be entitled to any of the rights of a Shareholder
set forth in or under paragraph 3 or 5(a)(ii) hereof. If the Selling Shareholder
fails to sell the Offered Shares to such party on such terms and conditions
within such 60-day period, the Offered Shares shall again be subject to the
provisions of this paragraph 5.

            (f) If the Qualified Offeror makes one or more new bona fide offers
at a lower price or upon terms which are more favorable to such Qualified
Offeror than those previously offered by the offeror to the other Shareholders
and the Corporation, then each new bona fide offer shall be treated as a new
bona fide offer subject to the provisions set forth in this paragraph 5, except
that the sixty (60) day offering period provided in subparagraph (b) above shall
be thirty (30) days; provided, however, that if any such thirty (30) day period
would terminate on a date prior to the date on which such period would have
terminated without giving effect to the new bona fide offer, then such period
shall continue until the original period's termination date.

            (g) For purposes hereof, a "third-party transaction" shall not
include, and a "third-party purchaser" does not refer to, any person or entity
that is a Shareholder or could be a Permitted Transferee of the offeror pursuant
to subparagraph 4(b) above or is controlled by, controlling or under common
control with, the offeror.

            (h) In the event that any Shareholder offers or is deemed to have
offered his or her shares of the Corporation for sale pursuant to this paragraph
5 (such Shareholder being referred to as "First Offeror" herein) and during the
offering periods applicable to such shares another Shareholder offers or is
deemed to have offered his or her shares of the Corporation for sale (such other
Shareholder being referred to as "Second Offeror" herein), the offering periods
with respect to the shares of the Second Offeror shall not commence until the
last offer of the First Offeror is accepted or expires hereunder. In such event,
the Second Offeror shall not be entitled to purchase or receive any further
offers with respect to any shares of the First Offeror and all prior offers made
to such Second Offeror shall be deemed cancelled and terminated.

            (i) As used in this paragraph 5, the requirement that any purchase
of the offeror's shares by the Corporation and/or any offeree Shareholder
pursuant to this paragraph 5 be at the "same price per share and upon the same
terms and conditions" as the offer to purchase such shares by a proposed
third-party purchaser may be met in accordance with the rules and guidelines set
forth in Appendix A hereto.

            (j) The offeror shall, at the request of a majority in voting
interest of the other Shareholders, take such action as is necessary and lawful
(i) to permit the Corporation's decision with respect to its acceptance of any
offer made to it under this paragraph 5 (to be decided by a majority in voting
interest of the other Shareholders) and (ii) to enable the Corporation to accept
such offer to the extent desired by a majority in voting interest of the other
Shareholders to the


                                       9
<PAGE>

fullest extent permitted by law, including, but not limited to, the creation of
corporate debt and the creation of legally available surplus (whether by
reduction of capital, revaluation of assets or otherwise).

            (k) The options and rights granted under this paragraph 5 shall be
assignable among members of the same Family Group, and the rights and
obligations of the Corporation may be assigned by the Corporation, provided that
the Corporation may not assign such rights to a Shareholder without the
unanimous approval of the Board of Directors.

      6. Certain Prohibited Transfers. Any transfer of shares of the Corporation
otherwise permitted under this Agreement shall require prior approval of the
Board of Directors of the Corporation if such transfer is to any individual or
entity (other than a Shareholder) which is any of the following: (i) a
competitor of the Corporation or any subsidiary thereof; (ii) any company which
has a class of securities registered with the Securities and Exchange
Commission; (iii) an individual or entity that would cause, by its ownership or
voting of such shares, a default under any loan documentation to which the
Corporation or any subsidiary thereof or any Shareholder then is a party or by
which the Corporation or any subsidiary thereof or any Shareholder is bound or
would adversely affect the ability of the Corporation or any subsidiary thereof
to maintain any license or permit or comply with any law, rule or regulation
applicable to the Corporation or any subsidiary; (iv) an entity controlled
directly or indirectly by any government or political subdivision thereof; (v)
an individual or entity for which such ownership or voting of shares would
conflict with, or result in a breach or violation of any law, rule or regulation
applicable to the Corporation or any subsidiary thereof, or would require prior
approval of any governmental department, entity, bureau, commission,
administration or other body, which approval has not been obtained; (vi) any
individual or entity controlled by, controlling or under common control with any
of those persons or entities described in clauses (i) - (v) immediately above.

      7. Drag Along Rights.

            (a) If the Company or a Shareholder receives a bona fide arm's
length outside offer (the "Outside Offer") from a third party to purchase all of
the shares of the Corporation, which at least sixty percent (60%) in interest of
the Shareholders (the "Initiating Shareholders") desire to accept, the
Initiating Shareholders may give the other Shareholders written notice (an
"Outside Offer Notice") setting out the following details of the proposed
purchaser, namely (i) the full name and address of the proposed purchaser and
(ii) the full terms and conditions of the proposed offer, including the price
payable per share.

            (b) If the Outside Offer is a bona fide arms-length offer from a
third party purchaser unconnected with any Shareholder then, provided that the
net proceeds resulting from such sale payable to the holders of preferred shares
of the Corporation or in respect of their preferred shares shall exceed the
outstanding liquidation preference (including accrued dividends) on such
preferred shares and be payable in cash in freely convertible currency at the
closing of such sale, the Initiating Shareholders shall be entitled to require
the other Shareholders, which shall be obliged, to join with them in accepting
the Outside Offer and to sell


                                       10
<PAGE>

the shares of the Corporation held by them to the said third party purchaser
upon the terms and conditions of the Outside Offer, by written notice to that
effect (a "Drag-Along Notice"), which notice may be the Outside Offer Notice. In
such event, the Shareholders shall do all things necessary to consummate such
sale as soon as practicable, but in any event within sixty days of the date of
the Drag-Along Notice.

      8. Reports to Shareholders.

            (a) At all times during the term of this Agreement, the Shareholders
shall keep or cause to be kept true and correct books of account, in which shall
be entered fully and accurately each transaction of the Corporation and its
subsidiaries. Such books of account shall at all times be maintained at the
principal office of the Corporation and shall be open to the reasonable
inspection and examination of the Shareholders or their duly authorized
representatives during normal business hours.

            (b) Annual financial reports of the Corporation and its
subsidiaries, in such form and subject to such a compilation, review or audit by
the Corporation's regularly engaged public accountants as the Board of Directors
shall determine, shall be transmitted to each of the Shareholders not later than
four (4) months after the end of each fiscal year of the Corporation. Quarterly
and other reports will be prepared in such form and in such detail (but not to
be audited) as the Board of Directors shall determine, and promptly transmitted
to each of the Shareholders.

      9. Unrelated Business Interests. The Shareholders agree amongst themselves
(without affecting the Corporation) that each Shareholder and the officers,
directors and shareholders thereof may engage in other activities unrelated to
the Corporation, and may engage in or possess an interest in other business
ventures of any nature and description, independently or with others, including
but not limited to the ownership, financing, leasing, operation, management,
manufacturer and marketing of specialty chemicals, the manufacture or
importation of opium or derivatives or other narcotics or controlled substances,
and of investment, brokerage and financial services activities, subject to
general principles of fiduciary duty and corporate opportunity that may be
applicable. Neither the Corporation nor any of the Shareholders shall have any
rights, by virtue of this Agreement, in or to any such independent activities or
ventures of the others. Except as provided in subparagraph 3(e)(iii) above, the
fact that a Shareholder, or any person or entity controlling, controlled by or
under common control with such Shareholder, is employed by, or directly or
indirectly is interested in or connected with, any person, firm or corporation
employed by the Corporation to render or perform a service, or from whom the
Corporation may buy or sell merchandise or other property, or to or from whom
the Corporation may lease or sell any of its assets, shall not prohibit the
Shareholders or the Corporation from executing any agreement or engaging in any
transaction with, or employing, such person, firm or corporation or from
otherwise dealing with him or it, and neither the Corporation nor any of the
Shareholders, as such, shall have any rights in or to any income or profits
derived therefrom; provided, however, that no Shareholder shall directly
participate in or recommend any such agreement, transaction or dealings, or
permit any of its affiliated persons or entities to engage therein, unless such
agreement, transaction or dealings is or


                                       11
<PAGE>

are in all respects on bona fide, arm's-length terms no less favorable to the
Corporation than terms obtainable by it from or with unrelated persons or
entities.

      10. Application of Agreement to After-Acquired Shares. All of the
provisions of this Agreement shall apply to all of the shares of the Corporation
now owned or which may be issued or transferred hereafter to a Shareholder or to
his transferees in consequence of any additional issuance, purchase, exchange or
reclassification of shares, corporate reorganization, or any other form of
recapitalization, or consolidation, or merger, or share split, or share
dividend, or which are acquired by a Shareholder in any other manner.

      11. Specific Performance. Inasmuch as the shares of the Corporation are
closely held and the market therefor is limited, irreparable damage would result
if this Agreement is not specifically enforced. Therefore, the rights and
obligations to offer for sale shares of the Corporation, and to vote shares of
the Corporation, as provided herein, shall be enforceable in a court of equity
by a decree of specific performance and appropriate injunctive relief may be
applied for and granted in connection therewith (in each case, without any
showing of actual damages or that monetary relief would not provide an adequate
remedy), without any bond or other security being required. Such remedies shall,
however, be cumulative and not exclusive and shall be in addition to any other
remedies which any party may have under this Agreement or otherwise.

      12. Legend.

            (a) Each certificate representing shares of the Corporation of which
a Shareholder is a record or beneficial owner shall have stamped, printed or
typed thereon the following legend:

                  "The securities represented by the certificate have not been
            registered under the Securities Act of 1933, as amended, or under
            any applicable state securities laws, and may only be sold or
            transferred in compliance with such Act and such state securities
            laws. The sale, assignment, transfer, pledge or hypothecation of the
            shares represented by this certificate is subject to a certain
            Stockholders' Agreement, dated as of January 5, 2000 and any
            amendments thereto, a signed counterpart of which is on file at the
            office of the Corporation."

            (b) The Corporation shall not at any time permit any transfer to be
made on its books or records of the certificates representing the shares of any
of the parties hereto unless such transfer is made pursuant to and is in
accordance with the terms and conditions of this Agreement.

      13. Complete Agreement; Waivers. This Agreement constitutes the complete
understanding among the parties hereto, and no modification or amendment of any
of the terms and provisions hereof shall be valid unless made pursuant to an
instrument in writing signed by each of said parties. No waiver of any breach or
default hereunder shall be considered valid unless in writing, and no such
waiver shall be deemed a waiver of any subsequent breach or default of the same
or similar nature. Anything in this Agreement to the contrary


                                       12
<PAGE>

notwithstanding (and without limiting the rights of the owners of all of the
then outstanding shares to amend, modify or terminate this Agreement), any
modification, amendment or termination of this Agreement, and any waiver,
consent or other instrument under or pursuant to this Agreement, by a written
agreement signed by a "Shareholder" as defined in the introductory paragraph of
this Agreement, shall be valid and binding upon any and all persons or entities
(other than the Corporation) who may, at any time, have or claim any rights
under or pursuant to this Agreement in respect of the shares originally acquired
by such Shareholder to the extent that such modification, amendment or
termination would have been binding upon such Shareholder if he had owned such
shares at the time thereof.

      14. Reduction of Capital to Create Surplus. In the event that at any time
the Corporation's surplus shall be insufficient to enable the Corporation to
purchase or to make any payment due with respect to shares which it elects or
agrees to purchase, the Shareholders (for themselves and their respective heirs,
successors, personal representatives and assigns) agree that they shall
forthwith take appropriate steps to effect a sufficient reduction of the stated
capital of the Corporation to enable such purchase or payments to be made;
provided, however, that if a Shareholder, other than the seller, so desires, he
may (but shall not be obligated to) in lieu of effecting a reduction of the
stated capital of the Corporation, elect to contribute to the Corporation a
sufficient amount of cash to enable the Corporation to purchase such shares or
to make any payment or payments due hereunder. Solely for the purpose of
effecting such reduction in stated capital, the Shareholders grant to, and are
hereby deemed to have executed in favor of each other (and their respective
permitted successors and assigns):

            (i) an irrevocable proxy to vote all of the shares of the
      Corporation owned by the grantor of the proxy in favor of a reduction in
      stated capital by a written consent of stockholders without a meeting or
      at a meeting of the stockholders of the Corporation held to vote upon and
      authorize such reduction in stated capital; and

            (ii) an irrevocable power of attorney to sign and file any and all
      papers required to be signed and filed by the grantor of the power of
      attorney in order to effect the requisite reduction in stated capital.

      15. Termination. This Agreement shall terminate:

            (i) upon the mutual consent in writing of all of the then
      Shareholders; or

            (ii) upon the consummation of a Qualified Distribution, except for
      paragraph 6 which shall survive; or

            (iii) upon the sale as herein permitted of all of the outstanding
      shares of the Corporation held by all but one of the then Shareholders.

Nothing contained in this paragraph 15 shall effect or impair any rights or
obligations arising prior to the time of the termination of this Agreement as
herein provided, or which may arise by an event causing the termination of this
Agreement.


                                       13
<PAGE>

      16. Successors and Assigns. All of the terms and provisions of this
Agreement shall inure to the benefit of and shall be binding upon the heirs,
personal representatives, successors and assigns of the respective parties
hereto; provided, however, that nothing contained herein shall be construed as
granting any Shareholder the right to transfer any of his shares except as
permitted by this Agreement.

      17. Governing Law. This Agreement has been made in and shall be governed
by and construed and enforced in accordance with the laws of the State of New
York.

      18. Notices. All notices, offers, acceptances, and other communications
permitted or required hereunder shall be sufficiently given and shall be deemed
effective on receipt if personally delivered (by courier or otherwise) or sent
by air mail, postage prepaid, or by facsimile or telex (with confirmed
answerback), if to any or all of the Shareholders, to each such party's address
set forth at the head of this Agreement and with a copy to the Corporation at
its then principal office. Any party hereto may change the address to which each
such notice or communication shall be sent, or may request that a copy thereof
be sent to another person, by giving written notice as aforesaid to all of the
other parties hereto of such address or person.

      19. Paragraph Headings. The paragraph headings contained in this Agreement
are for convenience of reference only and shall not affect the meaning or
interpretation hereof.

      20. Severability. In the event that any provision of this Agreement would
be held to be invalid, prohibited or unenforceable in any jurisdiction for any
reason, unless narrowed by construction, this Agreement shall, as to such
jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable. If, notwithstanding the foregoing, any provision of this
Agreement would be held to be invalid, prohibited or unenforceable in any
jurisdiction for any reason, such provision, as to such jurisdiction, shall be
ineffective to the extent of such invalidity, prohibition or unenforceability,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.

      21. Further Action. Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.

      22. Pronouns. Pronouns used herein shall be deemed to be and include
pronouns of the male, female and/or neuter gender whenever applicable. Words in
the singular shall be read and construed as though in the plural and words in
the plural shall be read and construed as though in the singular in all cases
where they would so apply.

      23. Several Liabilities. The obligations of the Shareholders hereunder are
several and not joint.

      24. Counterparts. This Agreement may be executed in one or more
counterparts which, when taken together, shall constitute one complete, executed
Agreement.


                                       14
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date and year first above written.

PHILIPP BROTHERS CHEMICALS, INC.        PBCI LLC


By: /s/                                 By: /s/
   --------------------------------        -------------------------------------


/s/                                     /s/
- -----------------------------------     ----------------------------------------


/s/                                     /s/
- -----------------------------------     ----------------------------------------


/s/                                     /s/
- -----------------------------------     ----------------------------------------


/s/                                     /s/
- -----------------------------------     ----------------------------------------


/s/                                     /s/
- -----------------------------------     ----------------------------------------


/s/                                     /s/
- -----------------------------------     ----------------------------------------


                                       15
<PAGE>

                                                                      Appendix A

                              Rules and Guidelines
                                 for determining
                      Price, Terms and Conditions of Offers

      1. If a proposed third-party purchaser offers to pay the entire purchase
price in cash or by check upon the transfer of all of the shares of the
Corporation to be purchased thereby, or in one or more installments payable from
time to time (collectively referred to as "Money"), such requirement may be met
by the offeree(s) hereunder offering and paying the selling Shareholder the
exact same sum as that offered by the proposed third-party purchaser, in cash or
by check, and/or by the delivery of instruments of indebtedness in the
proportionate share of each offeree upon the same date or dates and at the same
rate of interest, if any.

      2. If a proposed third-party purchaser offers payment in whole or in part
with property other than Money, such requirement may be met by each offeree
hereunder paying the selling Shareholder his proportionate share of the "cash
equivalent" (as hereinafter defined) of such other consideration, valued as at
the end of the calendar month immediately preceding the month in which the offer
or sale is first made to the Corporation (the "Determination Date").

      3. If a proposed third-party purchaser offers collateral and/or
third-party guarantees in connection with the unpaid portion of the purchase
price, if any, such requirement may be met by the offeree(s) hereunder pledging
in lieu thereof the shares purchased pursuant to such offer as collateral
security for and until the full payment of the purchase price therefor.

      4. Each Shareholder acknowledges that a comparison of an offer to purchase
shares of the Corporation made by a proposed third-party purchaser, on the one
hand, and the Corporation and/or another Shareholder, on the other hand, which
is payable in one or more deferred payments may involve an assessment of the
credit risk with respect to a particular payor. Each Shareholder further
acknowledges that an offer may involve additional terms (including, without
limitation, a pledge of collateral or guarantee by or on behalf of a proposed
purchaser, or management or insurance or reinsurance arrangements) the value of
which may be difficult to ascertain. Each of the Shareholders, being fully aware
of the foregoing, hereby waives any and all right to claim that an offer is not
at the "same price per share and upon the same terms and conditions" due to
differences in the creditworthiness of a proposed third-party purchaser and an
offeree, the quality of collateral offered, if any, or due to any such other
terms or conditions; provided, however, that the offeree or offerees hereunder
shall have complied with the provisions of subparagraphs (1), (2) and/or (3)
above to the extent applicable.

      5. For the purposes hereof, "cash equivalent" shall mean the fair market
value, in cash, as of the Determination Date of the consideration other than
Money offered by the proposed purchaser.


                                       1
<PAGE>

      6. Notwithstanding anything contained in this Agreement to the contrary,
if the Corporation and each other Shareholder receive a notice (the date of the
receiving of such notice being herein called the "notice date") from a
Shareholder of an offer from a proposed third-party purchaser payable, in whole
or in part, in consideration other than Money, the period of time from the
notice date to the date on which the cash equivalent of such consideration is
determined shall be excluded in determining all applicable offering periods
provided for in paragraph 5. Upon receipt by the Corporation of such a notice,
the Corporation and the selling Shareholder giving such notice shall use their
best efforts to determine and agree upon the fair market value, in cash (and
assuming payment in full at the closing) of the portion of the consideration not
payable in Money. If the fair market value of such consideration cannot be
resolved to the satisfaction of the Corporation and the selling Shareholder
within five (5) business days after the notice date, application shall be made
promptly thereafter by either the Corporation or the selling Shareholder to the
President of the American Arbitration Association, who shall appoint an
appraiser. The determination by such appraiser of the fair market value of such
consideration shall be made, at the expense of the selling Shareholder, as of
the applicable Determination Date and shall be final, conclusive and binding
upon the Corporation and the selling Shareholder. Such appraiser shall, as soon
as possible after receiving a written request from either the Corporation or the
selling Shareholder, make a determination of the fair market value of such
consideration and shall furnish a certificate setting forth such determination
to the Corporation. The Corporation shall promptly forward a copy of such
certificate to each other Shareholder and the selling Shareholder.


                                       2
<PAGE>

                                                           STATE OF DELAWARE
                                                          SECRETARY OF STATE
                                                       DIVISION OF CORPORATIONS
                                                       FILED 09:00 AM 11/18/1999
                                                          991493652 - 3128346

                          CERTIFICATE OF INCORPORATION

                                       OF

                             PENICK HOLDING COMPANY

            The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:

            FIRST: The name of the corporation (hereinafter called the
"corporation") is:

                             Penick Holding Company

            SECOND: The address, including street, number, city and county, of
the registered office of the corporation in the State of Delaware is 1013 Centre
Road, in the City of Wilmington, County of New Castle, State of Delaware
19805-1297; and the name of the registered agent of the corporation in the State
of Delaware at such address is Corporation Service Company.

            THIRD: The nature of the business and the purposes to be conducted
and promoted by the corporation is:

            to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.

            FOURTH: (a) The total number of shares of stock which the
corporation shall have the authority to issue is 25,000, which are divided into
10,000 shares of Common Stock, par value $.0001 per share, and 15,000 shares of
Preferred Stock, par value $.0001 per share.

                  (b) The Board of Directors is hereby expressly granted
authority to authorize, from time to time in accordance with law, the issue of
one or more series of Preferred Stock and with respect to any such series to fix
by resolution or resolutions the numbers, powers, designations, preferences and
relative, participating, optional or other special rights of such series and the
qualifications, limitations or restrictions thereof, including, but without
limiting the generality of the foregoing, the following:

                        (i) The number of shares to constitute such series and
            the distinctive designations thereof;

                        (ii) The dividend rate to which such shares shall be
            entitled and the restrictions, limitations and conditions upon the
            payment of
<PAGE>

            such dividends, whether dividends shall be cumulative, the date or
            dates from which dividends (if cumulative) shall accumulate and the
            dates on which dividends (if declared) shall be payable;

                        (iii) Whether or not the shares of such series shall be
            redeemable and, if so, the terms, limitations and restrictions with
            respect to such redemption, including without limitation the manner
            of selecting shares for redemption if less than all shares are to be
            redeemed, and the amount, if any, in addition to any accrued
            dividends thereon, which the holders of shares of such series shall
            be entitled to receive upon the redemption thereof, which amount may
            vary at different redemption dates and may be different with respect
            to shares redeemed through the operation of any purchase, retirement
            or sinking fund and with respect to shares otherwise redeemed;

                        (iv) The amount in addition to any accrued dividends
            thereon which the holders of shares of such series shall be entitled
            to receive upon the voluntary or involuntary liquidation,
            dissolution or winding up of the corporation, which amount may vary
            at different dates and may vary depending on whether such
            liquidation, dissolution or winding up is voluntary or involuntary;

                        (v) Whether or not the shares of such series shall be
            subject to the operation of a purchase, retirement or sinking fund
            and, if so, the terms, limitations and restrictions with respect
            thereto, including without limitation whether such purchase,
            retirement or sinking fund shall be cumulative or non-cumulative,
            the extent to and the manner in which such fund shall be applied to
            the purchase, retirement or redemption of the shares of such series
            for retirement or to other corporate purposes and the terms and
            provisions relative to the operation thereof;

                        (vi) Whether or not the shares of such series shall have
            conversion privileges and, if so, prices or rates of conversion and
            the method, if any, of adjusting the same;

                        (vii) The voting powers, if any, of such series; and

                        (viii) Any other relative rights, preferences and
            limitations pertaining to such series.


                                      -2-
<PAGE>

            FIFTH: The name and the mailing address of the incorporator are as
follows:

                        Richard S. Kaplan, Esq.
                        Golenbock, Eiseman, Assor & Bell
                        437 Madison Avenue
                        New York, New York 10022

            SIXTH: The corporation shall have the power to indemnify and advance
expenses to any person to the full extent permitted from time to time by the
General Corporation Law of the State of Delaware.

            The indemnification and advancement of expenses provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.

            SEVENTH: To the fullest extent permitted by the General Corporation
Law of the State of Delaware, as the same exists or may hereafter be amended, a
director shall not be liable to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as director.

            EIGHTH: The corporation is to have perpetual existence.

            NINTH: In furtherance and not in limitation of the powers conferred
upon the stockholders by statute, the board of directors of the corporation is
expressly authorized to make, alter or repeal the by-laws of the corporation,
subject to the power of the stockholders to alter or repeal the by-laws made or
altered by the board of directors.

            TENTH: Except as otherwise required in the by-laws of the
corporation, election of directors need not be by written ballot.

            Signed at New York, New York on November 18, 1999.

                                        /s/ Richard S. Kaplan
                                        ----------------------------------------
                                        Richard S. Kaplan,
                                        Incorporator


                                      -3-
<PAGE>

    STATE OF DELAWARE
   SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 1/04/2000
  001003926 - 3128346

                     CERTIFICATE OF DESIGNATION, PREFERENCES
                        AND RIGHTS OF SERIES A REDEEMABLE
                           CUMULATIVE PREFERRED STOCK
                                       OF
                             PENICK HOLDING COMPANY

            PENICK HOLDING COMPANY, a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY THAT:

            Pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") and pursuant to the provisions of ss.151 and ss.141 of the
Delaware General Corporation Law, the Board of Directors, by unanimous written
consent dated January 3, 2000, adopted the following resolution providing for
the designation, preferences and relative, participating, optional and other
rights, and the qualifications, limitations and restrictions of the Series A
Redeemable Cumulative Preferred Stock;

            WHEREAS, the Certificate of Incorporation of the Corporation
provides for two classes of shares, one known as common stock, $.001 par value
per share (the "Common Stock"), and one known as preferred stock, $.001 value
per share (the "Preferred Stock"); and

            WHEREAS, the Board of Directors of the Corporation is authorized by
the Certificate of Incorporation to provide for the issuance of the shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in such series and to fix the designation,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof.

            NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors deems it
advisable to, and hereby does, designate a Series A Redeemable Cumulative
Preferred Stock and fixes and determines the rights, preferences,
qualifications, limitations and restrictions relating to the Series A Redeemable
Cumulative Preferred Stock as follows:

      1. Designation; Ranking. The shares of such series of Preferred Stock
shall be designated "Series A Redeemable Cumulative Preferred Stock" which shall
be senior to all other capital stock of the Corporation with respect to
dividends, redemption and distributions upon the liquidation, dissolution or
winding-up of the Corporation (referred to herein as the "Series A Preferred
Stock").

<PAGE>

      2. Authorized Number. The number of shares constituting the Series A
Preferred Stock shall be 12,000.

      3. Dividends. (a) The holders of record of shares of Series A, Preferred
Stock shall be entiled to receive regular cash dividends, when and as declared
by the Board of Directors, at the annual rate of $85 per share, all of which
dividends shall be cumulative and shall be deemed to accrue from and after the
date of the issuance of such shares, whether or not earned or declared and
whether or not there be funds legally available therefor; provided, however,
that upon the occurrence of a Corporate Transaction (as defined in Section 4(b)
below), the right to such dividends shall terminate and cease to accrue as of
the date of original issue. All dividends shall be payable in cash upon the
earlier to occur of a Liquidation (as defined in Section 4(a) below) or a
Corporate Transaction, except that in lieu of cash, such dividends shall be
payable in shares of Series A Preferred Stock, the number of shares being
determined pursuant to subparagraph (c) hereof , if agreed to by holders of at
least a majority in interest of the Series A Preferred Stock then outstanding.
Any written instructions or determination delivered to the Corporation and
purporting to be the agreement of the holders of such requisite percentage of
the Series A Preferred Stock outstanding shall be final, conclusive and binding
upon the holders of all of the Series A Preferred Stock outstanding shall be
final, conclusive and binding upon the holders of all of the Series A Preferred
Stock. If the Corporation does not receive written direction as to whether such
holders desire to receive Series A Preferred Stock or cash for any dividend by
the date such dividend shall be payable, Series A Preferred Stock shall be
issued.

            (b) If, for any dividend accrual period, dividends at the rate
hereinabove specified are not declared and paid or set aside for payment, the
amount of accrued but unpaid dividends shall accumulate, and shall be added to
the dividends payable for subsequent dividend accrual periods. If the funds
legally available for the payment of such dividends are insufficient to pay in
full the dividends payable on all outstanding shares of Series A Preferred
Stock, the total available funds may be paid in partial dividends to the holders
of the outstanding shares of Series A Preferred Stock ratably in proportion to
the full dividends to which they are entitled. No dividend or distribution in
cash or other property (other than a stock dividend payable solely in shares of
Common Stock) on any other class of stock of the Corporation shall be declared
or paid or set apart for payment unless dividends on the Series A Preferred
Stock have been paid in full and then only if the Corporation shall not be in
default in respect of any redemption or purchase obligation pursuant to this
resolution. Any reference to "distributions" in this paragraph 3 shall not be
deemed to include any distribution made in connection with any liquidation,
dissolution or winding-up of the Corporation, whether voluntary or involuntary.
Dividends shall cease to accumulate in respect of shares of Series A Preferred
Stock on the day prior to their redemption unless the Corporation shall have
failed to pay the relevant redemption price on the date fixed for redemption.

            (c) If pursuant to subparagraph (a) hereof, a dividend is to be paid
in shares of Series A Preferred Stock, then the holders of shares of Series A
Preferred Stock shall receive and the Corporation shall issue and deliver or,
failing such actual issuance


                                       2
<PAGE>

and delivery, shall be deemed to have issued and delivered, to each holder of
record of Series A Preferred Stock that number of fully paid and non-assessable
shares of Series A Preferred Stock of the Corporation as shall be equal to the
aggregate amount payable in respect of such dividend payment not theretofore
paid on all outstanding shares of Series A Preferred Stock of each holder of
Series A Preferred Stock as if a dividend was payable in shares,. and the
Corporation shall be deemed to have issued and delivered such Series A Preferred
Stock, quarterly from and after the date of original issue, divided by the
Original Issue Price (as hereinafter defined). Fractional shares of Series A
Preferred Stock may be issued in respect of dividends hereon.

            (d) The Corporation will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation but will at all times in good
faith assist in the carrying out of all the provisions of this paragraph 3 and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of holders of Series A Preferred Stock to receive the
dividends specified herein.

      4. Preference on Liquidation, etc.

            (a) In the event of any voluntary or involuntary liquidation,
distribution of assets (other than the payment of dividends), dissolution or
winding-up of the Corporation (a "Liquidation"), before any payment or
distribution of the assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of shares of Common Stock, the holders
of shares of Series A Preferred Stock shall be entitled to receive the
following, as a Liquidation Preference: (i) in the case of a Liquidation, an
amount in cash equal to one thousand dollars ($1,000) per share (the "Original
Issue Price"), plus accrued and unpaid dividends to such date or (ii) in the
case of a Corporate Transaction (as defined in Section (b) below), an amount in
cash equal to the Original Issue Price without dividends, all of which shall
terminate and cease to accrue as of the date of original issue, but in either
such situation they shall be entitled to no further payment with respect to such
Series A Preferred Stock. After setting apart or paying in full the Liquidation
Preference, the remaining assets (whether stated capital or surplus), if any,
or, in the event of a Corporate Transaction, all consideration received by the
Corporation in excess of the applicable Liquidation Preference shall be
distributed exclusively to the holders of record of the issued and outstanding
Common Stock. If, upon any liquidation, distribution of assets, dissolution or
winding-up of the Corporation, the assets of the Corporation, or proceeds
thereof, distributable among the holders of shares of Series A Preferred Stock
shall be insufficient to pay the Liquidation Preference in full to the holders
of Series A Preferred Stock, then such assets or the proceeds thereof shall be
distributed among such holders ratably in accordance with the respective
liquidation amounts which would be payable on such shares if all amounts payable
thereon were paid in full. The Liquidation Preference shall be payable to the
holders of the Series A Preferred Stock upon the occurrence of a Liquidation, or
the closing of a transaction giving rise thereto, or a Corporate Transaction,
notwithstanding any delay in


                                       3
<PAGE>

the receipt of funds by the Corporation in connection therewith by virtue of any
escrow arrangement, promissory note, deferred payment of proceeds or otherwise.

            (b) (i) For purposes of this Section 4, a Corporate Transaction
shall be treated as a Liquidation and shall entitle the holders of Series A
Preferred Stock to receive, upon the consummation of such Corporate Transaction,
consideration in the same form as is to be provided in such Corporate
Transaction (whether cash, securities, other property or any combination
thereof), having a fair market value (determined in good faith by the board of
directors of the Corporation) equivalent to the amounts to which such holders of
Series A Preferred Stock would otherwise have been entitled pursuant to Section
4 (a) assuming such Corporate Transaction had constituted a Liquidation within
the meaning of said Section 4(a); provided, however, that the right to dividends
shall terminate and cease to accrue as of the date of original issue.

                  (ii) As used herein, "Corporate Transaction" means (A) any
consolidation or merger of the Corporation, other than any merger or
consolidation resulting in the holders of the capital stock of the Corporation
entitled to vote for the election of directors holding a majority of the capital
stock of the surviving or resulting entity entitled to vote for the election of
directors, (B) any person or entity (including any affiliates thereof) becoming
the holder of a majority of the capital stock of the Corporation entitled to
vote for the election of directors, (C) any sale or other disposition by the
Corporation of all or substantially all of its assets, or (D) the consummation
by the Corporation of an underwritten public offering of equity securities of
the Corporation registered under the Securities Act of 1933, as amended, the net
proceeds of which to the Corporation shall be at least $10,000,000.

            (c) Written notice of a liquidation, dissolution or winding-up
(including the transactions described in subparagraph (b) above), stating a
payment date, the estimated amount of the Liquidation Preference, and the place
where said amounts shall be payable shall be given by mail, postage prepaid, not
less than 30 days prior to the payment date stated therein, to each holder of
record of Series A Preferred Stock at his post office address as shown by the
records of the Corporation.

      5. Voting

            (a) General. Except as any provision of law, the Certificate of
Incorporation or this resolution may otherwise require, no share of Series A
Preferred Stock shall entitle the holder thereof to any voting power, to
participate in any meeting of shareholders or to have notice of any meeting of
shareholders. In all cases where the holders of shares of Series A Preferred
Stock have the right to vote separately as a class, such holders shall be
entitled to one vote for each such share held by them, respectively.

            (b) Special Class Vote. Without the consent of the holders of at
least a majority in interest of the shares of Series A Preferred Stock then
outstanding, given in writing or by vote at a meeting of such holders called for
such purpose voting together as


                                       4
<PAGE>

a class, the Corporation will not (i) increase the authorized amount of Series A
Preferred Stock, (ii) create any other class of stock (or a security convertible
into such a class of stock) entitled to a preference prior to or on parity with
the Series A Preferred Stock upon any dividend or distribution or any
liquidation, distribution of assets, dissolution or winding-up of the
Corporation or increase the authorized amount of any such other class, (iii)
amend, alter or repeal any provision of the Certificate of Incorporation so as
to adversely affect the preference, rights or powers of the Series A Preferred
Stock, (iv) merge or consolidate with or into any other person, firm or
corporation, or sell substantially all of its assets or business to another
person, or (v) purchase or otherwise acquire for value any Series A Preferred
Stock other than as provided in paragraph 6 hereof;

      6. Redemption.

            (a) Optional Redemption. (i) The Corporation, at its option, may
redeem, at any time or from time to time on or after January 1, 2003, out of
funds legally available therefor, the whole or any part of the shares of the
Series A Preferred Stock outstanding on the date fixed for redemption, at a
redemption price per share in the amount of the Original Issue Price plus all
accrued and unpaid dividends on such shares of Series A Preferred Stock to the
redemption date. Such redemption, if for less than all the outstanding shares of
the Series A Preferred Stock, shall be made pro rata in proportion to the number
of shares of Series A Preferred Stock held by each holder as of the date of the
Optional Redemption Notice (as defined below).

                  (ii) At least thirty (30) but not more than sixty (60) days
prior to the date fixed for any optional redemption of Series A Preferred Stock
(the "Optional Redemption Date"), written notice shall be mailed by mail,
postage prepaid, to each holder of record of Series A Preferred Stock to be
redeemed, at such holder's post office address last shown on the records of the
Corporation, notifying such holder of the election of the Corporation to redeem
such shares, specifying the Optional Redemption Date and calling upon such
holder to surrender to the Corporation, in the manner and at the place
designated, his certificate or certificates representing the shares to be
redeemed (such notice is hereinafter referred to as the "Optional Redemption
Notice"). On or after the Optional Redemption Date, each holder of Series A
Preferred Stock to be redeemed shall surrender his certificate or certificates
representing such shares to the Corporation, in the manner and at the place
designated in the Optional Redemption Notice, and thereupon the redemption price
of such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. From and after the Optional Redemption Date,
unless there shall have been a default in payment of the redemption price, all
rights of the holders of such shares to be redeemed as holders of Series A
Preferred Stock (except the right to receive the redemption price without
interest upon surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever.


                                       5
<PAGE>

            (b) Mandatory Redemption. (i) At any time on or after January 1,
2005, the holders of record of not less than eighty percent (80%) in interest of
shares of Series A Preferred Stock then outstanding may elect to have the
Corporation redeem, out of funds legally available therefor, all or any part of
the outstanding shares of Series A Preferred Stock, and except as provided
below, the Corporation shall, out of funds legally available therefor, redeem
and purchase any such shares upon the exercise of such option, and the holders
of record thereof shall be entitled to receive, out of funds legally available
for such purpose, payment in cash in the amount per share to be redeemed equal
to the Original Issue Price, plus accrued and unpaid dividends thereon to the
Mandatory Redemption Date (as defined below). The election by such holders to
cause the Corporation to redeem shares of Series A Preferred Stock shall be made
by delivering written notice to the Corporation at least ninety days prior to
the date such redemption is to be effected (the "Mandatory Redemption Date").

            (ii) At least thirty days prior to the Mandatory Redemption Date,
written notice shall be mailed by mail, postage prepaid, to each holder of
record of Series A Preferred Stock, at such holder's post office address last
shown on the records of the Corporation, notifying such holder of the election
of the holders of not less than eighty percent (80%) in interest of shares of
Series A Preferred Stock then outstanding to cause the Corporation to redeem
such shares, specifying the Mandatory Redemption Date and calling upon such
holder to surrender to the Corporation, in the manner and at the place
designated, his certificate or certificates representing the shares to be
redeemed (such notice is hereinafter referred to as the "Mandatory Redemption
Notice"). On or after the Mandatory Redemption Date, each holder of Series A
Preferred Stock to be redeemed shall surrender his certificate or certificates
representing such shares to the Corporation, in the manner and at the place
designated in the Mandatory Redemption Notice, and thereupon the redemption
price of such shares shall be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof and each
surrendered certificate shall be canceled. From and after the Mandatory
Redemption Date, unless there shall have been a default in payment of the
redemption price, all rights of the holders of such shares to be redeemed as
holders of Series A Preferred Stock (except the right to receive the redemption
price without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever.

            (c) Partial Redemption. Upon the surrender for redemption of only a
portion of the number of shares covered by a certificate surrendered pursuant to
the foregoing provisions of this paragraph 6, the Corporation shall issue and
deliver to or upon the written order of the holder of the certificate so
surrendered, at the expense of the Corporation, a new certificate covering the
number of shares of Series A Preferred Stock representing the unredeemed portion
of the certificate so surrendered.

            (d) Retirement of Shares. Shares of Series A Preferred Stock which
have been issued and have been redeemed, repurchased or reacquired in any manner
by


                                       6
<PAGE>

the Corporation shall be retired and restored to the status of authorized but
unissued shares of Series A Preferred Stock.

      7. Business Day. If any payment or redemption shall be required by the
terms hereof to be made on a day that is not a Business Day (as defined below),
such payment or redemption shall be made on the immediately succeeding Business
Day and no further dividends shall accumulate after the day payment was
required. "Business Day" means a day other than a Saturday, Sunday, national or
New York State holiday or other day on which commercial banks in New York City
are authorized or required by law to close.

      8. Headings of Subdivisions. The headings of various subdivisions hereof
are for convenience of reference only and shall not affect the interpretation of
any of the provisions hereof.

      9. Notice to the Corporation All notices and other communications required
or permitted to be given to the Corporation hereunder shall be made by
first-class mail, postage prepaid, to the Corporation at its principal executive
offices, Attention: President).

      10. Limitations. Except as may otherwise be required by law, the shares of
Series A Preferred Stock shall not have any powers, preferences or relative,
participating, optional or other special rights other than those specifically
set forth in this resolution (as such resolution may be amended from time to
time) or otherwise in the Certificate of Incorporation of the Corporation.

      IN WITNESS WHEREOF, this Certificate has been signed on this 4th day of
January, 2000.

                                        PENICK HOLDING COMPANY

                                        By: /s/ Richard S. Kaplan
                                           -------------------------------------
                                           Name:  Richard S. Kaplan
                                           Title: Director


                                       7

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>9
<FILENAME>0009.txt
<DESCRIPTION>LIST OF SUBSIDIARIES
<TEXT>


                                                                    Exhibit 21.1

                              LIST OF SUBSIDIARIES

<TABLE>
<CAPTION>
Subsidiaries of Philipp Brothers Chemicals, Inc.                  Jurisdiction of Organization
- ------------------------------------------------                  ----------------------------
<S>                                                               <C>
C.P. Chemicals, Inc.                                              New Jersey
Ferro Metal and Chemical Corporation Limited                      U.K.
Koffolk, Inc.                                                     Delaware
Koffolk (1949), Ltd.                                              Israel
MRT Management Corp.                                              Delaware
Odda Holdings AS                                                  Norway
Prince Agriproducts, Inc.                                         Delaware
The Prince Manufacturing Company                                  Pennsylvania
The Prince Manufacturing Company                                  Illinois

<CAPTION>
Subsidiaries of C.P. Chemicals, Inc.                              Jurisdiction of Organization
- ------------------------------------------------                  ----------------------------
<S>                                                               <C>
Phibro-Tech, Inc.*                                                Delaware

* Phibro-Tech, Inc. also does business as Agtrol International

<CAPTION>
Subsidiaries of Phibro-Tech, Inc.                                 Jurisdiction of Organization
- ------------------------------------------------                  ----------------------------
<S>                                                               <C>
L.C. Holding S.A.                                                 France
Agtrol Mexico S. A. de C.V.                                       Mexico
Agtrol Internacionale, S.A.                                       Argentina

<CAPTION>
Subsidiaries of L.C. Holding S.A.                                 Jurisdiction of Organization
- ------------------------------------------------                  ----------------------------
<S>                                                               <C>
Agtrol International                                              France

<CAPTION>
Subsidiaries of Koffolk (1949) Ltd.                               Jurisdiction of Organization
- ------------------------------------------------                  ----------------------------
<S>                                                               <C>
Koffimex Ltd.                                                     Israel
Planalquimica Industrial Ltda.                                    Brazil
Wychem Limited                                                    U.K.
Agrozan, Ltd.                                                     Israel

<CAPTION>
Subsidiaries of Ferro Metal and Chemical Corporation Limited      Jurisdiction of Organization
- ------------------------------------------------------------      ----------------------------
<S>                                                               <C>
D.G. Bennett Chemicals Limited                                    U.K

<CAPTION>
Subsidiaries of Odda Holdings AS                                  Jurisdiction of Organization
- ------------------------------------------------                  ----------------------------
<S>                                                               <C>
Odda Smelteverk AS                                                Norway

<CAPTION>
Subsidiaries of MRT Management Corp.                              Jurisdiction of Organization
- ------------------------------------------------                  ----------------------------
<S>                                                               <C>
Mineral Resource Technologies, L.L.C.                             Delaware
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27.1
<SEQUENCE>10
<FILENAME>0010.txt
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TEXT>

<TABLE> <S> <C>


<ARTICLE>                     5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2000 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>                                   1,000

<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                           JUN-30-2000
<PERIOD-START>                              JUL-01-1999
<PERIOD-END>                                JUN-30-2000
<CASH>                                            2,403
<SECURITIES>                                          0
<RECEIVABLES>                                    80,132
<ALLOWANCES>                                        756
<INVENTORY>                                      50,405
<CURRENT-ASSETS>                                149,761
<PP&E>                                          146,700
<DEPRECIATION>                                   70,520
<TOTAL-ASSETS>                                  258,451
<CURRENT-LIABILITIES>                            69,865
<BONDS>                                         100,000
<PREFERRED-MANDATORY>                                 0
<PREFERRED>                                         521
<COMMON>                                              2
<OTHER-SE>                                       31,095
<TOTAL-LIABILITY-AND-EQUITY>                    258,451
<SALES>                                         318,056
<TOTAL-REVENUES>                                318,056
<CGS>                                           229,553
<TOTAL-COSTS>                                    72,829
<OTHER-EXPENSES>                                      0
<LOSS-PROVISION>                                      0
<INTEREST-EXPENSE>                               14,754
<INCOME-PRETAX>                                  13,999
<INCOME-TAX>                                      3,946
<INCOME-CONTINUING>                              10,053
<DISCONTINUED>                                        0
<EXTRAORDINARY>                                       0
<CHANGES>                                             0
<NET-INCOME>                                     10,053
<EPS-BASIC>                                           0
<EPS-DILUTED>                                         0



</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27.1
<SEQUENCE>11
<FILENAME>0011.txt
<DESCRIPTION>1999 RESTATED FINANCIAL DATA SCHEDULE
<TEXT>

<TABLE> <S> <C>


<ARTICLE>                     5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>                                   1,000

<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                            JUN-30-1999
<PERIOD-START>                               JUL-01-1998
<PERIOD-END>                                 JUN-30-1999
<CASH>                                             3,022
<SECURITIES>                                           0
<RECEIVABLES>                                     71,063
<ALLOWANCES>                                         886
<INVENTORY>                                       51,430
<CURRENT-ASSETS>                                 141,358
<PP&E>                                           126,890
<DEPRECIATION>                                    62,596
<TOTAL-ASSETS>                                   238,779
<CURRENT-LIABILITIES>                             68,772
<BONDS>                                          100,000
<PREFERRED-MANDATORY>                                  0
<PREFERRED>                                          521
<COMMON>                                               2
<OTHER-SE>                                        20,925
<TOTAL-LIABILITY-AND-EQUITY>                     238,779
<SALES>                                          297,294
<TOTAL-REVENUES>                                 297,294
<CGS>                                            223,247
<TOTAL-COSTS>                                     63,539
<OTHER-EXPENSES>                                       0
<LOSS-PROVISION>                                     153
<INTEREST-EXPENSE>                                13,142
<INCOME-PRETAX>                                     (287)
<INCOME-TAX>                                         179
<INCOME-CONTINUING>                                 (466)
<DISCONTINUED>                                         0
<EXTRAORDINARY>                                        0
<CHANGES>                                              0
<NET-INCOME>                                        (466)
<EPS-BASIC>                                            0
<EPS-DILUTED>                                          0


</TABLE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
