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<SEC-DOCUMENT>0000891092-04-000122.txt : 20040112
<SEC-HEADER>0000891092-04-000122.hdr.sgml : 20040112
<ACCEPTANCE-DATETIME>20040112171255
ACCESSION NUMBER:		0000891092-04-000122
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20031226
ITEM INFORMATION:		Acquisition or disposition of assets
ITEM INFORMATION:		Financial statements and exhibits
FILED AS OF DATE:		20040112

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PHIBRO ANIMAL HEALTH CORP
		CENTRAL INDEX KEY:			0001069899
		STANDARD INDUSTRIAL CLASSIFICATION:	INDUSTRIAL INORGANIC CHEMICALS [2810]
		IRS NUMBER:				131840497
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	333-64641
		FILM NUMBER:		04521153

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

	MAIL ADDRESS:	
		STREET 1:		ONE PARKET PLZ
		CITY:			FORT LEE
		STATE:			NJ
		ZIP:			07024

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	PHILIPP BROTHERS CHEMICALS INC
		DATE OF NAME CHANGE:	19980908
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>e16591_8k.txt
<DESCRIPTION>FORM 8-K
<TEXT>
- --------------------------------------------------------------------------------

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 8-K

                                   ----------

                                 CURRENT REPORT
                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                         Securities Exchange Act of 1934

       Date of Report (Date of earliest event reported) December 26, 2003

                        PHIBRO ANIMAL HEALTH CORPORATION
             (Exact name of registrant as specified in its charter)

           New York                   333-64641                 13-1840497
- ----------------------------   ------------------------   ----------------------
(State or other jurisdiction   (Commission File Number)       (IRS Employer
      of incorporation)                                   Identification Number)

                                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)

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

<PAGE>

Item 2. Acquisition or Disposition of Assets.

      Effective December 26, 2003 (the "Closing Date"), Phibro Animal Health
Corporation (formerly known as Philipp Brothers Chemicals, Inc., the "Company")
completed the divestiture of substantially all of the business and assets of its
subsidiary, The Prince Manufacturing Company ("PMC"), to a company ("Buyer")
formed by Palladium Equity Partners II, LP and certain of its affiliates (the
"Palladium Investors"), and the related reduction of the Company's preferred
stock held by the Palladium Investors (collectively the "Prince Transactions").

      Pursuant to definitive purchase and other agreements executed on and
effective as of the Closing Date, the Prince Transactions included the following
elements: (i) the transfer of substantially all of the business and assets of
PMC to Buyer; (ii) the reduction of the value of the Company's Preferred Stock
owned by the Palladium Investors from $72.2 million to $16.5 million (accreted
through the Closing Date) by means of the redemption of all of its shares of
Series B Preferred Stock and a portion of its Series C Preferred Stock; (iii)
the termination of $2.25 million in annual management advisory fees payable by
the Company to Palladium; (iv) a cash payment of $10 million to the Palladium
Investors in respect of the portion of the Company's Preferred Stock not
exchanged in consideration of the business and assets of PMC; (v) the agreement
of the Buyer to pay the Company for advisory fees for the next three years of $1
million, $500,000 and $200,000, respectively (which were pre-paid at closing by
the Buyer and satisfied for $1.3 million, the net present value of such
payments); and (vi) the Buyer agreed to supply manganous oxide and red iron
oxide products and to provide certain mineral blending services to the Company's
Prince Agriproducts subsidiary ("Prince Agri"). Prince Agri agreed to continue
to provide the Buyer with certain laboratory, MIS and telephone services, all on
terms substantially consistent with the historic relationship between Prince
Agri and PMC, and to lease to Buyer office space currently used by PMC in
Quincy, Illinois. The Company has an understanding to receive certain treasury
services from Palladium for $100,000 per year. Pursuant to definitive
agreements, the Company made customary representations, warranties and
environmental and other indemnities, agreed to a post-closing working capital
adjustment, paid $3.958 million in full satisfaction of all intercompany debt
owed to PMC, paid a closing fee to Palladium of $500,000, made certain capital
expenditure adjustments included as part of the intercompany settlement amount,
and agreed to pay for certain out-of-pocket transaction expenses. PMC retained
$414,000 of its accounts receivable. The Company established a $1 million letter
of credit escrow for two years to secure its working capital adjustment and
certain indemnification obligations. The Company agreed to indemnify the
Palladium Investors for a portion, at the rate of $0.65 for every dollar, of the
amount they receive in respect of the disposition of Buyer for less than $21
million, up to a maximum payment by the Company of $4 million (the "Backstop
Indemnification Amount"). The Backstop Indemnification Amount would be payable
on the earlier to occur of July 1, 2008 or six months after the redemption date
of all of the Company's Senior Secured Notes due 2007 if such a disposition
closes prior to such redemption and six months after the closing of any such
disposition if the disposition closes after any such redemption. The Company's
obligations with respect to the Backstop Indemnification Amount will cease if
the Palladium Investors do not close the disposition of Buyer by January 1,
2009. The definition of "Equity Value" in the Company's Certificate of
Incorporation was amended to reduce the multiple of trailing EBITDA payable in
connection with any future redemption of Series C Preferred to 6.0 from 7.5. The
amount of consideration paid and payable in connection with the Prince
Transactions and all matters in connection therewith was determined pursuant to
arm's length negotiations.


                                       1
<PAGE>

Item 7. Financial Statements and Exhibits

      (b) Pro forma financial information.

            Pro Forma consolidated financial statements of the Company giving
            effect to the Prince Transactions (see following page)

      (c) Exhibits

Exhibit 1         Purchase and Sale Agreement dated as of December 26, 2003 by
                  and among Phibro Animal Health Corporation ("PAHC"), Prince
                  MFG, LLC, ("Prince MFG"), The Prince Manufacturing Company
                  ("Prince" and together with PAHC and Prince MFG, the "Phibro
                  Parties"), Palladium Equity Partners II, L.P. ("PEP II"),
                  Palladium Equity Partners II-A, L.P., ("PEP II-A"), Palladium
                  Equity Investors II, L.P., ("PEI II", and together with PEP II
                  and PEP II-A, the "Investor Stockholders"), and Prince Mineral
                  Company, Inc. ("Buyer")

Exhibit 2         Environmental Indemnification Agreement dated as of December
                  26, 2003 between the Phibro Parties and Buyer

Exhibit 3         Amendment to Stockholders Agreement dated as of December 26,
                  2003 between PAHC, the Investor Stockholders and Jack Bendheim

Exhibit 4         Advisory Fee Agreement dated as of December 26, 2003 between
                  Buyer and PAHC*

Exhibit 5         Certificate of Incorporation of PAHC, as amended

Exhibit 6         Amended and Restated Management Services Agreement dated as of
                  October 21, 2003 between Palladium Capital Management, L.L.C
                  and PAHC*

- ----------
*     This Exhibit is a management compensatory plan or arrangement.


                                       2
<PAGE>

                        PHIBRO ANIMAL HEALTH CORPORATION
         INDEX TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                                                          Page
                                                                          ----
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
  as of September 30, 2003                                                  4

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
  for the Three Months Ended September 30, 2003                             5

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
  for the Year Ended June 30, 2003                                          6

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
  FINANCIAL STATEMENTS                                                    7 - 10


                                       3
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
           PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
                            As of September 30, 2003
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                    Historical          Pro forma                Pro forma
                                                                     Balances          Adjustments                Balances
                                                                    ----------         -----------               ---------
                                                       ASSETS
<S>                                                                  <C>                <C>        <C>           <C>
CURRENT ASSETS:
      Cash and cash equivalents                                      $  26,917          $ (16,290) 2. (b)        $   3,839
                                                                                           (8,088) 2. (c)
                                                                                            1,300  2. (e)
      Trade receivables, less allowance for doubtful accounts
       of $1,466 historical and $1,466 pro forma                        54,324             (1,947) 2. (a)           52,377
      Other receivables                                                  4,541                 (3) 2. (a)            4,538
      Inventories                                                       94,389             (5,788) 2. (a)           88,601
      Prepaid expenses and other current assets                          9,117                (49) 2. (a)            9,068
                                                                     ---------          ---------                ---------

        TOTAL CURRENT ASSETS                                           189,288            (30,865)                 158,423

PROPERTY, PLANT AND EQUIPMENT, net                                      65,317             (2,725) 2. (a)           62,592

INTANGIBLES                                                              8,080                 --                    8,080

OTHER ASSETS                                                            13,531               (667) 2. (a)           12,864
                                                                     ---------          ---------                ---------
                                                                     $ 276,216          $ (34,257)               $ 241,959
                                                                     =========          =========                =========

                                         LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
      Cash overdraft                                                 $   2,417          $    (563) 2. (a)        $   1,854
      Loans payable to banks                                            38,750                 --                   38,750
      Current portion of long-term debt                                 23,828                 --                   23,828
      Accounts payable                                                  59,235             (2,639) 2. (a)           56,596
      Accrued expenses and other current liabilities                    48,965               (645) 2. (a)           49,620
                                                                                            1,300  2. (e)
                                                                     ---------          ---------                ---------
        TOTAL CURRENT LIABILITIES                                      173,195             (2,547)                 170,648

LONG-TERM DEBT                                                         102,880                 --                  102,880

OTHER LIABILITIES                                                       15,057                (74) 2. (a)           18,983
                                                                                            4,000  2. (d)
                                                                     ---------          ---------                ---------
        TOTAL LIABILITIES                                              291,132              1,379                  292,511
                                                                     ---------          ---------                ---------

COMMITMENTS AND CONTINGENCIES

REDEEMABLE SECURITIES:
      Series B and C preferred stock                                    69,868            (53,896) 2. (f)           15,972

STOCKHOLDERS' DEFICIT                                                  (84,784)            18,260  2. (g)          (66,524)
                                                                     ---------          ---------                ---------
                                                                     $ 276,216          $ (34,257)               $ 241,959
                                                                     =========          =========                =========
</TABLE>

  See notes to unaudited pro forma condensed consolidated financial statements


                                       4
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
      PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
                  For the Three Months Ended September 30, 2003
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                Historical             Pro forma                  Pro forma
                                                                 Results              Adjustments                  Results
                                                                ----------            -----------                 ---------
<S>                                                              <C>                   <C>       <C>               <C>
NET SALES                                                        $ 87,170              $ (5,683) 3. (a)            $ 81,487

COST OF GOODS SOLD                                                 66,006                (3,795) 3. (a)              62,211
                                                                 --------              --------                    --------

    GROSS PROFIT                                                   21,164                (1,888)                     19,276

SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES                                                       16,161                  (675) 3. (a)              14,698
                                                                                           (563) 3. (b)
                                                                                           (250) 3. (c)
                                                                                             25  3. (d)
                                                                 --------              --------                    --------
    OPERATING INCOME                                                5,003                  (425)                      4,578

OTHER:
    Interest expense                                                3,949                   348  3. (e)               4,297
    Interest (income)                                                (242)                   --                        (242)
    Other (income), net                                              (635)                   --                        (635)
                                                                 --------              --------                    --------
    INCOME FROM CONTINUING OPERATIONS
       BEFORE INCOME TAXES                                          1,931                  (773)                      1,158

PROVISION FOR INCOME TAXES                                            783                   (16) 3. (a)                 767
                                                                 --------              --------                    --------

    INCOME FROM CONTINUING OPERATIONS                            $  1,148              $   (757)                   $    391
                                                                 ========              ========                    ========
</TABLE>

  See notes to unaudited pro forma condensed consolidated financial statements


                                       5
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
      PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
                        For the Year Ended June 30, 2003
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                Historical             Pro forma                  Pro forma
                                                                 Results              Adjustments                  Results
                                                                ----------            -----------                 ---------
<S>                                                             <C>                    <C>        <C>             <C>
NET SALES                                                       $ 355,225              $ (22,332) 3. (a)          $ 332,893

COST OF GOODS SOLD                                                263,728                (16,178) 3. (a)            247,550
                                                                ---------              ---------                   --------

    GROSS PROFIT                                                   91,497                 (6,154)                    85,343

SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES                                                       66,360                 (2,575) 3. (a)             60,635
                                                                                          (2,250) 3. (b)
                                                                                          (1,000) 3. (c)
                                                                                             100  3. (d)
                                                                ---------              ---------                   --------

    OPERATING INCOME                                               25,137                   (429)                    24,708

OTHER:
    Interest expense                                               16,342                  1,391  3. (e)             17,733
    Interest (income)                                                 (86)                    --                        (86)
    Other expense, net                                              1,150                     --                      1,150
                                                                ---------              ---------                   --------

    INCOME FROM CONTINUING OPERATIONS
       BEFORE INCOME TAXES                                          7,731                 (1,820)                     5,911

PROVISION FOR INCOME TAXES                                         10,076                    (52) 3. (a)             10,024
                                                                ---------              ---------                   --------

    (LOSS) FROM CONTINUING OPERATIONS                           $  (2,345)             $  (1,768)                  $ (4,113)
                                                                =========              =========                   ========
</TABLE>

  See notes to unaudited pro forma condensed consolidated financial statements


                                       6
<PAGE>

                        PHIBRO ANIMAL HEALTH CORPORATION
   NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

1.    Basis of Presentation

      The pro forma condensed  consolidated  financial  statements are presented
for  illustrative  purposes  only,  giving effect to the  divestiture  of Prince
Manufacturing  Company ("PMC") as described and therefore are neither indicative
of the  operating  results  that might have been  achieved  had the  divestiture
occurred as of an earlier date nor  indicative  of operating  results  which may
occur in the future. In the opinion of management,  these statements include all
material  adjustments  necessary to reflect, on a pro forma basis, the effect of
the divestiture on the historical financial  information of Phibro Animal Health
Corporation (the "Company").  The condensed consolidated statement of operations
of the  Company  for the year ended June 30,  2003 is derived  from the  audited
financial  statements  of  the  Company.  All  other  financial  information  is
unaudited.  The unaudited pro forma condensed  consolidated financial statements
should be read in conjunction  with the  consolidated  financial  statements and
related notes contained in the Company's Annual Report on Form 10-K for the year
ended June 30, 2003,  and the  Company's  Quarterly  Report on Form 10-Q for the
quarter ended September 30, 2003.

      Effective  December 26, 2003 (the "Closing Date"),  the Company  completed
the  divestiture  of  substantially  all of the  business and assets of PMC to a
company  ("Buyer") formed by Palladium Equity Partners II, LP and certain of its
affiliates  (the  "Palladium  Investors"),  and  the  related  reduction  of the
Company's  preferred  stock held by the Palladium  Investors  (collectively  the
"Prince Transactions").

      Pursuant  to  definitive  purchase  and other  agreements  executed on and
effective as of the Closing Date, the Prince Transactions included the following
elements:  (i) the transfer of  substantially  all of the business and assets of
PMC to Buyer;  (ii) the reduction of the value of the Company's  Preferred Stock
owned by the Palladium  Investors from $72,184 to $16,517  (accreted through the
Closing  Date) by means  of the  redemption  of all of its  shares  of  Series B
Preferred  Stock  and a  portion  of its  Series C  Preferred  Stock;  (iii) the
termination of $2,250 in annual management  advisory fees payable by the Company
to  Palladium;  (iv) a cash  payment of $10,000 to the  Palladium  Investors  in
respect  of the  portion  of the  Company's  Preferred  Stock not  exchanged  in
consideration  of the business and assets of PMC; (v) the agreement of the Buyer
to pay the Company for advisory  fees for the next three years of $1,000,  $500,
and  $200,  respectively  (which  were  pre-paid  at  closing  by the  Buyer and
satisfied  for $1,300,  the net present  value of such  payments);  and (vi) the
Buyer  agreed  to supply  manganous  oxide and red iron  oxide  products  and to
provide certain mineral blending  services to the Company's Prince  Agriproducts
subsidiary ("Prince Agri").  Prince Agri agreed to continue to provide the Buyer
with certain laboratory,  MIS and telephone services, all on terms substantially
consistent  with the historic  relationship  between Prince Agri and PMC, and to
lease to Buyer  office  space  currently  used by PMC in Quincy,  Illinois.  The
Company has an understanding to receive certain treasury services from Palladium
for $100 per year. Pursuant to definitive agreements, the Company made customary
representations, warranties and environmental and other indemnities, agreed to a
post-closing working capital adjustment, paid $3,958 in full satisfaction of all
intercompany  debt owed to PMC,  paid a closing fee to Palladium  of $500,  made
certain capital  expenditure  adjustments  included as part of the  intercompany
settlement  amount,  and  agreed to pay for  certain  out-of-pocket  transaction
expenses. PMC retained $414 of its accounts receivable.  The Company established
a $1,000  letter of credit  escrow for two years to secure its  working  capital
adjustment  and  certain  indemnification  obligations.  The  Company  agreed to
indemnify the Palladium  Investors for a portion, at the rate of $0.65 for every
dollar,  of the amount they receive in respect of the  disposition  of Buyer for
less than  $21,000,  up to a  maximum  payment  by the  Company  of $4,000  (the
"Backstop Indemnification Amount"). The Backstop Indemnification Amount would be
payable  on the  earlier  to  occur  of July 1,  2008 or six  months  after  the
redemption date of all of the Company's  Senior Secured Notes due 2007 if such a
disposition  closes prior to such redemption and six months after the closing of
any such disposition if the disposition  closes after any such  redemption.  The
Company's obligations with respect to the Backstop  Indemnification  Amount will
cease if the  Palladium  Investors  do not  close  the  disposition  of Buyer by
January 1, 2009. The  definition of "Equity Value" in the Company's  Certificate
of  Incorporation  was amended to reduce the multiple of trailing EBITDA payable
in connection with any future  redemption of Series C Preferred to 6.0 from 7.5.
The  amount of  consideration  paid and  payable in  connection  with the Prince
Transactions and all matters in connection  therewith was determined pursuant to
arm's length negotiations.


                                       7
<PAGE>

                        PHIBRO ANIMAL HEALTH CORPORATION
   NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

      The  following  unaudited  pro  forma  condensed   consolidated  financial
statements give effect to the disposition of PMC. The accompanying unaudited pro
forma  condensed  consolidated  balance sheet reflects the  divestiture as if it
occurred at September 30, 2003. The  accompanying  unaudited pro forma condensed
consolidated  statements of operations  reflect the  divestiture of PMC as if it
occurred at the beginning of the earliest period presented.  The transaction has
been accounted for as a distribution  to the preferred  stockholders in exchange
for a  reduction  of the  redeemable  preferred  stock  held  by  the  Palladium
Investors. The excess amount of the reduction in redeemable preferred stock over
amounts distributed has been recorded as a contribution of capital.

      The Company's Odda Smelteverk  (Norway),  Carbide  Industries  (U.K.), and
Mineral Resource  Technologies,  Inc. (U.S.)  businesses have been classified as
discontinued operations in the historical financial statements.  These pro forma
condensed  consolidated  statements  of  operations  present only the results of
continuing operations.

2.    Pro  forma  Adjustments  -  Condensed  Consolidated  Balance  Sheet  as of
      September 30, 2003

      (a) To reflect the removal of the asset and liability accounts of PMC sold
      to the Buyer.

      (b) To reflect the cash paid for the Prince Transactions.

      (c) To reflect the transaction costs incurred.

      (d) To  reflect  the  contingent  backstop  indemnification  amount at the
      maximum potential amount payable.

      (e) To reflect the advisory fee prepaid to the Company by the Buyer.

      (f) To reflect the reduction of the Company's redeemable preferred stock.

      (g) To  reflect  the  excess  amount  of the  redeemable  preferred  stock
      reduction  over the book  value  of PMC  assets  divested  and  costs  and
      liabilities incurred:

          Series B & C Redeemable Preferred Stock:
          Accreted value at September 30, 2003 (pre-transaction)         $69,868
          Accreted value at September 30, 2003 (post-transaction)         15,972
                                                                         -------
          Amount of redeemable preferred stock reduction (2.(f))          53,896
                                                                         -------

          Assets Divested and Costs and Liabilities Incurred:
          PMC net assets sold (2.(a))                                      7,258
          Cash paid for reduction of redeemable preferred stock (2.(b))   10,000
          Intercompany debt payments (2.(b))                               3,958
          Working capital adjustments (2.(b))                              1,832
          Closing fee (2.(b))                                                500
          Transaction costs incurred (2.(c))                               8,088
          Contingent backstop indemnification amount (2.(d))               4,000
                                                                         -------
          Total assets divested and costs and liabilities incurred        35,636
                                                                         -------

          Excess amount contributed to capital (2.(g))                   $18,260
                                                                         =======


                                       8
<PAGE>

                        PHIBRO ANIMAL HEALTH CORPORATION
   NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

3.    Pro forma  Adjustments - Condensed  Consolidated  Statements of Operations
      for the Three Months ended  September 30, 2003 and for the Year Ended June
      30, 2003

      (a)   To reflect the removal of the income  statement  accounts of PMC for
            each period presented.

      (b)   To reflect the removal of the  management  fee paid to  Palladium by
            the Company.

      (c)   To reflect the  inclusion of advisory fee paid to the Company by the
            Buyer.

      (d)   To  reflect  the  inclusion  of the  treasury  services  fee paid to
            Palladium by the Company.

      (e)   To reflect  interest  expense on cash paid at 5.16%,  the  Company's
            average interest rate on its credit facility, plus pro rata discount
            related to the prepaid advisory fee.

4.    Depreciation and Amortization

      The total  depreciation and  amortization  expense of PMC was $243 for the
three months  ended  September  30,  2003,  and $956 for the year ended June 30,
2003.

5.    Cash and Debt at December 31, 2003

      The Company  estimates  that its balance  sheet at December  31, 2003 will
include  cash of $4,500 and total debt of  $167,100.  The  balance of its credit
facility at December 31, 2003 will be $5,700 and is included in total debt.  The
Company's  balance sheet will also include accrued expenses of $2,010 related to
the PMC transaction and accrued expenses of $3,300 related to the refinancing of
certain of the Company's  debt,  as described  below in Note 6, both amounts are
expected to be paid during the quarter ended March 31, 2004.

6.    Refinancing

      On October 21, 2003 the Company issued 105,000 units consisting of $85,000
of 13% Senior Secured Notes due 2007 of PAHC (the "US Senior Notes") and $20,000
13% Senior Secured Notes due 2007 of Philipp Brothers  Netherlands III B.V. (the
"Dutch Senior Notes" and, together with the US Senior Notes, the "Senior Secured
Notes"), an indirect wholly-owned  subsidiary of PAHC (the "Dutch issuer").  The
Company used the proceeds from the issuance to: (i) repurchase  $51,971 of its 9
7/8% Senior Subordinated Notes due 2008 at a price equal to 60% of the principal
amount thereof,  plus accrued and unpaid interest;  (ii) repay its senior credit
facility of $34,888  outstanding at the repayment  date;  (iii)  satisfy,  for a
payment of  approximately  $29,315,  certain of its  outstanding  obligations to
Pfizer Inc., including: (a) $20,075 aggregate principal amount of its promissory
note plus  accrued  and unpaid  interest;  (b) $9,681 of accounts  payable,  (c)
$9,257 of accrued expenses; and (d) future contingent purchase price obligations
under  its  agreements  with  Pfizer  by which  the  Company  acquired  Pfizer's
medicated feed additive  business,  and; (iv) pay fees and expenses  relating to
the above transactions.

      The US  Senior  Notes  and the  Dutch  Senior  Notes  are  senior  secured
obligations  of each of PAHC and the Dutch issuer,  respectively.  The US Senior
Notes and the Dutch Senior Notes are guaranteed on a senior secured basis by all
PAHC's  domestic  restricted  subsidiaries,  and  the  Dutch  Senior  Notes  are
guaranteed on a senior secured basis by PAHC and by the restricted  subsidiaries
of the Dutch  issuer,  including  Phibro Animal Health  (Belgium)  SPRL.  The US
Senior Notes and related  guarantees are secured by substantially  all of PAHC's
assets and the assets of its domestic restricted  subsidiaries,  other than real
property and interests  therein.  The Dutch Senior Notes and related  guarantees
are secured by a pledge of all the accounts  receivable,  a security interest or
floating  charge on the inventory to the extent  permitted by applicable  law, a
mortgage on substantially all of the real property, of the Dutch issuer and each
of its  restricted  subsidiaries,  a pledge of 100% of the capital stock of each
subsidiary of the Dutch issuer, a pledge of the  intercompany  loans made by the
Dutch issuer to its restricted  subsidiaries and substantially all of the assets
of the U.S.  guarantors,


                                       9
<PAGE>

                        PHIBRO ANIMAL HEALTH CORPORATION
   NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

other than real property and  interests  therein.  The  indenture  governing the
Senior  Secured Notes provides for optional  make-whole  redemptions at any time
prior to June 1,  2005,  optional  redemption  on or  after  June 1,  2005,  and
requires the Company to make certain  offers to purchase  Senior  Secured  Notes
upon a change of control,  upon certain asset sales and from fifty percent (50%)
of excess cash flow (as such terms are defined in the indenture).

      Also,  on October 21, 2003,  the Company  entered  into a new  replacement
domestic senior working capital credit facility with Wells Fargo Foothill, Inc.,
providing  for a working  capital  line plus a letter  of credit  facility.  The
aggregate  amount of borrowings  under such working capital and letter of credit
facilities may not exceed $25,000,  and the aggregate amount of borrowings under
the working capital facility may not exceed $15,000.

      Borrowings  under the  replacement  domestic  senior  credit  facility are
subject to a borrowing base formula based on  percentages  of eligible  domestic
receivables and domestic inventory.  Under the replacement credit facility,  the
Company may choose between two interest rate options:  (i) the  applicable  base
rate as  defined  plus  0.50% and (ii) the LIBOR  rate as  defined  plus  2.75%.
Indebtedness  under  the  replacement  credit  facility  is  secured  by a first
priority  lien on  substantially  all of the  Company's  assets  and  assets  of
substantially  all  of the  Company's  domestic  subsidiaries.  The  Company  is
required  to pay an  unused  line fee of  0.375% on the  unused  portion  of the
replacement  credit  facility,  a monthly  servicing fee and standard  letter of
credit fees to issuing banks.  Borrowings under the replacement  credit facility
are available until, and are repayable no later than, October 31, 2007, although
borrowings must be repaid by June 30, 2007 if the maturity of the Senior Secured
Notes has not been extended, as required by the credit facility, by that date.

      Pursuant to the terms of an intercreditor agreement, the security interest
securing  the Senior  Secured  Notes and the  guarantees  made by the  Company's
domestic  restricted  subsidiaries  are  subordinated  to a  lien  securing  the
replacement domestic senior credit facility.

      The Company believes that, through the refinancings referred to above, the
liquidity  issues mentioned in the Company's June 30, 2003 Annual Report on Form
10-K have been resolved.  The Company's replaced senior bank credit facility and
its note  payable  to Pfizer  were to mature in  November  2003 and March  2004,
respectively.  The effect of the above refinancing transactions will be included
in the December 31, 2003 financial statements and have not been reflected in the
pro forma information included in this Form 8-K.

7.    Other Information

      Statements  made in this Form 8-K may contain  forward-looking  statements
made pursuant to the safe harbor provisions of the Securities  Litigation Act of
1995. Such statements  involve certain risks and uncertainties  that could cause
results to differ materially from those in the forward-looking statements.

      Information on potential  risks and  uncertainties  may be found under the
captions  "Liquidity and Refinancing  Risks" and "Other Risks and Uncertainties"
in Note 2 of the Notes to  Consolidated  Financial  Statements  included  in the
Company's  Annual  Report on Form 10-K for the year ended June 30, 2003, as well
as under the caption "Certain Factors Affecting Future Operating  Results" under
Item 7 of such Annual Report.


                                       10
<PAGE>

                                   SIGNATURES

      Pursuant to the  requirements of the Securities  Exchange Act of 1934, the
Company  has  duly  caused  this  report  to be  signed  on  its  behalf  by the
undersigned hereunto duly authorized.

                                               PHIBRO ANIMAL HEALTH CORPORATION

                                               By: /s/ Richard G. Johnson
                                                   -----------------------------
                                                   Richard G. Johnson,
                                                   Chief Financial Officer

Dated: January 12, 2004


                                       11
<PAGE>

                                  Exhibit Index

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

Exhibit 1         Purchase and Sale  Agreement  dated as of December 26, 2003 by
                  and among Phibro Animal Health  Corporation  ("PAHC"),  Prince
                  MFG, LLC,  ("Prince MFG"),  The Prince  Manufacturing  Company
                  ("Prince"  and together  with PAHC and Prince MFG, the "Phibro
                  Parties"),  Palladium  Equity  Partners  II, L.P.  ("PEP II"),
                  Palladium Equity Partners II-A, L.P., ("PEP II-A"),  Palladium
                  Equity Investors II, L.P., ("PEI II", and together with PEP II
                  and PEP II-A, the "Investor Stockholders"), and Prince Mineral
                  Company, Inc. ("Buyer")

Exhibit 2         Environmental  Indemnification  Agreement dated as of December
                  26, 2003 between the Phibro Parties and Buyer

Exhibit 3         Amendment to  Stockholders  Agreement dated as of December 26,
                  2003 between PAHC, the Investor Stockholders and Jack Bendheim

Exhibit 4         Advisory Fee  Agreement  dated as of December 26, 2003 between
                  Buyer and PAHC*

Exhibit 5         Certificate of Incorporation of PAHC, as amended

Exhibit 6         Amended and Restated Management Services Agreement dated as of
                  October 21, 2003 between Palladium Capital  Management,  L.L.C
                  and PAHC*

- ----------
*     This Exhibit is a management compensatory plan or arrangement.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1
<SEQUENCE>3
<FILENAME>e16591ex_1.txt
<DESCRIPTION>PURCHASE AND SALE AGREEMENT
<TEXT>
                                                                  EXECUTION COPY

                           PURCHASE AND SALE AGREEMENT

      THIS  PURCHASE  AND SALE  AGREEMENT is dated as of December 26, 2003 (this
"Agreement"),  among PHIBRO ANIMAL HEALTH CORPORATION (formerly known as Philipp
Brothers  Chemicals,  Inc.), a New York corporation (the "Company"),  PRINCE MFG
LLC, a Delaware limited liability company (the "Prince Stockholder"), THE PRINCE
MANUFACTURING COMPANY, an Illinois corporation ("Prince",  and together with the
Company and the Prince  Stockholder,  the "Phibro  Parties"),  PALLADIUM  EQUITY
PARTNERS II, L.P., a Delaware limited  partnership ("PEP II"),  PALLADIUM EQUITY
PARTNERS II-A,  L.P., a Delaware  limited  partnership  ("PEP II-A"),  PALLADIUM
EQUITY INVESTORS II, L.P., a Delaware limited partnership ("PEI II" and together
with PEP II and PEP II-A,  the  "Investor  Stockholders"),  and  PRINCE  MINERAL
COMPANY, INC., a Delaware corporation  ("Acquisition Company", and together with
the  Investor  Stockholders,  the  "Palladium  Parties")  (each,  a "Party" and,
together,  the  "Parties").  Capitalized  terms not  otherwise  defined  in this
Agreement are defined in Article 11 hereof.

      WHEREAS,   Prince  is  engaged  in  the  business  of  (i)  manufacturing,
processing,  distributing  and selling iron and  manganese  compounds and lignin
sulfonate  and  (ii)  providing  custom  grinding  services  (collectively,   as
presently conducted by Prince on the date hereof, the "Prince Business");

      WHEREAS, Prince is a wholly owned subsidiary of the Prince Stockholder and
the Prince Stockholder is a wholly owned subsidiary of the Company;

      WHEREAS, on the date hereof, the Investor Stockholders own,  collectively,
(a) 25,000 shares of Series B Preferred  Redeemable  Participating  Shares,  par
value $100 per share,  of the  Company  (the  "Series B Preferred  Stock"),  (b)
20,000 shares of the Series C Redeemable  Participating  Preferred  Shares,  par
value $100 per share,  of the Company (the  "Series C Preferred  Stock") and (c)
all of the outstanding capital stock of Acquisition Company;

      WHEREAS,  prior  to the  Closing,  the  Investor  Stockholders  intend  to
transfer to Acquisition  Company  16,627 shares of Series B Preferred  Stock and
6,258 shares of Series C Preferred Stock (collectively, the "Exchange Stock");

      WHEREAS,  the Phibro Parties and the Palladium Parties have agreed, on the
terms and  subject  to the  conditions  set forth  herein,  that (a) the  Prince
Stockholder  will  purchase from the Investor  Stockholders  an aggregate of (i)
8,373  shares of Series B  Preferred  Stock  and (ii)  3,151  shares of Series C
Preferred Stock (collectively,  the "Purchase Stock") for a total purchase price
of $10,000,000 (the "Stock Purchase  Price"),  and (b) Acquisition  Company will
acquire  substantially  all of the assets of Prince in exchange for the transfer
and delivery of the Exchange Stock; and

      WHEREAS, each Schedule (other than Schedule 1.1 hereto) referred to herein
means the  particular  Schedule of the Disclosure  Schedule  delivered by one or
more of the Parties  concurrently  with the execution  and delivery  hereof (the
"Disclosure Schedule").

      NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the Parties hereto agree as follows:

<PAGE>

      1. PURCHASE AND SALE OF PURCHASE STOCK.

      1.1.  Purchase  and Sale of  Purchase  Stock.  Subject  to the  terms  and
conditions set forth in this Agreement,  at the Closing referred to in Section 3
hereof,   the  Prince   Stockholder   agrees  to  purchase  from  each  Investor
Stockholder,  and  each  Investor  Stockholder  agrees  to  sell  to the  Prince
Stockholder,  the Purchase Stock held by such Investor  Stockholder as set forth
on Schedule 1.1 hereto for the percentage of the Stock Purchase Price applicable
to such  Investor  Stockholder  as set forth on  Schedule  1.1 hereto  (each,  a
"Percentage").

      1.2.  Cancellation of Purchase Stock. On or promptly following the Closing
Date,  the Purchase  Stock shall be retired and  cancelled  by the Company.  The
retired and cancelled Purchase Stock shall not be held in treasury or reissuable
by the Company.

      2. PURCHASE AND SALE OF PRINCE ASSETS.

      2.1.  Purchase  and  Sale of  Prince  Assets.  Subject  to the  terms  and
conditions set forth in this Agreement,  at the Closing referred to in Section 3
hereof,  Prince  agrees to sell,  assign,  transfer  and deliver to  Acquisition
Company, and Acquisition Company agrees to purchase, acquire and take assignment
and delivery of, all of the assets (other than the Excluded Assets  specified in
Section  2.2) owned by Prince and used by Prince in the Prince  Business  on the
Closing Date (all of which assets are  hereinafter  referred to  collectively as
the "Prince Assets"), including, without limitation, the following assets:

      (a)  Those  certain   parcels  of  land   described  on  Schedule   2.1(a)
constituting all of Prince's  interests in real estate owned by Prince as of the
date hereof  (except for property  identified  as an Excluded  Asset on Schedule
2.2),  together  with any and all  buildings,  plants and other  structures  and
improvements thereon, any and all rights and privileges pertaining thereto or to
any of such buildings,  plants or other structures or improvements,  and, to the
extent   constituting   real   property,   any  and  all  fixtures,   machinery,
installations,  equipment and other property attached thereto or located thereon
(collectively,  together  with the  Kentucky  Street  Real  Property,  the "Real
Property");

      (b) Any and all plants,  fixtures,  machinery,  installations,  equipment,
furniture,  tools, spare parts, supplies,  materials and other personal property
located on any of the Real Property or owned by Prince and used by Prince in the
Prince  Business,  including,  without  limitation,  those  items  described  on
Schedule 2.1(b) (the "Equipment");

      (c) All of Prince's  title to and  interest in motor  vehicles,  including
those described on Schedule 2.1(c); and

      (d) Any and all of Prince's trade accounts  receivable,  notes  receivable
and  miscellaneous  receivables  other  than  any such  receivables  owed by the
Company  or  any  of its  Affiliates  to  Prince  (the  "Accounts  Receivable"),
excluding the Retained Receivables Interest;

      (e) All of Prince's  title to,  interest in and rights under the leases of
personal property described on Schedule 2.1(e) if and to the extent the same are
assignable  or for which  consents to  assignment  are received  (the  "Personal
Property Leases");

      (f) All of Prince's inventories,  including raw materials,  parts, work in
process and finished goods (the "Inventories");


                                       2
<PAGE>

      (g) All of Prince's  rights under the agreements with respect to employees
described on Part 1 of Schedule  2.1(g) if and to the extent any of the same are
assignable or for which consents to assignment are received  (collectively,  the
"Employee Agreements");

      (h) All of  Prince's  rights  under the  purchase  orders,  contracts  and
agreements  described on Schedule 2.1(h), for the purchase or sale of utilities,
goods,  materials and services,  and under all other contracts,  commitments and
agreements  of Prince  entered  into in the  ordinary  course of business to the
extent the same remain  unperformed  on the Closing Date (the  purchase  orders,
commitments,  contracts and  agreements  referred to in this paragraph (h) being
referred to collectively as the "Other Contracts");

      (i) All of Prince's  transferable  rights  under the Permits  described on
Schedule 5.9(c);

      (j) All of Prince's  trademarks,  trade  names,  trade  secrets,  Internet
domain names,  corporate names  (including,  without  limitation,  the name "The
Prince  Manufacturing  Company"),  copyrights,  designs,  patents,  licenses (as
licensee or licensor),  other  agreements and  applications  with respect to the
foregoing,  production records,  technical information,  manufacturing know-how,
processes, trade secrets, customer lists, telephone numbers and other intangible
assets  owned by Prince  and used by Prince in the Prince  Business,  including,
without  limitation,  those  described on Schedule  2.1(j) (the  "Intangibles"),
subject to the Trademark Agreement;

      (k) All of Prince's accounting books, records and ledgers,  employment and
personnel records for all employees of the Prince Business,  information systems
and all other documents and records relating exclusively to the Prince Assets or
the Prince Business; and

      (l) All of the cash,  commercial  paper and cash equivalents of the Prince
Business  or held by  Prince  on hand or in bank  accounts  (including,  without
limitation,  the  Intercompany  Settlement  Amount  and any  Initial  Adjustment
Payment),  including any of the bank accounts identified on Schedule 2.1(l) (the
"Business  Accounts")  and any  certificates  of deposit  identified on Schedule
2.1(l).

      2.2. Excluded Assets. Notwithstanding the foregoing, Prince is not selling
and Acquisition Company is not purchasing,  pursuant to this Agreement,  and the
term  "Prince   Assets"  shall  not  include,   any  of  the  following   assets
(collectively, the "Excluded Assets"):

      (a) the consideration received by Prince pursuant to this Agreement;

      (b) the rights of Prince under this Agreement;

      (c) the assets described on Schedule 2.2;

      (d) any cash,  commercial paper and cash equivalents otherwise included as
Prince  Assets  that have  been  withdrawn  by  Prince at any time  prior to the
Closing  whether  from the  Business  Accounts or otherwise  and  including  any
certificates of deposit identified on Schedule 2.1(l);

      (e) any and all amounts  owed by the Company or any of its  Affiliates  to
Prince;

      (f) all corporate  organization books and records of Prince, all books and
records relating to Excluded Assets, and all personnel records and other records
that Prince is required by law to retain in its possession; and


                                       3
<PAGE>

      (g) an undivided 20% ownership  interest in the Accounts  Receivable  (the
"Retained Receivables Interest");  provided, that the amount of collections with
respect to the Retained  Receivables  Interest shall not exceed $414,000 and any
collections  in respect of the Retained  Receivables  Interest in excess of that
amount shall constitute a Prince Asset.

      2.3.  Consideration.  The  consideration for the Prince Assets will be (a)
the transfer and delivery of the Exchange Stock by Acquisition Company to Prince
and (b) the assumption by Acquisition Company of the Assumed Obligations.

      2.4.  Assumed  Obligations.  At the  Closing,  Acquisition  Company  shall
assume,  and  agree  to pay,  perform,  fulfill  and  discharge,  the  following
obligations of Prince (collectively, the "Assumed Obligations"):

      (a) all obligations  and  liabilities  which (i) arise or accrue after the
Closing and which relate to events which transpire  subsequent to the Closing or
(ii) are scheduled to arise or accrue  subsequent to the Closing (whether or not
related to any event which transpires  subsequent to the Closing), in each case,
under  the  Personal  Property  Leases,  the  Employee  Agreements  or the Other
Contracts;

      (b) all  obligations  and  liabilities of Prince  reflected on the Interim
Balance Sheet and listed on Schedule  2.4(b) which remain unpaid or  unperformed
at the Closing;

      (c) all obligations and liabilities  incurred by Prince in connection with
the Prince Business in the ordinary course of business subsequent to the date of
the Interim Balance Sheet and through the Closing Date; and

      (d) all obligations and liabilities in respect of the matters described on
Schedule 2.4(d).

Assumed Obligations shall not, in any event, include any Excluded Liabilities.

      2.5.  Excluded  Liabilities.  Anything in this  Agreement  to the contrary
notwithstanding,  other than as set forth in Section  2.4,  Acquisition  Company
shall not assume,  and shall not be deemed to have  assumed,  any  liability  or
obligation  of  Prince  whatsoever  (with  all such  unassumed  liabilities  and
obligations  referred  to  herein  as  the  "Excluded  Liabilities").   Excluded
Liabilities will include,  without limitation,  any of the following liabilities
and obligations:

      (a) any liabilities or obligations for  Indebtedness of Prince (other than
Indebtedness arising under the Solomon Grind Non-Compete Agreement);

      (b) any liabilities  for foreign,  federal or state income Taxes of Prince
or for other Taxes  (except for any such other Taxes to the extent  reflected in
liabilities described in Section 2.4(b) or (c));

      (c) any liabilities or obligations under the Personal Property Leases, the
Employee  Agreements or the Other Contracts arising out of any default or breach
that occurred prior to the Closing;

      (d) any liabilities for Phibro Transaction Costs;

      (e) any liabilities or obligations arising out of any legal action,  suit,
proceeding or investigation pending as of the Closing;


                                       4
<PAGE>

      (f) any liabilities or obligations arising out of any legal action,  suit,
proceeding  or  investigation  commenced  after the  Closing  and to the  extent
arising out of any occurrence or event happening prior to the Closing;

      (g) any liabilities or obligations  arising out of Prince's  compliance or
non-compliance with any statute,  judgment, decree, order, regulation or rule of
any court or governmental or regulatory authority;

      (h) any  liabilities  or obligations of Prince under this Agreement or any
of the other documents executed in connection with this Agreement;

      (i) any liabilities (other than liabilities  constituting accrued expenses
arising in the ordinary  course of business and  reflected on the Final  Closing
Statement) to the extent  arising out of  employment,  employment  grievances or
termination  of  employment  of any persons  employed by Prince on or before the
Closing Date,  including any workmen's  compensation  claims  relating to events
which transpired on or before the Closing Date (whether or not known or reported
as  of  the  Closing  Date),  Change  of  Control  Obligations  and  2003  Bonus
Obligations, unless, in the case of any liabilities arising out of a termination
of  employment  of any  employee,  Acquisition  Company  hires the  employee  in
accordance with this Agreement;

      (j) any  liabilities  to the extent  Acquisition  Company  is  indemnified
therefor pursuant to the terms of the Environmental Indemnification Agreement;

      (k) any  liabilities  under any  Employee  Benefit Plan listed on Schedule
2.5(k)  and any other  Employee  Benefit  Plan  covering  any  present or former
employee  of any Phibro  Party or any of their  Affiliates  (including,  without
limitation, any liabilities relating to any health care plans or benefits);

      (l)  any  obligations  of  Prince  to any  other  Phibro  Party  or to any
Affiliate of any Phibro Party; and

      (m) any  obligations  to the  extent  arising  under or in  respect of any
Excluded Asset, or otherwise described on Schedule 2.5(m).

      2.6.  Cancellation of Exchange Stock. On or promptly following the Closing
Date,  the Exchange  Stock shall be retired and  cancelled  by the Company.  The
retired and cancelled Exchange Stock shall not be held in treasury or reissuable
by the Company.

      2.7. Tax  Treatment.  The Phibro  Parties and the  Palladium  Parties each
hereby  acknowledge  and agree that (a) the fair value of the Purchase  Stock is
$10,000,000  and (b) the fair value of (i) the Exchange  Stock and (ii) the fair
value of the Prince  Assets and the Other  Transferred  Assets  less the Assumed
Obligations,  are each  $19,858,400  (the "Asset Purchase  Price").  The Parties
shall treat and report the  transactions  contemplated  by this Agreement in all
respects  consistently  for  purposes  of  any  federal,  state  or  local  tax,
including,  without  limitation,  with respect to calculation of gain,  loss and
basis with reference to the Asset Purchase  Price  allocations  made pursuant to
Schedule  2.7  hereto.  The  Parties  shall not take any  actions  or  positions
inconsistent with the obligations set forth herein. Both Acquisition Company and
the  Company  agree to file  with the IRS an IRS Form  8594  (Asset  Acquisition
Statement  under Section 1060) with respect to the  acquisition  by  Acquisition
Company  of the  Prince  Assets  and the Other  Transferred  Assets,  with their
respective  Federal income tax returns for the year in which the Closing occurs,
consistent with the Asset Purchase Price  allocations  made pursuant to Schedule
2.7 hereto.


                                       5
<PAGE>

      2.8. Collection of Receivables.  From and after the Closing Date until the
entire Retained  Receivables  Interest has been paid (the "Collection  Period"),
Acquisition Company shall (i) use commercially reasonable efforts to collect the
Accounts  Receivables  (the  "Collections")  and (ii) pay to Prince the Retained
Receivables Interest of such Collections. Neither the actual Collections nor the
actual  timing  of   Collections   under  this  Section  2.8  shall  impact  the
determination  of  Net  Working  Capital  (or  the  inclusion  of  any  Accounts
Receivable or any interest therein) for purposes of the Final Closing Statement.
Within  five (5)  business  days  after the  Closing,  Prince  will  deliver  to
Acquisition Company a schedule of all the Accounts  Receivable.  Any collections
from any account  debtor in respect of any of the Accounts  Receivable  shall be
credited  against  the  Accounts  Receivable  of  such  account  debtor  in  the
chronological order of invoice, except to the extent a legitimate dispute exists
with respect to a  particular  Account  Receivable,  provided  that  Acquisition
Company has  promptly  notified  Prince of such  dispute.  Within seven (7) days
after the end of each calendar week during the  Collection  Period,  Acquisition
Company  shall  deliver  to  Prince  (i)  a  statement  or  report  showing  all
Collections  during such week and (ii) a wire transfer in an amount equal to 20%
of the aggregate  amount of the Collections  during such week (the  "Collections
Payments").  Upon payment in full of the entire Retained  Receivables  Interest,
Acquisition  Company  shall have no further  obligations  to Prince with respect
thereto.  Acquisition  Company  shall  not  agree to any  settlement,  discount,
credit,  rebilling or reduction of any of the Accounts  Receivables  without the
prior written consent of Prince (such consent not to be unreasonably withheld or
delayed).  Acquisition  Company's collection  obligations under this Section 2.8
shall not include any  obligation  to bring suit or take other legal  action for
the collection of any of the Accounts Receivable.  Acquisition Company shall not
have any  interest  in or to the  Retained  Receivables  Interest  and shall not
assign,  pledge or grant a security interest in any of the Retained  Receivables
Interest to any third party.  Acquisition  Company's obligations to make payment
to Prince under this Section 2.8 in respect of the Retained Receivables Interest
shall not be subject to any set-off  whatsoever.  Overdue  Collections  Payments
shall bear interest in accordance with Section 12.4.

      3. CLOSING.

      3.1. Time and Place. The closing of the transactions set forth in Sections
1 and 2 (the "Closing")  shall be held at the offices of Bingham  McCutchen LLP,
399 Park Avenue,  New York,  New York 10022,  on December  26, 2003,  or at such
other  time,  or at such other  place as the Phibro  Parties  and the  Palladium
Parties may agree.  The date on which the Closing is actually held  hereunder is
sometimes referred to herein as the "Closing Date".

      3.2.  Transactions  At Closing.  At the Closing,  in addition to any other
instruments or documents referred to herein:

      (a) The Investor  Stockholders  shall  deliver to the Prince  Stockholder,
free and clear of any Lien,  certificates  representing  the Purchase Stock duly
endorsed in blank or with duly executed stock powers attached.

      (b) The  Prince  Stockholder  shall  pay the Stock  Purchase  Price to the
Investor Stockholders,  in accordance with their respective Percentages, by wire
transfer  of  immediately  available  funds to an account  (or  accounts)  to be
designated by the Investor Stockholders.

      (c)  Acquisition  Company shall  deliver to Prince,  free and clear of any
Lien,  certificates  representing  the Exchange  Stock duly endorsed in blank or
with duly executed stock powers attached.


                                       6
<PAGE>

      (d) Prince shall duly execute and deliver to Acquisition  Company the Bill
of Sale and  Assignment  attached  hereto as  Exhibit  A (the  "Bill of Sale and
Assignment"),  recordable  deeds for each interest in Real Property  (other than
the Kentucky  Street Real  Property)  (collectively,  together with the Kentucky
Street Deed,  the "Real  Property  Deeds") and such other deeds,  bills of sale,
certificates  of title and other  instruments  of  assignment  or transfer  with
respect to the Prince Assets as Acquisition  Company may reasonably  request and
as may be necessary to vest in  Acquisition  Company  title to all of the Prince
Assets as herein provided,  in each case subject to no Lien except for Permitted
Liens.

      (e)  Acquisition  Company  shall duly  execute  and  deliver to Prince the
Assumption  Agreement attached hereto as Exhibit B (the "Assumption  Agreement")
and such other instruments of assumption with respect to the Assumed Obligations
as Prince may reasonably request.

      (f) The Phibro  Parties  shall deliver the Letter of Credit (as defined in
the Escrow Agreement) to the Escrow Agent.

      (g) The Phibro Parties and the Palladium Parties shall execute and deliver
the Estimated Net Working Capital Agreement and, if required by Section 4.1, the
Company or the Prince  Stockholder shall make the Initial  Adjustment Payment to
Prince.

      (h)  The  Phibro   Parties  shall  pay  and   discharge  all   outstanding
Indebtedness of Prince evidenced on the Closing  Calculation  Certificate (other
than Indebtedness arising under the Solomon Grind Non-Compete Agreement).

      (i) The Phibro  Parties  shall deliver to the  Palladium  Parties  pay-off
letters and lien discharges  reasonably  satisfactory  to the Palladium  Parties
from each  creditor  of Prince  listed on the Closing  Calculation  Certificate,
except with respect to Permitted Liens.

      (j) The  Company  shall pay to  Palladium  Capital  Management,  L.L.C.  a
closing fee in the amount of $500,000 (the "Closing Fee").

      (k) The  Company  shall cause  Prince Agri to duly  execute and deliver to
Acquisition  Company a recordable deed, in the form attached hereto as Exhibit C
(the  "Kentucky  Street Deed"),  for the Kentucky  Street Real Property and such
other documents as may be necessary to vest in Acquisition  Company title to all
of the  Kentucky  Street Real  Property as herein  provided,  subject to no Lien
except for the Permitted Liens.

      (l) Each of the Parties  hereto  shall  execute  and  deliver  each of the
agreements  and  certificates  required to be signed and delivered by such Party
pursuant to Sections 8 and 9.

      (m) The Quincy  Office  Building and related  rights of ingress and egress
shall be transferred by Prince to Prince Agri.

      (n) The  Company  shall cause  Prince Agri to duly  execute and deliver to
Acquisition Company the Bill of Sale and Assignment attached hereto as Exhibit D
(the  "Prince  Agri  Bill of  Sale")  and  such  other  deeds,  bills  of  sale,
certificates  of title and other  instruments  of  assignment  or transfer  with
respect to (i) all of the assets  described on Schedule  3.2(n)(i)  (the "Prince
Agri  Bowmanstown  Transferred  Assets") and (ii) all of the assets described on
Schedule  3.2(n)(ii) (the "Prince Agri Kentucky Street  Transferred  Assets") as
Acquisition  Company may  reasonably  request and as may be necessary to vest in
Acquisition  Company title to the Prince Agri Bowmanstown  Transferred Assets or
the Prince Agri Kentucky Street Transferred  Assets as herein provided,  in each
case subject to no Lien except for Permitted Liens.


                                       7
<PAGE>

      (o) The  Company  shall cause  Prince Agri to duly  execute and deliver to
Acquisition Company the Equipment Lease Agreement.

      4. NET WORKING CAPITAL ADJUSTMENTS.

      4.1. Closing Date Adjustments.  At the Closing, the Phibro Parties and the
Palladium  Parties shall mutually  agree in writing (the  "Estimated Net Working
Capital  Agreement")  to a good faith  estimate  of the Net  Working  Capital of
Prince as of the Closing  Date (the  "Estimated  Net Working  Capital").  If the
Estimated Net Working  Capital is less than an amount to be agreed in writing by
the Phibro Parties and the Palladium  Parties prior to the Closing (the "Minimum
Working  Capital" and such writing  herein  referred to as the "Minimum  Working
Capital Letter"),  either the Company or the Prince  Stockholder shall, prior to
the Closing, make a cash payment to Prince in an amount equal to such deficiency
(the "Initial Adjustment Payment").

      4.2. Post-Closing Adjustments.

      (a) Within ninety (90) days after the Closing Date, PriceWaterhouseCoopers
LLP  or  RSM   McGladrey,   as  the  Company  shall   determine  (the  "Seller's
Accountant"),  on behalf and at the expense of the  Company,  shall  prepare and
deliver to Acquisition  Company a statement of Net Working  Capital of Prince as
of the close of business on the  business day  immediately  prior to the Closing
Date (but after giving effect to the Initial Adjustment Payment, if applicable),
prepared in accordance with generally accepted accounting  principles applied on
a consistent  basis and in any event  consistent with the methods and principles
used by the Company in its  financial  statements as of and for the fiscal years
ended  June 30,  2001,  2002 and 2003 (the  manner  in which  such  methods  and
principles  constitute  exceptions to generally accepted  accounting  principles
being set forth on Schedule 4.2(a)) (collectively, the "Prince GAAP Principles")
(the "Final Closing  Statement").  Inventories  for the Final Closing  Statement
shall be  valued on the  basis of a  physical  inventory  jointly  conducted  by
Acquisition  Company and the Phibro  Parties within ten (10) days of the Closing
Date. Seller's Accountant shall consult with Acquisition  Company's  accountants
in connection  with the  preparation  of the Final  Closing  Statement and shall
permit  Acquisition  Company's  accountants  at the earliest  practicable  date,
subject to the  execution  by  Acquisition  Company and its  accountants  of any
reasonable release or indemnification agreement required by Seller's Accountant,
to review and make copies of all work papers, schedules and calculations used in
the preparation of the Final Closing Statement.

      (b) When the Final Closing Statement is delivered to Acquisition  Company,
the Company  shall also  deliver a  certificate  (i)  certifying  that the Final
Closing Statement was prepared in accordance with the Prince GAAP Principles and
(ii) containing the Company's calculations, based on the Final Closing Statement
(the "Company's  Proposed  Calculations"),  of the Net Working Capital as of the
Closing Date (the "Closing Date Net Working  Capital").  Within thirty (30) days
after receipt of the Final Closing  Statement and the accompanying  certificate,
Acquisition  Company shall notify the Company of its agreement or  disagreement,
as the case may be (the "Acquisition Company's Notice"),  with the Final Closing
Statement and the accuracy of any of the  Company's  Proposed  Calculations.  If
Acquisition  Company  disputes any aspect of the Final Closing  Statement or the
amount of any of the Company's Proposed  Calculations,  then Acquisition Company
shall  have the right to direct its  independent  accountants,  at its  expense,
subject to the  execution  by  Acquisition  Company and its  accountants  of any
reasonable release or indemnification agreement required by Seller's Accountant,
to review the Final Closing Statement.  Acquisition  Company's accountants shall
complete their review within thirty (30) days after the date of the  Acquisition
Company's Notice. If Acquisition Company and its independent accountants,  after
such  review,   still  disagree  with  the  Company's   Proposed   Calculations,
Acquisition  Company  will  deliver  to the  Company  its  proposed  alternative
calculations (the "Acquisition  Company's


                                       8
<PAGE>

Proposed  Calculations")  prior to the end of the thirty (30) day review  period
referred to in the  immediately  preceding  sentence.  If the  Company  does not
accept the Acquisition  Company's  Proposed  Calculations,  the Company shall so
notify Acquisition Company in writing within fifteen (15) days of its receipt of
the Acquisition  Company's Proposed  Calculations (the "Company's Notice"),  and
Acquisition  Company and the Company  shall submit the matter to an  independent
nationally  recognized  accounting  firm jointly  selected by the audit  partner
representing  Acquisition Company and the audit partner representing the Company
(the "Independent Accounting Firm") to resolve the remaining disputed items (the
"Remaining  Disputed  Items")  within  thirty  (30)  days  after the date of the
Company's Notice by conducting its own review of the Final Closing Statement and
thereafter selecting either the Acquisition  Company's Proposed  Calculations of
the Remaining  Disputed  Items or the  Company's  Proposed  Calculations  of the
Remaining  Disputed  Items or an amount in between the two.  Each of the Company
and Acquisition  Company agree that they shall be bound by the  determination of
the Remaining  Disputed Items by the Independent  Accounting  Firm. The fees and
expenses of the Independent  Accounting Firm shall be paid jointly,  one-half by
the Company and one-half by Acquisition Company, provided that if the difference
between the final adjustment  payment to be made pursuant to Section 4.2(c) (the
"Final  Adjustment") and the Final  Adjustment  payment that would have resulted
from the use of the  proposed  calculations  of one of the  Parties  hereto (the
"Erroneous  Party")  is more  than 1.3 times the  difference  between  the Final
Adjustment and the Final Adjustment that would have resulted from the use of the
other Party's  proposed  calculations,  the Erroneous Party shall pay all of the
fees and expenses of the Independent Accounting Firm.

      (c) If upon the  determination  pursuant  to  Section  4.2(b) of the Final
Closing  Statement and Closing Date Net Working Capital,  the sum of the Closing
Date  Net  Working  Capital,  including  all  cash,  commercial  paper  and cash
equivalents  otherwise  included as Prince  Assets,  and the Initial  Adjustment
Payment is less than the Minimum Working Capital,  the Phibro Parties shall make
a cash payment to Acquisition Company in the amount of such deficiency.  If upon
the determination  pursuant to Section 4.2(b) of the Final Closing Statement and
Closing  Date Net  Working  Capital,  the sum of the  Closing  Date Net  Working
Capital,  including all cash,  commercial paper and cash  equivalents  otherwise
included  as Prince  Assets,  and the  Initial  Adjustment  Payment  exceeds the
Minimum Working Capital (such excess, the "Net Working Capital Excess"), and the
amount  of cash on hand or in bank  accounts  included  in Net  Working  Capital
(including any cash payment to fund any Initial Adjustment) exceeds the required
cash  portion of Net  Working  Capital  (to be agreed  upon and set forth in the
Minimum Working Capital Letter) (such excess, the "Cash Component Excess"), then
Acquisition  Company shall pay to the Company or the Prince  Stockholder (as the
case may be) an amount equal to the lesser of (i) the Net Working Capital Excess
and (ii) the Cash Component Excess.  Any payment required by this Section 4.2(c)
shall be paid by the  Parties so  obligated  within ten (10) days after the date
upon which the Final Closing  Statement and Closing Date Net Working Capital are
finally determined pursuant to Section 4.2(b).

      4.3. Backstop Indemnification

      (a) Upon the sale or other  disposition,  by any Palladium  Parties or any
Affiliate  thereof  of all or  substantially  all of the  Prince  Assets and the
Prince  Business,  whether by sale of the stock of  Acquisition  Company (or any
successor   thereto  which  is  an  affiliate  of  the  Investor   Stockholders)
(collectively, "New Prince"), merger, reorganization, other business combination
or otherwise,  in an arms' length transaction to one or more parties that do not
include  one  or  more  Palladium  Parties,  Palladium  Controlled  Entities  or
Palladium  Affiliated  Entities  (a  "Resale  Transaction"),  the  Company  will
indemnify and pay the Investor Stockholders (or their designees) $0.65 for every
dollar  of  Total   Consideration   (without  regard  to  transaction   expenses
(including,  but not limited to,  brokers' and similar fees) or taxes) less than
$21 million in the aggregate (the  "Backstop  Indemnification  Threshold").  The


                                       9
<PAGE>

maximum payment by the Company  hereunder  ("Backstop  Indemnification  Amount")
shall be $4.0 million.

      (b) (i) Payment of the Backstop Indemnification Amount shall be based upon
the total  consideration  (the  "Total  Consideration")  paid or  payable to the
Palladium  Parties and other  equityholders  of New Prince and their  respective
members,  partners,  shareholders,   employees  or  other  security  holders  or
Affiliates  thereof  (the  "Palladium  Payees")  in  connection  with the Resale
Transaction  and  determined (to the extent  applicable) in accordance  with the
terms set forth below,  including amounts placed in escrow.  Total Consideration
shall include without limitation:

                  (A) Cash paid and  securities  transferred or issued to any of
            the Palladium Payees including the cash value of any outstanding and
            vested stock  options or warrants  that are "rolled over" as part of
            the Resale Transaction and any stock options or warrants (whether or
            not vested)  that are  "cashed  out" in  connection  with the Resale
            Transaction;

                  (B) In the  case  of a sale of  stock,  all  indebtedness  for
            borrowed money of or guaranteed by New Prince;  and in the case of a
            sale of assets, all indebtedness for borrowed money of or guaranteed
            by New Prince which is assumed by the buyer;

                  (C) The Net Present Value of scheduled  payments  provided for
            in any  leases by the  purchaser  of assets  retained  by any of the
            Palladium Payees;

                  (D) The Net Present Value of the principal  amount of deferred
            installments  of Total  Consideration  with  respect to such  Resale
            Transaction, including under any promissory notes;

                  (E) The fair market value of New Prince's  assets  (other than
            cash)  retained after closing of the Resale  Transaction  (including
            accounts  receivable and real  property) by the Palladium  Payees or
            transferred after the date of this Agreement to any of the Palladium
            Payees;

                  (F) The fair market value of any interest in New Prince, or of
            the right to acquire any such interest, that is retained or received
            by any  of the  Palladium  Payees  in  connection  with  the  Resale
            Transaction,  except to the  extent  the  Palladium  Payees pay fair
            value for such interests or rights; and

                  (G) The Net  Present  Value of the  maximum  amount  of future
            payments (to the maximum amount  reasonably  expected to be paid, if
            there is no cap)  that are  contingent  on the  future  earnings  or
            operations of New Prince ("Earn-Out Payment").

            (ii) If all or any amount (such amount, the "Adjustment  Amount") of
      any Earn-Out  Payment  included in the calculation of Total  Consideration
      subsequently  is  determined  not  to  have  been  earned  or  accrued  in
      accordance  with  the  terms of the  Resale  Transaction  (an  "Adjustment
      Event"), the Backstop  Indemnification  Amount and the Total Consideration
      shall be  recalculated  to


                                       10
<PAGE>

      exclude the Net Present Value of the  Adjustment  Amount as of the closing
      of the Resale  Transaction.  The  Investor  Stockholders  shall advise the
      Company in writing  (the  "Adjustment  Notice") of any  Adjustment  Amount
      promptly  following the  determination as to whether an Adjustment  Amount
      has arisen. The Adjustment Notice shall also include  reasonably  detailed
      good faith calculations of the Backstop  Indemnification Amount, the Total
      Consideration  after  giving  effect to the  Adjustment  Event and, if the
      Adjustment  Event occurs after the date that the Backstop  Indemnification
      Amount is due, any additional  amount payable by the Company in accordance
      with this paragraph. The Investor Stockholders' good faith calculations of
      the Backstop  Indemnification  Amount and the Total  Consideration  in the
      Adjustment Notice shall be binding upon all Parties unless,  within thirty
      (30) days following receipt of the Adjustment Notice, the Company delivers
      to the Investor  Stockholders  a written  notice  disputing the Adjustment
      Notice (and one or more of the calculations  set forth therein).  Any such
      dispute of an Adjustment  Notice shall be resolved in a manner  consistent
      with the procedures  set forth in Section 4.3(i) for disputes  relating to
      the Backstop Notice.  If the Adjustment Notice is delivered to the Company
      prior to the date that the payment of the Backstop  Indemnification Amount
      is due,  the Company will pay to the  Investor  Stockholders  the Backstop
      Indemnification Amount (recalculated in accordance with the first sentence
      of this  paragraph)  when due or, if disputed and not yet resolved on such
      due date,  within ten (10) days after  final  resolution  pursuant  to the
      procedures  set  forth in  Section  4.3(i).  If the  Adjustment  Notice is
      delivered  to the Company  after the date that the payment of the Backstop
      Indemnification  Amount  is due,  the  Company  will  pay to the  Investor
      Stockholders,  within thirty (30) days following receipt of the Adjustment
      Notice  (or,  if  disputed,  within ten (10) days after  final  resolution
      pursuant to the  procedures set forth in Section  4.3(i)),  the difference
      between the Backstop Indemnification Amount that was actually paid and the
      amount  that would have been paid had the entire  Adjustment  Amount  been
      excluded from the Total Consideration as of the closing date of the Resale
      Transaction. Notwithstanding anything to the contrary contained in the two
      immediately preceding sentences,  only the disputed portion of any payment
      may be  postponed  until  the final  resolution  thereof  pursuant  to the
      procedures set forth in Section 4.3(i).

            (iii)  If the  actual  total  amount  of  payments  received  by the
      Palladium  Payees in  connection  with the  Resale  Transaction  that were
      contingent on the future  earnings or operations of New Prince exceeds the
      amount of the Earn-Out  Payment  established  for purposes of  determining
      Total Consideration pursuant to Section 4.3(b)(i) (the "Excess Earn-Out"),
      the Backstop  Indemnification  Amount and the Total Consideration shall be
      recalculated to include the Net Present Value of the Excess Earn-Out as of
      the closing of the Resale  Transaction.  The Investor  Stockholders  shall
      advise the Company in writing of any Excess Earn-Out (the "Excess Earn-Out
      Notice")  promptly  following  the  determination  of  the  amount  of any
      payments  giving rise to an Excess  Earn-Out.  The Excess  Earn-Out Notice
      shall also include  reasonably  detailed  good faith  calculations  of the
      Backstop  Indemnification  Amount,  the Total  Consideration  after giving
      effect to the  Excess  Earn-Out  and,  if the  Excess  Earn-Out  Notice is
      delivered to the Company after the date that the Backstop  Indemnification
      Amount  is  due,  any  amount  payable  by the  Investor  Stockholders  in
      accordance  with this  paragraph.


                                       11
<PAGE>

      The  Investor  Stockholders'  good  faith  calculations  of  the  Backstop
      Indemnification  Amount and the Total Consideration in the Excess Earn-Out
      Notice shall be binding upon all Parties  unless,  within thirty (30) days
      following  receipt of the Excess Earn-Out Notice,  the Company delivers to
      an Investor  Stockholder a written  notice  disputing the Excess  Earn-Out
      Notice (and one or more of the calculations  set forth therein).  Any such
      dispute  of an  Excess  Earn-Out  Notice  shall  be  resolved  in a manner
      consistent  with the  procedures  set forth in Section 4.3(i) for disputes
      relating  to  the  Backstop  Notice.  If the  Excess  Earn-Out  Notice  is
      delivered  to the  Company  prior to the  date  that  the  payment  of the
      Backstop  Indemnification  Amount  is due,  the  Company  will  pay to the
      Investor Stockholders the Backstop Indemnification Amount (recalculated in
      accordance  with the first  sentence  of this  paragraph)  when due or, if
      disputed and not yet resolved on such due date, within ten (10) days after
      final  resolution  pursuant to the procedures set forth in Section 4.3(i).
      If the Excess  Earn-Out  Notice is delivered to the Company after the date
      that the  payment  of the  Backstop  Indemnification  Amount  is due,  the
      Investor  Stockholders  will pay to the Company,  within  thirty (30) days
      following delivery of the Excess Earn-Out Notice (or, if disputed,  within
      ten (10) days after final resolution  pursuant to the procedures set forth
      in Section 4.3(i)),  the difference  between the Backstop  Indemnification
      Amount that was actually paid and the amount that would have been paid had
      the entire  Excess  Earn-Out  been  included in the  Earn-Out  Payment for
      purposes of determining the Total  Consideration as of the closing date of
      the Resale Transaction. Notwithstanding anything to the contrary contained
      in the two immediately  preceding sentences,  only the disputed portion of
      any payment may be postponed until the final  resolution  thereof pursuant
      to the procedures set forth in Section 4.3(i).

      (c) For purposes of the calculation of Total  Consideration,  the value of
any securities  received by Palladium Payees in any Resale  Transaction shall be
the value of such securities  implied in such Resale  Transaction.  The value of
any other  consideration  received by  Palladium  Payees that is included in the
calculation  of Total  Consideration  that is not either  cash,  implied in such
Resale Transaction,  or calculated based upon the Net Present Value calculations
set forth in the  definition  of Total  Consideration  shall be determined by an
independent  nationally recognized accounting firm to be jointly selected by the
audit   partner   representing   Acquisition   Company  and  the  audit  partner
representing the Company.

      (d) All cash payments and cash  distributions to the Palladium Parties out
of New  Prince's  cash flow and other excess cash will be for the account of the
Palladium  Parties and other  direct and indirect  equity  holders of New Prince
and,  except as provided  below,  will not reduce the  Backstop  Indemnification
Threshold.

            (i) The Backstop Indemnification Threshold will be adjusted downward
      $1.00 for every $1.00 of cash payments or cash  distributions  made to the
      Palladium Payees in respect of the proceeds derived directly or indirectly
      from asset sales  (other than  inventory  sold in the  ordinary  course of
      business) consummated prior to the date of the Resale Transaction.

            (ii)  The  Backstop  Indemnification   Threshold  will  be  adjusted
      downward  by $1.00 for every  $1.00  that the net  working  capital of New
      Prince at the closing of the Resale Transaction is more than 15% less than
      the average net


                                       12
<PAGE>

      working   capital   (which   amount  of  net  working   capital  shall  be
      appropriately  reduced or  increased  for any  extraordinary  transactions
      during  such  period)  of New  Prince as of the last day of each  calendar
      month during the  twelve-month  period ending on the last day of the month
      falling  six  months  immediately  prior  to the  closing  of  the  Resale
      Transaction.  All  determinations  of net working  capital and average net
      working  capital of New Prince under this clause (ii) shall be  determined
      in accordance with generally accepted  accounting  principals applied on a
      consistent basis.

            (iii) The  Backstop  Indemnification  Threshold  will be adjusted up
      $0.80 for every  $1.00 of capital  expenditures  (including  the  purchase
      price of acquisitions and any related out-of-pocket costs payable to third
      parties  (excluding  fees  paid to the  Investor  Stockholders  and  their
      Affiliates)),  made by or on behalf of New Prince per Contract  Year above
      $458,500 for the first  Contract  Year or $300,000  for any Contract  Year
      thereafter (pro rata for any partial Contract Year). By way of example, if
      in any given  Contract  Year the  Palladium  Parties  were to spend  $10.3
      million on an  acquisition  to bolster New Prince (and no other amounts in
      respect of capital  expenditure  during such Contract Year),  the Backstop
      Indemnification  Threshold  would be adjusted up by $8.0  million to $29.0
      million.

            (iv)  The  Backstop  Indemnification   Threshold  will  be  adjusted
      downward  $0.80 for  every  $1.00  spent by or on behalf of New  Prince on
      capital expenditures (including the purchase price of acquisitions and any
      related  out-of-pocket costs payable to third parties (excluding fees paid
      to the Investor  Stockholders and their  Affiliates)),  less than $458,500
      for the  first  Contract  Year or  $300,000  per  Contract  Year  for each
      Contract Year thereafter (pro rated for any partial Contract Year).

      (e)  (i) All acquisitions by New Prince (whether by merger, stock or asset
acquisition or otherwise) will adjust the Backstop Indemnification  Threshold in
accordance  with Section  4.3(d)(iii).  In connection with any merger or similar
combination  of New Prince with the business or assets of another  entity,  such
transaction  shall  constitute an acquisition by New Prince for purposes of this
Section  4.3,  if New  Prince  and/or  the  Investor  Stockholders  control  the
surviving  entity.  For  purposes of this clause (i), the term  "control"  shall
mean, with respect to any entity, the ownership directly or indirectly of 50% or
more of the voting  capital stock or voting  equity  interests of such entity or
the right to elect or appoint a majority of the seats or  positions on the board
of  directors  or similar  governing  body of such  entity.  During the Backstop
Adjustment  Period,  New  Prince  will  not have any  subsidiaries  (other  than
wholly-owned subsidiaries).

            (ii) The surviving entity in any Combination  Transaction  involving
      the  business  or assets  of  another  Palladium  Affiliated  Entity  (the
      "Additional  Affiliated  Business") will thereafter  constitute New Prince
      for  purposes  of this  Section  4.3,  and the  value  of such  Additional
      Affiliated  Business at the time of the  acquisition  will be added to the
      Backstop Indemnification Threshold in accordance with Section 4.3(d)(iii).
      The  value  of the  Additional  Affiliated  Business  at the  time  of the
      acquisition  will be  determined in  accordance  with Section  4.3(e)(iii)
      below. Acquisition Company will not transfer any assets or business of New
      Prince to a Palladium Affiliated Entity except as and in accordance with a
      Combination   Transaction   described   above   in   this   clause   (ii).


                                       13
<PAGE>

      Notwithstanding  the  foregoing,  in no  event  will  Acquisition  Company
      transfer  any assets or business  of New Prince to a Palladium  Affiliated
      Entity  unless such  transfer  includes  all or  substantially  all of the
      Prince Assets and the Prince Business.

            (iii) Except as set forth below,  in connection with any Combination
      Transaction  with an  Additional  Affiliated  Business,  New Prince  shall
      obtain  an  appraisal  of  the   Additional   Affiliated   Business   (the
      "Combination  Appraisal") prepared by an independent nationally recognized
      investment  bank  selected by New  Prince.  Within 30 days  following  the
      consummation of such Combination  Transaction,  the Investor  Stockholders
      shall deliver to the Company  written notice (a  "Combination  Notice") of
      such transaction together with true and complete copies of the Combination
      Appraisal and the documents  governing such Combination  Transaction.  The
      Combination   Notice  shall   include   reasonably   detailed  good  faith
      calculations  of  the  value  of  New  Prince,  including  the  Additional
      Affiliated  Business and the revised  Backstop  Indemnification  Threshold
      based upon the  Combination  Appraisal.  The Investor  Stockholders'  good
      faith  calculations  of the value of the  Additional  Affiliated  Business
      shall be binding upon all Parties unless, within 30 days following receipt
      of  the  Combination   Notice,   the  Company  delivers  to  the  Investor
      Stockholders a written notice  disputing the  Combination  Notice (and the
      calculations  contained therein).  Any such dispute shall be resolved in a
      manner  consistent  with the  procedures  set forth in Section  4.3(i) for
      disputes relating to the Backstop Notice.  Notwithstanding  the foregoing,
      if  an  Additional  Affiliated  Business  is  first  acquired  by  another
      Palladium Affiliated Entity from Persons that are not Palladium Affiliated
      Entities within 90 days prior to the date that such Additional  Affiliated
      Business is combined with New Prince in a Combination  Transaction and the
      Investor Stockholders elect, then upon the consummation of the Combination
      Transaction  within such 90-day period, a Combination  Appraisal shall not
      be required.

            (iv) The  Investor  Stockholders  agree  that  during  the  Backstop
      Adjustment  Period  neither the Investor  Stockholders  nor the  Palladium
      Controlled  Entities (or any group of the foregoing)  will (a) acquire any
      business that constitutes a Material Prince Competitor at the time of such
      acquisition,  unless such  acquisition  is made by New Prince  (whether by
      merger,  stock or asset  transaction  or  otherwise)  or (b) engage in any
      business that would make the operation of such business a Material  Prince
      Competitor.

            (v) During  the  Backstop  Adjustment  Period,  New Prince  will not
      engage in any  transaction or series of related  transactions  (including,
      without  limitation,  a purchase or sale of assets by New Prince) with any
      entity  that  at  any  time  constitutes  an  Affiliate  of  any  Investor
      Stockholder or any group of Investor  Stockholders  ("Palladium  Affiliate
      Transaction"),  other  than on terms  taken  as a whole  that are not less
      favorable  than those  which would have been  obtained in an  arm's-length
      transaction with a non-affiliated party (such terms are referred to herein
      as "Arm's-Length  Terms"). For the avoidance of doubt, the foregoing shall
      not apply to cash  payments  or cash  distributions  by New  Prince to the
      Investor  Stockholders or any of their managers or general partners or the
      payment  of any  management,  advisory  or  similar  fees to the  Investor


                                       14
<PAGE>

      Stockholders or any of their managers or general partners. An opinion from
      an  independent  nationally  recognized  accounting  firm  selected by New
      Prince  as  to  whether  the  terms  of  any  such   Palladium   Affiliate
      Transactions  are, taken as a whole, not less favorable than  Arm's-Length
      Terms that is delivered to the Company promptly upon receipt by New Prince
      shall be binding on the Parties  (but only as to such  transactions  being
      consummated in all material  respects in accordance  with the  assumptions
      and terms  contemplated by such opinion);  provided,  that the identity of
      such firm,  the scope of its engagement and the form and substance of such
      opinion shall be subject to prior  approval by the Company (such  approval
      not to be  unreasonably  withheld or  delayed).  At the time of the Resale
      Transaction,  the  Company may inspect the books and records of New Prince
      to investigate whether the terms of any Palladium  Affiliate  Transactions
      were conducted on  Arm's-Length  Terms, as contemplated by this paragraph.
      If any Palladium  Affiliate  Transaction was conducted on terms other than
      Arm's-Length  Terms, as determined  pursuant to this paragraph,  equitable
      adjustments  will  be  made  to  the  Backstop  Indemnification  Threshold
      pursuant to the dispute resolution procedures set forth in Section 4.3(i).

            (vi) The  Investor  Stockholders  agree  that  during  the  Backstop
      Adjustment Period the Investor  Stockholders and the Palladium  Controlled
      Entities will not hire as an employee or otherwise  engage as a consultant
      any person that was a full-time employee of New Prince on the Closing Date
      without the prior written consent of the Company; provided,  however, that
      the foregoing shall not apply to Art Henningsen.

            (vii) If the Resale Transaction is part of a series of substantially
      contemporaneous  or related  sales of New Prince and  businesses of one or
      more other  Palladium  Affiliated  Entities to the same  purchaser  (or an
      Affiliate  thereof)  (each such  concurrent  or related  sale,  a "Related
      Palladium Disposition"),  then the independent accounting firm selected by
      the Investor Stockholders (the "Investor Stockholders' Accountants") shall
      determine the Total Consideration and the Backstop  Indemnification Amount
      and  advise  the  Company  in  writing  thereof  (the  "Related  Palladium
      Disposition  Notice").  In  connection  with such  determination,  (A) the
      Investor  Stockholders'  Accountants  will  determine  (1) the fair market
      value of New Prince,  and (2) the fair market value of the businesses sold
      in the Related Palladium Dispositions,  and (B) the Investor Stockholders'
      Accountants  will use  these  valuations  to  allocate  the  consideration
      received in the Resale  Transaction and Related Palladium  Dispositions in
      accordance  with the  terms of this  Section  4.3 and  such  criteria  and
      allocation   methodologies  as  the  Investor  Stockholders'   Accountants
      reasonably  believe to be fair and equitable.  The Investor  Stockholders'
      Accountant's  good faith  determinations  of the fair market  value of New
      Prince and of such other businesses in the Related  Palladium  Disposition
      Notice shall be binding upon all Parties  unless,  within thirty (30) days
      following receipt of the Related Palladium Disposition Notice, the Company
      delivers to the  Investor  Stockholders  a written  notice  disputing  the
      Related   Palladium   Disposition   Notice   (and   one  or  more  of  the
      determinations set forth therein). Any such dispute of a Related Palladium
      Disposition  Notice  shall be  resolved  in a manner  consistent  with the
      procedures  set forth in  Section  4.3(i)  for  disputes  relating  to the
      Backstop Notice.


                                       15
<PAGE>

            (viii)  The  Company's  sole  remedy  for any  breach  of any of the
      covenants  in this clause (e) by the  Investor  Stockholders  or Palladium
      Affiliate  Entities will be the  termination of the Company's  obligations
      under this Section 4.3.

      (f) If a Resale  Transaction  closes prior to the redemption of all of the
Company's Senior Secured Notes due 2007, payment of the Backstop Indemnification
Amount will be due on the  earlier to occur of July 1, 2008 or six months  after
the redemption date. If a Resale  Transaction closes after the redemption of all
of the  Company's  Senior  Secured  Notes  due  2007,  payment  of the  Backstop
Indemnification  Amount  will be due six months  after the  closing  date of the
Resale Transaction.

      (g) The Company's obligations with respect to the Backstop Indemnification
Amount shall cease in its entirety in the event the Resale  Transaction does not
close on or before,  and will not apply to any Resale  Transaction  that  closes
after, January 1, 2009.

      (h) From and after the date the Backstop Indemnification Amount is due and
payable  hereunder  until the  Backstop  Indemnification  Amount is paid in full
(whether before or after  judgment),  interest shall accrue on the unpaid amount
of the Backstop  Indemnification Amount at the annual rate equal at all times to
rate announced by Citibank, N.A., as its "Base Rate" plus two percent (2%). Such
interest shall be payable on demand by the Investor Stockholders.

      (i) The Investor  Stockholders shall deliver to the Company written notice
(the "Backstop  Notice") of the consummation of the Resale Transaction within 30
days following  consummation  of the Resale  Transaction  together with true and
complete copies of the documents governing such Resale Transaction. The Backstop
Notice shall set forth the Investor  Stockholders' good faith calculation of the
Total  Consideration  in accordance with terms of this Section 4.3, the Backstop
Indemnification   Threshold  and  the  Backstop  Indemnification  Amount  and  a
reasonably  detailed summary of such calculation.  Within thirty (30) days after
receipt of the Backstop Notice and the accompanying  documentation,  the Company
shall notify the Investor Stockholders of its agreement or disagreement,  as the
case may be (the "Company's  Backstop Notice"),  with the Backstop Notice or any
of the calculations contained therein. If the Company disputes any aspect of the
Backstop Notice or such  calculations,  then the Company shall have the right to
direct its independent accountants,  at its expense, subject to the execution by
the Company and its  accountants  of any reasonable  release or  indemnification
agreement required by the Investor Stockholders or their accountants,  to review
the  Backstop  Notice  and  the   accompanying   documentation.   The  Company's
accountants  shall  complete their review within thirty (30) days after the date
of  the  Company's   Backstop  Notice.   If  the  Company  and  its  independent
accountants, after such review, still disagree with the Backstop Notice, and the
Investor   Stockholders  do  not  accept  the  Company's  proposed   alternative
calculations of the Total Consideration,  Backstop Indemnification  Threshold or
Backstop  Indemnification  Amount, the Investor Stockholders shall so notify the
Company in writing and the Investor  Stockholders  and the Company  shall submit
the  matter  to an  Independent  Accounting  Firm for final  determination  with
respect to the disputed items. Each of the Investor Stockholders and the Company
agree  that  they  shall  be  bound  by the  determination  of such  Independent
Accounting Firm. The fees and expenses of the Independent  Accounting Firm shall
be paid jointly,  one-half by the Company and one-half by  Acquisition  Company,
provided  that if the  difference  between the final  adjustment  payment of the
Backstop  Indemnification Amount to be made pursuant to this Section 4.3(i) (the
"Backstop  Adjustment")  and the  Backstop  Adjustment  payment  that would have
resulted from the use of the proposed  calculations of one of the Parties hereto
(the "Erroneous  Backstop Party") is more than 1.3 times the difference  between
the Backstop  Adjustment  and the Backstop  Adjustment  that would have resulted
from the use of the other Party's proposed calculations,  the Erroneous Backstop
Party shall pay all of the fees and expenses of the Independent Accounting Firm.


                                       16
<PAGE>

      (j) THE  OBLIGATIONS  OF THE COMPANY  UNDER THIS SECTION 4.3 ARE ABSOLUTE,
UNCONDITIONAL  AND IRREVOCABLE,  AND SHALL NOT BE TO ANY EXTENT OR IN ANY WAY OR
MANNER  WHATSOEVER  SATISFIED,  DISCHARGED,  DIMINISHED,  IMPAIRED OR  OTHERWISE
AFFECTED,  EXCEPT  BY THE  PERFORMANCE  BY THE  COMPANY  OF ITS  OBLIGATIONS  IN
ACCORDANCE  WITH  THE  TERMS  HEREOF,  AND  THEN  ONLY  TO THE  EXTENT  OF  SUCH
PERFORMANCE. Without limiting the generality of the foregoing provisions of this
clause (j), the  obligations  of the Company under this Section 4.3 shall not be
to  any  extent  or in any  way  or  manner  whatsoever  satisfied,  discharged,
diminished,  impaired or  otherwise  affected by any of the  following,  and the
Company hereby waives any defenses that it may otherwise have as a result of the
occurrence of any of the following:  (i) any matter  whatsoever  relating to the
assets, business, operations, prospects or condition (financial or otherwise) of
New Prince at any time prior to, on or after the date hereof (including, without
limitation,  acquisitions and dispositions of assets and product lines,  changes
in  personnel,  changes in strategic  direction and  financing);  (ii) except as
expressly  contemplated  by the terms of this Section 4.3, any term or condition
of any Resale Transaction;  (iii) any breach by Acquisition  Company, any of the
Investor  Stockholders or any of their Affiliates of any obligations under or in
connection with any of the documents,  instruments  and agreements  delivered in
connection  with this  Agreement;  (iv) the  occurrence or  commencement  of any
Reorganization;   (v)  the  absorption,  merger  or  consolidation  of,  or  the
effectuation  of  any  change  whatsoever  in  the  name,  ownership,  place  of
incorporation  of the Company,  New Prince or any of the Investor  Stockholders;
(vi) the existence or creation at any time or times on or after the date of this
Agreement of any claim, defense,  right of set-off or counterclaim of any nature
whatsoever  of the Company or any of its  Affiliates  against  New  Prince,  the
Investor Stockholders or any of their Affiliates;  or (vii) the existence of any
other  condition or circumstance or the occurrence of any other event that might
otherwise constitute a legal or equitable discharge of or defense to performance
by the Company hereunder  (whether under a surety ship theory or any other legal
or equitable theory).

      (k)  The  Company   will  not,  by  amendment   of  its   Certificate   of
Incorporation,   By-Laws   or  other   organizational   documents,   or  through
reorganization,  consolidation,  merger,  dissolution  or  sale  of  assets,  or
contractual obligation, or by any other voluntary act or deed whatsoever,  avoid
or seek to avoid or delay the performance or observance of its obligations under
this Section 4.3. The Company will at all times in good faith assist, insofar as
it is able,  in the carrying out of all the  provisions of this Section 4.3 in a
reasonable  manner and in the taking of all other actions which may be necessary
in order to protect the rights hereunder of the Investor Stockholders.

      5.  REPRESENTATIONS  AND  WARRANTIES  OF THE PHIBRO  PARTIES.  Each of the
Phibro  Parties,  jointly and  severally,  represent  and warrant to each of the
Palladium Parties as follows:

      5.1.  Organization.  The Company is a corporation duly organized,  validly
existing  and in good  standing  under the laws of the  State of New  York.  The
Prince Stockholder is a limited liability company duly formed,  validly existing
and in good  standing  under  the laws of the  State of  Delaware.  Prince  is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Illinois and has the  requisite  corporate  power and  corporate
authority to own, operate and lease its properties and assets and to conduct the
Prince  Business  as such  business  is now being  owned,  operated,  leased and
conducted.  Prince  is  duly  qualified  and  in  good  standing  as  a  foreign
corporation  or  business in all  jurisdictions  in which the  character  of the
properties owned or leased or the nature of the activities conducted by it makes
such  qualification  necessary.  Complete and correct  copies of the Articles of
Incorporation  and  By-Laws of Prince,  and all  amendments  thereto,  have been
delivered to the Palladium Parties. Each of the Phibro Parties has all requisite
corporate or limited  liability company power and corporate or limited liability
company  authority,  as the case may be, to execute and deliver the


                                       17
<PAGE>

Transaction  Documents  to which  it is a party  and to  carry  out all  actions
required of it pursuant to the terms of the Transaction Documents.

      5.2.  Authority;  Binding Effect.  Each of the Phibro Parties has obtained
all  necessary   corporate  or  limited   liability   company  (as   applicable)
authorizations  and approvals  from its  stockholders  or members,  and Board of
Directors or other governing body required (a) for the execution and delivery of
this Agreement and the other  Transaction  Documents to which it is a party, (b)
for the consummation of the transactions contemplated hereby and thereby and (c)
to perform all of its  agreements  and  obligations  hereunder and thereunder in
accordance with the terms hereof and thereof. This Agreement has been and, as of
the Closing Date,  each of the other  Transaction  Documents to which any Phibro
Party is a party will be,  duly  executed  and  delivered  by each of the Phibro
Parties and constitutes or, as of the Closing Date, will constitute,  its legal,
valid and binding  obligation,  enforceable  against it in  accordance  with its
terms,  except as may be limited by any applicable  bankruptcy,  reorganization,
insolvency or other laws  affecting  creditors'  rights  generally or by general
principles of equity.

      5.3.  Subsidiaries.  Except as set forth on  Schedule  5.3,  Prince has no
Subsidiaries,  owns or holds of record  and/or  beneficially  no shares or other
securities  of any class in the capital of any  corporations,  and owns no legal
and/or beneficial  interests in any partnerships,  limited liability  companies,
business  trusts  or joint  ventures  or in any  other  unincorporated  trade or
business enterprises.

      5.4. Non-Contravention. Except as set forth on Schedule 5.4, the execution
and  delivery  by each of the  Phibro  Parties of this  Agreement  and the other
Transaction  Documents to which any Phibro Party is a party and the consummation
of the  transactions  contemplated  hereby and  thereby  will not (a) violate or
conflict with any provision of the Articles of Incorporation, By Laws, operating
agreement or limited liability company  certificate (or other applicable charter
or  governance  document)  of any Phibro  Party,  each as  amended to date,  (b)
constitute a violation  of, or be in conflict  with,  or  constitute or create a
default  under,  or result in the  creation or  imposition  of any Lien upon any
property of any Phibro Party (including,  without limitation, the Prince Assets)
pursuant to any agreement or instrument to which any Phibro Party is a party, by
which any Phibro  Party is bound or to which its or any of the  property  of any
Phibro Party  (including,  without  limitation,  the Prince  Assets) is subject,
except any agreement to which any or all of the  Palladium  Parties are parties,
or (c)  constitute a violation  of, or be in conflict  with, or give rise to any
rescission right or claim that any transaction contemplated by this Agreement or
any of  the  Transaction  Documents  is  void  or  voidable  under  any  statute
(including,  without  limitation,  the NYBCL,  any  federal or state  fraudulent
conveyance or fraudulent  transfer law and any federal or state insolvency law),
judgment,  decree,  order,  regulation or rule of any court or  governmental  or
regulatory authority.

      5.5. Governmental  Consents;  Transferability of Licenses,  Etc. Except as
set  forth on  Schedule  5.5,  no  consent,  approval  or  authorization  of, or
registration, qualification or filing with, any governmental agency or authority
is required for the execution and delivery by any of the Phibro  Parties of this
Agreement or any of the other  Transaction  Documents to which it is a party, or
for the  consummation  by any of the Phibro  Parties of any of the  transactions
contemplated hereby or thereby.

      5.6. Financial Statements. The Phibro Parties have delivered the following
unaudited  financial  statements (the  "Financial  Statements") to the Palladium
Parties,  and there are  attached as Schedule  5.6:  (a) the  unaudited  balance
sheets of  Prince  as of June 30,  2001,  June 30,  2002 and June 30,  2003 (the
latest of such  balance  sheets  being  referred to herein as the "2003  Balance
Sheet"),  and the  related  statements  of  income  of  Prince  for  each of the
twelve-month  periods ended on such dates and (b) the unaudited balance sheet of
Prince as of October 31, 2003 (the "Interim Balance Sheet" and collectively with
the balance sheets described in subpart (a), the "Prince Balance  Sheets"),  and
the related


                                       18
<PAGE>

statements  of income of Prince for the  four-month  period  ended on such date.
Except as set forth on Schedule 5.6, each of the Financial  Statements  has been
prepared  in  accordance   with   generally   accepted   accounting   principles
consistently  applied,  subject to year-end  adjustments  consistent with recent
historical practice, each of such balance sheets fairly presents in all material
respects  the  financial  condition  of Prince as of its  respective  date;  and
subject to year-end adjustments consistent with recent historical practice, such
statements  of income  fairly  present in all  material  respects the results of
operations  for the periods  covered  thereby.  The  balance  sheets and related
statements  of income  described  in clause  (a) of the first  sentence  of this
Section 5.6 contain  the  financial  information  and results of  operations  of
Prince used to prepare  the audited  consolidated  and  consolidating  financial
statements of the Company as of the dates or periods covered thereby.

      5.7.  Absence of Certain  Changes.  Except as set forth on  Schedule  5.7:
since June 30,  2003  Prince has carried on its  business  only in the  ordinary
course, and there has not been (a) any change in the assets, liabilities, sales,
income or business of Prince or in its relationships  with suppliers,  customers
or lessors, other than changes which were in the ordinary course of business and
have not had, either in any case or in the aggregate, a Material Adverse Effect;
(b) any acquisition or disposition by Prince, or any cessation of use by Prince,
of any asset or property other than in the ordinary course of business;  (c) any
damage, destruction or loss, whether or not covered by insurance, materially and
adversely  affecting,  either in any case or in the  aggregate,  the property or
business of Prince;  (d) any issuance of any shares of any of the capital  stock
of Prince or any direct or indirect redemption, purchase or other acquisition of
any of the  capital  stock of  Prince;  (e) any  increase  in the  compensation,
pension or other  benefits  payable or to become payable by Prince to any of its
officers or employees, or any bonus payments or arrangements made to or with any
of them (other than (i) pursuant to the terms of any existing  agreement or plan
of which the Palladium  Parties have been supplied  complete and correct  copies
(or in the case of an oral agreement a reduction to writing),  or (ii) increases
in the ordinary course of Prince's business  consistent with its past practice);
(f) any  waiver  of any right of  material  value,  other  than  compromises  of
accounts  receivable  in  the  ordinary  course  of  business  and  intercompany
indebtedness;  (g) any entry by Prince  into any  transaction  other than in the
ordinary course of business;  or (h) any incurrence by Prince of any obligations
or liabilities,  whether absolute,  accrued, contingent or otherwise (including,
without  limitation,  liabilities  as  guarantor  or  otherwise  with respect to
obligations of others),  other than obligations and liabilities  incurred in the
ordinary course of business.

      5.8.  Litigation,  etc.  Except as set forth on  Schedule  5.8, no action,
suit,  proceeding or, to the knowledge of the Phibro Parties,  investigation  is
pending or, to the knowledge of any of the Phibro Parties, threatened,  relating
to or affecting the Prince Assets or Prince,  or which questions the validity of
the  Transaction  Documents or challenges any of the  transactions  contemplated
hereby or thereby.

      5.9. Conformity to Law; Permits.

      (a) Except as set forth on Schedule 5.9(a),  Prince has complied with, and
is in compliance with (i) all laws, statutes,  governmental  regulations and all
judicial or  administrative  tribunal  orders,  judgments,  writs,  injunctions,
decrees or similar  commands  applicable to Prince or any of the Prince  Assets,
(ii)  all  unwaived  terms  and  provisions  of all  contracts,  agreements  and
indentures  to which Prince is a party,  or by which Prince or any of the Prince
Assets is subject and (iii) its Articles of Incorporation  and By-Laws,  each as
amended to date.

      (b) Except as set forth on Schedule 5.9(a), Prince has not committed, been
charged  with,  or,  to  the  knowledge  of  the  Phibro  Parties,   been  under
investigation  with respect to, any uncured


                                       19
<PAGE>

violation of any provision of any federal,  state or local law or administrative
regulation in respect of Prince or any of the Prince Assets.

      (c) Prince has and maintains,  and the permits  listed on Schedule  5.9(c)
include,  all licenses,  permits and other  authorizations from all governmental
authorities  (collectively,  the "Permits") as are used in and necessary for the
conduct of the  business of Prince as presently  conducted.  Except as expressly
designated on Schedule 5.9(c), (i) Prince is in material  compliance with all of
the Permits and (ii) true and complete  copies of such  Permits have  previously
been delivered to the Palladium Parties.

      5.10. Title to Property, Real Property Estate, etc.

      (a)  Except as  disclosed  on  Schedule  5.10(a),  Prince (i) is or on the
Closing  Date will be the lawful owner of all of the Prince  Assets,  (ii) as of
the Closing will have good and  marketable  title to all Real Property (iii) has
good and  transferable  title to all of the other Prince Assets and (iv) has the
full right to sell,  convey,  transfer,  assign and deliver  the Prince  Assets,
without the need to obtain the consent or  approval of any third  party.  Prince
Agri (i) is the lawful owner of all of the Prince Agri Transferred  Assets, (ii)
has good and marketable  title to the Kentucky  Street Real Property,  (iii) has
good and transferable  title to all of the other Prince Agri Transferred  Assets
and (iv) has the full right to sell,  convey,  transfer,  assign and deliver the
Prince  Agri  Transferred  Assets,  without  the need to obtain  the  consent or
approval  of any third  party.  The  Company  is the  lawful  owner of the Crown
Trademark, and has the full right to sell, convey, transfer,  assign and deliver
all of its rights to the Crown Trademark, without the need to obtain the consent
or approval of any third party.  Except for liens described on Schedule  5.10(a)
which  secure  Indebtedness  and  which  will be  discharged  at or prior to the
Closing and except for  Permitted  Liens,  at and as of the Closing,  all of the
Prince Assets will be, and the Other  Transferred  Assets will be, entirely free
and clear of any Lien.  At and as of the Closing,  Prince will convey the Prince
Assets to Acquisition Company by deeds, bills of sale, certificates of title and
other  instruments of assignment and transfer  effective in each case to vest in
Acquisition  Company good and marketable title to all Real Property and good and
transferable  title to all of the  other  Prince  Assets,  free and clear of all
Liens (other than Permitted Liens).  At and as of the Closing,  Prince Agri will
convey the Prince Agri Transferred Assets to Acquisition Company by deeds, bills
of sale,  certificates of title and other instruments of assignment and transfer
effective in each case to vest in Acquisition  Company good and marketable title
to the Kentucky Street Real Property and good and  transferable  title to all of
the other  Prince Agri  Transferred  Assets,  free and clear of all Liens (other
than  Permitted  Liens).  At and as of the Closing,  the Company will convey the
Crown Trademark to Acquisition Company by instruments of assignment and transfer
effective  to vest in  Acquisition  Company good and  transferable  title to the
Crown Trademark,  free and clear of all Liens (other than Permitted Liens).  (b)
All of the tangible Prince Assets and the Other  Transferred  Assets used in the
conduct of the Prince Business are in good condition and repair (reasonable wear
and tear excepted).  The Prince Assets,  Other  Transferred  Assets and Excluded
Assets  described in Sections  2.2(c) and (d),  when utilized with a labor force
substantially  similar to that currently  employed by Prince or available  under
the Transition Services  Agreement,  are adequate and sufficient to carry on the
Prince Business as presently  conducted  (provided,  that the Palladium  Parties
acknowledge  and agree that,  after the  Closing,  the Company  will not provide
Acquisition  Company with the  services  and support  provided by the Company to
Prince prior to the Closing that are described on Schedule 5.17)..

      (c) Schedule  5.10(c) sets forth complete and accurate legal  descriptions
of all Real Property  (which  includes all real property owned by Prince,  other
than real property  listed as an Excluded  Asset on Schedule 2.2 (the  "Excluded
Real Property")).  Other than Permitted Liens,  there are no material defects in
any such Real  Property  as to title or  condition,  not  described  on Schedule
5.10(a) or (c).


                                       20
<PAGE>

Neither any of the Phibro  Parties nor Prince Agri has  received any notice that
either  the whole or any  portion  of the Real  Property  or the  Excluded  Real
Property is to be  condemned,  requisitioned  or  otherwise  taken by any public
authority.  To the knowledge of any of the Phibro  Parties,  there have not been
any public improvements that are reasonably likely to result in material special
assessments against or otherwise adversely affect any of the Real Property other
than general tax increases. Prince does not lease any real property or otherwise
conduct  any part of the Prince  Business  on any  property  other than the Real
Property  other  than  as  indicated  on  Schedule  5.10(c)  (the  "Leased  Real
Property").

      5.11. Environmental Matters.

      (a)  Except  as set  forth on  Schedule  5.11 (it  being  understood  that
references in this Section 5.11 to (i) Prince shall be deemed to include  Prince
Agri with respect to the Kentucky  Street  Property and (ii) Real Property shall
be deemed to include the Leased Real Property):

            (i) neither Prince nor any of the Real Property  currently  owned by
      Prince, nor to the knowledge of any of the Specified Phibro Persons any of
      the Real Property  presently leased or operated by Prince, is in violation
      or alleged  violation of any federal,  state or local  statute,  judgment,
      decree, order, law, license,  ordinance,  rule or regulation pertaining to
      environmental matters, pollution,  natural resources, or the protection of
      human health,  safety or the environment,  including,  without limitation,
      those  arising under the Resource  Conservation  and Recovery Act ("RCRA")
      the Comprehensive  Environmental Response,  Compensation and Liability Act
      of   1980  as   amended   ("CERCLA"),   the   Superfund   Amendments   and
      Reauthorization Act of 1986 ("SARA"),  the Federal Water Pollution Control
      Act, the Solid Waste  Disposal  Act, as amended,  the Federal  Clean Water
      Act, the Federal Clean Air Act, the Toxic Substances  Control Act, and any
      regulations promulgated thereto (hereinafter "Environmental Laws");

            (ii)  Prince has not  received  any  written  notice  from any third
      party,  including,   without  limitation,  any  federal,  state  or  local
      governmental authority, (A) that Prince or any predecessor in interest has
      been  identified  by the United  States  Environmental  Protection  Agency
      ("EPA") as a potentially  responsible party under CERCLA with respect to a
      site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B
      (1986);  (B) that any hazardous waste, as defined by 42  U.S.C.ss.6903(5),
      any hazardous substance as defined by 42 U.S.C. ss.9601(14), any pollutant
      or contaminant as defined by 42  U.S.C.ss.9601(33) or any toxic substance,
      oil or  hazardous  material  or other  chemical or  substance  (including,
      without   limitation,   asbestos  in  any  form,   urea   formaldehyde  or
      polychlorinated biphenyls) regulated by any Environmental Laws ("Hazardous
      Substances")  which Prince or any  predecessor  in interest has generated,
      transported  or disposed of has been found at any site at which a federal,
      state or local  agency or other third party has  conducted  or has ordered
      that  Prince  or  any   predecessor   in   interest   conduct  a  remedial
      investigation,   removal  or  other  response   action   pursuant  to  any
      Environmental Law; or (C) that Prince or any predecessor in interest is or
      shall be a named party to any claim, action,  cause of action,  complaint,
      (contingent or otherwise) legal or administrative  proceeding  arising out
      of any third party's incurrence of costs,  expenses,  losses or damages of
      any  kind  whatsoever  in  connection  with the  presence  or  release  of
      Hazardous Substances;


                                       21
<PAGE>

            (iii)  To the  knowledge  of any  Specified  Phibro  Person:  (A) no
      portion of any Real Property presently owned, leased or operated by Prince
      has been used for the  handling,  manufacturing,  processing,  storage  or
      disposal of Hazardous  Substances,  except in compliance  with  applicable
      Environmental  Laws; and no underground tank or other underground  storage
      receptacle for Hazardous Substances is located on such properties;  (B) in
      the course of any  activities  conducted by Prince or any  predecessor  in
      interest  on any Real  Property  presently  owned,  leased or  operated by
      Prince,  no Hazardous  Substances have been generated or are being used on
      such properties except in compliance with applicable  Environmental  Laws;
      (C) all Real  Property  presently  owned,  leased or operated by Prince is
      free from  contamination  of every kind,  including,  without  limitation,
      contamination  in  groundwater,  surface  water,  soil,  sediment and air,
      except  in  compliance  with  applicable   Environmental   Laws;  (D)  all
      properties  (and the  buildings and equipment  thereon)  presently  owned,
      leased or operated by Prince and the buildings  and  equipment  thereon do
      not contain any Hazardous Substances,  other than Hazardous Substances the
      presence and condition of which comply with applicable Environmental Laws;
      (E) there  have been no  releases  (as used in this  Section  5.11,  shall
      include,  without  limitation,  any past or present  releasing,  spilling,
      leaking, pumping, pouring,  emitting,  emptying,  discharging,  injecting,
      escaping,  disposing  or dumping)  or  threatened  releases  of  Hazardous
      Substances  on,  upon,  into or from any Real  Property  presently  owned,
      leased  or  operated  by  Prince  except  in  compliance  with  applicable
      Environmental  Laws;  (F) to the knowledge of each of the Phibro  Parties,
      there  have been no  releases  on,  upon,  from or into any Real  Property
      presently  owned,  leased or operated  by Prince  which,  through  soil or
      groundwater  contamination,  may  have  come to be  located  on such  real
      property;  and (G) in addition,  any Hazardous  Substances  that have been
      generated  on any Real  Property  presently  owned,  leased or operated by
      Prince   have  been   transported   offsite   only  by   carriers   having
      identification numbers issued by the EPA and have been treated or disposed
      of only by treatment or disposal  facilities  maintaining valid permits as
      required under  applicable  Environmental  Laws,  which  transporters  and
      facilities,  to the knowledge of each of the Phibro Parties, have been and
      are operating in compliance with such permits and applicable Environmental
      Laws; and

            (iv)  no  Real  Property  presently  owned  by  Prince,  nor  to the
      knowledge of any of the Specified  Phibro Persons any of the Real Property
      presently  leased or  operated  by Prince,  is  subject to any  applicable
      environmental  cleanup  responsibility  law or  environmental  restrictive
      transfer law or regulation, by virtue of the transactions set forth herein
      and contemplated hereby.

      (b)  Attached  as part of  Schedule  5.11 is a list of all  reports,  site
assessments and material written  communications  with third parties  (including
without limitation any governmental authority) in the possession of Prince or to
which it has access,  which  contain any  material  information  with respect to
potential environmental  liabilities associated with any Real Property presently
owned,   leased  or  operated  by  Prince  and  relating  to   compliance   with
Environmental  Laws  or the  environmental  condition  of  such  properties  and
adjacent properties.  The Phibro Parties have furnished to the Palladium Parties
complete  and  accurate  copies  of all of the  reports,  site  assessments  and
material  communications  with third parties  (including  without limitation any
governmental authority) listed on Schedule 5.11.


                                       22
<PAGE>

      5.12.  Insurance.  Schedule  5.12 lists all  policies of fire,  liability,
workmen's compensation, life, property and casualty and other insurance owned or
held by Prince and describes the insurance companies,  funds or underwriters and
risks covered. All such policies are in full force and effect.

      5.13. Contracts.  Schedule 5.13 sets forth a complete and accurate list of
all contracts to which Prince is a party or by or to which Prince is bound or to
which any of its assets is subject,  except (i)  contracts  terminable by Prince
upon 30 days'  notice or less  without  the  payment of any  termination  fee or
penalty,  (ii) contracts listed in any of the other  Schedules,  (iii) contracts
involving  aggregate  payments  to or by  Prince  of  less  than  $15,000,  (iv)
purchase,  sales and service  orders in the ordinary  course of business and (v)
contracts relating solely to Excluded Assets or solely to Excluded  Liabilities.
As used in this Section  5.13,  the word  "contract"  means and  includes  every
agreement  or  understanding  of any kind,  written  or oral,  which is  legally
enforceable by or against Prince,  and  specifically  includes (a) contracts and
other  agreements  with any  current  or  former  officer,  director,  employee,
consultant or  shareholder  or any  partnership,  corporation,  joint venture or
other entity in which any such person has an interest;  (b) agreements  with any
labor union or association  representing  any employee;  (c) contracts and other
agreements for the provision of services by Prince;  (d) bonds or other security
agreements  provided by any party in connection with the business of Prince; (e)
contracts  and other  agreements  for the sale of any  assets or  properties  of
Prince  other than in the  ordinary  course of  business or for the grant to any
person of any preferential  rights to purchase any of such assets or properties;
(f) joint venture agreements  relating to the assets,  properties or business of
Prince  or by or to which it or any of its  assets  or  properties  are bound or
subject;  (g)  contracts  or other  agreements  under  which  Prince  agrees  to
indemnify  any party,  to share tax  liability of any party,  or to refrain from
competing  with any party;  (h)  contracts  or other  agreements  related to the
disclosure or  non-disclosure  of information by any party; (i) any contracts or
other agreements with regard to  Indebtedness;  (j) any operating lease; (k) any
contract or  agreement  listed or  described  in Schedule  5.18 or (l) any other
contract  or other  agreement  whether  or not made in the  ordinary  course  of
business.  The Phibro Parties delivered to the Palladium  Parties true,  correct
and  complete  (x)  copies  of all such  written  contracts,  together  with all
modifications and supplements  thereto, and (y) written descriptions of all such
oral contracts, together with a description of all modifications and supplements
thereto.  To the knowledge of the Phibro Parties each of the contracts listed on
Schedule 5.13 or any of the other Schedules  hereto is in full force and effect,
Prince is not in breach of any of the provisions of any such  contract,  nor, to
the  knowledge  of any of the  Phibro  Parties,  is any other  party to any such
contract in default thereunder, nor does any event or condition exist which with
notice or the  passage of time or both would  constitute  a default  thereunder.
Prince has  performed  all  obligations  required to be  performed by it to date
under each such  contract.  Subject to obtaining any  necessary  consents by the
other party or parties to any such contract (the requirement of any such consent
being reflected on Schedule  5.13), no such contract  includes any provision the
effect  of which may be to  enlarge  or  accelerate  any  obligations  of Prince
thereunder or give  additional  rights to any other party thereto or will in any
other way be affected by, or  terminate or lapse by reason of, the  transactions
contemplated by this Agreement and the other Transaction Documents.

      5.14.  Compensation  of  Employees.  Schedule 5.14 sets forth the name and
current  annual salary and other  compensation  payable by the Phibro Parties or
any of their Affiliates  (including,  without  limitation,  Prince Agri) to each
exempt non-hourly  employee of Prince listed on Part 1 of Schedule 10.5(a) whose
current  total annual  compensation  or estimated  compensation  from the Phibro
Parties and any of their  Affiliates  (including,  but not  limited  to,  wages,
salary,  commissions,  normal bonus, profit sharing,  deferred  compensation and
other extra  compensation)  is $25,000 or more in the  aggregate,  and also sets
forth, for each such employee,  the aggregate amount of such annual compensation
received by such employee for the annual  period ended June 30, 2003.  Except as
set forth of Schedule 5.14, no Specified  Phibro Person has any actual knowledge
that any employee of Prince


                                       23
<PAGE>

intends to terminate  employment with Prince prior to the Closing Date,  intends
not to accept employment with Acquisition Company on the Closing Date or intends
to terminate  employment with Acquisition Company within 12 months following the
Closing Date.

      5.15. Employee Benefit Plans. Except as set forth on Schedule 5.15:

      (a) Prince does not now maintain or  contribute  to, nor has any liability
in respect of, any pension, profit-sharing,  deferred compensation, bonus, stock
option, share appreciation right, severance, group or individual health, dental,
medical,   life  insurance,   survivor  benefit,  or  similar  plan,  policy  or
arrangement,  whether  formal or  informal,  for the  benefit  of any  director,
officer,  consultant or employee,  whether active or terminated, of Prince. Each
of the arrangements set forth on Schedule 5.15 is hereinafter  referred to as an
"Employee   Benefit  Plan",   except  that  any  such  arrangement  which  is  a
multi-employer  plan  shall be  treated  as an  Employee  Benefit  Plan only for
purposes of Sections 5.15(d)(iv), (vi) and (viii) and 5.15(g) below.

      (b) The Phibro Parties have heretofore  delivered to the Palladium Parties
true,  correct and complete copies of each Employee Benefit Plan of Prince,  and
with respect to each such Plan (i) any associated trust, custodial, insurance or
service  agreements,  (ii) any annual report,  actuarial  report,  or disclosure
materials  (including  specifically any summary plan descriptions)  submitted to
any  governmental   agency  or  distributed  to  participants  or  beneficiaries
thereunder in the current or the immediately  preceding  calendar year and (iii)
the most  recently  received  IRS  determination  letters  and any  governmental
advisory opinions or rulings.

      (c) Each Employee  Benefit Plan is and has heretofore  been maintained and
operated  in  compliance  with the terms of such Plan and with the  requirements
prescribed  (whether as a matter of  substantive  law or as  necessary to secure
favorable tax treatment) by any and all statutes,  governmental or court orders,
or governmental rules or regulations in effect from time to time, including, but
not limited to, the Employee  Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code, and applicable to such Plan. Each Employee Benefit Plan
which  is  intended  to  qualify  under  Section  401(a)  of the  Code  has been
determined to be so qualified by the IRS and nothing has occurred since the date
of the last such determination  which has resulted or is likely to result in the
revocation of such determination.

      (d) (i) There is no pending  or, to the  knowledge  of any  Phibro  Party,
threatened legal action, proceeding or investigation,  other than routine claims
for benefits in the ordinary course,  concerning any Employee Benefit Plan or to
the knowledge of each of the Phibro  Parties any  fiduciary or service  provider
thereof;

            (ii) no liability  (contingent or otherwise) to the Pension  Benefit
      Guaranty Corporation ("PBGC") or any multi-employer plan has been incurred
      by either the  Company or any  affiliate  (as  defined in Section  5.15(h)
      below) thereof (other than insurance premiums satisfied in due course);

            (iii) no reportable  event,  or event or condition  which presents a
      material risk of termination by the PBGC, has occurred with respect to any
      Employee  Benefit Plan, or any retirement  plan of an affiliate of Prince,
      which is subject to Title IV of ERISA;

            (iv) no Employee Benefit Plan nor any party in interest with respect
      thereof,  has engaged in a  prohibited  transaction  which  could  subject
      Prince


                                       24
<PAGE>

      directly or indirectly  to liability  under Section 409 or 502(i) of ERISA
      or Section 4975 of the Code;

            (v) no  communication,  report or disclosure has been made which, at
      the time made, did not accurately  reflect the terms and operations of any
      Employee Benefit Plan as it relates to Prince;

            (vi) no Employee Benefit Plan provides  welfare benefits  subsequent
      to termination of employment to employees or their  beneficiaries  (except
      to the extent  required by applicable  state  insurance  laws and Title I,
      Part 6 of ERISA); and

            (vii) Prince has not  undertaken  to maintain  any Employee  Benefit
      Plan for any period of time and each such Plan is  terminable  at the sole
      discretion of the sponsor thereof, subject only to such constraints as may
      be imposed by applicable law.

      (e) With respect to each  Employee  Benefit Plan for which a separate fund
of assets is or is required to be maintained,  full payment has been made of all
amounts that Prince is required, under the terms of each such Plan, to have paid
as contributions to that Plan as of the end of the most recently ended plan year
of that Plan, and no accumulated  funding  deficiency (as defined in Section 302
of ERISA and  Section  412 of the Code),  whether  or not  waived,  exists  with
respect to any such Plan.

      (f)  The  execution  of  this  Agreement  and  the   consummation  of  the
transactions  contemplated  hereby  will not result in any  payment  (whether of
severance pay or otherwise)  becoming due from any Employee  Benefit Plan to any
current or former director,  officer, consultant or employee of Prince or result
in the  vesting,  acceleration  of  payment  or  increases  in the amount of any
benefit  payable  to or in  respect  of any such  current  or  former  director,
officer, consultant or employee.

      (g) No Employee Benefit Plan is a multi-employer plan.

      (h) For purposes of this Section 5.15,  "multi-employer  plan",  "party in
interest",  "current value", "accrued benefit",  "reportable event" and "benefit
liability"  have the same meaning  assigned such terms under Sections 3, 4043(c)
or 4001(a) of ERISA, and "affiliate" means any entity which under Section 414 of
the Code is treated as a single employer with Prince.

      5.16. Labor Relations.  Except as set forth on Schedule 5.16, Prince is in
compliance with all federal and state laws respecting  employment and employment
practices,   terms  and   conditions   of   employment,   wages  and  hours  and
nondiscrimination  in  employment,  and  is not  engaged  in  any  unfair  labor
practice.  There is no charge  pending or, to the knowledge of any of the Phibro
Parties,   threatened   against  Prince  alleging  unlawful   discrimination  in
employment  practices  before  any court or agency  and there is no charge of or
proceeding  with regard to any unfair  labor  practice  against  Prince  pending
before the National Labor Relations  Board.  There is no labor strike,  dispute,
slow-down or work stoppage  actually  pending or, to the knowledge of any of the
Phibro Parties,  threatened  against or involving  Prince. No one has petitioned
within  the last  five  (5)  years,  and no one is now  petitioning,  for  union
representation  of any of the  employees  of  Prince.  Except  as set  forth  of
Schedule  5.16, no grievance or arbitration  proceeding  arising out of or under
any  collective  bargaining  agreement  is pending  against  Prince  and, to the
knowledge of the Prince Parties, no claim therefor has been asserted.  Except as
fully  described on Schedule 5.16, none of the employees of Prince is covered by
any collective bargaining  agreement,  and no collective bargaining agreement is
currently  being  negotiated  by Prince.  Except as


                                       25
<PAGE>

fully  described  on  Schedule  5.16,  Prince  has  not  experienced  any  labor
dispute-related work stoppage during the last five (5) years.

      5.17.  Potential  Conflicts of  Interest.  Except as set forth on Schedule
5.17 and except for the  relationships  and  transactions  and the  provision of
property or services  contemplated by the  Transaction  Documents and except for
any of the  Palladium  Parties,  none of the  Phibro  Parties  and no current or
former officer, director or stockholder of the Phibro Parties, nor any Affiliate
of any such Person, (a) owns, directly or indirectly, any interest in (excepting
not more  than 1% stock  holdings  for  investment  purposes  in  securities  of
publicly  held and traded  companies)  or is an officer,  director,  employee or
consultant  of any Person which is a  competitor,  lessor,  lessee,  customer or
supplier of Prince; (b) owns,  directly or indirectly,  in whole or in part, any
tangible or  intangible  property  which  Prince is using or the use of which is
necessary for the business of Prince; (c) has any cause of action or other claim
whatsoever  against,  or owes any amount  to,  Prince,  except for  intercompany
indebtedness owed to Prince or Excluded Assets,  Excluded Liabilities and claims
in the ordinary course of business,  such as for accrued salary or vacation pay,
accrued   benefits  under  Employee   Benefit  Plans  and  similar  matters  and
agreements;  or (d) is a party to any contract  (as defined in Section  5.13) or
has received any loan, advance or other investment from Prince that has not been
repaid or otherwise satisfied in full prior to the Closing.  Except as set forth
on Schedule  5.17,  none of the Prince Assets are located on real property owned
by or leased from any current or former  officer,  director or  stockholder  (or
Affiliate thereof) of any Phibro Party.

      5.18. Trademarks, Patents, etc. Schedule 5.18 hereto sets forth a complete
and accurate list of (a) all patents,  trademarks,  trade names, Internet domain
names and copyrights either registered in the name of Prince or for which Prince
has filed  any  registration  application,  and all  licenses  (as  licensee  or
licensor) and other agreements relating thereto,  and (b) all written agreements
relating to other  Intellectual  Property which Prince is licensed or authorized
by others to use or which  Prince has licensed or  authorized  for use by others
except  with  respect  to  non-exclusive  licensed  software  that is  generally
available.  Except to the extent set forth in Schedule 5.18,  Prince owns or has
the sole and exclusive right to use the Intellectual Property listed on Schedule
5.18,  and has the  right  to use all  Intellectual  Property  used by it in the
ordinary course of business as presently conducted,  and the consummation of the
transactions  contemplated  hereby will not alter or impair any such  right.  No
claims are pending or, to the knowledge of the Phibro  Parties,  threatened,  by
any Person regarding the use of any such Intellectual  Property,  or challenging
or questioning the validity or effectiveness  of any license or agreement,  and,
to the  knowledge of the Phibro  Parties,  there is no basis for any such claim.
The use by  Prince  of such  Intellectual  Property  in the  ordinary  course of
business does not infringe on the rights of any Person.

      5.19.  Suppliers and  Customers.  Schedule 5.19 sets forth the twenty (20)
largest  suppliers  and twenty (20)  largest  customers of Prince as of June 30,
2003,  based on the dollar  amount of  purchases  and sales for the fiscal  year
ended  June 30,  2003.  Except as set forth on  Schedule  5.19,  no such  listed
supplier or customer has  cancelled or otherwise  terminated,  or  threatened to
cancel or otherwise to terminate, its relationship with Prince or has during the
last twelve (12) months decreased materially, or threatened to decrease or limit
materially,  its services,  supplies or materials for use by Prince or its usage
or purchase of the services or products of Prince, except for changes related to
customers' businesses which are cyclical, based on substantially normal purchase
or sales cycles, seasonal or based on general economic conditions.  No Specified
Phibro  Person has any knowledge  that any such supplier or customer  intends to
cancel or  otherwise  substantially  modify its  relationship  with Prince or to
decrease  materially or limit its services,  supplies or materials to Prince, or
its usage or purchase of the services or products of Prince,  or to increase the
cost of any service or materials supplied to Prince.


                                       26
<PAGE>

      5.20.  Accounts  Receivable.  Except as set forth on  Schedule  5.20,  all
accounts and notes  receivable  reflected on the Interim Balance Sheet,  and all
accounts and notes  receivable  arising  subsequent  to the date of such Interim
Balance  Sheet,  have arisen in the ordinary  course of business  and  represent
valid obligations owing to Prince.

      5.21.  Inventories.  The  inventories  of Prince  consist in all  material
respects of, and the Inventories (including, without limitation, the inventories
in transit at the time of the Closing) to be purchased  by  Acquisition  Company
hereunder  will  consist in all material  respects  of,  material and goods of a
quality and quantity  which are useable or saleable in the normal  course of the
business  carried on by Prince as of the Closing.  The  Inventories are adequate
for present  needs,  and are in usable and  saleable  condition  in the ordinary
course of business,  subject only to appropriate reserves for obsolescence to be
reflected on the Final  Closing  Statement and  determined  in  accordance  with
Prince GAAP Principles.

      5.22. Equipment.  Schedule 2.1(b) sets forth a list, complete and accurate
as of the date  indicated  therein of all of the Equipment  other than (a) items
having a book or  market  value  individually  of less  than  $5,000,  (b) items
acquired by Prince in the ordinary course of business from such date through the
Closing Date, and (c) items disposed of in the ordinary  course of business from
the date thereof  through the Closing  Date.  Prince will identify in writing to
Acquisition Company,  prior to the Closing, each item so acquired or disposed of
and which has a value of $5,000 or more. The Personal  Property Leases listed on
Schedule  2.1(e)  include all leases by Prince of any item of personal  property
used in the Prince Business.  The Equipment,  and all personal  property held by
Prince under the Personal  Property Leases,  which are utilized by Prince in the
ordinary  course of business  are in  operating  condition  and repair for their
present  use in the  Prince  Business  (reasonable  wear and tear  excepted  and
subject to customary maintenance).

      5.23.  Taxes.  Except as set forth on  Schedule  5.23,  all of the income,
sales,  use,  employment  and any other Tax returns  and reports  required to be
filed by the  Company or Prince  relating  or with  respect to Prince  have been
filed with the  appropriate  government  agencies.  No waiver of any  statute of
limitations  relating to Taxes has been  executed or given by or with respect to
Prince  to  any  taxing  authority.  All  Taxes,  assessments,  fees  and  other
governmental  charges upon Prince or any of its  properties,  assets,  revenues,
income and  franchises  which are due and  payable by or with  respect to Prince
with respect to any period (or portion  thereof) ending on or before the Closing
Date have been paid,  other  than those  currently  payable  without  penalty or
interest which will be accurately reflected on the Final Closing Statement.  All
taxes  required to be withheld or paid in  connection  with  amounts paid to any
employee of Prince have been  withheld and paid.  To the knowledge of the Phibro
Parties,  no federal Tax return of Prince is  currently  under audit by the IRS,
and no other Tax return of Prince is  currently  under audit by any other taxing
authority.  Neither the IRS nor any other taxing  authority is now asserting or,
to the knowledge of the Phibro Parties, threatening to assert against Prince any
deficiency  or claim for  additional  Taxes or interest  thereon or penalties in
connection  therewith  or any  adjustment  that would have an adverse  effect on
Prince.

      5.24.  Indebtedness.  Except for Indebtedness  described on Schedule 5.24,
Prince has no  Indebtedness  outstanding at the date hereof.  As of the Closing,
Prince will have no Indebtedness  outstanding  (other than indebtedness  arising
under the Solomon Grind Non-Compete Agreement).

      5.25.  Change of Control and 2003 Bonus  Obligations.  Schedule  5.25 sets
forth in all material respects all of the Change of Control Obligations and 2003
Bonus Obligations including the name of the Person entitled thereto.

                                       27
<PAGE>

      5.26. No Prince Material Adverse Change. No Prince Material Adverse Change
has occurred.

      5.27.  Solvency;  Surplus.  Each of the Phibro Parties is, and immediately
before  and after  giving  effect to each of the  transactions  contemplated  by
Sections 1 and 2 hereof will be,  Solvent.  Immediately  before and after giving
effect to the transactions contemplated by Sections 1 and 2 (including,  without
limitation,  the payment of the Stock  Purchase Price and the  cancellation  and
retirement of the Purchase Stock and the Exchange Stock),  the Company will have
sufficient  "surplus" (as such term is determined under the NYBCL) to consummate
such transactions in compliance with the NYBCL.

      5.28. Note Offering;  Consent  Solicitation;  Note  Repurchases and Credit
Facility Financing.

      (a) The Note Offering was conducted and  consummated by the Phibro Parties
in  compliance  with all  applicable  foreign,  federal,  provincial  and  state
securities  laws,  and in accordance  with the Offering  Circular.  The Offering
Circular  did not contain  any untrue  statement  of a material  fact or omit to
state a material fact necessary to make the statements made therein, in light of
the  circumstances  in which any such statements were made, not misleading.  The
Company has delivered to the Palladium  Parties' counsel, a complete and correct
copy of the Indenture  governing the Note Offering  (including  all exhibits and
schedules thereto), all amendments, waivers and side letters relating thereto or
affecting the terms thereof and each document or instrument  delivered  pursuant
thereto or in connection therewith.

      (b)  The  Consent  Solicitation  was  conducted  in  compliance  with  all
applicable federal and state securities laws, and in accordance with the Consent
Solicitation  Statement.  The Company received consents to the matters set forth
in the  Consent  Solicitation  Statement  from the  holders of a majority of the
principal  amount of the outstanding  Existing Notes,  and the amendments to the
indenture  governing  the Existing  Notes set forth in the Consent  Solicitation
Statement are effective.  The Consent Solicitation Statement did not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the statements made therein,  in light of the circumstances in which any
such statements were made, not misleading.

      (c) There are no  documents,  instruments  or agreements  (or  amendments,
waivers  or side  letters  relating  thereto  or  affecting  the terms  thereof)
governing the Company's  purchase of approximately $52 million of Existing Notes
in October 2003, other than ordinary course trade confirmations.

      (d) The  Company  has  delivered  to the  Palladium  Parties'  counsel,  a
complete  and correct  copy of the Loan and  Security  Agreement  governing  the
Credit Facility Financing  (including all exhibits and schedules  thereto),  all
amendments,  waivers and side letters  relating  thereto or affecting  the terms
thereof  and each  document  or  instrument  delivered  pursuant  thereto  or in
connection therewith.

      5.29.  Broker.  Except as set forth on Schedule  5.29,  none of the Phibro
Parties has retained,  utilized or been represented by any broker, agent, finder
or  intermediary  in connection  with the  negotiation  or  consummation  of the
transactions contemplated by this Agreement.

      5.30.   Disclosure.   To  the   knowledge  of  the  Phibro   Parties,   no
representation  or warranty by any of the Phibro Parties in this Agreement or in
any Schedule hereto  delivered to any of the Palladium  Parties  pursuant hereto
contains any untrue  statement of a material fact or omits or will omit to


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<PAGE>

state a material  fact  required to be stated  therein or  necessary to make the
statements  contained  therein,  in light of the circumstances in which any such
statements were made, not misleading.

      6.  REPRESENTATIONS  AND WARRANTIES OF THE PALLADIUM PARTIES.  Each of the
Palladium Parties, jointly and severally, represents and warrants to each of the
Phibro Parties as follows:

      6.1. Organization/Formation;  Authority. Each of the Investor Stockholders
is a limited  partnership  duly formed,  validly  existing and in good  standing
under the laws of the State of Delaware.  Acquisition  Company is a  corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
State of Delaware.  Each of the Palladium Parties has all requisite corporate or
limited partnership power and corporate or limited partnership authority, as the
case may be, to execute and deliver the  Transaction  Documents to which it is a
party and to carry out all  actions  required of it pursuant to the terms of the
Transaction Documents.

      6.2. Approval;  Binding Effect. Each of the Palladium Parties has obtained
all necessary  corporate or limited  partnership (as applicable)  authorizations
and approvals from its stockholders or partners, and Board of Directors or other
governing body required (a) for the execution and delivery of this Agreement and
the other Transaction Documents to which it is a party, (b) for the consummation
of the  transactions  contemplated  hereby and thereby and (c) to perform all of
its agreements and  obligations  hereunder and thereunder in accordance with the
terms hereof and thereof.  This  Agreement has been and, as of the Closing Date,
each of the other Transaction  Documents to which any Palladium Party is a party
will be,  duly  executed  and  delivered  by each of the  Palladium  Parties and
constitutes or, as of the Closing Date, will  constitute,  its legal,  valid and
binding obligation,  enforceable against it in accordance with its terms, except
as  enforceability   thereof  may  be  limited  by  any  applicable  bankruptcy,
reorganization,  insolvency or other laws affecting  creditors' rights generally
or by general principles of equity.

      6.3.  Non-Contravention.  The  execution  and  delivery  by  each  of  the
Palladium Parties of this Agreement and the other Transaction Documents to which
any  Palladium  Party  is a  party  and  the  consummation  of the  transactions
contemplated  hereby  and  thereby  will not (a)  violate or  conflict  with any
provision of the Certificate of Incorporation, By Laws, partnership agreement or
certificate of limited  partnership (or other  applicable  charter or governance
document) of any Palladium  Party,  each as amended to date, or (b) constitute a
violation of, or be in conflict  with, or constitute or create a default  under,
or result in the  creation or  imposition  of any Lien upon any  property of any
Palladium  Party  pursuant  to (i) any  agreement  or  instrument  to which  any
Palladium  Party is a party,  by which any Palladium  Party is bound or to which
its or any of property of any Palladium  Party is subject,  or (ii) any statute,
judgment,  decree,  order,  regulation or rule of any court or  governmental  or
regulatory authority.

      6.4. Title to Shares;  Liens; etc. As of the date of this Agreement,  each
of  the  Investor  Stockholders  has,  and  will  at  all  times  prior  to  the
consummation  of the Closing have,  sole record and beneficial  ownership of the
Purchase Stock of such Investor Stockholder as set forth on Schedule 1.1 hereto,
free  and  clear of any  Liens.  As of the  date of this  Agreement  each of the
Investor  Stockholders  has,  and will at all times prior to the transfer of the
Exchange Stock to Acquisition Company have, sole record and beneficial ownership
of the Exchange Stock of such Investor  Stockholder as set forth on Schedule 1.1
hereto,  free and clear of any Liens. Upon the transfer of the Exchange Stock to
Acquisition Company from the Investor  Stockholders,  and as of the consummation
of the  Closing,  Acquisition  Company  will have  sole  record  and  beneficial
ownership of the Exchange Stock, free and clear of any Liens.


                                       29
<PAGE>

      6.5. Governmental  Consents. No consent,  approval or authorization of, or
registration, qualification or filing with, any governmental agency or authority
is required for the execution  and delivery by each of the Palladium  Parties of
this Agreement and the other Transaction Documents to which it is a party or for
the consummation by it of the transactions contemplated hereby or thereby.

      6.6.  Broker.  The Palladium  Parties have not retained,  utilized or been
represented by any broker,  agent,  finder or other  intermediary  in connection
with the negotiation or consummation  of the  transactions  contemplated by this
Agreement.

      7.  CONDUCT OF  BUSINESS  BY PRINCE  PENDING  CLOSING.  Each of the Phibro
Parties,  jointly and severally,  covenants and agrees that,  from and after the
date of this Agreement and until the Closing,  except as otherwise  specifically
consented to or approved by the Palladium Parties in writing:

      7.1.  Full  Access.  Subject  to the  confidentiality  obligations  of the
Palladium  Parties set forth in Section  10.1 hereof and subject to the terms of
the Confidentiality  Agreement, the Phibro Parties shall (a) allow the Palladium
Parties   and  their   potential   financing   sources   and  their   respective
representatives,  counsel,  accounting firms, financial advisors and consultants
to have full access during normal  business  hours and in such a manner as would
not be disruptive to the business or operations of Prince or the Company, to the
offices,  properties and  facilities of Prince,  the books,  records,  financial
statements, tax returns and other relevant information pertaining to Prince, and
the officers, directors, employees, attorneys,  accountants,  financial advisors
and key  customers  and  suppliers  of Prince and (b)  furnish to the  Palladium
Parties such  additional  financial  and  operating  data and other  information
regarding the operations, assets, liabilities, financial condition and prospects
of Prince as the Palladium Parties may from time to time reasonably  request. At
the Closing, the Confidentiality  Agreement shall automatically terminate and be
of no further force or effect.

      7.2. Carry On In Regular Course. Prince will use its reasonable commercial
efforts to maintain the Prince Assets in operating condition and repair, subject
to wear and tear and customary maintenance, and carry on its business diligently
and substantially in the same manner as heretofore and not make or institute any
unusual or novel methods of  manufacture,  purchase,  sale,  lease,  management,
accounting or operation.

      7.3. No General Increases. Except as may be required by or pursuant to the
terms of any existing agreement or plan of which the Palladium Parties have been
supplied  complete  and  correct  copies (or in the case of an oral  agreement a
reduction to writing), and normal merit increases granted and commissions earned
in the ordinary course of business  consistent  with past practice.  Prince will
not grant any general or uniform  increase in the rates of pay of its employees,
or grant any  general or uniform  increase  in the  benefits  under any bonus or
pension  plan or  other  contract  or  commitment  to,  for or  with  any of its
employees;  and it will not  increase  the  compensation  payable  or to  become
payable to officers,  key salaried  employees or agents,  or increase any bonus,
insurance, pension or other benefit plan, payment or arrangement made to, for or
with any such officers, key salaried employees or agents.

      7.4. No Property  Dividends,  Issuances,  Repurchases,  etc. Except as set
forth on Schedule 5.7, Prince shall not declare or pay any dividends (other than
in cash,  intercompany  loans,  shares of stock or other securities) on, or make
any other distribution (other than in cash,  intercompany loans, shares of stock
or other  securities) in respect of, any shares of its capital stock,  or issue,
purchase,  redeem or acquire for value any shares of its  capital  stock in each
case,  other  than  for  cash,  intercompany  loans,  shares  of  stock or other
securities.  The transfer of the Quincy  Office  Building  shall be permitted as


                                       30
<PAGE>

contemplated  by this Agreement.  Prior to the Closing,  neither the Company nor
the Prince Stockholder shall be restricted from taking cash from Prince.

      7.5. Contracts and Commitments. Prince will not enter into any contract or
commitment or engage in any  transaction not in the usual and ordinary course of
business or not  consistent  with the  customary  business  practices of Prince.
Without limiting the generality of the foregoing,  in no event will Prince enter
into  any  contract  or  commitment  or  engage  in  any  transaction  requiring
expenditures  by Prince  in  excess of  $100,000  in the  aggregate  except  for
repairs, replacements or maintenance contemplated by Section 7.2.

      7.6. Purchase and Sale of Capital Assets. Prince will not purchase or sell
or  otherwise  dispose of any  capital  asset  with a market  value in excess of
$5,000, or of capital assets of market value aggregating in excess of $25,000 or
other than in the ordinary course of business (except the transfer of the Quincy
Office Building contemplated by this Agreement).

      7.7.  Insurance.  Prince  will  maintain  its current  insurance  policies
(including,  without  limitation,  the  insurance  described on Schedule 5.12 or
replacements therefor upon expiration thereof.

      7.8.  Preservation  of  Organization.  Prince  will  use its  commercially
reasonable efforts to preserve its business organization intact, and to preserve
the present  relationships of Prince's suppliers and customers and others having
business relations with Prince, but shall not be required to change its business
practices or incur any  material  expense  other than in the ordinary  course of
business.  Without the prior written  consent of Acquisition  Company (not to be
unreasonably  withheld  or  delayed),  Prince  will  not hire  any  employee  or
terminate the employment of any of its current employees (other than for cause).

      7.9.  No  Default.  Prince  will not do any act or omit to do any act,  or
permit any act or  omission  to act,  which will cause a material  breach of any
contract, commitment or obligation of Prince.

      7.10.  Compliance with Laws.  Prince will use its commercially  reasonable
efforts to comply with all laws,  regulations and orders applicable with respect
to Prince or the Prince Assets or as may be required for the valid and effective
transfer of the Prince Assets.

      7.11.  Advice of  Change.  The Phibro  Parties  will  promptly  advise the
Palladium Parties in writing of any Prince Material Adverse Change.

      7.12. No Shopping. Prior to December 31, 2003, the Phibro Parties will not
negotiate  for,  solicit or enter into any agreement with respect to the sale or
transfer of any of the capital stock of Prince,  the sale of the Prince Business
or the sale of all or any substantial portion of the Prince Assets or any merger
or other  business  combination  of  Prince  to or with any  Person  other  than
Acquisition Company.

      7.13.  Consents of Third Parties.  Each of the Parties hereto will use its
commercially  reasonable  efforts,  to secure,  before  the  Closing  Date,  the
consent, in form and substance reasonably  satisfactory to the Palladium Parties
and their counsel, to the consummation of the transactions  contemplated by this
Agreement by each party to any  contract,  commitment  or  obligation of Prince,
under which such  transactions  would  constitute  a default,  would  accelerate
obligations  of  Prince  or would  permit  cancellation  of any  such  contract;
provided, however, that no Party shall be required to incur any material expense
that would not  reasonably be expected to be incurred by such Party in obtaining
such consent.


                                       31
<PAGE>

      8.  CONDITIONS  PRECEDENT  TO  THE  PALLADIUM  PARTIES'  OBLIGATIONS.  The
obligation of the Palladium  Parties to consummate  the Closing shall be subject
to the  satisfaction,  at or  prior  to the  Closing,  of each of the  following
conditions  (to  the  extent  noncompliance  is not  waived  in  writing  by the
Palladium Parties):

      8.1.  Representations and Warranties True At Closing.  The representations
and  warranties  made by each  of the  Phibro  Parties  in or  pursuant  to this
Agreement and the other  Transaction  Documents shall be true and correct in all
material  respects at and as of the Closing  Date with the same effect as though
such  representations  and  warranties  had been  made or given at and as of the
Closing Date; provided,  however, that each such representation or warranty that
contains a Materiality  Qualifier in the text of such representation or warranty
shall be true and correct in all respects.

      8.2.  Compliance  With  Agreement.  Each of the Phibro  Parties shall have
performed  and  complied  in all  material  respects  with  all of  their or its
obligations  under this  Agreement  and the other  Transaction  Documents  to be
performed or complied with by them or it on or prior to the Closing.

      8.3. No Prince Material Adverse Change.  There shall not have occurred any
Prince Material Adverse Change.

      8.4. Certificates of Phibro Parties. Each of the Phibro Parties shall have
delivered  to the  Palladium  Parties in writing,  at and as of the  Closing,  a
certificate  duly executed by each of the Phibro Parties,  in form and substance
reasonably  satisfactory to the Palladium Parties and their counsel,  certifying
that the conditions in each of Sections 8.1-8.3 have been satisfied.

      8.5. Opinion of Counsel.  Golenbock,  Eiseman,  Assor,  Bell & Peskoe LLP,
counsel to the Phibro Parties,  shall have delivered to the Palladium  Parties a
written opinion,  addressed to the Palladium Parties and dated the Closing Date,
substantially in the form attached hereto as Exhibit E.

      8.6.  Solvency.  The  Palladium  Parties  shall have  received a copy of a
solvency opinion with respect to the solvency of the Company from Houlihan Lokey
Howard & Zukin  addressed to the Board of  Directors of the Company,  reasonably
satisfactory  in  form  and  substance  to  the  Palladium  Parties,  indicating
compliance with the applicable  solvency  criteria under the federal  bankruptcy
code and state fraudulent  conveyance/transfer  laws as set forth in paragraph 2
of the Houlihan,  Lokey, Howard and Zukin engagement letter and as modified with
the consent of the Palladium  Parties or their counsel,  before and after giving
effect to the Closing.

      8.7.  Approvals.   All  corporate  approvals  of  the  Phibro  Parties  in
connection  with  the  transactions  contemplated  by this  Agreement  shall  be
reasonably satisfactory in form and substance to the Palladium Parties and their
counsel.

      8.8. No Litigation.  No restraining  order or injunction shall prevent the
transactions  contemplated  by this Agreement and no action,  suit or proceeding
shall be pending or threatened before any court or administrative  body in which
it will be or is sought to  restrain  or  prohibit  or obtain  damages  or other
relief in connection with this Agreement or the other  Transaction  Documents or
the consummation of the transactions contemplated hereby or thereby.

      8.9.  Title  Insurance.  Acquisition  Company  shall have  received  title
insurance  policies in customary  forms with respect to the Real Property on the
Closing  Date  issued  by a  title  insurer  reasonably  acceptable  to,  and in
customary form and amount reasonably acceptable to, the Palladium Parties naming
Acquisition Company as the insured.


                                       32
<PAGE>

      8.10.  Consents.  The Phibro  Parties  will have  obtained  the consent or
approval, in reasonable form and substance,  to the Closing by (a) each required
regulatory and  governmental  body which consent or approval  cannot be obtained
post-Closing  without  material  penalty,  and (b) each  party to any  contract,
commitment or other obligation of Prince set forth on Schedule 8.10.

      8.11.  Union  Contract.   Acquisition  Company  shall  have  entered  into
arrangements  reasonably  satisfactory to the Palladium  Parties with respect to
the union  contract  covering  the union  employees  at Prince's  facilities  in
Quincy,  Illinois,  it being  understood that the principal terms of the current
union  contract shall be deemed to be reasonably  satisfactory  to the Palladium
Parties  if such  terms  can be  provided  at a cost  reasonably  comparable  to
Prince's current cost.

      8.12. Charter Amendment. The Amendment to the Certificate of Incorporation
of the Company,  in the form attached  hereto as Exhibit F, shall have been duly
filed and accepted for filing with Secretary of State of New York.

      8.13. Escrow Agreement.  The Escrow Agreement, in the form attached hereto
as  Exhibit G (the  "Escrow  Agreement"),  shall  have been  duly  executed  and
delivered  by J.P.  Morgan  Trust  Company,  National  Association  (the "Escrow
Agent") and each of the Phibro Parties and shall be in full force and effect.

      8.14.  Quincy Office  Building  Lease.  The Lease  Agreement,  in the form
attached hereto as Exhibit H (the "Quincy Lease"), shall have been duly executed
and delivered by Prince Agri and shall be in full force and effect.

      8.15. Real Estate Option Agreement.  The Real Estate Option Agreement,  in
the form  attached  hereto as Exhibit I (the "Real Estate  Option"),  shall have
been  duly  executed  and  delivered  by Prince  and shall be in full  force and
effect.

      8.16. Transition Services Agreement. The Transition Services Agreement, in
the form attached  hereto as Exhibit J (the  "Transition  Services  Agreement"),
shall have been duly executed and  delivered by the Company (and its  Affiliates
that are parties thereto) and shall be in full force and effect.

      8.17. MnO Supply  Agreement.  The Supply  Agreement,  in the form attached
hereto as Exhibit K (the "MnO Supply Agreement"),  shall have been duly executed
and delivered by Prince Agri and shall be in full force and effect.

      8.18.  Red Iron  Oxide  Supply  Agreement.  The  Supply  and  Distribution
Agreement,  in the form attached hereto as Exhibit L (the "Red Iron Oxide Supply
Agreement"),  shall have been duly  executed  and  delivered  by Prince Agri and
shall be in full force and effect.

      8.19.  Bowmanstown  Blending  Services  Agreement.  The Blending  Services
Agreement,  in the form attached hereto as Exhibit M (the "Bowmanstown  Blending
Services Agreement"), shall have been duly executed and delivered by Prince Agri
and shall be in full force and effect.

      8.20. [Intentionally Omitted]

      8.21.   Environmental   Indemnification   Agreement.   The   Environmental
Indemnification  Agreement,  in the  form  attached  hereto  as  Exhibit  O (the
"Environmental  Indemnification  Agreement"),  shall have been duly executed and
delivered by the Phibro Parties and shall be in full force and effect.


                                       33
<PAGE>

      8.22.  Employment  Agreements.  Each of the individuals listed on Schedule
8.22 shall have executed and delivered to Acquisition Company written employment
and non-competition  agreements,  each in a form reasonably  satisfactory to the
Palladium  Parties  (collectively,  the "New Employment  Agreements"),  such New
Employment Agreements shall be in full force and effect.

      8.23.  Indebtedness.  Prince shall have no outstanding  Indebtedness as of
the  Closing  Date and shall have been  released  from all  collateral  or other
obligations in respect of Indebtedness of the Company or its Affiliates.

      8.24.  Intercompany  Accounts.  All intercompany accounts and indebtedness
owed by Prince to the Company, the Prince Stockholder and their Affiliates shall
have been  cancelled,  contributed  to the capital of Prince or otherwise  fully
extinguished  or  settled  on terms  reasonably  satisfactory  to the  Palladium
Parties.

      8.25.  Closing  Calculation  Certificate.  The Phibro  Parties  shall have
prepared and  delivered to the  Palladium  Parties a  certificate  (the "Closing
Calculation  Certificate")  certifying as to (a) the amount of  Indebtedness  of
Prince  outstanding  on the Closing Date, and specifying the amount owed to each
creditor  listed  thereon,  (b) the  aggregate  amount of Prince's cash and cash
equivalents  on  hand or in bank  accounts  on the  Closing  Date  prior  to the
consummation of the Closing and (c) the aggregate amount of Prince's outstanding
and unpaid checks on the Closing Date prior to the  consummation of the Closing.
The Phibro  Parties  shall have caused the holders of such  Indebtedness  (other
than the holders of the Indebtedness under the Solomon Non-Compete Agreement) to
deliver  lien  discharges,  in form  reasonably  satisfactory  to the  Palladium
Parties, with respect to such Indebtedness.

      8.26.  Cash.  Prince  shall have at least the amount of cash on hand or in
bank  accounts  included  in the  calculation  of Net  Working  Capital  that is
required by the Minimum Working Capital Letter.

      8.27.  Intercompany  Settlement Amount. In addition to the cash on hand or
in bank  accounts  described  in  Section  8.26,  Prince  shall  have (and shall
transfer to Acquisition Company as part of the Prince Assets) $3,958,400 in cash
on hand or in bank accounts representing the Intercompany Settlement Amount.

      8.28.  Closing  Payment.  The  Company  shall have paid the Closing Fee to
Palladium Capital Management, L.L.C.

      8.29.  Kentucky Street Deed. The Kentucky Street Deed shall have been duly
executed and delivered by Prince Agri and shall be in full force and effect.

      8.30.  Prince  Agri Bill of Sale.  The Prince Agri Bill of Sale shall have
been duly  executed and  delivered by Prince Agri and shall be in full force and
effect.

      8.31. Equipment Lease Agreement.  The Equipment Lease Agreement shall have
been duly  executed and  delivered by Prince Agri and shall be in full force and
effect.

      8.32. [Intentionally Omitted]

      8.33. Confirmation and Release. The Confirmation and Release Agreement, in
the form attached hereto as Exhibit P (the  "Confirmation  and Release"),  shall
have been duly  executed and delivered by the Company and shall be in full force
and effect.


                                       34
<PAGE>

      8.34.  Minimum Working Capital Letter.  The Minimum Working Capital Letter
shall have been  executed and  delivered  by the Phibro  Parties and shall be in
full force and effect.

      8.35. Chief Financial Officer.  Acquisition  Company shall have identified
and,  subject to the  consummation  of the Closing,  employed a Chief  Financial
Officer  satisfactory  to  Acquisition  Company  pursuant to an  employment  and
non-compete agreement satisfactory to Acquisition Company.

      8.36. Payment of Expenses. To the extent invoiced,  the Company shall have
paid or reimbursed the Palladium Parties for all their  out-of-pocket  costs and
expenses  required to be paid or  reimbursed  by the  Company  under the Expense
Reimbursement Agreement.

      8.37.   Proceedings  and  Documents   Satisfactory.   All  proceedings  in
connection  with  the  transactions  contemplated  by  this  Agreement  and  all
certificates and documents delivered to the Palladium Parties in connection with
the  transactions  contemplated  by this Agreement  shall be satisfactory in all
reasonable  respects  to the  Palladium  Parties  and  their  counsel,  and  the
Palladium Parties shall have received the originals or certified or other copies
of all such  records and  documents  as the  Palladium  Parties  may  reasonably
request.

      9. CONDITIONS PRECEDENT TO THE PHIBRO PARTIES' OBLIGATIONS. The obligation
of the  Phibro  Parties  to  consummate  the  Closing  shall be  subject  to the
satisfaction,  at or prior to the Closing,  of each of the following  conditions
(to the extent noncompliance is not waived in writing by the Phibro Parties):

      9.1.  Representations and Warranties True At Closing.  The representations
and  warranties  made by the Palladium  Parties in or pursuant to this Agreement
and the other  Transaction  Documents  shall be true and correct in all material
respects  at and as of the  Closing  Date with the same  effect  as though  such
representations  and  warranties had been made or given at and as of the Closing
Date; provided, however, that each such representation or warranty that contains
a Materiality  Qualifier in the text of such representation or warranty shall be
true and correct in all respects.

      9.2.  Compliance With Agreement.  Each of the Palladium Parties shall have
performed and complied in all material  respects  with all of their  obligations
under  this  Agreement  and  the  other  Transaction  Documents  that  are to be
performed or complied with by them or it at or prior to the Closing.

      9.3.  Closing  Certificate.  Each  of the  Palladium  Parties  shall  have
delivered  to the  Phibro  Parties  in  writing,  at and  as of the  Closing,  a
certificate  duly  executed  by  each of the  Palladium  Parties,  in  form  and
substance  reasonably  satisfactory  to the Phibro  Parties  and their  counsel,
certifying  that  the  conditions  in each of  Sections  9.1 and 9.2  have  been
satisfied.

      9.4. [Intentionally Omitted]

      9.5.  Amendment To  Stockholder  Agreement.  The Amendment to  Stockholder
Agreement,  in the form attached hereto as Exhibit Q (the "Stockholder Agreement
Amendment"),  shall have been duly executed and delivered by the parties thereto
and shall be in full force and effect.

      9.6. Escrow  Agreement the Escrow  Agreement shall have been duly executed
and delivered by the Palladium Parties and shall be in full force and effect.


                                       35
<PAGE>

      9.7. Trademark License Agreement.  The Trademark License Agreement, in the
form attached hereto as Exhibit R (the "Trademark  Agreement"),  shall have been
duly executed and delivered by Prince Agri Products,  Inc.  ("Prince  Agri") and
shall be in full force and effect.

      9.8.  Advisory  Agreement.  The Advisory  Agreement,  in the form attached
hereto as Exhibit S (the  "Advisory  Agreement"),  shall have been duly executed
and delivered by the Company and shall be in full force and effect.

      9.9. Quincy Office Building Lease.  The Quincy Office Building and related
rights of ingress  and egress  shall have been  transferred  to Prince Agri in a
manner and by documents in form and  substance  reasonably  satisfactory  to the
Phibro Parties, and the Quincy Lease shall have been duly executed and delivered
by Acquisition Company and shall be in full force and effect.

      9.10.  Transition  Services  Agreement.  The Transition Services Agreement
shall have been duly executed and delivered by Acquisition  Company and shall be
in full force and effect.

      9.11.  Storage  Space  License.  The Storage  Space  License,  in the form
attached hereto as Exhibit T (the "Storage Space License"), shall have been duly
executed  and  delivered by  Acquisition  Company and shall be in full force and
effect.

      9.12. MnO Supply Agreement.  The MnO Supply Agreement shall have been duly
executed  and  delivered by  Acquisition  Company and shall be in full force and
effect.

      9.13. Red Iron Oxide Supply Agreement. The Red Iron Oxide Supply Agreement
shall have been duly executed and delivered by Acquisition  Company and shall be
in full force and effect.

      9.14.  Bowmanstown  Blending Services Agreement.  The Bowmanstown Blending
Services  Agreement  shall have been duly executed and delivered by  Acquisition
Company and shall be in full force and effect.

      9.15. [Intentionally Omitted]

      9.16.   Environmental   Indemnification   Agreement.   The   Environmental
Indemnification  Agreement  shall  have  been duly  executed  and  delivered  by
Acquisition Company and shall be in full force and effect.

      9.17. Equipment Lease Agreement.  The Equipment Lease Agreement shall have
been duly  executed and  delivered by  Acquisition  Company and shall be in full
force and effect.

      9.18.  Minimum Working Capital Letter.  The Minimum Working Capital Letter
shall have been executed and delivered by the Palladium Parties.

      9.19. No Litigation.  No restraining order or injunction shall prevent the
transactions  contemplated  by this Agreement and no action,  suit or proceeding
shall be pending or threatened before any court or administrative  body in which
it will be or is sought to  restrain  or  prohibit  or obtain  damages  or other
relief in connection with this Agreement or the other  Transaction  Documents or
the consummation of the transactions contemplated hereby or thereby.

      9.20.  Union  Contract.   Acquisition  Company  shall  have  entered  into
arrangements  reasonably  satisfactory to the Phibro Parties with respect to the
union contract  covering the union


                                       36
<PAGE>

employees at Prince's facilities in Quincy, Illinois, and providing for Prince's
release  therefrom  with  respect  to  all  periods  from  and  after,  and  all
obligations accruing on or after, the Closing.

      9.21. Charter Amendment. The Amendment to the Certificate of Incorporation
of the Company,  in the form attached  hereto as Exhibit F, shall have been duly
filed and accepted for filing with Secretary of State of New York.

      9.22.  Solvency.  The  Phibro  Parties  shall  have  received  a copy of a
solvency opinion with respect to the solvency of the Company from Houlihan Lokey
Howard & Zukin  addressed to the Board of  Directors of the Company,  reasonably
satisfactory in form and substance to the Phibro Parties,  indicating compliance
with the  applicable  solvency  criteria under the federal  bankruptcy  code and
state  fraudulent  conveyance/transfer  laws as set forth in  paragraph 2 of the
Houlihan,  Lokey,  Howard and Zukin  engagement  letter and as modified with the
consent of the Phibro Parties or their  counsel,  before and after giving effect
to the Closing.

      10. CERTAIN COVENANTS.

      10.1. Confidential Information.  Without intending to limit the provisions
of the Confidentiality  Agreement,  any and all information  disclosed by any of
the  Palladium  Parties  to any of the  Phibro  Parties  or by any of the Phibro
Parties to any of the Palladium Parties, as a result of the negotiations leading
to the execution of this Agreement, or in furtherance thereof, which information
was not already  known to any of the Palladium  Parties,  on the one hand, or to
any of the Phibro Parties,  on the other hand, shall remain confidential to each
of the Palladium  Parties,  on the one hand, and to the Phibro  Parties,  on the
other hand, and their  respective  employees,  trustees,  and agents,  until the
Closing  Date.  If the Closing  does not take place for any reason,  each of the
Phibro  Parties  and the  Palladium  Parties  agrees not to  further  divulge or
disclose or use for its benefit or purposes any such  information at any time in
the future unless it has otherwise become public. The information intended to be
protected hereby shall include,  but not be limited to,  financial  information,
customers,  sales  representatives,  and  anything  else  having an  economic or
pecuniary  benefit to the Palladium  Parties,  on the one hand, or to the Phibro
Parties, on the other hand. Notwithstanding anything herein to the contrary, any
Party to this Agreement (and each  employee,  representative,  or other agent of
such party) may disclose to any and all persons, without limitation of any kind,
the tax treatment and tax structure of the  transaction and all materials of any
kind (including  opinions and other tax analyses) that are provided to the party
relating to such tax treatment and tax structure

      10.2. Non-Competition.

      (a)  Each of the  Phibro  Parties  acknowledges  that  the  covenants  and
agreements  in this  Section  10.2 are a condition  precedent  to the  Palladium
Parties'  obligations  to  consummate  the  transactions  contemplated  by  this
Agreement and the other  Transaction  Documents,  and that the Palladium Parties
would not enter into the  transactions  contemplated  by this  Agreement and the
other  Transaction  Documents but for the Phibro  Parties'  agreements  with the
Palladium  Parties in this Section 10.2. Each of the Phibro Parties  acknowledge
that from and after the Closing Date,  Acquisition Company will sell products to
customers  located in markets  throughout  the world and that  engagement by the
Phibro  Parties in the  Prince  Designated  Industry  (as  hereinafter  defined)
anywhere in North America other than for the benefit of  Acquisition  Company or
any  of  its  Subsidiaries,  could  cause  Acquisition  Company  or  any  of its
Subsidiaries  irreparable  damage.  For a period from the date hereof  until the
sixth anniversary of the Closing Date, the Phibro Parties shall not, without the
prior  written  consent of  Acquisition  Company,  (x) engage  anywhere in North
America,  directly or  indirectly,  alone or as a  shareholder  (other than as a
holder of less than 5% of the capital stock of any publicly-traded


                                       37
<PAGE>

corporation),  partner,  officer,  director,  employee  or  consultant,  in  any
business  organization  that is engaged or becomes  engaged in the  business  of
manufacturing,  processing,  selling or distributing iron or manganese compounds
or lignin sulfate for purposes  other than animal health,  nutrition and feed or
the  provision of custom  grinding  services,  except for sale of those  current
products of Prince Agri set forth on Schedule 10.2(a) to the existing  customers
of such  product of Prince  Agri set forth  opposite  such  product on  Schedule
10.2(a) (the "Prince  Designated  Industry"),  otherwise than for the benefit of
Acquisition  Company or any of its Subsidiaries or as noted below, (y) divert to
any competitor of Acquisition  Company or any of its  Subsidiaries in the Prince
Designated   Industry  any  customer  in  the  Prince  Designated   Industry  of
Acquisition Company or such Subsidiary, or (z) solicit or encourage any officer,
employee or consultant of Acquisition Company,  any of its Subsidiaries,  or any
of their Affiliates to leave the employ of Acquisition Company, such Subsidiary,
or such  Affiliates for employment by or with any Phibro Party or any competitor
of Acquisition  Company,  any of its  Subsidiaries  or any of their  Affiliates,
unless such person has been previously terminated by Acquisition Company, any of
its  Subsidiaries or any of their  Affiliates.  For the avoidance of doubt,  the
term "Prince Designated  Industry" as used herein shall not include or cover the
manufacturing, processing, selling or distributing of any products in the animal
health,  nutrition or feed industries.  If at any time after the date hereof any
customer of Prince Agri listed on Schedule 10.2(a) is merged or combined with or
into, or is acquired by,  another  entity the Schedule  shall  automatically  be
amended to include the  surviving or acquiring  entity  opposite the  applicable
products on the Schedule.

      (b) Each of the  Palladium  Parties  acknowledges  that the  covenants and
agreements in this Section 10.2 are a condition precedent to the Phibro Parties'
obligations to consummate the  transactions  contemplated  by this Agreement and
the other  Transaction  Documents,  and that the Phibro  Parties would not enter
into the transactions  contemplated by this Agreement and the other  Transaction
Documents but for  Acquisition  Company's  agreements with the Phibro Parties in
this Section 10.2. Acquisition Company acknowledges that the Phibro Parties sell
products  to  customers  located  in  markets  throughout  the  world  and  that
engagement by  Acquisition  Company in the Prince Agri Business (as  hereinafter
defined)  anywhere in the world other than for the benefit of the Phibro Parties
or any of their  Subsidiaries,  could  cause the Phibro  Parties or any of their
Subsidiaries  irreparable  damage.  For a period from the date hereof  until the
sixth  anniversary  of the  Closing  Date,  Acquisition  Company  and,  upon any
assignment or transfer of the Prince Business, New Prince shall not, without the
prior written consent of the Company, (x) engage anywhere in the world, directly
or indirectly, alone or as a shareholder (other than as a holder of less than 5%
of the capital  stock of any  publicly-traded  corporation),  partner,  officer,
director,  employee or consultant, in any business organization that is engaged,
or becomes engaged, in (i) the business of manufacturing, processing, selling or
distributing products or services in or for any of the animal nutrition,  health
or feed  industries  or businesses or use of the "crown" logo or trademark in or
for any of such  industries  or  markets,  except  for  sales of  those  current
products or services of Prince set forth on Schedule  10.2(b)-A  to the existing
customers  for such  products  or  services  of Prince set forth  opposite  such
product or service on Schedule  10.2(b)-A or (ii) the  development,  production,
manufacture  or  marketing  of any of the  products,  compounds  or  ingredients
described on (1) Schedule 10.2(b)-B or (2) on Schedule 10.2(b)-C to the existing
customers  of such  product of Prince Agri set forth  opposite  such  product on
Schedule  10.2(b)-C,  or  any  upgrade,  variation,   strength,  application  or
enhancement  thereof or  substitute  therefor or compound with any thereof as an
active  ingredient  (all  of the  foregoing  in  these  clauses  (i)  and  (ii),
collectively, the "Prince Agri Business"), otherwise than for the benefit of the
Phibro  Parties  or any of their  respective  Subsidiaries,  (y)  divert  to any
competitor of any of the Phibro Parties or any of their respective  Subsidiaries
in the Prince Agri  Business any customer in the Prince Agri  Business of any of
the Phibro Parties or any of such Subsidiaries,  or (z) solicit or encourage any
officer,  employee or consultant of any of the Phibro  Parties,  or any of their
respective Subsidiaries,  or any of their Affiliates, to leave the employ of any
of the Phibro Parties,  or any such Subsidiary,  or any of such Affiliates,  for
employment by or with Acquisition Company or any competitor of any of the Phibro
Parties, any of their


                                       38
<PAGE>

respective Subsidiaries or any of their Affiliates,  unless such person has been
previously  terminated  by  the  Phibro  Parties  or  any  of  their  respective
Subsidiaries  or any of their  Affiliates.  If any time  after  the date  hereof
Acquisition  Company  acquires a company  or  business  (a  "Target  Business"),
whether by merger,  acquisition  of stock,  acquisition  of assets or otherwise,
that is not  primarily  engaged in the Prince Agri  Business at the time of such
acquisition,  but is  engaged  in certain  activities  within  the  Prince  Agri
Business at such time,  nothing contained in this Section 10.2 shall prohibit or
restrict  Acquisition  Company or such Target Business from continuing to engage
in those  activities  within the Prince Agri Business.  Anything to the contrary
notwithstanding,  if at any time after the date  hereof any  customer  listed on
Schedule  10.2(b)-C  is merged  or  combined  with or into,  or  acquires  or is
acquired by another business or entity that at the time of such transaction also
purchases a product or service set forth  opposite such  customer's  name on the
Schedule  (but is not  itself  listed  opposite  such  product or service on the
Schedule), the Schedule shall be automatically amended to delete such customer's
name  opposite  such  product or service  without  any action on the part of the
Parties.  If at any time after the date hereof any customer of Prince  listed on
Schedule  10.2(b)-A  is merged or  combined  with or into,  or is  acquired  by,
another  entity the  Schedule  shall  automatically  be  amended to include  the
surviving or acquiring  entity  opposite the applicable  products or services on
the Schedule.

      (c) If at any time the provisions of this Section 10.2 shall be determined
to be invalid or  unenforceable,  by reason of being vague or unreasonable as to
area,  duration or scope of  activity,  this  Section  10.2 shall be  considered
divisible  and shall  become  and be  immediately  amended  to only  such  area,
duration  and scope of  activity as shall be  determined  to be  reasonable  and
enforceable by the court or other body having  jurisdiction over the matter; and
the  Parties  agree  that this  Section  10.2 as so  amended  shall be valid and
binding as though any invalid or  unenforceable  provision had not been included
herein.  Each of the Parties further  acknowledges and agrees that, in the event
of a breach or threatened  breach by it or any of its Affiliates (if applicable)
of its  obligations  under  this  Section  10.2,  in the  case  of a  breach  or
threatened  breach of Section 10.2(a),  Acquisition  Company and its Affiliates,
and in the case of the a breach or  threatened  breach of Section  10.2(b),  the
Company  and  its  Affiliates,   will  have  no  adequate  remedy  at  law,  and
accordingly, shall be entitled to seek injunctive or other appropriate equitable
remedies  against  such  breach or  threatened  breach in  addition to any other
remedies  which they or any of them may have. For purposes of this Section 10.2,
(A) the term "Phibro  Parties" shall be deemed to include all Affiliates of each
Phibro  Party,  (B) the  acknowledgments  made  and  covenants  and  obligations
undertaken  by each Phibro Party shall be deemed to be made by such Phibro Party
on behalf of itself and its Affiliates, (C) the term "Acquisition Company" shall
be deemed to  include  all  Subsidiaries  of  Acquisition  Company,  and (D) the
acknowledgments  made and covenants and  obligations  undertaken by  Acquisition
Company  shall be deemed to be made by  Acquisition  Company on behalf of itself
and its Subsidiaries.

      10.3. Use of Name. Subject to the Trademark Agreement, Acquisition Company
is purchasing  the rights of Prince to the business  names of Prince used in the
Prince  Business and therefore  none of the Phibro  Parties or their  Affiliates
(other  than Prince  Agri)  shall be  entitled  to use the name  "Prince" or any
variation  thereof as  corporate  and business  names or titles  anywhere in the
world from and after the Closing. Prince shall, simultaneously with the Closing,
undertake and promptly  pursue all  necessary  action to change its business and
corporate  names to new names bearing no resemblance to any of its present names
so as to permit the use of such name by Acquisition Company.

      10.4. Financial  Statements.  For the period beginning on the Closing Date
and ending on the later of (a) the  consummation  of the Resale  Transaction and
(b) January 1, 2009, the Palladium  Parties shall provide to the Company (i) the
unaudited internal quarterly financial statements of New Prince on a stand-alone
basis within thirty (30) days after the end of each fiscal  quarter  during such
period  and (ii) the  audited  annual  financial  statements  of New Prince on a
stand-alone  basis not later than the


                                       39
<PAGE>

earlier to occur of (A) one hundred twenty (120) days after the end of each such
fiscal year during  such period and (B) three (3)  business  days after the date
that such  financial  statements  are  provided  to a lender  that has  provided
financing to New Prince. In the event that the Total Consideration in connection
with any Resale  Transaction  includes  the  possibility  of Earn-Out  Payments,
promptly  following any  determination  as to whether or not an Earn-Out Payment
has been earned or accrued  (each,  an  "Earn-Out  Determination")  the Investor
Stockholders   shall   provide  the  Company   with  notice  of  such   Earn-Out
Determination.  The  foregoing  obligation  of the  Investor  Stockholders  with
respect to Earn-Out  Determinations  shall continue  whether or not the Investor
Stockholders  have assigned or  transferred  their rights under Section 4.3 to a
third party.  Such  financial  statements and Earn-Out  Determinations  shall be
subject to the confidentiality provisions of Section 10.6.

      10.5. Employee and Employee Benefit Plan Matters.

      (a) Employment of Employees.  Acquisition  Company shall offer employment,
effective  as of the  Closing  Date,  to all of the  employees  of Prince on the
Closing Date listed on Part 1 of Schedule  10.5(a) (and who are not on long-term
disability,  and if on  short-term  disability  only upon a return to work),  at
wages substantially  comparable to his or her then current wage or salary level.
Those  employees  who accept such offers of employment  and become  employees of
Acquisition Company shall be referred to herein as the "Transferred  Employees."
Acquisition  Company agrees that, for a period of 60 days after the Closing Date
it will not cause any of the Transferred  Employees to suffer  "employment loss"
for purposes of the WARN Act, and related  regulations,  or any similar  concept
under any state or local statute,  and the  regulations  related thereto (each a
"State  Act") if such  employment  loss,  or similar  concept,  would create any
WARN-related  liability,  or any State  Act  related  liability,  for any of the
Phibro Parties,  unless Acquisition  Company delivers notices under the WARN Act
and  under  each  such  State  Act in such a manner  and at such a time that the
Phibro Parties bear no liability with respect  thereto.  All of the employees of
Prince on the date hereof are listed on Schedule 10.5(a).

      (b) Employee  Benefit  Plans;  In General.  Except as  expressly  provided
otherwise  in this  Section  10.5,  the  Phibro  Parties  shall  have and retain
exclusive  liability and  responsibility  for providing any and all benefits due
and payable to or in respect of participants and other  beneficiaries  under any
Employee  Benefit Plan in  accordance  with the terms of such  Employee  Benefit
Plan,  including but not limited to the provision of COBRA continuation  medical
coverage to the extent  required by  applicable  law. As of the Closing  Date or
Benefits   Closing  Date,  as  applicable   under  Section  10.5(e)  below,  the
Transferred  Employees  shall cease to be active  participants  in, or to accrue
benefits or be credited  service in any of the  Employee  Benefit  Plans.  Prior
service of Transferred Employees recognized by Prince under the Employee Benefit
Plans shall be  recognized  for the purposes of vesting and benefit  eligibility
(but not benefit accrual) under any retirement or other comparable benefit plans
established by Acquisition Company.

      (c) Benefits of Represented  Employees.  As of and after the Closing Date,
Acquisition  Company  shall  assume  responsibility  for  the  provision  of the
benefits to Transferred Employees (but only the Transferred Employees) set forth
in the union contract  covering the employees at Prince's  facilities in Quincy,
Illinois  (as the same may have been  modified in  accordance  with Section 8.11
hereof) as well as dependents and beneficiaries  thereof. Any benefits due under
such contract in respect of individuals who are not  Transferred  Employees (and
their dependents and  beneficiaries),  such as prior retirees,  shall remain the
responsibility of the Employee Benefit Plans and the Phibro Parties.

      (d) Retirement Plans. (i) Certain of Prince's salaried and union employees
("DB  Participants") are participants in The Retirement Plan of the Company (the
"Company's DB Plan") which has been and will remain sponsored by the Company for
the  benefit of  eligible  employees  of the


                                       40
<PAGE>

Company and its Affiliates.  All benefits  accrued by DB Participants  under the
Company's  DB Plan will  remain the  liability  of  Company's  DB Plan after the
Closing  Date and no assets of the  Company's  DB Plan  will be  transferred  in
connection with this transaction.  All accrued benefits of DB Participants under
the Company's DB Plan shall be fully vested as of the Closing Date.

            (ii)  Certain  of  Prince's   salaried  and  union   employees  ("DC
Participants")  are participants in the Company's 401(k) Plan (the "Company's DC
Plan")  which has been and will remain  sponsored by the Company for the benefit
of eligible employees of the Company and its Affiliates. All account balances of
DC  Participants  under the  Company's  DC Plan will  remain  the  liability  of
Company's DC Plan after the Closing Date and no assets of the  Company's DC Plan
will be transferred in connection with this transaction. All account balances of
DC  Participants  under the Company's DC Plan shall,  as of the Closing Date, be
fully  vested.  In any  such  case  where  distribution  is  available  promptly
following the Closing Date under the Company's DC Plan,  Acquisition Company and
the Phibro Parties shall reasonably  cooperate to facilitate the direct rollover
of distributions due the Transferred  Employees  (including  outstanding loans),
where  elected by a  Transferred  Employee,  to any  defined  contribution  plan
intended to qualify  under  Section  401(a) of the Code  adopted by  Acquisition
Company, provided any such plan shall not be required to accept any distribution
not in the form of cash or the distributee's promissory note.

      (e)  Continuation of Certain  Benefits  Subsequent to Closing.  The Phibro
Parties and Acquisition Company agree that Prince Agri shall continue to operate
the medical,  dental,  short-term  disability plans,  which are self-insured and
administered  by  Principal  Mutual Life  Insurance  Company  ("Principal")  and
additional life insurance  plans provided and  administered by Principal and the
pre-tax flexible spending account plan administered by Principal,  as identified
on Schedule 5.15 (the  "Transition  Plans"),  for the benefit of the Transferred
Employees, and their eligible dependents and beneficiaries, on substantially the
same  basis  as in  effect  immediately  prior  to the  Closing  Date  for  such
individuals,  for the  period  commencing  on the  Closing  Date and  ending  on
February 29, 2004 or on such later date as  Acquisition  Company and the Company
may agree (as finally  determined,  the "Benefits  Closing  Date").  Acquisition
Company shall be fully responsible for all benefit claims and premiums incurred,
and all related  out-of-pocket  administrative  costs  incurred in good faith by
Acquisition  Company and/or Prince Agri, in the ordinary course of the continued
operation  of the  Transition  Plans after the Closing and through the  Benefits
Closing  Date in  respect  of  such  individuals  (such  amounts  determined  in
accordance  consistent  with the past  practices of Prince and Prince Agri,  the
"Benefits Transition Amounts"). Acquisition Company shall pay directly to Prince
Agri the  Benefits  Transition  Amounts  invoiced by Prince Agri to  Acquisition
Company accompanied by reasonable written  substantiation of the amounts thereof
within fifteen (15) days after invoice.

      10.6. Post-Closing Access To Books and Records and Confidentiality.  For a
period of six (6) years after the Closing Date, Acquisition Company shall afford
the  Phibro   Parties   and  their   accountants,   legal   counsel   and  other
representatives  reasonable  access  to the books and  records  included  in the
Prince  Assets  (including  access for  purposes of  reviewing  and copying such
records),  during normal business hours of Acquisition Company and upon at least
two business  days prior  written  notice,  to enable them to prepare  financial
statements  or tax returns or deal with the tax audits.  For a period of six (6)
years after the Closing  Date,  the Phibro  Parties  shall  maintain  and afford
Acquisition Company and its accountants, legal counsel and other representatives
reasonable  access to the books and  records of the Phibro  Parties  that do not
constitute  Prince  Assets but that  relate to the  Prince  Assets or the Prince
Business  (including access for purposes of reviewing and copying such records),
during normal  business hours of the  applicable  Phibro Party and upon at least
two business days prior written  notice,  for any  reasonable  business  purpose
specified in such notice.  At all times  following the Closing Date, each of the


                                       41
<PAGE>

Parties shall keep confidential and not divulge, disclose or use for its benefit
or purposes  any  information  provided to such Party under this  Section  10.6,
unless such  information  has become public  knowledge  other than a result of a
breach by any Phibro Party of this provision.

      10.7. Collection of Receivables.  From and after the Closing,  Acquisition
Company  shall have the right and  authority  to collect for its own account all
accounts  receivable  and other items that are included in the Prince Assets and
to endorse with the name of Prince any checks or drafts received with respect to
any such accounts  receivable or other items.  Each of the Phibro Parties agrees
to deliver  promptly to Acquisition  Company all cash,  checks or other property
received  directly  or  indirectly  by such  Phibro  Parry with  respect to such
receivables and other items, including any amounts payable as interest.

      10.8.  Tax Filings.  The Phibro  Parties shall  promptly after the Closing
prepare  and file  reports and  returns  required by law  relating to the Prince
Business, to and including the Closing Date.

      11. DEFINITIONS.  As used herein the following terms not otherwise defined
have the following respective meanings:

      "2003 Balance Sheet" has the meaning set forth in Section 5.6.

      "2003  Bonus  Obligations"  means  any  bonus  or  other  similar  payment
obligation  that Prince is obligated to make to any current or former  employee,
director, consultant,  stockholder or other Person in respect of the fiscal year
of Prince ended June 30, 2003.

      "Accounts Receivable" has the meaning set forth in Section 2.1(d).

      "Acquisition Company" has the meaning set forth in the preamble hereto.

      "Acquisition Company Notice" has the meaning set forth in Section 4.2(b).

      "Acquisition Company's Proposed Calculations" has the meaning set forth in
Section 4.2(b).

      "Adjustment Amount" has the meaning set forth in Section 4.3(b).

      "Adjustment Amount" has the meaning set forth in Section 4.3(b).

      "Adjustment Notice" has the meaning set forth in Section 4.3(b).

      "Advisory Agreement" has the meaning set forth in Section 9.8.

      "Affiliate"  means,  with  respect  to any  specified  Person,  any Person
directly or  indirectly  controlling,  controlled by or under direct or indirect
common control with such  specified  Person and shall include (a) any Person who
is a  director  or  beneficial  holder  of at least 10% of any class of the then
outstanding  capital  stock (or other  shares of  beneficial  interest)  of such
specified  Person and Family Members of any such Person described in this clause
(a), (b) any Person of which such specified  Person or an Affiliate under clause
(a)  above of such  specified  Person  shall,  directly  or  indirectly,  either
beneficially own at least 10% of any class of the then outstanding capital stock
(or other shares of  beneficial  interest) or  constitute  at least a 10% equity
participant,  and (c) in the case of a  specified  Person who is an  individual,
Family Members of such specified  Person;  provided,  that none of the Palladium
Parties shall be considered to be an Affiliate of any of the Phibro Parties.


                                       42
<PAGE>

      "Agreement" has the meaning set forth in the preamble hereto.

      "Asset Purchase Price" has the meaning as set forth in Section 2.7.

      "Assumption Agreement" has the meaning set forth in Section 3.2(e).

      "Assumed Obligations" has the meaning set forth in Section 2.4.

      "Backstop Adjustment" has the meaning set forth in Section 4.3(i).

      "Backstop  Adjustment  Period" means the period  commencing on the Closing
Date and ending on the earlier of (a) the consummation of the Resale Transaction
and (b) January 1, 2009.

      "Backstop  Claim" means any claim for  indemnification  made under Section
12.1(a) with respect to any breach of any covenant, obligation or undertaking of
the Company set forth in Section 4.3.

      "Backstop  Indemnification  Amount"  has the  meaning set forth in Section
4.3(a).

      "Backstop Indemnification  Threshold" has the meaning set forth in Section
4.3(a).

      "Backstop Notice" has the meaning set forth in Section 4.3(i).

      "Benefits Closing Date" has the meaning set forth in Section 10.5(e).

      "Bill of Sale and Assignment" has the meaning set forth in Section 3.2(d).

      "Bowmanstown  Blending  Services  Agreement"  has the meaning set forth in
Section 8.19.

      "Business Accounts" has the meaning set forth in Section 2.1(l).

      "Cash Component Excess" has the meaning set forth in Section 4.2(c).

      "CERCLA" has the meaning set forth in Section 5.11(a)(i).

      "Change of Control  Obligations"  means any bonus or other similar payment
that Prince is  obligated to make to any current or former  employee,  director,
consultant,  stockholder  or other  Person  as a result  of the  acquisition  by
Acquisition Company of the Prince Assets as contemplated by this Agreement.

      "Claim" has the meaning set forth in Section 12.3(a).

      "Closing" has the meaning set forth in Section 3.1.

      "Closing  Calculation  Certificate"  has the  meaning set forth in Section
8.25.

      "Closing Date" has the meaning set forth in Section 3.1.

      "Closing  Date Net Working  Capital"  has the meaning set forth in Section
4.2(b).

      "Closing Fee" has the meaning set forth in Section 3.2(j).


                                       43
<PAGE>

      "Code" has the meaning set forth in Section 2.7.

      "Collection Period" has the meaning set forth in Section 2.8.

      "Collections" has the meaning set forth in Section 2.8.

      "Collections Payments" has the meaning set forth in Section 2.8.

      "Combination  Transaction"  means the  combination  of New Prince with the
business  or  assets  of  another  entity  (whether  by  merger,  stock or asset
acquisition or disposition or otherwise).

      "Company" has the meaning set forth in the preamble hereto.

      "Company's Backstop Notice" has the meaning set forth in Section 4.3(i).

      "Company's DB Plan" has the meaning set forth in Section 10.5(d).

      "Company's Notice" has the meaning set forth in Section 4.2(b).

      "Company's  Proposed  Calculations"  has the  meaning set forth in Section
4.2(b).

      "Confidentiality  Agreement" means the  Confidentiality  Agreement,  dated
September 25, 2003, among the Company and the Investor Stockholders.

      "Confirmation and Release" has the meaning set forth in Section 8.31.

      "Consent  Agreement" means the Consent Agreement,  dated October 15, 2003,
by and among the Phibro Parties and the Investor Stockholders.

      "Consent  Solicitation"  means the  consent  solicitation  relating to the
Existing Notes described in the Consent  Solicitation  Statement dated September
24, 2003.

      "Consent Solicitation  Statement" has the meaning set forth in the Consent
Agreement.

      "Contract  Year"  means the one (1) year period  beginning  on the Closing
Date and each one (1) period beginning on each anniversary of the Closing Date.

      "Credit  Facility  Financing"  has the  meaning  set forth in the  Consent
Agreement.

      "Crown   Trademark"  means  the  Prince  "Crown"   trademark   (U.S.P.T.O.
Registration No. 1,902,265).

      "DB Participant" has the meaning set forth in Section 10.5(d).

      "Deductible Amount" has the meaning set forth in Section 12.5(a).

      "Earn-Out Determination" has the meaning set forth in Section 10.4.

      "Earn-Out Payment" has the meaning set forth in Section 4.3(b)(vii).

      "Earn-Out Period" has the meaning set forth in Section 4.3(b).


                                       44
<PAGE>

      "Employee Agreements" has the meaning set forth in Section 2.1(g).

      "Employee Benefit Plan" has the meaning set forth in Section 5.15(a).

      "Environmental Claims" has the meaning set forth in Section 12.5(e).

      "Environmental  Indemnification  Agreement"  has the  meaning set forth in
Section 8.21.

      "Environmental Laws" has the meaning set forth in Section 5.11(a)(i).

      "EPA" has the meaning set forth in Section 5.11(a)(ii).

      "Equipment" has the meaning set forth in Section 2.1(b).

      "Equipment Lease Agreement" means the Reimbursement Agreement, in the form
attached hereto as Exhibit U.

      "ERISA" has the meaning set forth in Section 5.15(c).

      "Erroneous Backstop Party" has the meaning set forth in Section 4.3(i).

      "Erroneous Party" has the meaning set forth in Section 4.2(b).

      "Escrow Agent" has the meaning set forth in Section 8.13.

      "Escrow Agreement" has the meaning set forth in Section 8.13.

      "Estimated Net Working Capital" has the meaning set forth in Section 4.1.

      "Estimated  Net Working  Capital  Agreement"  has the meaning set forth in
Section 4.1.

      "Exchange Stock" has the meaning as set forth in the preamble hereto.

      "Excluded Asset" has the meaning set forth in Section 2.2.

      "Excluded Liabilities" has the meaning set forth in Section 2.5.

      "Excluded Real Property" has the meaning set forth in Section 5.10(c).

      "Existing  Notes" means the Company's 9 ?% Senior  Subordinated  Notes due
2008.

      "Expense  Reimbursement  Agreement"  means  the  letter  agreement,  dated
September 23, 2003, between the Parties.

      "Family Member" means, as to any individual,  any parent,  spouse,  child,
spouse of a child, brother or sister of such individual,  and each trust created
for the benefit of one or more of such Persons.

      "Final Adjustment" has the meaning set forth in Section 4.2(b).

      "Final Closing Statement" has the meaning set forth in Section 4.2(a).


                                       45
<PAGE>

      "Financial Statements" has the meaning set forth in Section 5.6.

      "Fraud  Claims" means any claims arising out of or based upon fraud by any
of the Phibro Parties.

      "General Limit" has the meaning set forth in Section 12.5(b).

      "Hazardous Substances" has the meaning set forth in Section 5.11(a)(ii).

      "Indebtedness"  means, as applied to any Person,  (a) all  indebtedness of
such  Person for  borrowed  money,  whether  current  or  funded,  or secured or
unsecured,  (b) all indebtedness of such Person for the deferred  purchase price
of  property  or  services  represented  by a note or  other  security,  (c) all
indebtedness  of such Person  created or arising under any  conditional  sale or
other title retention agreement with respect to property acquired by such Person
(even  though  the  rights  and  remedies  of the  seller or lender  under  such
agreement  in the event of default are limited to  repossession  or sale of such
property),  (d) all  indebtedness  of such  Person  secured by a purchase  money
mortgage or other lien to secure all or part of the  purchase  price of property
subject to such mortgage or lien, (e) all  obligations  under leases which shall
have  been  or  must  be,  in  accordance  with  generally  accepted  accounting
principles, recorded as capital leases in respect of which such Person is liable
as lessee,  (f) any liability of such Person in respect of banker's  acceptances
or letters of credit,  (g) any  liability in respect of interest,  fees or other
charges in respect of any  indebtedness  referred to in clauses (a) - (f) above,
and (h) all  indebtedness  referred  to in  clauses  (a) - (g)  above  which  is
directly or indirectly guaranteed by such Person or which such Person has agreed
(continently  or  otherwise)  to purchase or otherwise  acquire or in respect of
which it has otherwise assured a creditor against loss.

      "Indemnified Party" has the meaning set forth in Section 12.3(a).

      "Indemnifying Parties" has the meaning set forth in Section 12.3(a).

      "Independent Accounting Firm" has the meaning set forth in Section 4.2(b).

      "Initial Adjustment Payment" has the meaning set forth in Section 4.1.

      "Initial  Settlement Proposal Losses" has the meaning set forth in Section
12.3(b)(iv).

      "Intangibles" has the meaning set forth in Section 2.1(j).

      "Intellectual Property" means all patents, patent applications, trademarks
(whether registered or unregistered),  trade names, copyrights,  know-how, trade
secrets, customer lists, software, technical information or processes.

      "Intercompany  Settlement  Amount" means the cash payment to Prince in the
amount of $3,958,400  to be made by the Phibro  Parties to Prince at or prior to
Closing in full satisfaction of all intercompany indebtedness owed to Prince.

      "Interim Balance Sheet" has the meaning set forth in Section 5.6.

      "Inventories" has the meaning set forth in Section 2.1(f).

      "Investor Stockholders" has the meaning set forth in the preamble.


                                       46
<PAGE>

      "IRS" means the United States Internal Revenue Service.

      "Kentucky Street Deed" has the meaning set forth in Section 3.2(k).

      "Kentucky  Street  Real  Property"  means the real  property  known as 630
Kentucky Street in Quincy, Illinois.

      "Leased Real Property" has the meaning set forth in Section 5.10(c).

      "Lien"  means any  security  interest,  mortgage,  pledge,  lien,  charge,
equitable interest,  community property interest, claim, right of first refusal,
or restrictions of any kind,  including,  but not limited to, any restriction on
the use,  voting,  receipt  of income or other  exercise  of any  attributes  of
ownership.

      "Losses" has the meaning set forth in Section 12.1.

      "Material  Adverse Effect" means a material  adverse effect on the assets,
business, operations, prospects or financial condition of Prince.

      "Material  Prince  Competitor"  means, at any time of  determination,  any
business  engaged in one or more lines of  business  conducted  by New Prince at
such time,  provided that such line or lines of business conducted by New Prince
constitute  in the aggregate  more than 10% of the total  revenues of New Prince
during the immediately preceding fiscal year.

      "Materiality  Qualifiers" means the phrases  "material",  "in all material
respects",  "material to Prince" or similar  qualifiers  based on the concept of
materiality.

      "Maximum Amount" has the meaning set forth in Section 12.5(c).

      "Maximum  Amount  Limited  Claims"  has the  meaning  set forth in Section
12.5(b).

      "Minimum Claim Amounts" has the meaning set forth in Section 12.5(a).

      "Minimum Working Capital" has the meaning set forth in Section 4.1.

      "Minimum Working Capital Letter" has the meaning set forth in Section 4.1.

      "MnO Supply Agreement" has the meaning set forth in Section 8.17.

      "Net  Present  Value"  means,  with  respect  to any  future  payments  or
installments arising in connection with any Resale Transaction,  the net present
value of such payments or installments calculated as of the date of consummation
of such  Resale  Transaction  applying a discount  rate equal to the  prevailing
prime rate (as published in the in The Wall Street Journal (Eastern  Edition) on
such  date  under  "Money  Rates"  (or in the  event  that  such  rate is not so
published,  in such other  nationally  recognized  publication  as the  Investor
Stockholders may specify to the Company).

      "Net Working  Capital"  means,  as at any date,  (i) the current assets of
Prince  included  in the Prince  Assets as of such date,  minus (ii) the current
liabilities  of  Prince  included  in  the  Assumed   Obligations  and,  without
duplication,  the aggregate  amount of  outstanding  and unpaid checks issued by
Prince  relating  to Assumed  Obligations  as of such date,  all  calculated  in
accordance with generally accepted accounting principles applied on a consistent
basis and consistent with the Prince GAAP


                                       47
<PAGE>

Principles.  Anything to the contrary  notwithstanding,  the  calculation of Net
Working  Capital  shall not  include the  Intercompany  Settlement  Amount,  any
Excluded Assets or any Excluded Liabilities.

      "Net Working Capital Excess" has the meaning set forth in Section 4.2(c).

      "New Employment Agreements" has the meaning set forth in Section 8.22.

      "New Prince" has the meaning set forth in Section 4.3(a).

      "Non-Deductible Claims" has the meaning set forth in Section 12.5(a).

      "Note Offering" has the meaning set forth in the Consent Agreement.

      "NYBCL" means the New York Business Corporation Law.

      "Offering Circular" has the meaning set forth in the Consent Agreement.

      "Other Contracts" shall have the meaning set forth in Section 2.1(h).

      "Other  Transferred  Assets" means the Crown Trademark and the Prince Agri
Transferred Assets.

      "Palladium  Affiliated  Entity" means any Palladium  Controlled Entity and
any entity that is an Affiliate of any Investor Stockholder or group of Investor
Stockholders or any private equity fund managed or controlled by any entity that
also  manages or  controls  or is an  Affiliate  of any entity  that  manages or
controls any Investor Stockholder. For purposes of this definition, (a) the term
"Affiliate"  shall not include any limited  partner (or the  equivalent)  of any
Investor Stockholder or of any other private equity fund that is included in the
definition of Palladium  Affiliated Entity (or any Affiliate of any such limited
partner (or the equivalent)) and (b) the term "control" shall mean, with respect
to any  entity,  the  ownership  directly  or  indirectly  of 50% or more of the
ordinary voting power  represented by the issued and outstanding  voting capital
stock or voting equity interests of such entity or the right to elect or appoint
a  majority  of the seats or  positions  on the board of  directors  or  similar
governing body of such entity or the right to direct the  day-to-day  management
policies of such entity by contract.

      "Palladium  Controlled Entity" means any entity controlled by any Investor
Stockholder  or any  group  of  Investor  Stockholders.  For  purposes  of  this
definition,  the term  "control"  shall mean,  with  respect to any entity,  the
ownership  directly or  indirectly  of 50% or more of the ordinary  voting power
represented by the issued and outstanding  voting capital stock or voting equity
interests  of such  entity or the right to elect or  appoint a  majority  of the
seats or positions on the board of directors or similar  governing  body of such
entity.

      "Palladium Parties" has the meaning set forth in the preamble.

      "Palladium Payees" has the meaning set forth in Section 4.3(b).

      "Party" has the meaning set forth in the preamble.

      "Parties" has the meaning set forth in the preamble.

      "PBGC" has the meaning set forth in Section 5.15(d)(ii).


                                       48
<PAGE>

      "PEI  II" has the  meaning  set  forth in the  preamble.

      "PEP II" has the meaning set forth in the preamble.

      "PEP II-A" has the meaning set forth in the preamble.

      "Percentage" has the meaning set forth in Section 1.1.

      "Permits" has the meaning set forth in Section 5.9(c).

      "Permitted Liens" means: (i) Liens arising from filing Uniform  Commercial
Code financing  statements  regarding  operating leases;  (ii) Liens in favor of
customs and revenue  authorities arising as a matter of law to secure payment of
customs  duties in  connection  with the  importation  of goods;  (iii) Liens to
secure obligations arising from or regulatory requirements of Prince,  including
the performance of statutory obligations, surety or appeal bonds, or landlords',
carriers',  warehousemen's,  mechanics', suppliers', materialmen's or other like
Liens, in any case incurred in the ordinary  course of business;  (iv) Liens for
taxes,  assessments or  governmental  charges or claims that are not yet due and
payable or that are being  contested in good faith by  appropriate  proceedings;
(v)  judgment  Liens,  so  long  as  such  Lien  is  adequately  bonded  and any
appropriate  legal proceedings which may have been duly initiated for the review
of such  judgment  shall not have been finally  terminated  or the period within
which such proceedings may be initiated shall not have expired;  (vi) easements,
rights-of-way, title irregularities and other similar charges or encumbrances in
respect of real  property  not  interfering  in any  material  respect  with the
ordinary  conduct of the business of Prince;  (vii) Liens upon specific items of
inventory or other goods and proceeds of Prince's securing  Prince's  obligation
in respect of bankers'  acceptances  issued or created for the account of Prince
to  facilitate  the  purchase,  shipment or storage of such  inventory  or other
goods;  (viii) Liens  disclosed on any title  insurance  commitment  and updates
thereto  delivered to  Acquisition  Company prior to the Closing with respect to
any of the Real  Property;  (ix) in respect  of any  registered  trademark,  the
restrictions set forth in the registrations  thereof; and (x) Liens disclosed on
Schedule 11 hereto.

      "Person" means a corporation,  an  association,  a partnership,  a limited
liability company, an organization,  a business, an individual,  a government or
political subdivision thereof or a governmental agency.

      "Personal Property Leases" has the meaning set forth in Section 2.1(e).

      "Phibro Parties" has the meaning set forth in the preamble.

      "Phibro  Transaction  Costs" means any and all costs and expenses incurred
by the Phibro Parties or any of their Affiliates (including, without limitation,
fees and  expenses of  accountants,  attorneys,  investment  bankers,  and other
consultants and any  reimbursement  obligations in respect of costs and expenses
of the Palladium Parties) arising out of the negotiation, execution and delivery
of this Agreement and the other  Transaction  Documents and the  consummation of
the transactions contemplated hereby and thereby.

      "Prince" has the meaning set forth in the preamble.

      "Prince Agri" has the meaning set forth in Section 9.7.

      "Prince Agri Bill of Sale" has the meaning set forth in Section 3.2(n).


                                       49
<PAGE>

      "Prince Agri Transferred Assets" means, collectively,  the Kentucky Street
Real Property,  the Prince Agri  Bowmanstown  Transferred  Assets and the Prince
Agri Kentucky Street Transferred Assets.

      "Prince Agri Bowmanstown  Transferred Assets" has the meaning set forth in
Section 3.2(n).

      "Prince Agri Kentucky Street Transferred Assets" has the
meaning set forth in Section 3.2(n).

      "Prince Assets" has the meaning set forth in Section 2.1.

      "Prince Balance Sheets" has the meaning set forth in Section 5.6.

      "Prince Business" has the meaning as set forth in the preamble.

      "Prince GAAP Principles" has the meaning set forth in Section 4.2(a).

      "Prince  Material  Adverse Change" means,  since June 30, 2003, a material
adverse  change in the assets,  business,  operations,  prospects  or  condition
(financial or otherwise) of Prince.

      "Prince Stockholder" has the meaning set forth in the preamble.

      "Principal" has the meaning set forth in Section 10.5(e).

      "Purchase Stock" has the meaning as set forth in the preamble hereto.

      "Quincy Lease" has the meaning set forth in Section 8.14.

      "RCRA" has the meaning set forth in Section 5.11(a)(i).

      "Real Estate Option" has the meaning set forth in Section 8.15.

      "Real Property" has the meaning set forth in Section 2.1(a).

      "Real Property Deeds" has the meaning set forth in Section 3.2(d).

      "Red Iron Oxide  Supply  Agreement"  has the  meaning set forth in Section
8.18.

      "Remaining Disputed Items" has the meaning set forth in Section 4.2(b).

      "Reorganization"  means,  with  respect to any Person,  any  voluntary  or
involuntary dissolution, winding-up, total or partial liquidation or bankruptcy,
insolvency,  reorganization,  receivership  or other  statutory  or  common  law
proceeding  or  arrangement  involving  such  Person or any of its assets or the
readjustment of the liabilities of such Person or any assignment for the benefit
of creditors or any marshalling of the assets or liabilities of such Person.

      "Resale Transaction" has the meaning set forth in Section 4.3(a).

      "SARA" has the meaning set forth in Section 5.11(a)(i).


                                       50
<PAGE>

      "Seller's Accountant" has the meaning set forth in Section 4.2(a).

      "Series B Preferred Stock" has the meaning set forth in the preamble.

      "Series C Preferred Stock" has the meaning set forth in the preamble.

      "Solomon Grind Non-Compete Agreement" means the Agreement for the Purchase
and Sale of Covenant Not to Compete,  dated August 7, 2000,  between  Prince and
Solomon Grin Chem Service, Inc. ("Solomon") and certain Solomon affiliates.

      "Solvent"  means when used with  respect to any Person,  as of any date of
determination, (a) the amount of the "present fair saleable value" of the assets
of such Person will, as of such date,  exceed the amount of all  "liabilities of
such Person, contingent or otherwise", as of such date, as such quoted terms are
determined  in  accordance  with  applicable  federal  and state laws  governing
determinations of the insolvency of debtors, (b) the present fair saleable value
of the assets of such Person will,  as of such date,  be greater than the amount
that will be required to pay the  liability  of such Person on its debts as such
debts become  absolute and  matured,  (c) such Person will not have,  as of such
date,  an  unreasonably  small  amount of  capital  with  which to  conduct  its
business,  (d) such  Person will be able to pay its debts as they mature and (e)
such Person is not "insolvent", as such quoted term is defined in the NYBCL. For
purposes of this definition,  (i) "debt" means liability on a "claim",  and (ii)
"claim"  means any (x) right to payment,  whether or not such a right is reduced
to judgment, liquidated,  unliquidated,  fixed, contingent,  matured, unmatured,
disputed,  undisputed, legal, equitable, secured or unsecured or (y) right to an
equitable  remedy for breach of performance if such breach gives rise to a right
to  payment,  whether  or not such  right to an  equitable  remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured
or unsecured.

      "Specified  Person"  means  any  of the  following  individuals:  Jack  C.
Bendheim,  Gerald K. Carlson,  Marvin S. Sussman,  Richard G. Johnson, Joseph M.
Katzenstein,  Dani Bendheim,  David C. Storbeck,  Steven L. Cohen,  Gary Enroth,
Dwight Glover, Tom Newkirk,  Brenda Siebers,  Jon Attridge,  Darryl Mayton, Alan
Petefish and Tom Henderson.

      "Specified Phibro Person" means any of the following individuals:  Jack C.
Bendheim,  Gerald K. Carlson,  Marvin S. Sussman,  Richard G. Johnson, Joseph M.
Katzenstein,  Dani Bendheim, David C. Storbeck, Steven L. Cohen, Gary Enroth and
Dwight Glover.

      "Stock Purchase Price" has the meaning as set forth in the preamble.

      "Stockholder  Agreement  Amendment"  has the  meaning set forth in Section
9.5.

      "Storage Space License" has the meaning set forth in Section 9.11.

      "Subsidiary" means, with respect to any Person, any corporation a majority
(by number of votes) of the outstanding  shares of any class or classes of which
shall at the time be owned by such Person or by a Subsidiary of such Person,  if
the  holders of the shares of such class or classes (a) are  ordinarily,  in the
absence of contingencies, entitled to vote for the election of a majority of the
directors (or persons performing similar functions) of the issuer thereof,  even
though  the  right so to vote  has been  suspended  by the  happening  of such a
contingency,  or (b) are at the time entitled,  as such holders, to vote for the
election  of  a  majority  of  the  directors  (or  persons  performing  similar
functions) of the issuer thereof,  whether or not the right so to vote exists by
reason of the happening of a contingency.


                                       51
<PAGE>

      "Tax" means any federal,  state, local, foreign and other income, profits,
franchise,  capital,  withholding,   unemployment  insurance,  social  security,
occupational,  production,  severance,  gross receipts, value added, sales, use,
excise, real and personal property, ad valorem, occupancy, transfer, employment,
disability, workers' compensation or other similar tax, duty, fee, assessment or
other  governmental  charge  (including  all interest and penalties  thereon and
additions thereto).

      "Third Party Claim" has the meaning set forth in Section 12.3(b).

      "Total Consideration" has the meaning set forth in Section 4.3(b).

      "Trademark Agreement" has the meaning set forth in Section 9.7.

      "Transaction Documents" means, collectively,  this Agreement, the Advisory
Agreement,  the  Assumption  Agreement,  the  Bill of Sale and  Assignment,  the
Bowmanstown  Blending  Services  Agreement,  the Confirmation  and Release,  the
Environmental  Indemnification  Agreement,  the Equipment Lease  Agreement,  the
Escrow Agreement, the Estimated Net Working Capital Agreement, the Quincy Lease,
the  Stockholder  Agreement  Amendment,  the MnO Supply  Agreement,  the Minimum
Working  Capital  Letter,  the Real  Estate  Option,  the Red Iron Oxide  Supply
Agreement,  the  Prince  Agri  Bill of Sale,  the  Storage  Space  License,  the
Trademark  Agreement,  the Transition  Services  Agreement and the Real Property
Deeds.

      "Transferred Employees" has the meaning set forth in Section 10.5(a).

      "Transition Plans" has the meaning set forth in Section 10.5(e).

      "Transition Services Agreement" has the meaning set forth in Section 8.16.

      12. INDEMNIFICATION.

      12.1. Indemnity By The Phibro Parties. Subject to the overall limitations,
minimum  amounts and time  limitations  set forth in Section  12.5,  each of the
Phibro  Parties,  jointly  and  severally,  agrees  to  indemnify  and  hold the
Palladium Parties (and their respective  directors,  officers,  representatives,
employees and Affiliates)  harmless from and with respect to any and all claims,
liabilities, losses, damages, costs and expenses, including, without limitation,
the reasonable fees and disbursements of counsel  (collectively,  the "Losses"),
arising out of any of the following:

      (a) any failure or any breach by any Phibro Party of any representation or
warranty,  covenant,  obligation or undertaking made by any or all of the Phibro
Parties in this  Agreement,  any  Schedule  hereto,  any  certificate  delivered
pursuant hereto on the Closing Date (including,  without limitation, the Closing
Calculation  Certificate) or the Minimum  Working Capital Letter;  provided that
this  clause  (a)  shall  not  apply  to  any  breach  by  the  Company  of  any
representation or warranty set forth in Section 5.11;

      (b) any claim or liability arising under the bulk sales or similar laws of
any jurisdiction in connection with transactions  contemplated by this Agreement
(in view of such  indemnification  obligation the Palladium Parties hereby waive
the Phibro  Parties'  compliance with any such bulk sales laws as a condition to
the Closing hereunder);

      (c) the Excluded  Liabilities,  except to the extent otherwise provided in
the Environmental Indemnification Agreement; or


                                       52
<PAGE>

      (d) any liability of Prince with respect to any of the items  disclosed on
Schedule 12.1(d).

      12.2. Indemnity By The Palladium Parties.

      (a)  Subject  to  the  overall  limitations,   minimum  amounts  and  time
limitations  set forth in Section  12.5  below,  Acquisition  Company  agrees to
indemnify and hold the Phibro Parties  harmless from and with respect to any and
all Losses  arising out of (i) any failure or breach by  Acquisition  Company of
any  representation  or warranty,  covenant,  obligation or undertaking  made by
Acquisition  Company in this Agreement or in any certificate  delivered pursuant
hereto on the Closing Date or (ii) any Assumed Obligations.

      (b)  Subject  to  the  overall  limitations,   minimum  amounts  and  time
limitations  set  forth  in  Section  12.5  below,  each  Investor  Stockholder,
severally  and not  jointly,  agrees to  indemnify  and hold the Phibro  Parties
harmless from and with respect to any and all Losses  arising out of any failure
or  breach by such  Investor  Stockholder  of any  representation  or  warranty,
covenant,  obligation or undertaking  made by such Investor  Stockholder in this
Agreement.

      12.3. Claims.

      (a) Notice.  Any Phibro Party or Palladium  Party seeking  indemnification
hereunder (the  "Indemnified  Party",  which term shall include all  Indemnified
Parties if there are more than one) shall  promptly  notify the other Party (the
"Indemnifying Party", which term shall include all Indemnifying Parties if there
are more than one) of any action, suit, proceeding, demand or breach (a "Claim")
with respect to which the Indemnified  Party claims  indemnification  hereunder,
provided  that  failure of the  Indemnified  Party to give such notice shall not
relieve the  Indemnifying  Parties of their  obligations  under this  Section 12
except to the extent, if at all, that such Indemnifying  Parties shall have been
prejudiced thereby.

      (b)  Third  Party  Claims.  If any  Claim  relates  to any  action,  suit,
proceeding or demand instituted against an Indemnified Party by a third party (a
"Third Party Claim"), the following provisions shall apply:

            (i) The Indemnifying Party will have the right to assume the defense
      of the Third Party Claim with  counsel of such Party's  choice  reasonably
      satisfactory to the Indemnified Party at any time within 30 days after the
      Indemnified  Party has given  notice of the Third Party  Claim;  provided,
      however, that the Indemnifying Party must conduct the defense of the Third
      Party Claim in a  commercially  reasonable  manner  thereafter in order to
      preserve  its  rights  in this  regard;  and  provided  further  that  the
      Indemnified Party may retain separate counsel at its sole cost and expense
      and participate in the defense of the Third Party Claim.

            (ii) So long as the Indemnifying Party has assumed and is conducting
      the defense of the Third Party Claim in accordance with Section 12.3(b)(i)
      above,  (A) the  Indemnifying  Party will not  consent to the entry of any
      judgment  or enter into any  settlement  with  respect to the Third  Party
      Claim without the prior written consent of the  Indemnified  Party (not to
      be withheld  unreasonably)  unless the  judgment  or  proposed  settlement
      involves only the payment of money damages by the  Indemnifying  Party and
      does  not  impose  an


                                       53
<PAGE>

      injunction or other equitable  relief upon the  Indemnified  Party and (B)
      subject to  Section  12.3(b)(iv)  below,  the  Indemnified  Party will not
      consent to the entry of any  judgment  or enter into any  settlement  with
      respect to the Third Party Claim without the prior written  consent of the
      Indemnifying Party.

            (iii) In the  event  the  Indemnifying  Party  does not  assume  and
      conduct the defense of the Third Party Claim in  accordance  with  Section
      12.3(b)(i) above, the Indemnified Party may defend against the Third Party
      Claim in any manner such Party reasonably may deem  appropriate,  provided
      the Indemnifying Party may participate in such action at its own expense.

            (iv) Anything to the contrary notwithstanding, the Indemnified Party
      shall have the right to settle or  compromise,  or cause the  Indemnifying
      Party  to  settle  or   compromise,   any  Third  Party  Claim  for  which
      indemnification  is sought by the Indemnified  Party from the Indemnifying
      Party  hereunder;  provided,  however,  that (i) unless the prior  written
      consent of the  Indemnifying  Party to such  settlement  or  compromise is
      first obtained by the Indemnified  Party, the Indemnifying Party shall not
      be liable to the  Indemnified  Party with  respect to any amounts  paid or
      payable  by  the   Indemnified   Party  pursuant  to  such  settlement  or
      compromise, (ii) if the Indemnifying Party does consent to such settlement
      or compromise, the Indemnifying Party's liability to the Indemnified Party
      in respect thereof shall, subject to the limitations  contained in Section
      12.5, be the full amount paid or payable by the Indemnified Party pursuant
      to such  settlement or  compromise  and the  Indemnified  Party will, as a
      condition  to such  settlement  or  compromise,  obtain  the  release  and
      discharge of each of the  Indemnifying  Parties from any and all liability
      to the claimant, and (iii) if the Indemnifying Party refuses to consent to
      such settlement or compromise  and, as a result  thereof,  the Indemnified
      Party elects not to effect such settlement or compromise, and, thereafter,
      judgment  adverse to the  Indemnified  Party is entered in respect of such
      Third  Party  Claim or such Third  Party  Claim is settled or  compromised
      after the date of such refusal in accordance  with this Section 12.3,  the
      Indemnifying Party shall, subject to the limitations  contained in Section
      12.5 with respect to the Losses such Indemnified Party would have incurred
      if the  Indemnifying  Party had given its prior  written  consent  to such
      rejected  settlement  or  compromise  (the  "Initial  Settlement  Proposal
      Losses"),  be liable to the  Indemnified  Party in respect thereof for the
      full amount of Losses incurred by the Indemnified Party in respect of such
      Third Party Claim, including without limitation, the amount of such Losses
      that are in excess of the Initial  Settlement  Proposal  Losses,  and such
      excess Losses shall not be subject to the limitations set forth in Section
      12.5 and shall not count towards the General Limit and the Maximum Amount.

      12.4. Method and Manner of Paying Claims. In the event of any Claims under
this Section 12, the Indemnified Party shall advise the Indemnifying  Parties in
writing of the amount and circumstances  surrounding such Claim. With respect to
liquidated claims, if within thirty (30) days the Indemnifying  Parties have not
contested  such claim in writing,  the  Indemnifying  Parties  will pay the full
amount thereof  within ten days after the expiration of such period.  The unpaid
balance of a Claim  shall bear  interest  at a rate per annum  equal to the rate
announced by Citibank,  N.A.,  as its "Base Rate" plus two percent (2%) from the
date thirty (30) days after written notice  thereof is given by the  Indemnified
Party to the Indemnifying Party pursuant hereto.


                                       54
<PAGE>

      12.5. Limitations On Indemnification.

      (a) No  Indemnifying  Party shall be required to indemnify an  Indemnified
Party  hereunder  except to the extent that (i) the  aggregate  amount of Losses
with respect to any claim or series of related  claims for which an  Indemnified
Party is  otherwise  entitled to  indemnification  pursuant  to this  Section 12
exceeds $12,500  (excluding costs of investigation and legal fees) (the "Minimum
Claim Amount") (it being  understood that no Indemnifying  Party shall be liable
for any Losses  with  respect  to any claim or series of  related  claims in the
event that such Losses are less than the  Minimum  Claim  Amount),  and (ii) the
aggregate amount of Losses for which the Indemnified Party is otherwise entitled
to   indemnification   pursuant  to  this  Section  12  and  the   Environmental
Indemnification  Agreement exceeds $210,000 (the "Deductible  Amount") (it being
understood and agreed that (A) any claims or series of related claims for Losses
of less than the Minimum  Claim  Amount  shall be  disregarded  for  purposes of
calculating the Deductible Amount and (B) the Deductible Amount is intended as a
deductible,  and except as set forth in this Section 12.5, no Indemnifying Party
shall be liable for any  Losses  less than the  Deductible  Amount for which the
Indemnified  Party is  otherwise  entitled to  indemnification),  whereupon  the
Indemnified  Party  shall be  entitled  to be paid the  excess of the  aggregate
amount of all such Losses over $210,000,  subject to the  limitations on maximum
amount of recovery set forth in this Section 12.5;  provided that Losses arising
out of (u) any  claims  for  indemnification  made under  Section  12.1(a)  with
respect to any  inaccuracies  in any  representation  or warranty in the Closing
Calculation  Certificate  delivered pursuant to Section 8.25, (v) any claims for
indemnification  made under  Section  12.1(a)  with respect to any breach of any
covenant,  obligation  or  undertaking  of any of the  Phibro  Parties  in  this
Agreement (including,  without limitation,  Backstop Claims), (w) any claims for
indemnification made under Sections 12.1(b), 12.1(c) 12.1(d) or 12.2(a)(ii), (x)
any claims for indemnification made under Section 12.2(a)(i) with respect to any
breach of any covenant, obligation or undertaking of Acquisition Company in this
Agreement,  (y) any claims for  indemnification  made under Section 12.2(b) with
respect to any breach of any covenant, obligation or undertaking of any Investor
Stockholder  in this  Agreement or (z) any Fraud Claim  (collectively,  all such
Losses  referred to in this proviso being referred to herein as  "Non-Deductible
Claims"),  shall,  subject to the provisions of 12.5(c), be indemnified in their
entirety by the  Indemnifying  Party and shall not be subject to the limitations
set forth in this  Section  12.5(a).  The  Non-Deductible  Claims will not count
towards or reduce the Deductible Amount.

      (b) The aggregate Losses payable by the Phibro Parties pursuant to Section
12.1 above with respect to all Claims (other than (i) the Non-Deductible Claims,
(ii) Losses  arising out of any claims for  indemnification  made under  Section
12.1(a) with respect to any inaccuracies in any  representation or warranty made
by the Phibro Parties in Sections  5.10(a),  5.15,  5.23, 5.27, 5.28 or 5.29 and
(iii)   Fraud   Claims   (collectively   "Maximum   Amount   Limited   Claims"))
(collectively,  the "General  Claims")  shall not exceed an amount (such amount,
the "General Limit") equal to $5,000,000, less any amount previously paid by the
Phibro  Parties  pursuant to this  Section 12 or  pursuant to the  Environmental
Indemnification  Agreement (excluding,  in any case, any amounts paid in respect
of Fraud Claims).

      (c) The aggregate  Losses  payable by the Phibro  Parties to the Palladium
Parties in respect of Maximum Amount Limited Claims (other than Backstop Claims)
shall  not  exceed  an amount  (such  amount,  the  "Maximum  Amount")  equal to
$15,000,000 less amounts  previously paid by the Phibro Parties pursuant to this
Section 12 or pursuant to the Environmental Indemnification Agreement.

      (d) No Indemnifying  Party shall be liable for any Losses pursuant to this
Section 12 unless a written claim for indemnification in accordance with Section
12.4 is given by the Indemnified  Party to the  Indemnifying  Party with respect
thereto within twenty-four (24) months after the Closing,  except that this time
limitation  shall not apply to any Losses of any Palladium  Party arising out of
any


                                       55
<PAGE>

claims  relating  to the  Maximum  Amount  Limited  Claims  (including,  without
limitation, Backstop Claims), as to which in each case the applicable statute of
limitations shall apply.

      (e) Each of the Phibro Parties and the Palladium Parties  acknowledges and
agrees that, except for equitable relief,  including specific  performance,  its
sole and  exclusive  remedy with  respect to the  subject  matter of any and all
claims  relating to this  Agreement  shall be  pursuant  to the  indemnification
provisions of this Section 12, other than with respect to Environmental  Claims.
The sole and exclusive  remedy of either of the Phibro  Parties or the Palladium
Parties, as applicable,  with respect to any matter arising under or relating to
Environmental   Laws   (including,    without   limitation,   any   claims   for
indemnification with respect to any inaccuracy in any representation or warranty
made by the  Company in Section  5.11)  (collectively,  "Environmental  Claims")
shall be as set forth in the Environmental  Indemnification Agreement. Except as
set forth in Sections  12.5(a),  12.5(b),  12.5(c) and 12.5(g) and except as set
forth in the  Environmental  Indemnification  Agreement,  the provisions of this
Section 12 shall not be applicable to or affected by any Environmental Claims.

      (f) The amount of any Losses for which  indemnification  is provided under
this Agreement shall be net of any amounts actually recovered by the Indemnified
Party from third parties  (including  amounts actually recovered under insurance
policies) with respect to such Losses.  The Indemnified  Party agrees to use all
reasonable efforts to obtain payment under any applicable  policies of insurance
available  to the  Indemnified  Party  for  Losses  with  respect  to which  the
Indemnified  Party is seeking  indemnification  pursuant to this Section 12. Any
Indemnifying   Party  hereunder  shall  be  subrogated  to  the  rights  of  the
Indemnified Party as against any relevant insurance company upon payment in full
of the amount of the  relevant  indemnifiable  loss.  If any  Indemnified  Party
recovers  an  amount  from a third  party in  respect  of any  Losses  for which
indemnification  is  provided  in this  Agreement  after the full amount of such
Losses has been paid by the Indemnifying  Party or after the Indemnifying  Party
has made a partial payment of such Losses and the amount received from the third
party exceeds the remaining unpaid balance of such Losses,  then the Indemnified
Party shall promptly remit to the Indemnifying Party the amount equal to (i) the
sum of (A) the amount  theretofore paid by the Indemnifying  Party in respect of
such  Losses  plus (B) the  amount  received  from the  third  party in  respect
thereof, minus (ii) the full amount of such Losses.

      (g) The Phibro  Parties and the Palladium  Parties agree that with respect
to any  representation,  warranty or covenant  referred to in Section 12.1(a) or
12.2 or in the Environmental  Indemnification Agreement, if such representation,
warranty or covenant  contains a materiality  qualification  (e.g.,  "material,"
"materially,"  "material to the Prince Business," "in all material respects," or
similar  qualifiers),  such materiality  qualification  shall be disregarded for
purposes of  determining a breach of such  representation,  warranty or covenant
for purposes of this Section 12.

      (h) Notwithstanding  anything to the contrary contained herein, the Phibro
Parties  shall be liable  for any and all  Losses  arising  out of any  Backstop
Claims and any such Losses  will not count  towards or be subject to the General
Limit or the Maximum Amount.

      (i) The Palladium  Parties agree to cooperate  with the Phibro  Parties to
assert any contractual  right,  rights to insurance benefits and any other forms
of mitigation of Losses reasonably requested by the Phibro Parties.

      (j) Anything to the contrary notwithstanding:

            (i) The Phibro  Parties shall not have any liability  with regard to
      any matter  covered by this  Section  12, to the extent any  liability  or
      obligation in


                                       56
<PAGE>

      respect of any such  matter(s)  does not exceed the amount of the reserves
      or accruals relating thereto reflected in the Final Closing Statement.

            (ii) The  Phibro  Parties  shall not have any  liability  under this
      Agreement for Losses or under the Environmental  Indemnification Agreement
      for  "Damages"  based on (A) the  diminution  in  enterprise  value of the
      Prince  Business,  (B) any  multiple  of  earnings,  profits or  financial
      condition or performance (including,  without limitation,  EBIT or similar
      financial  performance  criteria),  or (C) the  good  will  of the  Prince
      Business;  provided,  that this clause (ii) shall not limit any  liability
      for Losses  arising  from lost  profits or other  measures of damages that
      would be recoverable as an independent measure of damages.

            (iii) The Phibro  Parties  shall not have any  liability  under this
      AGREEMENT  OR  UNDER  THE  ENVIRONMENTAL   INDEMNIFICATION  AGREEMENT  for
      indirect,   punitive,   incidental,   special  or  consequential  damages,
      including  damages for lost opportunity  costs incurred by any Indemnified
      Party (other than Acquisition  Company or any successor thereto,  WHICH IN
      ANY CASE MAY BE  RECOVERABLE  BY SUCH  INDEMNIFIED  PARTIES  TO THE EXTENT
      PERMITTED BY  APPLICABLE  LAW) whether or not such  INDEMNIFIED  PARTY has
      been advised of the possibility of such damages.  The foregoing limitation
      on liability  in this clause  (iii) shall not apply to any Losses  arising
      out of Fraud Claims or out of any  inaccuracies in any  representation  or
      warranty  made by any of the Phibro  Parties in any of Sections  5.1, 5.2,
      5.4 or 5.8 (to the extent successfully  challenging the validity of any of
      the Transaction  Documents or any of the transactions  contemplated hereby
      or thereby) of this Agreement.

            (iv) NO PARTY  HERETO  MAKES  ANY,  AND  EACH  PARTY  HERETO  HEREBY
      DISCLAIMS  ALL,  REPRESENTATIONS  AND/OR  WARRANTIES,  WHETHER  EXPRESS OR
      IMPLIED,   INCLUDING,   WITHOUT  LIMITATION,  ALL  IMPLIED  WARRANTIES  OF
      MERCHANTABILITY  AND  OF  FITNESS  FOR A  PARTICULAR  PURPOSE,  EXCEPT  AS
      SPECIFICALLY  SET FORTH  HEREIN.  EXCEPT  AS  EXPRESSLY  PROVIDED  HEREIN,
      ACQUISITION  COMPANY  ACKNOWLEDGES  AND AGREES THAT IT IS  PURCHASING  THE
      PRINCE  ASSETS  "AS  IS,  WHERE  IS"  AND  THE  PHIBRO   PARTIES  MAKE  NO
      REPRESENTATION  OR  WARRANTY,  EXPRESS  OR  IMPLIED,  AS TO  THE  QUALITY,
      CONDITION, STATE OF REPAIR, ADEQUACY OR SUFFICIENCY THEREOF.

      13. TERMINATION.  If, the Palladium Parties, or the Phibro Parties, as the
case may be, are unable to consummate the  transactions  contemplated  hereby in
accordance with the terms set forth herein (including,  without limitation, as a
result of the  occurrence of a Prince  Material  Adverse  Change) on or prior to
December 31, 2003,  provided that such inability to consummate such transactions
does not arise primarily from the failure of the Palladium Parties or the Phibro
Parties,  as the case may be, to comply with any of their obligations under this
Agreement  or the other  Transaction  Documents,  the  Palladium  Parties or the
Phibro Parties, as the case may be, may by written notice to the others elect to


                                       57
<PAGE>

terminate  this Agreement and the  obligations  of the Palladium  Parties or the
Phibro Parties, as the case may be, to consummate the transactions  contemplated
hereby.

      14. GENERAL.

      14.1. Survival of Representations and Warranties.  The representations and
warranties  of the  Parties  hereto  contained  in this  Agreement  or the other
Transaction  Documents  (in each case  except as  affected  by the  transactions
contemplated  by this Agreement)  shall be deemed material and,  notwithstanding
any investigation by the Palladium Parties,  shall be deemed to have been relied
on by the Palladium  Parties and shall survive the Closing and the  consummation
of the transactions  contemplated  hereby. Each representation and warranty made
by any of the Phibro Parties or the Palladium  Parties in this  Agreement  shall
expire on the last day, if any, that Claims for breaches of such  representation
or warranty may be made  pursuant to Section  12.5 hereof,  except that any such
representation  or warranty  that has been made the  subject of a written  Claim
received by the Indemnifying Party with respect thereto prior to such expiration
date shall survive with respect to such Claim until the final resolution of such
Claim pursuant to Section 12.

      14.2. Consents To Jurisdiction; Service of Process.

      (a) The Phibro Parties hereby  irrevocably  submit to the  jurisdiction of
any state or  federal  court  sitting  in New York,  New York over any action or
proceeding  arising  out  of or  relating  to  this  Agreement  or  any  of  the
transactions  contemplated  hereby,  and the Phibro Parties  hereby  irrevocably
agree that all claims in respect of any such action or  proceeding  may be heard
and determined in such state or federal  court.  The Phibro Parties agree that a
final  judgment in any such action or proceeding  shall be conclusive and may be
enforced in other  jurisdictions  by suit on the judgment or in any other manner
provided by law.

      (b) Nothing in this Section  14.2 shall affect the right of the  Palladium
Parties to serve legal  process in any other  manner  permitted by law or affect
the right of the Palladium Parties to bring any action or proceeding against any
of  the  Phibro  Parties  or  their  properties  in  the  courts  of  any  other
jurisdiction.

      14.3.  Expenses;  Transaction  Taxes. The Company hereby  acknowledges and
confirms its  obligations  to pay or reimburse the  Palladium  Parties for their
reasonable  out-of-pocket costs and expenses in accordance with the terms of the
Expense  Reimbursement  Agreement.  The Expense  Reimbursement  Agreement  shall
terminate on the Closing Date immediately  upon the Closing.  The Company agrees
to pay or reimburse all expenses of the Palladium  Parties set forth on Schedule
14.3 on or prior to the dates indicated for those expenses on Schedule 14.3. All
excise,  sales, use, value added,  registration stamp,  recording,  documentary,
conveyancing,  franchise,  property,  transfer, gains and similar Taxes, levies,
charges and fees incurred in connection  with the  transactions  contemplated by
this  Agreement  shall be borne by the Phibro  Parties  and shall be paid by the
Phibro  Parties in a timely  manner,  regardless of the Party on whom such Taxes
are imposed by law.  This Section  14.3 shall  survive any  termination  of this
Agreement.

      14.4. Notices.  All notices,  demands and other  communications  hereunder
shall be in writing or by written telecommunication, and shall be deemed to have
been duly given if delivered  personally or if mailed by certified mail,  return
receipt requested,  postage prepaid, or if sent by overnight courier, or sent by
written telecommunication, as follows:

      If to any of the Phibro Parties, to:


                                       58
<PAGE>

      c/o Phibro Animal Health Corporation
      One Parker Plaza
      Fort Lee, New Jersey 07024
      Attention: General Counsel
      Fax:  (201) 944-9537

      with a copy sent contemporaneously to:

      Golenbock, Eiseman, Assor, Bell & Peskoe LLP
      437 Madison Avenue
      New York, New York  10022
      Attention:  Lawrence M. Bell, Esq.
      Fax:  (212) 754-0330

      If to any of the Palladium Parties:

      c/o Palladium Equity Partners, LLC
      Rockefeller Center
      1270 Avenue of the Americas, Suite 2200
      New York, New York 10020
      Attention:  Marcos A. Rodriguez
      Fax:  (212) 218-5155

      with a copy sent contemporaneously to:

      Bingham McCutchen LLP
      399 Park Avenue
      New York, New York 10022
      Attention: Neil W. Townsend, Esq.
      Fax:  (212) 752-5378

Any such notice shall be effective (a) if delivered  personally,  when received,
(b) if sent by overnight  courier,  when receipted for, (c) if mailed,  five (5)
days  after  being  mailed  as  described  above,  and (d) if  sent  by  written
telecommunication, when dispatched.

      14.5.  Entire  Agreement.  This  Agreement  and the Schedules and Exhibits
hereto contains the entire  understanding  of the Parties,  supersedes all prior
agreements  and  understandings  relating to the subject matter hereof and shall
not be amended  except by a written  instrument  hereafter  signed by all of the
Parties hereto.

      14.6. Governing Law. The validity and construction of this Agreement shall
be governed and construed and enforced in accordance with the internal laws (and
not the choice-of-law rules) of the State of New York.

      14.7.  Sections  and  Section  Headings.  The  headings  of  sections  and
subsections  are for  reference  only and shall not limit or control the meaning
thereof.

      14.8.  Assigns.  This  Agreement  shall be  binding  upon and inure to the
benefit  of the  Parties  hereto  and their  respective  heirs,  successors  and
permitted  assigns.  Neither this  Agreement  nor the  obligations  of any Party
hereunder  shall be assignable or  transferable  by such Party without the prior


                                       59
<PAGE>

written consent of the other Parties  hereto;  provided,  however,  that nothing
contained in this Section 14.8 shall  prevent any Palladium  Party,  without the
consent of the Phibro Parties, (a) from transferring or assigning this Agreement
or its rights or obligations hereunder to another entity controlling,  under the
control of, or under common control with any such Palladium  Party,  or which is
acquiring all or  substantially  of the assets of such Palladium  Party,  or (b)
from  assigning  all or part of its rights or  obligations  hereunder  by way of
collateral  assignment to any bank or financing  institution providing financing
to  Acquisition  Company.  Notwithstanding  the  foregoing,  prior to the Resale
Transaction,  the Investor  Stockholders may not assign or transfer their rights
under Section 4.3 (other than the right to receive payments or proceeds thereof)
to any Person (other than an Affiliate of the Investor Stockholders) without the
prior written consent of the Company.

      14.9.  Severability.  In the event that any covenant,  condition, or other
provision herein contained is held to be invalid,  void, or illegal by any court
of competent  jurisdiction,  the same shall be deemed to be  severable  from the
remainder of this  Agreement and shall in no way affect,  impair,  or invalidate
any other covenant, condition, or other provision contained herein.

      14.10. Further Assurances. The Parties agree to take such reasonable steps
and execute such other and further  documents as may be necessary or appropriate
to cause the terms and conditions contained herein to be carried into effect.

      14.11.  No  Implied  Rights Or  Remedies.  Except as  otherwise  expressly
provided  herein,  nothing  herein  expressed or implied is intended or shall be
construed  to confer upon or to give any Person,  other than the Phibro  Parties
and the Palladium Parties and their respective shareholders,  if any, any rights
or remedies under or by reason of this Agreement.

      14.12.   Counterparts.   This   Agreement  may  be  executed  in  multiple
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

      14.13.  Satisfaction of Conditions  Precedent.  The Phibro Parties and the
Palladium   Parties  will  use  their  respective  best  efforts  to  cause  the
satisfaction of the conditions precedent contained in this Agreement;  provided,
however,  that nothing  contained in this Section 14.13 shall obligate any Party
hereto to waive any right or  condition  under  this  Agreement  or to incur any
material  expense that would not  reasonably  be expected to be incurred by such
Party in  satisfying  such  conditions in connection  with  transactions  of the
nature contemplated by this Agreement.

      14.14.  Public  Statements Or Releases.  Each of the Parties hereto agrees
that prior to the  consummation  of the Closing no Party to this  Agreement will
make, issue or release any public  announcement,  statement or acknowledgment of
the  existence of, or reveal the status of, this  Agreement or the  transactions
provided for herein,  without  first  obtaining the consent of the other Parties
hereto.  Nothing  contained in this Section 14.14 shall prevent any Party hereto
from making such  disclosures  as such Party may  consider  necessary to satisfy
such Party's legal or contractual obligations.

      14.15. Knowledge. Whenever the phrase "to the knowledge of" a Phibro Party
or another  similar  qualification  is used  herein,  such Phibro Party shall be
deemed to have knowledge of any particular fact or other matter only if: (a) any
executive  officer  of such  Phibro  Party  or a  Specified  Person  has  actual
knowledge  of such fact or  matter or (b) any  person  serving  as an  executive
officer of such Phibro Party (in such capacity) or any Specified  Person serving
in the  capacity  that such  Specified  Person  serves with a Phibro Party or an
Affiliate  of a  Phibro  Party  would  reasonably  be  expected  to have  actual
knowledge of such fact or matter.


                                       60
<PAGE>

      14.16.  Prince Agri.  References in Sections 5.2, 5.4, 5.5, 5.8 and 5.9 to
Prince or the Phibro Parties shall be deemed to include Prince Agri with respect
to the Prince Agri  Transferred  Assets and the  Transaction  Documents to which
Prince Agri is a party.

      14.17. No Offset. The Parties payment obligations under this Agreement are
absolute  and  unconditional  and  shall not be  subject  to any  diminution  by
set-off, abatement,  counterclaim,  withholding, deduction or otherwise, whether
in connection with or arising out of this Agreement or any other agreement among
or between the Parties.

      14.18. Phibro Disclosure Schedules.  For purposes of this Agreement,  with
respect to any matter  that is  described  in any one of the  Schedules  for any
representation  set forth in Section 5 of this Agreement (the "Phibro Disclosure
Schedules") in such a way as to make its relevance to the information called for
by another  representation in Section 5 of this Agreement  reasonably  apparent,
such  matter  shall be deemed to have been  included  in the  Phibro  Disclosure
Schedules in response to such other representation, notwithstanding the omission
of  any   appropriate   cross-reference   thereto.   Anything  to  the  contrary
notwithstanding,  no matter  will be deemed to be  disclosed  in response to the
representations set forth in clauses (a) or (c) of Section 5.7 or Sections 5.15,
5.17,  5.19 or 5.27 based on the foregoing  sentence  (unless it is specifically
disclosed or specifically  referenced in the Schedule that is responsive to such
representation).

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       61
<PAGE>

      IN WITNESS WHEREOF,  and intending to be legally bound hereby, the Parties
hereto have caused this  Agreement to be duly executed and delivered as a sealed
instrument as of the date and year first above written.

                                THE PALLADIUM PARTIES

                                PALLADIUM EQUITY PARTNERS II, L.P.

                                By: Palladium Equity Partners II, L.L.C.

                                By: /s/ Marcos A. Rodriguez
                                   ---------------------------------------------
                                   Name:  Marcos A. Rodriguez
                                   Title: Managing Member

                                PALLADIUM EQUITY PARTNERS II-A, L.P.

                                By: Palladium Equity Partners II, L.L.C.

                                By: /s/ Marcos A. Rodriguez
                                   ---------------------------------------------
                                   Name:  Marcos A. Rodriguez
                                   Title: Managing Member

                                PALLADIUM EQUITY INVESTORS II, L.P.

                                By: Palladium Equity Partners II, L.L.C.

                                By: /s/ Marcos A. Rodriguez
                                   ---------------------------------------------
                                   Name:  Marcos A. Rodriguez
                                   Title: Managing Member

                                PRINCE MINERAL COMPANY, INC.

                                By: /s/ Kevin L. Raymond
                                   ---------------------------------------------
                                   Name:  Kevin L. Raymond
                                   Title: President


                                       62
<PAGE>

                                THE PHIBRO PARTIES:

                                PHIBRO ANIMAL HEALTH CORPORATION PRINCE MFG LLC

                                By: /s/ Jack C. Bendheim
                                   ---------------------------------------------
                                   Name:  Jack C. Bendheim
                                   Title: President

                                PRINCE MFG LLC

                                By: /s/ David C. Storbeck
                                   ---------------------------------------------
                                   Name:  David C. Storbeck
                                   Title: Vice President

                                THE PRINCE MANUFACTURING COMPANY

                                By: /s/ David C. Storbeck
                                   ---------------------------------------------
                                   Name:  David C. Storbeck
                                   Title: Vice President


                                       63
<PAGE>

Schedules:
- ----------

Schedule 1.1           Purchase Stock
Schedule 2.1(a)        Real Estate
Schedule 2.1(b)        Equipment
Schedule 2.1(c)        Motor Vehicles
Schedule 2.1(e)        Personal Property Leases
Schedule 2.1(g)        Employee Agreements
Schedule 2.1(h)        Other Contracts
Schedule 2.1(j)        Intangibles
Schedule 2.1(l)        Business Accounts and Certificates of Deposit
Schedule 2.2           Excluded Assets
Schedule 2.4(b)        Interim Balance Sheet Liabilities
Schedule 2.4(d)        Other Assumed Obligations
Schedule 2.5(k)        Employee Benefit Plan Liabilities
Schedule 2.5(m)        Obligations of Excluded Assets
Schedule 2.7           Asset Purchase Price Allocation
Schedule 3.2(n)(i)     Prince Agri Bowmanstown Transferred Assets
Schedule 3.2(n)(ii)    Prince Agri Kentucky Street Transferred Assets
Schedule 4.2(a)        Accounting Principles
Schedule 5.3           Subsidiaries
Schedule 5.4           Non-Contravention
Schedule 5.5           Governmental Consents
Schedule 5.6           Financial Statements
Schedule 5.7           Absence of Certain Changes
Schedule 5.8           Litigation
Schedule 5.9(a)        Conformity to Law
Schedule 5.9(c)        Permits
Schedule 5.10(a)       Liens
Schedule 5.10(c)       Excluded Real Property
Schedule 5.11          Environmental Matters
Schedule 5.12          Insurance
Schedule 5.13          Contracts
Schedule 5.14          Compensation of Employees
Schedule 5.15          Employee Benefit Plan
Schedule 5.16          Labor Relations
Schedule 5.17          Potential Conflicts of Interest
Schedule 5.18          Trademarks, Patents, etc.
Schedule 5.19          Suppliers and Customers
Schedule 5.20          Accounts Receivable
Schedule 5.23          Taxes
Schedule 5.24          Indebtedness
Schedule 5.25          Change of Control and 2003 Bonus Obligations
Schedule 5.29          Brokers
Schedule 8.10          Consents
Schedule 8.22          New Employment Agreements
Schedule 10.2(a)       Prince Designation Industry
Schedule 10.2(b)-A     Prince Agri Business
Schedule 10.2(b)-B     Prince Agri Business
Schedule 10.5(a)       Prince Employees
Schedule 11            Permitted Liens


<PAGE>

Schedule 12.1(d)       Indemnified Matters
Schedule 14.3          Palladium Transaction Expenses

Exhibits:
- ---------

Exhibit A              Bill of Sale and Assignment
Exhibit B              Assumption Agreement
Exhibit C              Kentucky Street Deed
Exhibit D              Prince Agri Bill of Sale
Exhibit E              Opinion of Golenbock, Eiseman, Assor, Bell & Pescoe LLP
Exhibit F              Amendment to the Certificate of Incorporation
Exhibit G              Escrow Agreement
Exhibit H              Quincy Office Building Lease
Exhibit I              Real Estate Option
Exhibit J              Transition Services Agreement
Exhibit K              MnO Supply Agreement
Exhibit L              Red Iron Oxide Supply Agreement
Exhibit M              Bowmanstown Blending Services Agreement
Exhibit N              [Intentionally Omitted]
Exhibit O              Environmental Indemnification Agreement
Exhibit P              Confirmation and Release
Exhibit Q              Stockholder Agreement Amendment
Exhibit R              Trademark Agreement
Exhibit S              Advisory Agreement
Exhibit T              Storage Space License
Exhibit U              Equipment Lease Agreement


                                       2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2
<SEQUENCE>4
<FILENAME>e16591ex_2.txt
<DESCRIPTION>ENVIRONMENTAL INDEMNIFICATION AGREEMENT
<TEXT>

                                                                  Execution Copy

                     ENVIRONMENTAL INDEMNIFICATION AGREEMENT

      THIS  ENVIRONMENTAL  INDEMNIFICATION  AGREEMENT (this "Agreement") is made
and entered  into as of this 26th day of  December,  2003,  by and among  PHIBRO
ANIMAL HEALTH CORPORATION (formerly known as Philipp Brothers Chemicals,  Inc.),
a New York  corporation  (the  "Company"),  PRINCE MFG LLC,  a Delaware  limited
liability company (the "Prince Stockholder"),  THE PRINCE MANUFACTURING COMPANY,
an Illinois  corporation  ("Prince"  and together  with the Company,  the Prince
Stockholder and Prince, the "Phibro Parties"), and PRINCE MINERAL COMPANY, INC.,
a  Delaware  corporation  (the  "Buyer")  (each a  "Party"  and,  together,  the
"Parties").

                              W I T N E S S E T H:

      WHEREAS,  the Phibro Parties,  the Buyer and the shareholders of the Buyer
are parties to a Purchase and Sale  Agreement,  dated as of December 26th,  2003
(the "Purchase  Agreement"),  pursuant to which, among other things,  Prince has
agreed to convey to the Buyer, and the Buyer has agreed to purchase from Prince,
the Prince Assets (as defined in the Purchase Agreement);

      WHEREAS, the Prince Assets include,  among other things, the real property
listed  in  Schedule  2.1(a)  to  the  Purchase   Agreement  (the  "Prince  Real
Property");

      WHEREAS,  in  connection  with the closing of the  transactions  under the
Purchase Agreement, a subsidiary of the Company, Prince Agri Products, Inc., has
agreed to convey the  Kentucky  Street  Property  (as  defined  in the  Purchase
Agreement)  (the Prince Real  Property  and the  Kentucky  Street  Property  are
referred to herein as the "Real Property") to the Buyer; and

      WHEREAS,  the Phibro  Parties and the Buyer desire to  allocate,  as among
themselves, obligations and liabilities after the Closing in respect of Existing
Environmental Conditions (defined below) and certain other environmental matters
as set forth herein;

      NOW THEREFORE,  in consideration of the mutual promises and agreements set
forth herein, the Parties agree as follows:

      1. Indemnification.

            (a) Phibro Parties Indemnified Matters.

      Subject to the limitations and minimum amounts in Section 1(c) below,  the
Phibro Parties agree, jointly and severally,  to indemnify,  defend and hold the
Buyer (and its respective shareholders,  officers, directors, employees, agents,
successors and assigns) (collectively, the "Buyer Indemnified Parties") harmless
from and against any and all Third Party Claims or Damages  (including,  without
limitation,  costs  associated  with the  performance  of  Response  Actions  as
described in Section 2(a) of this Agreement) to the extent arising out of any of
the following (the "Phibro Parties Indemnified Matters"):

            (i) any Existing Environmental Conditions;

            (ii) any Third Party  Claims to the extent  alleging  exposure to or
Damages  arising from any Existing  Environmental  (ii)  Conditions,  including,
without  limitation,  (A) all  litigation  matters listed in Schedule 5.8 of the
Purchase Agreement or (B) all Third Party Claims relating to the Release of


<PAGE>

or exposure to Hazardous  Materials  from any  inventory,  products,  materials,
processes or  operations  of the Prince  Business or at the Real  Property on or
before the Closing Date;

            (iii) any breach of the  representations  and warranties made by any
of the Phibro  Parties in Sections  5.9(c) (with respect to Permits issued under
or relating to Environmental Laws) or 5.11 of the Purchase Agreement;

            (iv)  (1)  the  assessment  of any  fine or monetary  penalty levied
by a Governmental  Authority on the Buyer for any violation or alleged violation
of  Environmental  Laws as in effect as of the Closing Date  associated with the
Real  Property  or the  Prince  Business,  but  only  to the  extent  that  such
assessment is caused by a violation occurring on or prior to the Closing Date or
arises from any violation described in Schedule A hereto, and (2) except for the
matters described on Schedule A hereto, all costs and expenses required to bring
the Real  Property  or the  Prince  Business  into  compliance  with  applicable
Environmental Laws as in effect as of the Closing Date; or

            (v) any past,  present  or future  Damages,  Third  Party  Claims or
claims by any  Governmental  Authority  arising from any Excluded  Real Property
(including, without limitation, the Blue Mountain Property),  including, without
limitation, Damages or Third Party Claims arising from (1) the actual or alleged
presence,  Release of, or exposure to any  Hazardous  Materials at, on, under or
emanating  from any Excluded Real  Property,  whether known or unknown,  (2) any
Hazardous  Materials generated at or transported from any Excluded Real Property
and disposed of or stored at off-site locations, (3) any violation of applicable
Environmental Laws at any Excluded Real Property, and (4) any acts or omissions,
or conditions  at the Excluded  Real Property that give rise to liability  under
any Environmental Law.

            (b) Buyer Indemnified Matters.

      Except as provided  in Section 3 of this  Agreement,  the Buyer  agrees to
indemnify,   defend  and  hold  the  Phibro   Parties   (and  their   respective
shareholders,  officers,  directors,  employees, agents, successors and assigns)
harmless from and against any and all Third Party Claims or Damages  (including,
without limitation, costs associated with the performance of Response Actions as
described in Section 2(b) of this Agreement) to the extent arising out of any of
the following (the "Buyer Indemnified Matters"):

            (i) the Release of, or exposure to any  Hazardous  Materials at, on,
under or emanating from any Real Property that occurs after the Closing Date;

            (ii) any Hazardous  Materials  generated or produced by the Buyer or
the Prince  Business or  transported  from any Real  Property and disposed of or
stored at off-site locations after the Closing Date;

            (iii) any  violation of any  Environmental  Laws by the Buyer or the
Buyer's  agents,  representatives  or employees or by the Prince Business at any
Real Property to the extent such violation  occurs after the Closing Date and is
not caused by,  related to or in  continuation  of any  violations of applicable
Environmental  Laws by the Prince  Business  or at any Real  Property  occurring
prior to the Closing Date; or

            (iv) any Third Party  Claims  relating to the Release of or exposure
to Hazardous  Materials from any inventory,  products,  materials,  processes or
operations of the Prince  Business or at the Real Property where such Release or
exposure occurs after the Closing Date.


                                      -2-
<PAGE>

            (c) Limitations on Indemnity.

            (i) Minimum Claim Amount.  The Phibro  Parties shall not be required
to indemnify  any Buyer  Indemnified  Party under this  Agreement  except to the
extent that (A) the  aggregate  amount of Damages  with  respect to any claim or
series of related  claims for which the Buyer  Indemnified  Parties is otherwise
entitled to  indemnification  pursuant to this Agreement  exceeds the following:
(1) with respect to any claim for indemnification  made under Section 1(a)(i) or
(iv)(2) ("Special Environmental Claims"),  $50,000 (excluding legal fees and the
Buyer's costs for investigation as described in Section 2(c) of this Agreement);
and (2) with  respect  to any  claim  for  indemnification  made  under  Section
1(a)(iii), $12,500 (excluding legal fees and the Buyer's costs for investigation
as described in Section 2(c) of this Agreement)  (each a "Minimum Claim Amount")
(it being  understood  and agreed,  with  respect to each of clause (1) and (2),
that the Phibro  Parties shall not be liable for any Damages with respect to any
claim or series of related  claims in the event that such  Damages are less than
the applicable  Minimum Claim Amount,  and if such aggregate  amount exceeds the
applicable  Minimum Claim Amount,  then the Buyer  Indemnified  Parties shall be
entitled to indemnification for the full amount of such Damages,  subject to the
deductible  and  limitations  on maximum  amount of  recovery  set forth in this
Section 1(c)), and (B) with respect to claims made under Section 1(a)(iii),  the
aggregate  amount  of  Damages  for  which the  Buyer  Indemnified  Parties  are
otherwise entitled to indemnification pursuant to this Agreement and pursuant to
Section 12 of the Purchase Agreement exceeds $210,000 (the "Deductible  Amount")
(it being  understood  and agreed,  with  respect to claims  made under  Section
1(a)(iii),  that (1) any claim or series of related claims for Damages less than
the  applicable  Minimum  Claim  Amount  shall be  disregarded  for  purposes of
calculating the Deductible Amount and (2) the Deductible Amount is intended as a
deductible, and the Phibro Parties shall not be liable for any Damages less than
the  Deductible  Amount for which the Buyer  Indemnified  Parties are  otherwise
entitled to  indemnification),  whereupon the Buyer Indemnified Parties shall be
entitled to be paid the excess of the aggregate  amount of all such Damages over
$210,000,  subject to the  limitations  on maximum  amount of recovery set forth
elsewhere in this Section 1(c); provided,  however,  that Damages arising out of
any claim for indemnification  made under Section 1(a)(ii),  (iv)(1) or (v), any
Fraud  Claim  (as  defined  in  the  Purchase  Agreement),   or  any  claim  for
indemnification  for the assessment of any fine or monetary  penalty relating to
matters   described   in  Schedule  A  hereto   (collectively,   "Non-Deductible
Environmental  Claims") shall,  subject to the other provisions of Section 1(c),
be  indemnified in their entirety by the Phibro Parties and shall not be subject
to  the  Minimum  Claim  Amount.   Neither  Special   Environmental  Claims  nor
Non-Deductible  Environmental Claims will count towards or reduce the Deductible
Amount.  Notwithstanding  anything contained herein to the contrary, the matters
described  on Schedule A shall not be subject to  indemnification  by the Phibro
Parties nor considered Phibro Parties Indemnified Matters,  except to the extent
of the assessment of any fine or monetary penalty relating to matters  described
on Schedule A hereto.

            (ii) General Limit.  The aggregate  amount of Damages payable by the
Phibro Parties  pursuant to Section  1(a)(iii)  above shall not exceed an amount
(such amount,  the "General Limit") equal to $5,000,000 less amounts  previously
paid by or on  behalf  of the  Phibro  Parties  pursuant  to this  Agreement  or
pursuant to Section 12 of the Purchase  Agreement  (excluding,  in any case, any
amounts paid in respect of Fraud Claims).

            (iii) Maximum Amount. The aggregate amount of Damages payable by the
Phibro  Parties  pursuant  to Section  1(a)(i),  (ii),  and (iv) above shall not
exceed an amount (such amount,  the "Maximum  Amount") equal to $15,000,000 less
amounts  previously paid by or on behalf of the Phibro Parties  pursuant to this
Agreement or pursuant to Section 12 of the Purchase Agreement.


                                      -3-
<PAGE>

            (iv)  No  Limitations  on  Indemnity  for  Excluded  Real  Property.
Notwithstanding  anything to the contrary  contained herein,  the Phibro Parties
shall  be  liable  for  any  and  all  Damages  arising  out  of any  claim  for
indemnification  made under Section  1(a)(v) and any such Damages will not count
towards or be subject to the thresholds or limitations on liability set forth in
this Agreement  (including,  without  limitation,  the Minimum Claim Amount, the
General Limit or the Maximum Amount).

            (v)  Consequential  Damages.  The  limitations  on  liability of the
Phibro  Parties  set forth in clauses  (ii) and (iii) of Section  12.5(j) of the
Purchase Agreement are hereby  incorporated by reference and made a part of this
Agreement with respect to liability under this Agreement.

            (vi)  Changes to  Environmental  Laws after the Closing  Date.  If a
Response  Action that would not be required as of the Closing Date (whether then
known or unknown)  under  Environmental  Laws in effect as of that time  becomes
necessary after the Closing Date to the extent of a change in Environmental Laws
after the Closing Date, the Phibro Parties shall not be responsible for the cost
or performance of such Response Action.  To the extent that the performance of a
Response  Action,  that is or would be  required  as of the  Closing  Date under
Environmental Laws in effect as of that time, becomes more costly due to changes
in  Environmental  Laws after the  Closing  Date,  the Phibro  Parties  shall be
responsible for performing Response Actions to the Least Stringent Environmental
Standards as provided in Section 2(a) of this Agreement.

            (d) No Assumption of Liability by the Buyer.

      Anything to the contrary notwithstanding,  the Buyer shall not assume, and
shall not be deemed to have assumed,  any liability or obligation for any of the
Phibro Parties Indemnified  Matters.  Without limiting the provisions of Section
1(c),  neither the  thresholds or  limitations on liability in Section 1(c) with
respect to  indemnification  nor any failure of the Phibro  Parties to indemnify
the Buyer shall be  construed to imply or create an  assumption  of liability by
the Buyer of any Phibro Parties Indemnified Matter.

      2. Performance of Response Actions.

            (a) Performance of Response  Actions for Phibro Parties  Indemnified
Matters.

      The Phibro  Parties agree that they shall cause the  Consultant to perform
the Response Actions relating to Phibro Parties  Indemnified Matters at the Real
Property  in  accordance  with  applicable   Environmental  Laws  and  generally
acceptable engineering standards to the Least Stringent Environmental Standards.
All costs for the  performance  of Response  Actions  which are Phibro  Parties'
Indemnified  Matters  hereunder  shall be at the  Phibro  Parties  sole cost and
expense,  subject to Section 1(c) of this  Agreement.  The Buyer shall grant the
Phibro  Parties and the  Consultant  reasonable  access to the Real  Property at
reasonable  times upon  reasonable  prior notice for the performance of Response
Actions.  The Buyer shall make available to the Phibro Parties,  upon reasonable
notice and at reasonable  times,  employees of the Prince  Business or the Buyer
who  have  supervisory  responsibility  for  environmental  matters  at any Real
Property.  The Phibro  Parties agree that they shall cause the Consultant to use
commercially  reasonable  efforts to minimize or avoid any interference with the
conduct of operations at any Real Property.  The Phibro Parties shall also cause
the  Consultant  to perform such  Response  Actions in a timely and  workmanlike
manner. The Phibro Parties agree to cause the Consultant to obtain and maintain,
in full  force and  effect  during  the  period of time that the  Consultant  is
engaged in the  performance  of  Response  Actions  relating  to Phibro  Parties
Indemnified Matters,  comprehensive general liability insurance and professional
liability insurance covering all work to be performed at the


                                      -4-
<PAGE>

Real Property,  in a minimum  coverage  amount of $2,000,000 for personal injury
and property damage and errors and omissions.  Prior to the  commencement of any
Response  Actions,  the Consultant shall provide the Buyer with  certificates of
insurance  evidencing  such  coverage  and  naming  the  Buyer as an  additional
insured.  The Phibro  Parties  shall  restore any portions of any Real  Property
affected by the Response Actions relating to Phibro Parties  Indemnified Matters
as soon as  practicable  after  completion  of such  Response  Actions and shall
promptly  complete such restoration in a commercially  reasonable  manner at the
Phibro Parties' expense. The Phibro Parties shall provide copies of all reports,
documents  or  testing  data  to the  Buyer  within  five  (5)  days  after  the
preparation  by it or by the  Consultant  or the  receipt  of same.  The  Phibro
Parties  shall not file or submit  any  written  documents  to any  Governmental
Authority  relating  to  the  performance  of  Response  Actions,  the  Existing
Environmental Conditions or the Real Property without the prior written approval
of the Buyer,  which approval  shall not be  unreasonably  withheld.  The Phibro
Parties  shall be entitled to control the  performance  of Response  Actions for
Phibro Parties Indemnified Matters, so long as performed in conformance with the
terms and conditions of this Agreement. The Phibro Parties shall be permitted to
contact and  discuss the  performance  of  Response  Actions for Phibro  Parties
Indemnified Matters with the appropriate  Governmental Authority after providing
notice to the Buyer and the Buyer shall have the right to  participate  (or have
its  representatives  participate) in such  discussions at its  discretion.  The
Buyer  shall  have the  right to have its  representatives  present  during  the
performance  of any  Response  Actions and shall have the right to obtain  split
samples during any subsurface  testing at any Real Property.  The Phibro Parties
shall be  responsible  for any fines or penalties  assessed  with respect to the
performance of Response Actions relating to Phibro Parties Indemnified  Matters.
To the extent  that,  during the  performance  of  Response  Actions  for Phibro
Parties  Indemnified  Matters,  any  Hazardous  Material  must  be  disposed  of
off-site, the Phibro Parties shall (or shall cause the Consultant to) dispose of
such Hazardous  Materials in accordance with applicable  Environmental  Laws and
manifest or sign bills of lading with respect to such Hazardous  Materials.  The
Phibro Parties shall  indemnify the Buyer for any Damages  associated  with such
off-site disposal of Hazardous  Materials.  In the event that the Phibro Parties
fail to commence or continue the  performance of any Response Action required by
the  Phibro  Parties  under this  Agreement  within  forty-five  (45) days after
written  notice of such failure from the Buyer (or such shorter period as may be
necessitated  by emergency  situations or applicable  Environmental  Laws),  all
costs and expenses incurred by the Buyer in performing Response Actions or other
obligations  relating to Phibro  Parties  Indemnified  Matters shall  constitute
Damages and shall be indemnified by the Seller.

            (b) Performance of Response Actions for Buyer Indemnified Matters.

      In the event the Buyer  receives  any notice,  claim or demand from any of
the  Phibro  Parties  for  indemnification  of a  Buyer  Indemnified  Matter  in
accordance  with  Sections  12.3 and 12.4 of the Purchase  Agreement,  the Buyer
agrees that it shall cause the Buyer's  Consultant to perform  Response  Actions
relating to Buyer  Indemnified  Matters at the Real Property in accordance  with
applicable  Environmental Laws and generally acceptable  engineering  standards.
All costs for the  performance of Response  Actions which are Buyer  Indemnified
Matters hereunder shall be at the Buyer's sole cost and expense. The Buyer shall
also  cause  the  Buyer's  Consultant  to  perform  Response  Actions  for Buyer
Indemnified  Matters in a timely and workmanlike  manner. In connection with any
Buyer Indemnified Matter for which the Buyer receives a notice,  claim or demand
from any of the Phibro  Parties,  the Buyer shall provide copies of all reports,
documents or testing data relating in whole or in part to such Buyer Indemnified
Matter to the Phibro Parties within five (5) days after the preparation by it or
by the  Consultant  or the receipt of same.  The Buyer shall  provide the Phibro
Parties  copies  of  any  written  documents  filed  with  or  submitted  to any
Governmental Authority relating to the performance of Response Actions for Buyer
Indemnified  Matters for which any of the Phibro Parties has submitted a notice,
claim or  demand.  The Buyer  shall be  responsible  for any fines or  penalties
assessed with respect to the performance of Response  Actions  relating to Buyer
Indemnified  Matters.  To the extent that,


                                      -5-
<PAGE>

during the performance of Response Actions for Buyer  Indemnified  Matters,  any
Hazardous Material must be disposed of off-site, the Buyer shall (or shall cause
Buyer's  Consultant to) dispose of such Hazardous  Materials in accordance  with
applicable  Environmental Laws and manifest or sign bills of lading with respect
to such Hazardous  Materials.  The Buyer shall  indemnify the Phibro Parties for
any Damages associated with such off-site disposal of Hazardous Materials.

            (c) Investigations by the Buyer.

      The Buyer  agrees that it shall not conduct any  voluntary  subsurface  or
other  investigation  of soil and  groundwater at the Real Property  unless such
investigation  is (i) required by a  Governmental  Authority,  (ii) necessary or
reasonably advisable for the sale, conveyance or financing of any Real Property,
(iii)  required by any lender,  (iv)  necessary or reasonably  advisable for the
construction,  expansion,  demolition, repair or maintenance or operation of any
new or  existing  structures,  (v) in  response  to an  emergency  situation  or
imminent hazard, (vi) otherwise required under applicable  Environmental Laws if
such  investigation  is not performed by the Phibro  Parties within a reasonable
period of time after the Phibro Parties are notified of such requirement,  (vii)
if there is reasonable  cause to believe  there was a material  violation of any
representations  and warranties  made by the Phibro Parties under Section 5.9(c)
or Section 5.11 of the Purchase Agreement,  (viii) any investigation  associated
with the performance of Response Actions for Buyer Indemnified  Matters, or (ix)
any investigation  associated with the performance of Response Actions for which
costs are not reasonably likely to exceed the Minimum Claim Amount. If the Buyer
desires to conduct any  investigation  described in this Section  1(c), it shall
give the Phibro Parties at least two (2) days prior written  notice,  specifying
the above clause in this Section  2(c) under which such  investigation  is to be
conducted, the reason for such investigation, and the name of Buyer's Consultant
(if other than GaiaTech  Incorporated);  provided,  however,  that (1) the Buyer
shall provide such written notice for any investigation  under clause (v) within
two (2) days  after  such  investigation  and (2) the Buyer is not  required  to
provide notice for any investigation under clause (viii),  except as provided in
Section 2(b) of this Agreement.

            (d) Disputes Regarding Minimum Claim Amount.

      Prior to the  commencement by the Buyer of any Response Action (other than
for Buyer Indemnified  Matters in accordance with Section 2(b)), the Buyer shall
deliver to the Phibro Parties a written estimate from Buyer's  Consultant of all
costs of such  Response  Actions in  accordance  with this  Agreement  ("Buyer's
Consultant's  Cost Estimate").  Notwithstanding  the foregoing,  nothing in this
Section  2(d)  shall  prevent  the  Buyer  from  performing  the  investigations
described in Section 2(c) of this Agreement prior to the delivery of the Buyer's
Consultant's  Cost  Estimate  to the  Phibro  Parties.  Such  estimate  shall be
reasonably  detailed,  describing  the scope of the proposed  Response  Actions,
including anticipated costs of remediation and monitoring and proposed times for
completion  of the  various  stages or phases of  Response  Actions.  The Phibro
Parties shall be entitled to obtain and deliver to the Buyer, within thirty (30)
days after receipt of Buyer's  Consultant's  Cost Estimate,  a written  estimate
from the Consultant ("Consultant's Cost Estimate") of all costs for any Response
Action  described in the Buyer's  Consultant's  Cost Estimate in accordance with
this Agreement. If Buyer's Consultant's Cost Estimate shall be for less than the
Minimum  Claim  Amount,  such  Response  Actions and the ultimate  cost thereof,
whether  less than or greater  than the  Minimum  Claim  Amount,  shall not be a
Phibro Parties  Indemnified  Matter and shall be the full  responsibility of the
Buyer;  provided,  however,  that if,  during the  performance  of such Response
Actions,  the Buyer's  Consultant  discovers that the scope of required Response
Actions is significantly  greater than  anticipated in the Buyer's  Consultant's
Cost Estimate and the cost exceeds the Minimum Claim Amount,  the Phibro Parties
shall be responsible for  indemnifying the Buyer in accordance with Section 1 of
this  Agreement  (including  reimbursement  of amounts  paid or  incurred by the
Buyer,   if  any,  for  the   performance  of  such  Response   Actions  and  of
investigations


                                      -6-
<PAGE>

described in Section 2(c)) and causing completion of the performance of Response
Actions in conformance with Section 2(a) of this Agreement. If both Consultant's
Cost Estimate and Buyer's  Consultant's  Cost Estimate shall be in excess of the
Minimum  Claim  Amount,  the Phibro  Parties  agree  that they  shall  cause the
Consultant  to promptly  initiate the  performance  of Response  Actions for any
Phibro  Parties  Indemnified  Matter in  accordance  with  Section  2(a) of this
Agreement  and that they shall  reimburse the Buyer for amounts paid or incurred
by the Buyer, if any, for the performance of investigations described in Section
2(c). If  Consultant's  Cost  Estimate  shall be for less than the Minimum Claim
Amount and the Buyer's  Consultant's  Cost  Estimate is in excess of the Minimum
Claim Amount and the Parties cannot reach  agreement after good faith efforts to
resolve  such  dispute,  the dispute  regarding  the Buyer's  Consultant's  Cost
Estimate and Consultant's  Cost Estimate shall be resolved pursuant to Section 5
of this  Agreement  (the  "Arbitrated  Determination").  In the  event of such a
dispute,  the Phibro Parties shall have the first right,  and if they decline or
fail to perform any Response  Action  within a reasonable  time,  then the Buyer
shall have the right to perform any such Response Actions pending  resolution of
such dispute if the Buyer's Consultant determines that the prompt performance of
such  Response  Actions is  reasonably  necessary or required  under  applicable
Environmental  Laws. If the actual cost of performing  Response  Actions for any
Phibro Parties  Indemnified Matter for which Buyer's  Consultant's Cost Estimate
exceeded the Minimum Claim Amount,  which is subject to a dispute  regarding the
Buyer's  Consultant's Cost Estimate,  (i) exceeds the Minimum Claim Amount,  the
matter  shall  constitute  a Phibro  Parties  Indemnified  Matter and the Phibro
Parties shall be responsible for (A)  indemnifying  the Buyer in accordance with
Section 1 of this Agreement (including reimbursement of amounts paid or incurred
by the Buyer,  if any,  for the  performance  of such  Response  Actions  and of
investigations  described  in Section  2(c)) and (B) causing  completion  of the
performance  of  Response  Actions  in  conformance  with  Section  2(a) of this
Agreement,  or (ii) is less than the Minimum Claim Amount,  the matter shall not
constitute a Phibro Parties Indemnified Matter and the Buyer shall reimburse the
Phibro Parties for amounts paid or incurred by the Phibro  Parties,  if any, for
the  performance  of such  Response  Actions,  in each  case  regardless  of the
Arbitrated  Determination  concerning the Buyer's Consultant's Cost Estimate and
Consultant's Cost Estimate (if an Arbitrated Determination regarding the Buyer's
Consultant's Cost Estimate or Consultant's Cost Estimate has not been made under
Section 5 such  dispute  shall be withdrawn  if the  Response  Actions  shall be
completed or if the cost of on-going  Response  Actions exceed the Minimum Claim
Amount).

      3. Permitted Releases and Contribution. If any Release occurs prior to the
Closing Date, and a similar Release also occurs within  one-hundred eighty (180)
days after the Closing Date that occurs in the ordinary course of the operations
of the  Prince  Business  and in  continuation  of the  practices  of the Prince
Business in existence on or before the Closing Date (such operations hereinafter
the  "Continuing  Operations")  then,  to the extent  Response  Actions were not
required as of the Closing Date under applicable Environmental Laws as in effect
at that time,  if at any point  during the  one-hundred  eighty (180) day period
such post-Closing  Release,  if known, would require the performance of Response
Actions under applicable Environmental Laws as in effect as of the Closing Date,
the proportionate  amount of the Release actually occurring prior to the Closing
date shall constitute Phibro Parties  Indemnified  Matters and the proportionate
amount of the Release actually occurring after the Closing Date shall constitute
Buyer Indemnified  Matters. In the event a Release that occurs after the Closing
Date exacerbates or contributes to an Existing Environmental Condition such that
the  performance  of Response  Actions  become  required after the Closing Date,
where such Existing Environmental Condition, if known at the Closing Date, would
not have required the performance of Response Actions under  Environmental  Laws
as in effect at that time,  and such Release (1) does not occur as the result of
the Continuing  Operations or (2) occurs more than one-hundred eighty (180) days
after the Closing Date,  such Release shall be the  responsibility  of the Buyer
and shall not constitute a Phibro Parties  Indemnified


                                      -7-
<PAGE>

Matter. To the extent a Release caused by the Buyer, which does not occur as the
result of Continuing  Operations or within  one-hundred  eighty (180) days after
the Closing  Date,  exacerbates  or  contributes  to an  Existing  Environmental
Condition  that if known,  as of the  Closing  Date,  would  have  required  the
performance of Response  Actions,  the Buyer shall be  responsible  only for its
proportional  share of costs for the performance of Response  Actions  resulting
from such Release.

      4. Environmental  Insurance.  For a period of at least [5] years following
the Closing Date, the Phibro Parties will use commercially reasonable efforts to
maintain all insurance  coverage in place prior to the Closing Date with respect
to the Existing  Environmental  Conditions on the Real  Property (or  comparable
insurance with financially sound and reputable insurance 4. companies) and shall
name the Buyer as an additional insured on any insurance policies in place as of
the Closing Date. The Phibro Parties shall, at their sole  discretion,  have the
option  to obtain  additional  insurance  coverage  for  Existing  Environmental
Conditions in the form of a Pollution  Legal  Liability  Select Policy issued by
AIG or any similar  policy the Phibro  Parties  may select  (the  "Environmental
Policy").  The Buyer  shall  cooperate  with the  Phibro  Parties  in  providing
information  reasonably  required  by an  insurer  to obtain  the  Environmental
Policy.  In the event the Phibro  Parties obtain such  insurance  coverage,  the
Environmental Policy shall name the Buyer as an additional insured. In the event
of a Phibro Parties  Indemnified Matter, the Phibro Parties shall have the right
to seek insurance  coverage under the  Environmental  Policy and the Buyer shall
provide the Phibro Parties with documentation or information reasonably required
to  assert a claim  for  insurance  coverage  for a Phibro  Parties  Indemnified
Matter.  This  Section  4 shall  not limit the  Phibro  Parties  obligations  to
indemnify  the  Buyer  or  to  perform   Response  Actions  for  Phibro  Parties
Indemnified Matters.

      5.  Resolution  of  Disputes.  With  respect to  disputes  concerning  the
performance of Response  Actions,  the Buyer's  Consultant's  Cost Estimate,  or
disagreements regarding statements,  invoices, or supporting  documentation,  or
other matters relating to any claim for indemnity,  the challenging  party shall
have the right to submit the dispute to binding  arbitration by a panel selected
in the following manner:  the Phibro Parties and the Buyer shall each select one
firm principally  engaged in engineering or environmental  science,  and the two
firms  so  selected  shall  then  select a third  firm  principally  engaged  in
engineering  or  environmental  science.  The  panel so  selected  shall  make a
determination  in writing and shall prepare written  findings of fact as part of
the  determination.  The determination  shall be fully and finally binding among
the parties. The costs of any dispute resolution by this panel shall be borne as
follows:  the Phibro Parties and the Buyer shall pay the fees and other expenses
of the firm chosen by such parties, and the Phibro Parties, on the one hand, and
the Buyer, on the other hand,  shall each pay 50% of the fees and other expenses
of the firm chosen by the other two firms.

      6. Miscellaneous.

            (a) Any notice,  claim or demand  required or  permitted to be given
pursuant to this Agreement  shall be given in accordance  with Sections 12.3 and
12.4 of the Purchase Agreement.

            (b) Demand may be made  hereunder on any number of occasions  and as
often as the occasion may arise. The Party seeking  indemnification shall notify
the other  Parties of any Third  Party  Claim,  with  respect to which the Party
seeking indemnification claims indemnification hereunder, in accordance with the
procedures established in Sections 12.3 and 12.4 of the Purchase Agreement.

            (c) Notwithstanding the foregoing provisions of paragraph (b) above,
the  indemnifying  party  shall not have the right to settle or  compromise  any
Third Party Claims without the prior written  consent of the  indemnified  party
if, as a result of such  settlement or compromise,  the


                                      -8-
<PAGE>

indemnified  party  will have any  material  liability  not paid or borne by the
indemnifying  party or if the  indemnified  party  will  become  subject  to any
material restrictions or constraints not previously applicable to them.

            (d)  This  Agreement  and the  Sections  of the  Purchase  Agreement
referred  to herein  set forth the  entire  understanding  of the  Parties  with
respect to the subject  matter  hereof,  and no change or  modification  of this
Agreement shall be valid unless made in writing and signed by all of the Parties
to this Agreement.

            (e) This Agreement  shall be governed by and construed in accordance
with the laws of the State of New York.

            (f) Each provision of this Agreement  shall be interpreted in such a
manner as to be effective  and valid under  applicable  law.  Nevertheless,  the
invalidity,  irregularity or unenforceability of any of the provisions hereunder
shall not  affect the  enforceability  of the  remainder  of this  Agreement  or
constitute a defense thereto or otherwise  affect the obligations of the Parties
hereunder.

            (g) The  execution  of this  Agreement  is neither an  admission  of
liability  of any issue  dealt  with in this  Agreement  nor an  admission  with
respect to any  question of law or fact arising out of or relating to the Phibro
Parties Indemnified Matters or the Buyer Indemnified Matters. Accordingly, it is
the intention of the Parties that this  Agreement  will not be  admissible  into
evidence in any proceeding other than to enforce any right or obligation arising
out of this  Agreement.  It is further  agreed by the Parties  that any payments
made herein or pursuant hereto are not and do not constitute penalties, fines or
monetary sanctions of any kind.

            (h) This Agreement shall be binding upon and inure to the benefit of
the Parties and their respective, successors and permitted assigns. Neither this
Agreement  nor the  obligations  of any Party  hereunder  shall be assignable or
transferable  by such  Party  without  the prior  written  consent  of the other
Parties; provided, however, that nothing contained in this section shall prevent
the Buyer,  without the consent of the Phibro Parties,  (1) from transferring or
assigning  this  Agreement or their rights or  obligations  hereunder to another
entity  controlling,  under the control  of, or under  common  control  with the
Buyer, or which is acquiring all or substantially of the assets of the Buyer, or
(2) from  assigning  all or part of their rights  hereunder by way of collateral
assignment  to any bank or  financial  institution  providing  financing  to the
Buyer,  but no such transfer or  assignment  made pursuant to clauses (1) or (2)
shall relieve the Buyer of its obligations under this Agreement.

            (i) This  Agreement  may be executed in  counterparts  (including by
telecopier),  each of  which  shall  be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

      7.  Definitions.  All capitalized  terms used but not defined herein shall
have the meaning set forth in the Purchase Agreement.

            (a)  "Buyer's  Consultant"  shall  mean  GaiaTech  Incorporated,  or
another  qualified  engineering  or  scientific  firm as the Buyer  may  select,
subject to the written approval of the Phibro Parties,  which approval shall not
be unreasonably withheld.

            (b)  "Consultant"  shall  mean  GaiaTech  Incorporated,  or  another
qualified  engineering  or  scientific  firm as the Phibro  Parties  may select,
subject to the  written  approval  of the  Buyer,  which  approval  shall not be
unreasonably withheld.


                                      -9-
<PAGE>

            (c)  "Damages"  shall  mean  any and all  losses,  costs,  expenses,
obligations, damages, liabilities,  payments, fines, penalties, liens, expenses,
and Third Party Claims for personal injury or death or damage to property or the
environment (including natural resource damages), including, without limitation,
reasonable  attorneys' fees, other reasonable  litigation  expenses,  reasonable
consultants' fees, and other reasonable costs and expenses relating thereto.

            (d)  "Environmental  Laws" shall mean any and all federal,  state or
local laws (including  principles of common law),  rules,  orders,  regulations,
statutes,   ordinances,  codes,  decrees,  guidelines,  or  agreements  with  or
requirements of any Governmental Authority regulating,  relating to, or imposing
liability  or   standards   of  conduct   concerning   health,   safety,   waste
transportation,  storage or disposal,  protection  of the  environment,  natural
resources or human health, including, without limitation, as amended through the
date  hereof,  the  Resource   Conservation  and  Recovery  Act  ("RCRA"),   the
Comprehensive  Environmental Response,  Compensation,  and Liability Act of 1980
("CERCLA"),  the Superfund  Amendments and Reauthorization Act of 1986 ("SARA"),
the Federal  Clean Water Act, the Federal  Clean Air Act,  the Toxic  Substances
Control Act, and regulations promulgated pursuant thereto.

            (e) "Existing  Environmental  Conditions" shall mean (1) the Release
of, or exposure to any Hazardous  Materials at, on, under or emanating  from any
Real  Property,  whether  known or unknown,  on or prior to the Closing  Date in
violation of or which, if known, would require Response Actions under applicable
Environmental  Laws as in  effect  as of the  Closing  Date,  (2) any  Hazardous
Materials  generated or produced by the Prince Business or transported  from any
Real  Property and disposed of or stored at off-site  locations,  on or prior to
the Closing  Date,  (3) any  violation of  applicable  Environmental  Laws as in
effect as of the Closing Date by the Prince  Business or at any Real Property to
the extent that such  violation  occurs prior to the Closing  Date,  and (4) any
acts or omissions by the Phibro Parties or the Prince  Business or conditions at
the Real  Property  existing on or before the  Closing  Date  (whether  known or
unknown) that give rise to liability under any Environmental Law as in effect as
of Closing Date.  The term Existing  Environmental  Conditions  does not include
Releases of  Hazardous  Materials  caused by the Buyer  after the Closing  Date,
subject to Section 3 of this  Agreement,  nor capital  requirements  or Response
Actions (but excluding  assessments of fines and penalties)  relating to matters
or conditions described on Schedule A hereto.

            (f)  "Governmental  Authority"  shall mean any  applicable  federal,
state, municipal, or other governmental department,  commission,  board, bureau,
agency or  instrumentality,  or any court having jurisdiction over any person or
matter.

            (g) "Governmental  Determination" shall mean a written determination
by the applicable  Governmental Authority to the effect that no further Response
Action is required with respect to an Existing Environmental Condition.

            (h) "Hazardous Materials" shall mean any hazardous waste, as defined
in 42 U.S.C.  ss.6903(5),  any  hazardous  substances,  as  defined by 42 U.S.C.
ss.9601(14),  any "pollutant or contaminant" as defined by 42 U.S.C. ss.9601(33)
and all toxic substances,  hazardous  materials or other chemicals or substances
(including,  but not  limited  to,  asbestos,  polychlorinated  biphenyls,  oil,
petroleum,  particulate  matter,  silica,  or the class of  substances  commonly
referred to as dioxins) regulated by any Environmental Laws.

            (i) "Least  Stringent  Environmental  Standards"  shall  mean,  with
respect to any Response Actions,  the least stringent  standards  required under
applicable  Environmental  Laws as in effect as of the Closing  Date to obtain a
Governmental   Determination,   provided,   however,   that  any


                                      -10-
<PAGE>

institutional  restrictions  proposed to be placed on any Real Property shall be
reasonably   acceptable   to  the  Buyer  and  shall  allow  the  continued  and
uninterrupted  operation of the Prince  Business or any other  operations at any
Real  Property  (including,  without  limitation,   expansion,   demolition  and
construction activities).

            (j) "Release" shall mean "Release" (as defined in CERCLA;  provided,
that in the event  CERCLA is amended so as to  broaden  the  meaning of the term
"release",  such  broader  meaning  shall  apply  with  respect  to  the  period
subsequent to the effective date of such amendment and provided,  further,  that
to the extent that the laws of the states in which the Real Property are located
establish a meaning which is broader than that  specified in CERCLA such broader
meaning shall apply) or any other discharge or disposal of Hazardous Materials.

            (k) "Response Actions" shall mean (1) any investigation, assessment,
testing, monitoring, reporting, remediation, cleanup, removal, response actions,
or containment of Existing  Environmental  Conditions  required under applicable
Environmental  Laws  or  required  by a  Governmental  Authority,  and  (2)  the
reasonable cost of restoration of any portion of any site affected by any matter
described in clause (1) of this definition.

            (l) "Third Party Claim" shall mean any action,  suit,  proceeding or
demand by a third party (excluding any Governmental Authority).

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                      -11-
<PAGE>

      IN WITNESS WHEREOF,  and intending to be legally bound hereby, the Parties
have caused this  Agreement to be duly executed and delivered as of the date and
year first above written.

                                    THE BUYER:

                                    PRINCE MINERAL COMPANY, INC.

                                    By: /s/ David Ventura
                                       -----------------------------------------
                                       Name:  David Ventura
                                       Title: Vice President

                                    THE PHIBRO PARTIES:

                                    PHIBRO ANIMAL HEALTH CORPORATION

                                    By: /s/ Jack C. Bendheim
                                       -----------------------------------------
                                       Name:  Jack C. Bendheim
                                       Title: President

                                    PRINCE MFG LLC

                                    By: /s/ David C. Storbeck
                                       -----------------------------------------
                                       Name:  David C. Storbeck
                                       Title: Vice President

                                    THE PRINCE MANUFACTURING COMPANY

                                    By: /s/ David C. Storbeck
                                       -----------------------------------------
                                       Name:  David C. Storbeck
                                       Title: Vice President


                                      -12-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3
<SEQUENCE>5
<FILENAME>e16591ex_3.txt
<DESCRIPTION>AMENDMENT TO STOCKHOLDERS AGREEMENT
<TEXT>
                                                                  Execution Copy

                                  AMENDMENT TO

                             STOCKHOLDERS AGREEMENT

      AMENDMENT,  dated as of  December  26,  2003  (this  "Amendment"),  to the
Stockholders  Agreement,  dated  as of  November  30,  2000  (the  "Stockholders
Agreement"),  by and among PHIBRO ANIMAL HEALTH  CORPORATION  (formerly known as
Philipp  Brothers  Chemicals,  Inc.), a New York  partnership  (the  "Company"),
PALLADIUM  EQUITY PARTNERS II, L.P. a Delaware limited  partnership  ("PEP II"),
PALLADIUM  EQUITY  PARTNERS II-A,  L.P., a Delaware  limited  partnership  ("PEP
II-A"), and PALLADIUM EQUITY INVESTORS II, L.P., a Delaware limited  partnership
("PEI II" and together with PEP II and PEP II-A,  the "Investor  Stockholders"),
and Jack C. Bendheim  (together with the Company and the Investor  Stockholders,
the "Parties" and singularly a "Party").

      This  Amendment is executed and delivered in connection  with that certain
Purchase and Sale  Agreement,  dated as of December  26, 2003,  by and among the
Company,  Prince Mfg LLC, a Delaware  limited  liability  company  (the  "Prince
Stockholder"),  The Prince Manufacturing  Company, an Illinois corporation,  the
Investor  Stockholders,  and Prince Mineral Company,  Inc. The Parties desire to
amend the terms of the Stockholders Agreement as hereinafter set forth.

      Accordingly, the Parties hereby agree as follows:

      1. Defined  Terms.  Capitalized  terms not otherwise  defined herein shall
have the meanings ascribed to such terms in the Stockholders Agreement.

      2. Amendments to the Stockholders Agreement.

      2.1 Section 1.1 of the Stockholders Agreement is hereby amended to include
the following additional defined terms:

      "Bond  Offering"  means the sale of the  Units  consisting  of the  Senior
Secured Notes due 2007 to be issued by the Company and the Senior  Secured Notes
issued by Philipp Brothers Netherlands III BV described in the Offering Circular
dated October 10, 2003.

      "Palladium  Transactions"  means  the  transactions  contemplated  by  the
Purchase and Sale Agreement.

      "Purchase and Sale Agreement" means the Purchase and Sale Agreement, dated
as of December  26, 2003,  by and among the Company,  Prince Mfg LLC, a Delaware
limited  liability  company,  The  Prince  Manufacturing  Company,  an  Illinois
corporation, the Investor Stockholders, and Prince Mineral Company, Inc.

      "Senior Credit Facility" means the Loan and Security  Agreement,  dated as
of October 21, 2003, by and among the Company,  Phibro Animal Health U.S., Inc.,
Phibro Animal Health Holdings,  Inc., Prince  Agriproducts,  Inc.,  Phibro-Tech,
Inc.,  the lenders from time to time


<PAGE>

party thereto, and Wells Fargo Foothill, Inc., a California corporation,  as the
arranger and administrative agent for the Lenders, as amended by Amendment No. 1
thereto.

      2.2  Schedule  2.3 to the  Stockholders  Agreement  is hereby  amended  to
include  (a) the  Palladium  Transactions,  (b) the offer and sale of up to $105
million of senior  secured  notes due 2007  issued by the  Company  and  Philipp
Brothers  Netherlands  III BV pursuant to the Note  Offering and the  registered
senior secured notes contemplated to be issued in exchange therefor, and (c) the
Senior Credit Facility.

      2.3 Section  2.3(iv) of the  Stockholders  Agreement is hereby  amended to
insert  the  phrase  "(including  the Equity  Value  Amount  (as  defined in the
Restated  Certificate)"  after the phrase  "Series C Preferred  Stock" set forth
therein.

      2.4  Section  4.5 of the  Stockholders  Agreement  is  hereby  amended  by
deleting the figure  "$45,000,000"  therein and substituting for such figure the
figure "$15,200,000".

      3. No Other  Changes.  Except as  expressly  provided  herein,  no term or
provision  of  the  Stockholders   Agreement  shall  be  amended,   modified  or
supplemented,  and each term and  provision  of the  Stockholders  Agreement  is
hereby ratified and shall remain in full force and effect.

      4. Governing Law. The validity,  performance,  construction  and effect of
this  Amendment  shall be  governed  by and  construed  in  accordance  with the
internal laws of the State of New York,  without  giving effect to principles of
conflicts of law.

      5.  Counterparts.  This Amendment may be executed by the parties hereto in
any number of  separate  counterparts  (including  telecopier),  and all of said
counterparts taken together shall be deemed to constitute the same instrument.

                  [Remainder of page intentionally left blank]


                                      -2-
<PAGE>

      IN WITNESS  WHEREOF,  the parties have executed  this  Amendment as of the
date first written above.

                                    PHIBRO ANIMAL HEALTH CORPORATION

                                    By: /s/ Jack C. Bendheim
                                       -----------------------------------------
                                       Name:  Jack C. Bendheim
                                       Title: President

                                    PALLADIUM EQUITY PARTNERS II, L.P.

                                    By: PALLADIUM EQUITY PARTNERS II, L.L.C.

                                    By: /s/ Marcos Rodriguez
                                       -----------------------------------------
                                       Name:  Marcos Rodriguez
                                       Title: Managing Member

                                    PALLADIUM EQUITY PARTNERS II-A, L.P.

                                    By: PALLADIUM EQUITY PARTNERS II, L.L.C.

                                    By: /s/ Marcos Rodriguez
                                       -----------------------------------------
                                       Name:  Marcos Rodriguez
                                       Title: Managing Member

                                    PALLADIUM EQUITY INVESTORS II, L.P.

                                    By: PALLADIUM EQUITY PARTNERS II, L.L.C.

                                    By: /s/ Marcos Rodriguez
                                       -----------------------------------------
                                       Name:  Marcos Rodriguez
                                       Title: Managing Member

                                    STOCKHOLDER

                                    /s/ Jack C. Bendheim
                                    --------------------------------------------
                                    Jack C. Bendheim


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>6
<FILENAME>e16591ex_4.txt
<DESCRIPTION>ADVISORY FEE AGREEMENT
<TEXT>
                                                                  Execution Copy

                             ADVISORY FEE AGREEMENT

      This Advisory Fee Agreement is made as of December 26, 2003 by and between
PHIBRO ANIMAL HEALTH CORPORATION  (formerly known as Philipp Brothers Chemicals,
Inc.), a New York corporation  ("Phibro"),  and PRINCE MINERAL COMPANY,  INC., a
Delaware corporation ("Acquisition Company").

      WHEREAS, Acquisition Company desires to avail itself, for the term of this
Agreement, of the expertise of Phibro; and

      WHEREAS,  Phibro is willing to provide the Services to Acquisition Company
as herein set forth.

      NOW, THEREFORE,  in consideration of the mutual agreements hereinafter set
forth and other good and  valuable  consideration,  the  receipt,  adequacy  and
sufficiency of which is hereby  acknowledged,  the parties  hereto  covenant and
agree as follows:

      ss.1.  Services.  (a)  During  the term of this  Agreement,  upon  written
request of Acquisition  Company,  Phibro shall render to Acquisition Company, by
and through itself, its affiliates and their respective officers,  employees and
representatives   the  services   described   on  Schedule  1  attached   hereto
(collectively, the "Services").

      (b) Upon  request of  Acquisition  Company,  Phibro will  provide up to 90
hours of Services per calendar  quarter during the first Contract Year, up to 40
hours of Services per calendar quarter during the second Contract Year and up to
20 hours of Services per calendar quarter during the third Contract Year. Except
as set forth below, if during any calendar quarter  Acquisition Company requests
Services  that do not  exceed the  applicable  hourly  limits for such  calendar
quarter and Phibro for any reason is unable to provide such Services, the number
of hours of such requested  Services that were not provided during such calendar
quarter  shall be carried  forward and shall  increase the hourly limits for the
immediately  succeeding calendar quarter. The parties acknowledge and agree that
value of the  Services  to be provide  hereunder  exceed the hourly rate for the
Services  determined pursuant hereto, and therefore  Acquisition  Company's sole
remedy  with  respect  to any  requested  Services  that  are  not  provided  in
accordance  with the terms of this Agreement shall be the right to seek specific
performance  of such  Services.  If the  number  of hours of  Services  that are
requested by Acquisition  Company  during any calendar  quarter is less than the
hourly limit for Services  during such  calendar  quarter,  Acquisition  Company
shall have no right to such  unused and  unrequested  hours of  Services  in any
future  calendar  quarter.  Phibro will not be required to provide any amount of
Services in excess of the hourly  limits  described  above  during any  calendar
quarter.  If at any time Phibro believes that Acquisition  Company is requesting
Services that are or will be in excess of the applicable  hourly limits,  Phibro
shall  promptly  notify  Acquisition  Company of such event and of the time when
such limits will be met.  The  Additional  Fees  provided  for  hereunder  shall
commence for Services after such time.  Within 20 days following the end of each
calendar  month,  Acquisition  Company  shall  provide  Phibro  with a statement
indicating  its  calculation  of the number of hours of Services  provided under
this Agreement during such month.  Notwithstanding the foregoing, within two (2)
business  days  following the end of any calendar  quarter in which  Acquisition
Company  requests  Services that do not exceed the applicable  hourly limits for
such  calendar  quarter  and Phibro  for any  reason is


<PAGE>

unable to provide such Services,  Acquisition  Company shall provide Phibro with
written  notice of the number  hours of such  requested  Services  that were not
provided;  provided,  however, if Acquisition Company shall fail to provide such
notice within such time period,  the number of hours of such requested  Services
that were not provided during such calendar quarter shall not be carried forward
and shall not increase the hourly limits for the immediately succeeding calendar
quarter.  Acquisition  Company  acknowledges  that Phibro may  provide  Services
hereunder  during  such  times and using  such  means of  communications  as are
convenient for the  individuals  designated by Phibro to provide these Services,
and shall in any event not be  required  to provide  services  outside of normal
business hours. If Acquisition Company requires Services in excess of the hourly
limits  described  above for any  calendar  quarter (the  "Additional  Requested
Services"), Phibro shall be entitled to additional compensation (the "Additional
Fees") for such Services at an hourly rate of $2,700 per hour.

      (c) Phibro shall not have any liability to  Acquisition  Company for or in
connection  with the  Services  provided by Phibro  pursuant to this  Agreement,
except for any such liabilities  arising out of the willful  misconduct or gross
negligence of Phibro.

      ss.2.  Advisory  Fees.  (a) In  consideration  of the Services  within the
hourly  limits  contemplated  by Section 1,  Acquisition  Company  shall pay the
following  fees to Phibro  (the  "Advisory  Fees")  for each  Contract  Year (as
defined  below):  (i) $1,000,000 for the first Contract Year;  (ii) $500,000 for
the second  Contract  Year;  and (iii) $200,000 for the third Contract Year. The
Advisory  Fees set forth in this  paragraph  (a) for each Contract Year shall be
payable to Phibro in arrears in quarterly installments in the amounts and on the
dates set forth on Exhibit A attached hereto.

      (b) In consideration  of the Additional  Requested  Services,  Acquisition
Company shall pay the Additional Fees to Phibro within 30 days following the end
of the calendar quarter in which the applicable Services are rendered.

      (c)  Acquisition  Company shall pay to Phibro  interest at the rate of two
percent  (2.0%) over the "base rate" as announced by Citibank  N.A.  (determined
and calculated on a daily basis) or the maximum  permitted by law,  whichever is
less,  on all overdue  amounts of any  installment  payment from the due date of
such  installment  until the installment is paid in full. Such interest shall be
due and payable upon demand.

      (d) Acquisition  Company's  payment  obligations  under this Agreement are
absolute  and  unconditional  and  shall not be  subject  to any  diminution  by
set-off, abatement,  counterclaim,  withholding, deduction or otherwise, whether
in connection with or arising out of this Agreement or any other agreement among
or between the parties or their affiliates.

      ss.3. Reimbursements.  In addition to the Advisory Fees and the Additional
Fees payable pursuant to this Agreement,  Acquisition Company shall pay directly
or reimburse Phibro for its out-of-pocket expenses, that are approved in writing
by Acquisition Company.  All reimbursements for Out-of-Pocket  Expenses shall be
made promptly upon or as soon as practicable  after  presentation by Acquisition
Company to Phibro of a written statement and appropriate  documentation thereof,
but in no event later than fifteen (15) days after presentation. Anything to the
contrary notwithstanding,  in no event shall Acquisition Company be obligated to
make any  expense  reimbursements  under  this  Agreement  except in  respect of
services that are requested and actually performed pursuant to Section 1.


                                       2
<PAGE>

      ss.4.  Indemnification.   Acquisition  Company  will  indemnify  and  hold
harmless  Phibro,  its affiliates and their  respective  stockholders,  partners
(both general and limited),  members (both  managing and  otherwise),  officers,
directors,  employees,  agents and  representatives  (each such person  being an
"Indemnified  Party")  from and  against any and all  losses,  claims,  damages,
liabilities,  costs and expenses,  whether joint or several (the "Liabilities"),
related to,  arising out of or in  connection  with the advisory and  consulting
services contemplated by this Agreement or the engagement of Phibro pursuant to,
and the performance by Phibro of the services  contemplated  by, this Agreement,
whether or not pending or threatened,  whether or not an Indemnified  Party is a
party,  whether or not  resulting in any liability and whether or not an action,
claim, suit,  investigation or proceeding is initiated or brought by Acquisition
Company,  provided,   however,  that  the  foregoing  shall  not  apply  to  any
Liabilities arising directly or indirectly out of any disclosure or reporting by
any  Indemnified  Party  of the  arrangements  contemplated  hereby,  or any tax
obligations  of any  Indemnified  Party in  respect of any  payments  hereunder.
Acquisition  Company will  reimburse any  Indemnified  Party for all  reasonable
costs and expenses (including  reasonable  attorneys' fees and expenses) as they
are incurred in connection with investigating, preparing, pursuing, defending or
assisting in the defense of any action, claim, suit, investigation or proceeding
for which the Indemnified Party would be entitled to  indemnification  under the
terms of the previous  sentence,  or any action or proceeding arising therefrom,
whether or not such Indemnified Party is a party thereto; provided that, subject
to the following  sentence,  Acquisition Company shall be entitled to assume the
defense  thereof  at  their  own  expense,  with  counsel  satisfactory  to such
Indemnified Party in its reasonable judgment.  Any Indemnified Party may, at its
own expense,  retain separate counsel to participate in such defense; and in any
action,  claim,  suit,  investigation  or proceeding  in which both  Acquisition
Company and or one or more of its  subsidiaries or both, on the one hand, and an
Indemnified  Party, on the other hand, is, or is reasonably  likely to become, a
party, such Indemnified Party shall have the right to employ separate counsel at
the  expense  of  Acquisition  Company  and to control  its own  defense of such
action,  claim, suit,  investigation or proceeding if, in the reasonable opinion
of counsel to such  Indemnified  Party, a conflict or potential  conflict exists
between the Palladium Parties or one or more of their subsidiaries or affiliates
or both, on the one hand, and such  Indemnified  Party,  on the other hand, that
would make such separate  representation  advisable.  Acquisition Company agrees
that  it  will  not,  without  the  prior  written  consent  of  the  applicable
Indemnified Party, settle, compromise or consent to the entry of any judgment in
any pending or  threatened  action,  claim,  suit,  investigation  or proceeding
relating to the matters contemplated hereby (if any Indemnified Party is a party
thereto  or  has  been  threatened  to be  made a  party  thereto)  unless  such
settlement,  compromise  or consent  includes  an  unconditional  release of the
applicable Indemnified Party and each other Indemnified Party from all liability
arising or that may arise out of such  action,  claim,  suit,  investigation  or
proceeding. Provided Acquisition Company is not in breach of its indemnification
obligations hereunder, no Indemnified Party shall settle or compromise any claim
subject to indemnification hereunder without the consent of Acquisition Company.
Acquisition  Company  will not be  liable  under the  foregoing  indemnification
provisions with respect to any  Indemnified  Party, to the extent that any loss,
claim, damage,  liability,  cost or expense is determined by a court, in a final
judgment from which no further appeal may be taken,  to have resulted  primarily
from the gross  negligence  or willful  misconduct  of Phibro.  Anything  to the
contrary notwithstanding,  in no event shall Acquisition Company be liable under
the foregoing indemnification  provisions except in respect of services that are
actually performed pursuant to Section 1.

      ss.5. Accuracy of Information.  Acquisition Company shall furnish or cause
to be furnished to Phibro such information as Phibro believes appropriate to its
assignment  (all  such


                                       3
<PAGE>

information  so  furnished  being  the   "Information").   Acquisition   Company
recognizes  and  confirms  that  Phibro (i) will use and rely  primarily  on the
Information and on information available from generally recognized public course
in  performing  the  services  contemplated  by this  Agreement  without  having
independently  verified the same;  (ii) does not assume  responsibility  for the
accuracy or  completeness of the  Information  and such other  information;  and
(iii) is entitled to rely upon the Information without independent verification.

      ss.6.  Permissible  Activities.  Subject to applicable  law, and except as
otherwise  provided in that  certain  Purchase  and Sale  Agreement of even date
among  Phibro,  Prince Mfg LLC, The Prince  Manufacturing  Company,  Acquisition
Company and the Investor Stockholders party thereto, nothing herein shall in any
way preclude Phibro,  its affiliates or their respective  partners (both general
and  limited),  members  (both  managing and  otherwise),  officers,  directors,
employees, agents or representatives from engaging in any business activities or
from  performing  services  for its or their own  account or for the  account of
others,  including for companies  that may be in  competition  with the business
conducted by Acquisition Company.

      ss.7.  Additional  Services.  Nothing herein  contained shall be deemed to
prevent Acquisition  Company and Phibro from entering into agreements  regarding
the provision of additional services by Phibro and its affiliates to Acquisition
Company, which services may be outside the scope of the Services provided for in
this Agreement,  and for which Phibro and its affiliates may receive  additional
reasonable compensation.

      ss.8. Term. This Agreement shall begin January 1, 2004 and end on December
31, 2006. For purposes of this Agreement, the term "Contract Year" means the one
(1) year period  beginning on January 1, 2004 or any one (1) year period  during
the Term  beginning on January 1; provided that Section 3 shall remain in effect
with  respect  to  Out-of-Pocket  Expenses  required  to be paid  hereunder  and
incurred  prior to the  termination of this Agreement and Section 2 shall remain
in effect with  respect to Advisory  Fees and  Additional  Fees and  interest on
overdue  installment  of Advisory  Fees or  Additional  Fees required to be paid
hereunder until payment in full of all Advisory Fees and Additional Fees payable
in  respect  of any  period  prior to the  termination  of this  Agreement.  The
provisions  of Sections 4, 6, 9 and 10 shall  survive  the  termination  of this
Agreement

      ss.9.  Confidentiality.  Except as  contemplated by the terms hereof or as
required by applicable law or legal process,  Phibro shall keep confidential all
material  non-public  information  provided  to  it  by or  at  the  request  of
Acquisition  Company, and shall not disclose such information to any third party
or to any of its employees or advisors except to those person who have a need to
know  such   information  in  connection   with  Phibro's   performance  of  its
responsibilities hereunder.

      ss.10. Miscellaneous.

            (a)  Governing  Law;  Jurisdiction;   Waiver  of  Jury  Trial.  This
Agreement  shall be governed by, and construed in accordance  with,  the laws of
the State of New  York.  No suit,  action or  proceeding  with  respect  to this
Agreement may be brought in any court or before any similar authority other than
in a court of competent  jurisdiction  in the State of New York, and the parties
hereto submit to the exclusive  jurisdiction  of these courts for the purpose of
such suit,  proceeding or judgment.  The parties  hereto  irrevocably  waive any
right which they may have to bring such an action in any other  court,  domestic
or foreign,  or before any similar  domestic


                                       4
<PAGE>

or foreign authority. Each of the parties hereto irrevocably and unconditionally
waives  trial by jury in any legal  action or  proceeding  in  relation  to this
Agreement and for any counterclaim therein.

            (b) Successors and Assigns;  Assignment.  Neither this Agreement nor
any of the rights,  interests or obligations hereunder may be assigned by any of
the  parties  hereto,  in  whole  or in part  (whether  by  operation  of law or
otherwise),  without the prior  written  consent of the other  parties,  and any
attempt to make any such assignment without such consent shall be null and void.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.

            (c) Entire Agreement;  Third Parties. This Agreement constitutes the
entire  agreement and supersedes all prior agreements and  understandings,  both
written and oral, between the parties with respect to the subject matter hereof.
This  Agreement  shall be binding  upon and inure  solely to the  benefit of the
parties hereto, and nothing in this Agreement,  express or implied,  is intended
to confer upon any other person any right, benefit or remedy of any nature under
or by reason of this Agreement.

            (d)  Severability.  If any term or  provision  of this  Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall  nevertheless  remain in full
force and effect so long as the economic or legal substance of the  transactions
contemplated  hereby is not  affected  in any manner  materially  adverse to any
party.  Upon such  determination  that any term or other  provision  is invalid,
illegal or incapable of being  enforced,  the parties hereto shall  negotiate in
good faith to modify this  Agreement so as to effect the original  intent of the
parties  as  closely  as  possible  in an  acceptable  manner in order  that the
transactions  contemplated hereby are consummated as originally  contemplated to
the greatest extent possible.

            (e) Amendment and Waiver.  This Agreement may be amended only by the
written  consent of all the parties hereto.  Any waiver,  consent or approval of
any kind by any party hereto of any breach,  default or noncompliance under this
Agreement  or any waiver by such party of any  provision  or  condition  of this
Agreement  must be in writing and is effective  only to the extent  specifically
set forth in such writing.

            (f) Delays or  Omissions.  It is agreed that no delay or omission to
exercise  any right,  power or remedy  accruing  to any party,  upon any breach,
default or noncompliance by another party under this Agreement, shall impair any
such right,  power or remedy,  nor shall it be  construed  to be a waiver of any
such breach, default or noncompliance,  or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring. All remedies,
either under this Agreement,  by law, or otherwise  afforded to any party, shall
be cumulative and not alternative.

            (g) Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be  notified;  (b) when sent by  confirmed  telex or  facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (c) five  calendar  days after having been sent by  registered or certified
mail, return receipt requested,  postage prepaid;  or (d) one business day after
deposit with a nationally  recognized  overnight  courier,  specifying  next day
delivery,  with written  verification of receipt.  All  communications are to be
sent to the addresses set forth below:


                                       5
<PAGE>

            If to Phibro:

                             Phibro Animal Health Corporation
                             One Parker Plaza
                             Fort Lee, New Jersey 07024
                             Tel: (201) 944-6020
                             Fax: (201) 944-5937
                             Attn: Jack C. Bendheim, President

            with copies to:

                             Golenbock, Eiseman, Assor, Bell & Peskoe LLP
                             437 Madison Avenue
                             New York, New York 10022
                             Tel: (212) 907-7300
                             Fax: (212) 754-0330
                             Attn: Lawrence M. Bell

            If to Acquisition Company:

                             Prince Mineral Company, Inc.
                             One Prince Plaza, 229 Radio Road
                             Quincy, Illinois 62301
                             Attention: President

            with a copy to:

                             Palladium Capital Management, L.L.C.
                             Prince Mineral Company, Inc.
                             1270 Avenue of the Americas
                             Suite 2200
                             New York, New York 10020
                             Tel: (212) 218-5150
                             Fax (212) 218-5155
                             Attn: Marcos A. Rodriguez

            and to:

                             Bingham McCutchen LLP
                             399 Park Avenue
                             New York, New York 10022
                             Tel:  (212) 705-7000
                             Fax:  (212) 752-5378
                             Attn: Neil W. Townsend

            (h)  Interpretation.  When a reference is made in this  Agreement to
Sections,  such reference shall be to Section of this Agreement unless otherwise
indicated. The table of contents titles and headings contained in this Agreement
are for  reference  purposes only and shall not affect in any way the meaning or
interpretation  of this Agreement.  Whenever the


                                       6
<PAGE>

words  "include,"  "includes" or "including"  are used in this  Agreement,  they
shall be deemed to be followed by the words "without limitation."

            (i)  Counterparts.  This  Agreement  may be  executed in one or more
counterparts,  all of which shall be considered  one and the same  agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered.

            (j)  Relationship  of  the  Parties.  The  parties  are  independent
contractors under this Agreement.  Except as expressly set forth herein, neither
party has the authority to, and each party agrees that it shall not, directly or
indirectly  contract any  obligations  of any kind in the name of or  chargeable
against the other party without such party's prior written consent.

            (k) Prepayment of Advisory Fees.  Anything to the contrary set forth
in Section 2 above notwithstanding,  at any time during the period commencing on
the date  hereof and ending on January 9, 2004,  Acquisition  Company may prepay
the  Advisory  Fees  payable  under  Section  2(a) for the  entire  term of this
Agreement  by paying to  Phibro  the net  present  value of such  Advisory  Fees
(calculated  using a discount rate of 15%). The foregoing  prepayment  shall not
apply to any  Additional  Fees  that may  arise in  connection  with  Additional
Requested Services.

                  [Remainder of page intentionally left blank.]


                                       7
<PAGE>

                                                                  Execution Copy

      IN WITNESS WHEREOF, the parties have executed this Agreement,  under seal,
as of the date first above written.

                                   PHIBRO ANIMAL HEALTH CORPORATION

                                   By: /s/ Jack C. Bendheim
                                      -----------------------------------------
                                      Name:  Jack C. Bendheim
                                      Title: President

                                   PRINCE MINERAL COMPANY, INC.

                                   By: /s/ David Ventura
                                      -----------------------------------------
                                      Name:  David Ventura
                                      Title: Vice President

                            [Advisory Fee Agreement]

<PAGE>

                                   Schedule 1

For  purposes of this  Agreement,  the term  "Services"  shall mean  advisory or
consulting  services relating to strategic and operational  matters  (including,
without  limitation,  advice  relating to sales and  marketing  and  processing,
procurement, distribution, contract administration and operating procedures). In
rendering the Services  (including  the Additional  Services),  Phibro shall use
reasonable  efforts  to make its  personnel  and the  personnel  of Prince  Agri
Products,  Inc and its other  affiliates  that Phibro  designates to provide the
Services  available  during  normal  business  hours  and at such  times  as are
convenient  to Phibro and its  affiliates  taking into  account the business and
operational  needs of Phibro and its  affiliates.  Such  personnel  will be made
available  at such times by  telephone,  telefax or e-mail,  and such  personnel
shall not be required to travel or attend any meetings in person.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5
<SEQUENCE>7
<FILENAME>e16591ex_5.txt
<DESCRIPTION>CERTIFICATE OF INCORPORATION
<TEXT>

                     COMPOSITE CERTIFICATE OF INCORPORATION
                       OF PHILIPP BROTHERS CHEMICALS, INC.

<PAGE>

                                    RESTATED

                          CERTIFICATE OF INCORPORATION

                       OF PHILIPP BROTHERS CHEMICALS, INC.

               (Under Section 807 of the Business Corporation Law)

      WE THE  UNDERSIGNED,  the  President  and  Secretary  of PHILIPP  BROTHERS
CHEMICALS, INC., hereby certify:

      FIRST: The name of the corporation is

            PHILLIP BROTHERS CHEMICALS, INC.

      SECOND:  The certificate of  incorporation of the corporation was filed by
the Department of State on May 11, 1946.

      THIRD:  The amendment and restatement of the certificate of  incorporation
of the corporation  herein provided for was authorized by the written consent of
the holders of all of the outstanding shares of the corporation entitled to vote
thereon pursuant to Section 615 of the Business Corporation Law.

      FOURTH:  The certificate of incorporation as heretofore  amended is hereby
amended or changed to effect one or more of the amendments or changes authorized
by Section 801 of the Business Corporation Law, namely:

      A. To amend  Article  THIRD of the  certificate  of  incorporation  by (i)
eliminating as separate classes the Special  Preferred  Shares,  First Preferred
Shares, Second Preferred Shares and Class D Capital Stock heretofore authorized,
no shares of which are issued or  outstanding,  (ii) changing the designation of
the Third Preferred shares  heretofore  authorized to Series A Preferred shares,
and reducing the number of authorized  Series A Preferred  shares from 60,000 to
5,207 shares,  (iii)  providing for the creation of a class of 155,750 shares of
authorized preferred shares, and vest in the Board of Directors authority to fix
the designations,  relative rights, preference and limitations of shares of each
series,  (iv) changing the  designation of the Class A Capital Stock  heretofore
authorized  to Class A Common  shares and  increasing  the number of  authorized
Class A Common shares from 8,100 to 16,200 shares and  increasing  the per share
dividend  rate of the Class A Common  shares  from  $.01 to  $.055,  so that the
holder thereof,  after exchanging Class C Capital Stock,  having a dividend rate
of $.10 per share,  shall be entitled to receive the same aggregate  dividend as
payable  in  respect  of the  former  Class A Capital  Stock and Class C Capital
Stock,  (v) changing the  designation  of the Class B Capital  Stock  heretofore
authorized  to Class B Common shares and  increasing  the  authorized  number of
Class B Common shares from 8,100 to 14,100 shares,  (vi) eliminating as separate
classes the Class C Capital  Stock and Class E Capital  Stock and  changing  all
authorized and issued shares  thereof into  authorized and issued Class A Common
shares and Class B Common shares, respectively,  (vii) deleting the statement as
to the amount, in dollars, of the capital stock of 2 the


<PAGE>

corporation,  and (viii) in connection therewith,  changing the headings for the
paragraphs of Article THIRD;

      B. To amend Article THIRD of the certificate of incorporation  corporation
by decreasing the total number of shares which the  corporation is authorized to
issue by 8,100 shares, an amount equal to the number of authorized shares of the
former Class D Capital Stock, from 194,150 to 186,050 shares;

      C. To delete Article  SEVENTH,  relating to the names and addresses of the
initial directors of the Corporation;

      D. To delete  Article  EIGHTH,  relating to the names and addresses of the
subscribers of the original certificate of incorporation of the corporation;

      E. To delete Article  NINTH,  relating to certain  additional  information
concerning such subscribers;

      F. To combine  Articles TENTH and FOURTH,  relating to the  designation of
the Secretary of State as agent of the  corporation and the address to which the
Secretary  of  State  shall  mail a copy of  process,  respectively,  into a new
Article FIFTH;

      G. To delete Article SIXTH, relating to the size of the Board of Directors
of the corporation;

      H. To add Articles SEVENTH and EIGHTH,  relating to the indemnification of
directors  and  officers,  and  deleting  parts of Article  EIGHTH  inconsistent
therewith; and

      I. To re-number certain Articles.

      FIFTH:  The text of the certificate of incorporation of the corporation as
heretofore  amended and as amended or changed hereby, is hereby restated to read
in full as follows:

                          CERTIFICATE OF INCORPORATION

                                       OF

                        PHILIPP BROTHERS CHEMICALS, INC.

               (Under Section 807 of the Business Corporation Law)

                                   ----------

      FIRST: The name of the corporation is:

            PHILIPP BROTHERS CHEMICALS, INC.

      SECOND:  The purpose for which the  corporation is formed are to engage in
any lawful act or activity for which  corporations  may be  organized  under the
Business  Corporation Law;  provided,  however,  that the corporation  shall not
engage in any act or  activity  requiring  the


                                       2
<PAGE>

consent or approval of any state official,  department,  board,  agency or other
body without such consent or approval first being obtained.

      THIRD:  The aggregate  number of shares which the  corporation  shall have
authority to issue is One Hundred  Eighty- Six Thousand Fifty  (186,050),  which
are divided into One Hundred  Fifty-Five  Thousand Seven Hundred Fifty (155,750)
Preferred shares (hereinafter  sometimes called the "Preferred Shares") of a par
value of $100 each, of which a series of Five Thousand Two Hundred Seven (5,207)
Series A Preferred shares (hereinafter  sometimes called the "Series A Preferred
Shares") of a par value of $100 each has been established,  Sixteen Thousand Two
Hundred (16,200) Class A Common shares (hereinafter  sometimes called the "Class
A Common Shares") of a par value of $.10 each and Fourteen  Thousand One Hundred
(14,100) Class B Common shares (hereinafter sometimes called the "Class B Common
Shares")  of a par value of $.10 each (such  classes  of common  shares are also
hereinafter sometimes referred to collectively as the "Common Shares").

      A. Preferred Shares.

      The statement of the relative  rights,  preferences and limitations of the
shares of each class is as follows:

            (a) General. Preferred Shares may be issued from time to time in one
or more series, each of such series to have such designations,  relative rights,
preferences  and  limitations  as are stated and expressed  herein and/or in the
resolution or resolutions  providing for the issue of such series adopted by the
Board of  Directors  as  hereinafter  provided.  Authority  is hereby  expressly
granted to the Board of Directors,  subject to the  provisions set forth herein,
to establish and designate one or more series of Preferred Shares and to fix the
variations in the relative  rights,  preferences and limitations of each series,
including without limitation:

                  1. The  number of shares to  constitute  such  series  and the
distinctive designations thereof;

                  2. The  dividend  rate or rates to which such shares  shall be
entitled and the  restrictions,  limitations  and conditions upon the payment of
such  dividends,   whether   dividends  shall  be  cumulative,   non-cumulative,
participating, or non-participating, the  date or dates from which dividends (if
cumulative)  shall  accumulate  and the dates on which  dividends  (if declared)
shall be payable and the form of payment of dividends;

                  3.  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;

                  4. 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


                                       3
<PAGE>

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;

                  5.  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;

                  6.  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;

                  7. The voting powers, if any, of such series; and

                  8. Any other  relative  rights,  preferences  and  limitations
pertaining to such series.

            (b) Series A Preferred Shares.

                  1.  Dividends.  Subject to the  rights of any other  series of
Preferred shares that from time to time may come into existence, each issued and
outstanding  Series A Preferred Share shall entitle the holder of record thereof
to receive, out of funds legally available therefor, when and as declared by the
Board of Directors of the corporation,  dividends in cash and/or property at the
rate of six per centum  (6%) of the par value  thereof,  which  shall be payable
quarterly  on such date or dates in each fiscal  year as the Board of  Directors
shall deem  advisable,  and which shall be declared and set apart or paid before
dividends  of any kind may be declared  upon the issued and  outstanding  Common
Shares.  The right as  aforesaid  to  quarterly  dividends  upon the  issued and
outstanding  Series A Preferred Shares shall be non-cumulative  and shall not be
deemed to accrue, whether dividends are earned or whether there be funds legally
available  therefor,  unless and until said  dividends have been declared by the
Board of Directors.  Whenever  full  dividends  upon the issued and  outstanding
Series A  Preferred  Shares  for the then  current  fiscal  year shall have been
declared and either paid or a sum sufficient  for the payment  thereof set aside
in full, without interest, the Board of Directors may declare, set aside, or pay
additional cash dividends, and/or may make share distributions of the authorized
but unissued Common Shares of the corporation and/or its treasury Common Shares,
if any, and/or may make  distributions  of bonds or property of the corporation,
including  the shares or bonds of other  corporations,  including  the shares or
bonds of other corporations. The holders of record of the issued and outstanding
Common Shares shall be entitled in respect of said Common Shares  exclusively to
receive any such additional cash dividends which may be declared and/or any such
distributions  which made be made,  as  hereinafter  provided.  Any reference to
"distributions"  in this paragraph  contained shall not be deemed to include any
distributions made in connection with any liquidation,  dissolution,  or winding
up of the  corporation,  whether  voluntary or  involuntary;  nor shall any such
reference to  "distributions"  in relation to issued and  outstanding  shares be
deemed to limit,  curtail,  or divest the authority of the Board of Directors to
make  any


                                       4
<PAGE>

proper distributions,  including distributions of authorized but unissued Common
Shares, in relation to its treasury Common Shares, if any.

                  2.  Redemption.  The  corporation  may,  through  its Board of
Directors and in conformity with the provisions of the Business Corporation Law,
at any time and from  time to time,  redeem  all or any part of the  issued  and
outstanding  Series A Preferred  Shares by paying the holders of record thereof,
out of funds legally available therefor, the par value for each such share to be
redeemed plus an amount  equivalent to all  dividends,  if any,  which have been
declared but not paid,  to the date fixed for  redemption.  In the event of such
redemption, a notice fixing the time and place of redemption shall be mailed not
less than thirty days prior to the date so fixed to each holder of record of the
Series A  Preferred  Shares to be  redeemed  at his address as it appears on the
record of  shareholders.  In the event  that  less  than all of the  issued  and
outstanding  Series A  Preferred  Shares  are to be  redeemed,  the shares to be
redeemed  shall be chosen by lot, pro rata, or by such  equitable  method as the
Board  of  Directors  may  determine.  On and  after  the  date  fixed  for such
redemption,  the  holders of the shares so called  for  redemption  shall not be
entitled to any  dividends and shall not have any rights or interests as holders
of said shares  except to receive the  payment or  payments  herein  designated,
without interest  thereon,  upon presentation and surrender of their certificate
therefor.

                  3.  Liquidation.  Subject to the rights of any other series of
Preferred shares that may from time to time come into existence, in the event of
any liquidation,  dissolution,  or winding up of the affairs of the corporation,
whether voluntary or involuntary, each issued and outstanding Series A Preferred
Share shall  entitle the holder of record  thereof to payment at the rate of the
par value  thereof,  plus an amount equal to all  dividends,  if any, which have
been declared but not paid, without interest, before any payment or distribution
of the net assets of the  corporation  (whether stated capital or surplus) shall
be made to or set apart for the holders of record of the issued and  outstanding
Common Shares in respect of said Common Shares. After setting apart or paying in
full the preferential  amounts  aforesaid to the holders of record of the issued
and  outstanding  Series A Preferred  Shares,  the remaining net assets (whether
stated  capital or surplus),  if any,  shall be  distributed  exclusively to the
holders of record of the issued and  outstanding  Common Shares,  as hereinafter
provided.  If the net assets of the corporation  shall be insufficient to pay in
full the preferential amounts among the holders of the Series A Preferred Shares
as aforesaid,  then each issued and  outstanding  Series A Preferred Share shall
entitle the holder of record thereof to an equal  proportion of said net assets,
and  the  holders  of the  Common  Shares  shall  in no  event  be  entitled  to
participate  in the  distribution  of said net assets in respect of their Common
Shares.  Without  excluding any other proceeding which does not in fact effect a
liquidation,  dissolution,  or  winding  up of  the  corporation,  a  merger  or
consolidation of the corporation into or with any other corporation, a merger of
any other corporation into the corporation,  or a sale, lease, mortgage, pledge,
exchange,   transfer,  or  other  disposition  by  the  corporation  of  all  or
substantially  all of its assets  shall not be deemed,  for the purposes of this
paragraph, to be a liquidation, dissolution, or winding up of the corporation.

                  4.  Voting.  Each issued and  outstanding  Common  Share shall
entitle the holder thereof to full voting power, as hereinafter provided. Except
as any 8 provision of law may  otherwise  require,  no Series A Preferred  Share
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.


                                       5
<PAGE>

      B. Common Shares.

      The statement of the relative rights, preferences,  and limitations of the
shares of each class of Common Shares is as follows:

            1.  Dividends.  After  payment in full of all dividends to which the
holders of Preferred  Shares  shall be entitled as set forth above,  each issued
and outstanding  Class A Common Share shall entitle the holder of record thereof
to receive, out of funds legally available therefor, when and as declared by the
Board of Directors of the corporation,  dividends in cash and/or property at the
rate of five and  one-half per centum (5 1/2%) of the par value  thereof,  which
shall be  payable  quarterly  on such date or dates in each  fiscal  year as the
Board of  Directors  shall deem  advisable,  and which shall be declared and set
apart or paid  before  dividends  of any kind may be  declared  upon the Class B
Common Shares of the corporation and before distribution of any kind may be made
upon the issues and outstanding Class B Common Shares. The right as aforesaid to
quarterly  dividends upon the issued and outstanding Class A Common Shares shall
be  non-cumulative  and shall not be deemed to  accrue,  whether  dividends  are
earned or whether there be funds  legally  available  therefor  unless and until
said dividends shall have been declared by the Board of Directors.

            2. Liquidation. (a) After payment in full of the preferential amount
of the  Preferred  Shares  as set forth  above,  then,  before  any  payment  or
distribution of the remaining assets of the corporation  (whether stated capital
or surplus),  if any, shall be made to or set apart for the holders of shares of
Class B Common  Shares as provided  in  subparagraph  (b) below,  the holders of
shares  of Class A  Common  Shares  shall  be  entitled  to  receive  out of the
remaining assets of the corporation (whether stated capital or surplus), if any,
payment of an amount  equal to the value  thereof,  plus an amount  equal to all
dividends,  if any, which have been declared but not paid, without interest, but
they shall be entitled to no further payment with respect to such Class A Common
Shares.  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 Class A Common  Shares,
shall be insufficient to pay in full the respective preferential amounts of such
Class A Common  Shares,  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
were paid in full.

                  (b) After paying in full the preferential  amount set forth in
the preceding  paragraph of this paragraph  B(2), the remaining  assets (whether
stated  capital or surplus),  if any,  shall be  distributed  exclusively to the
holders of record of the  issued and  outstanding  Class B Common  Shares,  each
issued  and  outstanding  Class B Common  Share  entitling  the holder of record
thereof to receive an equal portion of said remaining net assets.

            3. Voting. Except as any provision of law or except as any provision
herein or elsewhere of the certificate of incorporation  may otherwise  provide,
each Common Share of the corporation  without distinction as to class shall have
the same rights, privileges,  interests, and attributes, and shall be subject to
the same limitations, as every other Common Share of the corporation.  The Class
A Common  shares of the  corporation  shall at all times  entitle the holders of
record of the issued and outstanding shares thereof, exclusively and as a class,
by plurality vote, to elect all but one (1) of the directors of the corporation,
to  exercise


                                       6
<PAGE>

any right of removal of any of said directors, and to fill all vacancies and all
newly created  directorships  in said directors except those vacancies and newly
created  directorship  which may be filled,  under a duly adopted by-law, by the
existing directors or director elected by those holders of said class of shares.
The Class B Common  shares of the  corporation  shall at all times  entitle  the
holders of record of the issued and outstanding shares thereof,  exclusively and
as a class, by plurality vote, to elect one (1) director of the corporation,  to
exercise any right of removal of said  director,  and to fill all  vacancies and
all newly  created  directorships  in said director  except those  vacancies and
newly created directorships which may be filled, under a duly adopted by-law, by
the existing  director elected by those holders of said class of shares.  In all
matters  other than in the  election and removal of  directors,  each issued and
outstanding  Class A Common share 10 shall entitle the holder of record  thereof
to full voting power, and voting shall not be by class unless otherwise required
by law.  Except as any  provision  of law may  otherwise  require  and except as
hereinabove  provided  with  respect  to the  election  or  removal  of one  (1)
director, no Class B Common Share shall entitle the holder thereof to any voting
power,  to any right to participate in any meeting of  shareholders,  or to have
any notice of any meeting of shareholders.

      FOURTH: The county within the State of New York within which the office of
the corporation is located is New York County.

      FIFTH:  The  Secretary of State of the State of New York is  designated as
the agent of the  corporation  upon whom process  against the corporation may be
served. The post office address within or without the State of New York to which
the Secretary of State shall mail a copy of any process  against the corporation
served upon him is: c/o Golenbock,  Eiseman,  Assor & Bell, 437 Madison  Avenue,
New York, New York 10022.

      SIXTH: No director shall be  disqualified  from voting or acting on behalf
of the corporation,  in contracting with any other corporation in which he is or
may be an  officer,  a  director  or a  stockholder,  and no  contract  or other
transaction between this corporation and any other corporation shall be affected
by the fact that the  directors of this  corporation  are  interested  in or are
directors or officers of such other  corporation  and any director  individually
may be a party to or may be  interested in any contract or  transaction  of this
corporation and no contract or transaction of this  corporation  with any person
or persons, firm or association, shall be affected by the fact that any director
of this  corporation  is a party  thereto or is  connected  with such  person or
persons, firm or association, provided that the interest in any such contract or
other transaction of any such director shall be fully disclosed; and, subject to
the  foregoing  provision,  each and every  person who may become a director  or
officer of this  corporation  is hereby  relieved from any liability  that might
otherwise  exist through  contracting or dealing with this  corporation  for the
benefit of himself or any firm, association or corporation in which he is or may
be in any manner  interested.  Each director and officer shall be indemnified by
the corporation  against expenses  reasonably incurred by him in connection with
any action,  suit or proceeding to which he may be made a party by reason of his
being or having  been a director  or officer of the  corporation  to the fullest
extent  permitted by New York law, and the  foregoing  right of  indemnification
shall not be  exclusive  of other rights to which he may be entitled as a matter
of law.

      SEVENTH:  No provision of this certificate of incorporation is intended by
the corporation to be construed as limiting, prohibiting, denying, or abrogating
any of the general or


                                       7
<PAGE>

specific powers or rights conferred under the Business  Corporation Law upon the
corporation   with  respect  to  the  power  of  the   corporation   to  furnish
indemnification  and to  advance  expenses  to  directors  and  officers  in the
capacities  defined  and  prescribed  by the  Business  Corporation  Law and the
defined and prescribed rights of said persons to indemnification and advancement
of expenses as the same are  conferred  by the  Business  Corporation  Law.  The
indemnification and advancement of expenses granted pursuant to, or provided by,
the Business  Corporation Law shall not be deemed  exclusive of any other rights
to which a  director  or  officer  seeking  indemnification  or  advancement  of
expenses may be entitled, whether contained in this certificate of incorporation
or the  by-laws  or (i) a  resolution  of  shareholders,  (ii) a  resolution  of
directors,  or (iii) an agreement providing for such indemnification,  except as
expressly prohibited by the Business Corporation Law.

      EIGHTH: To the fullest extent permitted by the Business Corporation Law of
the State of New York,  as the same  exists or may  hereafter  be  amended,  the
personal  liability of directors of the  corporation  to the  corporation or its
shareholders  for  damages  for any  breach of duty in such  capacity  is hereby
eliminated.  Neither the  amendment nor repeal of this Article  EIGHTH,  nor the
adoption of any provision of this Certificate of Incorporation or of the By-Laws
of the corporation or of any statute inconsistent with this Article EIGHTH shall
eliminate or limit the effect of this  Article  EIGHTH in respect of any acts or
omissions  occurring  prior to such  amendment,  repeal or  adoption  of such an
inconsistent provision.

      IN WITNESS  WHEREOF,  we, the President and Secretary of the  corporation,
have subscribed this document on the ____ day of September,  1998, and do hereby
affirm,  under the penalties of perjury,  that the statements  contained  herein
have been examined by us and are true and correct.

                                          /s/ Jack C. Bendheim
                                          -------------------------------------
                                          Jack C. Bendheim, President

                                          /s/ Joseph Katzenstein
                                          -------------------------------------
                                          Joseph M. Katzenstein, Secretary


                                       8
<PAGE>

                            CERTIFICATE OF AMENDMENT

                                       OF

                          CERTIFICATE OF INCORPORATION

                                       OF

                        PHILIPP BROTHERS CHEMICALS, INC.

               (Under Section 805 of the Business Corporation Law)

      The  undersigned,  being  respectively  the President and Secretary of the
below-named corporation, hereby certify as follows:

      FIRST:  The name of the Corporation is Philipp  Brothers  Chemicals,  Inc.
(the "Corporation").

      SECOND:  The original  certificate of incorporation of the Corporation was
filed  by the  Department  of  State  on  May  11,  1946  (such  certificate  of
incorporation,  as  amended  and  in  effect  thereafter,  the  "Certificate  of
Incorporation").

      THIRD:  The Certificate of Incorporation is hereby amended to provide that
25,000 shares of the Corporation's  authorized and unissued Preferred Shares (as
defined in the  Certificate  of  Incorporation)  shall be designated as Series B
Redeemable  Participating  Preferred  Shares  (hereinafter  referred  to as  the
"Series B Preferred  Shares"),  which shall have the following  relative rights,
preferences and limitations,  as fixed by the  Corporation's  Board of Directors
pursuant to authority  granted to it under the Certificate of Incorporation  and
as permitted by Section 502 of the Business Corporation Law:

      1. Rank. (a) For purposes of this Certificate of Amendment,  the following
capitalized terms shall have the following meanings.

            (i)  "Senior  Securities"  shall  mean,  with  respect to a class or
series of Preferred Stock, all equity  securities  issued by the Corporation the
terms of which  specifically  provide that such equity securities rank senior in
preference  or priority to such class or series of Preferred  Stock with respect
to dividend rights or rights upon liquidation,  dissolution or winding up of the
affairs of the Corporation.

            (ii)  "Parity  Securities"  shall mean,  with  respect to a class or
series of Preferred Stock, all equity  securities  issued by the Corporation the
terms of which  specifically  provide  that  such  equity  securities  rank on a
parity,  without preference or priority,  with such class or series of Preferred
Stock with respect to dividend rights or rights upon liquidation, dissolution or
winding up of the affairs of the Corporation, whether or not the dividend rates,
dividend payment dates or redemption or liquidation  prices per share or sinking
fund  provision,  if any, of such equity  securities be different  from those of
such class or series of Preferred Stock.

            (iii)  "Junior  Securities"  shall mean,  with respect to a class or
series of  Preferred  Stock,  all equity  securities  issued by the  Corporation
ranking


<PAGE>

junior in preference or priority to such class or series of Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the  affairs  of the  Corporation,  including  but not  limited to all Common
Shares (as defined in the Certificate of Incorporation) of the Corporation.

            (b) The Series B  Preferred  Shares  shall rank senior to all Junior
Securities,  on a parity  with all Parity  Securities,  and junior to all Senior
Securities,  in each case  with  respect  to  dividend  rights  or  rights  upon
liquidation,  dissolution  or  winding  up of the  affairs  of the  Corporation;
provided that (i) the Series B Preferred  Shares shall rank senior to the Series
A Preferred Shares (as defined in the Certificate of Incorporation) with respect
to  dividend  rights and on a parity  with the Series A  Preferred  Shares  with
respect to rights upon liquidation, dissolution or winding up of the Corporation
and (ii) the Series B Preferred  Shares shall rank on a parity with the Series C
Preferred  Shares with respect to dividend  rights and rights upon  liquidation,
dissolution or winding up of the Corporation.

      2. Dividends. (a) The holders of issued and outstanding Series B Preferred
Shares  shall be entitled to receive,  when,  as and if declared by the Board of
Directors,  cash  dividends  at an  annual  rate  equal  to 15% of the  Series B
Liquidation  Preference  (as defined below) (the "Series B Base  Dividend").  In
addition,  the holders of issued and outstanding Series B Preferred Shares shall
be entitled  to  participate  with the Class A Common  Shares (as defined in the
Certificate of Incorporation)  and to receive,  before any dividends (whether in
cash or in kind) are paid upon or set aside for the Class A Common  Shares,  the
same dividends  (whether in cash or in kind),  as are  distributed in respect of
each Class A Common Share (the "Series B Participating Dividend").  One Series B
Preferred  Share shall be treated for  purposes of such  participation  as being
equal to 0.5 (the  "Series  B  Participation  Number")  shares of Class A Common
Shares.  Holders  of Series B  Preferred  Shares  shall not be  entitled  to any
dividend,  whether  payable  in cash or in kind,  in excess  of full  cumulative
Series B Base Dividends and Series B  Participating  Dividends,  as specifically
provided in this Article THIRD.  Series B Participation  Dividends shall be paid
at the same time as and when  dividends on the Class A Common Shares are paid to
holders of Class A Common Shares.

            (b)  Series  B  Base  Dividends  shall  accrue  on  a  daily  basis,
cumulative  from the date of  issuance,  and shall be payable  semi-annually  in
arrears  on the last day of each  June and  December,  or, if such date is not a
business  day,  the  succeeding  business day (each,  a "Series B Base  Dividend
Payment  Date").  Series B Base  Dividends  shall be  computed on the basis of a
360-day year  consisting of twelve 30-day months.  Series B Base Dividends shall
accrue and  cumulate  whether or not the  Corporation  has  earnings or profits,
whether or not there are funds  legally  available  for the payment of dividends
and whether or not dividends are declared. Series B Base Dividends shall be paid
to the  holders  of record of Series B  Preferred  Shares as they  appear on the
records  of the  Corporation  at the  close of  business  on the 15th day of the
calendar month in which the applicable Series B Base Dividend Payment Date falls
or on such other date  designated  by the Board of Directors  for the payment of
Series B Base  Dividends that is not more than 30 nor less than 10 days prior to
such Series B Dividend  Payment  Date.  Any payment of a Series B Base  Dividend
shall first be credited  against


                                       2
<PAGE>

the earliest  accumulated  but unpaid Series B Base Dividend due with respect to
such share that remains payable.

            (c) So long as any  Series  B  Preferred  Share is  outstanding,  no
dividend  (other than a dividend in Common Shares of the  Corporation)  shall be
declared or paid or set aside for payment or other distribution declared or made
upon any Junior  Securities of any kind, nor shall any Junior  Securities of any
kind be redeemed,  purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of any
shares of any such securities) by the Corporation  (except by conversion into or
exchange for other Junior  Securities),  unless,  in each case,  full cumulative
dividends   on  all  the   Series  B   Preferred   Shares   have   been  or  are
contemporaneously declared and paid or are declared and a sum sufficient for the
payment thereof is set apart for such payment for all past dividend  periods and
the then current  dividend  period.  If dividends  are not paid in full or a sum
sufficient for such full payment is not so set apart upon the Series B Preferred
Shares, all dividends declared upon the Series B Preferred Shares and any series
of Parity  Securities  with respect to  dividends  shall be declared pro rata so
that the amount of dividends declared per share of the Series B Preferred Shares
and such series of Parity  Securities  with  respect to  dividends  shall in all
cases bear to each other the same ratio that  accrued and unpaid  dividends  per
share on the Series B Preferred Shares and such series of Parity Securities with
respect  to  dividends  bear  to each  other.  Notwithstanding  anything  to the
contrary  in  this  Section  2(c),  Common  Stock  of  the  Corporation  may  be
repurchased by the Corporation as required by the  Shareholders  Agreement dated
December 29, 1987, by and between the Corporation,  Charles H. Bendheim, Jack C.
Bendheim  and Marvin S.  Sussman  (the  "Sussman  Shareholders  Agreement"),  as
amended and in effect on the date of original issuance of the Series B Preferred
Shares, and as thereafter  amended,  except for any amendment  subsequent to the
date of  original  issuance of the Series B Preferred  Shares  which  causes the
terms of such agreement to be less  favorable in any respect to the  Corporation
or the holders of the Series B Preferred Shares.

            (d) If the Corporation  subdivides or splits the outstanding Class A
Common Shares into a greater number of shares or combines the outstanding  Class
A Common Shares into a smaller number of shares, then the Series B Participation
Number shall be adjusted,  effective  immediately  after the relevant  effective
date, so as to represent the number of Class A Common Shares of the  Corporation
which would be represented by the then applicable Series B Participation  Number
upon the effective date of the  subdivision,  split or  combination.  As soon as
practicable, the Corporation shall deliver by first class mail, postage prepaid,
to each  holder of Series B  Preferred  Shares a notice,  certified  as true and
correct  by an  authorized  person  of the  Corporation,  stating  the  Series B
Participation  Number  after such  adjustment,  a brief  statement  of the facts
requiring  such  adjustment  and the effective  date of such  adjusted  Series B
Participation Number;  provided that the failure of the Corporation to give such
notice shall not invalidate any corporate action by the Corporation.


                                       3
<PAGE>

      3. Redemption.

            (a)  Optional  Redemption.  (i) During the period  beginning 90 days
before  and  ending  90 days  after  each  anniversary  of the date of  original
issuance of the Series B Preferred  Shares (the "Series B Anniversary  Period"),
but only once per Series B Anniversary Period, the Corporation may redeem all or
part of the issued and outstanding  Series B Preferred Shares by payment in cash
for each share of Series B Preferred  Share  redeemed in an amount  equal to the
Series  B  Liquidation  Preference;  provided,  however,  that if all  Series  C
Preferred  Shares are not  redeemed  concurrently  with the  Series B  Preferred
Shares during a Series B Anniversary Period, then, in lieu of the foregoing, the
amount to be paid in cash by the  Corporation in this Section 3(a)(i) in respect
of Series B Preferred  Shares to be redeemed shall be an amount equal to (A) the
Series B Liquidation  Preference,  plus (B) an amount so that, combined with all
other payments made on the Series B Preferred Shares to be redeemed, a holder of
Series B Preferred  Shares will have  received an internal rate of return of 20%
on the purchase price of the Series B Preferred Shares from the date of issuance
to the date fixed for redemption.  Notwithstanding anything to the contrary, the
Series B Preferred  Shares may be redeemed in part during a Series B Anniversary
Period only if the number of shares of Series B Preferred  Shares to be redeemed
during such Series B  Anniversary  Period is equal to or greater than 50% of the
number of shares of Series B  Preferred  Shares  issued and  outstanding  on the
first  day of the first  Series B  Anniversary  Period,  as  adjusted  for stock
dividends, subdivisions, splits, combinations or similar transactions thereof.

                  (ii) During  each  period  that is not a Series B  Anniversary
Period (a  "Non-Series B Anniversary  Period"),  but only once per  Non-Series B
Anniversary  Period,  the  Corporation  may redeem all or part of the issued and
outstanding  Series B  Preferred  Shares by  payment  in cash for each  share of
Series B  Preferred  Share  redeemed  in an  amount  equal  to (A) the  Series B
Liquidation  Preference,  plus (B) an amount equal to the  dividends  that would
have accrued after such redemption if such Series B Preferred Share was redeemed
on the  anniversary  of the date of original  issuance of the Series B Preferred
Shares occurring in the Series B Anniversary Period  immediately  following such
Non-Series  B  Anniversary  Period;  provided,  however,  that if all  Series  C
Preferred  Shares are not  redeemed  concurrently  with the  Series B  Preferred
Shares during a Non-Series B Anniversary Period, then, in lieu of the foregoing,
the amount to be paid in cash by the  Corporation  in this  Section  3(a)(ii) in
respect of Series B Preferred  Shares to be redeemed shall be an amount equal to
(A) the  Series  B  Liquidation  Preference,  plus  (B) an  amount  equal to the
dividends  that  would  have  accrued  after such  redemption  if such  Series B
Preferred Share was redeemed on the anniversary of the date of original issuance
of the Series B Preferred  Shares  occurring in the Series B Anniversary  Period
immediately  following such Non-Series B Anniversary  Period, plus (C) an amount
so that,  combined with all other payments made on the Series B Preferred Shares
to be  redeemed,  a holder of Series B Preferred  Shares  will have  received an
internal  rate of return of 20% on the purchase  price of the Series B Preferred
Shares  from the date of  issuance  to the  anniversary  of the date of original
issuance of the Series B Preferred  Shares occurring in the Series B Anniversary
Period   immediately   following   such   Non-Series   B   Anniversary   Period.
Notwithstanding  anything to the contrary,  the Series B Preferred Shares may be
redeemed in part during a Non-Series B Anniversary  Period only if the number of
shares of Series B Preferred  Shares to be redeemed  during  such  Non-Series  B
Anniversary Period is equal to or greater than 50% of the number of


                                       4
<PAGE>

shares of Series B Preferred  Shares issued and  outstanding on the first day of
the  first  Series B  Anniversary  Period,  as  adjusted  for  stock  dividends,
subdivisions, splits, combinations or similar transactions thereof.

                  (iii) The Board of  Directors  shall fix a record date for the
determination of the Series B Preferred  Shares to be redeemed,  and such record
date  shall not be more than 30 days nor less than 10 days  prior to the date of
redemption.  The Corporation shall deliver by first class mail, postage prepaid,
a notice of redemption  not less than 10 nor more than 30 days prior to the date
of  redemption,  addressed  to the  holders of record of the Series B  Preferred
Shares as they appear in the records of the Corporation. No failure to give such
notice or any defect therein or in the mailing thereof shall affect the validity
of the proceedings for the redemption of any Series B Preferred Shares except as
to the holder to whom notice was defective or not given. Each notice shall state
the following:  (A) the record date and date of  redemption;  (B) the redemption
price; (C) the number of shares of Series B Preferred Stock to be redeemed;  (D)
the place where the Series B Preferred  Shares are to be surrendered for payment
of the  redemption  price;  and (E) that  dividends on the shares to be redeemed
will cease to accrue on such  redemption  date. If less than all of the Series B
Preferred Shares held by any holder is to be redeemed, the notice mailed to such
holder shall also specify the number of shares of Series B Preferred Shares held
by such holder to be redeemed.

            (b) Mandatory Redemption. (i) On and at any time after the Mandatory
Redemption Right Date (as defined below), the Series B Preferred Shares shall be
subject to mandatory redemption by the Corporation at the option and election of
the  holder  thereof  at a price,  payable  in cash,  for each share of Series B
Preferred  Share  redeemed  in an  amount  equal  to the  Series  B  Liquidation
Preference. All shares of Series B Preferred Shares held by such holder electing
for  redemption  under  this  clause  (b)  shall  be  redeemed.  The  "Mandatory
Redemption  Right Date" means the earlier to occur of (x) the stated maturity or
the earlier redemption in full of the Corporation's Series A and Series B 9 7/8%
Senior  Subordinated Notes due 2008 (the "Notes") or (y) a Change of Control (as
defined in Article FIFTH hereto,  which definition is the same as that contained
in the Indenture,  dated as of June 11, 1998, among Philipp Brothers  Chemicals,
Inc.,  Chase Manhattan Bank, as Trustee,  and the guarantors  named therein with
respect to the Notes (the "Indenture")).

                  (ii) The  Corporation  shall  give  notice to the  holders  of
record of Series B Preferred  Shares of this mandatory  redemption right as soon
as practicable  after the Mandatory  Redemption Right Date, by first class mail,
postage prepaid,  at their addresses as shown on the records of the Corporation.
Each such notice shall state:  (A) that, on and after such Mandatory  Redemption
Right Date,  such holder has the right to require the  Corporation to repurchase
for cash all of such  holder's  Series B Preferred  Shares;  (B) the  redemption
price as of the Mandatory  Redemption  Right Date (it being  understood that the
actual  redemption  price  will  be  determined  as of the  date  on  which  the
redemption occurs);  (C) the place where the Series B Preferred Shares are to be
surrendered for payment of the redemption  price;  and (D) that dividends on the
shares to be  redeemed  will  cease to accrue  as of the date  such  shares  are
redeemed.


                                       5
<PAGE>

                  (iii) The  Corporation  shall  redeem  each Series B Preferred
Share  requested to be redeemed by the holder  thereof within 30 days of receipt
by the Corporation of a notice from such holder  requesting such redemption.  If
the Corporation  fails for any reason to so redeem any one or more of the Series
B Preferred  Shares so  requested  to be redeemed,  then,  immediately  upon the
expiration  of such  30-day  period and for so long as the  Corporation  has not
redeemed all of such Series B Preferred  Shares  requested to be redeemed,  each
Series B  Preferred  Share shall  entitle the holder  thereof to the same voting
rights to which each Class A Common Share of the Corporation  (and each share of
any  other  capital  stock of the  Corporation)  entitles  the  holder  thereof;
provided,  however, no Series B Preferred Share shall entitle the holder thereof
to any voting rights with respect to the election and removal of directors.  The
holders of Series B Preferred Shares shall vote together with the Class A Common
Shares (and with the shares of any other capital stock of the Corporation).

            (c) On and after the date of a redemption  pursuant to Sections 3(a)
or (b), the Corporation shall pay the applicable  redemption price of a Series B
Preferred Share to the holder thereof in cash upon surrender of the certificates
therefor (properly endorsed or assigned for transfer,  if the Board of Directors
shall  so  require  and  the  notice  shall  so  state);  provided  that if such
certificates are lost,  stolen or destroyed,  the Board of Directors may require
such  holder to  indemnify  the  Corporation,  in a  reasonable  amount and in a
reasonable  manner,  prior to paying such redemption  price.  From and after the
applicable  redemption  date (unless default shall be made by the Corporation in
providing money for the full payment of the redemption price),  dividends on the
Series B Preferred  Shares to be redeemed on such redemption date shall cease to
accrue,  and said shares  shall no longer be deemed to be  outstanding,  and all
rights of the holders thereof as  shareholders  of the  Corporation  (except the
right to receive from the Corporation the redemption price) shall cease. In case
fewer  than  all  the  shares  represented  by any  such  certificate  are to be
redeemed,  a new certificate shall be issued  representing the unredeemed shares
without cost to the holder thereof. Any Series B Preferred Shares which shall at
any time have been redeemed  shall,  after such  redemption,  have the status of
authorized but unissued Preferred Shares, without designation as to series until
such shares are once more designated as part of a particular series by the Board
of Directors.

            (d) Notwithstanding the foregoing,  unless full cumulative dividends
on all  Series B  Preferred  Shares  shall  have been or  contemporaneously  are
declared and paid or are declared and a sum sufficient  for the payment  thereof
is set apart for payment  for all past  dividend  periods  and the then  current
dividend  period,  (i) no Series B Preferred  Shares may be redeemed  unless all
outstanding Series B Preferred Shares are simultaneously  redeemed in accordance
with this  Section 3 and (ii) the  Corporation  shall not  purchase or otherwise
acquire directly or indirectly any Series B Preferred Shares; provided, however,
that the  foregoing  shall not  prevent  the  redemption  on a pro rata basis of
Series B Preferred  Shares in accordance  with this Section 3 or the purchase or
acquisition  of Series B  Preferred  Shares  pursuant  to a purchase or exchange
offer made on the same terms to holders of all  outstanding  Series B  Preferred
Shares.


                                       6
<PAGE>

            (e) If fewer than all of the outstanding  Series B Preferred  Shares
are to be  redeemed,  the  Series B  Preferred  Shares to be  redeemed  shall be
selected pro rata (as nearly as may be practicable  without creating  fractional
shares) or by any other equitable method determined by the Corporation.

      4. Liquidation Rights. (a) Upon the voluntary or involuntary  liquidation,
dissolution,  or winding up of the  Corporation,  each Series B Preferred  Share
shall entitle the holder  thereof to receive and to be paid out of the assets of
the  Corporation  available for  distribution  to its  shareholders,  before any
payment or distribution  shall be made on any Junior  Securities with respect to
the liquidation,  dissolution,  or winding up of the Corporation, a stated value
in the  amount  of  $1,000,  plus an  amount  equal to all  accrued  and  unpaid
dividends  to the date fixed for payment  thereof  (collectively,  the "Series B
Liquidation Preference").

            (b) After the payment to the holders of Series B Preferred Shares of
the full  amount of the  liquidation  distribution  to which  they are  entitled
pursuant to Section 4(a), the holders of Series B Preferred Shares as such shall
have no right or claim to any of the remaining assets of the Corporation.

            (c) If, upon any voluntary or involuntary  liquidation,  dissolution
or winding up of the Corporation, the amounts payable with respect to the Series
B  Preferred  Shares  and  any  other  Parity  Securities  with  respect  to the
liquidation,  dissolution or winding up of the Corporation are not paid in full,
the holders of the Series B Preferred Shares and of such other Parity Securities
will share  ratably in any such  distribution  of assets of the  Corporation  in
proportion to the full respective values to which they are entitled.

            (d) Neither the sale of all or substantially  all of the property or
business of the Corporation,  nor the merger or consolidation of the Corporation
into or with any other  corporation or entity or the merger or  consolidation of
any other corporation or entity into or with the Corporation,  shall necessarily
be  deemed  to  be a  dissolution,  liquidation  or  winding  up,  voluntary  or
involuntary, for the purposes of this Section 4.

      5. Voting  Rights.  (a) Holders of Series B Preferred  Shares will have no
voting  rights,  except as set forth below or as otherwise  required by law from
time to time.

            (b) So long as any Series B Preferred  Shares are  outstanding,  the
Corporation  shall  not take any of the  following  actions,  without  the prior
consent or affirmative  vote of the holders of at least two-thirds of all Series
B Preferred  Shares then  issued and  outstanding,  given in person or by proxy,
either in  writing or at a meeting  called  therefor  (such  holders of Series B
Preferred Shares voting separately as a class):

                  (i)  any  amendment,  alteration  or  change  to  the  rights,
preferences,  privileges or powers of any Series B Preferred Share in any manner


                                       7
<PAGE>

(whether by merger, consolidation, reclassification or otherwise) that adversely
affects any shares thereof or present or future holders thereof;

                  (ii)  any   authorization,   creation   (by  way  of   merger,
consolidation,   reclassification  or  otherwise)  or  issuance  of  any  Senior
Securities or Parity Securities of any kind;

                  (iii) any amendment,  repeal or alteration of this Certificate
of Amendment,  the Certificate of  Incorporation or Bylaws in any manner (by way
of merger, consolidation,  reclassification or otherwise) that adversely affects
the present or future holders of the Series B Preferred Shares; or

                  (iv) any understanding, agreement or contract to do any of the
foregoing.

      FOURTH:  The  Certificate of  Incorporation  is hereby further  amended to
provide  that  20,000  shares  of  the  Corporation's  authorized  and  unissued
Preferred  Shares  shall be  designated  as  Series C  Redeemable  Participating
Preferred Shares  (hereinafter  referred to as the "Series C Preferred Shares"),
which shall have the following relative rights, preferences and limitations,  as
fixed by the Corporation's  Board of Directors  pursuant to authority granted to
it under the Certificate of Incorporation and as permitted by Section 502 of the
Business Corporation Law:

      1.  Rank.  (a) The terms  "Senior  Securities,"  "Parity  Securities"  and
"Junior  Securities"  shall have the  meanings  given to them in Section 1(a) of
Article THIRD hereinabove.

            (b) The Series C  Preferred  Shares  shall rank senior to all Junior
Securities,  on a parity  with all Parity  Securities,  and junior to all Senior
Securities,  in each case  with  respect  to  dividend  rights  or  rights  upon
liquidation,  dissolution  or  winding  up of the  affairs  of the  Corporation;
provided that (i) the Series C Preferred  Shares shall rank senior to the Series
A  Preferred  Shares with  respect to  dividend  rights and on a parity with the
Series A Preferred Shares with respect to rights upon  liquidation,  dissolution
or winding up of the  Corporation  and (ii) the Series C Preferred  Shares shall
rank on a parity  with the Series B Preferred  Shares  with  respect to dividend
rights  and  rights  upon   liquidation,   dissolution  or  winding  up  of  the
Corporation.

      2. Dividends. (a) The holders of issued and outstanding Series C Preferred
Shares  shall be entitled to receive,  when,  as and if declared by the Board of
Directors,  cash  dividends  at an  annual  rate  equal  to 15% of the  Series C
Liquidation  Preference  (as defined below) (the "Series C Base  Dividend").  In
addition,  the holders of issued and outstanding Series C Preferred Shares shall
be entitled to participate with the Class A Common Shares and to receive, before
any  dividends  (whether  in cash or in kind) are paid upon or set aside for the
Class A Common Shares,  the same  dividends  (whether in cash or in kind) as are
distributed in respect of each Class A Common Share (the "Series C Participating
Dividend").  One Series C Preferred  Share shall be treated for purposes of such
participation as being equal to 0.5 (the "Series C Participation


                                       8
<PAGE>

Number") shares of Class A Common Shares.  Holders of Series C Preferred  Shares
shall not be entitled to any  dividend,  whether  payable in cash or in kind, in
excess of full  cumulative  Series C Base  Dividends and Series C  Participating
Dividends,   as  specifically   provided  in  this  Article  FOURTH.   Series  C
Participation  Dividends shall be paid at the same time as and when dividends on
Class A Common Shares are paid to holders of Class A Common Shares.

            (b)  Series  C  Base  Dividends  shall  accrue  on  a  daily  basis,
cumulative  from the date of  issuance,  and shall be payable  semi-annually  in
arrears  on the last day of each  June and  December,  or, if such date is not a
business  day,  the  succeeding  business day (each,  a "Series C Base  Dividend
Payment  Date").  Series C Base  Dividends  shall be  computed on the basis of a
360-day year  consisting of twelve 30-day months.  Series C Base Dividends shall
accrue and  cumulate  whether or not the  Corporation  has  earnings or profits,
whether or not there are funds  legally  available  for the payment of dividends
and whether or not dividends are declared. Series C Base Dividends shall be paid
to the  holders  of record of Series C  Preferred  Shares as they  appear on the
records  of the  Corporation  at the  close of  business  on the 15th day of the
calendar month in which the applicable Series C Base Dividend Payment Date falls
or on such other date  designated  by the Board of Directors  for the payment of
Series C Base  Dividends that is not more than 30 nor less than 10 days prior to
such Series C Dividend  Payment  Date.  Any payment of a Series C Base  Dividend
shall first be credited  against the earliest  accumulated  but unpaid  Series C
Base Dividend due with respect to such share that remains payable.

            (c) So long as any  Series  C  Preferred  Share is  outstanding,  no
dividend  (other than a dividend in Common Shares of the  Corporation)  shall be
declared or paid or set aside for payment or other distribution declared or made
upon any Junior  Securities of any kind, nor shall any Junior  Securities of any
kind be redeemed,  purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of any
shares of any such securities) by the Corporation  (except by conversion into or
exchange for other Junior  Securities),  unless,  in each case,  full cumulative
dividends   on  all  the   Series  C   Preferred   Shares   have   been  or  are
contemporaneously declared and paid or are declared and a sum sufficient for the
payment thereof is set apart for such payment for all past dividend  periods and
the then current  dividend  period.  If dividends  are not paid in full or a sum
sufficient for such full payment is not so set apart upon the Series C Preferred
Shares, all dividends declared upon the Series C Preferred Shares and any series
of Parity  Securities  with respect to  dividends  shall be declared pro rata so
that the amount of dividends declared per share of the Series C Preferred Shares
and such series of Parity  Securities  with  respect to  dividends  shall in all
cases bear to each other the same ratio that  accrued and unpaid  dividends  per
share on the Series C Preferred Shares and such series of Parity Securities with
respect  to  dividends  bear  to each  other.  Notwithstanding  anything  to the
contrary  in  this  Section  2(c),  Common  Stock  of  the  Corporation  may  be
repurchased by the Corporation as required by the Sussman Shareholders Agreement
(as defined in Article THIRD),  as amended and in effect on the date of original
issuance of the Series C Preferred Shares, and as thereafter amended, except for
any  amendment  subsequent  to the date of  original  issuance  of the  Series C
Preferred  Shares which causes the terms of such


                                       9
<PAGE>

agreement to be less favorable in any respect to the  Corporation or the holders
of the Series C Preferred Shares.

            (d) If the Corporation  subdivides or splits the outstanding Class A
Common Shares into a greater number of shares or combines the outstanding  Class
A Common Shares into a smaller number of shares, then the Series C Participation
Number shall be adjusted,  effective  immediately  after the relevant  effective
date, so as to represent the number of Class A Common Shares of the  Corporation
which would be represented by the then applicable Series C Participation  Number
upon the effective date of the  subdivision,  split or  combination.  As soon as
practicable, the Corporation shall deliver by first class mail, postage prepaid,
to each  holder of Series C  Preferred  Shares a notice,  certified  as true and
correct  by an  authorized  person  of the  Corporation,  stating  the  Series C
Participation  Number  after such  adjustment,  a brief  statement  of the facts
requiring  such  adjustment  and the effective  date of such  adjusted  Series C
Participation Number;  provided that the failure of the Corporation to give such
notice shall not invalidate any corporate action by the Corporation.

      3. Redemption.

            (a)  Optional  Redemption.  (i) During the period  beginning 90 days
before  and  ending 90 days after the third  anniversary,  and each  anniversary
thereafter,  of the date of original  issuance of the Series C Preferred  Shares
(the  "Series C  Anniversary  Period"),  but only once per Series C  Anniversary
Period, the Corporation may redeem all, but not less than all, of the issued and
outstanding  Series C  Preferred  Shares by  payment  in cash for each  share of
Series C  Preferred  Share  redeemed  in an  amount  equal  to (A) the  Series C
Liquidation  Preference,  plus (B) a pro rata amount equal to the product of the
Equity Value (as defined  below)  multiplied by the  Applicable  Percentage  (as
defined  below) as of the record date for such  redemption  (the  "Equity  Value
Amount").

                  (ii)  During  each  period  that is after the  first  Series C
Anniversary  Period but is not a Series C  Anniversary  Period (a  "Non-Series C
Anniversary  Period"),  but only once per Non-Series C Anniversary  Period,  the
Corporation may redeem all, but not less than all, of the issued and outstanding
Series  C  Preferred  Shares  by  payment  in cash for  each  share of  Series C
Preferred  Share  redeemed  in an amount  equal to (A) the Series C  Liquidation
Preference,  plus (B) an amount equal to the  dividends  that would have accrued
after such  redemption  if such  Series C  Preferred  Share was  redeemed on the
anniversary  of the date of original  issuance of the Series C Preferred  Shares
occurring  in  the  Series  C  Anniversary  Period  immediately  following  such
Non-Series C Anniversary Period, plus (C) the Equity Value Amount.

                  (iii) "Equity Value" shall mean an amount equal to (A) the sum
of (x) the  product  obtained  by  multiplying  7.5 by the greater of either the
Corporation's  trailing  EBITDA (as defined below) for the most recent four full
fiscal  quarters  (such  period,  the  "Last  Period")  or  the  average  of the
Corporation's  trailing EBITDA for the Last Period and the Corporation's  EBITDA
for the four full fiscal quarters immediately preceding the Last Period plus (y)
the Corporation's cash and


                                       10
<PAGE>

marketable  securities,  and minus (B) all  outstanding  indebtedness,  minority
interests,  preferred stock, accrued  environmental  reserves,  accrued currency
reserves,  accrued  indebtedness  for the Net  Revenues  Payment  (as defined in
Article FIFTH hereto,  which definition is the same as that contained in Section
2.6(b)  of  the  Asset  Purchase  Agreement,  among  Pfizer,  Inc.,  a  Delaware
corporation,  the other Asset Selling Corporations (as defined therein), and the
Corporation,  dated as of  September  28, 2000 (the "Pfizer  Agreement"))),  and
accrued  indebtedness  for Gross Profit Excluding  Virginiamycin  (as defined in
Article FIFTH hereto,  which definition is the same as that contained in Section
1.1 of the Pfizer Agreement).  For each relevant fiscal quarter, the calculation
of Equity  Value and all of its  components  (including  but not  limited to the
components  of EBITDA) shall be based on figures that are reflected in (and only
to the extent  reflected in) the  consolidated  balance  sheet and  consolidated
statements of income and cash flows of the Corporation as of and for such fiscal
quarter,  all of which must be prepared in accordance  with  generally  accepted
accounting principles  consistently applied and audited by nationally recognized
independent public accountants.

      "EBITDA"  shall  mean,  for  any  period,  (x)  the  sum  of  income,  all
depreciation  expenses,  all  amortization  expenses,  and  any  other  non-cash
expenses but excluding (y) all extraordinary  losses, all interest expenses (net
of interest  income),  all charges  against income for federal,  state and local
taxes, all non-recurring  expenses or charges,  and extraordinary  non-recurring
gains, in each case based upon (and only to the extent reflected in) the audited
financial  statements of the Corporation  used in calculating  "Equity Value" in
the immediately  preceding paragraph;  provided that, unless otherwise agreed to
by a majority the holders of Series C Preferred Shares, payments for all earnout
and royalty payments and all management fees shall be excluded from EBITDA.

      "Applicable  Percentage" shall mean, with respect to a redemption pursuant
to  Section  3(a)  during  a Series  C  Anniversary  Period  or a  Non-Series  C
Anniversary  Period  or  with  respect  to  the  calculation  of  Capital  Stock
Transaction Amount (as defined herein), the percentage listed below opposite the
period  in which the  redemption  occurs  or in which  the  consummation  of the
Capital Stock Transaction occurs, respectively:

         Period                                                      Percentage
         ------                                                      ----------

         September 1, 2003 to February 28, 2004                        14.00%
         February 29, 2004 to February 28, 2005                        18.00%
         March 1, 2005 to February 28, 2006                            22.00%
         March 1, 2006 to February 28, 2007                            25.00%
         March 1, 2007 to February 28, 2008                            27.50%
         February 29, 2008 and thereafter                              30.00%

                  (iv) The Board of  Directors  shall fix a record  date for the
determination of the Series C Preferred  Shares to be redeemed,  and such record
date  shall not be more than 30 days nor less than 10 days  prior to the date of
redemption.  The Corporation shall deliver by first class mail, postage prepaid,
a notice of redemption


                                       11
<PAGE>

not  less  than 10 nor  more  than  30 days  prior  to the  date of  redemption,
addressed  to the  holders  of record of the Series C  Preferred  Shares as they
appear in the records of the Corporation.  No failure to give such notice or any
defect  therein or in the  mailing  thereof  shall  affect the  validity  of the
proceedings for the redemption of any Series C Preferred Shares except as to the
holder to whom notice was  defective  or not given.  Each notice shall state the
following: (A) the record date and date of redemption; (B) the redemption price;
(C) the number of shares of Series C  Preferred  Stock to be  redeemed;  (D) the
place where the Series C Preferred  Shares are to be surrendered  for payment of
the redemption  price;  and (E) that dividends on the shares to be redeemed will
cease to accrue on such redemption date.

                  (v) The  Corporation  may not  redeem  any  share of  Series C
Preferred  Shares  pursuant  to this  Section  3(a) if any  share  of  Series  B
Preferred  Shares is  outstanding,  unless  all  outstanding  shares of Series B
Preferred  Shares are redeemed  concurrently  with such  redemption  of Series C
Preferred Shares.

            (b) Mandatory Redemption. (i) On and at any time after the Mandatory
Redemption  Right Date (as  defined in Article  THIRD),  the Series C  Preferred
Shares shall be subject to mandatory redemption by the Corporation at the option
and election of the holder  thereof at a price,  payable in cash, for each share
of Series C  Preferred  Share  redeemed  in an amount  equal to (A) the Series C
Liquidation Preference, plus (B) the Equity Value Amount. All shares of Series C
Preferred  Shares held by such holder electing for redemption  under this clause
(b) shall be redeemed.

                  (ii) The  Corporation  shall  give  notice to the  holders  of
record of Series C Preferred  Shares of this mandatory  redemption right as soon
as practicable  after the Mandatory  Redemption Right Date, by first class mail,
postage prepaid,  at their addresses as shown on the records of the Corporation.
Each such notice shall state:  (A) that, on and after such Mandatory  Redemption
Right Date,  such holder has the right to require the  Corporation to repurchase
for cash all of such  holder's  Series C Preferred  Shares;  (B) the  redemption
price as of the Mandatory  Redemption  Right Date (it being  understood that the
actual  redemption  price  will  be  determined  as of the  date  on  which  the
redemption occurs);  (C) the place where the Series C Preferred Shares are to be
surrendered for payment of the redemption  price;  and (D) that dividends on the
shares to be  redeemed  will  cease to accrue  as of the date  such  shares  are
redeemed.

                  (iii) The  Corporation  shall  redeem  each Series C Preferred
Share  requested to be redeemed by the holder  thereof within 30 days of receipt
by the Corporation of a notice from such holder  requesting such redemption.  If
the Corporation  fails for any reason to so redeem any one or more of the Series
C Preferred  Shares so  requested  to be redeemed,  then,  immediately  upon the
expiration  of such  30-day  period and for so long as the  Corporation  has not
redeemed all of such Series C Preferred  Shares  requested to be redeemed,  each
Series C  Preferred  Share shall  entitle the holder  thereof to the same voting
rights to which each Class A Common Share of the Corporation  (and each share of
any  other  capital  stock of the  Corporation)  entitles  the  holder  thereof;
provided,  however, no Series C Preferred Share shall entitle the holder thereof
to any voting rights with respect to the election and removal of directors.  The


                                       12
<PAGE>

holders of Series C Preferred Shares shall vote together with the Class A Common
Shares (and with the shares of any other capital stock of the Corporation).

            (c) Capital Stock  Transaction  Adjustment.  (i) The Corporation may
not effect (A) any  recapitalization  of the Corporation or  reclassification of
any  capital  stock  of  the  Corporation,  (B)  any  consolidation,  merger  or
combination of the Corporation with or into another  corporation or entity,  (C)
any  sale  or  conveyance  of all or  substantially  all  of the  assets  of the
Corporation  to any person or entity as a result of which holders of any capital
stock of the Corporation shall be entitled to receive cash, stock, securities or
other  property with respect to or in exchange for such capital  stock,  (D) any
initial  public  offering of any capital  stock of the  Corporation,  or (E) any
redemption,  acquisition  or other  purchase of any Junior  Securities or Parity
Securities  (other than Series B Preferred Shares or Series C Preferred  Shares)
of the Corporation (collectively, a "Capital Stock Transaction"), unless (x) the
amount of the Series C Liquidation  Preference is increased by the Capital Stock
Transaction  Amount (as defined below),  if any, with respect to all outstanding
Series C  Preferred  Shares as of the date of the  consummation  of the  Capital
Stock  Transaction,  and (y) if such Capital Stock Transaction occurs during the
one-year period following the redemption of any Series C Preferred Shares,  then
immediately  prior to or concurrently with the consummation of the Capital Stock
Transaction,  the Corporation pays in cash the Capital Stock Transaction Amount,
if any,  to each person or entity that was the last holder of record of a Series
C Preferred Share that was redeemed during the 360-day period preceding the date
of  the  consummation  of  such  Capital  Stock   Transaction.   "Capital  Stock
Transaction  Amount" means a pro rata amount equal to the excess, if any, of (1)
the aggregate value of the outstanding shares,  fully diluted, of all classes of
Common  Stock  of  the  Corporation  based  on,  but  immediately  prior  to the
consummation  of, the Capital Stock  Transaction  multiplied  by the  Applicable
Percentage as of the date of the  consummation of the Capital Stock  Transaction
over (2) the Equity Value Amount  immediately  prior to the  consummation of the
Capital Stock Transaction.

                  (ii)  The  Corporation  shall  deliver  by first  class  mail,
postage prepaid,  a notice of entering into a Capital Stock  Transaction as soon
as  practicable  and in any  event  not less  than 20 days  prior to the date of
consummation  thereof,  addressed  to the  holders  of  record  of the  Series C
Preferred Shares and, if clause (y) of subsection (i) is applicable, such former
holders  of record  of the  Series C  Preferred  Shares,  as they  appear in the
records of the Corporation.  Each notice shall state the following:  (A) a brief
description of the Capital Stock Transaction and (B), if applicable, the Capital
Stock Transaction Amount and the method of calculation therefor.

            (d) On and after the date of a redemption  pursuant to Sections 3(a)
or (b), the Corporation shall pay the applicable  redemption price of a Series C
Preferred Share to the holder thereof in cash upon surrender of the certificates
therefor (properly endorsed or assigned for transfer,  if the Board of Directors
shall  so  require  and  the  notice  shall  so  state);  provided  that if such
certificates are lost,  stolen or destroyed,  the Board of Directors may require
such  holder to  indemnify  the  Corporation,  in a  reasonable  amount and in a
reasonable  manner,  prior to paying such redemption  price.  From and after the
applicable  redemption  date (unless default shall be made by the


                                       13
<PAGE>

Corporation in providing  money for the full payment of the  redemption  price),
dividends  on the Series C Preferred  Shares to be  redeemed on such  redemption
date shall  cease to  accrue,  and said  shares  shall no longer be deemed to be
outstanding,  and all  rights of the  holders  thereof  as  shareholders  of the
Corporation  (except the right to receive from the  Corporation  the  redemption
price and any Capital Stock Transaction  Amount) shall cease. In case fewer than
all the shares  represented by any such  certificate  are to be redeemed,  a new
certificate  shall be issued  representing the unredeemed shares without cost to
the holder thereof.  Any Series C Preferred  Shares which shall at any time have
been redeemed shall,  after such  redemption,  have the status of authorized but
unissued  Preferred Shares,  without  designation as to series until such shares
are  once  more  designated  as part of a  particular  series  by the  Board  of
Directors.

            (e) Notwithstanding the foregoing,  unless full cumulative dividends
on all  Series C  Preferred  Shares  shall  have been or  contemporaneously  are
declared and paid or are declared and a sum sufficient  for the payment  thereof
is set apart for payment  for all past  dividend  periods  and the then  current
dividend  period,  (i) no Series C Preferred  Shares may be redeemed  unless all
outstanding Series C Preferred Shares are simultaneously  redeemed in accordance
with this  Section 3 and (ii) the  Corporation  shall not  purchase or otherwise
acquire directly or indirectly any Series C Preferred Shares; provided, however,
that the  foregoing  shall not prevent the purchase or  acquisition  of Series C
Preferred Shares pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding Series C Preferred Shares.

      4. Liquidation Rights. (a) Upon the voluntary or involuntary  liquidation,
dissolution,  or winding up of the  Corporation,  each Series C Preferred  Share
shall entitle the holder  thereof to receive and to be paid out of the assets of
the  Corporation  available for  distribution  to its  shareholders,  before any
payment or distribution  shall be made on any Junior  Securities with respect to
the liquidation,  dissolution,  or winding up of the  Corporation,  (i) a stated
value in the amount of $1,000 (as  adjusted  by the  Capital  Stock  Transaction
Amount, if any), plus an amount equal to all accrued and unpaid dividends to the
date  fixed  for  payment  thereof  (collectively,  the  "Series  C  Liquidation
Preference"), plus (ii) the Equity Value Amount.

            (b) After the payment to the holders of Series C Preferred Shares of
the full  amount of the  liquidation  distribution  to which  they are  entitled
pursuant to Section 4(a), the holders of Series C Preferred Shares as such shall
have no right or claim to any of the remaining assets of the Corporation.

            (c) If, upon any voluntary or involuntary  liquidation,  dissolution
or winding up of the Corporation, the amounts payable with respect to the Series
C  Preferred  Shares  and  any  other  Parity  Securities  with  respect  to the
liquidation,  dissolution or winding up of the Corporation are not paid in full,
the holders of the Series C Preferred Shares and of such other Parity Securities
will share  ratably in any such  distribution  of assets of the  Corporation  in
proportion to the full respective values to which they are entitled.


                                       14
<PAGE>

            (d) Neither the sale of all or substantially  all of the property or
business of the Corporation,  nor the merger or consolidation of the Corporation
into or with any other  corporation or entity or the merger or  consolidation of
any other corporation or entity into or with the Corporation,  shall necessarily
be  deemed  to  be a  dissolution,  liquidation  or  winding  up,  voluntary  or
involuntary, for the purposes of this Section 4.

      5. Voting  Rights.  (a) Holders of Series C Preferred  Shares will have no
voting  rights,  except as set forth below or as otherwise  required by law from
time to time.

            (b) So long as any Series C Preferred  Shares are  outstanding,  the
Corporation  shall  not take any of the  following  actions,  without  the prior
consent or affirmative  vote of the holders of at least two-thirds of all Series
C Preferred  Shares then  issued and  outstanding,  given in person or by proxy,
either in  writing or at a meeting  called  therefor  (such  holders of Series C
Preferred Shares voting separately as a class):

                  (i)  any  amendment,  alteration  or  change  to  the  rights,
preferences,  privileges or powers of any Series C Preferred Share in any manner
(whether by merger, consolidation, reclassification or otherwise) that adversely
affects any shares thereof or present or future holders thereof;

                  (ii)  any   authorization,   creation   (by  way  of   merger,
consolidation,   reclassification  or  otherwise)  or  issuance  of  any  Senior
Securities or Parity Securities of any kind;

                  (iii) any amendment,  repeal or alteration of this Certificate
of Amendment,  the Certificate of  Incorporation or Bylaws of the Corporation in
any manner (by way of merger, consolidation, reclassification or otherwise) that
adversely  affects  the  present or future  holders  of the  Series C  Preferred
Shares; or

                  (iv) any understanding, agreement or contract to do any of the
foregoing.

      FIFTH:  The following  terms,  as used in this  Certificate  of Amendment,
shall have the definitions set forth below.

      1.  Definition  of  Change  of  Control.  "Change  of  Control"  means the
occurrence  of any of the  following  events  after  the  date  of  filing  this
Certificate of Amendment: (i) any "person" or "group" (as such terms are used in
Sections  13(d) and 14(d) of the Exchange Act) (other than one or more Permitted
Holders) is or becomes  (including by merger,  consolidation  or otherwise)  the
"beneficial  owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have beneficial  ownership of all shares
that such Person has the right to  acquire,  whether  such right is  exercisable
immediately or only after the passage of time),  directly or indirectly,  of 50%
or more of the  voting  power  of the  total  outstanding  Voting  Stock  of the
Corporation; (ii) during any period of two consecutive years, individuals who at
the  beginning  of  such  period  constituted  the  Board  of  Directors  of the
Corporation  (together


                                       15
<PAGE>

with any new  directors  whose  election  to such Board of  Directors,  or whose
nomination for election by the stockholders of the Corporation,  was approved by
a vote of  66-2/3%  of the  directors  then  still in  office  who  were  either
directors at the beginning of such period or whose  election or  nomination  for
election  was  previously  so  approved)  cease for any reason to  constitute  a
majority of such Board of Directors of the Corporation then in office; (iii) the
approval  by the  holders of  Capital  Stock of the  Corporation  of any plan or
proposal for the  liquidation or  dissolution of the  Corporation as a whole and
not  any  Restricted  Subsidiary  or  Guarantor  (whether  or not  otherwise  in
compliance  with  the  terms  of the  Indenture);  or (iv)  the  sale  or  other
disposition   (other  than  by  way  of  merger  or  consolidation)  of  all  or
substantially  all of the  Capital  Stock or assets of the  Corporation  and its
Restricted  Subsidiaries  taken as a whole to any person or group (as defined in
Rule 13d-5 of the  Exchange  Act)  (other  than to one or more of the  Permitted
Holders) as an entirely or  substantially as an entirety in one transaction or a
series or related  transactions,  unless the  "beneficial  owners" of the Voting
Stock of such Person  immediately  prior to such  transaction  own,  directly or
indirectly,  more than 50% of the total voting power of such Person  immediately
after such transaction.

      As  used  in the  above  definition  of  "Change  of  Control"  and in the
definitions that follow, the following terms have the meanings set forth below:

      "Affiliates" means, with respect to any specified Person, any other Person
directly or indirectly  controlling or controlled by or under direct or indirect
common  control with such  specified  Person.  For purposes of this  definition,
"control"  (including,  with  correlative  meanings,  the  terms  "controlling,"
"controlled  by" and  "under  common  control  with")  of any  Person  means the
possession,  directly  or  indirectly,  of the  power to  direct  or  cause  the
direction of the  management  and policies of such Person,  whether  through the
ownership of voting securities, by agreement or otherwise.

      "Capital Stock" of any Person means any and all shares, interests,  rights
to  purchase,  warrants,  options,  participations  or other  equivalents  of or
interests   in   (however   designated)   corporate   stock  or   other   equity
participations,  including partnership interests, whether general or limited, of
such Person, including any Preferred Stock.

      "Exchange Act" means the Securities Exchange Act of 1934, as amended,  and
the rules and regulations of the Securities and Exchange Commission  promulgated
thereunder.

      "Guarantor" means (i) the domestic  Subsidiaries of the Corporation on the
Issue Date, (ii) each of the Corporation's  Restricted Subsidiaries which become
Restricted  Subsidiaries  after the Issue  Date and which are  organized  in the
United States, and (iii) each of the Corporation's  Restricted Subsidiaries that
in the  future  executes  a  supplemental  indenture  in which  such  Restricted
Subsidiary agrees to be bound by the terms of the Indenture as a Guarantor.

      "Issue Date" means the date on which the Notes are first issued under this
Indenture.


                                       16
<PAGE>

      "Permitted  Holders"  means (i) Jack  Bendheim;  (ii) each of his  spouse,
siblings,  ancestors,  descendants (whether by blood, marriage or adoption,  and
including  stepchildren)  and the spouses,  siblings,  ancestors and descendants
(whether by blood,  marriage or adoption,  and including  stepchildren)  of such
natural persons, the beneficiaries,  estates and legal representatives of any of
the foregoing, the trustee of any bona fide trust of which any of the foregoing,
individually or in the aggregate,  are the majority in interest beneficiaries or
grantors, and any corporation,  partnership,  limited liability company or other
Person in which any of the foregoing,  individually or in the aggregate,  own or
control a majority  in  interest;  and (iii) all  Affiliates  controlled  by the
individual named in clause (i) above.

      "Person" means any individual,  corporation,  partnership,  joint venture,
association,    joint-stock   company,   limited   liability   company,   trust,
unincorporated organization or government or any agency or political subdivision
thereof.

      "Preferred  Stock" as applied to the Capital  Stock of any  Person,  means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of  dividends  or  distributions,  or as to the  distribution  of
assets upon any voluntary or  involuntary  liquidation  or  dissolution  of such
Person, over Capital Stock of any other class of such Person.

      "Restricted  Subsidiary"  means each direct or indirect  Subsidiary of the
Corporation other than an Unrestricted Subsidiary.

      "Subsidiary"  of a Person means (i) any  corporation  more than 50% of the
outstanding  voting power of the Voting  Stock of which is owned or  controlled,
directly or indirectly,  by such Person or by one or more other  Subsidiaries of
such Person, or by such Person and one or more other  Subsidiaries  thereof,  or
(ii) any  limited  partnership  of which such Person or any  Subsidiary  of such
person is a general partner, or (iii) any other person (other than a corporation
or limited  partnership) in which such Person or one or more other  Subsidiaries
of such  Person,  or such  Person  and one or more other  Subsidiaries  thereof,
directly or  indirectly,  have more than 50% of the  outstanding  partnership or
similar  interests  or have the power,  by contract or  otherwise,  to direct or
cause the direction of the policies, management and affairs thereof.

      "Unrestricted   Subsidiary"   means  any  Subsidiary  of  the  Corporation
designated  as such  pursuant  to and in  compliance  with  Section  4.14 of the
Indenture and not  redesignated a Restricted  Subsidiary in compliance with such
Section.

      "Voting Stock" of a Person means Capital Stock of such Person of the class
pursuant  to which the  holders  thereof  have the  general  voting  power under
ordinary  circumstances  to elect at least a majority of the board of directors,
managers or trustees of such Person  (irrespective of whether or not at the time
stock of any other  class or classes  shall have or might have  voting  power by
reason of the happening of any contingency).


                                       17
<PAGE>

      2. Definition of Net Revenues  Payment.  "Net Revenues  Payment" means Net
Virginiamycin Revenues for the most recently completed Measurement Period.

      In the above  definition of "Net Revenues  Payment" and in the definitions
that follow, the following terms have the meanings set forth below:

      "Affiliate"  means, with respect to any Person,  any other Person directly
or indirectly  controlling,  controlled by, or under common  control with,  such
Person at any time during the period for which the  determination of affiliation
is being made.

      "Closing  Date"  means the date on which the  closing of the  transactions
contemplated by the Pfizer Agreement occurs.

      "Measurement  Period" means the three (3)-month  period  commencing on the
first day of the month  following the month in which the Closing Date occurs and
ending on the last day of the month that is three (3) months  after the month in
which the Closing Date occurs,  and each of the nineteen (19)  successive  three
(3)-month periods thereafter  commencing on the first day of the month following
the most recently completed Measurement Period and ending on the last day of the
month in which the fifth anniversary of the Closing Date occurs.

      "Net Virginiamycin Revenues" means the gross invoice value of all sales of
Virginiamycin by the Corporation and/or its Affiliates to third parties,  net of
(regardless of the period to which any such items apply) (i) all applicable bona
fide trade and volume discounts and rebates and allowances to customers  accrued
on such sales and (ii) credits,  allowances,  refunds,  returns and  adjustments
actually  granted to  customers  on account of  spoiled,  damaged,  outdated  or
returned goods;  provided that in the event sales of  Virginiamycin  are bundled
with other products of the  Corporation,  the portion of the gross invoice value
derived from the sale of the bundled products  attributable to Virginiamycin for
purposes hereof shall be in proportion to the most recent  published sales price
for  Virginiamycin  as compared to the most recent published sales price for the
other  bundled  products.  Net  Virginiamycin  Revenues  also shall  include net
royalty payments,  fees and other payments relating to Virginiamycin received by
the  Corporation  and/or  its  Affiliates  from  licensees  or  distributors  of
Virginiamycin  and other third parties  appointed by the  Corporation  serving a
similar function.  Notwithstanding the foregoing, there shall not be included in
"Net  Virginiamycin  Revenues" sales of Virginiamycin by the Corporation  and/or
its  Affiliates  to  Pfizer,   Inc.  and/or  its  Affiliates   pursuant  to  the
arrangements  relating to Egypt,  Algeria and India  entered into by the parties
pursuant to the terms of the Pfizer Agreement.

      "Person"  means  an  individual,   a   corporation,   a  partnership,   an
association, a trust or other entity or organization.

      "Products"  means certain feed additive  products  listed on Schedule 1 of
the Pfizer Agreement.


                                       18
<PAGE>

      "Virginiamycin"  means any of the Products  which  contain as their active
ingredient the composite virginiamycin antibiotic.

      3.  Definition  of Gross Profit  Excluding  Virginiamycin.  "Gross  Profit
Excluding   Virginiamycin"  means  net  sales  (gross  sales  less  returns  and
allowances) by the  Corporation  and/or its Affiliates to third parties less its
and/or their actual cost of sales  (standard cost plus  manufacturing  variances
and  the  impact  of  inventory   revaluations)  for  all  Products,   excluding
Virginiamycin,  and any  extensions,  improvements,  substitutes or replacements
therefor,  in each case that contain the same active  ingredients as are used in
the Products,  excluding Virginiamycin;  provided, however, that gross profit in
respect of any products  acquired by the Corporation or its Affiliates after the
Closing Date containing the same active  ingredients as are used in the Products
(excluding  Virginiamycin)  shall not be  included  in such  calculation  if the
acquired  products  are sold  under a  trademark  or brand name other than those
included in the Trademark  Rights acquired by the Corporation  hereunder.  Gross
Profit Excluding Virginiamycin also shall include net royalty payments, fees and
other payments relating to the foregoing Products  (including the aforementioned
extensions,   improvements,   substitutes  or  replacements)   received  by  the
Corporation  and/or  its  Affiliates  from  licensees  and  distributors  of the
foregoing Products and other third parties appointed by the Corporation  serving
a similar function. For purposes of determining cost of sales, the manufacturing
variances  and the  impact  of  inventory  revaluations  shall be  appropriately
allocated  between  Virginiamycin  and the  other  Products  based  on  specific
identification,  if feasible,  or any other reasonable  method that results in a
fair and equitable allocation.

      In the above  definition of "Gross Profit  Excluding  Virginiamycin,"  the
term "Trademark  Rights" means registered and unregistered  trademarks,  service
marks,  brand names and  certification  marks set forth on Schedule  5.12 of the
Pfizer   Agreement,   and  the  goodwill   associated  with  the  foregoing  and
registrations  in any  jurisdiction  of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such  registration or  application.  Other  capitalized  terms contained in this
Section 3 of Article  FIFTH not  otherwise  defined in this Section 3 of Article
FIFTH shall have the meanings ascribed thereto in Section 2 of Article FIFTH.

      SIXTH:   These  amendments  to  the  Certificate  of  Incorporation   were
authorized  and  approved  by the Board of  Directors  of the  Corporation  at a
meeting duly held therefor.

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                                       19
<PAGE>

      IN WITNESS WHEREOF, the undersigned are authorized to act on behalf of the
Corporation and have signed and executed this Certificate of Amendment, in their
respective capacities as indicated below, on November 30, 2000.

                                             /s/ JACK C. BENDHIEM
                                             -----------------------------------
                                             Jack C. Bendheim, President

                                             /s/ JOSEPH M. KATZENSTEIN
                                             -----------------------------------
                                             Joseph M. Katzenstein, Secretary


                                       20
<PAGE>

                            CERTIFICATE OF AMENDMENT

                                       OF

                          CERTIFICATE OF INCORPORATION

                                       OF

                        PHILIPP BROTHERS CHEMICALS, INC.

               (Under Section 805 of the Business Corporation Law)

      The  undersigned,  being  respectively  the President and Secretary of the
below-named corporation, hereby certify as follows:

      FIRST:  The name of the Corporation is Philipp  Brothers  Chemicals,  Inc.
(the "Corporation").

      SECOND:  The original  certificate of incorporation of the Corporation was
filed  by the  Department  of  State  on  May  11,  1946  (such  certificate  of
incorporation,  as  amended  and  in  effect  thereafter,  the  "Certificate  of
Incorporation").

      THIRD:  The  Certificate  of  Incorporation  is hereby amended by deleting
Article  FIRST  thereof in entirety and  replacing  it with a new Article  FIRST
which provides as follows:

            "FIRST: The name of the corporation is

                  Phibro Animal Health Corporation"

      FOURTH:  This amendment to the Certificate of Incorporation was authorized
and  approved by a majority of the Board of Directors  of the  Corporation  at a
meeting duly held and by the  shareholders of the  Corporation  entitled to vote
thereon.

      IN WITNESS WHEREOF, the undersigned are authorized to act on behalf of the
Corporation and have signed and executed this Certificate of Amendment, in their
respective capacities as indicated below, on July 24, 2003.

                                       PHILIPP BROTHERS CHEMICALS, INC.

                                       /s/ Jack Bendheim
                                       ---------------------------------------

                                       Jack Bendheim, President

                                       /s/ Joseph Katzenstein
                                       ---------------------------------------
                                       Joseph Katzenstein, Secretary


<PAGE>

          Certificate of Amendment of the Certificate of Incorporation

                                       of

                        PHIBRO ANIMAL HEALTH CORPORATION

                Under Section 805 of the Business Corporation Law

                                   ----------

      It is hereby certified that:

      FIRST: The name of the corporation is PHIBRO ANIMAL HEALTH CORPORATION.

      SECOND:  The certificate of  incorporation of the corporation was filed by
the  Department of State on May 11, 1946.  The name under which the  corporation
was formed was Philipp Brothers Chemicals,  Inc. It later became known as Phibro
Animal Health Corporation.

      THIRD:   The  amendment  of  the  certificate  of   incorporation  of  the
corporation  effected by this  certificate of amendment is as follows:  To amend
the definition of "Equity Value" contained  within Section  3(a)(iii) of Article
FOURTH of the  certificate of amendment of the certificate of  incorporation  of
the corporation filed on November 30, 2000 (the "Certificate of Amendment").

      FOURTH:  To  accomplish  the  foregoing  amendment,  Section  3(a)(iii) of
Article FOURTH of the Certificate of Amendment of the  corporation,  relating to
the definition of "Equity Value" is hereby amended to read as follows:

            (iii)  "Equity  Value"  shall mean an amount equal to (A) the sum of
      (x) the product  obtained by multiplying  6.0 by the greater of either the
      Corporation's  trailing EBITDA (as defined below) for the most recent four
      full fiscal  quarters  (such period,  the "Last Period") or the average of
      the   Corporation's   trailing   EBITDA  for  the  Last   Period  and  the
      Corporation's  EBITDA  for  the  four  full  fiscal  quarters  immediately
      preceding the Last Period plus (y) the  Corporation's  cash and marketable
      securities,   and  minus  (B)  all  outstanding   indebtedness,   minority
      interests,  preferred stock,  accrued  environmental  reserves and accrued
      currency  reserves.  For each relevant fiscal quarter,  the calculation of
      Equity Value and all of its  components  (including but not limited to the
      components of EBITDA) shall be based on figures that are reflected in (and
      only to the  extent  reflected  in) the  consolidated  balance  sheet  and
      consolidated  statements of income and cash flows of the Corporation as of
      and for such fiscal  quarter,  all of which


<PAGE>

      must  be  prepared  in  accordance  with  generally  accepted   accounting
      principles  consistently  applied  and  audited by  nationally  recognized
      independent public accountants.

      FIFTH: The foregoing  amendment of the certificate of incorporation of the
corporation was authorized by the vote at a meeting of the Board of Directors of
the  corporation,  followed  by the  written  consent of holders of  outstanding
shares  of the  corporation  entitled  to  vote  on the  said  amendment  of the
certificate  of  incorporation,  having  not  less  than the  minimum  requisite
proportion of votes,  which has been given in accordance with Section 615 of the
Business  Corporation  Law.  Written  notice has been given as and to the extent
required by the said Section 615.

Dated: December 26, 2003
                                            PHIBRO ANIMAL HEALTH CORPORATION

                                                     By: /s/ Jack C. Bendheim
                                                         -----------------------
                                                     Name:  Jack C. Bendheim
                                                     Title: President


                                       2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-6
<SEQUENCE>8
<FILENAME>e16591ex_6.txt
<DESCRIPTION>MANAGEMENT AND ADVISORY SERVICES AGREEMENT
<TEXT>

                                                                   Bingham Draft
                                                                 January 9, 2004

                              AMENDED AND RESTATED
                   MANAGEMENT AND ADVISORY SERVICES AGREEMENT
                                     (PAHC)

      This Amended and Restated Management and Advisory Services Agreement (this
"Agreement"),  dated as of October 21, 2003,  is entered into between  Palladium
Capital  Management,  L.L.C., a Delaware limited liability company  ("Advisor"),
and  Phibro  Animal  Health  Corporation  (formerly  known as  Philipp  Brothers
Chemicals,  Inc.),  a New York  corporation  (the  "Company"),  in amendment and
restatement of that certain Management and Advisory Services Agreement, dated as
of November  30,  2000 (the  "Existing  Agreement"),  between  Palladium  Equity
Partners, L.L.C. and the Company.

      WHEREAS,  Advisor,  by  and  through  itself,  its  affiliates  and  their
respective officers,  employees and representatives,  has expertise in the areas
of management,  finance,  strategy,  investment,  acquisitions and other matters
relating to the business of the Company; and

      WHEREAS,  the Company  desires to be entitled to continue to avail itself,
for the term of this  Agreement,  of the  expertise of Advisor in the  aforesaid
areas,  and Advisor wishes to provide a framework to provide the services to the
Company as herein set forth;

      NOW, THEREFORE, the parties hereto agree as follows:

      1. Appointment. The Company hereby appoints Advisor to render the advisory
and  consulting  services  described  in  Section 2 hereof  for the term of this
Agreement.

      2. Services. Advisor hereby agrees that during the term of this Agreement,
upon the written  agreement of the Company and the  Advisor,  it shall render to
the  Company,  by and  through  itself,  its  affiliates  and  their  respective
officers,  employees and representatives as Advisor in its sole discretion shall
designate from time to time, advisory and consulting services in relation to the
affairs of the Company in connection with cash management and treasury  advisory
services in accordance with such agreement.

      3. Fees. In consideration  of the services  contemplated by Section 2, the
Company  agrees to pay to Advisor such fees as the Advisor and the Company shall
mutually  agree  upon (the  "Fee"),  payable  in  accordance  with  such  mutual
agreement.  The Company shall have 30 days from a due date to pay the applicable
Fee (such thirty day period, a "Grace Period"). If the Fee for the corresponding
Grace Period is not paid in full by the end of such Grace Period,  then for each
day after the due date and during and after the Grace  Period  that a Fee due is
not paid in full and until such overdue Fee is paid in full,  the Company  shall
pay to Advisor an  additional  fee (the  "Additional  Fee") equal to a per annum
percentage  to be agreed  upon by  Advisor  and the  Company,  compounded  daily
beginning on the start of the Grace Period,  on the aggregate amount of the then
Series  C  Liquidation  Preference  of the  Series  C  Redeemable  Participating
Preferred  Shares  of  the  Company  (each  as  defined  in the  Certificate  of
Incorporation  of the Company then in effect).  The  Additional Fee shall be due
and payable as and when accrued.

      4.  Reimbursements.  In  addition  to the Fees  payable  pursuant  to this
Agreement,  the  Company  shall  pay  directly  or  reimburse  Advisor  for  its
Out-of-Pocket  Expenses  (as defined  below);  provided  that any  Out-of-Pocket
Expenses  that are incurred  other than in the ordinary  course of providing


<PAGE>

the  services  of Section 2 shall  require  the  consent of the  Company,  which
consent shall not be unreasonably  withheld or delayed.  Promptly  following the
Company's request therefor,  Advisor will provide written documentation relating
to any  Out-of-Pocket  Expenses to be paid or reimbursed by the Company pursuant
to this Agreement.  For the purposes of this Agreement,  the term "Out-of-Pocket
Expenses" shall mean the reasonable out-of-pocket costs and expenses incurred by
Advisor or its affiliates in connection  with the services  rendered  hereunder,
including,  without  limitation,  (i) fees and  disbursements of any independent
professionals and  organizations,  including  independent  accountants,  outside
legal counsel or consultants,  (ii) costs of any outside services or independent
contractors  such  as  financial  printers,   couriers,  business  publications,
financial  services  or  similar  services,   and  (iii)  transportation,   word
processing  expenses or any similar  expense not  associated  with its  ordinary
operations. All reimbursements for Out-of-Pocket Expenses shall be made promptly
upon or as soon as practicable after presentation by Advisor to the Company of a
written statement and appropriate  documentation  thereof, but in no event later
than fifteen (15) days after the date of such presentation.

      5. Indemnification.  The Company will indemnify and hold harmless Advisor,
its affiliates and their respective partners (both general and limited), members
(both  managing  and  otherwise),  officers,  directors,  employees,  agents and
representatives (each such person being an "Indemnified Party") from and against
any and all losses, claims, damages,  liabilities,  costs and expenses,  whether
joint  or  several  (the  "Liabilities"),  related  to,  arising  out  of  or in
connection  with the  advisory  and  consulting  services  contemplated  by this
Agreement  or the  engagement  of Advisor  pursuant to, and the  performance  by
Advisor of the services contemplated by, this Agreement,  whether or not pending
or threatened,  whether or not an Indemnified  Party is a party,  whether or not
resulting  in  any  liability  and  whether  or  not  an  action,  claim,  suit,
investigation or proceeding is initiated or brought by the Company.  The Company
will  reimburse  any  Indemnified  Party for all  reasonable  costs and expenses
(including  reasonable  attorneys'  fees and  expenses)  as they are incurred in
connection with investigating,  preparing,  pursuing,  defending or assisting in
the defense of any action,  claim,  suit,  investigation or proceeding for which
the Indemnified  Party would be entitled to  indemnification  under the terms of
the previous sentence, or any action or proceeding arising therefrom, whether or
not such  Indemnified  Party is a party thereto;  provided that,  subject to the
following sentence,  the Company shall be entitled to assume the defense thereof
at its own expense,  with counsel  satisfactory to such Indemnified Party in its
reasonable  judgment.  Any  Indemnified  Party may, at its own  expense,  retain
separate counsel to participate in such defense; and in any action, claim, suit,
investigation  or  proceeding  in which  both the  Company or one or more of its
subsidiaries  or both, on the one hand, and an Indemnified  Party,  on the other
hand, is, or is reasonably  likely to become, a party,  such  Indemnified  Party
shall have the right to employ  separate  counsel at the  expense of the Company
and to control its own defense of such action,  claim,  suit,  investigation  or
proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a
conflict or potential  conflict exists between the Company or one or more of its
subsidiaries or both, on the one hand, and such Indemnified  Party, on the other
hand, that would make such separate representation advisable. The Company agrees
that  it  will  not,  without  the  prior  written  consent  of  the  applicable
Indemnified Party, settle, compromise or consent to the entry of any judgment in
any pending or  threatened  action,  claim,  suit,  investigation  or proceeding
relating to the matters contemplated hereby (if any Indemnified Party is a party
thereto  or  has  been  threatened  to be  made a  party  thereto)  unless  such
settlement,  compromise  or consent  includes  an  unconditional  release of the
applicable Indemnified Party and each other Indemnified Party from all liability
arising or that may arise out of such  action,  claim,  suit,  investigation  or
proceeding.  Provided  the  Company  is not  in  breach  of its  indemnification
obligations hereunder, no Indemnified Party shall settle or compromise any claim
subject to  indemnification  hereunder  without the consent of the Company.  The
Company will not be liable under the foregoing  indemnification  provision  with
respect to any Indemnified  Party, to the extent that any loss,  claim,  damage,
liability,  cost or expense is determined by a court,  in a final  judgment from
which no further


<PAGE>

appeal may be taken,  to have resulted  primarily  from the gross  negligence or
willful misconduct of Advisor.

      6.  Accuracy  of  Information.  The Company  shall  furnish or cause to be
furnished to Advisor such  information  as Advisor  believes  appropriate to its
assignment  (all such  information so furnished  being the  "Information").  The
Company  recognizes and confirms that Advisor (i) will use and rely primarily on
the Information and on information  available from generally  recognized  public
sources in performing the services contemplated by this Agreement without having
independently  verified the same;  (ii) does not assume  responsibility  for the
accuracy or  completeness of the  Information  and such other  information;  and
(iii) is entitled to rely upon the Information without independent verification.

      7.  Confidentiality.  Except as  contemplated  by the  terms  hereof or as
required by applicable law or legal process, Advisor shall keep confidential all
material  non-public  information  provided  to it by or at the  request  of the
Company, and shall not disclose such information to any third party or to any of
its  employees or advisors  except to those persons who have a need to know such
information  in connection  with Advisor's  performance of its  responsibilities
hereunder.

      8. Term. Subject to Section 11 below, this Agreement shall be effective as
of the date hereof and shall terminate on the date that no Investor  Stockholder
(as defined in the Stockholders  Agreement dated November 30, 2000, by and among
the Company, Palladium Equity Partners II, L.P., Palladium Equity Partners II-A,
L.P.,  Palladium  Equity  Investors  II, L.P.,  and the  stockholders  signatory
thereto (the "Stockholders Agreement")) nor any of its Affiliates (as defined in
the  Stockholders  Agreement)  own any  Equity  Securities  (as  defined  in the
Stockholders  Agreement) (the "Termination Date"); provided that Section 4 shall
remain in effect with respect to  Out-of-Pocket  Expenses  incurred prior to the
Termination  Date;  and  provided  that  Section 3 shall  remain in effect  with
respect to  Additional  Fees until  payment in full of all Fees payable prior to
the Termination Date. The provisions of Sections 5, 7 and 9 and otherwise as the
context so requires shall survive the termination of this Agreement.

      9. Permissible Activities. Subject to applicable law, nothing herein shall
in any way preclude Advisor,  its affiliates or their respective  partners (both
general  and  limited),   members  (both  managing  and  otherwise),   officers,
directors,  employees,  agents or representatives  from engaging in any business
activities or from  performing  services for its or their own account or for the
account of others,  including for companies that may be in competition  with the
business conducted by the Company.

      10. Miscellaneous.

            (a)  Governing  Law;  Jurisdiction;   Waiver  of  Jury  Trial.  This
      Agreement shall be governed by, and construed in accordance with, the laws
      of the State of New York. No suit,  action or  proceeding  with respect to
      this Agreement may be brought in any court or before any similar authority
      other than in a court of competent  jurisdiction in the State of New York,
      and the  parties  hereto  submit to the  exclusive  jurisdiction  of these
      courts for the purpose of such suit,  proceeding or judgment.  The parties
      hereto  irrevocably  waive any right  which they may have to bring such an
      action in any other  court,  domestic  or  foreign,  or before any similar
      domestic or foreign authority.  Each of the parties hereto irrevocably and
      unconditionally  waives trial by jury in any legal action or proceeding in
      relation to this Agreement and for any counterclaim therein.

            (b) Successors and Assigns;  Assignment.  Neither this Agreement nor
      any of the rights,  interests or obligations  hereunder may be assigned by
      any of the parties  hereto,  in whole or in part  (whether by operation of
      law or otherwise), without the prior written consent of the other parties,
      and any attempt to make any such assignment  without such consent shall be
      null and


<PAGE>

      void, except that Advisor may assign its rights and obligations  hereunder
      to any one or more of its affiliates.  Subject to the preceding  sentence,
      this  Agreement  will be  binding  upon,  inure to the  benefit  of and be
      enforceable by the parties and their respective successors and assigns.

            (c) Entire Agreement;  Third Parties. This Agreement constitutes the
      entire agreement and supersedes all prior  agreements and  understandings,
      both  written and oral,  between the parties  with  respect to the subject
      matter hereof.  This  Agreement  shall be binding upon and inure solely to
      the benefit of the parties hereto, and nothing in this Agreement,  express
      or implied, is intended to confer upon any other person any right, benefit
      or remedy of any nature under or by reason of this Agreement.

            (d)  Severability.  If any term or  provision  of this  Agreement is
      invalid,  illegal  or  incapable  of being  enforced  by any law or public
      policy,   all  other  terms  and  provisions  of  this   Agreement   shall
      nevertheless  remain in full force and effect so long as the  economic  or
      legal substance of the transactions contemplated hereby is not affected in
      any manner materially  adverse to any party. Upon such  determination that
      any term or other  provision  is invalid,  illegal or  incapable  of being
      enforced,  the parties hereto shall negotiate in good faith to modify this
      Agreement so as to effect the original intent of the parties as closely as
      possible  in  an  acceptable   manner  in  order  that  the   transactions
      contemplated  hereby are  consummated  as originally  contemplated  to the
      greatest extent possible.

            (e) Amendment and Waiver.  This Agreement may be amended only by the
      written consent of all the parties hereto. Any waiver, consent or approval
      of any kind by any party  hereto of any breach,  default or  noncompliance
      under  this  Agreement  or any waiver by such  party of any  provision  or
      condition of this  Agreement  must be in writing and is effective  only to
      the extent specifically set forth in such writing.

            (f) Delays or  Omissions.  It is agreed that no delay or omission to
      exercise  any  right,  power or remedy  accruing  to any  party,  upon any
      breach,  default or  noncompliance  by another party under this Agreement,
      shall impair any such right, power or remedy, nor shall it be construed to
      be a  waiver  of  any  such  breach,  default  or  noncompliance,  or  any
      acquiescence  therein,  or  of  or  in  any  similar  breach,  default  or
      noncompliance  thereafter  occurring.  All  remedies,  either  under  this
      Agreement, by law, or otherwise afforded to any party, shall be cumulative
      and not alternative.

            (g) Notices. All notices required or permitted hereunder shall be in
      writing and shall be deemed  effectively given: (a) upon personal delivery
      to the party to be notified; (b) when sent by confirmed telex or facsimile
      if sent during normal business hours of the recipient, if not, then on the
      next  business  day;  (c) five  calendar  days after  having  been sent by
      registered or certified mail, return receipt  requested,  postage prepaid;
      or (d)  one  business  day  after  deposit  with a  nationally  recognized
      overnight courier, specifying next day delivery, with written verification
      of receipt.  All  communications are to be sent to the addresses set forth
      below:

                  If to the Company:

                        Phibro Animal Health Corporation
                        One Parker Plaza
                        Fort Lee, New Jersey 07024
                        Tel: (201) 944-6020
                        Fax: (201) 944-5937
                        Attn: Jack C. Bendheim, President


<PAGE>

                  with copies to:

                        Golenbock Eiseman Assor Bell & Peskoe LLP
                        437 Madison Avenue
                        New York, New York 10022
                        Tel: (212) 907-7300
                        Fax: (212) 754-0330
                        Attn: Lawrence M. Bell

                  If to Advisor:

                        Palladium Capital Management, L.L.C.
                        1270 Avenue of the Americas
                        Suite 2200
                        New York, New York 10020
                        Tel: (212) 218-5150
                        Fax (212) 218-5155
                        Attn: Marcos A. Rodriguez

                  with copies to:

                        Bingham McCutchen LLP
                        399 Park Avenue
                        New York, New York  10022
                        Tel: (212) 705-7000
                        Fax: (212) 752-5378
                        Attn: Neil W. Townsend

            (h)  Interpretation.  When a reference is made in this  Agreement to
      Sections,  such  reference  shall be to Section of this  Agreement  unless
      otherwise  indicated.  The table of contents titles and headings contained
      in this Agreement are for reference  purposes only and shall not affect in
      any way the meaning or  interpretation  of this  Agreement.  Whenever  the
      words  "include,"  "includes" or "including"  are used in this  Agreement,
      they shall be deemed to be followed by the words "without limitation."

            (i)  Counterparts.  This  Agreement  may be  executed in one or more
      counterparts,  all of which shall be considered one and the same agreement
      and shall become effective when one or more  counterparts have been signed
      by each of the parties and delivered.

      11.  Reinstatement  of  Existing  Agreement.   Anything  to  the  contrary
notwithstanding,  in the  event  that the  Palladium  Transactions  (as  defined
below),  are not  consummated on or prior to December 31, 2003,  effective as of
the close of business on December 31, 2003, the Existing  Agreement as in effect
immediately  prior to the amendment and  restatement  thereof by this  Agreement
shall  automatically  be  reinstated  without  any action by any of the  parties
hereto,  except that upon such  reinstatement  the Existing  Agreement  shall be
deemed amended to provide that Palladium  Capital  Management,  L.L.C.,  and not
Palladium Equity Partners,  L.L.C., shall be the "Advisor"  thereunder.  For the
avoidance of doubt,  in any such case where the Palladium  Transactions  are not
consummated  on or


<PAGE>

prior to December 31, 2003, the Fee (as defined in the Existing Agreement) shall
be reinstated and shall be payable  quarterly in advance in accordance  with the
terms of the Existing  Agreement,  with the first such quarterly  payment in the
amount of $562,500  due and  payable on January 1, 2004 for the  quarter  ending
March 31,  2004.  As used  herein,  the term  "Palladium  Transactions"  has the
meaning set forth in the Consent Agreement,  dated as of October 15, 2003, among
the Company, Prince MFG LLC, The Prince Manufacturing Company,  Palladium Equity
Partners II, L.P.,  Palladium  Equity Partners II-A,  L.P. and Palladium  Equity
Investors II, L.P.

                  [Remainder of page intentionally left blank.]

<PAGE>

      IN WITNESS  WHEREOF,  the parties have caused this Management and Advisory
Services  Agreement  to be  executed  and  delivered  by their  duly  authorized
officers or agents as of the date first above written.

                                   PALLADIUM CAPITAL MANAGEMENT, L.L.C.

                                   By: /s/ Marcos Rodriguez
                                      ------------------------------------------
                                      Name:  Marcos Rodriguez
                                      Title: Managing Director

                                   PHIBRO ANIMAL HEALTH CORPORATION

                                   By: /s/ Daniel Bendheim
                                      ------------------------------------------
                                      Name:  Daniel Bendheim
                                      Title: Vice President

                                   PALLADIUM EQUITY PARTNERS, L.L.C.
                                      (for the purpose of consenting to the
                                      amendment of the Existing Agreement
                                      as herein provided and with respect to
                                      Section 11 only)

                                   By: /s/ Marcos Rodriguez
                                      ------------------------------------------
                                      Name:  Marcos Rodriguez
                                      Title: Managing Director


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
